$1M Bitcoin Is Already Locked In | Nik Bhatia

I think Bitcoin is going to a million dollars in the 2030s simply by the passage of time. Besides something more extreme like a 6102 attack, what are the other risks at play for something like this? It's not a coincidence that Fidelity and BlackRock have 1 to 3% target allocations for Bitcoin in multi-asset portfolios. And now suddenly it's not 8 billion people who need access to better money. It's 8 billion people plus humanoid bots or whatever it ends up looking like.

Things don't grow linearly. They grow in this power law relationship. What the mathematicians have observed about Bitcoin is that... Today on the show, I have Nick Bhatia. Nick is an awesome guy and a wealth of knowledge. We talk about MicroStrategy, Strategy, Sailor, all of the stacking, the capital raising that they're doing, what it means for Bitcoin. We dive into some macroeconomic trends he's watching.

And of course, we have to touch on AI. He has a very interesting thesis on how AI is going to impact Bitcoin. And he's got some good unpopular opinions at the end. So stick around for that. You're going to really enjoy the show. Hey, everyone. Like I said in the intro,

I have Nick here. Nick, welcome to the Bitcoin Way podcast. Hey, Michael. Great to be here. Let's talk about strategy. Everyone's talking about it at this moment, the capital accumulation, the Bitcoin that they're buying, their stretch product in particular is sort of the hot topic. Would you share your assessment of what is going on? How does this

work? And the thing I'm particularly curious about is, do you view this as people waking up to the power of Bitcoin versus things like government bonds as a means of fixed income? Is this like the new retirement vehicle, the new fixed income vehicle that people are going to start flocking to? It's a great question, Michael. And actually, it was the number one question that I got last summer on my book tour when I went to D.C., New York, Chicago and San Francisco.

The number one thing people wanted to know was, is STRC specifically the new government bond, the new risk free rate? So I'll give you my answer then. And now. My answer then was definitely not yet, because if it was, you would see these yields start to converge. That's what arbitrage does, is you sell one thing and you buy the other because you believe that they're of equal value. So you try to capture that spread.

And that arbitrage trade drives yields together. It compresses them. We haven't seen that for the last year or since the summer, last summer when I was telling people that. So from that perspective, I feel comfortable in that answer. It's not really behaviorally driving that shift from government bonds to STRC. With that being said, there's something really special about strategy

and STRC and what's happening there. And I think that there is a marginal awareness of what people can achieve with STRC versus government bonds and the risk that they perceive that they are taking. That's really the key because the world views government bonds or US treasuries as risk-free. You can put it in air quotes or not. It doesn't really matter.

It is the risk-free instrument of the dollar world, nominally speaking, which means you're always going to get your money back that is stated on the security that you're buying. Now, the certainty in STRC is definitely less. People don't buy STRC thinking 100%, I'm going to get this coupon and par back. They know that they're taking a risk beyond government bonds. That risk, though, that they're taking is awarding them a compensation that is outsized

right now. Outsized meaning that it's more than really any yield that you can get in any safe bond. And that is what is driving the capital toward STRC. The volume numbers, the accumulation numbers, they're monstrous. So there is awareness there that the risk that they're taking is being more than compensated for with that huge yield. Could you describe what the risks are? Obviously, strategy doesn't, technically speaking,

at least have a money printer. And so they cannot guarantee the nominal returns that government bonds can. Besides something more extreme like a 6102 attack and the government says, we're taking all your Bitcoin strategy, which, by the way, nothing would surprise me from the federal government at this point. But aside from something like that, what are the other risks at play for something like this? And why might people not be driven to something like

Stretch? It does come down to the Bitcoin price and the math around its maturity schedule on its securities. So when a company takes in money, they're either issuing equity or they're issuing debt, the equity or preferred equity. So I think that that's an important asterisk. But the equity doesn't have a maturity. The preferred equity doesn't have a maturity. It means you don't have

to pay the money back. The debt side of things, those all have a maturity. So when they borrow money in the debt market, there is a maturity date and they're going to have to pay back US dollars. So the risk in owning parts of the strategy capital stack are if you buy the equity, it's not whether you'll be paid back, it's whether that equity is worth anything in the future. And that's going to be tied to the Bitcoin price.

If you buy the debt, your risk is that the US dollars are not there to pay you back when that instrument matures. That is also going to be a function of the Bitcoin price. So their ability to either issue at the money equity to buy Bitcoin or any cash flow dynamics that they have. So there is a risk. There's always a risk for the investors in the equity or the debt. Is the company going to pay me back? And if I own equity, is that equity worth anything after all the debt is paid back?

And with strategy specifically, that is all based off of the value of their Bitcoin. And not just the value, but the energy around the Bitcoin asset class, because their ability to issue equity to buy Bitcoin in the spot market is dependent on the market.

