The Bitcoin Thesis

Over the past months, we’ve focused a lot of our attention on stablecoins, digital dollars and broader themes around their synthesis with blockchains. The focus has been on how public chains will become the foundation for mainstream payments, commerce and broader financial applications.

This week we’re turning our attention back to the origin of all of this world, which is Bitcoin.  Running in some ways in parallel to the world of stablecoins, smart contracts and generalised blockchains, Bitcoin has maintained its role as the dominant digital asset and store of value, continuing to see growing levels of awareness, adoption and support as a major alternative asset in and of itself.

To drive this discussion we’ll be joined by two OGs of Bitcoin as an asset class, with Michael Sonnenshein, Managing Director of Grayscale Investments, and Dan Morehead, CEO and Co-CIO of Pantera Capital, both funds and investment vehicles that have provided retail and institutional investor access to Bitcoin as an asset class for nearly 8 years. We’ll hear from them on The Bitcoin Thesis — where are we today, and where are we going.  And, yes, we’ll certainly go after their short and long-term price predictions.

[00:10:58] Ten. [00:10:58][0.0]
[00:11:12] Hello, I'm Jeremy Allaire, and this is The Money Movement, a show where we chronicle the issues and ideas driving this brave new world of digital currency and blockchains over the past months on the show, we've focused a lot of our attention on stablecoins, on digital dollars and sort of on the broader themes that have to do with those types of digital currencies and their synthesis with Blockchains. The focus has been on how public chains are going to be the foundation of a new mainstream moment for how payments, settlement, commerce and sort of broader financial applications take place. And that overarching theme is is is really core here on this show. I think it's really important. Time to check in on one of the more fundamental theses that has sort of sat behind the broader digital currency movement, the broader money movement, and really turning our attention back to the origin of all of this world, really, which is Bitcoin. [00:12:23][71.0]
[00:12:24] And, you know, in in our view, sort of Bitcoin is running in some ways in parallel to this world of smart stablecoins, of smart contracts, of generalized blockchains, but also is very interwoven with them in terms of the market infrastructure, in terms of the broader thesis that's going on here. And clearly, if you're paying attention. Bitcoin has maintained its role as the dominant digital asset and the dominant store of value in the digital assets space. [00:12:57][33.1]
[00:12:58] And we're we're obviously continuing to see growing levels of awareness, growing levels of adoption. We're seeing really significant new categories of support for it as an alternative asset in and of itself. And so today, you know, we want to explore, you know, how the Bitcoin thesis has evolved over time. [00:13:21][22.7]
[00:13:22] We can touch on the current and sort of near-term global macro environment. We've talked about how that's driving stablecoins. It's also very much driving the Bitcoin thesis. And we'll talk about that and what the major drivers are of adoption or are looking to be this year, next year, in the coming years. And obviously, I I think think about what this could be. And in a few years to drive this discussion, we're joined by two OGs of Bitcoin as an asset class with Michael Sun and Shine, his managing director of Grace Dale Investments, one of the largest investment vehicles for Bitcoin in the world. And Dan Moorhead, the CEO and co chief investment officer of Pintera Capital, which also manages a significant set of funds in the space and including Bitcoin related funds. And both firms and both Dan and Mike have been driving these investment vehicles and providing retail and institutional investor access to Bitcoin as an asset class for nearly eight years. So it's really, really awesome to have you guys on the show. Welcome. Thank you. [00:14:37][75.0]
[00:14:38] Great. Thanks. [00:14:39][0.4]
Jeremy: [00:14:40] Yeah, good. You guys have probably you know, you have so much perspective on the Bitcoin thesis, and it's I'm really excited to be able to explore that with with you both today. I thought, you know, be helpful maybe to kick things off. Just to talk a little bit about, you know, when you first developed a Bitcoin thesis and you know, how how that emerged and what you thought then. And I just I like a little bit of an origin story because you guys had been in this asset class, as you know, as long as as almost anyone and and actually professionally in it and helping other investors be in it for a very, very long time. Maybe just a brief origin story on your own journey into it and and kind of what the thesis was that if you if you had it written down from back then and you looked at it, maybe I'll start with you, Dan. [00:15:35][55.3]
