Transcript: Bitcoin's Power Curve: Generational Bottom or Broken Model?

Matthew Mežinskis [0:07] You've had a dynamic where money's become freer than free. Let me talk about a Fed just gone nuts, all, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Probably should be. Probably should be.

Marty Bent [0:36] Got a war in Iran. Yemen has stepped in. They're embargoing Saudi Arabia. We got AI taking over, models leaking into other models, destroying them. OpenAI and Hugging Face, regulatory capture coming to America. But the most important thing out there right now is the fact that the power law or the power trend is broken.

Matthew Mežinskis [0:59] Power curve.

Marty Bent [1:00] The power curve. Power curve is broken, sir. Are we going to be able to do this moving forward? What are we going to talk about?

Matthew Mežinskis [1:08] I'm always up for a challenge, my friend. And when I hear the chirps and see the tweets of those very astute mathematical trend followers on Twitter saying the good old power law doesn't work anymore. I'm happy to rise to the occasion to show you, as I've been showing you on this show for how many years now?

Marty Bent [1:39] I think we're at 8.

Matthew Mežinskis [1:39] Yeah. For the monetary base, I don't think we've done power law updates all those times, but I have actually First charted that back in 2018 as well. So I'm happy to put some minds at ease that know the good old power curve of Bitcoin's network adoption is still growing fantastically well. And you should take comfort in that fact, not try to, not try to get all upset and worried about it. And, you know, that's what I'm here today. help you with. Just ease minds and let Bitcoin help you. That's it.

Marty Bent [2:20] Well, if I recall correctly, the last time we met here, we were probably around the same price level, and it was generational buying times. We looked at Bitcoin pricing, silver pricing, gold, and they were around the— I think the lowest band. It could be 90th percentile. below the mean or the trend, excuse me.

Matthew Mežinskis [2:46] And it's even lower.

Marty Bent [2:49] It's even lower now. Yeah.

Matthew Mežinskis [2:52] Do we want to take a look at it?

Marty Bent [2:54] Yeah.

Matthew Mežinskis [2:54] Dive in.

Marty Bent [2:55] I think we did February, so we are 5 months from our last recording. Generational buying opportunity 5 months ago. Obviously, we've gone down, we've gone up, we putzed around. So what are we looking at now?

Matthew Mežinskis [3:08] So I'm going to take off this for a second. This is the old Bitcoin power law, or the power curve if you like, what I like to call it, because the word law seems to trigger people, which we can, uh, we can also talk about. But you know, I do these, these updates a lot. I do streams like this if people want to, uh, see more. I check this stuff a lot, but every day we get a new data point here. And I don't know, you and I, Marty, probably started to do it. I feel like it was somewhere around 2020, maybe 2022. Can't remember honestly when I started to get these charts running full-time. But in any event, if you go log linear like most charts, like a stock, or if you're looking at bond yields, you're going to see straight lines. Bitcoin log linear, we have that nice kind of rainbow parabola, and that should immediately, should immediately make you think that something else is going on with Bitcoin. And if you go log log, you can see that straight line actually starts to emerge. But I, this chart I like, and I've been showing more because I'm actually I'm showing how the bands of regression deviations have evolved over time and that they're not always, you know, perfect. Of course, you want to draw those straight lines in the past. You're basically actually extrapolating from present back to the past and into the future. So you see that I'm doing it into the future here, but back to the past, it's actually not— you know, we see those nice, beautiful, straight bands, which I can show you as well. I have plenty of charts like that. That's not how it looked at the time. This is how the power law looked at the time every day. Okay. And, uh, what you should— a couple things to take away from this chart basically is you see early years, 2011, even after 2013, you see there's more spaces between the bands. Uh, bands aren't as close together and they can be a bit bit lumpy. I'm actually taking the Q100 off because it's a wild one. It, it even all the way until 2016, but this is good. It's a good point actually, because it shows you how wild it can be. It was still projecting that it was at least theoretically, statistically possible that Bitcoin could get to 66 million. And that's based on the data at the time. But as you see, there's a huge drop here as we get through the so-called crypto winter, which I guess is the name that they were calling it at the time. But basically the 2014, '15, '16, and as we got into more shitcoins and ICOs, 2017. But in mid-2016, it sort of resets itself entirely, and then we get more of a straight line. So if I zoom in to say from 2016 until today, See, it looks pretty good, right? Looks pretty good. The lines are closer together, less jaggedy. But one thing that also you should see is that the pandemic start and also SBF's gift to all of us, the 2022 crash on top of all of the— what do we call them? DeFi, Terra Luna.

Marty Bent [6:37] It's really like Bitcoin collateral mismanagement. That's what I would—

Matthew Mežinskis [6:41] Yeah, but I think there was a certain DeFi narrative that was grounded in nothing as well, which Terra showed. And I guess FTX had no Bitcoin anyway, although they did have Anthropic shares, right? Which was interesting. But in any event, we punched a new low. There to take the lower bound down. And when we talked, I don't think we had punched a new low, or at least maybe we were starting to. I'm looking— no, we wouldn't have. So it was only actually from about June, May, June where we had a big dip that if you start to see how that expands the realm of probabilities, basically.

Marty Bent [7:32] Yeah.

Matthew Mežinskis [7:33] We go even lower. So it's okay. It's happened plenty of times before. You can see it, that Q100 looks wild. But if you look at the bottom end, you know, the Q0, Q10, Q20, it's happened plenty of times where we expand the realm of probabilities. And I just want to remind people, this is completely different than, you know, a TradingView chart where you draw a channel with an exponential chart simply where things look like a straight line in expo space, log linear. This is not Elliott Wave, ABC corrections, all that. These are just every day expanding the set of probabilities of where Bitcoin can be relative to what's called a power regression or a power law. And we can talk more about, again, what it means because it's how— I know we get all types of listeners to your show and other shows I do, so I'm happy to repeat some concepts. But in any event, you can clearly see that we are at the low, low range for about the last couple weeks. We've actually done a nice little Bart Simpson, which we typically do. We have a big rise. I think it's totally possible, by the way, we could fall again. So I'm making no predictions of where we can be, but statistically, long-term, not financial advice, but statistically, we are in a very, very bullish phase of Bitcoin's growth relative to the power curve. I mean, you can't really get much cheaper. Could we go down and paint another low in this zeroth percentile, as I call it, which is really, it's 0.0001 percentile. It's like the worst data point you could paint. It will catch that basically. And so I still call it just the Q0. So it's basically as cheap as the realm of probabilities would paint. That's roughly where we are. We're basically just off it a little bit. And yeah, so I'd say it's danger zone. You don't want to, you don't want to maybe go too crazy with buying here, but slowly, steadily it could be. In fact, it certainly is. If you look past this prologue here, Coming in at these levels for anybody is a very, very good decision. I can hear them now.

Marty Bent [9:57] I can hear them now. Matthew, it all sounds well and good. You're bulling us up. Buying opportunity, cheap sats, looking at the regression, looking at the probabilities, but it seems to me that you're just changing the chart to make it fit your narrative. Are you the next Plan B? All these lines are moving, they're curving, they're going down. The power law is just— you can make it what you want at any point in time. You can manipulate it to make sure it's within the bounds of this trend that you've been describing for years. It's pseudoscience.