So energy, bullish energy, interest in the market, and all of that. So the risk is that Bitcoin goes down, stays down, and loses investor interest. In that case, it's likely that owners up and down the stack of strategy will get taken out at a loss that's maybe more than if Bitcoin went down, let's say, 75% and stayed there for five years.

If you own Bitcoin, you'll be down 75%. If you own parts of strategy stack, you'll probably be wiped out 90% or taken out. So the risk is obvious in that it's tied to Bitcoin. And it doesn't have the same risk as Bitcoin because you're owning a company that owns Bitcoin or is promising coupons based off of Bitcoin performance one way or the other.

So I hate to put you on the spot like this, but if you were to pull out a crystal ball and look five years into the future and you're looking at U.S. national debt is probably at that point well into the 40 trillions. I have to imagine that this risk-free rate that we take for granted today, or that many investors take for granted today, is – I think at some point, the can is no longer kicked forever. And people do begin to be wary of, I need real returns, not nominal returns.

Do you think the landscape of what we're discussing right now changes immensely? Do you think strategy does become, or maybe their STRC product or whatever else they've engineered at that point becomes maybe more influential and you do see those yields converge?

How do you anticipate this playing out over just the coming years? Well, I do see STRC's yield coming down nominally because I think the perceived risk will decline over time. So I do see the yield going down. But on the Treasury front, the U.S. Treasury front, I really do have a different view on the absolute value of Treasuries in today's world and even over the next 5 to 10 years as debt goes to $40 and even $50 trillion and beyond.

It really does come down to, Michael, the delta between the size of the Treasury market and the size of global debt. Right now, the size of global debt, $350 trillion. The size of US Treasury debt, $39 trillion. And a lot of it isn't even marketable debt. So let's call it less than 10% of global debt is Treasury debt. That means 90% of global debt is not US Treasuries.

So that balance of 10 to 1 or 10% or 90% in less than treasury quality fixed income assets, because every debt is also somebody else's asset. It does start to make sense why treasuries are so valued, why they're not 5%, 6%, 7% yield, why they're not close to the yields of emerging market government bonds. And they do keep interest rates on the US dollar borrowing universe low because if you didn't have all that risky debt available, you would flood into treasuries.

And so there's always an embedded bid in the market for treasuries because the things that can go wrong in the 90% are infinite compared to things that can go wrong for the treasury, which can print its own money. Like you said, yes, people need real yield. I understand that. But that doesn't mean that the nominal yield of treasuries will rise necessarily to give people that real yield. In fact, what we have seen during the 2010s was negative real yields.

and what you might continue to see or what you might see again are negative real yields. So let's say inflation goes back to 3.5%, 4%. The front end of the curve is at 3.5% right now, more or less. So you're going to be getting possibly negative real yields again here in the United States sometime in the next couple of years, possibly.

As an American and someone who's not analyzing the macro picture at large, I tend to just see these numbers of $37, $38, $39 trillion and think, why does anyone have any faith in any of this? And that question for me still remains. I mean, that's how I found Bitcoin is beginning to understand some of how this works. But I can see why US debt still looks attractive to many people who do not have the conviction in Bitcoin. They don't even know that Bitcoin is

something that might fix a problem that they have. And so maybe until then, until the Bitcoin conversation at least becomes ubiquitous, that people are analyzing it as a form of money, as an alternative, as an opt-out, as whatever you perceive it to be. Will there come a day then, in some near future perhaps, where then it's not even strategy versus US debt. But it's I can have the real risk free rate is just the appreciation of Bitcoin, because there is no there's no I can't be printed.

I can't be seized. Right. We've seen the weaponization of U.S. debt, all of these things. Is that a conversation that you think is going to start becoming more mainstream, where at the moment it feels like we're talking about this on Bitcoin podcasts and on Bitcoin Twitter?

Yes. And I would answer your question by asking you, you referenced $39 trillion and who would own it. So let me ask you a question. You have three options. You have to buy something and hold it for 30 years. You can't sell it. You have a 30-year US treasury, you have the S&P 500, and you have Bitcoin. So let's start with the S&P 500 versus the 30-year treasury. and you step into the shoes of a life insurer. So they have death benefits 30 years from now.

They can either buy stocks or they can buy treasuries. As a risk manager, you cannot put 100% of your money in stocks. You can't because there's too much risk to do that. So you have to balance with some stocks and some treasuries. You're forced into that decision because of risk. And part of the risk of owning the treasuries is that the real return is negative or zero, that you don't actually get any return beyond inflation. That is a real risk, and that's why you have to buy some stocks.

