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Matthew Crater
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Matthew Crater
It's more than just fireworks.
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Matthew Crater
LA I turned off news altogether. I hate to say it, but I
Jake
don't trust much of anything.
Matthew Crater
It's the rage bait.
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It feels like it's trying to divide people.
Jake
We got clear facts. Maybe we could calm down a little.
Matthew Crater
NBC News brings you clear reporting.
Jake
Let's meet at the Facts.
Matthew Crater
Let's move forward from there.
Jake
NBC News reporting for America.
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Matthew Crater
Summer's got a different tempo. Everything's a little looser, brighter. One plan turns into another. You hear something, you stay a little longer. Next thing you know, you're somewhere you didn't plan to be. It's those in between moments. That's where the ideas hit. Conversations stretch out. Little memories sneak up on you. And sometimes it's just about what's in your hand. That color, that chill. The new tropical butterfly refresher from Starbuck. Guava and passion fruit flavors with mango pineapple flavored pearls. Yeah, that feels like summer before you even taste it. Funny how one small stop becomes the best part of the day. Start your summer rhythm with Starbucks. Try the new tropical butterfly refresher from Starbucks. Why is it always chaos when we link up?
Jake
Because nobody plans anything, bro. Good thing the rug's ready like that for real.
Matthew Crater
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Matthew Crater
Five modes.
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Matthew Crater
That turbo torque is crazy.
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Jake
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Matthew Crater
The problem I have with Saylor now is he's just crossed a couple of red lines for me. Is first of all, I don't know, can I, can I curse on the podcast?
Jake
Yeah, why not?
Matthew Crater
If I turn out to be wrong about strategy, I will make a real confession video and I will eat humble pie.
Jake
We had clear direction and as we expand and expand, if you try and do too much, that might be the downfall of the system.
Matthew Crater
The way you destroy bitcoin is you make it like ethereum. You just try to do too much on the blockchain. I'm becoming more and more convinced that the strategic bitcoin reserve in the US is the large custodians, that they will be seized at some point. He was very good to me. I don't like the turn that he's taken towards surveillance and Palantir.
Jake
Something he said was like, it's important for me to keep the conversation going because when the conversation stops, violence takes place.
Matthew Crater
Wow, that comment really, it hits differently now.
Jake
Welcome back to Market Disruptors. Today I'm joined by the great and powerful Matthew Crater of Bitcoin University. Welcome to the show, Matt.
Matthew Crater
Thanks for having me, Jake. It's good to be here.
Jake
Yeah, it's, it's, it's an honor to have you.
Matthew Crater
I would dispute how power. How powerful I am, but the great
Jake
and powerful, you gotta take it yeah,
Matthew Crater
my wife tells me I'm great, so I can. All right, I can confirm that one
Jake
attitude is not too bad. Not too bad. Yeah. So I. I've been paying attention to your content for, I don't know, half a decade or so quite closely. I really believe you're one of the most important players in the bitcoin space and so really appreciate you taking the time to have this conversation today. You have this fascinating background that I didn't learn of until I listened to your conversation with Eric recently, which was a really great chat. You have a history with guys like Rene Girard, Peter Thiel, Kevin Warsh, even some interesting connections that I want to get into all that on the back half of this conversation. But I thought we should launch right into the knots versus core debate. I know this is something that you're passionate about, that's important you to be spreading the message about and how BIP110 is connected to that. So, first things first, for someone who's totally new to the core versus knots conversation, let's say they've been paying attention to bitcoin a little bit, but they don't really know what it's all about. Could you catch them up to speed with the quote unquote, civil war that's taking place right now?
Matthew Crater
Yeah, that's just how I was going to characterize it, actually. So bitcoin seems to go through these cycles, and we had a big Civil War in 2015-2017, sort of the block size wars, and then we had a period of peace, and now there's a real fracture in the community. And it has to do with arbitrary data on chain and the impact that it has on node runners. So for people who are relatively new to bitcoin, Bitcoin is a network, it's an asset, but it's also a network built of nodes. And these nodes, for the most part, are run by pleb bitcoiners like me and you, and just people who own bitcoin. And the thing is, with nodes, if you don't run your own node, you're forced to trust someone else's node. So the best way to run, the best way to interact with the bitcoin network, especially when you begin to really go down the rabbit hole and you begin to own a little bit of bitcoin and you'd want to be dependent on other people for receiving, sending bitcoin, or also even a very simple thing like verifying that your bitcoin is real, it's very important to run a bitcoin Node. And up until really, until last year, 99, 98% of the network, the people on the network ran something called Bitcoin Core, which is a descendant of Satoshi's original software. And basically it's an open source project that really was the dominant, it's called the reference implementation because almost everyone, everyone ran it. And then there was a small side implementation that these are not, these are not two different. Basically the, the rules, the rules of Bitcoin that the software enforces are the same, are the same. But there was an alternate implementation called Bitcoin Knots which has been run by really the great bitcoin dev og. His name is Luke Dasher and he's been in Bitcoin I believe since 2011 or so. And his implementation is also a descendant of Satoshi software. So we sort of have these two parallel types of software. And then what happened in 2025, and we can see how much you want to dig into it is the devs, the developers at Bitcoin Core pushed through an update to the software that was extremely controversial. And this is something that hasn't occurred in Bitcoin at least for a while. Because what Bitcoin Core does as an open source project is it's just meant to be somewhat janitorial where they are, you know, making sure the latest version of their software is compatible with Windows and Linux and Mac OS and fixing bugs and stuff like this. But what they did last year is they pushed through something that was that, that a lot of bitcoiners considered to be a bad decision. It was basically opening up the Bitcoin network to larger blobs of data. And that can include lots of bad things, including things like for example child sexual abuse material, csam, which is probably the worst thing imaginable. And this is a thing, when you run a Bitcoin node, you want to run it to use it as money. But what happened last year is they basically forced through this Update, they lost 20% of market share, 20% of Bitcoiners who were running notes basically dumped, stopped running their software and started running Bitcoin knots. And that's sort of where we are today. The problem with. So this is the whole, for people who've been following this was this was the whole opera turn, the whole opera turn debate. And the debate was over how much non monetary data should be included in a bitcoin transaction. Historically it's been a very small amount, 40 bytes or 80 bytes. And what Bitcoin Core did last year and what I think May actually be an intel state level attack. It's quite possible is they blew that open to 100,000 bytes. Which if you think about it, if you had a server and you just opened it up to the Internet and let random people post stuff there, you can imagine just the, There'd probably be some funny memes, but most of it would be horrific material that you would not want to host on a home server. And Bitcoin nodes are, you know, a lot of us run them on these personal servers like Star9 and, and we want to use money. We don't want to be relaying child sexual abuse material across the Internet or monkeys like Jason or.
Jake
Yeah, a bunch of other random crap.
Matthew Crater
Yeah, or just random crap. Yeah. Like arbitrary data. It could be, it could be whatever. And there's, there's so many different cultures in the world and people, and we, we just want people to use Bitcoin as money. We don't want to get bogged down in social and cultural things. And so that's why many of us have moved to, to Bitcoin knots. And we're running that as a node. It's, it's very easy to run a node. You can just go to bitcoinnots.org and download, run it, run it on your laptop or desktop or you can. A better way to run is probably on a personal server like a start9 server. That's, that's how I run mine. And you can either, you can either build or, or, or buy those.
Jake
In some ways this is a new conflict. Right. But in other ways it's a continuation of previous conflicts. There's been previous bitcoin civil wars, so to speak, related to block size and related to oper turn. We had the oper turn conversation war in 2014. There were the block size wars in 2017. And so this is a new problem, but also a continuation of these old problems. Could you explain maybe what similarities there are to this and differences? I think it's important for audience to know that this is not the first time we've had these things. Bitcoin was built in a way that it would be able to self correct and there's sort of checks and balances. The miners and nodes sort of check each other, the users. There's ways that there's this like circular checks and balances. But so how did Those play out? 2014, 2017? How's it connected to what we're seeing today?
Matthew Crater
Yeah, that's a good question. So the debate about non monetary data, or you could even call it Bitcoin spam and all online systems, everything on the Internet is all digital things suffer from the spam problem, obviously email, voice calls and voicemail. And so this is a general problem in, in online systems. But what makes it a little bit different for bitcoin is there's no one in control of bitcoin. And it's not like Google or something where they can just say we're going to do this with the Gmail filters or do this rule. It's much more difficult because it's an open source, decentralized project and there's no CEO or anything. And so there was, as you rightly say, there was. What's happening today is sort of a continuation of the spam, the spam wars or the opera turn wars of 2013 and 2014. And those wars occurred because there were people who were trying to do, who were basically trying to put altcoins on, on bitcoin, you know, crypto on bitcoin, kind of scammy tokens. There were, there were also people who were running online casinos, something called Satoshi Dice, which was basically spamming the bitcoin blockchain. And so the problem here is it's, it's more serious than, it's more serious in most cases than something like email spam. Because the bitcoin blockchain is forever. And those of us like me who think it's going to succeed and be around for the next thousand years, what that means is future node runners are going to have to download all of this past activity. That's what the bitcoin blockchain is. It's a history of all bitcoin transactions. And so we want to, obviously we don't want nasty images in there, but we also just don't want it to get too big because there is, it can take time. So when you spin up a new bitcoin node, it basically downloads all the history from 2009 to the present. So you can imagine 200 years from now, you want to make sure that there's nothing extraneous there. And the sort of conceptual reason for this is that people are used to, when you download an app on your phone, you. If it takes more than like 10 seconds, you're probably going to click away and forget about it. Whereas a bitcoin node today, depending on your Internet speed and your hardware, can take anywhere from maybe 10 hours to a couple of months. And so we want as many people as possible and people all over the world, people who make $2 a day, people living in the Global south, as well as people living, living elsewhere. We want everyone to be able to run a node. We don't want it to be too difficult, too expensive, and we don't want it to take too long to spin up a node. So we want to minimize our on chain footprint. And this is one of the reasons to fight Bitcoin spam. It's less of a problem with email because most people, you know, you're relying on Google to store all that stuff and you can delete it, but things can't really be deleted from the bitcoin blockchain operturn, which is sort of the field that we're talking about. It can technically be pruned for those who are a little more technically advanced. But if you do that, then it doesn't. Your node will not work as well with a wallet and your node will also not be able to bootstrap other nodes. So there's been a lot of gaslighting around this. Just run a prune node, you can prune out all the spam. The problem with that is you first have to download it to begin with, which takes time, it takes bandwidth. You don't want to have to download CSAM and then have your computer examine it and then prune it. Like that's just. No one wants that. And so what it was decided in 2014 was we actually had a bitcoin core who was. We had bitcoin core devs who were hostile to spam and really viewed Bitcoin as a monetary network that deserved to be protected. And so they gave a small space for people to put a small amount of arbitrary data. The OPER turn space, it was 40 bytes and it was 80 bytes. And it's now been blown open, as we said, in 2025 to 100,000 bytes. But this was basically the compromise that was made by the community being led by bitcoin core devs in 2014. And there were people who were not happy with this. There were people who wanted to scam on Bitcoin, people like Vitalik Buterin, who's the guy who started Ethereum. He got very upset because he couldn't build his scam on top of Bitcoin and he left Bitcoin and he created Ethereum, which I like to call an idiot container, basically helped us for. Gave us about eight to nine years apiece because everyone went and did their NFTs and their tokens and all their altcoins and tokens on Ethereum. Instead of what happened starting in 2023 is Bitcoin Core devs began to sort of let down their guard. And there was a bit of a change in the culture both at bitcoin conferences and among bitcoin core devs. And people began to be a little bit more postmodern about this. Like, do we. What exactly is spam? And you know, do we really, you know, who are you to say that this transaction's not valid? And there was a lot of kind of wokeism and postmodernism creeping into the space. And then spammers and scammers use this to their advantage because obviously, if you can, people have slowly figured out that crypto's a scam. And so what are you going to do if you're a crypto scammer? Well, bring it home to Bitcoin because bitcoin has the brand, bitcoin has the longevity. And bitcoin gives you an air of an aura or an air of authenticity. It's like, oh, it's on bitcoin, so it can't be bad, even though it is a scam and it interferes with Bitcoin's monetary usages. So this began to creep back in, in 2023 and there's quite a, quite a bit of damage done to the blockchain. And basically something, something that's called the UTXO set was, was really expanded by this. UTXOs are just chunks of bitcoin and every node needs to keep track of these because when they're, they're validating incoming transactions, they need to make sure that the bitcoin hasn't been spent already. So the net result of these spam attacks, and we saw various very serious spam attacks in 2023 and 2024 at the time of the bitcoin having especially we saw the serious spam attacks and it's made it much more difficult to run a node since then. And then to add, to add injury to insult, in 2025, Bitcoin Core devs opened up a larger area for spam while refusing for the last few years to fix the basically fixed the bug that had caused that UTXO set bloat in 2023 and 2024. The block size war is sort of a different thing. But what it has in common is at least the winning side, the small blockers, they understood that it was very important for Bitcoin's decentralization and neutrality for everyone to be able to run a node, whereas the other side, the big blockers like Roger Ver, they didn't really care about that. They thought it was fine to just let corporate, large corporations run the nodes and everyone would just tap into those nodes. And so it's an interesting situation because last time bitcoin core was sort of on the right side of things, fighting the big blockers. This time, they're on the wrong side of things. So it's very confusing. It's like a lot of tribal politics, but it is an actual. Unlike some politics, we can actually point to damage on chain, the blowing up of the UTXO set, the risk of things like CSAM and other arbitrary data, and also how it makes it much more difficult for people to spin up nodes and thus threatens Bitcoin's decentralization.
Jake
Previously, when you're running a node, not too long ago, maybe two, three years ago, something like that, the entire. Every bitcoin transaction in all of history could fit on a drive the size of your fingertip. And you could still probably find drives the size of your fingertip that would fit. But a micro SD card with 500 gigs, you could, 500 gigabytes, you could download every transaction history. Now, since 2023, and especially since the filters were blown open, essentially you've seen an increase in the size of the bitcoin blockchain. So that contributes to what you're saying, more difficult to download, more expensive as well, because you, you know, it costs more to store a terabyte, two terabytes, three terabytes. Now there's a. The argument against this is that, okay, so even if it does increase on an exponential, the price to store data has been decreasing on an exponen. And so if those two things were to continue, we would see about the same amount of decentralization as we would today. Now, those are theory, you know, in theory, that could be the case. And so that's kind of an argument against it, against the, like, panic over it, I suppose. But what's interesting too is that it's the sort of problem that's created, that it may not be an immediate problem, but the size of the problem will grow over time. And if it grows exponentially, Bitcoiners understand exponentials, you know, for the most part. And so if it grows exponentially, I
Matthew Crater
think it's actually already. It's already a problem. And, you know, people invoke Moore's Law and they say, this isn't a big deal. You can go buy, go buy a hundred, you know, an extra hundred dollars worth of storage. And again, that's not. These are, these are people living in San Francisco, New York. These are devs making $300,000 a year. So, you know, if you're a doctor in Cuba making $2 a day, just saying that. But it's not just the storage thing. It's also, you have to think of the initial sync of the node, which requires a certain amount of bandwidth. And if you don't have that bandwidth, because everything has to be downloaded and verified. So it's not just a question of storage. But we've seen the price of storage going up. We've seen the price of RAM obviously going up, and a lot of this being driven by AI and demand for this kind of hardware. But if you extrapolate the Trend, basically in 2013 or 2012 it was still possible to run a bitcoin node on an iPhone. And this should sort of be the ideal because a huge percentage of the world's population has smartphones and a lot of people just don't have computers. Even people in first world countries, they just do everything on their phone or their iPad or something. And so if we zoom out a little bit more, obviously Moore's Law and certain things may be able to bail us out. But the trend has been in the wrong. The trend has been in the wrong direction. And it takes longer to sync a node than it ever has. And if you spin up a new node, you'll run into the mess in 2023 and 2024 and your initial block download will sort of crawl to a halt. And so it's not just storage, it's also RAM and the cost of these things. But it's mostly just the, the effort that's the thing I worry about the most, is the effort required to spin up a new node. The other problem is basically the bitcoin satoshi set the bitcoin block size a little bit too big and it was further expanded as part of Segwit. There was sort of a secret. As part of the Block Size Wars 2017, it was expanded to be up to 4 megabytes per block. And there were people like Luke Dasher, who's the maintainer of bitcoin knots, who warned he was actually arguing that the bitcoin block size should be decreased to 300 kilobytes. But the current. So what we're trying to do now is just try to keep stuff under control and allow the underlying. Allow Moore's law and other similar laws to kick in and sort of catch it up. Because downloading a new app and it taking two weeks, we already have a problem now we have a global problem now it's not just a problem in the future. And if we're not really careful about this, it could really diverge and spin out of control.
