MI Rewind: Bitcoin, Cryptocurrencies, and Blockchain Part 2 w/ Preston Pysh

25:55It shows you the distribution plot and all that fun stuff. It shows you a histogram and all sorts of fun stuff. The other thing that I would tell you to look at is really pay close attention to Plan B's work on the stock to flow to understand what the price is at. More importantly, understand where you're at in the four-year cycle. So my personal opinion right now, you're probably at one of the most opportune times to enter a Bitcoin position because in the coming two years, I expect to have extremely good price action in the coming two years. If you would have asked me that two years ago, in fact, pull up my Twitter feed from December of 2017, and you'll see me saying, owning Bitcoin right now is extremely dangerous and probably not a good idea.

26:39I had about a whole month of tweets when the price was 18 to 20 ,000. Go to December 2017 and look at some of my comments, and you will see that back Back then, I was saying this was very risky to be buying it at that point in time because I understood where it was at in the four-year cycle. So understand where you're at in the four-year cycle before you buy it because there's going to be people that are listening to this conversation two years from now. The price will be$100 ,000 or more, and they'll be buying it. And they're probably going to be assuming they're going to maybe be on a very bumpy road ahead if the cycle continues to perform the way that it has in the past.

27:14I caution people listening two years from now, because if the bond market explodes, which is a potential based on the central banking actions, you might see Bitcoin fully become a global currency at that point. It could go to a million dollars for all we know. So it's really hard to make comments about that far in the future based on where we're at and everything that's happening. What role does non-professional or unsophisticated investors play in the price of Bitcoin in terms of their rationality. So when you talked about the run up to 18 to 20 ,000, I had people in my life that are friends, family, acquaintances that knew I was into finance, investing, things like that.

27:57And they were all texting me, telling me that they were running out buying Bitcoin. And so what role does just people that don't understand it to the degree that you do, how do they either help or hurt the way that you see your models working? Robert Leonard I would argue that when you look at the stock, the flow, and from a technical standpoint, price should go to 100 ,000, where they come into play is on the emotional side. So they're going to blow the price way through 100 ,000 on the way up. But they're also the same ones that are going to blow it down through 100 ,000 after it goes through its correction.

28:31And then by the end of the four-year cycle, it's going to come back to its appropriate price of 100 ,000. So if I was going to spitball it, But yeah, I'd tell you December of 2021-ish, somewhere around that timeframe, plus or minus 60 to 90 days is probably where you're going to see that peak of speculators that don't know much, that are chasing the price action, are going to drive the price to probably$200 ,000 to$250 ,000 at that point by December 2021. Those same people that buy at those extreme prices are the same ones that unravel it coming back down and then back down through$100 ,000. And then that's when you really want to buy it because the price during that cycle is, call it 100 ,000 based on stock to flow.

29:13So they just basically make it go more extreme on both sides, on the buying and on the selling. That's all they do. Robert Leonard So how about government regulation? This is a component that we haven't even mentioned yet. We've assumed that it can just continue to operate without government intervention. But what if the government does try to step in? Robert Leonard So we've already seen this happen. Back in 2017, the Chinese government came out and they said, you can own Bitcoin. You cannot buy it on an exchange. They banned the exchanges. And the impact in the short term was the price went down, but the impact in the long term was nothing.

29:52That's the tricky part for a government is in order for it to get shut down, every single government has to decide to shut it down. Every single government. I would argue you have a very strong incentive for countries that are not from the US, which is everybody but us, to have something other than dollar dominance. Because think about it, dollar dominance has provided the US an extremely powerful position in the world. And it's been that way since Bretton Woods. Let me say Germany. Right now, Germany is building so much legal framework around the protection of Bitcoin, because I think they understand where this is all going.

30:34And I think they understand the value of trying to attract as much of that business into their country to attract as much Bitcoin into their country when it becomes a new global currency. And they have one of the best legal frameworks on the planet right now to promote Bitcoin businesses into their country. I think that's going to set a precedence for many other countries to do something very similar. Robert Leonard So the fact that you already have a country like Germany, a country the size of Germany doing something like that, if you go ahead and ban it, you can do that. But I think what you're going to do is you're just going to lose your place in line.

