Bitcoin, The US Election, and AI w/ Bill Barhydt | EP #113

What's been going on? We've just seen the bitcoin price drop from 68,000 down to a low of 49,800.

This is another example of not understanding the nature of exponential growth.

What are we going to see over the next few months as we head into the election cycle?

I do think the tides are changing because they're getting tired of losing.

It's like, which way is the wind going right? Exactly 5, 10, 20 years from now, where's the price per bitcoin going to, you know, trend towards?

As we approach this so called fourth turning, what is the dollar? It becomes easier to define what a bitcoin is than it does what a dollar is. There's going to be a second coming for crypto when it merges with AI in the next three to five years.

Hi everybody, Peter Diamandis here and welcome to Moonshots. At this moment, the price of Bitcoin is $56,086. And my blood glucose level as measured on my levels app is 110. And I measure my blood glucose level like I measure bitcoin because it's important for my health. If you want more information about bitcoin, you can look at Abra. We're going to be talking to the CEO of Abra in a moment. Or if you want information about levels, I'll have my team put some information down below. Take a moment and introduce you. Bill Barheit is the founder CEO of Abra. It's an all in one mobile wallet that allows its customers to buy, trade, sell and store and borrow against cryptocurrency. He's a serial entrepreneur. He's worked at NASA, the CIA and Goldman Sachs. I mean, the perfect combination to talk about cryptocurrencies. We're going to do a deep dive right now. What just happened in Nashville with the presidential candidates in Japan in their recent bitcoin drop, his predictions for the future and why it all matters, and most importantly, the merger of AI and crypto. What does the future look like when these two super exponentials are colliding with each other? All right, if you like conversations like this, please subscribe so I can bring those individuals to you. Let's jump into the episode. Hey Bill, good to see you, my friend. Where are you today?

I'm at home. I just got back from my sauna and cold plunge, so I'm good to go. Let's do it.

Longevity in bitcoin, abundance in bitcoin.

That's what it's all about, right?

It is. I Want to dive in? You know, there's a lot happening in the market there. Always a lot happening in the market. But you were just in Nashville. I want to talk about what you heard there, what the presidents are saying, what's been going on. We've just seen the bitcoin price drop. I'm not going to call it a crash, as people are. It dropped from 68,000 down to a low of 49,8. It's recovered since then. We're at 56,000 at the moment. But it's always been moving back and forth in that channel. What's your reaction to people who are like calling this a crash and are just flummoxed about the price coming down 10k?

Yeah, I mean this is another example of not understanding the nature of exponential growth. And if you're looking at something in a base 10 chart and it's growing exponentially, you get a lot of noise. Right. So what you need to do is zoom out. My favorite chart is the 15 year log chart for Bitcoin because it basically looks like a straight line up and to the right, which is exactly what you would expect when you have something that shows exponential growth over time, which I know your audience loves to hear about because you know, we're all about exponential technology. And Bitcoin is one of the best examples of that in software that we've ever had. So we get these oscillations, the short term oscillations are a function of market liquidity. You know, this past week we had this, this so called carry trade in Japan which blew up, which we get into if you want, which basically was a result of long term interest rates in Japan being out of whack with the rest of the world, which traders were taking advantage of, as traders are known to do. And when that blew up, guess what happened, Right? So, so, so there's these short term fluctuations that are always going to happen. I think that ultimately bitcoin as a scarce asset, guaranteed scarce, is going to act as a liquidity suck for non scarce assets. I can give you other examples of that in history. We didn't invent this idea, we invented the digital version of this idea. Right? Ask any family that has intergenerational wealth why they collect art. Why did they not leave the money in Wymark papers or other currencies that don't exist anymore? Because they knew that those things were not only scarce because the dead artists couldn't make anymore. Right? But the paper that was their alternative was likely to fail eventually because all government issued currencies eventually fail. So we just have a much, infinitely better version of that now.

Well, listen, I want to just start by saying thanks for joining me on Moonshots to discuss this. For those of you, this is not financial advice. This is a dear friend of mine, Bill and I, educating each other on what's going on and hopefully you as well. I do want to say full disclosure. I hold all my bitcoin on Abra, where Bill is the CEO. And so that's the disclosures I wanted to make up front here.

I'll also say that I'm not here to give financial investing advice. Consider it entertainment value or informational value. Go to abra.com later if you want to talk to an advisor. But this is not that.

So I want to start with some fundamentals here. What moves the bitcoin price? I have to believe. I have to imagine from my perspective, we're coming into the. Having the supply is dropping. We're starting to see presidential candidates and financial institutions talking about buying up bitcoin. I thought this was the perfect conditions for there to be this massive escalation. I expected it to be north of 100 by now, and then we see it drop down to 50. I do want to get a little bit of understanding what's driving this. And we'll talk about where you expect bitcoin to be in the long term, the fundamentals. And I've had conversations recently with Cathie Wood on this subject and Michael Saylor. And now you. I'm hitting the triumvirate here. So what drives the price when it goes up and down? Is it just supply and demand? Why. Why are we not seeing up and to the right?

Yeah. So again, I would posit that over the right time frame, with the right perspective, it is up and to the right. What happens, though, when you zoom in? There's a lot of noise. Okay, so let's talk about the noise. Where does that noise come from? Why does it not look like that on a line chart, base 10 as opposed to an exponential log chart, when you zoom out. Okay.

Right, Right.

The idea is very simple. You have something that has a fixed supply, and you are valuing that in something that has an infinitely growing supply, namely the US Dollar. Okay. And the rate at which that supply is being created is actually increasing, which is not supposed to be able to happen because it was originally supposed to be based on gold, but we no longer do that. So we can more or less. We, meaning our overlords, can more or less create dollars at Will as often as they want, which is what they do. Right. So I think during the COVID lockdowns, we printed something like 25% of. Where we created 25% of the new money supply versus all dollars that had ever existed since.

You know, it's nice to be the king.

Yeah, well, okay, I guess. But they have the same money we do, and so they're being devalued the same way we are. It's just I'm guessing that they're wealthier than a lot of the people at the bottom of the US income pyramid who don't have assets they can put those dollars into. Okay, so back to Bitcoin. So the reason that the price fluctuates is a couple of things. One, right, Bitcoin as a scarce asset generally will act as a liquidity suck for dollars that are floating around. Most scarce assets eventually do. Right? Artists, you know, dead artists are notoriously good at being captured by the wealthy over time because it was one of the best scarce, long term assets we ever had.

Central park real estate.

Yeah, Central park real estate, exactly. So for first time, we have a digital version of this that's mathematically, provably scarce over time. So naturally it's going to act as a liquidity suck. However, it's a new asset. Fifteen years in the big picture is nothing. Okay. You know, we have to go back, you know, to oil as kind of the latest and previous new asset class. I mean, obviously oil has been around forever, but it wasn't as important to society until we had combustion engines that would need it. And all of a sudden it became, you know, the liquid gold. Right. So now we have a digital gold. If we want to focus on its, you know, value, its use as a store of value. And it's still new. Like I said, 15 years in the big picture is not a long time. So you have the trials and tribulations of the fact that this is a new asset class. People are still learning, people are still coming in. Right. It is not a hedge against anything yet because it's too new. Right. And so we're still at this point where it's being hoarded by the masses. There was a book written in the 70s by an Austrian economist even before the Internet existed, who predicted that if we had private money that was sound, it would slowly be hoarded by the masses before it became useful. And it's astounding to watch Bitcoin play out his kind of playbook almost to the letter, 50 years before, 40 years before the Internet. So that's what's happening. But in between, the government adjusts the liquidity of money. Right. So as inflation started rising, the government tried to take liquidity or money out of circulation. Right. By basically selling assets on its balance sheet. During COVID it was buying assets onto its balance sheet, which had the wonderful effect of lowering interest rates. So anyway, so this has the effect that risk on assets, risky assets, will go up and down in value based in the short term. Based upon these changes of liquidity. Neither of us would argue that one of the most important public investable technologies right now is AI. And AI stocks got hammered in the past few days. Does that mean that AI is now worthless? No. If you look at the same log chart that I was talking about, you know, I would posit over the next few years, in the next 10 years, it's going to look like I predict a straight line up and to the right with a lot of noise in the middle. The noise tends to be more micro driven. What is the government doing? What is the Federal Reserve doing? What are bond markets doing? The average person doesn't understand those things, so they look at the news as the next best thing to try to interpret what's really going on. But you know, outside of a president getting shot or going to war, like really big macro shocks, the daily news is not the biggest driver of these, these micro movements up and down. It's things that the average Joe public investor doesn't understand. Right. Which is why I always say your time horizon should be as close to forever as you can make it. Because historically this, by the way, I don't know if you know this. People think Warren Buffett is the best investor in history. He's not in my list. He's number three. Number two is politicians where illegal insider trading for us is legal for them. And number one is dead people who actually their families don't know that their investment accounts are still open. Find the investment accounts 20 years later and they're up and to the right because they can't screw with them.

