Lyn Alden - Bitcoin Dominance, The Lightning Network & Investing vs Inflation

Full transcript: Lyn Alden on London Real

2:36 This is London Real. I am Brian Rose. My guest today is Lyn Alden, the investment strategist, writer and Bitcoin enthusiast. After graduating with a degree in electrical engineering, you spent over 10 years working for the Federal Aviation Administration before retiring early to focus on your passion, financial investment and advisory. Now you run the Lyn Alden Investment Strategy research company, where you produce monthly financial analysis for hundreds of thousands of individual investors and financial professionals.

3:13 Your research focuses on the volatile and changing market conditions of stocks, precious metals, international equities and Bitcoin, with your work being featured in the Wall Street Journal, Times Money magazine and CNBC. Your ultimate goal is to remove the quote unquote chaotic financial noise and provide top-tier research in plain English so that both institutional and retail investors can benefit. Lyn, welcome to London Real. Thanks for having me. Happy to be here.

3:40 Great to have you here, Lyn. I’m looking forward to jumping in on markets, inflation and Bitcoin as well, but maybe we start by kind of zooming out a little bit and just talking about investing, because it’s not something that we teach people in school. It’s not something that most people know much about. You know, I had Robert Kiyosaki on my show, author of Rich Dad Poor Dad, and he always tells the story. He raised his hand when he was a kid and said, “When are we going to learn about money?”

4:03 And they’re like, “We don’t teach you about money.” And he said, “But you’re teaching me Spanish and algebra and all these other things.” And they’re like, “We don’t teach you about money.” And most of the people that watch this show probably never got an education. And yet your story in your life is, you, I think, taught yourself about money and then kind of retired early and do this as a passion, and I’m wondering what are some of the basics that people should know if they even want to understand the mindset of investing or even basic mistakes that people make, what can you tell people that maybe this is the first time they’re thinking about this concept?

4:35 Well, probably. I mean, when you get down to the really basics, it’s the idea of making more than you spend and then finding a way to compound that in a relatively safe, but still risk-taking, way to exponentially grow that capital over time. One story I like to tell is that, for example, my father had, you know, he was a police officer for a long time and then he had a second career. He was hard-working his entire life. He was working since he was a teenager.

5:06 He had a literally a perfect credit score. He paid every bill on time and he just never built his wealth, right? So he lived in an apartment. He lived in a trailer park. He wasn’t bad with money, but he just kind of was always just enough, right?

5:21 And there’s no idea to, you know, put things aside and compound it over time. And so there’s, it’s like, if you miss one small thing it can change everything else. And so my whole approach was to add that extra step of be good with money, but also find a way to compound it. And I think another big thing that people miss is they’re always focused heavily on ways to save money, which is useful, but it’s also, I mean, I think a more powerful thing is find ways to make additional money, either by obviously finding ways to increase your career standing, right?

5:57 So find ways to move up in your business or by having a side hustle. And obviously that’s becoming more popular today than when I started doing that, you know, over a decade ago. We’ve kind of shifted more and more towards the gig economy, but it’s still something that, you know, if people did more of, they’d, I think, they’d, you know, they’d have an easier time once they really get going. After maybe five years of that, they, you know, it’s up, it’s like work up front, but then it’s a lot more smooth sailing when they’re more financially secure.

6:26 Yeah, it really is kind of a game of inches. You can either kind of be in debt, you know, by a few grand every month, or you can try to be, you know, ahead by the maybe that same margin and then invest wisely and compound it. That puts you in two different scenarios when you’re 10 years, you know, later at 33 years old, like for you, for example, it really can change, I guess, your future if you’re a little bit intelligent about the small pieces. Exactly, yeah, small things, and it is, you know, it is a shame that they don’t teach it more in schools.

6:57 It’s kind of remarkable. I never learned it in school. You know, you have, like, one in math class they’ll have a couple, you know, word problems about compounding or banking and things like that, but other than that you never actually learn personal finance. Like, we learned all sorts of things. You know, we learned, like, different types of jellyfish and things like that, but we don’t learn how to manage money.

7:17 And it’s, it’s, it’s one of, like, the top five skills someone has to know in life, right? So managing resources is something that humans have been doing since the beginning. And money is just, obviously, our modern version of managing resources. Yeah, you’re right. Strangely enough, the only time that comes up is, like, in a math class, when they’re trying to explain the concept of what constant compounding right?

7:39 And so then they say, oh, like interest, and you’re like, what’s that? It’s probably our fault, in England because, you know, in Victorian times it’s kind of, I think, when they created this cool system and they created it for factory workers, to give something for their kids to do, which basically they probably want them to turn into more factory workers. So a lot of that curriculum, and even some of the systems and timings, is, it’s really antiquated.

8:03 You know, it’s hundreds of years old and probably needs a revisit at some point. But you’re right, it’s just something that’s not taught, and so many people, they seem out of place when it comes to understanding their own financial resources, and then you put in all sorts of, you know, shiny objects, like free credit cards and all these other startups are kind of giving other free kind of credits, and people get down a pretty dark road pretty quick. And again, they’re not necessarily bad people or not smart people.

8:31 It’s just financial education never came into their life. Exactly. Did it surprise yourself that you were able to, you know, retire and do what you wanted to do, kind of mid-30s? Is that what you always hoped and thought that was gonna happen if you just kept to your discipline? Kind of.

8:49 It’s one of those things. Like, I, you know, I had ambitions when I was young to do that. And it is, the whole point was never that I wanted to retire early, is that I wanted to have the option to retire early, basically, to be financially free early, so that I can then either, you know, continue working on what I was working, work on something else, working whatever I want. And so in that sense, the, you know, it basically went according to plan. And it’s one of those things where, you know, in my, say, mid to late 20s, I was a little bit, kind of, undershooting that goal from what I wanted, whereas by the time I got to my early 30s, I had overshot that goal.

9:23 So it’s one of those things, I think, it’s even like a Bill Gates quote, where it’s like, people overestimate what they can do in, like, a week, but they underestimate what they can do in 10 years, right? So it’s the way that the mind works. It, you know, so it’s like, we don’t give ourselves enough credit for how big we can do something in five or ten years. Whereas we always overestimate what we can do in a short period of time, and so basically, by catching up and ramping up, I kind of actually, over, you know, exceeded my goal.

9:50 I thought maybe by my late 30s or, you know, I’d be more independent, whereas I kind of got into that early to mid 30s. Yeah, I’m really bad at that. I’m very hard on myself in the short term, and then I look back after a year and I’m like, you know, it actually kind of compounded up to where you maybe made some gains, but I had a guest in here named James Clear who has a book called Atomic Habits, and he kind of goes through this. If you can improve by one percent, you know, a week, it doesn’t feel like much, but compounded over a year you know, you’re up 50, 60, 70 percent.

10:20 And again, not necessarily even on your investments, but a personal habit or some other goal. So yeah, as humans we’re sometimes a little myopic in how we’re thinking and maybe even investing, which maybe brings us right into this point that you talk recently about, and a lot about, just inflation, because if people are listening, they might be saying, well, then I save my money, and that’s probably the most advanced, most people’s personal finances is, I put some extra money in my fiat currency in the bank, and that’s all well and good until maybe you start to consider this concept of inflation, which I think, luckily, in the last 18 months has got a lot more air time. I actually have my 17-year-old daughter in here talking about money, and we talked about Bitcoin and she asked some really good questions, like, how come the central banks can keep printing money forever?

11:08 That doesn’t sound right. You know, it was strange, you know, that even a 17-year-old was asking some really good questions. Let’s talk about inflation. How do you first have that conversation with people to even understand what it is, because I think it was Terence McKenna that said, “I don’t know who discovered water, but it definitely wasn’t a fish,” and sometimes we’re in the middle of this and it’s hard to see what you’re in. I find that a picture’s worth a thousand words, and so a chart just showing what something cost over a century, for example, tells you almost everything you need to know about inflation.

11:43 And you know, sometimes I try to think back to, like, you know, when I started saving and investing I was like a little kid. I was like, you know, we basically you know, we, I was impoverished when I was a child, and then I moved with my father, and we were, you know more comfortable, and I started saving and investing when I was, you know, I was not even 10 yet. And I shifted into, you know, in addition to just, you know, saving cash from, like, birthday presents and stuff, I would, I shifted into, like, little tiny silver coins, and eventually, like, little fractional-ounce gold coins, and somewhere along the way I knew what inflation was.

12:18 I think it’s because I was always mathematically inclined, and so I just kind of, it’s something that just kind of randomly clicked with me. But I think for a lot of people it’s showing them a chart of inflation over time, and going back to my father’s example of how he saved, but he never compounded, right? He was always, he always was financially secure but never, I guess, abundant, is because he would save for things, but he didn’t understand investing at all, and back then you could at least earn a yield that exceeded inflation, but it was still maybe smaller than people think.

12:50 So people think that they’re earning five or six percent from the bank, but inflation’s three percent. They’re earning like half of what they think they are in terms of actual purchasing power. And then you’re also, if that inflation metric is, is understated, actually, inflation’s still higher, then maybe they’re not even saving that much or earning that much. And so I think it’s one of those things where people really need to go look at these long-term charts, and also just run the math, especially the modern times, where interest rates are below the inflation rate in most countries, especially most developed countries.

13:21 Saving is a very challenging thing for people, because you’re constantly, you know, adding more ice to, like, a hot area that’s just melting constantly. So it’s like this, it’s, you’re on a treadmill, rather than a long-term compounding approach. With that, yeah, and times have really changed. I mean, like, when I was a kid, well, you had, what, in the 80s, and you had double-digit interest rates, double-digit inflation. When I started on Wall Street in ’93, I remember Fed funds, overnight rates were three percent, long bond was six percent, and now these days you know, you’re much, much lower than that, and like you said, in most developed countries, inflation now over interest rates.

13:57 I’m going to put up a chart here that you posted on Twitter a couple days ago, where you just said, “The inflation report came in hot this morning at 6.2 percent,” and you can see this kind of big increase of inflation, I think in 2001, and I guess this is one of the many charts that you show to a lot of your followers. What was, what should people pay attention to in this chart? What’s the thing that really struck out for you? Well, I mean, overall the issue is, you know, we’re seeing basically a giant disconnect between inflation and rates, and so, you know, the United States right now at six point two percent official CPI, probably higher if you measure it in the way it used to be measured, while rates are near zero in just about every developed country.

14:39 And the same problem is throughout Europe at the current time. The same problem is in most places, and so that, you know, one of the key takeaways that basically the world’s now entering an inflationary spike that we’ve not seen for a period of time, and of course there’s different debates about how persistent it is going to be, and how, you know, sticky it is, how kind of, you know, what’s causing it. But overall it’s something that, you know, for a while, for the past couple decades, you could kind of get away with not following inflation.

15:09 Whereas now, because there’s such a disconnect between rates and inflation, is something that every person has to know, because if you’re simply failing to grow your wealth, that’s one thing, but if you’re actively losing purchasing power with your money in the bank at a notable rate, that’s a more serious problem that people have to pay attention to. What’s the reaction to the most, the people you meet in public and the people that subscribe to your newsletters? I mean, do they kind of get it right away?

