Michael Saylor SPEAKS on Bitcoin Ethereum Cardano & Altcoin Market

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if you were to say well do i want to invest in a  technology solana and cardano and ether competing   with each other in a technology realm but in  essence they're private equities with teams and   it's like private venture capital i think that the  industry would benefit if the sec and the cftc put   out clear guidance as to how you qualify as a  digital commodity most of them are non-compliant   right now but uber and airbnb were non-compliant  too right like airbnb is like illegal in half the   places they operate and i think what's important  is to give people a strategy to save their money   when i was growing up my family wasn't wealthy  what we had was a savings account and the savings   account yielded six percent interest and  now savings account don't yield any interest   and so if you're taking your paycheck and your  savings every single month and you're saving them   in currency you're probably going to see your life  savings dwindle away so i'm an advocate of bitcoin   uh primarily because people need a technology to  save their life's work back everybody to altcoin   daily you are going to love our current interview  guest the ceo and founder of microstrategy the new   bitcoin jesus this man is a blue chip in the space  michael saylor how are you doing today i'm awesome   thank you thanks for having me thank you so much  for coming on let's let's jump right into it   half of these questions are sourced from our  audience uh these are things people want to   know uh but first question let's just start  off big picture michael i want to be sold on   bitcoin give us your best pitch as to why someone  with no bitcoin should buy some bitcoin today i think we're living in a  very uncertain world right now   and there's a lot of political uncertainty  with regard to politics trade policy   labor policy manufacturing policy so if you're  if you're considering uh investing in a company   the question you have to struggle with is  will the company be impacted by tariffs or   trade policy or tax policy or labor policy  or manufacturing policy or a war or a famine   and so that's that's the first uncertainty  the second uncertainty we have today is   monetary uncertainty we see a lot of a lot  of countries with their currencies collapsing in argentina they just implemented some capital  controls limiting the amount of u.s dollars   that companies are allowed to hold in zimbabwe  their dollar rising their currency is literally   collapsed to nothing and so if you're if you're  holding a currency or you're holding a company   or a bond that generates cash flows and anything  other than the dollar you have a massive amount of   uncertainty and risk if we look at the last uh 12  months the euro has weakened against the dollar   the pound is weakened against the dollar the  yen has weakened against the dollar the turkish   lure is weakened against the dollar in fact just  about every currency in the world is collapsing   against the dollar anywhere from 10 to 20 to  30 percent and in turkey it's about 90 percent   in 12 months so there's a lot of monetary  uncertainty to go along with that political   and a commercial uncertainty we call the  two things together stagflation you've got   a stagnating economy you've got an inflating money  supply which means that your currencies are buying   less so if you're any individual and you're  looking out over the course of a decade   and you have any capital that you wish to preserve  or you're generating cash flow from your job   the question is what do you do to insulate  yourself from stagflation and if you rifle   through the list of options you can invest  in companies but which company if you invest   there's no company in zimbabwe that'll save you  so i guess if you x out all the international   companies and you invest in uh domestic  companies in the country where you live   the question then is uh do you actually  know enough to handicap their performance   98 of the companies are actually not monopolies  which means that they're getting eaten   by google apple amazon facebook so if you're  buying a non-monopoly company it's risky for all   sorts of reasons if the company has employees it's  risky because of employment taxes and labor policy   and unionization if the company manufactures  things and moves them across borders it's risky   because you end up with tariff barriers it may  be if you manufacture great stuff in china you   can't bring it to the u.s maybe it gets banned  so so if you're trying to save your capital by   investing in companies you take on all sorts of  uh corporate risk if you're trying to preserve   your capital by buying bonds bonds are currency  derivatives the value based on cash flows so   if the dollar supply increases by 15 percent a  year you have to discount the bond cash flows   by 15 a year that means that every five  years or so they're worth half as much   if you're holding the cash itself that's obviously  a currency derivative it's collapsing in value   i think uh last i checked real estate in florida  has escalated and priced 500 x over 90 years 500   in a hundred years it'll escalate a thousand x  which means that you your currency will lose 99.9   of its value against property scarce desirable  property over 100 years uh that's assuming   about a seven percent monetary inflation rate it  looks like uh the us is running 15 to 20 percent   monetary inflation rate you can keep track of the  strength of every other currency so if the great   british pound lost 13 percent against the dollar  then you're up to 33 percent uh inflation rate   and of course with turkish leary or you're  much much harder much higher inflation rate so   a a person's got to figure out how  they're going to store their life savings   and if i'm not going to hold it in a in a currency  and i even if i hold it to currency not only do i   have the inflation risk i have the counter party  risk the banks will actually freeze your funds   if you live outside the u.s banks are freezing  people's funds everywhere in the world right now   in the us perhaps your funds won't be frozen  you'll just have the currency collapse so there's   a risk with currencies there's the obvious  risk with bonds there's a risk with stocks um   and that takes you to property and collectible  so maybe you collect rolexes a lot of people   are doing that a lot of people you can see  what people are doing in this macroeconomic   environment they're buying watches they're  buying uh luxury cars they're buying real estate   if you look over the past two years the  money supply expanded by 40 percent uh   single family homes in the us increase in price by  40 percent so it looks in the near term over two   years like single-family homes uh are a pretty  good inflation hedge uh bitcoins perform better   than single-family homes in that time frame  but now we're we're stuck with this issue of   well our single-family homes and inflation hedge  over a decade and the challenge there is that   is the price of of homes go up then there's an  incentive for home builders to