In this ep, Terry and Ryan explain why they're primarily saving in Bitcoin right now. Guided by the intersection of monetary policy, Bitcoin behavior, and seismic shifts in the financial landscape. They also share a few good reasons why you should think twice before buying any at all.
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In this ep, Terry and Ryan explain why they're primarily saving in Bitcoin right now. Guided by the intersection of monetary policy, Bitcoin behavior, and seismic shifts in the financial landscape. They also share a few good reasons why you should think twice before buying any at all.
Expect to learn:
Join the Private Podcast Community
Click here to access free courses and trainings, build new habits, and connect with us and others on the journey to financial self reliance.
Other links 👇
Money mentorship:
Click here to start putting what you've been learning into practice.
Corporate program:
Click here to find out more about our workplace program
Follow us on Instagram:
Click here to see behind the scenes of our business and learn more about personal finance in bite-sized chunks.
Welcome back to the passive income project. This is Terry this time. Ryan, welcome. That's what you do every time, so I'll just flip the tables a little bit. Do it back to you, okay, terry, do you feel like you're being scolded by a parent?
Speaker 2:A little bit. A little bit About uncomfortable, for sure. What are we talking about today? We are talking about Bitcoin, are we? Yes, we are.
Speaker 1:We're talking about it because we were talking about the other day and I was like, and literally at the moment, everything I'm prioritizing right now, every spare dollar for me and, by the way, it's not a heap of spare dollars, because we're investing pretty aggressively in the business but every spare dollar for me at the moment is going into Bitcoin, and there are some real key reasons for that.
Speaker 1:And so we thought, well, we'll just talk about why that's the case, because this is probably a little bit of a different episode for us.
Speaker 1:We're not really talking about investing here, we're talking about speculating, and we thought it'd be good to sort of talk through some of that reasoning, maybe reveal some of the information behind this, just to talk about why. And if you haven't already understood and learned about Bitcoin, this might be a good way to kind of jump into the topic. And that's really the whole purpose of this episode. It's not for you to do anything other than start to learn about this topic and become educated, and so that's why we've said it's three reasons we're buying it and you shouldn't. I think this is more about that information that's coming through and the way some of these cycles are sort of converging when it comes to monetary policy, when it comes to Bitcoin and the way it behaves, and also some of the finance world, some of the big changes that are happening there as well. So we thought it'd be good to jump in, have a conversation about this, piss off some of our audience and see what they say.
Speaker 2:I reckon some people would be pissed off, especially because, like well, in saying that, the price of Bitcoin has been jumping recently. So I was gonna say that it's good to talk about it when it feels like no one's talking about it. But people are probably starting to murmur again now that the price is moving upward in that direction again. But yeah, there's lots of things happening on this front. We've got the second halving that's coming at the start of next year. There's some big kind of things happening with major investors and stuff like that.
Speaker 2:So I'm keen to talk about it because, just like you, actually we had a unexpected bill last week. With the bill of our house, we were just gonna be that we had to basically put a lot of our resources into our home and obviously reinvesting with the business and the app and stuff, but basically we're gonna have to come up with $15,000 for reinforced steel in our slab based off the soil testing and all that shit, and basically we're pressurized the financial cabin at our household. It meant that we're probably gonna have to pull $15,000 from Bitcoin. Oh yuck, to be honest, it really was like no, no, not now If there was a shocking time to sell your Bitcoin.
Speaker 1:It would be now, wouldn't it?
Speaker 2:No, I don't wanna take any of it out, in fact, it'd rather be going the other way, putting more in with these reasons. So fortunately it turned out that, you know, we actually didn't need to. It was about four grand. We didn't have to do it till the end of the next year anyway. So, but it did make me go no, no, no, no, not now, as new things happening, so let's get into that. So even me saying that, right, that is essentially timing the market. Yeah, it's trying to time the market. Now, I know you've got a bit to say around this.
Speaker 1:It is important to call that out, because we are actually not talking about investing here at all. So basically, I came up with this sort of model. I call it the money games model, and not all money games are played the same and everything's very, very different when it comes. So I'll put a link to the post that I put up on that and some visuals and the show notes, because it shows you how information asymmetry your time, your attention needs to be different at all these different stages. But there's basically like, if you think about it like a spectrum, you've got gambling on the far extreme to the left, then you move to trading okay, so that's in and out, in and out, and then you go to speculating and then you go to investing. That's kind of like these four different ways. You can play different money games. They're all completely different games and from left to right the amount of information asymmetry declines.
