 I think people are waking up to the importance of a digital or portable version of gold because so much of commerce is moving online. What gets really interesting is if you start to think about Bitcoin and its all time highs, not versus the dollar, but versus other regional fiat currencies. It's currency, it's a star of value, it's programmable money, it's got like the bill of the duck and the tail of the beaver and you know, it doesn't fit into any nice neat little bucket. Hello YouTube, welcome to the show. My name is Jackson and today I have the pleasure of welcoming Ryan Selkis who is the CEO and co-founder of Masari. How are you doing today Ryan? Doing great, thanks for having me. Yeah, it's really great to have you on, I've actually been really interested in speaking with you. So I guess we'll start things off on more of a fun note. There's been a lot of commotion on Twitter recently because J.K. Rawling, the author of the Harry Potter books, recently became aware of Bitcoin and is now feeling the full force of the crypto community. I saw that you mentioned the whole event in one of your recent tweets and I was wondering if you could elaborate a little bit more on your thoughts and feelings of this whole event. To be honest, I haven't thought twice about it, other than to remark on how ridiculous the whole thing was in terms of frankly caring what J.K. Rawling has to say about magic internet money. I think it's just like anyone else, any other celebrity, there's an opportunity to educate, get them excited and maybe just get them curious or make a good positive first impression. As you can imagine, there is no PR person for Bitcoin and the community is rather interesting and has been for a long time part of the DNA. So I'm not surprised that all of the hilarity that ensued with that particular Twitter thread and everybody piling in, but who knows, maybe she and Elon will finally come over the hump at some point in the next year, given everything that's happened in the macro context. Yeah, yeah, yeah. That would be amazing and interesting is definitely a good way to put it. So as you know, and as everyone knows, the Bitcoin halving proceeded last week smoothly without any hiccups. And I'm really looking forward to reading Misari's post halving analysis and report. And I was wondering if you could give me a little prelude to that report and tell me how you guys approached researching the halving and what insights did you discover? Well, you know, I think I'm on record as saying that this is probably most important as a narrative hardener, right? So at a time where central banks are printing unparalleled, you know, dollars and fiat assets to recover from the coronavirus, you just happen to have the most important deflationary event in Bitcoin's life cycle so far, which is the symbolic threshold that has crossed from three and a half percent down to down to sub two percent, which is the Fed's target inflation rate for the economy. And I think that's, you know, it couldn't come at a possibly better time because you started to see institutional investors look around at alternatives and you've got gold, which is this traditional safe haven assets. And then this up and comer, which should potentially arrive a gold as a speculative store of value or at least be a digital compliments and as the added benefit of pretty pronounced portability improvements over gold, and this is something that has finally kind of caught mainstream awareness of my mainstream. I mean, you know, one major institutional investor in Paul Tudor Jones, which in, you know, institutional investing circles is massive because it's followed the leader. So I think that, you know, it's generally been a straight shot up for 10, 11 years, but the biggest opportunity, you know, going forward is just to reinforce this digital scarcity elements that Bitcoin created for the first time ever, and which was really the novel solution and not just money, but how do you create digital scarcity period provable digital scarcity? So I think that's important. You know, there's been there's been a ton of work that our team has done in putting different models in context like stock to flow and studying the difference between gold and Bitcoin inflation rates and looking at the potential, you know, quote unquote, mining death spiral that we think is more myth than anything else. There's there's there's quite a bit of good work out there on the having as in terms of actual quantitative deltas that you see in network security or, you know, other key network stats, but far and away, the most important thing is the market development of it all. Yeah. And the thing about the Bitcoin having is that it's primarily a mining event, you know, fundamentally, it doesn't have any immediate impact on the price and it's mostly just an event for the miners. So I was wondering if you could explain a bit more why you believe that this mining death spiral is just a myth. Well, because the the mining capacity that tends to fall off after these having events is it's the weak hands and it's the most it's the miners that have the highest cost basis. But with the price where it is, those that have the most advanced equipment are still profitable, right? You know, they're still making margin and as some of the less profitable capacity falls offline, you'll see a natural difficulty adjustment. We saw this in 2016. We're seeing it again now, but the march forward in terms of new ASIC chips and higher efficiency mining operations, you know, continues to march inexorably onward. So, you know, it would probably take the combination of a major liquidity event like we saw on Black Thursday and the