build more homes   so commodities um they have a they have an  appeal but if you can produce more of a commodity   then if i increase the price by a  factor of 10 i increase the incentive   to build that thing by a factor of 10. so silver  gold lumber oil homes real estate in general   they're all um they're all subject to um supply  demand elasticity and when the demand increases   the supply is going to increase that's why a lot  of people probably they actually prefer branded   items controlled by monopolies i i think  they probably almost believe that ferrari   and rolex are more reliable they'll keep the  supply capped like it's not likely that a random   uh suburban ranch house and so you know in middle  america will have a cap supply because there's no   there's no single monopoly or brand organized or  brand controller to keep that supply from getting   out of control so the the general strategy  when you're staring at inflation is i want   to acquire scarce desirable property that i can  hold for a long period of time if i'm going to   hold it for a long period of time that means  i've got to be able to afford to maintain it   if you buy if you buy a really nice beach house in  palm beach you find that you have a two percent of   your property tax so in a decade you have to  come up with 20 percent of the purchase price   to maintain it then you probably got to come  up with another one or two percent per year   to pay for wear and tear hurricane insurance  electricity repainting whatever there might be   so if you take four percent a year  of the purchase price that means that   you have to come up with 40 percent of the  purchase price over a decade to maintain it   bitcoin is not going to cost you 40 of its  purchase price to hold it for a decade so   the maintenance cost on digital property is lower  than the maintenance cost on physical property the   scarcity on a digital commodity well well that's a  function of the protocol and the integrity of the   protocol so if i create a product like dogecoin  and i know i'm going to print more dogecoin every   year right it's not quite five percent inflation  a year but it's it's an inflating supply well then   you don't have an a hard cap you've got an  increasing supply it'll continue to increase   in supply forever that's an uncertainty if a  small group of people can change the protocol   that's another uncertainty the  reason that we don't trust stocks   as money over 100 years is because the board of  directors and the ceo can change the supply of   the stock so apple might be a good company  but if the ceo of apple changes the new ceo   might double the supply of the stock and so  it doesn't necessarily make a good currency   or a good money over the long term so i think  in short commodities are increasing in price   right now oil wheat soybeans natural gas all  of those have surged in the past 12 months   you'd like to hold a commodity that you can  hold forever that's that it has a supply   that is inelastic to the demand it's kind of  hard to dollar cost average into a skyscraper   right you can i mean the average person can't buy  387 a month worth of a skyscraper so it doesn't   quite work you can't buy 200 a month worth  worth of um the new england patriots either   so certain things that look like long-term trophy  assets don't work for the for the average person   you can't stockpile oil for a decade either  i i know i thought about it you know when   oil got to zero dollars a barrel there was  a point when it was free so why wouldn't   you just go and get a billion dollars worth  of free oil right a billion barrels of it   because you would have made a fortune if you could  have but the average person can't stockpile oil   you couldn't take delivery up so at the end of the  day the the the issue is most things you can buy   are currency derivatives and currency derivatives  are correlated to the strength of the currency   all currencies are collapsing international  currencies much faster than the united states   dollar but the united states dollar is also  collapsing so i have to find property which   is not correlated to currency i need it to be  scarce i need to be desirable i need to be able   to afford to hold it for a decade maybe hold it  for 20 30 40 years and i want something that's   globally desirable ideal and the ideal property  is something that a person more affluent than me   more more intelligent than me will want from me  in a decade so the case for bitcoin is it's scarce   desirable property it's not a currency derivative  it's not a security it's beyond the reach of a   company a nation state an agency you can hold  it and you can give it to your children or your   children's children you can take custody of  it and you don't have to trust a counterparty   and i think we can see especially this month  the risk of counter parties is great if you hold   gold in a vault and you're russia your goal can  be seized if you have cash in a bank account in   argentina this week your cash is locked up if  you had bitcoin with a counterparty like voyager   or celsius they they might very well block you  from withdrawing it so uh bitcoin is desirable   because it's portable it's global it's scarce  and you can you can duck a counterparty you   don't trust you can transfer it to a different  counterparty or you can take personal custody   and that's why it's a it's a useful asset right  now and it ought to be part of people's portfolios   and i can't think of anything better right  i mean there are other things you can own   other assets you can own apple stock you  can own google you can own a building in   los angeles and you can own the new england  patriots well you can't right i can't right   but the things that you could own they're  challenging to own they're expensive to   maintain they're not necessarily portable  and universally desirable around the world   and you in many cases you may not be able to  take personal custody of it you know we got a   phrase not your keys not your coin and the bitcoin  world but you know if you own a building in moscow   maybe you don't own the building you know if  the mayor of moscow turns against you and if   you have a yacht in the south of france and  you're russian maybe you don't own the yacht   and uh you know if you have granaries in the  ukraine and a war breaks out maybe you don't   own a farm and so most things they live in a  political domain or in a physical domain where   your ownership rights are questionable and you  have to at least discount them with some risk   depending upon your citizenship and your own  location and then the type of entity you are   i think bitcoin uh it appeals because it is it  is the purest form of property or ownership that   the human race has yet to divine and that's  why i think it's valuable in a portfolio   very well said um and one of the things i  love about interviews you've given in the past   is your conviction for the long-term viability  of bitcoin uh so speaking of beach houses and   single-family homes would you say now that  bitcoin is back at twenty thousand dollars that   um it's still a good idea for you personally  you know to mortgage a home to be able to buy   one full bitcoin for the long-term viability  of your future i think that uh the mortgage   issue is a function of the mortgage rates you  can get so if you roll the clock back a year   the 30-year mortgage rates were 275 basis  points and so i i would say a year ago   if you actually had unmortgaged real estate of any  sort and you had equity in the home then it makes   sense to draw down that mortgage because that's  that's in essence capital that's good for 30 years   there's less than three percent interest and  we know that the uh inflation rate the cpi   inflation is running eight percent while those  mortgages are 2.75 so so if the actual monetary  

