John is an integral part of our five person team at Ten31 and we dive deep into how we think about deploying funds throughout the ecosystem. We explore topics such as merchant adoption, bitcoin treasury companies such as MSTR, and other trends to watch going forward.
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(00:00:00) OCC Intro Clip
(00:02:17) Happy Bitcoin Monday
(00:03:18) Guest Introduction: John Arnold
(00:04:45) Discussion on Banks Holding Bitcoin
(00:07:22) Bitcoin as Money for Enemies
(00:10:19) John Arnold's Background and Bitcoin Journey
(00:18:09) Steak and Shake Accepting Bitcoin
(00:28:48) Bitcoin Treasury Companies
(00:36:00) MicroStrategy's Bitcoin Strategy
(00:51:58) Investment Strategy at Ten31
(01:02:30) Bitcoin as Shared Equity
(01:10:03) Missing Bitcoin Infrastructure
(01:18:01) Bitcoin's Impact on Small Businesses
(01:29:15) Current Bitcoin Market Analysis
(01:42:01) Retail Demand and Bitcoin's Future
(01:56:55) Final Thoughts and Sats Discussion
[00:00:03]
Unknown:
More than 50,000,000 Americans hold some form of cryptocurrency. This digitalization of financial services is not a trend. It is a transformation. Here at the office of the comptroller of the currency, we've confirmed that national banks and federal savings associations may engage in certain cryptocurrency activities responsibly in order to serve their customers. OCC regulated banks may provide custody services including the safekeeping and secure storage of cryptocurrencies and other digital assets all on behalf of their customers. The banks we supervise also may buy and sell cryptocurrencies they hold in custody at their customer's direction.
Additionally, these banks may provide other custody services including record keeping, tax, or reporting services for their customers. OCC banks may use a sub custodian to provide the same services subject to appropriate third party risk management practices. While a range of cryptocurrency and digital asset activities may be performed by banks and their third parties, I want to be clear that the OCC expects these activities to be conducted in a safe and sound manner and in compliance with applicable law. To learn more, please visit 0cc.gov.
[00:02:18] ODELL:
Happy Bitcoin Monday, freaks. It's your host, Odell, here for another Citadel Dispatch, the interactive live show focused on actual Bitcoin and Freedom Tech discussion. As always, dispatch is brought to you without ads or sponsors. It is supported purely by Bitcoin donations from viewers like you. Two best ways to support the show are through our Nostra enabled, Bitcoin enabled live stream. You can get to there at silodispatch.com/stream. I see we already have two ride or die freaks there. Kieran has zapped a 69 sets already. Thank you, Kieran.
Or through podcasting two point o apps like fountain podcasts, the top zap from last week's show with VNPRC was 5,000 sets from a user named steak and eggs. Great breakfast choice. Thank you for the sats. There was no message. There was also a couple others apps there, but there was one from Bob the Cow for 500 sats that said, Sedel Dispatch is the second best podcast on Earth after Call Her Daddy. Felt like that deserved an honorable mention. That is a crossover that few have expected. Call Her Daddy listeners are now listening to Sedel Dispatch. Anyway, freaks, that boring ass clip that I started off the show with was, I think, the chair I don't know if he's the chair of the OCC, but it's the office of the comptroller of the currency. I guess they're in charge of banks. I'm not a bank expert.
Maybe our guest is. We have ride or die freak, return guest, one of my partners at ten thirty one, John Arnold. How's it going, John?
[00:04:11] John Arnold:
What's up? Great to be here. I'm glad, you chose maybe the most boring clip in the history of the show to open up, this episode with me. Feel feel very honored.
[00:04:22] ODELL:
Well, you're my favorite suit, and I have the pleasure of working with you on a daily basis. So it felt fitting. Also, I mean, I've it seems like it's a big deal. I mean, I I would never want banks to hold my Bitcoin, but that seems huge. Do you have an opinion on, that that news?
[00:04:45] John Arnold:
Look. Yeah. I mean, well, on the on the suit point, I, I literally before we got on here, I realized I was wearing my Patagonia, pullover, so I had to rip that off and and, not I I couldn't be the first guest to support a Patagonia logo on the show, so, we we dodged that bullet. But, yeah, I mean, it's, in terms of direction of travel. Right? Like, it's I think we all expected it to eventually go this way. To your point on the, the banking question, so it's the OCC, the FDIC, and the Fed that are the three, like, banking regulators in The United States collectively.
That probably is the limit of my knowledge in terms of, who controls what and who does what, and I think, like, it probably varies based on the administration. But so, yes, that that all that is to say, like, OCC, Fed, FDIC moving all kind of collectively in that direction for, allowing Bitcoin custody in some capacity, still TBD. What that's actually gonna mean, is, definitely a notable mile marker. And at the end of the day, like, I you know, if if you've been here for a little while, and you've been here longer than me, but if you've spent any time in Bitcoin, you've probably heard the phrase, you know, Bitcoin is money for enemies. So the idea that, you know, the most powerful, wealthy, organizations that kinda pull the strings of, you know, everything around the world geopolitically and and beyond, you know, that they weren't gonna get into Bitcoin in some way and want to have some piece of that and be able to charge a big on, you know, the AUM of Bitcoin.
You know, I think if you thought that that wasn't gonna happen, you you probably haven't been paying enough attention, and you probably aren't bullish enough, frankly, on where, Bitcoin is ultimately gonna go. I I, you know, I think we've all discussed internally, and you and Marty have probably discussed as well at podcast at this point, that it's gone there faster than I think we would have ever expected even a year ago. If you looked at where regulations seem to be moving in The US around Bitcoin and broader air quotes air quotes crypto. So the last twelve months have been mass reversal, and I think we can get into it. I think there are definite cons to that, to it kinda suits being collectively a lot more involved and enmeshed in Bitcoin, but, I think there are some definitive pros as well. And either way, you know, I see it as largely just capitulation, on a faster timeline than I was ever expecting. So, yes, I think all of that is a long winded way to say. I think it's a big deal.
[00:07:23] ODELL:
It's the most boring, bullish video. So we have, rider die freaks in the live chat. I see Mav twenty one zapped us 10,000 sets. Super fat arrows zapped us 10,000 sets. Thank you, freaks. Guys, just to put it out there, you know, ten thirty one and the two projects I'm most focused on right now are ten thirty one and open sets. And as part of that, I mean, I've always tried to build in the open and and be as transparent and responsive as possible. And so part of that is I I I think it makes sense to have reoccurring shows, that involve team members at both ten thirty one and OpenSats.
Most recently, you know, we had, Nifty and MBK on that are both board members at OpenSats with me. And now, obviously, we have John here. But, as always, the live chat is unmoderated and unedited. So feel free to hit us with any questions or comments you have as we rip here. I'd like to be you know, for this to be as helpful as possible for you guys who have questions. Yeah. So with all that said, John, I mean, I think a good place to start here is you're relatively unknown by those who aren't, paying attention. Yeah. Mav twenty one's laughing that he actually zapped us 10,000 Bitcoins. Like, you call the smallest unit of Bitcoin whatever you want. The cool thing about Bitcoin is that anyone can simply push a change to their app and and name the unit whatever they desire. It is a beautiful thing. You don't have to argue about it on the Internet.
John, why don't you give us a little just a quick rundown on your background, how you got into Bitcoin. And, yeah, I think it should be good context for people.
[00:09:26] John Arnold:
Yeah. As Adele mentioned, classic suit. Out of college, went the, investment banking route. So eight hundred hour weeks, arranging PowerPoint logos and churning out Excel models. Did that for a couple years and then moved over to what's colloquially called colloquially called the buy side, just doing basically investment management at a couple large hedge funds, and focusing on the health care space. But over the course of, like, five years doing that, fell down the Bitcoin rabbit hole pretty hard. I had been a a big Ron Paul guy, big gold bug, and, was coming from kind of a libertarian Austrian economics background.
But, in my previous, forays into Bitcoin, I just, you know, I I didn't have the depth of my touch points to actually, do enough work to kinda grok it and understand, what was so meaningful about it. So first time I've heard about it was in college. It's probably around 2013. I think because, Mt. Gox blew up, I had maybe, like, heard it mentioned once or twice, on, like, Mises Institute pages, if you're anyone's familiar with that. But I, you know, thought, like, that's an interesting science experiment, but, obviously, Internet money is never gonna work. Fast forward to 2017, kinda working on my hedge fund seat.
Late twenty seventeen, aped in a little bit. Not nothing huge. Kind of not exactly at the pico top, but probably, you know, like, two or three weeks before, crash happened. And I, you know, got scared off by the ICO craze and kind of thought I had reconfirmed my priors that, well, yeah, actually, I was right. This this whole space is a scam, so not gonna be a hedge into it. And then finally, third touch point was in, spring twenty twenty. And I'll I'll let listeners, draw their conclusions as to what led to, that, reawakening on Bitcoin.
But, just because of guys like you, guys like Marty, and various other Twitter personalities, was able to kinda fully get pulled down the rabbit hole, and, was just kind of a random pleb for a couple years, working my hedge fund job. And in mid to late twenty twenty one, I was looking for ways to invest in the space, beyond just holding Bitcoin and support some of the companies that whose products I was already using, and 10/31 popped under my radar, because of because of you and Marty and, you know, saw that, just kinda combining, an interesting set of skill sets and capabilities between you guys on the Bitcoin technical side and then Grant and Jonathan, our other two partners, coming much more from traditional finance side that looked a lot like what I had done.
So and already at that point, the portfolio was was very strong and has, like, gotten stronger since. But, saw all those data points, reached out, started just kind of working with you guys on the side of my spare time as I was able to and then was able to come on full time in mid twenty twenty two. I think literally the day that Terra Luna blew up was, like, my first day with you guys. So, been Nice. It's been almost three years now. Quite a lot has has changed then, but I think the the thesis thus far that got me excited, has has definitely played out. So that's my my rough background. Reform reformed suit.
But, yeah. Happy to be here.
[00:12:56] ODELL:
Reform suit, ride or die freak. I I love the trajectory. And to be clear, spring twenty twenty, when you got reinterested in Bitcoin, that was, like, COVID crash, March 2020. Like, we fell from, like, 11 k to $3,000.
[00:13:15] John Arnold:
Interesting perspective to come into Bitcoin in full swing at that point. Yeah. Well, I think it was so it wasn't like, you know, every the the market crapped out, and I, you know, saw Bitcoin fall from whatever it was, like, $89,000 to, like, 3 k or whatever and thought, oh, I gotta get in on this thing now. Like, it wasn't so much that. It was probably the next, like, one to two months, the policy response to everything that All the printing. Yeah. On on a broad scale, the the monetary policy response and and otherwise, kinda was, I think I mean, other people have mentioned this, in other context, so I don't belabor it. But certainly, like, a a pivotal moment for a lot of people, I think, in just understanding a little better even if you kinda latently understood it before. Like, yeah, I I was very aware of the Fed central banking, kind of, the nature of of fiat money and, fractional reserve banking and everything like that from kind of my Austrian background. But, you know, it's one thing to kinda be theoretically aware of it, another to see just, a massive unprecedented acceleration of it to kind of its logical conclusion in your in your lifetime. So that, yeah, reframed some things for me and and made it feel a lot more urgent to investigate how to respond to that in my personal life.
And so kinda, you know, April, May '20 '20 was when I started, that that journey.
[00:14:33] ODELL:
Awesome. I guess, five years ago, feels kind of like yesterday, but also kind of feels like a decade. It's weird. Times are weird. Freaks. I love the activity in the live chat. Average Gary, five thousand sats. Sawzall, two point one thousand sats. Dame x, that's a new name I haven't seen before. Zapped, 10,000 sats. And Chief White, zapped 10,000 sats. I see some good questions there. So, I mean, this is a crazy time in Bitcoin. I kinda wanted this to be, you know, maybe a we'll, like, mix evergreen good stuff on, like, how we're thinking about it perspective wise, but also, like, very topical stuff because I always like bouncing ideas off of you in perspectives. This week, Bitcoiners lost their cool or got were very excited. I got be very positive. They got very, very excited about Steak and Shake accepting Bitcoin. What, the interfaith I'd the flow is probably the the single best merchant flow we've seen, to date in terms of just very well integrated, nice little pay with Bitcoin on the terminal.
It doesn't launch you out to another page, just puts a QR code there, shows Sats shows the USD to to Sats exchange rate. Everything is lightning by default. What is your what is your opinion on on this development?
[00:16:09] John Arnold:
I mean, it's great, first of all. Like, great to see. I you know, there's it's very self evidently, like, a good thing, so I don't know that I have anything interesting to say on, like, the positive side of the ledger. Like, the the hot take that you probably are looking for that we discussed a little bit in our 10:31 chat, is, like, I'm not sure that it's anything more than, like, a flash in the pan, pun kind of halfway intended. You know, Steak and Shake has, like, clearly gone down this route of being, like, you know, based since, like, last year, but especially since the election, you know, with, like, the the anti seed oil crusade and everything like that.
Because that's great. I I'm not certain that we've got, like, a two sided problem right now with kind of mass spending of Bitcoin. Number one being, like, you've talked about this on the show, but I think there are probably, like, less than certainly less than 50,000,000 people, probably less than 20,000,000 people that, like, self custody or, like, self custody Bitcoin or really even, like, use Bitcoin in a meaningful way. So, like, people who don't hold it in ETF, people who don't just, like, leave it on Coinbase or, you know, their their their preferred exchange of choice. So the population of those with, like, any bit a, Bitcoin to spend at all, is is kind of kinda small.
B, the even among those that kinda do have some Bitcoin that they control, you know, off of an exchange, whether in a custodial wallet or not. Right? Like, the actual units of Bitcoin that they could, you know, spend, you know, there's a huge percentage of those people that still see it as, a diversification to kind of their investment portfolio or something where they wanna hold, you know, x to have an x percent, like, target of either wealth that they wanna hold in Bitcoin or maybe they wanna build it over time. They see themselves as, like, net buyers of Bitcoin, and and, you know, they actively don't want to to spend it. So there's, like, that piece. And then that leads into the the other side of the the problem, which is because of that, because the population is still pretty small and even, like, a decent percentage of that existing population doesn't really wanna spend doesn't really wanna spend their Bitcoin, I think big box retailers and, like, national chains and certainly even more so, like, you know, smaller merchants, like, you know, we've seen this actively, right, like, on the ground, like, have real trouble, like, viewing it as worth their time to have any incremental overhead, to support people coming in and, like, and paying with Bitcoin. Like, the the demand doesn't really seem to to be there in mass on a sustained basis.
And so, like, the the attitude is, am I really gonna access, like, an untapped pool of How many customers? How many people do you think spent Bitcoin at Staking Strike this week? How do you feel total? Like, just number of I mean,
[00:19:05] ODELL:
it's it's under a thousand. Right? Like, I would have to think this What percentage of the people that went posted on social media?
[00:19:14] John Arnold:
Because there was, like, a hundred Almost a %. Or 200 Yeah. Posts on social media. I I think very few people went to Steak and Shake to to spend their Bitcoin and just to support kind of, you know, the merchants receiving Bitcoin and then didn't virtue signal about it. I think it's it's, you know, it's near zero. Right?
[00:19:33] ODELL:
Yeah. I think it was probably my guess would be, like, in the thousand range. Yeah. Which is an interesting dynamic. Right? Because part of the reason why I'm so excited about Nasr is is that it it natively uses Bitcoin as this this means of ex medium of exchange, right, as as a way of paying people. And if you look at something like Nasr, according to Nasr.band, to date on Nasr, which is what, like, three years it's been or something like that. But in the beginning, let's be honest, it was kind of broken. I mean, it's kind of been broken until, like, six months ago. It was hard to have a really stable experience with it. 5,000,000 transactions on Nasr. The primal wallet alone is almost at 2,000,000 Bitcoin transactions sent.
And it's interesting seeing the, maybe the lack of excitement for Nasr in comparison to the, maybe, over excitement of Steak and Shake. But that said, I I mean, I think it's undeniable that this was a major narrative win. I think I saw a bunch of posts that, like, oh, well, you have Bitcoin. What can you spend it on? It's like, oh, well, I can spend it on a burger. I feel inclined. So that's a win. That's a big win, especially in a cycle that is very dominated by store value and investment use case. It's good to see the the opposite. Right? This is also why I I on rabbit hole recap this week, we highlighted the fact that, the Bitcoin Vegas conference is gonna try and break the world record for number of Bitcoin payments done in person.
Because these narrative wins, they do matter. Right? And I've, I want people I want big good money should be you should be able to spend and save it without permission. I prefer to spend Bitcoin. My biggest issue is that there's not places that I could spend it on. The other piece that is interesting here to me is one of the issues we've seen in terms of merchant adoption, specifically physical merchant adoption, is that it requires training of, the help of the staff. And what happens is maybe one person pays with Bitcoin a month or two people, and then you come in and you you check, like, BTC map or something, and you wanna pay Bitcoin at this location. And you walk in and you ask the staff, like, do you accept Bitcoin? And they their eyes glass over. They have no idea what you're talking about.
The fact that it seems that Steak and Shake has already fired all of their frontline staff and just uses touch screens, is probably is probably a win in that regard. Right? It's like you add the button once, and you don't have to do any additional training. Like, the button's on the touch screen. Like, you're not talking to a person. There's no training of a individual. So I think there's a piece there, that makes me a little bit more optimistic that this will be a long standing thing. The last thing I would mention as someone who works very hard for his family to avoid seed oils, there's a little key aspect here with the steak and shake thing. They stopped using seed oils in store, but the fries come pre seed oiled when they arrive at the store. And I think people aren't aware of this, and I just I don't want seed oil washing. I want people to be aware of of that. But before we move on to the next topic, John, how much of this is because we as a collective last cycle kind of false started merchant adoption? Like, I mean, I I remember I was I was personally very excited. At some point, I believe that Bitcoin will become very commonly used as as a medium of exchange, people paying and receiving Bitcoin. I think at some point, more people will be will be paying Bitcoin than selling Bitcoin, will be receiving Bitcoin than buying Bitcoin.
And we were kinda I I I think we got a little bit too excited last cycle. Is part of your skepticism based because of that?
[00:23:40] John Arnold:
I mean, that that's a piece of it. I wouldn't say it's, like, necessarily it seems like what you're saying is, like, is it just scar tissue from, like, we were we were more bullish, like, last cycle, and it didn't happen in the way that we expected or hoped as quickly. So, like, does that kinda weigh on me? Like, not so much. Like, I wouldn't say I don't think I was, like, hyper bullish last cycle on medium of exchange use cases kind of, like, becoming, super widespread and super mainstream for the same reason that I just think that I just cited before, which is, like, there are not that many people that, like, have Bitcoin.
There's and, you know, there are very few people that kind of know what Bitcoin is, in any meaningful way. It can differentiate it from, you know, ETH or any other kind of, you know, shitcoin out there. And then there's an even smaller pie of people that actually have Bitcoin and and, and then a smaller pie of people that kinda want to spend it. And I think there's gotta be a more I think we need to hit a higher threshold of, like, total wealth, not necessarily people because I think, like and this is a discussion we can maybe get into on some of the other topics. But, like, a lot of, you know, wealth is disproportionately controlled by, like, a small handful of people. You can, like, cite whatever system you want on that and, like, you know, maybe that's maybe that's good, maybe that's bad. I think that there's always, like, gonna be a natural dynamic where that's the case. So it doesn't necessarily have to be, like, every single person in the world's orange bill, but you do need, like, a significant amount of cash balances, you know, as a percentage of global cash balances held natively in Bitcoin such that people, like, maybe, you know, the people on on this podcast have little choice but to, you know, but to spend their Bitcoin. Right?
And so, like, I I I don't yet see, like, the the demand push, and on a mainstream basis for, like, people to come in and and spend their Bitcoin. That would be necessary to probably lead to, like, a mass kind of medium of exchange push. I think we have just a long way to go to get, like, Bitcoin in the hands of more people and get more cash balances and, like, total wealth converted to Bitcoin first before you really start to see that kinda take hold. So, and I and I've always thought as well, like, the the stake and shake thing is good to see because to your point, it's table stakes for any of this to happen, for it to be as smooth and easy as any other type of transaction. Like, there has to be complete parity. There has to be no additional burden, no overhead for for employees or for customers. It's gotta be super smooth. But I've always felt like the natural bridge mechanism to get to kind of, like, Trojan horse more Bitcoin transactions into, like, mainstream big box retail, like, medium of exchange type setting is to have something where Bitcoin is, you know, affecting the value transfer. Right? And and it's, you know, effectively the rail in the middle. But at either end of the transaction, you have you know, at the edges, you have whatever kind of currency conversion, you know, you want. You know? So you walk in with dollars. You pay. You have no idea that, like, what's happening under the hood is that Bitcoin is affecting that transaction, and the merchant, you know, receives into a bank account dollars, but the, but you cut out the the the middlemen that have come to to dominate, you know, existing, medium of exchange structures. Right? And that way you have, like, something super easy, something super convenient for both sides and actively cuts out costs for, like, low margin businesses that could be very meaningful to, you know, the bottom line of all these businesses.
Like, that's that's a way I feel like you are much more likely to ultimately get Bitcoin, like, into you know, it's it's it's, you know, full flowering of, like, medium of exchange use when a lot of people are kind of leveraging it without even being aware of it, without having to be orange build or adopt any kind of new software or any kind of new payment terminals. You know, I think that that's, like, the the ultimate, like, killer use case that would really scale it up, like, a hundred x from a medium exchange kind of viewpoint. But so, yeah, I mean, there's there's some scar tissue, but I don't know that that's, like, my main kind of, reservation. But all that said, I'd love to be wrong. I'd love for this to go completely viral and, for this for it to be made mainstream next year.
[00:27:54] ODELL:
Hopefully, this is a trend, but it's not not a trend yet. Yeah. I mean, I see one comment here from Mav twenty one, which is something that I've been thinking about a lot lately is, like, this aspect of, like, could there be from a from a tech point of view, kind of like a black swan type of situation where we just go from zero to one and Bitcoin is accepted in a ton of places because of something like, Apple Pay adds Bitcoin to their wallet. Like, if I can just load up my Apple Pay with Bitcoin and just tap tap my phone anywhere Apple Pay is accepted, the merchant doesn't even know they're accepting Bitcoin, Apple settles on the back end Mhmm. Then maybe that's maybe that happens. But, barring that, I think it's just gonna be a slow, steady grind. I think it's a little bit different from our next topic, which is I wanna ask you your opinion on Bitcoin treasury companies.
But with merchant adoption, I feel like it's it's it's it's gonna take longer, and it's it's not as momentum fueled. I think it's going to be small wins that we see over time that slowly and steadily Bitcoin starts eating away at transaction volume in terms of retail. But yeah. So the I mean, the big news of this this year, last two years has been the rise of MSTR and copycats. How do you how do you think about that strategy? How do you think about that development?
[00:29:33] John Arnold:
I mean, it's like I've gone back and forth on it, from, like, a I don't know how much you want, you know, Bitcoin reviews is, kinda known as the the show that is best at putting people to sleep. I can go on a whole kinda corporate finance rabbit hole and, like, really put people to sleep if we wanna do that. No. Let's not put people to sleep. High level, like, it hasn't I I I struggled with it initially because, you know, the at the end of the day, like, a a corporation, especially a publicly traded corporation, like, does not function just to hold liquid assets that its investors could hold themselves without friction.
