Lyn Alden on whether Bitcoin has bottomed and what could spark a breakout

Transcript

It doesn't have to be that AI rolls over. It just has to stop being the fastest horse. And then capital that has been in there can say, "Okay, well, what's what's next?" You know, what could what could say 3x my money in a given time frame? Oil is up, inflation is up, interest rates are up, and AI is hacking the planet, but Bitcoin continues to refuse to break down. Is this a sign that Bitcoin's bare market is finally over and a new bull market is starting, or is this just one last gas before it gets hacked and goes to zero? Hello and welcome to Milk Road Crypto, the shows that you should never take financial advice from anyone who wears a turtleneck in California. I'm your host, John Gillan. Today is Monday, October 26th. And today we are joined by Lynn Alden. Lynn is the founder of Lynn Alden

Investment Strategy, a general partner at Ego Death Capital, and the author of Broken Money as well as the Stogard incident. She also just co-founded a company called Orange Juice, a new company that buys and holds cash flowing businesses and backs them with a Bitcoin treasury. We are going to dig into all of this. Lynn is one of the best people to talk about macro and uh all things Bitcoin digital assets. So, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it. And as a reminder, our podcast today is free and that would not be possible without our wonderful partners at alumni ventures, giving accredited investors access to private market investment opportunities alongside leading VC firms and Nexo, the digital asset platform that lets you trade, earn, and borrow all in one place, all from one account.

So, keep an eye out for more information about both of our wonderful sponsors later in the show. But for now, welcome to Milk Road Crypto, Lynn Alden, the macromaster of Bitcoin. How are you? >> I'm good. Thanks for having me. >> I'm really excited to talk to you today. I think you are one of the most ideal guests we could have on the program at this moment because, um, macro is driving a lot of concerns in the markets right now. Um, and I thought a good place to start would just be with Bitcoin. Um, as I said in the opening, Bitcoin has been hanging on to the low 80s here. It might be losing 80K as we speak. Um, but a lot of people have been bearish and expecting it to break down a lot more in this macro environment and it hasn't. How are you reading this

response and the strength relatively speaking from Bitcoin here? >> Yeah, good question. I mean, my my expectation, and I could be wrong, is that I do think that the the bottom's in uh for this cycle. Obviously, anything can happen. Uh, so it's all probability weighted, but um, basically, a lot of times bare markets end just because all the money that would sell has sold. So it's just the f the fast money is long gone basically. You know a lot of leverage has been liquidated multiple times. Uh and kind of what's left is just very strong holders. Now that doesn't necessarily mean that the you know it just goes to the moon right away either. Uh because the other the other side of that catalyst is okay you you maybe we have less selling pressure now.

U but then you still have to ask what makes people come back in uh you know what makes the next upward wave. So I I assume that's still going to be choppy for a while. you know, I'm not I'm not necessarily arguing that we're in a bull market per se. Um, but I do think that that the overall kind of riskreward profile of it uh is really attractive uh at these levels if someone has a multi-year view. That's Yeah, I I saw this in in the research I did in August. You were saying that Bitcoin was near the end of its valuation uh or near the low end of its valuation and sentiment range and that there weren't a lot of downside catalysts left. Is that still how you feel about Bitcoin here or do you think that we have seen some potential new downside catalysts start

to emerge in the market here? >> Well, I think that for most risks, I think a lot of that's already kind of in in the the price. Uh and like I said, I think a lot of money that that would sell for almost any reason has already sold. Um uh and so I I think kind of the structural risks are behind us most likely. Now, the more more recent one is like hack risk, right? So that you know there there are people that are that are generally worried about kind of the mathematical sustainability of the network. Uh and so I I would put that in a different bucket. I mean obviously if something severely damaged the Bitcoin network's operations then even people who otherwise wouldn't want to sell might be in a position where they where they have to just because the network's

damaged. So apart from kind of truly I I'd say catastrophic uh types of risks of that nature, I I find the riskreward compelling. Uh and then that's a complication that investors have to price in is just basically some sort of tail risk. Uh you know months ago or a year ago people would have talked about quantum as a tail risk. Uh and now it's more AI kind of just breaking math tail risk uh without quantum. Uh and so those are those that's a type of technical tail risk that people would have to consider. And of course that's a whole rabbit hole because uh obviously anything related to cryptography is extremely advanced and it can be very hard to make a judgment of what what percentage chance that someone should

assign to those types of tail risks. >> That's a question that I wasn't going to go to right away, but it does seem to be coming up again in conversations is these AI swarms. um you tweeted out last week um about the internet being hacked beyond our wildest comprehension and I think I've heard competing theories on if this is bullish or bearish for crypto. I had Chris Perkins who's the head of crypto for Franklin Templeton on and he thinks that because you know the digital asset space is so full of robust cryptographers and people working on these problems it'll be a net long-term positive for the space but in the short term there's a lot of fear. I'm getting questions about this from my community too. How do you think all this nets out or do we just not have visibility on that yet? I think on average it's worse

for the more complex a project is. You know, I' I've generally not been very bullish on the broader space. I mean, outside of Bitcoin and stable coins and certain tokenized things. Uh I I tend to think that the market for what's left is not as big as some of the bulls do. And and one of the new risks here with AI is just that that you know these are public attack surfaces and this the more complex systems are the more there's a vulnerability potentially. And because we're talking about like largely irreversible transactions in many cases, uh it's just kind of an asymmetric problem. And so I I generally I I am more concerned around the most complex things uh and less concerned but but still not zero concerned around the the

things that are kind of just the the most uh basic and robust uh things around because you know like let's say if someone's using DeFi or something like that. I mean any sort of like you know system of finance you're you're kind of trading one type of risk for another. So instead of relying on an opaque centralized entity, uh you're getting into this more transparent environment which does have its its pros, but then you're taking on some degree of technical risk. And for example, if you're earning a yield on something, you have to think, okay, in theory, if I were to hold this like, you know, over years and years and years, uh what is the chance that say on year six it gets hacked and it just go it goes, you know, everything you have in there goes to zero or you get 20% of it wiped

out or something. So it's like all all the yields or returns that someone can earn have to be offset by having some idea of what your annualized loss risk is. Uh and from what I' I mean a lot of just the return potential isn't super attractive to me compared to what I see from from downside risk. So I'm more concerned around the the complex side of the space. This pullback on Bitcoin is scaring a lot of people and I am not one of them. So, if you want to see what I'm not selling and why, what's on my watch list and when I'm going to be deploying more capital into these markets, you can join Milk Road Pro today. It's just a dollar. The link is in the description.