Dan: [00:15:37] Yes. My career has been investing in these, you know, disruptions, whether they're Russian privatization or, you know, Middle Eastern equities, Tesla Motors. And that was always kind of my hobby. You know, they weren't the the biggest things on Earth. And I was introduced to Bitcoin 2011 by my brother. And then a year and a half later, so Thieberger and Mike Novogratz, friends of mine from school and from Wall Street. Goldman asked me to talk about Bitcoin with them. And it really catalyzed my looking at it as an opportunity. And we basically started out with a coffee and I haven't left their offices since. And it's it's just it's the biggest trade of our generation. My opinion, you know, all these other disruptions that have traded in the past. They're interesting. They're kind of regional. They just impact one asset class. This is, you know, going after gold and money and cross-border payments. It's going to have massive, literally largest cases ever in Canada. Of the light bulb moment for me was at our first gathering, got all the leaders in Bitcoin industry out to like Tiel in 2013. And I just hate Bitcoin, got the same art galleries, Urban Outfitters. And I think when they dig up our society, our Planet of the Apes style is going to have a bigger impact on the world than Urban Outfitters did. And, you know, we're at L'Oreal now. You know, it's I just think I wouldn't trade Bitcoin for some shampoo. Right. Like, it's just going to have a much bigger impact than it's priced right now. [00:17:18][100.3]
Jeremy: [00:17:19] Yeah, that's a great it's a great story. And obviously so, you know, it sounds like when that thesis developed, it was it was clearly under one hundred dollars at the time. And and so it's been a good thesis since then. But that's awesome. Michael. [00:17:35][16.8]
Mike: [00:17:37] Yeah. My my journey is a little bit different. So I also spent time on Wall Street before getting into the crypto space, and I had the fortune and pleasure of meeting our founder and CEO, Barry Silver, in late 2013, early 2014. And when I met Barry. [00:17:56][18.9]
Mike: [00:17:58] I didn't know much at all about Bitcoin. I wasn't looking to leave the bulge bracket bank, I was working for for a job in the crypto space. I remember sitting around my office. CNBC was on in the background every day. We'd occasionally see Bitcoin show up on CNBC and have a little laugh or giggle about it, but no one really knew anything, really took it seriously. And when I interviewed with Barry to come join what's become now grayscale. You know, he he kind of sold me on this idea that money has just changed so many times throughout society. It's just taking so many forms. And ultimately, society dictates what constitutes money. And once he started talking about it in that respect, it started to piqued my interest. And then he came up with this analogy that has stuck with me ever since. Which is when we think about how transformative the cell phone was to developing communications in the developing world where there were never landlines. But suddenly you popped up cell phone towers and gave everybody this little tiny piece of plastic. And suddenly everyone was talking. He started to start throwing statistics at me, thinking that half the world's adult population didn't have access to financial services, but they all had cell phones. And so this idea that you could put a bank in everybody's pocket was this like light bulb. Aha. Transformative moment. And now, seven years later, you know, grayscale has become the five plus billion dollar asset manager know, largest in the space, the kind of tailwinds and the people and the human capital and actual capital that's gotten involved. It's just been unbelievable to see and be a part of. I don't think we're yet at that moment where Bitcoin is at that inflection point that does create financial inclusion. But I do think we're well on our way. And my faith in pieces around it still hasn't changed in that initial conversation with Barry. [00:20:03][125.2]
Jeremy: [00:20:05] Yeah, and that's that's that's awesome. I mean, love to have similar aha. Moments in developing their thesis. So I guess some to each of you, you know, within this sort of asset class sort of managed products for investors to you know, people can go, you know, go buy Bitcoin. Right. Lots of different ways. Now, the number of ways that people could do that around the world is it's proliferated greatly. But but you've built products that are for large investors, for people to invest through, you know. Well, you know, in an equity market like fashion or or, you know, through electronic markets and so on. Maybe just for a second. Dan, just talk about the Bitcoin kind of funds. And you had a thesis then how they performed from that early stage. [00:20:58][53.5]
Dan: [00:21:00] Yeah, so we've just been trying to help individuals or institutions get exposure to the Blockchains space. As you remember, back in 2011, 12 and 13 was definitely more of a Wild West feel. Right. While Gox's was the custodian of our industry, lot of Catledge, you know, at least immature, incompetent behavior. And so we were trying to offer a very professional way for for people to invest. And so our Bitcoin fund was the first thing on Earth to have Ernst and Young audit it, you know, all the normal law firms and things people would expect. And it just allowing us to get invested in the blockchains space in the vehicle, then they know and understand. And, you know, we're still waiting for an ETF. You know, that was seven years ago. I still think we still have a good bit of time for for that to come to our space. So we've set all of our products up as hedge funds because it's it's an easy way for accredited investors to invest in the space, either just crypto, just bitcoin or crypto generally, or venture. [00:22:04][63.5]
