The Mark Moss Show Dec 31, 2021

A and a CFP. Those are a lot of letters. He can tell us what those mean. Um. He works with a company called Swan Bitcoin as an advisor. Um, and so he is a financial advisor, financial planner. He's not yours, So go talk to your own. Uh don't, he's not yours. But anyway, Andy, thanks so much for joining me today. Yeah. Mark, thanks, it's a real pleasure

being with you. And appreciate that disclaimer right there that this is financial either you're a disclaiming out for you there on that one you anticipated that you knew it was coming. Yeah yeah, yeah, Well we gotta say that all the time. So it's not financial advice, right, So um So anyway, you know, I want to talk about bitcoin.

Obviously we're talking about that, but I want to talk about it from a different angle that I typically do because I'm not a financial advisor or financial planner, and so um you are, and um, you know, right off the bat, I would just like to start with that, like most financial advisors or planners, they don't talk about bitcoin as a matter of fact, is I understand it. I have my sister in law and she's hopefully not listening.

She works for Charles Schwab, and she told me that even if her clients ask her about it, she's not even allowed to talk about it, even if they ask her about it. And so I know that there's a lot of that in the industry. Um, where's the industry ad And how is it that you're different than everybody else? Yeah, that's a great question, and it is sort of mind boggling that we're still at that place where the people

who work for Schwab can't talk about it. So, you know, I get into bitcoin in and it was when I published my book Why Buy Bitcoin? And at the at that time and I think still today, it's the only bitcoin investment thesis in the form of a book published by a financial advisor. So I'm an outlier in that regard. Now, when I put the book out in nobody in the regular way financial advice space I want to talk about bitcoin. Almost nobody. I mean, I'm sure there were exceptions, but

I couldn't find him. Where we sit a few years later here a couple of years later, is the independent investment advisors are starting to take action. Um, you mentioned, you know, my involvement with Swan bitcoin. I'm watching a swant an advisor services product at the moment, and the reason I'm doing it now is I think we're at

an inflection point in acceptance and adoption among financial advisors. However, it's not like everybody's on board all of a sudden, as you pointed out, folks, especially financial advisors that work for major custodians, major companies that provide services to financial advisors and by extension, their clients, the big ones are still lagging right there, not there yet. It's the small independence that are more flexible, that don't have to go

through large bureaucracies basically to get something approved. Those are the guys who are taking action for the most part. But still, as you imply, the larger organizations are taking their time. My expectations that will change in the next couple of years. But that's where we are today as

I see it. Do you think some of that's because they're incentivized not to talk about it because like they want to sell their company's products, or is it Is it because of legal reasons or regulatory reasons that they can't talk about it? Yeah? I think that here you have to parse bitcoin a little bit from the rest of crypto. So definitely there's legal risk with respect to classification as a security for a large portion of the cryptocurrency or crypto assets space, or the digital asset space,

let's call it. Bitcoin does not have that same risk. Bitcoin is one of the very few digital assets that is unambiguously not a security under US law. So then if you say, well, okay, but why haven't they acted on bitcoin? I think some is still reputational. Let's be honest, the mainstream media had done done a very poor job, um, in covering bitcoin. I mean honestly, I I read factual errors all the time in articles in the Wall Street Journal,

New York Times, Washington Post. Um, you know, outlets like yours, and you specifically had done a much better job basically telling it how it really is with bitcoin. So, um, my hats off to you there, and yeah, so so I think some of it is reputational and then some of it is on boarding and the effort and time. It takes basically two run through the legal and the compliance and the accounting and the custody issues associated with

providing services to clients. And you know, Michael Sailor sort of laid out a playbook for corporations to do that. Even if you have a high incentive or really motivated to get it done as an organization, it can take you months and months, potentially years basically to UH to check all the boxes within your legal department, your compliance department, etcetera, etcetera. So I think they also face that headwind and it's

a mixed bag. I mean, you had players like Fidelity, right, Fidelity was mining bitcoin, I don't know, five or six years ago, maybe even longer. Um even they even they have been treading pretty carefully in terms of the actual products that they're providing to UH to clients, and so yeah, it just takes time I think for these UH, for these large organizations to act on it. And just to your question about, oh, you know, are these guys dragging their feet because they stand to lose fees or they

