This is Around The Block with Jeff and Dave. I’m Jeff and Dave is out ill this week.
Top of the news we have Bitcoin miners that are continuing to store or stack up on Bitcoins, even as Bitcoin remains under $60,000. Many of the Bitcoin miners are huddling rather than selling. Do they know something that we don’t know?
Meantime the FCC continues to delay making decisions on Bitcoin ETF. Most recently they’ve extended the decision period of the Banach, Bitcoin ETF with our comment that they have changed the deadline to made there was supposed to do it on May 3rd, but now they’re going to potentially do it sometime in June.
So one wonder is that the FCC is ever going to either support or completely ban Bitcoin. The SEC does have a Bitcoin, maximalist if you will, that formerly taught at MIT as the head of the SEC. So one hopes that they will support Bitcoin. Even as Tesla’s sold Bitcoin to prove its viability as a currency, liquidating 10% of their holdings Japanese gaming giant next on bought $100 million worth of Bitcoin. So even as the prices remain at the $50,000 level, Bitcoin is continuing to gain an audience. And so to talk even more about Bitcoin today, we have Bobby Lee, former CEO of BTCC, and current CEO of Ballet.
Bobby, say hello.
Jeff, thank you for having me on your podcast. Very excited to be here.
Jefferson: Glad to have you.
It’s fascinating news about Bitcoin over the last six months. It seems like it’s gone to the moon. What do you think is going on, what’s behind the rally?
Bobby: Yes, it’s very exciting.
So this rally crossing $20,000 in December, went to $30,000 $40,000. Now it’s surpassed $60,000 but it’s now retreated a little bit to over $50,000. This rally was quite expected actually. The industry insiders, Maximus we all knew that Bitcoin would rally every three years, every four years, this is this bull market cycle corresponding to last year’s third block reward halving, which took place I think it was in May of last year, 2020 that is.
So it’s exciting. Even I predicted this rally two and a half years ago, in 2018, I was calling that Bitcoin prices will start picking up again at the end of 2020 and then a breakthrough in 2021. So I expect this to go much, much higher. We’re definitely still in the bull market. People thought that we’d lost some steam or the last few weeks when it crossed $60,000 and retreated back. But personally, I think we’re heading to the moon and we’re not even there yet, right.
So whether you think the moon target is $100,000 or even $1 million, it’s far from over. So I’m still very, very optimistic about Bitcoin price. If you think about it today, all of Bitcoin in circulation is only worth $1 trillion. Now $1 trillion is a lot of money for any individual or company. But however, these days with inflation and money supply increasing companies are now routinely having trillion-dollar valuations, all-time earnings, making billions and billions of dollars. So it’s no longer a huge effort for a publicly listed company to reach a trillion dollars in market valuation. And for Bitcoin to get here, we’re still at the company level. And I think Bitcoin has the opportunity to go to 10 trillion or even 100 trillion, exceeding the value of gold and reaching the value of all real estate or stocks around the world. So it’s a big number.
Jefferson: Well, one thing that I look at and I follow is something called crypto quants. It’s rather interesting as they aggregate the data from a number of different exchanges. There’s only one of the 2.1 million as of today, 2.1 million bitcoins across the top 23 exchanges, which means that each exchange only has 91,000 bitcoins available for liquidity, right.
Bobby: Well, it’s not evenly distributed. So those numbers are estimates. First of all, all those numbers, the 2.1 million Bitcoins, they don’t belong to the exchanges, they belong to the private individuals and companies that own the Bitcoin, rather, they’re held in custodial storage held by the exchanges. And for that matter, different exchanges with different history reputations will have different varying amounts of that, it will certainly not be evenly split amongst the top 10 or even the top 20 exchanges.
Jefferson: Well, right.
There’s only 21 million total Bitcoin that can ever be mined, right.
Jefferson: It still will not that many more Bitcoins to be mined over the next few years, even before the next happening. And on top of that, the number of bitcoins that are on exchanges seems to be falling at a pretty dramatic rate. So all of that seems to add up to scarcity, right.
