Bitcoin Investment Theses

Hey guys, welcome to the Stephan Livera podcast episode three with Pierre Rochard, and the theme is Bitcoin investment theses. So Pierre has been around Bitcoin for a while, and he's a very insightful thinker. He's been quite influential over the years in terms of his understanding and foresight in terms of the investment case for Bitcoin. He has a strong Austrian economics background and knowledge, and that's combined with a good technical understanding of Bitcoin. Pierre is a co-founder of the Nakamoto Institute He is also a co-host of the Noted podcast, and he also runs Bitcoin Advisory, which you can find at bitcoinadvisory dot com. He also has various Twitter, projects such as Bitcoin Mergers, they're also worth a follow. So many people who have listened to his interviews and read his material have had aha moments, and I'm sure you'll really enjoy listening to this conversation with Pierre. Hey Pierre, welcome to the show. Thanks for coming on.

Thanks for having me on, Stephen.

Let's jump into it. So, from your point of view, what is the point of Bitcoin and what is its potential future value?

I think the, the point of Bitcoin is to become, the global money, the sand money, and the, pillar of civilization in the twenty-first century. right now, the US dollar is kind of the global money, which gives the United States kind of a disproportionate amount of financial power, and also, I think, is at the root of the financial problems that we've saw come to light with the global- financial crisis. so the first thing I wrote when I got interested in Bitcoin was, "End the Fed, hoard Bitcoins." So I think ending fractional reserve banking, central banking, and, fiat, government fiat monies, would provide an immeasurable amount of value to human civilization and allow us to, move forward. So, I think that in terms of what its potential future value is really hard to have very good com-comparables if we start with fiat, so, you know, there's different measures of money supply, M0, M1, M2, M3, but I think that in any case, they suffer from a deep bias in the sense that due to fiat's inflationary nature, governments can't help themselves but print more money and, make life easier for themselves to pay for whatever pleases either the voters or, the, dictators that are running these Ponzi schemes, and so fiat is always inflating, and so there's a bias against ever holding it as part of your portfolio. so, you know, you have like very,

Whether it's at a personal level, where you're working with a financial planner, they're not gonna put you in more than like five percent cash, right? and even among like hedge funds, there's very-- it's very, unusual to see a hedge fund have a third of their capital in cash or half of it in cash. so the reason for that is that you wanna always be invested so that you're not having inflation eating away At your cash. and that hasn't always been the case. So, for example, if you look back at what was written in the Torah, which is like ancient, Hebrew, Jewish writings, teachings back millennia ago, they said to keep a third of your wealth in cash, which at the time was gold, a third in your business and a third in land. so today that would be like a very unusual asset allocation. so I think- I think that Bitcoin isn't a good or it can't be compared to fiat today, because in a, in a full adoption scenario of Bitcoin, p-people would be holding a much larger percentage of their portfolio in Bitcoin than they currently are in fiat, which means that Bitcoin would have a much higher value than the value you would get by looking at just, money supply. and I would have a similar criticism for- Gold actually, which is that, gold ultimately, is more inflationary than Bitcoin is. Now, right now, if you look at the annual, you know, increase of supply of gold versus increase of supply of bitcoins. And I, I wanna set aside any, any debate about what the definition of inflation is. I'll, I'll just be using the word very loosely in our conversation. but, if you look at the different rates of- Of creation, you know, what, Safedon calls the stock to flow ratio. right now, Bitcoin has a worse stock to flow ratio than gold does, but, over the long run, w-that That is going to improve dramatically, and I think that, that's why gold isn't necessarily a, a very good, comparable, on top of, you know, looking at its other properties, in, in terms of it not being digital, right?

Yeah, no, these are great points, and I think you make a good point there that gold isn't the appropriate comparable, and the gold market is what, seven or eight trillion, and if we were to look at global M3 broad money, we're looking at something like ninety trillion, and so in a sense, that means, you know, it's you're, you're spelling out an even more bullish kind of- Final future value, not that there's a final value, but just indicative. Yeah,

but at equilibrium over, over the long run. And really the other thing is that we, we just, we've never had a, a money that is this deflationary. And so w- what are, what is people's marginal propensity to hold bitcoins in two thousand one hundred is unknowable, but if we kind of triangulate based on, you know Things like gold or, or fiat, we can clearly see that Bitcoin will have an astounding marginal propensity to hold and thus, a astronomical value at the margin.

