Bitcoin’s Million Dollar Network? (Uncut) 02-28-2025

Mark Yukso on Blockchain Disrupting Finance | Part II: Bitcoin’s Million Dollar Network?

What you just explained and how you just explained it makes me think that it’s worth a million dollars a coin. Oh my God, more, more, more. I want to stop you there for a second because what you just explained and how you just explained it makes me think that it’s worth a million dollars a coin.

Oh my God, more, more, more. But there’s yet there’s a group of bankers, Jamie Dimon and others that don’t think that. So what are they missing that you and I see? Or what are we missing that they see? No, they’re not missing anything, Anthony.

I told you we’re in the then they fight you phase, right? So in 1996, Al Gore saved the internet. He did not invent the internet, right? Contrary to how it was quoted, right? He never claimed to invent. He said, I saved it.

Now, what does that mean? Well, Verizon and AT&T hated the idea that you and I could do what we’re doing right now, that we could use voice over internet protocol, right? The base layer of the internet, TCP IP, that we could exchange voice and data and pictures and video for free, for free. They liked charging $3 a minute for long distance. So they lobbied, lobby, fancy word for corruption.

They paid millions and millions of dollars into DC to get a bill drafted that would have made that illegal, literally illegal. And it was 50-50, and Al Gore cast the deciding vote to say, nope, we’re not going to pass this bill. And so the internet was unleashed to basically liberate all that money that was tied up in media and commerce.

So what’s happening now is, why does Jamie Dimon say it’s a fraud? Why does Warren Buffett call it rat poison squared? I’m like, what does that even mean? And I also said, well, and I shouldn’t say this because Warren’s legendary and I’m not, but how do you even know what rat poison tastes like unless you’re a rat, right? So no, I’m just kidding around. But Munger, God rest his soul, one-upped his partner. He said, trading in Bitcoin is like trading newly harvested dead baby brains.

I’m like, what the hell, Charlie? No, there’s a reason. You have to hate this thing that’s going to disrupt 46% of your portfolio. It was 46% of their portfolio.

Now, what has Berkshire been selling faster than they can sell anything? Financials. And they’re commuting cash. Why? Because they’re going to buy a bunch of good stuff on the other side.

But Jamie doesn’t have any other business. He is banking. Do you think Buffett in his lifetime will own Bitcoin? He actually already does, right? Because he owns NewBank, which traffic’s here.

But I don’t know. I think he should. Let me rephrase it.

Would he say, hey, I thought it was rat poison, but after listening to Yusko? No. Well, here’s the thing. I’ll tell you why I say no.

In 2018, we had just started the firm. And it was right in the middle of bear market, right? Bitcoin peaked at 20,000 in 2017. December 18th, I remember the day.

And the reason it was December 18th is that was the day that Chicago Mercantile Exchange started Futures, which I’m going to come back to in answering your question. So I said, this is going to be the beginning of bear market. Because once you have Futures, you can do what’s called spoofing.

You can short, naked, this asset that you don’t own. In the old days, if I wanted to deliver you oil, I had to have oil. When the Futures markets come along, you can write a contract saying, I’ll sell you oil unless we set up the contract before it finishes.

And there’s a very important reason why Bitcoin was classified a commodity, not a security. So we’ll come back to that. So what Buffett says that, so anyway, so it’s 2018.

Price is 20,000, goes to 10. And then if you remember, it fell all the way to 6 in the spring. And then in November, it took the final puke to 3,200.

When it hit 3,200, Pomp and Jason and I issued the Morgan Creek Bitcoin challenge. And this was the time that the original bet that Buffett made with Ted Seides was finishing, hedge funds versus the S&P. And Buffett won.

And so I called Warren. Friend of mine gave me his phone number, said, call him after 5 o’clock. He’ll answer his phone.

I called at 5.05. He answered his own phone. And I said, you know, Mr. Buffett, I’d like to make this wager, you know, million dollar charity bet. Same thing you did with Ted.

I’ll take Bitcoin. You take the S&P. He was very gracious.

And he said, you know, I’ll consider it. And a couple of days later, I got a nice hand typed. It was typed by his assistant, but it wasn’t him.

Got a nice note back saying, you know, we’ve considered it. And I’ve decided that, or they’ve decided that I won’t be around long enough. So we can’t do a 10-year bet.

And I wrote back saying, look, you’re going to be chasing my tired ass around long. I have no concerns that you’ll make it 10 more years. But I understand, you know, you don’t want to do it.

So I was on CNBC later that week. And I talked about this. And I said, we’ll put this out for anybody, anyone.

This is like December 6th of 2018. Anyone else take the other side, we’ll take Bitcoin. Zero takers.

That’s not true. One guy, who I won’t name names, one guy runs an asset management firm in New York said, I’ll take it. And his son said, hell to the no, dad.

