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#66 Jesse Myers | Understanding Bitcoin Bubbles, and Enduring Bear Market Struggles

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Jesse Myers is a former Stanford MBA, and top-flight consultant and Bain and Co. As one of the most impactful Bitcoin educators, he is a master at helping you use what you already know as a scaffold for understanding something new. If you’re still not quite seeing the opportunity we have right now, this episode will definitely fill some gaps. 

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Hey It’s Terry. And in this episode, you’re about to discover the genius of Jesse mys. Jesse graduated from Stanford business school and was a top flight consultant at Bain and co. His life has led him to become one of the most impactful educators in the Bitcoin space. And in early 2021, I read his article why the yuppie elite dismissed Bitcoin, and it perfectly articulated one of the biggest reasons I was so hesitant even learn about Bitcoin at first.
And it’s also why I took another look. Since then I’ve been hounding him to come on the show and in this conversation, He shares some of his most powerful mental models. For understanding the factors that drive Bitcoin’s price and its popularity, including how fine art can explain the mania that we see in Bitcoin every four years or so.
How buying Bitcoin is like owning a slice of what he calls the internet of value. And why buying Bitcoin is like staking your claim in the wild west. Jesse is a master at using what you already know as a scaffold for learning what you’ve done. And if you’re still not quite seeing the opportunity we have right now, this episode will definitely fill some gaps for you.
I hope you enjoy. 

Terry: Jesse, thanks so much for coming on the show, mate. I really 

Jesse: appreciate it. Happy to be here. Thanks for having me. It’s

Terry: been a, a while in the making for me cuz uh, you were so formative in, I guess, my early journey really trying to understand this space and some of your work that we’re gonna touch on today. Some of the ideas that you have kind of put forward were really, really important for me to be able to really understand why this matters, why it’s important to pay attention to, why it’s important to. Invest the time to figure it out, and I think you’ve got a really unique skill set too, around the way you simplify without losing any substance, and that’s why I was so interested to talk to you, and that’s why I’ve been harassing you for the last six months, mate, so I appreciate it. Good

Jesse: I’m really bad at getting back to people on Twitter dm. So apologize. It has taken this long, but yeah, excited to go through it. 

Terry: And the other part of this too is that just recently you have kind of revealed your identity where a lot of Bitcoiners will kind of keep their identity hidden. But why was it so important for you to do that and do it right now?

Jesse: Yeah, so I guess I’ve been contributing. To Bitcoin as like a, as a writer and diagram maker really. I was a management consultant, so I’m pretty good in PowerPoint and like to communicate ideas that way. So I’ve been doing that for several years as an anonymous account, as CREs btc, which is my Twitter handle.

But now it felt like the time to emerge and go public and really kind of put my name behind my idea. And be able to like go to events, like go to Bitcoin conferences and actually have my face out there. And a big part of why right now is that we find ourselves once again at a depressing price bottom.

Which seems to happen every four years with Bitcoin. It happened in late 2018 through Q1 2019. That was the last time this happened, which incidentally is almost exactly four years ago. We’ll get into this, but that’s because of the four year having cycle with Bitcoin, where you have these speculative bubbles every four years and each one has a higher high, a higher low.

On the backside of that, High or high. So Bitcoin grows with these bubbles that don’t fully disappear. The base becomes higher each time, and there are reasons for that in supply demand mechanics that underpin that. But anyway, right now we’re in that bottom zone for the latest Bitcoin price bubble, which was the 2021 bull market following the 2020 Bitcoin, having.
Suddenly there was half as much supply being mined every single day, but there was just as much demand. 

And so in a system like that where you have completely inelastic supply and you have more demand than than supply now because demand wasn’t cut in half, there’s only one way for that tension to resolve itself, and that’s by the price drifting upwards.

And once you start that process, you end up in a flywheel of, of increasing demand, decreasing willingness to sell, and it turns into a bonafide bubble. So that’s what happened in 2021, in the wake of the 2020 having, and lo and behold, just like every previous cycle over Bitcoin’s 13 year history, after the price run has been a price crash. And right now Bitcoin is quote unquote dead in the eyes of the media and the broader public. Bitcoin is a mistake that has finally found its end.

Terry: I read somewhere, it’s just like the 450th headline that pronounces Bitcoin’s death over the last 13 years. 

Jesse: That’s right. Some people like to keep track of this and it’s a pretty comical if you put all of the dots on the price graph of Bitcoin, about every single time a major news publication has declared Bitcoin debt over the last 13 years, and you see the price just keep going upward with this volatility of bubble after bubble.

But, uh, every single time that happens, It is not the death of Bitcoin. And usually when people are saying it’s the death of Bitcoin, it actually is just the local bottom, the higher low for that four year period. And so that’s where we are and that’s why coming out public, making a little bit more of a splash in my professional network of saying these mechanics of Bitcoin.

Are real and they’re going to keep happening. The next having is coming in 18 months and when the next having happens, these mechanics will play out again. There will be another bubble that will have a higher high and then a higher low on the backside of that. And now is the time to pay attention. Now is the moment with.

Maximum opportunity specifically because there’s so much blood in the street that, uh, publications are declaring Bitcoin dead, you know, as if it’s bled out. And actually now is the time for people to be paying attention, and now is the time to be making calls about bitcoins going somewhere and you might wanna make pay attention. So a big driver behind why I’m going public right now, I guess. 