stand a loose economics on it. I used to think that, and I'm not sure that's the case anymore, because the reality is, you can package bitcoin as a financial product if you're a if you're an investment organization, and you can charge a fee just like any other product. Now, someday years in the future that might not be as true,

but these guys can make money on it. And so I think that it has more to do with those legal and compliance and just running the traps, you know, doing the work over time, you know, sort of inertia of the large organizations. I think it has more to do with that and less to do with the you know, the the worry about, oh, this is going to eat our business. Okay, that's a good perspective. I just heard a lot of times it's like they financial advisors will

sell the products that their firm offers. So a lot of times you hear that they're they're they're more sales reps than they are advisors. And that's probably true for something, but maybe not for everybody. Yeah, well, no, Look, you make a good point in that as a financial advisor, like wind back the clock a couple of years, what

were your options for getting your clients into bitcoin. Well, you could have bought the Bitcoin Trust right ticker GBTC, and until relatively recently, that was a little problematic because it traded at a premium to the net asset value, right, so you were you were buying a dollar's worth a bitcoin by paying a dollar twenty five, which was not great because you had to figure out, well, there's a good chance that that premium goes away in the long term.

So I think that was a barrier for sure, even though that product was carried by major custodians like Schwab and like TD Merri Trade. Um. So that's a fair point. And if the alternative was, oh, you know, tell the client I don't know, opened an account at one of the major exchanges, well then yeah, that's assets that leaves the pool that you charge fees on, and so that was that was problematic. Now the good news is most

of those problems are solved. We don't yet have the true spot e t F where or you can buy a dollars worth a bitcoin for a dollar and pay a reasonable management fee UM and be subject to all the protections that the the SEC and the u S

jurisdiction affords. Were not quite there yet, but there are now better usable services available to financial advisors, some of which have just popped up in the last year that actually are credible alternatives and the financial advisors can take advantage of And of course they have to do their diligence, you know, they have to look at their options. It takes potentially months of work to to get up to speed,

and that's kind of where we are today. Yeah, okay, well, I'm glad you were able to cut through and UH and be one of the guys leading this UM. Now that we've kind of established that base, there's a lot of stuff that I want to jump into. UH. Specifically,

I'd like to dig into UM portfolio management. So maybe you could kind of give us a background or a way to think through how the average person might want to think about UM bringing bitcoin into their portfolio, how much they should buy, and just kind of a thought process. I know that the difference or the answer is it depends, but maybe there's some framework that we'll get through. By the way, you're listening to the Mark mass Show. You

we're talking about bitcoin. We're talking about the decentralized revolution. I'm in the studio with Andy Extreme. We're talking about portfolio management with bitcoin. He's gonna tell us how to think through that, how much bitcoin you should buy. We'll be right back. Don't go away, all right, Welcome back. You're listening to the Mark Moa Show. We're talking about bitcoin. We're talking about this decentralized revolution. And we're specifically talking

about today. UM, looking at bitcoin as a through the lens of a financial advisor, and how you can think about putting bitcoin into your own portfolio. Um, if you should put int your portfolio, how much you should think about putting your portfolio, et cetera. I'm in the studio with Andy Edstrom. He's the c f A CFP. He's an advisor with Swan Bitcoin and he helps people think through these exact type of questions. He gets paid for this, and I've got him here to talk to you. Now.

He's not your financial advisor, but he can help you talk through this. So Andy, UM, we were you kind of filled this in on maybe why I find acial advisors haven't been talking about bitcoin and how they're kind of coming around to it, but now moving forward, So walk us through some brain exercises of people who either are thinking about adding some bitcoin to their portfolio or maybe maybe we start with why people should add some bitcoin to their portfolio and then we'll go onto how Yeah,

that's a great question mark. And here I'm just gonna apply the lens of pure investment. Right, there's other reasons to own bitcoin, and we can talk about those, but I'll lead those aside. So let's just look at it as an investment. So the first characteristic is Bitcoin is the best performing major assets of all time as far as I know right the last ten years plus of performance. It's basically on from zero to call it a trillion dollars um. It's also probably the fastest asset to reach