You can't put 100% in treasuries. That shows you that there is a balance there. And both are needed for long-term capital allocators. This is called Asset Liability Management, ALM, or Liability Driven Investing, LDI. These are insurance players and pensions. They buy a ton of treasuries, long-term treasuries. They are the natural buyer, and they are not going anywhere. So now you fold in Bitcoin and you ask mom and pop or life insurer, hey, you ask them the same question.

Would you own 30 treasury stocks or would you own Bitcoin And that where Bitcoin becomes more and more obvious is that if you not a life insurer with a guaranteed liability in 30 to 40 years that reduces your need to balance your portfolio with treasuries. Right. And so what is Bitcoin competing with? Over a 30-year time horizon, is it competing with a 30-year treasury or is it competing with the S&P 500? And that's where the question starts to get

interesting. And I think that it's a little bit of both, but it's definitely the 30-year treasury, which I think is what you were originally thinking about is that how could I buy a 30-year treasury? me as a 30-year-old person. That doesn't make any sense for me. And I think that question is

being answered in a similar way. All around the world, the ETF inflows are evidence of this, that long-term capital is ready to come in, buy Bitcoin, park it there, and understand why it's part of, it's not a coincidence that Fidelity and BlackRock have 1% to 3% target allocations for Bitcoin in multi-asset portfolios. That's insane versus where we were five to 10 years ago before ETFs. Now it's like, yeah, if you have a global portfolio, up to 3% should be in Bitcoin.

That's an enormous amount. And River just did a study where they actually compared that target allocation to how much is actually invested. And I can't remember the number, but there's like 400x capital that needs to come into Bitcoin to get it there. Like an insane amount of money that needs to flow into Bitcoin to just get the target allocation to a place where a balanced portfolio is weighing the pros and cons of 30-year treasury stocks and Bitcoin appropriately.

That process, they've identified the target allocation, I think, well, like zero is not the right answer. 1% is probably too low. So you don't need them to come out and say 5% to 10%. That will happen naturally over time. But just getting them to say 3% gets people off of zero and gets them above one. They're not at one yet. They're really not at 1%. The world is not at 1% yet, Bitcoin.

If you look at global balance sheet studies and wealth studies, the numbers are somewhere between $600 and $1,200 trillion in global wealth. So that's maybe up to $1 quadrillion in global wealth. Bitcoin is $1.7 trillion, right? So less than 1,500th. Going from 1 500th to 1 100th, it's five times the capital that's already in there. And Bitcoin really has an enormous room to grow in terms of the capital that's in other asset classes finding its way.

What is going to be required then to take us from 1 500th of global wealth to 1 100th?

Is it just people tuning into our podcast, reading your newsletter? Is there a, and this is maybe where I get into sort of our next topic. Is it a macro event that unfolds where people recognize the necessity for sound money, for something that's censorship resistant? They don't need permission to use. Like, what do you think the catalyst is? It's a great question. I would actually argue that a macro event is low on my probability in terms of what will drive it.

So I think that things happen naturally and slowly and not triggered by a macro event. So my answer to your question is time. And I'll fold in the fact that we're doing this podcast together in a second. Because that's part of it, but it's actually downstream from the time and the answer that I'm about to give you. So maybe people have heard of the idea of Bitcoin following a power law. So let me explain to people what this means.

When something grows, whether it's an organism or a city, when it grows, it's going to follow a growth path. So the pace of growth. And when things grow on this planet, they don't grow linearly. And here's one way to think of that. If a mouse requires 100 calories a day and an elephant is a thousand times the size of the mouse and it was a linear relationship, that would mean that the elephant requires 1,000 the amount of calories that the mouse does. But it doesn't.

It's only 100. The numbers are an approximate. I mean, not even approximation, I'm using arbitrary numbers, but the point stands here. And I do actually believe it's 10,000. The elephant is 10,000 times the mass of the mouse, but it only needs 1,000 times the amount of calories. So it's nonlinear. And if you actually, I'm citing a book called Scale by Jeffrey West, if people want to get into the science of this.

But if you plot mammals on this curve, this metabolic curve of mass versus calories required, you can see that it follows a power law relationship where the determinant, it's somewhere in an exponent. It's nonlinear. And that exponent can be above one or below one, basically sublinear or above linear scaling. So the amount of calories, it's sublinear in that you need less the quantity as the animal gets bigger. The mammals are efficient. They get more efficient as they grow.