Speaker 1:So there's a lot of asymmetry in gambling. That's why not some people aren't allowed to gamble because they have all that information and they could profit from it unfairly. And as you move towards trading, it's still fairly much the same. There's a lot of information asymmetry, speculating still some, but investing very little. Everybody's working off the same information. There. You're actually just having superiority and judgment over longer time frames, and so what we are talking about here is not investing. We're talking about speculating, and that means that we're not talking about big parts of our portfolio. We're talking about small parts of our portfolio, and for me it's always been the same. I wanna keep it very, very small part of what I'm doing 10% or less for me, and that feels right. And also a lot of the research shows that you don't react to like a 10% change in your position, but anything beyond that you start to react emotionally. So that's kind of like the sweet spot for me and that's kind of where I'm trying to keep it at the moment.
Speaker 1:But when we're talking about, like what you're prioritizing putting money in, it's actually just saying this is a great time to be putting more money in that If you haven't got to that level yet with a 10%. So that's kind of the caveat that I wanna make and it is actually saying look, there are periods where some people have more information than others when it comes to speculating, because Bitcoin is not an efficient market and it's not efficiently understood either. Not a whole big swathe of people still don't know what that is, and they probably have looked at the title of this podcast and decided it's crap. Right, there's a lot of people with very strong opinions who know nothing about it, and that in itself is the opportunity, so that's why we wanted to talk about it, and there are a couple of examples here where, on the frontiers of anything, the future is visible, but only a few people can sort of see it and know it. So do you wanna talk about the first one, mate Jeff Bezos?
Speaker 2:Yeah, for sure. Just before I do. I do wanna call out like that money games model is fantastic in terms of when you're learning from someone or hearing someone talk about their approach on something. If you can categorize them with one of those, it will actually tell you a lot. It'll help you go all right. Is this person investing here? Are they speculating, are they trading or are they handling? If you can categorize it in that way, it'll actually tell you a lot of a story to that.
Speaker 2:So, yeah, jeff Bezos he saw the incident opportunity before most, I would say the growth rate of the incident. He was a consultant working in a career was gonna be doing really well, but saw the growth rate of the incident was basically just like I wanna be a part of that. Another one that really stands out Reed Hastings, with Netflix. He's inside of the stream and he saw that the incident was doubling in speed and harping in cost every 12 months and basically just saw that nine months out he was like there's gonna be a crossroads, of crosspoint here. That basically means that we can do this effectively at scale at a price point that is very profitable. Made that transition away from the traditional lines of blockbuster style, essentially.
Speaker 1:Well, they were mailing out DVDs to people at that point, yeah, so they're two really good examples of people who are at the cutting edge of an industry and, when it comes to knowledge, they do have kind of an insider's view. Now I wouldn't consider us like extreme, extreme insiders, but there's probably more than a thousand hours so far that I've kind of devoted to this and kept in touch with like information on it, and the key point is, if you are a pioneer in that way, you will have an insight into the future. Because it's not evenly distributed. People are seeing things before others. You'll be able to see changes and consequences before others, and right now, everybody still thinks Bitcoin is the same as everything else when it comes to crypto.
Speaker 1:And there's a key difference, which is that Bitcoin is in control by anybody, so it is a commodity money and everything else is now being treated like a security, which is essentially the same as a stock. So you're looking at picking stocks versus a new form of money that does something completely different. They're not even remotely in the same universe and everybody still thinks they are. So that's the first big kind of oversight, and the other thing that's happening right now is that FTX trial is on Sam Bangman freeze basically fucked. He's going to jump for a long time and everybody still thinks that like that means Bitcoin's dead. They're still complaining, all that sort of stuff.
Speaker 1:So it's kind of just an interesting time because, like, public perception that's relatively undereducated, has no idea what's about to happen here. Over the next six to 12 months there's going to be some very big changes that converge all at once, and it is the interest rate cycle. It's also institutional money coming into ETFs for Bitcoin and the last thing is you mentioned at the top is the halving cycle. So I want to go through each of these in a little bit more detail just to talk through and reveal some of that insight or insight information and sort of start to think about what does this actually look like for the price of Bitcoin over the next 12 to 24 months? Because these are very big shifts and changes and if they are all converging over the same period, if they overlap, it could cause quite big changes to the price.