Jake
It reminds me of. We'll talk a little bit more about Saylor later, I think. But one thing I remember him saying that I think he was really right about was one of the biggest threats to Bitcoin is ambitious devs trying to change the code to increase functionality and make it better and by doing so introduce some unexpected variable that they didn't foresee, you know, And I think he was right about that. And I think that's actually exactly what we're seeing. You know, there's people who are like, okay, well, we want to have crypto functionality on top of bitcoin, we want our monkey JPEGs, we want whatever. And by adding such functionality, you harm the decentralization of it, essentially. And it seems like there was this in the brief I sent over. There's a one strange question I want to get into now. And this is the. For whatever reason, when I've been hearing this core versus Knots debate, it's reminded me of the Tower of Babel in Genesis. And essentially. Yeah, yeah, yeah. And essentially, like, I feel like one. I've been in the bitcoin space for a while now. I've been working, producing shows, that sort of stuff. And one of my main concerns for years, before this conflict even started has been bitcoin is great. I'm like, big bitcoin guy. I'm super pumped on it. I think it's very important. I think it's very good for humanity. I think it's a very important thing. But it's just money. And the things that have been true about money for thousands of years are still true about money. So if you raise money to too high of a place in your life, it will not go well for you, you know, if you make. If it. If it sits on the throne of your life, essentially. And so with my intense passion about the goodness of bitcoin, I'm also like, it's not like the good, essentially, right? And so for those who don't know, summary of the Tower of Babel in Genesis, there's a flood. After the flood, early humanity is rebuilding. They start to build some steam. They build this city and they want to have a tower that reaches to the heavens so that they can make for a name for themselves, take pride in their own greatness and be godlike, essentially. And basically God saw this. He saw their arrogance and their pride and that, you know, what they were aiming at. And he confused their languages so they could no longer be this single unit. He basically decentralized them, he scattered them across the earth so that they wouldn't have this corrupting thing take place, essentially. And the connection for me is that bitcoin was supposed to be money. Bitcoin is money. It's peer to peer cash was the premise. And now there's people who are wanting it to be much more than that. They want it to be arbitrary data storage. They want it to be this immortal source of truth. You can put something there and it will be there forever. And then it steps up. It's Bitcoin is truth, Bitcoin is love, Bitcoin is whatever. And it's like, yeah, it's just money. And money's very important. So I think that this is part of the problem really, because by allowing all of this non monetary data to be stored, you're going to create this sort of scenario where Bitcoin collapses under its own weight almost, you know, where or at least the key principles like it may not, probably wouldn't go away. Right. But the things that make it valuable and useful and important to humanity, the properties, decentralization, security that, that give it this, that give humanity like uninfringeable property rights, will, will go away essentially. And then it's like, what are we here for? You know. And so.
Matthew Crater
Yeah, I think. Yeah, that's right.
Jake
Go ahead, go ahead. Basically that's it. I just think like, are you seeing this in the same way and do you view this as an existential threat? Would it just be like Bitcoin is less good now or is it like whole revolution harmed? Yeah, yeah.
Matthew Crater
The strange thing about Bitcoin is it is as we talked about at the beginning of this conversation, it's a network built of people who run software. And so in a very strange sense, you and I can make, and the other node runners can make Bitcoin whatever we want it to be. And the thing that sort of protects it as money is that if you have almost your whole net worth in it, like I do, for example, you're very incentivized to look over it like a small child or something, because you see your whole future there and you see your life savings. And so it's important to protect Bitcoin as money. And there are actual technical reasons for that. Some people seem to think that it's a good, it's a good form of cloud storage, even though the blocks are only one to four megabytes, which is not a Whole lot of data. So it's actually pretty poor storage. But there's a technical reason why it can never be good cloud storage or good data storage. And that is people should use something like bittorrent or NOSTR if they want permissionless data storage. The problem is that bitcoin is secured by bitcoin miners and they expend a lot of electricity. They want to be paid for those expenditures. And the only way you can pay these miners, and Satoshi was very clever, if you tried to pay the miners with US dollars, then the banks and the Fed would just turn it off and the miners wouldn't get paid. So there's this kind of internal system where bitcoin miners help to issue new coins and help to package up transactions and build the blocks, but they need to be paid in the form of money. And so if the network itself degrades and becomes cloud storage, it becomes much worse money. And then the miners will no longer want to accept that money, so they won't want to spend electricity to secure the blockchain. And then basically you'll end up with no security. If you have no miners, it'll be very easy to rewrite the chain. So there's this. The metaphor I've used before is you've seen one of those trees that's completely covered with ivy or some other parasitical plant and you could just see the trunk at the bottom and the ivy has taken all the sunlight and that the tree itself is dead. That is what non monetary data has the potential to do to Bitcoin, where basically if you kill bitcoin as money and try to turn into cloud storage, it ends up being very bad cloud storage because the chain can be rewritten and there's not going to be anyone willing to secure the chain. It's a pretty technical argument and I'm trying to think of a good way to relate it to the Tower of Babel. Tower of Babel or Babel.
Jake
But it just seems like this, we had clear direction and as we expand and expand and expand, if you try and do too much, that might be the downfall of the system, right? Like trying to make it more and more and more and more until it's like now we don't have direction. Now we don't know what we're doing. We don't have this agreed on consensus of what we're doing here together as bitcoiners and we end up in this place where now we're trying to serve all these different roles and we're doing none of Them well, we're not doing money well. We're not doing data storage well. We're not doing anything well, you know, and so maintaining the narrow field and not trying to grow it too much, I think is an important part of this debate. And that's what I see. Yeah. Knots being like. And the knots bip110, I'm sort of using them interchangeably, but saying, like, let's maintain Bitcoin as money. We don't have to add all these additional features that may present unintended consequences, essentially, which, you know.
Matthew Crater
Yeah. It's not just a hypothetical either, because we've seen Ethereum is the great example of trying to. Trying to do too much on the blockchain and doing these very complex smart contracts. So, for example, Bitcoin is very simple smart contracts. But especially in the era of AI, we've seen a lot of hacks in crypto. And basically in Ethereum, it's no longer possible to run a node. The data is just. There's too much data. It's too expensive. You basically need to run it in a corporate. Corporate facility and corporate servers.
Jake
It should be better off having it centralized at that point. It'd be more efficient.
Matthew Crater
Yeah. Then it becomes centralized. Then you need to ask. It becomes just like checking your account at Wells Fargo or JP Morgan. And so Bitcoin is very good money. And money is really all we need to ask from Bitcoin. It's a foundational part of civilization, and we currently have very bad money that can be censored. We saw that certainly during the Canadian truckers protest and during COVID And lots of people over the years have been deplatform from Venmo and PayPal. And basically, if you can control the money, you can control the world. And so it's very important that we have this neutral money in the form of Bitcoin that's not controlled by anyone, and that's also not being subverted into being something. Something else. Because the real the way you destroy Bitcoin is you make it like Ethereum. You just try to do too much on the blockchain.
Jake
Right, right, right, right. And so the moral of the story to me is it doesn't mean, like, panic, freak out, whatever. It just means, hey, fire up a node, get involved, like, make your voice heard, help defend the network. Bitcoin is a living organism because it's made up of all of the participants of the network. Right. So it's like you have a duty. You can't just. If you want to store your wealth here. You have a duty to help defend what we're doing. And there's downstream implications of that that are very important for the well being of humanity. If you understand what's wrong with fiat, what's wrong with how many people across the world have essentially been enslaved and they don't know it in our country and other countries. And the solution isn't, ooh, I'm scared, I'm gonna run. You know, the solution is like, hey, it's time to like dig in and you know, do something to, yeah, help further the revolution.
Matthew Crater
And I want to emphasize too, it is, it is, you could frame it as a duty and there's, there's nothing wrong with that framing, but you could also frame it from, even from sort of a selfish point of view or self interested point of view where basically if you don't run a node, you have no access to the network, you have to trust other people. You don't know if your bitcoin's real. And if there were, say something happens in the US at the next presidential election and all the companies running, all the large corporations running bitcoin nodes that people rely on, say, those get taken offline. Even if you own Bitcoin and you have the right ideology and the right viewpoint, you won't be able to transact without a node. And so what I've been really pushing on my channel is trying to empower individual families. And it seems mostly a lot of fathers watch my channel and you know, they've put the family's money into savings, into Bitcoin and they've got their kids playing around with bitcoin and they're really trying to build their lives around it. So what I've tried to do is encourage them not just to hold your bitcoin in self custody, hold it in cold storage, but also learn how to run a node, learn how to make bitcoin transactions. And then the most exciting thing I've been working on this year is actually mining bitcoin from home. That's been the focus of my channel and basically you don't even need to have a bitcoin mining rig for this. There are now ways where you can actually rent the hash rate and use it to build your own blocks and to help support the network that way. And the nice thing about this as well is that if the large bitcoin miners ever try to censor us, if you're mining your own blocks and you're pool mining with like minded individuals, you'll always be able to get Your transaction, your transaction in. So I really view being a bitcoiner as you hold bitcoin you hold in self custody, definitely don't leave it on exchange or it's, it's probably going to get stolen at some point or they just won't let you withdraw it. So you hold bitcoin self custody, you run a bitcoin node and you mine bitcoin using that node. And it's really, really fun to mine bitcoin from home. You can rent the hash rate. Just like we don't produce our own electricity, most of us, we buy electricity and we have the water company deliver water and the natural gas company deliver natural gas. One of the reasons I didn't get into bitcoin mining is because I have high electricity rates where I live. And I don't think my wife would be really happy turning the garage into like an, it would sound like an industrial factory or an airplane hangar or something with those, those loud Asics. If you, if you're, if you're more handy than me and you have low electricity rates, it might make sense to get some bitcoin mining rigs. But the nice thing now is there are these marketplaces that developed for example, brains with two eyes where you can basically rent hash, point it at your own node, build your own blocks, decide which transactions go into your own blocks. So I'm really, really urging bitcoin plebs and families to take back the power and you become your own bank, you become your own miner. And this is really how we build a very strong, strong network so that when we're attacked, we're not relying on big corporations to defend us. We're all families and individuals who are self sovereign bitcoiners and we control all parts of the stack from self custody to running a node to mining with that node.
Jake
And that's an important thing for people to know too that it's, there's not a single bottleneck for getting your transactions processed right. So you might have a couple big players who are saying we don't want you to be able to transact. But if you have 10% of the hash over here who's willing to process your transactions, maybe it's going to take a couple extra blocks for that transaction to get through, but then it makes it onto the blockchain, all of the nodes receive it and TikTok next block, we keep going. They're not able to stop you in that way right now.
Matthew Crater
And that's what makes bitcoin censorship resistant. That's really how it functions, we need lots of people mining. So if you end up like right now we have a lot of mining centralization in bitcoin. We have basically five companies that decide what goes into bitcoin blocks. There's a large Chinese company and then a couple of large American companies. And so we would have a real problem in bitcoin if the US and China ever decided to collude and get together and say, basically we're going to try to censor because these are large regulated corporations. And so if the US government tells Foundry, which is a large mining pool in the US you can include transactions from Russia or Iran or just whoever Venezuela, whoever the enemy of the day is for whatever administration it is, if they do that, then it's going to be very important that we're all mining and helping to support the network. And so that's the other thing. When you rent hash, you draw hash away from these large pools and you help to decentralize mining. Pool mining in bitcoin.
Jake
Technical, important conversation covered. Now we're going to talk a little bit drama, perhaps a little bit of. There's been some spicy exchanges going on X lately around corporate bitcoin holders, around strategy. Sailor's a friend of the show. Fong's a friend of the show. I, I give a lot of credit to Saylor, my orange pilling experience. I was paying attention to bitcoin for a while, but I listened to the Sailor series before I was working on, on the what is Money show. And that was something that pushed me over the edge to where I was like, I gotta, I gotta hit pause on what I'm doing and focus on this right now, you know, and, you know, was a catalyst for me to be working in the space, getting involved. That's great. Yeah, I think that, yeah. Which, which I think there's a lot of credit. These guys deserve a lot of credit for a lot of the good things that they're doing. First, I would say there's two key questions I have perhaps like in defense of Saylor, the. The four groups that I can see that have a vested interest in strategy are, are bitcoiners the debt holders. Right. Like the corporate debt issuers, the preferred holders and common equity holders. Right. And so there's four buckets that are like the primary vested groups. Is there a way that you see that all four of these groups can win? Or do some of them have to exceed at the expense of others? Do the preferred shareholders win at the expense of the common equity? You know, do you see a world where all four of those can.
Matthew Crater
Can what, remind me what, what was the fourth one? So we have. Perfectly.
Jake
So you have your Bitcoiners who, although they're not holding Microstrategy, they're, They're, you know, have a vested interest in how well or, or poorly they do connected. You have your convertible and other debt holders, you have your preferred holders, and then you have your common equity.