Now, let me give you another example, which is cities. So in cities, when the population grows by 10 times, the amount of university graduates, for example, grows by more than 10 times non-linearly, with an exponent above one. So why is it that when cities grow in size, they graduate even more people per hundred people or per thousand people? It's because knowledge collects and compounds in a city. where smart people come together and it makes everyone smarter and it grows at more than a

one-to-one relationship in terms of the benefit to society. Now, homelessness also grows at more than one on the exponent there. So it's pros and cons, of course. So more college graduates, but more homelessness in bigger cities. So things don't grow linearly. They grow in this power law relationship naturally on earth. It's just something that we can observe. Now, what about Bitcoin? What the mathematicians have observed about Bitcoin is that as time passes, the number

of addresses grows with a power law relationship and an exponent above one. So as time goes, the network grows, but even faster than the time that has passed. Because people love Bitcoin, they love to use it. They love to come to it. And so the network is growing. Not only is the network growing, but as the network grows, the price grows once again non-linearly in a power law relationship with an exponent above one. So what you have in Bitcoin is two power law

relationships. As time passes, the network grows, and as the network grows, the value grows. And what we observe looking at 16 years of Bitcoin data is that this relationship, even though the price varies enormously, it is following a path.

Now, some people will call this voodoo, modeling, pure theory, and that's fine. And it is backwards looking and projecting into the future. But I've been sold on this for at least a year. I've interviewed Dr. Stephen Perrineau and Dr. Giovanni Santastasi, two astrophysicists that have written extensively about the power law, the Bitcoin power law. I read Jeffrey West's book, Scale, because of them. And I'm sold. So now I'll answer your question. How does Bitcoin get there?

It's simply the passage of time. And the fact that you and I are doing this pod is a result of that network growing and strengthening and value accruing to it. We are here because of that growth path, that it will continue to scale. The number of people that listen to this pod will be according to this moment in history relative to six months, 12 months ago, three years ago, five years ago, 10 years ago.

So it might be less than six months ago because six months ago we were in a bull market and today we're not, but it's definitely more than three years ago when the ETFs were introduced And that's because more people have joined the network. There's ups and downs. There's overshoots and undershoots. The model isn't the fair value. It's a way to understand the growth path. Okay. So I think Bitcoin is going to a million dollars in the 2030s simply by the passage of time.

and I'll just say one last thing, which is that the 16 years of data that make people conclude that Bitcoin is following a power law relationship, it's basically assuming that human beings have adopted this technology and it's here to stay.

So that's why it's not a macro event per se, but just the macro environment that we're in has made Bitcoin be awarded this... new great asset class and growth path into the future that is highly unlikely to change through a massive change in human behavior all around the world. Governments getting disciplined, central banks not going on, you know, getting off fiat or,

you know, everyone going on to a Bitcoin standard. In fact, not being on a Bitcoin standard for the world locks in the path of Bitcoin to keep growing in dollar terms versus the rest of the world. I think if Bitcoin became the standard today, government stopped using fiat or the credit system, that would abruptly change maybe the Bitcoin path. But I see the opposite. I see more of a steady growth path that's locked in because of the way that the world works.

And it's not going to pivot suddenly to something different. So is there anything with the exception of an obvious and apparent break from that path that would make you reconsider that thesis? Because I'll be honest, I haven't studied the power law deeply. I've heard more and more folks like yourself who I respect and have learned a lot from who have been sold on this. And it does seem reasonable.

I mean, sort of the crazy bull in me wants to imagine, no, we're going to 10 million by 2030 or whatever. But, you know, I'm open minded on what it could be. So I guess back to the question, is there anything besides like an obvious break from the path that you'd say, oh, you know what, maybe this model will be broken? I mean, of course, anything, anything can happen.

And I think understanding what your expectation is, is important so that if it starts to go to, let's say, Bitcoin is at $400,000 next year. Then at that point, you have to wonder, okay, is this just another overshoot or have the fundamentals changed? You do the same thing when Bitcoin goes from $120,000 down to $60,000 earlier this year. You think, okay, is this just another overshoot? Or is Bitcoin broken? Is the quantum fund right? Is Claude going to break Bitcoin? Or something like that.

And you ask yourself and that's part of investing, that you always do have to challenge your thesis. But I'm going to keep my thesis simple. I'm going to continue to watch Bitcoin oscillate between what I think is this fair value based on this power law scaling path. and you just never know, right? Bitcoin is, you know, technology, it uses cryptography. So there are dynamics around that that we probably just have to watch. And I think that the market always speaks the truth.

