 breaking news. Coinbase has decided to delist US dollars because it has been deemed a security through false advertising by its founders. Well, that escalated quickly. Over the last few months, we've seen big moves from players who historically have either ignored or actively derided the ideas behind Bitcoin, even as they sometimes embrace the idea of blockchain, not Bitcoin. Starting in September, we saw first micro strategies buying nearly half a billion dollars worth of Bitcoin, replacing dollars as their primary treasury asset. We've seen traditional investment firms worth hundreds of billions of dollars dip their toes into the waters, buying Bitcoin with tens to hundreds of millions of dollars as an inflation hedge. We've seen analysts from big vampire squid banks like JP Morgan publicly put price targets on Bitcoin that far exceed its current all-time high prices and in fact are multiples above where we currently are even today. We saw PayPal go live with a broadly available, but hobbled form of Bitcoin. And a recent survey, albeit with a smaller sample size, suggests that as many as 20% of PayPal's 300 million users have already bought Bitcoin through it. And all of those things happened before a year-end finale in Bitcoin markets, the price is peaking above $34,000 before breaking through $40,000 as we prepared for this discussion earlier today. I'm Adam B. Levine, and this is Speaking of Bitcoin. Today's session I'm joined by the other host of the show, Stephanie Murphy. Hi there. Andreas M. Antonopoulos. Hello. And Jonathan Mohan. So jumping right in, the AOL moment has never been a good thing so much as an inevitable thing. Is this it? Are we there? And if this isn't it, then what do we think it'll look like when it does arrive? Yes, we are definitely there. I think maybe we were even there before this at the last major run-up in what was it, 2017, up to $20,000. We saw a huge unprecedented spike in new user adoption at that point. Awareness of Bitcoin and cryptocurrencies spiked as well as a lot of the guidelines. The regulatory space became more fleshed out. And sure, there were still plenty of half-baked projects, some of which turned out to be scams. But I think a lot of people learned about what crypto was the scams included and how to protect themselves from it. And people are still learning about it. So I think we've already sort of reached at least the first milestone AOL moment. But I've been on this journey for a while. And I remember a lot of moments like this that were exciting. I mean, for example, I don't know if anyone remembers this, but remember when Bitcoin got this first article on Slashdot in 2010 or something like that? And I remember hearing about it on a talk radio show back in 2011 or 2012, I think, from Gavin Andriesen going on the show. So, you know, I've seen a lot of exciting moments with Bitcoin, a lot of disappointing moments, too. But this does feel like a special moment that we haven't yet seen so far. And I do think it counts as the AOL moment. Bah, humbug. When did we go from banking the unbanked, and it's all about the other six billion, to simping for investment banking billionaires? I mean, you know, I'm a bit disappointed. I think that happened the same time Blockstream integrated Tether. Yeah, probably. I know, I know. Listen, I'm really happy that Bitcoin is getting the attention it's getting positive and negative. And I'm really happy for a lot of people who waited very patiently and are seeing a great return on investment. But at the same time, like applauding JP Morgan for finally finding in the pits of the dark soul the opportunity to praise and acknowledge Bitcoin, because it might make the money really, that's what we're doing. A year ago, or a little bit more than that, the CEO there was saying something really negative about Bitcoin. Don't buy Bitcoin. Do you guys remember that? Yeah. Bitcoin is dead, says JP Morgan, before saying it reaches 130,000 sometime in the near future. Yeah. Here's the thing. As much as I'm excited about the excitement that everybody's excited about, this is really the kind of fickle attention that is going to go away as fast as it came. Because don't think that these types of endorsements don't come with strings attached or expectations of where we go next. We're pioneering a revolutionary technology that, unfortunately for them, breaks the mold and disrupts the status quo. And this is the status quo kind of trying to embrace and extend. Which is, if you remember the Internet days, there was a moment, and this was the AOL moment, but also the Microsoft moment, when the companies that were ridiculing the Internet finally decided to jump on board. And their initial instinct was not to jump on board because they actually understood and wanted to go with the principles of openness and peer-to-peer operation and decentralized communications and a new open communication medium for the world. No. Their plan was, that's great. Now we want to control it. So they got on board with the explicit intention of controlling the standards, steering the standards committees in their direction, locking down the browsers, creating new monopolies, staking out new territory on this new frontier, putting up fences as soon as they stake out the territory in order to control. So this is what Microsoft strategy