Yeah, no, great points. Agree with that. And so this all ties in very well with the theme for today's episode, which is your articles that you wrote, Bitcoin investment theses. So, maybe you wanna just give a quick overview of Bitcoin investment theses.

Yeah, so we kicked off the podcast with really the most bullish, possible investment thesis, which is, what I think is like the ultimate, goal of Bitcoin. But obviously there's a lot of people who don't see it the way I do and are more skeptical or have, kind of a more prob-probabilistic approach to it. Like I, I assign a 100% probability to, Bitcoin taking over, but, i-it's fine if people don't share that view. and there's a wide array of alternative investment theses for Bitcoin, which, Different people find more or less persuasive. and I kind of map it out onto a, a graph or a chart, and if you look at the x-axis, that's kind of the Potential adoption. So how, how many people would be using Bitcoin, for this particular use case? And then the y-axis is the holding period. So for, if, if you kind of think about it like, okay, if there's a hundred people using, one Bitcoin for one month, that's the same as one person using one Bitcoin for a hundred months. and so if you take those two variables together, I think that that gives you an idea of if, where, where the value is, in the sense that- Something that has a very low number of holders, for their use case. So for example, like, if you take, the "Nest Egg for Dictators," thesis. There's very few dictators or, very few, you know, families affiliated with dictators or beneficiaries of dictatorships, and so that's a very small pool of holders. but they're more-- the, and this thesis was put forward by George Soros, who, who said that Bitcoin might not crash as much as we would expect because it is such an ideal form of a nest egg for dictators. and then on the other side, on the holding period, you know, you can think about, okay, well, how would a dictator actually- Actually use Bitcoin, how long would he have to sit on it? Maybe he, he sits on it, for the duration of his dictatorship, and then when things start falling apart, he, you know, goes off to a foreign country and lives off of his nest egg. So that would be a very long holding period, you know, ten, twenty, thirty, fifty years or however long, and that gives you an idea of, of if this thesis is true, how much value does- Bitcoin, accrue from it. and then kind of on the opposite side of the spectrum, you might have like, machine-to-machine micropayments, where these machines never actually really hold bitcoins for more than a few seconds, because they pass it along, and thus- It's not, a very long holding period, but there's potentially billions of machines. there might be more machines than humans eventually, and so, that might be a very, very large market of, of holders that just don't hold for very long. so that's kind of the, the way I was, theorizing about it.

Yeah, okay, no, that's great. And then I think you've kind of answered my next question, which is sort of why do we care about holding period? And as you've pointed out, it's that the longer that holding period, the more it really adds to the, what we might call the reservation demand of Bitcoin as opposed to that sort of transitive or just using it purely as a payment rail aspect. And then I think- W-what is the significance of time preference in these different, investment theses?

Yeah, so I, I think, well, I, I didn't wanna add that there's kind of a third variable here, which is what's the probability of this thesis being true, and so like I think that the machine-to-machine micropayments, while- On paper, interesting, I think that like the probability of that actually being a, a significant adoption vector for Bitcoin is just very low. and there's other things too, like for example, Well, even the "Nest Egg for Dictators" thesis, I don't know how interested, most dictators within the foreseeable future are going to be interested in Bitcoin. they're probably going to be interested in Bitcoin when there is full adoption in the sense that it's, it just becomes a de facto, you know, form of global settlement money. But in the meantime, it seems like they're more interested in offshore entities that are, you know, as we saw in the Panama Papers, there's obviously- Plenty of legal, ways for them to get money offshore, without resorting to Bitcoin. But anyway, to answer your question, regarding time preference, so I think that-

It's interesting, I don't think that, as an investor, you should be looking at like what What are people's time preferences and how does that align with Bitcoin? But the problem is that there's reflexivity in it, and so arguably Bitcoin lowers people's time preferences, and it causes them to change their behavior and change their, their even their, you know, personality. so it's very hard to say a priori, okay, well, this thesis, lends itself to high time preference or to low time preference because it can And have a transfor- transformative effect on people. so for example, maybe someone, was using Bitcoin to buy drugs on the Silk Road. And so that's, that's kind of, in my view, the, the baseline definition of high time preference, right? but, perhaps they held a residual amount of bitcoins that went up dramatically in value, and suddenly their time preference changed, and they were like, "Oh, wow, I can have a, buy safe- Thing and by not doing drugs, I can increase my wealth and do more drugs in the future. and so, that, that, were there time for questions?