Matthew Mežinskis [10:35] Excellent. Excellent steelman of you know all of these mathematicians on Twitter's points, Marty. I just did a show yesterday with the great Giovanni. Some might find him a little cantankerous on Twitter, but he's actually a nice guy when you get to know him. I've met him a few times in in person now. And he has this institute which he has founded in Torino, Italy, actually. It's called the Bitcoin Science Institute. And he's continuing to study this stuff, basically how the price could represent adoption of Bitcoin, looking at hash rate, looking at addresses, looking at those things over time, looking at those things as a relationship to each other. They price versus addresses over time. How would that look? And it's very interesting with Bitcoin because no matter how you slice it, the power laws keep reemerging. And basically, you know, again, crash course here. What does it mean? Power law, the way you can see it, it's a straight line on log-log. All right? You can clearly see that that is roughly happening here with Bitcoin. Yeah, there are some booms to the upside. Yeah, there are some crashes to the downside, but that's to be expected in a market. Also, if you look at some stats here and I'll just highlight one for you, see, this is a 96.1% R-squared. And if we looked at any other type of regression, right? So exponential regressions would be if this was a straight line on log linear, which it's not, obviously a curved parabola-looking type, you know, decaying chart here. It would not fit an exponential trend, certainly wouldn't fit a stock-to-flow trend. It wouldn't fit a linear or logarithmic trend either. And I can show you, actually, I got a good one here for you. We can, we can go right through them. So here's, here's the same chart. Good old power law. All right. Which, by the way, again, we're significantly discounted just from the trend itself. Sometimes that helps to say it. Trend's about $142,000 at the moment, right? So if you go back here, I'm actually showing exactly the model. I think it's 0.42 roughly is the zero bound. We're a little bit higher than that. Where's the price? Yeah, 0.446. We're at 0.46. So under 50% of the trend itself, which again, It's been there before. So if it's been there before, there's no, there's no reason it might not be there again. Okay, now let's just, let's just, let's shoehorn in some good old models here. Like you said, like stock-to-flow. Oh, there's the wrong one. I want to show this one. All right, so let's try exponential. Exponential trend is going to be a straight line on log linear. I just asked you, Marty, look at these 2 trends right there. Exponential is the dotted one, power is the solid. Which one do you think more accurately describes what Bitcoin is doing?

Marty Bent [13:57] I mean, just the eye test looking at the chart, I would say the solid black line.

Matthew Mežinskis [14:01] You know, it looks good. It looks really, really good. We go a log-log here. You can see what an exponential starts to look like. Oops. Chart look weird, but log linear when it's a straight line. You can see it is hasn't Bitcoin's price hasn't hit it since mid 2022. All right, so it's not even close. And again, another eye test very simple thing. If Bitcoin was an exponential asset like all other assets in the world, as far as I can tell. gold, stocks, bonds, then if it was on the all-time exponential trend that you can clearly draw with statistical analysis, simple math, basically, if you have a computer or AI these days, it should be— price should be around $600,000 at the moment. It's not. So I would say I would put to a lot of people, that's a good thing. That's a good thing that the power law is more conservative. It shows you the scalability of how it grows. And another thing just to say is, and you can see it here, if I go down to the statistics, let's go here. You see Power Trends says 39.4% TTM. And then if you see exponential, you see 2 metrics, 108% CAGR and 108% TTM. And notice how Power does not have the same. It says 136% CAGR, 39% DTM, or about 40% DTM. The reason is exponential is just that. It's constant growth always, right? The rule of 72. We talk about this a lot, so just shut me off if I'm speaking too much, but if it helps some of the newbies in the crowd, you know, a 10% return is not going to double every 10 years. It's going to double every 7.2 years, and that's constant. Every 7.2 years, if you go at a 10% CAGR, going to double in another 7.2 years. That's exponential growth. Stocks do that, bonds, gold, silver. Bitcoin is not doing that right now, which is very interesting. It's actually slowing down slightly, but there is a constant proportionality, which is— and the numbers, you have to sort of do the math, but it's basically for every 13% increase in the life of Bitcoin, the price doubles. That's what the power trend tells us. So, and that's a very stable metric at the moment. So basically, if you figure out the math, Bitcoin's about over 6,000 days old, 13% of that, you're getting close to 800 days, i.e., roughly every 2 years, the price doubles. 2 years is also known as about 40% CAGR at the moment, which is an enormous return still. But the catch is it actually is declining a little bit. So that's, that's how it works. We can do the old Plan B trends. Let's look at his 2020 trend. That was— it's the one that's most laughable. All right. So Plan B's trend would be— it's showing 6.58 million Bitcoin at the moment. I think we can discount that one.

Marty Bent [17:10] I think we can get back to it. I think we just—

Matthew Mežinskis [17:13] It's a nice little stair stepper there. Notice, by the way, how it's very close to the exponential trend. And I'll explain that in a second, but let's just run through them all. Let's go to Plan B's 2019 trends. A little bit better, a little bit better, but still you got to look at the numbers to see how rough it is. $800,000 Bitcoin is projected at the moment. You know, we got a way to go. I'm not saying we can't get up there. I'm not saying at all we can't get up there soon. Notice, by the way, that we did catch it in right when the ETFs were approved. in early 2024, but we haven't hit his 2019 projection since then. That is, since 2024. We could also look at, say, another thing that helps if we want to see if a model works is how did it look at the time versus how does it look now? All right, so a good one I like to show is 2016 because that's about when Bitcoin's power trend really started to manifest itself. Giovanni and I started to notice it about 2018, as have many others since then. But let's take off Plan B. Let's take off— let's leave exponential. So let's look at Plan B's— or not, yeah, not Plan B's, because he was actually using even more crazy numbers, which I'll explain in a second. But let's just look at a pure stock-to-flow power trend in 2016. These would be the numbers. I'll put back 2019, actually. See, it's very close to 2019. It's actually slightly better than his 2019, $615,000 Bitcoin.

Marty Bent [18:46] Okay.

Matthew Mežinskis [18:48] And then notice that that means that we have stopped producing data. We just left it at 2016 and projected forward. All right. So again, $600,000 versus $60,000 price. We're an order of magnitude, 10 orders of magnitude actually off. If we go to This one, this, this would allow the model to keep calculating out kind of an all-time. Still a little bit better now, 260,000, but still, still off and well over the 140,000 power trend. Okay. But the key would be more look at the gap between what 2016 projected Right? With all the data in 2016 up until the end of 2016 versus today, $400,000 off. Now let's look at the power curve.

Marty Bent [19:44] Okay?

Matthew Mežinskis [19:44] And I'll take off exponential, but the power curve is projected $143,000 at the moment. Yes, we're well under it. That's fine. We've had plenty of periods where we've been under it and above it. All right? I've showed you before how it can evolve. Let's look at the power trend when it was calculated back in 2016, and then take no more new data. And let's see how good it has been. So that's 10 years now. The line I'm about to draw for you has not seen any data since 10 years. Are you ready for it? I'm ready. Look at that.

Marty Bent [20:21] Look at that, baby. I didn't even notice it.

Matthew Mežinskis [20:23] Look at that. So when the divas yell at you and say the power trend is broken or whatever, the calculation of looking at this power regression, say today with all time, 7,000 or 6,500, whatever it is, days of data points versus 10 years less of data points, the delta on that, all right, is something around $15K, $16K, $17K. It's incredible. It's really incredible. I mean, as far as statistics are concerned, this is the same number. It's literally the same number. Stock-to-flow will give you orders of magnitude wrong. Exponential trends will give you orders of magnitude wrong. The power curve is consistently painting the same numbers, it means it's stable and it has the highest R-squared, which is about 96%. So again, any time I see people try to say like it's not a valid model or whatever, it's not even anything. First, I guess I should just say this. I don't take it personally if, if people don't like the power law. I mean, maybe some people in the space kind of really to educate on this hardcore or something, but it might be possible in the future, which we can talk about, that Bitcoin could move to an exponential model. You and I have talked about this a lot. I'm not sure where your latest, say, remembrances are of this. It's possible that if the financial system starts to co-opt Bitcoin, monopolize Bitcoin, we get more and more fiat units of interest piled on top of limited Bitcoin. It's possible it could go exponential, but at the moment it's not. And I would say that's actually a very, very good thing because that's how networks usually grow. It's growing stable and scalable. So not only is it a scalable way to grow things in power, like the internet grows this way, network cities grow this way in power, which we can talk about too if you want, but it's also stable. It's basically not changed no matter if you look at now with all of the data that we have in Bitcoin versus 10 years ago. So it's, uh, it's actually an incredible way. It's an incredible way to look at how Bitcoin grows. It's way more accurate than any other model, if you want to call it a model. And, uh, most of all, I just think people should take comfort in it because trust me, if Bitcoin breaks the power law, breaks the model, which it's not even close to doing at the moment, it's not going to break it to the downside. It's going to break it to the upside. It's going to go exponential. I mean, if it goes exponential, that means it's even going to grow faster, not slower, faster. So there's just many layers there, many levels. I'll stop there, but there's many. When people sort of say that it's broken, or like you said, things are changing, it's actually not changing. It's quite stable, and it's also a scalable model. So people should actually take comfort in that.