inflation rate is in excess of the mortgage  rate and if you can afford to hold that duration   if you don't need the money for three four five  six years then you should take the mortgage   now once you take the mortgage i would say would  make sense to buy a lot of things with it right   buy a car with it if you need a car if you have  a portfolio of of assets that you want to hold   and you can borrow money at 2.75 interest i think  any uh portfolio of scarce desirable assets makes   sense to whole with a 2.75 percent mortgage  now if you would ask me the question today   well now mortgages are 575 basis points  so i suppose the negative is the 30-year   mortgage rate has doubled the positive is  bitcoin is less expensive so i think the   bitcoin looks less risky when it's trading around  the four-year simple moving average so that's   a plus i think the mortgage looks more risky  because the cost capital is doubled um and so   you know i i think there's a point uh  would i borrow money at five or six percent   well if it's 30 years and it's a mark to market  money and i thought that and i had passion for   spending it on something i would i would  definitely borrow the money to maintain   a lifestyle if that's what you wanted to  do at that rate i i think it's no-brainer   that you would rather be holding a 30-year  mortgage than holding any other kind of debt   for example you probably you probably would be  better off to borrow money at 500 basis points in   order to pay off your credit card debt and you'd  definitely be better off to pay off any margin   loan because those things are much more expensive  either in interest rates or they're much riskier excellent all right thinking about the future  obviously you're bullish on bitcoin i don't   know if you know i think your price  prediction is pretty up there the long   the more time goes by but uh you know thinking  about the average person how much bitcoin do you   think the average person needs to accumulate  to be considered wealthy in the future um i haven't really thought about that i'm not  sure what the definition of wealthy would be   i just i think the bitcoin is a good thing  to buy and accumulate so as a general rule   um i think that it ought to be part of someone's  long-term portfolio um i i'm not going to define   wealthy it's like that's that's a another topic  and i don't really think it's it's necessary   uh i think what's important is to give  people a strategy to save their money   when i was growing up my family wasn't wealthy my  father was a commission a non-commissioned officer   a sergeant in the air force what we had was a  savings account and the savings account yielded   six percent interest and now savings account don't  yield any interest and so if you're taking your   paycheck and your savings every single month and  you're saving them in currency you're probably   going to see your life savings dwindle away so  i i'm i'm an advocate of bitcoin uh primarily   because people need a technology to save uh their  life's work or to save their assets at any level   any scale it seems to me and correct me if i'm  wrong or if you have a different opinion but it   seems to me that crypto and not just bitcoin is  you know seeping into the mainstream in a big way   do you feel pressured to stay bitcoin  only when we're talking about things that   aren't for the use case of bitcoin so we're not  talking about the use case of money or store value   but when crypto is seeping into other places  in the mainstream what are your thoughts well   i think that bitcoin is is uh the first and the  greatest and perhaps the only digital commodity   and a digital commodity means not a  security it means not without an issuer so in a world where we're going through a digital  transformation you want a digital commodity to   serve as the base layer because if i can put  billions of dollars into a digital commodity   on a layer 1 then i can move it on a layer 2 or  layer 3 or layer 4 at the speed of light friction   free and i can store the money for 100 years  so there clearly is a benefit to having a layer   one digital commodity now as for the rest of the  world the world's full of securities and the world   world's full of companies for example is there a  place for apple computer like like it's it people   in the crypto world seem to think that the only  place there's technology that's relevant is crypto   right they think that all the software engineers  went into crypto they didn't right there's   software engineers working for ibm and their  software engineers working for general electric   and their software engineers at apple computer  and google and facebook and amazon and the like so   i of course i think there's a place  for software engineering and technology   in apple and google and amazon and jp morgan  banks governments there's hundred thousand of   them and uh and the crypto world in general  has been focused upon crypto exchanges defy   tokens crypto securities cryptocurrency stable  coins that's one part of the technology world   and uh it's a it's an embryonic part uh the  difference between the technology and the   non-crypto market like the technology that apple's  using and the technology in the crypto market   is that apple's technology is is sitting generally  in a regulatory zone where there's less murkiness   there's not a massive debate about whether  apple can add a certain feature to the iphone   90 98 percent of what apple does is not that  controversial 2 is on the other hand in the crypto   world about 75 of what they do is controversial so  there's a lot of controversy and there's a lot of   uncertainty and a lot of murkiness in crypto which  makes it uh very very high risk and more like   it's appropriate for venture capitalists generally  and it's a speculation and uh and it'll continue   to be that way until we lay down uh clear lines  about about uh rules for crypto exchanges what's   compliant uh rules for cryptocurrencies what's  a stable coin rules for crypto securities   you know what's the disclosure required  on a crypto security that's got an issuer   right we don't really have those rules uh  there's and there's a lot of controversy   and uncertainty about what they will be  so if you want to invest in technology   right uh invest right and by the way when i say  uh when i talk about bitcoin i'm talking about   saving i'm actually converting money a currency  into a commodity i don't see uh if you said to me   what are