A Comprehensive Bitcoin Update with Robert Breedlove

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1:29Robert Breedlove, welcome back to Real Vision Crypto. Glad to be here, Ash. Thank you for having me. It's such a pleasure to have you. So much to talk about here, all about what's happening in Bitcoin right now. Before we do that, let's just take a look at Bitcoin price. Looks like Bitcoin is trading right now on my screen at$27 ,247. It's an interesting split. It's down about 7 % on the week. down about, it looks like around 1 % on the last trailing 24 hours. But on a year-to-date basis, up 66%, obviously a lot of green on that chart. Robert, let's talk about it all. What's the current state of play in Bitcoin right now?

2:07What's your view? I mean, I guess my view hasn't shifted a lot. Other than the banking crisis that has just started and seems to be justifying more and more currency debasement. So, you know, as we've been beating the drum in Bitcoin circles for a long time, that no matter which way you really look at the future, all roads tend to lead toward more money printing. All right. This is something that not only is there a significant precedent for, but also central banks have a large incentive to continue doing it. So I'm not really surprised to I see Bitcoin performing well with all of the news, especially with all of the fear the depositors were feeling during the SVB collapse.

2:56There was kind of this weird lingo period where it wasn't certain whether or not the government would backstop SVB depositors. And then the conversations since then have been, seems like there's a more explicit guarantee for depositors in large banks and less of an explicit guarantee for depositors in smaller banks. So we've seen this crisis of confidence that maybe people are actually starting to wake up to the reality that the money that they think they have in their bank account is not actually their money. It's just a liability from a counterparty, and it's a liability that can be defaulted upon and often is defaulted upon.

3:41It's also brought into the foreground other illusions like FDIC insurance, which they have around 1 % of the assets necessary to cover the depositor base that they ostensibly insure. So, you know, I don't know. People... People that don't typically think about these topics are now thinking about these topics. And then when you consider there's that crisis of confidence occurring in an age where ideas move extremely fast, everything seems to be moving faster. Like a bank run that used to be a guy or a girl going to the teller window and filling out a slip and taking out their money, these things are now automated via APIs.

4:29So we saw tens of billions of dollars flow out of SVB in, I think, 24, 48 hours. So the speed at which ideas and financial flows move is just an order of magnitude or more than what we're traditionally accustomed to. So there's a crisis of confidence. Things move extremely fast. the ultimate no matter again which type of response you see whether it's red or blue or whoever's in office all roads do lead to more money printing it's the only thing you can do to keep covering the the exponential expansion of liabilities that occur in each round of money printing so you end up like like a dog chasing your own tell but you have to go faster and faster to try to keep up with the inflation that you're creating as a central bank so for bitcoin it's like you know what happens in a world where everyone's printing money faster and faster you know and i think the bitcoin thesis and you could also roll in the gold bug thesis is that a lot of that liquid value will flow into the assets that cannot be printed so i would expect to see i guess the last piece to bitcoin too is just the halving cycle you know we're about one year out from the halving, which is scheduled for, not scheduled for.

5:55It's probably, because you don't really know how fast it comes in based on how much hash rate comes online, but right now it's probabilistically scheduled to happen in like May 2024. And typically when you look at Bitcoin price action mapped over the halving cycle, the price tends to have that blow off top about 18 months after the halving. I think the last time we looked at this, the number was like 510 days. So it might be a little bit right around that 18-month mark. So, yeah, I think by, let's say, November 2025, we could see a Bitcoin price that's just going to melt faces.

6:40And, you know, in the banking crisis, I think we've authorized to date like$2 trillion. so far. We don't know how much further this banking contagion will continue. But if that continues, we get more money printing and we've got this Bitcoin halving cycle that tends to, which for the audience that may not know, you're cutting the supply issuance in half that puts upward pressure on the price essentially. The confluence of these things could lead to a very healthy and perhaps even scarily volatile Bitcoin market to the upside overall, but obviously to the downside along the way. So crazy times we're living in.

7:29Money is, as far as I can tell, we're going into early stage currency failure. And I think you need to own assets that cannot be counterfeited and have very low to no counterparty risk. and to that end, Bitcoin is the best asset in the world that I know of. Hey, everyone, we're going to take a quick pause and hear a word from our partners. We'll be right back.

7:56Yeah, you've just made the case in terms of what you believe very strongly there and very powerfully, I think. You know, it's interesting when you talk about the current banking system, I'm of kind of two minds. Everything that you've said is completely true in terms of specifically two points. It's number one, the fact that when you deposit money in the bank, it is a liability of the bank. You do not technically, you are not technically the owner of that money any longer. The bank is. And that is just a fact in terms of the way the banking system works. You become a creditor of the bank in the case of an insolvency.

