 If Bitcoin ever reaches $1 trillion, that's still 10% the size of gold. Could it reach 10% of gold's market cap? I think so. This is strategic investor Lynn Alden. Back in 2017, she was highly skeptical of Bitcoin. I was concerned with dilution, right? So if there's no kind of one network effect that kind of retains control, you could see that kind of market cap distributed among multiple different protocols. In the three years since then, the world has changed dramatically. The coronavirus has spread quickly around the world, leaving a tragic and growing toll of illness and lost lives. Yes, Stu, this is the biggest push yet that I've seen from the Federal Reserve Chairman to get more fiscal stimulus into the economy. Against this new macroeconomic backdrop, Alden stands toward Bitcoin, has done a nearly 180-degree turn. We can look at price history, we can look at market share, we can look at all the different ways of measuring a network effect and see that the thesis for Bitcoin's network effect is playing out. In our conversation, Lynn explains why 2020 may be one of the most favorable years to invest in Bitcoin. My name is Jackson, and welcome to another exclusive Cointelegraph Interview. Back in, I think, 2017, you had an analysis of Bitcoin that was overall bearish. And since then, in your 2020 blog post, you've turned bullish. So could you take a moment to explain the factors that led you to change your position there? At the time, we saw the hard fork, and then we're also seeing Bitcoin's market share of the cryptocurrency space was declining. And I was concerned with dilution, so if there's no one network effect that retains control, you could see that market cap distributed among multiple different protocols. That I was like, I'm just going to watch this for now. I think there's a lot of enthusiasm here. And so about two and a half years later, in early 2020 here, Bitcoin basically round-tripped all the way to the same price. So it was in the $6,000 to $7,000 range. But so you can get at the same price as you could back in 2017, but the network effect was much stronger. I mean, the ecosystem around Bitcoin was stronger, the use case was stronger, the macro backdrop was stronger. So we could have had, for example, a challenger come along and possibly take some market share. We could have had issues around some of the hard forks. We could have had more split communities. But so far, Bitcoin has survived all of those various riskier moments for it. So now from looking back in early 2020 when I made my investment, a lot of those initial concerns were addressed. It survived a lot of the challenges coming up to it. I think the path dependency is a key thing. And I incorporated that into part of my argument that Bitcoin came first. There could have been potentially an early challenger to kind of take it away a little bit. But from what we've seen, it built up that security advantage from a really early period. And because especially as a store of value, security is the most important attribute for a digital asset to have. And so the fact that Bitcoin has the highest hash rate and has tons of decentralization really has a really fixed monetary policy. We know exactly how many Bitcoins pretty much are going to be created over any given time period, which you don't get that with some of the other protocols. So it's basically the only strength in the argument over time. And the further we go, the more we can look at price history. We can look at market share. We can look at all the different ways of measuring a network effect and see that the thesis for Bitcoins' network effect is playing out. Yeah, Bitcoin is kind of interesting because its network effect is inherently tied to its security protocol. The bigger it gets, the more secure it gets. So it kind of builds on itself in that way. So it's definitely interesting to invest in. And speaking of that, I think a lot of people could probably guess where I'm kind of going with this. We had this news recently of PayPal integrating Bitcoin payments into its system. And a lot of people are incredibly bullish on this news. I mean, we saw the price skyrocket. Mike Novogratz has called it the shot heard around the world on Wall Street. Cointelegraph reported that this PayPal integration could potentially double or triple Bitcoin's network effect. So if we're talking about investing in Bitcoin as an investment in its network effect, how big is this news actually, in your opinion? So I do think that that's yet another kind of platform that strengthens Bitcoins' network effect. And so if people can access it with Robinhood, they can access it with Cash App, they can access it with PayPal. Most of these protocols, they're not really kind of meant for the hardcore Bitcoin enthusiasts that want to custody their own coins and stuff. But the point is that they get out to people. They get people familiar with it and then they can go down the rabbit hole and then they can find other ways of acquiring it later on. So I do think it is important for reaching a wider audience to have these big entities allow as more access points in the protocol. It also, some of these services are Bitcoin only. So we have some companies like Cash App or Swan Bitcoin that are Bitcoin specific companies. They let you accumulate Bitcoin. And so I think that strengthens Bitcoin's network effect. And the same thing is when we see PayPal, they're not letting you trade into 5,000 different cryptocurrencies. There's only a handful that they're willing