That's so funny.

Right. So that's my point, right, Is like if you have the right time horizon but the noise dissipates, you're your own worst enemy.

Yeah. And so it's really returning to the fundamentals of what Bitcoin is and believing in it and ignoring the news and ignoring what's going on. Is the right mindset then to basically just accumulate over time. I mean, do you see people with strategies where I'm going to take 10% of my paycheck every month and put it into Bitcoin and just hold on to it.

So we see, I mean we see three things, right? There's the active traders and let's put those people aside. That is not something that I would, even if I was giving investment advice, I would recommend that you not do that unless you really know what you're doing because your chances of losing money are very high. Then there's the people who already have accumulated wealth and people who are in the process of accumulating wealth. And usually the people who have wealth are also accumulating more wealth either via cash flow or whatever. And what we see now is more and more people who have accumulated wealth saying, okay, I get it, what percentage of my wealth should be in Bitcoin?

Well, let's answer that question. What's the advice that people are giving? I don't want to necessarily put you on the spot, but is there an ethos out there?

So I look at it this way, right? I don't perceive risk the way the average person does. I'm well educated, I have an engineering degree. You know, I don't entrepreneur for 30 years. So I don't see risk the way the average investor sees risk. And I think most people have risk defined incorrectly. So let's put that aside for a second. So I'll try to leave my personal bias out of this. The older you are, the more dependent upon dollar based cash flow you're going to be, you know, unless you're, I guess you would say unless you're under 60 and maybe you'll be alive still when we reach longevity, escape velocity. But for other people, they have a cash flow concern to live out their remaining years. And so putting 10% of their wealth in Bitcoin is a relatively safe bet in my opinion. And if you had done that over the last 15 years, it would have had a huge outsized impact on your investing portfolio. And in my opinion, the younger you get, the more you should be considering putting your portfolio, putting Bitcoin or potentially something like a Solana. But, but let's just focus on Bitcoin for now in your portfolio. And I think that given that we're in this, what I call late stage debt cycle, my, and that bitcoin is actually less risky now to me the biggest risk with Bitcoin when I was having the same exact conversation with others eight years ago was technology risk. And so that technology risk as it relates to Bitcoin has been mitigated in my opinion. You know, we could talk about Quantum computing and stuff like that. But, you know, I, I think even that will be addressed over time, you know, via other encryption schemes and digital signature schemes. So, so, so as you get younger, right, I actually think the percentage of your holdings that you should put in Bitcoin goes up and, and, you know, obviously between 10 and 100. And you know, if you're a computer scientist, a math oriented person who can really dig in, do the thousand hours of digging in that Michael Saylor and others have talked about, it's going to be very hard for you to become unconvinced that you shouldn't be putting a, you know, a big chunk of your net worth in this. The younger.

Well, put differently, it should be the place that you are storing your net worth, holding your net worth in Bitcoin versus anything else.

I think about my net worth in terms of number of Bitcoin now, not dollar value.

I think that's an important point. I have to say. I do too. It's my single largest holding other than the equities in my venture companies and my venture funds investments. But me personally, it's my single largest holding. And I think about that. I think about what I could have done if I had started 15 years ago, but my time machine is broken. You were just in Nashville to hear RFK and Trump talk about Bitcoin. Let's jump there. How much did that surprise you? And how meaningful is that to everyone listening here? Anyone who's a bitcoin holder.

Let me talk about RFK first. Even though I think it's obviously, well, not obviously, a million things can happen between now and November, but it's highly unlikely that he would win. But having the first presidential candidate speak was astounding. And the reason that it was astounding is he was not pandering. I mean, this guy has gone deep. He has a huge bitcoin holding. Personally. He was describing the technology. I have friends that have spent time with him on this. He's done many podcasts in my kind of crypto sphere where he's gone deep on broken money. And you know, it's, it's truly astounding the degree to which he has dug in on not only the history of our fiat system and, and how bitcoin works, but how bitcoin can complement the dollar or any, any fiat system for that matter, or other commodity based system. And he's gone super deep. And his presentation and his recommendations for the government to hoard Bitcoin were not realistic, by the way. But if we got a fraction done of what he was talking about, it would be astounding. I mean, his idea, which is bold, and I love bold ideas. I know you do, was we should basically have equal percentage of the world's Bitcoin in the US Reserves as we do in the world's gold. I actually don't agree with that, which I can explain why, but my opinion is less important. What's important is to your question. We had a viable presidential candidate saying that for the first time. Now, the first person who was on a presidential ticket of any kind that I heard talk about this was also there, and that's Vivek Ramaswamy. A lot of your audience may not even know who Vivek is. He is among libertarians.

He's a hardcore libertarian and a very persuasive speaker.

Very. I mean, unbelievable. I mean, I, I am mesmerized when he talks, and I am not easily mesmerized. It's truly like his knowledge of American history. I've never heard anything like it.

It's amazing.

I wish I have a minor in history science. I wish that my, my knowledge of, of scientific history was, Was one twentieth of. Of his knowledge of American history. Anyway, he has been talking about fixing, you know, ending the Fed, fixing the money. And the problem is that these all seem like crazy ideas to the average American who's just not informed on this stuff. And they're really not that crazy ideas. We didn't have a Federal Reserve for the first half of the existence of the United States, and we survived just fine without trillions of dollars worth of debt. So you could actually make a case, well, maybe we were better off without a bunch of private bankers. By the way, the Federal Reserve is run by private bankers, right? So they do report to Congress, but it's basically private bankers who basically decide to increase and decrease the money supply largely to their own benefit. Right. So, anyway, so the third person who was on a presidential ticket that spoke was obviously President Trump. Now, behind the scenes, myself and a few others, full disclosure, donors, whatnot, have been talking to him, courting him to say, look, you know, I hate to make this all about politics, but our space, our industry, has been attacked to no end the last four years. I've never seen anything like it. I've been involved in venture capital investing since my Netscape days. Even when I was at NASA, you know, I had friends who were doing vc, so I knew about it, I knew how it worked. So. So I'll give myself a little credit and go back 30 years. I didn't know what a Wells notice was until I got into the crypto space, even though I've done dozens of venture deals over time, all of which have, you know, are registered deals with the sec. You're issuing private stock, it gets registered with the sec. Companies go public, register with the sec. Never heard of a Wells notice. Almost every major company in the crypto space that I'm friends friendly with has either received the Wells notice, has received a subpoena threatening a Wells notice, or is in the process of being investigated, potentially leading to a Wells notice, or is already past that point and is now fighting in court or settlement.

All right, so tell us what a Wells notice is.

A Wells notice is basically the SEC's informing you of their intent to sue you for some securities violations. And I'm not a lawyer, so I'm giving you the bill. Speak on this. And mathematically, okay, what are the odds that our one space has found every fraudster, every evil CEO, every lawbreaker, and managed to put them all in one space and wait for 35 years when all of tech in Silicon Valley, where I've grown up, right, Physically grown up, because I've been here most of my life now, has never heard of a Wells notice? I would say the odds of that are zero. So clearly there's something else going on here.