31:10Now you're at the back of the line and long-term that's going to be a huge disadvantage for the countries that do it. I would argue China is a perfect example of something that was done in haste and done in fear. It's going to be a huge consequence to them long-term if they're not doing something behind the scenes to put as many of these things into their treasury as possible. Robert Leonard So how would a ban work? Say the US government decides to ban Bitcoin. Can people in the US still obtain it some way, or how would that work? Robert Leonard Absolutely, they can. They can VPN out through encryption.

31:47They can VPN outside of the country. Now, you have to have an exchange in some other country, which, boy, there's going to be a black market for that real fast. You could VPN to that exchange. You could collect the coins, and then you could run your own full node up through the Blockstream satellite. There's satellites in space right now that are broadcasting the blockchain. Whether people believe that, understand that, you can take a satellite to your house, you can connect to the Blockstream satellite that's orbiting earth, you can run your own full node, you can conduct transactions, and you don't have to go through a internet service provider hub and they'd have no idea what your IP address is or anything.

32:22Trey Lockerbie, MD, PhD So it sounds like it'd be very difficult to even ban on a wide scale, even if they wanted to. Robert Leonard, MD, PhD Absolutely. It's the same reason you can't ban BitTorrent to this day. It still exists. I mean, Bram Cohen, who created BitTorrent, he is a hardcore Bitcoiner. Trey Lockerbie, MD, PhD So let's talk about some of the misconceptions about Bitcoin. What is a misconception surrounding Bitcoin or just cryptocurrencies in general that you think a lot of people have. And why is that? Robert Leonard I really think a lot of people have a misconception as to what it's trying to solve, first of all.

32:58I think a lot of people are thinking that it's for transactional basis. I mean, you have a guy, Roger Ver, who I can't even tell you how much money he lost. And that was one of the forks that we were talking about earlier with Bitcoin Cash. I mean, the guy was hell bent on the idea that this is for transactions of buying coffee. And in my humble opinion, he made the most fatal mistake of all, which was trying to make this something that it was not trying to solve whatsoever. This is trying to solve a global peg to global money because there's an issue where fiat is run amok and you're driving interest rates to nothing and you're about to have an explosion in the bond market.

33:35Let's take a quick break and hear from today's sponsors. Hey, it's Sean O'Malley, just popping in with a quick message. If you like this podcast, well, I've got great news for you. We've got a handful of other shows for you to explore, from learning about Bitcoin to embracing a richer, wiser, happier lifestyle. Just go into your podcast app and type in We Study Billionaires to find our collection of shows. We Study Billionaires is our flagship podcast, and we've made a name for ourselves over the years by interviewing the best investors in the world, including Ray Dalio, Howard Marks, Joel Greenblatt, and many, many more.

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36:53That's theinvestorspodcast.com slash tip-finance. All right, back to the show. Do you think that that misconception exists because it's much easier for people to, the general population, for them to understand and wrap their head around it being a transactional currency rather than it being a peg? I mean, think about it. Mark Cuban, billionaire, Mavs owner. He's as smart as they come when it comes to business. He's making that same mistake. He's making the Roger Ver argument. It's crazy to me. I mean, when I was having the back and forth with him, I'm literally laughing out loud like, this dude does not get it.

37:33This has been blowing my mind that somebody who made all this money in tech doesn't get this. So I mean, how is your mom and dad going to get it? I mean, come on, give me a break. Robert Leonard I'd say it's pretty clear that you're bullish on Bitcoin, but what would someone on the other side of the argument say? What are the bears saying about Bitcoin? What are some of the major risks or cons to just cryptocurrencies in general, and maybe more specifically Bitcoin? Robert Leonard I think a lot of people are going to make the argument about the government banning it. They're always going to go back to that.