I answer questions day and night in Discord. I'll see you there. Gotcha. Okay. So, the more complex, the more attack vectors, the broader the attack surface. Um, that that kind of makes sense. Um, yeah, and I guess we'll see how that plays out because it's it's not going to be the same for everything in the market here. Um, another thing, and I know you've been asked about this a lot of times, but the quantum fear uh continues to to come up. Chimath Polyhapatia said on a podcast last week that he thinks Bitcoin is capped and is going to zero because of you know quantum computing risks. Um this has not gone away even though it's been like a kind of a known outstanding question mark in the markets. What's your updated thoughts on this and why do you think these quantum fears just can't be put to

rest? >> Yeah. So I from from talking to institutions uh I mean it is a institutional concern uh and I do think that it has a nonzero impact on price. Now that's a separate question from if those concerns are valid or not. But putting that aside for a second, I do think that at the current time it generally is impacting price. There's you know there'll be multiple theories about what's impacting price. Uh and you know some of them when you talk to to large entities like they're not even thinking about that at all. Uh but quantum is one of the ones that that they are really thinking about. And so when we bring that other question back in of like is it a valid concern? I I think part of what makes it hard to go away is that it's again it's when you're when you're think like uh talking about

cryptography or or you know the nuances of quantum computing we're we're in such kind of technical space that any sort of like money allocator like they're not going to have unique novel thoughts on on that. I mean they have to rely on on experts uh to to basically assess the risk and they have to you know the closest they can get is being technically literate enough to understand good technical arguments from bad ones. uh but you're still you know you're still sampling through a broad range of opinions around quantum and there are people that are saying quantum just around the corner and then there are people that saying that you know ultimately it's like not even clear it's poss it's it's possible yet that you know a properly error correcting you know economic quantum computers is just nowhere near on the horizon. So and

there's a obviously there's a huge gap between those two things. I I generally fall into kind of the moderate or longer camp, meaning that I, you know, I think it'll probably take longer than people expect. And that's because almost anything hardwarewise does take longer than people expect. Hardware is super hard. I mean, when I was in college, you know, now quite a long time ago, I mean, we're talking like two decades ago. So, my early classes would I'd be we'd be talking about quantum computers and how like maybe in 10 years we'll have them, right? And it's it's like we're still so things just take longer than than they often expect until maybe one day they don't but but that's the general tendency and there are signs like there are certain signposts that we can be watching for um you know there's always the risk of something being developed in

secret but there are but in general there are signposts that can be monitored uh and and I haven't you know hasn't really crossed a line that I find particularly concerning yet uh even as someone who is is actively kind of looking for those types of threats. Uh if anything I think that this more like kind of baseline AI hack risk like this kind of solving math problems unexpectedly risk if anything I would say that that's currently leapfrogged quantum in terms of a risk because quantum like basically it takes a lot of money to to you know like research and build a quantum computer but if if you know a week from now uh a system is able to break cryptography just with a novel mathematical solution uh that is

something that could in theory come quicker than expected. Doesn't necessarily take a lot of money if it's it more comes down to if the solution's out there or not. Not not you know so and that's as a nonmath genius it's hard for me to even assign a probability to that. But I would say that's I consider that a a larger threat than quantum in the I would call over the next couple years. And you know, there are people in the space that are like, if something's going to if something really bad's going to break, it's probably in the next six months because it's like if almost like if you get past the next six months of of this happening over and over again and some of the core cryptography is still safe, then uh the Lindy effect starts to kick in and it's like, you

know, they keep throwing the the computation at it and it's just not finding anything like any sort of like unraveling. But, you know, if I was an institution, I mean, that that would take more of my mind share than quantum at the moment just because of the speed uh that something could in theory arise there. So let's talk about this. So I I appreciate all the thoughts on that, but you know, kind of what I'm hearing is is what we're all seeing, which is that these uncertainties remain in the markets and institutional investors have been, you know, let's take taking the lead on Bitcoin's price action here. How do you expect that to play out from here as this asset moves from something that was, you know, kind of a retail focused asset towards an institutional asset in the face of all of these uncertainties?

Uh how does that play out in terms of that institutional adoption of digital assets and Bitcoin specifically? Uh, so I think part of it is just narrative exhaustion. Like I said, if you go another six months and you know, things keep getting hacked and and math keeps getting discovered, but no one breaks, you know, key key cryptography that Bitcoin relies on, you know, if anything, it starts to make the case, it it's like trying to prove a negative, which that's kind of the the issue with with cryptography. So, you can't always prove that you're safe. Uh, but it's like, you know, the longer it's tested, especially with the new tools around, you know, that like, you know, the next six months are a lot harder time period than say a six-month period from 5 years ago, right? So it's like on once it's kind of been around these tools and

tested uh that narrative can just weaken over time and you know if Bitcoin is maybe not in a bull market but it's just not going down anymore then that combination can be enticing and people can say well you know we were avoiding it for this but as time went by we you know we find it more compelling. I mean that's that's probably the main thing I would think of is just is kind of more time based. I mean again we're trying to prove a negative here. Uh so the best we can do is kind of say well I mean we we'll see everyone take their shot at it and if you know we if if it works we'll find out in a negative way and if no one can can break anything critical on it then that's I mean that that's information in and of itself it's not