Right? Like, it's drawing in capital to do something that the individual investors, you know, could, could not do by themselves and, you know, implicitly, like, they have decided that the most efficient way to, like, organize their capital and organize production is under the form of a, you know, corporation or a publicly traded corporation in some cases that can kind of deploy, you know, their their capital effectively to to some end just to generate some, you know, return over some hurdle rate. Like, that's that's basically it. Right? And so, with a company that makes cars or company that makes clothes or, you know, any kind of, goods or services, like, you can make a strong case that, like, we can't do that as efficiently as individuals, so we need to have capital come in, to these different structures and you do that, and that drives a better rate of return overall.
But you can hold Bitcoin, right, in in many different vehicles. You can hold it in cold storage single sig, cold storage multi sig, collaborative custody. You can hold it in ETF if you want. You can, you know, put it on exchange. Don't really recommend that, but, like, something you can do. And and, generally, for, like, pretty much with pretty much no slippage, pretty much no fees, you know, comparatively to to most other asset assets that people hold. So, you know, it's it's always like, it initially you know, it's pretty mystifying to me, what the value is or was of, doing this in, like, a public company vehicle. Like, especially because at the end of the day, like, if you're if you're explicitly one of these companies, and you're explicitly not going to distribute, the the assets based on the fruit of the assets that you've accumulated, which ultimately, like, companies are are traditionally valued on that. Right? Like, discounted cash flows, dividends, whatever.
The idea is, like, I put up my capital and you give me you distribute at some point in the future. Maybe it's ten years in the future. Maybe it's fifty years in the future. You distribute either through dividends or stock buybacks. You cash, that, you know, that benefits me for holding the equity. If the, story here is we're just gonna hold this indefinitely, and in fact, like, the story falls apart if we if we ever say, like, we're gonna get you know, distribute any of this Bitcoin, then, you know, it it basically, all this is pretty able to say. Like, there's a lot of reason, I think, to be skeptical and suspicious about, like, this concept, you know, in theory.
I think that there are players out there having looked at it more that for various reasons have and MSTR is, like, the the obvious one. Right? Have had the ability some of it, I think, is as a result of just historical accidents and kind of, you know, call it, accidents of, the capital markets and restraints and regulations on different pockets of capital, have been able to, take in capital. And, for a dollar of capital, they've been able to accumulate more than a dollar's worth of Bitcoin. The debate would be, well, how long can that actually go on? Is there some reason that they should be able to do that indefinitely? And I think for the vast majority of, you know, the companies that are coming to market now and we're seeing, like I'm not the first to say it, but this is basically, like, you know, the the ICO craze of of this cycle perhaps. You know, for the vast majority of those, I think the answer is gonna be no. I think the the strategic value, and kinda competitive edge and mind share, which is really important here, is going to accrue to, like, a few of the big players that can move really fast in size.
And, you know, the rest of them will probably trend toward, you know, something like one x nav. A lot of them will trend to zero because they'll probably, you know, take lever bets that blow up at exactly the wrong time. And, you know, the the equity will will end up being worth, you know, nothing. I but I do think, like, there's some merit to a couple of these, and I think that they may even help juice this cycle a lot more than otherwise. Ultimately, the flow side is probably there will be games played by a lot of them that then, help offer the the next bear market. So, I guess I would sum it up by saying, on a, again, zero on a one to 10 kind of scale where one is, you know, Bitcoin on a one to 10 scam scale where one is Bitcoin and 10 is, I don't know, ETH. Maybe ETH is not even the scamiest of scams. Maybe that's like an eight. I think, like, this But XRP is 10. X XRP is a 10. That's right. Yeah.
ETH is high, but XRP would be a 10. You know, I'd I'd say this trend is on, like, you know, is like a five maybe. Right? Interesting. I think MSTR is is lower on that scale. There are some others that are higher on that scale. But, yeah, that's kind of how I'm I'm looking at it today.
[00:35:06] ODELL:
Interesting. I mean, so MSTR right now is trading at a two x nav. Right? So it's basically I mean, what Sailor has said is my goal is is to increase your Bitcoin per share, increase the amount of Bitcoin that each share is worth. So, presumably, that's pricing in the thought that he'll at least double your Bitcoin per share. And you think that NAV, yeah, like, do you think that's a justified NAV, or do you think do you think that goes up, or do you think that goes down? Does it go negative? Can it go negative? Is it, like, GBTC?
[00:35:47] John Arnold:
Yeah. Okay. A couple of things.
[00:35:49] ODELL:
I have no idea where that multiple is gonna go. This is not financial advice. This is not financial advice. We should we should probably start talking about commodities and not securities. Yeah. All that shit scares the shit out of me. Yeah. I mean, certainly not,
[00:36:06] John Arnold:
not financial advice, and anyone who tells you they know where m s where Bitcoin's going or where MSTR is going, is is probably, not something you should listen to. But, I mean so a few things. Like, when I think about the amount of Bitcoin that MicroStrategy has and let's assume let's put let's put aside the question of, like, well, do they actually have it? And, Let's assume they have it. Let's assume they have it. I think it's a valid and legitimate conversation to ask, do they actually have, you know, economic benefit from the the Bitcoin that they claim to have, and, you know, how how secure is that, and why don't they provide proof of reserves and addresses and things like that, like, that's all legitimate question. But if you assume that they have it and they and they are exercising control over it, and aren't going to get it, $61.00 2 for to start The US strategic Bitcoin reserve.
[00:36:56] ODELL:
Right.
[00:36:57] John Arnold:
It's think about the replacement cost of 575,000 Bitcoin. Right? Like That's way higher than two x. Yeah. Could you even go buy $575,000 of Bitcoin without, like, significantly moving the market and get that much Bitcoin quickly? Like, probably not. Right? When so when MSTR had difficult. You'd have to try
[00:37:19] ODELL:
difficult to near impossible.
[00:37:21] John Arnold:
Yeah. So when MSTR had 5,000 Bitcoin or 10,000 Bitcoin on the balance sheet, like, you know, okay. You could you could replicate that probably pretty easily. And even, like, a multiple of that, you could probably replicate. I one so the first thing that I'm wondering with it is, has it gotten to the point of a level of critical mass and escape velocity where, getting even that much Bitcoin into, like, one single pool, would be impractical enough that there should be some premium applied to, like, that stack of Bitcoin. So that's one question. The next thing I would, like, go through in the progression and ask myself is, like, well, if we're heading eventually to a Bitcoin denominated financial services future of some sort, Then Saylor has, you know, several percentage points of the most valuable, you know, resource on Earth.
And he starts to look, and I think, you know, he's pretty clearly tried to, like, it seems, try to position, you know, the company more and more in this way. Like, does it start to look more like, you know, a bank of the future? Right? Like, someone's sitting on a huge pile of the the capital asset of the future they're on once. And so if it looks like a bank and that's ultimately where he's going, well, you know, JPMorgan or or even, like, Berkshire Hathaway or something, you know, like, these these companies that have used, you know, their asset bases in very creative ways, those guys have, you know, traded at certainly, you know, whether it's two or, you know, I think three is on the high end in terms of book, in terms of book value, but they don't trade at one. Right? They don't trade exactly at NAV. And and when we talk about, like, NAV, what what we're talking about is book value. Right? It's like asset assets mile minus liabilities.
And, you know, none of those institutions generally like, when they're healthy and doing well, right, when they're distressed is a different question, but, like, they generally trade, like, notably above, like, one x. And so if you think that there will be some sort of, like, future where there's something at all productive to do with the Bitcoin, like, Bitcoin denominated, you know, yield, I'll say. Right? Like, lending out Bitcoin in some way. But but but not but not like scamming you. Like, I I'm gonna give you you know, I'm gonna I'm gonna lend you some amount of Bitcoin. You think about, you know, the the when Bitcoin is appreciating, like, let's say, if we're in a future or Bitcoin's appreciating, like, 5% a year, 10% a year, whatever, you probably have you probably have much less debt in a world like that, just because that's much more expensive to service. But, like, you can imagine, like, economic arrangements where someone gets Bitcoin. You know, a a capital provider gives you Bitcoin in some structure. And, you know, if you're a successful business, you can repay that with some, you know, interest rate or dividends or something. Right?
So if there's a world like that where you could do that with all of Safler's Bitcoin, then, yeah, it's it's not clear to me that, you know, the that pool of Bitcoin should just trade at, like, you know, one x. Right? So I think, with with a with a company like that, a vehicle like that, I think you can make interesting and not totally insane arguments for there to be, some premium. For for the guys who are on, you know, Twitter posting in all caps that, you know, here's my price target for when no. Well, no. Not not not like you. I I would never lump you into you should not on Twitter. Right? But, the Fair enough. The the the Twitter bros who are on, you know, on their posting, their sensitivity table showing here's what happens when MSTR goes to, like, 10 x nav, you know, and it's gonna it's gonna be worth Apple and NVIDIA and Meta combined. Right? Like, I think that's probably not, a case I can subscribe to, but, you know, the idea that it should have, you know, like, some premium to one to me is given how big the pool is and given how actually, well constructed at this point the balance sheet is and how, I think, low risk it is for Saylor to completely blow up at this point.
I think it's hard for me to say that it should just be one x. Not impossible for him to blow up, but I think for it to go to for for the equity to go to zero, or very close to zero, I think you've gotta have a prolonged bear market sub, like, 25,000 that sits there for, like, years. Right? So all that is to say, like, MicroStrategy is a special case or strategy, whatever. And I think the the players in the game that can quickly develop, like, a huge treasury, you know, maybe can get to a point where it becomes a bit of a self fulfilling prophecy where that capital base gets so big that they can either, you know, efficiently use it and leverage it, to build to mount, like, a real case that they can grow Bitcoin per share and acquire more Bitcoin more efficiently than you could with that same dollar and or, like, that they'll have, you know, this strategically advantaged kind of, position over the next number of years as Bitcoin gets more and more integrated into, you know, financial
[00:42:07] ODELL:
services. But that's not make that you could you could even make the argument that, like, like, the traditional cash pile argument. Right? Where, like, he could do strategic acquisitions or something post as Bitcoin adoption slows down. And he'll and he'll have the most dry powder out of anyone.
[00:42:25] John Arnold:
Yep. But, I mean but, yeah, it's it's the the flip side of it, right, is, like, people people see a good thing, people see a successful thing, version of it. Right? They wanna copy it. They wanna, like, ride on its coattails. Yeah. You know, it's it's I like Bitcoin. Buy my shit coin. So, you know, it I think we have we are just in the first inning of seeing, like, companies, coming to market with their Bitcoin strategies. But you already see it's it's a lot like, summer twenty seventeen with, like, you know you remember, like, a Long Island Iced Tea, adding adding blockchain to long blockchain. Right?
[00:43:01] ODELL:
You see these companies putting out these press releases where they're like But they were all miners back then. They were like like, Long Island Iced Tea, like, bought, like, 10,000 mining rigs, and they were like, we're Long Island blockchain.
[00:43:12] John Arnold:
Yeah. That's right. But, yeah, you see these guys putting out these PRs where it's like, we've initiated our Bitcoin strategy, and we're we're targeting a a billion dollars of Bitcoin in our treasury. And you read through it, and it's like, okay. Well, like, yeah. Their their their board is evaluating a capital plan that illustratively, theoretically, it might someday allow them to buy $1,000,000,000 of Bitcoin. Right? So, you know, we're we're just at the beginning of of seeing that, and I think, unfortunately, a lot of people will get burned and, and rugged by, all of the kinda ankle biters that that pop up, over the next, you know, year and change trying to, maybe even longer trying to chase this trend.
But I don't think I I'm not convinced yet that the entire strategy is completely, like, asinine and backward and doomed to failure for every single company that tries it. I think it probably is for, like, 95% of them. Right? But I do think there's some degree of signal there that will kinda ride out through, you know, a cycle or two. Because it's like Bitcoin is is such Bitcoin just because, like, if Bitcoin is what we think it is, it is such a powerful capital asset. It's there's there's no way you're not gonna have, you know, the the, speculative attack that Pierre Schard wrote about ten plus years ago, taking some form some kind of shape in, like, the deepest, most liquid capital markets in the world. Like, someone, you know, Saylor and, you know, his his, his successful followers, like, are going to figure out ways to, cheaply access capital, whether that's diluting shareholders or, you know, doing converts or doing preferred stock offerings or all these different things. Like Right. They're they're going to find ways to, at a low cost of capital, buy more Bitcoin. And that's what, like, individuals are doing every day. Right? If you're if you're taking out, you know, Bitcoin backed loan to buy more Bitcoin or if you're borrowing, you know, from your your bank at, like, a if you're doing an e lock from your bank to go acquire more Bitcoin, like, you are running the same playbook. Right? Yeah. Exactly. Right? Like, you're you're running the same playbook.
And so the idea that it it would not be possible for some corporations to do the same thing at a much greater scale in these huge liquid markets is, you know, I think probably misguided. That said, a lot of them are gonna blow up.
[00:45:36] ODELL:
Yeah. I mean, the difference with an individual or, like, a small business or a start up, which is what ten thirty one is focused on, is the cash flow element. Right? And MSTR originally started with not insignificant healthy cash flow. Now at this point, the cash flow is, like, incredibly dwarfed by the Bitcoin position, which is why I think when people are trying to price it, they're they're obsessed with the NAF. But I the if you if you have actual positive cash flow and you're actually a profitable business or profitable individual and your income is higher than your expenses and you're putting that into Bitcoin, that to me always has seemed like the holy grail. Like, that is, you know, I've had I've had dentists reach out to me. Right? And they're like, I'm I'm a dentist. I have a dental office. I love I love Bitcoin. What can I do to, like, further the movement? I was like, you should just be a dentist that holds holds Bitcoin.
Ideally, accept Bitcoin. Maybe you'll have, like, one or two clients that wants to pay in Bitcoin. That helps out those clients. You help be a part of the movement. But just be a profitable dentist and stack sets. You'll be probably one of the most you'll probably have some of the most options available to you in five years, ten years out of any private dental office in the world because because having that capital, having that, that treasury gives you optionality. But just before we move on to the next topic, like, I just because you're given your background, and given given your background, you you tend to be, like, my Oracle in terms of, like, pricing things and pricing businesses.
Do you think is the is is focusing on the nav of my let's just focus on MicroStrategy because there's all these copycats and there's nuances and add additional risks to all of them. Obviously, strategy is the is the big dog in the room. Is the focus on mnav the wrong way to price it? Like, why are people no one does that. I mean, you don't you don't really see that kind of valuation when you're talking about something like Tesla that's, you know, trading at, like, massive PE multiples.
[00:47:52] John Arnold:
Yeah. I mean, I think there are a couple of things there. So the first is, to get back to my bank example, it certainly seems like they're skewing themselves in that direction. And a lot of traditionally, like, banks are valued on book. Right? So doing, like, price to book is is I think it's, like, fair from from that perspective if that's kind of the the direction they're gonna go. And I think that's, like, the business model that most people can, like, most easily, you know, map onto them. So I don't think that's crazy. I think the other thing is, like, they also have yet to show, like, you know, Tesla well, Tesla is maybe a bad example, but, NVIDIA, Apple, Meta, you know, these companies, and and non tech companies too, like, traditionally are valued on something more like, you know, price to earnings or price to free cash flow or EBITDA.
But, basically, like, you're valued on, like, your recurring, like, business operating earnings of some kind. Like, you can pick whatever metric you want, to reflect that, but they're kind of priced that way. But I think MicroStrategy has yet to show that it can generate, anything equivalent in terms of kind of operating earnings. Some of the MSTR bros will kinda try to argue that thanks to thanks to the changes in in FASB rules, you now have, like, this concept of, you know, Bitcoin Bitcoin yield or Bitcoin gain or Bitcoin income. Like, Sailor's got all these different metrics, which I think are, like, reasonable to kind of frame up what's going on, and you definitely do wanna look at that to kind of understand, like, well, is he actually efficiently increasing, you know, the the Bitcoin HODL of the company or not? Like, they're so they're relevant. But the problem is and I alluded this to I alluded this earlier. Like, with an NVIDIA or an Apple, you can look at earnings or, you know, even better free cash flow and say, like, that is a proxy or, like, an analog for what I, as a shareholder, can can receive from this company. Even if they choose not to distribute it, you know, they they can pay dividends or they can do stock buybacks that proportionally increase my ownership of the business.
And that will ultimately be governed by, you know, the cash flow that they can generate. So I can I can kind of, like, as a shortcut, put a multiple on that, and, you know, get to some sort of, like, valuation that may make sense? The the difference especially with that I see with MSTR is not only have they not proven that they can kind of do that, even more importantly, like, the Bitcoin earnings that they're generating right now are not, like, I think in principle, like, not distributable. Like, obviously, they are. But the second that Saylor turns around and says, alright. I'm paying Bitcoin denominated dividends to, to my shareholders, or we're gonna fund buybacks, through kind of our Bitcoin HODL or something.
I think the second he does that, the the whole narrative collapses that this is just kind of, like, one way machine to acquire Bitcoin. So if he if he does that, like, I think he's implicitly saying, we no longer see a way to capital to capital efficiently acquire more Bitcoin per share, basically. And so we're just gonna now turn this into, like, a distribution vehicle. At that point, you know, there's no reason it shouldn't basically trade it, you know, one times NAV and kind of the whole the whole game stops. Right? So I I don't think it's, like, reasonable to look at kind of his metrics of, like, Bitcoin earnings and say, well, it should just be you know, we should use, like, a PE ratio for that because, like, the the earnings between, like, NVIDIA and MicroStrategy are just completely different in kind. Like, they're they're not, like, approximating the same thing, which is, like, distributable cash flows back to shareholders.
So for now, I think, like, cap, capitalizing it on NAV and and looking at it that way is, like, a a a pretty reasonable approach, especially since they're kinda taking that that banking route, anyway.
[00:51:35] ODELL:
Okay. I think that's fair. Let's go to an audience question, and then we'll go back to an Odell question. How does that sound? Superfat arrow is asking if we as ten thirty one would invest in direct competitors or once we have a horse in the race, would we back that one only? What are your thoughts?
[00:52:02] John Arnold:
Yeah. I mean, I think couple different ways to look at it. Certainly, our if you look at our portfolio that we have, like, on the on the site that anyone can go look at, we've definitely got companies on there that overlap in some of the products that that they provide and some of the services they provide. You know, I definitely think there's room for us to invest in a lot of different companies that play in similar pools because the market opportunity here, if we're right, is so massive that competition, like, as such is not going to be the main governor on, like, whether these businesses kind of, you know, do well or not. Right? So if you're taking kind of the five to ten year view on where these companies are gonna go, I don't necessarily worry that much about, like, I I worry way less, I guess, I'll say about competition, among Bitcoin companies than I do about things like you know, we talked about regulatory. You had your regulatory episodes on the show recently. That's a piece that we're always, like, much more worried about. I worry about, you know, distraction from, like, altcoins and Bitcoin treasury companies and things like that, like diverting, you know, attention away from some Bitcoin native, you know, financial services and things like that.
Fortunately, I don't think that's hindered a lot of our businesses thus far, but, you know, that that's something that kinda, like, slows down potentially, like, you know, the secular tailwinds of Bitcoin uptake. But I think, like, the the underlying, like, market tailwinds are much more of a focus point, for me and for us. And then, like, there's competition between, like the other, like, competitive element too is, like, competition with incumbents. Like, the the the the race is always, like, will, you know, the will the start up find distribution before the incumbent finds innovation?
Right? And then to the extent that incumbents kinda wanna get more into, like, these pools, like, like, maybe enabled by, you know, the OCC and FDIC and and Fed changes. Like, if that happens, how do incumbents look at, you know, the companies in our space? I think they'll probably look at a lot of them as strategic targets, but they may also look at them as, you know, competitors to to be to be squashed and and to be, you know, done away with in some way. Right? So from a competitive angle, that's what I would think we're all much more kind of focused on. I think there's room for us to invest in a bunch of different companies that are all kind of overlapping, in some of the things they're providing because, generally, these companies, when you kinda look under the hood, are not all doing exactly the same thing. They have certain products that overlap and then certain certain ones that don't.
I don't know that we've ever invested in two companies that do, like, precisely the same thing, that have exact the exact same value proposition to customers, and ex the exact same customer bases. Like, if we were ever, you know, given, a situation like that, like, yeah, I think we'd probably have to pick, you know, one horse over the other. But as it stands, I think, like, the that issue is not something that I think we lose a a ton of sleep over with the portfolio.
[00:55:11] ODELL:
Yeah. I mean, I guess there is an example with, like, Nodl and start nine. But I think that's also a good example of just the pie is so small. Right? Like, if the goal is if the goal is people self hosting easily with with low friction on open source with open source software, the hurdle is not each other. The the hurdle is actually, like, moving society to that type of world. And, usually, in most cases, a rising tide lifts all boats is what we're seeing and how we're kind of playing it out. I would I I mean, I would add to John's comments here. There have been a couple situations that we have to be delicate with it. I will say, just in general, the space is way smaller than people pretend it is, particularly when you're on, like, in terms of, like, businesses and, like, founders who are building in them.
It's way smaller. We're all at we're at all the same events. We're, like, in the in similar circles. There's a lot of friendships involved. So like most things in life, there's a lot of people things to navigate, and relationships to navigate. But I think if you're truthful and you're transparent and you act in an ethical way, we haven't seen you know, you you'll you'll seek occasional flare ups on Twitter or whatnot. But, mostly, I think people strongly do believe in the idea of, like, same team where we're all working towards the same goal. We all can benefit from it. I will also add just, like, if you go to our website, if you go to 1031.xyz, 35 companies are listed there or maybe 36 now at this point. But, if you actually like, in terms of funds deployed, percentage wise, it's a much smaller subset is the overwhelming majority of money we've invested.
So when those when when those investment sizes get larger, right, like, we've we've invested a hundred $50,000,000 into Bitcoin companies, when those when those investments get bigger, then all of a sudden you have to be a lot more obviously, you have to be a lot more deliberate in terms of prudence and making sure it's a good investment, but also in terms of conflict of interest there. And we in that situation, we do tend to coalesce around who we think will, you know, have more market share and and have have a stronger business. Do you have anything to add before we move to the next question?
[00:57:51] John Arnold:
No. No. I think that's all that's all reasonable. It's a good question.
[00:57:56] ODELL:
I see another question here that I can just answer real quick, bringing up I think it was Average Gary who set it, but now I can't find it. Asking about the grant we gave Cali. How does ten thirty one determine grants like the one we gave Cali differently than venture funding? I mean, it's quite simple. You know? An open source grant is for a project that we just think is important that is not easily monetizable, or maybe it doesn't even make sense to monetize. Like, in Cali's case, like, I think you add a lot of regulatory risk. As one of the investors of Samurai Wallet, I think we know about regulatory risk and taking deliberate risk more than others.
