Now, when it comes to bitcoin, it has such asymmetry to it. It basically is kind of this apex predator. If you will, it can do everything anthony pompliano, often simply known as pump, is one of the most bullish.
Bitcoin investors around over 50 percent of his net worth is in bitcoin and he has never been afraid to say it out loud over 50 of my net worth in bitcoin, and i don't plan to sell. I forbid that that's insane last year, he predicted bitcoin will reach a hundred thousand dollars by the end of 2021.
But after the latest bitcoin rally, how have pomp's, views changed more educated investors, better infrastructure and the new market entrance with large pockets end up driving the price of a scarce asset, higher find out about pom's, bitcoin outlook for 2021 and beyond in our latest crypto market, show, with mikhail van de popper welcome anthony.
How are you doing doing great thanks for having me um recently, we've, seen that bitcoin approaches all-time high within a completely different landscape than when it was during the peak high of 2017.
. In your opinion, how is the current rally different from the previous one in 2017 yeah? I think the main difference is just there's been much more time for people to get educated on what exactly this asset is and then also at the same time, there's been a lot more infrastructure that's, Been built out so when you have a more educated kind of investor base, also giving them more infrastructure to buy, sell custody, etc.
You're, going to end up having something that looks much less like a blow off top or kind of bubble. Type mania, and instead you're, basically going to get true adoption, and so not only does that help the people who are already in bitcoin uh in terms of you know 2017 and before, but also now what you have is you have new market Entrance so you & # 39.
Ve got many large kind of institutional investors, whether they're pensions, foundations endowments or they are wall street financial institutions. You're, starting to see more and more of them kind of look at the macro landscape, understand the challenges there and seek bitcoin as a um kind of portfolio, exposure, uh and so those three things kind of more educated investors, better infrastructure and then New market entrance with large uh pockets end up driving the price of a scarce asset.
Higher yeah, i should just said one of the primary drivers of this recent run - is institutions and big parties coming into the markets with michael saderis from microstrategy. As one of the examples and he's been actually buying up in the recent week, how do you think that this will be affecting the markets from now on, as they are the key plays in the current markets and not retail as what it Used to be in 2017.
and when you start to look at you know very very large asset managers, uh hedge funds, with billions of dollars. You start to understand that they're, not going to invest small dollars here right. They're.
Going to look to put hundreds of millions of dollars, if not single-digit, billions of dollars into the market, and so naturally, when you have uh a larger average kind of purchase amount. You're, going to have a bit much bigger impact on the market.
Right, it takes way more retail investors to match those institutional investors, and so that's. Just a classic market dynamic that's, not special to um, bitcoin or cryptocurrencies. It's, just how markets work and when you have a market cap that's still relatively small in the grand scheme of things it's, only 350 billion dollars uh.
Then you're, starting to look at a world where you say it: doesn't really take that much money to move the market uh price higher either, and so i think that's, where institutions are kind of faced With a situation where they want to get exposure, they want to put it in their portfolio in the size that they want, but they also are trying to be very um kind of slick, about the way that they get the exposure without moving the market price.
And so you know, i think we & # 39. Ll continue to see this trend over time. I think that we & # 39. Ve really only started to see the the beginning of that institutional adoption, but as it kind of cranks up here, i think we & # 39.
Ll, see a pretty aggressive increase in the us dollar price of bitcoin. Well, as the bitcoin market cap is relatively small, isn't the overall institutional interest, not just a self-fulfilling prophecy.
I mean they have a narrative to use or to see the price of bitcoin go up as they are now having bitcoin in their portfolio. Or are we actually seeing that there is a major trend shift in which bigger players start to understand the potential of bitcoin? In those markets and in our current financial system, that's, the big question i would say really where a lot of the institutional world has focused, is they've, been kind of fanatical about? How do i drive returns? How do i drive yield? How do i drive alpha and really try to outpace the inflation, and so, if there's, you know it's called two percent inflation targets.
Uh they're looking to can they get six? Seven eight percent type returns uh and so on a real uh basis. It's. You know something that continues to grow their pool of capital. What i think now is happening, though, is people are saying, wait a second.
There actually may be an asset that one has the store of value mechanisms that we need in terms of protecting us from what could end up being higher levels of inflation. You've, got the federal reserve in the united states saying that they want over two percent.