So, you know, watching how Bitcoin behaves at 60 when it gets really cheap is important. Like if it breaks 60 and then goes to 30, you have to think about, hey, why did that happen? Versus, okay, Bitcoin reached 60, but it been trading at or above 70 for two months now What does that say about Bitcoin And really and that like a lot of what I do too is I look at the short price short price action medium-term price action. Hey, what has Bitcoin done since it crashed 50%? And half the mainstream

media was like, Bitcoin is dead again. Quantum is going to break it in three years. It's over. gold is, you know, gold won the whole time. And that's what everyone was saying two months ago. So what did the price do from that point? It went sideways, leaked a little higher, has performed pretty well over the last two months, despite the fact that we're in quite a large war, relatively speaking. There's so much information in that, Michael.

like the 20% bounce we've had since first week of February. There's so much information in there. And so is Bitcoin dead? No. Like I'm using the last couple months of evidence. The market is telling you, no, it's not. It's not dead. And so you want to do that on both sides. And, you know, some of my readers are coasting to a million and others just really want to get involved every day. like, well, what's it going to do now? What's it going to do now? And I have fun with both

readers, both types of readers, for sure. I can imagine the questions you must get.

So Nick, what are some of the other, what are some macro trends, maybe just one or two that you're following closely? And what are you observing? What does it mean for anyone listening? Yes. The move index and the dollar index, those are two things that I'm watching pretty closely. So at the Bitcoin layer, we have a proprietary index. It's called TBL liquidity. And we've manipulated that index and its rate of change to give us a beat on risk markets.

We basically designed a quant for your pocket, a model that will tell you a macro is supportive or it's not. And then we have a Bitcoin native metric called our state quadrant saying Bitcoin is either cheap or not or trending or not.

And right now, Bitcoin isn't trending up yet. So that indicator is still on the red side of things. But our macro indicators switch green at the beginning of April. And by the way, today, stocks reached an all-time high on the S&P 500, if you can believe it. One of the most legendary bounces I've ever seen in the stock market. And trust me, I've seen a bunch. but the way that the stock market has come back.

And what we have done is we've designed a framework and a metric that makes it very understandable why these things are happening. Well, you can actually trace the day that bond volatility topped out the last week of March and line it up exactly with the bounce in Bitcoin and stocks. So volatility and the dollar index are two financial conditions on risk markets. As vol goes up and as the dollar goes up, the ability of the system to take leverage, to trade, and to pay back debt, it gets damaged.

And the opposite is true. When vol comes down and the dollar comes down, everything gets easier. Market makers get more active. Investors can take more leverage. Investors can buy. The fear goes away. The desire to buy insurance goes away. The price of insurance goes down. That's volatility coming down. Option prices come down and everything is good again. So we've tried to make it really simple for our readers, but for us too. I designed this for myself.

I've actually designed everything that we've done quantitatively for myself. And I'm giving that to the readers. You guys can see how I analyze it. Well, instead of looking at bond vol rates, dollar, everything, you know, and then trying to calculate it, I have one metric. And then I've taken that metric and I've swung it on an indicator to tell you green or red. and try to make it really easy for me and the readers. And what am I watching? I'm watching vol and I'm watching the dollar.

And if they're calm, all is good. Okay, interesting, interesting.

Let's transition to a topic that seems unavoidable for me these days, and that is AI. I've had a handful of people on. No one so far has been bearish on AI. I think there's more enthusiasm for what is to come. We had, I guess, a number of ways we could take this. First of all, you wrote in one of your articles recently a bit on AI. And I would love to know, so part of the way I read it is this, maybe this, correct me if this is a misframing or if it's just something you don't agree with.

But maybe Bitcoin is migrating from like this hedge or this opt out to the obvious de facto base layer of money as we move into a world maybe more and more dominated by AI. Is that a way of framing sort of the way that you might see things? And could you share your comments on that or perhaps elaborate? Yes, I do think that that's a good way to frame it. Bitcoin has always been a counter free money akin to gold, a base layer type of money. It's always

been that. However, it has almost always traded like a beta on the stock market. And because of the volatility of Bitcoin, the risk is associated with things that move with high volatility, like tech stocks. And so it's been grouped in. So that break, that proverbial decoupling that every Bitcoiner has prayed for, recognized when it happens briefly, then pretends like they never celebrated the fact that it had decoupled when it recouples with the stock market. I mean, we all

do this. So when is it going to trade? Not like a tech stock? When is it going to be recognized more of a base layer money? This is why AI matters is it shakes up everything in terms of what matters, what people should put their money in, what can be profitable, and what might be, literally killed by AI. And in that chaos, Bitcoin starts to emerge with more of its properties, counter free money, scarce, not a company, not a debt structure, no funding required.

If you buy shares in a leveraged hedge fund that buys mortgages, let's say super safe assets. This is actually the first shop I worked at, mortgage hedge fund. They bought a bunch of safe-ish mortgages, but levered it two to three to one by funding it in the repo market. So if Barclays, Merrill Lynch, Goldman Sachs, and Deutsche Bank, when you call them next month, and they say, sorry, I need to return your bonds to you, and I can't lend you the money next month.