38:07You're going to have people making arguments as to there's a million of the coins. How do you know Bitcoin's going to win? There's a lot of arguments that just keep coming up and keep coming up. And it's funny because I just look at it and be like, oh my God, we used to hash that out back in 2015 a million times. The fact that you're bringing this up in 2020 is just kind of funny in a way. But those are some of the big ones that I can think of just off the top of my head. Robert Leonard Admittedly, those are the two things that I think of initially from someone who doesn't know a lot about the technology or Bitcoin in general, and I'm not pro or con for it.

38:43I don't know enough to have an educated opinion on it, but just from my knowledge, those are the two things that I think about a lot and things that I've heard just from people who are skeptical about it as well. The one other one that I think is huge is the Cuban argument, which is, well, no one's using it. It's going to be slower than me just pulling a dollar out of my pocket and paying or swiping my credit card. Why doesn't that work? You're going to hear that argument all day as well. Yeah. And I think it comes back to just a complexity versus simplicity type dynamic where it's too complex to understand why that's not necessarily the case.

39:16And it's simpler to just say that that's why it won't work. But this is what people have to think about is back when you had Bretton Woods, did you see people going to stores and paying with gold? Did you see any of that stuff? No, you didn't. But that was the root of the entire underlying layer one of the entire financial system globally was the balance of payments of the amount of gold that central banks had in their coffers. So if we had a deficit with Germany or vice versa, and it needed to be adjudicated in gold, well, it took place in gold. Those balance of payments occurred at that central banking fundamental layer level.

39:58And all that's happening right now is that, but it's happening digitally now. Robert Leonard So how does this entire conversation relate back to millennials and their investing? What actionable advice do you have for a new investor who's just getting started on their investing journey that's listening to the show today? Should they be allocating a portion of their portfolio to cryptocurrencies or are they better off just sticking with the tried and true assets like ETFs and stocks? I think you're absolutely nuts if you don't have some exposure to this, my personal opinion. I would highly encourage millennials to get smart on the four year cycle.

40:32Understand where you're at in that four-year cycle for Bitcoin and be very hesitant to add to your position when you're at the top of that cycle, which I'm saying is probably somewhere around December of 2021 for the next cycle. Be careful adding to your position during those times. And when you're in the bottom or you're in a very advantageous part of the cycle, you should probably have a much larger percentage inside your portfolio. So right now, I think is a very advantageous time to be a buyer. And this is where I would probably take a larger percentage on your portfolio. So it's still an advantageous time, even though that it's up 43 % since January 1st of 2020.

41:12And we're only at, what, February 13th today as we're recording this? Yeah, I think so. My expectation for the end of the year, end of year closeout is a price of$20 ,000. Why I'm saying that number has a lot of reasons behind it. I'm not just pulling a number out of and error. That's my metric. In fact, I posted that on Twitter probably three or four days ago as to what I think is a buy line and where I expect it to end by the end of the year. But my estimated price by the end of this year, 2020, is going to be around$20 ,000, which means you could go 100 % gain from here. Robert Leonard And I'm no technical analysis trader by any means, but with the last peak ending around$20 ,000, Is there a resistance at that 20 ,000 number if we do get there again?

41:58There absolutely is. And if and when, in my opinion, it penetrates the 20 ,000, that's when you start getting your just crazy moves to the upside is when it penetrates the previous all-time high. Yeah. I suspect that you're going to go from 20 ,000 to 200 ,000 in a year. So after you would hit the 20 ,000, call it next December, I think by the following December, you're going to have literally gone from 20 ,000 to 200 ,000. Preston Pysh, MD And so one of the things I wanted to talk about as well is how this is portrayed on social media. So let's take Instagram, for example. I hear this conversation that you and I are having.

42:37This all makes sense. It makes me bullish on Bitcoin. I came into this conversation not knowing much, but now through what we've learned and what I've learned through you, I feel like it's a much more legitimate asset that I can be bullish on. But then I think there's a lot of people that are going to see on Instagram, they're going to get fraud messages all the time. I get hundreds of them probably a day saying that they can make you rich with Bitcoin overnight. So how is that going to play into Bitcoin and the legitimacy of it? So you're endowed with senses, right? That are innate to your protection.

