Volatility Is An Ally For Long Term Holders

Hi Michael. Hey Bill nice to be with you. This is fantastic. Okay we'll get right into it Michael. I've talked to many heavy hitters around this conference and

They're all saying the same thing which is this feels like a momentous occasion not only for Bitcoin history but for American history

Can you say a little bit more about what other potential inflections could be ahead for Bitcoin?

Yeah, I mean I first let's not let's not run over that comment too quickly

This is the biggest week in the history of Bitcoin. So this is a big deal

I mean this is the week when we have two of three presidential candidates you have a former president perhaps the next president here as

as

Trump said 10 senators a lot of congressmen

governors and

And the amount of media attention is profound

So this is an extreme. It's a coming out party for Bitcoin

I think and it's

and it's

It's extraordinary week because they recognize the political power of the community

They also they also recognize this as a technology critical to the success of America and of global significance and

So I think it is a great week

um

This is an inflection point and before I tell you the next set of inflection points. Let's talk about what why this is an inflection point

This is an inflection point

because

there's

There's a

a subtext here

an implication and the implication is

Bitcoin is digital property

Bitcoin is property rights

Bitcoin is ethical

Bitcoin is technically sound

Bitcoin is economically sound

Bitcoin is an instrument of economic empowerment and

The establishment now agrees with you

Right and we all knew it four years ago

But it would have been not clear the establishment knew it the mainstream media in 2020 didn't even cover the industry

And so I think that this is a wake-up call this week to the mainstream and the the establishment around the world

that

Bitcoin is here staying

And and Bitcoin is the future

You know, I guess the other thing

That I don't want to I don't want to not comment on is the speech we just heard is

profound and historic

Right is it's pretty important because if you listen to what

Trump just said

He said

We're not going to sell our Bitcoin you do not sell your Bitcoin that recognizes that

You know, you would never say this about most criminal proceeds that you seized right

Actually the truth is if the United States

Seized car if they seized a drugship men if they seized a

Crata foreign currency if they seized pesos if they seized your roast if they seized

Paintings or collectibles if they seized your house

They would sell it

Right, I mean the normal thing is to auction off any kind of that property so the fact that

He would note that we're not it's going to be the policy of the government not to sell it elevates Bitcoin as property that is

economically superior

To all the other property

So first we have an endorsement and acknowledgement Bitcoin is property and

This and if you if it is property you a property rights to it the second thing is it's better property than that other property

And I recognize it the third is

We're going to create a national United States Bitcoin strategic reserve

That's a big deal

That's a big deal because

You know we go from

Bitcoin being something this toxic do you want to get rid of?

To something that is virtuous

That we want to hold on to so I think that that's a profound thing that just happened I think I

Think that Donald Trump's acknowledgement that the Bitcoin community is full of

Intelligent ethical hardworking creative inspired individuals

The kind of which that made America great he pretty much said that the people that that

Created this great country

Would a bit Bitcoiners. He said the founding fathers of Bitcoiners

He said everybody came to America as a Bitcoiner and what he's acknowledging is whereas once

The United States was the new world and it was risky and dangerous to come here for a better life and property

Now Bitcoin is the new world and it's risky and dangerous and people have suffered

Like Ross Olbrek to come here for this property and he recognizes that he honors that

And he's willing to actually stand up until the entire world that

That will be an observation that ripples everywhere in the world throughout the establishment and throughout other governments and there's gonna be a bunch of German politicians looking at that

Saying well if the US is not gonna sell as Bitcoin we must have been pretty stupid to sell our Bitcoin

And I think that's

Big big move forward

So a variety of proposals now we had yesterday rfk

Proposing to buy millions of Bitcoin

Different level of commitment today

What sort of policies would you think could potentially improve Bitcoin and its trajectory?

I think that there's the big three

There's three policies that accelerate us

To institutional adoption, you know that

Three things that take Bitcoin up by a hundred X from where it is today

the first thing is

To to legitimize and accept and endorse it as an institutional grade asset so

so fair regulation of the asset itself in the securities industry and

And January we got the first installment of that with the approval of the spot Bitcoin ETF

But it was an incomplete

an incomplete

regulation because the SEC still denies N kind creation

of ETF shares and

The SEC still denies the ability to trade

Options on top of spot Bitcoin ETF shares and

The acceptance was given grudgingly, you know, you know, it was basically I did it because I had to do it

But I didn't like it, okay?

so so what's the significance of that?

The negative opinion expressed when and when the approval came that

Sits as a shadow over a lot of mainstream investors

We need to flip from a negative opinion to at least a neutral opinion like what?

Why is it that a federal regulator is an expressing an opinion that this asset is good or bad versus that asset?