I mean, the hedge fund has to liquidate half of its holdings. It can't pay for it. It funded the purchases. So if the funding stops, you have to sell the bonds. So Bitcoin isn't any of that. It's not a leveraged mortgage fund. It's not a tech stock. It's not a government bond. It's not a perishable commodity. It's not an energy commodity. It really is only closest to gold. but is never traded with a strong correlation to gold.

If it did, the gold, the Bitcoin gold chart would look like this, but instead it looks like this. Right? So it is the holy grail for Bitcoin to trade more like gold and less like stocks.

It is the holy grail for Bitcoin to decouple and AI and the changes that AI is forcing on the world, which by the way includes like get all the metals get all the oil build a semiconductor plant and build robots and you need metals you need energy you need electricity to do all of that so what is the cost of things or what what are people spending money on it's stuff it's materials commodities and they're they need all the stuff well 10 years ago what did they need they needed

a great software that replaced a thousand workers or that made them efficient, that made them reach more customers. That's like a very different world than a scramble for resources world. And what is the trigger? It's AI. It's the AI race. The AI race is this trigger that moves capital out of software equities, for example, and into oil and gas producers and rare earth miners and manufacturers and like steel, for example, or a lumber company.

So if that's what's happening and AI is the trigger, does Bitcoin win or lose in that? And I think it wins because then people have to reassess what is Bitcoin? Is it like a software or is it closer to a steel plant? They have to make that reassessment in this new AI world. And that's why it's important. It's this trigger, Michael.

So you're saying it becomes a reassessment from an investment perspective because where my head goes to, and I talked with someone recently on the podcast about this, is AI agents adopting Bitcoin as the form of money. And now suddenly it's not 8 billion people who need access to better money. It's, you know, 8 billion people plus, you know, humanoid bots or whatever it ends up looking like. So you're saying it becomes more of a re-evaluation from investors.

And perhaps you agree that there's a play for agentic AI to use Bitcoin. And that's a piece of the puzzle. But you're saying it becomes a reassessment from investors. How do I, in my mind, categorize these different things and what is needed? Because coders and code is abundant, software companies, software in general, becomes less appealing.

And the actual stuff that makes the world move and enables what we need in order for an AI world to exist, that becomes much more interesting, the commodities. And then Bitcoin is sitting there and they're saying, well, it's not software. It seems like it's more of a commodity. So that seems like an allocation. I need some. And we've kind of left this tech stock world behind where everyone's focused on Facebook and all the others. That's exactly what I was trying to say.

So the couple words that you said that were perfect, one is the categorization. You have to figure out what category Bitcoin is in. And the other word you said, which I completely agree with, is only a piece of the puzzle. The agentic AI using Bitcoin because it's the best digital currency. That is incredible. It's incredibly fascinating. It is so interesting. but I think that it's a danger to think of it as the main event. It's a kicker. And it could be the main event.

I don't want to dismiss that. I think people that think it's the main event too, God bless them. I think that there's something there. And I see a path, right? But I can't say that that's the path, that's the main event. But I can see a path that that is a big kicker in the future. It is, though, about investors recategorizing what Bitcoin is and how it plays. Would you rather own, so five years ago, would you rather own Bitcoin or the S&P 500?

Would you rather own Bitcoin or the tech sector within the S&P 500? Or would you rather own Bitcoin versus banking stocks? All those decisions five years ago versus today, it's a new conversation. Just wipe the slate clean. Think about the effect of LLMs on each and every single company and rethink whether it's investable or not. Rethink whether any of these companies will do well or not over the next five to 10 years. Every investor is having that conversation right now.

Forget about if they're talking about Bitcoin or not. They are reassessing every equity that they own. So the software fall, it's bounced a lot this week as we've gone through this epic bounce. I mean, truly an epic bounce in the stock market. But yes, investors are reassessing all of this. So Bitcoin jumps into the conversation at a great time because the ETFs are already there. Morgan Stanley just went live. Goldman Sachs is coming online with theirs. everyone wants to get involved.

And everyone is aware that that target allocation of 1% to 3% is common sense, but they were probably off of zero. So if they were in 8% software, take the 8% software down to 2%. And with the 6%, you can put 4% in the rest of equities and put 2% in Bitcoin. And boom, you've gone from 0% to 2% on a reallocation strategy

because AI has changed the way that you think about the software sector. That's the main event to me in terms of AI being an accelerant to Bitcoin But even with that being said I still think it going to follow a similar pace to the way that the power law has played out over the last 16 years because you had insane growth in the early years. You have modestly strong growth still today that will taper off over time. But maybe we've overshot to the downside. So now the next

move is to overshoot, Bitcoin will trade at 400K. I just can't tell you when or how quickly, or if that point will be an overshoot or just par for the course, right? It's an overshoot if it happens next year, par for the course if it happens in three or four years. And what I love

about my job is that I don't have to come out and predict everything. I can give you some medium term and some long term predictions but just tell you that you know nobody knows if i knew i'd be trading it not on a pod uh being interviewed and writing a newsletter so um there's a special type of person also that can be a fiduciary and take these bets and also being able to stomach downside right because even if you're right you can be wrong for a really long time you remember