How do you spell witch hunt? Right.

Exactly. Exactly. And so strange bedfellows, Right? So now we come back to President Trump speaking in Nashville and behind the scenes.

And by the way, Nashville was the bitcoin conference.

Yeah, it's the largest. There are multiple bitcoin conferences in the US around the world. Bitcoin is not a company. It's not owned by anyone. So there are lots of them. This happens to be the largest run by Bitcoin magazine. David Bailey's been a longtime friend. Great, great guy. He was instrumental, by the way, in what we call in our world, orange pilling President Trump, and not only basically arranging for influential donors like the Winklevoss twins and others in our space to spend time with him, but to explain to him and to actually get his feedback in a very engaging way on why this has been a problem, why we're being attacked, why this has to stop. So he got on stage and he didn't really know how. I guess he was coached. You know, SEC has been a problem. Like, I guess he can relate to that.

But.

But, you know, he went on stage and said on day one, now he talked. He said a lot of things, okay, about crypto, about bitcoin. Some of the bitcoin maxis don't like the word crypto, by the way.

They don't want to be, they don't want to be mixed up in the, in the crypto shitcoins.

Right? And I don't agree with that. It's a word. And so its meaning, its intent, its context is what matters. But anyway, so he got up there, said a lot of interesting stuff, was clearly prepared, and he rambles a little bit, like President Trump is known to do, and then he says, and on day one, I will fire Gary Gensler. And the crowd of 8,000 people literally goes bananas and loses their mind. Now, he had no idea. He was like, I don't even know if these people know who Gary Gensler is, because I'm guessing right now a lot of your audience is googling, who is Gary Gensler. Gary Gensler is the chairman of the sec. The sec, I believe, is run by a commission of five commissioners and presidential appointees, I believe. And one is based upon who is in power in the executive office as made commissioner. And so he's the senior executive for overseeing the securities industry in the United States. And so, you know, he is basically, let's, for all intensive purposes, an Elizabeth Warren appointee, hell bent on killing our industry. And again, I'm not here. It's not about politics. It just is. I don't want this to be true. I've voted Democrat before in my life. I don't really care that much about the difference. But they both print money ad nauseam, right? So for me, it's about why are you killing this technology that is the future of money and banking. And so, you know, it's clear. And so he was blown away, I.

Think, I think he was so, so blown away that he said it again just to get another reaction.

And yeah, he was taken back. Like I said, he probably believed when they told him to say it. Are you sure these people even know who this guy is?

I'm curious, in your opinion, for both rfk, for Vivek and for Trump, is it the size of the population holding Bitcoin that they're focused on getting the attention of, or is it the long term benefit for America and humanity of bitcoin? How much? What's the mix there?

Okay, I think it's three things, and I'm going to be brutally honest, some of it is money. Right? I mean, he's got large donors in my world now, Trump in particular. Right. And Vivek did last year as well when he was running in the primary for president. You know, he was the first person willing to stand up for us and it got him a lot of attention, which I think helped propel him into Trump's arms. And I wouldn't be surprised if he has a cabinet position or an economic position in Trump's cabinet. Agreed, and I hope he does. But I think it's three things, right? I think the first is money. I think the second is, I think that the Democratic Party underestimated the number of crypto holders who not only hold this, but truly care about this and believe it's important.

So what is that number right now, you think?

Well, crypto holders in the US is probably 50 to 70 million.

50 to 70 million. Individuals.

Individuals.

It's a significant amount.

It's a lot. And thank Robinhood for some of it. Right. Coinbase, obviously, you know, I mean, we don't deal with the small dollar retail, but they've done a fantastic job in making that available. Even PayPal, right. That is easily. Now for all those people, they're not single issue voters. Right. But you can only push a cat into a corner so far before it's going to try to scratch your eyeballs out. And so I think that when you factor in the other issues that matter, the percentage where this is single issue voters, I think we represent 3 to 5 percentage points. I really do. That's insane for a space that didn't exist a few years ago. They totally underestimated that. Now, the third part is, and honestly, for me, there's another announcement that happened afterwards that was just as important as the President speaking. But for me, it's clearly about the future of money in this country and the world.

Right.

I mean, the United States basically has the dollar, the global reserve currency, and as a result, you know, the military industrial complex to support it. That's coming to an end. Whether we wanted to or not.

There's a lot more conversation.

Yeah, right. The question is, what is it going to be replaced with? It is going to be replaced with something. All right. And how does that replacement happen? If you read Ray Dalio's book, his last book, it's not a very pretty picture. Historically, it's replaced via wars. Right. And I don't want that to happen. This isn't just about, you know, this is cool technology to me. So long winded way of saying, you know, people are starting to get it. And of the three, clearly RFK had the most impassioned kind of plea for why this technology matters. However, when they were done, immediately, Senator Lummis the senior senator from Wyoming got on stage and blew us all away. She introduced legislation that would cause the United States for the first time to start adding Bitcoin effectively to the country's balance sheets or reserve assets.

Has she always been a strong proponent?

Huge.

Is, is this recent or. It's been for some time.

A few years. So Wyoming has very interesting unique bank license regimes specifically for digital assets. Most states and the federal government have existing bank charters, money transmission charters, where they've kind of made crypto and digital assets a part of those existing regimes, which is complicated. A lot of these laws go back to the 1930s and 40s. What Wyoming did, and she was part of this, even though she's, you know, national senator, is they created legislations specifically contemplating digital asset banks, banks. And you know, there are a few of those licenses have already been granted. And so she's gone knee deep on this issue. For years. She's appeared on crypto podcasts, you know, Fox talking about crypto, CNBC talking about crypto, etc. Etc. And so clearly this had been in the work for months, if not years. Right. And you can see the legislation if you just go to her Twitter feed, Senator Lummis, you can actually go to the webpage and read the legislation. Now, look, I don't, you know, if Trump wins, it might have a reasonable chance of getting signed, but we would need both houses because I don't think, I don't think a Democratic, you know, Congress would vote for this right now. And I'm not even sure the timing is right in the magnitude of and numbers she's talking about. But the fact that we're now having this conversation, that we've had three people on presidential tickets, a sitting senator, multiple congresspeople, and from both sides of the aisle. Right, because you know, Ro Khanna, one of the most technologically astute people in Congress from here in Silicon Valley also spoke and you know, I give him credit because, you know, he took his lumps right now, given, you know, his peers stance on this, it's incredible that this is even a conversation.

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Right.

Digitize something. In the early days, it's deceptive, eventually gets disruptive, but it dematerializes, demonetizes and democratizes products and services. And, and I was talking about Bitcoin in that regard. And of course it's exactly what it does. We've digitized money. It's been a deceptive growth. It's now beginning disruptive. And it's dematerialized, demonetized and democratized a whole part of the financial industry. And I remember a conversation about what would we be looking for? And it was the adoption of different segments of society along the way. It's going from the entrepreneur to the high net worth individual to the family offices and then financial institutions, sovereign wealth funds, and then governments eventually. Where are we? Where are we in that progression? What have we seen? Obviously we're seeing this incredible meaningful conversation on the presidential stage, but we've started to see the financial institutions begin to adopt it and promote it to their customers. Yes. Where are we in that? Where are we now and what are we looking for next?