There’s no upside. If we lose, OK, we’re idiots. If we win, we were supposed to win.

No, we’re not taking this. So no one took the bet. Good thing, because we would have crushed him.

But so I don’t think Buffett will ever take. Well, it’s not that intellectually, I think he doesn’t hate it. Intellectually, I think he’s there.

Just like he said, I don’t believe in electric cars. But he owns a shit ton of BYD. And they make the best cars on the planet.

So I get it. He has to do what he has to do. But that’s a long-winded way of saying it.

I don’t think Buffett’s going to do it. So all of this comes down to, why was it classified as a commodity? What do futures markets do in commodities? Well, they allow suppression of price. We all know what happened with gold and GLD, right? So GLD, gold price was going up.

Remember, it was $200. And it was going to $300. And it got to $400.

Everybody’s like, yeah, yeah, yeah, let’s do GLD. And three years, three years, three years, J.P. Morgan fought GLD. Now, why J.P. Morgan? Well, J.P. Morgan happens to run the largest desk in London in gold price fixing, price making.

And they were reported, Scott Besson, actually, our new Treasury Secretary, had done all the work on this. They’re pretty much short a lot of gold, like a lot. And they needed someone to take the other side.

So once they got their shorts in position, they’re like, OK, fine, you can approve the GLD. And everybody’s like, OK, GLD, gold’s going to go to the moon. Gold went boom, boom, boom, boom, boom, boom, boom, boom, two years straight down.

Because J.P. Morgan could control the price through the futures market, because they didn’t have to have the gold. They could just make up paper gold. In 2022, I love this part, they got fined $960 million, or $920 million, I don’t remember the exact number, for spoofing the price of gold.

So you’re not supposed to do this. And they got caught. But I love the guy’s quote.

He said, yeah, but we made $20 billion. So it’s just the cost of doing business. No big deal.

So that’s what’s happening in Bitcoin. Right now, you’ve got massive demand. You’ve got BlackRock buying every day.

You’ve got Millennium buying. But here’s the thing. Millennium isn’t buying long.

Millennium is a market-neutral shop. I love when the 13Fs come out. And everybody says, oh, look, Millennium bought $2 billion of the ETF.

I’m like, yeah. And they shorted at least $2 billion, maybe $2.1 or $2.2, of futures against it. Because they’re just arming the spread between the futures price and the spot price.

There’s something called roll yield. So the futures price is higher than spot price, because humans are optimistic. And over the course of the month, that price rolls down.

And that’s why these futures-based ETFs destroy capital. They’re really profitable for the people that structure them, but not if you hold them. It’s like a triple-levered short ETF.

They destroy capital because of the rebalancing and this roll yield between futures and spot. So we’re in this thing where a year ago, the ETFs get approved. And everybody’s like, oh, it’s going to be great.

The price is going to go straight up. And we went up in anticipation. And then when it happened, because no one was talking, Anthony, about the same day, January 10, the exact same day, not a coincidence, the CME listed massive numbers of new Bitcoin futures.

So what’s happening is every time someone is accumulating, these big dogs, the banksters, can make it short against it to suppress the price. Now, part of that’s just to make money, right? You’re short here. You’re long here.

You make about 11%, 12% annualized. And you lever it up 8%, 10% times. And you make a lot of fucking money.

Sorry. You make a lot of money. But the other little dirty secret, if you wanted to accumulate a large position of something, what would you do? Would you talk highly about it? Hell to the no.

No. And look, I was there. I mean, I was there inside a number of firms.

Soros used to do this all the time. I mean, I wasn’t at Soros, but I had money with Soros. I had money with Scott Besson.

I had money with Julian. I had money with all these guys. And I saw my favorite story is Julian wanted to go super long copper.

And Dwight Anderson had done the research. He was the commodities guy. And he comes in with this big thing.

He’s like, hey, Julian, I think we should buy copper. It’s going to go up a lot. He’s like, OK, great.

Go short 50 million copper. And I want you to tell every reporter that we hate copper. I want you to tell Morgan Stanley that we hate copper.

He’s like, no, I like it. He said, no, no, no, you’re not. I want to buy a lot of it.

And I want the price to go down. So I will argue that you’ve got two things going on. One, you’ve got this natural arbitrage that’s going on between people who are long the ETF, the financialized version of Bitcoin, and short the future.

And that caps the price movement. Second thing that’s going on is I do believe, and I don’t know if it’s Buffett. I don’t think it’s Buffett.

But somebody has changed their mind. In my opinion, somebody, and whether that’s nation states or whether that’s other billionaires, somebody has changed their mind. And they want to accumulate.

And they don’t want to accumulate at high prices. They want to accumulate at low prices. So what do you do? You unleash the bots on all the leveraged speculators.