So so I think that that's got to change still I

Think that the lack of N kind creates and redemption means that it's a taxable event if I want to contribute Bitcoin or

Would draw Bitcoin from an ETF?

So if you were to like invest in an ETF and it 10x'd and then you wanted to take your Bitcoin in self-custody

You're getting charged 30% of the Bitcoin

If you wanted to move the Bitcoin from an ETF to a bank or to another custodian

You're getting charged as if you sold it even though you didn't sell it

So so right now it's it's there's a tax inefficiency and that's hostile

Whenever you tax someone to vibrate the I remember what I talked about vibration and frequency when you tax on the trade or on the transformation

you're

You're hostile you're oppressing the transaction. It's like you're damping you're damping the wave so I think

Allowing in-kind creates and redemptions will be a big advance forward

When you allow people to trade options on them you will you will eliminate the ball are less than the volatility and increase the ability to generate yield and

Those two things are are what you would expect in the maturation of the asset class as a security

So that's the first point

You know, I would say on a scale of one to ten with regard to

institutionalizing the asset

We're at a six there, you know and in terms of embracement and bracing

The second plank is fair accounting

Okay, if I want

If I wanted to keep you from buying anything

I would establish an accounting rule that said you can only lose money on the trade

But you can never make money and and that's a one-way ratchet if I actually set up an accounting system where you

You always lose you never win and if you win you have to act like you lost and

Then if you lose again, you could win 99 times, but the hundred time you lose you report one loss no wins

Okay, that's just prejudicial in hostile

Okay, so indefinite and tangible accounting allows you to lose but not win and it's the kind of accounting you give to things you don't want people to buy

And so fair accounting was critical and this January it became optional and

Next January it will be mandatory and so that's the that's a big step forward

You know, let's just say we're like

We're

75% of the way along there, but but will be sort of at a hundred percent when you have two dozen or three dozen

Companies and they're all using the same fair value accounting and everybody's talking about it and you start to see companies

report multi-billion dollar or ten mega billion dollar gains on that accounting, right?

That'll be a big deal. That's two and then the third the third is

We

If individuals aren't allowed to self-custody

That's hostile to Bitcoin if I passed the law saying you can't custody

That's that's an attack on Bitcoin

If companies can't self-custody

That's an attack on Bitcoin

If if I had a company whose job was to provide to sell custody services to institutions

If I provided custody to Yale and Dalman or to a big hedge fund and then if the government had a law that made it illegal for the custodian

To provide custody for your asset that's hostile

So right now

Sab 121 is a rule that basically makes it impossible for a bank

to custody Bitcoin and the right way to look at it is well

That's basically a regulation preventing companies the want to custody from custody and so the result of that is

You have basically the government saying I

Guess you can buy the ETF but the ETF is not allowed to use their bank to custody the Bitcoin and they can only use a crypto exchange

The custody the Bitcoin and we're gonna sue the crypto exchange and so when you have the government hostile to the crypto custodian

hostile to the banks hostile to the institutional custodian

You're kind of you're undermining the ETF industry and you're undermining the asset

So the third plank is we just need for the SEC the OCC the FDIC

To allow banks like JP Morgan and Citigroup and Goldman

But by the way you might like not like JP Morgan because of what the CEO has said

But let me guarantee you the within a year or two years of when it's possible to custody

Bitcoin JP Morgan will start a process to do that and within four years

They'll be custody Bitcoin because it's money and that's what they do

So you want a world where Goldman Sachs Morgan Stanley Citigroup

JP Morgan can

Custody Bitcoin because if they can custody it they can buy it for you and if they can buy it they can sell it

And if they can buy it and sell it and custody it they will give you a loan on it and

They will also give you yield on it. So the world after the banks can custody Bitcoin will be

I could have Bitcoin at a bank too big to fail back by a trillion dollar balance sheet

They would give me five hundred basis points of you

You know how much money you get if you put your money on T-Bells right now you get five hundred fifty basis points risk free

I think that the banks will give Bitcoiners

550 basis points risk free

When they can custody the Bitcoin and so the world would be very different if you got paid five percent interest on your Bitcoin

While you're actually holding the Bitcoin and I think the other thing is

They will give you a loan at so far which is five hundred fifty basis points plus fifty basis points spread

So you can get a loan of six percent from Citibank or Bank of America when they can custody the Bitcoin and then the third thing is

They'll let you know they'll let you post the Bitcoin is collateral against your house or you're or you're a mortgage

And you'll be able to I think refinance your mortgage

Maybe to a hundred percent loan to value or a hundred and twenty percent loan to value

By putting the Bitcoin is collateral like right now if you go to some of these banks

and you had a five million dollar house and

And you wanted a bar of money that might say well I can loan you

70 percent or 60 percent all loan you three million dollars against the house at

The best interest rate it used to be two and a half percent by way what I told people to take mortgages and buy Bitcoin

