Bitcoin price has been rising and some argue that it is tracking along with the S2F model! Others argue that this is statistically invalid. PlanB, pseudonymous analyst and creator of the S2F and S2FX models rejoins me on the show to talk:

  • S2F and S2FX vs recent market action
  • Critiques and spurious correlations
  • Comparison with past cycles
  • PlanB’s thoughts on whether this is the final cycle
  • Macro factors – Tether
  • Negative rates
  • Cash and carry trade

Previous episodes:


Stephan Livera links:

Podcast Transcript:

Stephan Livera: PlanB, welcome back to the show!

PlanB: Thanks Stephan! Thanks for having me!

Stephan Livera: Yeah! So PlanB it’s been a little while since we spoke and obviously it’s been a very exciting time in the Bitcoin space! So just for context for listeners we are recording on the 14th of January 2021. And as I speak the Bitcoin price is around $36,188 in USD terms. PlanB, can you just give us a bit of your thoughts on where we are in the recent run-up and the sentiment in the market?

PlanB [03:38]: We’re actually at a place where we joked we would be! We went up very fast from $10,000 straight to $40,000 and then we “crashed” to $30,000 — and we have joked about this a lot of times when we were sub-$10,000 or even at $20,000. But hey, here we are! And I must say — for me especially — this is a fantastic place to be, because the model and the research that I’ve done seems to be getting validated as we speak! It’s a bit too early to call of course, we’re not at the levels we are expecting, but hey it sure goes up, and it goes up at exactly the time that the model predicts — that is right after the halving or slowly after the halving to our target level. So yeah! Very exciting time!

Stephan Livera [04:33]: In terms of the models, we’ve got two main ones to talk about and think about. So we have your OG model, the S2F model, and we’ve also got the S2FX, the cross-asset model. In terms of performance against reality, how would you rate them the two different ones?

PlanB [04:52]: Yeah, it’s very well that you say that they’re two different models. And maybe to give listeners some context, especially the new ones — a lot of new people are getting into this space — the first stock to flow model was created in March 2019 and it was a time-series model, so it looked at the Bitcoin price and it looked at the stock to flow and measured to quantify scarcity and then there’s a nice correlation between them. And you can extrapolate that into the future and you get to a value that was then quite conversatively estimated at $55,000 end of 2021. And it’s later adusted with new data and other [coin?] correction to $100,000 USD at the end of 2021. So that’s the first model — the original OG stock to flow model! Then a year later in April 2020 the S2FX model — the cross-asset model — was made, and it was basically not a time-series model anymore! So it was a model that also uses the same stock to flow measure for scarcity and looks at market values, but then, across different assets! So Bitcoin is one asset, and I divided four phases — four phase transitions within Bitcoin. But then it also includes in the model, in the data, and ultimately in the model parameters — the stock to flow and market value of other assets like gold, real estate, silver, diamonds — and that’s what makes it very different from the stock to flow model originally, but also more robust if you ask me! The important thing is that price prediction for end of 2021 is also a bit higher — it’s $288,000 as an average price in that specific four-year period. To be honest, I like both models — they’re both my babies! But if I had to choose, I would choose the S2FX model, because it’s not a time-series model so it’s more robust. It’s always better to have time out of the equation, because we’ll get maybe into that later, but if you correlate to time-series, there is a big risk of correlation being spurious. And that risk is less if you don’t have time series! The other big thing is that we can now interpolate instead of extrapolate! If you have a time-series model — it can be the number of transactions, it can be the time itself, it can be the number of Bitcoins in existence — then you don’t know what the number of transactions in the future are, and to base the prediction on top of that is a risky thing! It’s extrapolation — it’s based on data that you don’t have in your data set! But the S2FX model, we have gold being at a higher stock to flow, and real estate being at a higher stock to flow and higher value, so we can actually interpolate within the data that is used to fit the model, and that is a very, very strong argument for this S2FX model!

Stephan Livera [08:19]: And so probably it’s a good point also to discuss some of the critiques of some of the modeling. The thing is, it’s kind of shifted over time, right? And I guess we’re talking about both the different models, but with the S2F, one of the interesting developments was this idea of cointegration, which then later it seems that part has now been shown that we can apply the cointegration test. From your perspective, what does that mean? Does it essentially just mean we don’t have the confidence that would have been provided by cointegration, but you believe that the model might still provide some high-level predictive power? Is that how you would summarize it? Or how would you summarize it?