Terry: Awesome. You just touched on there. You wanted to make a splash in your professional network. Let’s just step back a little bit and talk about where you’re coming from. It’s your background and everything that kind of sets you up for your journey into Bitcoin.

Jesse: I am a management consultant. In my prior life, I worked at Bain and Company for a handful of years, and I went to Stanford to get my MBA in the middle of that and. That’s actually where I first came across Ethereum really in early 2016. Some of my classmates were buzzing about Ethereum and I felt like I had missed out on Bitcoin.

You know, this is the classic feeling that everybody has of heard about Bitcoin in 2013 when it had its first major run. And I thought it was stupid. You know, I thought it was Monopoly money on the internet and just the latest tulip mania. So I dismiss. But then Ethereum comes along and the value proposition of that sort of resonated with me.

And it felt like I had the chance to be a part of an earlier adopter of this new thing that really might go somewhere and could unseat Bitcoin in theory. And it spoke to the, you know, I, I was at Stanford for my MBA and immersed in technology and innovation and in investing, and Ethereum’s narrative is all about.

Move fast and break things. It’s, it’s very much in line with the internet ethos. Um, and. The, the core idea is that we’re gonna innovate our way into a superior technology driven way to settle contracts and exchange value digitally. And so that ped my interest then, and I got into Ethereum. My main thesis back then was that Ethereum and then the other alt coins would chip away at the incumbent positions of Bitcoin and then Ethereum itself, and that those were sort of venture capital investing plays that you could make to invest in the, the cutting edge developments on all based on believing that this was a technology investment. That worked well through 2017, and then I got crushed in 2018 because Bitcoin outperformed all of these up and coming alt coins that I was excited about.

So that forced me to dig deep and try to understand what was I missing? What was I missing about Bitcoin? Why was it outperforming in this bear market in theory and incumbent shouldn’t be gaining ground over time. It should be losing. And so through that journey of going down the Bitcoin rabbit hole, I figured out that actually this isn’t about technology.

This is about money. And flipping that switch in my mind helped open up the ability to understand Bitcoin’s real value proposition, what it is, why it fits in to the financial landscape, and why it’s better than what’s out there current. I had thought that this was about like disintermediating banks and disrupting credit card payments.

You can have the same functionality via a cryptocurrency network for much lower cost, and that’s what I was excited about with Ethereum. There was something there that made sense, but then getting a little further down the rabbit hole and, and figuring out that actually this is about money. That Bitcoin is really positioned to be a better gold and what gives gold value.
Gold is valuable primarily because it is hard to make more gold. That’s the core value proposition of gold as a store of value asset. That something that you can trust to put your value into it today and know that it will not be diluted over. So that you can withdraw that value in the future, having only suffered a 2% dilution per year and the total amount of gold that exists because that’s how much gold is created from gold mining all over the globe every year.

So that’s the winning bet in the physical world if you wanna store value in a commodity. And that’s why Gold has emerged as the best commodity store value and became the defacto money through the free market forces over thousands of years of human history of. The hardest money, the hardest to make more of money winning out versus inferior competitors like seashells or even silver or copper.

You’re better off storing your money in gold because you can always find more seashells, but you, it’s very hard to make more gold. So Bitcoin is an a digital perfection of the properties of gold because it goes beyond just saying it’s gonna be hard to make more Bitcoin as it is with gold. Now actually, there’s a hard capped supply, a finite amount of Bitcoin, only 21 million.
That’s not true with gold. You can always find an asteroid or there’s gold and sea water even So having a hard cap supply changes the game and the supply schedule of Bitcoin, the way that the Havings work amount to a reduction of that supply issuance every four years. So right now we’re at 1.8% more Bitcoin being added to the total circulating supply every year.

And when the next having hits in 18 months, that’ll drop to 0.94 years after. 0.45% and you see how it’s becoming a better gold. Every four years that manifests through the supply demand mechanics of this asset, having less supply going out into the market to meet just as much demand. Every time that happens, the price can only go one way, and that is up.
So this turned into a bigger dive into the value proposition of Bitcoin here, but, My journey of going through alt coins, you know, starting being interested in Ethereum at Stanford, having, and then getting rocked in the the last bear market. Having to figure out, okay, actually why is Bitcoin winning? Only to discover that this is not about technology, this is about money, and Bitcoin has.

Perfected the properties of money that matter to us as people. We want to be able to store our value in something that we can trust and know will not dilute all the value of that. Of those savings over time, and in fact, Bitcoin takes it another step further and says that actually your money will appreciate the value that you’re storing in Bitcoin will appreciate over time because it has this unique property that no other financial asset has of increasing scarcity, so that four years from now there will be less Bitcoin being made every day than there is.
And those supply demand mechanics play out. The only analog that I can think of for how that works, and another example in the world is when a famous painter die. Suddenly the market knows right then that there will never be more supply created by that painter. And what happens to the value of that existing body of work shoots up.

But of course, that’s a a one time event and it’s not knowable when it’s gonna happen, really. And it’s also confounded by the fact that there are more painters being made. And the taste of art shift over time. So it’s that mechanism, but it’s purified and distilled and turned into a reliable every four years mechanism, uh, for the next century, so that it’s as if a painter is not fully dying, uh, but going to reduce their production by 50%.