But in Kali's case, like, I think it's important that he never directly monetizes it, and she keeps it as an open protocol and doesn't custody people's funds. So we just provided him a grant because we think it's good for the ecosystem. We think it benefits our investors. We think it benefits our portfolio companies. We think it benefits Bitcoiners in general. Obviously, the lion share of grants that I'm personally involved with come out of OpenSats. But there is a nice con the it it I think businesses and individuals should be providing grants to developers directly without middlemen.
And I would like to see more of that. Our whole team at 10:31 would like to see more of that. And I think the way you see more of that is by leading by example and doing it. Right? And there there is a beauty of of just giving a grant with nothing expected in return and not having to work under a nonprofit framework where you have to take all this different identifying information and stuff. So we for that specific situation with Cali, we literally just reached out to Cali, and we were like, we would like to support you. Send us a Bitcoin address, and we sent them some Bitcoin.
Okay. Back to an Odell question. So people that were listening to Rabbit Hole Recap, since we started in 2018 I think it was 2018. Maybe it was late. Maybe it was 2019. I don't know. Whatever. Seven years, six years. When we started, I hated VCs. I was, like, super anti VC. I was, like, very loud anti VC. Why is what what makes what makes what we do at 10:31 different than the a sixteen z's of the world, the Sequoias of the world? Like, how do you think about that?
[01:00:40] John Arnold:
Yeah. I mean, I'll say, I also, like, did not care for VC and still don't. Like, I don't largely think it's a very attractive asset class. Maybe, you know, twenty years ago, mainstream VC was, but it's gotten so bloated and, just full of the the the incumbents that have existed for a long time have gotten just massive, and I think they've got an asset base that they just can't realistically allocate into kind of true hundred x, thousand x, like, early stage, category killers anymore. And meanwhile, you've got, like, just this ecosystem of, you know, kind of undifferentiated, like, generalist tech investor ankle biters that have popped up over the last, especially, you know, ten years.
And I think, you know, you're seeing now, for anyone who's paying attention to to that ecosystem, it it's starting to come through in, like, returns and lack of distributions, especially from a lot of those smaller funds. And so, you know, I think I I I am I was and am right there with you on, like, general VC. And I think, you know, what we do that's different than that, that made me kind of excited to join and made me wanna get involved is, I mean, a, first of all, we're hyper focused on a space that we believe has massive secular tailwinds. So we're not just kind of an also ran in kind of b to b SaaS investing or whatever. Like, we're we're purpose built to be, you know, this hyperfocus machine on this one vertical that we think is ultimately gonna touch every, you know, industry in the world.
But we have this kinda differentiated and and specific specialist lens on that that I think, is is necessary to have any kind of differentiated returns in, you know, early stage VC or private markets investing, like, in general. Right? That's a piece of it. The other piece is, you know, because we're so focused on Bitcoin, and because we're all Bitcoiners first, and are so levered to to Bitcoin and, you know, both the asset itself and also just, like, the the ecosystem around it, you know, we come at things from the perspective of Bitcoin being our opportunity cost. So that plays into, the investments that we make and why we make the ones that we do and what we find attractive and what we don't find attractive.
It's it's a filter for us to not just invest in the latest hot round of, you know, what everybody else in the valley is investing in. Right? Because we need to feel very good that we can underwrite, like, a Bitcoin denominated return on an an investment over the course of our fund life. And, you know, it it also, biases us as a result toward investing and not just not businesses that not only have, you know, great potential like tailwinds and massive market opportunity and secular opportunity to grow, it also biases us toward, businesses that we think can be scalable quickly and can have really, really profitable we can become very profitable quickly so that they can, you know, start stacking sets and adding that to their their own balance sheets and so that they can get to a point where, they no longer need capital from us or from others, and they don't need to take any more dilution, so that they can give up the smallest amount of potential kind of, you know, Bitcoin possible. Right? So they can keep, our equity protected and get to a point where they're generating Bitcoin for their investors as fast as possible. And all the companies that we focus on also are kind of in that same boat from their perspective. You know, they're all Bitcoiners first. They would be you know, they they could be working at a Google or a a Meta or an Amazon or something as software engineers or at, like, a, you know, hedge fund or a bank or something, probably making, higher fiat salary and and using that to to stack stats for their personal balance sheets.
But instead, they've taken the leave to to go build a business in the space that they think has all these tailwinds. And so they're also hyper focused on, you know, their Bitcoin opportunity cost and getting to, Bitcoin denominated profitability as fast as possible. And that kind of focus, on our side and on our company's side of, getting to kinda self sustaining unit economics as fast as possible and getting to a point where you're actually producing, you know, returns for your investors as quickly as possible is completely antithetical to the way that generalist VC operates, or has operated for the last, you know, fifteen plus years during during ZURP.
And, you know, I think you can't understate how much that changes and fill and kinda flows into how you look at companies and how you look at capital deployment. It's not growth at all costs. It's not, you know, just burn as much cash as you can to get to do a land grab and get as quick, get as big as possible as quickly as possible so you can go raise your next round, from some other VC who's being funded implicitly by, you know, infinite money out of the Fed. And they'll give us a markup, and then we can go use that to go raise raise our next fund to kinda rinse and repeat, do the same thing. You know, I think we're all coming at it from the perspective that that world is ending, that, you know, we're we're coming up on kind of the end of the, unconstrained fiat experiment.
And, you know, whether kind of the dollar dies, whether fiat dies, whether the fed dies in the next ten years, like, I don't know. But it's pretty clear that the free money train, is, you know, slowing down, if not coming to an end entirely for a lot of these these types of investors that I mentioned that have popped up over the last ten or fifteen years. And, you know, I think we're on the forefront of looking at the world through that lens where most kind of VCs are still stuck in this mindset that, you know, the the good old days are are just about to return, and the IPO market's about to heat up. And, you know, any day now, we'll be able to to get our next markup on our all our unprofitable businesses that we're invested in. We just look at things totally differently because of that that Bitcoin focus.
[01:06:37] ODELL:
Well said. Do you think, on that note, do you think like, I'm fascinated by this aspect of Bitcoin as, like, almost the shared equity. Like, if you're, you know, like, if if if if you're Jack Mallers and you're at Strike, you personally hold Bitcoin. Your company holds Bitcoin. Your employees hold Bitcoin. If you're Parker Lewis at Zapprite, you personally own Bitcoin. Your company owns Bitcoin. Your employees hold Bitcoin. How do you think about that dynamic? Like, I feel like that is a key differentiator too. That just no matter who you are in the ecosystem, you you're you're literally have this this this shared common monetary incentive to to grow and improve.
[01:07:30] John Arnold:
Yeah. For sure. I mean, it, it bleeds into, like, every single company that's building anything of value in the space that's enhancing the ability of people to, like, to get Bitcoin, to secure Bitcoin, to use it in different ways, is adding to at least on the margin in some degree, right, adding to, the embedded value in the ecosystem and in the asset. And because this is an open network, something we talk about a lot with investors, the companies in our portfolio, all benefit in a very unique way from kind of participating in essentially the same broad project. Right? Like, one company may be working on financial services for Bitcoin. Another company is working on some sort of consumer application. Another one is you're doing, like, mining services or something. But they're all they all have the ability either often directly through, partnerships that are much less, that have much less friction because they're all operating on this open standard or just indirectly of each kind of enhancing the others, you know, relative, you know, the value that they're holding, on their balance sheets and the the value of their businesses in that open network.
All the companies in our portfolio can benefit from each other and play off each other in a way that you don't see in, like, a traditional VC portfolio where you've got, like, a, you know, some medtech company and then you've got b to b SaaS company and then some, like, wellness company. Like, they're just not, you know, in anything like the same swim lane. And all of the all of their ecosystems are also like, everything every stack they're building on is completely closed closed source, and, you know, you've got people reinventing the wheel at every single business kind of in their own way versus, like, you know, every business every business in our portfolio just about kinda leveraging BBK, for example, like, in this great open source library.
That's a force multiplier for very small teams. You know, you had Rob Hamilton on, one or two episodes ago talking about that specifically, about how that's helped Anchor Watch, build much faster with a very lean team. That's the kind of stuff that you're just not gonna replicate in any portfolio that is not kind of leveraging, where the companies are not leveraging this kind of one common shared open open source, you know, set of standards. So I think, yeah, like, shared equity is an interesting way to put it. I definitely think that's a that's a big differentiator too for for all the companies that we invest in.
[01:09:57] ODELL:
Love it. Okay. Back to audience questions. Gary, wants to know, do you see any pieces of Bitcoin infra services that are missing that could be a good business. He left that part out, but, presumably, that would be a strong monetizable business, not just for good feels.
[01:10:26] John Arnold:
Yeah. I mean, the one that I like that we've talked about with various companies in the portfolio, that I've kind of been banging a drum on for a while, internally, and I think everyone, like, is directionally aligned. But, like, kind of an all in one place for, your Charles Schwab type client to get everything that they need in financial services out of Bitcoin without having to to touch, at first anything related to Bitcoin itself while still benefiting from, actual kind of assurances that can be provided on chain, right, and not just, like, buying on Coinbase. And, doing that in a way where, you can get everything that you would be expecting out of, like, a private wealth management product, at at a Schwab or at an Edward Jones or something while still having, the benefits of of relative trustlessness, the benefit that Bitcoin can provide.
There's been a lot of talk about kind of multi institutional custody. I think that's one pathway. Anchor Watchers, as I mentioned a second ago, is is, you know, working on kind of fusing insurance with Bitcoin. You're seeing more and more kind of movement toward that kind of business, you know, providing something that's catering to, like, basically, where all the money is. Right? Getting the, you know, the people that currently have big fiat balances, whether that's in, you know, cash or stocks or bonds or something, getting them a way to securely leverage Bitcoin.
And when I say leverage, I just mean use Bitcoin. They may also be, you know, leveraging it in terms of borrowing against it. But The the bank's definitely securely yeah. Right. Exactly. In a way where, you know, they could still have assurances that, you know, they're not putting their money into an FTX or, you know, a coin based honeypot that, you know, where they can just kinda have overnight zero if the balance is right. I still think, like, you know, Bitcoin's 15, 16 years old. We still really haven't cracked, like, we call it the order of operations, you know, internally and on our investor calls. Like, the adoption of Bitcoin is gonna have to go through that kind of order of operations. And right now, I think we're very much in the first inning of that. We were alluding to that earlier with the payments conversation.
And so I think, like, when I when I think about missing pieces in the industry, it's where can I go to have the assurances of, or something approaching the insure the assurances of, you know, Bitcoin on, you know, my cold card with my seed stamped in steel, something like that much closer to that than, oh, I have some Bitcoin at Coinbase, while not immediately having to take on the burden of being in any way technical, knowing what an XPUB is, knowing what an output descriptor is, you know, knowing how to use a block explorer, like, any of that? And, probably only 1% of people will actually take further steps to really investigate.
But I think the the point would be set it up in such a way that even though most people will not investigate, it it still is, you know, set up to not be a a giant honeypot or a giant rug, where trust is distributed in in some way. So I think bridging those two worlds to me is still kind of the holy grail for, bringing a huge amount of wealth into Bitcoin natively and not just letting it all default to, you know, iBit on, exchange accounts. And a lot of it's gonna go that way regardless. Right. But I still think there's massive value capture, to to be had, in in a product like that, that can be kind of side by side with, you know, an IBED like experience.
[01:14:13] ODELL:
Yeah. I mean, maybe maybe how we see that unfold is one of these existing private wealth juggernauts goes and acquires a company, like an existing Bitcoin company. Charles Schwab buys Unchained or some shit.
[01:14:28] John Arnold:
Yeah. I mean, that's that's my guess. Right? That's that my guess is I mean, you've seen Schwab, for example, over this past year, like, make a bunch of overtures about, offering kind of Bitcoin custody. And it makes sense. Right? Because when you think about, a a platform like that, if they've got clients that want Bitcoin exposure, right now what they can tell them is like, okay. Well, you can buy Ibit. Right? But Schwab doesn't make anything on on Ibit. I mean, BlackRock, you know, barely makes anything on Ibit right now too because we're you know, the fees are so low temporarily. But, like, you you've got a few ETF providers, you know, BlackRock, Fidelity, Arc, etcetera.
Like, they'll they'll make some fees on yes. There was. I shouldn't shouldn't have forgotten them. They're they're they're key part of the ecosystem. But, you know, they'll they'll be able to make some fees on those balances, and they'll be able to benefit from, you know, the natural, like, tailwind of AUM growth as Bitcoin does what we think it's gonna do. You know, they can take a a fixed, you know, bips fee on, you know, this growing value. But, like, Schwab, Edward Jones, Ameritrade, or, excuse me, Ameriprise, and all the all these other long tail of, you know, wealth management platforms that have, like, tens of billions or hundreds of billions or trillions of dollars, like, you know, they're missing out on being able to actually charge clients anything, by just, you know, referring them over to iBit. And so I think there's there's gonna be someone eventually who looks at the space and says, if I just own, you know, a tech stack that allows me to natively, provide some sort of, like, distributed trust, system to allow my clients to hold Bitcoin, I can tell people very legitimately, like, this is a step up from, just holding an ETF, for all the the properties that it gives you, and then I can monetize around that. I can charge AUM fees directly for, you know, the the service of actually holding real Bitcoin that we can verify, and, you know, everything you can do with actually holding that Bitcoin.
And I think, like, that's that's a natural way that these massive platforms that otherwise don't really profit at all from the clients holding Bitcoin, I think that's a way that they can step in and, you know, absolutely rake, you know, rake in, from the, you know, the broader Bitcoin adoption trend. So I do think it's a logical thing to happen, you know, at some point.
[01:16:42] ODELL:
Yeah. Fair enough. I don't know what I what my answers to that question would be. No. No. I gotta think about it a little bit more. But, I mean, I think that product's gonna exist. It's just and it's gonna come from different directions. It'll be it'll come from the the existing juggernauts from a top down approach and acquisition and whatnot. And we're already seeing the early signs of it from a bunch of startups in the Bitcoin space, and they'll probably, like, coalesce. I see a question here from Cheaplight If we know of any companies that offer vacation pay and bank sick pay to be saved in SATs, preferably paid out in SATs. No. I mean, you could call in sick and work a second job and stack SATs with it.
That's probably not the answer you're looking for. I mean, that's interest I I like I I think we'll see one of the interesting things that Bitcoin has talked about in the early days was this idea that if you had all of these freedom, ideologically freedom focused people, all generating wealth because of Bitcoin price appreciation, that they would have knock on effects and change the world. I think we're seeing the early signs of that with the growing Bitcoin industry, specifically the the Bitcoin only industry that's focused purely on Bitcoin rather than, you know, greater crypto.
But we're also seeing that in in small businesses around the world. I I'll bring up the dental office again. Random dentist. He's a Bitcoiner. He's got four employees, five employees, something like that. I don't know what a dentist office has. And he's a Bitcoiner and, you know, maybe he offers incentives to his staff. You know, I could totally see that offer incentives to your staff. You don't call in sick, I'll send you sets. And I I think we're gonna start to see those different knock on effects. I think we see it on a protocol level with stuff like Nasr. Like Nasr was seeded by Bitcoiners that, had at least some savings that they were willing to try and tackle a problem as large as trust minimized communication, social, and identity.
So, I mean, I think we'll see more of that. So I would keep your head up in in terms of that regard. But smaller businesses, more likely. Right? Because smaller businesses, they can adapt. It just matters who the who who's running it. If you have a big HR department, Bitcoin is probably not gonna be incorporated anytime soon. And I see Gary asking about, local custodians, providing custodial or collaborative custody for people in your local vicinity. I look. I think that's great. I see some people calling it the uncle Jim model. As the person that I believe coined the uncle Jim model, I wanna be clear that it was never supposed to be a custodian. You're you're supposed to, like, be running their node for them.
And they were still supposed to hold their own keys. But I think it's a great model. I think it it makes sense as a model. I don't think it's something that can be monetized. From a liability point of view, you have issues. But also, like, custodianship is just not something that makes that much money. Like, rumors are that, you know, some of these big holders, they're they're paying, like, five basis points, 10 basis point, point 05% to have someone hold their Bitcoin for them. And these are with the large regulated custodians that presumably have a moat because they're, like, regulatory, compliant and whatnot.
They have teams of lawyers. So I don't think the actual being a custodian is can be that profitable. Then you have to deal with all the bank secrecy act and everything like that. But that's why I think the open source stuff is super interesting. That's why I think Cashew is super interesting, because we should empower individuals and empower community leaders to be able to make that decision for themselves. You're gonna say something, John? You seem very excited about this topic. No. I mean, I was just gonna say,
[01:20:46] John Arnold:
I don't wanna, I don't wanna take that's too spicy, but I I'm not convinced that the world of, you know, five basis point fees for, custody for big holders is, like, here to stay forever. Interesting. Just because all it takes is one hack, all it takes is one, snafu with, like, misattributed funds somewhere, for people to for, you know, big holders for, you know, whales or companies, especially with fiduciary duty, to realize that custody is not necessarily a commodity. And I think that FTX was three years ago. Like, FTX just happened. But but, yeah, but FTX is, like, no no major US publicly traded stock, or, you know, large company that has a lot of power with, like, Washington lobbyists, for example, like, meaningfully lost money on FTX. Like, the people hurt by FTX could be safely, I think, you know, cordoned off into like, the the system in general could, like, you know, cordon off FTX, victims into, like, you know, the crypto native people, like crypto hedge funds, you know, degens, whatever. You could kinda write them off.
I don't necessarily know that this is this is coming, and I don't wish it on anyone, obviously. But, it it it doesn't it would not take much, for the market to, I think, quickly realize that custody is not a commodity for those that are trying to actually store Bitcoin on, like, a long term basis. And because that's the thing too. Like, people people had assets on FTX. Like, by and large, we're not, like, you know, trying to store massive amounts of, you know, their wealth for, like, the long term for their, like, kids to inherit. Right? Or for they didn't have, like, a ton of, like, fiduciary responsibility to a massive amount of investors or something like that. So, look, like, I I don't know what's gonna happen, but I wouldn't be surprised, is all I'm saying, if in the next, like I could see that. Five years, like, maybe people wanna pay just a little more for having, more transparent, you know, more robust kinda custody solutions.
[01:23:02] ODELL:
But isn't the problem that well, first I mean, there's two different things here. Right? There's there's big time custody, like, regulated big time custody, and then there's, like, small time custody. Small time I mean, I just I you're not gonna make I I do not see a path where someone's making money being, you know, the the custodian of their high school or some shit. Yeah. Or they're, like, their their local club. But, Yeah. That's an artisanal cottage industry for sure. Yeah. On the big time and it's good that we we should have open source tools that give individuals power and whatnot. The the thing that's pushing back against that concept of fees going up is that self custody is relatively cheap and low friction. Right? Like, what, like, what cost would someone have to charge Sailor before he just switched to in house custody?
[01:24:00] John Arnold:
Yeah. I think yeah. I'm not saying to be clear, like, I'm not necessarily saying that all these companies will go to, like, self custody. Yeah. Sailor, there there is I think there's basically no cost that would be that would make, MSTR preferred self custody because it be it becomes like, well, yeah, because they they have their regulatory requirements. They have, like, fiduciary requirements. What about Coinbase? Coinbase self custody is
[01:24:25] ODELL:
Yeah. Imagine if Coinbase was paying someone 1% to to store customer Bitcoin. That'd be ridiculous. They've, like, built it in house. They figured it out. Yeah. I mean, I think
[01:24:36] John Arnold:
that relates to the point that I was making that you may have these massive honeypots that may or may not be as secure as, you know, people are hoping that they are. All I'm saying is that there's a lot of vulnerability, like, service area for something to not even be catastrophically wrong, but just, and and not even calling it anyone in particular, but just, like, when you've got, like, you know, trust their parties or security holes, like, when you've got massive pools of Bitcoin somewhere, and you can't really audit, like, what's going on under the hood in terms of custody. My point is just it doesn't take much before, companies, big holders, and maybe even regulators decide, like, custody is not enough of a commodity that it's something that people can just assume they can charge, like, you know, two or three basis points for, and, you know, that'll that'll that'll be enough. Like, there may be demand for something more robust.
But that said, when I say something more robust, I don't mean, like, you know, Sailor holding, like, a a a cold card in his desk and then, Fong Wei holding a cold card in his desk, and then they, you know, have have, you know, their seat plate buried in the backyard or something. Like, I mean, like, some sort of multi institutional insured, kind of setup, that maybe has more audibility behind it. Right? Like, something that is institutional grade and is still, like, outsourced, but is more you know, leverages the distributed trust and programmability that Bitcoin provides so that you don't so you can still have, like, very cost effective, cost efficient custody without having to just put it behind, like, you know, an opaque wall of a custodian says, you know, here's a GUI that says here's your what your balance is, and that's, you know, that's the end of the story. Right? Okay. But we agree that up until this point, it's been a shit business. Right? Like, that's why you see, like, the Bigto's of the world try to go to consumer buy sell because, like, they they're just not making any money off of it. Yeah. I mean, it's it's at the very least a business that only makes sense at, like, larger and larger scale. And then, ideally, you want to have, you know, value added services around that, which is also, like I mean, that's also banking. Right? Like, just, just making literally just, like, sitting there warehousing, you know, money, is,
[01:26:44] ODELL:
has never been, like, a wildly lucrative business. But Well, they're banks make money by, like, leveraging the fuck out of our our savings accounts. Yes. Exactly. I would that's that's value added services. I don't know if you knew that that's the what the euphemism means.
[01:26:58] John Arnold:
No. But, basically, like, you getting getting that beachhead of, having custody of someone's funds even if you don't have it directly or unilaterally, but being an access being like a a a piece of their quorum or an access point for them, to kinda use their Bitcoin in some way enables the ability to sell a bunch of other stuff on top of that. Right? And that's a it may not be necessarily a super, profitable business or a business that you can generate huge revenue off of per customer, but it's an incredibly sticky business, which is important. And that because that enables you to have have and build a relationship with, you know, customers over time, as they get wealthier and as their needs change, and you can, you know, sell on on top of that.
[01:27:41] ODELL:
And once they trust you and they have a good relationship with you, like, it's there would need to be a significant reason for them to move and go somewhere else. Exactly. Right. I mean, we've seen that with we've seen that with just Bitcoin buy sell. Right? Like, the thesis for a while was that Bitcoin buy sell would go fees would go to zero. But especially post FTX, you know, I mean, I'm personally happy to pay point 8% or whatever, to to buy Bitcoin in a trusted way where I don't think I'm gonna get rugged to where I think they're, like, taking care of my private information well and whatnot. And clearly, a lot of other people are. So it's probably similar in this situation.
Okay. I don't see any other questions in the live chat. If you if you have one,
[01:28:32] John Arnold:
feel free to put it in there. Gary Gary wants to know what Gary wants to know my thoughts on Hashpool, and, unfortunately, I I I haven't listened to your your last one. It was literally last week. I know. I haven't listened to it yet. And Gary also talked to me about it at, the mining summit this year a couple months ago. And I remember, thinking that it seemed very cool and then not doing any much, like, further digging on it thereafter. So I need to listen to your episode, Gary. I'm sorry. I don't have an answer that, like, would be interesting or or meaningful at at this point.