8:30And the second point that you made, the idea of the FDIC coverage ratio being incredibly low relative to the amount of dollars that are in the system. Now, obviously, that's used as kind of a basis for marginal insurance, and the idea is that it doesn't all collapse at once. On the flip side, here in the United States, historically, over the last, let's call it 50 years, over most of our lifetimes, over most of the lifetimes of the people who are listening to this show, the system has actually worked fairly well for most depositors, at least depositors above a certain threshold. middle class people in the United States have had traditionally access to their money the last round of major banking crises.

9:09The legal component of who actually owns the assets notwithstanding, going back to the 1920s and 1930s. So it is interesting to see when you have one of these crises bubble up to see the reaction that people have and to see what's happening. But again, to your point, gold is rallying also. We're looking at prices on an ounce of gold right now at or near$2 ,000, I think$1 ,995 last time I looked earlier this morning. So these are all issues that are very much on the forefront, very much in people's minds. You've laid out and articulated the case, I think, very well, very clearly there in terms of your view of the value proposition of Bitcoin.

9:49I'm curious if you could talk a little bit about what you see as the state of play in the Bitcoin ecosystem. And specifically, looking forward, Robert, how do you see Bitcoin becoming a more central part of the lives of most Americans. I think for a lot of people out there, the actual sort of core functionality of Bitcoin as a store of value is something that's an interesting proposition. It's a compelling proposition indeed to many. But in terms of bringing new people into the ecosystem, do you see other layers developing around that, whether it's layer twos or also just the wallet system, the ability for people to access it who don't have strong tech backgrounds?

10:27Talk a little bit about that and your view of the future of Bitcoin. Yeah, I think the whole thing happens. It's like what Ernest Hemingway responded when he was asked how you go bankrupt, right? It's gradually then suddenly. And this tends to be the shape of most hyperinflations historically is that, yeah, sure, things work well for a long, long, long period of time. But there eventually comes some psychological inflection point where people realize that the inflation will never stop, right? The currency printing will never stop. And when this like generalized notion gets out, gets into the marketplace, well, people naturally start to sell those units of currency or dollars for things that cannot be counterfeited.

11:18So it's very much as much of a monetary phenomenon as it is a psychological phenomenon. Because once people even have the expectation of ongoing inflation, then there's this incentive or inducement to sell the currency for anything else. And that actually brings about the very hyperinflation that was anticipated. So as far as what gets Bitcoin, I guess you could say, what is that old saying, right? There's weeks where nothing happens and then weeks where decades happen, something like that. Well, we've seen, like you saw what happened with SVB, right? Like it's all sunny skies the week prior. And then all of a sudden, this bank collapses out of the blue.

12:00I don't think many people really saw it coming. So it's just kind of a testament to you cannot have faith in something in the financial system just because it's operated well for 100 years or 200 years. It's kind of a false confidence, specifically in a fractional reserve or a fiat paradigm, because these things happen very suddenly. And I think if you've been following a lot of the financial media that's out there, there is writing on the wall, maybe not in mainstream financial media, but I'm sure you guys talk about it a lot on this show. I know we talk about it a lot on our show. I'm not surprised when these things happen.

12:40There's no surprise when you see another fractional reserve bank get out over their skis and then collapse. It's the natural order of fractional reserve banking. And again, we mentioned that you're in a creditor-debtor relationship with the bank. You don't actually own the dollars in the bank. But it's even more insidious than that because you can't – one might believe based on that assertion that you could just go to the bank, take out your cash, stick it under your mattress. and then problem solved. But that doesn't work either, right? Because you still, because we're talking about debt-based money, it's like not, it's an oxymoron in terms.

13:21It's self-contradictory. If money is intended to be the final extinguisher of debt, the fact that we have a debt-based money called fiat currency gives you this asset that you cannot escape the counterparty risk. You cannot escape the counterparty risk of the central bank debasing it more. So even the cash into your mattress is not insulated from the counterparty risk of currency debasement. So, you know, I think it's a good way to frame up inflation, too. It's like just a manifestation of counterparty risk. And so if you're in something like physical gold or Bitcoin, you're just you're removing all exposure to counterparty risk and you're not going to get debased arbitrarily.

14:03um so for most people you know i guess this is kind of the human way is we we we like to think things that have worked will continue to work and we tend to not really move until we've kind of painted ourself into a corner right we just right there's this inertia right if you've got you've used the same wealth advisor for 25 years You've been with J.P. Morgan for 20 years. It's your trusted bank. You think within the confines of your own little lifetime as if that's going to apply to the broader historical context. And it just simply doesn't. And so, unfortunately, I hope that the educational efforts that you guys are doing and we're doing, I hope this helps people learn a little bit more about the nature of money and the nature of fiat and fractional reserve banking and how fragile it really is.

