SLP266 Croesus_BTC – Bitcoin: Stake Your Claim Before Everyone Else

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Croesus_BTC joins me to talk about why the yuppie elite do not like Bitcoin, making simplified bitcoin content, adoption and cycles, speculative attacks on fiat, and staking your claim on your ‘fair share’ of Bitcoin. Don’t miss this one!

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Podcast Transcript:

Stephan Livera:

Croesus, welcome to the show.

Croesus:

Happy to be here.

Stephan Livera:

So Croesus, I’ve been following some of your work. I’m a fan. I like a bunch of your articles and content you’ve been making. Like the one about the Yuppie Elite. You also had one about the speculative attack, well kind of like a continuation of Pierre Rochard’s speculative attack idea. And also some of the images you’ve been doing, you’ve really helped in some ways, clarify and simplify some of the material that I, and many others have been talking about for years, but just putting it in really simple and easy to understand terms. So let’s hear a little bit about you, obviously I know you’re under a pseudonym so don’t dox, anything about yourself, but maybe just, what was it that appealed to you about Bitcoin?

Croesus:

So, a little bit of a background about sort of how I stumbled into it all. I come from a business background I got an MBA, ‘the best business school in the world’ that when I was there, some of the more technical people in my class were buzzing about Ethereum actually. And I was smart enough to realize that they were excited for some reason, and I didn’t understand, and I should try to find out more. And so I stumbled down the Ethereum rabbit hole back in 2016. And the ethos that I was immersed in was very much the internet playbook, internet investing, technology investing the sort of venture capitalist mindset about trying to invest in innovation to have a diversified portfolio of up and coming new projects in an emerging technology space, sort of the Silicon Valley established wisdom after several decades of learning in technology investing.

Croesus:

And so I was an altcoiner from 2016, until 2019 and that worked great on the way up. And then I rode it all the way back down you know altcoins outperformed Bitcoin in 2017. And I thought I was a genius. I thought I was onto something and then massively underperformed Bitcoin in 2018. And I was humbled, Bitcoin humbles everyone. And I had to be bludgeoned to be disabused of my notion that this was like the internet 2.0 that this asset class was something where a multicoin future would exist. And you would be smart to diversify and invest in up and coming projects. I had to be disabused of that notion through a terrible, terrible bear market. And then…

Stephan Livera:

So tell us a little bit about that. Like what made you stop and rethink that idea?

Croesus:

Yeah, I think that it really took like being so wrong that I was open to considering what the crazy Bitcoin maximalists were talking about. Every time that would peek into, this was, I formed my opinions about Bitcoin maximalism in 2016 and period. And it was so hardcore, the, the people who were Bitcoin only were pretty gruff characters and pretty intense. And it didn’t make sense because I was coming from this world view, this business person, worldview, this investing worldview of technology’s all about innovation and having a diversified portfolio in innovation. And so it took the market proving to me that I was missing something so fervently that I had to go look into. Okay, fine. What is the Bitcoin maximalist point of view?

Croesus:

What am I missing? And I finally read The Bitcoin Standard and realized that I thought I had gone down the rabbit hole already. I thought that I was already enlightened about the importance of digital value in the future, but that was when I realized that there’s sort of, there’s two stages to going down the rabbit hole. If you want to break it into two big steps, one is, is being open to digital value as an important part of the future of assets, which I was already there. And anyone who’s in Ethereum or altcoins, they are there. They believe, they’re already at that point, but I hadn’t realized what Bitcoin was. I hadn’t figured out that, Oh, this is much deeper than technology innovation. This isn’t even really about technology. This is about money, and this is about scarcity and like the deepest level of society and human civilization being based on the scarcest money and sort of Darwinian reality of money being in constant competition with other forms of money. And the scarcest form wins over time. I hadn’t that was so much deeper than what I had entertained as possible, that it took that bear market for me to open my eyes to that possibility and then go to that second level of the rabbit hole.

Stephan Livera:

Because it’s like, when we’re in this space and quote unquote space, there’s all these people who look from the outside and they look at those of us in the Bitcoin focused group, or Bitcoin only camp where they say, Oh, look, you guys are just tribal. Why can’t you just get along with everyone else? And, just let us all, do, and then from our point of view, we’re kind of like, well, a lot of this stuff is basically scamming and you guys are just being nice to people because you want to curry favor, or you want to win them over, and you obviously catch more flies with honey and you pretend to be all nice. And this is all this big collaborative industry, and it’s kind of, I guess those are the different views. So for you read the Bitcoin standard and then what other material did you kind of go through? What was your process of thinking about it and then changing your mind?

Croesus:

Yeah. so I think it’s a lot, it’s a lot easier now. Right. when I was starting in 2016, there wasn’t really any, like, really thoughtful like truly incisive explanation as to like what Bitcoin was doing, why it was doing it, the stock to flow model was only created in 2019. And the Bitcoin standard was released in 2018. Vijay’s the bullish case for Bitcoin, was early 2018 as well. So yeah, the, those, those resources were super helpful. And then I have a fondness for Parker Lewis and Breedlove. They’re very different writing styles. I think hit on the business Parker with the more classical business angle and understanding money a little bit more classically and Breedlove with this like philosophy element that I think is necessary to understand the scale, the magnitude of what Bitcoin represents for humanity going from literally going for all of human history.