Okay, so I mentioned earlier that I've been watching bitcoin play out this kind of playbook from Hayek's book in the 19th. Friedrich Hayek, who is considered kind of one of the founders of modern Austrian economics, wrote this book called the New Denationalization of Money. And it was basically the premise was we need private money to compete with government money. And in the U.S. historically, that's illegal. You can't do that. But we have one you can't stop because there's no off switch. So it's ones and zeros, which turns out are protected free speech. Which is a nice interesting way to get around the problem of making something illegal if you make it protected free speech. The Supreme Court's already opined on this issue. So that that's good. Right. We can't stop it. Right. So where are we? What does it mean from an adoption perspective to your question? I actually think that, you know, having like a Bitcoin etf, you know, governments holding bitcoin, I think these things are interesting from a marketing perspective, but I don't think that they actually solve long term real problems for anyone. Okay. You know, obviously if RFK got his way and the government bought 20% of Bitcoin, the value of Bitcoin would go up to $100 trillion. And so for those people who hold Bitcoin, congratulations. Okay, that's not the point of Bitcoin. Right. The point of Bitcoin is that we now have a global system with no off switch that allows you to store value and move value with no financial intermediary. Okay. That's the value of Bitcoin. The fact that you can hold it in a vault and trade it via security, which is what ETF is, is interesting. It makes it accessible to more investors, which is fine if you're hoarding it. It's just another way to hoard it then. Right. But long term, it's not why I got into Bitcoin. Right. I got into Bitcoin because it solves the problem I'm talking about. So. So I think what ultimately matters and what I look at is, okay, family, office is hoarding it. Awesome. You know, hedge funds, you know, mutual funds buying it. Fantastic. Right? We're going down that. And now with the ETFs, you get to kind of middle class retail IRAs, 401ks. Now what I'm looking at are what's happening in Africa, what's happening in Southeast Asia, what's happening in the poorest parts of Latin America. Venezuela, which used to be one of the wealthiest countries, Right. In the South American peninsula, via these moronic, idiotic communist policies, has become one of the poorest countries. Right. Where are we with bitcoin adoption there? What Milei has done in Argentina is interesting to me. He basically saved that country. If you look at what's happening economically, that's where I think bitcoin adoption and crypto adoption. Bitcoin as money, crypto as potentially and defi as the future of banking. That's where I'm looking next. Right. Government adoption. I like that for two reasons. I like government adoption and that discussion for two reasons. Right. It's great marketing and it takes the heat off of us, given everything that, you know, we've been going through for the last five years.

Sure.

Right. So maybe not the answer you were expecting, but for me, if it really is the kind of the people's money, Right. And I don't really look at it myself that way, but it's a good way to capture the idea. Right. Does everyone have access? Can everyone use it? And right now that's not true. Not everyone can. But we're inching closer to that and we've Made huge strides in making that happen. Not just with bitcoin as money, but this new kind of defi or decentralized finance, which we can talk more about later as the future of banking.

Yeah. And for me, it is the abundance thesis, right? It is. It's the means by which we create global abundance accessible to all. I want to talk about a little bit of near term elements and then jump into some questions from my. I have to still call it my Twitter ecosystem. It's hard to call it my X ecosystem because it doesn't sound right. I told Elon, I need a verb. Elon, I need a verb. Give me a verb, please. So the fear meter. So I mean, we've talked about this before. There's a meter in the, in the, in the economy and in the bitcoin and crypto ecosystem about fear versus greed.

Where are we there in regards to just the investment cycle?

Just, just to. Just bitcoin right now, people.

Oh, fear. You know, I mean, I think, I think the last few days, like around the time we're recording this, we went from euphoria when the time the ETFs were released to kind of sideways for a few months to fear the last few weeks or last few days. And a lot of that is coming out of Japan.

So let's talk about. I want to talk about Japan then in that I want to talk about Japan and the impact on interest rates on Bitcoin. Yeah.

Economies work in cycles. And one of the most important functions of those cycles is because of the fact that the government controls the printing and the amount of money in circulation is what the Federal Reserve of the United States chooses to do as the largest of the world's government banks. And the Federal Reserve basically sets monetary policy, the most important being the Federal Reserve, the short term rates, the rates at which banks can lend to each other, among other things. And these rates basically can cause money to enter into society at a faster rate or pull money out of society. And they can change the rate of that. And that velocity of money is a huge factor in how these cycles work. Now, there are a few other things that matter here. One is that's not the only key tool in the Federal Reserve's toolbox. They also have the ability to buy assets. So during, if you remember, during the lockdowns, interest rates got so low that you effectively couldn't lower interest rates unless you started giving people free money, making them negative. And so what they started doing is buying assets. Okay, so when they started buying assets, when you buy bonds, right you're creating demand for the bonds artificially. That drives the price of the bonds up. Right. When bond prices go up, the rate of the bond that the bond provides effectively goes down. Bond prices versus the rates move in opposite directions. Right. So by buying those bonds creating artificial demand, they were actually driving interest rates down even closer to zero than where they were. Right. And in some ways even negative, depending upon how you, you know, how you look at it. So, so, so they have that trick in their tool bag. They have interest rates. Right. And they can also coordinate with international governments or Treasury. Right. So there's other, you know, so they have some, some tricks there. Japan, as some of your viewers may know, basically had a multi decade deflationary hangover from its exuberance from the 80s and 90s. And their interest rates have been near zero for a very long time. This created an opportunity for traders to potentially look at free money because they could go into the Japanese markets and borrow dollars or yen, in this case at very low rates. Right. Even if they're going to invest in dollars, the cost of pegging or hedging the interest rate, the currency fluctuations is relatively low. And then invest in other assets that would generate cash flow or potentially Nvidia.

Turns out, seems like a logical thing to do.

Very logical thing to do. Especially if your goals, your only goal is to make money. So this ARB trade is known as a carry trade in the hedge fund world, in the trading world. And this has been going on for a long time to the tune of probably trillions of dollars. I've heard numbers as high as 20 trillion. I don't think it's that high. I think it's probably a fraction of that, but certainly trillions, single digit trillions, that's a lot of money. So last week the bank of Japan announced that they were raising their baseline interest rate by 25 basis points or a quarter of a percent. And that sent shock waves through the investing world because not only were investors taking advantage of this, they were leveraging themselves. Okay. So when you are levered, right. A small loss gets magnified.

Yes, yes.

Right. And so the idea here that all of a sudden, if you're buying an asset, leveraging that asset to borrow more money in Japan and doing it over and over again, we don't know how far the leverage went, but what we do know is that the unwind started last week. Okay. And it went into overdrive on the week, the first weekend of August.

So connect that now to Bitcoin for us.

Sure. So as the market basically becomes fearful and traders, hedge funds, whoever, becoming fearful this will have an impact on all risk on assets because people are basically fearful that this unwind is just going to push people towards cash and cause a flight to safety and everybody's going to be selling and it just kind of propagates and it becomes its own thing. Right. And so that weekend this past Sunday, when, when in the US which is morning in, in Japan and Asia, immediately we saw a big drawdown, one of the biggest we'd ever seen, as a matter of fact, in the Nikkei.

So people are selling assets to get cash to cover their shortfall and.

Yes. Or they're fearful that they may basically be suffering from the hangover of what everybody else is doing.

Is there psychologically a point at which people are then going to flee to Bitcoin eventually?

We're not there yet. That's the difference between being an asset for a thousand years, like gold, and being an asset for 15 years. I think there's the promise of what Bitcoin will become as this hoarding that I talk about and the creation of this private money happens over the next decade or two. And we get the benefit of that for being early. Right. Because that will be the stable measure of value 50 years from now. Right. In the meantime, we get the benefit of the fact that it's on its way there.

You know, it's fascinating how public reactions and fear, I mean, it's in the financial industry, it's, you know, traders are watching the financial tickers and use like minute to minute and not the world I want to live in. And you know, the advantage of buying my Bitcoin, you know, putting it into Abra and just forgetting about holding it, is a psychological peace of mind in that regard. But what are we going to imagine, what are we going to see over the next few months as we head into the election cycle? And, and where do you imagine Democrats are going to come out on this, in particular on the Democratic ticket? Has there been any softening in their point of view on bitcoin?

Let me kind of connect the dots here. So as I said, this kind of moves in cycles, right? And Federal Reserve interest rates, market liquidity, those are the biggest contributor to those cycles. And what happens is, is that in, in sometime early in 2022, because of the inflation that was going on post Covid, the government was really trying to force interest rates up and take dollars out of circulation to basically get prices down because, you know, bread was super expensive, going out to dinner was getting expensive toilet paper.

Was expensive.

