- ORIGINAL PANEL TITLE: CROSSING THE CHASM
- SPEAKERS: PRESTON PYSH, LYN ALDEN, MICHAEL SAYLOR, LARRY LEPARD
- CONFERENCE: BITCOIN ATLANTIS 2024
INTRODUCTION
The panel discussion “Crossing The Chasm” tackled Bitcoin’s mainstream adoption challenge head-on. Michael Saylor, Lyn Alden, and Larry Lepard, offered deep dives into Bitcoin’s journey since 2020. Saylor charted the evolution of his #Bitcoin conversations from initial skepticism to a steady increase in constructive institutional interest. Alden highlighted the change in perception from Bitcoin being an oddity to a recognized asset, punctuated by each high and low in its price chart. Larry Lepard’s transition from gold to Bitcoin enthusiast symbolizes a broader acceptance of digital currency. As these experts shed light on the nuances of Bitcoin’s march towards widespread adoption, they revealed a collective effort to transform Bitcoin from a financial outlier to a bedrock of future economies. Let’s dive in!
Preston Pysh
All right, so I have a personal question I’ve got to ask Michael, and I think everybody up here wants to hear this question. So, when you first came into Bitcoin in 2020—and we are going to get to the future of Bitcoin—but this very first question I have to ask: When you came to Bitcoin in 2020, I’m sure you had some fiat whales that you talked with, and you had conversations about why you were buying Bitcoin. I’m curious, what the difference, or the delta, is to those same conversations with some of the people now, and obviously, you don’t have to name names, but what has that been like in the past four years? What are these conversations sounding like right now?
Michael Saylor
I had a lot of conversations in the fourth quarter of 2020 where people would ask me what we did and why we did it. Some of them went on to buy Bitcoin; many of them bought Bitcoin and then sold it when the market crashed, and they disappeared. Then I would see them again, and they would say, “Yeah, I guess I shouldn’t have done that.” I think the number of people interested has been building steadily since the beginning of 2023. 2022 was a difficult year where you just had to explain the crypto crash, but I think every single quarter since 2023, the number of inquiries and conversations has been building, and they’ve become more constructive.
I think the difference today is that now you start to see a lot of big names like Citadel, Blackrock, and Fidelity that own stock in my company, or they’re into Bitcoin. So, I think my status as an institutional spokesperson for Bitcoin is dwindling, and now that torch is being carried by the analysts at Fidelity, Blackrock, Bitwise, Ark, or many of the other ETFs, and I’m happy to see that.
Preston Pysh
Lyn and Larry, any further comment? I mean you guys talked to some Heavy Hitters, what do you guys see?
Lyn Alden
I definitely think we’ve seen a shift in the Overton window. Back then, Bitcoin was still viewed as very niche, very weird. A lot of assets soared in the second half of 2020. A lot of people, when they looked at Bitcoin, were like, “Oh, that’s just a liquidity thing; it’s just a flash in the pan.” Most people here have probably seen the logarithmic price chart of Bitcoin. It’s a very common thing you’ll see on Bitcoin Twitter; you’ll see it everywhere. You see all the highs and the lows. But most people in the world have not seen that chart, right? So that’s in our echo chamber. That’s a very common chart to see, the long-term price of Bitcoin, especially in log terms. You can see all the higher highs, higher lows.
Most people have not seen that, and instead, they only see the cycles that they personally witnessed. They usually look at the linear chart, which at any given time either looks like an insane bubble or it looks like a broken bubble, and that’s how most of the people see it. They don’t really see those older cycles generally, so at this point, they might have seen the 2017 cycle, they might have seen the 2020 bull market cycle, and for them, there’s really only been those two cycles. They know Bitcoin’s older than that, but they don’t really see the price chart in their mind, and I think what catches people is when there’s another high and another higher low, and another higher high and another higher low, every single one of those is like another point to them that Bitcoin didn’t die.
So they don’t see the four-plus cycles; they see two or three, and the third one, I think, is pretty important. When you see something not die three times, that’s hard to really ignore. So I think that at the institutional level, we’re having some discussions with institutions, and those go a lot smoother than they did a handful of years ago.
Larry Lepard
First of all, let me just say, somebody pinch me! I mean, it’s like I’m a club player for Bedford, and they say, “Let’s go scrimmage with Messi and Ronaldo.” I’m like, “What the heck am I doing here? I’m just an old fart gold guy!” I view my role in this whole thing as converting gold guys into Bitcoin because they get half the problem. They understand the monetary debasement issue, but they just have the wrong tool, as Michael says.