Speaker 2:The first one is interest rate. Let's unpack that a little bit.
Speaker 1:The main thing here is that, I mean, most people who commentate on this sort of stuff are all pretty much in agreeance with this, which is we're kind of at the top of this peaking this cycle. When it comes to where the rates are at, it may be that they go up once or twice more, but when you look at where we are in relation to the last 12 years, we're at the highest point within the last 12 years. The difference is, though, the debt loads now, versus 12 years ago, are much, much higher, so the tolerance of the system to be able to cope with the rates for this high, for this long, is very low, and even though people are telling you that rates will be higher for longer, these are the same people that were telling you the rates will be lower for longer. We're always overcorrecting when it comes to monetary policy, and the way I understand this is imagine you were driving the Titanic right, and you had to drive through a very kind of narrow sort of channel of ice, but every time you turn the wheel, there was a two to three minute lag between when you started turning and when the actual boat started moving in the direction you turned, and this is essentially how monetary policy works, and so they're always flying blind and always overcorrecting. You just go back and you'll see oh, we went too low, we eased too much, we created too much, oh, we're gone too high, and we're always doing that you wouldn't want to put your name to drive the Titanic either, would you?
Speaker 2:It's the worst job in the world Like. Honestly doesn't turn out well for you.
Speaker 1:Just a shocker. Like you cannot outsmart an economy, you can't actively manage an economy, but we're going to keep trying because we don't know a better way.
Speaker 2:Something I do want to unpack there, though. You said before around like debt loads for people, like interest rates where they're at in relative terms and debt loads. Just like to give a good example of this 2011,. I think it was the last time the cash rate set by the central bank, which informs the interest rates for your mortgages that was the last time was around that 4.35, 4.5 percent.
Speaker 2:For example, if you think about the person that bought a house in Sydney in 2012, what they paid for that house, let's say it was a million bucks, and they had to borrow 800,000 to buy that $200,000 deposit. So they've had to borrow 800,000 at like 6 percent as a mortgage. That person now buying that same house, they're spending 2 million or 2.2 million and having to borrow 2 million to get it, and now the interest rate is now back up around that 6 percent for them personally too. So it's the same house 10 years later, but they've had to borrow twice as much to get it. So interest rate in 2012 at 6 percent for that person and the interest rate now at 6 percent for that person it's literally double.
Speaker 1:That's what I'm saying, like the tolerance for the system to cope with this for any period of time, even though they're telling you rates are going to be higher for longer. They need to be, they absolutely should be, but they're not going to be able to be that way because people won't be able to tolerate it. We're already seeing lead markers in retail really chop right down. There's always like a cascade of events that unfolded. Housing is kind of the last one along that line. We're only really seeing the impact of when they started raising rates now, because there's usually about a 12 to 18 month lag between when they make a change and when it actually flows through to the actual economy and people actually feel it. And so where we are now at 6 or 7 percent I think I'm close to 7 percent on my mortgage that there now we're going to be feeling this last rate change, you know, sort of mid next year, and they're always choosing between two things which is slight inflation that's what we're going for or deflation. We don't want deflation in any way, because if deflation happens and deflation is just a quick drop in prices going the other way and actually you're money buying you more over time, we don't want that, because then everything collapses. A debt based system collapses in that way. So they're always treading this line. That's why I said this Titanic, you're going in this like narrow channel of ice. There's deflation on the left and inflation on the right. You're trying to keep it in between the two sucky job.
Speaker 1:So the point is people that are telling you rates are going to be higher for longer. The reality is they need to be, but they're not going to be able to be because it actually never happens that way. Anytime rates have risen this far, this fast, historically, within an 18 month period, they're already back on the floor. Now we're over 12 months into that cycle. So that kind of tells you that we are at, or very close to, peak rates, which means that the only material way that rates can go is more likely down than up. Now that's a probability. So I'm not saying that is going to happen, but it's a higher probability that rates are going down. And if they're going to go up, mean the material way.
Speaker 2:Then they're going to be going up. And the important thing to note there is you don't make decisions based off right now as a point in time. You make decisions about overtime and when you're thinking about interest rates. My decision framework around this is what is the average of the interest rate going to be over the next 10 years, as opposed to what is it today, and what is it going to be next year, and is that average going to be higher or lower than what it is now? You would assume that the band, exactly as you've said, all those markers, suggest that the average of that will be a lot lower than what it is right now. Maybe not a lot lower, but lower.