Matthew Crater
Yeah, well, let me, let me echo what you. Just what you said there in the, in the introduction where I learned a lot from Michael Saylo and watching him on podcasts. I've consumed probably hundreds of hours of interviews with him. And I think he started off from a very good place. I don't like where the company has moved to this point. I would say that basically there are three. I would say they're basically three constituencies. You said four. But in terms of. I don't think bitcoin is dependent on any single corporation. Obviously, if a large company in the space goes down, that can have repercussions, usually just short term for Bitcoin's price. But fortunately, bitcoin is not. It doesn't depend on Michael Saylor or strategy. It doesn't depend on me. It doesn't depend on any of us. And that's one of the nice things. That's what it means by it being decentralized in terms of the capital structure of strategy. I think they're currently in a very bad place because they were able to accumulate a lot of Bitcoin over the past few years because something called the M Nav, the multiple of the net asset value was trading at a premium. And this was a really interesting thing to see where the stock was actually trading at a premium or the market cap of the company was trading at a premium to the value, the fiat value of the underlying Bitcoin holdings. And this meant that you could, you could sell stock, you could issue new shares of MSTR and you could buy Bitcoin with the proceeds in an accretive way, which means that the Bitcoin per share went up whenever they did that. So when basic M Nav, which is just market cap divided by bitcoin holdings, when that's above 1.0, these issuance of new shares is accretive. When it's below that, it's dilutive. And so the problem now is they've been, for example, that they just, they just issued, they raised, they raised 100, whatever it was, but 100, they bought, they bought $100 million more of Bitcoin over the past week. But they did it in a dilutive way because the M nav was less than 1. And so each shareholder now each share a bit of micro, of mstr has less Bitcoin associated with it. So that's something that's changed with strategy in their funding model. So what Saylor did at the beginning is he just took all the cash that was on the balance sheet and he bought Bitcoin. And then what he did is he used what people called the. I forget the exact phrase, but the perpetual motion money machine, or whatever it was, this MNAP premium allowed him to buy a lot of Bitcoin. What has happened since then? And then there are a lot of spinoff, there are a lot of competitors and microstrategy strategy copycats. And this is the whole, what's called the Bitcoin Treasury, Bitcoin treasury companies, or the Bitcoin treasury space. And what's happened over the past 12 months is that the market has figured out that maybe, and it remains to be seen because we're in a bear market. So this may just be a result of the bear market, but I think it's actually more permanent and I can tell you why. But basically the market has decided that these companies, there's really no need for them to trade at a. At a premium to their underlying Bitcoin holdings, which makes sense to me because if you think about it, bitcoin in a wrapper, Bitcoin in a corporate wrapper with operational risk and CEO risk and all the risks that come with corporations and stocks. And Saylor himself did a good podcast, I think, with Nick Bhatia, about the, the 24 risks or the 21 risks of stocks. And you could basically, you could basically go through and watch that and apply all of it to mstr. And I think it's an interesting exercise. And so my hypothesis is that Bitcoin, all these Bitcoin treasury companies in their current form are broken and they're never coming back. I think the market has figured this out, and the market will look back on this as a very interesting experiment. And so what Saylor sought to do as the M Nav multiple is compressed is he sought alternate ways of, of raising capital to buy Bitcoin. He played around with convertible bonds in the early years and he's slowly retiring those. But the part of the capital structure that he's really been milking lately has been preferred shares, which are higher up in the capital structure from common shares. And so he's issued about 10 or $11 billion worth of STRC known as stretch, which is a perpetual preferred stock and that comes with a currently 11 or 12% dividend or effective yield. So he has a real problem now because the only way he. As long as M Nav stays below one, the only way he can raise new capital is by using these preferred shares and they're trading the peg for them. Seems a little bit unstable, especially on Stretch. And the market is trying to figure out. Because if. I think you set it up perfectly because basically he needs to pay the dividend on the preferred because this is, this seems to be his baby. He says we can build money on top of it. And he wants to, you know, grow this to supposedly trillions of dollars, which I think is, is never, never going to happen. But in order to pay that dividend, he needs to get money from somewhere. And so what, what do you, what should he do? Should he, should he sell the. Sell the bitcoin? They're sitting 850,000 bitcoin. If he sells that though, then bitcoin per share goes down and. Well, would it be accretive to buy more bitcoin?
Jake
Would it not be accretive to. Now this is, this would not be a popular take. I'm not recommending it exactly. But would it not.
Matthew Crater
I know what you're going to say and it's, it's a good idea.
Jake
Yeah. Would it not be accretive to sell the bitcoin and buy back shares at lower m nav than one that would technically be accretive?
Matthew Crater
I'm 99. Sure. That would be a creative sell and various. I think he said that in the past that if it ever traded a low M Nav, he would sell bitcoin and buy, buy back the shares. And so that would,
Jake
like, if he was just a normal guy, nobody'd have a problem with that, you know, or like, like if you're doing this on a, on a smaller scale or something like that. I feel like that wouldn't freak anybody out. Even just to be like, we're going to sell a little bit of bitcoin to harvest tax losses. We're going to sell a little bitcoin for a little financial jujitsu here. It wouldn't freak anybody out if they weren't like, oh, but you said you were never going to sell, you know, or, or that sort of thing. You know what?
Matthew Crater
I think the tax law selling thing is a little bit of a red herring because.
Jake
Well, 32. Yes, yes.
Matthew Crater
No, but even if it were a larger amount, it would only really count. Toward, I mean, essentially all their Bitcoin's underwater now. So you would basically get a tax benefit from future, you could use it to offset future capital gains, which means you'd be selling Bitcoin in the future. So.
Jake
Okay, gotcha.
Matthew Crater
Tax loss, high risk.
Jake
You can apply that to their operating revenue, which is quite relatively low in comparison.
Matthew Crater
Yeah, you can't, you can't, you can't offset operating income with, with capital losses, unfortunately, as a business or, or an individual, at least in most cases, I'm not a tax guy. So yeah, he could do that. The problem I'm not sure that would solve. So maybe he could do, he could do that and he could get the M nap back up to about one, but if it's at one, it doesn't do him any good. He's got to get it above that. And so it's really something the market has to give him. And so he could do that. That would be sort of the classic CFA charter holder answer. You sell the asset and you buy the discounted common stock. The problem with that is he still needs to come up with, call it $1.3 billion every year for the, for the preferred, lots of different preferred stocks in his capital structure, but especially for stretch and they have this other prop
Jake
55 billion or something like that. Right. So we're talking Maybe he's got 40 years covered, if, or 45, something like that. At current valuations. We're in the bear market, but it's,
Matthew Crater
it's a little, it's a little bit misleading simply because he's such a, we saw what happened when he, he sold 32 Bitcoin. And so when you're, when you're the elephant in this, it's, it's easy to say I can float on my back in the swimming pool. But if you're the elephant that's as, as big as a swimming pool, you can't really float on your back the same way as smaller animals can. And there's, there's kind of a circularity to this too. If he, if he sells a lot, then the price goes down and then he needs to sell even more. So you can have kind of a vicious circle. The other thing that's coming due is some of his convertible bonds are going to, they have, they have various put options associated with them and the holders of those are going to be able to put them back onto saylor in 2027 and 2028. And this is one reason he retired one of those convertibles a couple weeks ago. And so basically that's a, the number just off the top of my head, people can fact check me. It's about $3.5 billion. And so he needs to, he needs to come up with $3.5 billion over the next couple years and he needs to pay that one and a half. So let's say this is over two years. So three and a half billion dollars of convertibles getting put back to him and then $1.5 billion of dividends per year. So that's 3 billion plus, 3.5 billion, $6.5 billion he needs to come up with. And that's a lot of money. Obviously he's got the bitcoin to cover that. But you have to ask what would be the repercussions of selling that. And the other thing I think people miss is when they say that he's got 50 years of coverage. While this is true, the way the stock market values stocks is it values them based on what's going to happen in the future. And so if it becomes a self liquidating venture where he's basically just keeps selling the bitcoin every year to pay the stretch dividends, that's not a business, if you think about it. That's not business anyone would want to own for five or ten years. Just, it's like watching an oil company pump all its oil and pay for the private jet or something or end up burning the oil. So certainly to trade it an m nav above 1, you have to display some sort of growth properties. Maybe he could bolt on an operating company. But this is why I think people miss the point when they dismiss the market's reaction to selling 32 Bitcoin. And they're like, what's 32 Bitcoin out of 850,000 Bitcoin? What they're missing is the market is a forward discounting mechanism. I always use the Wayne Gretzky analogy that when you're playing hockey you have to skate to where the puck is going to be. And this is how the market prices prices stocks. So obviously the market doesn't care that he sold $2 million worth of Bitcoin. But if he's changing his, if he's changed the language somewhat from saying I'm never going to sell bitcoin to I'm never going to be a net seller bitcoin. The problem with saying you're never going to be a net seller bitcoin is you can only say that if you provide the time period. And so if the time period that he, that's that he's referencing for that is the past five years. He could sell 500,000 Bitcoin and he's bought 850,000. So he could say I've been a net buyer, he could sell half his bitcoin and still say I've been a net buyer of bitcoin. I haven't been a net seller of bitcoin over the past five years. And so I think it's worries like that and then the market looks at the M nav. The M Nav's currently at about 85 cents on the dollar. So it's actually quite far away from where he can hit that without diluting the MSTR shareholders. So they're looking at that, that the M Nav funding mechanism is broken and that stretch is trading like a junk bond. It's a preferred stock but it's basically trading, I made a video about that this morning. It's trading at junk bond levels. Junk bonds are currently priced, the yield on them is somewhere between 6 and 14%. And Saylor's stretch is priced at 12%. And so the market is saying this is basically, this is basically like a distress bond or a junk bond. But unlike a junk bond, if you're a junk bond holder, you have some debt covenants that protect you. You might be able to say make me whole. At par there's a maturity. Whereas with perpetual preferreds, The particular stretch as a perpetual preferred stock, he can stop paying the dividend at any time if he wants to and that, that doesn't trigger anything. Whereas for a lot of bonds, if they were bonds instead, that could trigger some sort of default and then the bondholders could do something about it. But I see holders of MSTR or STRC stretch saying this is great that he has these preferred shares that he never needs to pay back. But what they're doing is they're, they're listening to sailors perspective. Yes, this is great if you, if your strategy, it's not great if you're a holder of one of them because you really don't have protections and the only way that you're going to be able to get out is by, by actually just selling those in the open market.
Jake
So it's a little bit of a trust me bro, you know, like 11.5% a month. But like he doesn't have per year,
Matthew Crater
not per month but. But still.
Jake
Yeah, yeah, yeah, yeah. Paid out monthly but so I predict
Matthew Crater
I've seen this happen before. I've been in the capital markets for 25, 30 years, I believe Stretch will end up trading as trading like basically a broken preferred where a lot of people misinterpreted my words and said that I think that strategy is going to blow up. I don't think it's going to blow up, but I don't think it's really going anywhere from here. And so I think what happens eventually to Stretch is it ends up trading 40, 50 cents on the dollar. So 40 or $50 per share and it can just kind of hang out there. If it gets down to $20 or $30, you'll begin to have some of the Wall street vultures come in and circle and maybe buy it for a quick pop. But I think he has a real funding problem at this point, so that would be my concern. I only hold Bitcoin in self custody and that's what I encourage other people to do. I don't think you'll be able to. I certainly don't think you're going to be able to outperform Bitcoin by holding MSTR shares and certainly not holding Stretch shares because the maximum you can make there is about 12% per year.
Jake
I wonder if he came into the game with the convertible bond strategy. That worked out quite well for a while. They launched a few different preferreds. He was transparent about, hey, we're going to try this one out, we're trying the next one out. We're figuring out, we're dancing, we're on the edge. And I wonder if he. If there's. I can see different exit or like ways that it works out. I could see perhaps the demand for stretch stays, perhaps because the reason there was the M Nav multiple initially was there was so much capital that wanted exposure to Bitcoin but that couldn't have it. So we had mstr. It gave you that exposure to Bitcoin at first. Then we had the ETFs come and that maybe sort of diluted the opportunity for them. That's when you saw them begin to pivot from the convertible bonds stuff to the Stretch. I could see a world where people go, hey, I like this relatively stable product. It's not risk free, nothing's risk free. But I like this relatively stable product that pays me 11% a month, 11% annually per month. And that capital continues and they float and that ends up providing exposure to Bitcoin vaguely in different ways to different groups that want it. I guess one question I'm curious to hear your answer is if you were to like Steel Man Saylor's case, if it does work out for him. What do you think that that looks like? And microstrategy holders, let's say, like the common equity, you know, that group.
Matthew Crater
It's, I think, I think it's all dependent on, I don't think there's anything to steal, man, simply because the fundamental problem he's up against is there's no free lunch in economics. And so you can't create using financial engineering. I don't think you can outperform bitcoin without. You can outperform it. If there's some bag holders, there's some people who get wrecked. So for example, if you issue a lot of debt and just never pay it off and use that to. Well, I guess you couldn't even use that to enrich the common shareholders because they're further down the capital structure. But yeah, a huge rally in bitcoin's price could, could conceivably bail him out for, for the, in the, in the short term and then maybe you get some new blood coming in and they're able to push the M nav above, above 1. But I think, I think he's got a fundamental problem because it's a, it's a. And I, I think, you know, Saylor's a brilliant mind. He's got this engineering degree from, from MIT and he, he knows how to. He has been a business intelligence software company for decades. And so I think the best thing he could do would be to bolt on an operating business that would help have a business that throws off some free cash flow. And I think this is where bitcoin treasury companies will eventually move towards. But at that point we won't call them bitcoin and treasury companies, we'll just call them companies. And so I think this is where I think the bitcoin treasury company thing is just an experiment and that the experiment is over. What would get me excited is if Apple, if Apple or Facebook or Google or I guess SpaceX, I guess SpaceX already owns some Bitcoin. If they dump their US treasuries and they bought Bitcoin and put it on the balance sheet, I think there's been a little bit of sleight of hand here thinking that the only way you have a bitcoin company is you just do Wall street financial engineering. And because I have this tradfi background, I'm up to here with financial engineering. It's new to a lot of bitcoiners, but it's what led to the great financial crisis in 2008. It was what led to the long Term capital management problem in the late 90s. Financial engineering, it can be okay. There are uses for it like pooling mortgages and stuff can be kind of interesting. But it got pushed too far in 2007, 2008 and it almost took down the US banking system. And so I think the future of bitcoin in corporations is operating businesses holding Bitcoin on their balance sheet as a good store value. Because U.S. treasuries and cash and T bills and money markets, these are melting ice cubes. And this was Saylor's original message. He had this $400 million of cash that was on his balance sheet and the Fed was printing. And so I think he did a very smart thing moving that into Bitcoin but trying to create a perpetual. Basically everyone comes to bitcoin late and is a little bit bitter about it. And like I, I discovered Bitcoin in 2011, but I didn't really start buying it and holding it until 2019. And so there's been, there's been, there's always this, this pressure to, when people come to the space, the first thing they do is they're like, oh, I'm too late to bitcoin, so I'm going to buy some crypto. And then of course that doesn't work. They lose money. And I see mstr. The only reason people were interested in MSTR is because it outperformed bitcoin and it did indeed. There's some mean reversion happening there. I think you'll eventually, if you bought it right in 2020 and you hold it long enough, it's going to actually go below Bitcoin's returns because of some of the things he's done with leverage. But I see MSTR as just another version of people trying to play catch up with bitcoin. And I think using leverage, using levered products on exchanges, using futures, using options, trying to buy stocks that promise to outperform Bitcoin. I just wish people would be more honest about this. I don't think there's any way to play catch up with bitcoin. But the good news is you and I are still really early. What percentage of the population owns Bitcoin and still understands it? So what people should do is they should do what they're best at. They should offer goods and services to the world and earn money, try to get paid in bitcoin and buy Bitcoin with that. That's how you play catch up. If you think you can buy a stock and play catch up, even if you're super sophisticated institutional investor. I still think it's not going to work. So I encourage plebs to buy bitcoin and hold in self custody and just to acknowledge that, you know, most of us, even the people who bought Bitcoin in 2011, most of them just ended up spending it on things or losing it. And this, this is part of the, this is part of the process. But you know, people want, they want the Lambos, they want the free lunch. But there is, there's, there's no free lunch in the world. You know, you have to, if you want to become a trillionaire, you need to start a rocket company. Like it's, it's hard work.