Thank God Bitcoin came along and gave us a much stronger and better weapon, which I’ve increasingly embraced. Now, I’m a full-fledged Maxi and out of gold, or getting out of gold. But, you know, I’ve seen in my base probably a 50-50 conversion. Some people are just too “dyed in the wool” and can’t get over the physicality issue. They don’t understand the future. They don’t want to take the time, don’t want to do the work.
I’ve seen others who’ve completely flipped. A notable one recently was Chris Irons of “Quoth the Raven,” who was a very smart guy and understood the debasement issue but was anti-Bitcoin because he hadn’t done the work. So, I just kept working on him, and working on him, and working on him to do the work, and now he’s a raving Maximalist. It’s really fabulous, so it goes both ways; some guys get converted, and some don’t. We just have to keep chipping away. I think Michael’s point from his brilliant speech earlier, that it’s incumbent upon all of us to spread the word because this is the solution to all our problems, is very important.
Preston Pysh
If we’re looking at Bitcoin time now, and a little bit of the past, and we have to find kind of where we’re at, we look to the next six months to a year. I think everybody in this audience is looking at the number of coins that are getting gobbled up on a daily basis, and they’re then looking at the supply suffocation that they know has happened over the last year and a half. Everybody on CNBC wants to talk about all the coins that are being bought. But what they’re rarely talking about is the amount of coins that the crazy Bitcoin people soaked out of the market for the last year and a half and how scarce it is with 70% of the coins not moving in more than a year.
So, when we look at that, and we understand what that means, 10,000 Bitcoin are getting soaked up just on ETFs alone, and there’s 900, soon to be 450, being issued per day. I’m looking at that and I’m saying, “This price is going to move out so aggressively.” What has not been built that worries you? What is the thing that you think needs to be built or engineered, or infrastructure that needs to be in place in this coming year that maybe isn’t built?
Lyn Alden
I think that basically, pain points reveal themselves in each cycle, and things get built kind of in response to problems. So it’s one thing to look forward and see what problems are going to exist, and there’s always people trying to do that, but it’s not really until they need the solution that they turn to it. For example, when there are low fees in main chain transactions, people don’t really look at other payment layers that much, but then when there are high fees on the main chain, suddenly those other layers matter to them, and suddenly there are more people willing to build layers because there’s a more clear demand for it.
I think that we’re going to see a number of pain points along the way, probably fees being one of the notable ones, during manias or when people are putting other things on the chain, all sorts of reasons. I think that’s one of the things, that there’s going to be that shortage and there’s going to be a response to it.
To your point, I think that the HODL wave, the 70% of coins you said haven’t moved in a year, that’s arguably as big of an effect as the halving in every cycle. For people that aren’t familiar with it, during a raging bull market in Bitcoin, generally, you see some of those older coins that haven’t moved in a while start to come to the market. People are up 5x or 10x or more on their investment, some people trim their position, or they want to buy a house and they need a down payment. There’s Bitcoin that starts getting sold as the price goes up.
Eventually, that exhausts the new demand that’s coming in for the cycle, in addition to all the other meme coins and everything else soaking up excess demand. But then, during the bear market, a lot of the fast money gets out, and over a year or two or three years, more and more of those coins gravitate into hands that are really not going to sell anytime soon. They’re either in Microstrategy, where they’re never going to be sold, or they’re with various people that are holding for five years or 10 years; they don’t plan on selling anytime soon. Then it only takes a very small spark of new demand to come into that wall of “not going to sell,” and that’s what we’re seeing now if a fairly modest amount of new capital is coming into the space but so many of those coins have already rotated to the diamond hands and away from the fast money. I think that this is still a cycle that will probably last another 12-24 months.
Michael Saylor
I don’t think anything has to happen this year in particular; it’s already happened. But, I do think if we’re talking about the future of Bitcoin, I think that we’re in the Bitcoin Gold Rush era, and it started in January of 2024, and it will run until about November of 2034. It’s 10 years. The reason November of 2034 is an important date is that if you pull up Clark Moody’s dashboard, you’ll see that in November of 2034, 99% of all the Bitcoin will have been mined, and the last 1% comes out over the next hundred years.
For all practical purposes, stock to flow becomes irrelevant. The stock to flow ratio of Bitcoin is infinity in 2034. It’s within the tolerance of just random hourly trading of the asset, so it becomes noise. You have about 42 quarters until then, somewhere between 40 and 42 quarters. If you look at that 40-quarter period, at the beginning of the Gold Rush, no bank could custody Bitcoin, no institutional investor could buy Bitcoin, no Wall Street trading firm, no investment company could handle Bitcoin, and it was unclear whether that would ever happen. That was a binary.