a trillion dollars ever in history. Okay, so that's what um, Yeah, very very impressive. Um. The second thing to consider is in the context of an overall portfolio, and that's how I think is a financial advisor on behalf of my clients is doesn't have characteristics that play well with the other assets, And as it turns out, it does, and the reason is it's returns have low correlation to the returns of other assets, and it's low correlation to the

returns of most other major assets. So I'm talking about US stocks, foreign developed market stocks, emerging market stocks, bonds, gold. Okay, in all cases, bitcoin sort of moves to the beat of its own drum. Now all caveat and say that, yes, Bitcoin has correlated more closely with stocks and especially tech stocks in the last couple of years. Nevertheless, the correlation

is still relatively low. So what do you have. You have a You have an asset that goes up in value at a rapid clip right historically well over a year, um two. It moves at a different pace than the rest of the portfolio, so it has great characteristics in terms of making money even when other assets are not making money for the investor. And then three is the potential value is still much much higher than where we

are today. So when I look at the valuation to bitcoin, I see at least tens of trillions of dollars of value over the long term, potentially even more. I can talk about, you know, how I get to those numbers, but suffice to say that if bitcoin is worth roughly a trillion dollars, today in terms of the total value of the network or of the total asset, there's still multiples of potential upside. So I say, Wow, amazing performance

so far, likely amazing performance in the future. Of course, we don't know what the future holds, but that's my expectation. And it adds diversification benefit to the portfolio because it has low correlation. It's returns up low correlation with the rest of the assets in the portfolio. Um, it's really a star performer in the context of an overall portfolio. And then the last thing I'll say is for you know, leave aside the past and look to the future. What

is this? This is something that I've heard you talk about and I'm glad you're talking about it, um with folks on your show, Which is, you know, is the world of financial assets going to look in the next decade like it has in the past couple of decades. And my expectation, I think, like you is is No, it's not. And uh. And the biggest risk that I worry about personally is durable inflation. And I categorize bitcoin

as a hard money asset from from investment perspective. And so when I look at my clients portfolio, as I say, Okay, if there's a significant risk of durable, sustained higher inflation now and in the future, boy, I really want to own those hard money assets. And the hard money asset of the past with gold, But the hard money asset of the future appears to me to be bitcoin. Now, when you say hard money asset, are you saying hard money in a sense where people can't inflate it or

create more of it? That's exactly right, Mark, exactly right, hard to make more of Okay. So um uh, there's the whole correlation to the portfolio, and we could probably spend an hour just talking about that specifically. Um. But if we look at bitcoin and say, okay, it has a I think it's got an easy five act. I think it's got an easy ten X in front of it, right, I mean Cathy Wood says it has a ten X. I think if it got five of SMP reserves, it

could be a ten x. Right. So it has a ten X. It maybe has a hundred X in front of whatever whatever number you assigned to that um and then you go, okay, well, what's the probability of it achieving that five X or that ten x. UM. So I think there's a one percent chance that that happens, or there's a fifty percent chance that happens. Um. So if people are very bullish or there's somewhat skeptical on that, but you know, it's better than a zero percent chance

that to do that. Um, how would they think about now, um, applying that to their portfolio. Yeah, that's like a risk adjusted basis. And I think that's part of this whole correlation and so forth right. Yeah, that's a great framing. Mark. I like your framing there by the way, I agree with you that to me, the upside is more than ten x, and could be x, could even be higher. But that's you know, that's kind of the brackets that I that I put around it these days, at least

for the foreseeable future, let's say, for this decade. Um. And as you point out, reasonable people can disagree about the probability of success or the probability of failure for bitcoin. I personally happened to think that the probability that bitcoin reaches its potential, which is much higher than much higher in price than where it is today, is actually greater. Um. I've I've become more bullish. Let's say, since I think I put thirty or a third probability UM on paper

in my book a couple of years ago. But facts and circumstances and events that have transpired since then, not least the pandemic, you know, have caused me to get more bullish. So if we if we talk about if we talk about that just for a second, like I started buying in and uh, if I would have just put the amount of money in UM that I've done this year, that I would have put that back in, I probably wouldn't be on the radio right now, right