Croesus:

We’ve only had physical forms of money, and we’ve been using physical forms of money for 75,000 years. At least, that’s what the documented evidence of using shells in caves goes back 75,000 years. And then now we’re living in the digital revolution and information has been digitized. That’s the internet, but value hasn’t been yet. And that’s what we’re starting to live through now. The compliment to the internet revolution is the Bitcoin revolution. The scale of that, meaning like for all of human history, we’ve been analogue, physical. And right now in this window of time in our lifetime, we are transitioning to digital value, meaning we’re hot swapping out the base layer of human civilization during our lifetimes that I don’t know that philosophical element, I think was one of the key pieces for me to make everything else click together. So I think that largely came from Breedlove.

Stephan Livera:

Awesome. Yeah. And so basically I really enjoyed one of your recent articles. This is going back a couple months now, but it was talking about why the Yuppie Elite dismiss Bitcoin. So I think it’s kind of like, there’s all this material out there, but now some of them, maybe they haven’t taken the time to actually read it or listen to it, but some of them have seen it and still don’t see the point of Bitcoin. So maybe you want to tell us a little bit, a little bit about who these people are and then why is it that they can’t see what we see?

Croesus:

Yeah so this has been an ongoing phenomenon, I guess, in my personal life. And my friend groups, I’ve gone down this rabbit hole, and I’ve been telling everybody in my life what, sharing my excitement and telling them they need to look into this and different groups in my life have listened. But my MBA friends haven’t for the most part, and this kind of, this frustration, this fascination with why they hadn’t really kind of crystallized during the like early pandemic period when I don’t know about you, but like my friend groups were, we had like a Thursday night zoom happy hour that we did every week for, the first couple of months when that was still exciting. And I of course, wanted to talk about Bitcoin.

Croesus:

And I was just like trying to nudge the conversation towards that. And they would always like mock me, or like very openly dismiss it and change the topic whenever I tried to like, poke them about, you should really look into Bitcoin. And so that, I guess that contrast between my MBA friends and other friend groups really stuck out to me. And when I tried to think about like, what was driving that, like, what was the core reason why this friend group, these super smart people were uninterested in this revolution in money, despite being MBAs, that should be in the wheelhouse, but they were dismissive and borderline hostile to it. When I really thought about it, it seemed to me that the core reason was not how smart they were, because they were clearly super smart, but instead how much trust they had in the system.

Croesus:

So my MBA friends, all of us jumped through a lot of hoops to get into a top MBA program. And we’re all, classic Yuppies work hard for companies and, put in 60 hour work weeks. And think that that’s the way forward towards a brighter financial future it’s to put your head down, work hard and get promotions and opportunities that way. And to have that sort of life path requires having a lot of trust, faith in the system, faith that if you’re a good employee, a good foot soldier, you will be rewarded. And I think that’s kind of the common, one of the common values that all Yuppies, young, urban professionals who are willing to live that kind of life, they all share that perspective. And that’s not necessarily true of everyone.

Croesus:

You know, in fact, some people don’t trust the system and in fact, libertarians, anarchists, crypto-anarchists, yeah. Even Trump supporters tend not to trust the system as much, or if at all, and in fact, that’s who we see adopting Bitcoin earlier, the earliest being, the crypto anarchists, the people who, who were so paranoid and freaked out about the infringement of the state on their rights, that they wanted a way out of the financial banking system and wanted to seize their privacy in the digital space. Those are the people who adopted Bitcoin first. And so if you put it on a two by two matrix, the classic consulting thing, you have to forgive my consulting. You can take the Yuppie out of consulting, but he’ll always make slides. So I put it on a two by two and what came out is, if you, if you graph on the Y axis IQ and on the X axis from left to right trust in the system, Bitcoiners are in the top left that they have low trust in the system and are very smart and Yuppies are in the top right.

Croesus:

High trust in the system. And very smart. And those are like the core differences in worldview. I think stem from that fundamental base layer disparity in how those two groups view the system and the world generally.

Stephan Livera:

Yeah. I love that way of thinking about it because fundamentally the experience you had is very similar to what many Bitcoin people have had, because what many of us would have found, obviously the closer you are to somebody like if they’re a close family or a close friend, that they’re more likely to hear you out. But typically anyone who is not close family or close friends often wouldn’t really even pay that pay you at the time of day, give you that attention, or give you a chance to actually explain why Bitcoin is important. And so for many of us over the years, we spent time trying to teach our family and friends. And in many cases just completely failed to have it actually resonate with them to have the Bitcoin message resonate with that family or friend or work colleague. And, they tend to just be stuck talking about other things. And so they will be constantly chasing other ideas or ways of preserving their wealth. So they will be looking at property or stocks or bonds, or, maybe even some other crazy ideas out there, but you just can’t seem to get through to them on why Bitcoin actually fixes so many of the issues that they’re having.

