The Physics of Bitcoin: Giovanni Santostasi in Conversation with Minotaur Trading Systems

I am a PhD in astrophysics. I taught in college for several years. Physics. Almost 11 years in college. I was part of large scientific projects. One of them is called ligo. You know, it has thousands of scientists working together. They're trying to detect gravitational waves from black hole neutron stars. You know, this was my field of interest during the 2008 financial crisis because I was teaching in a small college, my physics department was closed down, and so I had to look for another job. This was actually the year where I was supposed to get tenure. You know, I took this as an opportunity because I wanted to reinvent myself and do something different. And so I went to EuroScience and I thought it was a bet, you know, like, I'm going to use my skill as mathematician, physicist, programmer in biotech, and I will have an advantage because, you know, most of these people don't know these things. You know, they are maybe medical doctors or something, you know, and it was a very good bet because within a year, I actually had a patent in the field of neuroscience. I invented a device, you know, like, in one year from joining this new field. And I was willing to start from scratch, you know, like, even as a student, you know, But I started to publish papers. I basically created almost a new field of neuroscience that is how to stimulate the brain during sleep using sounds. And we show that we could improve memory, for example. So very interesting. But the relevance of these for the bitcoin understanding is that it allow me to see the same tool that we use in physics for understanding stars, for example. You can use it to understand the brain. I could see the same patterns. So it really helped me to see how this is something that it's universal, you know, it applies to many different areas of the world. You know, not just physics, but also the brain. And then I discovered Bitcoin. This was like I actually downloaded the wallet in 2010, but I didn't do anything with it. It was so stupid. But then I heard about it again in 2012. I was part of this newsletter of futurists, people that think about the future. And this guy, being a futurist, he could see the value of Bitcoin. You know, Bitcoin was $9 at that time. And he had a vision of what bitcoin will be. You know, he explained all the technology very well, you know, but also he said, you know, bitcoin is going to help redistributing wealth, you know, to new people that are explorers, you know, they want to understand new things. And they say, well, that is Me. And so I jumped in. I needed to understand it first. I wanted to understand the math of it. So I downloaded the data, I looked at the chart, and I was looking for some kind of a key to understand Bitcoin, because I had this intuition that Bitcoin was going to be different from gold, from stocks. It was going to behave in a much more regular fashion because it's a code. But also people join in because they believe in a cause, you know. So I started to understand it. And one day I was watching TED Talk. It's by this physicist called Jeffrey west, and he's an expert in studying this phenomena that is called scale. So scale is when you have different phenomena in nature. And this phenomena goes from being very, very small and then it grows, it grows, or it covers a vast range of possibilities. Like for example, a famous scaling principle is if you have an animal and has a certain mass, it's going to consume a certain level of energy, right? But it's not like that. It's more sophisticated than that. It's actually a power law, what is called a power law because a lot of these scaling laws are expressed by power laws. So there are many, many of these laws everywhere like this power laws. And I was familiar with them, but I didn't know they apply also to social phenomena, you know, to human beings. And this lecture allowed me to see that because this guy, Jeffrey west, he was talking about his career path, it was kind of similar to mine, right? He left physical science to go to biology where he found a lot of these power laws. And then he did the next step that I actually did because he went from biology to actually social systems, you know, kind of like it was, oh, wow, you know, we have the same career, you know, because he started to study cities, you know, while I was studying Bitcoin, you know, that was the analogy. I started to study financial system still made by humans, right? So he's an expert in cities. So you look at many different parameters for cities, like the gdp, the number of patents that are produced in that city, the number of crimes. So even negative things, how many gas stations there are in a cities, how fast somebody walks in a city in average. And you know, all these things, they are power laws. And you can plot them on top of each other so it makes predictable, right? You can know, okay, if a size has, if a city has this size, it's going to have this number of patent, it's going to have this gdp. And you can go, there are people that verify these studies looking at literally Thousands of cities all over the world, you know, and you can tell this city is from China, this city is from America, because we have a slightly different power laws, you know, for each country, but the general shape is the same. And he was describing the city, right, In a very poetic fashion. And science have actually common things. Because when you look at poetry, you make analogies, right? You say, oh, this is like that, right? And a beautiful poem has these allegories, these analogies, right? The same thing with science, where we look for comparisons, right? Like a city and animals, right? They are similar organism. So this guy was in a very poetic fashion, talking about city, like if they were living organisms. But, you know, he was saying, oh, the circulatory system of a city is like the