You've got an incoming treasury secretary uh, janet yellen, or at least who's been nominated. Who is notorious for tolerating higher levels of inflation, and so you've? One got ta think about how do i protect myself in this situation? Uh, but then two is uh.
The difference between let's say a gold and a bitcoin gold can serve as a store of value, but it doesn't provide any sort of real upside potential right. It's more! Let's. Protect you, rather than gain some of that um increase in value.
Now when it comes to bitcoin it has such asymmetry to it. It basically is kind of this apex predator. If you will, it can do everything right, it can basically protect your wealth. At the same time, it has incredible asymmetry to it, and so i think that's becoming more and more attractive.
Um and the beauty of this is this: isn't the first time, something like this has kind of shown its face right to go back to 1971 bitcoin's, uh uh, i'm. Sorry gold is up more than 40x right, and so what i think we're, we're.
Seeing here is bitcoin going through a similar trajectory in terms of adoption and price discovery. It's, just happening on a more compressed timeline, uh and as institutions. Wake up to that. You're right that it just becomes more of a self-fulfilling prophecy.
Uh and eventually kind of you go from a contrarian trade in bitcoin to a consensus trade and when that happens, kind of all bets are off well. During 2020, we've, also seen the massive expansion of quantitative easing, what you just discussed in which they try to achieve the inflation target of 2 percent a year.
This has caused the dollar to become relatively weaker in. In one of your previous interviews, you & # 39. Ve argued that this might be the end 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.
However, right now, countries are starting to use vaccines which might open up the economy in the near future. What effect do you think this will have on the markets and their policies, and how will bitcoin do in this scenario? Yeah there's, a whole bunch of stuff in there right so first kind of from a fiat experiment standpoint.
I think it's, pretty clear that um. You know the system is working as designed and so uh. What that has led to is the greatest wealth inequality um, you know at least in our lifetimes for sure, and it's kind of ever increasing uh two is uh.
We have created an addiction where our economies can't operate without the intervention of central banks, uh and then the third thing is uh. We basically have gotten to the point where uh there's, the point of no return right.
We can't, stop doing this and so uh. As we know, every uh global reserve currency in the world that fell has fallen because they devalued it away. If you think back to even just last year, it was pretty clear that we were getting to the later stages of an economic cycle.
Right, you saw everything from inverted yield. Curves you saw repo markets kind of seizing up. You saw a high level of ceos leaving their jobs like all these kind of notorious red flags, but again nobody knew when was the market going to crash right or correct, and so obviously the virus ended up being that catalyst kind of the pin that pops the Bubble you get this market crash now to the federal reserve's, credit in their job of trying to manage employment and uh the economy.
They basically stepped in with monetary policy kind of bombs right they were like we're, going to throw as much money at this as possible over 3 trillion and what they basically did was they inflated asset prices again uh artificially and on that um Kind of action they actually punished, those in the bottom 50 of the population, and so really what we ended up is in this case-shaped recovery, which you know feels great.
If you hold stocks, doesn't feel great if you have no investable assets, and so that's, where you get kind of the the bifurcation. But i tend to think that as the virus and the vaccine kind of work themselves out uh, what we're going to see is a continuation of what we've.
Seen now like we're going to have interventionism economics, we're, going to have central banks, think they can solve all the problems. Uh, and so individual citizens are faced with a choice. Either you can continue to participate in that system or there's, a new system being built, and do you want to participate in that one? I personally think that the new system is better um and, frankly, it provides much more equality uh for people around the world and better opportunity, and therefore i choose to focus my time and energy there.
Well, that's, a very decent uh answer. Thank you very much. Well, we you've, discussed that currently to keep the system going. Um governments actually have to continue the money printer. Actually, as that keeps the inflation going that's.
The only way why the system is still continuing. As it is, however, it's, getting harder and harder to keep that inflation at two percent or higher than two percent, so potential, stagflation or deflation is also on the tables to end this system.
How do you expect bitcoin to perform in the case of deflation will bitcoin possibly act like gold as in the 1930s, or will it be different yeah? So i i tend to think that uh it's, not really gonna matter right and what i mean by that is uh in the short term in terms of short-term price movements, sure it matters right.
We saw in march, for example, when we got into this deflationary environment. Uh investors were basically panicking. They were uncertain. There was a lot of chaos. They sold off all their assets, um that had liquid markets attached to them, so it didn't matter.