See, here’s the problem. So here’s my outlook for the year. So Bitcoin’s fair value, as you said earlier, is around 95k.

Maybe 98, somewhere in the high 90s. What’s that based on? That’s based on Metcalfe’s law. It’s just a theoretical equation that takes all the inputs, the number of nodes, the number of transactions, et cetera, and comes up with a mathematical formula for the value of the network.

And networks are valuable. Five largest companies in the world aren’t really companies. They’re networks.

What is Amazon? They don’t make stuff. They are just a network of buyers and sellers. And they take a cut.

And their margins are really high. But the reality is that the Bitcoin network is very, very valuable. The Bitcoin network, the network itself, the secured network that’s never had a fraudulent transaction.

How many times do you have to get a new Visa number because your number gets hacked often? Bitcoin’s never been hacked. Not once. Ethereum hacked.

Bitcoin never been hacked. And it’s had like 20 minutes of downtime in 16 years. So it’s pretty reliable.

Well, why? It’s the most powerful computing network the world has ever seen. It’s 1,500 times, not 1,500%, 1,500 times more powerful than CERN supercomputer. So this is a really valuable asset just as a computing asset.

Well, then the number of nodes keeps growing. The hash rate keeps growing. All the fundamentals keep growing.

So we can calculate this fair value. When the price is below fair value, who buys it? People like you and me and all the other people we traffic with, investors. We like to buy stuff on sale.

We like to buy things below their fair value. That’s what we do. OK.

And what does that do? That slowly pushes the price toward fair value. Now, as the price starts to move, who gets involved? Traders. Traders don’t really care about fair value.

They just want movement. They want to scalp a little here, there, up, down. They don’t really care.

They just want movement. Then who comes in? As we start to get towards fair value, and maybe we can get a little bit above fair value, well, then the speculators come in. Well, who’s a speculator? Speculator is the opposite side of a hedger.

So if the price is fair value, and I’m a miner, and I can produce it below fair value, then I will sell my production, and I’ll sell it forward in the futures market, and the speculator will come in and take the other side. That’s just a natural phenomenon. It’s like an oil producer or a gold producer.

You sell forward production to lock in your profits, to pay your bills, and somebody speculates. But then the problem is, as the price starts to move, it starts to generate attention, and there’s this self-fulfilling price. And then the gamblers come in.

And the gamblers do a couple of things. They don’t give a shit. They don’t care about value.

They don’t even know maybe what they’re buying. They just see movement, and they want in, and they use leverage. And so what happens, we have this four-year cycle.

What’s the four-year cycle? Some of the most brilliant programming really ever, in the sense that every four years, the block rewards, the number of Bitcoin that are given to the miner to secure the network, which is a genius idea, it gets cut in half. But why is that a good idea? Well, think about it. All your miners have fixed costs.

Electricity is fixed. The machines are fixed. So if you decrease the number of rewards in half, in theory, half of them should go out of business.

But they don’t. Why not? Because they’re like, well, then I just won’t sell. And I’ll force the bid up in order for me to sell.

So after the halving event, we see this basic doubling of fair value. This doubling of price. Well, that increase attracts the speculators.

And the halving event happens when we’re below fair value, because of the fourth cycle. So that first part of the cycle is that recovery from winter, and it starts to move toward fair value. Then we get into what’s called crypto summer, which we’re starting to get close to fair value, and the halving event occurs.

That was a year ago. Then we get crypto fall. Well, what’s crypto fall? That’s where the price starts to move above fair value, and the gamblers come in.

And the further it gets is based on leverage. In the previous three cycles, we got to just about 2 to 2.1 times fair value. So the first one, fair value was 10.

I’m sorry, the first one, fair value was about 3,000. We got to like 6. Second, it was fair value was 10. We got to 20.

The third was 32. We got to 69. So we get to these levels of extremes.

Well, then gravity works. And somebody comes in, squeezes the people who are over levered, and the price starts to correct. Now, there are those who would argue that that’s happening right now.

The cycle’s over, and we’re headed down. No, because we’re too close to fair value. My guess, and I said this back in January, was the four-year cycle extends sometime into Q3.

Is it October? Is it September? I don’t really know exactly, but that’s based on long-term history. So in theory, based on previous cycles, we should get somewhere between 1 to 2 times fair value. A fair value, we’ll round it to 100.

I think there’s going to be less leverage. We don’t have FTX anymore. We don’t have Bitfinet.

There’s not as much leverage in the system. There’s still leverage. Obviously, we’ve seen that last couple of days.

But my estimate was we’d go to 150. If you just look at the pure cycles, it says 170. Some would say we’re going to get to 200.

I know Max is saying 220 and others. I’m taking 150. Maybe it’s 170.