43:10That's how you're wired. That's your genetic DNA that wires that into your brain. And then your past experiences, you've been conditioned to be aware of scams. And when a person hears me say, oh, I think it's going to be 20 ,000 by December, and then it's going to be 200 ,000 the year after that, their senses are saying that is a total flipping scam, 100%. And that means you have good senses. So what you have to do is you have to say, all right, well, how are they coming to that opinion? What's behind that opinion? What's driving it. And you have to ask yourself a lot of hard questions. And you have to do an extreme amount of work to understand what's behind that, whether it's true or not.

43:52I would argue this is the strongest reason why Bitcoin is going to be successful is because so many people do not believe this is possible and they don't invest. Dude, I can't even tell you how many hours I've invested into trying to understand this. I can't even put a number to it. But that's because I was extremely skeptical. But I think what drove me to research it is I understood the fundamental global problem that was happening. And I was searching for how in the world is this going to be resolved? Because right now it appears like there's no solution to this. And lo and behold, I started reading up on Bitcoin and I said, oh my God, I think this could potentially be the solution.

44:29Then I dug more and I dug more and I dug more. So I kind of came to it from a completely different vantage point of your typical person who comes to it as total speculation to make a quick buck. That's how a lot of people come to this. And that's why so many people are skeptical of it. You know when you're skeptical of something is when you don't understand it. That's when you're skeptical of it because you're saying, that's too good to be true. That person looks like a scammer. They sound like a scammer and they're promising things that there's no way is possible. Scam level of analysis complete and they're done.

45:01And so I would challenge the heck out of everybody to question everything I just said and to treat me as if I am a scammer because that's how you're going to arrive at the truth. And if you don't arrive at the truth as to how this thing works, you will not have the conviction to hold it through wild swings and wild rides. I mean, that's just a fact from stock investing is if you don't actually have conviction behind your trade, you will not hold it and you will sell when it goes down. So if a person goes out there and buys Bitcoin, you had said, I don't know if we said this before or during the discussion, but you had said that you purchased it and then you turned around and sold it.

45:37Well, why did you do that? Well, because you knew you didn't understand it. And everybody else who's listening to this is going to do the exact same thing. If they buy it, it goes down 20 % in a day, which can happen. They'll sell the position because inherently at their core level, they have no idea what's actually happening. So when you see these people on Instagram and they're saying, I'm going to make you rich and just buy this token and this crypto coin. Well, you're chasing a narrative that you heard where your neighbor made$1 ,000 or$10 ,000 or whatever, and you're trying to replicate it based on speculation and hope opposed to truth and understanding.

46:19So I don't know if I answered your question well, but I would tell you being skeptical is a good thing and doing your homework as to how it works is insanely important to not be shaken out of your position if you do decide to take a position. And following the right resource, don't go follow some yayhoo who's a nobody who has no experience in financial markets, doesn't even know what a bond is or know what a stock is. if that person's telling you what to buy, well, I guess I'm going to say it bluntly. You're being dumb, right? You're being dumb. So do your research on who the person is. Look at what authority they have and how they got that authority and technically why they're making the arguments that they're making.

47:04Robert Leonard I'm wondering if a similar tactic that I like to use in the stock market can work with Bitcoin, specifically for people listening to the show who haven't studied it like I haven't. So when there's a stock, now that there's no commissions on trading, I do this even more. But if there's a company on my radar and I'm interested in it, it's hard for me to find the time to actually analyze that company and determine if I want to buy a position. So now I buy one share or two shares just to get it in my portfolio. Now I have skin in the game. And now just something psychologically tells you that you need to go make the time and research that company because you have money on the line.

47:39And it really works. It really does. And so I wonder if somebody should, listening to the show today that's interested but skeptical, maybe buy, it's$10 ,000, so maybe you buy a tenth of a coin or even a 5 % of a coin and just kind of get some skin in the game so that you are then invested in it and then you go and learn about it more. And then, so you feel comfortable, either sell your position because you decide you don't believe in the thesis or you believe in it after you studied it and you buy more. I think that's a great way to do it. Robert Leonard If someone listening to the show today is completely new to cryptocurrencies, Bitcoin, and just blockchain in general, like I am, but they want to learn more about these topics, what resources would you recommend they check out?