Came for the drugs, stayed for the sound money. So, yeah, okay, that, that, that's, that's a really nice way to outline it. And one thing that I really like that you've done with the investment thesis is that you've tried to be balanced. You've tried to present the pro argument and then the anti, you know, the anti-thesis for that same argument. I suppose out of your Theses that you've got, you know, we're gonna take 'em and we're gonna nail 'em on the front door of the BIS. Which case is the strongest case? Which one do you think is the most likely or kind of most powerful case?

Well, some of these are already being realized today, so I think that just de facto they are the strongest cases. So speculative trading, I think, is, the strongest case. These, these online casinos like BitMEX or Binance, they just have a tremendous amount of volume going on them, of people punting on what the, value of Bitcoin will be today and tomorrow. And so I think that, that just de facto, if we look at reality, that's definitely the case that speculative trading is the, greatest, or the strongest case, for Bitcoin. now the, the pro- The problem with that use case is that you can argue that, well, it's like Beanie Babies, like people will latch onto the next, you know, speculative investment that comes along, and that's not really a sustainable advantage So I think that if we have that as the strongest case, I would put the second strongest case as, Holders of last resort is, I think, the strong, second strongest case, and in, in my mind, I, I think that, you know, Trace is the authority on, on this. He's the one who came up with the phrase, and the phrase comes from the fact that in, in fiat fractional, you know, central banking, you have the lender of last resort, which is that if there's a bank run and the entire, system of fractional reserve lending is insolvent you have someone, some entity that is capable of, bailing the whole system out and, reintroducing liquidity to it. So that's kind of in the traditional system. And in, in Bitcoins, you have the, the holders of last resort, which is that, when-- and this is a very important point, which is that, and, Warren Buffett made this point, Bitcoin's a non-productive asset. And that's actually true of any money. any money is a non-productive asset. and the what provides a floor for the value of a non-productive asset? So for a productive asset, it's the cash flows or, you know, the, the fundamental value or the liquidation value. but for a non-productive asset, it is the holders of last resort, the, the people who, no matter what, will not, excuse me, will not sell their bitcoins. and the reason that- Holders of last resort exist, is that they have a combination of some kind of irrational, ideological motivation, and so in my case it's, you know, to end the Federal Reserve, but also just The, this, this, crazy wild community we've built, you know, I, I, I don't see myself ever, selling bitcoins and, getting out of the game and, you know, deleting my Twitter account, I don't know what I would do with the rest of my life. But The, I think the more rational aspect of it is that they're essentially, discounting the future value of this becoming a global money. And so it's an entrepreneurial undertaking, taking on this, this price risk today because we're anticipating that in the future, other people will also view this non-productive asset as money. and I think that that's, that's really the- The most confusing part about Bitcoin, because you'll have people come out and say, "Oh, you know, Bitcoin's too volatile to be a medium of exchange or too volatile to be a store of value, and thus it's-- it doesn't fit the definition of money, and thus it's a scam or it's a Ponzi or it's tulips." I think that what's missing from that analysis is that, okay, may-- maybe that's true today, but can we envision a future where that's not-- that's no longer true? And that it has reached, some sort of equilibrium state of adoption, and, you know, we can debate about where, where, what that adoption percentage would be, whether it's a hundred percent adoption or a niche five percent adoption, but nevertheless once it's reached its full adoption, wouldn't we expect that its value would be relatively stable? and so to me, holders last resort are really thinking about, "All right, we haven't reached equilibrium adoption yet, and there's no way that I'm going to trade these bitcoins, these, UTXOs on the UTXO set for, Whatever is promised to me, whether it's, you know, the next Bitcoin or, a, a, a Twitter scam.