[01:29:04] ODELL:
I think it's pretty awesome. I think it's another example of an idea that should be funded throughout with Satsum after 10/31. I don't really under I don't see, like, a strong business model there.
[01:29:15] John Arnold:
Well, it seems like more of a primitive. Right? Like, you wouldn't Yeah. You you could leverage it in a business, but it wouldn't be like the business. Yeah. Well, I would just say mining pools in general are also not a great business to be in. Yeah. So a mining pool can leverage hash pools,
[01:29:29] ODELL:
to be a more profitable mining pool, but that's still a cut super cutthroat hard to compete in business. We've seen the most successful mining pools are usually vertically integrated. You know, foundry, integrated basically with loans, and they have some of their own hash rate. And then, of course, the Bitmain, the bit the Bitmain cartel over there is they're manufacturing ASICs, and they control, the most hash rate in the world through all their proxy pools. So it's just a really tough business to be in. But, yeah, hash I'm super excited about Hashpools. If for some reason you're listening to this episode and you've gotten this far, you haven't listened to last week's episode with the VNPRC, definitely check it out. I wanted to talk a little bit about, just the current market where we're at right now? How you think about I've we have I know this is usually a technical show, where we focus more on open source software. I don't know if you freaks have noticed. I've I've tried to branch out a little bit, scratch multiple itches.
I'm trying to do one week one week, software focused, one week a little bit more broad, and just do, like, every other week. But I'm not dumb enough not to include a live price sticker in every stream no matter what. And I see right now we're over a hundred and $5,000. How are you thinking about the current yeah. To what Gary said, one moon?
[01:31:05] John Arnold:
Well, I mean, it's it's funny. Right? You've got you've got this graphic up here, and we're at a hundred 5,000 and and change Bitcoin price, and sats are at three sats a byte. And, like, yesterday, I checked, and we were at, Nimpol was showing zero sets per byte. Right? So it's a very it's an odd market right now. Right? Like, you don't you haven't seen this in prior cycles where you know? And we're not necessarily, like we're still, like, you know, one or 2% off all time highs. So it's not true, like, insane FOMO yet, and you're not seeing and, like like, you would expect, from prior cycles that would then kinda flow through and then kind of hit the chain, and you'd see, you know, fees flare up kind of in line with with price.
We absolutely haven't seen that at all this cycle. Right? Some of that is related to, you know BlackRock is is proven to be, you know, the best scaling layer for Bitcoin.
[01:31:59] ODELL:
Not a scaling.
[01:32:00] John Arnold:
Not a scaling layer. Yes. I'm I'm aware. But, you know, that's that's a piece of it. Right? Like, you're getting assuming you don't believe that it's an an entirely paper Bitcoin game, which doesn't seem to be the case, you've gotten kind of Do you think BlackRock actually holds Bitcoin? I think so. Yeah.
[01:32:20] ODELL:
I think so too. Yeah. I Sorry. Continue.
[01:32:24] John Arnold:
It would be yeah. I think it I think it would be incredibly difficult for them to pull off because of how liquid and global and twenty four seven the, the market is as a relative to, like, any other asset relative to, say, gold. I think it's it would be much harder to pull off for any amount of time, like a a paper Bitcoin scheme, where, you had, you know, billions of dollars like we've had flow in and, not have that like, I don't know how you could actually sustain, like, the inflows they've seen without, if if you were not buying Bitcoin, on the other side of it because that incremental demand pressure would not be, like, actually going anywhere.
And so you wouldn't see any kind of commensurate price move. You'd have, you know, declines in you know, as a result, like, there's a reflexivity component to to What do you say to the people that that all this money has gone to MSTR and BlackRock, but we're only at a hundred and $5,000? I I think that's I think that's, like, a big, piece of it, is that there had like, but MSTR money going to MSTR is different than money going, like, into iBit. I think IBIT actually directly hits, like, demand for Bitcoin. MSTR, much less so because if I'm buying, you know, a share of MicroStrategy, like, that's not actually like, it's supporting incremental capital that they can then go use when they hit the ATM, to to to lose shareholders and and yeah. Exactly. Yeah. Exactly. And and go buy Bitcoin. But, you've got a lot of people, a lot of money that has flowed just into to that, and then also, like, MSTY, MSTX, MSTU, all these other vehicles.
And so I think, like, not all of that immediately has, like, meaningful impact on, the price. Over time, it should, assuming that MSTR doesn't blow up and they're actually doing what they say they're doing. But that's a piece of why I think we're maybe not higher right now. It should flow through over time. But, anyway, all that is to say, you've got a lot of demand that is being in some way satisfied by, not even, like, Bitcoin exposure, like, directly on a custodian even though, like, that's what's underneath ETFs, but rather, exposure to vehicles that then, like, on a batched basis have claims to underlying Bitcoin. Right? So Right.
I think that's that's a piece of it. That's a piece of why it feels like a weird market. It's we've seen, like, in our conversations with investors, in the space and, you know, potential investors, like, it's definitely there's a huge amount of interest and a huge amount of, growth in the legitimacy of the way that big money is looking at Bitcoin. We get way less pushback, than I think we did, you know, even a year ago on why is this interesting, why is this gonna stick around, why does this have staying power. I think there's increasing consensus that there should be some level of, you know, exposure, But I don't know that people have really hit, like, the absolute kind of FOMO point, in kind of, you know, investor circles yet.
Some piece of that, I think, is because we were talking about this earlier this morning. Like, the the broad market backdrop is not, like, that accommodative right now, right, relative to where it was four years ago, when, you know, in in 2020 and '21, you could pretty much buy anything and, you know, it would go up 10% within a month and, like, 50%, you know, within a year. And everyone's equity portfolios were reduced. Bonds were doing great. Real estate was through the roof. So there was just a lot of money. Yeah. Exactly. Yeah. Like, the Fed balance the Fed's balance sheet is, you know, is going the other way, at least to some degree.
We're still technically in quantitative tightening. We're still technically shrinking, you know, the overall balance sheet, and it's it's very different dynamic. So people are not people are not, like, feeling the benefits of the wealth effect. Right? They're not looking for new places to allocate necessarily even if they're interested in in Bitcoin. And so, there's definitely a, I think there's a huge amount of interest in legitimacy, which is very helpful, and I think this is the best risk adjusted setup that Bitcoin has ever seen. And I think people broadly in our conversations really get that. The question is just when do they start to fully feel the itch in the FOMO?
And, you you know, like, I I won't make price predictions. It's it's well above my pay grade. And like I said, anyone who tells you where Bitcoin is going is is not really to be trusted. But, I think when when people come around, I don't know what the catalyst is for that, but there's literally no narrative that you could use at this point to actually make you fundamentally bearish on Bitcoin. So whenever your animal spirits kick into gear, whenever your the wealth effect starts to kind of kick back into, you know, the the positive direction, whenever the Fed has to, do its next round of accommodation and, you know, pull out its next alphabet soup facility to, facilitate money printing of some stripe. Like, there's really nothing that holds Bitcoin back at this point. Like, environmental FUD, no one cares about it.
Reg regulators are gonna kill it. It's the exact opposite. Regulators are embracing it. All the, you know, the the big banks that we just you discussed at the top of the show are interested in getting involved. You know, the president loves it. The treasury loves it. Most of the agencies are way less combative, against it than they were before. Hard money assets in general have seem to have, like, much more of a growing place in, like, global trading global capital flows, and people are seeing that already with gold. And, and, increasingly, I think that flows over to Bitcoin. We have a strategic Bitcoin reserve in The US and, you know, more being discussed around the world, and some have already been implemented. Like we no. We do have a strategic Bitcoin reserve. Now whether we add to it at all is a different question. Were they supposed to do an audit? Do we not know I think we don't even know how much Bitcoin we have. I think that well, the the problem is I don't know if they ever promised to make it public, and I think there are good reasons that they may might not wanna make it public.
Either if either because they have less than they thought. We have less or maybe we have more. But Yeah. We technically have a sorry. I interrupted you. No. No. I'm I just like you go down the list and it's like, I can't tell you exactly when the floodgates open, but, when the when the switch gets flipped, like, there just are no headwinds at all like there were over the last few cycles. So, I would say, like, I think it's the best risk adjusted setup we've ever seen. I think investors are increasingly appreciating that, both, you know, whether it's endowments and, like, actual institutions that we talk to or family offices or high net worths.
It's just a question of when do people feel like they really wanna aggressively kinda get off the sidelines and and and fully get off zero. And, you know, it's it's tough. Right? Because the the market psychology is like, you know, when Bitcoin's at $1.00 5, you're like, oh, well, I missed it. Right? I I I missed the move. I can't I can't get in now. When we dump to 85 because Trump says, you know, I'm gonna put a four gazillion percent tariff on China, people are like, oh, well, I I can't buy that right now. Like, it's it's dumping. Like, that's, you know, Bitcoin's so volatile. Like, I I'm in an uncertain time, and I I can't just buy Bitcoin. And so everyone's gonna have to, like, oscillate through that. Was that, like, 75 k a month ago? Right? Yeah. Yeah.
It's it's it's wild and, like, everyone's gonna have to oscillate, you know, through that until until they finally just, feel like they, you know, they can't wait around anymore, and that break point's gonna be different for everybody.
[01:40:22] ODELL:
Yes. 76 k 70 6 k on April 7. How quick people forget. That's pretty crazy. That's, like, forty days ago. It was at it bottomed at 76. I think that is another piece for at least larger investors that are paying attention is that we didn't drop as low as people would have expected in that situation.
[01:40:47] John Arnold:
Yeah. I, unfortunately, I'm still, on Twitter, which I know I should be shamed for. But, like, a a month ago, I tweeted out Oh, you're good. Just, like, four four charts side by side of the way Bitcoin acted relative to the equity and the the major equity indices during the COVID crash versus the way that, it acted during this last kind of tariff tantrum. And, you know, if you just thumb through those charts, and I think you'll see, like, there definitely is a difference. Like, I'm not gonna say it's a decoupling. Right? That's the that was the word that was on everyone's minds, during that period. But, I do think people are it's it's hard if you're, you know, paying attention to markets at all to not notice that Bitcoin did not act exactly the way that you would expect, during kind of a a global reset like that.
So, you know, it's it's you gotta see, like, everyone needs touch points, and everyone needs more and more data points like that to to get comfortable at their own pace. But, yeah, that's just another kind of, yeah, arrow in the quiver, right, for, you know, reasons to reasons to not be bearish on Bitcoin.
[01:42:01] ODELL:
Yeah. I mean, I it it's insane to me that people are bearish at all. It is I I'm curious on your opinion because you did start it off with, mentioning the fee rate, the on chain fee rate, because the dashboard is powered by mempool.space. Ten thirty one, portfolio company. And we're just not like, the retail demand is just not there for actual Bitcoin, for real Bitcoin. Like, maybe retail is, like, opening up Robinhood and buying iBit or, MSTR or one of the derivatives. But I they're not here and they're not here in Bitcoin land. They're not here buying actual Bitcoin, self costing actual Bitcoin. Is is that just the is is that the new normal, or is or is it just still too early in this part of the cycle of the cycle's extended? Like, do we see that again? Are we gonna see the craziness of average people coming in and buying Bitcoin stack?
[01:43:14] John Arnold:
Yeah. I mean, I think I think we will see some kind of retail FOMO mania again. But increasingly, I don't know that that's really, like, the main marginal driver of Bitcoin's price. Right? Like, I don't know that it's like the, you know, the the the degen on, you know, some it's right on some, like, offshore exchange or the the guy, you know, buying in in Robinhood, like, just kinda aping in his his life savings in, you know, in Robinhood or something. It feels and looks, you know, a lot more institutional for for better or worse. So I think we'll see that, but it's gonna I think that's gonna require, like, us getting deeper into the cycle, and probably, you know, some degree of, like, moving back toward monetary easing, to to get animal spirits, like, you know, rip ripping again and to get kind of the the average guy, you know, wanting to to participate at, you know, some to some degree.
But, yeah, I think it's like what's gotten us here clearly has been much more, like, institutional flows, than, or or like your, you know, broad your your Charles Schwab accounts in mass, buying iBit or something. Right? It's not been your traditional, like, retail d gen player.
[01:44:37] ODELL:
Maybe some of them are are maybe some of those guys are now going to You don't have to you don't have to be a d r. What about the just the stackers? Like, what about
[01:44:46] John Arnold:
Well, them I mean, yeah. But them too. Right? Like and and when I say them, I like, it includes me and and I would assume you, like, you know, you're, like think about Bitcoin's market cap and think about, like, you know, your hundred dollar DCA or whatever per week or your $500 DCA or whatever. Yeah. Well, there's 10,000,000 people that adds up. Yeah. I mean, I guess it's a it's a question as to how many are, like, actually how how many people are there out there that are DCA ing in a meaningful way and also, like, hitting the chain?
[01:45:17] ODELL:
It's probably less than a hundred thousand.
[01:45:21] John Arnold:
Yeah. That may be right.
[01:45:24] ODELL:
But in previous cycles, it's 10 x or something. I mean, there's no way to measure it. So it could be a million people. It could be a million people.
[01:45:35] John Arnold:
Yeah. Absolutely. And the tools are getting better for that. Right? And we see that in, like, our, you know, some portfolio companies that we have, like, the the tools to, like, actually take custody of Bitcoin, and whether you wanna store it, you know, single sig or do it kind of collaborative custody or something like that. Like, that's all getting better and easier, and, generally, that's kind of been, like, up into the right for all those businesses. But, yeah, just as it as it relates to, like, on the margin, like, you have to add a lot more stackers every cycle who are doing it in a dedicated way to move the market to the same degree, as the prior cycle. Right? Guess the as the market gap gets bigger.
So, like, that's that's a piece of it too.
[01:46:18] ODELL:
I don't know. That'll be interesting to watch. I think it might just be I I'm, like, coming to the conclusion or not the conclusion, but my working thesis right now is that the treasury companies and even to a lesser extent, the ETFs, primarily iBit, have delayed and extended the cycle. Because you buy MSTR. It's gonna take about a month for that to show up in real demand for Bitcoin, buying Bitcoin or whatever. Like, he's got a w even if you buy iBit, it's gonna take, like, four or five days for them to, like, settle it out and, like, make it happen. Like, they don't do it instantly. They're like they have to go through whatever traditional flows to make it happen. Like, you buy on strike and, like, boom, done. You got it. It's like ten minutes.
So it slows it down and extends it. But then the other question to me that I've been so then and then historically, I believe the best months for Bitcoin price appreciation wise is usually in, like, the fall. So we're, like, gearing up to for, like, a FOMO crazy fall winter. But at the same time, I do ask myself, historically, at this point in the cycle, you would see maybe people speculating on shitcoins. The shitcoin market is nonexistent. It seems like it's just fallen out from underneath itself. Even, like, the most die hard Shitcoiners now have brought brought down their portfolios to, like, one Shitcoin. They're like, oh, but this one's not a Shitcoin. The yeah. The qual the quality shitcoins.
Yeah. They're like, oh, I I should just have, like, 1% of my portfolio in Solana, but the rest in Bitcoin. Like, I heard from, like, one of my shitcoiner buddies. And, with the shit coins, though, it was a very easy thing for, like, Solana pumps. You're already self custodying Solana, and then you go to one of these swap services and you move it into Bitcoin, which you self custody. The that flow doesn't exist for, like, holding MSTR. Like, you buy MSTR and Schwab, how far away are you from going to self stacking self cuss you're pretty far away from stacking self custody Bitcoin. I don't know how that flow work. How does that transition work? And so maybe that takes significantly longer. Maybe eventually that happens anyway, probably.
But still, it's it's it's definitely complete it's definitely same same, but different from previous cycles, it feels like.
[01:49:11] John Arnold:
Yeah.
[01:49:13] ODELL:
Yeah. Okay. Well, we'll keep an eye on it. John, I let I think we'll make this, like, every six months or something. We'll have you come back on.
[01:49:23] John Arnold:
Okay. Great. You can do your, obligatory two suit episodes a year, and we can give the freaks the the updates that I'm sure they were all craving.
[01:49:35] ODELL:
Dude, people seem to freaks, it seems like you've at least the ride or dies in the live chat have seemed to enjoy it. We'll see we'll see how people feel on the podcast apps. John, before we wrap, final thoughts.
[01:49:50] John Arnold:
Final thoughts. I will not it doesn't doesn't really matter what I think. It doesn't really matter what anyone individually thinks. And that's the beauty of emergent decentralized systems such as Bitcoin and also such as language. But, I won't die on many hills, but I will die on the hill of Sats. The Bits conversation to me is, just completely illogical. I I I get what people are going for, but anything that injects incremental, like, at this point in the in the game, confusion on units, is, you know, probably not gonna have the the result that I think people are looking for. And more importantly, 21,000,000 hits, 2.1
[01:50:34] ODELL:
does not. 21,000,000 sounds like a small number. People know what that means. Wait. You're mixing up two you're mixing up two different things. Right? There's some people that wanna call Sats the smallest unit of Bitcoin. Bitcoin.
[01:50:46] John Arnold:
Yes.
[01:50:47] ODELL:
And it but in that case the 21,000,000 names. Yeah. Yeah. So you're right. Sats, bits, and Bitcoin calling, like, each You can just change the name of Sats. But We could change the name of Sats to bits.
[01:50:59] John Arnold:
I I see them I see them as interrelated because it's a lot of the same parties, like, trying to get these different things. But yes. So, like, the Sats bits thing, like, I think is pretty seldomly just, like, not gonna happen. But the calling each, each Satoshi a Bitcoin, I I think distracts from or or does not take into account one of the key shelling points and, like, memetic, powers of Bitcoin, which is 21,000,000. People don't understand how to conceptualize a quadrillion, so we're never gonna walk around telling people there'll only be 2.1 quadrillion Bitcoin and have them think like, oh, well, there aren't there aren't that many. I better get some. And it is important to give people that showing point that they can latch on to to understand just how scarce Bitcoin is.
[01:51:41] ODELL:
Yeah. No. I think it doesn't make any sense to me to confuse confuse users, but, like, people know what a Bitcoin is. Right? There's key is there's 21,000,000. Like, that makes no sense to me. That said, if if you run you know, if you maintain an app or wallet and you wanna do that, by all means, do that. See, you know, see how it plays. You you're your own person. I I will say, like, I can disagree with him, and I can disagree with John Carvallo in this regard if he's the author of BIP one seventy seven, which proposes this. But at least he did it in his wallet. Like, he just changed it in his BitKit wallet. Like, that's how it's displayed.
So anyone could do that, see how it plays out. There's no, like, king or, like, the legislature body of of, Bitcoin that can decide how to do that. I don't think it's something that should really debate is unproductive really on this on this front. Language is mostly organic, and people should decide what to do. But to me, the idea of, like, calling the smallest unit Bitcoin is just super confusing. It adds more confusion than it presumably benefits. But I don't necessarily agree with that about the whole bits argument. Now there's two there's two pieces on the bits side, right, which is you you could we could use one bit right now is a hundred sets. That's always been the case in in accepted language in the in the organic cultural language.
One bit is a hundred sats. So we could have bits and sats. And then there's another contingent that wants to convert sats to just call sats bits, which then I don't know what we would do with the unit that is currently referred to as the unit formerly known as bits.
[01:53:46] John Arnold:
I just think adding I yeah. I I just think adding any new element to the taxonomy right now at this point is just, like, it's not helpful. I don't know who's really asking for it. Like, I think people can I I think it's easiest for people to track 1 Bitcoin and a hundred million sats, and it's like it's just like I don't I don't really know what having a bit adds to the the conversation? I guess you could say, like, you know, dollars, like, can get subdivided up into, like, pennies and then dimes. Yeah. But they're not called they're not called dolls. Yeah. Right. Right. Exactly. Yeah.
But so, yeah, I on just the bits versus sats, like, should we add bits to the taxonomy? To me, that's like you know, I don't really care that much about that. I I but I don't really know who's asking for it at the same time. So I you know, it's not something that I really wanna see happen just from that perspective. But the call each sat, just call them all Bitcoins, to me, like, that's definitively in the wrong direction. And I can't control it, and you're right. Like, language is emergent and organic. But I just hope it doesn't go in that direction because I don't think it will. We have to preserve 21,000,000 as a as a mimetic shelling point. I think that's the least likely
[01:54:55] ODELL:
the the most likely scenario is it just stays as it is. Yes. That's what the momentum is. The least likely is that Sats get start getting referred to Bitcoin and catches on. Sats are Bitcoin. They're little bits of Bitcoin. Then maybe the second most likely after the stats just staying Lindy is, we've renamed them to bits. No. Probably not. The second most likely is that some wallets denominated in bits, which is a hundred sets. I personally when I was championing sats, to be clear, I wasn't necessarily championing the name. The name already existed. Like, someone else came up with the name. Satoshi didn't come up with the name. That was after Satoshi. I was just championing the idea of thinking in the smallest unit possible, and that was SaaS. And I think that's important. Right? Because people think they're late to Bitcoin. They think it's too expensive for them.
But and we were getting a lot of pushback from, like, XRP people, Ripple people who were saying Ripple the standard, XRP the standard, XRP so cheap. Well, XRP is more expensive than SaaS. Right? And Lightning Network happened at the same time. I do think it's it's hilarious that even today, while people argue about it on x, they're like, oh, evil Odell made SaaS the standard, like, blah blah. It's like, I deleted my fucking x account. Account. Like, you guys can argue all day, all long. Do whatever the hell you wanna do. I'm thinking Sats. Noster is using Sats. I think it's a standard unit of value.
It is what it is. But change your apps. If you wanna change your apps if if Dorsey wants to put change all Sats and cash app to Bitcoin, then he's welcome to do that, and see how it works out. Like users either like it or they hate it. Sounds good. We solved it. I can't I can't believe that was your final thought. I thought we could just avoid the whole topic.
[01:57:02] John Arnold:
I feel like it was important for me to draw a line in the sand on our our shelling point.
[01:57:07] ODELL:
Yeah. I mean, I don't really I fair enough. Well, I I don't I'm it's something that I'm I sleep well at night. Like, I just don't really care. Yeah. That's that's really the right thing to do. Think it's a real I don't think it's a real concern. I think, I think you said it earlier. I think what we see in our day to day with calls with people, particularly, like, large potential investors and smaller investors too. Right? We have two funds. We have an institutional fund, and then we have a a smaller one for, like, medium high net worth individuals. And it's it's a weird lack of urgency.
And I would just say, like, I feel like all this stuff is just distracting a ton of people when really, in your head, you should just be like, fuck. I don't have enough Bitcoin. I need to have more Bitcoin. I need to have a deliberate strategy here. Like, I need to be focused on this thing because we're born in this one period. We're we were blessed to be born in this period where Bitcoin gets adopted during our, like, the primes of our lives where we're most focused and most productive and most working. Massive opportunity.
And instead, you know, there's just people flaming each other on social media. It's just a distraction. And I just would implore people to try and stay focused and stay on Bluestacks ads.
[01:58:38] John Arnold:
Good way to end.
[01:58:40] ODELL:
John, thanks for joining. Always a pleasure. We'll do this again. Freaks, you can find them at primal.net/john. What's your x handle?
[01:58:50] John Arnold:
John arnold ten thirty one.