Jeremy: [00:22:05] Right, Michael? [00:22:06][1.3]
Mike: [00:22:07] Yeah. So I think we've taken a similar thesis, but a slightly different approach to Pintera at Grayscale now we've developed a suite of investment products. Nine of them give investors the ability to gain exposure to a single digital currency. And in the tenth product is a diversified basket of large cap funds rather than going the hedge fund route. We have launched these as primarily as trust structures so similar to the way investors are used to gaining exposure to a commodity or a lot of other subsets of the market. And we've had a lot of success, as has Pantera, because even though our firms have come along and the space has come along over the last seven years, buying Bitcoin still does not exist in the same places that investors are used to making investments in stocks and bonds and all the other things that they invest in. So by packaging up this exposure inside investment structures, we've really opened access to a lot of folks. So for us, we have an ongoing private placement of Bitcoin trust. Now it has north of two percent of the outstanding Bitcoin float inside the product. So through accredited. You can invest through the private placement. Non accredited investors can participate and you can trade shares in the Bitcoin product on the public market here in the U.S. under the symbol GTC. And so it's been really rewarding. And again, I think anything that firms like Grayscale and Pintera Circle anyone that any of us can do to really remove those barriers to entry, to make crypto access, you know, avoiding the challenges of sourcing, storing safekeeping, et cetera, is really helping to draw more capital, more interest since the asset class. [00:24:00][112.6]
[00:24:03] It's matured to mean. [00:24:04][0.7]
[00:24:05] And just sort of looking back over this arc of time from today to 2013 to two to test to today. [00:24:13][7.6]
Jeremy: [00:24:15] What's changed for for either of you in your own thesis on Bitcoin? I mean, I think there's sort of these narratives, these Meems these sort of themes that have been there. And people have kind of certain themes have ebbed and flowed. And, you know, is there is there a dimension of this thesis that where the convictions even deeper than before? You know, maybe it's just a juxtaposition with where we are in the world today or, you know. I'd love to hear you both opine a little bit on kind of, you know, how how the thesis has evolved. And I think it's OK for a thesis to not be exactly the same. At one point, there should be some thread that runs through it, of course. [00:24:57][42.0]
Jeremy: [00:24:58] But, you know, how do you feel like that thesis has evolved in articulating this opportunity to investors today? [00:25:06][8.2]
Mike: [00:25:09] I'll jump in. So I think it's actually two different pieces. Jeremy, I think the first is the thesis, and I think in tandem with that, it's also who is showing up around this thesis and what they're doing. So I remember back in 2014, 2015, we had a lot of family offices, a lot of kind of folks that we're talking about, Bitcoin and Silicon Valley and things like that. But it was still a pretty neat investment that most people were were not willing to take that leap of faith and do. There was a lot of pushback given there might not have been enough regulatory clarity for them. There might not have been enough of a track record around Bitcoin, only been introduced a couple of years prior to then. You really did not start to see much of that until actually, I think for me, one of the turning points was Goldman Sachs investing in Circle. I think when you started to see that real institutional participation in digital currency related businesses, it provided a certain level of air cover that it was okay for other investors to get involved in the space. And so you quickly started to see people moving away from Bitcoin as a Ponzi scheme or it's only for criminals and people really started to do their homework. And I think what's emerged now, probably over the last call it two and a half plus years, it's for now two narratives, one that we really believe in and understand, the other that, quite frankly, drives us crazy. So the first is that Bitcoin should be viewed as a digital gold or a digital store of value or perhaps a store of value for a world that's gone ever more digital. And maybe we need to start moving away from historical stores that value inflation, hedges, et cetera. And when a lot of folks examine those overlapping attributes between assets like gold and Bitcoin, they really do start to see that bitcoin can on many fronts really outshine gold. Now, that has happened and really solidified in the investment community. There