having to really put the hurt on miners, which is not totally out of the question, but we've never seen a situation where things got that dire that the network just ground to a halt. And by the way, most of the miners, the institutional miners that are responsible for majority of network security, they have hedges in place. If there is an event that looks and feels exactly like that, it is very unlikely that they would do the equivalent of bricking all of their own, you know, tens, hundreds of millions of dollars worth of equipment, even in the worst Tuesday scenario where they had to mine unprofitably for a short period of time, because they wouldn't want trust to be diminished in the network and for blocks to take, you know, an hour, two hours, three hours, whatever it is and cause this short term dislocation and difficulty. So, you know, again, I think it's overblown. It's been one of those things that's been de-risked over time. And to me, the more interesting element is what happens in subsequent having cycles and will we see changes in the composition of the minor award to see you more towards higher fees as the issuance continues to tick lower and what exactly is that lower bound for network security? Great. So now I'd like to turn our eye more towards the macro and global scale. There's a lot going on in the world right now. You've got COVID-19. You've got universal money printing, massive job loss, and the stock market is rising amidst all of this. And I think it can be really difficult and overwhelming to really understand what's going on holistically and putting everything into a larger perspective. So I was wondering if you could kind of break down your view of what on the macro scale of what's going on in the global economy right now and where crypto fits into all of this. Well, you know, I think I hinted at it with the news from Paul Tudor Jones. You are starting to see a mainstreaming of the digital gold narrative. And given everything that's going on with the coronavirus, I think people are waking up to the importance of a digital, more portable version of gold because so much of commerce is moving online, so much of your life is moving online and especially in kind of a global lockdown. There is no flight. There is no physical flight to safety and people emigrating from hostile regimes or things that traditionally you'd want to wear the gold that you had around your neck in that kind of doomsday scenario. With this, you're hiding inside, so the escape and the exit is virtual. Well, gold doesn't do you a whole heck of a lot of good in that scenario. But, you know, I think, you know, more generally speaking, you know, investors, you know, the big investors are diversifiers by nature. Right. So why put all of your eggs in one treasury bill basket, given everything that's going on in the US? Why put all your bag, all your eggs in one basket of gold, particularly given how it did from 2012 to, you know, current when, you know, people forget it lost a ton of its value after the sovereign debt crisis evaded. So I generally think that maybe the most interesting development in this particular cycle is the fact that Bitcoin is finally ascended to that stage and that level of importance globally. So I'm curious, because there's this idea that I've heard, you know, there's a lot of money printing going on and people are expecting inflation and the devaluing of the US dollar and other currencies. And we're certainly seeing that, you know, there's the inflation is widespread. It's not just in the US. It's happening in other countries around the world. There's even hyperinflation in other countries around the world. And the idea is that because inflation is happening everywhere, the US dollar will actually retain or could even come out better in its valuation because compared to other international currencies, it will do much better. So I'm curious to hear your thoughts on this idea of the US remaining better relative to other international currencies and how that relationship between the dollar and other currencies will affect Bitcoin? Yeah, I mean, one of the more interesting things from our reports that's coming out tomorrow is it's kind of a follow up is, you know, taking a dollar centric view misses some of the larger picture. The same thing happened in 2011-2012, right? There was a flight to safety in the US dollar, even though one of the catalysts for the sovereign debt crisis was the US debt downgraded by S&P. And what happened? Well, treasuries rallied and they went to their lowest yields in years. And ultimately the dollar was just fine because people counterintuitively flocked to it as, you know, flight to safety. The big issue with a strong dollar is going to be felt in emerging market debt. And what gets really interesting is if you start to think about Bitcoin, and it's all-time highs, not versus the dollar, but versus other regional fiat currencies. So, for instance, we just saw a new all-time high for Bitcoin versus the Argentinian pay sale. We're very close to all-time highs for the Brazilian Real, the South African RAN, Turkish lira, and I'd expect we probably hit some of those all-time highs sooner than, you know, US dollar all-time highs. You're kind of revisiting the 20,000 market everybody talks about. So if you zoom out and you think about Bitcoin as a potential store of value, even if it is volatile relative to some of these other emerging market fiat currencies that do have high inflation that aren't benefiting from the reserve currency status the US dollar does, then it starts to look, you know, quite a bit different. Yeah. So you've really been hammering on this Bitcoin as digital