to go into. So that further entrenched the network effect of the top players and particularly Bitcoin. Just from the news, we already saw the jump as you mentioned. Do you have an idea of as the Bitcoin network spreads, people are interested in learning how to buy it? I mean, if we see this like doubling or tripling of Bitcoin's network, what do you think that will do to the price? Well, I think the market cap could easily go to over a trillion because that's still a small fraction of gold's market cap. I mean, gold, depending on the estimate is somewhere in the ballpark of a $10 trillion market capitalization. So if Bitcoin ever reaches $1 trillion, that's still 10% the size of gold. So even if you just only call it a digital gold, and you forget the fact that it has other use cases as well, but you say, okay, say it's just a store of value, could it reach 10% of gold's market cap? I think so. So as you get more and more people into it, that can definitely put up the price pretty far. And as some of the analysis I did showed how much it grew in each halving cycle. And even though each halving cycle, it has explosive price gains. Each cycle is a little bit less in percentage terms than the one before it just because you're starting from a bigger base. But even if this halving cycle is like one quarter of the magnitude of the previous halving cycle, that's still a very, very large jump for the market capitalization. So I'm looking at that market cap of over a trillion as my first target we're looking at here. You were saying in your blog post that stock prices, bond prices, gold prices, and real estate prices have all been pushed up over the past 25 years, more or less, obviously. And that even like a 1% spillover into Bitcoin from the tens of trillions of dollars worth of zero yielding bonds and cash assets, that spillover would be far larger than Bitcoin's entire current market capitalization. So how likely do you think a 1% spillover from all of those asset classes would be? Well, I mean if you look at global assets, it's somewhere in the ballpark of 400 trillion. And so if you were to get a 1% spillover, that's $4 trillion. If you were to get a quarter of 1%, that gets you at a trillion dollars. So I start there and I say, what does it take for Bitcoin to reach a $1 trillion market cap? It needs about a quarter of 1% of global assets, back of the envelope kind of figure. So for example, going forward, gold is likely to see a little bit of a bid in terms of the percentage of the total world assets that are in gold. I mean, even if it just goes up from, it's a tiny base, so it can double pretty easily. Whereas Bitcoin, of course, is a much smaller base. So it's not hard for that to go up three-fold, five-fold, and then long-term potentially more, but I like to focus on the next few years ahead and just see, I think it shouldn't be that hard to reach a quarter of a percent, half percent, we can re-evaluate from there. Is the current money printing environment accelerating that spillover process, do you think? Yeah, I think the macro backdrop certainly favors scarce assets. The overall kind of, the amount of debt in the system, the demographics of the system, and technology growth are deflationary. But the policymaker response to that, the large deficit spending financed by Central Bank reserve creation, that's kind of an inflationary reaction to those deflationary forces. And so the things that newly benefit from that are scarce assets. So in an inflationary environment, real estate does well, commodities do well, bonds and cash do poorly. With stocks, it varies. So for example, in the 1940s, we had an inflationary decade, stocks did very well, but they started from extraordinarily cheap valuations. In the 1970s, we had inflation, stocks did very poorly, and they started from very high valuations. So generally, highly valued stocks don't do well in an inflationary period. So Bitcoin is definitely one of the potential contenders there. And because it's such a, it's a new technology, it's still a tiny market capitalization in the grand scheme of things, the percent gains can be pretty large if more and more investors view it as an inflation hit. And I think a lot of people are wondering where this is all heading. What's, what's the, what's the reckoning? You know, I think, I think you called it in one of your articles or in one of your interviews, the event horizon. But I've asked this because I think a lot of people in the crypto sphere have some pretty interesting ideas about the eventual fate of fiat. I think Anthony Pompliano even said that we may soon see the end completely of the fiat experiment. You know, the US dollar will fail, right? And whether we like that or not, that's just how history has played out. So, I mean, do you think that we eventually will live in a society without fiat? But I guess before that, you know, where are we heading with this current currency debasement? I think if you look far enough in the future, those options are always on the table. I think, you know, if we're looking at, say, you know, the next five years or so, or even putting out to 10 years, like, let's focus on this decade. Historically, in this sort of situation, you see that the debt, you know, gets partially inflated away. So there's all sorts of disagreements on what the actual inflation rate is. But the general theme is that the inflation rate will be above the yields you get on cash or treasuries and things like that. And so if you are a long-term holder of