was called, Embrace and Extend. And they did this with every standard starting with the web. Fortunately, they failed to take their incumbents monopoly and extend it into this new domain and establish new monopolies. But they did enormous damage even in their attempts to control this new space. And this is exactly what's going to happen next. These new companies that are finally endorsing Bitcoin have no intention to honor its decentralization roots, to honor the neutrality and borderless operation and censorship resistant. The moment a regulator says, well, you can either do business the way we like it or you can't at all, they will demand changes. And because they can't affect the protocol, they'll demand changes at the edges, at the exchanges, they'll clap and applaud and endorse all regulatory normalization that must happen in order for us to achieve mainstream adoption. Very serious people will now tell us what Bitcoin needs to do to be adopted by the mainstream investors. So don't be lulled into a sense of success. This is just the beginning of a very, very long struggle. On the bright side, though, haven't they been doing that all along, Andreas? It's been since the beginning that I remember lots of calls for, oh, if we could just tweak this to comply more with the regulations and if we could just get guidance and stuff like that. And they haven't succeeded. The fundamentals of the protocol are still intact. It is still possible to capture that vision that I think all of us had when we got into this cryptocurrency world at the beginning. And it is still possible to maintain a focus on the other six billion and banking the unbanked. You're doing it kind of next to these giant behemoths that are using it for their own purposes and just seeing it as an investment. But it's so much more than that. And the fundamentals have not been eroded to the point where it's fundamentally different or useless now. Not at all. We have every opportunity to preserve the principles. We just have to keep our on the ball. We have to keep remembering why we're doing this. We're not doing this to get the approval of Jamie Dimon. We're not doing this to get the approval of the investment class. At least I'm not. And the price appreciation is great. And not because it brings with it the approval of Jamie Dimon, but because it funds and extends the runway of 10,000 startups that are funding developers to actually build. So that makes me very happy. It means that a lot of the startups and small businesses in this space actually have an opportunity to continue to build innovation and do great things. But I do worry a bit that with every round of adoption, the principles get a tiny bit diluted. We need to keep working harder to remind people. And when these behemoths, as you put it, Stephanie, have billions and billions of skin in the game, they're going to increase the degree of propaganda and lobbying and marketing to shift the principles in their favor to basically turn Bitcoin into simply a bigger version of PayPal. Are they really going to try to make fundamental modifications to Bitcoin, the protocol? Well, they'll try. Yeah, I know they can try, but isn't it simpler just to use technologies like Ripple to create their own little blockchains that are not really a blockchain because it doesn't have the fundamental immutability and the RIPcord principles? I think it's a lot easier to keep what is and then just malign it and make it harder to use. So if you look at the attack on self-custody that's occurring, in my head, the Undertale boss music is playing right now when it comes to Bitcoin adversaries. I think we've kind of hit the final boss. We may have a secret boss or one or two left. If you really want to grind out the game and you get to the secret ultra boss, but in terms of the boss that you beat the game with, I feel like we're finally there as a community and as an industry. And right now, if Bitcoin can survive this last attempt of both being co-opted by the banks and still maintaining self-custody and unsensibility and immutable transactions, it's one. And that's not to say that it's going to win because I do think that this is the hardest adversary we've ever had. And it's also, I think, the final adversary, which is the banks themselves. It's not the banks. It's the central banks. And this has always been the big adversary. And so it's not the JPMorgan's that are going to want to endorse the regulation of self-custody and reject the privacy improvements of tap roots so as not to dilute their position in the market. No. What's going to happen, I think, is we're going to see much more strong demands coming from government. And that's going to be driven by competition from central banks. Central banks are beginning to be threatened by this. And so governments are going to try to hobble all of the decentralization principles, starting with self-custody and privacy. And so when they do that, when they impose these draconian demands, the banks are simply going to be useful allies. They're going to be placed in this impossible position, protect their billions and billions and billions in investment and potential upside that they now have skin in the game on the one side and placate the regulators on the other because the regulators have them by the shortened curlies. So this is the