roads, etc. That is very similar. It's a network. The body is a network, the city is a network, the nervous system of cities, all the telecommunication system, you know. So I understood the poetry, but see, a scientist backs the analogy with data, you know, with mathematics, etc. So we have both, right? While he was talking about this, I immediately saw the relevance for bitcoin. Bitcoin is this living city. And so I went online and started to download all the data. Because with bitcoin, we have the fortune of getting all the possible information from the chain, right? You can get the number of addresses, you can get the price, you can get hash rate. So I went to this frenzy where I was plotting all these quantities, and there were power laws everywhere. There were a power law between price and transaction, power law between price and hash rate, price and addresses. You know, it was like, okay, it's full of power laws. Bitcoin is a place where you will find all these scaling properties. It was like a revolution, you know, because now I could make sense of bitcoin. And in fact, this is when I jumped in and became a bitcoiner. By the time it was $200, it was not $9 anymore, you know, but it was still good. You know, I was. Was early on. And this is where my adventure started, you know, with bitcoin. And many people rejected it. Like, at that time, I was mostly posting on Facebook because X was not still active and there was part of relatively large group. One was called bitcoin and the Internet of money, you know, and 35,000 people. I will post there. Some people liked it. They saw this was one of the most significant things I ever saw about bitcoin. And other people will say, oh, you know, you're crazy. Bitcoin is not predictable. What Are you talking about blah, blah, blah. And six years ago I posted on Reddit, you know, because I should have maybe published papers. You know, I'm in the process of doing that, of actually writing scientific papers on this topic. But I posted on Reddit one of these charts, right? And this was six years ago. And they say, oh, bitcoin for the last 10 years has been a power law. You know, the title was 10 Years of Bitcoin Power Law. And again, same thing. Some people liked it, some people attacked me, you know, but it's really amazing because you see bitcoin like a straight line. It looks like a straight line. It's really striking, you know, like, if you see it like, oh, bitcoin looks like a straight line. It's weird. But, you know, I didn't get famous or anything because of that, right? I got some likes and most people ignore it, right? Five years later I posted again. And in fact, it was kind of a critical time in my life. I say, you know, I tried to commercialize this invention that they told you I make my own company. But, you know, the economy was not right to be in that field at this particular time I got some grants, but I was trying to find, should I go back to teaching or whatever, you know, because, you know, I have enough bitcoin, but I don't want to touch them, you know, I want to speak, still have a job, you know, I will have a job until I can, you know, even if I have a lot of bitcoin, you know, I lost it all, by the way. I lost all my bitcoin in a boating accident, unfortunately, you know, I said, you know, maybe I can talk about this power law and have a newsletter, you know, some people will maybe support me on Patreon or whatever, you know. And I post this update and it was 15 years of Bitcoin power law, right? Five, five years later. And that post went crazy, went viral because now I could tell people go and check what I told you five years ago. And it's the same chart. It's exactly the same chart five years ago. And the people, they couldn't understand went crazy. And then there was this guy, his name is Andre Jick. I didn't know who this guy was. This guy contacted me and he said, giovanni, let's do an interview. We did an interview. And then he made this beautiful, beautiful video, very high production video with a lot of animation. We were talking about the history of a power law like Kepler's, you know, he discovered the organization of the planets and that is a power law. You know, the distance of a planet versus how much time it takes to go around the sun is a power law. Very beautiful video. You know, basically I'm trying to say that Bitcoin is like nature. You know, it becomes like a natural system. It's not. Or a city. You know, it's one of these systems that follow very precise pattern. You know, it's not random. Yes, it has some randomness, but in general, it's like a natural system. So he showed me this video. I showed it to my son. You know, the preview say, don't. Don't post it yet. You know, it's just a preview. And he said, do you know who is this guy? Said, no, I don't know. Who is this guy is Andre Jake. He's like one of the top three YouTubers in finance on the entire Internet. Like, he has a 1.5 million people following him or whatever. You know, say, you are going to be viral. You're going to be famous. You know, I say, okay, sure. And all of a sudden, my ex was starting with 500 people following me, and now I have 50,000, you know, something like that. But yeah, this is how my adventure started. You know, we have people following me, but, you know, it's tough because there are people that don't believe it. They attack me. They. I'm an Italian, a very, you know, feisty. You know, I debate with people. You know, he's like, oh, sure, you don't. I don't put up with trolls. I came to a conference and Costa contacted me and said, giovanni, look, we have this trading system. We really like the Power Law because the Power Law gave us. He said that it was almost like an altimeter or a radar. You know, they had this very good trading system, but once they discovered the Power Law, give them a sense of direction of what Bitcoin is doing. And also it allows them to calibrate better their algorithm and all kinds of things