When those spot ETFs were approved, that created a fire or an avalanche. The genie is out of the bottle. It doesn’t matter who’s elected president next, it doesn’t matter who’s the next head of the SEC, it doesn’t matter. No politician’s opinion, no banker’s opinion, no regulator’s opinion matters after that date. That was the most consequential thing that kicked off the gold rush.
Now, as of the first quarter of this year, which we’re in now, March 1st, 2024, every single institutional investor would have looked at this and said, “Bitcoin is interesting, but I can’t buy it.” You have 99% of the money in the world that has been unable to buy and unwilling to consider things. Institutional investors are like this; they could watch your company and have a million opinions, but don’t really care. Then you could go to them on a Tuesday morning and say, “Do you want to buy $50 million worth of this security?” and they’ll look at it and they’ll give you an answer by 4 p.m.
So when they can buy via their bank, their institutional wirehouse, their prime broker, they will make a $50 million decision in one hour, and they will watch you and cheer for you, or laugh at you for 20 years when they can’t buy. So we flipped a switch in January 2024. What you’ve got is 40 quarters of people getting educated. Here is what happens next: all those ETFs, they’re only distributed through 20% of the distribution channel right now, maybe even 10%, so that distribution is going to go from 10% to 20 to 40 to 60 to 80, and there’ll be a point at which all the investors can buy. So you’re going to see resistance drop, you’re going to see all the major banks add support.
The next question is, “Is it creditworthy? Can I borrow against the asset?” No major bank in the world will give you a loan against those ETFs yet. They’ve all got clocks that are running after 30 days, after 90 days, after six months, after a year. So first, they let you buy it, then they loan you money against it. None of those instruments can you trade options on. You can’t buy or sell puts and calls on a spot ETF. That’ll be a year.
What you’re going to see is it’ll take years for the distribution to open up, for the credit capillaries to work, for the volatility trading to kick in, for the hedging to kick in. Then you’ll actually see all the big banks that don’t like Bitcoin getting pressured to custody it because their biggest customer wants them to. So right now, you can’t custody, but there’s a big battle afoot on Capitol Hill. That battle will take place, Bitcoin will win that battle, then you’ll see banks custody. Then you’ll see one, then you’ll see 10, then you’ll see a hundred, then you’ll see a thousand. Likewise, there will be famous analysts. You can name the analysts that cover Bitcoin today, Lyn Alden, Chris Kyper, Yassin.
But, there’ll be a day when there’ll be 200 analysts, and you won’t be able to name them all. There’ll be a day when Bitcoin ETFs have already blasted past gold, and then Bitcoin ETFs trade more than the S&P index ETFs, and there’ll be a day, I believe, when Bitcoin ETFs will have more capital than SPY or the S&P index, and on that day, the people at Vanguard will say, “Oops, I guess all the money just shifted out of equity.” But that day won’t come tomorrow; it’ll take many, many quarters, and by the time we get to 2034, I think you can say that the high-growth institutional adoption phase of Bitcoin has now moved to just the growth phase.
Larry Lepard
I think the quick answer to your question is better layer 2. I mean, Lightning needs to get a whole lot better. A whole lot faster. I think it will. But let me give you a little bit of a longer answer to the question if you’ll indulge me. In the early 1980s, I started my business career. The IBM PC was introduced in 1980, and Microsoft came public in 1986. It came public at 14 times trailing and was growing 40% a year. At the time, if you were in the computer business, you were at IBM, or Prime, or DEC, or Wang, and the mini-computer was really the thing.
A lot of people regarded these PCs as toys, and I think it’s an interesting analogy that back at that point in time, software was regarded as risky because it was “ones and zeros,” and people didn’t see that there could be any value in it. They were thinking, “How can there be value in the software? It’s just written; it’s code; it has no value. The value’s in the disk drives, the value’s at IBM, the value’s in these hardware computers, with people who are making real stuff.” Sounds kind of familiar, right?
I recall a little further back, I’m at business school, and I’m with my business school roommate. He’s with his roommate from Harvard College, a guy named Steve Ballmer. We’re walking along the Charles River, and Ballmer says, “We’ve got this thing called DOS, and the entire world is going to need this thing. The entire world, everybody, is going to have it. It’s going to be a part of everybody’s life. This is going to be a multi-billion dollar corporation.” I looked at him; I thought he was nuts.