perfect information but it would be information uh and you know when it comes to institutions or even personal ownership I mean the way to mitigate that risk is position sizing right so I you know I've generally been in the camp of you know there are people that put a 100% of their net worth in Bitcoin And I've generally been in the more diversified camp. I mean, I I come from, you know, an equity analyst background and and a macro background. There's a bunch of different assets I like, of which Bitcoin is is a, you know, very significant one and the one that's, you know, got the, you know, potentially the the strongest return profile or near the top. But it's not something I just bet everything on. Uh, because I would only do that if I had perfect knowledge, which I don't have. You know, I don't

have perfect knowledge of cryptography or or these other risks we've been discussing. And so I have to to allocate accordingly and institutions I mean you know they're going to have a smaller allocation usually unless they're like a treasury company or something than than say an individual like me uh in terms of percentage but so it comes down to you know if they would have if they maybe would have said okay we're comfortable putting 5% in to Bitcoin and if instead they say well because of all these risks we're going to dial that down to 3% or 1% that that does have really real impacts on price action and then the question is can enough risks get alleviated to the for them to be interested in going back to the higher end of their, you know, potential allocation spectrum.

>> Gotcha. Okay. So, we just kind of need more time and more um assurance from the markets that these things are battle tested and some of these risks start to dissipate and and maybe that capital comes back. Um Lynn, I want to ask your thoughts on this. The the equities markets have had a really rough time of it uh in October. Um, and a lot of people have speculated, and I think you've talked about this idea in the past as well, that if AI stocks start to peak or plateau, that some of that capital uh could could move to digital assets and and come into Bitcoin. Do you see any signs of that beginning to happen? Do you think that's still on the horizon here or or what do you think might happen? Uh, in terms of that capital rotation, >> I think we're seeing signs of the AI

trade getting exhausted, which is not to say that it's like the mega top. It it just, you know, it goes through cycles. You know, I still think there's a lot of buildout that's going to happen. uh and certain parts of the space are kind of higher like overvalued compared to others and so for example I still think that chip stocks have potential but for example like the models themselves are just you know they're extraordinarily high value compared to to the revenue they get and you know very real questions around their economic modes if they have moes and and how you know how wide are those moes compared to those valuations. So I I do think that that at least certain parts of that market are getting exhausted and part of it just is just size you know so like the whole for example just the semiconductor space

like if you looked at I forget the exact number of stocks they used call the top 20 semiconductor stocks it was under like you know two or three trillion just a handful of years ago the entire market cap and then it it literally like 8xed like it was it was kind of knocking on the door of 20 trillion obviously you know Nvidia and the RAM stocks some of the others are doing really big uh you know and Taiwan Semi are doing really big uh roles there. But that's I mean that it's you know it's it's one thing to 8x from you know two trillion. It's another thing to like what what kind of returns can you get when you're already knocking on the door of 20 trillion right? It's just a different it's a different market size. And so part of what happened here is that Bitcoin used

to be the the fastest horse uh at least among large liquid liquid assets. And for for a while that's been AI and it doesn't have to be that AI rolls over. just has to stop being the fastest horse. Uh and then capital that has been in there can say, "Okay, well, what's what's next?" You know, what could what could say 3x my my money in a given time frame. Uh and if they see Bitcoin on the bottom of a, you know, kind of a typical valuation range and say, you know, could that it's, you know, it's it's not that big. It's not that hard for it to triple uh compared to say the semiconductor industry or or you know, one of the top semiconductor stocks. Uh, so I think part of that I think we're not in the stage where any money is really coming

back into Bitcoin, but I I just do I think we're in the phase where some money that's in AI is now looking to see what might be next. >> Gotcha. Okay. And that's still something to to be sorted out by the markets here. Um, Lynn, I want to kind of do a hard pivot here because I I got you on the show to ask you some questions about macro and we haven't really gotten to some of those yet, but um, a lot of thing that investors are watching is is the Federal Reserve and uh, interest rates. They've they've raised rates raised rates once. There's another Fed FOMC meeting this week and the market seems pretty certain at like 90 something% that they're going to hold rates, but the market is also very strongly expecting another hike in December. Can you walk me through your thoughts on this and and what that macro

backdrop in terms of monetary policy means for Bitcoin through the rest of Q4? >> Yeah, good question. I think a hold is likely. December I'm less sure about. Uh my my base case from from many months ago was that um uh somewhere around one hike would be my base case this year, but I wouldn't be surprised by two. And so far that's where we've landed. We got one we got one hike from this this new Fed and you like you mentioned we we might get one in December. Uh we obviously a lot can happen between now and then, especially how headline driven everything is. the the point that I brought up is that um it it's almost irrelevant when we're talking about 25 basis point uh uh hikes or or cuts in my view. Um because that's not really the issue, right? It's not like it's it's

it's it's actually it like it it is true that you know rate hikes will take some fuel out of the market, but then they also put fuel into the market through the higher interest expense on on the debt and deficit. And so in an environment, and I' I've kind of gone over this on other shows, but basically in an environment like the 70s where the money supply is primarily growing because of very high rates of bank lending. And so in that and and the public uh debt is low as a share of the economy, uh then interest rate hikes have a very one directional trend. They they do indeed slow down that that money supply creation. uh and and they while they can blow up the deficit, it's not

as big of a number as the downward pressure it puts on housing and other types of lending. Whereas when you're in the in the current environment where you have 7% of GDP deficits, over 100% debt to GDP, a really big just massive stock of interest bearing debt um uh higher rates. It is true that they they put downward pressure on housing. they would put down pressure on other types of lending uh which is already kind of sluggish not you know not not not super fastp not really the source of the issue right now uh but then they actually blow out the deficit by a larger dollar figure uh and and a lot of that that is that gets spent into the economy as as money and so it's not at the stage where like like in a very extreme fiscal