the other commodities that i might  choose in lieu of bitcoin gold lumber land   real estate right oil natural gas fields right  those are commodities in lieu of bitcoin that   that's what it competes with if you were to  say well do i want to invest in a technology   well what solana and cardano and ether competing  with each other in a technology realm but they're   but in essence their private equities with  teams and it's like private venture capital   whereas google apple and facebook are competing  with each other in their public equities   also with teams and that's public tech investment  so if i was a if i had a billion dollars of um   capital and my job was to invest in tech equities  i would be shifting between apple and google and   facebook and if i had a billion dollars of  venture capital and i was a crypto vc fund   and my limited partners wanted me to invest in  private entities high growth entities the like   that was my mission then i would be sifting  through the other cryptos because i'm a vc   and if i'm a public company and i want to  adopt a treasury reserve asset strategy   in lieu of what are my choices sovereign debt i  can hold 30-year treasuries or two-year treasuries   i can either do that or i can adopt a  treasury reserve strategy where i buy gold   and i just buy 500 million worth of  gold or i can uh adopt bitcoin right   in order to adopt something as a treasury  reserve it needs to be a commodity not a security   and there's a couple of reasons for that one of  them is a technical legal reason a public company   can't hold more than 40 percent of its net assets  in securities so like if i had a hundred million   dollars i couldn't buy more than 40 million worth  of a security including like an etf apple stock   the nasdaq index the s p index i couldn't spend  more than 40 percent of it if i went beyond that   i would trip i think the sec 40 act and i become  an sec 40 financial company and now i've got to   go through i've got to transform the business  and when that happens you lose the ability to   operate the rest of the business so it's pretty  catastrophic right so so there's there's a pretty   good reason why you want to be a commodity  the second reason is you don't want an issuer   if there's an issuer then that means there's  a management team and then it's a security   and it's a security it's subject to sec rules  and then you have have all sorts of securities   liabilities about what you can say what you can  do how you can handle it now as a general rule   most uh most bonds are our securities and most  equities of securities and private companies are   securities it turns out that uh sovereign  debt of the united states is a carve out   because the united states issued it and that  and that gets an exemption and is treated as   a commodity not as a security right don't ask me  why i wasn't around when they made the decision   but um you can see for that reason uh it  really depends on what entity you are right   are you a venture capitalist are you a public  company tech investor are you a macroeconomic   investor or are you a saver right and then  you would choose the assets accordingly   let's uh well let me ask you about that how it  relates to ethereum because uh senator loomis   credits you as being pivotal in the loomis-gilbran  responsible financial innovations act   and based on the language in that bill ethereum  is seemingly a commodity what do you think   you know i didn't have any input into that she's  too kind to me but but that's not me right unless   unless some unless they referred to some publicly  available uh comments i made uh i didn't offer any   private comments with regard to that act um with  regard to ethereum i think ethereum's a security   i think it's pretty obvious it's a security it  was issued via an ico there's a management team   uh there's a pre mine there uh there's a hard fork  there's multi you know there there's continual   hard forks there's a difficulty bomb that keeps  getting pushed back the difficulty bomb is going   to wipe out the entire east mining industry it's  going to obliterate it murder it okay the fact   that somebody is able to murder an entire industry  and then they keep changing their mind every six   months about whether to do it or not do it is in  disha that it's a security and not a commodity   for it to be a commodity there can't be an issuer  and the truth is you can't really make decisions   i mean one of one of the fundamental insights in  the crypto industry is is the fact that you can   change it is what makes it a security so if you  look at most of these cryptos where they have hard   fork after hard fork after hard fork the problem  with a hard fork is it changing the protocol   means that some development team is making a  decision and and if you can change the protocol   in a material way you can change the monetary  protocol right a hard fork can change the issuance   pattern or can change the value of something and  so that makes an investment contract under under   securities law and that means it passes  the howie test so what you want is is a   completely decentralized protocol where nobody  can change it even if they wanted to change it   so fundamentally the problem with ethereum is  they keep changing it right from a securities   law point of view right and there's a team of  people that make recommendations and and if you   if you um want to establish yourself as a digital  commodity then you're trying to create something   like gold in cyberspace so for example no  gold miners in the world could change the   the physical characteristics of gold right if  a government passed a law i mean they wouldn't   send an email saying oh gold is now steel or steel  is now aluminum right you can't if you can change   the characteristics of it right then it's not  a commodity it's a security and securities have   a place in the world but they need to be sold  to the general public pursuant to a disclosure   full and fair disclosure you want to take  the company public you have to disclose   who owns the the company what are the risk  factors and that way people can make a decision   the problems i see right now it's like you  know you've still got the ether locked up   and will the merge take place will it not  take place and then after it takes place   then the question is how long is your eth locked  up and then what's this is there a staking reward   and what is that and if it if there is a staking  reward it's probably a security the head of the   sec is said on six different occasions that  if you generate staking uh off of a crypto   asset network it it makes it a security you  can't generate yield and not be a security so   i mean in theory you can create another digital  commodity but uh you can't leave on you can't   leave questions uh unanswered oftentimes people  in the crypto industry they think well we'll   just resolve this by taking a vote taking a vote  doesn't make something decentralized if 51 percent   of the people vote to double the supply or like  if you look at this solana thing salend last two   weeks ago the fact that you can vote on something  is is proof that it's a