Bitcoin was forty thousand and

The mortgages were two and a half percent interest. I took infinite crap for that by the way infinite um

Well

So you want to buy the you want to borrow the three million what they would say is I'll give you a loan for three million against the house

Or you while make the mortgage five million if you post some securities like Apple stock

If you want to post T bills or Apple stock or the S&P

ETL they will give you a five million dollar mortgage a two and a half percent interest

And you could have done that with those institutional great assets

A marginal world where you can top up your mortgage with Bitcoin

Barrow at three or four or five percent interest for ten to thirty years

Right and and what's the requirement the banks got a custody that they got a custody of the Bitcoin

They got to recognize it as an asset that's just as good as Apple stock

Just as good as a T-Bell and so I think

You know we're rippling where we get a couple more

Improvements on the ETFs will be at a hundred percent

You know a few years from now will be at a hundred percent in accounting and people be comfortable with that

You know once once the regulators you know when they start to repeat what

Robert of Kennedy said yesterday and what Donald Trump said today

Which is Bitcoin is digital property Bitcoin is freed of Bitcoin is virtuous

We're not going to sell our Bitcoin when they say that

The banks pay attention

Okay, the banks you know you got to look at this is the banks are looking to the regulator the regulator is looking to the president the

administration

When the president says

You know this is sketchy stuff, you know, it's used by criminals

The banks take that you know and they pay attention and you know what happens if you don't pay attention

The signature and silvergate bank both actually were very pro Bitcoin and pro crypto

And they got out on a limb and the regulators shut down the two banks right and so you can see why banks are conservative

You can see why public companies are conservative the SEC the CFTC the OCC and the FDIC matter

political leadership matters

rhetoric matters

So the words have changed

At Bitcoin is good for them America if it's good for the dollar if it's good for the country's

Prosperity if it's going to grow the economy

If that's the case we're going to see all of those switches flip

those all became catalyst and now

You have the three planks of institutional adoption

And now I want to make an observation

city bank

Is from is it based on national city bank

And you guys know the origin of national city bank

The head of national city bank was John D. Rockefeller's brother

And national city bank was the bank set up by John D. Rockefeller because he didn't want to trust his money with

JP Morgan

And so that happened more than a hundred years ago

People that do business with these banks sometimes keep the same bank for a hundred years

JP Morgan city bank they're more than a hundred years old

So a CFO

They want to do business with a bank they trust

And the world that I'm seeing is a world where

Google generates a billion dollars in month

And they send a billion dollars a month to city bank or JP Morgan and they say

buy a billion a Bitcoin

And it's like a billion a billion now it's two billion a month

Then meta sends a billion a month then Microsoft sends five billion

And if you want to see a world where a billions of dollars a month flow

And then it flows into the Bitcoin ecosystem

Then it has to be with a bank that is too big to fail

When you're a trillion dollar company

You're not going to send your money to a bank that's the third tier bank

That is a two big to fail because your shareholders don't expect you to take that risk

So I think the catalyst is going to be banking acceptance

When that happens you kind of look at that is these are the high power rails

Right these are the rails that move a billion dollars a day

Maybe a billion dollars an hour

Maybe a billion dollars a minute

Right and

When we get there then I think Bitcoin takes its next leg up

So enormous progress on the regulatory front

Yesterday your keynote was phenomenal in highlighting the addressable market for global capital

And how how high the price of Bitcoin could go

You and I share the view that it's inevitable that it will go there

However, if we look out maybe three to four years and Bitcoin is

Lower than it is today

A is that possible

B

It does does Bitcoin have key man risk in Michael sailor

Okay, I'll answer the there two questions the first question is

At Bitcoin is lower than it is right now in four years you should count yourself lucky because you get to buy it

Okay, and by the way, that's that's not me that's Warren Buffett speaking Warren would say the same thing, right

Warren would be a bit coin or if he was just 40 years younger trust me

just

I'm probably not so open to the new like telepathic coin when I'm 99

You know or whatever I mean I might not be on stage talking about the new thing

But my point is Warren Buffett would say you shouldn't be sad with the price is lower as you're opportunity to buy it my second point

If you had a choice in this audience and if I said I know where I know where Bitcoin's going

It's going to 13 million coin

I'm willing to bet

15 billion dollars on it maybe 50 billion maybe a hundred billion on it. That's what I believe

now

If I told you it's going to 13 million of coin tomorrow

Tomorrow

How do you feel?

What would you be thinking?

Now if I told you it'll go to 13 million of coin in eight years

What are you thinking?