impossible situation that they're in. And in the past, when put under this pressure, they have always taken the devil's deal. They have always taken the deal that says protect us from competition, help us entrench our monopoly, and we'll give you surveillance data on everybody on this planet. And that's the same deal they're going to try to strike with Bitcoin. It's not because the banks don't want financial privacy, it's because they want billions of dollars more than they want financial privacy and the government will give them that as a binary choice. Well, it's the character of the stick, right? I mean, like that's really what we're talking about. And it's something, you know, as we've kind of been going down this path with cryptocurrency and as we've had kind of the example of the lockdowns that have been happening, I'm in a state that has not had a big outbreak and yet has one of the strictest lockdowns out of anywhere. And the way that it's actually been imposed makes it really, really hard to try and object to it because they impose it through the business licensing layer of the state government. The businesses licenses are threatened. Now that's a little bit different with the banks. I don't think that many people like the banks, but at the same time, the choice is the same, the approach is the same. They can't control this by putting the restrictions on us as individuals, but they can very much do so through the licensing and through the way that these companies are regulated. And that's how they wind up applying these things. And it's also worth noting that, you know, reality doesn't apply in the mind of a judge. What a judge says is legal reality. And so just as in the Ross Albrecht case, when they arrested him, and before they even had access to the keys, the judge seized the assets of the Silk Road. And the way that the judge did that was by decreeing judicially, the government has seized these assets corresponding to this public key, irrespective of any custody to any signatory keys to get the funds out of that address. They just said legally, this is now the property of the United States government, irrespective of reality. It is legally ours. And it just so happened that Ross chose to then not steal from the government when he turned over the keys to the money the government legally owned. You know, we may come to a day not too far away where technical realities are interpreted through legal realities, and the legal realities don't care at all about reality. What finance showed us one thing, it's that even if something's a mathematical certainty, the law and government writ large, really doesn't care much about reality, and they can sort of keep fictions going as long as they want. So I want to take us back just a little bit to the start of this conversation. The little summary I gave kind of leading us into this talked about the different banks and the investment firms and stuff like that. And the reason why I think that that's a relevant way to introduce this segment is because when we're talking about cryptocurrency, when we're talking about the journey that Bitcoin has been on, since the very beginning, it's not really been about Bitcoin. Bitcoin is kind of this static thing. It has its own technical progression and it's being improved and stuff like that. The thing that drives the story of Bitcoin is not Bitcoin. It's everything that happens around Bitcoin and it's the environment in which Bitcoin is existing. Now, the flip side of that is that Bitcoin at the start was weird, was unusual, was unexpected, and people who didn't have sort of the ideological rationale already cemented in their head for why a thing that looks like Bitcoin is really actually useful to the world were like, well, why the hell would I want something like that? And I think that that's really the journey that we've been on over the last 10 years is moving from this really, really fringe thing that very few people understand or appreciate the context of why it's important to now something where that's not the situation we're in. The situation we're in now is broadly people understand that there is importance to it. They may understand it for the wrong reasons. Since the beginning, again, I think this is the fourth big bubble we've been through since we started the show. And again, every time this happens, you have the price go up and people like us say the price doesn't really matter because it's about the technology and the revolutionary potential. But for the people who are not yet on that path, it does matter like a lot. And just last time, it was all about this kind of retail like stock market, ICO frenzy. Well, this time, it's kind of the institutional side. My personal feeling is that the next time we go through this cycle, it will be about central banks, actually, not every central bank, but smaller central banks that don't want to compete in the central bank digital currency world, starting to use Bitcoin as a reserve asset. And again, I think we'll see a ramp just as similar as we did with the micro strategies thing. The hardest sale to make is that first sale. And then once you have one of those people on board, then it's much less risky for the next person to come in. And I think that that is over the last six months, what we have largely seen on the corporate and