gold store of value narrative. Have you totally counted out the Bitcoin as a digital currency? Have you totally counted out the Bitcoin as a currency narrative? Well, I like Spencer Bogard from some blockchain capital, his old comparison of Bitcoin to the platypus, right? It's currency. It's a store of value. It's programmable money. It's, you know, it's got like the bill of a duck and the tail of a beaver. And, you know, it doesn't fit into any nice neat little bucket. Traditionally, currencies have been relatively stable because they've been fixed supply and fixed population. What's interesting about Bitcoin is you've got an exploding population of people using it and treating it different ways for different use cases. And that results in, you know, quite a bit of dislocations in terms of how it's priced because it's fixed and doesn't match dollar to dollar with the population that's using it. So I do think long term as more people acquire it, as it starts to look and feel more similar to gold, that will stabilize. But, you know, by definition, that can only happen if it hits trillions and trillions of market caps. This is weird dynamic. And I would say that if you look at the shortest amount of time, it's an excellent currency because it can move faster than anything else anywhere in the world, right? Fastest, you know, your internet connection versus T plus two or whatever the settlement would be in your banking system. If you zoom out, it becomes an excellent currency because it's hard and it's commodity money like gold. Everything in between, it's a tradable speculative asset, right? And it's a trader's paradise. So it really depends on your time horizon. If it's instant or long term, it is a good currency. Anything in between, right? If you've got to pay bills in fiat, then you probably want to make sure that you have fiat revenue or fiat savings versus living and dying by the spec, the volatile wins of where the Bitcoin price is. I thought one of the issues with Bitcoin becoming a currency was the fact that it wasn't that fast. You know, it takes 10 minutes to confirm a block. And if you're sending a large amount of money, it can have even more confirmations required, which can make it, you know, take even longer, up to an hour or more. And I thought this issue with the speed of confirmations and transactions was one of the reasons why Bitcoin started veering more towards the digital gold narrative and away from the international global payment system narrative. Well, I think there are solutions around that, right? Lightning is still very, very early for small payments, but for large payments, you know, it's still by far the fastest method that you can you can actually settle any type of payment. And, you know, let's not conflate the time to send and the time to confirm, right? You can receive assets instantly. How long you want to wait and how many confirmations you would like to wait to ensure that that hasn't been double spent is entirely your prerogative. But there's there's nothing that prevents you from instantly, you know, receiving and sending, you know, payments. The cost and the hassle of executing a double spend for a five dollar coffee transaction is just not worth it, right? For, for, for, you know, by and large for most use cases. So you're going to be comfortable taking that risk that the person on the other end of the transaction isn't going insanely out of their way to defraud you of five dollars, you know, if it's five hundred thousand dollars, what you're probably going to be comfortable waiting an hour and that's still a hell of a lot faster than anything else that we that we have today in payments, whether you're talking about, you know, central bank driven and kind of traditional banking driven or even FinTech driven. So now I'd like to switch focus to something that actually happened the day after the Bitcoin halving on May 12. Pavel Durov, who is the CEO of Telegram, announced that Telegram was terminating its association with the Telegram open network and would no longer be developing the gram cryptocurrency token. This came after a lengthy legal battle with the United States Securities and Exchange Commission. And this is now the second time that we've seen a potential cryptocurrency titan, the other one being Libra, have major setbacks and in this case fail because of US regulatory policy. So I'm curious to hear what your thoughts on the potential role that one of these really big corporate cryptos could play in the macroeconomic structure and what are your thoughts and feelings on the US's regulatory approach to these entities? Well, I mean, the US doesn't want to lose control over its ability to print money, right? I think Libra will ultimately launch. It's going to be a permission system. It's basically going to be a hybrid between a cryptocurrency and a central bank digital currency. It's not permissionless, right? They came out of the gate saying that it's going to be single single currency pegs to the US dollar. So it doesn't look anything like the desired crypto currency and kind of true international reserve that they were working on. But a company like Facebook's spearheading that was probably too much to ask for, you know, right out of the gates anyway. There are going to be other stablecoin initiatives and there are other stablecoin initiatives that are taking, you know, different paths, Celo being one. Obviously, you've got the more regulated versions like USDC and Paxos. On the other hand, you do have algorithmically generated reserve asset or crypto dollars that are being created through things like dye. You've got the kind of frontier, I don't want to call it dark