Guaranteed, and that’s gonna happen at 25 times over the next century. Bitcoin is the once in a species invention of digital scarcity, which is the perfection of the properties of money that have made gold. So successful and so valuable over analog human history. And now in the digital era, here comes Bitcoin to be a better gold, and yet it is still misunderstood by almost everyone. So that’s the whole story

Terry: mate what was the data point that brought you to that epiphany? That it’s not about technology, it’s about money. What was the single thing that you were like, oh, hang on the frame. We’re looking at this in and everybody’s looking at it in is.

Jesse: That’s a great question. I don’t know that there was like a single epiphany moment. The closest thing to that probably was reading the Bitcoin standard by safe Aine, who is a, uh, a Austrian economics, libertarian minded, uh, Bitcoin aficionado, who is a little bit bombastic in his, um, that’s another. In his contempt for, um, mainstream economics. And so reading the Bitcoin standard is a bit of a painful experience because it is a direct assault on, for me, as a MBA who has a masters in accounting before that and has been died in the wool mainstream business and economics.

My whole career, it was an assault on my worldview to read that book, but it also forced me to question things and recognize that, you know what, actually in an AUMs razor kind of way, you know, stripping away the complicated explanations that I had relied on with economics, it. The possibility that there was a much simpler explanation for a lot of things that flew in the face of what I had been taught.

And so that bothered me, you know? And it created this cognitive dissonance for me that I had to then reconcile. Like I couldn’t let that sit. And so I started to pull in more data points from different sources. In one month, I read the Bitcoin Standard Jeff Booth, price it tomorrow, and I saw you had him on the show and also Ray Dalio’s changing world order and so that trium it.
Yeah. How is he not a Bitcoin? 

Terry: I’ve read the book as well. I’m like, come on mate. Let’s be honest.

Jesse: It’s that classic problem that I’m sure we’ll, we’ll talk about with yuppies of, uh, if you have been successful in the system. It’s really hard to see how the system is flawed. And he has been more successful than anyone until recently ran the largest hedge fund in the world.You know, he’s an old guy and. When he is asking the question of what happens to reserve currencies through history and what can that tell us about what is likely to happen, the current reserve currency of the US dollar into the future. He’s inherently looking at it through like a a nation state lens, and by looking at it through that lens, you come to the conclusion that the ascendant nation state right now is.

So he never really says that, like that’s where things are heading, but that’s kind of the implication. And I think his big omission, his big mistake is that there’s a different global superpower rising, and it is. The internet, everything that, that enables individuals to do in a, in a borderless future.
And ultimately, I trust the internet. I trust math and code and the internet more than I trust the Chinese government more than I trust any government. So I think if you ask a millennial, all of us would agree and see it that way. But if you ask, uh, an 80 year old, I think they see it the opposite. Yeah.

Terry: Yeah, and it’s interesting, I think those two books that you mentioned that is proof of Work for Bitcoin and you can tell who’s read ’em and who hasn’t because you cannot read the Bitcoin standard and come out of it going, that’s bullshit. You can’t do it cuz it takes you back through history in a way where you go, this is this pattern.
It just continues and it continues and we’re doing it again. And the difference being now there’s an alternative. There’s a form of money and I think this is, you know, gets to I guess the money versus technology thing. It’s interesting. I think it’s both, right? Because what I learned, what I realized reading that is like money is the original social network and everybody wants to be on the same, no social network, cuz it works better.
And that’s that whole shelling point you read the whole N Abo thing. And that’s why for me, I was like, Exactly right. And then you’ve actually put together some work too around understanding how Bitcoin is that next layer of the internet. Can you talk to us a little bit about how you’ve got those two phases of the digital revolution, internet, and then Bitcoin is the sort of the value layer of that.

