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

28:22Most 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. You know, 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 a, you know, national senator, is they created legislations specifically contemplating digital asset banks. And And there are a few of those licenses have already been granted. And so she's got a knee deep on this issue for years. She's appeared on crypto podcasts, Fox talking about crypto, CNBC talking about crypto, et cetera, et cetera.

29:05And so clearly this had been in the work for months, if not years. And you can see the legislation, if you just go to her Twitter feed, Center, LEMMIS, you can actually go to the web page 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 a Democratic Congress would vote for this right now. And I'm not even sure the timing is right in the magnitude of a number 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 Congress people, and from both sides of the aisle, right?

29:47because, you know, Rokana, one of the most technologically astute people in Congress from here in Silicon Valley, I also spoke. And, you know, I give credit because he took his lumps right now, given his peers stance on this. It's incredible that this is even a conversation. Real quick, I've been getting the most unusual compliments lately on my skin. Truth is, I use a lotion every morning and every night religiously called one skin. It was developed by four PhD women who determined a 10 amino acid sequence that is a syndolytic that kills senile cells in your skin. And this literally reverses the age of your skin.

30:31And I think it's one of the most incredible products. I use it all the time. If you're interested, check out the show notes. I've asked my team to link to it below. Alright, let's get back to the episode. It's interesting, years ago, I forget exactly when I was on, I think, was CNBC and talking about the six, the six Ds of exponentials, right? Digitize something in the early days, it's deceptive, eventually gets disruptive, but it dematerializes, demonetizes, and democratizes products and services. And I was talking about Bitcoin in that regard. And of course, it's exactly what it does. We've digitized money.

31:09It's been a deceptive growth. It's now beginning disruptive and it's dematerialized. You monetize 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, to, 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.

31:59But we've started to see the financial institutions begin to adopt it and promote it to their customers. Yes, we've. 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 one of the founders of modern Austrian economics wrote this book called the denationalization of money. And it was basically the premise was we need private money to compete with government money. And in the US historically that's illegal. You can't do that.

32:39But we have one you can't stop because there's no off switch. So it's from 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 speedcorts are already opined on this issue. So that's good, right? We can't stop it, right? So what does it mean from an adoption perspective to your question? I actually think that having a Bitcoin ETF, 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.

33:17Obviously, if RFK got his way and the government bought 20 % of Bitcoin, the value Bitcoin would go up to $100 trillion. And so for those people who hold Bitcoin, congratulations. That's not the point of Bitcoin. Bitcoin. 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. That's the value of Bitcoin. The fact that you can hold it in a vault and trade it via security, which is what ATF 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?

33:55But long -term, it's not why I got into Bitcoin, right? I got to Bitcoin because it solves the problem I'm talking about. So I think what ultimately matters and what I look at is, okay, family office is hoarding it? Awesome. You know, hedge funds, 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 401k's. 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, you know, communist policies has become one of the poorest countries.

34:50Where are we with Bitcoin adoption there? What melee 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 has money, crypto as potentially and defy as the future of banking.

35:14That's I like that for two reasons. I like government adoption and that discussion for two reasons. It's great marketing and it takes the heat off of us, given everything that we've been going through for the last five years. Maybe not the answer you were expecting, but for me, if it really is the people's money and I don't really look at it myself that way, but it's a good way to capture the idea. 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 defy or decentralized finance, which we can talk more about later as the future of banking.

35:58Yeah. And for me, it is the abundance thesis, right? It is 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 in some questions from my I have to still call it my Twitter ecosystem. It's hard to call it. You might X ecosystem because it doesn't sound right. I told you, I need a verb, you want to 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 economy and in the Bitcoin crypto ecosystem about fear versus agreed where are we there? In regards to just the investment cycle.

36:44Just a bit coin right now people. Oh, fear. I mean, I think the last few days around the time we're recording this, we went from euphoria when the ETFs were released to sideways for a few months, to fear the last few days. And a lot of that is coming out of Japan. So let's talk about Japan then in that I want to talk about Japan and Impact on interest rates on on Bitcoin. Yeah, economy's work in cycles and One of the most important functions of those cycles because of the fact that the government controls the printing and 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 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 blend to each other among other things.

37:44And these rates basically can cause money to enter into society and a faster rates 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 toolbox. They also have the ability to buy assets. So if you remember during the lockdowns, interest rates got so low that 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.