15:36 Do they need a few ways to convince them, and then after that, what’s their usual, their next steps once they see this actually happening? I think, I mean, there’s a big disconnect between my readership and people on the street, right? So my readership is self-selecting towards people that are already interested in this subject and generally know about the subject, and so they get it. It’s something I cover quite a bit, whereas, you know, a lot of people I run into, they just, you know, they don’t fully grasp what it means to, you know, have that deep of a negative yield, right?

16:11 So they kind of assume that the current, it’s, I would describe it as recency bias. So as people, as humans, we often think that the, say, the last five years are going to tell us a lot about the next five years, or the next, last 10 years about the next 10 years, right? Things we assume some degree of stability. And so even though this past decade was a pretty bad one for savers, it was hard to notice because it wasn’t too severe, and they assume that maybe the next decade’s like that.

16:37 They’ll think I probably should invest, but, you know, I don’t know how to. It’s scary. They’re worried about volatility, and especially with with, you know, it is challenging, because with stock valuations so high, especially in the, and many places have very high home valuations, it is intimidating for investors to come in. And so they feel like they’re stuck between a rock and a hard place. They’re like, well, there’s expensive assets I don’t understand, they’re volatile, what if the market crashes, and then they’re like, or I can just hold this melting ice cube.

17:05 And many of them aren’t fully aware of just how how rapidly that ice cube melts. Yeah, and it’s really good that we’re talking about this, because people do ultimately have to make a decision, because when you don’t do anything, I guess you are deciding to kind of hold that ice cube. It’s funny to me when I look at kind of older generations and how they kind of inherently understood what you did when you were a kid. My mom, she’s 76, and she lives in San Diego, and she’s bought rental properties her whole life, and that’s how she survives.

17:34 She rents those out. She paid off 30-year mortgages, Lyn, over 30 years, and now she has these assets. And strangely enough, my wife’s mother in Bulgaria, she, you know, we call her Baba, she’s kind of old school, and if you really ask her where she puts her money, she’s got it in gold, and she’s got it maybe in dollars, and she has some properties, but she sure as hell doesn’t keep it in a local currency There, of course, there, you know, more inflationary issues and devaluation issues, but it’s interesting to look.

18:03 There’s always people around that kind of understand this from a core level, and that’s where the smart money goes. Now these days it’s maybe harder to do, especially for a younger generation. You know, my daughter at 17, just owned her first asset, which is a piece of cryptocurrency. I personally, I don’t think I own an asset until I was in my 30s, because I just, unless you owned real estate, as a, in the States, you never really would own an asset unless you went out of your way to get educated.

18:29 Like you said, the choices are tricky out there. So if people are getting this right now, and they’re like, okay, I get it, inflation is something I should worry about, how do they start that journey into investing in something? Probably the first thing is research, right? So, just research you know, stocks, precious metals, real estate, you know, Bitcoin, these different asset classes. Right now it’s cash and bonds that are the ones that, you know, historically you’d research, how bonds work too, but right now bonds are in the same boat as cash, where they’re rather poor investments.

18:59 So basically start by researching some of those inflation-protected assets, and the point you bring up about some people natively getting it. It’s often based on their experiences, right? So anyone in the developed world that’s old enough that it was aware during the 70s generally gets it. And, you know, for some people that even, you know, they’re always expected to come back in that magnitude, and they often for decades thought we’d, you know, they had a more inflationary mindset, and sometimes that actually was even a setback for them when it came to investing.

19:29 And whereas I think it’s probably going to pay dividends in this type of environment, and people in emerging markets often get it, because they’re, you know, those countries are more prone to currency problems, currency devaluations, high inflation, broken currency pegs, right? So, like, I have a friend in Egypt, and I think it was back in 2016, they had, they broke a peg, and so the Egyptian pound lost about half of its value practically overnight. So you wake up, and your savings are cut in half in terms of purchasing power.

20:01 And so there’s this tendency to, you know, shovel the currency into hard assets. Like, basically, they do a plan where they want to buy a house. They don’t do 30-year fixed mortgages there, but they’ll have, like, a seven- year payment plan, and you’re kind of, uh, you’re contributing to the construction of that house, and it’s considered risky, but it’s basically their main way to invest. You’re getting into those harder assets. And so for many places, real estate’s the go-to one, because everybody can intuitively understand it.

20:29 Right? So, I mean, we even, even kids play video games. We, like, build your own house, right? In your virtual world, you decorate it, you invested it over time, right? If anything, people, you know, kids learn more about finance from video games than they do from school, because you have these in-game economies.

20:47 You basically collect gold, and you can build your house, and you can upgrade it to a stone house, and you can invest it over time. And so I think a starting point for a lot of people is to understand how real estate works, and then go from there. Yeah, don’t get me started talking about the metaverse and play to pay, and how that goes into DeFi. We’ll get to that. I’ve been having some of those conversations recently, and I bought a few Axies over the weekend, and I was playing with those too, so it’s interesting to see where that’s going.

21:13 But I agree, that’s the way a lot of people do learn about this, like Sims and stuff. They kind of see how that’s built. How do you feel about inflation going forward? I actually had Jeff Booth here two weeks ago, and, you know, he wrote a whole book about inflation deflation, actually, before the crisis, kind of predicting what was going to happen. And, you know, Jeff breaks it down and says, “Look, you know, this is something we’ve repeated on 80 to 120-year cycles, where, you know, we always seem to inflate our currency until there’s a war or an overthrow period, and we’ve done it since the Roman times.

21:46 And until we create something deflationary, which of course he goes and talks about Bitcoin, which we will talk about. It’s going to be very hard to get out of that paradigm.” Do you share the same views as Jeff does, or do you think this is just about getting the central bank to, you know, talk more about to the public about what they’re doing? What’s your view going forward, how we solve this? Yeah, so I have some reviews to him, and he’s an acquaintance of mine.

22:08 I’m a big fan of his work. So I would describe the inflation situation in a couple different ways. One is that over the long arc of human history, you know, our technology is deflationary, right? So it used to be, you know, some would have to spend almost all their time working to get food, and then we invented tools to make it so you have to work half your day to get food, and then we invented things like tractors. So, you know, you could pay one person, and that person could feed 10 people with the work they do.

22:36 And so basically if you look at share of workers in agriculture, it was like, you know, eighty percent, and it went down to, like, one or two percent in the developed world because of better and better technology, and that applies to all sorts of other things: construction methods, obviously software and electronics, and things like that. We get, we get better and more efficient over time, and that, you know, pushes the price of things down, in a vacuum, right? So a lot of things go down, say, in terms of gold over time.

23:07 And whereas, because we have modern central banking, right? So we constantly inflate the money supply, we offset that natural deflationary pressure with an inflationary money supply, and so we end up getting some sort of, you know, in a good period, say, moderate inflation, so prices go up a little bit every year, every couple years. And, but every few decades, because that system is inherently unstable, right? So when you can just print money, essentially, um, inevitably you run into a problem, and you just print a ton of money, and then the currency breaks.

23:44 So if you look at the long arc of history, they’ve tried fiat currencies a number of times, and they last for a period of time, but because they’re inherently abusable, they eventually get abused and they break, and it goes back to gold or other assets. And so over the past 50 years, we’ve been in basically an experiment, the first time in human history where the entire world was on a fiat currency standard, and it’s been the longest and most sophisticated one by far. Because, you know, modern technologies made it more workable, and in addition, they have, you know, they have certain guard rails that have kept these things going, you know, in a semi-stable way for quite a long period of time.

24:25 And so it’s, in some ways, it’s very impressive. They’re, you know, it’s one of those things that seems simple on the surface, but we actually get into the geopolitics of how currencies work, all the way down to, say, the petrodollar and how that system functions. It’s a very sophisticated system with guard rails and these long-term arrangements. But, you know, essentially it’s basically trying to offset this big deflationary force, whereas if you go back to Jeff’s argument, it’s the idea that we should just let that deflation play out, that the world would be a much better place if we didn’t structure our banking system around this idea of constant money supply growth, and instead let technology deflation, you know, boost our purchasing power over time, reward savers rather than debtors, and kind of shift to that different type of economy.

25:11 And do you think that’s what we should do? I think so. I mean, if you go and look back to, say, the second half of the 1800s, or the, you know, the last, you know, three decades of the 1800s, that was a very, you know, that was a very good period for productivity growth, and you had deflation in many places, especially the United States. Now there were some, there were some key things there. I mean, they had abundant land, for example, and but you basically had a technology revolution with the internal combustion engine, like electricity and all these things throughout the developed world, and that translated into lower prices of things.

25:49 So it wasn’t rapidly offset by all that monetary inflation, and it wasn’t a perfect time, but it shows that deflation is not the boogeyman that it necessarily is made out to be. I think what mixes people up is that, generally, in the current system, deflation only happens during recessions, so we call deflation bad. It kind of mixes up causality. And then, two, because our current system is so debt-based, it’s the idea of constant debt growth and basically consumerism and debt growth.

26:18 In that system, deflation is bad, because when you have that much debt and then you get deflation, you can’t service the debt. You need prices of things to keep going up to offset that debt. So in a highly debted system, which we have, it makes sense that people, you know, assume deflation’s bad, because in that niche circumstance, which is mostly what we’re familiar with, it is. But in a healthier system with less debt in the system, that’s more based on saving and capital, deflation is not the bad thing that it is as it is in its current system.

26:52 And if you had to look at, you know, U.S. monetary policy, the last 100 years, or some of the decisions they’ve made, like you said, when you have the option of printing money, it’s almost like that’s saying, you know, absolute power corrupts absolutely. It’s almost like there doesn’t have to be a bad guy, and you can say that Nixon was the bad guy in ’71, or FDR was the bad guy in ’33, or whatever, when they stopped necessarily reporting the gold pieces. Or you could say, last year, the massive printing of money during pandemic, there was bad people that did that, but it’s, you shouldn’t look at it that way.

27:24 In your opinion, is it just something that’s going to be abused over time, and it’s ultimately a system that’s not going to be able to be stable, or were there certain of those points where we actually accelerated this thing breaking? So I would describe it as an inherently unstable system, but the speed with which it unravels can vary greatly based on individual decision points. And I mean, going back to the Nixon example, you know, one thing I pointed out is that that system was doomed from the ’60s, and so you know, basically it already broke essentially, and it just, it was marked to market in 1971.

27:58 And so he, you know, Nixon’s bad for all sorts of reasons, but that particular issue was, you know, he was a small cog in that, in that big machine that was set up all the way back in 1944, in the Bretton Woods system. And if I were to describe where I think, in the modern era, where central banking went wrong, is probably under the Greenspan era, and because that’s when central banking policy started shifting more towards Wall Street rather than Main Street. Right?

28:28 So you had, for example, Long-Term Capital Management blew up, and Greenspan cut interest rates, even though the employment situation was great, right? So so basically you did a rate cut just for the markets rather than real Main Street, and that arguably led to the dot-com bubble. It certainly fueled it, among, you know, it was one variable among many. and then, in addition to the behaviors they did after the dot-com bubble, essentially led to the housing bubble, and so you know, we basically started a series of bubble formations.