security for example   my company votes on things shareholders vote on  things when you take a shareholder vote it doesn't   make you gold right there's no way that the gold  owners or the gold miners could take a vote and   convert gold into aluminum you see and if i owned  a bunch of lumber i couldn't take a vote and turn   the lumber into steel right so ultimately the  challenge with these things is the ability to do   anything if it's truly decentralized then you have  to release at least the protocol into the world   and not change it not even not even contemplate  changing it in fact you know that one of the big   problems with all these proof-of-stake networks  is in order to get them to work they have to   keep doing hard fork after hard fork and the  reason they're doing it is because they're   they're putting the security into the software  instead of into the hardware or into the physics   if you're relying on the physics of of the  network with proof of work then you don't have   to keep upgrading the software if you keep  upgrading the software then then someone's   got to write the software and when you write the  software you end up with this exploding complexity   and then you have to you know you have to  keep changing it and so there's this pursuit   of functionality and performance via continual  upgrade that's that makes you a software company   and there's nothing wrong with software companies  i have a software company i have more experience   writing software than anybody in the crypto space  i've been in the software business since 1989 so   i've actually seen what happens when you upgrade  software every year 25 years in a row right   and you know it makes your company you and and if  you're a company and you want to go public and you   want to sell your shares to the general public  you have to do it with a registration statement   so that i mean that's the challenge  in the crypto space that um that   really they're just all securities and and the  problem with it is they're all securities trading   on exchanges that don't have a license to trade  securities and they're being traded by management   teams that haven't issued a registration  statement which means they're non-compliant   securities so what will happen nobody knows  what will happen i don't know what'll happen   but what i know is there's a lot of uncertainty  so you're either a speculator or you're a venture   capitalist and you're waiting and to see what'll  happen and and uh bitcoin is different because   it's proof of work based and ultimately you  know there was no ico there was no pre mine   nobody could change it nobody wants to change  it it doesn't need to be changed right and so   you would you would generally think you got  to think more like genetically you know like   something that got released into the wall 300  million years ago and the dna is the same that's   that's what you're trying to do with a crypto  asset network you're trying to release a protocol   and not change it and uh and so i think that that  um it's one more point i'll make here which is   from a from an institutional investor's point of  view the point at which you consider trusting a   crypto network is somewhere in the range of five  to ten years after people stopped changing it   i mean i would say it's after  after a hard if there's a hard fork   to fix a fatal bug maybe that's okay if you're  fixing a fatal bug or or if you're if you're   improving the network against a fatal security  threat right then then maybe you can get past that   but if you're hard forking to change the  functionality or change the performance   you know change the block size anything like that  where you're changing it it resets the lindy clock   and you have to wait for five to ten years after  five years it's risky after 10 years you think   well maybe all that combination of protocols is  going to work right and if you look at bitcoin   well they had the 21 million coins and the and  the monetary protocol it was set january 3rd 2009   and on pizza day around may 2010 it's the still  the same protocol the things traded for nothing   and then it starts to monetize and if someone  you know if someone changed materially that   monetary protocol you know it it calls into  question is the thing robust is it lindy right   and uh so if you keep changing the thing every six  months i mean you can do it but but the problem is   a someone changed it and somebody voted on  it or did it and that makes it a security   and they've got if they've got a vested interest  in it right you've got a management team and an   issuer and that means you can't be a commodity and  then b you have to wait five years to figure out   whether or not it's robust right and so you keep  restarting the clock every time you push that back   i have a different question i want to ask you  it's about the wider cryptocurrency market   but just a very short one in 60 seconds or less   agree or disagree ethereum in the cryptocurrency  market would be out of all the altcoins the most   decentralized compared to the others the most  censorship resistant compared to the others   i mean i can't say that it looks pretty  centralized to me like there's probably something   there's i'm not going to give you an opinion on  all of them except they all are securities right   i mean i'll give you that opinion there might be  something on it there's 20 400 cryptos or 20 000   20 000 cryptos there might be a half dozen that we  can debate whether they're commodity but none of   the proof of stake networks and and none of the  smart contract networks would be in it you'd be   having a debate over proof of work networks right  that that have not changed in the past five years   right that don't have an issue or don't have a  management team don't have a foundation did never   if you didn't have a pre mine if there's  no ico there's no foundation if no one's   controlling it if it's not changing  right then you can have a debate but   uh i don't think that that ethereum qualifies for  that debate i think that's pretty black and white   cool i love the conviction i might and just a  piggyback off what you said prior i know you're   not the sec i know you you just said there's  risk with the other cryptocurrencies software   is fine it's just incredibly risky so you're not  interested but spacing you put out a tweet out   the other day the whole crypto market besides  bitcoin right now is unregistered securities   what should happen should you know some get  fined or should they all be go to zero and   start new what's the solution there i don't know  what the solution is i i think that the industry   would benefit if um if the sec and the cftc  put out clear guidance as to how you qualify   as a digital commodity for example if you could  submit if you want to go public you actually   submit a registration statement to the sec and  you negotiate it with them and over the course   of three months or six months when they grant you  when they approve the registration statement you   can go active and then you're a publicly traded  company so there is a process by which you can   take a company public as a public equity