Speaker 1:Yeah, but it's so easy to get sucked into the short terms kind of like what are they right now? And then look at the trajectory. Let's say, for example, we've just had the latest rate rise and so we've talked about this in the past. But you do this emotional forecast where you start actually just drawing a straight line into the future and in reality, you ignore the fact that it's cyclical. And when you look at history, you go well, it's probably not likely to be up, it's probably likely to be flat in, if not down and down, sooner than a lot of people think. And why does that matter? It matters because that's where we're going back into an easy monetary policy, which means it's easier to get money. And in times where it's easy to get money, assets like real estate, like Bitcoin, which are very hard to make, skyrocket in value because the money itself is losing its value, and so it matters because of that.
Speaker 1:The US obviously, is kind of the leader in this. There's an election cycle coming up. There's always, always, always policy that changes to make sure that things are easier for people around elections. They don't want people to be struggling, particularly when that happens, and their deficit right now is already at a trillion dollars a year, which is greater than Don't quote me on this, but somebody said it's actually greater than the UK's GDP, their deficit so that means that the amount of money they're paying on their credit card bill exceeds what some countries are able to produce.
Speaker 1:So they've got a lot of debt. Basically, they've got credit cards on their credit cards and at a certain point, actually, if you keep raising rates, you have to print more money to pay the debt servicing cost, and they're actually very, very close to that, and so that's why America has been downgraded from a AAA bond, which means that it's very well rated as a nation that will pay back its debt. It's gone from a AAA back to a AA, so that's a recognition that well, actually, this money isn't as good as it used to be. That's a huge thing, quite a big tectonic plate shift, and so that is really important, because we just need to understand that we're in a cycle here, and if the cycle starts to go the other way and we go back to an easing environment, we know what that does to the price of hard assets like Bitcoin.
Speaker 2:The same people who said rates will be higher for longer, the same people who said rates will be lower for longer. And the nature of the central bank is they do need to use that idea of job, job owning, which is influence, public perception over what will happen to influence behaviors, influence decisions around spending. So a lot of what you hear will be out there to influence the decisions you're making, because ultimately, they want to curb inflation without actually having to increase interest rates, and the only way they do that is to think that interest rates are increasing, and so that's the idea of job owning, not have to do it instead just how you. They will, and so that's where you always need to go through it and look at what has happened in the past. I think that covers the interest rates quite well. So a big reason is there's a lot happening there and a lot unfolding right now. The second reason you mentioned was institutional money and you mentioned ETFs and there's some big players on this front. Let's talk about that.
Speaker 1:This is a big one. This is one of those. If you are paying attention, you're starting to notice that the perception or the way the big money manager is talking about it starting to change quite dramatically. Larry Fink is a guy who owns BlackRock. Blackrock is the biggest money manager in the world. It's got $9.4 trillion worth of funds under management. So it manages a lot to people's money and a lot of money. And Larry Fink just recently has completely flipped on Bitcoin in particular and now believes it's going to be one of the most important things, most important technologies kind of moving forward. And this is a huge, huge thing because, essentially, blackrock is a product provider and it needs to respond to demand from its customer. So I guarantee you that Larry Fink has been asked repeatedly and repeatedly and repeatedly and repeatedly and repeatedly by customers for a way to get my money out of this kind of system and into something else. And this is really really important, I think, because cycles like this in history Lin Alden has done this kind of work as well and talked about in periods of high peace.
Speaker 1:You use money that requires trust because we trust each other, and so a Fiat-based monetary system is a money based on trust. I trust that you're not going to print too much of it on me and debase it too fast on me. That's a trust-based system. In times of low peace, people move towards money that requires no trust and that's a commodity money that's out of the hands of humans. And so what is Bitcoin, other than the best commodity money that's ever existed is basically Bitcoin and gold and real estate is a form of money also is kind of can be used in that way.
Speaker 1:So when you look at kind of cycles in history, you'll see that in times of war, I don't want the certificate. Give me the real thing. I'm not trusting that you're going to got my best interest at heart. Give me the real thing, and so you'll see that happen all the time. And so this is why I think the demand is just basically forcing these companies to go into it, and there hasn't been an on-ramp in a way that's sort of acceptable for the normal person. But if they do get approved because there's now 12 financial institutions currently have Bitcoin ETF applications in, with the SEC, blackrock's leading the way, fidelity is another one 4.3 trillion so that's like whatever. That is 13 trillion between the two of them which is huge, right.