29:02 Whereas before that, they had a semi-stable environment. They, you know, it’s still an inherently unstable system, but it was being reasonably well managed, and so I would describe that kind of 90s period as where they could have made different choices that would have made the system more stable. And now I find that they’re kind of in that Nixon situation, where the table’s already set. Right? So people often ask what I would do if I was the Fed chair, and my answer is, I’d resign.

29:29 And I, like, because I don’t know what, I don’t know what Powell should do. I can say I can list things he shouldn’t do, but essentially they’ve chopped themselves in the corner. They, by constantly lowering rates, they allowed so much debt accumulation, because by lowering rates, a company can take out more debt and still bear the service of it, because the rates are so low, and the same thing for the government. And so when rates get that low, there’s a ton of debt to GDP, and then they can never raise rates, because it would blow everything up.

30:01 The, you know, everything would go bankrupt, unlike, say, the ’70s, where Volcker was able to raise rates super high because debt as a percentage of GDP was very low. So he could. It was painful to raise rates that high, but it didn’t result in, like, every entity out there going and solve it. Whereas with debt this high, that’s what would happen if they raised rates to, to say, above the inflation rate. So right now inflation’s 6.2 percent.

30:25 If they raise rates to seven percent, you know, the government would be paying trillions of dollars in annual interest. You know, vast, you know, tons and tons of corporations would go bankrupt. And so they kind of trap themselves into that corner where they have to hold rates below the inflation rate and try to inflate that debt away. But that’s how these fiat currency systems historically kind of start to unwind. And so they’ve kind of pushed this pretty far as they can go, and now they’re just doing damage control, and it’s not a place I’d want to be in.

30:54 And so, the last 18 months, they haven’t had much of a choice than to lower rates and print just huge chunks of money, and then now, once they do that, they’re in an even worse situation. Exactly. I mean, you know, around the margins, there’s things I would disagree with their actions. Like, I don’t think they should buy corporate bonds. I don’t think, I don’t think Japan should buy equities.

31:15 You know, Bank of Japan should buy equities, you know, but but the other thing is that, you know, they’re essentially stuck. And it’s something that a lot of people are surprised by what the central banks are doing. But for example, by looking at the long-term debt cycle, I was talking about this you know, over the past couple years, this big disconnect between inflation and rates, and that we’d start to see some of these unusual policy actions, because they’ve trapped themselves into a corner mathematically.

31:42 There’s too much debt for them to basically behave as you’d expect from the inflation levels. Yeah. And I actually remember Long-Term Capital crashing in ’98. I’m showing my age a little bit, but, you know, when I was at Bankers Trust, you know, they had just started forming, I think around ’96, ’95, and they were the hottest thing. Right?

32:01 All the talent was going on there. They’re big names, right? Like, good friend, I think they had Myron Scholes out there, or something. There was a chunk of capital, and they levered it to high hell. Everybody wanted to do business with them from a banking perspective, and then nobody knew how much leverage they had.

32:15 Obviously, they made massive bets on interest rate swaps, traditionally a very, not a very volatile instrument, and then when they did pop, I think it was Russian crisis in ’98, and then it all went wrong. Right. And then they had to fill this hole, and like you said, the first time the Fed kind of decided, all right, we’re gonna, I mean, it was kind of one of the early bailouts. They weren’t really a bank, but it would have hurt the banks, right? So they made that call, like you said, right?

32:40 And that put them up to then future subsequent bailouts and asset bubbles. Is that the way you see it? Yep. They kept blowing it up, in addition to, in addition to organizing that bailout. Now, that was among bailouts.

32:53 I mean, at least, at least they weren’t, you know, they weren’t able to keep operating. I mean, that fund was done. But another thing they did, besides the bailout, was they cut interest rates, right? So even things that are not directly related to that big pool of capital that broke basically, the Asian financial crisis and the Russian financial crisis were the triggers for it. And then specifically, I think was the Russian side that they really messed up that fund.

33:17 But the fact that they also cut interest rates, uh, for the entire economy, based on a market event is basically a key thing. I mean, if you want to bring it back further, you can go back to the 1987 period. But I would say, at least, Long-Term Capital Management was, you know, a time where what a central bank focuses on changed. Yeah, really good moment there. I want to get into Bitcoin, but before you, you do have some interesting IP around long-term debt cycles, and you look at kind of the 1940s and the 1970s, how would you explain that to people?

33:50 Why is it important? So if you start with the idea of a short-term business cycle or credit cycle. So after a recession happens, the economy’s, you know, not that strong. It starts to build up over time. People get more confident, then they start issuing more credit, so banks lend more.

34:07 You know, companies are able to issue bonds. You build up debt in the system. You get into an economic boom, and eventually there’s too much of that. There’s malinvestment, and it pops. Often it’s the central bank that pops it, because they cut interest rates in the first place, and then they raise rates, uh, and then they pop it, or an external event could pop it.

34:27 It could be a pandemic, could be, you know, some sort of other external event. It could just kind of work itself out over time, because it’s just the malinvestment build-up, but some way or another, you get a deleveraging event. And so, in a perfect world, you deleverage all the bad debt and have the dust settle, and then go on to the next cycle. But because of the, you know, the incentives that we live in, obviously, policymakers want to come in and they want to shorten that cycle, soften that deleveraging cycle, and so they cut interest rates, they do fiscal stimulus.

34:58 And so, if you look at, say, debt as a percentage of GDP over time, let’s say in the corporate sector, you only partially deleverage. So you don’t go back to the leverage you had at the beginning of that cycle, as a percentage of GDP. You only partially deleverage, and you start building up from there. And so when you string multiple of those cycles together, you get higher highs and higher lows in debt levels, and then you get lower highs and lower lows in interest rates.

35:24 And so you string those together for a couple decades, or a few decades, and you go all the way down to zero interest rates and extremely high debt levels, and then you’re trapped. And so if you look back in history, we would call that a long-term debt cycle. So people often just think in these five- to ten-year increments without realizing that they add up together, and then they have a bigger event, and that bigger event is generally a currency devaluation.

35:47 Kind of their, you know, their only, you know, quote unquote way out. When that happens, is that they hold interest rates below the inflation rate, through basically yield curve control or financial repression, basically various ways to do that. And then savers and bondholders, basically anyone who, you know, owns those liabilities gets screwed, and the debtors basically get partially bailed out through inflation, and then they basically maintain that financial repression through a period until debt as a percentage of GDP is lower, because you expanded nominal GDP so much, partially because of inflation, while holding those debts low and constantly devaluing them.

36:28 And so if you go back to the ’70s, we were not in that long-term debt cycle issue. We had other issues, right? So, you know, we had run out of gold to support the Bretton Woods system, and, you know, the United States had peak oil. So oil oil production peaked in the United States in 1970, and we had to start importing it more from other countries. So you had the combination of a broken money system and a real-world constraint on resources.

36:53 So that’s a classic inflationary event, but the one thing you did not have was high debt-to-GDP levels. So government debt-to-GDP was like 30 percent, partially because they already did decades of financial repression by that point, from the ’40s. And so, and private debt was a little bit higher, but still on the low end, in the past hundred years, and so they were able to combat inflation by raising rates. Whereas, if you go all the way back to the ’40s, there’s a very different environment because you had the war spending and you had the large fiscal stimulus and all that.

37:25 That was the only time, you know, basically that developed countries had as high debt levels as they have now. Right. So in the United States, the only other time we had 130 debt to GDP was World War II. Uh, same thing for Europe. I mean, all that, all the ’20s, ’30s and ’40s, those were the last time where they had debt as high as they have now.

37:45 And the way that was handled was, you know, in the ’20s and ’30s, they devalued their currency versus gold, and in the ’40s they did financial repression, so they held interest rates super low while inflation, you know, averaged six percent for the ’40s. It peaked in the double digits for periods of time, and they just basically inflated debt away. So if you were holding T-bills, for example, you lost about 40% of your purchasing power over a nine- year period from 1942 to 1951 or so.

38:11 And so when that dust settles, if they thread the needle correctly, they’ve inflated enough debt away that they have lower debt to GDP levels, and then they can actually raise rates again and kind of start the next cycle. The problem is, if you, you know, that’s a very dangerous time for currencies, because instead of devaluing 40%, you can overshoot that, and you risk a much more, even more severe currency devaluation than that. So my whole thesis for the past couple years is that because interest rates are zero, because that’s so high, they’ve entered a long-term debt cycle where, even when we get inflation, they’re just not going to raise rates by a meaningful enough amount.

38:51 And so savers and bondholders are at risk of devaluation. Gosh, it’s like, it’s a, it’s a bit of a, a bleak future when, when I think about it. What happens in the next 10 years? Do you think? Honestly, I mean, so I think the base case is that inflation will be higher than interest rates for most of that time.

39:10 Now, there could be, there could be occasional deflationary shocks. Nothing’s in a straight line. If you look at inflation in the ’40s or the ’70s, it wasn’t a straight line. Now partially that was because of price and wage controls, but it’s also just because there’s ebbs and flows of fiscal spending and bank lending and things like that. And so, but I think overall, the 2020s are going to be more inflationary than the 2010s.

39:31 It’s hard to say how much, because that depends on certain choices, and that the rates will not reflect that inflation level, so it basically be a decade of financial repression. And so overall, I think that the main takeaway is the whole you know, harder assets. And then, as it works out geopolitically, you know, the U.S. and China and Europe, I mean, that all remains to be seen. That’s hard to predict, but I think, I think, you know, the event I’m focusing on is these currency problems.

40:01 So Jeff Booth concluded at the end of our interview that, uh, Bitcoin could save humanity. What does Lyn Alden think? I certainly think it’s, it’s, it’s one of the most attractive assets to hold in this type of environment, because you’re contrasting a scarce money, so something that is credibly not going to go over 21 million units. And of course it’s divisible, but the point is, if you own a certain fraction of Bitcoin, you own a certain percentage of fully diluted Bitcoin, and no one can shrink your percentage of that pie.

40:33 Whereas, for example, if you hold X number of dollars, and there’s a wide number of dollars in existence, which is going to keep increasing, so unless you constantly increase your number of dollars at that same rate, you’re going to have a smaller percentage of those dollars that exist. And so when you compare and contrast an inflating currency with yields below the inflation rate, compared to a stable currency, one that has a hard cap, and if anything is deflationary, because occasionally someone loses their coins, although it doesn’t happen as much as it did in the past, it’s a much more attractive, at least a store of value, and then in some places, or for some types of people, becomes an effective medium of exchange as well. And so it’s certainly an asset that I think it makes sense for a lot of people to want to hold.

41:19 In addition, unlike, say, securities, you can self-custody it, right? So if you own a stock certificate or a bond certificate, or if you have cash in the bank, you know, that’s essentially someone else’s liability, and just being held on your behalf. You’re on the ledger that someone else controls. Um, whereas there are very few things that you can self-custody. Property is kind of a mixed one, because you can’t move it, right?

41:44 So you can hold the deed, but you can’t move it. You can say it’s not even necessarily really yours in that sense. Um, whereas, say, gold coins and bitcoins are things that some can actually physically custody, and have, and basically you can move them. And the advantage of Bitcoin is that you can safely self-custody large amounts of it because you can do things like multi-signature solutions and things like that. And two, it’s the most mobile, so you know, if anyone tried to bring gold through an airport, for example, you know, good luck.