PlanB [09:00]: A bit differently! By the way, I got a lot of critique on the models, which I also invited, because I think the models are only getting better if they’re open sourced and discussed! And the point you mention about cointegration was one of the more interesting and very intelligent discussions! I liked that very much! It’s important to know that it only applies to the first model — the time-series original S2F model — and not to the S2FX model. And what it basically does — it’s a measure that gives you some certainty that it is not a spurious regression, not a spurious correlation. Because there’s always a risk that you find correlation [but] that there is no causation or no relationship at all! It’s just a fake, fake correlation — that’s always a risk! And to be clear, that is still a risk! It could be, the relation between stock to flow, scarcity, and value, could be spurious—although every day that seems less likely! It is important to make that point! Now with cointegration it’s actually a test, and that test — if you apply it and it proves cointegration — then the less likely, it’s not certain, but the less likely the relationship, the correlation, is spurious, is false. So there’s a lot of probability that it’s a causal relation and a correlation that you can use for making predictions! But the discussion was quite interesting because it was actually held with a Dutch guy, an Australian guy, a German guy, and me! There were four people working on the same data and the same test. And first we all did the same test and the test clearly showed cointegration! And cointegration means that the series stick together very closely. The story about the drunk and the dog was made. The drunk goes on the street to walk his dog, the dog is on the lease, the drunk goes everywhere, the dog goes everywhere, but the distance between the drunk and the dog can never be longer than the leash! And that’s what you measure — the leash! They always stick together, and actually that’s what you see in the data! If you look at the Bitcoin price, it sticks to the model, it tracks the model really really close! And if you do the test, you also measure there is cointegration. But then the German guy said, Well, one of the assumptions of the test is that both variables are stochastic and not deterministic, so they should be random and not predetermined. And of course, stock to flow is predetermined! So we couldn’t apply the test! So although the test showed cointegration, theoretically and practically we cannot use it! But it clearly shows the moving of the price around the model. The test also shows it, but we cannot use it! Yeah, that was the end of it right there! You could say, Okay, we should use another test, or develop another test, because it clearly sticks to the model—the price. But on the other hand, it’s maybe best to be conservative and say that there is no cointegration and probably the relationship is spurious! So, that was the end of that discussion! On the other hand, if there’s no cointegration, it doesn’t mean there is no correlation. And the cointegration only works on the time-series model — so the original S2F model. By the time the discussion was at its peak, I introduced the other model, the S2FX model, and there of course you see an even higher R2, and even higher correlation, and we cannot apply the cointegration test over there. Yeah, that was a very interesting discussion at the time!

Stephan Livera [12:57]: One other interesting critique that I have seen in terms of the — so now we’re talking about the cross-asset model, the S2FX model — is this idea that the S2F multiples of different assets, like if there’s a variant in one of the variables that goes into it, I think the argument is essentially that the S2F variable dominates that calculation, and then that is what’s driving a high R2. How would you think about that kind of issue?

PlanB [13:26]: I think that’s true. We actually did some tests in the S2FX model but also for the S2F model, to include other input variables next to stock to flow. For example, the number of transactions over the time, or other variables. And it clearly shows what you already said, that whatever you input into the model, the stock to flow is the main and dominant force driving the price! That’s the case with both models.

Stephan Livera [13:58]: Yeah I see. That would just be a difficult thing if you were gonna try to run that on other assets, because we can see that with Bitcoin, but if were gonna try to run those other — not the price calculation, but with other things — on gold and property, that’s kind of a harder thing to do! Theoretically some of those numbers might be possible to create though, right?

PlanB [14:18]: Well there’s different aspects. If you do it on other coins for example you find no correlation between stock to flow and price. You actually find cointegration and correlation with the price of those altcoins and the price of Bitcoin, but not between their own stock to flow and the price of those altcoins. If you look at gold and silver and other assets, there are not much assets with a large stock to flow! With a stock to flow larger than, say, 2. There’s really not much there: silver, gold, diamonds, real estate, maybe art. Art is a $2-$3 Trillion market but I don’t have the data for that! I would be very happy to analyze if somebody has the data. But that’s about it I guess. For example if you look at gold, gold over the same period that we have the Bitcoin data, since 2009 — if we look at the stock to flow of gold and the market cap of gold, it sort of stays the same! It’s very stable and I plotted it in some of the charts. The amount of movement in stock to flow of gold and the market price of gold is — if you plot it, it’s really stable! It’s remarkable!