38:25So when they started buying assets, and 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 actually 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 they have that trick in their tool bag.

38:58They have interest rates, and they can also coordinate with international governments or treasury. So they have some tricks there. Japan and 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. And so 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, even if they're going to invest in dollars, the cost of pegging or hedging the currency fluctuations is relatively low, and then invest in other assets that would generate cash flow or potentially Nvidia turns it.

39:51It seems like a logical thing to do. Very logical thing to do, especially if your goal is to make money. So this arbitrate is known as a carry trade in the hedge fund world and 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 percent.

40:27And that sent shockwaves 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, 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.

41:03So 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, you know, 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 in the US, which is morning 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?

41:50And yes or they're fearful that they may basically be suffering from the hangover of what everybody else is doing. Is there a 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 that 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. Because that will be the stable measure of value 50 years from now.

42:29In the meantime, we get the benefit of the fact that it's on its way there. It's fascinating how public reactions and fear, I mean, in the financial industry, it's, you know, traders are watching the financial tickers and news 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 piece 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 where do you imagine Democrats are going to come out on this in particular on the Democratic product ticket.

43:20Is there, has there been any, any softening in their point of view on unbitcoin? Let me kind of connect the dots here. So, as I said, these are, 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, two, 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.

43:59Tyler paper was expensive. Yep. 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 need the rate of increase has either slowed or stopped right and it hasn't stopped But it's back down to probably like one and a half percent for most staples right now. There are other things like housing that skew at higher Okay, so so That's fine mission accomplished, but that's a cycle. Okay, so now in in late 2022 the Fed said okay, we're probably at the bottom of that cycle right we we think that inflation is moving in the right direction and it will take 18 months to get there and they would mostly write on that.

44:45Okay, so then what you wanna do is you wanna slowly start loosening the purse string on the money because if you don't, what's gonna happen is people are gonna start stop borrowing, businesses will stop growing, small business and medium -sized businesses which are the heart -blood of new job creation historically are gonna stop being created, right? And so they have no choice, but to predict to some degree when these cycles are gonna 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.

45:23Right. And it was the velocity of money, even though conditions were still tight, dramatically flipped. And 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 stocks were very flat, except for Bitcoin, which was up into 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.

46:07Because now 401Ks and IRAs for the first time 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 do 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.

46:46So 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, OK, we're seeing unemployment 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 stave 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 in the world of the world.

47:32It 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. Risky assets are going to act as a liquidity suck for that stock. Crypto will be number one in terms of percentage gain, technology stocks, number two, small cap stocks, number three, etc. etc. down the pipe. So is the is the you know the word on the street so to speak that it's going to be a strong fourth quarter for yes for crypto and bitcoin yes let's get back to what do we what are you hearing from the democratic conversation I mean are they going to come out in favor of a 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.

48:20They'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, Grace Kale 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 them. 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 that the lawyers making these decisions are also people.

49:04I mean, they don't want to get their asses kicked regardless of what their subordinates are telling them to do time after time. So I think that is trickling down now to Congress people who are also hearing it from their constituents. So there's these draconian rules in the US right now that make it extremely difficult for banks themselves to hold crypto on their kind of, let's call it the bank's balance sheet. Which is crazy. It's just an asset. right? 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 hold in their balance sheet by the way.

49:45Nothing 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 just taking it on the chin and we're fighting, but also because they're getting tired of losing.

50:22And they're also seeing the donations that are coming in. which is the win 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 escape days, the Clinton administration was trying to back door the ability to read encryption in all new hardware. Oh yes, I do remember that, yes. Yes, and we lost our collective minds in Silicon Valley, I was working on SSL, you know, HTPS back in my Netscape days and we couldn't believe it. Well, this defeats the purpose of everything we've been trying to do to create e -commerce online.

50:59And they eventually figured it out and they got it and they act we asked 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. A bit coin 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. So 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.

51:35It's interesting. It's places like Nigeria, Philippines, Argentina, the US, historic, I think India. Let's see what else comes to mind that I know. So, 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. Right? That's why me lays a hero now. Right? Because he took the vect playbook, which is, look, the only way to stop this corruption, is to shut it all down. And he did. Everybody want to take a short break from our episode to talk about a company that's very important to me and Could actually save your life or the life of someone that you love companies called fountain life And it's a company I started years ago with Tony Robbins and a group of very talented physicians You know most of us don't actually know what's going on inside our body.