42:18 Um, if they’re trying to, you know, and people in the United States or the UK or other places in Europe might say, well, why would anyone want to do that? We have to think more broadly about seven or eight billion people in the world, and how many people you know, the majority of them live in emerging markets where they’ve had currency problems and where they want to build a self-custody assets. Many of them live in authoritarian regimes where they’re subject to confiscation, and so a self-custody asset that, you know, depending on how much you have, this can be custody different ways.

42:52 You can hold down a free mobile wallet. You can hold it in a hardware wallet. You can, you can hold it in a more secure multi-signature cold storage solution, you know, there are different ways to hold it, but the point is you have this access that you can, you can go anywhere in the world and still access it. You can send it to anyone in the world, and, and there’s no ability to stop it. And so that’s a really powerful technology.

43:15 And then, of course, compared to other cryptos, it’s the one that has the most credible decentralization. So there’s no, there’s no kind of group that can change the money supply or permission or, or try to permission the transaction. This is the one that’s the most audible, the, the, you know, one of the two widest network effects in the space, and by far the most secure in that sense. And what’s been your relationship with Bitcoin? Because I, I think you first came on your radar back in ’17, but you didn’t really go in and invest yourself until 2020.

43:46 Am I right with that? And what was your learning curve like? Because I had Max Keiser in my studio here in 2013 screaming about Bitcoin. I, I just met him after bouncing around on Twitter, and that’s the first time I heard of it. I bought a couple.

44:00 I lost them on a mobile wallet, and then I had Andreas Antonopoulos come here in ’15 and ’17 and ’19 talking about the future of money, and Andreas is amazing, but I still didn’t really get it until really this year, where I finally got it. Um, it took me a while. What was your journey like? Mine was similar. Basically, I think it’s common that you need a couple different touch points before you get it, and so mine, mine’s, I mean, Max was super early.

44:25 And the funny thing is, like, I, I had heard about it super early. It was like, I had a friend that mined it on her computer back when that was possible. It was like 2010, and I was like, Bitcoins, that’s neat. And, you know, it’s like, I was like, that sounds like cool technology. I spent five minutes learning about it.

44:42 I decided I had no idea how to price that. It wasn’t, I don’t think it was even at a price then, and so I just, like, maybe I should do that, and just never did it. Right. So, uh, and I probably would have lost them anyway if I had done them, and, and then, you know, fast forward, I occasionally hear about it, and just thought, you know, it’s like this cool libertarian thing, you kind of you make your own money. And I was like, I still don’t know how to price it, and can’t someone just copy it?

45:07 And so again, I was like, I didn’t dislike it. I just kind of it didn’t interest me enough to really go into the rabbit hole and learn. And then in 2017, when I was having that very large bull market, I started to get a lot of client questions about it. Uh, and so I, that was the first time I really sat down to try to make sure I understood it. Um, and again, it’s a, it’s a spectrum, so you never fully understand it, but at least at that point I put in enough hours that I could talk intelligently about it.

45:35 And so I put out this long-form research piece where I basically said, it’s really cool technology. Um, I don’t know which cryptocurrencies, you know, gonna win, because even though every one of them is scarce, anyone can make a new cryptocurrency, and they’re all competing, and that’s also when Bitcoin Cash had split out of Bitcoin, and I didn’t have a way to evaluate which one was going to be successful. And so I said, you know, if you want to speculate with a couple percent of your portfolio, that makes sense, but be very careful here.

46:03 Uh, it looks very euphoric, and that ended up being largely correct, because you had to blow off top, but then you had a massive crash, and actually, they generally underperformed most other assets the next two and a half years. And so I, you know, kept tabs on the space since then. I would update that article occasionally with fresh information, but over those two and a half years, they started to answer more of my questions. So they basically, we kind of resolve the Bitcoin versus Bitcoin Cash split.

46:29 I learned more about why block sizes matter so much. I basically saw that Bitcoin’s network effect kept strengthening. I saw the early signs of institutions coming to the space with, you know, professional custodians, things like that. And so by the time it was like late 2019, I was more optimistic on it. And then of course we had the big liquidity crash of March 2020.

46:55 I saw that it behaved very similar to, say, how silver behaved, where it would crash, and because I had a background in precious metals to some extent, I was familiar with those types of liquidity events. And so when Bitcoin is coming back up in April, it was like 6,900. That’s when I finally, I recommend that, I was like, no, I think it’s, I think it’s worth an allocation. Now I’m bullish on Bitcoin, and then I bought it myself, and then I continued learning from there, because once you own it, you actually want to learn even more about it.

47:23 And so I kind of expanded from, say, maybe 50 hours of research to a thousand hours of research. I kind of put a big chunk of my 2020 research budget time into understanding Bitcoin and the bigger ecosystem. And so I’ve written, you know, tens of thousands of words about it. I’ve researched almost every angle I can, and of course, you know, you still never fully learn it, right? So it’s like 10,000 hours to master it, if you actually want to be maybe a Bitcoin Core dev or something.

47:49 Maybe a thousand hours to get it reasonably well, and like, you know, 100 hours to kind of get it. So It’s a very deep, feel, it’s like, the more you learn, the more you think you get it. The deeper the the more you realize that you’re still shallow in that pool. I’m so glad you said that, Lyn. You never fully understand it.

48:08 I hope everyone is listening to that. So, for the last six months, I’ve been trying to teach this stuff in my, in a, in my DeFi Academy, and I’ve got so many people coming from so many different points of learning, and like, that’s a great lesson, that you’ll never fully understand it. I had, I had Silvio Micali, a professor at MIT, here two days ago, who invented zero-knowledge proofs, and he’s telling me all about cryptography before cryptocurrencies, right?

48:33 And he’s explaining this whole science of cryptography, and why it’s very important, not just to keep secrets, but just to keep systems from failing. And you realize how much you don’t even know about that, let alone all these other pieces. And actually, uh, Gary Gensler, current chairman of the SEC, taught a course at MIT Sloan in 2018 on blockchain that I’m about 20 hours into now. I highly recommend anyone watching it, but you’ll really start to like Gary if you watch it for too long.

49:00 Um, and he’s not the bad guy that you might hope he is, but, um, he’s really smart and really well disciplined, and really, really understands hash rates and a lot of this cryptography, and he’s paying homage to a lot of the professors who came before him. And, again, it made me realize still how little I understand about this. Um, lastly, you made a good point there. Anthony Scaramucci was on the show, and he said, “Brian, your first Bitcoin is the hardest one to buy.”

49:23 And it’s a good point, because after you buy that one, you kind of want to buy more, or it’s easier to learn, you know, once you own that asset. Is that what you found with your readers and your clients, that by owning a little bit is a good way to start that journey, and to do a minimal portfolio allocation, just to be aware of crypto? I, I think so, especially if you look at my own writings’ evolution on it over time. It went from, you know, 2017, like, you know, it’s speculative, be careful with it, to early 2020, it was like, this is worth having a small percentage of portfolio in, and then to later saying, like, you know, I think basically that zero is not the right number anymore, and that the right number depends wildly, depending on how research they are, how high conviction they are, uh, you know, what their risk and volatility tolerance is.

50:13 So I think there’s no right number, but I do think that it’s essentially at the point where the right number is not zero, and it is something that people should be familiar with, even if it’s a number that does not really impact their life. Right? Just to get familiar with technology. Even something, just buying it and then transferring it to a mobile wallet and realizing you own this, you self-custody it, you can send it to anyone in the world, and you’re not going through a centralized third party.

50:42 It’s kind of crazy to think about when you actually do it in person. It’s kind of, it’s different than any owning of security, for example. So I’ve kind of focused on that evolution over time. And I also often emphasize dollar-cost averaging, right? So instead of people often worry about, what if I buy it and it goes down 50, or what if I, you know, and I just find that the dollar-cost averaging makes sense, and the culture, especially in the Bitcoin space, is kind of shifted more towards that model, where instead of treating it like a speculation, you treat it like a savings.

51:18 And so by dollar-cost averaging, you lower your, like, mental connection to a specific entry price, and you become kind of price sensitive, and you say, look, I’m gonna put this, whatever percentage of my portfolio, into this, and then just, you know, add a little bit every week, every month, whatever the case may be. And you’d be kind of, you just kind of desensitize yourself for the price. And so for me, for example, I have a certain allocation. I add to it on a regular basis.

51:45 And so when we had, for example, a, what was it, a 56% correction, uh, in, you know, mid 2021, because my position size was appropriate, and because I had bought at a much lower price, even from that correction level. And because I was just dollar-cost averaging in, I was like, wow, you know, the money that I’m putting in is going to buy more bitcoins now than it was going to buy back in April, when it was when it was higher. And so that’s just how I approach it.

52:14 I think that’s a healthy mindset, as you kind of learn more about it. Yeah, and that’s something that, you know, I know Jack Dorsey’s really set up with the Square and with the Cash App and all. There’s a lot of technology now that allows people to do that. Um, and again, when it’s an increasing value asset, it all, that strategy also does look good over time. What is the right percentage?

52:36 Lend of people to hold if it’s not zero, and it’s not 50, or it’s not 30? What is that in between? I think it’s really different. I mean, a 25-year-old tech professional probably has a very different ideal number than an 80-year-old retiree, for example. That doesn’t really get it right, so, but many of them do get it.

53:00 They’re, I have readers that are 75, 80, 85 that, that own Bitcoin. Uh, I mean, that you know, they, they fully get it, so it really depends on their personality, their experience, what other assets they have. So I think this is literally a wildly different number. There’s also the case where there might be a difference between how much you put in versus how much you maintain. And so for example, my allocation is actually quite big, but it’s because of appreciation, right?

53:27 So it’s simply because I have not rebalanced. I have not, I’ve not sold and then realized all sorts of capital gains taxes and things like that. Um, and so a lot of times you’ll hear people say what the percentage is, it’s actually quite big. But people should realize that they didn’t, they didn’t, most of them didn’t put that much of their percentage in up front. They didn’t just say, I’m gonna put twenty percent of Bitcoin.

53:51 Um, it’s more like they put five percent in and it became twenty percent over time, for example. Um, and so the percentage of someone who’s worked up to that percentage is a very different number than what someone should, should put in when they’re, when they’re just starting out. So I think the first step is start small, because there’s, there’s technical risks, right? You, you risk losing it if you don’t know what you’re doing. So you first, you buy on exchange, or you buy on one of those dollar-cost averaging services like Swan Bitcoin, or a place like that, whatever is kind of accessible in your country, and you, you start dollar-cost averaging into that.

54:26 And then you, you can eventually take custody of it, and you learn more about it, and then if you, you’ll naturally start to research more, and then you’ll be able to answer your own question for how much you can hold, because you’ll be more knowledgeable on it. You’ll have a conviction on it or you won’t, and therefore you’ll better determine what percentage makes sense for you. I always find that some degree of diversification is helpful. I never go all in on anything.