But somewhere between 150 and 170, to me, is where we end up in Q3. And then we start crypto winter again. So that’s the longest answer you’ve ever had to a simple question.

No, look, you’re one of the most articulate speakers I know, which is why I’m listening. And I think this content is awesome for our viewers. We’re going to take a few questions, if you don’t mind, because people did write in.

They want to hear from you, Mark. So let’s go to a few questions. What asset allocation principles do you recommend for those nearing retirement to balance risk and reward? That’s Brian from Canada.

Ah, again, such a good question because I resemble that remark, right? I mean, I’m about to turn 62 this year. Although I’m my hero in life. In business life.

Roy Neuberger, right? Went in the office every day until he was 94. Managed his own money until he was 101. Finally passed 107.

Good life. So I’m never going to retire. So that changes my calculus.

But for the average person who says, OK, I’m going to retire. My problem with that, Anthony, do you remember Dennis the Menace cartoons? I do. So Dennis the Menace lived next door to Mr. Wilson, right? And he was talking to Mr. Wilson one day.

He says, Mr. Wilson, what’s retired? Mr. Wilson says, tired yesterday, tired again today. I don’t want that. So but to answer the question, 65, we’ll use that as retirement age.

I really should be 71 or 72, but we’ll call it 65. At 65, just on math, you got at least 13, 14, 15 years based on life expectancy. Many are going to live well beyond that.

So if you’ve got a 15 to 30-year time horizon, my asset allocation recommendation wouldn’t be that different than a normal endowment, which is 80% equity-like and only 20% fixed income-like. Some would say, oh, you got to get more like 60% bonds as you get into your 60s. Like, why? I mean, if you’re going to live 30 more years, you need equity.

So I would say model an endowment, particularly if you have a little bit of capital for multi-generational stuff for kids, grandkids, meaning 70% to 80% equity. Equity doesn’t mean stocks. It means private equity, real estate equity, commodity equity, private equity.

I would own Bitcoin, 5%, 10%. The younger you are, the higher that percentage should be. In my mind, I could get you up to a pretty big number if you’re in your 20s and 30s.

But in your 60s and 70s, maybe 5% or 10% is enough. And then I would still try to focus on equity and being an owner of things, as opposed to a loner and owning bonds. Listen, Mark, you are one of the big thinkers.

I’m going to invite you back to talk about AI in the future and venture capital as well, because I know that you’re on to that space too. And you’re one of the visionaries. And I give you a lot of credit, because in addition to being a visionary, you’re also a great teacher.

And you’re willing to spend the time and the energy to explain what’s going on to other people. So as always, always appreciate those very kind words. I appreciate it.

And it’s funny, because you’re prophetic in that I always say my chapter four, I’ll teach. So I probably will pick up teaching some point when I’m done being a venture guy. Well, aren’t you down there in the triangle? You got a lot of schools to pick from.

And I actually have my eye on one. There’s a program over at that other school, not this color blue, but the other school that they have a leadership program. And I do have an eye on a chair over there in leadership.

At the end of the day, what I do now, I’m a venture capitalist. We focus on the ABCDs of the digital age, AI, blockchain, chips, and data. So I’d love to come back and talk all about that.

The things that are going on in the chip world, in the AI world are mind boggling. And that’s the thing that I loved my jobs in the endowments. I loved my job building Wharton Creek Capital Management.

But I’m having more fun today than I have ever had, because I hang out with young, talented, visionary leaders who literally want to change the world and are inventing things. One quick one. We do a lot of chip investing.

We have chips that enhance AI and do all kinds of things. So one of the challenges with chips is you got your memory over here and you got your processor over here. And the faster it goes, the electrons go back and forth and back and forth between them.

That’s what causes the heat. So literally, I’m talking to you on my computer, sitting on a little box, because it gets so hot that I can’t leave it on the desk. So long story, he’s like, well, what if we didn’t use electrons? What if we use photons? Then there’d be no friction and no heat.

And I’m like, you can’t do that. He’s like, well, why not? I could do this. He said, well, you can’t get the photons into the silicon.

He said, well, I could deposit liquid crystal right on the silicon, and then I could get the photon. And he actually did it. And the kid’s like, and I mean kid in a loving way, not dismissive.

I mean, he’s 29 years old. And that’s the stuff that’s going on. And you see the team from DeepSeek.

They all look like they’re 14. And what they did with software to get around the inability to get the hardware is mind boggling, but not to them, because their mind is unencumbered. Like they don’t think outside the box.

They think like there’s no box. Right, right. Amen.

All right, well, listen, great to have you on. Good to get you back. I’ll see you at Anthony Pompliano’s event tomorrow.

Awesome. And thank you so much for joining us on Speak Up.