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54:12If you go to fountainlife .com, Backslash Peter will put you to the top of the list. Really it's something that is for me one of the most important things I offer my entire family, the CEOs of my companies, my friends. It's a chance to really add decades onto our healthy life spans. Go to fountainlife .com, Backslash Peter. It's one of the most important things I can offer to you as one of my listeners. All right, let's go back to our episode. Let's look forward. You know, I have to ask this question. It's the most popular question asked, you know, 5, 10, 20 years from now, where's the price per Bitcoin going to, you know, trend towards?

54:52You know, it's hard to answer in dollar terms because I do think that a Bitcoin will equal one Bitcoin, right? Obviously, yeah, that's the easiest and most important answer. I hope. Yeah. But as we approach this so -called fourth turning, right, 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 I'll stay answer your question, right? Fair enough. So if we keep creating increasing the money supply by 6 % a year on average, which is more or less what we've done since the 50s What is gold increases gold increases by some percentage points from Actually 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 Sailor 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.

55:49Is that a coincidence? Wow. 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 in dollars, it should at least go up 6 to 10 % a year because we're adding 60 to 10 % more dollars every year. So if you do that math and basically assume that, for the next 10 years, it goes up by 20 to 25 % because we're still getting the exponential adoption.

56:24And then after that, it basically starts to become slightly better liquidity suck than equities because you can always create more equities. right? People create companies, they can share, right? Can't issue more Bitcoin. So, so Bitcoin should do better, right? So let's say it's 10 percent, right? So you do that out for, you know, 20 years, the numbers are astronomical. No company has ever grown that fast for that on that sustained basis in in corporate history. I mean, the way, you know, others look at it is it should be equal to to half the value of holdings in gold or 10 % of real estate or whatever the case might be.

57:05The 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 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 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's 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 What's the message question that comes over from X from a PicDoc 5801?

57:56He 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 per -entity power law or that it's value might increase more than expected because of the limited supply? Yeah. So there's two ways to look at this. One is 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 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.

58:35Has to. Right? It's not enough to go around. The more important question becomes purchasing parity. Meaning, what am I buying with the Bitcoin? Sure. if I was to buy a commodity that we know more or less what it should be worth. Starbucks coffee, 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 in the houses where you see basically how many Bitcoin it took to buy a Ferrari in 2013. their team will take all of them.

59:13And 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 a deflationary asset. It's the opposite of the way we're talking 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 so what we did is we made up something which is more sound, right? So it's 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.

59:53Dollars 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, as a result, the price of Bitcoin on a dollar basis could go to infinity. What does that mean? Right? Here's a couple of questions I find fascinating. This one is from Maga 10424. Bitcoin doesn't create a source of income for retirement. So, and I want to talk about that. I mean, if you're holding Bitcoin, how do you create... how do you make it a source of income? So, let me just finish the question here. So, what would be the strategy to use PTC for retirement?

1:00:27Is it work, borrow, die, or sell a little bit each month? So, so that sounds morbid workbarrow die. But hopefully it's workbarrow longevity. Yes. Yeah, and so let's assume it's workbarrow 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 it just just perfect. 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 Seller. He is highly incentivized for the dollar not to fail. Okay? And it's partly 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.

1:01:15It's if my purchasing power on a dollar basis via Bitcoin is going up really fast, really fast. What I should be doing is borrowing against that Bitcoin. And if I borrow at a low enough LTV in theory, I mean, I have to pay back the loan. Okay, now let me own wine that one step at a time. It's going to be nice. I want to go deep into this personally and for a number of questions from the community here. Yeah. Okay, 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.

1:01:50Okay. and you know, 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. Okay? Yeah. 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 and 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.

1:02:23Well 40 % is now double what it was before but you have a loan to pay back from before. What if you could basically 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 would love to make the interest payments in this case because because the price of the house isn't going up very fast, or at least not compared to other assets, but 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, 20 to 40 % per year, if a factor in the standard deviation, I predict that, I can make, well, I should say, I predict, I make a good case, I think, that we could see 20 to 25 % increases in value for the next 15 years.