But then it kind of hit me; he wasn’t nuts. It was the base layer of the technology that allowed the PC to grow, and 40 years later, it is ubiquitous, and Ballmer’s obviously a billionaire, and Microsoft’s a multi-billion dollar company. I bought MSFT at the time, in 1986, when it came public, sold it three years later to buy a condo. It was a mistake. The split-adjusted price is 6 cents, and the stock trades at, you know, $290 today, so it was 4,700 times your money. The point I’m trying to make is that Bitcoin is the same thing, and people don’t understand it. They don’t understand that it is the base layer of money and it is going to absorb the entire monetary system given a long enough timeframe, at least in my opinion.
Michael Saylor
Hey Larry, I got a question for you. Microsoft comes public 1986 yes? How many years after Microsoft became public did it take before investors thought investing in Microsoft was a conventional investment?
Larry Lepard
Good question. I would say it really started to get going in the mid 1990s, maybe and late 1990s. At least 10 years, and it just kind of got progressively better, as you know, we could go look at the stock chart and see the curve.
Michael Saylor
But for 10 years it was risky.
Larry Lepard
Oh absolutely!
Michael Saylor
You know what’s funny? What you just said, which is you bought it and then you sold it after you made some money, and so many people will do the same thing with Bitcoin.
Larry Lepard
Exactly!
Michael Saylor
In fact, they have said it, but you’ll see a generation of institutional investors. They’ll buy Bitcoin because it’s going up, and then they’ll sell it after they’ve made triple profit to take some money off the table. Then, 10 years, in 2035, they’ll look and they’ll understand it much better, and then they’ll think the way people think about Microsoft and Apple today, which is, you just never sell them; you just own them forever. By 2035, they’ll probably say, “Now, I think I just own it,” and Jim Cramer, if he’s still working on CNBC, he’ll be saying, “Yeah, Bitcoin, you just own it; you don’t trade it.” We’ll win him over.
Lyn Alden
I think one thing that gets lost in the conversation is that institutions are made of people. There are people, and then there are institutions, often described as separate buckets, but institutions, of course, are just made up of a lot of people in an organized way. What you generally find when you talk to people in institutions is that there are a lot of people in institutions that do get it; a lot of them own Bitcoin personally, even up to the CEO level sometimes, but it has not gotten to the point where they could bring it or integrate it into their institution yet. They couldn’t put it on their big balance sheet; they couldn’t put it on their corporate balance sheet, their pension balance sheet, their asset allocation plan, even though they themselves are like, “Oh yeah, I own Bitcoin; I just can’t give it to my clients yet,” or “I can’t put it on the corporate treasury.”
As the asset goes through more positive cycles, as there are more milestones being met, they can start bringing that from their personal account and start actually doing some of the same actions that they’ve already done personally, just in their institution, in a more professional light because the asset’s got large enough, liquid enough, understood enough, that they can bring it to their peers.
Preston Pysh
Everybody inside that institution knows who that person is because they just talk about Bitcoin all day long, right? So we covered 2024; that was the answer you got for 2024. Now we’re going to go to 2025. When you were talking about collateralized lending, Michael, I look back at Mt. Gox, absolutely devastating for folks that had deposits on Mt. Gox. This last cycle we had FTX, and many others that were doing lending.
There’s going to be big bankers, call it BlackRock, Fidelity, whoever, that maybe are listening to this conversation. If you could give them a bit of advice about how Bitcoin works and they’re going to be doing lending with Bitcoin, what would be your bit of advice to them right now?
Michael Saylor
I don’t think they’ll have any problem against Bitcoin. The problem with these other examples is they’re all wildcat banks. Nobody in their right mind would put money in a private, opaque, un-audited operation run by two dudes out of their garage, offshore, without a mailing address. So, the problem wasn’t borrowing against Bitcoin; the problem was actually dealing with people running personal banks out of their basement, and they didn’t know how to run a bank.
The way all these wirehouses work right now is, you have a portfolio of assets, they mark them to market every day, and they give you margin loans with a loan-to-value no more than 50% or something, and they will adjust the advance ratio. The way they manage risk is they just mark them to market. They already know how to mark to market. With Bitcoin, they’ll just be able to mark to market at 24/7/365. Normally, the way they work is they would say, “We’ll give you a loan of x,” if your portfolio is Apple stock, and Microsoft, and Bitcoin, they’ll give you a loan of up to 20-30% of that, and then if those things trade down, they’ll just ask you to post more collateral, pay off the loan. That’s a business that works perfectly fine for the last 40 years. All their systems are wired, and the risk here is the people that got screwed in a Bitcoin loan, they didn’t get screwed because the Bitcoin collateral went bad, they got screwed because the bank stole their money.