Croesus:

Yeah. I think you nailed another point there that like the more you know about business the more you have to unlearn to entertain the potential merit of Bitcoin because you’re so bogged down with like, pre-existing notions about what is the right or wrong way of building wealth and investing generally. That’s natural, but it’s ironic the result of that is people who have dedicated their lives to business and investing. And we see this with venture capitalists now trying to wade into crypto and make a name for themselves as experts. But yeah, the more you, you have spent your life, establishing a framework for what is true and not true, and what’s the right way to go about things. The less open you are to something that totally breaks this paradigm and completely undoes everything you think, you know about how money works in this Fiat system that has only existed for half a century, but long enough that it’s all we know and Bitcoin stands so staunchly outside of that it’s hard to wrap your head around it unless you’re coming at it from a truly fresh and open mindset. And that I think I see more from my non Yuppie friends, people who are open to learning for the first time where’s a good place to put my money. They’re totally open to Bitcoin’s message or more open to it than somebody who already firmly believes that just investing in a diversified stock portfolio is the best thing you can possibly do with your money.

Stephan Livera:

Yeah. And I think you make a really good point around the, I don’t know the right word to put this, but people feel, or they have already advanced up the hierarchy, so to speak the normal kind of society hierarchy. And they feel that now Bitcoin is representing a challenge to some of that, right. If you’re a, whatever, a senior person in some kind of banking organization or some organization that only does well in the fiat world, then you might at some level of perceive Bitcoin as a threat against that. But I think it’s also for other people, it’s just a straight category era. So people are thinking of it. And so I’ve mentioned this often is that they are thinking, Oh, it’s just like a stock or a bond, and it should have a dividend payment, or it should have an interest payment, or it should be like a property that I rent it out. And it pays me rent and Bitcoin doesn’t have any of that. So therefore Bitcoin must be a bad investment. How much of it do you think is that category error aspect?

Croesus:

Yeah. A ton of it. I wrote in the Yuppie elite article about about how Bitcoin has a subtle camouflage in many ways, where in one way, it has a lot of red flags when you first look into it, cause it sounds like a scam. It sounds like a Ponzi, right? And some of the Bitcoin community has even embraced the joke of it being a Ponzi because from the outside, it shares the characteristics of a Ponzi of people who get in early make more money. But that’s also, if you dig way deeper, turns out that’s what happens when an asset goes from being worth nothing bootstrapping itself, to being a store of value, like whoever was there first makes more money. So, there are these red flags upfront, and then there’s also the category error of people don’t know how to think about it.

Croesus:

Cause it doesn’t fit into any of the established asset classes that people are familiar with. It’s not a stock, it’s not a bond. It’s not, it’s not quite money. Really. It’s something bigger than that. It’s something more amorphous it’s not a commodity, but it is a commodity. It’s its own brand new thing. It really is. The first new asset class that th that society has seen has witnessed the birth of far as I can think this is it. This is the only time a new asset class truly, you could say venture capital didn’t exist a half century ago, but that was just, just early stage equity. And so this is really like the first time a truly new asset class has ever existed. And that’s why we’re so bad at, at trying to assess what it is and define its nature and understand it. This has just never happened in history before. We’ve never because we’ve never had a shift from physical to digital. And so we’re all experiencing this for the first time.

Stephan Livera:

And in terms of Bitcoin being adopted, it’s also an interesting aspect around monetary competition, because that’s something we talk about and we try to explain that to people, but perhaps to an outsider that might look like, Oh, you Bitcoin people, you are overly sure of yourself. How can you be so sure that it’s, Bitcoin is going to be the one. How do you sort of answer those kinds of questions or think about that?

Croesus:

It’s so fascinating that if you’re, unless you’re down here deep in the rabbit hole with us, we sound crazy. if you’re an Ethereum fan, and the first layer of the rabbit hole who, who believes the digital value is of course that’s going to be important and yada, yada Bitcoiners sound crazy to them even, and they’re in, involved in crypto and yeah. So to a total normie, this whole idea is beyond the pale. Yeah.

Stephan Livera:

Yeah. And what about this whole winner takes all idea?

Croesus:

So I guess when you, when you take the step, the final leap down to, the true Bitcoin maximalist level of understanding in the rabbit hole, the essential thrust of that is to come to grips with Bitcoin’s space in the monetary landscape. And to understand that money is in competition constantly, this Darwinian element that you mentioned. And I think that the Bitcoin standard does such a good job of introducing this, walking you through monetary history. The first third of the book is just a walk through monetary history and the reader is left to infer conclusions about the nature of money, just through that historical journey for anybody who hasn’t read that book yet, it’s a must. And you come away from that. And from more reading about the history of money and money generally shelling out by Szabo is another incredible resource.

