Anthony Pompliano 0:00
This leads to Bitcoin, right? You’re famous for calling it the schmuck insurance. I’m not gonna say that we’re in the situation where the insurance is, is needed yet, but we’re definitely headed that direction over a long period of time. How is your views on Bitcoin kind of changed over time? And have you bought more Bitcoin sold Bitcoin or change anything and kind of portfolio allocation standpoint?
Chamath Palihapitiya 0:24
So first of all, I think you set it exactly right, which is that I think that this is the setup, meaning I think Bitcoin needed a moment like this, for it to be relevant. In 2003, or sorry, 2013. I bought a lot and at one point, I think I had almost 5% of all Bitcoins.
My basis is about 80 bucks a coin. I’ve never bought more. Most of my Bitcoin now sit with a company. And, you know, they use it for trading purposes. They use it to run a bunch of other strategies, and I did that Mostly for safety and security and peace of mind.
I didn’t want to deal with it. I wanted to own equity in a business, that equity can be hedged that equity can be tax structured and advantageous Lee, and then it allows them to run a big business which generates cash and I can get a cash in, you know, dividend stream. So I have not bought since I initially, basically wrote that article for Bloomberg in 2013.
My thoughts are the following right now, I think what you’re seeing is that it’s still a speculative instrument, and it’s too speculative for it to be reliable. So if you’re going to make the case that you know, it should replace fiat currency Well, one thing you have to look at is the volatility of the US dollar.
And you can’t replace it with something that’s nine sigma more volatile. It doesn’t work. And the reason it doesn’t work is that it’s too again, going back to what markets are important, the only market that’s even more important than the debt markets or the currency markets.
And what you see is enormous amounts of liquidity where 5% moves. So 500 basis point moves are newsworthy? Well, those 500 basis point moves in the absence of some massive exhaustion is that that takes years to play out.
And in that there’s value because it allows more market participants to be active in that market so that they can use it as a critical pillar of how they run their business. But now all of a sudden, if you have 2000 basis point moves the half hour, you can effectively use it. And so what it does is it pushes it into this ghetto of day traders and speculators. And right now, that’s where we are, we’re in that ghetto, and you need to get out.
And the way that it gets out is that you need to flush the speculators and day traders out and you need to have still some basis of interest. From long term holders, and then you need to have it slowly look like the traditional infrastructure could really implode. So again, I go back to, we are driving slowly but we are driving towards a top of a cliff. And then we’re going to drive much, much faster down that cliff or down that hill.
And at the end of it is a is a huge brick wall. The way we avoid it is by pivoting to a resilient economy where we introduced inefficiency and cost and inflate our way out of it, or debasement. The path dependence for Bitcoin is if it looks like path two is likely it will really emerge as a flight to safety.
And over the next 10 years where this trajectory is going to take shape, and it is a 10 year trajectory. You’ll have a lot of time to vector in to it, to protect yourself and to hedge yourself. And I’ve always thought of Bitcoin as a very binary investment, whether it goes from 80 to 8000 to 6000 to 3000 to 13,000, it just it doesn’t matter.
This is either zero, or it’s millions. Because what it will do is it will create a quasi gold standard, it’ll create an index, except instead of having to own gold, where gold is owned by central banks, it is an instrument that has value that’s determined by in between its participants, and it’s owned by everybody.
So maybe the correct way to say this is that it’s not gold, but in gold being gold 2.0 which some people have used about the coin. What it does is it replaces the the method of value transfer that you need for fiat money to be valuable, but That only happens if the US dollar looks like it’s going to Korean into this wall. So I think that’s the bet.
So the setup is here. So before, there was no path dependence, meaning you were speculating and not really hoping, because, you know, if you were, if you’re using a schmuck insurance as I was, you were kind of hoping it would never come in. But now, if the probability, you know, was 1%, that that it would be valuable. Unfortunately, the probability is now probably like five or 10%. And there’s a real chance by 2030.
We don’t find a way to inflate our way out of this, and that the only way to break the back of deflation is essentially to create some quasi form of gold standard. But it’ll be almost impossible to do that between governments and central banks. They’ll never agree on an instrument and we’ll never agree on an exchange. But then bottoms up, people could decide to do it.