or whatever. I don't know, but I didn't because it was too risky right at who knew right in seen it had become more developed, we launched the futures like that, a lot of the risk was removed, but it was still risky. Today I almost feel like we're at this place where like almost all the risk has been removed at this point, but we still have this ten X, which makes it maybe the best risk adjusted trade we've

ever seen, maybe UM. But to to your point, no reasonable person and so unfortunately there's a lot of unreasonable people. I get over five thousand comments a week across all my platforms, and people say it's never gonna work, um, you know, or it's going to zero, and it's like, well, that may be close to true, but you can't say a percent, right, there's maybe a one percent chance that succeeds or and so you have to figure out like where your conviction is based off of that. I think

it's kind of what you're saying. Um, they're listening to the Mark Yeah, you're listening to the Markmah Show. We're talking about bitcoin. Um, we're talking with Andy Edstrom. He's a c F a c FP, and he is talking about how to incorporate bitcoin into our portfolio and specifically, uh, we're about to We talked about where it could go, so we think it can be worth a lot more

in the future. UM, we need once you figure out what that probability is, what your conviction is, then you can figure out how much you should bring indyr portfolio. And he's gonna answer that question when we come back. Um, you can find him on Twitter, um and look him up, give him say you say you heard him on the radio. You can find him at at Edstrom E D S t R O M Andrew at Edstrom Andrew Um say, Hi, of course I am one Mark Moss on Twitter. Shoot

me a message as well. We're gonna be right back talking with Andy, and we are going to find out what's your conviction level is and how to figure out how much to put into bitcoin. We'll be right back. Don't go away, all right, Welcome back. You're listening to the Markma Show. We're talking about bitcoin, and we're talking about this decentralized revolution, and specifically I'm in the studio

with Andy Edstrom. He is UH an advisor financial advisor works with Swan bitcoin and he is talking through right now. He kind of gave us where he thinks bitcoin could go. I said, I think it has an easy tent X in front of it. He agrees, he thinks it has even more than that. Now, as he said, any reasonable person you have to admit it has at least a better than zero percent chance of doing that. So does it have a one percent chance or chance or hundred

chance depending up what your conviction is? Now, Andy, you're about to tell us based off of that, Um, how should we think through adding a tour portfolio? How much we should have in there? Yeah? So a couple of thoughts there. Mark one is how much do you have in hard money assets, which is a different way of saying how much of your portfolio is assets that you think are going to save your bacon in the event of high sustained inflation. For me, for my clients on

average today, that's roughly okay. And that is basically bitcoin and monetary medals, primarily gold. And you know, I personally think that in the long run gold there's a possibility that gold gets demonetized, right, which means an investment in gold today it's probably not going to turn out well, but for the foreseeable future, you know, next few years. Basically I want my clients to own both bitcoin and gold. Now, the question of you know how much bitcoin maybe counterintuitive.

I'll just tell you how I do it for my clients, which is, most of my clients have roughly a five percent position, And partly that's because I want to have a an inflation resistant asset in the portfolio, and partly it's because I expect to make a multiple on that investment. And also partly because although I think there's almost zero probability that bitcoin loses most of its value or goes to zero, I do recognize that the volatility is high, and my clients do not have infinite patients for the

volatility of this asset. And it really is a you know, it's a it's an issue of human psychology because you know, and I know, and probably your listeners know that volatility doesn't really matter in the long run if you're accruing value,

if you're making money over time. But you know, the lizard side of our brain, you know that those lower baser parts of the brain that probably evolved much earlier than our intelligent prefrontal cortex, those parts of the brains get triggered the fear centers, the amygdala, etcetera, when we're losing money. So for clients, it's kind of a balancing act between the logical rational portfolio optimization versus the fear that can get triggered in the event of of of

loss of value. And then the second thing I'll say is I have clients at different risk levels, right, So there are clients that want to shoot the lights out and make a lot of money, high returns, and then at the other end, they're the clients that you know, barely want to even keep up with inflation. They just want to avoid a catastrophe, you know, catastrophic loss, and

then there's ones in the middle. And what's interesting about bitcoin is bitcoin is a good quote unquote high risk asset because the returns have been high and are likely to be high in the future. But it's also an important low risk asset in the sense that a quote unquote low risk portfolio classically defined has lots of bonds in it, lots of fixed income and the and as you know, the one thing that's kryptonite two bonds is inflation.