So here you have JP Morgan, Citigroup, Bank of America, Wells Fargo, with trillion-dollar balance sheets. They don’t normally steal their clients’ money as a normal thing. They’re too big to fail. So, I think that anybody wanting a mortgage, or wanting a credit card, or a home loan, they would normally go to a mega bank anyway, and the problem in the market is those banks haven’t custodied Bitcoin, and because they don’t custody it, it’s not part of the collateral package. There are a lot of reasons why they haven’t, or they couldn’t, but as soon as they can, I actually think the rest of the credit issues become very straightforward, and you’ll find a bank will give you either that margin loan in lieu of Apple or Microsoft stock.
Or sometimes they’ll give you a mortgage and they’ll say, “Post some other assets as security against the mortgage,” and you end up posting some securities and you get a 30-year mortgage with some securities posted to get it going, and they may just take Bitcoin as that security to top up your mortgage, or refinance it.
Preston Pysh
If I was going to push back on this, I think if Caitlyn Long were here, she would say, “There might be a frequency mismatch.” So, when we’re looking at the speed of settlement of Bitcoin, and we look at the volatility of Bitcoin, and then we look at traditional rails, equity certificates; what’s the frequency? Are they 24/7, that we can clear those? And if we’re posting collateral with things that can’t match Bitcoin’s frequency, does that pose a systemic risk for some of these custodians?
Michael Saylor
I don’t think it poses systemic risk. You’re talking about 0.1% of the money. A big bank would give you a $100 million loan against Apple stock over the weekend if you had a billion dollars of Apple stock. If you had $300 million of Apple stock, they’d give you a $100 million loan over the weekend. Maybe something happens in China; Apple can’t manufacture iPhones, and in the morning, Apple stock gaps down. Well, the bank took the risk, not you, and the banks are already willing to take 48 hours or 72 hours settlement risk on all these other securities. They would be taking an order of magnitude less risk with Bitcoin.
So, Bitcoin derisks the bank, but the point really is the banks are already taking more risk, and they’re comfortable with it. They’ve got massive balance sheets; they’ve got hundreds of billions of dollars of equity capital. The point is the only thing that’s holding back Bitcoin credit markets is the big bulge bracket banks being able to custody Bitcoin. At the point that they begin to custody Bitcoin, they will start to extend credit as the natural next step. There’s nothing about the asset class that makes it harder for them. It’s a better asset for them to extend credit. It’s better than the hundred trillion dollars of equity; it’s not worse.
So, I actually think they will embrace it, and their view would be a lot less risk. It’s a lot easier to manage. The reason they’re not doing it now is not because there’s an issue with Bitcoin; it’s just they’re not able to custody it, and if they can’t custody it, there’s no handle on it. That’s why you don’t see that market taking off.
Lyn Alden
I think there’s been good success, for example, companies like Unchained that have been around for quite a while doing Bitcoin collateralized loans, and I, you know, you mentioned Caitlyn. I think a key thing she would point out is the difference between commodity credit and circulation credit, as Mises has described it, which is basically whether or not you can then take the collateral, rehypothecate it.
The ones that have been doing this successfully through multiple cycles, the key is that the collateral is safe; they’re making low loan-to-value loans against collateral, and then they’re holding the collateral safe rather than lending out the collateral and creating this big rehypothecated monster that they can’t deal with. So the firms that have done that well, they’ve experienced little or no credit losses because it’s done prudently, and I think we’ll see larger and larger institutions get into that over time because it’s a loan type that makes sense amid the other loans that are out there.
Preston Pysh
When I think about 2024-2025, regarding all these people around the world that are dealing with horrific currencies, and they’re unbanked, and the payments side of the house. How do you guys see that playing out in the coming two to four years with what’s currently built?, where Lightning’s at, some of the technologies that are on the horizon? How do you see the order of technology manifesting itself in the coming two to four years?
Michael Saylor
I think there are a thousand different on-ramps; it’s not one. Lightning is an important layer 2, but there’s a dozen Bitcoin wallets in every country, there’s a dozen Bitcoin exchanges, there’s peer-to-peer. It’s a different story in every country. In Africa, a different story, in every country in Asia, it’s going to be an evolving story, and you’re going to see people develop a lot of competitive layer 2s.