Marty Bent [23:30] Thank you for answering. I've been hearing the naysayers and they've having me doubting, questioning, should I even bring Matty back on to talk about this? I'm kidding.

Matthew Mežinskis [23:38] No, it's important. And he also supports Ukraine. My God.

Marty Bent [23:40] But it's, uh, I think it's important to remind— I feel like despite the fact that we've gone over these core concepts quarter in and quarter out for, for many years now, it is important to really drill in the fundamentals because even I I stray every once in a while. I forget. I get caught up in supercycle narratives. I think what I love most about our quarterly catch-ups is the grounding nature of the data that you bring to the table. And on that note, I mean, you mentioned it, and I think people do like analogies and they do like to get heady when it comes to describing Bitcoin to other people, trying to paint the picture. I mean, cities, Following a power trend growth too. How does that happen? How has that happened historically? How could you measure that?

Matthew Mežinskis [24:32] Yeah, so it's actually very elegant. It fits in very well to, I think, a lot of the reading that you and I have done over the years, and I'm sure many people talk about free markets, talk about exponential debt, talk about fiscal deficits exploding that can't be restored. Those are actually noticed, by the way, In a big way. Of course, you can do fiscal— you have fiscal debt problems on a local level, and plenty of states in America have gone bankrupt and municipalities as well. But on a national level, especially when you print money, whether you're in the United States or Britain or, you know, Germany or some, you know, banana republic, when it blows up in a big way, it's on a nation-state level. And that's an exponential trend. So it fits, it maps very elegantly into reality. Is just look at this chart again. Like, let's not even introduce debt and more numbers and all that stuff. But if you just look at these 2 trends here, our nation's debt grows on that straight dotted line. The money supply, the base money supply, the broad money supply, they have a little bit different rates, but they grow on that straight dotted line. The stock market actually grows on that straight dotted line as well. So it does keep up. That's why it's important to stay invested in something. Bitcoin does not. So that causes confusion. And we can talk about sort of the grand thesis as well. Like, how does this— what happens when these things are going to match? Because Bitcoin's growing much faster at 40% per year than say the stock market, which is only growing, you know, 12 to 14% per year with dividends. maybe 14, 15% reinvested. I don't want to get ahead of myself, but it maps on quite elegantly just to say, and this is something I've been studying for a long time, is exponential trends are volatile. They are. They're just by nature, mathematically by nature, they're volatile. They can explode, they can cause financial ruin, and you have to have a currency completely reset. That's the nature of exponential debt. Compound interest, it's an exponential function. It's all exponential at the end of the day on broad levels, and that is volatile. You can have great growth, you can have some winners, a lot of losers, you can have all that other stuff politically, but it's a volatile function. So power curves, what are interesting about them are they tend to actually be visible in things that are less volatile. So like I said, nations' GDPs, debt, stock markets, all those things, they grow exponentially. But something like— and actually even nationwide populations grow exponentially as well, which is kind of interesting. But on a city level, on a more local level, you actually notice that they grow in power. And so what would that mean? It would basically mean that instead of having the population of a city just flip into the sun, right? Like sci-fi skyscrapers and all the rest. It doesn't actually look like that. And in fact, every year, even though there might be a growing growth rate, like a positive growth rate, I should say, of people coming into New York or Philadelphia or wherever, the rate of growth now in, say, New York is way less, way less than it was 100 years ago or 200 years ago. So that's the way to think about a power law is basically it's a scalable growth. And what that does mean in practice is over time, it's a declining growth rate. And when I say declining, don't think that means anemic or bad. It just means it's scalable. It grows at a slower and slower rate, but it still grows. I can stop there.

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Matthew Mežinskis [30:51] And we can talk about it again.

Marty Bent [30:52] Yeah. I feel like it has to be a recurring theme. Have you thought— but at some point in the future, Bitcoin's power trend is going to intersect with the exponential growth of M2 and the stock market and all these other assets that are growing exponentially. And that posits the interesting thought experiment of what happens then? What co-opts what? Does Bitcoin co-opt the exponential trends and force all these other assets to grow at a more stable and scalable rate, or do those exponential trends pull Bitcoin onto the exponential curve and send it on that trajectory moving forward? And this is really a conversation of how do you think society should grow? What is sustainable, I think, is the best question. Is this exponential boom-bust economy driven by money supply expansion, equities expansion, is it the right way to do things? I mean, if we're looking now, I'm sitting here halfway across the world from where Matty is right now. We're having a conversation. We've got very strong internet. There's no latency in the talk. It seems like this exponential growth trend has gotten us pretty far from a societal and technological perspective. But what is the case for convincing people that then maybe power trend growth is more advantageous.

Matthew Mežinskis [32:15] Right. And if it will, if there even is the possibility to convince, or if we would be again, which I do fear honestly, is you might be co-opted into a system where, by the way, Bitcoin number go up could even be stronger. Exponential growth is stronger by definition. It's more constant, it's more forceful. But then you can add a lot of volatility there. I had a similar discussion with Danny recently, and he mentioned an interview he did with Thomas Pacchia, who said basically kind of what I was trying to explain mathematically is like, might be where we're all rich or something, but the project has failed. I actually remember that interview that Thomas did with him, but that would be something that I would, I'd say again, it might be okay in that world, but what I think that means is if Bitcoin, say, goes exponential, which by the way is a different topic than a lot of people on Twitter saying if the power law is broken or something. Again, if the Bitcoin power law breaks, it's going to break to the upside, not to the downside. But if it goes exponential, then that just means that Bitcoin's going to start to mirror an already volatile financial system. And I'll, rather than show charts, I'll just try to talk through this a little bit more. I can show the charts, but even though the stock market grows at that constant exponential rate, it's actually what Jeffrey West calls super exponential. So if you look back far enough, and this should be intuitive to people as well, is when we had less technology, less growth, I can show you charts of the stock market in the 1800s. It was only growing like 2%. Then after the Fed was formed, it's 5%. Then when I was growing up, even, you know, in the '90s, whatever, starting university, we'd talk about 9% being a good stock market return. That's about what the S&P 500 was doing. Now it's doing 12% plus 2% with dividends. You're almost to 15%. But to find those trends, you got to kind of separate out the noise. And I can show you that chart in a second. But the bottom line is, There's a directionality right there. So you have, firstly, it's exponential, which is constant, but actually if you look at it in the big picture, it's super exponential as Jeffrey West uses it. It's not a mathematical term, but it's what we're noticing in certain markets. And you see this with the money supply as well, by the way. Well, I should be cautious on that. You see that in some money supplies, not all, but certainly with the stock market. The big one is the stock market. you see that the returns get more and more. People need more and more to catch up with inflation, monetary price inflation. And that gets the rat race going a lot more, right? No matter what the Fed says or whatever any other central bank says, I try to measure the actual markets and the returns and try to make my decisions there. And things are getting crazier, not less crazy, as probably most people can sense. Map that on Bitcoin's growth rate. Well, let's even stop there before, before we say map that on Bitcoin's growth rate. Let's say, let's say that Bitcoin would just go exponential and start to map onto the stock market's growth rate. So even though it's faster now, let's just say it starts to go even faster in the future. I think what that shows is really not— I mean, you would, for Bitcoiners, for sure, they could do well in either scenario. Bitcoin turns the world into a power curve or Bitcoin gets pulled into a TradFi exponential curve. This is basically my grand thesis. If we say that Bitcoin goes exponential, I think you're going to see more volatility. And yeah, Bitcoiners might be fine in certain ways, but society might not be. And we're on this path, we're on this collision course right now. And it's basically the verdict is, I think, out, or the jury's still out on how that verdict will be decided. And I tend to lean towards the fact that I would not want to see a Bitcoin world where it matches the stock market. I would like to see a world, as I'm sure you would, many others would, it's like the cypherpunk world, the distributed networks world, a lot more freedom. No one can tell us if we can't withdraw our coins from exchanges. The only way we can hold Bitcoin is not only through ETFs. I think if you start to see the opposite of those things that I just mentioned, Bitcoin could start to look like the stock market. It's going to start to just sort of mirror it, or it looks like, I don't know, the GLD or something like that. We might go through long periods of just nothing and then some big booms and corrections. That would be an exponential world. And I think it's more volatile, not less. I think you'll have more and more debt, just like it, you know, in the real estate world, you get more and more debt, but behind the same asset that's really not that much more productive. Again, Bitcoin doesn't produce revenue anyway.