dominant scenario like let's say you had 300% debt to GDP and very little bank lending if you and you have inflation If you try to raise rates, I mean, you're probably going to make inflation worse. You're you're just blowing out interest expense on a comically large amount of debt. Uh, on the other hand, if if you're where they are now, which is, you know, you're you're like a little over 100% debt to GDP and kind of mediocre rates of bank lending, it's you're more in that questionable territory. Like you're you're taking you're you're taking one step forward and one step back and it's more industry specific. Like it is, you know, it is restrictive on housing primarily. this the biggest factor right now is just buying a house on a mortgage is extremely costly. But then it literally like every time they raise rates, people with very large like

money markets uh balances just get a raise, you know. So like it and and they've already locked in their mortgages in many cases and then they have this kind of floating rate cash or cash-like assets uh that just they just pay them more and and when you especially when you have pretty significant wealth concentration and and an age population where that's where the deficits are going that's who has the money. When you raise interest rates like that it just it's it's kind of a mixed bag at the moment. So it's it's that's kind of a a in the nature of being in fiscal dominance rather than monetary dominance. What are you expecting from the other side of of the Fed's FOMC meeting here in terms of balance sheet management? Because they've been doing these reserve management purchases um sort of like

adding a little bit liquidity to support reserves in the banking system, but they haven't really gone into like quantitative easing and that war seems very opposed to that. Uh what are you expecting there in terms of providing liquidity from the balance sheet side if you know monetary policy side, the interest rate side isn't the most important thing right now? >> Yeah, good question. I mean, so so far they've done exactly what they said they would do. Uh, so I mean, year years ago, they they projected that their balance sheet would probably bottom around 2025 2026 and it and it did in late 2025 cuz they kind of ran into like a bank liquidity floor in a sense, at least with based on current regulations and and things like that. And so they started doing the the the purchases.

Then they intentionally said, "Okay, we're going to do it at a certain rate until tax season." Because on tax day or tax week, there tends to be a big um you know, draw down of cash from uh the banking system to the the Treasury's cash account just for for settling tax day. Uh and so they they wanted to have enough liquidity that even after that, you know, unusual, you know, seasonal liquidity pool that there still would be enough liquidity. So, they purposely bought a little extra leading into tax day and then slowed down, which they have done. Uh, and now they they've kind of slowed to a crawl. And at the current time, I mean, there's there's still like there's some room to to kind of keep it flat for a period of time. Banks are on somewhat of the lower end of their kind

of modern cash level range, you know, kind of the post um GFC kind of the the environment that they operate in. Not at the absolute bottom yet. Uh, and so I mean, I think they could hold this for another year or so. Uh but then after that they'd have to explore one of a handful of options. Either either resuming balance sheet growth at a pretty slow pace or doing kind of various deregulations that allowed banks to operate on on slightly lower cash levels. Uh which generally means letting them hold more treasuries without kind of penalizing them in a in a in a a capital ratio aspect. And so we'll see what what ultimate kind of decisions they make, but I my general base case is this more gradual print scenario. So I

keep fading like the really big, you know, that that some some gigantic printing is around the corner. Uh I mean certainly long enough time frame, sure, but but in in a kind of intermediate term time frame, I I keep fading that that risk, but also I think they're going to be kind of limited in how much they can reduce the balance sheet, you know, unless they just radically change kind of the the bank regulation environment. And the reason that that QE I mean QE is not really on the table right now just because they don't consider the economy to need stimulus. I mean if they wanted to stimulate they could they could cut rates uh and and and you know do things like that. The main thing is that they're it's it's you know they're they're making sure that banks have adequate cash levels. Uh

they're making sure that that the just the sheer amount of treasury issuance doesn't crowd things out which is basically like a a minor form of debt monetization. uh like a pretty small percentage of it, but still uh you know permanent balance sheet growth and and permanently buying treasuries, but they're not trying to suppress duration. You know, not they're not trying to buy the long end. The yield curve is not particularly steep, so they don't really have a reason to to want to buy the long end. And so they're it's more just like what what allows banks to operate smoothly so they don't show up in in repo markets and other areas like that. >> Okay. So, leaving the Fed and monetary policy and and their balance sheet management aside, because you know what I'm hearing you saying, and I I kind of agree, is that they're they're still

important, but they're diminishing important. And the thing that's most important is the deficit, the fiscal situation. We're about to have a midterm election in the United States. It seems likely that the Democrats will take the House and likely the Senate as well. So, we'll have a split government. How does that factor into your thesis for the next two years on this gradual print and fiscal dominance? and you know just like what do you expect to happen in that picture from the fiscal side um if if we do have a split government for the next two years in the United States? >> Yeah, one of one of the pillars not the only pillar but one of the pillars of the of the um kind of the nothing stops his train view is the polarization of of Congress in politics which is uh I mean even in the current environment where

where you know it's it all leans red you're not over for example filibuster thresholds and things like that. Uh and so there even even now there's polarization post election like you said we're almost certainly going to have more polarization uh which basically make gridlock. So basically any sort of meaningful deficit reduction uh either in the form of spending cuts or tax increases all the the the possibility that just gets significant reduced. And so when you're in that kind of um like uh just polarized environment it pretty much locks the current status quo in. Uh so the 7% of GDP deficits I think are just there for the next 2 years uh even after the next election. I mean we'll see what happens but it's just there

there's no real political appetite to address them. And so I you know obviously the midterms can be important for any number of reasons but there's there's very little portfolio decision-m I'm I'm doing based on election outcomes because it's all within the framework that I'm already operating under. uh which is just these these very sustained deficits uh at least into the 2030s. It gets interesting when you start to run into the um social security trust fund issue. That's that's the only kind of a big question mark I have for the deficits and that's not until the 2030s. >> So just so I understand this a little bit better like you're saying the gridlock means we're probably locked into where we are right now. Does that just mean that we just continue to see this enormous amount of deficit spending? The debt continues to grow.