Now if I told you it's going to go to 13 million of coin in 21 years

What do you think it and let me tell you what's the most valuable information in the world

It's not knowing what's going to happen tomorrow

In fact if I told you it was going to go to 13 million

In 21 years and it was going to go perfectly linearly with no volatility

Is that better than if it goes to 13 million and it goes all over the place like this

And I'm gonna give you I'm gonna to give you my opinion

The worst thing is to know what happens tomorrow

If I give it goes to 13 million tomorrow

The only big coin you're ever going to have is why you have in your pocket right now

And your thought is going to be damn. I should about more

My second thought is oh all my family and friends it's too late for them

They missed it. I feel really awful because I wanted to get them into it

The third thought is wow, I don't have time to go refinance my house

The fourth thought is well how do I start a business and raise a billion dollars to buy more Bitcoin

I'm not gonna get that done by tomorrow morning fifth thought is

Damn I have all this money. It's not on the exchange. I can't wire it because banks are closed tonight

Okay, that's awful news

You don't want that

Okay

If I give you eight years, okay, you have eight years, but that's not enough time for everybody to get on board

If I give you 21 years and it's perfectly linear

That's awful too because every stupid

Normie person that doesn't believe in Bitcoin that doesn't understand what you understand that has no conviction

They're gonna get more Bitcoin than you because they're just the do you want the stupid dumb money to buy all your Bitcoin before you buy it?

No

You don't want it to be non-volatile

Here's what you want you wanted to be extremely volatile because that way you know something

Nobody else knows

I give you 21 years and you can go start a company borrow money

Raise capital start a hedge fund create a Bitcoin business tell your friends start a podcast build a life for yourself

Get leverage

mortgage your house

Change the view of your bank

I'm giving you the ability to do work

It's a it's a lever. It's a 21-year lever, okay?

Like micro strategy's been working four years

At Bitcoin had gone from 10,000 to 65,000 on August 11th on the day we announced our Bitcoin buy on August 10th

We wouldn't be worth 40 billion right now. We would be worth

4 billion right now you see so

You want the lever you want the time and the second thing you want is you want massive volatility

because

You know like for example when Bitcoin went from 66,000 to 16,000

Everybody else you know had a crap lost their minds freaked out and we doubled down

Right and it was a benefit for us

It was a problem for everybody else we ripped up and and so

You get the chance to prove yourself

Economically and you get a chance to prove yourself intellectually

And you get a chance to prove yourself morally and ethically if you live through the volatility

You should pray for the volatility

When it goes away you'll lose your advantage and you should you should be happy that you know

Where everybody else on the planet's gonna be in 21 years you got a 21-year-old star

That's a career you can make a life out of that

And don't worry about the stuff that comes in the middle it's a good thing

If you look at it

Once Bitcoin's at 13 million a coin there will be no more volatility

No, when Bitcoin is 13 million a coin

If you look at my base case

Bitcoin is like 20 30% of the equity market and so it's just big enough

That the volatility is decreasing but but my model and my mind and what we're thinking is

If the money supply expands at 7%

The the the equity index will spend about 10%

The volatility the S&P index will be about 10 to 12

The volatility of Bitcoin will be 20 to 22 it'll always be more volatile

The performance will be 20 to 22 ARR it'll always be higher performance always be more volatile because it's an open

Unregulated global market because it doesn't have the counterparty risks and it strips away

The risk of a company and it strips away the entropic

uh the entropic degradation of physical property

It's always gonna be better. It's always gonna be more volatile

And I'm not concerned about it

That's why even when Bitcoin's 13 million you'd be stupid to sell your Bitcoin and buy the other stuff

It's all the other stuff's always gonna be inferior

And I didn't answer your last question which is you know

Keyman risk

You know what if I go away, you know and I thought about it and I you know and and what I would just say is uh

First of all, I don't have any errors, but a nonprofit foundation which will amorphan being a public charity

So when I'm gone

My stock my shares my assets flow into a public charity whose mission is to support Bitcoin and the adoption of Bitcoin forever

And so

You don't have to worry about micro strategy changing direction. You don't have to worry about you know the truth is

I'm probably better for a Bitcoin

Gone than here

You know dead than alive as long as you're if you're dead you can't

You know you can't one was the word murder was it slay your heroes

Slay your heroes

You know so

You know like once I'm gone. I'm not gonna be talking so I can't give a bad

tweet I suppose uh and

Micro strategy or just going with the micro strategy and the micro strategy is simple

It's raise capital from the institutions that have capital by Bitcoin

Hold the Bitcoin forever

Don't lose the Bitcoin

Don't sell the Bitcoin

So that's a great note to end on Michael Bitcoin is forever to the moon

Thank you for everybody in the room

You do not sell your Bitcoin

You

You