54:50 Um, just for mental clarity, really. And so when something falls 56% in a couple months, it’s literally, you lose zero sleep if, you know, if you manage your position size well and if you know what you own. Yeah, really good advice, and similar advice and even commentary I heard from, like, you know, Anthony Scaramucci and SkyBridge. He’s like, yeah, Brian, it started off as a small percentage of our portfolio, but now it’s bigger because it’s grown so much in value, you know.

55:19 Um, and that’s a really good point. He also said, he said, look, Brian, I’ve been in this game for a long time, and I’ve thought things were sure things before, and I’ve been proven wrong. So we know, just to have intelligent risk management, you know, all in everything we do. Strangely enough, I’ve got, you know, people in their 70s in my course who get it. I’ve got people in the 20s who get it.

55:40 I’ve got some people who are very conservative with their allocation, you know, 5 to 10 percent. I got some people that have like 80 in, and, um, they’re quite transparent inside our groups, and I’m like, all right, you do understand that that’s extremely high, and they’re like, yeah, I get it, I’m comfortable with this, you know, and maybe, maybe they’re young, maybe they’re in tech, sometimes they’re not, and I’m just like, okay, I mean, you’re, you’re an adult. You can also go drink a bottle of vodka.

56:02 You can jump off a roof. You can do all these other crazy things, so as long as you know what you’re doing, but it’s, it’s just nice, at least, to have, a people that you can talk to about it and check with about it. Um, and then, and then go from there. So I appreciate your thoughts on that. Tell me about, you know, Bitcoin.

56:18 Um, my good friend Max Keiser is, uh, you know, his name is Max, and he is a maximalist. For him, it is Bitcoin or nothing, and, uh, you know, I respect Max, and I have Michael Saylor on the show, and of course Michael Saylor is choosing to own Bitcoin for his public company balance sheet. I think that’s a really smart move. He said, “Brian, I like Bitcoin because it has low aspirations. It’s not trying to be something else.

56:41 It’s also massively decentralized.” And Jeff Booth has a lot of good things to say about it. Um, how do you feel about other cryptocurrencies, and how do you feel about the Ethereum and the other ecosystems? Obviously, everything is growing super fast. It’s what is it 2.85 trillion market cap now across all the coins?

56:58 There’s 12, 14,000 protocols now, and there’s obviously some coming at a very shocking rate with very little information, but how do you look at that from an investor analysis? So, a couple ways. One is that I separate Bitcoin from the others, in the sense that Bitcoin is the one that I think is decentralized enough to call sound money, in the sense that there’s, there’s no one who can change the the monetary policy of it. It’s kind of designed in such a way, uh, I guess if you go back for a second for trade-offs, right?

57:30 So when you build a blockchain, what essentially you’re doing is you’re making an inefficient database. And it’s a database that has the unique capability that it can be stored in anyone’s personal device around the world, and that comes with advantages, mainly decentralization. Uh, but it also comes with tons of trade-offs, because if you’re gonna have thousands or millions of people store your database, it has to be tiny. It has to be low bandwidth, and so that’s this really small and tight database, and the more you try to add features to that, or or add throughput to that, you’re sacrificing some degree of decentralization.

58:06 And so there’s that trade-off there. So Bitcoin is built like a cockroach in that space. It’s basically fully optimized for as much decentralization as possible, and is willing to sacrifice other variables, and that’s what gives it, uh, that sound money quality. Back in 2017, the block size were, you know, 80% of the hash rate, the largest maker of Bitcoin miners, which, which was almost a monopoly. The, um, the largest exchanges and custodians and some of the earlier developers all teamed up, and they wanted to change Bitcoin’s block size, and they couldn’t do it.

58:42 And so it was basically because of that distributed node network, because that decentralization, it’s almost impossible to change without utterly massive consensus to change something. And even then, when it changes, with, for example, this upcoming Taproot, um, uh, soft fork, it changes through soft forks, you know, rather than hard forks. And so Bitcoin, in that sense, is something that I consider to be sound money at this point. Whereas when you go into other cryptos, they, I think, it’s, it’s one.

59:11 On one hand, if they’re fully transparent with what they’re doing, um, and, and they’re basically acknowledging the trade-offs that they’re making, there’s certainly experimentation to be had here. I mean, even, for example, some of the things started on Ethereum end up going on to, onto Bitcoin DeFi as well. So there’s innovation in the space. The challenge that we’ve run into in those other projects is that by expanding complexity on the base layer, they sacrifice some degree of decentralization, and there’s a spectrum there.

59:39 And so with say Ethereum, obviously you put smart contracts into the base layer. So one issue is, so you have a lot more features. You can do a lot more with it. You can do DeFi. You can do stablecoins.

59:51 You can do NFTs. Uh, whereas Bitcoin can only do that with additional layers put on top of it. So that’s a whole different design philosophy, whereas with the theory, we could all in the base layer. The downside is, so in order to do all these changes, and they, kind of, their cultures are based around changes and iteration and improvement, they put, for example, difficulty bombs in the code, and so they change through hard forks rather than soft forks.

1:00:15 So it kind of takes away a lot of the power of the nodes, and in addition, the block size grows so much faster than Bitcoin’s does, where in a few years you’re going to need multiple terabytes of data if you want to be able to validate the entire blockchain. Uh, and so and it’s also, it’s harder to sync it, and then they’re going to go to proof of stake, and, and just you know, just change that system, and so there’s more centralization risk there. And then we get into another project, if you, so that’s the kind of thing: if you see the Bitcoins and the Ethereums arguing with each other, it’s often about decentralization and risk and things like that.

1:00:48 Then if you get into something like Solana, where you have a proof-of-stake smart contract chain, it has a lot more throughput than Ethereum, so a lot cheaper fees, um, but it comes with even more centralization. So you often see that, you know, Ethereum critics criticize Solana for being too, uh, centralized, and they, you know, as an example of how centralized Solana is, they still do manual slashing. So proof of stake works on slashing, meaning that, you know, if a proof-of-work miner verifies the wrong blockchain, their punishment is simply that they mine blocks that don’t make it into the main chain, therefore they wasted real-world resources.

1:01:24 And that’s their own punishment. Whereas in a proof-of-stake, because you’re not using real resources to validate, you’re using your tokens, you have to get, your part, some of your tokens taken away if you vote for the wrong chain. And Solana still has manual slashing, so it’s not even a fully automated blockchain. The developers still essentially have complete control over at the end of the day, and we saw, you know, a couple months ago it went down for 17 hours, the entire blockchain, and had to be, like, manually… they had to, like, talk and manually restart the validators.

1:01:53 So there’s a spectrum of decentralization there, and so I put Bitcoin in one bucket, and all the others are kind of these experimental tech equities. And so it’s two very different types of investments. It’s kind of like comparing, you know, like a startup company with no profit yet that’s, that is kind of getting an idea off the ground versus an established business, right? So it’s two very different ways of looking at it. But then another thing I do is that I separate price action from fundamentals.

1:02:22 So, for example, in my research service, I would talk about these issues with Ethereum, but then say, I think for the next year, it’s going a lot higher, right? So, and I would talk about some of the supply squeezes that are happening with it. Um, I basically, once it broke over 1,400 back in, like, January or February, that’s when I became, uh, you know, quite bullish on Ethereum along with Bitcoin in my, in my service, and in terms of price, and said, you know, unlike Bitcoin, I don’t have a long-term view on this necessarily.

1:02:49 I don’t know if this is going to be the winner of the smart, smart contract chains. Here’s all the centralization risks, but all of us being equal, there’s a really attractive supply squeeze here. It’s probably going higher, and I did the same thing for Solana. So, for example, you know, two and a half months ago I said Solana has a good probability of flipping Cardano, and back then Cardano was 90 billion market cap, and Solana was 40 billion. Uh, and you know, a couple, you know, less than a week ago, they did flip, at least, you know, at least for the moment.

1:03:17 Um, and so I separate price action from those fundamentals to some degree, for at least, for the coins that I cover, which is generally only, say, the top 10 coins. That’s really insightful. While we’re on those other chains, can we just talk about the others, maybe the ones that are worth talking about? Obviously, you know, we’re going to run out of Ethereum co-founders pretty soon, but we’ve got Hoskinson with Cardano, right? We’ve got Gavin Wood and Polkadot.

1:03:41 They’re doing their parachain auctions this last week, so it’s becoming more live. I recently had, you know, Silvio Micali of Algorand do that. That was another consensus protocol, and I had Emin Gün Sirer of Avalanche, who has his own consensus protocol. All of them are getting traction in the market. All of them are top 20 market caps.

1:03:59 They’ve got real customers. They’ve got protocols and then some, but again, I do feel like we’re going to be in the layer-one wars in the next year. And I also feel like there’s not that many people left, you know, that have a history of understanding a lot of these complex pieces. They could even credibly talk about a reasonable new consensus algo or a proof of stake. What other ones are on your radar, at least for price action for your readers?

1:04:25 I mean, the main ones that I’ve been covering besides Bitcoin would be Ethereum and Solana. Um, and there’s a small number of other ones that I touch on, uh, but those are the two that I’ve been focusing on in terms of price action, because my services is, we cover equities, we cover commodities. We’re not a crypto service. And so I’m not sitting there saying, okay, this 25th biggest crypto is attractive. And if anything, because I’m more in that Bitcoin side, I’m basically looking at it and saying, a lot of these projects, not every project, but a lot of the projects, they’re not being transparent with their trade-offs.

1:04:59 I think some of their founders are not even fully aware of the trade-offs that they’re making, like they might get it in the technical sense, but they might not fully understand what made Bitcoin successful. And we generally see a pattern where Bitcoin has these bull runs every four years, so we’re, you know, roughly four-year cycles. The first one was kind of off, so you had 2011, 2013, then you had 2017 and 2021, right? So these kind of four-year cycles.

1:05:24 The first, the first one was a little bit compressed because it was different, but overall, every, every time Bitcoin has, when these big bull runs, everybody gets into space. They want to make their own coin. They want to try something different, and, and again, there are some of them that are essentially professors that are, that are basically tokenizing their research, so they’re they’re contributing to the field in a way that some would consider, you know, it’s challenging because they’re essentially issuing security, right?

1:05:50 So a lot of these, they pass the Howey test, and so they meet the definition of a security, which has its own challenges. And then it comes down to how transparent they are, and generally, if you look at kind of the theory of money, or historically how money works, it tends towards network effects. So strong money over time pushes away money that is less decentralized, less credible supply, more prone to changes, more prone to centralization. Um, and so that’s why a lot of Bitcoin maxis focus on Bitcoin and exclude the others, because there is a very high percentage of scams, frauds, overpromises, insufficient trade-offs happening in their space.

1:06:30 Now, I, I go a step less than saying, you know, some Bitcoiners say everything else is a scam. Whereas my approach is simply to say Bitcoin is different than everything else, so those other things are just a different category, which I think is overall highly speculative, and that there’s a large percentage of them that are not being fully transparent, or the people don’t even, aren’t fully aware of the trade-offs that they’re making, like when I talk about Solana, for example, there are a lot of people that are like, what do you mean, it’s manual slashing? Right?

