The $200T Shift Into Bitcoin | Jesse Myers, Smarter Web Company

This is the reason he was using my my chart all along was it's a map for where are the pockets of capital that you can tap into and now Saylor's designed the preferred equity instruments offering 11 5. That's going to win market share. That's a better value proposition to a fixed income investor. I asked this question of Saylor on a on a podcast, never sell your Bitcoin, but what what do you do here if there's something that can grow your Bitcoin ownership. He cut right through it and said, you know, for for a Bitcoin maximalist cold storage Bitcoin is the risk free rate, but there's still a place for risk capital in a portfolio. Archie. Where is the demand coming from in your analysis? Like can you sort of first of all just lay out the analysis that you've done and how the global asset sort of registry breaks down by by classification and value? Yeah, so um Bitcoin's full potential valuation is is this the piece I put out a few years ago and then Saylor has adopted it as the basis of of his valuation model. Um The idea there was, you know, I come from management consulting. When you when you start a project, you know, a common exercise to start with is what is the addressable market here and and how much of it can we capture? Right? Like whatever the question is there. Like usually it's you know, if we were to to start operating in Mexico, you know, how big's the market and how much of market share could we capture? Mhm. Uh in the case of Bitcoin, you know, I this is analysis didn't exist out there. So I thought, okay, I will I'll take a crack at this. Uh what's how big is the market and how much can Bitcoin take? Um And I quickly realized there there just wasn't uh a a singular view out there of how much value is in the world. So then I had to build that that um that picture. Mhm. Um and you know, the reason that didn't exist is it's kind of an impossible task. Uh impossible to to get it precisely right, but you can get it you know, roughly right. You know, you can triangulate, you can take various estimates and average them out and you know, come to a a picture that's reasonable. >> Mhm. And when I did that, you know, I the number now is a thousand trillion dollars of of value in the world. Uh and that's split between the various buckets of, you know, real estate, there's equities, there's money itself, uh and and then there's bonds and fixed income uh and then art and gold and Bitcoin. Uh and you know, when you take stock of Bitcoin's total valuation in this landscape, it's still 0.2% of global asset value. And I think that was a big part of why that piece became quite popular is you know, nobody had really put a number to just how small Bitcoin is relative to everything else um because we didn't have a denominator, you know, and and that piece kind of created a denominator. Um and and you know, think about how Bitcoin is digital value and everything else is analog value. Everything else is traditional capital, physical value of some kind. Uh and in the increasingly digital world, how much value will digital value end up taking? What what market share will it end up winning? In that original piece I I ended up, you know, going going through each of the buckets and saying, well, I think Bitcoin, you know, will take this percentage from bonds and so on. Uh and arrived at, you know, Bitcoin eating 20% you know, full potential valuation of Bitcoin becoming 20% of global asset value. Um At some point. At some point. >> Mhm. Which would from today mean, you know, 100x relative growth relative to everything else. So, you know, if if if >> a key point. >> Yes. So just break that down for us because, you know, people heard the word relative, but explain explain what what that actually means in numbers. >> So using your house example, you know, like if you bought a house today for a million dollars and the the same kind of asset inflation occurs over the next 10, 20 years, yeah. And 20 years from now that house is 10 million dollars, but it's still the same purchasing power as it was today. >> If all the other houses are 10 million dollars, your house hasn't really increased in value. It's just if you sell that, you're going to have to buy another house to live in that's going to cost you the same. But if your house outperforms the market, Yes. it was and it's worth 12 and a half million, that's the profit you'll effectively have made. >> Right. Yeah, exactly. So in in this scenario, you know, if you if you have a a house that goes from 1 million to 10 million, that's treading water, but 100x on top of 10 million would be 100x relative performance. And [clears throat] and that's what I think Bitcoin will do over the coming decades. And so your analysis right now puts a particular figure on it, but by the time Bitcoin fulfills its I guess the market opportunity. If you if you put it at 5% or 2% or 1%, whatever, by the time Bitcoin is worth as much as 10 or you said 20%, didn't you? Yeah. By the time Bitcoin is worth as much as that 20%, that 100 trillion might that segment of the market might be worth 500 trillion. In nominal Yes, in nominal terms. >> Exactly. >> Yeah. Because a lot of people when they think about Bitcoin, they think, okay, what could the price be? Yes. In nominal terms, right? And and cleverly that's what Saylor Saylor, you know, took my model, said some very nice things to me about it, started using it in his presentations and and I didn't fully understand why. Um but it then he put out a a a Bitcoin valuation model setting up a point in time in the future and using the same framework of mine and and you know, he arrived at a number of 20 years from now, he