Michael Burry in his basement playing the drums and screaming when he was down 18%. And his wife calls down, are you okay? He's like, I'm great. I'm great, honey. He's like yelling with his drum set. So that's not for everyone. It's not for me. Yeah, I hear you. So one other thing that came to mind, I do not know much about the energy

markets, but my understanding is we need a lot more energy to fuel our AI ambitions. And I can imagine too, a place where the actual utility providers need to beef up their infrastructure. And the reason, as I understand it, the reason why they haven't historically done that is because there's only so much demand. They can meet peak demand almost all the time, except for in rare cases or perhaps in just

poor infrastructure environments. But do you see Bitcoin mining as a load balancing tool to help incentivize that expansion that sort of along with agentic AI adopting Bitcoin, along with investors reassessing Bitcoin in what category it falls into, also the energy producers or the utility companies by necessity, because of the demand for AI, building out infrastructure that they say, we can't have this just sit in idle. It can't just be charging electric cars

overnight. We need to be utilizing all of the energy that are a much higher percentage of the energy that we're producing. Do you think that could be another catalyst for, I don't know, I guess, Bitcoin adoption. And again, I know you think it's going to continue to follow the power law, but do you think that's going to be one of the potential effects? And could it be a significant one of the adoption of more AI? I think that the load balancing is an important

concept and utility providers are recognizing that. So they like Bitcoin miners being involved. I think that's an important part of adoption that will continue. But the electrification that we need that you mentioned. Well, do you think that Google and Facebook are going to wait for some random city to build a power plant or they're going to build it themselves?

They've already told us they're going to build it themselves. I think NVIDIA said that they're going to have their own mini nuclear reactors in the next seven years for some of their chip making facilities that they're going to build in the United States. That's a big deal because if they need energy for their own compute, they will realize that Bitcoin mining can fit in to their risk mitigation strategies on excess cost or capturing stranded energy and being able to

turn stranded energy into revenue or balancing the compute demand. Right now, they're balancing their own compute in terms of the LLMs, they have to either buy compute to process or buy compute to train. So they have to make that decision right now, not between Bitcoin and compute, but between compute for revenue or compute for growth in the future just to train your models to get better.

But my answer is that if the tech companies like ExxonMobil and like Royal Dutch Shell have recognized already that they can use Bitcoin to capture some stranded energy, to balance their, to mitigate risks, if tech companies do the same thing with their own power plants, then that takes the adoption curve of Bitcoin another step forward in terms of retail, then the hedge funds, then traditional investors, 401ks, Royal Dutch Shell, ExxonMobil, NVIDIA, Apple, right? Those types of big steps

are, yes, I expect them. But just because I believe in the power law doesn't mean you don't want to see the steps happen. And those are the types of things that will confirm. So when I see the Morgan Stanley headline, Morgan Stanley coming in with a Bitcoin ETF, I say, yes, checkmark. That's right on time. And so when I see NVIDIA in three years saying, yeah, we're mining Bitcoin too, it's going to be like, wow. But it'd also be like, yes, this is the path that Bitcoin needs to

be on. And this shows me that we're heading for that adoption. And by the way, you're waiting for 10 million, a million becomes 10 million quickly. And it's just another zero at that point, right? 10,000 to 100,000, 100,000 to a million, million to 10 million, they'll happen quickly, but you do have to get to the next order of magnitude before you get to the next one. So we'll get to 10. On what path? I don't know. But right now, I'm focused on getting to a million, right?

five to six years. Yeah. I'm patient, man. Bitcoin has brought me a lot and it's not been purchasing power. I've only been in for four years, but it's opened my eyes to a lot of things. And I get to have fantastic conversations with people like you because of it. So, Nick, I appreciate your time. I got one more question for you and you know it's coming. What

is an unpopular opinion that you have? You get some bonus points if you offend Bitcoiners with it. Well, I have never believed in or liked the word hyper-Bitcoinization. I believe in Bitcoinization, the slow adoption process that happens naturally instead of the world going into panic and Bitcoin forcing itself on the world. The world is stable enough that hyper-Bitcoinization is not my base case scenario.