is this prevalent narrative that somehow Bitcoin is not a success because Jeremy, Dan and Michael are not buying lattes with Bitcoin and somehow that it has failed. And we think that that could not be further from the truth. You know, this is an asset that didn't even exist 10, 12 years ago. And the amount of development that's gone around it is truly astounding. So anytime you guys hear that. I'm hope hopefully you just felt that just as much as we do. And I think in a similar fashion, you know, as as this thesis has developed, certainly our investor base has shifted ever more into institutional investors. And so we deal with a lot of hedge funds, registered investment advisors, pensions, endowments, and really started to see investors that have oftentimes much more stringent investment mandates really starting to make room in their portfolio allocations for digital currency, which has been super, super validating and really exciting from our perspective to see them getting involved. [00:28:22][193.7]
Jeremy: [00:28:24] One comment, and I want to hear damps view on this evolution, but, you know, I think the sort of monetary policy of Bitcoin in this sort of this rapid inflation or distribution over these first 12 plus years and then this sort of long tail of steady state inflation, so to speak. You know, I think some of the brightest minds to think about this over the long run, you know, feel like, you know, the amount of the monetary base needs to grow much, much, much larger into the trillions, you know. And when it gets when the monetary base gets into the trillions, you know, the the ability to transact in this as a payment medium will really start to take hold. And obviously, the utility value of, you know, layer two models and all the things that are that are evolving, we're still in the early stages of that. And I even had a view at one point on this that it might take it might take 30 years to get to that point where it's just it's a preverb it becomes a preferred medium of exchange as a as a global reserve asset as well. And that's OK. Like, you can have a thesis that's 30 years on this kind of stuff. You don't have to bet that next week it's used to buy lattes. Yeah. Dan, I would love to hear how the thesis has evolved in your mind. [00:29:52][87.6]
Dan: [00:29:54] Yeah, I see. Great question. I love the way you posted it. And I would even say to some extent, what's Chiang's? The answer is what hasn't changed. Bitcoin, it never changes. Right. And that's why it's so powerful. And that's why people want to store Todor billion. And in the you know, the gripe is, oh, you know, it hasn't evolved or it doesn't do this. It does that. And I'll say, you know, it's an interesting side thing we can talk about. But the thing that really makes Bitcoin appealing is it doesn't change. It's fixed. And it's been proven. It's, you know, 24/7 uptime for eleven years. Never fallen over, never been hacked. And, you know, sweat gets hacked. Facebook goes down like everything breaks. Right. And that Bitcoin never breaks is it's it's built. The other thing is never changes. It's never lost. No one's that is the number one for eleven years. Right. Never do change the lock. You know, as you know, ex ERP area, you know, like call it everything cycles through and you know, all these things come and go. And Bitcoin still 60 percent of the entire market gap, the entire industry. So if you're if you're talking about, you know, evolution, you know, there are some really cool things happening. Obviously, stablecoins a lot of smart contract things by lack of cool things happening. But there is a use case for the storage of wealth, a, you know, censorship resistant thing. Bitcoin's been doing that. Great. Yeah. So it's always fun to hear it like there are some people that thought, you know, Bitcoin is gonna change everything overnight to a thousand different things. What it's doing, it's doing really well. [00:31:31][97.8]
Jeremy: [00:31:32] Yeah. Slow and steady. And it's obviously really, really incredible. I think it's sort of tight ties into the thesis that has always existed, which is, you know, the Bitcoin is obviously born out of the financial crisis. One could argue that the you know, the Great Recession and, you know, a view about, you know, the grand monetary experiments that kicked off really in 2009 or really in 2008, but very heavily into 2009 and then ongoing and and sort of that that drove a lot of the global macro thesis. But obviously today, the current global macro environment has profound implications for Bitcoin in the coming years and arguably in the coming decade, decades. And so I think, Dan, you obviously have a a distinguished career in trading global macro for some really significant firms. And this this sort of level of monetary intervention, intervention, the tapping not just in the United States, but every everywhere in the world. What is this going to mean from your perspective, in terms of the Bitcoin thesis now? [00:33:01][88.9]