thinks Bitcoin will be worth 13 million dollars per Bitcoin. Mhm. Importantly, in that all assets have 4xed in in nominal value, right? >> So there's like a 4x inflation built into that. >> Yeah. Um that would mean 20 years from now being worth 7% of global asset landscape. And he thinks that, you know, end state for Bitcoin is as much as 50% of global asset value. I I put it at 20%. I was frankly being a little conservative. Um and he puts it as much as 50%. Which would which would be to say that uh 50% of the world's asset value is just looking for the best store of value asset. And Bitcoin is, to use the old phrase, a infinitely expandable blueberry that can satisfy all of that, you know, uh store of value demand because it is a perfection of store of value fidelity through time because there's no no uh supply growth. So okay. So we've got we've got this preferred instrument structure. >> Yes. Which part of the asset which asset class is that targeting? Yes. Most. So this is the the thing that I I I think people haven't wrapped their heads around in general about Bitcoin treasury companies yet. So that you know, if you look at that chart of here's where all the value is. The big buckets that stand out, real estate's big, bonds is really big, you know, 300 plus trillion, um money is big, 130 trillion plus, and then and then equities, 130 trillion or so. Um those are big numbers. And what a Bitcoin treasury company does first is it represents, you know, a securitized Bitcoin exposure. It's an equity that is a balance sheet built on Bitcoin. And you know, that balance sheet in theory will grow at the value of Bitcoin's performance over time. So if that's 29% a year, the value of that balance sheet grows at 29% a year uh plus whatever growth in Bitcoin per share there that company is able to achieve. >> Mhm. Um that's pretty incredible for, you know, compared to other stocks. You know, with uh in the UK over the last decade or two, the average performance on the LSE is 6% a year. So, you know, if if that's what you're able to achieve 29% a year compared to that, that's very enticing to equity investors. So you might get an increasing number of of uh of increasing amount of capital allocating from traditional equities to Bitcoin balance sheets, Bitcoin treasury companies. That's the first step of a Bitcoin treasury company. And now what Saylor has has perfected, and this is the reason he really was using my my chart all along was it's a map for where are the pockets of capital that you can tap into if you can offer a superior product to that capital. So the bond market, that's fixed income. They're used to getting 4 or 5% and now Saylor's designed, you know, reached this end state with uh the preferred equity instruments offering 11 5. That's going to win market share. That's a better value proposition to a fixed income investor than what they can get with >> So fixed income total size was? 370 trillion at this point. >> Gosh. Yeah. Just attracting 1% of that in the next 5 years. >> And so >> It's phenomenal. >> is what Saylor this is how Saylor thinks and he and he talks about it. Uh I was at a at a dinner at Strategy World where you know, he he was doing the quick math in his head of like the addressable market is you know, 100 100 trillion here, 300 trillion there. He's thinking about that chart. And he knows that he has a better product than anything else out there for a fixed income investors. So, what's to stop them from getting 1% or 5% of the capital there and ingesting it into stretch and using that capital to buy Bitcoin. And then what you're talking about if it's 1% you're talking about $3 trillion of capital that Saylor is going to use over the next decade or two to buy Bitcoin. That's so the current market cap of Bitcoin is 1.4. Mhm. >> Just over. Just over. >> Yes. Right. >> 1.4 trillion. Yeah. And we're talking about 3 trillion. >> It's just 1% over 5 years. Right? And there's a multiplier to that. Do you know what the multiplier is, Jess? Well, yeah, you know, that that is a subject to debate. Um Give us a range. What what's We don't have to enter into any sort of conjecture. What's what's the range that people I I think it's a sensible to be in the in the one to four x sort of It just depends on the part of the market cycle as well, doesn't it? >> Yeah, and then and then all that all averages out to something in in one to four x. You know, if you're buying at at the the peak enthusiasm when there's the fewest sellers an incremental dollar will drive up the the price the most. Yeah. And then that all kind of washes out and averages out over the course of 4 years to something like one to four x. Even though I I feel that way, I also think there's a place for cold storage Bitcoin for everybody because you know, I I have cold storage Bitcoin the majority of Absolutely. Yeah. in cold storage. And I'm and I'm an advocate of that being your absolute primary goal Yes. >> comes to Bitcoin. Okay, I I might encourage some people just to get them started like just just buy some Bitcoin and I won't even tell them to get a wallet yet, right? Depending on how much they're buying, right? But if I'm just getting them started with like I don't know, something just >> Yeah. It's just like okay, just keep it in then I will hit them up with the wallet. Now you got to take custody of it. And that's your savings. Yeah. >> You know, that's that should be that should be your your bedrock. Mhm. Uh you can always have and control and have absolute minimal risk involved there. Zero risk essentially. I asked this question of Saylor on a on a podcast um cuz I was you know, 100% uh um cold storage Bitcoin and here in and then I'm seeing what Strategy