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Jesse: I guess what you’re referring to is I put out a few graphics that focused on putting Bitcoin in context here of what we’re living through in our lifetimes is the digital revolution. We think of that as just being the internet and what is the internet? The internet is how the world digitized information storage and exchange.
The internet is all about information, but implicit in that is that it’s not good for value. The reality of it is information can be copi. You don’t want that for value. So the internet hasn’t really had value as part of its digitization process, and that’s what Bitcoin made possible. Bitcoin is the invention of a system that creates digital scarcity and enforces it and makes it impossible in the information landscape to copy and paste or in any way violate the rules of value, which is that you can.
Copy and paste. So if in the digital revolution context, we’ve had the Internet of Information and now we’re watching the Internet of value. Value storage and transmission that is starting to take shape now. That’s what we’re living through. That’s what cryptocurrency enthusiasts are all hyped up about.
And my experience, my journey has been to realize that all of the hype around all of the different cryptocurrencies, it all collapses back into this singular. Base layer of value. The real innovation here, the only innovation is having digital value that can’t be violated, and that that is a protocol that has network effects attached to it.
And so as a result of that, we’re watching HTTP or T C P I P. Those are information protocols for the internet, and now we’re watching the protocol for value. Develop, which is Bitcoin being the first. The invention of digital scarcity puts it in a different position and means that every other alt coin is inherently a copy of Bitcoin’s invention of digital scarcity.
And the problem there is that you can make a copy of that system. You can create light coin, which is basically it’s own little pie that looks and acts just like. And you can create Ethereum and you can create, there are now 19,000 plus other cryptocurrencies. The thing is, is there’s no marginal cost to create another.
Uh, so you can create as many cop as you want, and therefore there’s infinite inflation potential, and therefore there’s no scarcity for any copies of digital scarcity. The only instance that is actually scarce is the original, which is. So what that all creates is this incredible moment in human history where with the internet, it wasn’t possible to own the protocol, to own the base layer, to own the internet itself.
You couldn’t take an ownership slice of that. You could just invest in Facebook or Amazon or Google, you know, as, as a equity holder. But with the internet of value, there’s a value layer that somebody has to. And means that it’s possible to own a slice of the protocol. So by taking an ownership stake in Bitcoin, owning part of a Bitcoin or a whole Bitcoin, you own a percentage of the internet of value that is built on Bitcoin.
And currently there’s not a ton businesses or economic activity happening using Bitcoin. It’s a system that is early in its adoption. There’s really only like 4 million people, in my opinion, in the world who. Actually adopted Bitcoin and we can get into that. And obviously there’s 8 billion people, so 99.95% of people haven’t properly adopted Bitcoin yet, so it’s very early.
And that means that it’s possible to get an ownership slice of the internet of value, the internet part two, and own all of the future economic activity on this protocol by taking an ownership stake in the base layer. That’s one of the difficult things for people who, over the last 20 years have seen the internet revolution and think that all value is driven by c.
To have to wrap their heads around, okay, now there’s digital gold, and you can just own a slice of that. And it’s a protocol, which means that there’s network effects and it gets more valuable as more people adopted as a savings technology to include in their portfolio. And because of the mechanics of increasing scarcity, you can expect increasing value to come from that based on supply and demand.
And who in the world is interested in storing value in an asset that is going to reliably increase in value over time, everyone, that’s why we’re in strange moment where everyone has a chance. Build their conviction enough in what Bitcoin is and the opportunity in front of them and realize just how early it is.
It’s a $400 billion asset in a $900 trillion sea of asset value out there. Gold is 10 to 13 trillion in value. Bitcoin is a vastly better gold for the digital age. It dematerializes gold. You don’t have to have it locked up in a. With promissory notes attached to it and re hypothecation and all those problems.
Instead, you can have this perfect digital gold connected to the internet available to be lent out to someone in Tokyo overnight for a, you know, for a percent interest. So that’s a vastly better gold. And you know, I think the conservative case is that it ends up being worth two times. As much as gold is today, which would be a million dollars US dollars per Bitcoin.
And I think that’s the low end. So we’re living through the second part of the internet revolution, and that’s the digitization of value. And from what I can tell and my six years now of digging into this, that all comes back to. Bitcoin is the internet of value and 99.95% of the world has no idea yet. I don’t know if it’s the
right analogy, and you can correct me if I’m wrong, but the way I’m thinking about it is the internet was first a military technology, right, and then there was a protocol that was developed that made it possible.
For everybody else to build on the internet, but we don’t have lots of those. We just have the one. So if you chose one of the wrong ones, you build on nothing. As Jeff Booth calls it quicksand and it has to tend towards one because it’s only useful if we’re all building on the same base layer and, and is that kind of what you’re saying?
Because if you own a part of that, then everything that happens on top of it, it’s almost like you own the index fund of the next layer of the internet. Whatever people do, whatever their endeavors are, you’re gonna get a little bit slice of that because the value’s gonna be reflected and manifested in the value of what you own.
Is that what you’re saying? Yeah. To build that out a little bit like the internet is worth probably like $20 trillion, something like that. All the global economy that runs on the internet, it’s worth a lot. That’s all built on one protocol because every participant in that economy doesn’t wanna be on their own little island.
They wanna be. Talking to exchanging information successfully with all the other computers on that network. So you converge towards the protocol standard. You want to be where everyone else is, and you also want to invest your energy in building. Where everyone else is and where you expect everyone else will end up.
So it creates, um, this game theoretic problem. You know, to bring it into the Bitcoin analogy, everyone on Earth has to ask themselves, do digital assets have a future? Do they have merit? Is there something to owning an asset that has a finite supply and is not controlled by anyone? It’s only controlled by math.