if you  don't get that approval then you can't go public   you can't sell shares to the general public so  right now the question is if you had some crypto   the only crypto that's been deemed as a  commodity is bitcoin that's the only one   that i think is is certain i mean everything  else is a question and and uh the chair of   the sec said that on television a few days  ago right so the question then becomes okay   i think that my crypto is a commodity how do i  get it certified okay there's no clear process   so if there was a process by which i could submit  it to the cftc or the sec and get them to certify   that it is not a security that would be a step  forward i think the other step forward would be   um a process by which i could submit a stable  coin uh to get it certified as a stable coin   like uh there there's a way you can get registered  as an etf right now with the sec right they they   deny or they grant they've granted some etfs  they've denied some etfs but there's a process   um there's a process by which you can sell  mutual funds and and other investment funds   the general public they can grant but they can  deny so i don't see the process by which i can   spin up a stable coin you know and as you as you  look at it right there's there's stable coins   like um like uh circle and paxos and you know  they're registered registered entities in the   united states and they claim to be 100 backed by  cash and cash equivalents so that's one type of   stable coin but the sec is not certifying them the  cftc is not certifying that there's no national   certification there i think they're they've  got money uh they've got licenses from states   so there's no fdic registration there's no sec  cftc i think um i think that's frustration then   you've got tether right which is sitting in the  middle right uh it's more opaque popular but   opaque and and the problem is because it's opaque  it's getting attacked people are not so much if   people think they can wreck you they'll attack you  right i mean it's like it's kind of sad like they   like uh i'm not a big fan of hedge funds and short  sellers myself but they will attack and so so they   shorted ust and that worked for them and so now  they're short tether they're not shorting circle   and paxos because they perceive that they're  not wreckable right then you have ust which   some people thought was a stable coin i mean you  could have called it a stable coin you people they   would add up you know the market cap of stable  coins they added up circle and tether and ust   but when ust had 18 billion dollars worth of value  the question is how much collateral was backing it   right at one point ust plus luna was about a 50  billion dollar ecosystem and i you know they had   a billion maybe two did they have three billion in  collateral somewhere between one and three billion   in collateral against fifty billion dollars of  afloat and 18 billion dollars of a stable coin   now instead you know issuing 18 billion dollars  worth of the stable coin is like borrowing 18   billion dollars from counterparties so if you  borrowed 18 billion dollars from counterparties   and you had one billion in collateral you're  levered up 18 to one okay on the other hand if you   borrowed it at 50 loan to value then that means  you have 36 billion in collateral so you see the   difference between having 36 billion in collateral  which is by the way 50 loan to value is risky 25 loan to value probably less risky for  a volatile market so in order to issue 18   billion in stable coin and and use uh bitcoin  as collateral then the right mix would be i have   72 billion dollars worth of bitcoin and  i issued 18 billion dollars worth of ust okay and that's over collateralized but still risky so it's pretty clear ust  was never a stable coin it was a security   the point of the regulators when they say these  you know these cryptos need disclosure is if you   if you'd known that you were buying a token that  had a billion in equity and 20 billion in debt   and that a five percent move would wipe you out  you wouldn't have traded it like cash or cash   equivalent right you wouldn't have said oh this  is like a bank account that yields 20 interest   you would have said something different  you said this is extremely risky   this is like a 20x margin trade and a bitcoin  trades down 6 i'm going to lose my life savings   so there's no way there's no way right now to  certify to get like a national certification   for a stable coin if there was it would drive a  process and people in the space would go through   the certification process to get that there's no  way to create a certified crypto bank right now   right the reason you had uh celsius and voyager  and block fi as kind of uncertified you know   unregulate registered bank is because the  regulators kind of they were loose with   regard to cracking down but they also didn't  give a path to certification uh caitlyn long   you know has created a a crypto bank and she's  been trying to get an fdic license for 18 months   she can't get it and there's no path there's  no obvious path to to get the right license   but you can imagine if i was running an etf and  i said i'm running a high-tech etf and i'm going   to buy a mixture of facebook app on amazon and  trade it and you're going to buy my etf well i   would then post on a routine basis like every day  or or whenever i change my portfolio i post what   i own in the etf that's complete transparency and  if i if we can do that with an etf the question is   why can't we do it with another crypto like why  why wouldn't you just say okay you know tether   if you want to be certified you just have to  post everything online via this form in 8k form   when microstrategy uh when we buy bitcoin we  file an ak it's an sec filing and the a if you   go read it right there are very very talented  lawyers that very carefully write those aks   and then they file them with the sec and  they're online in their legal documents   and the the management team is legally liable  for a lie right we're legally liable the cfo   the ceo probably the general counsel and so you  end up with adult supervision and you end up with   since everybody's liable the accountants  are liable they're worrying about it the   outside law firm is paying attention there's an  army of lawyers there's an army of accountants   and because you do that well you know everybody  knows where you stand and then they can make a   decision that's intelligent um we're lacking that  in the crypto space and there's uh there's no way   so there's no way for me to issue a token that's  a security there's no way for me to issue a public   nft token that's that's regulated there's no  way for me to to get a commodity created that's   regulated also there's this issue of exchanges  right like either a d5 exchange or a c5 exchange   they're deemed as being unregulated  the reason that this sec keeps denying   the spot etf of bitcoin is they claim that all  the crypto exchanges are unregulated and there's   and and uh there's no surveillance agreements  and there's no transparency but what they're   really saying is they don't trust the