is doing and it's enticing. It's and I asked him like, you know, what do you never sell your Bitcoin, but what what do you do here if if if there's something that can grow your Bitcoin ownership? And he he he cut right through it and said, you know, for for a Bitcoin maximalist cold storage Bitcoin is is the you know, the risk-free rate. Um but there's still a place for risk capital in a portfolio. Yeah. And that that made perfect sense to me and still how I think about it. It's obviously it's up to the individual to decide what percentage of their portfolio they feel comfortable with as risk capital. Yeah. And that's ultimately you know, what comes with parking your capital in any anything outside of cold storage. I think that's very sensible and one of the things I really don't like seeing is that Bitcoin maxis tend to box themselves out of other opportunities by saying you're you're playing fiat games. That's absolute rubbish, right? But you you you can't say you're in favor of free markets, I you Austrian economists and all that sort of stuff and then um issue opportunities to participate in free markets through equity ownership, other securities as well. Like every depending on what your circumstances are and your risk appetite, there are definitely other instruments out there, other investment opportunities. Many of them actually um potentially offer better returns than Bitcoin. And that's something that you know, like AI for example potentially offers more risk, potentially more return. And you can't deny that. Okay, you you've got to find the winners. That's why I don't go there because I I'm building [snorts] my business. I don't want to care I don't want to waste my time about that. But there are some people who do that research. So, there's that Codl you're probably familiar with him. Yeah. Great guy. >> Yeah, he's wonderful guy, really good guy. Um that's his thesis is that Bitcoin might cold cold storage stack stays there. Yeah. But you know, there's we're in a gold rush with AI and all that sort of stuff. Um and I want to participate in that as well and I think the returns in that space are going to far outsize anything Bitcoin will offer as a maturing um asset class. I think he's absolutely right. He he got a lot of um flak for that. Yeah. >> And I'm just like, guys, don't box yourselves out of stuff. If you if you're not looking for extra return, don't do that. But not everything else is a shitcoin. Like there is such thing as investing in businesses that are growing, you know, Yeah. And it's a it's a high bar cuz because you know, call it 29% a year is pretty damn hard to beat, but it's possible. Um and And it's risky. Like we should we should say that. But you know, like that's a legitimate form of investing. Like investing in speculative startups Yeah. >> and technology companies is a legitimate thing to do. Yeah. And and that that's part of why I love the concept of a Bitcoin Treasury company. You know, depending on your entry point in terms of MNAV um this may or may not play out correctly, but in theory you can grow your Bitcoin per share by owning a Bitcoin Treasury company. Mhm. And so if you're able to buy at a one x MNAV or below right? Like you can in theory um outperform Bitcoin because that's the the rising tide and then performance on top of that through execution of the strategy can deliver more Bitcoin ownership. So, that you know, in my view that's that's the kind of risk capital that I'm excited about right now. Of course, I I haven't looked into AI like at all. I'm fully focused on Bitcoin. Yeah. Um Well, there's that there's that fellow that's I think he's only 24 in the states. I can't remember his name. But um he raised I think a fund of like 200 million. Turned it into almost 5 billion. >> Yeah, the like German named German >> German sounding name. Yeah, maybe it might might even be Dutch. I don't know, but uh Could be Dutch. He's he's had a he had a thesis executed superbly. Yeah. Um great timing. And it's just worked out incredibly for him. I think one of the Bitcoin miners was I think was it Iron Iris Iron Energy. >> Yeah. I think that was one of his plays which cuz they've pivoted hard towards AI data centers as well. And so like that was his thesis and he's done exceptionally well out of that in the space of like 12-18 months, right? It's possible. It's possible, but but in in many ways you're Yeah. No, you have to pick the winners. There and and there's not going to be many of those uh examples that outperform Bitcoin. >> No, there isn't. But that's that's the point of stock picking, right? That's why I don't recommend it to people. But I don't discourage people who do it either. It's not shitcoinery. Like it's it's investing, bro. Yeah. Um and how how blessed are we to have Bitcoin as an option offering such returns still, right? Because in a generation that's going to be over. It's just going to be store of value. We're not going to get these outsize returns for the next, you know, or well, next 15-20 years, sure. But then after that, it's gone. Like it's just going to be a mature asset class then. Well, it it will diminish. So, you in that in Saylor's model there, the the $13 million per coin in 20 years, that would be 7% of global asset value at that point in time. >> Okay, so he's still got upside. He's modeling And he [laughter] expects that to to go to 50. So, that's a a seven x relative growth still for Bitcoin relative to everything else. Who knows how long that takes. That could take Is is that 20 more years or is that 100 more years? We'll we'll see. And and who knows if that you know, that's Saylor's model. That's Saylor's uh projection of CAGR. We'll see what we actually get.