Marty Bent [37:29] holders.

Matthew Mežinskis [37:29] It does for miners, but not for holders. And you get more and more fiat interests piling up, like trillions and trillions of fiat currency interest units piling up on the same amount of Bitcoin. It's like a hot potato, right? It's like musical chairs. You get more and more volatility. So I actually think the whole thing, again, just to sort of be clear, and maybe I haven't fully described the Bitcoin turns the world power yet, we can talk about that, but I think it's quite elegant. I think the idea that exponential curves are volatile, the markets, money supply, debt, fiscal deficits, all that stuff is exponential and volatile. It's pretty interesting how Bitcoin, which is this totally unique and different financial asset than we've ever had, for all the reasons you talk about on your show, is not growing that way. It's clearly not growing that way. The R-squared doesn't show it. The eye test doesn't show it. The numbers don't show it. So I hope that it continues to grow that way. I will say, am I going to be disappointed if it goes exponential? Maybe a little bit. I mean, but Bitcoin is going to do well either way, I think. But I do actually think there's something here and we're going to see it in the next, you know, you and I'll be here for it for sure. In the next 10 to 15 years is where I think there's going to be some sort of a crossing where basically this 40% Bitcoin, that 40% rate of return that Bitcoin does now, is probably going to cross with this super exponential treadmill stair-step growth that the stock market is doing, where maybe in 10, 15 years the stock market is also doing that. And then people are just going to have to ask themselves a question like, okay, do I just want to keep chasing all these fiat interest units? Or would I want to just go back to the castle, so to speak, have some Bitcoin, to do my transactions completely different than the way the financial world has always done them before? That's going to be a big question, I think, for the TradFi system. And I certainly don't see the TradFi system giving up their power easily.

Marty Bent [39:38] Neither do I. And I wouldn't be shocked if that intersection point is pulled forward. I mean, if you just look at the stock market gains the last year with the AI boom, you could see things getting getting rather crazy. I think Google just put out their earnings report yesterday. I think they did like 24% growth last year as a $70 billion company, which is insane at those levels. Yep.

Matthew Mežinskis [40:03] I don't have it handy, but if you look at the top, those top tech stocks in the US, they are absolutely at, let's say, 25% CAGR even before AI. After AI, even higher. But, you know, 22 to 25% CAGR. That's what they're doing. So if you think, okay, they're already leaving the stock market behind, AI is a part of the story, this crazy fiat growth is part of the story, it's going to be pulled in, I think, even faster.

Marty Bent [40:31] Yeah. And then you think it looks like AI is being deemed an existential industry, at least here in the United States and other parts of the world for that matter, and it's going to be backstopped by the full force of the federal government and And the Fed essentially, even though the Fed probably won't explicitly admit that, the Treasury's there to backstop them. We've seen this with the quasi-nationalization of some of these publicly traded companies, the government getting stakes in them. And as we all know, the Fed exists to monetize the debt that the Treasury prints. And so, it's hard to believe that the Fed would've backstopped this if pressure was put on from the federal government, which it seems like the intent of this administration has been when it comes to the Fed is to tie it more closely to the Treasury. But bringing this back to the power trend and the effect it has on Bitcoin, it stays on the power trend and the effect it will have on markets. I don't think we've expressed it this way in the past, and it may be interesting to wander down this thought experiment, but this concept has been popular in Bitcoin for quite a while. But maybe when they intersect, the market just comes to a sort of come-to-Jesus moment or just a question. It's like, okay, what do we want the risk-free rate of return to look like? And how do we want to calculate opportunity cost moving forward? Do we want to do it on this exponential curve? that is very much affected by Fed policy and M2 monetary expansion, M0 monetary expansion, M1 monetary expansion? Or would we like to coalesce around this sort of neutral distributed protocol with rules that are very cut and dry and begin to weigh opportunity cost of return versus the returns of this asset here?

Matthew Mežinskis [42:25] Yeah. I have charts. It does. It does. Makes perfect sense. I have charts actually to show all of it, but I'll still try to— before we go back to the charts, the power curve won't— by definition, a power curve, a power regression, a power law is different than an exponential curve. More, you know, exponential curves in the markets are exponential because of compounding interest. That is what makes them exponential. So more and more, as I've been saying, more and more fiat units of interest begets higher and higher principal balance, debt balance, all the things system-wide. That's just, that's how it looks. Every once in a while you get an explosion of that. You know, we had that actually in World War I and we had it in World War II. We had nations that basically couldn't pay their debts anymore. Some of them started wars, some of them were defending in wars like Britain. But they, you know, Britain, Britain was basically bankrupt in both wars, both World War I and World War II. So it certainly feels— again, this is where I always try to be careful saying when is the point, it comes a moment, so on and so forth. You know, I've told you that on the show for many years, right? Because I think gold bugs in the 1980s probably thought this was it, right? Gold was going to $850 an ounce and then it went into a 20-year bear. So I'm not sure exactly when this point will come. Maybe AI gives us like another 3 decades with its productivity somehow. I don't know. I honestly do not have a crystal ball there, but I would say So the other idea basically of this, my grand theory is that if Bitcoin kind of does, it's a little bit, I'll come back to your point about having a risk-free rate of return, but a power law can't actually have a risk-free rate of return because a power law over time has this declining growth rate. So it just won't work. Exponential interest won't work. So again, then you would go back to maybe other theories that other Bitcoiners have espoused or other people, you know, people have talked about like equity only, equity only type world where basically everyone's kind of a VC. People are just investing. You invest in someone's future. It might be on sort of a socialist, like family level, or it might be on an actual, like, here, I expect you to gimme this return. If you don't, maybe I'll, you know, I'm just throwing it out there, but like, you know, I'll have collateral on your car or something. I don't know. It could be all sorts of things, but the required rate of return or the constant rate of return doesn't work. It just does not work in power law mathematics. And I haven't seen this, by the way, explained by anyone, by anybody even say smarter than me in the power law world, like Giovanni or one of the people that have, you know, physics PhDs. it will not work. So that's why I keep saying the only way I can see it working is if literally Bitcoin, like a black hole, pulls the whole TradFi market into its really interesting, more stable growth rate, but not something that can rely on exponential fiat units of interest versus Bitcoin itself being pulled back into this monopolized TradFi world where you have ever-expanding amounts of debt contracts with ever-expanding amounts of fiat interest behind that. And I think that would still happen under your model of Bitcoin as the risk-free rate. I think that would happen. I think, I mean, even if it's Bitcoin's a risk-free rate, it's still a rate and it's still going to be a compound interest rate. So it's kind of a wild thought to think that we wouldn't have proper old-school interest rates at all, but that would be if the power law were going to hold. And I'm not saying that it has to. It could absolutely turn back into a traditional good old TradFi exponential curve. But if it holds, then compound interest actually won't work. So that's the theory.

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Matthew Mežinskis [50:34] Yep. And it also changes the picture when you think of what your North Star becomes, right? So if your North Star is still dollars, You know, this transactional currency of dollars, and they still have the strongest military and they can force you to, you know, use their dollars and pay taxes in dollars. Even if they have like a large portion of the treasury having some Bitcoin, which again may happen sooner than we think, if it's still in dollars, you're going to move towards something that represents the rest of the TradFi. world. Your thought experiment, I would say, is harder because it could also be that we're in a sats world, right? And if we're in a sats world, then it could be like, well, we know that Bitcoin is always going to— it's like everyone's going to continue to chase Bitcoin.

Marty Bent [51:27] Okay?