Stephan Livera [15:39]: Yeah! And I think you’ve also been Tweeting out recently just under a month ago, you were saying, RIP to the idea of lengthening cycles and diminishing returns. So why was that?

PlanB [15:53]: Yeah that’s one of the models that’s out there, and actually it’s a model I looked at before I had the S2F. It’s basically the time model that a lot of guys are using, and that is I think for the first time used and published by Trolololo in 2014. It has this nice curve and it fits the price of Bitcoin very well! But it tends to be not that stable. It tends to be— you have to adjust it every year to keep it fitted to the data. So the time model is there but it’s also underestimating it a little bit, and it doesn’t of course give credence to the step function that you see in the Bitcoin price. And that occurs after the halving! So if you use the time model, it’s the first crude indication and we’ve all seen those charts, but it doesn’t give any weight to the halvings and the very clear timing of price rise that you can see in the Bitcoin price that is around a year, one-and-a-half years after the halvings. It’s a nice model, but it’s maybe a starting point but not a robust one. And while we’re at it, I think it also underestimates it a little bit, because if you look at the S2FX model, you can clearly see that last period, the last couple of years, the Bitcoin price was a little bit underperforming to that model. So the phase if you will — the last four years — was lower than the model predicted! And that might be due to COVID, the last part of that four-year period was kind of low, but if you use only that data — the time series data — to fit the curves, then it must be a little bit lower, it must track that lower data in the last couple of months! The other thing, actually the main reason why I said the lengthening cycles and the lower cycle theory is dead — if you track the prices without the model, just looking at the data, you compare it to what happened after the 2016 halving and what happened after the 2012 halving, you see that the price now is right in the middle of those two historic tracks. And the diminishing cycle return theory says that it has to be lower. It states that the next peak will be later and lower than the last — well if you look at it right now it’s obviously not the case! It’s a bit early to call I should say, but we’re smack in the middle of the last two! So yeah, it doesn’t look that way!

Stephan Livera [18:51]: Right. So I guess to clarify, that would mean that the diminishing idea is more like the cycle top would be less as a multiple than last time.

PlanB [19:05]: Yes and the current price would be much lower than it is right now!

Stephan Livera: I see. Yeah. And if we compare something like the S2F and one of the Twitter bots by our friend Bitstein—he’s got the S2F Multiple and he’s got a really interesting chart where he’s basically showing the actual price versus the model price. And right now we’re above the model price. It’s like $36,000 versus the model price right now is around $28,000-$29,000. So what’s your view on that idea? Even though we don’t have cointegration and that’s not part of it anymore — it’s just interesting to a person looking at that chart, that you think, Okay, it’s really interesting that it’s staying inside that range! One critique that someone might be thinking is, Well hold on! These guys with their charting and modeling, they keep changing the day and now it’s 463 days and so on! How would you think about that particular issue?

PlanB [20:09]: Yeah the 463 days is a nice thing, I’ll get to that later! But first of all, the fact that the price tracks the model so well it’s actually magical to see! Also for me! You make the model, you hope it will be right, but of course the proof is in the pudding, and now we see it happening. So it’s really magical to see it, I’m very happy about that. And we have to see whether it goes to the $100k or the $288k, but I’m quite optimistic about the $288k. That would be my target! About the 463 days, that’s actually an improvement that was suggested by Preston [Pysh]. Preston and I discuss the models a lot, and also that site, and you mentioned the Bitstein bot — it is a beautiful thing! And digitalik has also real-time charts on his website. Well Preston said — you’d have to ask him himself because he can tell it much better than I! — but he said, Okay I see what you did there. You tried to keep the model as simple as possible, only to have the stock to flow as an input, but we also see from the last two halvings that the price effect kicked in later. So there was a time lag in price going up after the halving, and we can model that if just very roughly look at the last two halvings. We see that the all-time high after the 2012 halving was about 13 months after the halving, and for the 2016 halving that was about 17 months after the halving! So on average there’s 15 months from the halving to the all-time high, and if you multiply that by the number of days in a month which is 30.5, you get very close to that 463 number, and that’s how you calculate it! And when you use that number the fit will be even better than if you use only the stock to flow variable, because you now have adjusted the average to stock to flow over those 463 days. Yeah I think that’s a very nice addition and it tracks even better!