And so you kind of need to have I shouldn't say you kind of need, you really need to have that inflation proof asset, you know, or hard money asset hedge, even in a quote unquote overs portfolio. And so for my clients, bitcoin exists for for all those reasons in the portfolio. So could it be as simple as saying, well, I think it has a one percent chance of success, so I might put one percent of my portfolio in it. I think it has a twenty percent chance of getting there,

so I'll put a percent of my portfolio there. Or is that too oversimplified. I think that's a little bit oversimplified because of what does that mean in the extremes. So even if I'm almost a hundred well, so, first of all, I'm not a hundred percent confident of anything. Yeah, I'm rather confident of of Bitcoin's success. But I have to allow that there's from you said, you went from Yeah, that's that's true. So there you go. That's that's an

indication of my confidence level. Um exactly. So. Um So given that fact, though, what if you took it two extremes, What if you took it to a d percent and therefore you put a hundred percent of your portfolio in it. Um. You know, I'm sure there are people in the world. I know, there are people in the world that have done effectively that you know, I think, Yeah, I think that in most cases, those people, if it all goes

catastrophically bad, still have some back stop, you know. Maybe they have earnings potential, right they have they have a way that basically they can earn their way back into a into a portfolio. Hopefully they do. And then um yeah, So so I would say the percent of success equals percent allocation to the portfolio probably is not quite It's not the way I think about it. It is the

way to think about it directionally, so that I agree. Obviously, the higher your confidence in the level of success, the more allocation you should have. But I wouldn't go as far as to say, you know, literally the math works out as a multiple that way. Yeah, okay, what about on the other side. By the way, you're listening to the Markma Show, we're in the studio with Andy Edstrom. We're talking about bitcoin, and we're talking specifically about portfolio allocation.

How much a bit kind should you have bit? And if so, what are you buying it for? And and how much should you have in your portfolio? So? Um, Andy, what about the other side of that? So I work with people who, um say, uh, there's nowhere else to put bitcoin. I want to be a hunter per cent of bitcoin, Like there's it doesn't make sense to put

any money anywhere else. What would you say to those people? Yeah, I think that for a small segment of the population that both believes in it as an investment and wants to hold their own keys, uh for their own personal security reasons, that can make sense. I think that's a

very small subset of the population. Uh, you know who basically fully believe in it, they have investigated it, done their due diligence, they know it inside it out, and they've made the personal decision that this is really where I want to park my wealth. And in fact, I'm looking far enough ahead and to the future that I think that bitcoin becomes the base money. And so to me, this is just you know, putting my money in the savings account or the bank account of the future. And look,

I get that perspective. That's not the perspective that I can apply with my clients because I have to allow for the possibility that things don't turn out that way. And I can't say that I have any clients who would be willing to live with the possibility of losing their substantial fort fortunes, you know, because whatever that low probability event that maims or kills bitcoin comes to pass.

So basically say, it's not what I've what I've told people in regards to that is the reward of getting that right isn't worth the risk of getting that wrong. I like that framing a lot. I like that framing a lot. And this is this gets yeah, exactly into the risk of ruin, which is one of the most important things about investing is to stay in the game right, not get knocked out of the game and literally ruined.

And so if holding of your assets in one asset could ruin you because of even a small probability of that asset basically going to zero, then you're taking a risk that you likely cannot afford. Yeah, and most people listening probably know my story, and that happened to me in two thousand eight. I was had multiple businesses. I had a fortune. I sold my other business, I want

in high tech medical one, an online business. I was developing real estate I sold, I sold all my apartments, and I was all in on developing a couple of pieces of property in southern California. And it did not work out well for me at all, which is why I constantly pound the table on diversification because uh uh, the risk of me getting right was not worth the risk of me getting it wrong, which I did and it was a super painful lesson. Um. He listened to

the Mark mo Show. We're talking about bitcoin. I'm here in the studio with Andy Edstrom. Um. He's a financial advisor. I Swan advisors were talking about putting a bitcoin in the portfolio. I want to talk about Um. You mentioned earlier that it has a low correlation, and so I