1:06:59 So they don’t fully get the technical details of what they’re investing in, which could be fine if they have, you know, one percent of portfolio in it, right? But if they’re like, aggressively in a protocol and they don’t understand some of the technical details of why it’s different than Bitcoin, that’s a challenge. And then the same thing happened when they had all these meme tokens, that, you know, the dog tokens, like the, the Dogecoin, Shiba, all these other ones, relatively few of those buyers, especially on Robinhood, where they’re just buying, they’re not self-custodying anything, they’re not using them, they’re purely speculating on a screen.

1:07:30 They don’t necessarily see the technical trade-offs that all the different tokens make, the different network effects, how the nodes actually function to maintain the network. And so I think that’s, during bull markets, unfortunately, a lot of retail investors pile into things that they don’t fully understand, and then it all comes crashing down when there’s an inevitable bear market. And we, so far, we’ve seen Bitcoin’s the one that survives through those cycles.

1:07:53 Ethereum’s gotten through two cycles, and very few other tokens, there’s a huge track record of not getting through to a second cycle, uh, meaning that you, you’ve, you have higher highs than the prior cycle. And so basically, investors should be aware of the math that’s against them when they’re speculating in these tokens with anything other than fun money. Yeah, I, I heard Mike Novogratz of Galaxy Digital. He was at a conference here in London, although I think he was beamed in, and he said, um, he said, look, Bitcoin is an asset play.

1:08:23 Everything else is a technology play. Any, and again, very clear about what you just said. You know, everybody who’s come here, Lyn, including the people that are into DeFi, first of all, they all have a chunk of their portfolio in Bitcoin. They all pay homage to the fact that Bitcoin is, you know, digital gold, the most decentralized. Um, Dan Morehead of Pantera Capital, who actually spent a couple years at Bankers Trust with him at the same time.

1:08:45 He said, “Brian, this network has never gone down.” He said, you can’t say that about a banking network, about any other technology network. He’s just like, he’s like, you have to just, to really, you know, um, give credit where credit’s due to this. That being said, he, you know, he’s a technology investor, and even though he had the first Bitcoin fund back in 2013, he does see a lot of the growth in some of these other protocols. Lyn, would it be safe to say that the percentage of your portfolio to have in Ethereum is not zero in 2021?

1:09:16 I think it depends on, on the type of investor. And so I, I use some for research purposes. Right? So I have some Ethereum in my Ethereum piece. I made the case that Bitcoin is, is certainly a non-zero.

1:09:30 Now, and then I can see why investors want to have some Ethereum as well. I’ve not gone to the step of saying that people should have Ethereum, and it’s because of that centralization problem that essentially, you know, it is, it’s this environment where you’re changing the engine of a car while you’re driving it. So they’re going to change from proof of work to proof of stake. It’s been, it’s been delayed for years. Um, and because it’s a hard problem, it’s a very hard problem.

1:09:56 They’ve also, they keep changing how they’re going to scale it. So you mentioned, uh, proofs, for example, the person who invented proofs, there’s, there’s been, there’s been inventions over the past four or five years that have changed some of their, their base case for how they’re going to scale their protocol. And so overall, my, my issue with some of the smart contract platforms is that they seem like they’re going to tend towards centralization, and you see that with the Solana versus Ethereum comparison, where a more centralized blockchain comes along that’s more efficient because it’s more centralized, and then people start kind of flocking to it.

1:10:33 The excitement goes there. The DeFi grows a little bit quicker there than on Ethereum because there’s lower fees, and again, they don’t fully understand the trade-offs. Um, but as long as it’s working, they don’t really mind too much. And so overall, I think that, you know, it’s, it’s fine for people. Obviously, there’s a spectrum, right?

1:10:52 So Ethereum is the only other asset in the space that I consider to have a serious network effect. Right? So, so Bitcoin is the only one that I consider money. The other ones I consider tech equities, and then when we look at network effects, Bitcoin and Ethereum have serious network effects, and everything else is, is, you know, more in kind of like startup mode. Right?

1:11:10 So I I, I kind of have those couple different buckets, and then I let investors do what they, what they want to do with that information. Right? My job’s not necessarily to tell people about their allocations. I don’t know, the only one that I’ve been comfortable to say that I think people should really consider owning is Bitcoin. Yeah.

1:11:28 Now, some really good points. Uh, it’s what they’re, with a healthy argument. I mean, you know, Amazon is centralized, and it offers, and it created a lot of value. So I realize some of these networks aren’t Bitcoin. They’re not following those strict rules of Bitcoin.

1:11:40 They’re also doing incredible technology innovation, as long as you know what that is. And like you said, there’s a lot of hype around Solana right now. It’s actually named after Solana Beach, near where I grew up. And there’s a lot of hype. I just had a conference in Lisbon, and everybody said it’s just like there’s obviously a big bull run sentiment here, and we’ll have to see if it can deliver.

1:12:00 Uh, and like you said, when you dive into the tech and a lot of the details, you know, it’s, it’s definitely not Bitcoin, and it definitely is not Ethereum. And I agree, people should be very wary. Lastly, I think Dan Morehead had posted a picture on their latest research that had the number three market cap coin for the past 10 years, and Lyn, it was all these, um, logos I’d never seen before, you know. And so we have to remember, in this space, a lot of people are new to this space.

1:12:29 Realize that, you know, there’s been a lot of jockeying for positions, and even six months ago when we started covering, going deep into DeFi, Solana wasn’t even being talked about really, and like I said, it flipped Cardano recently, so, um, really good observations there. Um, when it comes to Bitcoin, uh, what is the state of the Lightning Network, and is that evolving constantly, and will that someday have its own device components, because the maximalists say it will, and one day all we’ll need is Bitcoin? But I tend to also not necessarily believe that, and I don’t really know what this data that is.

1:13:03 Are you up to speed with, like, the Lightning Network and Bitcoin tech, et cetera, and you talked about this soft fork as well. So I cover Lightning regularly in my research service. I’m also pretty good, pretty good friends with Elizabeth Stark, who’s the CEO of Lightning Labs. They have the largest market share in Lightning implementation. And so I, I’m very bullish on the Lightning Network, and so if we take a step back for a second, when we talked about these trade-offs with blockchains, right?

1:13:27 So, so by adding features, you’re sacrificing decentralization. There’s basically two ways to solve that. One is you can just say, we’re going to have less, that we’re going to have less decentralization so we can do more, and we’re going to have kind of a federated chain or a semi-centralized chain. So if we acknowledge that, obviously, centralized databases have a purpose, so Amazon’s centralized database has a purpose, and then we have Bitcoin, a fully decentralized database, has a purpose.

1:13:54 So then the question becomes, can a blockchain in the middle have a purpose? Does a partially decentralized database have a purpose? And basically, like Solana and Ethereum would essentially say yes, and that’s so that’s what they’re innovating towards. They’re saying that we think a partially centralized, uh, partially decentralized database has purpose because you can do all sorts of things with it. It’s, it’s, it’s, it’s auditable, and yet it’s also you know, more centralized, so we can do more features.

1:14:22 Now, the Bitcoin approach is instead to build in layers. So you say, okay, we have this rock-solid, super simple foundation, and if you look at any monetary system in the world, they build over layers, right? So you have gold, and you have, say, paper currency on top of gold, and then you have credit on top of that. And so Bitcoin is saying, okay, the base layer is not going to be super scalable. It’s just going to be rock-solid settlement security, and then on top of that, you can build all sorts of things.

1:14:50 And so one of them, for example, is Liquid, where you can lock Bitcoin into it, into a, you know, basically peg it into the Liquid network. It’s a federation, so you make certain trade-offs, but then it becomes a lot faster, and, and so it can settle things. They can do more. You can have NFTs on it. And so it basically, it, it unlocks Bitcoin onto this, under this, you know, higher-frequency state, you can call it, so you’re sacrificing a little bit of that security, a little bit of that decentralization for more features while still being pegged to Bitcoin.

1:15:20 Lightning is a similar approach in the sense that it’s built on top of Bitcoin. So smart contracts, uh, very simple smart contracts allow you to open channels. And when we think about, you know, when we send payments, if I send you money, we don’t want to broadcast that to the world. So blockchains broadcast everything to everybody, so that’s inherently doesn’t scale very well. There’s no reason why, if I pay for coffee, that the entire world should know about it, even if they don’t know who I am by my address.

1:15:50 They don’t need to know that this address paid this address, the entire world. And so Lightning says, okay, so in addition to that underlying broadcast settlement layer, we’re going to have direct channel to channel payment connections in here. And so it’s kind of like you open this tab, like a bar tab, and instead of, you know, paying for every individual beer, if you’re buying beer for your friends at the bar, instead of paying for every one, you open a tab with a bartender.

1:16:17 You collateralize it, so no one’s trusting anyone else, because, unlike a bartender, you actually have code to enforce this, and it’s collateralized, and you basically do a lot of transactions, and they can settle it back on the base layer at any time. So you can do 100 transactions and then settle it at the end of the month, or whatever, and so in addition, you can do things like, if I have a bar tab open with the bartender and someone else doesn’t, she can, she could talk to me and say, hey, can you just get me a beer, and I’ll pay you back? So basically she’s using my tab with the bartender, and then we’re, kind of, we’re connecting through there.

1:16:57 And so that’s how the Lightning Network works. And back in, you know, it was conceived in 2015, 2016, it was implemented in 2018, the, you know, early 2018 for, like, the beta. And for a while it was, like, a slow-growing thing, because it’s really about the network effect and liquidity. But one argument that I’ve been making since early 2021, like January, was that it’s finally hitting critical mass. So the liquidity is sufficient that you can actually reliably send payments on it, and you’re getting adoption from exchanges and other things like that.

1:17:27 And of course, a few months later, in the middle of the year, we had El Salvador, you know, announce that they’re going on, you know, they’ve made it legal tender Bitcoin, and even though we call it Bitcoin, they’re essentially, they’re heavily using the Lightning Network. I mean, a lot of their implementations are based on Lightning, so the Chivo wallet, um, and also the open-source wallets that people can get there. A lot of that is based on Lightning, and so it’s kind of showing that you can do these very fast, very secure payments on top of Bitcoin, rather than relying on Bitcoin’s base layer.

1:18:01 So I’m quite bullish on it, and over the long term, I think that, you know, when you look at Liquid, when you look at Rootstock, which is another DeFi aspect on top of Bitcoin, and we look at Lightning, I think we’re going to see increasing, probably, DeFi on that platform. But it’s also important to realize that because the Bitcoin culture is less about speculating and less about yield, and more about, say, the sound money approach, I think it’s going to be inherently less financialized. So those things will exist there, but I think the question is, will they become as big as you see on the other chains, which kind of prioritize them?

1:18:37 Yeah. It’s, I mean, I worked in finance for 15 years. It’s almost like finance kind of needs to be around currency, as opposed to digital gold or digital property, as Saylor would call Bitcoin. So I see what you’re saying. It’s all, you might expect the finance to be around the stablecoins and develop faster there than, say, on the Bitcoin, but we’ll have to see with some of these protocols.

1:19:00 Yeah, that’s one of those things where if you’re more centralized, you can iterate faster. And whereas with Bitcoin, because the base layer is very secure and it changes slowly, a lot of that innovation happens on higher layers. And so the last major Bitcoin update was 2017, SegWit, and the one that’s coming out now is called Taproot, and that implements new encryption methods that people can opt into, so it’s not forced on them. It’s a soft fork, so they can opt into it, and that enables that.