web, but kind of original cowboy, you know, crypto dollar, which is Tether, still the largest by an order of magnitude. So I think it's kind of like crypto more generally speaking, right? The US government can shut down individual projects because they're just in the crosshairs of this administration where they're deemed to be too centralized. And it's easier to go to court with Telegram or Facebook because they're large companies. It becomes exponentially more difficult to do that at scale with dozens of different implementations that are all taking slightly different design paths. And especially once these things do actually become decentralized, it is very, very difficult to put the genie back in the bottle. So I do think you'll see some stablecoin, probably algorithmically generated stablecoin projects that ultimately are issued and generated more like Bitcoin, where there is no off switch. And how long that takes remains to be seen. But I think we're kind of in the first inning when it comes to stablecoins and still second inning, maybe in Bitcoin and crypto more general. So I'd like to actually go back to someone that you mentioned near the beginning, Paul Tutor-Jones. And this news was really big all in crypto recently. And there's always been talk about the implications and timing of big institutional investors getting involved in crypto. So I'm curious to hear you talk a little bit more about your thoughts on institutional investment in crypto. And do you think that this is the beginning of a waterfall, a big wave of institutional investors getting involved? Or do you think that these investors are already here in crypto and it's just becoming more apparent as they start to reveal themselves? I think it's probably a little bit of both. I think it's almost certain that this is gonna have a positive impact on any institutional investors that might have been getting knowledgeable about Bitcoin, but didn't necessarily pull the trigger. And you need someone like that to kind of come out and take all the arrows and get all the press and make it safe for you to actually get off zero and start to put some assets to work. And then you think about what folks like Fidelity are doing, all the infrastructure now is in place. So part one was getting the unwashed masses excited about Bitcoin. That happened in 2009 to 2017, but then the money started to get real and everything that was built in the couple of years since then on the institutional infrastructure side is gonna pave the way for the Paul Tudor Joneses of the world to make their first purchase and ultimately everybody else kind of follows the leader. So I definitely believe in that path just from like an adoption standpoint and from an enterprise embrace standpoint, but that only happens with some of the macroeconomic backdrops that we have, even pre-coronavirus, record debts, consistent money printing, dysfunctional governments, all that was already in place. This has just been a massive accelerance of a lot of the trends that have been going on for 10 years. So for my last question, I think a lot of people recently have been bamboozled more or less by the stock market. You have this, our economies are failing. There's massive unemployment. Everything is forced to change and companies are really struggling and figuring out how to react. And yet the stock market is going up. So how do you make sense of this relationship between a failing economy and a rising stock market? Well, the stock market's forward-looking, right? So you could argue that there's too much optimism in the market or not enough. It depends on how much we're printing and what your inflation expectations are and expectations around kind of future growth. But with interest rates where they are, the impact of short-term hits to the economy are radically reduced in terms of how they're reflected in a different company's asset crisis. That's just kind of like basic discounted cash flow and kind of future value projections. But I think the crisis to watch out for is always going to be kind of liquidity and insolvency crisis, where are there permanent dislocations in certain markets? Are there companies that don't get bailed out or that just become structurally deficient and ultimately fall by the wayside because this health crisis lasts a year or two, right? Airlines being one, the restaurant industry and kind of small businesses being another. And that I think has an incredible deflationary impact on the economy. It's net very unhealthy for kind of main street and ultimately for kind of downstream spending. But at the same time, very large chunk of the stock market indices are tech companies these days. So those are the ones that tend to be weathering the storm the best. And in some cases like Amazon, you've seen a 10 percentage point increasing in e-commerce over the course of the last few months really. Well, that means Amazon's going to be a net winner there or digital content consumption Netflix is going to be a net winner there. So I don't read too much into the stock market in a given day, but I personally would protect against liquidity, place of liquidity and kind of panics like we saw in March, which is why I think safest place to be is in cash, but for people that are investing, you're going to want to have some hedged exposure for some of these potential crashes or think about what your game plan is if things really go sideways again. Thank you so much for coming on the show. That was Ryan Selkis, the CEO and co-founder of Misari. My name is Jackson. And if you enjoyed the show, please hit that like button and subscribe to our YouTube channel. Cointelegraph, like, subscribe and hodl.