Stephan Livera [23:05]: Yeah I certainly think it’s really interesting that when you look at this chart that it just seems to stay within these blue bands. There are times when it goes outside the dark blue bands but it’s still inside the light blue bands. It’s just an interesting chart to look at, but I guess at any point it depends how bullish we are on Bitcoin. Obviously all of us are, we’re all bullish on Bitcoin! I wonder, because we really don’t know when any of these things break down, right? And when I say break down, I mean break to the upside! It may just be that enough people around the world wake up to Bitcoin, start buying it, and then just completely destroy all the models and just completely blast through, right? And this would be more like — as I was discussing with Preston — the idea of the final cycle. So I wonder, as you look at the landscape, what’s your thoughts on that idea of, Okay, are people just gonna start front-running the future cycles and just buy it all now? Are we going to a final cycle? Or, the counter-argument might be something like, Well see, there’s just not that many people who are woken up to Bitcoin and putting in enough of their portfolio into buying Bitcoin! So it just can’t reflect yet!

PlanB [24:27]: Yeah! Well that’s a very interesting discussion! I think we’ll be having that exact discussion for the next 12–18 months at least! It touches on a lot of interesting aspects — this final cycle discussion. And let me mention a few: one is the efficient market hpothesis, which was also one of the critiques on my model. Nic Carter wrote a nice piece about it. The efficient market hypothesis says that all the information that’s publically available should be reflected in the prices of the assets. Stock to flow is publically available, the model is publically available, it should not be so easy to make money as just to buy Bitcoin now, follow the model and be rich! That model cannot be! On the other hand, and then we come to this front-run argument: if now we see that the model does work, regardless of the efficient market hypothesis, it does work and it goes to $288k, what happens then? Will people when front-run the next cycle? Because for the next cycle the model predicts a price that’s far above $1 million per Bitcoin! So will investors then price that cycle in as well? And the efficient market hypothesis says that they will, because the information is out there, we’ve seen that it works, and if everybody thinks that it works then it would be the rational thing to do! On the other hand, I don’t know! I had that same question when the price shot up after publishing the article in 2019, but that turned out to be too early, because the price went down aftwards. But we had that exact same discussion back then! And just like back then, I think we will not have a final cycle now, and we will not see front-running — we will see some front-running, and some FOMO if you will after $288k — so the price will probably go much higher, maybe to a half-million at the all-time high, but I think the other important aspect is risk, and that was my counter-argument at the time against the efficient market hypothesis, that critique as well. And I wrote an article about that. Yes, the model is out there, yes all the information is out there and it shouldn’t be as easy as it seems to be now to make money — just buy Bitcoin and follow the model and be rich — on the other hand there’s perceived risks and real risks in the market. I did a poll on that! And the number one risk that people see is governments banning Bitcoin! And we see a lot of actions in that direction! We see US Treasury minister announcing draconian laws over Christmas with a process that’s not very democratic, so they’re really trying to kill it! And we see today, like [inaudible from inaudible 27:56] warning about regulation that has to be made against Bitcoin, although regulation of course is not a ban, well it could be good or bad, but it’s a big risk! And people see it as a big risk, and governments have barely woken up to the possibility that Bitcoin could be a $1 Trillion, let alone a $10 Trillion market, so when that happens, they will move! And that could be a good thing or a bad thing, but there is a risk! And another risk is quantum computing. They could break the private public key relationship. So all the experts say it’s not possible and it’s not possible for at least ten years and there may be adjustments to the software, etc., but still it is a risk. And I think those risks whether true or not will surface again, especially after the FOMO phase, after we hit the stock to flow target models and maybe beyond. There will be risks, and there will be black swan events that make those risks look very real! We will go down again. So I surely think that that will happen, and also that’s another argument — human nature! Greed and fear! It will stay the same. So yeah we probably will have FOMO once we go up and go beyond $100,000, and we go too high because of greed! And then some risk will surface and people will be so fearful and they’ll estimate the risks too high and price will go down. I think that will stay the same. Having said that, the third discussion we’ll touch — it’s the topic of hyperbitcoinization! All Bitcoiners know what it is, but it basically means that Bitcoin goes to the moon. That it will become a unit of account, and that maybe the Dollar dies. And Bitcoin will be the thing that we all use to pay and to save money. Yeah, when that happens, that would be the final cycle, but it would be more of a final cycle for the dollar in my opinion than for Bitcoin! So it will be the moment that the Dollar will end, to exist as the global currency. And I don’t think that will be this phase, the phase 5 if you will, but the phase after phase 5, when Bitcoin will reach a market cap of somewhere in the neighborhood of real estate — let’s say $100 Trillion USD. I like that number for some reason!