1:19:31 It actually empowers Lightning, so it makes Lightning far more useful, in particular, but also it just kind of makes the whole blockchain more efficient. And the reason that kind of thing wasn’t implemented in the beginning was that it had just kind of come out. I think when Bitcoin was invented, it wasn’t battle-tested yet. I think it wasn’t even, it might have been patented, for example, but over time that type of encryption is now more understood. And so that’s another way to improve Bitcoin.

1:20:00 So Bitcoin basically changes very slowly on the base layer, and we see a lot of innovation happening in the higher layers. In addition, you see innovation in other spaces. So, for example, a lot of the hardware improvements have been on the Bitcoin side, right? So, if, so, you know, there are wallets like Trezor or Ledger that, you know, they hold multiple tokens, but then Bitcoin also goes further with, like, Bitcoin-only wallets that have more features.

1:20:25 Uh, and then also Bitcoin-only multi-signature solutions, because it’s, you know, this kind of collateral asset, sound money approach. There’s a lot more focus on security and custodianship for it, uh, and so there’s more innovation in that space. So there’s kind of different areas of emphasis for innovation on these blockchains. We definitely need more security innovation in the DeFi space for sure. Um, so any help from the Bitcoin people would be great.

1:20:53 You mentioned NFTs, Lyn. What are your thoughts on the phenomenon of NFTs and their future? A couple thoughts. I think overall, I mean, I don’t think sustainable to pay millions of dollars for most types of NFTs. I think that it’s kind of a localized bubble, but I think, you know, I think that there’s probably the biggest use case for me that I find them interesting in is gaming.

1:21:20 Um, because you know, anyone who’s played some of those, say, massive multiplayer online games, it’d be cool to be able to take your character or some of your property and other things like that and move them to another game and have them be recognized by another game, or basically build a transact outside of the game and basically trade them with other people, or do things like that. And so I do think that NFTs can potentially add to certain types of games. I think it’s a mistake to build a whole game just around the blockchain to monetize it, and it ends up not being fun, and that’s kind of like the wrong way to do it.

1:21:54 I mean, so far there’s been tons and tons of blockchain games. The only one that really kind of broke out so far was actually Axie Infinity. Um, and it’s because I think a lot of them just focused too much on the monetization, and even, like, a month ago, Steam banned, or, more like, they added to the terms of service that you can’t have a game based on blockchains and NFTs in their service, and they’re of course huge for the PC gaming market. And so, you know, I don’t know if that’s the right approach either.

1:22:25 Um, but I think it’s one of those things where in selective circumstances, I think NFTs can make a lot of sense for gaming. And, you know, we also saw, for example, like on the Liquid Network on Bitcoin, they did movie tickets, they were NFTs, right? So it can potentially be more efficient for event tokens and things like that. I think that, I think it’s an area that’s going to be explored a lot, and that does probably have a lot of utility in the long run.

1:22:49 And just like anything else, there’ll be a speculative boom, where, you know, a lot of the dot-com stocks didn’t do very well, but of course the internet was a real innovation that went huge places over the next, you know, 20 years. And so I think that NFTs are maybe in that kind of boat, where I think they’re very speculative. They’re also very prone to manipulation, because if I want to manipulate Bitcoin, I can’t really do it. They’re all the same, this very liquid fungible market, and it’s hard for me to manipulate Bitcoin.

1:23:16 Whereas if I want to, if I have a set of art, so there’s a thousand pieces of, uh, in the set, if I want to manipulate the price up, I can trade this one piece of art. I can have an anonymous account, and I can trade this piece of art back and forth and build up the price, and I can have friends do with other individual pieces of artwork, and we can build up these crazy prices, and then attract people, say, oh, look at, look at, look at the market going up, and then I can sell them that picture, and it wasn’t really a real price to begin with. It was insiders doing that, and so I’d be, you know, I think people should be very cautious about buying NFT artwork, because it is a much easier market to manipulate than, uh, you know, Bitcoin or even like Ethereum’s price and things like that, because it’s specifically non-fungible.

1:24:02 So I would separate, basically, this current round of price speculation versus some of the long-term potential that we could see in the NFT space over time. Yeah, I think someone tried to do that with a CryptoPunk a couple weeks a week ago, where they printed some, you know, half-a-billion-dollar trade, and then they traced it between two wallets. Again, uh, I think the art market is this. They’ve been doing this for the last hundred years, right? Like, this is their game now.

1:24:29 It’s just faster. Yeah, it’s just, it’s basically, it’s all the same problems with art, and now it’s super fast, and you can trade with yourself, and so it’s basically prone to, it’s like art market on steroids. So, and anyone, and people are getting into this space, they’re not familiar with the art market, and they think, wow, I want to buy this, this this penguin without necessarily realizing that maybe someone traded it between themselves seven times to bid up the price, and then, and then unloads it on that unsuspecting speculator.

1:24:55 So yeah, I think people would be very careful with that, while maybe also acknowledging that it is interesting for gaming, it’s interesting for event tokens. Maybe we’ll see, we’ll see where it goes, we’ll see what what innovators do with it. Yeah, I think there’s an entire multi-dimensional space of what it could be. Uh, Andreas Antonopoulos said the same thing when he was here. He said, you know, people know year 2000 as the worst year for the internet, but that was just the stocks.

1:25:19 It was actually an incredible year of innovation and adoption for the internet. Um, just wasn’t so good if you’re an equity holder. Um, and maybe the same is going to happen with NFTs. I think the modern art market has been playing these games for a while. A famous artist here in London named Damien Hirst, who is you know, a bit of an Andy Warhol, where he produces, in manufactures, art, but I think he did, like, a skull with diamonds all over it, uh, 10 years ago, and then it supposedly sold for 100 million dollars, and you weren’t sure, but there was the great hype around it, and you see that sometimes with NFTs.

1:25:49 I actually had a conversation with Yat Siu of Animoca Brands, who’s in Hong Kong, last week, and he just was talking about how gaming is gonna kind of intersect back in with DeFi with a lot of this open metaverse, and it was an interesting way, because the gamers have been doing this for a long time, right, and they understand the metaverse better, and points and NFTs. Uh, they just weren’t always very tradable between games, and like you said, some of these gaming brands have now kind of banned that, but they understand this. Sounds like you’ve done a little bit of gaming.

1:26:21 I forced myself onto Axie Infinity a couple weekends ago, and I had to buy a couple Axies with my Ethereum, and I could see how I had to, you know, actually go buy these things that had been invested in by people, and then I had them fight some other Axies. One of them died like within a minute, and I thought I just lost, like, 300 of the ETH, but he came back. Um, but it’s just interesting to see how that happens, and Yat said that the DeFi markets actually helped accelerate the gaming, because it gave the tokens liquidity, and then some people are using them, you know, to make a living.

1:26:49 And I don’t know, I think it will be interesting to see how the metaverse intersects back in. And, um, again, back to Andreas, he said, “Our first experience of the internet, at least mine, was in 1989, was sending an email at MIT to my brother at Stanford, and then that’s what I thought the internet was, and it wasn’t very interesting until we saw the browser.” And maybe NFTs were seeing, you know, a JPEG, when in fact it could be, like you said, a ticket, an access, a metaverse a multi-dimensional piece, your own information.

1:27:18 Perhaps there’s a lot of possibilities. Um, but like you said, I see a lot of the games we used to play on Wall Street being played in these markets with people that don’t understand the game, and that’s one of the biggest, uh, observations I have about the crypto markets. Most of the investors have no idea what they’re doing. Sometimes they don’t even own the tokens, like you said, they’re on an app, but someone has custody. They’ve never traded an asset in their life.

1:27:42 Um, and then they also don’t know the way that, you know, the, the experience people do with front running or posting trades or wash trades or all these things that are great ways to manipulate psychology, but um, most people just aren’t savvy to that stuff. Um, yeah, so that’s the risk. Be aware. Um, just want to finish with a couple questions. Um, Lyn, you seem to be beloved by this entire community.

1:28:05 Do you, why do people love you so much? I mean, that’s a hard thing to answer. I, I try. I think I just try to be objective. I try to be honest.

1:28:16 I don’t, my marketing is not hypey, right? So I’m like, if anything, it’s anti-hype. I understate things. Uh, I think people appreciate that, and, you know, when it comes to, say, I, it’s also, I kind of break rules of the internet. So, like, you know, I, when I was, like, reading about online writing, it’s like, keep your article short and make it snappy, and I was like, I don’t, I don’t do any of that.

1:28:38 So I’d write, like, 5,000-word articles, 10,000-word articles that have, like, 18 charts in them, and of course it attracts a certain type of reader, but then they remember that article for years. It kind of, they were something they didn’t understand, and then they read it, and they, they get it now, right? So it’s not just, like, they kind of get it. It’s, like, they actually read it, and they, they get it, and so I think by just having differentiated content, being honest, um, and just, you know, trying to put out useful research, I think people appreciate that.

1:29:08 Wow, sounds a bit like my journey 10 years ago when I started recording these episodes. Everyone said they’re too long. Um, no one cares, no one’s going to watch it, and they started off like an hour, and then they went to, like, three hours long, and, um, and we just, I don’t know, we just, I didn’t really care. I just wanted to have a really, uh, you know, complete conversation with people, and then after a few years, I would have my guests come here and I’d be like, if somebody watches this whole episode, they will be a fan for life, because they will have invested in all of your ideas.

1:29:37 And the truth is, is, you know, the internet is on demand anyway, so if people want to watch a little bit, they can, or if they want to read some of your articles, they can. But then if they can absorb the whole piece. Yeah, it’s a great, it’s a great, uh, resource to give people. Um, it, it’s also great little snapshots back into time, you know. Um, you watch those Andreas episodes now.

1:29:57 It’s, they’re quite eerie as he talks about this kind of future of money and internet of money, and the word DeFi isn’t even mentioned yet, and all these possibilities, and just to have captured those conversations is, it’s, uh, yeah, it’s a really interesting thing to kind of see those now. Um, then you had quite an interesting background where, like, you know, you, you, you know, you, you you struggled sometimes, your family struggled, and you’re homeless at one point, you went all these of these things, but I think you said that also gives you a really unique relationship with money. Can you just talk a little bit about how that background helped you with what you do today?

1:30:30 Well, I think going back to the prior question, of why do people like my research? I think part of it is because I don’t, I don’t come off like I’m speaking down to people, or that I’m out of touch, kind of a stereotype of finances, the people out of touch, right? And it’s partially true. I mean, not everybody, but it’s a, it’s a somewhat out-of-touch industry. Um, and so, you know, when I was, when I was young, I mean, I was like a lot of people, that, you know, my parents were separated.

1:30:57 Um, and when I lived with my mom, for example, we were homeless for a period of time, uh, for a couple years. And so then I, with my dad, we were in trailer parks, and, like I said before, we were reasonably comfortable, but it was still somewhat of a, you know, kind of a financial struggle, a little bit. And so I kind of had those somewhat humble origins, and, you know, I kind of I had to take out debt to go to college, basically. I, you know, I kind of started out from that kind of scrappy beginning, and I think that gives me an appreciation of things.

