I wanted to give something more pragmatic and measured than what was available. The Bitcoin Standard was really the only book finance people were handing out at that time. I wanted to look at history, identify pain points from historical patterns, and actually explain how Bitcoin works without just using analogies. It was for guys from my world who really want to look under the hood before understanding things.
That got me started in the industry, and then I got into the venture side of things.
What’s the state of Bitcoin venture capital right now?
Our view is Bitcoin is going to be used as a store of value for a long period of time. The payment use case – we view that as a barbell between Bitcoin and stablecoins right now. We have stablecoin stuff involved with our portfolio. But the store of value is the big piece we’re focused on.
We see adoption happening in three primary S-curves. First is store of value – taking on gold, moving into broader store value assets, realizing Bitcoin is the best way to store your wealth over time. By the time Bitcoin has consumed this market, it’s going to be a different world.
Once that market’s achieved, we move to medium of exchange. What infrastructure needs to exist for this? These are really tough questions. The final S-curve is unit of account where people start denominating in it.
Some things will come quicker than others depending on constraints. It’s not happening in full everywhere at once – Bitcoin is being used as a medium of exchange in certain communities, as a unit of account in others. But from a global dominance standpoint, that’s going to take a very long time.
How confident are you about the medium of exchange use case?
I don’t have complete conviction on it. I think the revolutionary aspects of Bitcoin will emerge from the medium of exchange use case, while the store of value use case will unlock some benefits too. Having a permissionless form of store of value acts as a deterrent mechanism against certain behaviors.
The multi-trillion dollar question is: will maturity of Bitcoin in the store of value market be enough to have governments start keeping their money in check? Or will it emerge because governments have such a hard time controlling anyone who wants to trade value with cryptographic signatures on the internet?
I think if we build technologies with low marginal cost of participation, whether perfectly trustless or not, we’ll get a hyper-competitive system. As long as that happens, I believe a free banking system on Bitcoin would serve consumers better than any system we’ve seen historically.
Do you believe in the demonetization of other assets as Bitcoin succeeds?
100%. Artificially manipulating price by lowering interest rates forces people to spend and invest in things they otherwise wouldn’t. You can’t keep up with inflation with a savings account – it’s impossible. So there’s all this capital allocation just to stay above water.
I see it happening anecdotally right now. Companies are offering home equity loans to put into Bitcoin. People are selling houses, renting, and putting the money into Bitcoin. As long as Bitcoin’s capital appreciation outperforms rent costs, you do well on that trade.
It’s definitely something that is happening. Bitcoin is effectively a way to short everything bloated by central bank excesses. It’s like a put option with no theta.
Let’s talk about your 130-page report on the Bitcoin banking system. Who’s the target audience?
We wrote this primarily for bank executives and fintech founders. When the Trump administration entered and SAB 121 was repealed, everyone said “banks are coming.” We asked ourselves: what does this actually mean?
We worked with the former CTO of Silvergate, who built the SEN network. We wanted to steelman how this impacts Bitcoin and stablecoins. We collaborated for 6 months and wrote this beast. It became everything you’d want to know if you’re thinking about what happens when banks move into Bitcoin or broader digital assets.
Walk me through your banking system framework.
We have a two-tier banking structure globally. Central banks run large developed economies, set monetary policy, and produce the money. Then you have commercial banks that plug into central banks. Beyond that you have correspondent banks in the middle. Not every bank gets a Federal Reserve master account – those that don’t go through banks that do.
Bitcoin represents a new central bank plugin – a truly neutral, predictable fixed supply alternative to fiat monetary policy. It’s highly differentiated in that regard.
You argue stablecoins are a Trojan horse for Bitcoin. How do you respond to critics who say they’re dystopian surveillance tools?
Every dollar that exits the banking system into stablecoins, every dollar not used in the banking system, is much better than staying in the banking system. Stablecoins are cutting out the two-tier banking system, buying government debt directly. They’re disintermediating banks.
The Community Bankers trade association literally put out a letter before the Genius Act saying you cannot give stablecoins Fed master accounts because it cuts out the commercial banking layer.
Even in the dystopian scenario where stablecoins mature fully, you’re still disintermediated to a degree. That’s a net good in my view. And stablecoins proliferate adoption of using cryptographic signatures for payments and settlement. That’s huge because the rails and infrastructure are being built where, if Bitcoin is better money, it will win with more infrastructure and access.
How will competition between stablecoin issuers evolve?
They’ll compete on passing along interest. Look at Tether’s reserves – about 5% is in Bitcoin. If Bitcoin’s going to be better money and people are using it in reserves, what reserve asset allows for the highest paying interest over time? It’ll shift toward Bitcoin.
What Saylor did with his recent issuance is the proto-version of this model – using Bitcoin that appreciates at 30% CAGR or whatever to pay out much higher interest at shorter duration than anybody else with this reserve asset. If we’re competing on passing along the most interest, Bitcoin’s going to gradually expand within reserves.
What are the risks to this Bitcoin banking future you envision?
We’re witnessing an experiment in governance within Bitcoin. Nobody knows how this will go – what percentage of supply needs to be owned for it to be co-opted versus whether a minority permissionless stake is enough deterrence.
I don’t view custodial Bitcoin as inherently bad – it’s the concentration that matters. If 70% of supply is held by one custodian, they could influence Bitcoin’s outcome. But how much economic activity could happen in the remaining 30% minority? There could still be a reaction causing large wealth redistribution.
Where do you see Bitcoin actually being used as a medium of exchange sooner?
I think that as Bitcoin gets adopted more, it will become more of a widely used FX unit of account. It seems crazy today at 2 trillion, but when it gets to 20 or 30 trillion it will seem a lot less crazy. I think that will be a major shift.
For capital-controlled countries, settling in Bitcoin often makes more sense than stablecoins. Bitcoin might be viewed as a commodity or property, while stablecoins trigger dollar requirements and fees.
If you’re using working capital accounts with Lightning Network or similar protocols, holding Bitcoin means you make more money over time. Some businesses will realize costs are the same but they add 1% to margins every year by settling in Bitcoin.
What about the crypto argument that you need “productive money” integrated with DeFi?
Look at gold – it’s been functionally demonetized yet it’s still the highest fungible asset valuation in the world. Bitcoin could succeed without all the DeFi.
I think we’re going to end up somewhere in the middle. We’ve had this race to the bottom toward centralization in crypto. People don’t actually care that much about decentralization – permissionless access was the huge demand driver.
The reality is cryptography allows us to selectively reveal information about ourselves. That let us create a public ledger we otherwise couldn’t. When we automate value functions as software applied to that, it’s much more efficient than other systems. But eliminating trust from everything? People probably don’t want that unless the solution is exactly the same as the trusted one.
Any predictions for Bitcoin’s future?
We’re going to see a new Bitcoin correspondent bank model emerge. Bank adoption will spike Bitcoin trading volumes 17x within five years. The lending market will expand massively – it’s around 50 basis points of market cap now, long-term equilibrium is probably 150-200 basis points.
The Bitcoin treasury company trend will grow but also wash out. There’ll be a whole asset management side to this industry – companies deploying Bitcoin into sustainable yield strategies by taking on appropriate risk.
Long-term, Bitcoin will become a dominant stablecoin reserve asset. That’s one of our hot takes – in hindsight it’ll be more obvious as incentives play out.
Bitcoin can create the first neutral, apolitical monetary system the world’s ever had. That’s going to change how everything works. It’s going to grow wealth and make everybody’s lives a lot better.