Yeah, no, these are fantastic points. I think, and you make a good point around it's almost like a category error. People look at Bitcoin and they think that it should just be like a stock or a bond, and it should have some kind of, you know, it-- some kind of either dividend or capital gain, and that's all that it could be. But I think that, you know, and the point that you've made there To look at this like it's a potential new global money, which is a, a special kind of good. It's not the same thing that will, you know, throw off a dividend, in the same way that gold doesn't throw off a dividend for you every year, right? and I, I guess while we're on the topic of gold, some people have chara-characterized Bitcoin as a kind of digital gold, and I know you've made comments on this in the past on Twitter. and I think you made-- basically, you were making the pa-the point that it's directionally correct, but it's just an inadequate analogy to explain just how much better Bitcoin is. So could you elaborate on that?

Yeah, and it's, it's really to, to no fault of anyone, because historically, every time there's a new technology, the baseline is kind of what the previous one was. So, you know, you had horseless carriages, was the, the word for cars before, which today sounds kind of absurd. So Eventually, I think that, we'll, we'll talk about gold as being physical bitcoins, rather than bitcoin being digital gold. but the, the, the reason that,

The reason I really don't like the metaphor very much is that it, it undersells Bitcoin by a lot, and I think that, it really-- it, it's great for marketing to goldbugs and people who are already, kind of interested in sound money, but in terms of capturing the full economics and also the, inevitability of it, I think it's inadequate. The, the inev-inevitability of it, I think, stems from the fact that with gold, gold had a good chance of doing a speculative attack against the dollar, during the late 1970s, when it had that massive run up, dollar, you know, the consumer price inflation in the US was at twenty percent, and then Paul Volcker stepped in and essentially reestablished the US dollar as a, let's call it a quasi sound money, by letting interest rates, float to twenty percent and then having, the money supply being targeted, and that reestablished the credibility of the dollar's, monetary policy and essentially quashed any hopes we had of, of gold doing a speculative attack on the dollar. and I think that- You know, part of the credit goes to Volcker and the strength of the US dollar, but part of the credit or the discredit goes to gold's, relatively high inflation in the sense that the higher the price of gold goes, the more gold gets mined, right? The, the The more economical it becomes to, mine more gold, and thus you can produce more gold, whereas with Bitcoin, with the difficulty adjustment every two weeks, you don't really have that effect, and so the, when the price of Bitcoin is skyrocketing, it's not like the miners can produce, you know, twice as many bitcoins to fulfill this demand and kind of stabilize the market. and that's why I think that Bitcoin actually has a much higher chance, and frankly, an inevitable, outcome of, of destroying these fiat currencies. so the digital gold meme, and same thing with kind of like the store of value, you know, u-using that phrase, is good marketing, I, I don't think that it captures the whole picture. and maybe, you know, it's, it's good to not capture the whole- Picture sometimes, leave a little mystery.

Yeah, no, that's a great point. I think, you know, it, it's, it's, it's out there for people to really take it and take it further than what we've gone before. okay. now a lot of people complain about illegal use cases of Bitcoin. So for example, judgment resistance, the nest egg for dictators, as you mentioned before, money laundering, the use of Bitcoin in, you know, crypto scamming like crypto lockers and so on, or those Twitter scam bots, use in, you know, you know, drug markets and prostitution and porn and so on. Do you have any comments on whether this will change the adoption of Bitcoin as money or is it just really kind of neutral? And the fact that it can be used for anything is, you know, that's just a, that's just money.

Yeah, I, I, the latter, I think these are just like epiphenomena of, of a money. and from an investor's perspective, there's kind of two ways to see it. One is that If Bitcoin is really good for all these nefarious activities, then that means that there's going to be-- it's going to have value. And in fact, you could argue that Bitcoin bootstrapped itself off of the Silk Road, and that was like one of the major catalysts of creating demand for, Bitcoin. now, the other view, which also, you know, is credible, is that due to Bitcoin's permissionless system where anyone can be sending transactions pseudonymously, you know, with an internet connection, it has attracted these illegal activities, and thus governments are going to intervene and really crack down on it hard. So practically speaking, I, I kind of approach it from a US perspective because that's where I live. the government has been, very insistent on exchanges hav- Having KYCAML, Know Your Customer, Anti-Money Laundering, controls so that, these illegal activities are choked off. And the problem is that that creates friction for people who wanna buy bitcoins, you know, without revealing their identity, which they might wanna do, not because they're gonna do anything illegal, but because they wanna preserve their privacy and not, you know, have someone burglarize their home because- This person hacked the Coinbase customer database and, you know, found their home address and is now pointing a, a gun at their dog, you know, saying, "Uh, hand over your bitcoins." So there's, there's lots of legitimate reasons for not wanting, your, your- your identity to be attached to your bitcoins, but because bitcoin has been used for nefarious activities, governments have put in place regulations, and then at the extreme, governments have, have quote-unquote banned bitcoin in their jurisdiction, out of a concern to, you know, mitigate illegal activities.