The dollar continues to get debased. Does that accelerate in your view or like how does that actually play out over the two years? >> In my I don't really have a reason to think it accelerates over the next two years. Uh just because the like if I mean it's it's much harder in that environment to pass big spending things like uh you know like some sort of I mean if anything if the Republicans somehow hold I mean they promised these $5,000 checks which I actually don't think would happen even in that scenario because their incentive to do it would be gone and there's it's not clear Congress would support that. But like in theory, a more unified Congress can can spend more or or just do tax reductions, whereas a more split Congress is is locked on both sides. Uh so it's like they should not expect any sort of large

stimulus in those two-year periods. They shouldn't expect uh meaningful tax reductions. If anything, it probably more tangible outcome is it probably just caps defense spending compared to what you otherwise might have gotten if if it if it stayed red. um uh just because that that side is going to push back on and on on some of that uh more and so yeah it's just kind of in the thesis of you know debase I wouldn't say it's like it's not rapid debasement and the funny thing is like so historically the US uh broad money supply grows by about 7% a year on average obviously it's it's not evenly distributed in the '90s it was quite slow during co it was like the fastest ever since World War II and the current time it's actually slightly under 6% in a trailing uh 12

per actually we're slightly below average money supply growth. Uh and it's largely because of that restrictive environment on housing and lending. Uh and so it's offset by the deficit. Uh and I think you know anywhere between five and 8% money supply growth is just is just kind of business as normal. Uh and I think that's the environment that we're we're going to be in for for quite a while. >> Okay. So more gridlock, but you're not repositioning because the nothing stops this train thesis isn't really impacted by that. So, you're just kind of expecting that to continue. And I also just want to acknowledge that I got you to say nothing stops this train on the podcast, which is an achievement unlocked. Um, okay. I I want to move on to something that has really been a big shock this year. Um, that, you know,

wasn't really part of anybody's plans, but the oil shock with the straight of horses closure. Um, I still think is like one of the biggest macro events maybe economically we've had in 20 years, maybe longer. Um, and it's still playing out. Obviously, like the short-term impact of this has just been energy costs rising. So inflation, but where are we on that in your mind in terms of like the ripples of this playing out and you know it's still not over. What are your updated thoughts on the outlook for oil and just the energy crisis that has resulted from this? >> Well, that continues to be like the biggest macro thing to watch. You know like I remember before like earlier this year I'd be asked uh you know what's a bigger risk like you know that or like private credit blowing up and I would

say it's not it's not even close. I mean the whole the whole energy situation is just such a larger u you know kind of macro variable at the current time and so uh I mean it's the interesting thing is that for a long time uh oil itself stayed below what many of the oil analysts thought would happen. Basically China had more uh flexibility to reduce imports than people thought. That's probably the biggest variable. Um also of course you have the US strategic petroleum reserve drawing down and things like that. So the actual impact on oil prices themselves obviously it it you know it pushed oil up but it it wasn't as kind of catastrophic in these many months people thought the the bigger problem showed up in the refineries uh you know that both both in terms of damage uh not just in the in

the Middle East but also in Russia. So just damage from from mult you know two wars really you know hitting all that and then also the obviously the transportation bottlenecks are still very much there and it takes it takes like a very long time to build a new refinery both from a reg regulation standpoint there's a very strong not in my backyard aspect and then also just there I mean they're very technically complex expensive you know projects and so like in the US just if you look at the last time you built like a green field refinery it's like it's like like I wasn't alive when we when that happened, right? It's it's like so long ago. They've done like little expansions and things like that. Uh I believe um and so it's just it's that's kind of locked in for a while and it doesn't

have to just keep rising just by staying as high as it is uh or inching up. I mean that that affects inflation, that affects what the Fed can do, that affects midterms because people are kind of looking around and saying, "Well, how have I been benefited from any of this?" Um you know, with with diesel prices and and refined products and everything all just just very high. And then that of course puts pressure on stores that all the transportation. So even if they're not, you know, worried about fueling their own car, they're worried about the the cost of of, you know, groceries on the store shelves that had to use diesel to get where they are. Uh or, you know, natural gas and and other uh you know, hydrocarbon uh type products for fertilizers and things like that. So that's that's just this sustained background pressure in a world that's

becoming just you know less globalized uh having to focus on more redundancy both in terms of supply chains and in terms of now energy infrastructure and production and transport uh and so that on average is a slightly more inflationary world because you just you just don't have certain deflationary offsets and then the other kind of timing thing to be to watch is what happens when the US stops drawing down a strategic petroleum reserve because it gets too low And if the work is still going on and that doesn't have that offset anymore, that's how you can get you know another $20 on the on the you know barrel of oil if it's sustained long enough with these very high crack spreads. So these you know the spread between a refined product like gasoline or diesel and and the initial source it's I mean it's a very it's that's the

biggest macro vera to watch. If we could snap our fingers and just open straight to her muzz and uh you know stop damaging refineries tomorrow uh that'd be a very different investing environment than the one we're in now. You know, one of the weird things about crypto is that the longer you're in it, the more accounts you seem to end up with. You buy in one place, trade somewhere else, earn yield somewhere else, and if you actually need capital, you end up having to sell something that you probably wanted to keep. That's why we at Milkroad are partnering with Nexo. These guys keep the whole thing under one account. You can buy, trade crypto, earn interest on what you already hold and even borrow against your capital without having to sell it. All in one spot, all in one account, all on Nexo.