48:20Any specific books for a new investor? I know we've mentioned a bunch of different resources so far, and those will definitely go in the show notes, but any specific books or other resources? Robert Leonard So I think it's really important who you follow and who you pay attention to. So you want to pay attention to the engineers that have actually written the code for this stuff and the people that have participated in this. So people like Adam Back is somebody you want to follow on Twitter. Somebody like Nick Zabo is somebody you want to follow on Twitter. There's three podcasts that I would recommend.

48:50One is Stefan Levera. He has a podcast. We'll have it in the show notes. You have another podcast called Noted. You have another one by Trace Mayer that I would highly recommend. I think those three people are total forces in this field for podcasts to listen to. Robert Leonard The first book that I read back in 2015 was called The Age of Cryptocurrency. Robert Leonard I thought that was an extremely good book. It was written by some Wall Street Journal authors. And there's a couple other books that I'd recommend. One is called The Bitcoin Standard. This is written by Saif Adina Moose. That's an incredible, incredible book that I think is vital for people to read.

49:29There's another book called The Book of Satoshi. And what it does is it takes all the emails, it takes everything that Satoshi ever wrote, and they put it into a book. I would highly recommend that you check that out. There is a website called the Nakamoto Institute that's run by Michael Goldstein and Pierre Richard. That's an incredible resource. I would highly encourage people to read the Bitcoin White Paper, which is Satoshi's very first document that he published that talks about Bitcoin in general. I took a course from Yale University that is completely free. I think it's on Coursera that was, oh my God, 65 to 70 hours long that gets into the details of how Bitcoin from a technical standpoint works.

50:14I would highly recommend that. There's a guy named Jamison Loop that has a just incredible list of resources that will be way better than everything that I just listed for you that goes into all these details of things. He is an original attributor to the source code as far as updates and things like that to the protocol. So huge source that you would want to follow on Twitter as well. All of those things, we will get you links in the show notes too, and that will get you moving in the right direction. But pay very close attention to the source of people that you follow in this industry, because there's so many coins out there and so many scammers that are trying to leverage quote-unquote blockchain and all these buzzwords.

50:57But follow the right people, read the right resources, and I think you'll be in a good spot. Preston Pysh As Preston mentioned, I'll definitely put all of the different resources we've talked about throughout the show in the show notes so you guys can go check it out in case you missed any, if you couldn't write it down. so you can definitely go to the show notes and check it out. They will all be there. Preston, thanks so much for coming on the show today and talking all about cryptocurrencies and Bitcoin with me and the audience. I know I learned a ton from our conversation, and so I'm sure the audience will too.

51:27Preston Pysh Hey man, this was a blast. I had so much fun, I lost my voice. Preston Pysh So that's it, guys. That's the end of the two-part series about Bitcoin, blockchain, and other cryptocurrencies. I hope you all enjoyed the conversation as much as I did. I had to listen to it a few times, but I learned a ton and I can't wait to dive into all of the different resources that Preston mentioned throughout the show. You can find all of those resources linked below in the show notes of your favorite podcast player or at theinvestorspodcast.com and clicking on the Millennial Investing Show. If you know anyone that wants to learn more about Bitcoin, blockchain, or cryptocurrencies, please share this completely free two-part series with them.

52:08And I'd love to hear what you thought about this two-part structure. Connect with me on Instagram with my username Robert at T-I-P, which is spelled out as Robert A-T-T-I-P. And let me know what you thought. Did you like how the episodes were split in two? Would you have preferred one much longer episode? Or do you like the shorter content? Do you even like learning about the topics Preston and I talked about? I truly do love hearing your feedback and connecting with you guys. I respond to every single comment and DM that I get. So be sure to reach out. That's all I had for this week's episode of Millennial Investing.

52:47I'll see you again next week. Thank you for listening to TIP. To access our show notes, courses, or forums, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decisions, consult a professional. This show is copyrighted by the Investors Podcast Network. Written permissions must be granted before syndication or rebroadcasting.