like that. And they said, you saw that you are at the conference. And you know, this was in Nashville last year. Why don't we meet? So I went and I really like the team, etcetera, and say, look, you know, the only way I have to appreciate what you're doing is that if you let me try it, you know, let me try. Let's test it. Because this is how I do things. I do it scientifically. You know, I need to have scientific evidence that your system is really working. And eventually they told me they were afraid because then I have this Reputation that strained my mind, you know, both in good and in bad. And the first system was crap. I was going to tell everybody what was crap and they say, yes, you're right, I will have told everybody that don't buy these things because it's terrible. You know, I started to see the result. They were just amazing. I could see that they both add intelligence that we started to talk about how to integrate with Power Law. They what they did to integrate. We started to collaborate. I was very surprised of how it behaves and the results and also the intelligence and the goal. Because one of the goal is to keep it in such a way that, you know, we are using the power law floor. That is something that is one of the strongest aspects of this theory, that there is a place where bitcoin never goes, never goes down there lower than that. And that we think it has to do with, with the cost of production of bitcoin that if you go below that price then miners start to lose money. So they stop selling, you know, maybe take a loan or they failed, you know, they. The company doesn't work anymore. And so it's something very unique to bitcoin because this is why I like company because they are focused on bitcoin itself, right? And we don't do anything else. And so it was really important to focus on bitcoin because bitcoin has these very precise properties that nothing else has. So this system in theory could work with other things. But bitcoin is so unique that this system really has all these incredible properties that they will not work so well with anything else. And one of these things is this floor, you know, the floor that we use to calibrate all the trades that we are doing, right when the bot is DCA down and is trying to average down the cost of buying the deep. Basically we know how many of these trades we are going to do because we are using the support that we calculate every time as our reference point, you know, and that basically almost guarantees that you will never be liquidated. That is fundamental for this type of trade, you know, because that is really biggest limitation of any system like this, that you could be liquidated, you know, you never can guarantee because in trading there is never guarantee of anything. But we really, really focus and try to avoid liquidation. That is like a priority number one. And the power law allows you to do that, you know, and many other system they don't. So I'm very excited about working with the group because I talk finally, you know, after testing it for a while, I Had many people telling me because I was showing my results, you know, and people were seeing the results because it's a real thing, you know, you cannot make it up, right? You have these third party, like, you know, by beat or whatever and you post what the third party says your gains are and then people can see it, you know, and they are convinced by the data. You know, I am a scientist, but for months and months and months they say, guys, you know, let's wait until I have enough data, you know, because people wanted to know what was this trading system. And then finally I announced it when I had enough data. It has been very successful because really people appreciate and now we have dozens and dozens of people that are using this system. And by the way, it doesn't take out anything from users. Basically you can scale it to anything. You know, it's not that we are in competition with each other. You can have a lot of people doing the same thing. It's not exactly the same thing. It's tailored to different person. The bot starts at different time. So there is no really competition. Because that is one of the things that people say all the time. You know, if you have such an amazing system, why don't you use it yourself? We do. I'm using it every day. Everybody in the team is using it. It's just that we also want to share it with people. And I have a community of people that are interested in the Power Law. They want to learn from the Power Law. We have a discord channel with 1,300 people. You know, many of them started to use the bot and now we have a lot of testimonials that yeah, yes, the bot works. You know, it's a service. I see it as a service to the community that we are offering something. Because to conclude in remarks, Bitcoin has two properties that are fundamental. We have this long term trajectory that is based on how Bitcoin really works. It is a network. So I think this will never be violated. We will have probably another 20 years of this Power Law behavior and then you have still a lot of volatility around that behavior. And you can use that volatility while you know that you are safe because you're investing in the best investment ever that mankind created that is Bitcoin. So it's both safe and it has a lot of volatility. You know, it's like a Chinese wise man, ancient, and he behaves like a young person. You know, it's both, you know, it's amazing. And you can extract that volatility, you can extract that young behavior to continue to build your bitcoin. It's not a question of belief. As a scientist, I don't believe in things. I know, I know. It's like this. All the data shows right now that this is what is going on with these trading systems. I'm really enthusiastic about working with the team and making it available to people know because that component is very important to me too. I want more and more people benefiting from bitcoin.