Speaker 2:9.4 trillion, just BlackRock in itself, bitcoin, its market cash. So the amount of US dollars in Bitcoin right now is about 750 billion. Now, that's a lot of money, don't get me wrong. And when I actually ran all these numbers yesterday to kind of compare this and go well, what's the relative size of these? And I did have to use Google to help me get the amount of commas and zeros to get that right. It's such an abstract amount of money.
Speaker 2:But the thing to recognize here is BlackRock. The amount of funds out of management with this fund manager is around 12 times the amount of money that is in Bitcoin. From a US dollar standpoint. It's 13 times the size Fidelity 4.3 trillion. It's about five times the size of the amount of money invested in Bitcoin. That's a lot just in those two and, like I said, there's another 10 that have applications in and expected to hear something around BlackRock application in January by the sounds as well, which is a lot of money that if all the customers of BlackRock, for example, by itself, if they said we want to put 1% of our portfolio into Bitcoin, into an ETF that helps us get access to that in a really safe way through this way, where they don't have to go through a backdoor or through it. You know something like an FTX or a cryptocom or something like that we can do it througha trusted resource. 1% would increase the amount of volume in Bitcoin by 12%, which is massive just in BlackRock itself.
Speaker 1:And that's just the first order consequence. Right, because once that happens, what you're going to see is you're going to see manager risk change completely in people's minds. The calculus in a fund manager's mind is going to change completely, because now it's good for Larry Fink, it's good for me. Now they'll want you to know that they've been thinking about it logically all the way through. They have not. The most important thing that everyone thinks about is how do I keep my job Right? And if you're the person sticking your neck out and you get it wrong, then you're done. So I guarantee there's going to be a Vanguard ETF and all the people in fire that think it's all bullshit and nothing. They're going to have to all eat their words because they're going to be like well, hang on. The Paragon of Finance is now got a Bitcoin ETF. I wonder why that would be so. It's going to happen that when this is approved, you'll just watch the Domino's continue to fall and more and more people are going to want to do it now. Because, if you're looking at times like this, you want high beta opportunities and that just means high volatility, high return. And if you look at the last 13 years since it's been in existence. Stanley Dracamella, best trader in history, says it's the fastest horse. It is the fastest horse. Nothing's doing anything close to what it's doing over time. Yes, it's volatile. That doesn't mean you don't have big troughs, but just keep zooming out and you see that it's absolute best performed thing since day one. And that is because nobody controls it and it's becoming more and more important. And there's this other concept called the Lindy effect, which is basically the longer something's around, the more likely it will be around. So there'll be a whole bunch of this stuff because this price will pop.
Speaker 1:People say it's another bubble. It absolutely is a bubble, but the thing that's different about a Bitcoin bubble is it doesn't pop and go away. It pops and keeps going. So Chula bulbs nobody uses Chula bulbs anymore, but the use of Bitcoin and the amount of people around the world that are using it is going up. So it is not the same, even though there is a mania that happens from it. The whole point here is there's a big source of new demands, big money and the big money wants in. The big money wants in. That's the key point to take from this. If you've got 12 applications in from financial institutions, that represent over $15 trillion. That means the big money wants in, and when you're talking about something that is capped in supply, that's going to do not a small thing to the price. It'll do a big thing to the price.
Speaker 2:And especially when a lot of that big money is also in the bond market and these fixed interest products that are showing consistently basically being negative real rates of return, then there's a lot of investors there thinking, hey, we need to do something a little bit different here, because the inflation, or asset inflation, is this and this is what my money is actually earning in terms of interest, and there's very little growth in the bond market. Then there will be pressure on those fund majors do something different. Okay, so that's a big one Interest rates and then institutional money Bitcoin ETFs coming into play. The third one the halving cycle.