14:59but for the vast majority of people i think they ultimately have to experience the pain right like we're seeing the pain uh being inflicted in lebanon right now right like people are going through um i what they had a devaluation of what 90 on their currency something like that like very brutal stuff um and you see you see the consequences manifest in these videos like people are killing themselves and there's there's just craziness right when the money breaks down society sort of breaks down along with it so i think unfortunately people are going to have to go through that pain here in the west we've barely started to touch it with a little bit of post covid inflation i think things will get much worse over the next 15 20 years um you also have things like the BRICS countries experimenting with their own currency block.

15:55That's going to reduce reservation demand on the dollar. That means we'll have to print currency even more rapidly to keep engaging in deficit spending. That's going to create more domestic inflation. So there's more pain coming. And I think that's really the motivational force that actually gets people to move. Right. And the other piece is just counter, like, people need consistency of experience. So if you're going to move from the fiat paradigm into the Bitcoin paradigm, I think most people need a custodian, right?

16:33You interface with them in a similar way that you're used to. So, you know, for instance, there's Nidig Bank in New York, right? They're basically a bank, but they also provide Bitcoin services. So that might be one of those seamless kind of experiences that bridge people across, especially older generations. Right. Let's talk about that a little bit more. But first, let me just say, I think you articulate this view, the Bitcoin review, extremely eloquently, Robert. Whenever you have me on the show, I'm always impressed by your ability to make those points so clearly. You know, it's interesting.

17:06I should point out, of course, that there is another point of view of this. I, for example, am less negative on fractional reserve banking than you are, less negative on fiat than you are. But I see the rising case for Bitcoin as a hedge against fiat currency debasement, against central bank debasement. It's very clear, as you point out, the general trend. If you look at the chart, by the way, if you're feeling nerdy today, type in WALCL into your browser and take a look at the Fed balance sheet position, the way it's gone over the last 20 years. There is a real case to be made on the other side, the case that you're making for what's happening in terms of the degree to which the monetary supply has been expanded and the degree to which the central bank balance sheet has just expanded dramatically to some$9 trillion here since the global financial crisis.

17:58So this is an incredibly important conversation, I think, for people to have. And by the way, the same hedge capacity holds true for gold as well. That's why you've seen those rise in prices. But this new technology, Bitcoin specifically, is just incredibly exciting to a lot of people for a lot of different reasons, many of which you just mentioned there, Robert. But I want to talk a little bit about something that you are getting to, which is the idea of the roadmap for Bitcoin and the Bitcoin ecosystem moving forward. You know, one of the challenges I think even people who are very passionate about Bitcoin would say is it is a very complex ecosystem to get into.

18:31If you're an individual who doesn't have a background in computer science and you're listening to this and you think, boy, Robert Breedlove makes an interesting point, I think I want to get off zero. I think I want to put 1 % or even half a percent of my assets in Bitcoin. It's still very difficult for those investors to do so. Talk a little bit about that experience for the user, how you see that evolving over the next one, three, five, even 10 years into the future as a passionate Bitcoiner. How do you see the Bitcoin ecosystem becoming more open to people who don't have backgrounds in computer science and who haven't been in this space for as many years, certainly, as you have, Robert?

19:10Yeah, I guess first to speak to fiat currency and fractional reserve banking. I mean, I would challenge you, Ash, and anyone else listening to this to go out and read or listen to the book, The Creature from Jekyll Island. it actually will answer a lot of the questions on that were that were sort of dancing around here which is what is the it gives the inception story of the federal reserve in the united states it talks about the nature of central banking itself it actually answers the question what is money goes into kind of a an ontological view on money how it emerges what it is how we got from gold to central banking, let's say.

19:50And I would challenge anyone to read that book and not come away with their worldview shifted pretty significantly. The punchline here is that counterfeiting currency is only useful for one thing. And it's useful for moving wealth or the ability to acquire wealth from the hands of one group, which are savers in the currency, into the hands of another group, which are the producers of the currency or central bank shareholders or insiders profiting through seniorage and all of these other things. So the fact that you have systemic theft embedded into the primary economic medium of exchange is a real problem.

20:35And this is what we discuss on the show at length, right, is how much the corruption of money actually leads to the corruption of society, the corruption of individual incentives, the corruption of relationships, et cetera, et cetera. So I don't like to, it's very easy to dismiss fiat currency or central banking because it's kind of an esoteric, boring domain. But I think if you do the work to actually look beneath the surface that you'll see there's a real immorality to it. It's a very unethical institution. It's purposefully opaque and confusing. They use jargon to mystify these operations as if they're some type of priest that only they know how to operate the monetary system.

21:18And then us peons should just follow their lead. But it's not that at all, right? Money is actually much simpler than it's represented to be. Granted, there is this large interdisciplinary effort necessary to understand money and Bitcoin, right? You have to go into the domain of history and politics and economics and incentives and computer science and game theory, et cetera, et cetera. There's a big lift. But the conclusions you will reach are much more intuitive and much more sensical than the bullshit propaganda you see flowing out of the central bank. So I feel very strongly about that. that and I, you know, if people want truth, right, you want to orient your life to what is true in the world, then I suggest you do that deep dive.