Croesus:

Understanding that every individual has a choice every single day about which money to store their hard-earned value in. Where do you store your wealth? And invariably people gravitate towards whichever form of money is hardest to produce more of for all of human history that has meant gold. So whenever a civilization that used an alternative to gold came into contact with a civilization that used gold, it was easier for civilization that used gold as their money to create more of the money of their new adversary than vice versa. So if a civilization valued glass beads which is one of the examples that Breedlove talks about, it’s easy to make more glass beads. It’s really easy if you have the technology. And so it’s easy to flood, like to just create a bunch of new glass beads and then use those newly produced beads to purchase the assets that are owned by that civilization, that values glass beads until they figure out that glass beads can no longer be trusted.

Croesus:

And the thing that we should be relying on in storing our wealth in is, is the thing that this new civilization relies on, which is gold. So that story played out through all of human history. And I sort of like to think about it as like a like sports tournament bracket, of all these different competitors going head to head and gold eventually emerged the champion. And that’s on one side of the bracket here, but now we’ve got a new competitor coming in from the digital space and it’s Bitcoin. And it has superior monetary properties because unlike gold, which has 2% new supply being created every year, Bitcoin has a terminal hard cap supply. So it is infinitely harder to make more Bitcoin than it is to make more gold. And gold has been historically the champion in the physical realm.

Croesus:

So if we can extrapolate that lesson from monetary history, looking back at how this has played out every time there’s been competing money in every civilization conflict before, what we can extrapolate is that the hardest money ends up winning because it’s from an individual point of view, people learn that that’s the thing to store their wealth in if they want to keep their wealth. And that’s the position that Bitcoin finds itself in as, as the one and only credible form of digital scarcity, that’s now going to eat the lunch of every other form of store value that has supply growth over time.

Stephan Livera:

And I think it’s also interesting just to chat about the adoption, because as people come in, they might start more at, what we might hypothetically, or we might just say, they’re more like a toe dipper. Like they’ve just started, they’re just dipping their toe. And then over time they actually, people tend to increase their investment. So I know you did a thread a little while back on this also where you were trying to categorize some of the different levels. So I know obviously the numbers that you brought up in that thread might be a little bit out of date now, but in terms of the high-level framework, do you mind spelling that out?

Croesus:

So yeah. You hear different numbers batted around about how many people have adopted Bitcoin or cryptocurrencies generally. And they’re all over the place. A common one that you hear though is like 150 million people. And that just felt really high to me, as a former consultant, I wanted to like run the numbers and see it for myself. And I think for any skeptical young professionals out there who are trying to assess the merits of Bitcoin, I encourage you guys to do the same of just run the numbers. Run some simple numbers to see from all sorts of angles, to take stock of how early it is, because it’s hard to imagine that Bitcoin at $58,000 per coin or whatever we’re at is still really early, but when you run the numbers, the scale of it comes into focus.

Croesus:

So, I wanted to figure out how many people have actually stored a meaningful amount of their wealth in Bitcoin form. And luckily, we have on chain numbers. So you can see that there are 3 million addresses with 0.1 Bitcoin or more in them. And of course it’s not one-to-one with, each address is owned by one person and all that. So it’s a little fuzzy, but let’s use that broad number and then let’s account for how many people probably are keeping it on exchanges too and call that 10 million. So 10 million people, have to date stored $6,000 or more in Bitcoin format. 10 million sounds like a lot, but that’s a pretty small number if you’re thinking globally. So how many people in the world have wealth to store? 2.2 billion people in the world have $10,000 or more of wealth.

Croesus:

So if that’s what we think of as the potential adopters of a digital store of value than 10 million is only half a percent of that 2.2 billion group. So in terms of meaningful adoption of Bitcoin, we’re only half a percent into the adoption curve. And this is a framework that I think about a lot. And it comes from previous from the study of previous technology and how it was adopted, whether that’s radio or television or the internet, but invariably we follow as humans, a S curve when we adopt a technology, meaning that adoption of it is really slow at first and then starts to pick up as more and more of us try it and, broadcast its benefits to our friends and family and the network effects pick up and it becomes more attractive to adopt that technology.

Croesus:

So it ends up looking like an S, slow at first, then really fast and then tails off to a plateau. The rate of change of that derivative of that shape is the classic bell curve, right? Where on the left side, we’ve got our innovators, people who are at the extreme edge of early adoption of a new technology, then your early adopters, then your early majority, late majority and laggards. And the first think it’s like 2% is typically considered the innovators. And we’re only half a percent into our bell curve. So we’re still in the first quarter of the first category of Bitcoin adoption. The freaks at the extreme edge who are very forward thinking and quick to realize and adopt the benefits of a new technology. So when you run those numbers, it’s really early.

Stephan Livera:

Yeah. I love that explanation because people looking at it from the outside or when they’re relatively new, they still look at it thinking, Oh, look how expensive it is. I missed out. And the reality is, even for me, I came in in 2013 and I felt like I was late. So I think it’s one of those things where whoever you speak to whenever they joined, they always felt late. But if you really zoom out and look at the actual numbers here, it is just crazy how early we still are. And as you were saying, normally that first two and a half percent of the human population is considered the innovators in that little classical bell curve thing you see, and we’re not even there yet. We’re not even finished that. So it may well be that, there are maybe who knows, right, I’m speculating, but there might be important contributors to Bitcoin who have not even started yet. there might be someone who comes in in the next few years, who then becomes later, goes on to become an important contributor in the Bitcoin ecosystem. That is just how small we are right now.