Matthew Mežinskis [51:27] And it's— I'm not saying that this is the goofy, like, central bank, like, deflationary situation, because this is the central bank propaganda, by the way, is that, you know, productive good deflation is a bad thing. Of course it's not, right? Because we know, you know, because they say, oh, if you have deflation in assets, then you're never going to buy them and the economy slows. But that's obviously patently false. I'm sure you've talked about this many times on your show, right? I mean, we know that technology in particular, like your laptop's going to be faster and better next year, even with Moore's Law. Like it's still faster and better next year. Like we're— The rate of return is is declining. That's true, but we're getting there. So yeah, the question is, if we, if we are in a Bitcoin world, we have sats, we know that sats are like the gold standard, so to speak. What is going to be a project that's going to make you want to risk those sats? And the thing is, I think people always think about getting that defined CAGR and everything, but it's I don't know. Theoretically, in a power world, it's not, it's not constant. It's not a constant rate of return. If you get a constant rate of return, then you're back to exponential. You're back to square one anyway. So it's, it's a weird thought experiment. The only, the only like way I could sort of simply say it is, okay, I have Bitcoin, I'll hold it, I'll save in it. And if I want to take some risk to get excess of what that purchasing power is expected to gain me in Bitcoin next year, right? I'll take the risk, right? And of course people can put numbers on those investments and everything, but the rate is not constant. The rate actually will decline. It will slowly and slowly come down, basically. So that's, that's just how a power curve works.

Marty Bent [53:21] different. Yeah.

Matthew Mežinskis [53:23] So it's hard to even think about mathematically. This is why it's a, it's a wild thought because we like, never in recorded history has anything even worked like this at all. I do think you could come back to a situation where, and Bitcoin helps with this too, by the way, is where the collateral Which, by the way, is what the ancient Greeks use. It's called like, and probably if you have European, many European, different European speakers listening right now, like the word for collateral in many languages is hypothec or hypotheca. It's like the hypothetical. And it's possible. First of all, collateral is way more hypothetical than it's ever been today in this financial world. Like it's actually so the word rehypothecation It means rehypothecating. It doesn't mean fractional reserve banking or anything. It just means rehypothecating a single piece of collateral that everybody clearly understands, like a house. So it's like instead of having one loan on a house, you have 4 or 5. That's the very simple example of rehypothecation in the worldwide financial system. And that's bad. That's bad. It would be great if everybody knew asset values and they knew the collateral and everything. And so Bitcoin can actually do that. If you look at what people in DeFi are doing or other projects, if you have the collateral, you take a loan out against it, even in a fiat world. So it's a still exponential world at the moment, but the idea is clear. And you can't pay back that loan, then the collateral goes back to the lender. That might be something that is clear in everybody's mind, and could be something. It sucks, but it's like if you're a borrower and you lose your collateral, but if you're a lender and you really want to worry about your risk, collateral might be something that's way more important in the future and actually very clearly understood. That's another thing I'm thinking about. And that's an ancient concept, right? So it's the hypothetical, the thing that is pledged It's literally the word the Greeks use is hypothec. So it's the hypothetical thing that is pledged when someone draws a loan. And I think that a Bitcoin world will allow for like extreme clarity on what is collateralized and what is not collateralized.

Marty Bent [55:49] Extreme transparency, right?

Matthew Mežinskis [55:51] Yeah. Primarily because of the blockchain and primarily just even because of the Bitcoin itself. So that's, that would be like, like DeFi, for example, at level 1 right now, there you can, pledge Bitcoin in multisig where everybody sees it, borrow, lender, platform, a bank, you could have a lawyer, whatever, doing a multisig. You know that the collateral is right there and it's not going to be rehypothecated further. It literally kills rehypothecation. It's a great concept what they're doing, for example, and other people are doing it. But DeFi, in my opinion, is the one that's— and I have a relationship with those guys. I don't personally, but just I've, you know, worked with those guys. They put the Honey Badger on. So be clear about that. But not anymore, unfortunately. Not going to do that this year.

Marty Bent [56:37] But anyway, hiatus this year. Hiatus this year.

Matthew Mežinskis [56:39] Yeah, hopefully. Hopefully. The point is, it's a great product that utilizes Bitcoin's multisig, doesn't do anything too fancy, and it actually kills rehypothecation because everybody knows, borrower, lender, you know where the collateral is and you know that's not pledged again to some other loan, or if it's going to be pledged again, you could clearly see, okay, that this is, this is already pledged once, right? You can actually see that in, in the platform and the code and everything. So it's really interesting. Really interesting. Now, that is still an exponential world. You're using fiat interest, fiat currencies to borrow against that. Everything is still exponential world. But I could see in the future where we get to some sort of a power arrangement or an equity-like arrangement where the collateral is really what people start to think about. They're like, okay, me as a borrower, do I want to pledge my car to take a loan to try to do this project? If I have the real risk of losing my car, maybe I do if I believe in it, or maybe I don't. And so that is something as well that I'm thinking about a lot is because Bitcoin can make all of that perfectly transparent, which would be another way to think about it. But again, are you using interest rates there? Are you using like, I don't know, haircut somehow technology or terminology where, I don't know, maybe you force the borrower to sell the collateral. Like, I mean, the collateral itself could be Bitcoin actually simply. And so you just force the borrower to sell the Bitcoin if they can't repay. which is how it works now. But I'm just thinking, again, if you think out long and long, longer term in an exponential world, it still won't work with the compounding rates. So you'd have to think about someone who was comfortable really taking a risk both on the borrower and the lender side. So it's— but that's far in the future. What I'm talking about right now is 10, 15 years at least, if it works out this way. The much clearer, easier thing to understand is say what DeFi is doing right now. You just have a fiat loan, you have an interest rate, it's compounding, it's exponential. If you can't pay it back, You either post more Bitcoin or they liquidate the Bitcoin.

Marty Bent [58:52] Yeah. I think a better way to— or maybe not a better way, but another way to reframe this is, do we think the landscape of financial arrangements, financial contracts between individuals has explored the whole design space? will we innovate in the world of finance in the pursuit of economic expansion and productivity gains in a Bitcoin world? You know what I'm trying to get at? We can't right now. We've been talking about this for years and we always come back to the same part, same answer, which is the same conclusion, which is we don't know what's going to happen. And so I think of reframe is, do you think the extent of financial engineering, for lack of a better term, has— we've explored the whole design space there and we won't innovate again? And I think that's what we've been getting at for 2 years is we don't know what it will be and if we are going to pull TradFi onto the power trend, I think it would preclude that we need to figure out a new sort of financial arrangement for investment in the economy.

Matthew Mežinskis [1:00:15] And I'm optimistic, right? I'm sure you are as well. Human beings are, if nothing but creative. I mean, when worst comes to worst, you can creativity, technology, there's definitely room for optimism even amidst the crazy, volatile, exponential world. So I'm super optimistic about all of it. And yeah, we'll probably be surprised.

Marty Bent [1:00:43] Well, this is a good segue into— I'm actually writing, was writing the newsletter. I didn't get it out before we started to hit record, but I'm really excited to get this one out in particular because I've been tweeting about it this week and I think it's particularly here in the US, it's a big problem, which is the fact that Gen Z and many younger millennials, they are turning towards the Democratic Socialists of America, Mehr Mondani, and others of that ilk because they believe that the United States as a capitalist system has failed them terribly. And I'm going to posit and put forth in the newsletter, and I've already done that in a couple tweets, but I'm expanding on it, today that we live in a capitalist society. And it brings back to, I think, why we're into Bitcoin is because we live in a quasi-socialist experiment here in the United States and globally for that matter, because of fiat currency. You can't have a truly capitalist system if the most important tool used to coordinate economic activity is centrally controlled. And I think it's a big social problem that needs a lot of narrative work here in the United States, as many people thinking that the K-shaped economy, the income inequality that exists here in the United States is a product of a capitalist system. And obviously to a degree, there are private free markets in the United States, but they're sitting above a layer that is completely centralized. And I would argue very socialist, particularly when you consider bailouts and the ability to issue debt that will be monetized by the central bank. And you can use the proceeds of that debt to throw at things that otherwise would not exist.

Matthew Mežinskis [1:02:28] Yep. Completely agree with you. Completely agree with you. And that's, that's, you know, it could be a, in fact, a perfect time. I mean, I, I say often you have to have gratitude in life, and I'm very grateful for Bitcoin. And it, all of that, I think layers on very well to what you've been saying, you've just been saying. And I think, you know, again, I think it's just, As surely you've talked about plenty of times on your own show, it's just, it's an elegant solution for so many problems in the world. It's hard to see why it won't keep pushing the boundaries of things that we wouldn't expect. And one more thing, by the way, to try to stay away from the numbers and the compound interest, because I know that can cause people's eyes to roll in the back of their head, but I would still say if we get into a system like you're saying with Bitcoin, where just forget the numbers, but if it's a, if it's sort of this Bitcoin treasury or the United States Treasury or governments hold some Bitcoin and that's it, and exchanges are really, you know, the KYC is just even more overbearing than the law itself, whatever it might be. At some point, withdrawals shut down, you know, the system becomes completely centralized and controlled. Everybody already intuitively knows that's not a good thing, but I think that that actually pretty cleanly layers onto a volatile exponential system. Whereas if you have the other, we have whatever it is, more community-based, distributed, people can actually withdraw or people don't even have to worry about withdrawals because you're anyway trading on layered networks above the main chain. If you want to withdraw back to the main chain, that's fine. All those things, you have multisig on a main chain level. I think that actually pretty cleanly aligns with a new technological era that grows in a scalable, sustainable power law fashion. So that's another way I would try to just tie up the things that we've been saying.