Jake
Yeah. Speaking of rocket companies, I guess I wonder, it's not something I've heard you talk about, but you know, Tesla, SpaceX, they've got Bitcoin on the balance sheet. Obviously. Elon is a pretty sharp guy. When I hear him talk about bitcoin, it sort of feels like he's being like, like borderline intentionally obtuse about it or like trying to make it look like he doesn't know as much about it as he does. You know, he memes about dogecoin, all those sorts of things. Obviously he's at it. You know, you look at what people do more than what they say to see where they're are really aligned. He's also had that conversation recently where he was like, in the future I don't think that we'll have currency. We'll just use like energy will be the currency essentially. And most of us know that bitcoin is basically an energy backed currency. It's a. Energy backed.
Matthew Crater
Yeah, I thought that was a really, I don't know if he believes that. But bitcoin is not energy.
Jake
Energy is, takes energy to produce, I suppose is the better for.
Matthew Crater
It takes energy to produce. But energy is pretty much infinite. Like there's a lot of star, the universe, okay. And so you can't, you can't base. You know, even, even crude oil makes very bad money because it's, it's not scarce and energy is not scarce. So it's a very bad basis. It's a bad basis for money. It is used. Obviously a lot of energy is used to secure the blockchain, but that's in sort of this social software equilibrium context. So when I heard him say that, you know, you, you never know with these guys who are operating at such a high level and they're playing, they're playing 4D chess and they're huge Targets as well for regulators and for the deep state, et cetera. And they may be part of the deep state themselves. But the way he talks about money is absurd and doesn't make any sense. And so we're forced to conclude that he either doesn't. Lots of smart people don't understand Bitcoin and still don't. Lots of people on Wall street. And, I mean, I thought it was a fad and a scam when I first encountered it. And Elon's a very busy guy, so it's always hard to know. But energy. This was Henry Ford's idea that making energy into money, which is kind of cool, but only Satoshi really came up with it, and money needs to be scarce or it's not good money.
Jake
I know you had, I don't know if I'd say close relationship, but a working relationship with Peter Thiel, I think soon after you graduated from college. I wonder how that lines up with the timeline of the creation of PayPal. Elon was obviously involved with PayPal. PayPal's initial mission was to create a digital currency, essentially a global digital currency for. And that was. I forget the timeline there. Did they. Did that start in 2008 or around 2008, I believe? PayPal.
Matthew Crater
No, they. PayPal was funded in 1997 or 1998,
Jake
and they all exited around 2008 or something along those lines? No, it was. It was.
Matthew Crater
So PayPal ended up. It was. It started as a company called Confinity, and then it eventually. Then they changed the name to PayPal, and then they merged with a company called. I believe it was called X.com because Elon likes X. That was the original X.com. they merged. They kept the name PayPal. There was a fight between Elon and Peter about who would be the CEO, but they basically merged forces. And we have the PayPal mafia, obviously. I was actually very close to Peter at the time, hanging out with him a lot. I was in the original PayPal offices and going to some of their parties, and Peter and I had a philosophy professor at Stanford in common. That's how we met. And then we had market interests, but basically PayPal was sold to eBay in 2000, 2002. And Peter took his. I think he netted something like $50 million out of that. And he had. In his Roth IRA, which was a. I remember when he explained the Roth IRA to me in the. In the early days, and I didn't really understand what he was talking about, but he did it in a very smart way. And Then. And so Peter was a friend of the family, and he actually came to my wife and I, our wedding, and so we hung out a fair amount. And then I went to work for his hedge fund when he really rebooted it after he sold PayPal to eBay, and he had this chunk of change. And so I worked for his hedge fund, which is called Clarium Capital, and we grew it when I was there from about 50 million to $2 billion. And so I knew Peter before he was rich, and. And obviously he's just, you know, he. He moves at a different level from. From most people these days. And I'm. I'm not a. I'm not a. He was very good to me. He gave me, as a. As an English PhD graduate, a job at a hedge fund, which was amazing. And I think I did. I did good things for him. And it was a great group of people to work with, just very interesting people. I don't. I don't like the turn that he's. He's taken towards surveillance and Palantir and some of these things. And I find it quite puzzling, especially because he used to be a serious hardcore libertarian. But the risk is, if you want to get really big, the ultimate customer for your startup is the US Government. And so that's basically what Elon and Peter both did. They figured out that you should sell things to the US Government, like rockets and surveillance, and you should use US Government carbon credits for Tesla and kind of play those things. So I've seen this transformation in Peter, and people do their own things, and I haven't spoken with him in over two years. And I guess I'll be quite frank here in terms of what I saw with the Epstein files coming out. I don't really have a strong desire to talk to him at this point.
Jake
That was something.
Matthew Crater
It's kind of a sad trajectory. I'm very grateful to him. You know, people can do what they want with their lives, but I was. I was not happy to see that he was still in contact with Epstein in 2018 and 2019. And you could almost forgive earlier stuff, but obviously, if you're moving at a certain level, there were a lot of people involved with Epstein.
Jake
Yeah, It's a complicated world up there. Not one I feel inclined to get all that involved in, really. I'll keep my simple pleb. Humble existence and keep track of it.
Matthew Crater
Me too. I think it's a good idea.
Jake
Yeah. You mentioned the philosophy professor that you guys shared, which I believe was Rene Girard. Is that right?
Matthew Crater
Yes, that's right. He passed away in the 2014 or 2015. But he was a big influence on both me and Peter. And he was a Frenchman, a brilliant cultural theorist who tried to. His goal was to provide sort of a unified field theory. So in physics, obviously we have the different forces and trying to reconcile the strong and weak, weak nuclear force and electricity and magnetism, those forces, E and M and gravity. That's what's called unified field theory. Kind of a theory of everything is how. It's how it's talked about. And Girard sought to do the same thing in the humanities. He sought to come up with a sort of a synthesis of sociology and anthropology and literature and try to understand what makes human if they're basic laws of human culture. And so he did very, very interesting cross disciplinary, interdisciplinary work which attracted a great, great group of people. People, as I said, that's, that's where I met Peter. And it was a little bit like hanging out with bitcoiners today. Just a lot of really interesting people who were interested in a lot of different things.
Jake
Autistic smart weirdos, basically, who are like, wow, you're sharp and weird.
Matthew Crater
This happened kind of in a university setting, this was at Stanford, these sort of, these notorious, now notorious seminars and salons. But we would hang out and that's how I got to know Peter, because I'd go to these seminars and then afterwards we'd all go out for drinks and Peter and I would talk about the, the markets and trade notes. And he was running a small hedge fund at that point before he did PayPal. So those are some of the connections.
Jake
Interesting. And was this overarching theory, was this his mimetic desire sort of theory or what was.
Matthew Crater
Yeah, he called it the mimetic theory. So this basic idea that he started off looking at human psychology kind of through the prism of, of comparative literature and went through various. Don Quixote and Madame Bovary and Proust and Joyce and Shakespeare went through these people and came up with this idea. Mimetic desires. Basically, mimesis or mimetic just means imitation. And so one of his early insights was that we don't just imitate how each other, we don't imitate how people dress or how we. You know, obviously if, if you've, when you have kids, if you've had young kids, you realize like how. What little imitation machines they are because they want to, they want to dress up like daddy or mommy and they want to. If you have certain personal mannerisms, you know, they'll they'll pick up on them and try to copy them, which can be very humorous. But what Girard's insight was, people don't just imitate these things. They also imitate each other's desires. And so you want something because someone else desires it. And this inevitably leads to a convergence of desires on the same object. And that can create conflict and rivalry. So it escalates to mimetic rivalry. And in his later work, he was very interested in cultural crises, what he called the mimetic crisis, and also the role of scapegoating in terms of providing cultural. Cultural union. So basically, the kind of rough story would be there's problems in the village. Everyone's fighting with each other, and then they realize that that old lady who lives in the cottage in the woods has been casting magic spells on everyone. And so they all get together and murder her. And then all the bad things stop. You know, the. The drought stops, and the crops start growing, and people stop getting scratched by their cats and dogs, and so they basically begin to. It's his theory that I'm really simplifying here, but his theory is that archaic religion comes out of scapegoating rituals and ritual sacrifice. And that's why when you look all across archaic cultures, there's this emphasis on sacrifice. So one of Girard's best books is called Violence in the Sacred, which is about sacrifice and trying to talk about archaic religion and also talk about his. His most interesting work has to do with the Christian revelation and how it interacts with archaic religion. And basically, Christ is the scapegoat. Christ reveals. He kind of unmasked scapegoating because. Because he was innocent. He didn't do anything, and he. He basically broke. Broke human culture. So right now, it's much easier for us to see scapegoating. We know that that old woman who lived in the woods wasn't really a witch casting magic spells on people that she was. And she wasn't actually guilty of anything. She was just weird and old. But Girard has good evidence that people didn't really understand these things before Christ's crucifixion and the resulting Christian culture. So that was one of the interesting things about Girard, is he was a devout Catholic. I used to attend his church occasionally as well. So he's a very, very, very broad thinker and certainly very hard to summarize in a short. In a short. In a short space. But he was on my. He was on my dissertation committee, and I wrote a dissertation that he. He supervised and so that was. That was, you know, he was a. He was a mentor to me. He was one of these, you know, these great, great figures that you can. You can learn a lot from.
Jake
I wonder if, like, I, I sort of consider myself a student of Jordan Peterson. He's probably one of the main people that I consider, you know, that I've learned a lot from over the. Over the years in my development. And he's pretty. There's a lot of overlap there, I'd say. Like, I read his Maps of Meaning, which came out probably around a similar time that you were meeting with Renee. Probably, like, I want to say, like, 95 or something. Something in that. That vague time frame. And then, you know, the progression, the psychological viewpoints, the. The kind of like connecting that to stories and ancient religious traditions and that sort of stuff. I'm just kind of curious.
Matthew Crater
Did.
Jake
Was he on your radar back then? Did he come on your radar later? Like, are you quite familiar with his work or.
Matthew Crater
I, I'm. I've. I've just. By sort of by osmosis, I'm. I'm a different. I'm. I'm Gen X. And so I think. I think I sort of miss the. I mean, certainly Jordan Peterson has had a huge, huge impact over the last couple decades on. On young men. And so I'm. I'm vaguely familiar with his work. He seems to be much more of a Jungian than Girard focused. Girard focused a lot. Girard was not a fan of Sigmund Freud, but he, He. He did a lot of work on. On Freud, kind of. Kind of deconstructing him, if you. If you want to use that word. But, yeah, Jordan Peterson is a similar cultural. Cultural figure who's probably achieved a lot more influence outside the university than Gerard did.
Jake
He's had some interesting intersections in the bitcoin world, too. He had that conversation with Saylor. He had a conversation with breedlove back in 2021 that I was there for 21. 22 maybe, I think 21 at the Bitcoin conference. And it was just electric. Me and my buddies were there and we left, and we were just like, no way. You know, like the one. I remember. I remember Jordan said at one point in time that reputation was the original store of value. And he was talking about hunter gatherer societies. You hunt, you have a little meat, you share it with somebody, then it's like, okay, this guy's helpful. When I get a little meat, we share it with him. It was just this. They went like, you know, real first principles. And I remember back then I was just like, oh, my gosh, Bitcoin's going to change everything, you know, as part of my progression in that way.
Matthew Crater
Yeah, it's great when you have people who understand lots of different disciplines, like Girard and Peterson, and they can draw together and make connections, and you can certainly learn a lot from people like that. And I think Michael Saylor is another figure like that who's very comfortable discussing. He did a couple great. So obviously he can talk engineering, he can talk bitcoin, he can talk about running a software company for decades. And he's also. You. You may or may not know. The Sailor's an excellent amateur historian as well. He's very interested. He's done some good work on pre Revolutionary American history and he did a great, I think, two podcasts with. With Seifudina Moose where they discussed, I believe, is it conceived in liberty, which is. Is it Rothbard? I don't want to make a mistake. I think it's Rothbard hard. But yeah, say Sailor's one of those. Those big minds who makes. Makes connections between things.
Jake
Yeah. You in this conversation with Stacks, too. I remember you saying that it was Sailor. Teal and Gerard were like three of the greatest thinkers that you've personally interacted with over your lifetime. And even for me coming into this conversation, you know, I love.
Matthew Crater
Yeah, I think just, just like, just brainiacs, just really being really smart.
Jake
Intellectual capacity, maybe just having a lot of.
Matthew Crater
Yeah. Having a big computer upstairs.
Jake
Yeah, right, right, right, exactly. Yeah. And, you know, you. You've spoken about previous. You know, you guys, you guys have had. It's been, it's been a little rough on X the past couple days between you guys. But you have a history where you spoke very warmly about him quite recently. You said, you know, you think he's brilliant. He's always been nice to you. You know, you guys have spent time together and stuff like that. For me, looking at it, one of my, like, hopes coming in the conversation, I was like, how do I facilitate some, like, Kumbaya? Like, how can. Or, you know, like, get. Because I think, I think that if you guys were speaking with one another, you could be like, hey, I like, you could probably tell him things that would be helpful for him to hear and he could probably, you know, you guys are both brilliant. And I was just trying to figure out, like, how do we, you know, how do we get them to talk in a way that's because I have. I think you're great, basically. This is, like, I'm gonna level, like, one tiny little criticism here at you, but I think, like, I have tons of deep admiration for you. Really. Like, I want. Want my respect to be clear. But. Sorry to use a but. But there's. There's.
Matthew Crater
No, no, that's fine. I like honesty, and it's. Yeah, that's the only way you can work through things if people are honest with each other.
Jake
Right? Yeah. And. And so there's. There's been. For me, it's like, I agree with you from an intellectual perspective pretty strongly on just about, you know, most of your takes and your concerns and that sort of stuff, but I wonder if you would, like, catch more flies with honey rather than a baseball bat or something, you know? Like, I wonder if there's this because it's so important to be like, hey, I'm ringing the alarm. You know, like, you know, pay attention. You know, people who did that. During ftx, there was, like, a lot of gratitude from. I remember I had, like. I had a low chunk of bitcoin on ftx. I was like, let me get a little yield over here back in 2021, you know, and there was alarms that were raised. My good buddy Mike, who's backstage right now, he. He was like, bro, right now, I got it off. You know, it was a few grand, but I got it off that night. And then they collapsed a day or two later. And so, you know, I think the point being is that I think there's a lot of value in this. Like, I'm paying attention. I'm paying attention to the threats. I'm sensitive to the threats that are coming up towards us. But if it might be more productive to, like, have a more, like, loving approach, I don't know, more, you know, like, the balance that could be struck there. I guess it's not a really formal piece of advice or criticism, but that my instinct is like, I wonder if we could be more productive furthering our shared mission with a little bit more, like, because it's just so toxic. Bitcoin can be such a toxic place. And there's value in that in some ways. But part of me wonders, like, hey, can we get along a little better?
Matthew Crater
What do you think of that? The problem I have with Saylor now is he's just crossed. He's crossed a couple of red lines for me. And, I mean, I received. I've been through this a number of times now, and even, like, with Celsius, I fought with a lot of people. People forget about Mashinsky and Everyone was telling me Mashinsky had the best interests of bitcoin and bitcoiners at hand and he was just showing people another way to use Bitcoin. Whereas in fact he turned out to be a scammer. And so it's, it's hard when people are. When people have made money with someone. And so there was kind of like a mini religion around Pashinsky and Celsius because it was just like, wow, this is the low money machine. And a lot of people have made money with MSTR and Saylor and have almost a. I've encountered almost a religious devotion to him where it's, it's. People are basically. And, you know, it makes, it makes sense. You've got it. Life is, you know, we're all busy and people don't always have time to dig into the financial statements and think through these things. But the two red lines that Saylor has crossed for me is, first of all, I don't know, can I curse on the podcast?