Yeah, Right. And so we're still suffering from the overhang of that. It's just that the prices aren't increasing as fast as they were. So when people say inflation has come down, what they mean is they don't mean the prices have come down. They mean the rate of increase has either slowed or stopped. Right. And it hasn't stopped, but it's back down to probably like 1 1/2% for most staples right now. There are other things like housing that skew it higher. Okay, so, so that's fine, mission accomplished. But that's a cycle. Okay, so now in late 2022, the Fed said, okay, we're probably at the bottom of that cycle. Right. We think that inflation is moving in the right direction and will take 18 months to get there. And they were mostly right on that. Okay, so then what you want to do is you want to slowly start loosening the purse string on the money. Because if you don't, what's going to happen is people are going to stop borrowing, businesses will stop growing. Small business and medium sized businesses, which are the heart blood of new job creation historically, are going to stop being created. And so they have no choice but to predict to some degree when these cycles are going to happen. So slowly, liquidity was coming back in, which is one of the reasons why bitcoin and tech stocks had a booming 2023, if you remember.

Yeah, it was an amazing year.

Right. And it was the velocity of money, even though conditions were still tight, dramatically flipped and from, from ridiculously tight to a little tight and again at the edge, it's that velocity of money that moves markets. Okay. And so that slowed late last year. Right. And so it looked like, you know, bitcoin was going to be flat for a while. The reason, if you remember early this year, a lot of assets, except for, you know, a few, few stocks were very flat, except for bitcoin, which was up and to the right. Why? Well, that was the etf. Okay. So the ETF at that moment, that liquidity was drying up a little, created incremental demand for the bitcoin itself because now 401ks and IRAs for the first time could, could, could allocate. Okay. So for the last few months, liquidity has been very dry because the Fed has been very concerned about making sure that they really got this inflation under control. Right now it's clear that not only did they have it under control, at least in the short term. Right, because you can't have it under control forever, but the economy is slowing dramatically. And again, it doesn't matter in absolute numbers. It matters about the rate of change. And it's clear that they've turned the Titanic slowly. And if they don't basically start thinking about the direction of the Titanic now, it's going to be a problem. So a lot of people are predicting that you're going to see interest rates come down quickly over the next few months. And then the discussion is turning to, okay, we're seeing employment numbers, unemployment numbers start to trickle up. Are they going to be able to steer this Titanic quickly enough to stave off a recession, or is it going to be a small recession, or is it going to be a big recession? So staving off a recession is almost impossible.

If the interest rates do come down, what will that mean to the bitcoin price?

So historically, like I said, risk on assets act as a liquidity suck for dollars sloshing around the system. Which is why the price of bitcoin was skyrocketing during COVID because it was the fastest we had ever printed money and put money proverbially in circulation in the United States. History, actually, world history. And so it won't be that much money. But we have two problems. One, we have to stave off this recession, which means a lot of money is going to come into the system, and risky assets are going to act as a liquidity suck for that. Stocks, crypto. I think crypto will be number one in terms of percentage gain. Technology stocks, number two, small cap stocks, number three, et cetera, et cetera, down the pipe.

So is the word on the street, so to speak, that it's going to be a strong fourth quarter for crypto and bitcoin?

Yes, it is.

Let's get back to what are you hearing from the Democratic conversation. I mean, are they going to come out in favor of bitcoin as well, or are they going to stay flat on this conversation?

I think they have no choice over time but to soften their stance. They're losing court cases right now, like important court cases. And that's why we got the ETFs. They tried to fight the ETFs. They denied the applications for six or seven years. And finally, which is what we predicted, somebody I went on CNBC and said this. You know, BlackRock filed and took, you know, grayscale, took them to court and said, hey, you know, this, you have to allow this. I mean, this is perfectly legal. I mean, there's nothing, there's no, there's no legal reason for you to Deny this. And the court agreed with him. That's how we got the etf. Right. So, so I think what happens here is when you start losing these court cases, it does send a message because, you know, the lawyers making these decisions are also people, I mean, they don't want to get their asses kicked regardless of what their subordinates are telling them to do time after time. Right. So I, I think that is trickling down now to Congress people who are also hearing it from their constituents. Right. So there's these draconian rules in the US right now that make it extremely difficult for banks themselves to hold crypto on their, on their kind of, let's call it the bank's balance sheet. Okay. Which is crazy. It's just an asset. Right. And, and so there was legislation introduced a few months ago to undo this SEC rule that made it difficult for banks. SEC should have nothing to do with what banks can, can't hold in their balance sheet, by the way. Nothing as far as I can tell. But they have this, they managed to create this rule that prevented banks from doing it, even though banks are overseen theory by different regulators. The legislation was passed, but it was vetoed by President Biden. I think if this happened again under a different administration, Democrat or Republican, it would have a very good chance of getting signed. I think they regret not signing it, actually. And so that's a long winded way of saying, I do think the tides are changing, both because we're now just not, you know, just taking it on the chin and we're fighting, but also because they're getting tired of losing. And they're also seeing, they're also seeing in the donations that are.

Which way is the wind going?

Right, exactly right. And so it's just common sense that at some point, I don't know if you remember this whole Clipper chip nonsense from the 90s with the encryption. Back when it scape days, the Clinton administration was trying to backdoor the ability to read encryption encryption in all new hardware.

Oh yes, I do remember that. Yes.

Yeah. And we lost our collective minds in Silicon Valley. I was working on ssl, you know, HTTPs back in my Netscape days and. Right. We just couldn't believe it. We're like, well, this defeats the purpose of everything we've been trying to do to create E commerce online. And they eventually figured it out and they got it and they acquiesced and everything was fine. This isn't that, unfortunately, it's going to be a harder fight, but eventually, one, it's not Going to matter long term anyway. It's just not.

Yeah, Bitcoin will outlast a multitude of administrations.

Me, you, presidents, whoever. Doesn't matter. And by the way, we're 300 million, 400 million people out of what, 8 billion?

By the way, what countries are the biggest bitcoin holders by percentage of population?

You know, I don't know the answer to that exactly, but I think I have anecdotal evidence. It's interesting. It's places like Nigeria, Philippines, Argentina, the U.S. historically, I think India. Let's see what else comes to mind that I know.

Interesting.

Uk. So, you know, it's an interesting mix. Argentina has always been. Look, if you're in Argentina, this is a very interesting, very easy discussion to have. Because if you're over the age of 40, you have lived through so many currency failures, so much corruption, that this is just obvious. That's why Melee's a hero now, right? Because he took the VEC playbook, which is. Look, the only way to stop this corruption is to shut it all down. And he did.

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It'S hard to answer in dollar terms because I do think that a bitcoin.

Will equal one bitcoin.

Right. Obviously, yeah, that's, that's the easiest and most important answer, I hope. But as we approach this so called fourth turning right, what is, what is the dollar? It becomes easier to define what a bitcoin is than it does what a dollar is. So now let's assume nothing changed and the chances of that is zero. But I don't know how else to answer your question. Right, fair enough. So if we keep increasing the money supply by 6% a year on average, which is more or less what we've done since the 50s, what does gold increase?

Gold increases by some percentage points from.

Yeah, it more or less max. It matches price inflation plus a couple of percentage points over time is my understanding. But if you look at stocks over time. Right. And I know Michael Saylor's talked about this on other outlets as well. If you look at the rate of average increase of stock prices over decades, it matches the rate of increase of the money supply. Is that a coincidence? I don't think so. And so what does that tell you? I mean, it's kind of a scary thought, right? So anyway, whether it's scary or not, if nothing changes, at a minimum, it should stabilize in terms of exponential adoption at some point. And then the question is, what are we measuring in? Well, if we're measuring it in dollars, it should at least go up 6 to 10% a year because we're adding 6 to 10% more dollars every year, right? So if you do that math and basically assume that, you know, for the next 10 years it goes up by 20 to 25% because we're still getting the exponential adoption. And then after that, it basically starts to become a slightly better liquidity suck than equities, because you can always create more equities, right? People create companies, they can issue more shares, right? Can't issue more bitcoin. So bitcoin should do better. So let's say it's 10%, right? So you do that out for 20 years. The numbers are astronomical. No company has ever grown that fast on that sustained basis in corporate history.