Marty Bent [1:04:33] Yeah. I mean, on that note, I have my thoughts on this, which are very bullish, but I'm I recorded with Francis from Bull Bitcoin a few weeks ago, and I was really jacked up over that because he confirmed something that I've believed, particularly during this bear market, is that the rumors of Bitcoin's cypherpunk roots being completely ripped out of the ground and dead are greatly exaggerated. The freedom tech movement, particularly within Bitcoin as it pertains to the usability around payments, the ability to achieve privacy in a much easier fashion, and just optionality in terms of how you actually use Bitcoin as payments. Or now with these ARCs launching, and I know the Arcade team and Arc Labs, they're thinking about interesting covenant solutions on top of their protocol. I'm very bullish on the ability to use Bitcoin as everyday money, and obviously Square launching the ability to receive payments for Square merchants this year. I think the calls for the demise of the cypherpunk movement within Bitcoin are greatly exaggerated. And yes, they've been drowned out by the suitcoiners and TradFi making its way in, but—

Matthew Mežinskis [1:06:02] Suitcoiners. Yeah.

Marty Bent [1:06:05] But—

Matthew Mežinskis [1:06:06] I'm living over here in Europe, so I don't hear all the The parlance, as you know.

Marty Bent [1:06:10] The 2 ties and the 2 corners.

Matthew Mežinskis [1:06:11] Yeah, that's funny.

Marty Bent [1:06:14] That's—

Matthew Mežinskis [1:06:14] dude, you're totally right. I'm 100% on board with that. I mean, I've never not believed that myself. And the more and more you explore with Bitcoin, the more layers you find just in general and how the thing works. And surely it just can't be, you know, who's the best regulator of Bitcoin policy. That's the future of Bitcoin. Surely not.

Marty Bent [1:06:36] No, I'm bullish. Let's get back to the charts. What's Q1 monetary base looking like?

Matthew Mežinskis [1:06:46] Okay. Let's look at the Federal Reserve's balance sheet here really quickly. Back to a little bit more concrete price stuff. You see the craziness of 2008, right? Q1, Q2, Q3. This is the asset side of the balance sheet, by the way. Monetary base on the liability side, but I just want to show you asset side. Currently, this is not this week's because that's not going to be released for me at least until tomorrow. But you see, we topped out at the pandemic almost at $9 trillion, and now we're at $6.74 last week, last Wednesday. And what I wanted to— I want to show a couple of things here. So first of all, you can obviously see it's been growing. So my monetary-based stuff, and it's going to continue to be this way because I'm really AI's taken me to other levels, like many people with this, but it's still, I'm trying to make it more encompassing anyway. They release stuff very slowly, these central banks. So on a worldwide level, we're actually still going to do Q1 and it's mostly flat still, even down actually. But you can see the Federal Reserve through Q1 itself is rising a little bit, its balance sheet in total and even throughout the year. So we can continue to expect that a little bit more. Obviously, people are wondering how Warsh is going to be here in the next few meetings. Is he a dove in hawk's clothing or is he a hawk in dove's clothing? He's being very cagey about things, but most people expect a hold and maybe even a hike in September. So we'll see. But again, backing out again, and we talk about hard money, This is kind of an interesting chart. I just want to show you. Let's look at this on percentage. This is, this is, this is the Fed's balance sheet over 100 years percentage-wise. Now, this, this light red shade area is the MBS, right? So basically real estate, bad real estate that the Fed has held on its books since 2008. But notice here the blue All right. The blue is basically corporate debt. So when they were started, they basically just held gold and loans to corporates, which is quite interesting throughout their first part of the history. And then World War II came, a lot of gold came into the US and the US itself had more gold. This is just the US's gold here, which gold actually became 86% 87% of the Fed's balance sheet at the start of World War II. And then Bretton Woods started, dollarization started, Treasury purchase binds, you know, continuous Treasury purchase binds started after Bretton Woods fully ended only even here. Gold standard ended here. And by the way, this is Fed valuation of gold at that same value, $42 an ounce. That's another thing to keep in mind here, but it left room for lots and lots of treasury buying. And it is kind of interesting if you look at this chart. Again, Bitcoin is our gold analog, or at least that's how I look at it in many ways. Does this gold remind you of any other chart that you've seen, like the way that it looks?

Marty Bent [1:10:08] Shitcoin chart?

Matthew Mežinskis [1:10:10] It's a good guess. There's this famous, kind of famous, I don't know, I have like a shirt of it, like where it shows the purchasing power of the dollar over the last 100 years that actually the Fed doesn't publish it. The BLS publishes it in US cities. So if I put that on it, kind of interesting.

Marty Bent [1:10:29] Yeah. Mine's pretty—

Matthew Mežinskis [1:10:31] Tracks it pretty nicely. A little bit different here. My tooltip is too much in the way, but you can see that a little bit different. during the Great Depression. But generally, that's tracked that pretty well. And again, I just, I look at all this as an analog of what's going to come to Bitcoin. I think no doubt about it, whether it's the Treasury, whether it's a central bank that's going to hold Bitcoin, and they will before we get to any of the things that you and I were just theorizing about. Bitcoin is the only way that they're going to be truly be able to hold the value of currency. And I think this chart actually shows it pretty well. Back to the way that the money base is growing. Again, here's the ECB. Again, just keeping in mind, so these are weekly charts, so they're a little bit more current than what I'm going to show you next. You can see that ECB, same deal. They got to— it's almost like the Fed. They didn't get to €9 trillion. They were flirting with it, but never got to it. And here, you know, I have again, this is exponential charts, a straight line on log linear. You can see that they're in very, very low, historically low quantiles, you know, between the worst and the 10th percentile of their monetary base. And they're about— the monetary base is on the liability side. I'm just showing you the total assets just here, just to kind of see the trend. But it's $6 trillion, which obviously, you know, they've worldwide central banks have cut a lot in the last 6 years and we're still there. And again, I'm not, I'm not hoping for like runaway crazy inflation, but you know, if you did want to worry about that, here are the global numbers again. So you can see here, this is a new dashboard, by the way. We can look at other currencies if you want. And all this stuff is going to be released shortly, soon, very soon for people in the fall. So that's another good update I have for people where people will be able to subscribe to get some of this data. 2021, we topped out again over $30 trillion in the money base. And now through the first quarter, which as I said, is a little bit less current than the figures I've shown you, we're at $26 trillion. a little over $26 trillion at the end of 4th quarter 2025. So even still slightly down, but at the end of the day, your CAGR is about 11.3% in native terms, or about 1% per month compounded. And it's quite low, interestingly. I mean, they have not done much money printing at all since Since the pandemic worldwide.

Marty Bent [1:13:26] The TA chartist in me just sees a coiling, a coiling band here getting ready to explode.

Matthew Mežinskis [1:13:34] Right here.

Marty Bent [1:13:35] Yeah. It looks like suppressed volatility. Yeah.

Matthew Mežinskis [1:13:39] And here, here's actually the, the money base chart across time. Really, I need to go to here for you in the modern era. Same chart, but the total here you can see $26.2 trillion. That works. Still working on my, my rounding there, but $26.2 trillion here in first quarter. Again, that slight difference from the other chart is, is Claude. Got to work on some of those things. But anyway, $26 trillion basically. But notice it is, again, this is the worldwide figure. So we went from the top of the band during COVID to now we're at the bottom of the band. So like, yeah, again, I don't know. I mean, like, this is not— this is where— this is clearly an exponential curve. We could go on for maybe another year. They try to fight inflation. They try to, you know, keep the money presses down a little bit. But yeah. And I'm not even hoping for crazy central bank inflation, but they have really taken it down to, let's say, trend historically low levels. And, you know, if bad things happen, we know that they usually solve things with the printing press. So I certainly would say all of this shows signs of Bitcoin as usual being a good place to run if the printing presses do really start up globally, but they're not actually that crazy. $26 trillion is where we are basically, which is $4 trillion less than 4 or 5 years ago. They're still keeping it low.