Jake
Yeah, why not?
Matthew Crater
Just shitcoining.
Jake
Okay. Yeah.
Matthew Crater
Recommending DeFi protocols and ERC20 tokens.
Jake
It's not a good look from no second best guy, I will say. Yeah.
Matthew Crater
And talking about, I mean, he used to talk about how bitcoin was ethical money and Ethereum was unethical and had a pre mine. And so I just, you know, seeing him, I understand why he's retweeting it. I called him out on it and he was basically like, you know, retweet, repost or retweets. Not an endorsement. And there was a lot of, you know, he, he's had these companies at Strategy World and he puts them in his slides at the Bitcoin magazine conference. The bitcoin conference. And he's retweeting them. And I find it bizarre. I hadn't really been paying attention. That's one of the things that brought me back to covering cellular and strategy that he was. That he was actively promoting shitcoin protocols that are very, very dangerous that you use, that are basically targeted towards retail investors. This is not institutional investors. And Saylor's been going on crypto podcasts. I've featured a couple on my YouTube channel talking about Stretch and how you can put in these defi protocols. And that's just going to. Adding leverage to Stretch when Stretch itself. I want to make it clear to people Stretch is not a safe product. In my opinion. There's no free lunch. You can't have something that's pegged at 100 that has a high Yield like that, Bitcoin is not going to magically make this possible. And I think that the peg will break. I think it's a very dangerous product. And I think plumbers and farmers and electricians and working class and middle class people are going to get hurt by this. And so it's.
Jake
What percentage probability would you put on that? Let's say what percentage probability versus people getting really hurt or like, hey, it mostly works. It stays maybe 90 to 100 bucks. And for the next 10 years they've
Matthew Crater
already gotten, they've already gotten hurt quite badly by MSTR because it's down a lot more than bitcoin. And we've had the multiple, the M Navs compressed as bitcoin. Price has gone down, but in some
Jake
ways it's done what he's told us it would do too. In some ways, he said we're looking to build an instrument that's 2x levered on Bitcoin and it was 2x levered on the way up and it was 2x on the way down. So Bitcoin drops 50%, strategy drops 75 or however you'd calculate that. But it's moving roughly as a 2x. In some ways it's doing what he said said. But obviously it's, you know, we went from a 3.8x M nav or something to a 0.8 something along those lines. Right. So yeah, that's rough.
Matthew Crater
No, no, that's. That, that is, that is true. It is, it is a levered product in, in that way. I think the, you know, what's changed is that the problem is now that the M Nav dilution thing that we've, we've been talking about. So I think something's fundamentally changed there. But no, I think there's a very, I think there's a very high, very high probability that strategy is basically finished as a company because I don't see how they square the circle. And it doesn't mean it's going to be liquidated in bankruptcy or anything, but there's going to be this. What's going to happen. He's going to either have to massively dilute the MSTR shareholders as we talked about, or he issues more stretch and that if he's a seller of stretch when other people are a seller of stretch. So it's.
Jake
I see.
Matthew Crater
So that, that's a problem. And then you have, you have this fat, you have this, this fat tail as well. Where if stretches in defi protocols, it's. It, there's, there's currently hundreds of millions of dollars worth of it. And it's levered up so when those people get margin calls, basically the stretch is going to get dumped. It's sort of tokenized stretch that's going to get dumped, and then that's going to lead to more selling pressure. It's a guarantee these defi protocols are going to blow up. Because you can't just engineer something to make yourself 40 or 50% or 60% a year like many of these, the APYs that they promise. It's just not possible. It's leverage piled on leverage piled on leverage. The two red lines he's crossed is shitcoining. And I want to be very careful how I say this, but I believe that he's been lying the last couple weeks as well. Where he. I don't know if you saw how he. At BTC Prague, he basically said, I never said strategy would not sell bitcoin. I said that you should not sell your bitcoin. And so I made a video yesterday basically pointing out even two months ago he was saying strategy would never sell bitcoin.
Jake
I wonder if he meant it when he said it, you know, and now he's like, oh, well, maybe we got to adjust our strategy here a little bit to. For this to work out.
Matthew Crater
The problem is if you build a company and you tell everyone for five years that the business objective of the company is to increase bitcoin per share, it's in every slide deck, it's in every earnings call, then you change that. It's like that's the whole point is to increase bitcoin per share. And his whole brand was never sell your bitcoin. And so I think basically it's another red flag. It's a sign that he's in distress that the company's in distress, that he has to try to pump up confidence. So I wish him well. And I certainly. My goal is to just enlighten people because I have this tradfi background, enlighten people about the risks, the risk that they're taking. So you can buy a junk Bond and make 12% a year, but what normally happens is you have some of that principle gets eroded away. And so I think that's what will happen to these holders. And so the thing that really there are two things that brought me back. The first thing was his saying that strategy makes bitcoin into money and stretch. And I thought that was just a departure because what he's been saying for the past five years, bitcoin is money. And so he has this idea that somehow we're going to build US dollar stablecoins on top of Stretch, which is that's never going to happen. It's completely delusional. And I don't know why he thinks that could ever happen where you sort of hedge out the, and hedge out the volatility of Stretch and create some product that is somehow pegged. This is never, never happened. And I'm not sure why anyone would want it to happen because we don't need the US dollar. I mean the whole point of Sailors preaching for the past five years is we want to move to Bitcoin. And I think there is these arguments that we're currently in a transition period where we somehow have to, you know, onboard people to Bitcoin in ways that are less volatile. I think these are very self serving arguments and I don't think they're true. I don't think there's trapped institutional capital either. There's not trapped institutional capital. The whole way this is presented is completely false. Because basically the way this works is you have, let's say you have fixed income managers who have a lot of bonds. And so this idea is Saylor's going to give them a bond that they can buy or preferred stock for preferred people who have funds that buy or ETFs that buy preferred shares.
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Because
Matthew Crater
the way capital allocation works is at a level above that where there's someone above that who says we're going to devote this much to stocks and this much to fixed income and this much to commodities and then this much to bitcoin and crypto. And so there is no trapped institutional capital. This can all be moved around at the allocation level, at the capital allocation level at these institutional players. And we know, we also see this as true because stretch strc is a retail product. Strategy itself has said it's 83% retail investors and if there were some value there, there would be a lot more. So if Stretch is underpriced, there'd be a lot of institutional buyers stepping in right now. But they're not because they're sophisticated and they understand that this is a junk bond that has huge risks of capital principal loss. And so I dispute these various arguments as I go back and review them. They're simply not true because the capital allocator at the top can say, well, we're not going to, the fixed income bucket is going to shrink and we're going to buy Bitcoin instead. We're going to create a crypto bitcoin bucket and we're going to allocate that to the BlackRock ETF, because we understand ETFs, they're very, they're very. They're very clear and transparent. It's run by BlackRock. Like you never get fired for buying a BlackRock ETF. And the second thing is that I think I just lost my thoughts.
Jake
Well, first one was crypto stuff, right?
Matthew Crater
Yeah, I know what it is. So if they create this new bucket of bitcoin and crypto, which will basically just be bitcoin, because they'll learn very quickly that stuff in the crypto is toxic. What they're going to do is they're going to buy Bitcoin and hold it at an institutional custodian. Because the one thing they don't need, if they want to have Bitcoin, if they want to buy Bitcoin, they can buy Bitcoin just like.
Jake
Well, what if it's like a pension fund or something like that, right? Like, they can't really just buy bitcoin.
Matthew Crater
They'll buy Bitcoin and store it at Coinbase. Custody and pension funds will not. They're not going to be interested in Stretch.
Jake
Well, can they do that now? Can they, like, can a pen like, I know Wyoming, I think one of these states, their pension fund got some. I think it actually has exposure to msc.
Matthew Crater
You know, they have charters and stuff, but if they can buy gold and commodities, they can certainly they might have to. But this idea that, that somehow they're going to. That they need Stretch to buy. So I mean, I have this hedge fund background, so I have a good intuition for how these things work. Basically, if they want to buy Bitcoin, they'll buy Bitcoin itself or they'll buy the Bitcoin etf. And the one thing they don't want is they don't want layers of risk. So Stretch is a very complicated product. It has bonds, it has convertible bond holders, and I think it's got another preferred stock ahead of it in the capital structure. It's got, you know, it's got all these retail investors and you have Saylor just, just going on podcasts, shooting his mouth off. That's how you get fired. You get fired for buying Stretch. The one thing that could help Stretch is if they make it to the three year. So these products usually, first of all, no institutional investor is going to buy it for three years from inception. They'll want to see it get seasoned. And so if Stretch is still around, if it survived in three years from now, which I don't I think it's be trading as a broken preferred. It'll be trading at 50 or $60 if we're lucky. If. If it's still around, then maybe it has a chance. But I still don't think. I think if a. If a pension or other institutional investor wants to buy Bitcoin, they will buy Bitcoin because there are fewer layers of risk, there are fewer layers of analysis. If you buy MSTR or Stretch you again, you can go watch Saylor's own video on the 21 risks of owning a stock. He goes through the operational and the regulatory and all these different things, things, Stretches. If they want to buy Bitcoin, they will buy Bitcoin and they have the capacity to do it because they're large Bitcoin custodians. They're not going to hold it on a hardware wallet, but they'll hold it at Coinbase Custody or Fidelity or something like that. So I think it's a very misleading story that he's been telling and I want to make a video about this, pushing back on this idea of trapped institutional capital. There is no trapped. Maybe there's something, you know, if you're an individual and you have a 401k at your company, it's sort of trapped and you can only buy the funds that they recommend. But when you leave that job, you can do a rollover IRA and you can invest it in. You can invest it directly in Unchained
Jake
and do an IRA there.
Matthew Crater
Yeah, Unchained. I was actually just going to say Unchained. There's no trapped institutional capital. And if people want to reallocate, they will sell. They will just sell. You know, I think there's a. There's a kernel of truth here, which is that people should be holding Bitcoin, as we said, like Apple or Facebook Meta should be holding Bitcoin instead of US Treasuries. But they don't. They don't need Stretch to do that. They'll just buy Bitcoin.
Jake
Yes, yes. So I wonder, because when I look at it, to me, when I look at. I think in Bitcoin denominated terms, it's like, oh, of course the STRC holders are the bag holders. But let's say it all works out, right? They get their 11 and a half percent that stays perpetual. Works out. If Bitcoin does 30, 40, 50, whatever we think Bitcoin is going to do, they're the bag holders. But Michael's really transparent about that too. He's like, we're shortening the duration, shortening all these sorts of things. We're giving you this payout. And so in bitcoin terms, they're the bag holders. But for those who are agreeing to it, again, assuming that it works out, they're like, okay, fine, I'm going to give you the upside because I want the stability and the shorter duration of holding. And so it's transparent. Even though he's like, yes, I'm taking your money and I'm buying bitcoin with it, and I want more bitcoin, I don't want 11.5% yielding.
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Whatever.
Jake
That's what I'm selling.
Matthew Crater
I don't think he's marketed in a transparent way because he's marketed it as a high yield savings account.
Jake
Sure, sure. Right. And it's not.
Matthew Crater
He's compared it to money markets, which, I mean, these are the kind of red lines we're talking about. And these border on fraud, in my opinion. And this is one reason there hasn't been as much honey lately, because you never know why people do things. And we've all had friends in our lives, for example, who just took a turn for the worse and became kind of bad people. And it took us a while to figure it out. I'm not necessarily applying this just strictly to sailor, but it can be very confusing when someone you love and trusted and was a good friend of yours just takes a turn for whatever reason. You know, maybe. Maybe they do an ayahuasca trip and they become really weird or whatever it is, or maybe they get compromised in some way and they're operating according to some different. You know, people change over time and it's. There's a lot of cognitive dissonance. It's very hard to slay your heroes, and it's hard to. I've had to do this with Adam Back. I've had to do this with Michael Saylor. I've had to do this with Greg Maxwell, who are all big bitcoiners, obviously, over the past 12 months. But I prefer to live in the world of reality. And it makes me sad. I had personal relationships with. Not with Greg Maxwell, but with Adam Back and Michael Saylor. And they were very good to me in many ways. They never mistreated me and, you know, promoted my stuff and answered my. My questions. So that makes. That makes it more difficult at the human level. But I think. I think both of them have become bad actors. And I think all bitcoiners are going to understand this probably sooner rather than later. There's. There's a. There's a piece that's going to come out in the New York Times about Adam back, I've been told soon. And there's good evidence from the Epstein emails. Adam back, you know, went to Epstein island allegedly. But you can, you can Google Andy back in the Epstein files and you can, you can read about it. And so when, when people change, I think, you know, people, people. The only thing I have in this business is people's trust in me. And I have this history of calling out, calling out people, taking a lot of, A lot of grief for it. People accusing me, oh, you must be shorted, this somehow benefits you, etc. And then they.
Jake
I believe your intentions are pure for, you know, I've paid attention for quite a while and I really do believe that, yeah, I can be.
Matthew Crater
I can, I can be wrong. But at least, you know, people should look at that track record now. Maybe, you know, I've got some scheme at the end this, you know, build up trust and for seven years.
Jake
And here's Matthew Crater.
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Cool.
Matthew Crater
But basically. Yeah, exactly. We'll talk about that at the end. We'll give people the link. I think you have to live in the world of reality. I want to pretend Saylor's still the guy. He was the podcast I listened to and when I hung out with him in person. He's very charming, very funny, brilliant, etc. He's a great guy. He's also a great salesman. But the problem is there's economic reality and there is reality. And, you know, people went to Epstein island, you, they're not the same people they were before, or you just, you know, you, you have to, you have to slay your heroes. And so none of this is, none of this is ad hominem. I don't have grudges against these people. But we're gonna see. We're gonna see what happens to Adam back over the coming months, and we're gonna see what happens to MSTR and Stretch over the coming months. And I'm. I'm virtually certain that I've gotten everything right. And so I hope people don't get wrecked by Stretch and MSTR and maybe a giant bitcoin rally, which he's going to need pretty soon, is going to bail everyone out, but I'm skeptical about that.
Jake
I'm rooting for you, Mike. I hope it works out.
Matthew Crater
Yeah, no, look, I don't want to see things crash and burn, but it's.
Jake
Which is part of why you raised the red flag.
Matthew Crater
People misunderstand. It's like I don't hate people. I didn't hate people who bought Ethereum. I just thought, especially when it moved to proof of stake, it was really dumb. One of the things you have to do, obviously, in this business is get your engagement up. And so I'd make jokes about Vitalik and do this stuff, you know, sometimes maybe I was more cruel than I should be. But if you, if you're a little cruel to, you know, being cruel to billionaires, not the worst thing in the world. And if you watch my channel, you realize. I don't, I don't, I don't. I never punch down. I always punch up. And the people I attack and call scammers and stuff, these are people with net worth of over 100 million. And they have. They're very powerful people. They're very connected. And so, you know, they could take a beating. It's. They're going to be okay. Saylor will be okay. And I wish him the best. I wish shareholders the best. I just, I think it's going to end badly for them. I think that. And I don't think the stretch holders are going to be the bag holders. They may be, but the mstr, they're lowering the capital structure, so.