Is that something you want? Everyone who does enough of their homework, in my experience, ends up concluding, yes, actually that’s something that is attractive. And then the question becomes, okay, which one you have to pick If you’re storing your value, your savings somewhere, you have to pick one asset, one protocol to put your money in, and you can do a scattershot approach of trying to own an index of the various cryptocurrencies.
But each dollar that you invest, Has to go somewhere. So you’re betting with each dollar, which is gonna win, which has a future. And that becomes a game theoretical problem of you’re trying to guess which are other people going to value now and into the future. Which asset will people converge on as gold versus seashells?
And that’s one of the great things that Safe Dean does in his book is. Go through the history of money and show you how different civilizations through history used different monies, and that works fine so long as your civilization doesn’t come into contact with another civilization that uses a better money.
And the most important facet of better is that it is harder to make more of that. So seashells or salt. Certain kind of rock or copper or silver, which is easier to mine than gold, they all lost to gold. Because once you know about gold, that’s what you as an individual choose to store your value in because you can trust it more and you know that other people will trust gold more.
So that’s the game theoretic question at the heart of investing in cryptocurrencies is one, does this technology have a future? Does it have value at all? And then two, which protocol standard do I think will win? And the more you dig into it, the more obvious it is that Bitcoin has already won, likely won from day, maybe it won after it reached a certain critical mass after a few years of accumulating adopters who were gonna defend it and advance.
The merits of it through word of mouth, but at some point it already passed the critical mass threshold, and it’s just a snowballing network effect from this point until the whole world adopts it. It’s actually really
Terry: easy to be misled though, because you look at something like Ethereum and you say, look at all the building that’s happening on Ethereum, and you can tell whether somebody has understood the history of money based on whether they think that’s important or not, because it’s even just more recently, the way it’s sort of transitioned to more proof of stake and what that means for issuance, how those rules can be rewritten.
I think the protocol’s been changed five times for Ethereum, so it’s easy to look at something like that and say, but all the buildings happening over. What are you guys talking about? Because this is a slow, clunky thing. You can’t scale all those kind of things. What do you say to somebody who’s thinking on that level at the moment?
Jesse: That’s the thinking, the lens that I was caught in for the first few years that I was interested in cryptocurrencies and yeah, building is such a big part of the internet ethos and like such a signal of where. Pay attention what to invest in going forward because of the growth rate of all the applications built on a system, but they all come back to the wrong metric.
So with Ethereum, And all that, the fancy Defi applications built on top of it. What you’re effectively doing is creating lots of activity, lots of transactions. You can do all these things. You can transact in all these cool, clever ways on Ethereum. And that is pointed at as proof of utility of use.
You’re not using Bitcoin, you’re using Ethereum because you’re doing these transactions. But that’s wrong because I’m using Bitcoin every day, every second of every day because I’m using it to store my value. And so I have tied up some portion of the Bitcoin supply because I’m hoarding it, if you wanna call it.
As my savings vehicle, and so that Bitcoin is being used every second of every day, whereas Ethereum is being used for transactions. And then after the transaction, where are you storing your value? You conveniently can leave it in Ethereum. And you’re doing that because you believe that Ethereum is going to hold its value, okay?
And you want the convenience of it there. But if you’re storing your life savings, what you really care about is what asset can I trust to retain its value and hopefully grow its value. After you’ve done your transactions with whatever fancy Defi contract, and because of the network effects, because of the properties of Bitcoin, because of the fact that it’s not controlled by any group and where the Ethereum is controlled by a group of insiders that have changed the code, I think it’s over a dozen hard forks, over Bitcoin’s short history.
They will continue to do that. Ethereum is relying on marketing and appealing to the existing ethos of. Internet innovation, whereas a Bitcoin is relying on cold, hard math and supply and demand, and the monetization of spare or underutilized energy resources to secure the network. And in a funny sort of DaVinci Bridge way is how I like to say it.
It helps contribute to Bitcoin’s value because if there’s a cost to produce a Bitcoin, which there is in. It doesn’t entirely create a price floor or a price that the Bitcoin market has to return to at any point, but it helps in part do that. It helps create some sort of anchor. What’s the replacement cost of a Bitcoin?
So it helps tie Bitcoin to the real world and. Cold, hard, free market economics as opposed to Ethereum, which is you’re trusting a cohort of people who you don’t really know and you don’t know who’s included in that. You know that there’s vitalic and you maybe have heard of Joseph Lubin who’s pulling a lot of strings behind the curtain, but.
You don’t realize that you’re trusting these people with monetary policy over your savings and beyond monetary policy. Also to change the rules of the game. That’s what you have enabled them. You’ve empowered them with total control to unilaterally change the code by which your assets, your savings are kept.
I think the truth is that people who know a lot about have spent a lot of time looking into this stuff. They inevitably, invariably come away thinking, actually, I trust Bitcoin because there’s no. Buddy I need to trust. And if you’re betting on Ethereum, you’re hoping that the influx of people who don’t know what they don’t know much yet exceeds the outflow of people who learn enough to stop trusting Ethereum.
And that’s a losing bet over enough time. Yeah, and you can
Terry: see that through the cycles, right? Just the everything else it blows up. Pops goes away.
Jesse: Yeah. Everyone likes to talk about how Ethereum is up a ton, but it’s actually down versus Bitcoin. Versus its all time peak, which was June, 2017. So June, 2017, it reached something like $400 and versus Bitcoin.
That was actually its peak. And then January, 2018 it reached $1,500. Something like that. But it was actually down versus Bitcoin. That was a lower peak. And then in this most recent cycle, it reached 5,000, something like that. But that versus Bitcoin was again a lower peak. So each successive peak for Ethereum is lower in Bitcoin terms.