If the world was completely unstable, then perhaps. But I am privileged in that I live in the United States, a very stable society, you know, with everything that's going on today, still a very stable society. I also am privileged that I get to travel around the world to Europe and non-European countries as well. I've spent time in India. I've spent time in the Middle East recently. I've spent time in other parts of Asia. I've spent time in Western Europe. I've spent time in Eastern Europe. I've

spent time in different parts of the United States as well. The world is stable. And I know a lot of Bitcoiners think that the world is so chaotic and so crazy that hyper-Bitcoinization is inevitable.

And I completely disagree with that. Maybe it's a naivete, maybe it's just an optimism, but I think that the stability in this world is enough for Bitcoin to have a slow adoption process where it just slowly chips away as a store of value across the world doesn't really replace the hand-to-hand currency that people use on any grand scale anytime in the next 10 to 20 years.

And it can get to a million absolutely just fine. So just to be clear, the distinction you're making, it probably has more to do with the pace and the relative amount of chaos that might ensue based on your scenario versus like you think that the quote unquote hyper Bitcoinized world is coming, but it's not going to happen in a hyper fashion? Like 50 years from now, do you think Bitcoin will be ubiquitous, use as money, the base layer money of the economy?

It's just a matter of following this longer progressive arc toward that future versus, look kind of your point earlier, it's not a macro event where everyone says, oh, I have to have Bitcoin today. It goes to 10 million overnight, that kind of thing. Is that the distinction you're drawing or is it more than that? I think it's more than that because I think that governments need currencies for stability. They need to have their own currency to have

any control and control leads to stability, right? If they're able to have a controlled environment, there can be stable economic activity. There can be economic activity if everyone agrees on the currency. And if everyone, if the government allows or basically sends its currency out into the world, then that is a currency that people will use. So I'll answer your question like this.

10 years ago, when I got into Bitcoin research, I had the thought exercise because I do travel internationally, is that in how many years will I go through a duty free shop and the prices are in Bitcoin. The prices are in sats. And it's the lead price, not underneath the dollar price or the

price, but the lead price. How many years until I see it? Not until it's every airport, every item for sale in every corner of the world, but how long until I actually see it for the first time or the second time, or I'm in an airport where everything is starting to be priced in Bitcoin. 10 years ago, I would have thought maybe in 10 years. Well, I would have been wrong because I've gone through a bunch of duty-free shops this year. There is no Bitcoin pricing.

There's Bitcoin ads like in the Istanbul airport. There's Bitcoin, huge Bitcoin exchange ads everywhere you go. I was just in Heathrow. There's a, you know, in the British Airways terminal, there's a big crypto ad with a Bitcoin logo on it. It's everywhere. Okay. It's not like it's not present in the airport, but it is not being used for transactions in international airports. I would have been somewhat wrong 10 years ago, but now I look and I say,

okay, well, what about the next 10 years? Am I going to be walking through an international airport and see Bitcoin pricing in the duty-free store? I don't think it's more likely today than what I thought 10 years ago, 10 years into the future. If it's not in 10 years, well, what about in 20 years? I don't know that Bitcoin gets to that hyper-Bitcoinization role that it is the currency that everyone uses. Because government currencies are so useful to governments.

And so don't discount the power of these incumbents, like the United States of America, the European Union, the People's Republic of China. Don't discount how long these institutions can last or how powerful they are or their willingness and ability to use their currency to accomplish their objectives. So Bitcoin, is it the store of value role for the next 20 years

still and not the global medium of exchange role? Even though it might break into more corners of the internet for online commerce, it's not going to compete with the US dollar for the medium of exchange function, for the funding currency function, for the banking role, for deposit lending. It's not. Well, I'll tell you, I think your opinion will be unpopular with money, obviously. Nick, I think this was a fantastic conversation. Always good chatting with you. Thank you so much.

Why don't you tell people where they can find out about you, follow you, read your sub stack, anything else you want to share? Yeah, thebitcoinlayer.substack.com is where we are writing all of our work. And thebitcoinlayer.com, you can see everything that we're doing there. The YouTube channel, our socials, and our new standalone terminal, which is called TVL Pulse, gives you all of our liquidity metrics without the additional writing. But we really want people to see the data.

And so it's a great new product that we have. The BitcoinLayer.com for everything. And I'm on X at time value of BTC. Perfect. Nick, thank you so much for your time, man. Great chatting. Thanks, Michael. And that's a wrap again. I hope you enjoyed my conversation with Nick. I know I sure did. Always learn a lot when I listen to him. And it was a pleasure getting to chat with him. Go follow his sub stack. Go check out his podcast. Everything that he's working on.

He puts so much time and energy behind all of it.

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It's a freedom loving jurisdiction that you should consider as a plan B. Again, it's thebitcoinway.com slash podcast. Until next time, stay safe, stay sovereign. And remember the yield on Bitcoin is freedom.