Yeah, good point. interesting that you point out, you know, you've got to consider it from the US point of view. but even still, as a investor, you have to consider at the global level because, you know, we've got jurisdictional competition, right? And what will happen is that some countries that are very permissive of Bitcoin will kind of attract a lot of capital. do you have any comments on that sort of global case for Bitcoin and the jurisdictional competition?

Yeah, for sure. I mean, I, I, I overhear things like, I've overheard that Malta is a, a friendly jurisdiction. and then I, I saw a picture of one of the big exchange CEOs was visiting Bermuda, and they seemed to be friendly with them. So clearly there's jurisdictions that are gonna be friendlier than others, but I don't think that there would be any jurisdiction that would say, "Okay, no KYCAML." you know, so, anything goes here,

f-for fiat on and off ramps, because ultimately, if, if that were to happen, the-- it would, first of all, it would get abused, right? Because you kind of have a, adverse selection bias where, okay, now all of the fraudsters are using your jurisdiction. and then that abuse would lead to, whether it's Swift or the federal- Reserve or any of these, big fiat, you know, payment system, you know, organizations would, would shut off that jurisdiction, and we've seen them do that for other reasons to countries like Iran, where they essentially cut them off from the world financial system, as a form of punishment or sanctions. And so there's, there's only so much a jurisdiction can do. Now, I think that what's, what's very promising is mo- Models where you, you don't have a fiat on an offerant, and you essentially use, you know, quote unquote, stable coins or even just, sending bitcoins. So for example, BitMEX, like you can't deposit fiat at BitMEX, you send your bitcoins there, and then they, they, you, you trade with, your bitcoins there. So that's a way of getting around these, onerous, financial- So legacy financial institution regulations, but, you know, people will debate whether that's good or bad.

Yeah, sure, sure. Agreed. let's go now into the sort of next steps on the path to the investment mainstreaming of Bitcoin. What we're now starting to see is- Large financial institution chief executives come out and comment on Bitcoin, we're seeing billionaires come out and comment on Bitcoin. let's start with one in particular which I know you've commented on in the past, Lloyd Blankfein, who is the outgoing, chief executive of Goldman Sachs. do you wanna comment a little bit on, on- What he said about Bitcoin?

Yeah, so he really, he, he touched on, I think, is the most important thing to understand about money, which is that on- Some level, money is a, a, a social phenomenon, and I wouldn't, I wouldn't say, I wouldn't go so far as to say that it's a social construct or, a, a, you know, something that's like artificially created by humans out of thin air, because it's definitely grounded in, well, for gold specifically, you know, in its chemistry and in its, properties, and its scarcity. and then I think the fiat essentially- Is just piggybacking off of, and going off of the momentum of gold going into the twentieth century. and Bitcoin has its own properties that we can get into, but at the end of the day, all these things are properties that are recognized by humans, by individuals, and the more individuals, agree on these properties, being, indicators of a good money, the more participants you have We have in the monetary system and in, in the, you know, indirect exchange economy, catalysis, as the Austrians would say. So, what Lloyd recognized was that, well, I, you know, I don't know, do I call Mr. Blank fine? I don't know him on a first name basis, but, the, the, the outgoing CEO of Goldman Sachs, he was saying that, you know, people were very resistant when Money went from being gold to fiat, and, you know, the Austrians would argue, rightly so. and you could see the same thing of people being resistant going from fiat to cryptocurrencies and Bitcoin specifically, and that essentially, if, if he were to have to explain how it happens, and, you know, he, he kind of, was very, he, he put up some disclosures, which is that he, he himself doesn't- not own any, Goldman doesn't own any, and he's not super excited about it. But if, if looking back on it, and, you know, if we're in a world where Bitcoin has taken over, and he were asked to explain how, it would be that people changed their, the social consensus of what money is. and so- Essentially, to the extent that once baseline properties have been established, to be a money, and I think that Bitcoin has established those, Then it really is just a matter of human psychology and of, people agreeing, to, to Bitcoin being their money. And, you know, Bitcoiners are, in, in my view, if you were to draw like concentric circles like a, a target for, you know, shooting arrows, like Bitcoin, the holders of last resort are, are the kernel of that. And then you have concentric circles around that of, of people jumping in and, being convinced that Bitcoin's the future of money. And a-at the outer periphery of that, you have the, the no coiners, well, and now let's, let's be specific. When I say no coiners in this context, I do actually mean people who, who actually don't own any bitcoins. but they're, they're slowly gravitating, and, you know, as Jay was pointing out in, in your earlier podcast, that, their, their mind has been captured, and so eventually they buy a little bit, you know, just for fun, just to see what all the hubbub is about, and then the price goes up ten x, a hundred x, and now they've got a serious investment, and they're adding to it. so anyway, to go back to, the question about Lloyd, Wow, I, I was rambling there. no, no, I think that's,