So you’re writing this incredible volatility to have your asset. Underperform this more boring, more stable, less sexy asset that doesn’t have all the PO and circumstance and excitement around it, and you’re choosing which of those you would prefer to store your savings in. Even if you’re not consciously making that decision every day.
That is what you’re doing, and that’s why the more you learn about differences in these two assets, the clearer it becomes that Bitcoin is the thing to trust.
Terry: It’s just obvious that the more you do study the history of money, the more you realize humans suck at money. Controlling money. We actually suck at it, and we make the same mistakes all the time.
So if there’s another human who’s on top of this money, this new other sort of thing, you can bet that on a long enough timeframe they’ll make the same mistakes. And so the whole point of cryptocurrency was to take humans out of money. That’s where I was like, they’re just completely different things for me now.
That’s another experiment with humans trying to control money. And the reason we’re here is because we’re sick.
Jesse: Yeah, and that’s part of why Ethereum has this appeal is because it speaks to our recent history of trusting central banks with monetary policy and we, we kind of feel like that’s should be a part of how money is managed.
But then if you look far enough back in history, you just have to look back before 1971 when we went off the gold. Or arguably before central Banks created, so before 1913, when you look back then it was just gold and the amount of prosperity that was created. Think about the 150 years before central banking emerged.
Those were the most incredible years of free market productivity and innovation. That’s the Guilded age, right? The Gilded Age. That was the industrial revolution, and we created the railroad and the automobile and modern civilization as we know it. And then central banking comes around and less of a crucial role.
As it was still sort of seizing power over money, and then it became complete in 1971. And think about how the world has sort of gone downhill, if you really think about it since 1971. Yes, technology has gotten better and we’ve made all these advancements with that technology. But in terms of the economic, the financial conditions of the working class, your average hard worker earning a.
Life has gotten worse. Asset valuations have been bid up and wages haven’t kept. And that’s in this era of money that is unbacked by gold. We’ve broken the link between money and cost to create more money, and that has only incentivized and furthered the interests of wealthy people who have a lot of assets and it has hurt everyone else.
So bringing it back to Ethereum, why do you wanna stay in that kind of. I think the lesson from history is that gold served as this solution to the money problem of what money do you trust in a transaction between two strangers? You trust gold because it has these great properties and it’s hard to forge and you can trust it and look what we built on the gold standard.
Look how things have gone awry since we straight away from unmanaged free market money. And Bitcoin is this incredible stride to create a perfected free market money, and Ethereum is a continuation of the same management principles that we’ve seen spoil the financial condition of the 99% over the last 50 years.
Terry: you can kind of see Lynn Oland’s done some great work on this, and Jeff Ruth talks about this as well. Like you can see why, from a technology point of view, if you think of money as a technology, why we sort of did break that link because it speeds up the velocity of money and it makes everything work better, right?
Because of how slow and clunky goal was. The problem being that it creates that incentive to. It creates that incentive to create more receipts than there is actually money. And that’s why we’re in this situation now where I see all these graph now, and it’s the same. It’s basically we’re living in a world now where you can buy more of what doesn’t matter.
Netflix, pizza, , entertainment, and less of what does housing, healthcare, education, all that sort of stuff. And that’s what you’re talking about. That’s what’s hard to wrap your head around. We’re living in a world now here in Australia where you know, over the last couple of years, you’re paying eight to 10 times your income for a house pre 1971.
You’re paying 2.2 times your income. Your mortgage represents 15% of your paycheck. That ain’t how it works. Now we’re living in a better standard of life because of technology, but it’s actually we’re worse off in terms of our time, and that’s actually what wealth is. How do you get to spend your time?
We’re in this rat race because our money’s broken.
Jesse: Yes, perfectly summarized it. Somehow we unintentionally created the incentive to print money and handed that to a generation and a set of that generation that had every interest in the world to print money because it jacked up the value of the assets that they purchased in 1981.
When, you know, if you’re talking about real estate a mortgage, the interest rates in 1981 were 15. In the US at least you would get a mortgage for 18%, and that’s so high that the value of that house, the sticker price has gotta be pretty low for that to make sense for anybody to purchase it. So you had the baby boomers buying houses.
At two x their annual pay house for $50,000 or less. And then over the next 40 years, interest rates have been managed down by people who have an interest in managing interest rates down, and have the tools and freedom to print money and play with all the levers in order to do that. So that’s what we’ve seen.
We saw interest rates go from 15% down, managed down to 0%, and stay there effectively for the last 10. Jacking all asset valuations up over the course of their careers. And now our generation, the millennials and the Zoomers, and I went to Stanford Business School and most of my classmates were in our mid thirties.
Most of my classmates can’t afford a house and we’re Stanford MBAs. You would think that we would be on the. Latter. And part of that is that we’re, you know, largely in high cost of living areas, but that’s ridiculous. That’s an outcome of being able to print money. That’s what the innovation is too.
That’s just a symptom of the disease here.
Terry: Yeah. But that’s something Jeff Booth said really sort of struck home for me is like all that stuff, you can see why they wanted to sort of decrease that link so they can increase the velocity of money. But now we have a form of money that has high velocity that doesn’t require.
It doesn’t require receipts of money, and that’s the huge thing. I think that when you understand that, you go, wow, that’s. Huge. And we talk about how things have just gotten worse for everybody. Now, what that can do to make things better for everybody is massive. But the problem being, I think people are just watching the price, right?
And they’re watching the price and they’re saying, well, the price is down, so it’s crashed. Which means it’s nothing. It’s dead. Look, you’ve been through few of these cycles. I’m on my first tour of duty, right? So I’m buying, I buy up. I’m also buying down now. Right? Now you’ve got a great analogy, I think, and it really helps me to understand if you don’t know where you.