Dan: [00:33:02] No, I think you're right that Bitcoin was born in a financial crisis and it's going to come of age in this one. And the thing we put in our I think they invest your letter was quoting Satoshi in the first block of Bitcoin agenesis block. He put at times the Times of London headline about another bank bailout that was outrageous to the institution. It was 50 billion pounds, like we're thrown around 50 billion literally every four days in nine states. I mean, you see those things rolling over in his grave. Whatever the amount of money is being printed now makes whatever Satoshi was frustrated with just completely irrelevant. [00:33:47][45.1]
Jeremy: [00:33:48] And this is this is the United States, right? The trillions and trillions. And that's the full faith and credit of the United States. And, you know, hey, we're eventually going to grow. We're going to pay it back and all that good, good stuff. Or maybe we don't have to maybe just as, you know, sort of monetize out of existence. And whenever there's various arguments about that. But around the world, you know what? You know, the United States is, whatever it is, 350 million people. It's a small fraction of the world. And every government everywhere is undertaking dramatic fiscal stimulus measures in this dramatic impact on on on their currencies, on their outlook, on the ability for them to operate their treasuries. All of these things that are you know, we have not yet seen the dominos fall, but clearly there will be more that fall. Seems like this is going to, you know, continue to kind of amplify interest around the world, not just from, you know, big pension funds in the United States, which is great to see that level of interest starting to emerge. But just, you know, to the quote unquote, man on the street in a lot of countries. Michael, do you do sort of feel like there's like a new wave of awareness that's going to grow out of, you know, the current environment around there? [00:35:07][78.7]
Mike: [00:35:08] I think they're actually already it's you know, one of the things that investors tell us that for that makes Bitcoin investable is the fact that it hasn't backed the fact that it has been called dead. No shortage of times. It has been challenged by other digital currencies, by all kinds of things over the years. [00:35:30][22.7]
Mike: [00:35:31] And when a lot of them saw the massive deleveraging in the market in March as the pandemic really took hold and just greed pretty much propping entire world to a grinding halt and then saw how Bitcoin snapped back even faster and more fervently than other asset classes. It caused a lot of folks to at least share with us that they are really taking the time to drill in to what makes Bitcoin, Bitcoin and what has changed about it or not changed about it over time. And for a lot of them, one of the very first things that we talk about is that they're self educating on is the verifiable scarcity of Bitcoin. And when you think about Bitcoin, verifiable scarcity in the context of an environment where you have governments domestically and abroad, you know, just printing unlimited amounts of money to really, I guess, print our way out of the problems that we're now in, it does really shine light on one of the most important attributes about Bitcoin that we all know that we all love and that we all believe will continue to always be a core attribute of the protocol. And a lot of investors, as a result of understanding that, I think are really saying that there is some part of their portfolio that deserves to have an allocation to an asset that they know will not be intervened with, will not be deleted because more of it won't get created and that they can very predictively know what amount of it is going to be in the supply at any point in time. And that's not lost on people. And that's a pretty transformative idea, particularly in this environment. [00:37:13][101.5]
Jeremy: [00:37:14] And so while, you know, it's absolutely horrific, the amount of loss of life and all the hardships that are going on around the world, it is for sure shedding light on a very, very important aspect of Bitcoin here and abroad is something that we're really excited, that is giving people an opportunity to understand this asset better. [00:37:34][20.3]
Jeremy: [00:37:35] You know, it's been interesting to watch. Obviously, if you zoom out and you go back to 2013 to today. [00:37:40][5.6]
[00:37:41] Right. Bitcoin is this is completely uncorrelated to kind of anything else. Right. It's just like obviously it's like the best performing financial asset over that period of time. And maybe there's some stock, I don't know. That's had a bigger run. [00:37:54][13.1]
Jeremy: [00:37:55] But, you know, and you can't draw a line. There's no chart that. Just that now, you know, over time, you sort of have these varying levels of correlation. [00:38:05][10.3]
[00:38:07] This year there's been a higher correlation to gold and gold's really been a safe haven asset. And there's a lot of capital there. [00:38:16][8.9]
Jeremy: [00:38:18] There was a piece yesterday that was saying there's the correlation between the S&P 500 and Bitcoin's higher than it's been before. And, you know, you saw the tech sell off last week and you saw a corresponding risk off in the crypto markets. And there's lots of capital that play lots of pockets of capital that play in in the in this investing in this space. There's momentum there. Speculative, there's arbitrage. There's long there's all these different positions. What do you guys think about Visa B? That correlation does matter. [00:38:48][30.7]