Jake
Oh, yeah, if it goes, if it goes right, stretches the bag holders. If it goes wrong, the common equity is the bag holders. Right?
Matthew Crater
No, whoever's lower in the capital structure always do worse. And so it's kind of like a waterfall. The convertible bond holders get paid first and then there's one or two preferreds ahead of stretch, and then there are a couple preferreds. There are a couple preferreds before stretch that are not cumulative dividends. So if they miss a dividend, they're never getting it back. And then there's the common. The common shareholders are at the very, very bottom. If there's ever a liquidation or something, they get the crumbs that are left over and there probably won't be much in, in that sort of scenario. And again, I'm not predicting the strategy is going to blow up. I think it's going to be. It's going to be a slow decline. M Nav's never really going to, yeah, maybe it pops above, they'll survive or something. But yeah, it's. The company has fundamentally changed and that's what a lot of people. They think I'm upset that they sold 32 bitcoin, but I'm used to analyzing stocks. I'm used to seeing transition phases and strategy is going through a transition phase. And if you understand how capital structure works. I just. Now, Saylor's a brilliant guy. Maybe he can pull a rabbit out of the hat.
Jake
Maybe they launch a bitcoin based operating company and they start doing some great revenue as this transition continues to take place. And that helps support, you know, maybe they become more of an operating company, less of a.
Matthew Crater
It's hard, it's hard to spin up a profitable operating company. And that's for sure. The whole reason Sailor got into bitcoin is because he had a failing operating company. There was, you know, and he's talked about this publicly. Saylor's biggest problem is he, over the past 10 years is he had to compete with Microsoft and Bill Gates. And so how do you compete with the network effects like that? It doesn't matter how brilliant you are. And Saylor's certainly brilliant. I think it's unlikely they could buy a successful operating business. But those are expensive and you have to sell Bitcoin to buy that. So he's in a weird place. But I do wish him the best and the shareholders the best. I don't want to see things crash and burn. And I would just like to see, you know, people slowly, or at least people just understand the risks that they're taking. Because there's, there's a post that you, you probably saw that post, it's in Saylor's feed where there was some guy who, basically some guy who's a bitcoiner and his father is a farmer. And his farmer. You know, obviously being a farmer is very difficult in modern times. It's very thin margins and you end up getting into a lot of debt and you have to lease your equipment and everything. But basically this guy onboarded his father into strc, into stretch, and his father was just like, this is a miracle. I'm getting this very high interest rate. And that just made me want to cry seeing that, because this is not both that father and that son. They don't understand what they just put their savings into and maybe they're okay. But if instead he said, hey dad, let's take some risk because, you know, we need to, you know, maybe you can retire sooner if we take some risk. Here's a risky junk bond, you know, if he buys it with that in mind, then it's completely fine. But the problem is, and then having Saylor retweet this and I'm sitting here as a tradfi guy, seeing that and saying those people are taking risks that they are not aware of and you can say, technically it's all in the stretch prospectus, and it is. But. But obviously the son didn't read it and the father, you know, this is why we have certain protections, because you can't expect people, you can't expect a farmer to do financial statement analysis. And so. So this is one thing I'm very upset with Saylor about onboarding people like that by talking about this as a high yield savings account that he said. Saylor himself said he would onboard his grandmother to this. And I think that's misleading. It's probably. He's got very good lawyers. It's probably okay. From a legal perspective, though, it may not be. I'm not a lawyer and I don't want to see a sailor get sued. I don't want to see anyone get hurt or anything, but that's not good. And for Saylor to retweet that too, is like a success story. Like this farmer is now onboarded into stretch. These are the kind of people who are going to get hurt.
Jake
Well, I will say that I don't know. Yeah, I do believe that your intentions are pure. I do believe that pursuit of the truth and operating in reality is the wisest.
Matthew Crater
I could be wrong. I'll have the humility to say that, too. So do your own due diligence.
Jake
But, yeah, understanding the risks involved I think are important. Understanding. Yeah. Okay. There may be, you know, if you're levering up to buy STRC and, you know, it's not as stable as a vehicle as you thought, maybe you, Maybe you have a play around that. But you being more well informed on the risks of such a play doesn't hurt anybody. I think that would be helpful. I might leave that there. You know, I've tried to play a little bit of a. I won't say devil's advocate, but I try to play a little bit of a. You know, given the perspective, it's, you
Matthew Crater
know, that's how we sharpen. We both sharpen. I. I'll give you. Do you want to. Do we have time for a structural argument about.
Jake
I got as much time as you got, Matt.
Matthew Crater
So I have another. My thinking sort of evolved on this. So there's. There's the risks that come with these and the fact that there's no economic free lunch. But I, I want to make the argument here as well that I've been making recently that I don't think these are good for banks, Bitcoin either. I think they. The problem here is that the wholesaler cult. Too many people are being onboarded into stocks and thinking that this is somehow bitcoin. Whereas in previous years, if you're a newcomer to bitcoin, you would buy bitcoin and maybe you'd be dumb and leave it on the exchange and then the exchange would get hacked and you'd learn your lesson. So the next time you bought bitcoin, you withdrew it. I think that's the proper way to onboard people and families. And the, the argument against this is bitcoin is, is. Well, bitcoin is risky, so you have to do your own research on that. And obviously I don't think bitcoin is, is that risky. And when you, when you do your. This is. I've covered on my channel for, for years trying to explore all the, the ways that it could fail, etc, but, but this idea that bitcoin's too volatile for people to hold, I just don't. I know, don't I, that's. It's just simply not true because you can, you can basically dial it up or dial it down. So when I, when I first your allocation size, when I put like 1% of my net worth in it, and then I put 5% and then, and then I reached the point where I was putting everything in and I was selling the third car and I was selling the rental houses and putting that in it. And so I could adjust. If you have 1% of your net worth in BTC and it goes down 50%, you've lost 0.5% of your net worth. And so I think that's the proper way to help people learn about the volatility. I think bitcoin's volatility is actually. Bitcoin's volatility is actually very, is very helpful into making you into a strong person and building conviction. Like after going through my first full cycle, the bull market and the bear market of 2022, it really. Strength just strengthened me much more as a Hodler and gave me strength in all the different areas of my life. So I think there's sort of a trial by fire. There's. Again, I had my whole net worth in it. So watching your net worth go down 70 or 80% or something is not pleasant.
Jake
I know the feeling.
Matthew Crater
But yeah, a lot of bitcoiners know the feeling. So I think bitcoiners should be new bitcoiners. Newcomers should be onboarded to btc, not onboarded to stocks. And there's a reason for this, because I fear that we're going to go through. We're in the fourth turning and we're at the end of the long term debt cycle. And what happened during the last fourth turning was in, in the US was president, President Franklin Roosevelt confiscated all Americans Gold in 1933. And he did this because they were, they need to revalue the dollar, et cetera. But the way he did it, he didn't go door to door with, with, with soldiers trying to take people's gold. He basically took it at the large honey pots at the bank vaults. And this was how, this is how the gold ended up in Fort Knox. And whether it's still there, no one knows. But the government, the US government, the freest country in the world, this libertarian experiment stole all Americans Gold in 1933 and 1934. And I think it's going to happen again because we're really anyone who understands the budget situation and the amount of debt to GDP that the US is holding, there's going to be confiscation of Bitcoin and it's going to be confiscated from the large custodians like, like Coinbase, Custody and Fidelity and Bitgo, et cetera. And if we want to protect against this, we should not have large centralized custodians and large honeypots. And so if individual families hold Bitcoin in self custody, the U.S. government, if they wanted to confiscate it would need to go door to door. And we obviously have the second amendment in the US and so this is much more difficult than in most countries. If you have an armed population, it's not trivial to go and it's too much work to go to 300 million homes or whatever and try to say give me your bitcoin.
Jake
Not to mention, yeah, you can store it in your head, you can memorize 12 words which I wouldn't exactly recommend for most people, but you have the commercial.
Matthew Crater
All you own is if you just own STRC and mstr, just your brokerage account will be freezed or they'll just frozen. And the things this is not people who live through Covid, we all know the crazy stuff that happened in Canada, freezing the bank accounts of the truckers, et cetera, etc, and so you want to have over the next five to 10 years, you want to have your life savings and things that cannot be frozen, they cannot be debased and they can't be hacked or stolen. And so whether Saylor is aware of this and whether Larry what's his name at blackrock is aware of this, that the impact that the bitcoin spot, etf, IBIT and strategy MSTR is having is they are collecting a boatload of Bitcoin. I think there's something like a million Bitcoin now at Coinbase Custody. And they're basically saying, give me your fiat, I'll give you a stock in your brokerage account and we're going to store the Bitcoin at Coinbase Custody. This is a centralization of coins that has just huge repercussions and it creates a honey pot that can be. First of all, it's much less safe because no one's trying to steal your and my bitcoin. Well, maybe they are, but it's not a million Bitcoin. And so the whole world, everyone in the world, the AI and North Koreans and Russians and whatever, they all want to steal Coinbase Custody as Bitcoin. And what does strategy do? What does IBIT do? It's building that pile bigger and bigger and bigger. And that's not a robust way of onboarding people to Bitcoin. We want individual families to be sovereign and to not be dependent on bank accounts and brokerage accounts and to not be dependent on large custodians to keep their Bitcoin safe. Because I think it's. I'm becoming more and more convinced that the strategic bitcoin reserve in the US is the large custodians, that they will be seized at some point. And this was part of Trump's.
Jake
Everything in there has come from seizure so far.
Matthew Crater
Yeah, exactly. And it's an executive order that it's for seized Bitcoin. And so I'm not saying Trump's going to do it or Whoever's there in 2020, but this is just inevitable when there's a huge pool of money and you're a government that has a spending problem and you're having to run the money printers. We saw it happen in 1933. It's going to happen again. There's going to be seizure of these assets. And we've seen this happen all over the world in Lebanon and Turkey and all these places where people have had to rob banks to get their own money out. And so I think Saylor creates this culture of. It's a very fiat way of thinking of stuff. He perpetuates bank accounts and brokerage accounts. And so that poor farmer who now owns Stretch, yeah, he doesn't have the volatility, but he's also. Here's a guy, that farmer and his family, they should own BTC in self custody, because here's a guy who understands the value of growing your own food and having land and Hard assets. Stretch is not a hard asset. MSTR is not a hard asset. And it's all going to end up. It's probably going to end up. I could give you a scenario, a scenario where one of these companies perhaps strategy at some point. Again, I'm not saying this is going to happen right away, but say they fail for some reason and we have an administration that's friendly to Michael Saylor because obviously billionaires are very connected. If strategy needs a bailout, how do you think the bailouts can be paid?
Jake
For printed money, I'd imagine no bitcoin.
Matthew Crater
Well, the government will trade you.
Jake
Yeah, we'll trade you.
Matthew Crater
So basically be like we can, you know, we'll stabilize things. We're going to take an ownership stake.
Jake
Well, especially after the intel deal. Right. It'd be a really similar sort of
Matthew Crater
setup or just like, you know, it's a threat. We've discovered that China has a million bitcoin and Russia has a million Bitcoin. And this is a geopolitical threat to the US Very sorry. Coinbase custody. You know, you still, everyone who has their coins on Coinbase custody, you still own the bitcoin, but temporarily. The US government's going to take control of it for, for the good of Americans.
Jake
Spend it temporarily.
Matthew Crater
Our national security. Yeah, just like they did with the, with the gold before. I want this to be in, I want families to be holding it. It's much more, it's much more robust. So. So part of my thought is that there's a psyop going on here and Saylor and Blackrock may or may not be aware of it, maybe they're just not aware. But there could be a long term plan here to just create this huge honey pot of bitcoin that ends up being owned by the deep state, by the federal government, by some shadowy who even knows who runs things. The Epstein class, that's their. Ends up being their bitcoin. And so that's why I onboard bitcoiners. You know, I want people running nodes holding their own bitcoin in self custody. I don't, I think it's a mistake to. I think it's almost a sleight of hand to say you come here for bitcoin and we give you. It's like you know, giving your son a stone when he asks for bread is the, the proverb is, you know, you give your son the bread and so if you love someone, you onboard them to BTC and self custody because you understand bitcoin, you don't. You don't onboard your farmer father into Stretch. Like that's actually, even if Stretch turns out to be a wonderful product and returns 12% a year, instead of putting all the money into Stretch, they could put. If that farmer's family can't handle the volatility of bitcoin, put a third of it into bitcoin and keep 2/3 in cash or put in gold or something and you'll still get that 12% return. If Bitcoin goes up 36% a year and you've just had a third of your assets in it, you'll still get that 12% but you'll be immune to state level attacks. And I think they're definitely coming. You just have to study the government debt situation and entitlements and we've got just a disaster, the disaster that's coming. And the government, when it's desperate, it's like a drowning man, he'll just grab. It will grab everyone, it'll change. We saw this during the great financial crisis in the bank bailouts where the bankers all got made whole, they got their investments and the little guy got his house foreclosed on. And there was no, no one looked out for the little guy. It was just the bankers and the banks, et cetera. And so this is how it always happens. That wasn't that long ago, that was just a few years ago.
Jake
And this time is maybe one step up to the central bank level where whoever is the unfortunate soul who ends up in the position of President of the United States when this all comes to a head, they're going to be looking at a position of, okay, I'm backed into a corner of like global debt, market collapse, we default on our debt, maybe world war breaks out as a result or whatever, because you guys promised us and now you've ruined our economy and blah blah, blah. Or hey, we're going to nationalize 10% of Coinbase and we're going to freeze withdrawals for a little bit. I'm just throwing stuff out there, right? But when one alternative is global debt, market collapse, global economic collapse, world war, and the other one is, well, we could just lie and steal and cheat a little bit, a little bit more covertly and everyone will be a lot less upset. Paired with, well, do whatever we need to in terms of money printing to keep the system going for as long as possible. You know, it's, it seems like the second one is, is probably the likely outcome.
Matthew Crater
Or I'll give you, I'll give you a third version of it, which is We've seen, we've seen a lot of sort of anti capitalist socialist rhetoric, you know, people, people like aoc, for example, saying like, no one should be a billionaire. Like, you know, how can you earn a billion dollars? And there's a. I just, I hear a lot of talk from, not necessarily from friends, but from acquaintances about how rich people don't really deserve their money. And you can debate there's some bad billionaires out there, but if the US transitions to a sort of a more socialist or communist mind way of looking at things, then people look out and they see these bitcoiners. And so a dozen eggs costs $100. But, you know, you have a couple, a couple of your neighbors are bitcoiners and they're just like doing great. And then some politician comes out and says, basically, we are suffering. You can't afford groceries because basically bitcoiners have destroyed the US dollar and caused this tremendous inflation. And so we're going to have a, you know, we're going to, we're going to attack bitcoiners and take their money, starting with coinbase customers, because that's the easiest one to grab, obviously. So it can be. Bitcoiners cause the inflation. And so we have a right to take their bitcoin because they basically broke. They've been saying for years they're going to break the dollar and break the fiat financial system. And look, they broke it and now they're all fine.
Jake
People will love that. They'll love to grab onto that narrative. Yeah, exactly.