Stephan Livera [31:14]: Ah yeah, I wonder why! So just looking at the OG S2F model, it seems to me that that model predicts the price for $100k for this round, and I think it’s something like $300k or so for the next round in 2024-2025 cycle. And then the 2028–2029 halving and bull run I think it’s predicting something in the millions! I mean really if we were gonna talk about final cycle I think to me it makes more sense that 2029 might be the final cycle. But things can change, but that’s one way to look at it if you’re looking at the S2F model.

PlanB [31:56]: Yes. That’s true. So it will be the next cycle after 2024, more in the 2026–2028 area. But then again, there will always be risk, greed, and fear. A total elimination of the cycle — I don’t know! Hyperbitcoinization, I don’t know if it’s a good thing or a bad thing to look at, but it will be very interesting. And the front-running also, I don’t know! For sure if we reach even the $100,000 level, people will think, Whoa! Well it might go to a million I better buy some. Well maybe it goes down but I’ll wait a couple of years! It will be really really interesting how that plays out, how that dynamic goes from here.

Stephan Livera [32:42]: Yeah and I think having that regular stacking dollar cost averaging or order stacking group of people out there — those people are in some sense holding up the floor, because after every dip, these are the people running in and either they are manually buying the dip or their automated buys are kicking in, and that’s in some sense raising the price floor over time.

PlanB: Yeah true that. The DCA’ers, the retail investors of course. Maybe that’s not the biggest driver at the moment. The three big buyers at the moment: Greyscale, who buys everyday more Bitcoins than are mined. Paypal — same thing. Cashapp. So those three buyers buy each along everyday more Bitcoin than there are made so they have to bid the prices from people who hold them. But as we’ve seen, most of the weak hands have already been shaken out by the volatility, so the hands holding the Bitcoin right now are stronger as ever! I mean if I look at my own coins, I’m not gonna sell, never! Ever! But to the next person who wants to sell, but you don’t get my coins. And they will be harder to get. And it’s really funny, I can see that on the on-chain data as well. The fact that there’s not much coins. And I don’t mean the balances on the exchanges that are Tweeted about and looked at. I mean really the on-chain data, it shows a pattern that is very consistent with the stock to flow model and the four-year cycle, and it shows a shortage that is scary actually! The price has only one way to go in my opinion.

Stephan Livera [34:14]: Yeah for example my sponsor Unchained Capital they have some really interesting work, the HODL waves chart. Which gives you a nice indicator of waves of HODLing and how long some people have been HODLing their coins. Because there’s people out there that have been HODLing for multiple cycles at this point. You make that point and it’s a good point about how you add across Greyscale and Cashapp and Paypal and others — that’s buying more coins each day than are issued by the miners each day. But then I guess the other part of it is old HODLers, because eventually at some price they might say, Okay I want to take some out and buy a house and buy a car, because obviously yes Bitcoin is going up but I need to live, I need to look after my family, I have living costs. Maybe that will become a more dominating factor of just how many people are willing to offload, even if it’s a small portion aggregated across millions of millions of HODLers. That small portion can add up to a new amount of supply hitting the market in terms of the sale of Bitcoin.

PlanB [35:24]: Yeah I think that’s a key thing that you described there. And the HODL wave chart is one that has inspired me since the very beginning to do on-chain analysis and look at the data. If the listeners don’t know what we were talking about, Google it, look it up in Twitter and find that chart! The HODL waves’ basis is really an intriguing way of looking at Bitcoin! I make the HODL charts myself. If you run a full node you have all the data, so if you can do a little bit of programming in Python you can make them yourselves, and you can go a lot deeper than that as well. For example the UTXO set, the total amount of coins in the transactions that are unspent out that — that changes over time, which is sort of the HODL waves in one dimension. That gives a treasure of information about how those coins move, who is selling, and it’s really unique to Bitcoin as well, because in bank data you don’t have that! You would have to have access to all the banks’ databases. With Bitcoin for the first time you have that! It’s like a heaven for quants, it’s like a heaven for people who like to make new economic theories about how this works — this supply and demand game in Bitcoin.