Speaker 1:Yeah, and just to kind of lay this up and tie this together Bitcoin ETFs on the verge of being approved, interest rates at the top of the cycle will flip to being more easing soonish, and then around the same time this is all happening. This is a halving cycle. Now, the halving cycle is just how Bitcoin is issued. So the way fear currency works is that it comes into supply from either the government selling bonds or commercial banks selling loans. Money is created out of thin air and it comes into supply. From that point of view, now, that is not a fair issuance, because the government chooses who its money goes to and also you have to be credit worthy to get the money. The difference with Bitcoin is it's completely fair. It doesn't matter if you've got more computing power, it doesn't matter if you've got more resources, it doesn't matter if you fit a certain criteria. It's 100% random. And how it happens is when they do the validation of the blocks. So this analogy, I think, is the best way to understand it right and how the Bitcoin network is secured, how it works and how Bitcoin is actually created. So the Charlie and the Chocolate Factory analogy if you think back to the Charlie and the Chocolate Factory movie. You'll remember that there was the golden ticket and kids all over the world had to be competing to find this golden ticket, and that meant that they could go to the factory and they could have as much shock as they wanted. They could have this grand tour, okay. And so what that did was it created a reality where kids all over the world were expending all this energy, all this activity to be able to find this golden ticket. So they're buying all these chocolate bars and they're rifling through them. They're not even eating them now, they're just actually rifling through them to see if they've got the golden ticket. And as they expend that effort to find the ticket, really what's happening is in a Bitcoin sense. If they're trying to find this golden ticket, they're actually the ones that are validating the transactions. Their effort and energy is actually going towards validating the transactions on the Bitcoin network. So, rather than a bank approving the transactions on the ledger and you having to pay for all the infrastructure, all of the labor that goes into that, you're actually getting that done for you by your peers on the network, and everybody doing that for each other actually secures the network as well, because it's already a decentralized way of doing it. Everybody is actually validating all the same transactions at the same time.
Speaker 1:Now someone is going to win the reward completely at random. It's called the block reward, so they get the golden ticket. And so if I'm the one who gets the golden ticket because I've been validating transactions for everybody else, then what it means is I get awarded Bitcoin, and currently the block reward is 6.25 Bitcoin. Okay, so that means at our current price, what is it? 55,000? It's going to be something like $350,000. Is the lock reward? Something around that? And so I'm going to win that and that's my incentive for actually doing the transactions validating and securing the network at the same time. So that's the most important thing you get. There's a block reward. It happens. Somebody gets it at random, but every roughly four years the block reward changes and it drops 50%. So it has been 6.25 Bitcoin.
Speaker 1:It is about to become 3.125 Bitcoin, which means the issuance of Bitcoin has slowed down dramatically. It's become an even harder asset, which means there's less of an insupply. There's less of it that's going to be insupply. So what this does is it creates a supply shock. Okay, when that steady demand for buying Bitcoin meets supply shock, what you're going to see is a price spike and historically, if you look back through the history of Bitcoin, what you'll notice is, at every one of these harbors, that price spike.
Speaker 1:It attracts speculators, it attracts traders, it attracts people who are kind of looking at opportunities. Because humans love the idea of a rising price, I'm going to buy something that's rising. We buy when things are rising and we sell when things are falling where it is. The point is it creates kind of a hurting instinct in people which pushes up the price. Now imagine that is happening at the same time that demand for Bitcoin through Bitcoin ETFs happens and at the same time that monetary policy starts to ease. What would that do to the price of Bitcoin? That's the key insight here those three things happening together, converging those three trends, those three events. If they're all happening and they start to overlap, that could be one of the best opportunities of your lifetime.
Speaker 2:I just want to dig into that example you just shared there around, like the supply shock part of it. The way I actually kind of translate this in my mind to make it feel more real is like just to compare it to like gold, in the sense that you've got a bunch of people in the world that are mining for gold in the ground. They're digging holes trying to find that little nugget that exists there somewhere that pays that amount of money and it's essentially saying that all these people continue to dig but the amount of gold that they can find in the grounds has halved, and so the amount of money that's coming out. But you've got all the people in the world. They're still wanting to buy gold jewelry and that demand the amount of people wanting to buy jewelry. The same people are getting engaged in buying engagement rings and wedding rings and all those things.
Speaker 2:All that stays the same, but then half of the amount of gold is coming out of the grounds to be able to support that demand of people wanting to buy jewelry. For me it helped me kind of reconcile that a little bit, because it still feels abstract. You know you think about blockchains and bitcoins and all these things. But when you do see it like that, you know people are going to continue to want to buy jewelry and there's going to be that steady demand, but half amount of gold is coming out of the ground to support that. Then the value of what is coming out of the grounds goes up a lot because people want it More. People want the less amount that is now coming out.