You’re going to see people develop competitive layer three apps, competitive exchanges. Some people will be good, some companies will move fast, some will move slow. There’ll be regulatory turmoil. I could have predicted, like in Argentina, I would have said at some point Argentina will close the door to Bitcoin before Javier was elected. I would have thought that they’re going to institute capital controls, but then that election turned everything 180 degrees, and it went the opposite way. So, politics is chaos. Then you saw the opposite thing happening in Nigeria, where that was 400 Naira to the dollar, and when it jumps to 1,200 Naira to the dollar, they’re closing the onramps to the custodians, but non-custodial solutions become all the more compelling then, right?
So, I don’t think there’s one answer. It’s not even one best outcome or need in one country because it’s dynamically evolving based upon the politics and the circumstances in every single nation on the ground. It even changes by state, by province, right? So, I just think this is a classic market situation. The one thing that will happen is, all these currencies, as they weaken, there’ll be marketing events for Bitcoin. Everyone in a collapsing currency is going to look for a solution. More and more are going to hear about Bitcoin, then they’re going to want to be paid in Bitcoin, then they’re going to want to download a Lightning wallet, then there’ll be another wallet, then there’ll be a debate about what to do with it, and then some companies will fail, some will succeed, some governments will ignore it, some governments will embrace it, some governments will roll around in the mud with it.
Preston Pysh
Lyn?
Lyn Alden
One thing I described in my book is that there are 160 different currencies in the world. If you look historically at how money gets in and out, they all have varying levels of capital controls around them. The two ways money gets in or out are either through physical ports of entry, which are obviously very restricted — you can only bring so much cash or gold to an airport — and then wire transfers, which again are tightly controlled environments. So, when you have a space with a failing currency and millions of people, historically, the ways to get out were somewhat limited in terms of scale.
What things like Bitcoin and stablecoins do is, one, you can bring them through ports of entry with infinite value density, so it gets past that issue. Then two, I hire a graphic designer in country XYZ; she could hold up a QR code over a video call, or she can send a payment string over email or DM, and I can pay her over that and go around her local banking system. So, there’s obviously friction there for those trying to maintain those kinds of captive audiences in 100 plus different currencies around the world. But, what we’ve generally seen is countries try to block the exits and realize it’s not working. You mentioned Argentina; in 2022, a lot of banks that were going to get into Bitcoin, and the Argentina government stopped them from doing it. Then the next year, they extended it to the fintech companies, not even the banks. They never got to the point where they said “Bitcoin’s illegal,” but they were trying to make it harder and harder to do. Now, some of that’s being reversed.
We also saw in Nigeria they went through a phase where they blocked all the banks from sending to exchanges. Nigeria then developed the largest peer-to-peer market volumes in the world, according to most measurements, if you look at chain analysis. Basically, whenever there’s friction, if the people want it, the tool is so powerful that they can route around blockages until the problem at the top is forced to change and modify their strategy. So, I think we’re going to see more and more ways of that. We’re going to see frictions, and then we’re going to see overcoming frictions, and then we’re going to see new frictions, and overcoming frictions because the tool itself is so powerful that it gives you so many ways to route around problems when they emerge.
Larry Lepard
I agree with Lyn. Just quickly, a reminder that one of the original strong Bitcoin use cases was the Chinese. Wealthy Chinese who had a lot of capital and could not get it out and couldn’t put enough gold in their suitcase to leave would convert into Bitcoin, fly to Vancouver, convert back to Canadian dollars, and buy a house on the water. So, the capital controls that are likely to come from oppressive regimes just drive adoption and use cases.
Preston Pysh
Let’s go to the next four to eight years. Because energy infrastructure takes time, four to eight years from now, how do you see energy production in Bitcoin? What is changing from what we’re seeing today? Is anything changing from the trends that we’re seeing today? Any insights in that area?
Lyn Alden
I think it’s going to be more and more normal for Bitcoin to be used to soak up stranded energy. I think it becomes increasingly normalized. We often turn the light on, and it just works; we turn the light off, it goes off, but behind the scenes, it’s actually very complex because you have fluctuating demand for power, and you have fluctuating supply in some cases, or you have a supply that’s always online, it’s always producing like a hydro dam, and there’s fluctuating demand around it. So, how do you manage that delta, that gap between both sine waves fluctuating against each other, demand and supply? You need a really flexible source. Either you do things like natural gas plants that can turn on in a second, or you need to just waste the energy. If it’s always on like hydro power and people aren’t using it in the area, it just gets curtailed; it just gets wasted. Bitcoin represents this buyer that is low bandwidth. They can go into remote environments with very low uptime requirements, where they happen to have grids that go down a lot, and say, “Look, we’ll buy any spare energy for a couple of cents per kilowatt-hour.”