1:03:11Let's say 25 % I think is realistic. I think there'll be years where it's higher, but then I think it 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 real estate are in a fixed float, right? We increase the value. We increase the amount of that float, whereas the Bitcoin we don't. So it should get a higher rate 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.

1:03:47I borrow $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 Develop 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, right, you set a loan to value ratio.

1:04:44So think of this as an online marketplace where you're practically borrowing from the Internet itself. All right, what can we 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?

1:05:28They might automatically sell some of your Bitcoin. And that's what you're trying to avoid. You don't want to sell your big one. So if you kept your loan to value ratio low for the initial loan, let's say 30%, 20 % to 30 % to keep it conservative, Bitcoin is still increasing. 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 principle of the loan, which would increase the loan to value ratio. That makes sense. But you're still far away from 65 % in most cases because the interest payments today The rate you know might be between 6 and 10 % just depending upon the market gyrations, right?

1:06:10So so but you start to see a model which says you can hold a deflationary asset Bitcoin borrow an infl in an inflationary asset the dollar Right, and if you have enough of this asset that's 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 Abriet is because not everybody's heard of Abriet. And so part of my goal is for everybody who's, you know, 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.

1:07:01Yeah, 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 flood my life. So let's talk about what are you doing in Abra to enable that? Well, we call these lifestyle loans. And if you're holding like, guys it's the same example I gave you if you're holding millions or hundreds of thousand 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 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 stable coins, which you can use to stable coins or convert to dollars.

1:08:02It doesn't matter. They're the same. And again, depending upon how low that loan to value ratio is, you can even roll the interest payments over into the principle. You can make the interest payments if you want. And if the price of Bitcoin is growing faster than the rate of interest, you're 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 Sailor's talked about it. I've heard others talk about it. I think we're the first ones to come close to perfecting it.

1:08:44We've worked on this for a long time, and you know, it's still early, it's still new, 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 we've seen anything from, there's months when it's zero, two months when it's 15%. And so 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, And these are DeFi -based systems. So the important message here, because everybody wants to know about risk, right, is, well, okay, well, what risk am I taking?

1:09:26Sure. 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.

1:10:05And just to be clear, Abra was There's last man standing in the category that you are today and you basically redefine yourself. Can you speak one second about the process you went through because I think it's important people 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's in kind and so if you deposit a Bitcoin you would get more Bitcoin back. And the counterparty to those transactions was Apple. And my opinion as to the legality of that doesn't matter.

1:10:50The government didn't agree with all that. So 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, 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 individuals 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 breakthrough.

1:11:27It's as close to the mantra of not your own keys, not your coins, as you can get. Yeah. 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 by ETF says one point You can do something like what Aberdes you can get yourself a hard way to wallet and hold on to it yourself And it's a matter of how technically literate you are and how much attention you want to pay to this Yeah, like I have a degree in computer science, Stanford PhD dropout. I'm telling you, I still like it cold hands when I sweaty palms when I have to deal with a lot of that stuff.

1:12:09You're a 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 taxes. So do you think 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.

1:13:03That is my understanding, and I'm not a tax expert, but I know many people have taken, including 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 crypto assets that are commodity assets. and I agree with him on this. 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 are decreasing the purchasing parity of the dollar at my expense.

1:13:41So 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. what I've already paid tax on the the well 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 and microbes by reading their RNA.

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1:15:36I've asked Naveen Jane, a friend of mine who's the founder and CEO of Viome to give my listeners a special discount. You'll find it at Viome .com slash Peter. You mentioned DeFi. For those who don't know what DeFi is, can you give us a 101 and what and what you think about DeFi on Bitcoin? Sure. This is one of my favorite topics. 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 is that it runs on the open internet just like Bitcoin in a way that it can't be shut off.

1:16:35There'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 I might be 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 borrowing and contribute coin holdings.

1:17:16That was the first generation. We're already on generation four of DeFi, where these kids are now developing sophisticated derivative systems, sophisticated yield generation systems, to the likes of which the world has never seen before. or 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.