If it was stocks, bonds, uh, gold, bitcoin, everything sold off, uh correlations moved towards one and really they just wanted dollars right and the dollar strengthened, and asset prices uh weakened. Well, all of a sudden when the government stepped in they flooded the market with um.
You know liquidity you & # 39. Ve got this reversal, so you & # 39. Ve got a weakening dollar. You've got a strengthening asset price um, and so they've done well there. What i think that people are um kind of worried about is in the short term if we do enter this stage of kind of deflation uh, do you see some sort of you know, price decrease or whatever when it comes to bitcoin? I tend not to worry about that, mainly because i think that one you're, seeing actual people say that the new system is better, and so there there's, going to continue to be this disconnect or non-correlation between the two systems And i think that's, one a positive thing, but then also the second thing is uh.
I don't think that we're, going to get into a world where these central banks just throw up their hands and say: oh, that's. Fine, we're. Just gonna go to uh no inflation at all. Like we're, just gonna go, you know in a fully deflationary environment.
I i think that we uh kind of underestimate their committed uh miss to uh, seeing some level of inflation, if not over two percent right and uh. Frankly, they can uh only really do two things: they can print money or they can manipulate interest rates, but in a world where they want to go negative on the interest rates and they want to print 10 plus trillion dollars.
I think that we would see some level of inflation, but obviously that just pulls forward kind of the end game or ultimately, the demise of a currency. So you & # 39. Ve got to kind of play this balanced game between.
What do you do now to affect the short term uh without causing too much damage long term, and i think it's, a really hard um? You know kind of task to do. Uh and frankly, i do not think that humans are well suited for making those types of decisions, because we're too emotional uh.
We we care too much about the short term. We don't. We don't want to make the hard decisions. We want to make what sounds right and can help people today, and so i tend to just kind of opt out of the the legacy system and focus my time on the new one.
Well, as you said, markets are quite cyclical. This might be the end of this current cycle of our financial system. There's, also another part which is the four year cycle in uh bitcoin movements with the whole things occurring, and some people argue that the four year cycle is going to last from now on and bitcoin will be moving in those four year cycles.
What is your feel on that perspective? Do you believe that this will last and bitcoin is going to top out in december 2021 again or do we believe that the having will have less effect over time as the price goes up for bitcoin? So when you think about kind of the opportunity that we're looking at here, if there continues to be fixed supply, meaning that basically the code continues to execute as it's supposed to.
And you get a uh kind of that supply shock that just occurred in may of this year, um and then that's, coupled with a demand shock where there's, a lot of people with a lot of money coming in and Trying to adopt the asset you're, going to get a increase in the us dollar price of the asset.
Now one of the things that people always forget is they say. Oh there's, 18.5 million bitcoin in circulating supply kind of. Yes, there are 18.5 million in circulating supply, but if you think about about 63 65 of bitcoin haven't moved in the last 12 months, and so all of a sudden you couple that with let's say like a grayscale gbtc, Where they're, basically buying bitcoin, and they're, putting it in cold storage, it almost like disappears, they call it the bitcoin black hole, and so actually you & # 39.
Ve got about 60 65 of bitcoin that hasn't moved, which means that of 18.5 million you're talking about 11 million, or so that have gone nowhere right, 10 million they've gone nowhere, and so really the Addressable supplies, let's, call it.
You know plus or minus eight million uh bitcoin in the market, and so when you start looking at that, you're like wait. A second. This is interesting because if all of a sudden, only about eight million bitcoin are available and all this new demand is showing up, you're gonna have a pretty aggressive price increase because there's, just not any bitcoin right, and I keep saying that like bitcoiners, aren't selling their bitcoin, and so i think that those market dynamics are gonna drive a very aggressive price increase um.
You know i uh earlier. I think this year or end of last year, whatever it was uh when we first broke 10 000. I wrote and said you know. I think we're, going to hit 100 000 before the end of 2021.. Literally people were like that's insane, you're crazy.
You know all the stuff uh. Now, all of a sudden, i'm, somehow the most conservative person, because everyone else is throwing out these wild numbers um. You know 200 300. I have no clue right. All i know is it's? Gon na be pretty aggressive.