Jeremy: [00:38:49] Does it not matter? Just I would be interested in your thoughts. Dan, maybe start with you. [00:38:55][6.1]
Dan: [00:38:55] Yeah, we we've studied this. And it is true that for very short periods of time when there's a steep sell off in the S&P, there's been five in Bitcoin's life. Bitcoin becomes more highly correlated around zero point eight to the S&P, but it's only correlated for about thirty two days on average. And then over 70 days, it kind of dissipates. And that's what we predicted in our March investor letter. And it's actually pretty much happened that Bitcoin did go down 50 percent when you do it down. [00:39:23][27.4]
Dan: [00:39:24] It did stay down there for just a couple of weeks and then has exploded back up. And it's way higher than it was in March where that was at the beginning of the. Yeah, it's a little bit off because the tech so but that's that's our view is only in very, very short, very steep declines in the S&P. Is there a correlation? If you look at it over any longer period, it's around zero point one, which is essentially nothing. And there is no other asset like that that has a two hundred nine percent compound annual growth rate in the sense of the zero correlation to everything else. So it's you know, in the short run, it seems like it's correlated, but in the long run it isn't. And one of the best examples of that is Bitcoin goes way up, as we've seen, and it also goes down 80 percent every couple years. It's had a lot of 80 percent downgrades. It's only had one year out of last nine years where the low for the year was below prior lows. So, yeah, it goes down 80 percent a lot, but even at 80 percent below its peak, it's higher than it was before because it just went up fifteen hundred percent or, you know, sixteen thousand percent like our big break. It just it keeps going up so high that even has these really scary downdrafts. It's reaching a higher plateau. [00:40:37][73.5]
Jeremy: [00:40:38] Yeah. Yeah. No, it's it's good. Very helpful. Dan, I appreciate that perspective. That's right. [00:40:47][8.1]
Jeremy: [00:40:47] So as we look now, it feels like we've all been in this space for four, seven, eight years and you sort of experienced a lot of iterations. [00:40:58][11.0]
Jeremy: [00:40:59] It feels to me at least, that right now things are moving incredibly fast, like there's there's unbelievable progress in market infrastructure for Bitcoin. Regulatory regulatory treatment, a lot clear and around the world. It's sort of supported the pace is there, you know, beyond the sort of global macro environment, the sort of that part of the thesis, which is obviously very, very supportive of Bitcoin. What do you believe the biggest drivers are in the next year or two years? [00:41:32][33.1]
Mike: [00:41:36] I don't know that I have one for the next year or two, but I'll tell you something that my team is paying a lot of attention to. You know, again, I think in the near term, this idea of thinking about Bitcoin as a store of value is probably in the near term. The killer use case for Bitcoin. We all know and believe Bitcoin can have all kinds of other use cases as time goes on and maybe it develops other killer use cases, maybe it doesn't. But certainly one audience that is very crucial to this is the younger audience of investors. Over about the next twenty five years or so, I think it's almost 70, 70 trillion is going to pass over to younger generations and from boomers and, you know, down to millennials and Gen Z, etc.. And when you think about the way assets that are currently postured today and how they're going to get postured as they get passed down to that younger generation, we're certainly definitely not saying that all of that money is going into crypto. But we'd be hard pressed to believe that crypto does not somehow become the beneficiary of this great generational about fans. [00:42:50][74.2]
Michael: [00:42:52] They're already starting to see that. But but that's one thing we're not fully paying attention to. [00:42:56][3.9]
Jeremy: [00:42:56] My my son is in that group. He's 20, and he started to hold. It's in 2013 when he was young and I mean, when when you see something like that happen, you know, like his conviction is like a of course, where I'm going to invest in crypto. [00:43:14][17.2]
[00:43:14] Right. I mean, it's the best lie, right? [00:43:17][3.0]
Mike: [00:43:17] It's the generation raised on Venmo and Tesla and Gmail. And, you know, it's it's just apples and oranges and maybe things like gold and other things just will not ever resonate with that younger audience of investors. [00:43:30][12.2]
Jeremy: [00:43:31] Yeah. Absolutely. Dan, what what are you seeing beyond the global macro piece here as like with the kind of acceleration in the space? What what do you see as drivers? [00:43:40][9.8]
Dan: [00:43:42] Yes. Or the global macro story is so unprecedented and compelling. It's easy to focus on that. But the fundamental story blockchains, as you know well at Circle USDC it's happening. [00:43:53][10.4]