actually quite good. Go on.

Yeah, we, we see this, process of social consensus, of accretion, happening, and the social consensus is getting louder and louder. And so right now, you know, I think Bill Miller is the biggest, Wall Street Bitcoin bull, and he- represents the, the vanguard of this trend, and I think that it's just the, tip of the spear at this point, but we're going to see it more and more common where, on one hand, you have people, I think the CEO of BlackRock was saying that none of his portfolio managers, thought anything of Bitcoin, and that's fine, they'll be the late adopters, but, the, the gains will go to the early adopters, and we'll start seeing more and more portfolio managers saying That there's a role for Bitcoin, in a portfolio, you know, whether it's one percent or five percent or whatever it may be, but just Part of it will be based on looking at the quantitative aspect of Bitcoin and this-- and I, I find it kind of silly, but there's actually a lot of truth to it, which is that if you just look at the historical returns of Bitcoin and their lack of correlation with other assets, and also just the very high Sharpe ratio, which is, you know, how much are you getting paid to, to take on the volatility of, owning Bitcoins? it's very attractive in that regard. And then on the qualitative level of looking at- And all these investment theses and seeing, oh, well, you know, even if we don't think that Bitcoin's going to supplant all fiat currencies, it's still, you know, judgment resistance is an interesting investment thesis or, you know, doing, high value settlement of payments, across borders, you know, wh-whatever Whatever rationalization they might have, to get them to invest a portion of their portfolio.

Yeah, no, fantastic points. I think, yeah, you make great points there around the uncorrelated nature of Bitcoin versus other traditional assets, and also the Sharpe ratio comment that basically it's paying a very high- Return for the level of risk that you're taking on, and so some people view it almost like it's a positive expectation lottery ticket sort of bet. okay, so I think the next thing would be if you're a young person and you're interested in Bitcoin What should you think about from a Bitcoin investment strategy point of view?