So, if you need liquidity, but you don't want to give up your position, or you're already holding crypto and you want to be able to do more with it, I think Nexo is worth your time. We love working with them. I think you will, too. Tell them sent you. In crypto, you can get into a project long before it lists on Coinbase. In tech, the early window mostly belongs to VCs, and companies now stay private for a decade or more. Alumni Ventures, a partner of the Milkro Show, gives accredited investors a weigh in. Time and CB Insights both rank them as a top 20 US venture firm. You can sign up for free to see the weekly deal flow or write one check into their foundation fund for about 25 private deals. Venture is high risk and long-term though, so read the details first. Go to av.bc/milkroad.

>> So, I agree with you. This is uh the most important thing to watch right now. But what exactly are you watching? Because diesel prices are up about 70% since February. Obviously crude prices, you know, WTI versus Brent, they keep climbing up as well. Is there a threshold that you're watching for? Is there something like specific indicator that you have your eye on around this or are you just generally watching how this plays out just across the board? >> Yeah, good question. I mean, so on average things break at a higher level than most people expect because they're they're they're not adjusting nominally and and so, you know, they they think of$120 oil being like catastrophic. uh and it was in the 2000s, but just like money supply is way bigger. Uh you know, the

stock market's way bigger. Uh wages are bigger just because all that all that money has grown and sloshed around. So, you know, $120 oil today is is not as bad as $120 oil 20 years ago. You know, you have you have to get notably higher than that to be of a similar environment. Now, the fact that we have high, you know, high crack spreads basically. So you have you have fairly high not not not catastrophically high oil but you have you have fairly elevated oil which then has another you know $50 or $60 added on to to get the refined product at the end which is unusually high number. Uh you've got kind of the equivalent of of $120 plus oil. Um generally speaking I think the economy runs into problems at more like $150 plus dollar oil. I mean obviously

it's already running into issues but it's like it doesn't break the way that that many sensationalists would say it breaks until I think you get to much higher thresholds. Uh so the things I'm watching are one um you know plans around the strategic petroleum reserve. Two any sort of escalation or deescalation uh in the war itself. I mean there there there some people that think that after the midterms the incentive structure changes and maybe the US ramps up again. I'm not I'm not a geopolitical strategist. I would leave that to others but it's a a narrative that I'm monitoring. So, in the weeks after the the election, I'll be seeing see seeing what happens in the headlines around there and then just kind of going from there. It's just it's just part of the new background that that we have to monitor.

>> Okay. Let's kind of synthesize some of this around your outlook for Bitcoin because what I'm hearing is there's an ongoing energy crisis. That's inflationary pressure that's in the background. And then, you know, you're expecting gridlock in Congress. So, continued deficit spending and sort of growth of the debt there. Nothing stops this train. Does that strengthen the outlook for Bitcoin for you over the next two years? Does it present risks if you know the all these pressures start to break the bull market? Like what is how does all this net out around Bitcoin for you? Well, I think that structurally it's supportive of Bitcoin in the sense that I mean, you know, like if you had an environment where you expect very slow money supply growth uh and like austerity, you you would generally be

more concerned around assets that are kind of debasement resistant because you'd say, okay, well, there's a lot of money in them and maybe money will be less interested in being in them uh because it can it can just come back into the relatively all steer banking environ fiat fiat environment. Uh and so the fact that we are running 7% of GDP deficits as far as I can see. Uh and the fact that you know we're monetizing some percentage of those deficits that does play a role in why you want to own things that that are not the dollar. Uh you know whether it's equities, whether it's gold, whether it's Bitcoin, whether it's housing in certain environments, that's that's probably harder, but it that's the case for it. Um and and so I think that that's supportive. Now in the near term you know if you get spikes in

oil prices you can get like liquidity shocks where just various funds or or you know entities have to sell things and you know that can create a riskoff environment which can harm Bitcoin and I think that it's it's more like the a one two stage like in general things like higher rates higher energy prices they should kind of near-term not be great for Bitcoin but then when you find out okay well the Fed's still monetizing anyway they they can't really do much about it. Um that's when people say, "Well, wait a second. I mean, that's even more bullish for for Bitcoin, right?" So then, so if it's like it kind of has to hold up against that initial narrative and then to the extent that either the market looks through it or or investors change

their view, uh it benefits from the long-term debasement. I mean, you want to be short fiat, you want to be long, scarcer things. Uh now probably the one of the more negative cases against assets like gold and bitcoin right now um is that the the dilution rate on bonds is not terrible. So I've historically been a bond bear since like 2018 2019 and and it's been like the wor it's like been the worst performance for bonds like in modern history. But at 5% yields it's way less bad for bonds. uh and and the dilution rate that I look at is I'll take the money supply growth rate and I'll compare it to the industry get paid on on bonds. So, for example, uh let's say in the in the 2010s, you'd have money supply growing at 7% a year

and you're getting paid 2 and a half% on your on your on your 10-year Treasury. Uh so, if you if you're if you're holding bonds and you're thinking, okay, what is my share of the money supply doing? Well, it's getting diluted by the difference between 7% and 2.5% roughly. But then you're paying taxes just just for on the interest just to to make it worse unless you're holding in an account uh that that kind of prevents that. And so your dilution rate is pretty substantially negative. Uh on the other hand, if money supply is growing at say 6% like it is now and you're getting paid 5%. Your dilution rate is like 1%. Which is you know it's way better than call it 4 and a.5%. So, it's it's like there there's less of a kind of a screaming reason to go out and sell

treasuries and buy gold or Bitcoin when that dilution rate is is smaller. And so, I think that that is providing some near-term pressure. If anything, it's it's remarkable that equities, gold, uh, and Bitcoin are all at the levels they are despite the fact that the Treasury market is, you know, it's not like as a bond bear, it's hard to say, but it's not it's not the worst asset out there anymore. You know, five or 10 year Treasury. And so that that's probably one of the near-term headwinds uh for these assets. >> I appreciate that outlook, Lynn. One of the reasons I was so excited to talk to you today is that despite all of these pressures and uncertainties and macro headwinds and quantum FUD and all these other things, you're not just investing in Bitcoin, you are innovating and building on it. And I want to talk to