exchanges  they think they trade against their own customers   right so if you're if you're if you're buying a  token like let's say let's say you were buying   some random coin on an offshore exchange and  you had a big order in if that exchange actually   was operating a hedge fund and they got your  order and then they trade they front run you   and they bought that token drove up the price  and then sold it to you you'd be pretty hurt right well this so so when the regulators are  are concerned about that their view is there's   just too many conflicts of interest right like  how you you could issue a token own a bunch of   the token and then you could uh list the token  on your exchange the price would trade up then   you could sell it and then you could not tell  anybody you did it that's all totally illegal   with a security you couldn't do it every it's  pretty obvious to everybody that is unethical   it is illegal and there would be like  a hundred people that would tell you   no you cannot do that in the traditional economy  and the crypto economy you know it's not even   clear that they know that it's unethical and  illegal right it's like sometimes people like   they just think that's just being creative and so  in this particular case you've got a while west   and uh and what needs to happen is it needs  to grow up now we need adult supervision now   let me just grant one more thing in favor of the  cryptos which is there's a tension between the 19   the 20th century and the 21st century the 20th  century is uh nasdaq you start trading at 9 30   in the morning you end at four in the afternoon  you can't trade on the weekends right you can't   take personal custody that's how microstrategy  stock trades mstr started trading in 1998   and there has been no material improvement in  the way that that stock works on the nasdaq   in 24 years okay so that seems kind of antiquated  and the crypto world is is why can't i take   custody why aren't there 500 exchanges instead of  one nasdaq why is why can't i trade 24 7 365 why   can't i do things faster so the crypto world wants  to go fast and it wants sexy stuff and it wants to   do it in the palm of your hand and it wants to do  it everywhere in the world and it wants to do it   on a holiday on labor day okay so those are all  admirable right that's 21st century technology   the 20th century technology as well we've got  the compliance down and we've worked through   the ethics and the conflicts of interest and  it's pretty clear to me for example that i have   an obligation to tell all my shareholders  any material thing that i do at my company   that might impact their shares right that's pretty  obvious to me so we've we've got adult supervision   in the 20th century world but it's expensive and  it's slow and it's not function the functionality   there's low functionality it's very expensive  and it's slow right in the 21st century you've   got crypto which is very functional very fast but  they haven't worked out the regulations and and   the protections for consumers and so you know it's  kind of hard to defend it if you watch 50 billion   dollars get torched and go to zero in a matter  of two weeks we can see why that's not so good   but what the world wants the way this should  end you know what you'd like to see happen   is you'd like to see the regulators embrace  the good that's come out of the crypto world   while extending some investor protections that  are common sense like thou shalt not lie cheat   and steal common these are not like from 1933 sec  act they're not 1940 these are like 4 000 year old   rules right hammurabi's code they're in the bible  right they go back to ancient ancient times the   greeks the romans everybody had this idea thou  shalt not lie cheat and steal so we need somehow   to introduce those those common sense guidelines  into a modern technology framework and right now   uh for better for worse it's the united states  regulators the sec the cftc the occ they have uh   the control of this and the rest of the world's  going to follow them right and probably going to   adopt their broad brush their guidelines once  they figure out what they want to do and the   industry is kind of in in betwixt and in between  you know we're we're out of the first decade   which is a lot of innovation a lot of creativity  a lot of you know mark zuckerberg used to have on   the wall of facebook's headquarters before they  went public it's like go fast and break things   okay that was the facebook motto go fast and break  things after they got public and after they became   a billion user network and they had the power  to change the course of democracies i think they   got rid of that motto right that you know at some  point you can't go fast and break things anymore   so i think the crypto world is moving from its  first decade which is go fast and break things   to the next decade which is let's try to keep you  know the the good that comes from the technology   uh while we introduce uh it into the public policy  framework that allows it to scale to the next   order of magnitude and if you're wondering what  what do the regulators think is good about crypto   this is not a secret they've said it out loud uh  they think bitcoin is good they think the proof of   work such that you create a digital commodity  using energy and no issuer is a good thing   it's a it's an innovation it's a brilliancy but  what satoshi did the the creation of digital   commodity and cyberspace or digital energy or  digital property if you will or digital money   using energy and sha 256 or some hashing  algorithm that's a brilliancy so there's   a place for digital commodities the second thing  they like is digital currency like a stable coin   the world wants trillions of dollars of us  dollars and probably digital euros and digital yen   to move at the speed of light on mobile  phones and on websites that's an innovation   and they haven't we haven't quite got it right  right we've got ust which is a defective one   we've got tether which is successful but but  opaque and then you've got you know circle   you know packs that are struggling and no one  there's no fdic approved bank that's issued   a stable coin yet so that's a new thing we're  working on and then uh i think they appreciate   24 7 365 trading right that's that's an innovation  which is clearly an improvement over over the 9 30   to 4 in the afternoon five days a week the rest  of the world doesn't you know doesn't necessarily   take american holidays off and sunday is not  a holiday in the middle east right and so and   shutting down the economy of china because  you want to declare a holiday in california   isn't the way to run a global ecosystem so  so global access that's another plus and then   the final the final thing is just the idea of of  crypto crypto tokens right cryptography zero proof   and the ability uh to do things instantly  in a hundred milliseconds right that's an   innovation right now a lot of the world still  approves wire transfers by talking on the phone   right and and that that is about a ten thousand  times more expensive than doing it with by signing   with a