Croesus:

Yeah and that’s a topic I think about a lot too, of and in many ways, that’s why I’m here today. When I thought about, what takes Bitcoin further through the adoption curve, through the bell curve, it’s the viral propagation of its benefit propagated by early adopters to their network. And the way that’s done is through communicating through educating, through transmitting what people have learned or come to know about Bitcoin, to people who, have yet to adopt. And when I thought about that more, that’s how human groups work, right? Like that’s why the S curve is what it is. That’s why the bell curve functions in that way is that people who figure out that something is worth using worth, looking into worth adopting. they tell more than one of their friends, right. And convince more than one of their friends about this.

Croesus:

And in turn those people do the same. So that that’s a, positive, viral coefficient that spreads through a population. But along with that is this process of coming to understand and synthesize why something makes sense, why something is a good idea to adopt a new technology is a good idea to use. And that’s like the educational element of synthesizing what it is. That’s special about this thing, what it is about this that will add value to somebody’s life and communicating that to people who have yet to look into it. And that’s what, that’s what we’re doing. That’s what podcasts like yours are doing. And that’s why I started putting out graphics and other articles about Bitcoin is because it’s in my self-interest to communicate the benefits of Bitcoin to others, so that they realize it’s in their self-interest to also adopt Bitcoin. And so I’m trying to do my part to synthesize and like reduce the essence of Bitcoin down to a little bit more simplified and understandable data points or anecdotes that can help the next slice in the bell curve get it, so that they can in turn, do the same for the next slice after them.

Stephan Livera:

Yeah, of course. And I think it’s funny because in the recent years we started using a lot more of these short form memes, Number Go Up, Bitcoin Fixes This, Orange Coin Good and various things like that. And I’ve also noticed you’ve got some good graphics as well. And so I guess those are your effort at simplifying some of the material down for people, because the average person is going through life, they’re storing money in US dollar or whatever their fiat money is. And they’re not really thinking very hard about purchasing power and purchasing power is actually what matters isn’t it?

Croesus:

It’s so unfair that we go through life with this idea of points on the board, with, with dollars. But that measuring stick is constantly moving. It’s constantly inflating. We printed 26% more dollars in 2020, and it’s part of human psychology that we don’t update our measuring stick so easily or naturally. So, yeah, I think a big part of the educational push that Bitcoiners can and should make is to really clarify, and in quite simple terms, the difference between holding, holding one Bitcoin which is a fixed percentage of 21 million Bitcoin pie forever versus holding $50,000. And that is a percentage today that will shrink very rapidly over time. And that means your purchasing power is shrinking very rapidly over time. And yeah, I think that’s, I mean, talk about a product that has massive benefits and just needs to have those benefits articulated to potential adopters. It’s a night and day difference in how people are choosing to store their value. And, once you recognize the difference and and get comfortable with the idea of holding Bitcoin in lieu of dollars, which you’re familiar with. I can’t even tell you how much better you sleep at night.

Stephan Livera:

Yeah. And I notice as well, that for people as they go on their Bitcoin journey towards the end of that, once they get sort of towards the orange, like final orange pill level, is they start actually thinking about things in Bitcoin terms, or at least they are at least doing that comparative every now and again, and thinking of things okay, what’s my net worth in Bitcoin or sat terms rather than thinking of it all in fiat terms. So is that something you’ve noticed as well in your discussions?

Croesus:

Yeah absolutely, my measuring stick has switched because I don’t see the value of a measuring stick. That’s constantly moving and what I value now, my, my unit of account is Bitcoin. And yeah, I think, I think it’s that that’s another part of the like understanding money and the monetary history and the Darwinian nature of money is coming to understand the nature of how a money gains its emergent monetary properties. It’s not by being a good medium of exchange. It’s not by having the capacity for a lot of transactions per second. It’s instead this arc that you’re familiar with, but of first it has to be valued by a small group of people as a collectible. And then as more people value that collectible, it becomes, it starts to evolve into a store of value that can be relied upon to store value.

Croesus:

You know, instead of just being a fun thing to own, it’s now a store of value that you fundamentally know, other people also value such that you can store your value in it. What’s called an inter subjective value. It goes from being a collectible that has value to a few people to achieving inter subjective value where a whole social group values it. And then once it achieves that, then it can potentially be used in trade as a medium of exchange to finalize transactions. And then once people are using it in that way once the whole society is using it in that way, it becomes the de facto measuring stick the unit of account for a whole society. And because of the nature of the internet, we’ve already achieved that sort of small group of early adopters who have already gotten to that point where they have established for themselves and for their internet community, a Bitcoin unit of account Bitcoin standard. And, as the propagation of Bitcoin’s benefits continues and the S curve continues that group will grow outwards. So it’s a beautiful thing to be watching in real time and something of such incredible like historical significance.