institutional side. And I think that again, once we get to that spot with central banks, well, there's no further level to go up. Well, it's not just central banks. It's central banks and sovereign funds. It's countries, currency reserves, it's sovereign investment funds. A lot of people don't realize that some of the biggest funds in the world are so-called sovereign funds, which are basically funds held. They're almost like hedge funds or investment funds that are run by a government. They're not the central bank per se. You see this in places like Dubai, United Arab Emirates, Saudi Arabia, but even also Norway. The most material difference is that the central bank is there to mismanage your retirement fund, whereas the sovereign wealth fund is the house's money and the house doesn't lose money. Yeah, exactly. But to add to Adam's point, yes, I think the next big boss is sovereign funds and central bank reserves. That is a possibility. I don't know if it's a very big possibility, but it is a possibility. So okay, the newbies came for the price. How do we keep them? So everyone always says that the problem with Bitcoin is there's not enough educational material or that the education isn't good enough to be accessible or whatever. And I've, for the first two years of doing this, I really came to realize that it's a lot less about the materials and it's a lot more about the context of the minds that people go into with. So this last year has been the definition of disruption across many, many, many categories, which always pushes people towards these types of goals and towards the kind of alternative thinking because they have been disrupted, they have to find something else. Now, whether they come in for the ideology or not, the fact of the matter is that they're here. And again, so long as the narrative that's being pulled by Bitcoin, which is basically that inflation or deflation or any of the other kind of hyders that are out there that may potentially cause problems for the world, are not really problems in Bitcoin. And so I think the biggest challenge that we have is to emphasize the differences between something like Bitcoin versus the myriad, you know, thousands of other projects that are out there to look like Bitcoin, but which have such fundamentally different origin stories or fundamentals about kind of how they work or what the point is, that it's very easy to get kind of confused and to think that, oh, these things are the same thing, when in fact they're completely different. And the story that Bitcoin's telling is the story of disruption around the world and what happens after it's done. I actually think to that topic that what we're not seeing is an AOL moment. I think what we're seeing is something way more profound, which is Bitcoin is finally having its second Cyprus moment, only this time it's finally mature enough with the infrastructure and the groundwork to actually be there when it happens. So give us some context on that, Jonathan. Take us back for the audience that hasn't listened to that episode from six years ago. Right. Well, I mean, how about we let the Greeks speak about it? Well, I mean, asking the Greek to speak about Cyprus has started several wars in Cyprus. So yeah, jokes aside, in 2013, one of the things that brought a lot of attention to the Bitcoin experiment was the fact that in Cyprus, there was a so-called bail-in, which was due to a bank crisis that was happening as an aftermath of the 2008 Great Global Depression, the banking system in Cyprus became effectively insolvent. And instead of getting a bail out from the government, they permitted the banking system to take a percentage of depositors' money and use it to recapitalize the banks for those depositors who had above a certain amount. So for example, people who had their retirement funds in the bank, I think it was about 100,000 euros or something like that. And over that amount, they would take a 20% cut out of depositor money. So that's called a bail-in. But it's basically depositor confiscation to recapitalize the banks. Now, the unique circumstances here, I think one of the things that really shocked the world there was Cyprus is in the European Union and is a fairly advanced economy, a powerhouse of banking. And so the idea that it could happen there got a lot of people thinking, this isn't Zimbabwe, right? It was even scarier than that, too, because it wasn't just, hey, we're literally going to decimate your life savings. It was, and it's illegal for you to have access to your money. And it's illegal for you to withdraw from a bank account. We're going to let you go to the bank and take $200 out for the next three days. And so you had lines, not bread lines. The please master, let me have my own money lines. Yeah, so there were depositor withdrawal limits, which they also applied in Greece. And I believe they also applied them in another two states in the European Union, I think also in Spain and Portugal, very, very briefly. In Greece, it was a couple of years of depositor restrictions. And Cyprus, it was withdrawal restrictions plus the bail in the haircut. If that was a moment when people started seeing why self-custody and control over your own finances is a good idea. A lot of the people who are first introduced to Bitcoin say, but why would I care? I have FDIC, an