[01:58:53] ODELL:
X dot com slash john arnold ten thirty one. And, obviously, all the information on 1031 is at 1031.xyz. Freaks, thank you for supporting the show. Thank you for joining us if you were in the live chat. There'll be a dispatch next week. I'm not going to Vegas. I don't know who with. I haven't figured that much out yet, but I'll I'll make it happen, and you can just just find out on on Noster, if you wanna join the live show. Anyway, love you all. Thanks, John. Thanks. Stay humble, Stack Sats.
More than 50,000,000 Americans hold some form of cryptocurrency. This digitalization of financial services is not a trend. It is a transformation. Here at the office of the comptroller of the currency, we've confirmed that national banks and federal savings associations may engage in certain cryptocurrency activities responsibly in order to serve their customers. OCC regulated banks may provide custody services including the safekeeping and secure storage of cryptocurrencies and other digital assets all on behalf of their customers. The banks we supervise also may buy and sell cryptocurrencies they hold in custody at their customer's direction.
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[00:02:18] ODELL:
Happy Bitcoin Monday, freaks. It's your host, Odell, here for another Citadel Dispatch, the interactive live show focused on actual Bitcoin and Freedom Tech discussion. As always, dispatch is brought to you without ads or sponsors. It is supported purely by Bitcoin donations from viewers like you. Two best ways to support the show are through our Nostra enabled, Bitcoin enabled live stream. You can get to there at silodispatch.com/stream. I see we already have two ride or die freaks there. Kieran has zapped a 69 sets already. Thank you, Kieran.
Or through podcasting two point o apps like fountain podcasts, the top zap from last week's show with VNPRC was 5,000 sets from a user named steak and eggs. Great breakfast choice. Thank you for the sats. There was no message. There was also a couple others apps there, but there was one from Bob the Cow for 500 sats that said, Sedel Dispatch is the second best podcast on Earth after Call Her Daddy. Felt like that deserved an honorable mention. That is a crossover that few have expected. Call Her Daddy listeners are now listening to Sedel Dispatch. Anyway, freaks, that boring ass clip that I started off the show with was, I think, the chair I don't know if he's the chair of the OCC, but it's the office of the comptroller of the currency. I guess they're in charge of banks. I'm not a bank expert.
Maybe our guest is. We have ride or die freak, return guest, one of my partners at ten thirty one, John Arnold. How's it going, John?
[00:04:11] John Arnold:
What's up? Great to be here. I'm glad, you chose maybe the most boring clip in the history of the show to open up, this episode with me. Feel feel very honored.
[00:04:22] ODELL:
Well, you're my favorite suit, and I have the pleasure of working with you on a daily basis. So it felt fitting. Also, I mean, I've it seems like it's a big deal. I mean, I I would never want banks to hold my Bitcoin, but that seems huge. Do you have an opinion on, that that news?
[00:04:45] John Arnold:
Look. Yeah. I mean, well, on the on the suit point, I, I literally before we got on here, I realized I was wearing my Patagonia, pullover, so I had to rip that off and and, not I I couldn't be the first guest to support a Patagonia logo on the show, so, we we dodged that bullet. But, yeah, I mean, it's, in terms of direction of travel. Right? Like, it's I think we all expected it to eventually go this way. To your point on the, the banking question, so it's the OCC, the FDIC, and the Fed that are the three, like, banking regulators in The United States collectively.
That probably is the limit of my knowledge in terms of, who controls what and who does what, and I think, like, it probably varies based on the administration. But so, yes, that that all that is to say, like, OCC, Fed, FDIC moving all kind of collectively in that direction for, allowing Bitcoin custody in some capacity, still TBD. What that's actually gonna mean, is, definitely a notable mile marker. And at the end of the day, like, I you know, if if you've been here for a little while, and you've been here longer than me, but if you've spent any time in Bitcoin, you've probably heard the phrase, you know, Bitcoin is money for enemies. So the idea that, you know, the most powerful, wealthy, organizations that kinda pull the strings of, you know, everything around the world geopolitically and and beyond, you know, that they weren't gonna get into Bitcoin in some way and want to have some piece of that and be able to charge a big on, you know, the AUM of Bitcoin.
You know, I think if you thought that that wasn't gonna happen, you you probably haven't been paying enough attention, and you probably aren't bullish enough, frankly, on where, Bitcoin is ultimately gonna go. I I, you know, I think we've all discussed internally, and you and Marty have probably discussed as well at podcast at this point, that it's gone there faster than I think we would have ever expected even a year ago. If you looked at where regulations seem to be moving in The US around Bitcoin and broader air quotes air quotes crypto. So the last twelve months have been mass reversal, and I think we can get into it. I think there are definite cons to that, to it kinda suits being collectively a lot more involved and enmeshed in Bitcoin, but, I think there are some definitive pros as well. And either way, you know, I see it as largely just capitulation, on a faster timeline than I was ever expecting. So, yes, I think all of that is a long winded way to say. I think it's a big deal.
[00:07:23] ODELL:
It's the most boring, bullish video. So we have, rider die freaks in the live chat. I see Mav twenty one zapped us 10,000 sets. Super fat arrows zapped us 10,000 sets. Thank you, freaks. Guys, just to put it out there, you know, ten thirty one and the two projects I'm most focused on right now are ten thirty one and open sets. And as part of that, I mean, I've always tried to build in the open and and be as transparent and responsive as possible. And so part of that is I I I think it makes sense to have reoccurring shows, that involve team members at both ten thirty one and OpenSats.
Most recently, you know, we had, Nifty and MBK on that are both board members at OpenSats with me. And now, obviously, we have John here. But, as always, the live chat is unmoderated and unedited. So feel free to hit us with any questions or comments you have as we rip here. I'd like to be you know, for this to be as helpful as possible for you guys who have questions. Yeah. So with all that said, John, I mean, I think a good place to start here is you're relatively unknown by those who aren't, paying attention. Yeah. Mav twenty one's laughing that he actually zapped us 10,000 Bitcoins. Like, you call the smallest unit of Bitcoin whatever you want. The cool thing about Bitcoin is that anyone can simply push a change to their app and and name the unit whatever they desire. It is a beautiful thing. You don't have to argue about it on the Internet.
John, why don't you give us a little just a quick rundown on your background, how you got into Bitcoin. And, yeah, I think it should be good context for people.
[00:09:26] John Arnold:
Yeah. As Adele mentioned, classic suit. Out of college, went the, investment banking route. So eight hundred hour weeks, arranging PowerPoint logos and churning out Excel models. Did that for a couple years and then moved over to what's colloquially called colloquially called the buy side, just doing basically investment management at a couple large hedge funds, and focusing on the health care space. But over the course of, like, five years doing that, fell down the Bitcoin rabbit hole pretty hard. I had been a a big Ron Paul guy, big gold bug, and, was coming from kind of a libertarian Austrian economics background.
But, in my previous, forays into Bitcoin, I just, you know, I I didn't have the depth of my touch points to actually, do enough work to kinda grok it and understand, what was so meaningful about it. So first time I've heard about it was in college. It's probably around 2013. I think because, Mt. Gox blew up, I had maybe, like, heard it mentioned once or twice, on, like, Mises Institute pages, if you're anyone's familiar with that. But I, you know, thought, like, that's an interesting science experiment, but, obviously, Internet money is never gonna work. Fast forward to 2017, kinda working on my hedge fund seat.
Late twenty seventeen, aped in a little bit. Not nothing huge. Kind of not exactly at the pico top, but probably, you know, like, two or three weeks before, crash happened. And I, you know, got scared off by the ICO craze and kind of thought I had reconfirmed my priors that, well, yeah, actually, I was right. This this whole space is a scam, so not gonna be a hedge into it. And then finally, third touch point was in, spring twenty twenty. And I'll I'll let listeners, draw their conclusions as to what led to, that, reawakening on Bitcoin.
But, just because of guys like you, guys like Marty, and various other Twitter personalities, was able to kinda fully get pulled down the rabbit hole, and, was just kind of a random pleb for a couple years, working my hedge fund job. And in mid to late twenty twenty one, I was looking for ways to invest in the space, beyond just holding Bitcoin and support some of the companies that whose products I was already using, and 10/31 popped under my radar, because of because of you and Marty and, you know, saw that, just kinda combining, an interesting set of skill sets and capabilities between you guys on the Bitcoin technical side and then Grant and Jonathan, our other two partners, coming much more from traditional finance side that looked a lot like what I had done.
So and already at that point, the portfolio was was very strong and has, like, gotten stronger since. But, saw all those data points, reached out, started just kind of working with you guys on the side of my spare time as I was able to and then was able to come on full time in mid twenty twenty two. I think literally the day that Terra Luna blew up was, like, my first day with you guys. So, been Nice. It's been almost three years now. Quite a lot has has changed then, but I think the the thesis thus far that got me excited, has has definitely played out. So that's my my rough background. Reform reformed suit.
But, yeah. Happy to be here.
[00:12:56] ODELL:
Reform suit, ride or die freak. I I love the trajectory. And to be clear, spring twenty twenty, when you got reinterested in Bitcoin, that was, like, COVID crash, March 2020. Like, we fell from, like, 11 k to $3,000.
[00:13:15] John Arnold:
Interesting perspective to come into Bitcoin in full swing at that point. Yeah. Well, I think it was so it wasn't like, you know, every the the market crapped out, and I, you know, saw Bitcoin fall from whatever it was, like, $89,000 to, like, 3 k or whatever and thought, oh, I gotta get in on this thing now. Like, it wasn't so much that. It was probably the next, like, one to two months, the policy response to everything that All the printing. Yeah. On on a broad scale, the the monetary policy response and and otherwise, kinda was, I think I mean, other people have mentioned this, in other context, so I don't belabor it. But certainly, like, a a pivotal moment for a lot of people, I think, in just understanding a little better even if you kinda latently understood it before. Like, yeah, I I was very aware of the Fed central banking, kind of, the nature of of fiat money and, fractional reserve banking and everything like that from kind of my Austrian background. But, you know, it's one thing to kinda be theoretically aware of it, another to see just, a massive unprecedented acceleration of it to kind of its logical conclusion in your in your lifetime. So that, yeah, reframed some things for me and and made it feel a lot more urgent to investigate how to respond to that in my personal life.
And so kinda, you know, April, May '20 '20 was when I started, that that journey.
[00:14:33] ODELL:
Awesome. I guess, five years ago, feels kind of like yesterday, but also kind of feels like a decade. It's weird. Times are weird. Freaks. I love the activity in the live chat. Average Gary, five thousand sats. Sawzall, two point one thousand sats. Dame x, that's a new name I haven't seen before. Zapped, 10,000 sats. And Chief White, zapped 10,000 sats. I see some good questions there. So, I mean, this is a crazy time in Bitcoin. I kinda wanted this to be, you know, maybe a we'll, like, mix evergreen good stuff on, like, how we're thinking about it perspective wise, but also, like, very topical stuff because I always like bouncing ideas off of you in perspectives. This week, Bitcoiners lost their cool or got were very excited. I got be very positive. They got very, very excited about Steak and Shake accepting Bitcoin. What, the interfaith I'd the flow is probably the the single best merchant flow we've seen, to date in terms of just very well integrated, nice little pay with Bitcoin on the terminal.
It doesn't launch you out to another page, just puts a QR code there, shows Sats shows the USD to to Sats exchange rate. Everything is lightning by default. What is your what is your opinion on on this development?
[00:16:09] John Arnold:
I mean, it's great, first of all. Like, great to see. I you know, there's it's very self evidently, like, a good thing, so I don't know that I have anything interesting to say on, like, the positive side of the ledger. Like, the the hot take that you probably are looking for that we discussed a little bit in our 10:31 chat, is, like, I'm not sure that it's anything more than, like, a flash in the pan, pun kind of halfway intended. You know, Steak and Shake has, like, clearly gone down this route of being, like, you know, based since, like, last year, but especially since the election, you know, with, like, the the anti seed oil crusade and everything like that.
Because that's great. I I'm not certain that we've got, like, a two sided problem right now with kind of mass spending of Bitcoin. Number one being, like, you've talked about this on the show, but I think there are probably, like, less than certainly less than 50,000,000 people, probably less than 20,000,000 people that, like, self custody or, like, self custody Bitcoin or really even, like, use Bitcoin in a meaningful way. So, like, people who don't hold it in ETF, people who don't just, like, leave it on Coinbase or, you know, their their their preferred exchange of choice. So the population of those with, like, any bit a, Bitcoin to spend at all, is is kind of kinda small.
B, the even among those that kinda do have some Bitcoin that they control, you know, off of an exchange, whether in a custodial wallet or not. Right? Like, the actual units of Bitcoin that they could, you know, spend, you know, there's a huge percentage of those people that still see it as, a diversification to kind of their investment portfolio or something where they wanna hold, you know, x to have an x percent, like, target of either wealth that they wanna hold in Bitcoin or maybe they wanna build it over time. They see themselves as, like, net buyers of Bitcoin, and and, you know, they actively don't want to to spend it. So there's, like, that piece. And then that leads into the the other side of the the problem, which is because of that, because the population is still pretty small and even, like, a decent percentage of that existing population doesn't really wanna spend doesn't really wanna spend their Bitcoin, I think big box retailers and, like, national chains and certainly even more so, like, you know, smaller merchants, like, you know, we've seen this actively, right, like, on the ground, like, have real trouble, like, viewing it as worth their time to have any incremental overhead, to support people coming in and, like, and paying with Bitcoin. Like, the the demand doesn't really seem to to be there in mass on a sustained basis.
And so, like, the the attitude is, am I really gonna access, like, an untapped pool of How many customers? How many people do you think spent Bitcoin at Staking Strike this week? How do you feel total? Like, just number of I mean,
[00:19:05] ODELL:
it's it's under a thousand. Right? Like, I would have to think this What percentage of the people that went posted on social media?
[00:19:14] John Arnold:
Because there was, like, a hundred Almost a %. Or 200 Yeah. Posts on social media. I I think very few people went to Steak and Shake to to spend their Bitcoin and just to support kind of, you know, the merchants receiving Bitcoin and then didn't virtue signal about it. I think it's it's, you know, it's near zero. Right?
[00:19:33] ODELL:
Yeah. I think it was probably my guess would be, like, in the thousand range. Yeah. Which is an interesting dynamic. Right? Because part of the reason why I'm so excited about Nasr is is that it it natively uses Bitcoin as this this means of ex medium of exchange, right, as as a way of paying people. And if you look at something like Nasr, according to Nasr.band, to date on Nasr, which is what, like, three years it's been or something like that. But in the beginning, let's be honest, it was kind of broken. I mean, it's kind of been broken until, like, six months ago. It was hard to have a really stable experience with it. 5,000,000 transactions on Nasr. The primal wallet alone is almost at 2,000,000 Bitcoin transactions sent.
And it's interesting seeing the, maybe the lack of excitement for Nasr in comparison to the, maybe, over excitement of Steak and Shake. But that said, I I mean, I think it's undeniable that this was a major narrative win. I think I saw a bunch of posts that, like, oh, well, you have Bitcoin. What can you spend it on? It's like, oh, well, I can spend it on a burger. I feel inclined. So that's a win. That's a big win, especially in a cycle that is very dominated by store value and investment use case. It's good to see the the opposite. Right? This is also why I I on rabbit hole recap this week, we highlighted the fact that, the Bitcoin Vegas conference is gonna try and break the world record for number of Bitcoin payments done in person.
Because these narrative wins, they do matter. Right? And I've, I want people I want big good money should be you should be able to spend and save it without permission. I prefer to spend Bitcoin. My biggest issue is that there's not places that I could spend it on. The other piece that is interesting here to me is one of the issues we've seen in terms of merchant adoption, specifically physical merchant adoption, is that it requires training of, the help of the staff. And what happens is maybe one person pays with Bitcoin a month or two people, and then you come in and you you check, like, BTC map or something, and you wanna pay Bitcoin at this location. And you walk in and you ask the staff, like, do you accept Bitcoin? And they their eyes glass over. They have no idea what you're talking about.
The fact that it seems that Steak and Shake has already fired all of their frontline staff and just uses touch screens, is probably is probably a win in that regard. Right? It's like you add the button once, and you don't have to do any additional training. Like, the button's on the touch screen. Like, you're not talking to a person. There's no training of a individual. So I think there's a piece there, that makes me a little bit more optimistic that this will be a long standing thing. The last thing I would mention as someone who works very hard for his family to avoid seed oils, there's a little key aspect here with the steak and shake thing. They stopped using seed oils in store, but the fries come pre seed oiled when they arrive at the store. And I think people aren't aware of this, and I just I don't want seed oil washing. I want people to be aware of of that. But before we move on to the next topic, John, how much of this is because we as a collective last cycle kind of false started merchant adoption? Like, I mean, I I remember I was I was personally very excited. At some point, I believe that Bitcoin will become very commonly used as as a medium of exchange, people paying and receiving Bitcoin. I think at some point, more people will be will be paying Bitcoin than selling Bitcoin, will be receiving Bitcoin than buying Bitcoin.
And we were kinda I I I think we got a little bit too excited last cycle. Is part of your skepticism based because of that?
[00:23:40] John Arnold:
I mean, that that's a piece of it. I wouldn't say it's, like, necessarily it seems like what you're saying is, like, is it just scar tissue from, like, we were we were more bullish, like, last cycle, and it didn't happen in the way that we expected or hoped as quickly. So, like, does that kinda weigh on me? Like, not so much. Like, I wouldn't say I don't think I was, like, hyper bullish last cycle on medium of exchange use cases kind of, like, becoming, super widespread and super mainstream for the same reason that I just think that I just cited before, which is, like, there are not that many people that, like, have Bitcoin.
There's and, you know, there are very few people that kind of know what Bitcoin is, in any meaningful way. It can differentiate it from, you know, ETH or any other kind of, you know, shitcoin out there. And then there's an even smaller pie of people that actually have Bitcoin and and, and then a smaller pie of people that kinda want to spend it. And I think there's gotta be a more I think we need to hit a higher threshold of, like, total wealth, not necessarily people because I think, like and this is a discussion we can maybe get into on some of the other topics. But, like, a lot of, you know, wealth is disproportionately controlled by, like, a small handful of people. You can, like, cite whatever system you want on that and, like, you know, maybe that's maybe that's good, maybe that's bad. I think that there's always, like, gonna be a natural dynamic where that's the case. So it doesn't necessarily have to be, like, every single person in the world's orange bill, but you do need, like, a significant amount of cash balances, you know, as a percentage of global cash balances held natively in Bitcoin such that people, like, maybe, you know, the people on on this podcast have little choice but to, you know, but to spend their Bitcoin. Right?
And so, like, I I I don't yet see, like, the the demand push, and on a mainstream basis for, like, people to come in and and spend their Bitcoin. That would be necessary to probably lead to, like, a mass kind of medium of exchange push. I think we have just a long way to go to get, like, Bitcoin in the hands of more people and get more cash balances and, like, total wealth converted to Bitcoin first before you really start to see that kinda take hold. So, and I and I've always thought as well, like, the the stake and shake thing is good to see because to your point, it's table stakes for any of this to happen, for it to be as smooth and easy as any other type of transaction. Like, there has to be complete parity. There has to be no additional burden, no overhead for for employees or for customers. It's gotta be super smooth. But I've always felt like the natural bridge mechanism to get to kind of, like, Trojan horse more Bitcoin transactions into, like, mainstream big box retail, like, medium of exchange type setting is to have something where Bitcoin is, you know, affecting the value transfer. Right? And and it's, you know, effectively the rail in the middle. But at either end of the transaction, you have you know, at the edges, you have whatever kind of currency conversion, you know, you want. You know? So you walk in with dollars. You pay. You have no idea that, like, what's happening under the hood is that Bitcoin is affecting that transaction, and the merchant, you know, receives into a bank account dollars, but the, but you cut out the the the middlemen that have come to to dominate, you know, existing, medium of exchange structures. Right? And that way you have, like, something super easy, something super convenient for both sides and actively cuts out costs for, like, low margin businesses that could be very meaningful to, you know, the bottom line of all these businesses.
Like, that's that's a way I feel like you are much more likely to ultimately get Bitcoin, like, into you know, it's it's it's, you know, full flowering of, like, medium of exchange use when a lot of people are kind of leveraging it without even being aware of it, without having to be orange build or adopt any kind of new software or any kind of new payment terminals. You know, I think that that's, like, the the ultimate, like, killer use case that would really scale it up, like, a hundred x from a medium exchange kind of viewpoint. But so, yeah, I mean, there's there's some scar tissue, but I don't know that that's, like, my main kind of, reservation. But all that said, I'd love to be wrong. I'd love for this to go completely viral and, for this for it to be made mainstream next year.
[00:27:54] ODELL:
Hopefully, this is a trend, but it's not not a trend yet. Yeah. I mean, I see one comment here from Mav twenty one, which is something that I've been thinking about a lot lately is, like, this aspect of, like, could there be from a from a tech point of view, kind of like a black swan type of situation where we just go from zero to one and Bitcoin is accepted in a ton of places because of something like, Apple Pay adds Bitcoin to their wallet. Like, if I can just load up my Apple Pay with Bitcoin and just tap tap my phone anywhere Apple Pay is accepted, the merchant doesn't even know they're accepting Bitcoin, Apple settles on the back end Mhmm. Then maybe that's maybe that happens. But, barring that, I think it's just gonna be a slow, steady grind. I think it's a little bit different from our next topic, which is I wanna ask you your opinion on Bitcoin treasury companies.
But with merchant adoption, I feel like it's it's it's it's gonna take longer, and it's it's not as momentum fueled. I think it's going to be small wins that we see over time that slowly and steadily Bitcoin starts eating away at transaction volume in terms of retail. But yeah. So the I mean, the big news of this this year, last two years has been the rise of MSTR and copycats. How do you how do you think about that strategy? How do you think about that development?
[00:29:33] John Arnold:
I mean, it's like I've gone back and forth on it, from, like, a I don't know how much you want, you know, Bitcoin reviews is, kinda known as the the show that is best at putting people to sleep. I can go on a whole kinda corporate finance rabbit hole and, like, really put people to sleep if we wanna do that. No. Let's not put people to sleep. High level, like, it hasn't I I I struggled with it initially because, you know, the at the end of the day, like, a a corporation, especially a publicly traded corporation, like, does not function just to hold liquid assets that its investors could hold themselves without friction.
Right? Like, it's drawing in capital to do something that the individual investors, you know, could, could not do by themselves and, you know, implicitly, like, they have decided that the most efficient way to, like, organize their capital and organize production is under the form of a, you know, corporation or a publicly traded corporation in some cases that can kind of deploy, you know, their their capital effectively to to some end just to generate some, you know, return over some hurdle rate. Like, that's that's basically it. Right? And so, with a company that makes cars or company that makes clothes or, you know, any kind of, goods or services, like, you can make a strong case that, like, we can't do that as efficiently as individuals, so we need to have capital come in, to these different structures and you do that, and that drives a better rate of return overall.