want to talk about what that means. And specifically, UM, let's say that I decided I want to be you know, thirty percent of my portfolio bitcoin and to your point, UM, I don't want to to all go away if the market crashes, and so you talk about this non correlation, but what if it all moves together? So we're gonna talk about that when we come back. Um, you're listening to the markma Show again. I'm in the studio with Andy Edstrom. We're talking about bitcoin. You can find them

on Twitter at Edstrom Andrew. Of course, I am one Mark Moss and it's a message don't go away. We'll be your back up. Hey everyone, welcome back. You are listening to the Mark mo Show. We're talking about bitcoin. We are talking about this decentralized revolution, and specifically today right now, we're talking about how to think through um your own portfolio and should you add it? If so, what should you expect and more importantly, how should you

allocate towards that. I'm in the studio with Andy Edstrom um. He has a financial advisors financial planner with Swan Bitcoin UM. Now, Andy, before the break, you were talking about how you would you know if somebody I asked the question, if somebody said, hey, I want to put a person in, what would you tell them? And we talked about it's not you know, worth the risk of getting it wrong. Um, And so you had you you'd mentioned earlier about it has a

low correlation with the rest of the market. Um. However, right now many people are saying that maybe it's become highly financialized, and maybe it is moving with the market, and so um, you know, as you reference what I say that the market we're going into is different than the market that we left behind, and we're kind of driven by this fed stimulus today and all the markets have been highly kind of correlated, I guess is the word.

And so, um, what if I do make a allocation because I don't want to be wrong and lose everything or temper centers on whatever it is, But then you know, the bubble bursts and everything drops, and Bitcoin just drops with everything else. So then doesn't matter what allocation I had towards it. Yeah, if I do, I do, I do, I lose the upside but still have the same downside. Yeah,

it's a really good point. Mark So, first of all, your spot on about the fact that as institutions have come to play a larger role in the ownership and trading a bitcoin, Uh, there's no doubt that the correlation to other risk assets, primarily stocks and especially tech stocks, has increased. And so what that means is, especially when you're looking at monthly data, you know, in a month when the Nasdaq is down, there's a good chance that that bitcoin is going to be down in price as well.

So and then so then you talk about, well, what about scenario analysis, like you know, thinking about monthly returns or quarterly returns. That's one thing, but if you're a long term investor, you shouldn't care as much about those issues, especially if you have your portfolio segmented from your cash. Right, you have your cash to fund your household day to day, but you're taking a long term view with your investment portfolio. So do you really care about movements in price day

to day, month to month, quarter to quarter. Hopefully not. However, if you get a scenario like you're implying, where maybe the FED stop stimulating or stimulates less than people expect, then yeah, most risk assets are likely to go down in price. And in fact, we saw a taste of that relatively recently when the Fed finally acknowledged that inflation might not be transitory and that they might have to withdraw their stimulus at a faster rate than they were anticipating.

So that is a very significant risk to the price of bitcoin over months and even potentially years. Is basically, do banks to the central banks stop printing as much money and will therefore the price of your bitcoin go down I'm talking about the US dollar price at the same time that your stocks go down. Yeah, probably it will. So you better be in a position where you're willing

to hold on for a significant period of time. And just to play a little bit off of your earlier comment about how unfortunately you got liquidated effectively with your real estate portfolio in a prior life, Um, this is why I do not lever bitcoin, right. I don't lever

it from my clients. I don't love it for myself because I never want to be in a position where the price moves down farther or faster than I thought it would and I get a margin call Um, that is that is your risk of ruin right there, at least with respect to that asset, and it's something to be very careful of. Yeah, you listen to the Mark Mo show, we're talking about bitcoin. I'm in the studio with Andy Edstrom. We're talking about portfolio allocation to bitcoin

right now. And so I guess back to back to the question though, UM, I don't want to go on to all in the bitcoin because I could all drop. But um, if I only do bitcoin and the rest is in across markets, but if they all drop at the same time, am I in the same boat? I guess as the question now, Um, I've looked at if we don't know right, bitcoin hasn't been round through these