private key so so all of those all of  those crypto capabilities those are innovation   i think all of those things together plus just  speed like being able to spin up a token you know   whether it's a tom brady coin or whatever coin  being able to spin it up is an innovation now we   know what the innovations are and the question  is how do you merge that uh with regulation   and we'll see right we're waiting on that yes yes  um so let me ask you this because i appreciate   you uh you know giving up giving us your reasoning  on this i think i think we understand how you you   know bitcoin is different from rest of the market  and i think we understand kind of your thoughts   on the cryptocurrency market as a whole however  as i'm sure you know not everybody in the world   thinks like you i believe there's a spot etf  in australia uh spot ethereum etf in australia   along with bitcoin there's spot ethereum etf  in canada along with bitcoin multiple ones   and you know canada is from what i hear very you  know tight with the global financial regulators so   your best guess do you think ethereum and crypto  at large will continue to grow and gain usership   over the next five to ten years  despite your personal thoughts   i mean the only thing i'm gonna advocate is  bitcoin and that's the only thing i advocate   i don't look i'm not advocating google stock  or apple stock or amazon stock i'm not even   advocating my own stock like to be to be clear  like i'm an equal opportunity uh ambiguous   uh ambiguous uh analyst with regard to property  i'm not going to tell you to buy property in   new york city or moscow or los angeles i'm not  going to advocate a trophy asset or a collectible   i'm not going to advocate or opine on any  other crypto i don't know how they will end uh   i'm i'm open-minded to the sense that it's  possible to create things but there are many   many different ways to do it right i mean there's  there's a lot of ways to create functionality   and there's a lot of models and i think there  are a lot of different countries in the world   right so different countries and different  different regulators will have different opinions   and and uh different management teams will do  different things and stuff will happen and if   you uh if you want to have an opinion on silver  i think you should study silver for 10 000 hours   and for someone to have an opinion on ethereum  they should study that for 10 000 hours and   you can take their opinion if you like my  my opinion is clearly the least risky thing   and uh and the purest thing that's come out  of the crypto ecosystem is bitcoin and uh   and the reason i advocate is because  it's property and not a security   and i just i'm not gonna i'm not gonna advise  you to invest in a private company i'm not   gonna advise you to invest any public company  i'm not going to advise you to invest in any   of 20 000 other things i think that those are all  individual decisions that people have to make and   i would willingly grant like maybe the best  investment for you is to own a ranch in kansas   people do well or own a bunch of lumber right  or own an oil well or own a natural gas facility   there's a lot of businesses that make sense  for people and you know if if you have uh if   you have proprietary knowledge about it and  you have strategic assets and interest in it   and it fits with your family you know your  and your uh you know your citizenship and your   long-term intent right to live wherever you're  going to live then i think you do that thing but uh you know cryptocurrency is global right  it's not just in the u.s so even if u.s cracked  

down hard from a regulatory standpoint you  know presumably like rubble paul says maybe   they just go offshore so if you had to just  i know you're not advocating for it but best   guess do you think crypto will continue to  grow and gain usership in five to ten years   i think that uh that what's going to happen is   digital property in the form of bitcoin is going  to grow i think digital currency in the form of   the dollar is going to is going to grow i can't  be sure which network but i think that i think   that the overall digital currency network will  grow i think that um other digital currencies   will grow as well but much less so i think that  the dollar is the king winner and i think the euro   maybe number two and the cny and then all the rest  will will be small and i think that ultimately the   the currency the digital currency will eat into  fiat currencies uh the digital property bitcoin   will eat into properties it'll eat into gold it'll  lead into real estate it'll demonetize other other   corporate bonds and stores of value instruments  over time i think that there'll be a lot of   innovation in other areas but again like most of  the proof-of-stake networks they're all companies   right and so they're private companies and if they  can if they can come public maybe they'll be you   know the next google or the next something but  the way i think about them is i think of them as   technology ventures all on instagram or snapchat  or or something like that and you manage your   risk accordingly right i mean do you trust the  people doing it do you understand the regulations   look i i they're most of them are non-compliant  right now but uber and airbnb were non-compliant   too right like airbnb is like illegal and  half the places they operate and uber is   so it's what happens who knows what happens  right people tend to get very sensitive when   money is at stake as opposed to other things  but people are sensitive about a lot of stuff so   so if you want to invest in technology then uh  you go and invest in technology but just keep your   eyes open about what the risks are and i generally  think the most important thing though is that is the regulatory risk is huge if you're going to  move money around and the reason that bitcoin   works is because the use case is property it's  i'm buying a block of money i'm holding it for   a decade and i'm not moving it around at the point  that you want to move the money a million times an   hour and you want to move it to a thousand or  hundred thousand counter parties you start to   cross uh into other regulatory jurisdictions right  now you're dealing with the treasury and the occ   and you're dealing with tax issues and and and the  like so so if you're going to get into those use   cases the ultimate the big question that everybody  in crypto has got to ask themselves is why is it   that google hasn't already done this because  google has more money than god why has why has   amazon not done this why has citadel not done this  why you know why has apple not done this why why   has a centralized company running in silicon  valley not done it they all have infinite money   they all have infinite programmers and if the  answer is because they thought they get shut down   by the regulators then you have to figure out how  you're going to deal with that right and and if   the answer is they could do it then the question  is do you need a token or not that the challenge   with fundin

2022-07-12

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