Matthew Crater
And so if you own stretch or MSTR in that situation, even if Saylor's really politically connected and stuff, he's not going to be able to. No one's going to have sympathy for Saylor. AOC is not going to be like, oh, this poor billionaire. I could probably have given enough time, come up with 10 scenarios like that, confiscation or hacks, et cetera.
Jake
How do you think about preparing for that world? So let's say we're, whatever, 10, 20 years down the road. Bitcoin has been successful where bitcoiners are very comfortable. Yet we may be living in a world where there's a lot of resentment from people who are like, oh, you got lucky. It's like, man, you should have tried to hold for 10 years. Tell me I got lucky, you know, but, yeah, exactly.
Matthew Crater
They don't know the sleep, the pain. Yeah, the incredible pain.
Jake
Right. Everyone thinks you're crazy and you're in great pain for 10 years and then you made it you know, it's like not a walk in the park, but how do you think about preparing for that world?
Matthew Crater
I think the best way to prepare is to onboard our friends and relatives and neighbors. We want, we want everyone to get on the. You don't want to be in the ark and seeing like drowning people, you know, flapping around the water. That's really disturbing. So, so this is why it's coming. The flood is coming that the, the US dollar printing flood is coming. So the best thing we can do is just get as many. Make as many people bitcoiners as possible, because then they're, they're part of us and there's no resentment and they can participate and they can preserve their, their life savings. And then there's. The other scenario is obviously bitcoin is very portable and then it becomes a question if you have to flee your jurisdiction if things get too bad. But one of the reasons I cover bitcoin so much and sort of target it at the family and pleb is I want to onboard as many people as possible because I see where things are trending and I have kids and I want them to, you know, I want them to live in a. I don't want them to live in this cataclysm. And so it's important to onboard as many people as possible. There are scenarios where bitcoiners have to all flee their countries and maybe they go hide in El Salvador or in the jungle somewhere. And so fortunately, I mean, bitcoin does give you optionality. So let's say things get really bad in the U.S. you know, heaven forbid. I hope it doesn't. And you need to, you need to,
Jake
you know, all your dollars get locked in the country, something like that.
Matthew Crater
All your way.
Jake
All your dollars get locked in. You know, you can't. Capital flight is not permitted, these sorts or something.
Matthew Crater
You know, even you could imagine the draft coming back if there's a ground war in Iran or then there's a ground war in Iran and then AOC becomes president and says it's illegal to own bitcoin.
Jake
These, these young kids wouldn't go. Gen Z would be like, nah, ah, I'm not doing it. I'm not going. I think, you know, a lot of them.
Matthew Crater
Yeah, exactly. I don't, I don't think my kids want to, want to fight in a war. That's not. If the US is being invaded. That's. That's one thing. Right, right. And so in a scenario like that, in a scenario like that, you certainly can't take your stretch and your MSTR with you and you can't take your farm with you either. You need, you need to have Bitcoin and you need to have, you need to know how to run a node when you get to your new country. You need to know how to move Bitcoin across borders and you need to know how to build your own hardware wallet like the seed signer. So I think that these sort of survivalist skills which are very useful even if we don't have societal collapse. It's really, it's a good people should check out seedsigner.com you know, build your own hardware wallet, learn how to build your own node and become, become self sovereign because you've got 12 words in your head. You can go anywhere in the world. You can go to the, you can go to Bitcoin jungle in Costa Rica and you can bring your Bitcoin with you and you can buy fruits and vegetables and you don't have to, you know, you've emptied out your brokerage account, you've emptied out your bank accounts and you know, maybe the US government comes after you in Costa Rica. But if enough people are all spread over the world so there's scenarios like that Bitcoin owning Bitcoin self custody is, is gives you optionality and the world is like changing so quickly and it seems like we're seeing a retrenchment where the US is going to basically, it can't really afford to be the world's policeman anymore and have these bases everywhere and be fighting these trillion dollar wars in the Middle east every couple years. And so maybe there's this retrenchment and US power retrenches and just begins to control the Americas. And so then you have the question is the US government going to be doing regime change in all these, these Central and South American countries? You probably don't want to be in those. Do you want to be. And then China probably takes over everything from, from Japan to the Philippines, you know, all the islands that becomes the Chinese sphere of influence. Then north and South America become the US sphere of influence.
Jake
Okay.
Matthew Crater
And then I don't know what happens to, you know, maybe Russia comes into Europe or I don't know, Europe seems to be shooting themselves in the foot pretty good anyway, so, so but you have to kind of think forward to. I spend some time thinking about geopolitical realignments and what it looks like obviously that would be bad for the dollar as well, but probably inevitable because I don't think that the math Works out for budget deficits, spending 6, $7 trillion a year.
Jake
Yeah, that makes sense. Thanks so much for being so gracious with your time. This has been a great chat, a lot of fun. Yeah, it has been fun. Yeah. I think, I'm sure we'll be seeing clips of this online. It's going to be some spicy takes. I think it's good for people that the more information out there, the better. I think so. I appreciate it.
Matthew Crater
I love X and I love the debates that happen there. And I think it's just really, I'm grateful to Elon for buying it. And this might just be a temporary thing, but, but you seem to be able to say a lot of crazy things on X. And I think it's, it's important for people to be able to talk to each other in the, in the public square and, and call out each other. And that's one reason I interact on X is because, because people are, people are brutal and they'll, you know, if you're, if you get something wrong, you find out very quickly and that's, that's very helpful. It's nice when people, you know, it's good to be nice to people as well, but, but if you want to just go down the truth rabbit hole and test your assumptions and learn how to, learn how to think through arguments and then, you know, what do you do when you get rebutted? It's, you know, X is very useful for that. So we'll see, we'll see the clips. Make it there.
Jake
Yeah, yeah. I, I think it's really important that, specifically that keeping the conversation going, keeping people talking with one another. I love the phrase, like, you can't hate somebody close up. And talking on X is not exactly close up, you know, and there's some problems with that in terms of. It removes some of the human element. But keeping people having a conversation where I can hop on and someone who's living in Iran right now, I can be like, what's going on? What's going on with you? Yeah, they're like, why are, you know, I talk to somebody in Israel and be like, what are people saying? What are people feeling? What's going on in Iran? You know, and, and that, I think is a really important thing. I remember, you know, Charlie Kirk, something he said was like, it's important for me to keep the conversation going because when the conversation stops, violence takes place. And, you know, there's that comment.
Matthew Crater
Really, it hits differently now.
Jake
Yeah, yeah. It's heartbreaking, really. And, you know, someone else Who I haven't listened to so much Lex Friedman in a while, but he was someone who. Listen, I listened to a lot of his podcasts, like, back during the pandemic, and I loved this thing that he had that was like. Like, I'm gonna try and be loving. I think we should, like, lead with love. And nobody's perfect, you know what I mean? Nobody has all the right answers, blah, blah, blah. But this attitude of we need to keep people talking and we need to be loving to our fellow man, and maybe that is the answer moving forward. Maybe that's how we are able to have a unique fourth turning this time, where we could sidestep this violent catastrophe, where we could keep the conversation going, where we could have a nonviolent means of revolution in Bitcoin, where we could have this great global regime change without the bloodshed that we've seen in previous ones. I think I want to say nine of the last 13 times that a rising power has surpassed a reigning power, there's been a violent conflict between them, which the stats aren't good, but four out of the times it worked out, it was not the violent catastrophe. And so there's. I think we have tools at our disposal that give us a better shot at it at this time than the historical times where we've seen those patterns repeat.
Matthew Crater
And so, yeah, I agree with that. And I've noticed that with my own kids that they have connections to people because of exchange programs and trips and stuff. They have connections to people in different countries. And it just hits. One of my kids went to Taiwan, for example, so. So we have this family over there that's sort of become family friends. And so you think differently about. And you know. Or if you know someone in one of the official enemy countries of the U.S. like you're saying you're talking to people in Iran and stuff. That's so helpful because it just hits differently. And I've had a bunch of subscribers over the years. I haven't seen. I heard from them lately, and I fear hopefully bad things didn't happen to them. But people from Iran. And so when I see those bombs, not to weigh in on the Iran war one way or the other, but when I see those bombs dropping, I think of. My first thought is actually to those people, because they're just. We're all at the mercy of our politicians and they're regular people. And to the extent we have that, it's very easy to talk to people in different countries. I think you're right that hopefully that could Lead to a better outcome this time. If I had to bend money, I think it's going to be. It's going to be like it always is, because humanity's fallen, at least in this world, but hopefully not.
Jake
Right. You do your best and then the chips will fall where they may, but.
Matthew Crater
Yeah, exactly.
Jake
You do what you can and fight for what you think is good. And you don't stress out because you're not really in charge. So you do your part and you let it.
Commercial Announcer
It.
Jake
You let it roll.
Matthew Crater
And the other good thing, I mean, we have bitcoin, and so we can all. We can all strengthen the network. We can help to strengthen the exit. You know, people in Iran need bitcoin, people in the US need bitcoin. And maybe, you know, bitcoiners, Bitcoiners, you know, from all cultures and races and tribes and everything get along really well. And so that could be. You could see the. The really optimistic scenario is you have kind of this global bitcoin culture where we're all. We all respect each other's private property. Because I can't steal your bitcoin because I don't know your private keys and you can't steal mine. And so why do we need to attack each other? We can just be friends and have dialogue, et cetera. So maybe a global bitcoin culture, something like that. You could see something like that happening. Possibly it'd be sort of like the Roman Empire on a global scale. Like this. This pox Romana, the bitcoin version of it.
Jake
Yeah, I've had some conversations before.
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We.
Jake
We won't get into it now, I don't think, but about this concept of, like, the nation of bitcoin, where it's like, there's. It's like a new group of united people.
Matthew Crater
We are a country. And when you meet bitcoiners at conferences or wherever, you're just like. You hit it off right away because you have so much in common.
Jake
I have more in common with the bitcoiners that I meet than the average American, that's for sure. And that goes to the bitcoiners I met in Bali, Indonesia, and. And, you know, people that I met all over the world. Right, Me too.
Matthew Crater
Most of my life is online now with. With other bitcoiners. And it could be. You forget what the normies are like when you go, yeah, you go to some kid's birthday party and then the dad's like that scam bitcoin, or, you know, like, sbf, you know, scammed bit with bitcoin or like you just like, you get out there and you realize, wow, we're so deep down the rabbit hole.
Jake
Yeah, right. Didn't FTA collapsed bitcoin already?
Matthew Crater
Isn't bitcoin dead because FTX collapsed or whatever?
Jake
Yeah. I'd even say you spend so much time talking with bitcoiners, you go to a bitcoin conference and you're like, oh, that's right. Okay. We're like, not everybody's on the same page.
Matthew Crater
Exactly. Yeah, true.
Jake
Last question for you. So we talked about a little bit off air about a touch of my history working in the bitcoin space, how it's a complicated space. There's like those who must not be named, who you like may not criticize. And there's, you know, there's like, there's different dimensions of that. There's that in the bitcoin space and other areas, you've managed to stay really free. I feel like you've managed to say what you think is the truth. You're not like beholden to anybody. I wonder what advice you could give me. I'm sort of embarking on this journey. I've been working in bitcoin for a little while, but, you know, being more of a public figure now in the space, I suppose. What advice could you give me? What lessons have you learned in your time doing this? And what would you pass to me, 30 years old, kind of more on the infancy of doing such things?
Matthew Crater
Yeah, that's a really good question. I'm not sure I have anything too profound, but I would say that the first thing would be pick your sponsors really, really carefully. And there's always the temptation to go with the highest paying sponsors who usually, you know, and you have to think, think. I've never had sponsors on my channel, so I'm sort of extrapolating here. And I was fortunate enough, I had this hedge fund background. So I basically, I ported my wealth into bitcoin and then was able to, I haven't really had to, you know, pull all the levers for. For revenue. I have created like my own premium website where I sell some courses and I take grief for this as if they're scammy courses or something. But that's one thing you can do if you create your own products that you're really proud of and that you believe in because people will want to talk to you as a bitcoin expert or just get know what Jake wants, you know, what Jake thinks about this thing or want to hang out in a group. So, like, I have a forum on my website, and that's kind of fun. So to the extent you can be your own sponsor and create products that, you know they're good because you created them yourself, you know, there's no rug pull. And you're not going to wake up one morning and learn that, you know, your sponsor is FTX and the guy's a huge scammer, and then everyone's mad at you because you onboarded them to ftx. So you can avoid that by having your own products. I don't make that much money doing it, but that's one way to supplement, for example, podcasting or YouTube stuff. And then the other thing I would. The biggest piece of advice I would give, though is it's just extremely important to be honest, even if that involves having to burn. I don't want to say burn bridges, but, you know, hurt people or move in a different direction, that this is a very dynamic new space. And so you have to. As you learn new information, you have to revise your priors. And it can be very difficult, especially when your own audience is. Is criticizing you for your latest take. And it's very easy to stay. I see a lot of influencers and bitcoin educators trying to stay in the safe middle ground where they never speak badly about anyone. And if your job is to interview prominent bitcoiners, if you start criticizing them, then they may not want to be interviewed by you. So there's just that to take into account. But to the extent you can just be. Because basically, if you try to play too safe, you become just very bland and you become like just a boring, you know, old news channel or something, because people want. Well, people want. People want excitement, but people also want, you know, if you're just. If you're bland and you don't. If you don't say anything, you don't have strong views, then you're just not that interesting. I'm not saying you. I'm just saying you in the general. But then if you don't call things as you see them and people, or even worse, you support things that then end up blowing up because you're unwilling to burn previous bridges, then your audience ends up losing trust in you.
Jake
You.
Matthew Crater
And it's. It's a very painful transition period. And I've been through this a few times on my channel where I figure out something's not. Not good. And then I start. I start talking about it, then I realize that, oh, my gosh, like, you know, a tenth of my audience or something that now hates me for it. But those people that they'll only, if you turn out to be right, they'll only hate you temporarily. And then a lot of them will come back and be like, then they'll respect you even more because they'll be like, like, wow, I was, I have people come back all the time and say, like, I was on you for Celsius and this. And I thought you were, you had these ulterior motives. But, you know, I lost all my money in Celsius and now and you're the only one I heard calling it out. So then you've got, you've got like a fan for life. Yeah, if you. So I think that's one reason. One, it's just important to stay honest with yourself. And it's very, it's very difficult because you, there's such a thing as audience capture as well, where you know what your audience likes. It's like red meat for the troops or whatever the expression is. And whenever you throw in that red meat, you know, your views go crazy, et cetera. But maybe that's not what you should be talking to them about. Maybe there's something that you can be sort of prophetic about and you can be saying this and it's sort of like high time preference behavior versus low time preference behavior. It won't get you the clicks today. But like, now I can go around and say, like, when I'm criticizing strategy, I can refer to all those videos, like, I made a video last summer about how to wreck yourself buying bitcoin treasury companies. And I got so much hate for that. But, you know, strategy's down 70% since I put out that video. And so, and today I have people saying, well, why didn't you, why didn't you criticize strategy last summer? I'm like, well, I did. And here's the video and read the comments how much hate I got got for it. But the stock's down 70%. So to the extent you can do that, you build, you build fans for life. And it's also, it's just easier being, being honest with yourself. And I see some, some influencers who are. And I've even heard some talk where they, they're, they're selling products that they don't believe in themselves. They're like, I, you know, I would never own that. You know, I would never use that particular wallet or whatever, but they pay me, pay me a lot, or, you know, yeah, I don't know if your bitcoin channel is Selling gold to your subscribers.