you about Orange Juice because I've heard you talk about this company as a private equity business with a Bitcoin treasury attached to it, which is a very different thing than just a Bitcoin treasury company. talk to me about this idea and and what led to this and and why this is a different kind of Bitcoin company. >> Yeah, so I mean basically I I think that there is a role for kind of more pure play Bitcoin treasuries. You know, if they're the largest, most liquid ones, that's that's somewhat of an economic moat and it kind of justifies what they're doing. Um but I think that the overall room for just a bunch of kind of very similar, you know, kind of more pure play treasure treasury companies is limited. Um I think the much bigger market is to just be companies that happen to have a Bitcoin treasury. So

they have c you know that like cash flow like you know if you have cash flow you can support debt indefinitely. You don't have a ticking clock attached to your Bitcoin stack that that maybe makes you have to sell it in in opportune times. Uh and now obviously you have you have less kind of pure play potential. So if someone happens to think Bitcoin is going to 10x uh in the next 3 years then I mean probably a purely levered Bitcoin strategy is the way to go. Uh on the other hand, if you if you're, you know, looking at this from a more diversified standpoint and you say, well, what, you know, what can help us accumulate more Bitcoin long-term, it's buying kind of low multiple cash flow businesses, uh, and, you know, being able to to stash that into a Bitcoin treasury. Uh, and

just separately, I mean, even putting Bitcoin aside, there's just a demographics issue with businesses, which is that you have a lot of aging business owners that are looking to sell. Uh, one of the hardest things in the world you can sell as a business because they're they're large. uh individually unique and complex you know transactions. Uh and so private equity has been the the bridge to provide liquidity to to buyers and sellers of of businesses. Uh but the general trend there is they've you know they benefit for 40 years of falling interest rates. Uh they primarily rely on leveraging kind of cost cutting and flipping. So you kind of like buy a business and almost sell it for parts. There's I mean there's statistics that show companies that emerge from the PE process have a higher bankruptcy rate uh just because

there's less margin of error when you're when you're indebted or um you know when you when you've done a lot of cuts like that. So you kind of potentially broke company morale even if you saved on the on the near-term. So the the whole incentive structure there is basically what can you do with a business to to kind of maximize your your call it fouryear returns whereas it's a you you run a business differently if you never plan on selling it. you know, you might make decisions that, you know, maybe it'll make us money this year, but it'll help us make sure we keep making money five and 10 years out. And so, and so there's a basically a lot of private equity stuffed with businesses that they're looking to sell. Uh, there's a lot of aging business owners that are looking to sell and, you know, maybe

their kid is a doctor or a lawyer and and is not, you know, doesn't want to be the next business owner. Sometimes they do, sometimes they don't. And so there's, you know, just a a I think a need for more permanent capital vehicles, which is a jargon way of saying a company that is able just to not a fund. So a fund has, you know, a lifetime attached to it, you know, call it 10 years, whereas a company is an indefinite vehicle. Uh it never has to give money back to to shareholders because shareholders can sell their equity stakes instead. Uh so the I mean the most public example would be Berkshire Hathaway. Now that's you know that that's a trillion dollar example but basically in addition to their public stock portfolio they just buy whole businesses like seize candy and

then they just hold it for for decades indefinitely. And that's what that's what Orange is looking to do on a on a smaller scale with the difference being that instead of our kind of bread and butter being insurance like Berkshire Hathaway uh you know this is one kind of created by a bunch of Bitcoiners >> and I want to understand how Bitcoin allows you to offer that because I think a lot of people see and understand the problem of private equity sort of gutting these businesses saddling them with debt frontloading the frontloading the returns and then trying to sell them off. But how does Bitcoin allow you to be that more permanent capital and take that longer view of of these businesses and and talk to me about how you pitch that to people and and situate Bitcoin as essential to that process.

>> So there are a couple main ways. One is just that um uh like we talked before, Bitcoin treasury companies have a ticking clock. you know, if they don't really have substantial cash flows, but they do have substantial debt, then, you know, they they they have to rely on kind of, you know, Bitcoin appreciating or they'll find themselves having to eventually trim their position down. Uh, in addition, you know, and I mean, I've been long some Bitcoin treasury companies. It's not a criticism, but they're also, I mean, they tend to be pro-yclical. Uh, meaning that, you know, when when they're in a bull market, that's what everybody wants to give them capital. And when they're in a bare market, nobody wants to give them capital. So they end up buying high and then either just holding low or sometimes even selling low which is not

ideal. Whereas if you have cash flows and then you know you can conservely lever those cash flows uh especially against a holding like Bitcoin you you're on not on a clock anymore. So kind of like how private equity is on a clock you know a permanent capital vehicle is not on a clock. You know you don't have to do anything to that business in the near term to to optimize it. You just you're you're building it for the for the long-term future. And similarly, you're not on a on a debt clock either. Um, you know, as long as you manage that conservatively. Um, and so that's just a it's a different kind of um incentive structure. And then also it makes it so there's potentially less counter it's like less um proyclical. So for example, when we have two main things we can buy, businesses or

Bitcoin, we can kind of assess, okay, well, what is our current pipeline of businesses that are looking to sell to us? You know, is it really strong right now? Is it really weak right now? Uh somewhere in the middle. And then you can also go separately look at the Bitcoin market and say, I mean, did it just go up 5x and it's near kind of the euphoric range of a lot of metrics. Uh or is it in a bare market and and you know, kind of chopping along and like a lot of the metrics look pretty cheap. You can then you can compare those two things and say, okay, which one is the more compelling one at this use of at this use of do the marginal dollar at this time? And you know, while we would generally intend to be, you know, growing both, you know, reliably,

there's certainly a case where you'd lean into one more than the other, and it would largely ideally be counteryclical, which is, you know, you're leaning into more businesses buying when you're getting better deals and you're leaning into buying more Bitcoin when that's kind of on sale. >> Lynn, I know we're going really long on time here, but I got I ask a couple more questions for you really quick here. Um, I've heard you say, we talked about a lot of FUD in this episode of of oil, of the Fed, of quantum, of AI. I've heard you say that the biggest risk to Bitcoin isn't any of these things, it's us, it's the people. And I'm curious what you mean by that and how do we go about defending against the risks posed to Bitcoin by people.