Yeah, so I think that- The first thing you've gotta work on is, yourself. so I think that educating yourself, whether it's about Bitcoin or about, finance or monetary economics, you know, if, if you find that it, it, if you find it interesting, definitely dig into it. if, if you don't find it interesting, then I think that you're gonna have a really hard time understanding Bitcoin because it's in such, An early stage. And so I don't think that humans are actually, meant to cope with or reason about, the emergence of a new money and, It's just, it's so foreign to us because it's just never happened. You know, at some point, gold had a value of zero. That is, that people thought of gold as being worthless. now, this might have been like Neanderthal days or before that. I, I, I'm not an anthropologist, you know, maybe even anthropologists probably don't even know themselves. You'd have to like teleport or, time travel back to, to the, the first Cretan who picked up a gold nugget and saw that it- Shine a little bit and was like, "I'm gonna hold this, and, someone's gonna have to, barter with me, for me to give this up." but anyway, so gold built up its value over centuries and millennia, and then fiat kind of piggybacked off of gold. We've, we've, I, I haven't read of any, historical accounts of a fiat money starting with a value of zero and, you know, accruing value from there. I think that's unheard of. and, Bitcoin comes in and it does have a value of zero and now it has a value, an ever-changing value, but, you know, it's, it's in the billions of dollars of, total money supply and, It has done a number on people in the sense that it's, I think it's caused a h- huge amount of misunderstanding about, first of all, why it has this value in the first place, and then people wanting to replicate that phenomenon with, you know, their, their altcoin du jour. and so if you're young and coming into this, I think that you can learn a lot of, misinformation, and you know, learn, essentially learn the wrong lessons from Bitcoin, and get involved in things that either won't have lasting value or are just straight up scams, and, you know, o-are ultimately unfulfilling from the perspective of, of changing the direction of, mankind. So, my advice would be to If you're not interested in monetary economics, and you're going to only read one book about money, it would probably be The Ethics of Money Production by Gita Holzman. And if you're not into reading, he has an excellent YouTube, video that's an hour long. And if an hour is too long, you can put it on 2x and listen to it in 30 minutes, and you'll, probably have to watch it twice because it's a lot of information to absorb, but, you'll have a fairly decent understanding of, what the monetary underpinnings of Bitcoin are, even though he doesn't say the Bitcoin word once. but, that aside, I think the, the next step for a young person would be to- Really think about whether they're interested in programming or not. and so there I would go on Codecademy dot com and do a few tutorials and see, are you interested in programming? it's okay if you're not, there's a lot of other things to be done, but if you are, then You should, by all means, get, a hundred percent involved in, software development and Bitcoin software development. And so, pick up a copy of Mastering Bitcoin by Andreas Antonopoulos. and, you know, if, if you have the means or if you can get a scholarship to do a Jimmy Song's programming blockchain course, that'll get your feet wet in the technical underpinnings of Bitcoin, and enable you to, whether you do it as a career or as a hobby, get involved in, in Bitcoin programming. now, from an investment perspective of straight up financially, I think that it's a very- A, difficult, area to be in, because basically we have a lot of young people graduating from college with a lot of student loan debt, and traditional financial planning advice would be to pay off that student loan debt before you start making highly speculative investments. and You know, there's a lot of truth to that, and so if, if you wanna-- and the reason there's truth to it is because these, these student loans have like eight percent interest rates on it, which means that if you pay off that student loan debt, that means that you're earning a risk-free eight percent, which is pretty good in terms of traditional investments. Now, if you look at historical returns of Bitcoin, you know, Bitcoin increases by hundreds of percents a year on average, but, how much can you rely on that? And how much risk do you wanna take on? If you're young, I would argue that you can take on a lot of risk. Now, if you're a little older and you have family and kids and, maybe Have a little less risk, and so, there, I would argue that if you've got student loan debts, you know, pay off your student loan debts at a reasonable rate, as a reasonable pace, and start accumulating some bitcoins, but really focus on changing your lifestyle so that you're spending less and Learning more. I think that if you're in your twenties, the most important thing you should be doing is learning, and that'll enable you to have either a high-paying job or, have a, start your own company, start your own venture. but really the, the, the two things are reduce your expenses and increase your income. and so, those are the most important, pieces. Rather than, on the investment side, I think that the investment side is really down- stream of that, and so you've gotta have savings to invest in the first place, and then you have a, first class problem of figuring out where to put your money.

Yeah, yeah, great points. Agreed with that. one other question that I thought would be good to get your thoughts on, and I get this view when I attend Bitcoin meetups, and sometimes there are altcoiners there, and basically some of these altcoiners, they, they think of it like, "Oh, why would I buy Bitcoin when..." And, you know, Bitcoin might, you know, quote unquote, only do two x or five x or ten x from here, whereas, you know, in a year, if I buy this altcoin, there's a chance that it could, you know, colloquially, go to the moon, that kind of argument, obviously. now I disagree with that as well, but I'm just curious, how, how would you, respond to that kind of view? How would you caution, you know, newcomers to crypto against kind of getting lost amongst all of the altcoin gambling