FDIC, a federal depositor insurance corporation, which is something that was instituted after the Great Depression in order to calm depositors. Really, most people don't understand how it works, but it is a very, very flimsy and thin protection for the occasional bank going under so that it doesn't become a systemic problem. It is absolutely not a defense against systemic problems. Oh, actually, I disagree. What FDIC did was basically like California when they made brush fires illegal. So every brush fire grew and grew. So we have 30 years of these mega fires. What FDIC did was made it illegal for retail banks to collapse, so it's systematized the risk to the point where now entire economies collapse instead. Yep. Well, the point was that people who are first coming into Bitcoin don't understand why you would need that, because I'm like, well, I have my money in the bank, but it's okay because FDIC protects it. They're shocked to learn that, of course, Cyprus also had FDIC. And the bail-in was taken from money that was supposedly protected by depositor insurance. So these protections matter if your local credit union has liquidity events. They do not matter if every bank has liquidity events, because no system can actually protect against that. So the idea of self-custody suddenly made sense. In 2013, Cyprus became a rallying crime for people who are interested in Bitcoin. This was the second big rallying cry. The previous one was the bank blockade and embargo of WikiLeaks. But together, these two events catalyzed the message of Bitcoin. On the one hand, financial censorship. On the other hand, confiscation and seizure of assets that you do not have custody of. But back in the days of Cyprus, I mean, 2013 Bitcoin, I don't even think even had hierarchical deterministic wallets. So to talk about how immature of a product it was, Bitcoin as a solution to Cyprus was only there as a conceptual idea. Whereas now it is a fully manifested reality. I wouldn't say it's fully manifested reality. Honestly, I think the system is still quite immature and still plagued by capacity shocks for sure, scalability issues. I would say that Bitcoin is that really, really, really smart woman who perpetually has imposter syndrome and never feels like she can get the job. Bitcoin's never going to put a goddamn 1.0 in front of itself. No, darling, you're there. You're amazing. You got this. I really think Bitcoin's got it. It may not have lightning, but it certainly has the let's save your life from getting Cyprused. Because if you look at Bitcoin, it may not be a currency system, but it beats the hell out of ACH when you look at it on a cost-by-cost basis. Yeah, exactly. And also, remember how people were worried about cat videos breaking the Internet in the early days of streaming video. And all it did was test the system and make it stronger and more robust. And maybe this is another opportunity for Bitcoin infrastructure to grow in response to what's going on now. And I think you guys are right to compare what happened with Cyprus, at least a little bit to what's going on now, where everything in our lives has been disrupted over the past year because of COVID. There's a lot of quantitative easing coming down the pipe and going on right now. There's a lot of money printing going on by governments to stimulate the economies or to try to. And it's looking pretty dire. And I think that at least I'm starting to see people connect those two things, the price of Bitcoin or the value proposition that Bitcoin offers to inflation in the economy. And at least in America, that's what I'm seeing. I think also that globally, at least in the first world, the concept of your economic rights radically shifting and eroding is finally real in a way that no syllogistical argument about proper natural rights would have done three years ago or two years ago. I think everyone feels it and they see it. And now, there are only really two conversations I have when I talk to a normal person about Bitcoin. The first one is you just show them the M1 chart, which is the smallest understanding of what constitutes the amount of money in circulation. And you show them how it went up 20% this year. It's probably going to go up another 20% next year. 20% of every dollar that's ever existed was made in the past 12 months. And here's another shocking statistic. 75% of every dollar ever made by America was made after Bitcoin's Genesis Block. Wow. Oof. Yeah. And for the average person, none of this is yet meaningful. I think it's important to realize that out there in the world, the vast majority of people do not understand money, do not understand inflation, do not understand M1 or any of these topics. However, the financial impact of the pandemic and the financial management of the pandemic as a secondary effect hasn't yet hit. It's hit the middle class and the working class really, really hard, but it hasn't hit the asset bubbles. It hasn't hit the stock market. It hasn't hit and transferred through to inflation outside of asset inflation. And I think it's coming. I think there is a tsunami wave of economic crisis coming. And I think at that point, this whole conversation becomes a very different conversation. I'm hoping that we can avoid that. But it seems unlikely. No, yeah. I think it's coming. These are all the reasons