Stephan Livera [36:42]: Right and there are providers as well who do some of the things. I know Coinmetrics do some related analysis and also Glassnode. For listeners I have an interview with Rafael Schultze-Kraft, he’s from Glassnode he’s the CEO. And we spoke about these statistics as well. One interesting one is looking at, of all the unspent transaction outputs, you can look at how many of them are sitting in a profit and how many of them are sitting in a loss position, and try to ascertain where the market is at from looking at those numbers. Looking more broadly at the macro world of all of this, what are some other relevant factors to think about? It seems every six months we get some drama about Tether, and, Oh my god, Tether is not backed and so on! What’s your thoughts on all of that?

PlanB [37:30]: About Tether — I don’t think it’s a relevant factor! It’s a lot of FUD. It’s really a lot of FUD, and it’s been there since I’ve been in Bitcoin! For years and years I’ve heard that type of FUD, and it’s at specific times, when the price is sort of wobbly and there’s a lot of things going on such as with regulation at the moment, and all of a sudden — I get daily about 50 DMs in my Twitter of people, How about Tether? How about Tether? They put their comments under each one of my Tweets, and my impression is that it’s like an army of FUDsters that try to spin a story, and of course it gets picked up by people without a brain! So yeah it’s nothing! There was a podcast I don’t know where it was but it was with the two guys from Tether last week — it was very good! They explained how it works and why Tether is there, because you know the banking system is very slow. If I transfer money to the US or to Australia it could easily take three days, where if I want to park some Bitcoin money in cash and use dollars for a couple of hours, that then would not be possible. So yeah you need a coin, a synthetic dollar where you can park your money that goes way faster than the old, slow, traditional banking system. And I get it! Of course how much the Tethers are backed by real dollars and other assets — that’s an important thing and more transparency can be given there by Tether, but it’s a very traditional issue as well with having collateral against loans and future markets that are fully collateralized every day. I guess for people who are not aware or not familiar with those collateral processes, that it sounds very opaque and mystique, and it’s just stuff that you make a lot of FUD and conspiracies about, but for me it’s a non-issue.

Stephan Livera [41:20]: I think it’s really interesting that a lot of people just latch onto an explanation and sometimes they can’t find it in themselves to believe that Bitcoin is this genuinely new thing — it is a monetizing new asset! It’s not some new little tulip bubble thing! And tulip bubbles don’t last for twelve years and continually grow each time and have all this actual utility and networks growing around the people who really use it in the real world, right?

PlanB [41:51]: Yeah and maybe Stephan it is easy for us, both having a background in banking and institutional investing! But I mean, what I’ve been seeing since 2008–2009 basically since Bitcoin was developed — since the global financial crisis — the amount of quantitative easing and the amount of money being printed by central banks what they have done the last years is so overwhelming, it’s the only macroeconomic topic! It overarches everything! It’s staggering really how much money has been printed and what it has been used for! And I’ve been in a position where I have dealt with banks on a daily basis, from bank contacts, with Basel capital management requirements, from insurance contacts, solvency requirements — we’ve been selling stuff to the central banks for years and years and years, and they buy everything! You know that famous scene in The Big Short where the crew is at a conference in Las Vegas about mortgages and mortgage securities — there’s also conferences like that in Europe, actually the same organizers. And at those conferences — the central banks are there as well — everybody talks about the central banks because they’re the biggest buyer out there! They buy everything! They have an unlimited budget! I think if you’re in the trenches and you deal with the central banks and with quantitative easing no matter how you call it — it can and has become a semantics game lately— if you’re in the trenches and doing this work, you see the absolute staggering obscenity of it, if you will! It really reminds me of Zimbabwe and Weimar Germany! We’ll have to see, but knowing the quantitative easing and how it works, it’s very helpful in making me a big believer in Bitcoin, I truly believe that!

Stephan Livera [43:53]: In terms of comparing this Bitcoin bull run versus other Bitcoin bull runs, and I know you’ve been charting them out and trying to show, Okay, if this were equivalized to the previous cycle, what would it look like? We’re sort of tracking in the middle of the two other halving cycles?