I think that it will be increasingly normal to have that be part of energy generation grid management. It’s just a natural thing. Then, at that 4 to 8-year horizon, I think that portable capital becomes a thing; you have this kind of portable capital in size that can move around the world. This basically rewards jurisdictions that respect capital and punishes jurisdictions that don’t. So, generally, you’ll see capital wants to flow out of the tighter jurisdictions and more towards the jurisdictions where capital wants to be, and this is a tool that just enables that, and I think that’s a good incentive structure to exist in the world.
Preston Pysh
Michael, regarding AI in the future, including AI data centers, GPUs, and the associated energy intensity, do you foresee any relationship with Bitcoin mining in the next four to eight years? Or do you believe that the availability of cheap energy predominantly influences Bitcoin mining and is not necessarily geographically tethered to where large cities and the demand for AI and data processing are located?
Michael Saylor
I think that Bitcoin uses maybe 15 gigawatts of energy, and it’s trending up, but I think that the Bitcoin energy fixation or narrative may have peaked, or will peak, in the next few years because Bitcoin is getting exponentially more efficient in using energy. Whereas if you look at AI, a lot of these hyperscalers are looking to scale up 60 gigawatts this year, and they’re wanting to go to 600 gigawatts within the decade. So what’s going to happen is they’re going to inherit all of the energy FUD that we used to have.
You’d think that 10 gigawatts is a lot of power, but when someone decides they want 100 gigawatts, now it’s real power. And so they will actually throw all their lobbyists at that, and I actually think that it’s pretty clear that civilization is headed toward using hundreds and then thousands of gigawatts of power. A lot of it will be for digital intelligence, AI. Some of it will go to secure digital money, you know what Bitcoin is, but clearly, the bigger idea is it seems inevitable that at some point, big Tech and the hyperscalers are going to actually overturn or reverse the stigma for nuclear power, and you’re actually going to see that Microsoft, and Amazon, and Apple will do for nuclear power what nobody else could do in 50 years because they’re going to need it to run their AI data centers. As for what I think about our relationship, I think if you look at Bitcoin companies today, you’d say, “Oh, here are 20 Bitcoin miners; those are the big Bitcoin companies,” but I actually think there’ll be an emergent new class of Bitcoin companies, and there’ll be applications on top of Bitcoin—layer 2, layer three, layer four, layer five applications—and they’ll be doing things that were inconceivable last year that are profoundly important to society.
So I think there’ll be a new generation of Bitcoin companies, and they may not actually be electrical energy intensive. I think they’ll be digital energy intensive. I think they’ll use Bitcoin on their balance sheets to do those things. I think that Bitcoin’s role is critical to securing the internet against all of the bad actors with AI. If you want to actually watermark, timestamp, cryptographically sign messages and documents and content, you’re going to need Bitcoin to do that as a system of truth. I think AI will drive demand for Bitcoin in that way, and then I also think that at some point, you could release an AI to run autonomously, and you’re going to power it with digital energy, which is Bitcoin. If you want to create an AI version of yourself and have it live on the internet forever, you better give it some Bitcoin. So I think there’s going to be an interesting demand function there.
Preston Pysh
That’s amazing! All right, I want to take this opportunity to present you guys with a question that I think is a really powerful opportunity. If you could look into the camera and talk to the world leaders, presidents of countries, and give them a two- to four-minute elevator pitch of why they need to take Bitcoin really seriously, what would that sound like?
Lyn Alden
I think there’s the proactive way or the reactive way. You want to take the proactive way so you don’t go through the phase where you’re fighting the whole time; you’re losing the battle against a decentralized thing that people want. Instead, you want to embrace it proactively and say, “Look, we want our people to own Bitcoin.
We want institutions that are making Bitcoin companies to come and make jobs here and create capital here.” I think that there’s like a time preference. A lot of governments will look and say, “This is a threat to our currency; this is a threat to XYZ,” and their first instinct is to push back on it. But that’s very short-term thinking. If they said, “If we look out 5, 10, 15 years, do we want to be a hub that portable capital wants to come to, that people want to live in, that people want to do business in, or do we not?” So, I think that if they just look out longer term, to not go down that short-term approach of trying to make those capital controls, those firewalls, to try to make the frictions, because it just doesn’t work. It’s just better to get in front of that and embrace it.