Marty Bent [1:15:24] It's fascinating how it aligns with Bitcoin hitting the nadir. Is that the right term? Of its—

Matthew Mežinskis [1:15:32] Nadir being the low, yeah.

Marty Bent [1:15:34] Its power trend.

Matthew Mežinskis [1:15:38] Although notice, notice I have another chart to show this, but Bitcoin actually went up here too. So this is where Bitcoin, I think, is still so small that I think the power curve is more actually important for Bitcoin's movement than the money base. Because as money base was coming down from $30 to $26 trillion over the last 4 years, Bitcoin did go through a bull. It didn't go through as strong a bull, actually, interestingly, as it had in prior trends. Right. As you know, I'll show you this in a second, but we're right. We barely got to the trend line basically in the last 3 years, and we kind of front ran it with the ETF approval in January, February, March of 2024. So all those things are true, but what's also true is the money base actually went down when Bitcoin had a bull. So that's also something to keep in mind. Bitcoin's still small enough that it can do different things, right? I mean, the money base can go down and Bitcoin can still go up, so we'll see. But yeah, I think Bitcoin's still the main story for me as far as like directionally and where Bitcoin goes is actually the power curve. I think you can have more comfort there than you can have in the value of the money base. All right.

Marty Bent [1:16:50] Can I share a chart? And this is like completely not aligned with what we're talking about, the global monetary base, but I'm thinking again about exponentials, power trend, which pulls which to which, and how do you make the argument?

Matthew Mežinskis [1:17:00] Do I need to stop sharing?

Marty Bent [1:17:02] Yeah, stop sharing. I'm going to share. But this is a chart I've been talking about this week as well, because again, it's been like on me, this problem. I'm sure you've seen this, the Henry-Adams curve.

Matthew Mežinskis [1:17:11] Yeah.

Marty Bent [1:17:13] And so 1971, you just showed the charts when we clearly went off the gold standard or made a clean cut. And again, just from a narrative perspective, thinking about despite the fact that we can talk from across the world, have very high latency, do things that are incredible, I guess how do you articulate the lack of necessary investment in the economy? And this chart highlights the lack of investment in energy infrastructure that would keep energy consumption per capita on that red line, which is the Henry-Adams curve, which was true for many, many centuries. And so yes, the stock market may be going up exponentially, monetary base similarly so, but the products of that have led to a ton of fiat gains that make people feel rich on paper. And many people feel rich in real life because they're able to buy a bunch of financial assets and real estate assets and things of the such. But there is this neglect to the base layer of our economy, which is the energy system, that I don't think is sustainable if we were trying to continue to grow exponentially and the fiat system were to allow the misallocation of capital to the base of the economy around our energy systems. It feels like it would collapse on itself. So that's another, I guess, Thought experiment framework is like everything's exponential until it isn't. Are we barreling towards a complete collapse of the system? Because systems are complex and if you don't tend to them, they will collapse in and of themselves. And everybody may be rah-rah, Google's growing at 25% a year right now, pile in. But I do fear that there's extreme neglect to critical parts of the economy that actually make it function. Yeah.

Matthew Mežinskis [1:19:13] Yeah. This is, this is a great chart. I do need to get this up as part of my data as well, because I think, you know, that last dip there should be right about— I would assume that last dip is Fukushima and the Germans, many other countries as well, completely, completely are a part of this collapse by taking out their nuclear energy, their cheap, efficient, amazing nuclear energy away from the markets. And I mean, Merkel did a lot of stupid things, including making Europe reliant on barbarous Russian energy. But in any event, they had nuclear, they had more energy security. Energy independence isn't the right word for people, by the way. It's energy security. If you have security and yeah, there are— the world is way behind there right now. And I think that's going to be a huge I hope that there's like sort of a renaissance here. I don't know. I'm not as much of an expert, you know, in this industry as you are, but I think Bitcoin can certainly be a part of this. Absolutely think Bitcoin can be a part of that as well, turning that around.

Marty Bent [1:20:14] I agree. I'm sorry for derailing our—

Matthew Mežinskis [1:20:19] No, no, no. It's— that's a great chart. And by the way, actually, speaking of going off the trend, let me, let me go back to this one. Not this one, actually, but shoot, sorry.

Marty Bent [1:20:34] Before you go forward, Logan, is Maddie's video frozen for you too? Should be fine. You're recording locally, but you've been frozen for the last couple of minutes for me.

Matthew Mežinskis [1:20:45] Yeah, for me, we're both moving at least. Okay.

Marty Bent [1:20:50] Logan must be taking a bathroom break, so proceed. You're, you're Okay.

Matthew Mežinskis [1:20:54] Luckily we should be fine. I did not, I did not hit my local recording, but anyway, hopefully it'll work. So going back to this chart, which is again the trend of the globe on money, and as you go back into history, the data gets a little bit thinner. But if we go from here, which is Bretton Woods ending, and it does actually relate to your chart. So I'm showing actually the inverse of what you just showed is money as well, interestingly. So we started this conversation talking about the faster and faster treadmills of super exponential growth in the stock market, which is undoubtedly happening, but it's almost like they're kind of worried in the money world too. And like they actually understood that they were At least I'm giving a different explanation than what you are, but they were tending— notice how this is— I'm just showing this from 2008, basically the start of Bitcoin. All these trend lines start from the 2008 crisis, which also happened to be the start of Bitcoin. That is a slower rate of growth in dollar terms. It's only 7.6%, 7.6% CAGR on basically the OLS here. If you went back to 1971, you can just see obviously the gaps here, The data's all real. You can clearly see that it would— it's growing faster from 1971. So I'm showing kind of the inverse of what you just showed me. The money base was growing at 10%, 11%, even 12% at times, CAGR. So it was actually growing faster until 2008. And then even if it's— it did seem like crazy amounts of money printing at the beginning of the financial crisis, and it was, They tapered off a lot from about 2017 until that repo crisis in 20— the US in particular stopped even in 2014 until the repo crisis of 2019. And then of course the world went nuts in the pandemic, but in the last 4 years as well, they've tapered off massively. So the net-net of all this is actually slower money growth rate in the last 16 years, 18 years, say, compared to the last 60 years. And that's also another— it's kind of a— I don't know what you want to call it. It's a wrench in the calculations. It's kind of weird. You might expect it to be going the other way, but it's actually the money supply is growing slower. I'm basically showing the same chart that you had, but the trend lines are drawn differently.

Marty Bent [1:23:28] Yeah. And do you think that was an explicit recognition by the powers that be to slow the growth or just sort of—

Matthew Mežinskis [1:23:34] Yeah, I do. I do in some ways. I mean, this Basel Basel initiatives, Basel I, II, III, III in particular, which came in light of all this stuff talking about different levels of capital, tier 1 capital. Gold had a more higher place and holding treasuries and holding treasuries. I actually forget now the full tier 1. I think at 90 days is a special place in bonds that hold treasuries, but it's not just 90-day bonds. It's or even year bonds have a special place in Basel III capital. It is any expiration date that expires within 90 days. So it could be a 30-year bond expiring within 90 days or a year that would count as Tier 1 capital. So I think that they have tried to add to the appeal of buying central bank treasuries, but treasuries to, you know, to protect balance sheets, let's say. And they've also tried to stop some of the rehypothecation that we were just talking about earlier. So I do think that there is an effort there, but, you know, these are centralized, monopolized, slow-moving institutions. And I don't think that we should read into it as anything like some really genius moves. Here's another example. So I'll just show you this chart. This is one of my favorites. Basically, notice how I told you before the Fed was holding basically when they— so this is US Federal Reserve ownership of US federal debt. So back in the Roaring '20s, before the Great Depression, they owned basically zero government bonds as part of the balance sheet. It was corporate bonds and it was gold. And you get all the way to the end of the Vietnam War. And actually this percentage starts to go down, not because the Fed holds less treasuries, because the United States has more debt growing. And so all of that continued basically until here. They thought all this was kind of fine. Federal Reserve can just buy proportionately less debt, but the United States can issue more debt. And then you get to this ratio of something like 10% or something. And then this goes down because of corporate bailouts. But bottom line, if you look at the crazy days, they got up to 20% ownership of the Federal Reserve. As you rightly said, monetized 20% of the US federal debt in 2021 at the height of the pandemic. And now it's down to like 12, 11, actually 11.38% to be precise as of June 30th. So Warsh, Actually, Powell gave Warsh plenty of runway to work with should they need to monetize again. And again, I'm not cheerleading for them to do this. Maybe they know, you know, we more than, more than they let on how dangerous some of this can be. And you can kind of see it with the shallower money supply. But if they need it, they could certainly bring out the monetary bazooka and buy more treasuries. That was basically what Powell left Warsh with, which by the way is actually better than what Greenspan left Bernanke with, for sure.