You’re gonna be affected by this volatility, but I think a piece that you wrote, which really did help me understand what it is you’re doing when you’re buying Bitcoin, is staking a claim. Can you talk to that analogy between you’re staking a claim, the American West and you riding the volatility of investing or putting your money in, or saving in Bitcoin right now?
Jesse: Yeah. So Bitcoin is volatile because it’s in the process of monetization. It’s in the early stages of the world, figuring out what it is and realizing that it has value, but it has these mechanics that are relentless at causing it to become a more scarce, more proven asset. And through that relentless pushing forward every cycle, every having, and then the post having bull market run and crash, you’re going to.
Onboard, just an incremental slice of the world that is finally forced to consider, okay, maybe there’s something to this Bitcoin thing. I’m gonna learn about it. Actually, now that I’m reading about it, I realize it has these incredible properties. It has merit. I’m a believer I’m gonna accumulate some, and you add that slice of adopters to the existing pool like you or me, and that’s how this thing.
Monetizes. So it does it through these very volatile cycles, but Bitcoin itself is not volatile. It’s how we react to this supply shortage that each having precipitates, we are, our psychology is such that we pile in with fomo. When we see the price drifting upwards, which is just a mechanical reaction to the having, but then we exacerbate it and turn it into a bonafide bubble, and the bubble by definition is unsustainable and eventually pops and crashes, and then we overdo the fear on the way down.
And so we are the volatile ones, introducing volatility to Bitcoin in its. Bitcoin is just doing its thing every 10 minutes, producing a new block and every four years getting twice as scarce, twice as hard. So that’s just the nature of investing in this asset or believing in it, is understanding that there’s a ton of human psychology layered on top of the realities of this asset in its early process of monetization.
So the analogy that I like to make here is to the American West of, if this is the protocol of value storage and exchange the internet of value, and you can own a slice of that protocol because it is value and, and someone has to own all the Bitcoin that’s out. Then it’s kind of like land. There’s real estate on this protocol and anyone can go out there and stake a claim to that real estate.
And so when in history have we had any kind of similar. Example of vast new area of real estate opening up and early intrepid daring pioneers or people who were otherwise driven away from mainstream society to go seek their fortunes. As an American, the American West pops out as once the Louisiana purchase happened in 1803.
The following century really was characterized by this westward push and the population and build out of the infrastructure for two thirds of the land mass of the continental United States. And what did it look like to be a pioneer on the American West? The Oregon Trail. The Oregon Trail was Midwesterners from Illinois in that area heading out to this new colony of Oregon because the authorities there in their attempts to build a population, promised people 640 acres.
If they would make the journey and arrive in Oregon, you just by getting here, we will give you 640 acres of farm. And the earliest people to do that were crazy or driven away from society, and some of them died on the way and there’s a video game now about their apparel. But those who made it got to stake a claim to this fertile farmland valley in Oregon for 640 acres, and worked that land for generations to come cementing the financial security of their families for generat.
So some guy sitting in Illinois made that choice to dare it all, risk it all, and became the legend in his family that secured financial prosperity for his family, for generations to come.
Terry: And his partner and everyone who went with him did that as well. I got obsessed with this kind of part of history.
After reading your article, actually, there’s a fantastic TV show called 1883. Oh, I haven’t seen. It’s got the country music singer, Tim McGraw and Faith Hill are in it, and they’re the like main characters along with their daughter and it’s about them going Westwood to stake their claim.
And if you wanna know what that journey looks like and you wanna know how gritty that is, watch 1883 because. It’s really well done and I read a lot about it after your article, but then watching the TV show, I was like, wow, that’s insane. And it does put in perspective, right? What you’re doing is you’re dealing with that volatility now in the market because you’re staking your claim, but you don’t have to put your physical health and wellbeing and your life at risk the way these folks did.
Jesse: Yeah. And implicit in that bet that people, pioneers of the American West were making was farmland, is farmland. It has value. I can work this land. And I think that’s a good proposition. Like, I want this land and I will take it and work with it. And part of that is knowing that people value farmland. And for whatever reason, people on the east coast had a tough time conceptualizing of the value of farmland in Oregon, and there was an arbitrage there.
Basically, the opportunity to invest in Oregon, knowing that as Oregon built out and became more developed and more people arrived there, that farmland would be precious and you can get it now before the rest of the world gives a. Or you can wait and not have that slice of the frontier. And so to tie it back to Bitcoin, I think that Bitcoin is a savings technology.
I think that’s the right way to think about what Bitcoin is and what it can be for you and your family and your financial future. It has this built in mechanism of increasing scarcity that manifests. And appreciation and value every four years. What are your other options in terms of how you’re building your wealth for your family and your financial future?
Right now you probably have a 401k and maybe you have a mortgage, and these are forced savings contracts where you’re signing up to allocate to your 401k with every paycheck to allocate to your mortgage and build your real estate. Every month. And if you understand that asset valuations have been bid up to crazy multiples because of the effects of printing money, quantitative easing over the last 20 years, and driving down interest rates from 15% to zero over the last 40 years.
There’s not a ton of upside in equities or real estate when you put it in those terms, but there’s this asset where you. Squirrel away. You can set up on one of the Bitcoin exchanges to purchase a little bit of Bitcoin with your paycheck every week, and it can be an additional forced savings, uh, arrangement, contract, whatever that you set up with yourself to save for your future in this asset that.
Only 4 million people in the world own $2,000 or more of it. And that’s an on chain number. So if you look at the Bitcoin ledger, that’s how many addresses there are with that much money in it. And of course there are people who hold it on exchanges, but if you hold it on exchange, do you really understand what you’re owning?
And does that mean you’re really an adopter? I don’t think so. So 99.95% of the world don’t understand that this is an asset, this frontier is worth. In the same way that Oregon was worth a, with having a slice of and over time, as people learn about this asset, we’ll more and more people adopt it as a savings technology for themselves.