Speaker 1:And there's another example that you could use, and it's probably like 10 or 15 years ago now there's a big cyclone up in Queensland and it decimated all the banana crops and so, all of a sudden, bananas went from like $2 a kilogram to like $12 a kilogram. That's a really good example of how you've got steady demand for something. When it meets supply shock, what happens to the price? Because you've got the same amount of money chasing half of the thing or less of the thing, and the price has to get bit up, and so that kind of supply shock is baked into the way that Bitcoin is issued, and every four years it creates that kind of similar behavior, and so you can just watch human behavior play out the same way.
Speaker 1:Right, you're going to hear more and more articles coming up about Bitcoin, as it happens, and it's going to be Bitcoins, booting, bitcoins, mooning, all this sort of stuff, and so people just read those articles and go, better, buy myself some Bitcoin, you know, and this is exactly how we got into it in 2021. We just kept getting asked questions and questions and questions and questions about it, and we're like, well, I'm going to have to friggin understand this thing, and so that interests drive its own interest. And now, all of a sudden, news articles. They're going to get more clicks if they start actually talking about how Bitcoin's mooning, and so you'll see a lot of Bitcoin mooning articles. You'll hear a lot of hype and most of it's complete bullshit, but what you will understand is that, over time, every time that supply shock happens and it meets steady demand, a bunch of speculators come in. Right, the price goes way up to the top, it hits its peak and then, as it starts to fall, the people that don't understand what Bitcoin is. They sell out.
Speaker 1:But some of the people like us that actually do do the work. They understand what they bought and so they stay in. So it creates a new floor. And the thing that's distinct about Bitcoin is and this is what a lot of these guys, these fund managers, have said is that no other asset class in history have they seen the behavior of investors actually be the same. Where they're like they actually are completely rigid, they don't give a shit, they'll just buy anyway, and so that's distinct and that's different and that's new when it comes to this stuff.
Speaker 1:And so every one of these kind of new bull markets, new bubbles, creates a new mania, there'll be a subsection of that audience or subsection of those buyers that actually do do the work. That creates the new floor and then another four years we see the same thing. So what's different about this one is that we have the big other trends converging at the same time as the halving cycle and, as I said before, they overlap all at the same time. Like I'm not making any predictions on price, but I haven't seen those things happen all at the same time, all at once. So that's why I'm sort of like well, if I've got a spare dollar right now, I think I know where I'm putting it.
Speaker 2:Then tell me, mate, like those things being true? You said in the intro that you included that. Why you shouldn't? You said this is why you are using every spare dollar, and this is why you shouldn't. Why'd you say that?
Speaker 1:Because the opportunity with Bitcoin is to firstly understand it and look if you are going to buy it, like if you're going to ignore what we're about to say. What I'd encourage you to do is just to buy enough, like put $500 in it or something like that. That actually just gets you paying attention to it. That is actually not a bad way to learn, but you shouldn't buy it before you know what it is, and there's actually a fair bit of work required to understand what it is and what it isn't, and most people aren't willing to do that work. So you should never listen to an episode like this and go I'm going to do what they're doing. Right, and the point of this episode isn't to get you to buy Bitcoin. I actually don't want you to buy it. I want you to learn about it and hopefully you do. So why should you not buy Bitcoin? You shouldn't buy it if you don't know what it is or why it's here. And why is it here and what does it actually do? You need to probably devote about 100 hours to that question. If you're not willing to do that, then just stop listening to this episode right now and just forget you ever heard it. Forget about it, because you'll be one of those people that sees it, buys it when it's up and then when it crashes, you'll be like, well, I made a big mistake and you'll sell at the bottom and you'll be like, oh, that's a scam.
Speaker 1:That's the first part and if you do want to understand what it is and why it's here, we've done a bunch of the work. We've put our whole Bitcoin series together. We also got a whole bunch of experts to come and talk about it. So I'm going to put links to our series, but also the expert episodes in the description of this podcast. The other thing we've done is also we've collated all the resources that we actually went through in our kind of learnings to understand that and put that stuff together. So if you do want to do that learning, we'll make it super easy for you to put it in the show notes. That's the first reason. Do you want to go through the second?