1:18:06And remember banks are open 35 hours a week maybe some are open in the next two or five hours on Saturday so 40 hours a week. These systems are open 24 -7, 168 hours. They don't close. There's no holiday. So this weekend when markets when haywire people were able to access their bitcoin. So, I think this is the future of banking. Do you see Bitcoin getting integrated into the traditional financial systems? It's hard because the way Bitcoin settles is very different than the way traditional asset movement works. And so you get into all these hypothesization and it's complicated, I apologize, but these re -hypothication issues related to leverage and other things we talked about earlier that don't reconcile well with banks.

1:19:00The 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 board, orders. They don't know anything about draconian banking laws. They've never heard of the Bank Secrecy Act or KYC rules.

1:19:39They 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, right? So these DeFi systems that lend and borrow money and generate yield for people, they just run. 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.

1:20:16It'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. So we created a protocol for accessing hypertext, HTTP, what 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 defy these decentralized finance systems didn't really use Bitcoin. The next generation actually do, and the merger of the two is incredible.

1:20:53Right. That's when you start to, 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 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 log 2X every couple of years. Now 10X every year Elon was at stage at the abundance of this year saying he's seen a 100X in a year and expects that for next couple of years.

1:21:39And 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 slash Bitcoin intersect and transform each other. Speak to what's on your mind there. What do you find exciting? I mean, are we going to see AI agents transacting, basically buying and selling? and I assume that crypto is the unspoken additional layer on top of the internet for financial transactions. Yeah, let me try to make it real and tangible for people to give you some real world examples. So I believe we had this idea during the last crypto summer we had when everybody was going crazy during COVID, this new concept of a Dow was created.

1:22:38It'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 DAO's. And the system has software -based governance built in. There's no people, there's no necessary people involved, there's no it runs on a set of rules. It runs on a set of software -inforcible rules based upon who owns potentially the tokens in the system and maybe you earn more of those tokens as yield. There's different aspects to how the governance can work. But what's important is it's not people -based, meaning there's no...

1:23:16Once it's a Dow, you can't have a Dow that's a company, but it doesn't really make sense in my opinion. People are trying. The beauty of a Dow is no off switch and 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 doubts. And what we define as a doubt 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 doubts everywhere. So take the RoboTaxi model that Tesla is close to finally announcing.

1:23:56So 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 scale of the model in my opinion. The scale of the model is the tax that the car itself is an owned by a person or a company. It's actually part of a doubt and it drives itself around right and you automatically pay using crypto, probably stable coins or Bitcoin via Lightning whatever. And there's rules in the Dow via software contracts that decide what the car has to do in terms of, you know, where do I go to automate getting charged.

1:24:35If 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 are automated because the biggest challenge with all this right now is people. We get in the way and we screw things up. And so, but eventually, you 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 the life itself. And you've made all your money back as people who invested in the car via this token issuance.

1:25:12And that's how DAO's 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, you know, out in the cloud, you know, I created a smart contract out in the cloud to sell my 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 end of life itself and it's just open source content.

1:25:56You know something like that. I can give you thousands of examples of these. Sure. Crypto and smart contracts become the transactional layer for all of these autonomous agents, DAO's. I think you know I was listening to Elon's Lex Freeman interview where they were in Memphis, you know, 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 gonna become compute in globally decentralized AI systems and remember years ago when Setti was basically letting you install software and you let me do 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, etc etc so that these systems can can can communicate contract to contract having a person who speaks what do they say at eight bits?

1:27:06Yes, eight beats per second. Yeah. Yeah, process transactions makes no sense right visa when every single person on the planet is or sorry Sorry, there's a lot of religions. When every person is buying a Christmas time, there's a couple of billion people that shop over a one -week period. That's Visa's peak transaction processing. That is a roundoff 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.

1:27:44It'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. Yeah. You know, we made some token investments in Aber in this area and I'm really excited about it. And that is the time frame, right? It's not 10 years or 20 years. It's the next five years and maybe even before that with the speed of which things are moving. Bill, where do people go to find you on social? Where do they go to learn more about Abra? Yes, sure. I'm on Bill Barr X on Twitter. X, sorry. We do need to verb Abra .com.

1:28:22You can sign up. You can get more information. I'm on the inner webs 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 you can check that out but we're pretty easy to find. Fantastic and Bill, love you having being part of the abundance community and thank you for joining me here and sharing your wisdom and your technology and yeah super pumped for our conversation and for where things are going.

1:29:03I'll see you soon. Thanks Bill. See you soon. Take care.