Jake
Like, yeah.
Matthew Crater
And your whole channel's about why bitcoin's superior to gold. Well, why do you have a gold sponsor? That's just not a good look. And people, eventually, people want authenticity and sincerity. And the other thing I've done over the years, which I would advise. So I've made some big mistakes. I was very bearish on Elon Musk and Tesla. Call it 2017, 2018. And I just got some stuff wrong. And so I was like, this is when I was more of a trading channel was talking about. And I lost money on it. I was like short Tesla as well. But I basically made a. I made a video after that, basically saying I was just. I got this completely wrong. I lost money. I'm sorry. You know, my ego took control of me and that was such a humbling, painful thing to have to make. But people, people will respond to that stuff because they'll. Then they'll realize you're human and you have good intentions. And so it's really important to. And so if, if I turn out to be wrong about strategy and Saylor, I will make, I will make a real confession video and I will eat humble pie and I will talk about what an idiot I am and, you know, apologize to people that, you know, they sold their MSTR at the bottom and they're stretch at the bottom and it's now a trillion dollar company. I will definitely make that video and I'll do that just because, you know, I want people. Because if people don't trust you that there's just so much online content, there's no point, no point listening to people who either don't know what they're talking about or who are dishonest. And people keep track of your, your track record. And eventually. So it's, it's important to be honest with yourself and honest with your audience. So that would be, that would be my advice.
Jake
Yeah, yeah, it's really great advice. Yeah, just maintain fealty to the truth. And there's a couple things I thought when you were talking. One is that sort of the fan for life sort of thing after somebody's disagreed with you, hated on you, and then being like, shoot, you were right, I was wrong. I remember one time I got goofed on by Magoo a little bit. You know Magoo, right. He's a great goofster and gaffster, you know, but he goofed on me a little bit, you know, a couple years back. And I remember like six months later, I was like, damn, he was totally right. He was totally right. And I was, like, grateful. You know, it's like, if I'm wrong about something, I want you to tell me. You know what I mean?
Matthew Crater
I don't know.
Jake
Twitter was right.
Matthew Crater
Yeah, yeah, yeah.
Jake
And so. And so, yeah. You know, like, there's times where it's like, yeah, if I'm wrong, goof on me. Like, tell me why. You know, And I've seen you do a good job of like, yeah, being open to. Here's my take. Here's what I think. Here's why I think it. I'm not God. I don't know for sure. You know what I mean? But, like, here's my rationalization.
Matthew Crater
I think, yeah, we're all human. We all get trapped in our own egos, and it's. Yeah, putting yourself out there on the Internet is. Oh, it can be so painful. And you get. You get humbled.
Jake
Right, right, right. It's. It's useful if you can take it, if you can bear it, if you can, like, hear the criticism. When I get a criticism in the comments of our stuff, I try to be, like, elaborate, like, tell me more. You know, someone says, you're doing too much of this. It's like, where. Where did I do that? Tell me why. You know, sometimes I'm not always, like, you're right, because they're not always right. But sometimes it's like, you know what? Yeah, I was doing a little bit too much. Much of that or whatever, and it's helpful.
Matthew Crater
That's a great approach, I think.
Jake
Yeah. The second thing I thought, oh, yes. I just wanted to say I think that's great advice. I really appreciate it. Since I've been working on the podcast, I work closely with Mark on it. I help produce and run his segment. I'm doing this segment of my own as well. Just shout out to our sponsors. I love our sponsors. River Unchained. And we have. I think we're about to sign one with Blockware. If we don't do it. Cut this, Greg. But these are guys where I've developed a relationship with Sam at River Mitchell's an old friend. I met him two, three years ago. He's at Blockware. And I think that these are companies that I believe in the ethos where their heads are at as Bitcoiners, similar to you in many ways. And so
Matthew Crater
I love River. I'll. I'll plug them with.
Jake
With you.
Matthew Crater
I love River. They're just a great exchange. And. And Unchained is a great company as well.
Jake
Right.
Matthew Crater
It's a very, very good multi sig product for, for retail investors. And yeah, it's both good companies.
Jake
Yeah. And Mark has his own like coaching program sort of thing that he does and he does a good job of being like I like we don't need sponsors. If we have people that we really like and we trust and whatever, then we'll bring them in. But like we don't need to do this. Yeah. Kind of, kind of similar thing to what you said and yeah, I think that that, that works out for us.
Matthew Crater
So I love river because they do, they do proof of reserves on their exchange which is pretty rare.
Jake
Yes.
Matthew Crater
And I think it's just a really. Well, the engineering at that company, they have a very narrow focus and they're not distracted by other things and they just make like a very solid, solid prod product and you shouldn't leave your coins on river or any other exchange. But river is one of the more reputable ones. Definitely. And I think Alex Leishman is a really impressive guy and the way he's led that company is impressive. So I'd second that.
Jake
Yeah. Worthwhile follow on X Leishman. He's an interesting thinker. He's posted a little bit of history, a little bit of. Yeah, he's a well rounded guy.
Matthew Crater
I feel like, like, yeah, I got, I haven't checked out his ex in a while. I got a. Just so many, so many cool bitcoiners that the day's not long enough.
Jake
I wonder if we got time for one more question. You have time for one more question?
Matthew Crater
Yeah, of course.
Jake
Okay, great. I just wonder, thinking of that, do you have any feelings, takes opinions on Jack Mallers and Strike? You know, they're another big player.
Matthew Crater
Yeah, I mean I, I like Jack. We've had, we've had some good conversations and I remember when he, I think some, some. There was some thread on X where I was, I was making fun of Vitalik or just talking about how he was scamming people and Jack told me the story about how he was at some dinner with his mom and Vitalik was like if I forgive me Jack, if I got this wrong, but it's, it's somewhere on X there that, that Vitalik was trying to sell his mother Ethereum. And so that, that was, that was great because he basically helped me make, make whatever point I was making. Just you know, Vitalik scamming people or whatever. And he gave this example of his mom. So yeah, I like Jack Mallers. He's a good guy.
Jake
That's cool. Well, I think this is a good time to wrap it up. We could probably chat forever. This has been awesome. I learned a lot. Yeah, I really appreciate the time.
Matthew Crater
Hey, you ask great questions. Thanks for doing this.
Jake
Yeah, thank you. Thank you. We'll have all your links in the description. Matt runs the great Bitcoin University and yeah, highly recommend listening there. I've been listening for years. Is there anything else you'd like to share with people before we wrap up?
Matthew Crater
Yeah, I'll give, I'll give you, you guys a link. I've got a free video that's on YouTube but I, I put it on my website as well for people who are interested in learning how to mine bitcoin from home. Bitcoinuniversity.com forward/mining Bitcoinuniversity.com forward/mination I mean, it's the same video that's on YouTube, but I like having just an easy URL to show people if you want to really level up as a bitcoiner and start earning virgin sats from the coinbase. Non kyc bitcoin, it's pretty cool. And when you start mining bitcoin, it's highly addictive and you learn a lot in the process. So check out. It's a completely free tutorial. There's no paywall. You don't have to give your email address or anything. But Bitcoin university.com mining learn how to mine. I'm currently mining at 5peta/. 5peta/per second, just from my home office, which is, to put that in perspective, that's like four or five thousand bit axes and it, it costs, it's costing me about da da da da. I'm going to blank, I'm going to blank on the number now. But I think it's Basically, it's like $200 a day, which is a lot more, it's a lot less than it sounds because you make back 95% of it it. And so that's one of the cool things. You pay for rented hash and then you earn, you earn 90, 95% of it back and you earn a lot. You learn a lot in the process. So you could, you could spend, you could easily spend like $30 a day and you'd earn back, call it 20, $27 a day. And so for, for $3 a day, you know, mine for a couple weeks and learn how to build your own blocks a day. Really, really fun. So it's a, it's a good, good project for people who want to get into bitcoin mining and it's. That tutorial is all free.
Jake
Yeah. And it's worth considering the premium you individually would place on no KYC sats as well. And if you're putting in 30 bucks and getting back 27 and no KYC sats, you know, you run those calculations for yourself. Where would you point people if they wanted to? Like where do you think the best resource is for setting up a node for the first time?
Matthew Crater
I would, I would use Start9. So you can either, I think it's startnine.com or whatever it is, just Google it. You can buy, you can buy a server from them. That's the, the easiest thing. It's a personal server that you just. I'm not affiliated or paid by, by Start nine or anything. But it's, it's what I use. It's basically a little box and it's a personal server and you plug it into your router, you plug it into the wall and you can basically use it as sovereign and self sovereign computing. So think of everything you have in the cloud, all your photos, old emails, password managers. And so you can run all of that on Start nine. You can basically replace Google Cloud, replace Icloud and you can also. And you have access to your data so you don't have to worry about Apple turning you off or Google turning you off, or Google freezing your account so you can never use it again. But the most important thing you can do with that is you can run a Bitcoin node. You can run a Bitcoin knots node. It's just an app. It's like using your iPhone. You just click on the app and download it and you can run a Lightning node. So you can set up your own Lightning channels, you can set up your own Mempool space, your own instance of that, and then connect it to your own wallet. So the problem is obviously the hardware, just the raw components have gone up and we talked about rams skyrocketing. So if you buy one of Those, it's about $900. If you have the money to throw at it, just go buy it and plug it in and then you get free support from the company for life. If you want to save some money, there's some good do it yourself ways of doing it because you can basically you could buy a mini PC and then just flash it with the Start 9 Start OS, which is a Start 9 operating system. And so whatever, like a Mac Mini
Jake
or something like that.
Matthew Crater
You don't even need a Mac Mini. You can get Some cheaper, probably some cheaper Chinese version. I think I, I bought a, I bought a mini PC that was. And it's just, you know, it's like a square box. It looks like just like the Mac Mini. I think I paid like 250, $300. But that was maybe, that was a year ago. So. But that's, that's a fun do it yourself project. And you can just ask Ask Rock or Chat GBT how to do it or you can just go on YouTube. Paul Lam has a great video and also Forest Hodl Bitcoin, not crypto. Those two YouTube channels, they have some tutorials where you basically set up the mini PC Flash it with Start OS and then you have everything on there and you just connect to it. Basically it sits six next sits next to your router in your router closet or wherever or in your office. But you can access that server from anywhere in the world over Tor or from anywhere in your house just using a browser. So I can just open up a browser on my computer. I can see all my apps there, all my bitcoin apps. I mainly use it just for bitcoin. So my node and there's Datum Gateway. If you want to mine bitcoin that's a great way to build your own blocks and then you can pull mine with Ocean. So Start nine is the way to go and just learning how to run your own. I'm an English major, I think we mentioned that. And not tech savvy at all though. I've definitely upped my skills over the last few years. But Start nine is made for. If you can use, if you can use apps on your iPhone and if you can use email and stuff like that, you can and then they have great, great free support. If you don't want to buy buy server from them, you can buy support in their forum for like lifetime support for like $250 or $300. And that's also. And start nine is a, is a great bitcoin company. So you're supporting good, good, good bitcoiners as well. So I'd encourage everyone become self sovereign in your computing as well. Don't depend on the big, don't depend on big tech, big tech to look after you and to always you, you may not always have access to, to things like that.
Jake
If I was able to orchestrate a conversation in person, maybe between you and Saylor working towards this kumbaya moment, you know, seeing if we could get you guys to sit down and say okay, maybe let's say we Are.
Matthew Crater
Where we are.
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Are.
Jake
We're here in this present moment, maybe. See, what would you advise. Advise, maybe a better word I could use. But, you know, what would you advise Saylor to do from here? You know, what rebuttals does he have to some of your arguments? Does he have plans?
Matthew Crater
He doesn't need my advice.
Jake
Right, right, right. Probably another way to phrase it, but
Matthew Crater
just, I wouldn't, I wouldn't frame it like that because, you know, he's a super, super successful guy and I, I have no illusions that I could. But no, I, I'm always open to dialogue. So.
Jake
Yeah. Because I wonder if he might say, like, yes, these. You're. You're thinking about these things. They are real concerns. We're thinking about that if this. We do this, if that our plan is to do that. You know, I wonder. It might maybe. I don't know. It'd be interesting to see what could come of it.
Matthew Crater
Yeah. I would never say. I would never say no to a bridge like that or dialogue. And as we talked about, you know, it's. It's important for humans to talk and work out their differences. So, yeah, I would be. I would definitely be open to that. But again, you know, I've got a. A big YouTube channel by, by. By bitcoin standards. Not even by fiat standards, certainly. And Saylor's a impressive guy and a billionaire, so, you know. Yeah, if he, If. If he wants to talk to me, I'd be open to it, definitely.
Jake
Yeah. You know, I mean, he does a lot of. He does a lot of conversations, that's for sure. He's always chatting with people. He's got to chat with somebody. So I think he's.
Matthew Crater
To be honest with you, he's probably pretty. Pretty mad at me at the moment, if. If he even cares. You know, I'm. I'm a. I'm a fly.
Jake
Yeah.
Matthew Crater
I'm a fly on the whatever.
Jake
Yeah, yeah, yeah, yeah.
Matthew Crater
And I'd be open to it. I appreciate you offering that.
Jake
Yeah. Yeah, I think, I think it, you know, bringing people together, more conversation, bringing more stuff to light, I think is always a good idea if you want to see it. Clip this spread around X. We'll. We'll make it happen. All right. Thank you. Thank you, Matthew. I really appreciate it, man. It's. It's. It's great to chat. I think you're doing important, great work. I admire and respect you. Thank you for doing what you do, honestly.
Matthew Crater
Thanks for having me on, Jake. That's been a great conversation.
Jake
Awesome. Thank you sir.
Matthew Crater
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This episode dives deep into the ongoing shifts and controversies in Bitcoin, focusing on the tensions between decentralization, development philosophies, and corporate Bitcoin strategies. Host Jake interviews Matthew Kratter, founder of Bitcoin University, for a candid discussion on the current "civil war" within Bitcoin’s developer community, the growing risk of centralization via large custodians and institutions, and a hard-hitting critique of Michael Saylor's recent strategies at MicroStrategy. The conversation ranges from Bitcoin’s technical philosophy to practical advice for preserving sovereignty as the world and its money systems transform.
“Two red lines Saylor has crossed for me: shitcoining, and I believe that he’s been lying the last couple weeks as well.” – (Kratter, 80:49)
“I don’t think [Stretch] is marketed in a transparent way because he’s compared it to money markets... and these border on fraud, in my opinion.” – (Kratter, 94:19)
“I’m becoming more and more convinced that the strategic bitcoin reserve in the U.S. is the large custodians, that they will be seized at some point.” – (Kratter, 11:05/111:10)
The show ends with Kratter emphasizing the need for continued honest dialogue, keeping conversations going even in disagreement, and the critical importance of family-level sovereignty in the digital asset era. Both express hope for a non-violent, dialogue-driven transition into whatever the next money paradigm brings, but are realistic about the threats on all sides—technical, financial, and political.
“Bitcoiners, from all cultures and races and tribes and everything, get along really well. You could see the really optimistic scenario is you have kind of this global bitcoin culture... maybe a global bitcoin culture, something like that.” – (Kratter, 129:04)
[For more on running a node or mining from home:
bitcoinuniversity.com/mining
Start9 node resource, YouTube/Paul Lam, Forest Hodl channels**