I & # 39. Ve got pretty high confidence. 100 000 by the end of 2021. We & # 39, ll, see what happens well. We have been focusing majorly on uh bitcoin right now, but in one of your recent postcard podcast with raul paul, you were actually discussing ethereum, as probably he might be, even better performer and a broader platform than bitcoin massive amount of human cap intellectual capital.
Working in that particular space, i think there's, a chance that ethereum can have a larger market cap than bitcoin. What are your expectations to watch those other cryptocurrencies for the coming year, and do you expect that those cryptos will get more of the spotlight of institutions as well? I think bitcoin will be the king.
It's, going to stay the king, it & # 39; s, got the branding it's, got the kind of name recognition. It's, the focus of most of the institutions. Yes sure there are some people who will look at other things, but um you know i.
I think that the majority of the time and attention is going to bitcoin, maybe that changes in the future, but for now that's. Definitely true, uh in terms of you know, kind of performance. The thing that uh raul - and i were talking about that, i think is important people to understand is like market dynamics are true in every market right, and so, if you think of stocks, for example, if all stocks increase, the large caps usually increase at a smaller Percentage than the small cap stocks right, it's, just that it takes less dollars to move on a percentage basis, a small cap than a large cap, and so in crypto that's.
The same thing now that doesn't mean that you should run and go buy a bunch of you know small cap type cryptocurrencies in fact, the way that i think about it is i basically draw a venn diagram on one side i put what Is my confidence level in the success of this happening right and then on the other side, i put: what is the return profile that i see from this asset, and so when i take those two things and i put them together the thing that'S in the middle, where i have the highest degree of confidence, is going to work and also has an attractive return profile.
Uh is bitcoin, and so that's. Where i choose to focus majority of my time, i've, made a couple of investments in companies that are building in other places, but for the most part um you know, bitcoin is my uh my focus and i tend to think that that's going to uh to do just fine, i've, got to ask you as there's, also a bunch of new people coming into the markets.
What advice would you give to them with the bitcoin being at 20k? Right now and everybody just shouting six figure numbers, even seventh figure numbers of where bitcoin will be in a year from now yeah.
So i definitely don't. Think we're gonna see a seven-figure number uh. So, whoever's, saying that uh, we should have a conversation and and understand why they're thinking that, but i i definitely don't, think that um, i you know look the advice right is basically the same for Every asset is one.
The first thing you got to do. Is you got to make sure you do your own research really educate yourself understand what you are looking at, how it works, why it has value uh what the thesis is behind it all that kind of stuff, so educating yourself is the most important thing.
The second thing is understanding in your portfolio: uh how you're, going to construct this portion of your portfolio. So if you & # 39, ve got a 60 40 global portfolio. Are you gonna put one percent of your assets? Five, ten 15.
5? Whatever the number is, you got to figure out that component of it, based on that education that you gave yourself and then i think that the key piece here is to understand. This is a super volatile asset uh.
It is definitely something that you need to take a long time, uh horizon on and then just dollar cost average into it so say: hey you know. Every week, or every month i'm, going to buy x dollars worth of it, and i'm, going to continue to kind of use it almost as a savings technology, and i'm going to just accumulate it right.
Bitcoin is a game of accumulation and i think that the faster people understand if i educate myself, if i figure out the portfolio construction and then i simply work just to accumulate uh bitcoin, that tends to be kind of the winning strategy and the part that i Love is like if you bought bitcoin at twenty thousand dollars uh in 2017, and you basically dollar cost averaged your way through the bear market for two years you actually would have been up, even though the price was still down significantly.
Now you look at - and you say, hey if you dollar cost average, since the top in 2017, all the way back to now in 2020, you'd, be up a lot, and so i think that people just have to remember that dollar cost averaging Is a very popular timeless financial kind of approach because it works, and so rather than try to time markets or think that you're the next great day trader.
Instead, i think that just having that asset allocation, kind of framework, staying very disciplined, very patient having a long time horizon and simply just dollar cost averaging into your positions, ends up being a very, very kind of prudent way, uh to treat not only bitcoin but other Assets in your portfolio as well.
Well, i think that's, quite helpful for all the new people that are feeling the fomo getting into those markets, but they have to get into the marks with a strategy. 20 21 is going to be a massive year for crypto and a very interesting year that's been a great conversation.