>> Yeah, I wrote a um a piece for for Bitcoin magazine, a print issue um uh earlier this year, and it contained that that kind of thesis. uh and the the view generally was that one of the you know when I think of things that could that could you know make Bitcoin not work out as an investment over over call it a 10-year time horizon one would be some of those tail risks we already discussed but the the you know the more persistent one is just that what if people just don't really want what Bitcoin offers that that we've overestimated the percentage of the population that's interested in you know portable portable self-custodial money that that can't be debased Right. And and make and obviously in theory that sounds great to people, but then you say, "Okay, well,

you have to learn some things about it. You have to learn how to hold it properly." And obviously we we've seen challenges in in terms of um you know, even being able to safely hold it. So there's a there's a riskreward trade-off with anything, you know, kind of like how the the analogy I use is that um some people really like to fix up their own cars, you know, like I had a I had a boss once that basically build his own cars. He he'd buy he'd buy like these like junkers and then just literally he just fix the entire car and knows how every part of it works. And then there are people that just lease a car. They never want to touch the car. They never want to change the oil. They just, you know, it's just they're not a a car person. They're not going to be hands-on

with it. Uh and it's kind of like that with money. There are people that just say, "I want a bank account. I don't, you know, I don't self-s sovereign. I don't know what that means. I just, you know, I want to have my bank account." And then there are people that want to hold, you know, they have, you know, gold in their house or they have Bitcoin on a hardware wallet or in a in in, you know, multi-IG collaborative custody or something. Um, you know, they they run their own node. they so so and I think one of the the the kind of the market questions is what percentage of the world population uh will want some percentage of their assets in Bitcoin uh and is willing to go through some of the the technical hassles and risks of of getting there because if you look at it

from purely price action think you know when people say okay it's absolute scarcity it's like well that's great but I mean there are equities that do 20 years in a row of share reductions so they're actually you know deflationary supply of their thing and you know there are stocks that give very strong multi-year returns. So someone is just holding it in an account you know a bitcoin ETF or you know bitcoin on exchange that has to compete with the entire world of like equities you could own uh whereas there's actually a relatively small handful of like liquid bare asset monies uh that that are debasing resistance. You have gold, you have silver, platinum's kind of questionable, but you know, I like platinum. It's just it's way less liquid. And then Bitcoin. Uh, and

there's there's really not a long list after that. I mean, you start to get into smaller, less liquid markets at that point. Uh, and so and of course, Bitcoin's advantage is that among um, you know, digital assets, it's, you know, compared to physical assets, it's, you know, portable, right? So I, if I live part of the year in the US and part of the year in Egypt, I can't bring my gold stash back and forth every time. But I but I can bring back and forth in various ways in various kind of secure ways access to bitcoin uh because it's it's access to information uh which is different uh and so you know and the question is what is the market size for that and if governments try to keep chipping away at things like privacy or or like you know legal self-custody or

legal development of certain things even like you know legally developing privacy tools or legally developing you know peer-to-peer type of networks and and peer-to-peer you're trading and things like that. Um, if people just kind of let that happen and not a lot of people get interested in the topic and just kind of submit to to the other options available, that's a way that Bitcoin can stagnate even with nothing going catastrophically wrong. It's just that the market uh isn't very big and isn't defended well enough uh for what it can be. >> Well, I'm doing my part to try to educate people about the virtues of Bitcoin here. So, thank you for that.

Last question, I promise. Is 2027 going to be a bull market year for Bitcoin? If if I could answer that, I I you know, I would love to. Um my my my inclination is I I think it goes up in 2027. Um I I prefer to give two or three year views. So I would say I'd be I'd be quite surprised if it's notably higher, you know, say at the end of 2028 or as we go into 2029. Uh one year get is puts more pressure. Uh because a lot of things can happen in one year. Uh but my bias would be toward up.

>> I like that bias. That's my bias too. And I like the long view. Lynn Alden, thank you so much for coming on in this trying time and giving us uh a lot of insight and wisdom and taking the long view of Bitcoin digital assets. Uh Lynn Alden, investment strategy, orange juice, ego death capital, and author. Uh Lynn, where can we send people to find more of you and your work online? >> Uh people can check out lynalden.com uh or you know, Twitter, lynalden contact uh and um or check out my books. Uh so thanks for having me. >> Yeah, I strongly recommend you check out Lynn's books. Uh Lynn, thanks so much for being here. I hope we can catch up again soon.

>> Of course. >> And thank you all for joining us. I hope you all learned something today. So until next time, stay safe, stay educated, stay bullish, and we will see you all in the next episode of Milk Road Crypto. Thanks for being here, everyone. Bye. >> Thanks for listening to Milk Road. If you enjoyed the show, make sure you like and subscribe. And if you're struggling to find winners in the market, that's exactly what Milkro Pro is built for. Our analysts have called some of the biggest winners early, and Pro lets you see what they're buying next, every trade they make, and the research behind every position. Check out Milkroad Pro at the link below. Everything you hear on Milkroad is forformational purposes only. These are our personal opinions, not financial advice. And we may own some of the investments we talk about.

Always do your own research and make the decisions that are right for you. See you next time.