those assets, you'll lose purchasing power over time, even though you still, if you look at your bank account, if you look at your Treasury value, it's slowly going up over time. But the number of, you know, the goods and services that those can buy are generally going down. And so whereas things like, you know, harder assets, they can retain value. And of course, if you have a growth scarce asset like Bitcoin is taking market share, you can actually increase your purchasing power if that if that bullish story continues to play out. So, you know, some of those, basically, you can, if more, if that becomes a narrative, right? So we're still kind of in this period where there are still people saying, well, you know, the high unemployment is going to be deflationary, the pandemic is deflationary. And they are correct about that in the current time in some sense. I mean, we're seeing kind of price pressure on discretionary goods, for example, we're seeing, you know, things like that, whereas essential goods are still kind of inflating. But basically as you go forward and it becomes more and more unmistakable, as we say, come out of this pandemic, as we get further rounds of stimulus, whatever the case may be, if you get that kind of more clear inflationary direction, then you could see investors saying, okay, we don't want to hold a ton of cash. We don't want to have a ton of treasuries. Why do we have a non-zero Bitcoin position? Why do we have 1% in gold when you could have 5%? So you can see kind of a spillover into some of those assets that do better in that environment of perpetually negative inflation adjusted rates. And how would you, how do you respond to Anthony Pompilano's statement that we could potentially see the end of the fiat experiment? Do you think that there's, like, do you think that we will eventually live in a world where fiat just doesn't exist anymore? I think it's possible. I mean, if you get, you know, one of the ways that they could combat inflation is to repag the dollar to something, right? So, you know, we have been an unusual period in history for the past 50 years. You know, now a lot of people have come to think of, you know, money not being backed by anything is normal. Whereas if you look back over the really long stretch of human history, this was an unusual 50-year period of, you know, the entire world. Every fiat currency in the world is exactly that fiat. So it's not backed by anything officially. And so that's, you know, that's been an exception rather than the rule to human history. So I do think, you know, people should have an open mind about what currency looks like, you know, 10, 20 years from now. I think there's going to be like a lot of ways that that could play out. But I think in this decade, in order for that to happen, you'd have to see a pretty big inflationary crisis. And, you know, there's, on one hand, there's a lot of disinflationary pressures, again, like the debt, the demographics, technology. But on the other hand, the policy intervention is kind of relentlessly inflationary. So I do think that we're going to see higher inflation in the 2020s. I do think we're going to see long-term negative real yields. And I do think there's going to be a shift out of, you know, some of those paper assets into some of those scarce assets. And ultimately, where that settles, I think is an open question. But I think the first step is to make sure you have exposure to some of those scarce assets, things that have kind of intrinsic value, whether they're real estate, whether it's, you know, like key commodities like copper or uranium or nickel or silver, things like that. Gold for some investors. And, you know, maybe high-quality equities, things like that, that, you know, basically it's a claim on something of intrinsic value. And so, and Bitcoins, you know, the main selling point is that, you know, there's never going to be more than 21 million. It's still a pretty small market capitalization. It has a lot of advantages due to its portability, its inability to be confiscated. It's just, you know, it's kind of a technology applied to make what is one of the kind of the most optimized scarce assets. And do you think there's any caveat in Bitcoin that people are missing? Because right now, I mean, I'm hearing all of this and I'm just hearing be bullish on Bitcoin, you know? Like that's all, seemingly all the signs are pointing towards. Is there anything that's pointing in the opposite direction? I don't see that many signs at the moment. I mean, you know, I was the first to be, you know, somewhat bearish back in 2017. I mean, I'm happy to point out bearish things when I find them. And but at the moment, I'm quite bullish on Bitcoin. You know, there's always kind of risk. You could see kind of, you know, you can see like a last ditch resort to try to ban it. So if you were to have governments try to ban the exchanges or ban the access points, it can kill some of the institutional demand. I do think it's at a point now where there's still kind of a small amount of vulnerability where I think they could delay the story to some extent. But the way that the Game 3 works out is if some countries ban it, other countries can say, you know, we're not going to ban it. Come build your businesses here. And so that could be a potential setback. I don't think it, I think it's really hard to kind of permanently stop the train at this point. I love that. Thank you. Thank you so much for joining me today, Lynn. Yeah, thanks for having me.