So this is what’s most unique. I tell people, why am I such a strong believer of Bitcoin. And I tell people, fundamentally Bitcoin is amazingly powerful for two reasons. Number one is its scarcity, that it’s the world’s only asset class that has a true upper limit to how much is available. And number two is that it is decentralized, and no one is in charge. So by the way, they’re linked, right. You can’t enforce a limit if someone’s in charge, because someone’s in charge and they can change the rules and add more coins down the road. So those are the two fundamental reasons why I think Bitcoin is an amazing investment opportunity of a lifetime. And it has a ways to go.
Jefferson: We could turn our attention to physical cryptocurrency, which you have a little bit of with your company the Ballet. Are you familiar with one of the very first ones the Cassius coins?
Bobby: Yes, the Cassius coins. It was invented by Michael Caldwell, I think early 2011, 2012. He proposed it on a Bitcoin talk forum. He was he’s a grandfather of the physical Bitcoins, the notion of encapsulating digital Bitcoin currency in physical form. So essentially, what he did back then was he was using these tokens, these brass tokens and printing out the private key of a Bitcoin account behind tamper evidence stickers, hologram stickers if you will seals and it was still the mana brass token and that would represent one Bitcoin. And back then the coins were just pennies or dollars so it’s very affordable and very cheap. These days, that very same token with one Bitcoin is well worth over $50,000, maybe even $60,000 with collectors premium on it.
So this is something that’s amazing in the early days of Bitcoin unfortunately, Michael Caldwell no longer makes them anymore. So Cassius coins are regarded as one of the early pioneers in physical Bitcoin. The infection top with the highest premiums. In fact, my last company, my first startup BTCC. I was a coin maker for a new series of physical bitcoins called BTCC MIT. And these are physical Bitcoins, same model, as same genre as a Cassius, but they also have the feature of being mined from our BTCC mining pool. So these are so called virgin coins from BTCC mining pool. And we sold them for three years from 2016 to 2018. Created over 32,000 individual coins and tokens, coins and poker chips, valued over 8000 BTC. So it’s a lot of money and I’m proud to have that track record as a very trusted and reliable coin maker. And in fact, that’s the background of how and why we created the Ballet wallet company. So Ballet wallets has its roots in the Cassius coin and then BTCC MIT.
Jefferson: Yes, that’s fascinating. And that’s one of the elements. It’s taking something that’s digital, and currently going into something that’s physical that I just find fascinating. It’s just a fascinating concept.
Bobby: It’s great because people really find it valuable to see and hold something in real life. And as much as the internet is powerful and use globally, we as human beings, we still live in the physical world, we still go out shopping, eating, probably not in the COVID times. But the idea is that we live in the physical world. So for us to hold something physically, and not just some virtual objects on the internet, it really makes a big difference. That’s why I went out to do this Ballet crypto company, for creating cold storage wallets for everyday people.
Well, turning our attention to just some of the other cryptos that are out there. I understand you’re a maximalist, but Ethereum is up there. They’ve made a lot of improvements in rows and in rows, and there’s a lot of people using them. What do you think of Ethereum?
Bobby: So Ethereum is one of the few other altcoins that I’ve invested in personally. I still have the majority of my stash in Bitcoin, I put some money in Litecoin and also put some money in Ethereum. And what I have to say is Ethereum, the premises different. Bitcoin was created as money as sound money, as digital money this peer-to-peer decentralized. And Ethereum was created more as a computing platform for smart contracts. It was created as a decentralized global computing platform using blockchain to settle all the computation of transactions and enable the programming language to run smart contracts. So is a very great innovation of itself, but addresses a different market than money. So that’s why people say Bitcoin is like digital gold. And Ethereum is like the digital computer, the master computer for all transactions. And for that matter Ethereum has been very successful over the years, most recently four years ago with the ICO issuing tokens, what they call ERC 20 tokens, and more recently, issuing NFT’s. NFT’s come in the form of ERC 721 and ERC 1155. So Ethereum smart contracts have been great for that. Now the challenge is it’s become so popular, Ethereum has become really congested. And there’s been a lot of alternatives that come on board including Binance smart chain, which is back then created Binance exchange. And by next March, I think it’s BFC. But the point is that Binance Smart chain is trying to steal away some of the traffic in terms of the coins and tokens and stable coins as smart contracts function.
Jefferson: Yes, they’re trying to.