I mean, the way others look at it is it should be equal to half the value of holdings and gold or 10% of real estate or whatever the case might be. I mean, the question becomes ultimately, how much has the global economy inflated at the same time?

But remember, we increase the supply of gold, we find. We don't increase the supply of gold. We find more gold that's usable at the rate of about 2% a year in commodities. We call that the stock to flow ratio of, of gold. So every 50 years, we double the supply of gold. In 50 years, the supply of bitcoin will not have doubled. Okay, we can build up for new property, right? So, so those are assets that, you know, while historically they have been good liquidity sucks for intergenerational wealth. They're not, they're still not optimal. Bitcoin is optimal for storing intergenerational wealth because you, you are mathematically certain how scarce it's going to be.

Asked this question that comes over from, from x from Pick Doc581, he says, do you think Bitcoin's price could go higher than what experts predict using the power law and stock to flow models. Specifically, do you think bitcoin might see bigger price jumps than usual parentheses power law, or that its value might increase more than expected because of the limited supply?

Yeah. So there's two ways to look at this. You know, one is via the last question, which implies dollars. And there I would say, well, what happens if we start printing dollars like crazy again because we're trying to, you know, deflate our way out of this debt crisis, right? And of course, at that point, the price of bitcoin is going to outpace the power Law has to. Right? There's just not enough to go around. The more important question becomes purchasing parity, meaning what am I buying with the bitcoin? And if I was to buy a commodity that we know more or less what it should be worth, a Starbucks.

Coffee, a McDonald's burger, whatever it might be.

So if there's the same number of Starbucks, same number of employees, how much bitcoin am I using to buy that cup of coffee? In 10 years, 20 years, 50 years, I've seen people do this with the Ferraris and the houses, where you see basically how many bitcoin it took to buy a Ferrari. And you know, 2013, well, it took all of them. And then, you know, and you can see that, like how much bitcoin it takes to buy a Ferrari now. And the number is just going down because it's, it's a deflationary asset. It's the opposite of the way we're taught to think, which is the value of money should go down because you're inflating it. We made that up. We literally made it up. And, and, and so what we did is we made up something which is more sound. Right? So, so, so the answer to that question should be, I think bitcoin follows the power law relatively closely over time. So it's a good question. And what that implies to me is that its purchasing power should increase versus other things that you would want to buy with it. Dollar is a different story because we can't trust the government to responsibly do anything with the dollar and they'll just inflate it to infinity. And so, so as a result, the price of bitcoin on a dollar basis could go to infinity. What does that mean?

Here's a couple of questions I find fascinating. This One is from maga10424. Bitcoin doesn't create a source of income for retirement. So, and when I talk about that, I mean, if you're holding bitcoin, how do you create, how do you make it a source of income? Right. So let me just finish your question here. So what would be the strategy to use BTC for retirement? Is it work, borrow, die, or sell a little bit each month?

So that sounds morbid, work, borrow, die. But hopefully it's work borrow longevity. Yes. Let's assume it's work borrow longevity for a second. And I think the answer to this question becomes even more interesting. It's the same answer either way. By the way, I'm not trying to be cute. I am. But just for effect. So I think that the future of bitcoin as it relates to the dollar and this is part of why, you know, I love Michael Saylor. He is highly incentivized for the dollar not to fail. Okay. And it's part of, partially related to the answer to this question, which is that, you know, the right way to think about how to generate a yield versus Bitcoin is not, you know, my cash flow on bitcoin, it's if my purchasing power on a dollar basis via Bitcoin is going up, really passed really fast. What I should be doing is borrowing against that Bitcoin. And if I borrow at a low enough ltv in theory, I may never have to pay back the loan. Okay, now let me unwind that one step at a time and it's, I.

Want to go deep into this personally and for a number of the questions from the community here.

Yeah, okay. Let me, let me paint a picture that is relative to historical finance, using your home, which everybody understands. Okay? If you have a house that's worth a million dollars and it's completely paid off and housing prices in your area have been relatively stable, there's a bunch of banks that will probably lend you 40% of the value of that house. Doesn't matter if they will or won't. Let's just assume for the sake of this discussion, they will. Okay, so you have now a loan for 40% of the value. Historically with housing, the value of the house only goes up a few percentage points a year. But let's say you keep the loan, you're making interest only payments on it for a few years, but you wait like 10 years and for whatever reason, the value of the house is now $2 million. Well, 40% is now double what it was before. But you have a loan to pay back from before. What if you could basically, you know, reset that loan with the same bank so that you're now borrowing $800,000 because it's still 40% of the loan to value. Okay, so you'd still have to make the interest payments in this case because the price of the house isn't going up very fast, or at least not compared to other assets. But you're now, you've now drawn more money out of the house. Okay, now let's think about it in terms of Bitcoin for a second. Bitcoin is historically going up between on average, you know, 20 to 40% per year. If I factor in the standard deviation, I predict that I commit. Well, I shouldn't say predict I make a good case. I think that we could see 20 to 25% increases in value for the next 15 years. Let's say 25% I think is realistic. I think there'll be years where it's higher. But then I think it, you know, kind of goes into that 10% in dollar terms for the reasons we talked about before, because of the government money printing and the fact that things like gold and, and real estate are in a fixed float, right? We increase the value, we increase the amount of that float, whereas with Bitcoin we don't. So it should get a higher rate of, of increase over time. So what does that mean in terms of lending? Let's break it down. If I, let's say I have a million dollars worth of Bitcoin and I conservatively borrow 20% of that value in dollars, I borrowed $200,000. Okay? Let's say that my bitcoin increases in value the next year 25%. So I now have $1.25 million. Okay? The loan to value ratio that I have has gone down, right? So that means that if I want to stay at 20%, right. I can now borrow 20% of 1.25 million. You follow? So as the price of Bitcoin keeps increasing, the amount that I can borrow against, this also continues to increase. Now, with the traditional banking system, the banks need you to make that interest payment.

That's how they make their money.

That's how they make their money. But that's not the way defi works. Okay? So with these defi loans, you set a loan to value ratio. So think of this as an online marketplace where you're practically borrowing from the Internet itself. Alright, we can come back to the mechanics, but basically you're borrowing from the bank of the Internet, however it works, all right, you do the same loan that I just described, okay? Bitcoin goes up another 25%. So you can actually borrow at least 25% more and keep your loan to value ratio the same.

Right?

With these defi systems, if you're borrowing dollars against something like Bitcoin, you can actually increase your loan to value ratio to something like 60 to 65% that high until such that if the price of bitcoin starts to fall, which would make your loan to value ratio go up, right? They might, they might automatically sell some of your Bitcoin and that's what you're trying to avoid. You don't want to sell your bitcoin. So if you kept your loan to value ratio low for the Initial loan, let's say 30% to 20 to 30% to keep it conservative. Bitcoin is still increasing. Right. You can now not only continue to borrow if you want to and maybe make interest payments, or you can roll the interest payments over into the principal of the loan, which would increase the loan to value ratio, if that makes sense. But you're still far away from 65% in most cases because the interest payments today the rate might be between 6 and 10% just depending upon the market gyrations. Right. But you start to see a model which says you can hold a deflationary asset, Bitcoin, borrow in an inflationary asset, the dollar. Right. And if you have enough of this asset that's deflationary in theory, you can borrow forever depending upon the math between the inflation and the deflation. Right. So we now have clients who have figured this out, you know, and the only reason that they haven't figured it out from Abra yet is because not everybody's heard of Abra. And so part of my goal is for everybody who's trying to figure out how to manage their money long term, relative to the answer from Maggie's question that they see that this is a viable model for leveraging your Bitcoin to live and still not have to sell your Bitcoin.

Yeah, I mean, I think that's one of the important. Another friend, Claire, is asking basically the same thing. I don't want to sell my bitcoin, but I want to be able to borrow against it, earn, yield on it to, you know, to fund my life. So let's talk about what is, what are you doing at Abra to enable.