multiple bear markets. But if we look at what gold did, like in two thousand and eight, it dropped about half of what the stock market did, but then it rebounded and reclaimed it high and seven months. Stocks took seven years. Of course it wanted to make new highs and then we can see March of gold did the same thing and bitcoin kind of the same thing. Is that maybe what you would expect if there was a big drop, Maybe bitcoin does drop with everything, but then it rebounds

much faster, or what do you think would happen? That would be my expectation, and it also depends on what is the driver of the bear market. So when you highlight the financial crisis, that was not only a bear market, as you know, but it was a liquidation of leverage, right of debt in the system. And when that happens, literally every asset other than let's say, very short term

safe debt like treasuries loses value. Um. By the way, there is an inflection when central bankers get nervous, and we saw that inflection during the pandemic in March of last year, which was okay, people got freaked out about the pandemic. Stocks went down, Bitcoin was going down, then gold started going down, and then treasuries started going down.

And that's the real moment of panic, right if you're a central bankers like, oh god, the safe asset right now is losing is listening value and that's when that's when you pull out all the stops and do whatever it takes basically to to keep the system with float. So yeah, I expect, I fully expect the price of bitcoin to go down in that kind of a liquidation event. And that can happen because of some you know, outside

force like a pandemic or it can be happened. It can happen just because central bankers, you know, pull away, pull away the punch bowl. So yeah, but in the long run it should pass. It has passed, right. We saw that leverage liquidation take place last year in the pandemic, and of course bitcoin soared in price. Ultimately, you know, a year later the price was up by a multiple And so yeah, I agree with your characterization there. Yeah. And I mean just like the gold crash, like I said, No.

Eight in the March of twenty and bitcoin seemed to follow that pattern. It's not really something that you want to trade. I mean, it dropped in and rebounded so quick and so fast. Um, that would be hard to trade that. Um. And of course you know, the future is uncertain. Um, so we don't know. Um. One one other thing that I was thinking about as well as we already mentioned kind of this financialization of the market

and maybe somehow kind of starting to move everything together. Um. What about the futures that are that we are the e t F that we have directly today. Um. And because the futures in the United States they've rejected every physical one and we only have the cash settled futures um, And it seems like all that does is artificially or

create artificial demand. Right, It creates paper bitcoin in a sense, and so instead of billions of dollars going into bitcoin, now billions of dollars sitting on the sideline playing the paper bet. Um, what do you see the risk in that? Do you see that as something that has potential risk to suppress the price of bitcoin, both in artificial demand as well as even and potentially spoofing and naked shorting and things like that. Yeah, I do see a risk mark,

and it depends though on the magnitude. In other words, if I look at bitcoin, I see, okay, this is a trillion dollar asset. If I see the value the notional value of the futures outstanding growing much more quickly and catching up with the value of the underlying asset, then I start to get worried about it. Um, I don't see that yet, and so I'm not especially worried about it at the moment. I would characterize it as Yeah, you're absolutely right that a paper claim against bitcoin is

not the same as the outright bitcoin. Um. The good news about having futures products is, you know, for every futures contract that is created for which the price of

the futures contract is higher than Spot. Right I I you were in, were in a contango situation with respect to the futures curve that does incrementally fuel demand, that demand for bitcoin because chances are that, you know, if the current Spot prices fifty k today and two months out, your futures contract is at six k, well people are gonna come in. They're gonna buy Spot basically to close that gap. But yeah, I'm on the lookout for how

is this future market going to develop? Is the notional value of all those futures, you know, growing rapidly and becoming a significant portion of the overall value of the Spot market, of the of the network itself. So I'm I'm watching carefully. Mm hmm good, good point. Yeah, it's definitely something to see what happens. Um, hopefully it doesn't get ran away. I think, uh man, well, we'll see about that. Um. You listen to the Markmall Show. We're

talking about bitcoin. We're talking in the studio here with Andy Edstrom. You can find them on Twitter at Edstrom and Andrew and we were talking about bitcoin and portfolio allocation towards that hopefully that sets you up for next year. We both agree that we have a we think a ten X and of us not certain, but we think there's an easy tex in front of us, and so um.

If you're not already, it's time to rethink what's your portfolio allocation is for two to be ready to crush the year and make it the best year of your life. That's what I got for you today. Thanks so much for listening. To see you next time.