Speaker 2:Yeah, I think I'll just expand upon your point there around not knowing what it is, and I think it's probably a good signal of that If you are thinking that it's the similar or the same as stocks, that you're looking at those things and comparing them, and that's probably a pretty good sign that you need to spend that a little bit more time, like you mentioned, to understand it a little bit better, because it's not the same. It's a form of money. It's not a company. A company is a group of people trying to figure out how to solve a problem, create a profit, then share those profits with you as investors. This is talking about like a systemic change, and then you know potentially a new way of people working together in the form of trust in the system and transferring a value Very, very different things. So I think that would probably be a good sign. Dig into a little bit deeper.
Speaker 2:But another one I'll probably add is if you're not sure how to actually buy it and hold it safely, there are scammers. There are absolutely some really faulty institutions that exist, like in FTX, like these different ones that are bad players, if you like. So you do need to take that time to understand how you actually buy it safely, but then, importantly, how you hold onto it and keep it away from that danger as well. And so you need to take that time to go all right, what is the best platform to help me buy it from the exchange, if you like, but then, importantly, how to put it into storage. Take it away from the internet, take it away from the exchange, take it away from those exchanges where, well, like an FTX, that can collapse and it has nothing to do with it, it's just a vehicle to help you buy it.
Speaker 2:And so you need to take that time to figure out how do I put that into cold storage, how do I put it onto a hard drive, or it's a USB, for example, and then how do I protect that. But I think, as you mentioned, like you know, if it's $500, for example, that idea you mentioned around the herd mentality you want to be a part of that one or 5% that maybe becomes a part of the herd and sees the price going up. But the small percentage of that herd that actually gets curious enough to want to learn more, to understand it better, to invest the hours, actually helps set the floor of the what comes next, and I think these are some of those little steps that are worth doing, and if you're not willing to do them, then you shouldn't buy it.
Speaker 1:Yeah, and if this is the first time you've thought about this, but what we've said makes some sense to you just don't spend your money buying Bitcoin. Just spend your time studying it. And the way to do it, I think, is to spend your time trying to discredit it in earnest. And if you've done that for a period of months and it still keeps coming up, yes, then you're going to have the conviction that you need to be able to hold onto this bucking Bronco, because it is a bucking Bronco.
Speaker 1:It's the most volatile asset that's out there and if you don't know what it is, you're going to be like shaken out of your position because you're worried and you're going to be overexposed. And the key point with this is what I said at the start we're not investing here, we're speculating. Okay, and what's really, really important about the properties of Bitcoin is the asymmetric nature of its risk versus return and reward. So for a small amount of risk, you can get a great amount of reward and return. So you actually don't need to have a lot of this. You just need to have small parts of it if you are that way inclined and you've done the work. So the people that don't understand it or have gone too far and have done understand how to manage risk. They've got way too much exposure to it. It has to work for them. And now, all of a sudden, it's not a money decision, it's way too emotional, it's playing too big a role in their lives. So just remember that as your exposure increases, then you actually lose that asymmetric nature of this asset. And we're calling it an asset because you can store your value in it. And we're not investing, we're speculating, and we're speculating in a new form of money that we can save in, we're saving in it. There's no income from this, at least not yet.
Speaker 1:That's probably the last thing I'd add. Don't ignore us. This is just information. Hopefully it gets you curious enough to go back to the first series. If this has done its job, go back to the first series, go work your way through that and then listen to the Bitcoin experts that have come on as well. We did that at the bottom of the bear market, so we're not just here saying Bitcoin's about to moon. We've been talking about this when it's popular, when it's not popular, and right now, everybody's overlooking it. Everybody's overlooking it. So that was why we wanted to do this one now.
Speaker 2:Yeah, absolutely mate, and like if those things don't make you want to learn more about it those big three reasons and how they're converging all at the same time then I don't know what will, so I wouldn't even bother if they don't see it Get you excited. And, as we mentioned, going back to that series for Dylan Crypto, what episode Believe?
Speaker 1:it's episode 40 on the podcast. You're going to have to scroll your way down a fair way we were talking about a little while ago now, but yeah, that'll take you through the whole series. It'll talk about what it is, why it's here and then just how to think about it over time, and I think that, paired with those episodes we sort of brought in those experts on, is a really great place to start, and that's all I'd call it is a start.
Speaker 2:Yeah, brian, I love that timeless. It's not topical, so it still makes sense now. Thanks, man, good job, beautiful, say the next one.