why, again, people like us have been looking at this technology, have been interested in this technology. It's not the exclusive reason. But at least for me, it's been a big underlying reason, is our system has been unsustainable for a very long time in terms of how our money is managed. In the US specifically is what I'm talking about, but it's not a US problem. It's just kind of most acute here sometimes. Really, again, we are in this transition period. And the question has always been, how long will it last and what will happen at the end and what will the system look like that emerges? And so it's not necessarily going to be Bitcoin, but Bitcoin doing what it's doing right now, not just in terms of price, but again, in terms of mind share, in terms of how people are going to be Bitcoin, but outside of our interest in the technology, a little share of the Venn diagram, that's significant. And I think that it's going to change things. I think there's something to be said for the fact that every other system of money out there is following the same recipe. And what's unique about Bitcoin in this moment is that it is the only system that is truly following a different recipe, a radically different recipe. And you can say that's the right recipe or the wrong recipe and some very interesting academic discussions and economists will debate this forever. But if you want to place bets on the other recipe, if you want to or if you want to hedge against the fact that every other monetary system is following the same recipe, there is really only one option. That's basically what these corporate treasuries are doing. That's basically what these investors are waking up to. They said for years, this is going to go away. This is going to collapse. This is going to get shut down by the government. And as it doesn't gradually simply by surviving, it becomes the only game in town that actually has an alternative option. So as we wrap up this new shorter format episode that we're working on with the idea of doing more of them more often, I want to direct you all to a site that I discovered just yesterday. And I'm sure some of our listeners know about it, but I'm also sure some of them don't. It's called fiatmarketcap.com. It's like coinmarketcap.com, except it compares national currencies against Bitcoin and I guess other cryptocurrencies, but I only see Bitcoin on there. And currently, if you were to consider Bitcoin a currency with the amount of Bitcoin currently issued, which is about 18.5 million Bitcoin, it sits right above the Mexican peso and right below the Russian ruble. And it's currently placed number 16 of all of the currencies around the world. So this is a very interesting way to measure these things, but also, again, as an indication of just how crazily far this project has come, at least as the world is valuing it relative to everything else. I love that last column on the website, MaxSupply, unlimited, unlimited, unlimited. Only Bitcoin says 21 million. Yeah. You know, something I would enjoy and I doubt they ever would. But if Kraken or Binance or Coinbase for April 1st could do their ICO coin analysis of sovereign currencies to see which ones they wouldn't list on their website for not meeting the qualifiers for what constitutes a scam when they decide what they list on their own exchanges, I think people would be surprised major national currencies don't make the list or not surprised at all. Oh, breaking news. Coinbase has decided to delist US dollars because it has deemed a security through false advertising by its founders. One other note, if you were not around for the very early days of the show and you'd like more information about what happened in Cyprus and all of the stuff that we were talking about a little bit earlier with regards to the FDIC, I actually wrote an article about exactly this way back in 2013. And I'm going to repost it with this episode. So that'll be available there. And the stat that I think is worth mentioning is that the FDIC deposit insurance fund at the time in 2013 was $25 billion. The deposits at US banks was $9.2 trillion. And again, keep in mind that so much money has been printed, there's been so much expansion. And the total US financial derivative exposure at the time was almost $300 trillion. So you're talking about $25 billion trying to protect against all of that, as has been said before, really, like it can handle small drops in the bucket, very small singular failures, but anything on a systemic level, and this is not a solution to the problem. The other thing worth noting about Cyprus was that because they didn't have control over their own currency, they couldn't inflate out of it. So it was the one time we actually saw Demirage rather than inflation. The thing about the US dollar is we just had a Cyprus moment. 20% of every retail bank account had their money taken from them. M1 went up by 20%. It's just a question of how much time do you have before that hits the market? And you actually feel that in purchasing parity. All right, folks, that's it for this episode of Speaking of Bitcoin. Stay tuned for our next episode where we'll be talking about TAPRUDE, one of the very interesting privacy and scalability improvements that's been long in the works and which looks like it's pretty quickly coming to the blockchain near you.