Yeah, so I, I think that the reason that we, we do hear that view is because there's some truth to it, which is that if you go on CoinMarketCap dot com and you look at the different altcoins, first of all, I mean, obviously there's some that have just pumped and, you know, have massive gains, but there's also some that have sustainably, increased their value even in, in Bitcoin terms. So for example, if you look at Ethereum, if you bought Ethereum at the presale, and then held It to today, you would have, you could convert it into more bitcoins today, than you would have if you'd bought bitcoins, at the presale. So clearly there, there's some truth to it. Now, obviously, that's one hundred percent hindsight bias and survivorship bias, because who knows how many other presales you would have invested in, and lost your shirt on. But, even that aside, I think that,

The, they are right that Bitcoin has, less upside than it did in the past, and that's just mathematically true. Now, I, I would argue that, how much upside does one need in life? and Bitcoin still has a tremendous amount of upside going for it, and it's also massively de-risked. and so if you look at it from kind of a risk-adjusted expected return, Bitcoin still has a higher risk-adjusted expected return than, altcoins, or any given one altcoin. and then the other side, the other thing is that if you look at what, at equilibrium, you know, and part of the difficulty here is whether you're communicating with someone who is, a day trader or- Or, someone who is a long-term investor, because I, I think a day trader doesn't really care about what is the terminal value of Bitcoin at equilibrium, you know, when it's reached full adoption, you know, what's the total addressable market of Bitcoin, like, they don't care, they're, they're looking at, whether it's going to pump tomorrow or yesterday. so, but for the long-term investor, you have to think about, what What is the total addressable market for this, this investment? And so, for Bitcoin, it's, it's global. It's, it's, the global money, and that's a total addressable market of, you know, however many billions of people there are today, and then looking at all their portfolios and how much, is held in cash and how much more would be held if, Bitcoin was cash or Bitcoin was the global money, and so- that's a massive, massive, massive addressable market. Now, if you have an altcoin, that's DentaCoin that is for dentists, that's a much smaller total addressable market And here we're assuming that DentaCoin is wildly successful, right? And that every dentist uses DentaCoin. even that just-- it wouldn't touch Bitcoin's, full potential. so I think the- Yeah, on, on, in that regard, I mean, DentaCoin's kind of a silly example, but there's other ones, you know, like, that, that market themselves as memes essentially. So for example, with Ethereum, you have to look at what's the total addressable market for smart contracts and for, token issuance. Now, you could argue that, oh, you know, that's everything's going to be tokenized and everything's going to be, on the blockchain. And then, all right, well, how much value does Ethereum itself, eth The, the, the money, ETH, the ticker symbol, how much does it accrue from that use case? and you could argue that if someone is using Ethereum just to issue their token and have an ERC twenty token on the Ethereum blockchain, well, The, the holding period for that would be very short, right? It's just the time that the, the, the investor in the ERC20 token buys Ethereum, sends it to this ICO promoter, and then the ICO promoter dumps it to, you know, buy a yacht or go on the beach or ideally pay for investors to develop the project, and so that doesn't really seem like a very good, long-term investment, Compared to Bitcoin, just because of the way it's marketing itself, but also the way that it is designed from an engineering perspective, in terms of its scalability and, its, its, its decentralization.

Fantastic points, Pierre. Really agree with that. Excellent answer. okay, I think we're pretty much getting to the end of our time. I've got to let you go, Pierre. but, look, guys, you can find Pierre on Twitter. His handle is at pierre underscore rochard, and he also runs bitcoinadvisory dot com and also look up his podcast, Noted Podcast. Pierre, have you got any other projects or anywhere else that you would like the listeners to, find, where they, you would like them to find you online?

no, you listed them all. I think that on, on all the topics that, we were talking about, we could probably, dig into it for another few hours. So, I hope to be back on, and yeah, this was fun. Thanks for having me on.

Fantastic, thank you very much, Pierre. Bye. Bye. So I hope you enjoyed that conversation with Pierre Rochard. As usual, I will set up a show notes page on my website, stephanlivera dot com, search S L P three for the links associated with this episode. Lastly, as this is a new podcast, I'd really appreciate if you guys can give this podcast a five star rating on iTunes if you enjoyed it. Please share it with your friends, subscribe to the channel, and if you have any feedback, please come find me on Twitter. My handle is at Stephan Livera. Thanks guys, see ya!