Bobby: Yes, trying to. So it’ll be interesting to see whether we can, and if Binance can steal some of the traffic from Ethereum, then it will go to show that Ethereum is just one of many platforms for hosting smart contracts. There’s no strong network effect, if you know what I mean.
But in the meantime, Ethereum is continuing to evolve, it looks like their next major upgrade is scheduled for summer. Everybody blames the dirt and video card, the inability to buy video cards on mining. But actually, it’s just because so many people ended up working from home. And of course, they needed to upgrade their computers. And that’s actually largely the demand that hit the manufacturer is that they had a short run of video card, they weren’t expecting everybody to be working at home. And then all of a sudden, there’s all this demand for buying video cards to play video games, I guess. Because they’re working from home, right. See how that goes.
So yes, it’s not so much GPU mining. But still, proof of steak should free up all of those video cards, right.
Bobby: Well, so it’s a good point you bring up, like who’s really using all the video cards. Why is there a supply shortage of video cards. I actually don’t know, to be honest, I haven’t read up on the reports and all that. I would actually still believe that the mining sector is using up a lot of the video cards and video computation. So it brings me reminds me of a different thing, which is recently there’s been a third kind of proof. So there’s proof of work, right. There’s a proof of stake. And then the third one is a proof of storage in time. And recently there’s something called Filecoin and even more recently, there’s something called Chia. So by the way I’m an investor in Chia, Chia the company. So what I’ve heard recently is that China has been really big into mining Chia mining Filecoin and they’ve been buying up all the hard drives. So Chia and Filecoin, they use hard drives for mining proof of space and stuff like that.
So what’s happened is just like there’s been a run on video cards. And by the way, the run on video cards happened since the very beginning days, even 10 years ago when I first got into Bitcoin mining in 2011. And it’s still happening now. And what’s happened this year, is that there’s been a shortage of hard drives, because people are buying up hard drives, SSD drives regular spinning, rotating hard drives, they’ve been buying them up and using it for mining Chia and mining Filecoin. And that’s been the latest trend. So I think, cryptocurrency is definitely here to stay. And this is quite interesting how it’s affecting distorting the computer sort of peripherals market in terms of shortages of hard drives and video graphics cards.
Jefferson: But is that necessarily a bad thing? Because we are in effect, pushing, for example, interplanetary file systems, we’re pushing more secure financial systems, right. And if you look at the actual wage by, just regular Fiat, it far exceeds anything that cryptocurrency is doing today, right.
Bobby: Yes, exactly.
So I think cryptocurrencies have just gotten started. Like I said, Bitcoin is 12 years old, but when you measure it as human years, it’s not even a teenager yet. It’s still just finishing Middle School if you will. So, I think give it another 15 years, 20 years, I think it’s going to really grow up and mature. I can’t wait until Bitcoin turns 21 so to speak.
Jefferson: Well, on that note, what do you think is next, what’s next for all of us with cryptocurrency?
Bobby: Well, first of all Bitcoin, let’s come back to Bitcoin. By the way my book on Bitcoin is called, “The Promise of Bitcoin” it’s been published next month on May 18, by McGraw Hill. And it’s really written for the mainstream audience for people to understand what the big deal is about Bitcoin. What’s the big hoopla? Why is Bitcoin a good investment? So I really want to make that case.
And the fact that Bitcoin has reached $1 trillion today in market value, I think it’s got a ways to go. I think, in this cycle, we saw most recently, the big news items, we saw companies like Tesla coming in to buy Bitcoin in January, and they did do some trades and sold some, but they still hold probably over a billion dollars worth of Bitcoin position, Tesla themselves. And if you think about it, that’s point 1% of all the Bitcoin in circulation, because there’s $1 trillion worth of Bitcoin. And I think besides Tesla, there’s also companies like MicroStrategy, and others buying Bitcoin on the corporate balance sheet. So this is the cycle, where we’ll see a lot of companies buying Bitcoin. And I think in the future, in the coming three, four years that the next cycle, the price bull market cycle, will see Nation States coming in. So I think that’s when I predicted countries will be buying Bitcoin as their reserve asset class. But we probably won’t see that until a few years later. And it’ll be very secretive. And it’ll be a race in terms of who gets in first and who announces first.
Jefferson: Do you think we’re still just on this 4th wave, and we’ll actually just still be taking our time before we hit the 5th wave, or do you think we’ll just go right into the 5th wave?