1:31:28 So even though I became more financially well off over time, I never forgot those roots. And also, I mean, going back to why I got interested in money and, say, precious metals and inflation when I was like eight is because I think of that backstory, basically, the experience of always being without resources or being fragile or being vulnerable and not having, not knowing what’s good, you know, what’s going to be next week, right? So it kind of, it pushed me a little bit towards the other direction more so than most people.

1:31:59 So I, if you know, I kind of became like a hardcore saver and investor earlier on, so it’s kind of like turning a problematic period into an upside, without going overboard and being like a scrooge, you know, like a hoarder, kind of. So that, that right balance, I think. Um, and so that I just kind of whenever I research something or write about something, I always try to approach it from multiple angles. So, and sometimes I’m writing, I try to make pieces so that if I write something, a financial professional will find a lot of value in it, but then at the same time, you know, someone who doesn’t work at finance but is, you know, reasonably well read and intelligent will get it as well.

1:32:41 And so that’s why my readership ranges from people working on Wall Street to people working at a supermarket. Right? There’s a massive range there, because the whole purpose is to take institutional-level research and then apply it, to put in plain English, in such a way that, you know, experts still benefit from it, but also other people. And I, because I appreciate that when I look up things that I’m not an expert in, or that I’m not experienced in, and I want to learn how to do something, and there’s someone explaining how to do it, it’s really helpful when they understand what it’s like to not fully get it, and then therefore to put it into plain English.

1:33:17 Yeah, I do think that’s why people really appreciate you, Lyn. And, um, I also, I’m dying to ask about your background in mixed martial arts, and, you know, have you been in, have you trained before, and you’ve been in fights and cages and things like that? I’ve got a little bit of a jiu-jitsu background myself, but what’s yours? Yeah, so when I, when I moved from my mom to my dad, um, when I, I was either just about to turn seven or just turned seven. Um, like, I, I had some social problems just from being homeless for like two and a half years at that point, and my dad put me in martial arts, and back then it was like karate, but it was actually a combination of karate, jiu-jitsu and kickboxing, and over time they branded themselves as MMA when that term became more popular.

1:34:01 It was essentially MMA from the beginning, but it had, we had, we had belts, and we broke wood, and, you know, it was kind of like MMA combined with those traditional karate elements, and they gradually kind of drifted away from the karate part. And so I, that was kind of like my main sport growing up, all the way, all the way until I went to college. And so I, I was bad at most, like, anything with hand-eye coordination. Like, anything involving balls, I’m terrible at, and I never really even had talent for martial arts.

1:34:29 It’s just this, the one thing I did week in, week out, multiple times a week, uh, I was tournament fighting, becoming an assistant instructor, just kind of grinded at it so much that I eventually became pretty decent at it, and so it’s the one sport where I, I kind of know what I’m talking about, or I can watch it intelligently. And that, I, you know, it basically made it so that even when I stopped doing it, it was kind of like I was always in shape because of it, and I retained that. It just kind of became natural to stay in shape, and so it was useful for fitness, it was useful for confidence, it was useful for practicality.

1:35:03 Um, and it was also, like, a lot of my friends back then, you know, I had more friends from martial arts than from school, so it was kind of a neat thing. One of my martial arts instructors, all he said, something to me once, he said, “Brian, you learn a lot about yourself when you get into a fight.” That’s what he said. And, uh, I wonder if you ever learned something about yourself when you’re in a, like, a knock-down drag-out fight in there with someone with a will who’s bigger than you, and yet you still have to keep fighting.

1:35:30 Have you had those moments? Absolutely. I think that that’s huge, and, you know, it’s one of those things where people fear things that they never tried, and so part of grinding and getting better at martial arts is just getting used to being hit or used to being thrown down and crushed. Um, obviously, you want to do it in a, you know, a responsible way. You don’t get injuries.

1:35:51 I have a couple, you know, I did it long enough that I have a couple injuries that, you know, I still have around in a slight way, but overall, as long as it’s a responsible environment, there’s a really, you get a lot of use out of that. So, in our, basically, often said, you know, what makes a black belt is not someone who never gets hit. It’s someone who gets hit and doesn’t care, and so that’s something that we emphasize a lot. When, you know, someone comes in, they’re soft, and then over time, they, in addition to building up their actual muscles and, and bone density and things like that, they also just get, get used to discomfort in a way that I think is applicable to other areas of life as well.

1:36:32 Yeah, amen to that. I just have a lot of respect for watching these fighters walk into the cage at a UFC event, and you look at them like, there are these, you know, like, there’s, they’re stone cold, or there are these, you know, professionals. But then you hear, behind the scenes, and they’ll, like, Cowboy Cerrone says, when I walk into that cage, I keep thinking to myself, what are you doing? This is the stupidest thing you’re ever doing. What am I doing here again?

1:36:54 I don’t want to be here. Like, most of them still say it’s, it’s quite a mental challenge to lock yourself in that cage with someone else. You know, even the pros. Absolutely. And, you know, for most people, obviously, those are people that are doing it for money, and so they’re willing to take more risks.

1:37:09 But for a lot of people, you know, their tournaments, they don’t have helmets on, right? So you’re less likely to get, you know, concussions, less likely to break your nose, obviously. And so overall, there are precautions you can take to still make a sport out of it. I mean, I, I broke my thumb doing it. I broke my left leg doing it.

1:37:28 So there are risks involved, um, but, you know, especially as a more casual practitioner, you get, you get a lot out of it, um, and it’s, it’s really not that more dangerous than any other, you know, semi-intense sport, like football or some of these others. Yeah, I think it’s essential for kids to change some kind of martial arts. I’m trying to get my two young boys. They’ve been to jiu-jitsu classes already, and just getting comfortable with pushing ourselves around.

1:37:54 When I get home from work, they jump on me on the bed anyways, and they want to fight, so it’s, it’s natural. Dana White always just said, the UFC said, if some guys are playing basketball and some guys are playing hockey, and some guys are playing baseball, and a fight breaks out, everybody goes to watch the fight. So he says fighting’s in our DNA, and he might be right. Do you still train, or do you still follow the sport at all? Uh, not actively.

1:38:16 No, I, I don’t train currently. I still stay in shape in other ways. Uh, and my husband watches UFC a lot, so he kind of, he kind of pulled me back into it, and so I I, there are certain events that I follow, or sometimes, for a few months, I’ll follow up pretty closely, and then I’ll drift off because I’m too busy, and then I’ll get pulled back in, usually by him again. Uh, like I said it’s the one sport where I actually could watch it, and I know what I’m watching, because if I, if I watch other sports, it’s like I don’t know who’s better than who.

1:38:45 I don’t know, like, I don’t know what makes what makes, like, I don’t know, you know, I don’t know what I’m looking at. Whereas in martial arts, I know what the moves are. I can tell when someone’s messing up. Like, I get what I’m seeing. Yeah, it’s also human theater, because it’s so real, and the stakes are real, and the emotions are there, and someone’s gonna get hurt.

1:39:03 And, uh, I find it just to be amazing to watch. You know, the even, the before the fights and after the fights, and everything that is going on, not to mention the fight. Um, and it’s come such a long way. I mean, I was at UFC 38 in London in 2002, in that form, and now they just finished UFC 268, and it’s just become this global brand. It’s pretty amazing.

1:39:23 Um, Lyn, just wanted to get your final thoughts here, and also, how can people follow you, get your research, or learn more about, you know, what we’ve been talking about today? Uh, so I’m at lynalden.com. I’m on Twitter at @LynAldenContact. People can find me there. I have tons of free stuff.

1:39:38 And overall, I think, you know, this is, it’s a challenging environment to navigate, because we are living in unusual times in the sense that, going back to, we talk about the long-term debt cycle, right? This is not a normal currency environment that we’re in. Um, and so there’s a, there’s a thread to navigate, because on one hand, there’s a lot of hyping marketers out there. They’re people talking about currency hyperinflation for decades, right? So there’s that side, and then there’s people that are actually, you know, that there’s actually things happening here that are worth paying attention to, to protect your savings.

1:40:14 And so it’s really important, it’s important to be both skeptical and open-minded, which is a very challenging thing to do at the same time. That was a challenge I had with understanding block sizes. Even though I was young, and I’m still young, I’m an, I’m inherently kind of a conservative, skeptical type of mind, and so that can serve you well. Usually, you can also, sometimes, slow you down a little bit. And I think in this type of environment, it’s important to be skeptical of claims you see, but it’s also important not to have too much recency bias and assume that things are normal, which I think is probably the takeaway I would have, and kind of the mindset to have is be open-minded but also skeptical.

1:40:54 Yeah, that’s really good advice. I was in the dot-com bubble, uh, in New York City in ’99, 2000. I was working for a company. Um, I mean, we’ve seen a lot of interest in crypto this year, um, but for me it feels 10 times, 20 times bigger than that that excitement and that technology adoption. I mean, is this probably one of the wildest times that we’ll experience in our life, when it comes to, you know, excitement, you know, hype bubbles, things to look out for, but also opportunities?

1:41:25 I mean, is this, is this big right now? So, I, I think so, but I think it, it’s going to come and phase it. So I think this whole decade is going to be an interesting one, um, and it’ll have different, different parts, right? So there’s the crypto part. You know, we already had a taste of the energy, energy shortages, energy parts.

1:41:44 I think I think they’re going to come back at some point in this decade, um, and I think the ongoing underlying financial repression, currency devaluation theme is going to be with us for a while. Again, it could come and go in fits and starts, but overall, I do think that this is a pretty interesting environment that’s comparable to the ’70s, comparable to the ’40s, comparable to 2000s tech mania. So it is, I think, a pretty historic time to be in. Um, when you have meme coins, meme stocks, uh, you know, there’s a lot of landmines out there.

1:42:16 Um, but it’s also stuff for the history books. Yeah, uh, and is, could there be any long-term value in the meme coins? Is that something maybe we just don’t understand yet, or not? I mean, I think there’s very low probability, because they have technical deficiencies. Um, that, you know, basically there’s a difference between people trading something on Robinhood versus people actually using the protocol.

1:42:40 Right? So, um, jokes are inherently not that sustainable. Now, if something is an underlying good product, and then they go viral because of memes and things like that, that’s different. So, for example, in the Bitcoin community, they use a lot of memes to spread their messages, but those are memes on top of this underlying thing that’s been working for years and years before the memes. Right?

1:43:01 So, so it’s different when something is only a meme versus using memes to spread a good idea. And I think that’s, that’s the way to approach it, that memes have value, but things that are entirely memes don’t have value. All right, some fantastic thoughts. Uh, Lyn, really appreciate everything you do. I appreciate the way you do it as well.

1:43:20 Um, and yeah, I encourage everybody to definitely follow you on Twitter and go check out your research, um, on your website. Um, appreciate the time. Uh, love to do this in person sometime if you get to London, so, uh, let’s try to make that happen. And, uh, wishing you all the best. Thank you so much.

1:43:34 Sounds good. You too, have a great day. All right, fantastic. Thanks, everybody, for watching. We’ll see you next time on London Real.

1:43:52 Take care. Bye, you