Dan: [00:43:54] You know, when your bank is physically close because of the pandemic or the other types of payment services you're used to, you need a natively digital thing to get done. What you're trying to do, you know, USDC volumes have tripled over the last few months. We track a index of other portfolio companies like Circle that we're invested in, and it's up 120 percent since the pandemic started. Actual transactions using mainly Bitcoin, but sometimes other crypto currencies to do something. Move money back to the Philippines or whatever. They use Cleese's as people can't, you know, can't get things done. We're investing in gold. Coin me that as physical kios in safe ways. Right. And if you Google Bitcoin near me, it's going to pop up, you know. Twenty five different Safeway's or Kroger's, whatever in your neighborhood. And those are essential businesses. They're open. You go in, you can feed threatener bucks in the machine and it pops out Manila. Right. That is why Bitcoin is working. And then the other thing and you're talking about Catalyst's is the three of us deal with the regulators for eight years. We were so positive on the industry. I'll admit, I had no idea OCC was going to bring Bitcoin as custodial acid. National banks, as quickly as that stuff's great. Right. [00:45:13][79.5]
Michael: [00:45:14] You know, most people know what the OCC even is. Before that happens. [00:45:17][3.2]
Dan: [00:45:19] But they wouldn't. When they walk into their bank branch and there's a sign you want to buy Bitcoin or store Bitcoin. I mean, to me, things like that are really showing that it's not kind of a fringe level like. Yeah. And it's it's I mean, this is pretty legit. Nationally chartered banks storing your bitcoin. [00:45:34][15.0]
Jeremy: [00:45:35] Yeah. There's this sort of classic Geoffrey Moore crossing the chasm. You know, there's always been you know, I was given speeches in 2014 about, you know, whenas the mainstream moment for all this sort of stuff. And what are all the things that have to happen, regulatory market, infrastructure, you know, usability, scalability, all this kind of stuff. And, you know, the early adopter to mainstream phase that chasm, like we're kind of like we are like leaping over it as we speak. You know, and and those curves that you see. You know, the good news is, is that the part before the chasm is is typically, you know, like 20 percent of the market. And then, you know, the the remaining 80 percent of the market comes in over over an extended period time. So it does feel like usage and awareness and all these things are are are very much there. And that is absolutely outside of just this global macro context. That's a great, great perspective on that. I want to change, you know, change to a slightly more abstract. We're not even necessarily abstract, but a very different kind of question, which is, as you know, this grows as a non sovereign, you know, sort of unsensible digital store of value as as it's recognized as that. Do we see it being accumulated as a reserve currency? Do we see it emerging in the next three years as a balance sheet asset in more and more central banks? Do we think that China and Russia maybe already have Bitcoin on their balance sheet, but it's in some tucked away footnote or or what not? I mean, we know the Russian Federation built their own mining infrastructure. What are they doing with that Bitcoin? Is that is that a reserve that's there? And how seriously are you know, that reserve currency status is something that I think people who, you know, bright eyed, bushy tailed walking into the space sort of said that's going to happen. And that was one of the most, you know, the things that was perceived to be it's just preposterous and ludicrous by by anyone who is serious at all, but actually maybe happening right now. And political geopolitical things, etc.. [00:47:53][138.0]
Jeremy: [00:47:53] I'd love to hear your thoughts on on you know, there's there's, what, two hundred billion dollars of Bitcoin out there today. Right. I think that when you're already seeing public companies like MicroStrategy, which is very publicly put Bitcoin on their balance sheet, I have a hard time believing that, you know, state actors either are not already or will. [00:48:18][24.7]
[00:48:19] We'll soon be doing so in the future. [00:48:20][1.7]
[00:48:21] I think they're going to experiment with it, at least to be like, what the hell is the movie like? If anything, it's like a call option for them. [00:48:27][6.2]
Mike: [00:48:28] Right. And whether they're publicly doing things like building mining and infrastructure and things of that nature to support the asset or not, they're going to kind of have to be there because their bitcoin is infectious. You know, once you learn about Bitcoin, you kind of can't shut up about it and then you talk about it to everybody else. And, you know, whether it's Russia or China or whatever it is around the world, the citizens of all the in all of these geographies are using Bitcoin. I mean, it's explosive. So I have a hard time seeing how how they could ignore it. Not to mention the fact that they are certainly glommed on to this idea of blockchains technology and the emergence of, you know, sovereign, you know, central bank digital currency and things of that nature where they can actually have quite a bit more oversight and control of their own currency. [00:49:21][53.1]