And if those things are true, then you have the ability right now to set up a digital savings technology for the digital future. that is separate and different and a little bit scary because it’s not tried and true through generations of equities and real estate history. But that’s why, in my opinion, It is a better, more attractive savings vehicle because people don’t understand it yet.
So that’s the potential and the problem that all of us have to reckon with is as you learn about Bitcoin and you learn about cryptocurrencies more generally, you have to integrate what you’re learning with your behavior. How are you going to interface with this thing? Is there an opportunity for you and your family?
Build a Bitcoin savings plan and trust in that and have conviction in it because you learn more about properties of Bitcoin and. You can see by learning about it where this thing is going. And that’s the problem that unfortunately all of us have to figure out and constantly update what we’re gonna do.
And as I dug into this enough, I came to the conclusion that Bitcoin is the most important asset of the 21st century and the thing that I believe in and trust in the most. So I’ve changed my behavior based on that, and it’s very uncomfortable for everyone. But everyone every day makes the decision.
Where they store their savings and how they invest their money. And as you learn more about Bitcoin and cryptocurrency in general, unfortunately we all have to continuously update our own savings plans.
Terry: Yeah, it’s a really good point, man. Thank you so much for coming on the show. What would you say to those who were buying in the run up last year and now think they’ve made a mistake?
How would you advise that person right now?
Jesse: Yeah, there’s blood in the streets, right? And you feel stupid. And holding Bitcoin, I can tell you, is 90% pain. And you are a genius 10% of the time. And that emotionally is very difficult because you feel wrong most of the time. And. That’s just the market resetting the prevailing beliefs about Bitcoin.
Clearing out a bubble in terms of market sentiment in the way that happens for whatever reason with human psychology, is a crash. And then everyone holding that asset feeling stupid. And that’s probably how it is on every frontier. You know, like I’m sure that the early farmers of Oregon wondered if they had made a terrible mistake when there was a drought or flooding, or the latest wagon train got destroy.
And the only thing you can do is zoom out enough to take stock of the fundamentals of this thing and ask yourself, is there a having coming? Will the next having happen? What do I know about the mechanics when a having happens? And it’s hard and fast, it’s simple math here that there is a have in.
Nothing can stop it unless you destroy the internet. Satellites and radio permanently, unless you do that, having is going to happen in 18 months. And when that happens, there’ll be a supply shock because there’ll be half as much supply going out into the market. And this cycle will repeat because the only way for price equilibrium to reestablish is for when there’s half as much supply in just as much demand is for the price to drift upwards, which is what has happened after every having, and that creates the climate for a new bubble to develop.
So when I look at it, when I zoom out enough to take stock of it, that’s what’s coming again. And the whole history of Bitcoin is a high and a low, and then a higher high and a higher low again and again. So welcome to everyone who bought on the way up or bought at the top. You’re earning your stripes right now, unfortunately, sorry about it.
The option you do have is to buy more and lower your basis, and the only way you’re gonna do that is if you take stock of the fundamental. And remind yourself why the hell you bought this thing in the first place? And realize that all of the noise out there in the media is coming from the 99.95% of people who haven’t integrated what Bitcoin is with their financial plan.
And so they react to Bitcoin crashing and call it dead.
Terry: The thing is the value propositions actually got stronger. When you look at how volatile and fragile the existing system is now because of a few rate hikes, it actually just solidifies. And so if you understand what it is you’re buying, then you shouldn’t be shaken outta your position in these times.
Actually, as you just said, you see this as an opportunity to be able to average down what you’re buying at. And I did hear something yesterday, don’t quote me on this, but this is like one of the cheapest times in history. You could ever buy Bitcoin at any price. I’ll see if I can find that and put it in the show notes, but.
This is a time of all right, like I’m continuing to accumulate, I’m getting more for less, and I’m not taking outward risk with this. I’m not, I’m like staking my whole life on it, but the thesis hasn’t changed. If anything, it’s only solidified. So what I think is, if you’re worried about it, Go back and really understand that history of money.
Go back and read the Bitcoin standard cuz you will see that it always tends to one, and it’s always the same one. It’s always the hardest form of money and there isn’t the harder form of money than Bitcoin and it won’t be, we now foreseeable kind of lifetime. So that’s big. But then in terms of what you’ve just said about the actual technology itself and how the increasing scarcity works.
That having coming? No think anyone can do to stop it cuz nobody’s at the forefront of this. Nobody’s making these decisions and it’s almost like it’s got a life of its own. So for me, I’m like, yeah, let’s do the Oregon Trail. I wanna be the grandfather that everyone looks back on and says, that guy had some foresight, that guy had some vision and he was, I guess, courageous enough to put some skin in the game.
And we get to benefit because.
Jesse: That’s the opportunity that everyone has. And the only way you can take advantage of that is if you build enough conviction by learning enough to realize that actually this is the asymmetric bet of our lifetimes. And do with that what you
will. Mate,
Terry: thank you so much. I’m gonna put links to all your work cause if we have just inspired you there to do a little bit more work and really understand this stuff.
Chris’s work or Jesse’s work is absolutely critical to be able to dig through and understand. So I’ll have links to all your work in the show notes. Is there anything else that you wanna point
Jesse: people? That’s everything. Yeah. You can find me on Twitter at cress btc, C R O E S U S, underscore btc. I love shooting the shit on Twitter.
I’m not great at dms, but you can find me on there and would love to engage with whoever uh, finds it’s valuable. Twitter’s
Terry: good too cuz you’ve got a lot of threads on there that really break things down. Some good stuff there you put on there around, I guess like how the blocks work and how that’s gonna change with price, all those kind of things.
So if you want more bite sized knowledge. That’s really good mate, thank you so much for coming on again, really appreciate you for, um, the time that you’ve given us. Yeah,
Jesse: Terry, thanks for having me.