Stephan Livera:

Yeah. And so for many people, when they’re learning about Bitcoin, they have to think about Bitcoin versus other things. So they could have, they could be buying stocks, property, bonds, holding it in cash, or even consuming. And I like one of the charts you did where you show each of them on a different trajectory. And so you can see, okay, Bitcoin is going up the most because it’s a scarce asset, increasing scarcity and early stage growth because it’s so basically it’s just like the complete sweet spot, everything optimal. This is the thing to be holding because this thing is doing on average 200% per year, then, it’s like a no brainer to be trying to maximize the amount that you can hold. But then you compare that with say other things like, I don’t know, equity or collectibles and art. How did you think about making that chart and what are you hoping to sort of convey for people?

Croesus:

Yeah. And I’m glad you brought up that one. Cause, candidly I don’t think I’ll ever come up with a better chart than that, than that. I think that might be as far as I can take the Baton and somebody who comes after is going to improve on that chart is the summation of all of my accounting classes, everything I learned from accounting and then everything I learned by going down the Bitcoin rabbit hole, put into one chart, of all the asset classes, assets exist, in different classes with different characteristics, they have different DNA. And that’s I put that turn that that’s slide that chart into an article for Bitcoin magazine called asset DNA and talked about the speculative attack expanding on Pierre Rochard’s, 2014 article and yeah, so different asset classes appreciate or depreciate in value over time at different rates.

Croesus:

Whether that’s because of depreciation of an asset, like a car or land holding its value well or equities generating some yield. But there’s never been in history, an asset that has Bitcoin’s core design, which stands in direct contrast with Fiat design. Fiat by definition, by its design is intended to decay in value over time because of it’s an exponential decay function because they’re printing certain percentage more every year. And that decays the purchasing power of existing dollars in contrast to Bitcoin, which by its design has increasing scarcity. So to me, that is the essence of Bitcoin and that has never existed in human history, an asset that has increasing scarcity. The only example that I could really think of to help somebody try to like, think about how this works or what this looks like is, this is the phenomenon where when a famous painter dies, their work goes up in value because the art world knows that painter’s not going to be making any more, there’s going to be no more supply.

Croesus:

So suddenly everything that existing body of work becomes more valuable just because of the reduction in new supply. And Bitcoin has that built into its monetary policy where every four years, it’s not like fully dies, a hundred percent drop in new supply, but a 50% drop. So it has that same mechanic of guaranteed increasing scarcity every four years. So by definition the purchasing power of Bitcoin, you hold today will increase in value because the supply and demand balance will be thrown off and the price will have to drift upwards in order to reestablish equilibrium every single four years. So if you were to put that onto the chart of performance compared to all other forms of assets that we’re familiar with, Bitcoin just is, the highest performing asset over time now and into the future, because it has this characteristic that doesn’t exist in any other asset class of increasing scarcity built into it. So yeah, that chart was the summation of everything I learned about accounting and business from a career in business and going down the Bitcoin rabbit hole.

Stephan Livera:

That’s awesome. And I think another interesting example, so obviously the painter example is a good one. And another good one listeners might be interested in is there are some, I think historical episodes where a central bank has gone kaput and the money that they previously made had then been used in that country. And I think this has happened, maybe it’s in Iraq or some other countries where, because of that central bank going down, or that government going away, the actual money left behind had sort of on in a relative sense stored some value a little bit better because people knew they could trust that there wasn’t going to be inflated as much. So it’s kind of a funny thing in that way, obviously Bitcoin, that, obviously Bitcoin kills all of those, but just as a pedagogical example, just something to think about and help you understand the concept that’s, that’s also there. And you’ve also spoken about the speculative attack as my friend Pierre Rochard wrote about that in 2014. And I think your article that you wrote kind of took that forward a little bit. And I think you are also using this graph that we were talking about, or a form of it to show like, basically, this is the play, this is the judo move. So what is the play? What does it look like? And who can execute that kind of play.

Croesus:

Yeah, So, when I, when I made that chart of different asset classes, how they typically perform over time on a logarithmic scale, and again, this is all like theoretical, highly simplified. I’m not using raw data or anything I’m sort of academically, theoretically putting down on paper, how these mechanics work. Yeah. So when I created that slide, what jumped out to me was the diverging paths of Bitcoin going up into the right on a logarithmic scale and Fiat going down to the right, in terms of its purchasing power over time, because they’re printing more constantly. And I realized that that kind of gets back to the core idea of Pierre’s piece, Speculative Attack. The idea of which is that because, because Bitcoin is designed to increase in scarcity over time and as a result of that to increase in value over time.

Croesus:

And simultaneously the dollar’s design is to decay it’s by design. And because of the reliable printing into the future, the stated intent of central banks to keep printing and print more. You know that the purchasing power of a dollar today will drop over time. So Bitcoin’s going up and the dollar is going down. And that gets back to this idea of the speculative attack of what, if you could borrow dollars today and buy Bitcoin and wait a certain amount of time for this inherent divergence, this inborn asset DNA difference to manifest such that the value of the Bitcoin that you have purchased has vastly increased. And you can then use a small portion of it to repay the dollar debt after enough time has elapsed and enough time roughly meaning like, you know a halving cycle or more so four years.