Jeremy: [00:49:23] Dan, what do you think? Reserve currency. Are we. Are we there yet? Not not yet. [00:49:28][4.6]
Dan: [00:49:28] I totally believe it will be a reserve currency. And it's entirely rational to use it as a reserve currency today. You know, certain countries are complaining about the dollars and jimminy around the world. It's hard to change. There's no other currency, you paper currency that's ever going to replace the dollar. But Bitcoin could if you wanted to bet on the over under on three years, down 40 cents a over. I think it's central banks are very slow moving. Yeah. They've been talking about diversifying or D acquisition in gold for like 20 years. You know, they only like three percent of it. You know, it's just it's a very slow pace. So of all the things that are going to happen, being a reserve currency might be one of the last ones. [00:50:13][45.3]
Jeremy: [00:50:14] Yeah. Yeah. And that's the maybe on the 20, 30 year thesis. But there's pockets of activity, obviously, that are there. Well, so we're kind of getting close to winding up here and we can't have this episode without price predictions. No. And I guess you can you can you can hedge however you want. But, you know, we're at ten thousand now. You know, where where are we at the end of this year? Where we in in three years. [00:50:44][29.6]
Mike: [00:50:45] All right. I'm going to go first. So I can't give you a price prediction. But you've got this credible product by my lawyers will have a field day. Jeremy, I'll tell you a couple of things to look out for. [00:50:56][11.0]
Mike: [00:50:57] One, the grayscale team just authored a paper called Valuing Bitcoin. It's on our website. Go check it out. A lot of investors say to us it's not a cash flowing asset. How do I value it, etc.. We put together a whole series of metrics that people can look at to identify signals that may lead to certain valuations for Bitcoin. And hopefully that's a good resource. In my opinion, Bitcoin is not something that people should be putting more money into than they can afford to lose. Think of it as an early stage technology. Buyer beware in a flash that everybody does have those 80 percent draw downs. But from here, Bitcoin either is a hell of a lot higher and a lot more valuable than it is today, or something somehow comes along and displaces Bitcoin and we all move on to something else. [00:51:50][53.6]
Jeremy: [00:51:52] That's really helpful. We'll put a link to valuing Bitcoin in in the in the show notes and stuff. That's great. Dan. You're in front with price predictions more often, but I would just love to hear your thoughts. [00:52:07][15.1]
Dan: [00:52:09] Yeah, our predictions are normally the same is that it's got to it's got a nine year, two hundred nine percent compound annual growth rate, and we think that will continue. And it is just that simple that, you know, it has some bubbles as some downgrades. But if we got back onto that trend, it would be a hundred thousand within the next year. And in the normal market state, some goes up 10 FX is ludicrous. And, you know, you'd be ridiculed. But it happens every three or four years and all the factors have come together. So I think it is a pretty good shot that it hits thousands in the next year. [00:52:43][34.1]
Jeremy: [00:52:44] Yeah, I'm right there with you. All right. This is really excellent. [00:52:50][6.9]
Jeremy: [00:52:51] Really appreciate both of you joining, sharing the long term perspective and having been there all along the way and your outlook and what you're seeing. It's it's it's really tremendous and and obviously you guys have done a tremendous service to investors who have participated in this as well. So thanks again for joining The Money Movement this week. [00:53:14][23.0]
Jeremy: [00:53:15] Awesome. Thanks for being here. You're welcome. [00:53:17][2.3]
Jeremy: [00:53:20] So interesting moment in time as Bitcoin continues to sit at ten thousand and all of these kind of fundamentals supporting thesis continue as well. And as we've talked about, the non sovereign and store of value thesis sits alongside the digitization, the true digitization of reserve currencies through things like US dollar coin and the adoption of Stablecoins and Blockchains infrastructure as a whole. All of these continuing to run very much in parallel and reinforcing each other in terms of awareness and an adoption. Next week we're actually taking off and we'll be back soon with more episodes the following week. We're going to be doing something unique, which is I'm going to be hosting an AMA on The Money Movement. We'll be talking about how people can participate in live questions, a Synchronoss questions and should be a lot of fun. So until next time. Stay well. Stay safe and stay informed. Thank you. [00:53:20][0.0]

Dan Morehead
CEO & Co-Chief Investment Officer, Pantera Capital
Michael Sonnenshein
Managing Director, Grayscale Investments