PlanB [44:14]: Yes we have the two earlier cycles, which is not much, but we can compare. That was the 2017 cycle and the 2013 cycle, and they are quite different actually! 2013 was of course very early, and it was in a stage where mining was a big topic as well, because that was the year also that ASIC chips — mining chips — application specific integrated circuits, very specific mining chips were produced and made the security of the network like a million times bigger, and everybody that had that chip had an advantage. So there was huge optimism and excitement about this next step in the Bitcoin history, and price shot up from a low of $2.5, average $5 to $100 to $1,000 within one year! So that was really unimaginably fast, without much corrections in between as well! But then 2017 the mining technology was already done, there was a lot of improvement but not that big huge jump like in 2013. So the new thing and the excitement was all about altcoins and ICOs and forks. Everyone was dreaming about tokenized world and new coins and FinTech wave hit the markets! And that craze shot the price up from $200-$400 at the low to $20,000 at the high, so that was also very nice rise, but it had several corrections in between, like six or seven! Very different from 2013. It had six or seven corrections of about 30% in between in that big rise. So right now the big question is: correction or no correction? I guess part of the answer we already have because we just had a big correction when price shot up from $10,000 to $40,000 and then crashed to $30,000, which is -25% correction. But if you ask me it’s very similar and maybe more similar to 2013 price-wise than 2017! So we might as well see not that much corrections on our way up! And that is also compatible with the macro environment that we see at the moment. We talked about that — the quantitative easing has gone full throttle of course since COVID, and more money has and will be made by central banks in the months to come than we have ever seen before. That money has to go somewhere! That goes to banks, that goes to companies that are saved that would have otherwise defaulted, and all the people, all the managers and employees of those companies, they can go on buying stuff which is a good thing of course, but it also keeps the economy going and in that way in a real sense that quantitative easing money — the printed money — enters the real economy! And it enters the real economy at the top first: managers, politicians, the people that are already rich. So what did they do with it? They buy assets: a second or third house, a street of houses, as an investment objective. They buy gold, they buy Bitcoin! And part of that you can quantify in the model, but part of that money will trickle down to assets and also to Bitcoin. But with the amount of money being printed, it’s almost unimaginable that we go down from here or have very big corrections. And quite honestly you can see that in the prices too! The last three months, if there was a significant dip in the price, it got scooped up immediately by buyers! And Michael Saylor was very eloquent and very open in how he did it, how he bought his first $200 million and the other $400 million and the other buys since then. He does this very professionally with a lot of help from people that have the equipment and the access to the market, and they move that money without moving the price too much, in very small tranches. [49:00] Yeah I have the feeling that every dip, every time the price goes down, there is somebody with stronger hands that will say, Thank you very much for the coins, they will now end up in my wallet and they will go in deep cold storage, never to be seen again! Or at least in the next ten years! So yeah I think we’re witnessing that right now! And it feels more like 2013 than 2017.

Stephan Livera [49:27]: As we are entering this whole Phase 5 thinking, are there any other broader macro themes that you think are worth commenting on in terms of things like, What other kinds of entities we might see entering the space? What kind of vigor will they be entering the space with? Will they be cautiously dipping their toe in, or will they start to really dive in in a more deep way to Bitcoin?