Croesus:

And who can do that, is anyone important caveat there that, it’s not a guarantee it’s just a theoretical calling attention to what appears to be the reality of the dollar versus Bitcoin. And anyone can do that. If you are prepared to service the debt, during the time that you have to wait for that disparity to appreciably manifest, or also in the event that you screw up and you lose your keys. So the Bitcoin that you purchased is gone and you still have the debt, and you have to repay that somehow you need to be able to service that. But if you meet those conditions and you can find debt for a cheap enough rate, which many corporations can do right now, because they’re basically giving it away. The fed is giving away money at next to nothing, because they’re trying to stimulate everything because of that MicroStrategy for one has already deployed this playbook of I forget the exact numbers, but they took on, I actually don’t remember the scale of it.

Stephan Livera:

a billion dollars from what I recall.

Croesus:

Yeah. Okay. That’s what I thought, a billion dollars of debt at essentially 0% interest rates. I don’t remember how long but enough to see at least one halving cycle, and they’re already up like a hundred percent on that. We can call it a bet, but really it’s an informed strategic move based on an understanding of the different nature of Bitcoin versus the dollar and as more of the world and more corporations who have the balance sheets to support taking on debt. As more of the world, realizes that these assets have different natures, that their DNA points them in different directions in terms of their purchasing power over time, more people can and will execute the same playbook. And so I see MicroStrategy’s play, most people think it’s crazy that Michael Saylor has somehow lost his mind, what could he possibly be thinking he, or is he just betting the farm on Bitcoin in some ill-informed gambled, but no, he has already deduced himself. He has figured out this divergent reality and has used the tools at his disposal to make the most of that. And I think more people will do the same as they come to understand Bitcoin and how it contrasts with the dollar better over time.

Stephan Livera:

Of course, and so, I guess in practice, though, there are differing abilities to execute on this particular strategy, because if you are a large public company, you can get credit far cheaper. Or if you are a financial institution, you can get, you can get access to credit, much cheaper compared to let’s say the retail pleb, you and me. But I think nevertheless, there are still some things people can do. Some people will even have home loans that they can redraw. Some people will go take a personal loan. There are various strategies and options there, but I guess in terms of the cost of that capital, there is a pretty strong disparity there because if you’re a large, like if you’re a high net worth, super high net worth guy who has connections and you can kind of find, you can get capital cheaper then, I guess you can access that kind of strategy a little bit cheaper, but these are all things inside the Fiat standard, right? So people can get rewarded for playing the debt game well, because that’s what a fiat standard rewards.

Croesus:

Right. Exactly. And that might be particularly true if we are approaching the, an end game where the rate of printing accelerates and debt today diminishes a lot in it’s real value versus the nominal rate that the nominal amount of debt that you take on today.

Stephan Livera:

Yeah. It seems really funny because in some ways, a lot of this stuff is just out there in the open, right? Like Bitcoin people, we’ve been talking about these strategies and these things for years and years and years. And they have now, like anyone who basically did these strategies did very, very well. And yet it seems weird that, the rest of the world is only just now waking up to this. And I guess to some extent, I mean, I wonder what you think, but I guess the way I would think about it is that basically, even though the material is out there, there’s podcasts, there’s articles, there’s books, there’s all this stuff out there, but I think people don’t execute on it because they are looking more at what their family and friends are doing and it’s not popular in those circles.

Croesus:

Right. Yeah. And, we’re such social animals and we’re also so preoccupied with our day-to-day jobs, right? Like it’s hard to learn about a brand new technology and the history of money and Austrian economics and on your nights and weekends, when you’ve got a family, that’s just not happening. But luckily Bitcoin has this catalyst built into it every four years that forces people to pay attention to it. It was reduction of supply of new supply causing the price to drift upwards it’s causing people to come back to question whether or not they fully understood Bitcoin in the first place. And you’re right. That like people who have been executing this playbook of selling their assets to buy more Bitcoin or taking on debt to buy more Bitcoin have for the most part been proven right. Like I remember last cycle, there was a lot of like mainstream news for some reason, picked up the story of the Bitcoin family I think they’re from the Netherlands.

Stephan Livera:

Didi Taihuttu.

Croesus:

Right. And they sold everything to live on the road so that they could have more Bitcoin and mainstream media loved sort of lampooning them, like calling them, into focus and saying like, wow, that’s irresponsible. That was sort of the subtext of all of the media attention that they seem to get, fast forward a few years and they were right.

Stephan Livera:

And I think that’s going to be a similar story for a lot of people who are buying Bitcoin now. And it’s funny as well, because yeah, we’re very social creatures. And I think to some extent, yeah. Like, people have jobs, they have families, they have other hobbies. But the funny thing is that I find is that there will be some people who, like, it seems like they’re so close and yet, so far because they are looking for strategies to make money. But as soon as some Bitcoin person tries to teach them about it, no, no. They would rather be looking at stocks, what stocks they need to be buying or what options they need to be trading or what foreign currency trading course they need to take. And so it’s not, it’s not for want of time and attention spent on trying to make money. It’s just that they’re focused on the wrong thing.