Larry Lepard
I think what I would say is this: “Guys, we need to have a serious talk here, and the talk has to center around the fact that Keynes has driven us into a monetary cul-de-sac, and there’s no way out. We’re in a box canyon inside a plane, and we’re going to crash into the wall.
The reason is that the Keynesian system is built on fractional reserve lending, which requires increasing debt consistently in order to generate any form of GDP growth. We’ve gotten to the point at which the efficiency of that debt is extremely low, and so it’s growing in a way that cannot be supported by the underlying GDP. Therefore, the two possible outcomes are sovereign debt collapse or very, very high rates of inflation, potentially hyperinflation. The money is badly broken, and we need to fix it in as fair a manner as we can for everybody, and that is to return to some kind of a sound money standard. Bitcoin, in my opinion, is the correct sound money standard.”
Read Jeff Booth’s book and you’ll understand why we need a deflationary currency rather than inflationary currency.
Keynes was wrong, and money is really all about matching efficiency. The amount of money saved and the amount of money invested should balance one another; it’s what sets the interest rate. That’s classical economics. That’s really what we’ve gotten away from. The central banks control the interest rates; they manipulate it. We had 0% interest rates for years and years, and this is why we have this boom/bust cycle. It’s creating enormous wealth inequality, and it’s why you’ve got everybody screaming at each other and wondering what the hell is wrong. What the hell is wrong is that the money is broken, so we need to fix the money. If you want to be a true leader of your country, you need to educate all your people as to why we need to fix the money, how we’re going to fix the money, and reset the currency so that we’ve got a system that’s stable and sound for everybody.
Michael Saylor
I wouldn’t even frame it economically. What I would say is that you’re responsible for a nation. The Romans were great because of their roads, and that gave them land power. Then the British Empire was great because they had ships, and they could find longitude on the ocean, and they had ports, and they had good rivers, and harbors, and that gave them sea power. Then at some point, we invented the airplane, and we had airports and aircraft, and that created air power. You can’t imagine a great nation without an airline; that’s why the nations subsidize the airlines. Then along comes generators, and coal, and oil, and we create electrical power. Then there are nuclear reactors, and you have nuclear power. Then we create rockets, and the great nations launch rockets and satellites into space, and that gives you space power. As you can see, your nation doesn’t have a future if you don’t have air power, space power, electrical power, land power, sea power. Even today, the United States is based on air power, sea power, space power, land power. Bitcoin represents digital power. If you want a future for your country, you need to harness digital power; it is the future.
If I have an airplane, I can go around the Earth in one day, and it’s very visible to someone. If you have a ship, you can haul a thousand tanks, and it’s very visible. When you have a road, you can move an army of 100,000 people; it’s very visible. What I can do with Bitcoin is I can move a hundred billion dollars in 30 minutes on Sunday afternoon from you to me and back again, and you can’t do that with any other technology. If you don’t think that’s important, then give me the hundred billion.
Preston Pysh
I want to go down the line, one minute each. Everybody here, everybody watching on YouTube, or wherever they’re streaming this, they are asking what’s the most constructive thing I can do to move this forward? What’s the most constructive thing that everybody out there in the audience, listening to this, and watching this right now, that they can do?
Lyn Alden
I think it’s very local depending on where you are. Just buy it! Just have it, maybe gift a book to someone. I don’t think it’s the right strategy to go down and push it down other people’s throats, but basically be there, be willing to answer questions. Research it for yourself so that you’re ready to answer questions that come. In certain places in the world, I’m really excited about these Bitcoin hubs that are building. Here in Madeira, for example, that’s a Bitcoin hub. Bitcoin Beach was powerful enough that it inspired a nation to get more into it. We see multiple hubs in Africa, Asia, Latin America, and the United States. Multiple football teams are now embracing Bitcoin and holding Bitcoin on their balance sheet, and getting involved. Basically, if you have a business or you have an organization, adding Bitcoin to it is one of the ways to connect it and to make it better. So, I think that basically whatever you’re doing, figure out how you can do it in a way that is beneficial to the network, or just be a source of education to people around you and answer their questions..
Michael Saylor
I would just say, cheerful constructive Bitcoin advocacy.
Larry Lepard
I would just echo what Michael said. I think I’ve given away a lot of copies of Saif’s book, and I just try and let it percolate, and answer questions, and support people.
Preston Pysh
All right give a hand to the panel here! What a thoughtful group [Applause].
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