PlanB [50:02]: Two things I’d like to say about that: one is the institutional investors are really lining up now to buy Bitcoin! I’ve been invited almost weekly to join meetings with hedge funds, family offices, banks, insurance companies, to talk about Bitcoin, not only the stock to flow model, but just the whole Bitcoin thing and how you can buy it and how you can hedge it and how you have to look at it as an investor. So there’s really a lot of demand from investors, and one of the things that I find very interesting—also for myself — is the derivatives markets. So if you look at the futures market for example, you can now buy Bitcoin for, say, $35,000, and you can sell it at the same time for a year later — you can future sell it for more, I don’t know what the price is, but $36,000. So you get a certain $1,000 profit, you only have to wait for a year! And of course you give up your upside and you also have no downside so there’s really less risk, but you really have to know what you’re doing. But anyway, if you do it like that—it’s a cash and carry strategy — you can make a 20% return annualized, and that is the kind of returns that Warren Buffett and famous hedge funds get! But not banks or insurance companies — they’d be happy with maybe 5%. So 20% in an easy trade like that is something that cannot be ignored and is seen by more and more people, and some people pop their toes in the water and of course it works. It is too good to be true! And after that in a negative interest rate environment that I’m living in in Europe, -0.6%, you can actually borrow money for negative interest rates if you’re an institutional investor. But even as a private individual you can lend against your house for 1% or lend without collateral for 3%! Well if you use that money — and I’m advising not to do that, but for professional investors this is candy that is too good to be true! And then if we look at option markets, we see implied volatilities of over 100%, which means there’s call premiums from 40–50%. So you can do volatility harvesting strategies which are very very profitable and cannot be done on other asset markets! So the whole derivatives markets and the relation between the spot markets, derivatives markets, futures, options, etc., I’ll be watching them like a hawk—actually participating in them! I see a lot of people entering those trades and looking at it. I think the future and option market prices will give us a lot of information about the future, so it’s really interesting if the base rates of the futures stay that high, if the implied volatilities in the options markets stay that high, and yeah so that’s one thing that cannot be denied anymore by the more traditional investors and that will be seen by more and more. The other thing — it’s not so much investing but more society thing — it’s a very positive thing: good money, sound money is very important for humanity! It’s good for trade, it’s good for specialization, it’s good for capital allocation and allocation of scarce resources, where the investors were not. And to have sound money, a measure, a unit of account that can be counted upon, it can be depended upon, is very interesting! And very important! And we don’t have that at the moment, because central banks are printing the money at will, they’re using it for political purposes, they’re weaponizing it, and it’s like an architect that uses a measure like the meter or an inch that changes every day! Imagine how a building like that looks after the architects are finished! And that’s our economy at the moment! So we’re building with a measure that is changed every day, and Bitcoin will — for the first time — introduce a constant. And that is the 21 million coins. So that will for the first time ever, be a constant in finance like there is a constant in physics — the speed of light, for example. In mathematics. So that is from an Austrian perspective and I talked about this with Saifedean lately. It could be very interesting, this constant! And maybe with that comes a sort of predictability, but at least a totally different kind of economy, separation of money and state, and in my opinion it will even unleash the next Renaissance with science at the very heart of it, but also with art and freedom and a totally different society than we have at the moment that is dominated by governments and states. And this one will be more sovereign individual and math and art-based! So yeah I find that a very hopeful perspective, and that’s maybe, apart from the investing, the main reason why I find Bitcoin so very very interesting!

Stephan Livera [56:05]: Yeah there’s certainly a lot of factors in there that really point to being bullish at this point in time. And some of the earlier points you were just making there like the cash and carry strategy — now obviously for those of us who are more hardcore Bitcoiner, we wouldn’t want to give up the upside of holding Bitcoin, but for somebody who’s a little bit more trying to dip their toe in here, this is an easy way for that kind of person to — so long as they have the right institutional set-up to be able to achieve that kind of strategy. And I think the other point that you raised that’s really interesting in terms of where the next big amount of demand or the next potential big markets of people who are gonna come into Bitcoin, is this whole cost of carry which we’re seeing in Europe! People who have large amounts of fiat money in their bank accounts are now starting to get charged for that! And well, if we think from a cost of carry perspective, you can quite cheaply hold Bitcoin for a tiny tiny fraction of the cost that these people are paying to hold fiat money in a bank account, so I think that is just gonna really start driving home this cost of holding fiat. Whereas historically it was free — or you made money on it!

PlanB: Oh absolutely! And for example in Holland it’s not even small amounts, it’s everything above 25,000 Euros you get negative interest! You don’t get interest — you have to pay! I can tell you, the moment that that happens, that negative interest rate is unleashed upon your savings, then the demand for Bitcoin will skyrocket! I saw it happening around me with friends and family, I saw it at work, I saw it in the whole country! Everybody is scrambling to get their money out of this negative interest rate bullshit! It’s really unimaginable what that does psychologically and of course it just eats your money away!

Stephan Livera [58:10]: Yeah it’s a very big injustice. And hopefully more people start to see that and I think they will see that over these next couple of years. But I guess with all that said it’s a good to wrap things up at this point. Follow @100trillionUSD on Twitter and find his website Anywhere else to find you?

PlanB: Twitter is the main place. My website is and it has all the podcasts and articles, but Twitter is the main thing, and reach out if you will, the DMs are open!

Stephan Livera: Fantastic, thank you for joining me again PlanB and I hope to chat again soon!

PlanB: Thank you very much!

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