But you can hold Bitcoin, right, in in many different vehicles. You can hold it in cold storage single sig, cold storage multi sig, collaborative custody. You can hold it in ETF if you want. You can, you know, put it on exchange. Don't really recommend that, but, like, something you can do. And and, generally, for, like, pretty much with pretty much no slippage, pretty much no fees, you know, comparatively to to most other asset assets that people hold. So, you know, it's it's always like, it initially you know, it's pretty mystifying to me, what the value is or was of, doing this in, like, a public company vehicle. Like, especially because at the end of the day, like, if you're if you're explicitly one of these companies, and you're explicitly not going to distribute, the the assets based on the fruit of the assets that you've accumulated, which ultimately, like, companies are are traditionally valued on that. Right? Like, discounted cash flows, dividends, whatever.
The idea is, like, I put up my capital and you give me you distribute at some point in the future. Maybe it's ten years in the future. Maybe it's fifty years in the future. You distribute either through dividends or stock buybacks. You cash, that, you know, that benefits me for holding the equity. If the, story here is we're just gonna hold this indefinitely, and in fact, like, the story falls apart if we if we ever say, like, we're gonna get you know, distribute any of this Bitcoin, then, you know, it it basically, all this is pretty able to say. Like, there's a lot of reason, I think, to be skeptical and suspicious about, like, this concept, you know, in theory.
I think that there are players out there having looked at it more that for various reasons have and MSTR is, like, the the obvious one. Right? Have had the ability some of it, I think, is as a result of just historical accidents and kind of, you know, call it, accidents of, the capital markets and restraints and regulations on different pockets of capital, have been able to, take in capital. And, for a dollar of capital, they've been able to accumulate more than a dollar's worth of Bitcoin. The debate would be, well, how long can that actually go on? Is there some reason that they should be able to do that indefinitely? And I think for the vast majority of, you know, the companies that are coming to market now and we're seeing, like I'm not the first to say it, but this is basically, like, you know, the the ICO craze of of this cycle perhaps. You know, for the vast majority of those, I think the answer is gonna be no. I think the the strategic value, and kinda competitive edge and mind share, which is really important here, is going to accrue to, like, a few of the big players that can move really fast in size.
And, you know, the rest of them will probably trend toward, you know, something like one x nav. A lot of them will trend to zero because they'll probably, you know, take lever bets that blow up at exactly the wrong time. And, you know, the the equity will will end up being worth, you know, nothing. I but I do think, like, there's some merit to a couple of these, and I think that they may even help juice this cycle a lot more than otherwise. Ultimately, the flow side is probably there will be games played by a lot of them that then, help offer the the next bear market. So, I guess I would sum it up by saying, on a, again, zero on a one to 10 kind of scale where one is, you know, Bitcoin on a one to 10 scam scale where one is Bitcoin and 10 is, I don't know, ETH. Maybe ETH is not even the scamiest of scams. Maybe that's like an eight. I think, like, this But XRP is 10. X XRP is a 10. That's right. Yeah.
ETH is high, but XRP would be a 10. You know, I'd I'd say this trend is on, like, you know, is like a five maybe. Right? Interesting. I think MSTR is is lower on that scale. There are some others that are higher on that scale. But, yeah, that's kind of how I'm I'm looking at it today.
[00:35:06] ODELL:
Interesting. I mean, so MSTR right now is trading at a two x nav. Right? So it's basically I mean, what Sailor has said is my goal is is to increase your Bitcoin per share, increase the amount of Bitcoin that each share is worth. So, presumably, that's pricing in the thought that he'll at least double your Bitcoin per share. And you think that NAV, yeah, like, do you think that's a justified NAV, or do you think do you think that goes up, or do you think that goes down? Does it go negative? Can it go negative? Is it, like, GBTC?
[00:35:47] John Arnold:
Yeah. Okay. A couple of things.
[00:35:49] ODELL:
I have no idea where that multiple is gonna go. This is not financial advice. This is not financial advice. We should we should probably start talking about commodities and not securities. Yeah. All that shit scares the shit out of me. Yeah. I mean, certainly not,
[00:36:06] John Arnold:
not financial advice, and anyone who tells you they know where m s where Bitcoin's going or where MSTR is going, is is probably, not something you should listen to. But, I mean so a few things. Like, when I think about the amount of Bitcoin that MicroStrategy has and let's assume let's put let's put aside the question of, like, well, do they actually have it? And, Let's assume they have it. Let's assume they have it. I think it's a valid and legitimate conversation to ask, do they actually have, you know, economic benefit from the the Bitcoin that they claim to have, and, you know, how how secure is that, and why don't they provide proof of reserves and addresses and things like that, like, that's all legitimate question. But if you assume that they have it and they and they are exercising control over it, and aren't going to get it, $61.00 2 for to start The US strategic Bitcoin reserve.
[00:36:56] ODELL:
Right.
[00:36:57] John Arnold:
It's think about the replacement cost of 575,000 Bitcoin. Right? Like That's way higher than two x. Yeah. Could you even go buy $575,000 of Bitcoin without, like, significantly moving the market and get that much Bitcoin quickly? Like, probably not. Right? When so when MSTR had difficult. You'd have to try
[00:37:19] ODELL:
difficult to near impossible.
[00:37:21] John Arnold:
Yeah. So when MSTR had 5,000 Bitcoin or 10,000 Bitcoin on the balance sheet, like, you know, okay. You could you could replicate that probably pretty easily. And even, like, a multiple of that, you could probably replicate. I one so the first thing that I'm wondering with it is, has it gotten to the point of a level of critical mass and escape velocity where, getting even that much Bitcoin into, like, one single pool, would be impractical enough that there should be some premium applied to, like, that stack of Bitcoin. So that's one question. The next thing I would, like, go through in the progression and ask myself is, like, well, if we're heading eventually to a Bitcoin denominated financial services future of some sort, Then Saylor has, you know, several percentage points of the most valuable, you know, resource on Earth.
And he starts to look, and I think, you know, he's pretty clearly tried to, like, it seems, try to position, you know, the company more and more in this way. Like, does it start to look more like, you know, a bank of the future? Right? Like, someone's sitting on a huge pile of the the capital asset of the future they're on once. And so if it looks like a bank and that's ultimately where he's going, well, you know, JPMorgan or or even, like, Berkshire Hathaway or something, you know, like, these these companies that have used, you know, their asset bases in very creative ways, those guys have, you know, traded at certainly, you know, whether it's two or, you know, I think three is on the high end in terms of book, in terms of book value, but they don't trade at one. Right? They don't trade exactly at NAV. And and when we talk about, like, NAV, what what we're talking about is book value. Right? It's like asset assets mile minus liabilities.
And, you know, none of those institutions generally like, when they're healthy and doing well, right, when they're distressed is a different question, but, like, they generally trade, like, notably above, like, one x. And so if you think that there will be some sort of, like, future where there's something at all productive to do with the Bitcoin, like, Bitcoin denominated, you know, yield, I'll say. Right? Like, lending out Bitcoin in some way. But but but not but not like scamming you. Like, I I'm gonna give you you know, I'm gonna I'm gonna lend you some amount of Bitcoin. You think about, you know, the the when Bitcoin is appreciating, like, let's say, if we're in a future or Bitcoin's appreciating, like, 5% a year, 10% a year, whatever, you probably have you probably have much less debt in a world like that, just because that's much more expensive to service. But, like, you can imagine, like, economic arrangements where someone gets Bitcoin. You know, a a capital provider gives you Bitcoin in some structure. And, you know, if you're a successful business, you can repay that with some, you know, interest rate or dividends or something. Right?
So if there's a world like that where you could do that with all of Safler's Bitcoin, then, yeah, it's it's not clear to me that, you know, the that pool of Bitcoin should just trade at, like, you know, one x. Right? So I think, with with a with a company like that, a vehicle like that, I think you can make interesting and not totally insane arguments for there to be, some premium. For for the guys who are on, you know, Twitter posting in all caps that, you know, here's my price target for when no. Well, no. Not not not like you. I I would never lump you into you should not on Twitter. Right? But, the Fair enough. The the the Twitter bros who are on, you know, on their posting, their sensitivity table showing here's what happens when MSTR goes to, like, 10 x nav, you know, and it's gonna it's gonna be worth Apple and NVIDIA and Meta combined. Right? Like, I think that's probably not, a case I can subscribe to, but, you know, the idea that it should have, you know, like, some premium to one to me is given how big the pool is and given how actually, well constructed at this point the balance sheet is and how, I think, low risk it is for Saylor to completely blow up at this point.
I think it's hard for me to say that it should just be one x. Not impossible for him to blow up, but I think for it to go to for for the equity to go to zero, or very close to zero, I think you've gotta have a prolonged bear market sub, like, 25,000 that sits there for, like, years. Right? So all that is to say, like, MicroStrategy is a special case or strategy, whatever. And I think the the players in the game that can quickly develop, like, a huge treasury, you know, maybe can get to a point where it becomes a bit of a self fulfilling prophecy where that capital base gets so big that they can either, you know, efficiently use it and leverage it, to build to mount, like, a real case that they can grow Bitcoin per share and acquire more Bitcoin more efficiently than you could with that same dollar and or, like, that they'll have, you know, this strategically advantaged kind of, position over the next number of years as Bitcoin gets more and more integrated into, you know, financial
[00:42:07] ODELL:
services. But that's not make that you could you could even make the argument that, like, like, the traditional cash pile argument. Right? Where, like, he could do strategic acquisitions or something post as Bitcoin adoption slows down. And he'll and he'll have the most dry powder out of anyone.
[00:42:25] John Arnold:
Yep. But, I mean but, yeah, it's it's the the flip side of it, right, is, like, people people see a good thing, people see a successful thing, version of it. Right? They wanna copy it. They wanna, like, ride on its coattails. Yeah. You know, it's it's I like Bitcoin. Buy my shit coin. So, you know, it I think we have we are just in the first inning of seeing, like, companies, coming to market with their Bitcoin strategies. But you already see it's it's a lot like, summer twenty seventeen with, like, you know you remember, like, a Long Island Iced Tea, adding adding blockchain to long blockchain. Right?
[00:43:01] ODELL:
You see these companies putting out these press releases where they're like But they were all miners back then. They were like like, Long Island Iced Tea, like, bought, like, 10,000 mining rigs, and they were like, we're Long Island blockchain.
[00:43:12] John Arnold:
Yeah. That's right. But, yeah, you see these guys putting out these PRs where it's like, we've initiated our Bitcoin strategy, and we're we're targeting a a billion dollars of Bitcoin in our treasury. And you read through it, and it's like, okay. Well, like, yeah. Their their their board is evaluating a capital plan that illustratively, theoretically, it might someday allow them to buy $1,000,000,000 of Bitcoin. Right? So, you know, we're we're just at the beginning of of seeing that, and I think, unfortunately, a lot of people will get burned and, and rugged by, all of the kinda ankle biters that that pop up, over the next, you know, year and change trying to, maybe even longer trying to chase this trend.
But I don't think I I'm not convinced yet that the entire strategy is completely, like, asinine and backward and doomed to failure for every single company that tries it. I think it probably is for, like, 95% of them. Right? But I do think there's some degree of signal there that will kinda ride out through, you know, a cycle or two. Because it's like Bitcoin is is such Bitcoin just because, like, if Bitcoin is what we think it is, it is such a powerful capital asset. It's there's there's no way you're not gonna have, you know, the the, speculative attack that Pierre Schard wrote about ten plus years ago, taking some form some kind of shape in, like, the deepest, most liquid capital markets in the world. Like, someone, you know, Saylor and, you know, his his, his successful followers, like, are going to figure out ways to, cheaply access capital, whether that's diluting shareholders or, you know, doing converts or doing preferred stock offerings or all these different things. Like Right. They're they're going to find ways to, at a low cost of capital, buy more Bitcoin. And that's what, like, individuals are doing every day. Right? If you're if you're taking out, you know, Bitcoin backed loan to buy more Bitcoin or if you're borrowing, you know, from your your bank at, like, a if you're doing an e lock from your bank to go acquire more Bitcoin, like, you are running the same playbook. Right? Yeah. Exactly. Right? Like, you're you're running the same playbook.
And so the idea that it it would not be possible for some corporations to do the same thing at a much greater scale in these huge liquid markets is, you know, I think probably misguided. That said, a lot of them are gonna blow up.
[00:45:36] ODELL:
Yeah. I mean, the difference with an individual or, like, a small business or a start up, which is what ten thirty one is focused on, is the cash flow element. Right? And MSTR originally started with not insignificant healthy cash flow. Now at this point, the cash flow is, like, incredibly dwarfed by the Bitcoin position, which is why I think when people are trying to price it, they're they're obsessed with the NAF. But I the if you if you have actual positive cash flow and you're actually a profitable business or profitable individual and your income is higher than your expenses and you're putting that into Bitcoin, that to me always has seemed like the holy grail. Like, that is, you know, I've had I've had dentists reach out to me. Right? And they're like, I'm I'm a dentist. I have a dental office. I love I love Bitcoin. What can I do to, like, further the movement? I was like, you should just be a dentist that holds holds Bitcoin.
Ideally, accept Bitcoin. Maybe you'll have, like, one or two clients that wants to pay in Bitcoin. That helps out those clients. You help be a part of the movement. But just be a profitable dentist and stack sets. You'll be probably one of the most you'll probably have some of the most options available to you in five years, ten years out of any private dental office in the world because because having that capital, having that, that treasury gives you optionality. But just before we move on to the next topic, like, I just because you're given your background, and given given your background, you you tend to be, like, my Oracle in terms of, like, pricing things and pricing businesses.
Do you think is the is is focusing on the nav of my let's just focus on MicroStrategy because there's all these copycats and there's nuances and add additional risks to all of them. Obviously, strategy is the is the big dog in the room. Is the focus on mnav the wrong way to price it? Like, why are people no one does that. I mean, you don't you don't really see that kind of valuation when you're talking about something like Tesla that's, you know, trading at, like, massive PE multiples.
[00:47:52] John Arnold:
Yeah. I mean, I think there are a couple of things there. So the first is, to get back to my bank example, it certainly seems like they're skewing themselves in that direction. And a lot of traditionally, like, banks are valued on book. Right? So doing, like, price to book is is I think it's, like, fair from from that perspective if that's kind of the the direction they're gonna go. And I think that's, like, the business model that most people can, like, most easily, you know, map onto them. So I don't think that's crazy. I think the other thing is, like, they also have yet to show, like, you know, Tesla well, Tesla is maybe a bad example, but, NVIDIA, Apple, Meta, you know, these companies, and and non tech companies too, like, traditionally are valued on something more like, you know, price to earnings or price to free cash flow or EBITDA.
But, basically, like, you're valued on, like, your recurring, like, business operating earnings of some kind. Like, you can pick whatever metric you want, to reflect that, but they're kind of priced that way. But I think MicroStrategy has yet to show that it can generate, anything equivalent in terms of kind of operating earnings. Some of the MSTR bros will kinda try to argue that thanks to thanks to the changes in in FASB rules, you now have, like, this concept of, you know, Bitcoin Bitcoin yield or Bitcoin gain or Bitcoin income. Like, Sailor's got all these different metrics, which I think are, like, reasonable to kind of frame up what's going on, and you definitely do wanna look at that to kind of understand, like, well, is he actually efficiently increasing, you know, the the Bitcoin HODL of the company or not? Like, they're so they're relevant. But the problem is and I alluded this to I alluded this earlier. Like, with an NVIDIA or an Apple, you can look at earnings or, you know, even better free cash flow and say, like, that is a proxy or, like, an analog for what I, as a shareholder, can can receive from this company. Even if they choose not to distribute it, you know, they they can pay dividends or they can do stock buybacks that proportionally increase my ownership of the business.
And that will ultimately be governed by, you know, the cash flow that they can generate. So I can I can kind of, like, as a shortcut, put a multiple on that, and, you know, get to some sort of, like, valuation that may make sense? The the difference especially with that I see with MSTR is not only have they not proven that they can kind of do that, even more importantly, like, the Bitcoin earnings that they're generating right now are not, like, I think in principle, like, not distributable. Like, obviously, they are. But the second that Saylor turns around and says, alright. I'm paying Bitcoin denominated dividends to, to my shareholders, or we're gonna fund buybacks, through kind of our Bitcoin HODL or something.
I think the second he does that, the the whole narrative collapses that this is just kind of, like, one way machine to acquire Bitcoin. So if he if he does that, like, I think he's implicitly saying, we no longer see a way to capital to capital efficiently acquire more Bitcoin per share, basically. And so we're just gonna now turn this into, like, a distribution vehicle. At that point, you know, there's no reason it shouldn't basically trade it, you know, one times NAV and kind of the whole the whole game stops. Right? So I I don't think it's, like, reasonable to look at kind of his metrics of, like, Bitcoin earnings and say, well, it should just be you know, we should use, like, a PE ratio for that because, like, the the earnings between, like, NVIDIA and MicroStrategy are just completely different in kind. Like, they're they're not, like, approximating the same thing, which is, like, distributable cash flows back to shareholders.
So for now, I think, like, cap, capitalizing it on NAV and and looking at it that way is, like, a a a pretty reasonable approach, especially since they're kinda taking that that banking route, anyway.
[00:51:35] ODELL:
Okay. I think that's fair. Let's go to an audience question, and then we'll go back to an Odell question. How does that sound? Superfat arrow is asking if we as ten thirty one would invest in direct competitors or once we have a horse in the race, would we back that one only? What are your thoughts?
[00:52:02] John Arnold:
Yeah. I mean, I think couple different ways to look at it. Certainly, our if you look at our portfolio that we have, like, on the on the site that anyone can go look at, we've definitely got companies on there that overlap in some of the products that that they provide and some of the services they provide. You know, I definitely think there's room for us to invest in a lot of different companies that play in similar pools because the market opportunity here, if we're right, is so massive that competition, like, as such is not going to be the main governor on, like, whether these businesses kind of, you know, do well or not. Right? So if you're taking kind of the five to ten year view on where these companies are gonna go, I don't necessarily worry that much about, like, I I worry way less, I guess, I'll say about competition, among Bitcoin companies than I do about things like you know, we talked about regulatory. You had your regulatory episodes on the show recently. That's a piece that we're always, like, much more worried about. I worry about, you know, distraction from, like, altcoins and Bitcoin treasury companies and things like that, like diverting, you know, attention away from some Bitcoin native, you know, financial services and things like that.
Fortunately, I don't think that's hindered a lot of our businesses thus far, but, you know, that that's something that kinda, like, slows down potentially, like, you know, the secular tailwinds of Bitcoin uptake. But I think, like, the the underlying, like, market tailwinds are much more of a focus point, for me and for us. And then, like, there's competition between, like the other, like, competitive element too is, like, competition with incumbents. Like, the the the the race is always, like, will, you know, the will the start up find distribution before the incumbent finds innovation?
Right? And then to the extent that incumbents kinda wanna get more into, like, these pools, like, like, maybe enabled by, you know, the OCC and FDIC and and Fed changes. Like, if that happens, how do incumbents look at, you know, the companies in our space? I think they'll probably look at a lot of them as strategic targets, but they may also look at them as, you know, competitors to to be to be squashed and and to be, you know, done away with in some way. Right? So from a competitive angle, that's what I would think we're all much more kind of focused on. I think there's room for us to invest in a bunch of different companies that are all kind of overlapping, in some of the things they're providing because, generally, these companies, when you kinda look under the hood, are not all doing exactly the same thing. They have certain products that overlap and then certain certain ones that don't.
I don't know that we've ever invested in two companies that do, like, precisely the same thing, that have exact the exact same value proposition to customers, and ex the exact same customer bases. Like, if we were ever, you know, given, a situation like that, like, yeah, I think we'd probably have to pick, you know, one horse over the other. But as it stands, I think, like, the that issue is not something that I think we lose a a ton of sleep over with the portfolio.
[00:55:11] ODELL:
Yeah. I mean, I guess there is an example with, like, Nodl and start nine. But I think that's also a good example of just the pie is so small. Right? Like, if the goal is if the goal is people self hosting easily with with low friction on open source with open source software, the hurdle is not each other. The the hurdle is actually, like, moving society to that type of world. And, usually, in most cases, a rising tide lifts all boats is what we're seeing and how we're kind of playing it out. I would I I mean, I would add to John's comments here. There have been a couple situations that we have to be delicate with it. I will say, just in general, the space is way smaller than people pretend it is, particularly when you're on, like, in terms of, like, businesses and, like, founders who are building in them.
It's way smaller. We're all at we're at all the same events. We're, like, in the in similar circles. There's a lot of friendships involved. So like most things in life, there's a lot of people things to navigate, and relationships to navigate. But I think if you're truthful and you're transparent and you act in an ethical way, we haven't seen you know, you you'll you'll seek occasional flare ups on Twitter or whatnot. But, mostly, I think people strongly do believe in the idea of, like, same team where we're all working towards the same goal. We all can benefit from it. I will also add just, like, if you go to our website, if you go to 1031.xyz, 35 companies are listed there or maybe 36 now at this point. But, if you actually like, in terms of funds deployed, percentage wise, it's a much smaller subset is the overwhelming majority of money we've invested.
So when those when when those investment sizes get larger, right, like, we've we've invested a hundred $50,000,000 into Bitcoin companies, when those when those investments get bigger, then all of a sudden you have to be a lot more obviously, you have to be a lot more deliberate in terms of prudence and making sure it's a good investment, but also in terms of conflict of interest there. And we in that situation, we do tend to coalesce around who we think will, you know, have more market share and and have have a stronger business. Do you have anything to add before we move to the next question?
[00:57:51] John Arnold:
No. No. I think that's all that's all reasonable. It's a good question.
[00:57:56] ODELL:
I see another question here that I can just answer real quick, bringing up I think it was Average Gary who set it, but now I can't find it. Asking about the grant we gave Cali. How does ten thirty one determine grants like the one we gave Cali differently than venture funding? I mean, it's quite simple. You know? An open source grant is for a project that we just think is important that is not easily monetizable, or maybe it doesn't even make sense to monetize. Like, in Cali's case, like, I think you add a lot of regulatory risk. As one of the investors of Samurai Wallet, I think we know about regulatory risk and taking deliberate risk more than others.
But in Kali's case, like, I think it's important that he never directly monetizes it, and she keeps it as an open protocol and doesn't custody people's funds. So we just provided him a grant because we think it's good for the ecosystem. We think it benefits our investors. We think it benefits our portfolio companies. We think it benefits Bitcoiners in general. Obviously, the lion share of grants that I'm personally involved with come out of OpenSats. But there is a nice con the it it I think businesses and individuals should be providing grants to developers directly without middlemen.
And I would like to see more of that. Our whole team at 10:31 would like to see more of that. And I think the way you see more of that is by leading by example and doing it. Right? And there there is a beauty of of just giving a grant with nothing expected in return and not having to work under a nonprofit framework where you have to take all this different identifying information and stuff. So we for that specific situation with Cali, we literally just reached out to Cali, and we were like, we would like to support you. Send us a Bitcoin address, and we sent them some Bitcoin.
Okay. Back to an Odell question. So people that were listening to Rabbit Hole Recap, since we started in 2018 I think it was 2018. Maybe it was late. Maybe it was 2019. I don't know. Whatever. Seven years, six years. When we started, I hated VCs. I was, like, super anti VC. I was, like, very loud anti VC. Why is what what makes what makes what we do at 10:31 different than the a sixteen z's of the world, the Sequoias of the world? Like, how do you think about that?