That we call these lifestyle loans. And if you're holding like it's the same example I gave you, if you're holding millions or hundreds of thousands of dollars to millions of bitcoin, millions of dollars worth of Bitcoin. We will set up borrow facilities for you using our registered investment advisor. It's a basically these are separately managed accounts which are similar to separately managed accounts you would get in the equities world. And that's important because you're not giving your Bitcoin to Abra, you're actually retaining title to the Bitcoin. But if you want to borrow against the Bitcoin, you'll place the bitcoin into a collateralized contract using Defi and then receive stablecoins which you can use as stablecoins or convert to dollars. Doesn't matter, they're the same. And again, depending upon how low that Loan to value ratio is right. You can even roll the interest payments over into the principal. You can make the interest payments if you want. And if the price of Bitcoin is growing faster than the rate of interest, Right. Your LTV is still going down even though you haven't been paying the interest, which is super interesting. Right. So if you have conviction for these markets the way I do, and I think the way you do, this model makes perfect sense. Right. Michael Saylor's talked about it. I've heard others talk about, I think we're the first ones to come close to perfecting it. We've worked on this for a long time and you know, it's still early, still new, but, but it's working.

In terms of getting yield on Bitcoin, what kind of numbers are you seeing in the marketplace?

Yeah, it fluctuates. It's supply and demand. So, you know, we've seen anything from, you know, there's months when it's zero to months when it's 15%. And so, you know, I think steady state over time for the next kind of cycle, the demand will probably put IT in the 4 to 6% range, which is pretty good. But again, these are defi based systems. So the important message here, because everybody wants to know about risk, right. Is okay, well, what risk am I taking?

Sure.

You're not lending Bitcoin to Abra or another company. You're not taking corporate counterparty risk. When you deposit money in a bank, your asset becomes a liability on the bank's balance sheet. Right. That's why the FDIC exists to address exactly that problem. Right. So this isn't a bank. You are holding your assets if you choose to put them into the defi marketplace. The risk you're actually taking is technology risk. It's not mostly technology risk. It's not counterparty risk to Abra. And that's a big breakthrough because all things considered, no offense to my peers in the banking world, I would rather trust the open Internet if I could than the banks.

And just to just to be clear, Abra was last man standing in the category that you are today. And you basically redefined yourself. Can you speak one second about the process you went through? Because I think it's important people to understand it.

Yeah, sure. So we were part of the first generation of crypto lending companies. We were doing the opposite of what I just said. We were basically people were lending money to us and then we would generate yield for that in kind. And, you know, so if you deposited Bitcoin you would get more Bitcoin back. And the counterparty to those transactions was Abra. And my opinion as to the legality of that doesn't matter. The government didn't agree with all that. So, you know, we're the last man standing because we weren't doing a lot of the shady stuff that others were doing, in my opinion. But regardless, just from a regulatory perspective, you know, we had a long to do with the sec, which we've settled, several states, which we've settled. And then we migrated to this registered investment advisor, which is an SEC registered entity, which then gives you these individual separately managed accounts so that you're not actually lending your assets to Abra anymore. So if Abra goes away, you've still retained title to your assets. Okay, that's the, that's the breakthrough. It's as close to the mantra of not your own keys, not your coins as you can get and still have somebody helping you.

Yes, I completely get that. I mean the other option. And personally, you know, the way I weigh people listening should think about this. You can go buy ETFs as one point. You can do something like what Abra does. You can get yourself a hardware wallet and hold onto it yourself. And it's a matter of how technically literate you are and how much attention you want to pay pay to this.

Yeah, look, I have a degree in computer science. Stanford, PhD dropout. I'm telling you, I still get cold hands when I sweaty palms when I have to deal with a lot of that stuff.

Your hardware wallet shit, I remember these keys. Talk one second about the wash rules. One moment. So people need to know this. If Bitcoin drops substantially, you're able to take the loss and rebuy the Bitcoin and take the loss on your stocks. Unlike with a normal stock where you can't rebuy it and take the loss right away on your stock, on your, on your taxes. So do you think that that situation will last for a while longer?

I have seen no indication that it's going to change you. Just to my knowledge you described it perfectly. Meaning you can take the tax, you can get the gain, the tax write off immediately even if you rebuy the assets within minutes. That is my understanding and I'm not a tax expert, but I know many people have taken myself have taken advantage of it over time. I suspect at some point they would be incentivized to close that loophole. By the way, one of the things that Kennedy proposed was that there should not be any capital gains Taxes on selling, you know, crypto assets that are commodity assets. And I agree with him on this. I think, I think it's ridiculous. This is a store of value, so you're effectively getting taxed twice in the same thing. So basically we're paying a tax on the fact that you're decreasing the purchasing parity of the dollar at my expense. So I've chosen to put my stuff in another digital currency that doesn't have that problem. And now I have to pay you extra for the rights to not have my purchasing parity fall when I've already paid tax on the wealth that I generated in order to get the Bitcoin in the first place. So it doesn't make any sense, right? I mean, obviously there's a million things about our tax system that don't make sense, but this is way at the top of my list.

Did you see the movie Oppenheimer? If you did, did you know that besides building the atomic bomb at Los Alamos National Labs, that they spent billions on biodefense weapons, the ability to accurately detect viruses and microbes by reading their rna? Well, a company called viome exclusively licensed the technology from Los Alamos Labs to build a platform that can measure your microbiome and the RNA in your blood. Now, viome has a product that I've personally used for years called Full Body Intelligence, which collects a few drops of your blood, spit and stool and, and can tell you so much about your health. They've tested over 700,000 individuals and used their AI models to deliver members critical health guidance like what foods you should eat, what foods you shouldn't eat, as well as your supplements and probiotics, your biological age and other deep health insights. And the results of the recommendations are nothing short of stellar. You know, as reported in the American Journal of Lifestyle medicine, after just six months of following Biome's recommendations, members reported the a 36% reduction in depression, a 40% reduction in anxiety, a 30% reduction in diabetes, and a 48% reduction in IBS. Listen, I've been using Viome for three years. I know that my oral and gut health is one of my highest priorities. Best of all, VIOME is affordable, which is part of my mission to democratize health. If you want to join me on this journey, go to viome.competer. i've asked Naveen Jain, a friend of mine who's the founder and CEO of viome, to give my listeners a special discount. You'll find it@viome.com Peter, you mentioned Defi for Those who don't know what defi is, can you give us a 101 and what, and you know what you think about defi on Bitcoin?

Sure. This is one of my favorite topics. So defi is short for decentralized finance. The basic idea of decentralized finance or DEFI is to take all of the components of banking and financial services, lending, savings, certificates of deposit, yield, more sophisticated instruments like derivatives and make all of those capabilities available using this latest smart contract technology, which is software. But what's unique about this software software is, is that it runs on the open Internet just like Bitcoin in a way that it can't be shut off. There's no off switch, right. So there's no company that owns a defi system. So there are defi systems now for borrowing and lending, right? So that's the marketplace where on the one hand I might deposit Bitcoin into the Defi marketplace to earn yield and the other side it might be borrowed borrowing it, but it's over collateralized in dollars. So I'm not losing money. And if the LTV gets too high, they're automatically converting those dollars back to Bitcoin for me. So I'm not taking a risk of losing my Bitcoin. So these marketplaces now manage tens of billions of dollars just for borrowing and lending yield and you know, borrowing against your Bitcoin holdings. That was the kind of first generation we're already on, like Generation 4, 4 of DeFi where these kids are now developing sophisticated derivative systems, sophisticated yield generation systems the likes of which the world has never seen before. We're basically wholesale rebuilding the entire banking stack, the entire stack of capabilities of the banking system one layer at a time over the last five or six years. Ethereum was the first system that we could use to do this. Now we have Solana, which is gaining in popularity because it's more performant than Bitcoin and scales better. So you can actually in theory with the upgrades coming to Solana, get almost visa like numbers in transaction processing. And remember, banks are open 35 hours a week, maybe some are open an extra five hours on Saturday. So 40 hours a week, right. These systems are open 24, 7, 168 hours. They don't close, there's no holiday. And so you know, this weekend when you know, markets went haywire, people were able to access their Bitcoin. Right. So I think this is the future of banking.