22:05Like, do you use money? Do you care about making more money? Well, then don't you think you should understand the nature of money, where it comes from and how it operates? It seems like it's something that's universally applicable no matter what you do. Hey, everyone, we're gonna take another quick break and hear a word from our partners. We'll be right back to the Real Vision crypto daily briefing.

22:28You know, Robert, you make some interesting points there. Obviously, these are contentious issues. There are people who disagree very strongly. But I think you've made your case very clearly. Let's switch gears here and talk a little bit about what you see happening in Bitcoin in terms of the adoption use case going forward. Is this an ecosystem that you see in the future becoming simpler to enter? Are there things that are going to happen in terms of user interface, usual experience being built on top of Bitcoin. Do you see L2s playing a more important role if we scroll forward, say, one, three, five, 10 years?

23:01Yeah. So again, we mentioned the counterparties earlier. I think as Bitcoin's market cap naturally grows in tandem with currency debasement, that there's more and more incentive for new players to enter the game or existing legacy financial players to start offering Bitcoin financial services. How do you think that would work, Robert? What would that look like? You mean how would they offer financial services? Yeah, what might it look like in terms of the way legacy financial institutions might become more involved in the Bitcoin ecosystem? Well, I think specifically for people who have had challenges getting into it because they find it too complicated.

23:40Do you see that being something that might ease some of those barriers and frictions? Well, look, at the end of the day, legacy financial players are going to do whatever they can to make money. And if Bitcoin continues to rise, then I think you'll eventually just see an option in your online banking or your brokerage account to just buy Bitcoin. now granted that that doesn't get you to the full realization of its value prop because that's still going to be counterparty custody bitcoin not self-custody bitcoin but there's this kind of strange thing that where people's money goes their mind tends to follow so i think once people start to acquire this thing is again even as just um a risk position in their portfolio or just a hedge or even just a speculative position, right?

24:33Like you said, a half percent or 1 % of your portfolio on Bitcoin. I think it leads people to start to think about it more. And when you juxtapose this like collapsing fiat paradigm that we're seeing all over the world, and it's only going to get worse, and you're going to juxtapose that against the rising market cap of Bitcoin. And as we mentioned earlier, the speed and rapidity with which ideas move in the world today. I call it the liquidity of ideas. It's never been higher than in the digital age. I just don't think it's as easy to repress the truth. So I see more and more of these counterparties coming online.

25:16This also encourages layer two and higher order protocol development on Bitcoin. Lightning is not fully mature yet, but it's highly usable. I already use it. extensively. Robert, give us a sense of how you use it, what do you do with it, and how is it helpful? Well, you basically load a wallet with sats, and once you have it in a Lightning wallet, it is the simplest transaction medium you can imagine. You hit send, you scan a QR code, and you send, or someone copies and pastes you an alphanumeric string that is an invoice number, It's a Lightning invoice, and you paste that into the wallet, and you hit send.

25:57So it is, you know, I don't know if you've tried to send a wire lately, but things seem to get continually more frictional to try and send a wire. There's more questions. There's waiting periods. There's forms, et cetera, et cetera, fees. so I think the simplicity and the ease of sending money on the Bitcoin network specifically with Lightning is just going to naturally outcompete these legacy modes of moving money the only thing we're missing is we just haven't hit that inflection point yet people still view the dollar as money and they might for some time but there is inevitably going to come to point as there has with every fiat currency across all of human history that people will see, right?

26:42This thing is going, it's going down. The ship is sinking. And so the question really becomes what lifeboats do people shuffle themselves into at that time? And the technology is already there. Like if you want to be, and you can live on a Bitcoin standard today. You don't even need to cash out into fiat in most cases. And if you do need to cash out into fiat, there's a lot of peer-to-peer exchanges that you can do that in a non-centralized way. right i don't want to jump in i don't go from bitcoin to fiat often but people do things like sell their bitcoin for gift cards like there's all these different things you can do so i think that's really the path it's going to go is there's just going to be more pain more incentive to move into bitcoin and therefore more vendors and protocol development in and around bitcoin to support that migration we've got some viewer questions uh from our audience that I want to take.

27:35But I just want to point out this and ask you this question. Obviously, there is an anchor in terms of the value of the dollar. If you're an American citizen, you have to remit your federal taxes and dollars and not in Bitcoin. So there is constantly this need to exchange US dollars just to pay taxes here in the United States if you're an American. And for example, if you're in the UK, it's in British pounds. And if you're in the euro, it's in euro. So there is something of an anchor for fiat currency that I think sometimes gets It's lost in the Bitcoin review. Sure, but if you are paying taxes, presumably you're running a profitable business.