[01:00:40] John Arnold:
Yeah. I mean, I'll say, I also, like, did not care for VC and still don't. Like, I don't largely think it's a very attractive asset class. Maybe, you know, twenty years ago, mainstream VC was, but it's gotten so bloated and, just full of the the the incumbents that have existed for a long time have gotten just massive, and I think they've got an asset base that they just can't realistically allocate into kind of true hundred x, thousand x, like, early stage, category killers anymore. And meanwhile, you've got, like, just this ecosystem of, you know, kind of undifferentiated, like, generalist tech investor ankle biters that have popped up over the last, especially, you know, ten years.
And I think, you know, you're seeing now, for anyone who's paying attention to to that ecosystem, it it's starting to come through in, like, returns and lack of distributions, especially from a lot of those smaller funds. And so, you know, I think I I I am I was and am right there with you on, like, general VC. And I think, you know, what we do that's different than that, that made me kind of excited to join and made me wanna get involved is, I mean, a, first of all, we're hyper focused on a space that we believe has massive secular tailwinds. So we're not just kind of an also ran in kind of b to b SaaS investing or whatever. Like, we're we're purpose built to be, you know, this hyperfocus machine on this one vertical that we think is ultimately gonna touch every, you know, industry in the world.
But we have this kinda differentiated and and specific specialist lens on that that I think, is is necessary to have any kind of differentiated returns in, you know, early stage VC or private markets investing, like, in general. Right? That's a piece of it. The other piece is, you know, because we're so focused on Bitcoin, and because we're all Bitcoiners first, and are so levered to to Bitcoin and, you know, both the asset itself and also just, like, the the ecosystem around it, you know, we come at things from the perspective of Bitcoin being our opportunity cost. So that plays into, the investments that we make and why we make the ones that we do and what we find attractive and what we don't find attractive.
It's it's a filter for us to not just invest in the latest hot round of, you know, what everybody else in the valley is investing in. Right? Because we need to feel very good that we can underwrite, like, a Bitcoin denominated return on an an investment over the course of our fund life. And, you know, it it also, biases us as a result toward investing and not just not businesses that not only have, you know, great potential like tailwinds and massive market opportunity and secular opportunity to grow, it also biases us toward, businesses that we think can be scalable quickly and can have really, really profitable we can become very profitable quickly so that they can, you know, start stacking sets and adding that to their their own balance sheets and so that they can get to a point where, they no longer need capital from us or from others, and they don't need to take any more dilution, so that they can give up the smallest amount of potential kind of, you know, Bitcoin possible. Right? So they can keep, our equity protected and get to a point where they're generating Bitcoin for their investors as fast as possible. And all the companies that we focus on also are kind of in that same boat from their perspective. You know, they're all Bitcoiners first. They would be you know, they they could be working at a Google or a a Meta or an Amazon or something as software engineers or at, like, a, you know, hedge fund or a bank or something, probably making, higher fiat salary and and using that to to stack stats for their personal balance sheets.
But instead, they've taken the leave to to go build a business in the space that they think has all these tailwinds. And so they're also hyper focused on, you know, their Bitcoin opportunity cost and getting to, Bitcoin denominated profitability as fast as possible. And that kind of focus, on our side and on our company's side of, getting to kinda self sustaining unit economics as fast as possible and getting to a point where you're actually producing, you know, returns for your investors as quickly as possible is completely antithetical to the way that generalist VC operates, or has operated for the last, you know, fifteen plus years during during ZURP.
And, you know, I think you can't understate how much that changes and fill and kinda flows into how you look at companies and how you look at capital deployment. It's not growth at all costs. It's not, you know, just burn as much cash as you can to get to do a land grab and get as quick, get as big as possible as quickly as possible so you can go raise your next round, from some other VC who's being funded implicitly by, you know, infinite money out of the Fed. And they'll give us a markup, and then we can go use that to go raise raise our next fund to kinda rinse and repeat, do the same thing. You know, I think we're all coming at it from the perspective that that world is ending, that, you know, we're we're coming up on kind of the end of the, unconstrained fiat experiment.
And, you know, whether kind of the dollar dies, whether fiat dies, whether the fed dies in the next ten years, like, I don't know. But it's pretty clear that the free money train, is, you know, slowing down, if not coming to an end entirely for a lot of these these types of investors that I mentioned that have popped up over the last ten or fifteen years. And, you know, I think we're on the forefront of looking at the world through that lens where most kind of VCs are still stuck in this mindset that, you know, the the good old days are are just about to return, and the IPO market's about to heat up. And, you know, any day now, we'll be able to to get our next markup on our all our unprofitable businesses that we're invested in. We just look at things totally differently because of that that Bitcoin focus.
[01:06:37] ODELL:
Well said. Do you think, on that note, do you think like, I'm fascinated by this aspect of Bitcoin as, like, almost the shared equity. Like, if you're, you know, like, if if if if you're Jack Mallers and you're at Strike, you personally hold Bitcoin. Your company holds Bitcoin. Your employees hold Bitcoin. If you're Parker Lewis at Zapprite, you personally own Bitcoin. Your company owns Bitcoin. Your employees hold Bitcoin. How do you think about that dynamic? Like, I feel like that is a key differentiator too. That just no matter who you are in the ecosystem, you you're you're literally have this this this shared common monetary incentive to to grow and improve.
[01:07:30] John Arnold:
Yeah. For sure. I mean, it, it bleeds into, like, every single company that's building anything of value in the space that's enhancing the ability of people to, like, to get Bitcoin, to secure Bitcoin, to use it in different ways, is adding to at least on the margin in some degree, right, adding to, the embedded value in the ecosystem and in the asset. And because this is an open network, something we talk about a lot with investors, the companies in our portfolio, all benefit in a very unique way from kind of participating in essentially the same broad project. Right? Like, one company may be working on financial services for Bitcoin. Another company is working on some sort of consumer application. Another one is you're doing, like, mining services or something. But they're all they all have the ability either often directly through, partnerships that are much less, that have much less friction because they're all operating on this open standard or just indirectly of each kind of enhancing the others, you know, relative, you know, the value that they're holding, on their balance sheets and the the value of their businesses in that open network.
All the companies in our portfolio can benefit from each other and play off each other in a way that you don't see in, like, a traditional VC portfolio where you've got, like, a, you know, some medtech company and then you've got b to b SaaS company and then some, like, wellness company. Like, they're just not, you know, in anything like the same swim lane. And all of the all of their ecosystems are also like, everything every stack they're building on is completely closed closed source, and, you know, you've got people reinventing the wheel at every single business kind of in their own way versus, like, you know, every business every business in our portfolio just about kinda leveraging BBK, for example, like, in this great open source library.
That's a force multiplier for very small teams. You know, you had Rob Hamilton on, one or two episodes ago talking about that specifically, about how that's helped Anchor Watch, build much faster with a very lean team. That's the kind of stuff that you're just not gonna replicate in any portfolio that is not kind of leveraging, where the companies are not leveraging this kind of one common shared open open source, you know, set of standards. So I think, yeah, like, shared equity is an interesting way to put it. I definitely think that's a that's a big differentiator too for for all the companies that we invest in.
[01:09:57] ODELL:
Love it. Okay. Back to audience questions. Gary, wants to know, do you see any pieces of Bitcoin infra services that are missing that could be a good business. He left that part out, but, presumably, that would be a strong monetizable business, not just for good feels.
[01:10:26] John Arnold:
Yeah. I mean, the one that I like that we've talked about with various companies in the portfolio, that I've kind of been banging a drum on for a while, internally, and I think everyone, like, is directionally aligned. But, like, kind of an all in one place for, your Charles Schwab type client to get everything that they need in financial services out of Bitcoin without having to to touch, at first anything related to Bitcoin itself while still benefiting from, actual kind of assurances that can be provided on chain, right, and not just, like, buying on Coinbase. And, doing that in a way where, you can get everything that you would be expecting out of, like, a private wealth management product, at at a Schwab or at an Edward Jones or something while still having, the benefits of of relative trustlessness, the benefit that Bitcoin can provide.
There's been a lot of talk about kind of multi institutional custody. I think that's one pathway. Anchor Watchers, as I mentioned a second ago, is is, you know, working on kind of fusing insurance with Bitcoin. You're seeing more and more kind of movement toward that kind of business, you know, providing something that's catering to, like, basically, where all the money is. Right? Getting the, you know, the people that currently have big fiat balances, whether that's in, you know, cash or stocks or bonds or something, getting them a way to securely leverage Bitcoin.
And when I say leverage, I just mean use Bitcoin. They may also be, you know, leveraging it in terms of borrowing against it. But The the bank's definitely securely yeah. Right. Exactly. In a way where, you know, they could still have assurances that, you know, they're not putting their money into an FTX or, you know, a coin based honeypot that, you know, where they can just kinda have overnight zero if the balance is right. I still think, like, you know, Bitcoin's 15, 16 years old. We still really haven't cracked, like, we call it the order of operations, you know, internally and on our investor calls. Like, the adoption of Bitcoin is gonna have to go through that kind of order of operations. And right now, I think we're very much in the first inning of that. We were alluding to that earlier with the payments conversation.
And so I think, like, when I when I think about missing pieces in the industry, it's where can I go to have the assurances of, or something approaching the insure the assurances of, you know, Bitcoin on, you know, my cold card with my seed stamped in steel, something like that much closer to that than, oh, I have some Bitcoin at Coinbase, while not immediately having to take on the burden of being in any way technical, knowing what an XPUB is, knowing what an output descriptor is, you know, knowing how to use a block explorer, like, any of that? And, probably only 1% of people will actually take further steps to really investigate.
But I think the the point would be set it up in such a way that even though most people will not investigate, it it still is, you know, set up to not be a a giant honeypot or a giant rug, where trust is distributed in in some way. So I think bridging those two worlds to me is still kind of the holy grail for, bringing a huge amount of wealth into Bitcoin natively and not just letting it all default to, you know, iBit on, exchange accounts. And a lot of it's gonna go that way regardless. Right. But I still think there's massive value capture, to to be had, in in a product like that, that can be kind of side by side with, you know, an IBED like experience.
[01:14:13] ODELL:
Yeah. I mean, maybe maybe how we see that unfold is one of these existing private wealth juggernauts goes and acquires a company, like an existing Bitcoin company. Charles Schwab buys Unchained or some shit.
[01:14:28] John Arnold:
Yeah. I mean, that's that's my guess. Right? That's that my guess is I mean, you've seen Schwab, for example, over this past year, like, make a bunch of overtures about, offering kind of Bitcoin custody. And it makes sense. Right? Because when you think about, a a platform like that, if they've got clients that want Bitcoin exposure, right now what they can tell them is like, okay. Well, you can buy Ibit. Right? But Schwab doesn't make anything on on Ibit. I mean, BlackRock, you know, barely makes anything on Ibit right now too because we're you know, the fees are so low temporarily. But, like, you you've got a few ETF providers, you know, BlackRock, Fidelity, Arc, etcetera.
Like, they'll they'll make some fees on yes. There was. I shouldn't shouldn't have forgotten them. They're they're they're key part of the ecosystem. But, you know, they'll they'll be able to make some fees on those balances, and they'll be able to benefit from, you know, the natural, like, tailwind of AUM growth as Bitcoin does what we think it's gonna do. You know, they can take a a fixed, you know, bips fee on, you know, this growing value. But, like, Schwab, Edward Jones, Ameritrade, or, excuse me, Ameriprise, and all the all these other long tail of, you know, wealth management platforms that have, like, tens of billions or hundreds of billions or trillions of dollars, like, you know, they're missing out on being able to actually charge clients anything, by just, you know, referring them over to iBit. And so I think there's there's gonna be someone eventually who looks at the space and says, if I just own, you know, a tech stack that allows me to natively, provide some sort of, like, distributed trust, system to allow my clients to hold Bitcoin, I can tell people very legitimately, like, this is a step up from, just holding an ETF, for all the the properties that it gives you, and then I can monetize around that. I can charge AUM fees directly for, you know, the the service of actually holding real Bitcoin that we can verify, and, you know, everything you can do with actually holding that Bitcoin.
And I think, like, that's that's a natural way that these massive platforms that otherwise don't really profit at all from the clients holding Bitcoin, I think that's a way that they can step in and, you know, absolutely rake, you know, rake in, from the, you know, the broader Bitcoin adoption trend. So I do think it's a logical thing to happen, you know, at some point.
[01:16:42] ODELL:
Yeah. Fair enough. I don't know what I what my answers to that question would be. No. No. I gotta think about it a little bit more. But, I mean, I think that product's gonna exist. It's just and it's gonna come from different directions. It'll be it'll come from the the existing juggernauts from a top down approach and acquisition and whatnot. And we're already seeing the early signs of it from a bunch of startups in the Bitcoin space, and they'll probably, like, coalesce. I see a question here from Cheaplight If we know of any companies that offer vacation pay and bank sick pay to be saved in SATs, preferably paid out in SATs. No. I mean, you could call in sick and work a second job and stack SATs with it.
That's probably not the answer you're looking for. I mean, that's interest I I like I I think we'll see one of the interesting things that Bitcoin has talked about in the early days was this idea that if you had all of these freedom, ideologically freedom focused people, all generating wealth because of Bitcoin price appreciation, that they would have knock on effects and change the world. I think we're seeing the early signs of that with the growing Bitcoin industry, specifically the the Bitcoin only industry that's focused purely on Bitcoin rather than, you know, greater crypto.
But we're also seeing that in in small businesses around the world. I I'll bring up the dental office again. Random dentist. He's a Bitcoiner. He's got four employees, five employees, something like that. I don't know what a dentist office has. And he's a Bitcoiner and, you know, maybe he offers incentives to his staff. You know, I could totally see that offer incentives to your staff. You don't call in sick, I'll send you sets. And I I think we're gonna start to see those different knock on effects. I think we see it on a protocol level with stuff like Nasr. Like Nasr was seeded by Bitcoiners that, had at least some savings that they were willing to try and tackle a problem as large as trust minimized communication, social, and identity.
So, I mean, I think we'll see more of that. So I would keep your head up in in terms of that regard. But smaller businesses, more likely. Right? Because smaller businesses, they can adapt. It just matters who the who who's running it. If you have a big HR department, Bitcoin is probably not gonna be incorporated anytime soon. And I see Gary asking about, local custodians, providing custodial or collaborative custody for people in your local vicinity. I look. I think that's great. I see some people calling it the uncle Jim model. As the person that I believe coined the uncle Jim model, I wanna be clear that it was never supposed to be a custodian. You're you're supposed to, like, be running their node for them.
And they were still supposed to hold their own keys. But I think it's a great model. I think it it makes sense as a model. I don't think it's something that can be monetized. From a liability point of view, you have issues. But also, like, custodianship is just not something that makes that much money. Like, rumors are that, you know, some of these big holders, they're they're paying, like, five basis points, 10 basis point, point 05% to have someone hold their Bitcoin for them. And these are with the large regulated custodians that presumably have a moat because they're, like, regulatory, compliant and whatnot.
They have teams of lawyers. So I don't think the actual being a custodian is can be that profitable. Then you have to deal with all the bank secrecy act and everything like that. But that's why I think the open source stuff is super interesting. That's why I think Cashew is super interesting, because we should empower individuals and empower community leaders to be able to make that decision for themselves. You're gonna say something, John? You seem very excited about this topic. No. I mean, I was just gonna say,
[01:20:46] John Arnold:
I don't wanna, I don't wanna take that's too spicy, but I I'm not convinced that the world of, you know, five basis point fees for, custody for big holders is, like, here to stay forever. Interesting. Just because all it takes is one hack, all it takes is one, snafu with, like, misattributed funds somewhere, for people to for, you know, big holders for, you know, whales or companies, especially with fiduciary duty, to realize that custody is not necessarily a commodity. And I think that FTX was three years ago. Like, FTX just happened. But but, yeah, but FTX is, like, no no major US publicly traded stock, or, you know, large company that has a lot of power with, like, Washington lobbyists, for example, like, meaningfully lost money on FTX. Like, the people hurt by FTX could be safely, I think, you know, cordoned off into like, the the system in general could, like, you know, cordon off FTX, victims into, like, you know, the crypto native people, like crypto hedge funds, you know, degens, whatever. You could kinda write them off.
I don't necessarily know that this is this is coming, and I don't wish it on anyone, obviously. But, it it it doesn't it would not take much, for the market to, I think, quickly realize that custody is not a commodity for those that are trying to actually store Bitcoin on, like, a long term basis. And because that's the thing too. Like, people people had assets on FTX. Like, by and large, we're not, like, you know, trying to store massive amounts of, you know, their wealth for, like, the long term for their, like, kids to inherit. Right? Or for they didn't have, like, a ton of, like, fiduciary responsibility to a massive amount of investors or something like that. So, look, like, I I don't know what's gonna happen, but I wouldn't be surprised, is all I'm saying, if in the next, like I could see that. Five years, like, maybe people wanna pay just a little more for having, more transparent, you know, more robust kinda custody solutions.
[01:23:02] ODELL:
But isn't the problem that well, first I mean, there's two different things here. Right? There's there's big time custody, like, regulated big time custody, and then there's, like, small time custody. Small time I mean, I just I you're not gonna make I I do not see a path where someone's making money being, you know, the the custodian of their high school or some shit. Yeah. Or they're, like, their their local club. But, Yeah. That's an artisanal cottage industry for sure. Yeah. On the big time and it's good that we we should have open source tools that give individuals power and whatnot. The the thing that's pushing back against that concept of fees going up is that self custody is relatively cheap and low friction. Right? Like, what, like, what cost would someone have to charge Sailor before he just switched to in house custody?
[01:24:00] John Arnold:
Yeah. I think yeah. I'm not saying to be clear, like, I'm not necessarily saying that all these companies will go to, like, self custody. Yeah. Sailor, there there is I think there's basically no cost that would be that would make, MSTR preferred self custody because it be it becomes like, well, yeah, because they they have their regulatory requirements. They have, like, fiduciary requirements. What about Coinbase? Coinbase self custody is
[01:24:25] ODELL:
Yeah. Imagine if Coinbase was paying someone 1% to to store customer Bitcoin. That'd be ridiculous. They've, like, built it in house. They figured it out. Yeah. I mean, I think
[01:24:36] John Arnold:
that relates to the point that I was making that you may have these massive honeypots that may or may not be as secure as, you know, people are hoping that they are. All I'm saying is that there's a lot of vulnerability, like, service area for something to not even be catastrophically wrong, but just, and and not even calling it anyone in particular, but just, like, when you've got, like, you know, trust their parties or security holes, like, when you've got massive pools of Bitcoin somewhere, and you can't really audit, like, what's going on under the hood in terms of custody. My point is just it doesn't take much before, companies, big holders, and maybe even regulators decide, like, custody is not enough of a commodity that it's something that people can just assume they can charge, like, you know, two or three basis points for, and, you know, that'll that'll that'll be enough. Like, there may be demand for something more robust.
But that said, when I say something more robust, I don't mean, like, you know, Sailor holding, like, a a a cold card in his desk and then, Fong Wei holding a cold card in his desk, and then they, you know, have have, you know, their seat plate buried in the backyard or something. Like, I mean, like, some sort of multi institutional insured, kind of setup, that maybe has more audibility behind it. Right? Like, something that is institutional grade and is still, like, outsourced, but is more you know, leverages the distributed trust and programmability that Bitcoin provides so that you don't so you can still have, like, very cost effective, cost efficient custody without having to just put it behind, like, you know, an opaque wall of a custodian says, you know, here's a GUI that says here's your what your balance is, and that's, you know, that's the end of the story. Right? Okay. But we agree that up until this point, it's been a shit business. Right? Like, that's why you see, like, the Bigto's of the world try to go to consumer buy sell because, like, they they're just not making any money off of it. Yeah. I mean, it's it's at the very least a business that only makes sense at, like, larger and larger scale. And then, ideally, you want to have, you know, value added services around that, which is also, like I mean, that's also banking. Right? Like, just, just making literally just, like, sitting there warehousing, you know, money, is,
[01:26:44] ODELL:
has never been, like, a wildly lucrative business. But Well, they're banks make money by, like, leveraging the fuck out of our our savings accounts. Yes. Exactly. I would that's that's value added services. I don't know if you knew that that's the what the euphemism means.
[01:26:58] John Arnold:
No. But, basically, like, you getting getting that beachhead of, having custody of someone's funds even if you don't have it directly or unilaterally, but being an access being like a a a piece of their quorum or an access point for them, to kinda use their Bitcoin in some way enables the ability to sell a bunch of other stuff on top of that. Right? And that's a it may not be necessarily a super, profitable business or a business that you can generate huge revenue off of per customer, but it's an incredibly sticky business, which is important. And that because that enables you to have have and build a relationship with, you know, customers over time, as they get wealthier and as their needs change, and you can, you know, sell on on top of that.
[01:27:41] ODELL:
And once they trust you and they have a good relationship with you, like, it's there would need to be a significant reason for them to move and go somewhere else. Exactly. Right. I mean, we've seen that with we've seen that with just Bitcoin buy sell. Right? Like, the thesis for a while was that Bitcoin buy sell would go fees would go to zero. But especially post FTX, you know, I mean, I'm personally happy to pay point 8% or whatever, to to buy Bitcoin in a trusted way where I don't think I'm gonna get rugged to where I think they're, like, taking care of my private information well and whatnot. And clearly, a lot of other people are. So it's probably similar in this situation.
Okay. I don't see any other questions in the live chat. If you if you have one,
[01:28:32] John Arnold:
feel free to put it in there. Gary Gary wants to know what Gary wants to know my thoughts on Hashpool, and, unfortunately, I I I haven't listened to your your last one. It was literally last week. I know. I haven't listened to it yet. And Gary also talked to me about it at, the mining summit this year a couple months ago. And I remember, thinking that it seemed very cool and then not doing any much, like, further digging on it thereafter. So I need to listen to your episode, Gary. I'm sorry. I don't have an answer that, like, would be interesting or or meaningful at at this point.
[01:29:04] ODELL:
I think it's pretty awesome. I think it's another example of an idea that should be funded throughout with Satsum after 10/31. I don't really under I don't see, like, a strong business model there.
[01:29:15] John Arnold:
Well, it seems like more of a primitive. Right? Like, you wouldn't Yeah. You you could leverage it in a business, but it wouldn't be like the business. Yeah. Well, I would just say mining pools in general are also not a great business to be in. Yeah. So a mining pool can leverage hash pools,
[01:29:29] ODELL:
to be a more profitable mining pool, but that's still a cut super cutthroat hard to compete in business. We've seen the most successful mining pools are usually vertically integrated. You know, foundry, integrated basically with loans, and they have some of their own hash rate. And then, of course, the Bitmain, the bit the Bitmain cartel over there is they're manufacturing ASICs, and they control, the most hash rate in the world through all their proxy pools. So it's just a really tough business to be in. But, yeah, hash I'm super excited about Hashpools. If for some reason you're listening to this episode and you've gotten this far, you haven't listened to last week's episode with the VNPRC, definitely check it out. I wanted to talk a little bit about, just the current market where we're at right now? How you think about I've we have I know this is usually a technical show, where we focus more on open source software. I don't know if you freaks have noticed. I've I've tried to branch out a little bit, scratch multiple itches.