Do you see Bitcoin getting integrated into the traditional financial systems?

It's hard because you know, the way bitcoin settles is very different than the way traditional asset movement works. And so you get into all these hypothecation and it's complicated. I apologize. But these rehypothecation issues with related to leverage and other things we talked about earlier that don't reconcile well with banks. The problem is not bitcoin. The problem is the arcane banks. Yeah, Bitcoin works just fine. So yes, you can do it. My concerns are not related to the things that the government would have you be concerned about. My concerns are more related to the issues with the banks themselves. But I actually think the banks are going to be rebuilt faster than people think over the next 10 years leveraging this technology. The problem that regulators have now is that these systems have no off switch, no borders. They don't know anything about draconian banking laws. They've never heard of the Bank Secrecy act or KYC rules. They just run, right? I'm all for following the laws. I have no problem with following the laws as a company. I do. I have a team of lawyers that make sure that we do all these things legally. But when you implement something in software and put it on the Internet, they're not asking for permission anymore, it just runs, right? Nobody asks for permission to put bitcoin out there. It just runs. So these DEFI systems that lend and borrow money and generate yield for people, they just run. And so this is the future. So I can't really see a model where the laws and regulations exist the same way they do today in 25 years. It's actually not possible. It doesn't really make any sense. I think the borders as we know them related to finance are going to disappear just like they have for messaging on the Internet or video streaming or zoom calls. It's just another protocol, right? So we created a protocol for accessing text, hypertext, HTTP. Well, we've now created protocols for money, first with Bitcoin as the money itself and then protocols for banking. And I think bitcoin is now being integrated into those protocols. The first generation of DEFI or these decentralized finance systems didn't really use Bitcoin. The next generation actually do. And the merger of the two is incredible, right? That's when you start to. When you can start to see a world where you don't ask yourself anymore what is this worth in dollars, but what is it worth in sats or Bitcoin?

You know, switching topics slightly, we've been in the midst of a, an AI explosion, right? Anyone who's not been hiding under a couch. At the same time that bitcoin has been making headlines, AI has been just moving at not exponential but hyper exponential speeds. We've seen compute what was Moore's Law 2x every couple of years now 10x every year. Elon was at stage at the Abundance Summit this year saying he's seeing 100x in a year and expects that for the next couple of years. Then we have AGI sometime in the next one to five years and then digital superintelligence. There's a lot happening there and you've got to be thinking about how AI and crypto bitcoin intersect and transform each other. Speak to what's on your mind there. What are you finding exciting? Are we going to see AI agents transacting basically buying and selling and you know, I assume that crypto is the unspoken additional layer on top of the Internet for financial transactions.

Yeah, let me, let me, it is, let me try to make it real and tangible for people. I'll give you some real world examples. So I believe we had this idea during the kind of, you know, the last crypto summer we had when everybody was going crazy during COVID this new concept of a dao was created. It's called A dao is a decentralized autonomous organization and you can literally build an organization in software. And a lot of these defi systems are basically daos and the system has software based governance built in.

There's no necessary people involved. It runs on a set of rules.

Independent of universal software, enforceable rules based upon who owns potentially the tokens in the system and maybe you earn more of those tokens as yields. You know, there's different aspects to how the governance can work. But what's important is it's not people based, meaning there's no. Once it's a dao, you can't have a dao that's a company. But it doesn't really make sense in my opinion. People are trying. The beauty of a dao is no off switch and you know, it's not run by politics.

No opinions, no opinions.

But now merge that with AI. And I've spent a lot of time on this lately. So I think that we're about to enter into a universe where we have billions of daos and what we defined as a dao in the first generation and what you're talking about as autonomous agents, which is also the phrase we use at Abra, basically become the same thing. And there's daos everywhere. So take Elon, the Robo taxi model that Tesla's close to finally announcing. Right. So I think what you're going to see is you're going to see the corporate version of the taxis that Tesla owns and you're going to see the ability for people to own taxis, because that's what people can get their arms around right? Now that's not the scalable model, in my opinion. The scalable model is the car itself isn't owned by a person or a company. It's actually part of a dao and it drives itself around. Right. And you automatically pay using crypto, probably Stablecoins or Bitcoin via Lightning, whatever. And there's rules in the DAO via software contracts that decide what the car has to do in terms of, you know, where do I go to automate getting charged?

If it needs servicing, it goes.

Exactly. What do I do for maintenance? How do I distribute the profits to the token people who own tokens? Right. So all of this is happening, right, without governance. Now, this is a lot easier when all cars are automated. The biggest challenge with all this right now is people.

We get in the way and we screw things up.

But eventually you can see where I'm going with this. I just gave you one quick example, which was a car that owns itself and then eventually it'll end of life itself and you've made all your money back as people who invested in the car via this token issuance. Right. And that's how DAOs are created. You have a token issuance where you deposit money as stablecoins or bitcoin into the dao and then the software rules determine how it gets used. Well, it automated buying the car, it automated setting this up, and it automated the token distribution back to the people. There's a million other examples. What if I have autonomous agents that do video content distribution and basically determine out in the cloud. I created a smart contract out in the cloud to sell my movie, movie, and it's automatically going to give the money to this group of investors that invested in the movie based upon how the distribution rights work. And then at some point the price is going to come down for watching the movie and then eventually an end of life itself. And it's just open source content, you know, something like that. I can give you thousands of examples of these crypto and smart contracts become the transactional layer for all of these autonomous agents daos, I think. You know, I was listening to Elon's Lex Friedman interview where he was. They were in Memphis, these massive compute centers. You need them now. But you know, if you look at the amount of compute, you know, my laptop here that we're talking from, that sits idle, this is all going to become compute in globally decentralized AI systems. Remember years ago when SETI was basically letting you install software in your home? Yeah, I remember from my NASA days. Right. And so, so we're wasting so much compute that is eventually going to become part of these decentralized systems. And it's all going to basically use a smart contract based layer on top using technologies like Solana, Ethereum, et cetera, et cetera, so that these systems can communicate contract to contract. Having a person who speaks, what did he say at eight bits.

Yes. Eight beats per second.

Yeah, yeah. Process transactions. Makes no sense, right? Visa, when every single person on the planet is, or I'm sorry, there's a lot of religions. When every person is buying at Christmas time, there's a couple of billion people that shop over a one week period. That's Visas peak transaction processing. That is a round off error compared to what's coming. Okay, so people can't manage that. Oracle, an Oracle database can't manage that. You need a globally decentralized network that can process transactions to manage that. That's what DEFI enables. Right. It gets us out of the way.

It's going to be an exciting few years ahead, you know, as they say.

Yeah, it's awesome. There's going to be a second coming for crypto when it merges with AI in the next three to five years. We made some token investments in ABRA in this area and I'm really excited about it.

And that is the timeframe, right. It's not 10 years or 20 years, it's the next five years and maybe even before that with the speed at which things are moving. Bill, where do people go to find you on social? Where do they go to learn more about Abra?

Yeah, sure. I'm Bill Bar X on Twitter. X. Sorry, we do need a verb. Abra.com you can sign up, you can get more information. I'm on the Interwebs all the time. Relatively easy to find. We have our Money Talks podcast every Friday. I think we're taking this week off for August, but most Fridays we have Money Talks online via all the normal channels where I give you the kind of macro, latest on what's going on related to crypto and other things related to exponential tech and all this stuff. So, so you can check that out. But we're, we're pretty easy to find.

Fantastic. And Bill, love you having being part of the abundance community. And thank you for. For joining me each year and. And sharing your wisdom and your technology and. Yeah, super pumped for our conversation and for where things are going. I'll see you soon.

See you soon.

Take care.

Of sam.