Croesus:

Yeah, And not open to entertaining just how wrong they’ve been. like I think that’s part of the humbling process that part of getting to Bitcoin is admitting to yourself that you’ve been wrong, cause everyone dismisses it at first. Cause it sounds crazy. It’s internet monopoly money. Nobody pays attention to it at first. And then you dig your heels in. Right. And you want that to be true because you don’t want to have been wrong for ignoring it. And then so coming, yeah. So, then you have to embrace Bitcoin, to get there, to reap the benefits of Bitcoin for your financial security, your peace of mind about your money, your wealth. To reap those benefits, you have to get past that big barrier that blockade of, admitting to yourself that you were wrong and recognizing that it’s still really early. If you divide there’s 21 million Bitcoin, if you divide that by how many people there are on the planet, that’s 0.0025 Bitcoin per person.

Stephan Livera:

Yeah. We’re talking something like 220 or 230,000 sats per person. If divided equally.

Croesus:

And that today is $150. So even though it feels late, everyone feels late. Even the people in 2011, 2013, they felt late. But when you look objectively at it, it’s still so early, that one person’s share of the world’s Bitcoin, if divided equally costs $150 today, if you divide all the wealth in the world, by the number of people in the world, that’s $45,000 of wealth per person, very unevenly distributed, but that’s what it comes out to. So, if we fully shift to a Bitcoin standard in the future that’s what you’re talking about, but you can buy that today for $150. That’s how early it is. So if you, if you set up a DCA, a dollar cost averaging plan, if you have a recurring buy every, every week or every month for $150 every month, you are stashing away one person’s worth of wealth.

Stephan Livera:

That’s crazy. When you think about it like that, Hey, it’s like, it’s like, obviously we’re oversimplifying and pushing it out to the future. But imagine it’s like every month you’re buying like $45,000 worth of somebody, you know?

Croesus:

Yeah. That’s right. Of land for $150. When I one of my other articles that I wrote the Bitcoin in the American West to when I was writing that I researched what was it like for early settlers of Oregon, Oregon trail had this promise at the end of farmland for anyone who completes it. So in 1843 anyone who made it to Oregon any couple was, was granted free of charge 640 acres of farmland. That was the reward you got for being an early settler to Oregon. And of course, that dropped rapidly over time. And now that that amount of land is probably worth $10 million. That’s what happens when a frontier, a new land grab is going on and you’re at the very early stages of it. You get, you have this opportunity to stake, a larger claim before the rest of the world has showed up. And even though it doesn’t feel like it because, the prices of a whole Bitcoin is in the 50 thousands, it’s still that early, we’re still half a percent into the global adoption curve. You can still buy a person’s worth of Bitcoin for 150 dollars.

Stephan Livera:

Yeah. That’s really crazy when you think about it and the gold rush analogy certainly makes a lot of sense. I think this industry will have fortunes won and lost over this next, call it 10, 15 years. Do you have any, I guess, speculations on what you think that will look like?

Croesus:

Yeah it is still the wild West. And the whole industry, I guess the truth of it is, is that since, since Bitcoin represents the swapping, the upgrading of the base layer of human money, everything is built on top of that in terms of trade and wealth, it’s all downstream of that foundational block. So this impacts banking, it impacts financial services. It impacts how we do transactions and trade. It impacts culture. It impacts everything and fortunes will be made and lost in every single one of those industries, meaning every industry based on the, probably fairly rocky transition that we are at the early stages of in terms of this new financial system becoming part of the mainstream and eventually the preferred financial system over the traditional legacy one. So yeah, it scares me to consider the possibility that like I could be, if I make a misstep, I could be one of the losers.

Croesus:

So keep your keys safe, as safe as you can. Because if you are here, if you’re listening to this, you know the scale of what’s happening and the opportunity for just holding. So like, for example, if you were considering putting your money on an interest earning, your Bitcoin on an interest earning third party platform I personally think that there’s something like a 20% chance that any one of those goes out of business overnight at some point in the next few years. And am I willing to risk, a 100x upside with Bitcoin by holding and securing my own keys for a couple of percent of upside on a lending platform with a 20% chance that I lose it all? Absolutely not. So, I think that the thing to do from a individual standpoint is recognize the importance of just holding and the scale of the opportunity ahead from just holding and keep those keys.

Stephan Livera:

Fantastic. I think that’s probably a good point to close out here. So Croesus where can listeners find you.

Croesus:

Yeah, I’m mostly on Twitter at creases underscore BTC that’s C R O E S U S underscore BTC, and yeah, my DMS are open and I have a pinned tweet with all of my educational content in there. If you want to go check out what I’ve put out in the past, it’s all there.

Stephan Livera:

Excellent. Thanks for joining me.

Croesus: Thanks for having me.

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