I'm trying to do one week one week, software focused, one week a little bit more broad, and just do, like, every other week. But I'm not dumb enough not to include a live price sticker in every stream no matter what. And I see right now we're over a hundred and $5,000. How are you thinking about the current yeah. To what Gary said, one moon?
[01:31:05] John Arnold:
Well, I mean, it's it's funny. Right? You've got you've got this graphic up here, and we're at a hundred 5,000 and and change Bitcoin price, and sats are at three sats a byte. And, like, yesterday, I checked, and we were at, Nimpol was showing zero sets per byte. Right? So it's a very it's an odd market right now. Right? Like, you don't you haven't seen this in prior cycles where you know? And we're not necessarily, like we're still, like, you know, one or 2% off all time highs. So it's not true, like, insane FOMO yet, and you're not seeing and, like like, you would expect, from prior cycles that would then kinda flow through and then kind of hit the chain, and you'd see, you know, fees flare up kind of in line with with price.
We absolutely haven't seen that at all this cycle. Right? Some of that is related to, you know BlackRock is is proven to be, you know, the best scaling layer for Bitcoin.
[01:31:59] ODELL:
Not a scaling.
[01:32:00] John Arnold:
Not a scaling layer. Yes. I'm I'm aware. But, you know, that's that's a piece of it. Right? Like, you're getting assuming you don't believe that it's an an entirely paper Bitcoin game, which doesn't seem to be the case, you've gotten kind of Do you think BlackRock actually holds Bitcoin? I think so. Yeah.
[01:32:20] ODELL:
I think so too. Yeah. I Sorry. Continue.
[01:32:24] John Arnold:
It would be yeah. I think it I think it would be incredibly difficult for them to pull off because of how liquid and global and twenty four seven the, the market is as a relative to, like, any other asset relative to, say, gold. I think it's it would be much harder to pull off for any amount of time, like a a paper Bitcoin scheme, where, you had, you know, billions of dollars like we've had flow in and, not have that like, I don't know how you could actually sustain, like, the inflows they've seen without, if if you were not buying Bitcoin, on the other side of it because that incremental demand pressure would not be, like, actually going anywhere.
And so you wouldn't see any kind of commensurate price move. You'd have, you know, declines in you know, as a result, like, there's a reflexivity component to to What do you say to the people that that all this money has gone to MSTR and BlackRock, but we're only at a hundred and $5,000? I I think that's I think that's, like, a big, piece of it, is that there had like, but MSTR money going to MSTR is different than money going, like, into iBit. I think IBIT actually directly hits, like, demand for Bitcoin. MSTR, much less so because if I'm buying, you know, a share of MicroStrategy, like, that's not actually like, it's supporting incremental capital that they can then go use when they hit the ATM, to to to lose shareholders and and yeah. Exactly. Yeah. Exactly. And and go buy Bitcoin. But, you've got a lot of people, a lot of money that has flowed just into to that, and then also, like, MSTY, MSTX, MSTU, all these other vehicles.
And so I think, like, not all of that immediately has, like, meaningful impact on, the price. Over time, it should, assuming that MSTR doesn't blow up and they're actually doing what they say they're doing. But that's a piece of why I think we're maybe not higher right now. It should flow through over time. But, anyway, all that is to say, you've got a lot of demand that is being in some way satisfied by, not even, like, Bitcoin exposure, like, directly on a custodian even though, like, that's what's underneath ETFs, but rather, exposure to vehicles that then, like, on a batched basis have claims to underlying Bitcoin. Right? So Right.
I think that's that's a piece of it. That's a piece of why it feels like a weird market. It's we've seen, like, in our conversations with investors, in the space and, you know, potential investors, like, it's definitely there's a huge amount of interest and a huge amount of, growth in the legitimacy of the way that big money is looking at Bitcoin. We get way less pushback, than I think we did, you know, even a year ago on why is this interesting, why is this gonna stick around, why does this have staying power. I think there's increasing consensus that there should be some level of, you know, exposure, But I don't know that people have really hit, like, the absolute kind of FOMO point, in kind of, you know, investor circles yet.
Some piece of that, I think, is because we were talking about this earlier this morning. Like, the the broad market backdrop is not, like, that accommodative right now, right, relative to where it was four years ago, when, you know, in in 2020 and '21, you could pretty much buy anything and, you know, it would go up 10% within a month and, like, 50%, you know, within a year. And everyone's equity portfolios were reduced. Bonds were doing great. Real estate was through the roof. So there was just a lot of money. Yeah. Exactly. Yeah. Like, the Fed balance the Fed's balance sheet is, you know, is going the other way, at least to some degree.
We're still technically in quantitative tightening. We're still technically shrinking, you know, the overall balance sheet, and it's it's very different dynamic. So people are not people are not, like, feeling the benefits of the wealth effect. Right? They're not looking for new places to allocate necessarily even if they're interested in in Bitcoin. And so, there's definitely a, I think there's a huge amount of interest in legitimacy, which is very helpful, and I think this is the best risk adjusted setup that Bitcoin has ever seen. And I think people broadly in our conversations really get that. The question is just when do they start to fully feel the itch in the FOMO?
And, you you know, like, I I won't make price predictions. It's it's well above my pay grade. And like I said, anyone who tells you where Bitcoin is going is is not really to be trusted. But, I think when when people come around, I don't know what the catalyst is for that, but there's literally no narrative that you could use at this point to actually make you fundamentally bearish on Bitcoin. So whenever your animal spirits kick into gear, whenever your the wealth effect starts to kind of kick back into, you know, the the positive direction, whenever the Fed has to, do its next round of accommodation and, you know, pull out its next alphabet soup facility to, facilitate money printing of some stripe. Like, there's really nothing that holds Bitcoin back at this point. Like, environmental FUD, no one cares about it.
Reg regulators are gonna kill it. It's the exact opposite. Regulators are embracing it. All the, you know, the the big banks that we just you discussed at the top of the show are interested in getting involved. You know, the president loves it. The treasury loves it. Most of the agencies are way less combative, against it than they were before. Hard money assets in general have seem to have, like, much more of a growing place in, like, global trading global capital flows, and people are seeing that already with gold. And, and, increasingly, I think that flows over to Bitcoin. We have a strategic Bitcoin reserve in The US and, you know, more being discussed around the world, and some have already been implemented. Like we no. We do have a strategic Bitcoin reserve. Now whether we add to it at all is a different question. Were they supposed to do an audit? Do we not know I think we don't even know how much Bitcoin we have. I think that well, the the problem is I don't know if they ever promised to make it public, and I think there are good reasons that they may might not wanna make it public.
Either if either because they have less than they thought. We have less or maybe we have more. But Yeah. We technically have a sorry. I interrupted you. No. No. I'm I just like you go down the list and it's like, I can't tell you exactly when the floodgates open, but, when the when the switch gets flipped, like, there just are no headwinds at all like there were over the last few cycles. So, I would say, like, I think it's the best risk adjusted setup we've ever seen. I think investors are increasingly appreciating that, both, you know, whether it's endowments and, like, actual institutions that we talk to or family offices or high net worths.
It's just a question of when do people feel like they really wanna aggressively kinda get off the sidelines and and and fully get off zero. And, you know, it's it's tough. Right? Because the the market psychology is like, you know, when Bitcoin's at $1.00 5, you're like, oh, well, I missed it. Right? I I I missed the move. I can't I can't get in now. When we dump to 85 because Trump says, you know, I'm gonna put a four gazillion percent tariff on China, people are like, oh, well, I I can't buy that right now. Like, it's it's dumping. Like, that's, you know, Bitcoin's so volatile. Like, I I'm in an uncertain time, and I I can't just buy Bitcoin. And so everyone's gonna have to, like, oscillate through that. Was that, like, 75 k a month ago? Right? Yeah. Yeah.
It's it's it's wild and, like, everyone's gonna have to oscillate, you know, through that until until they finally just, feel like they, you know, they can't wait around anymore, and that break point's gonna be different for everybody.
[01:40:22] ODELL:
Yes. 76 k 70 6 k on April 7. How quick people forget. That's pretty crazy. That's, like, forty days ago. It was at it bottomed at 76. I think that is another piece for at least larger investors that are paying attention is that we didn't drop as low as people would have expected in that situation.
[01:40:47] John Arnold:
Yeah. I, unfortunately, I'm still, on Twitter, which I know I should be shamed for. But, like, a a month ago, I tweeted out Oh, you're good. Just, like, four four charts side by side of the way Bitcoin acted relative to the equity and the the major equity indices during the COVID crash versus the way that, it acted during this last kind of tariff tantrum. And, you know, if you just thumb through those charts, and I think you'll see, like, there definitely is a difference. Like, I'm not gonna say it's a decoupling. Right? That's the that was the word that was on everyone's minds, during that period. But, I do think people are it's it's hard if you're, you know, paying attention to markets at all to not notice that Bitcoin did not act exactly the way that you would expect, during kind of a a global reset like that.
So, you know, it's it's you gotta see, like, everyone needs touch points, and everyone needs more and more data points like that to to get comfortable at their own pace. But, yeah, that's just another kind of, yeah, arrow in the quiver, right, for, you know, reasons to reasons to not be bearish on Bitcoin.
[01:42:01] ODELL:
Yeah. I mean, I it it's insane to me that people are bearish at all. It is I I'm curious on your opinion because you did start it off with, mentioning the fee rate, the on chain fee rate, because the dashboard is powered by mempool.space. Ten thirty one, portfolio company. And we're just not like, the retail demand is just not there for actual Bitcoin, for real Bitcoin. Like, maybe retail is, like, opening up Robinhood and buying iBit or, MSTR or one of the derivatives. But I they're not here and they're not here in Bitcoin land. They're not here buying actual Bitcoin, self costing actual Bitcoin. Is is that just the is is that the new normal, or is or is it just still too early in this part of the cycle of the cycle's extended? Like, do we see that again? Are we gonna see the craziness of average people coming in and buying Bitcoin stack?
[01:43:14] John Arnold:
Yeah. I mean, I think I think we will see some kind of retail FOMO mania again. But increasingly, I don't know that that's really, like, the main marginal driver of Bitcoin's price. Right? Like, I don't know that it's like the, you know, the the the degen on, you know, some it's right on some, like, offshore exchange or the the guy, you know, buying in in Robinhood, like, just kinda aping in his his life savings in, you know, in Robinhood or something. It feels and looks, you know, a lot more institutional for for better or worse. So I think we'll see that, but it's gonna I think that's gonna require, like, us getting deeper into the cycle, and probably, you know, some degree of, like, moving back toward monetary easing, to to get animal spirits, like, you know, rip ripping again and to get kind of the the average guy, you know, wanting to to participate at, you know, some to some degree.
But, yeah, I think it's like what's gotten us here clearly has been much more, like, institutional flows, than, or or like your, you know, broad your your Charles Schwab accounts in mass, buying iBit or something. Right? It's not been your traditional, like, retail d gen player.
[01:44:37] ODELL:
Maybe some of them are are maybe some of those guys are now going to You don't have to you don't have to be a d r. What about the just the stackers? Like, what about
[01:44:46] John Arnold:
Well, them I mean, yeah. But them too. Right? Like and and when I say them, I like, it includes me and and I would assume you, like, you know, you're, like think about Bitcoin's market cap and think about, like, you know, your hundred dollar DCA or whatever per week or your $500 DCA or whatever. Yeah. Well, there's 10,000,000 people that adds up. Yeah. I mean, I guess it's a it's a question as to how many are, like, actually how how many people are there out there that are DCA ing in a meaningful way and also, like, hitting the chain?
[01:45:17] ODELL:
It's probably less than a hundred thousand.
[01:45:21] John Arnold:
Yeah. That may be right.
[01:45:24] ODELL:
But in previous cycles, it's 10 x or something. I mean, there's no way to measure it. So it could be a million people. It could be a million people.
[01:45:35] John Arnold:
Yeah. Absolutely. And the tools are getting better for that. Right? And we see that in, like, our, you know, some portfolio companies that we have, like, the the tools to, like, actually take custody of Bitcoin, and whether you wanna store it, you know, single sig or do it kind of collaborative custody or something like that. Like, that's all getting better and easier, and, generally, that's kind of been, like, up into the right for all those businesses. But, yeah, just as it as it relates to, like, on the margin, like, you have to add a lot more stackers every cycle who are doing it in a dedicated way to move the market to the same degree, as the prior cycle. Right? Guess the as the market gap gets bigger.
So, like, that's that's a piece of it too.
[01:46:18] ODELL:
I don't know. That'll be interesting to watch. I think it might just be I I'm, like, coming to the conclusion or not the conclusion, but my working thesis right now is that the treasury companies and even to a lesser extent, the ETFs, primarily iBit, have delayed and extended the cycle. Because you buy MSTR. It's gonna take about a month for that to show up in real demand for Bitcoin, buying Bitcoin or whatever. Like, he's got a w even if you buy iBit, it's gonna take, like, four or five days for them to, like, settle it out and, like, make it happen. Like, they don't do it instantly. They're like they have to go through whatever traditional flows to make it happen. Like, you buy on strike and, like, boom, done. You got it. It's like ten minutes.
So it slows it down and extends it. But then the other question to me that I've been so then and then historically, I believe the best months for Bitcoin price appreciation wise is usually in, like, the fall. So we're, like, gearing up to for, like, a FOMO crazy fall winter. But at the same time, I do ask myself, historically, at this point in the cycle, you would see maybe people speculating on shitcoins. The shitcoin market is nonexistent. It seems like it's just fallen out from underneath itself. Even, like, the most die hard Shitcoiners now have brought brought down their portfolios to, like, one Shitcoin. They're like, oh, but this one's not a Shitcoin. The yeah. The qual the quality shitcoins.
Yeah. They're like, oh, I I should just have, like, 1% of my portfolio in Solana, but the rest in Bitcoin. Like, I heard from, like, one of my shitcoiner buddies. And, with the shit coins, though, it was a very easy thing for, like, Solana pumps. You're already self custodying Solana, and then you go to one of these swap services and you move it into Bitcoin, which you self custody. The that flow doesn't exist for, like, holding MSTR. Like, you buy MSTR and Schwab, how far away are you from going to self stacking self cuss you're pretty far away from stacking self custody Bitcoin. I don't know how that flow work. How does that transition work? And so maybe that takes significantly longer. Maybe eventually that happens anyway, probably.
But still, it's it's it's definitely complete it's definitely same same, but different from previous cycles, it feels like.
[01:49:11] John Arnold:
Yeah.
[01:49:13] ODELL:
Yeah. Okay. Well, we'll keep an eye on it. John, I let I think we'll make this, like, every six months or something. We'll have you come back on.
[01:49:23] John Arnold:
Okay. Great. You can do your, obligatory two suit episodes a year, and we can give the freaks the the updates that I'm sure they were all craving.
[01:49:35] ODELL:
Dude, people seem to freaks, it seems like you've at least the ride or dies in the live chat have seemed to enjoy it. We'll see we'll see how people feel on the podcast apps. John, before we wrap, final thoughts.
[01:49:50] John Arnold:
Final thoughts. I will not it doesn't doesn't really matter what I think. It doesn't really matter what anyone individually thinks. And that's the beauty of emergent decentralized systems such as Bitcoin and also such as language. But, I won't die on many hills, but I will die on the hill of Sats. The Bits conversation to me is, just completely illogical. I I I get what people are going for, but anything that injects incremental, like, at this point in the in the game, confusion on units, is, you know, probably not gonna have the the result that I think people are looking for. And more importantly, 21,000,000 hits, 2.1
[01:50:34] ODELL:
does not. 21,000,000 sounds like a small number. People know what that means. Wait. You're mixing up two you're mixing up two different things. Right? There's some people that wanna call Sats the smallest unit of Bitcoin. Bitcoin.
[01:50:46] John Arnold:
Yes.
[01:50:47] ODELL:
And it but in that case the 21,000,000 names. Yeah. Yeah. So you're right. Sats, bits, and Bitcoin calling, like, each You can just change the name of Sats. But We could change the name of Sats to bits.
[01:50:59] John Arnold:
I I see them I see them as interrelated because it's a lot of the same parties, like, trying to get these different things. But yes. So, like, the Sats bits thing, like, I think is pretty seldomly just, like, not gonna happen. But the calling each, each Satoshi a Bitcoin, I I think distracts from or or does not take into account one of the key shelling points and, like, memetic, powers of Bitcoin, which is 21,000,000. People don't understand how to conceptualize a quadrillion, so we're never gonna walk around telling people there'll only be 2.1 quadrillion Bitcoin and have them think like, oh, well, there aren't there aren't that many. I better get some. And it is important to give people that showing point that they can latch on to to understand just how scarce Bitcoin is.
[01:51:41] ODELL:
Yeah. No. I think it doesn't make any sense to me to confuse confuse users, but, like, people know what a Bitcoin is. Right? There's key is there's 21,000,000. Like, that makes no sense to me. That said, if if you run you know, if you maintain an app or wallet and you wanna do that, by all means, do that. See, you know, see how it plays. You you're your own person. I I will say, like, I can disagree with him, and I can disagree with John Carvallo in this regard if he's the author of BIP one seventy seven, which proposes this. But at least he did it in his wallet. Like, he just changed it in his BitKit wallet. Like, that's how it's displayed.
So anyone could do that, see how it plays out. There's no, like, king or, like, the legislature body of of, Bitcoin that can decide how to do that. I don't think it's something that should really debate is unproductive really on this on this front. Language is mostly organic, and people should decide what to do. But to me, the idea of, like, calling the smallest unit Bitcoin is just super confusing. It adds more confusion than it presumably benefits. But I don't necessarily agree with that about the whole bits argument. Now there's two there's two pieces on the bits side, right, which is you you could we could use one bit right now is a hundred sets. That's always been the case in in accepted language in the in the organic cultural language.
One bit is a hundred sats. So we could have bits and sats. And then there's another contingent that wants to convert sats to just call sats bits, which then I don't know what we would do with the unit that is currently referred to as the unit formerly known as bits.
[01:53:46] John Arnold:
I just think adding I yeah. I I just think adding any new element to the taxonomy right now at this point is just, like, it's not helpful. I don't know who's really asking for it. Like, I think people can I I think it's easiest for people to track 1 Bitcoin and a hundred million sats, and it's like it's just like I don't I don't really know what having a bit adds to the the conversation? I guess you could say, like, you know, dollars, like, can get subdivided up into, like, pennies and then dimes. Yeah. But they're not called they're not called dolls. Yeah. Right. Right. Exactly. Yeah.
But so, yeah, I on just the bits versus sats, like, should we add bits to the taxonomy? To me, that's like you know, I don't really care that much about that. I I but I don't really know who's asking for it at the same time. So I you know, it's not something that I really wanna see happen just from that perspective. But the call each sat, just call them all Bitcoins, to me, like, that's definitively in the wrong direction. And I can't control it, and you're right. Like, language is emergent and organic. But I just hope it doesn't go in that direction because I don't think it will. We have to preserve 21,000,000 as a as a mimetic shelling point. I think that's the least likely
[01:54:55] ODELL:
the the most likely scenario is it just stays as it is. Yes. That's what the momentum is. The least likely is that Sats get start getting referred to Bitcoin and catches on. Sats are Bitcoin. They're little bits of Bitcoin. Then maybe the second most likely after the stats just staying Lindy is, we've renamed them to bits. No. Probably not. The second most likely is that some wallets denominated in bits, which is a hundred sets. I personally when I was championing sats, to be clear, I wasn't necessarily championing the name. The name already existed. Like, someone else came up with the name. Satoshi didn't come up with the name. That was after Satoshi. I was just championing the idea of thinking in the smallest unit possible, and that was SaaS. And I think that's important. Right? Because people think they're late to Bitcoin. They think it's too expensive for them.
But and we were getting a lot of pushback from, like, XRP people, Ripple people who were saying Ripple the standard, XRP the standard, XRP so cheap. Well, XRP is more expensive than SaaS. Right? And Lightning Network happened at the same time. I do think it's it's hilarious that even today, while people argue about it on x, they're like, oh, evil Odell made SaaS the standard, like, blah blah. It's like, I deleted my fucking x account. Account. Like, you guys can argue all day, all long. Do whatever the hell you wanna do. I'm thinking Sats. Noster is using Sats. I think it's a standard unit of value.
It is what it is. But change your apps. If you wanna change your apps if if Dorsey wants to put change all Sats and cash app to Bitcoin, then he's welcome to do that, and see how it works out. Like users either like it or they hate it. Sounds good. We solved it. I can't I can't believe that was your final thought. I thought we could just avoid the whole topic.
[01:57:02] John Arnold:
I feel like it was important for me to draw a line in the sand on our our shelling point.
[01:57:07] ODELL:
Yeah. I mean, I don't really I fair enough. Well, I I don't I'm it's something that I'm I sleep well at night. Like, I just don't really care. Yeah. That's that's really the right thing to do. Think it's a real I don't think it's a real concern. I think, I think you said it earlier. I think what we see in our day to day with calls with people, particularly, like, large potential investors and smaller investors too. Right? We have two funds. We have an institutional fund, and then we have a a smaller one for, like, medium high net worth individuals. And it's it's a weird lack of urgency.
And I would just say, like, I feel like all this stuff is just distracting a ton of people when really, in your head, you should just be like, fuck. I don't have enough Bitcoin. I need to have more Bitcoin. I need to have a deliberate strategy here. Like, I need to be focused on this thing because we're born in this one period. We're we were blessed to be born in this period where Bitcoin gets adopted during our, like, the primes of our lives where we're most focused and most productive and most working. Massive opportunity.
And instead, you know, there's just people flaming each other on social media. It's just a distraction. And I just would implore people to try and stay focused and stay on Bluestacks ads.
[01:58:38] John Arnold:
Good way to end.
[01:58:40] ODELL:
John, thanks for joining. Always a pleasure. We'll do this again. Freaks, you can find them at primal.net/john. What's your x handle?
[01:58:50] John Arnold:
John arnold ten thirty one.
[01:58:53] ODELL:
X dot com slash john arnold ten thirty one. And, obviously, all the information on 1031 is at 1031.xyz. Freaks, thank you for supporting the show. Thank you for joining us if you were in the live chat. There'll be a dispatch next week. I'm not going to Vegas. I don't know who with. I haven't figured that much out yet, but I'll I'll make it happen, and you can just just find out on on Noster, if you wanna join the live show. Anyway, love you all. Thanks, John. Thanks. Stay humble, Stack Sats.
OCC Intro Clip
Happy Bitcoin Monday
Guest Introduction: John Arnold
Discussion on Banks Holding Bitcoin
Bitcoin as Money for Enemies
John Arnold's Background and Bitcoin Journey
Steak and Shake Accepting Bitcoin
Bitcoin Treasury Companies
MicroStrategy's Bitcoin Strategy
Investment Strategy at Ten31
Bitcoin as Shared Equity
Missing Bitcoin Infrastructure
Bitcoin's Impact on Small Businesses
Current Bitcoin Market Analysis
Retail Demand and Bitcoin's Future
Final Thoughts and Sats Discussion