Bobby: You’re talking about the price cycle for Bitcoin?
Bobby: I think so far again, like no one knows the future, right. I don’t even claim anything about the future.
Jefferson: But based on my sort of 10 years of experience, I have a strong gut feeling that Bitcoin price cycles will mirror and match, it’s a lot reward, halving schedule, which is every four years. So roughly the block reward halving happens, and then there’s a delayed effect where the price goes up after it happens. So we’ve seen that happen in 2012 to 2013. The block having happened in November 2012. And then the bull market cycle came in April 2013. And they finished off in November, December of that year. The next, the second block we weren’t having was in July of 2016. And the price appreciation came towards the end of that year, early 2017. It went broke $1,000. And then the rally continued through the summer and the peak that $20,000 in December 2017. The third block reward having happened in May of 2020. And then of course, we know the prices started appreciating in November, December of last year. And now this year, this is the bull market cycle I believe they’ll certainly get beyond $100,000 it will likely easily get over $200,000 and there’s also a chance it might reach $300,000. And it wouldn’t be out of the norm for to reach that price level for this bull market cycle. But people beware right after a bull market cycle, Bitcoin will always react with a severe price correction, bring it down 50% initially, and even 60% 70% 80%. And at the peak, it could go down to 85% or more.
Jefferson: That’s the thing I think you might be right, you know, we’ll go through this 4th wave, which is rubber in now and every technology cycle to cycle through five waves. Before you see mass adoption, it happened with just about everything, from electricity, way back in the olden days to today. The cryptocurrency now going through the fourth wave. So, yes I think you’re right. I think the fifth wave is coming. And so I still think oddly that we’re in the early days still, for cryptocurrency.
Bobby: We are.
Until Bitcoin reaches and passes a million dollars. I think we’re still in the early days.
So I would encourage definitely people if you’re interested in learning a lot more about cryptocurrency even if you know to pick up Bobby Lee’s book, it’s coming out, what is it coming out again?
Bobby: It’s on May 18th. It’s on pre-sale right now on Amazon. And you can also order on bobbylee.com. And by the way, you’ll get the version hardcover, “The Promise of Bitcoin” or you can even get the Kindle version from Amazon. And then later this summer, I’m happy to announce that my publishers have agreed to also release an audiobook version of my book later this summer. So it’s very exciting.
Well, I’ve already picked up the pre-order. So that should be exciting stuff.
Any final thoughts for our audience?
Bobby: First of all, I encourage everyone to consider Bitcoin as an investment. It’s a great addition to your portfolio. And again, I’m not saying put all your money in it, certainly 1% or 2% will be reasonable. It’s a very small amount of a portfolio and people who will 5% or 10% is fine as well. Obviously, do your due diligence. And the other thing is, whatever price you buy Bitcoin, be prepared that one day the price will be below your entry price. That’s how you feel bad about it. But at the same time, if you hold it long enough, if you have enough conviction, it’ll way surpass your original entry point and give you multiple multiple orders of return.
Jefferson: Fascinating and a great advice.
Just on my own, I’ve been putting just a little bit of money every week, both into cryptocurrency and into the stock market. And well cryptocurrencies have done a lot better than the stock market. That’s for sure.
Bobby: That’s great. That’s awesome.
I’m so glad to hear you say that you’re doing investments on a weekly basis in Bitcoin in the stock market.
Jefferson: And that’s the thing, my grandma told me years ago, even if it were just $10 bucks, you know, cup of coffee, just set it aside, at least you’ll be able to buy a cup of coffee later if you really needed.
Bobby: Exactly. That’s great.
The mentality of savings is very important.
Jefferson: So that’s what’s key. And I think a lot of people have missed that. And they keep buying the latest, whatever and not putting money aside.
Well, Bobby, it’s really great to have you on the show. I’d love to have you come back maybe about six, seven months from now if you’d be up for it. I will do a follow-up and. So it was great to have you thank you so much.
And then hopefully it’ll be over $200,000 when I come back next time.
Jefferson: Exactly. Exactly.
We could be talking about the day the $50,000, right.
Well, this has been another great episode of Around the Block with Jeff and Dave and I’m Jeff, Dave is out and, “Glad To Have You”.