Marty Bent [1:26:52] Well, I mean, you mentioned Basel I, Basel III, and now with the second Trump administration, Warsh and Bessent, many believe in working somewhat in tandem. We have this new SLR ratio rule kicking in. The thesis there is that the Fed doesn't want to be looked at as the reason for monetary and credit expansion, so they're pushing that to the commercial banks by messing with the reserve ratio requirements, the short-term liquid reserve ratio requirements. And so have you talked about that?

Matthew Mežinskis [1:27:31] Yeah. I need to get that up there. That's very important. Both Let's say it'll come back on our September call or October call because both the banks holding treasuries and foreign banks, both central banks and non-central banks, are something that I want to get a better handle on. And I think that's a big shakeup that's coming here too. It'll probably play a part. But yeah, theoretically at least, Federal Reserve is not— it's monetizing still a lot. Let's look at the number, by the way, and say what it is. All right. So the Fed owns $4.5 trillion, which means basically they money print on the other side. Money base is on the other side of this. But as far as what they own, $4.5 trillion out of $39.46 trillion, it's, you know, it's not as high as it's ever been. It's been closer to $5.7, $5.8. at the worst of the pandemic. But still, I think they have room to buy more and they probably will. Yeah.

Marty Bent [1:28:39] And it's weird too, I'm looking at this chart and it doesn't look like BTFP had any effect on this, but it gets into the weird accounting tricks that they— So there was a period there, post-'23 banking spasm, banking crisis, where they did at least temporarily bring on treasuries held by the banks onto their balance sheet. It doesn't look like it's showing up on this chart though, because it was considered like a loan, right?

Matthew Mežinskis [1:29:09] They actually brought on corporate debt to their balance sheet and they— the banks took the treasuries onto their— they swapped basically. So that gave the banks more liquidity.

Marty Bent [1:29:22] Yeah.

Matthew Mežinskis [1:29:23] I mean, Fed—

Marty Bent [1:29:24] didn't the Fed take on the risk though? Because they were essentially just giving them— Absolutely.

Matthew Mežinskis [1:29:28] Absolutely. 100%. The thing that you don't see is all the guarantees, the assurances, which was basically there anyway. This is what the monopoly does, right? It's a moral hazard. So that was already there anyway when all the crazy bets were happening, you know, after the dot-com and 9/11 and before the global financial crisis. All that was there anyway that they had the guarantee. But yeah, they fully enacted that with TARP and the TALF and all that stuff. So that's what that dip is, is basically the Fed holding more corporate debt than the treasuries. And you can actually see it as a percentage right here. But look at that, they went to 75% of their balance sheet as basically corporate debt in the global financial crisis.

Marty Bent [1:30:16] It's crazy how volatile these charts can look. I mean, just looking at the charts, it's like, this is very unnatural to me. And we've talked about this. If you go back to a couple charts ago that you were looking at, I think that was the— no, I think it's treasuries owned. Yeah, this one. This one, right? We've talked about this before. That was very volatile leading up to 2008, and then it's like, boop, boop, more Streamlined loans.

Matthew Mežinskis [1:30:48] Yep. So yeah, it would be good. Absolutely. Like you said, to show here now, okay, what does the Fed own? What do the banks own? What do the foreign banks own? Both central bank and non-central bank. So, and then what do the American people actually own at the end of the day? So, 'cause there are American people that own some of that, but yeah, it's, it's, The key takeaway you should get from this is that Powell gave, uh, worse, a lot of breathing room after all the stimulus that they had. But also, you know, the economy wasn't— it was already— there was these big hiccups during the repo spike in September 2019. And then of course we had the pandemic, which just papered over everything there. Um, and you can just see it now, like the— even back in the '80s, at least it was kind of up and down. There was still some trend. But at least you can see the markets like kind of interacting on the edges. And here it's just smooth lines with big mountains and it's just showing that the Fed will just do anything that they want to try to paper over any fears or if any Wall Street bank's going to lose some money. And that's how it looks.

Marty Bent [1:32:00] Yeah.

Matthew Mežinskis [1:32:00] I'll probably have to call it here soon, Marty. Got to pick the daughter up. But this is your favorite chart.

Marty Bent [1:32:11] Yes. All right.

Matthew Mežinskis [1:32:13] It's a great chart.

Marty Bent [1:32:13] It's a great chart. One of the best charts.

Matthew Mežinskis [1:32:15] Yeah. So this is the old— I've gone just take out any adjusted, like if there's change, whatever, I'm counting everything just to show you what Bitcoin's technically been able to transfer in value. So the record's still $60 trillion, by the way, on a trailing 12-month basis in 2022. That was a huge, huge number. But still to this day, Fedwire, which is the Federal Reserve's— that is all those reserves that we're talking about, basically this $5, $6 trillion reserves are even less than that actually, because hard currency is included there, $2.5 trillion. But in any event, $2 to $3 to $4 trillion if you count reverse repurchase agreement, $4 trillion of reserves that the Federal Reserve transfers every year through the financial system through Fedwire.

Marty Bent [1:33:11] Yeah.

Matthew Mežinskis [1:33:11] But what's the word here? What's the velocity of that? How much does that actually transfer in value every year? $1.2 quadrillion worth. So it's an incredible number. And it shows you, by the way, that This is not Visa. This is not MasterCard. This is the base layer. And so Bitcoin absolutely can compete with this because the TPS is about the same, 6, 7. I think Bitcoin's TPS is even a little bit bigger, transactions per second. And I'm not showing that here, but all that Bitcoin needs to do to compete here is just rise in price. It can totally handle anything. So as far as value goes, so, you know, it, there's an incredible amount of money that goes through the traditional financial system This is the core of it. This is Fedwire. There's only $2 or $3 trillion of value, of balance sheet value for all the banks in the United States, $2 to $3 trillion in reserves at any one time. That goes to the tune of a quadrillion dollars a year. It's an incredible amount of money. And so Bitcoin is certainly smaller than that right now. Bitcoin's on a $24 trillion a year clip. But you can see my little Fedwire supremacy on log scale. Actually, in 2022, we got to only 16, 17 times smaller than Fedwire, which is, which is pretty nice. But now we're about 50 times smaller than Fedwire, 47.6 times smaller than Fedwire, to be exact.

Marty Bent [1:34:43] When do we, when do we hit 200 there? What was that? What year was that?

Matthew Mežinskis [1:34:47] Uh, 200?

Marty Bent [1:34:49] No, no, the, the last big, I guess, contraction in Bitcoin.

Matthew Mežinskis [1:34:54] You mean the, the ratio? So the ratio is on the right side.

Marty Bent [1:34:59] Yeah, in that one right there.

Matthew Mežinskis [1:35:02] This one? Yeah. Uh, 2023 November, the, the number is 133, 134.

Marty Bent [1:35:09] 134.

Matthew Mežinskis [1:35:10] Okay, Fed was 134 times larger than Bitcoin in 20 '23, November. But notice that actually in the depths of Bitcoin's crisis, which was the end of 2022, it was trading a lot. A lot of Bitcoin was moving. ETFs had already, or no, ETFs had not started, actually started in 2024, but a lot of Bitcoin was moving here, $60 trillion worth. And you know, that was not, that was not huge dollar Bitcoin. That was $16,000, $17,000 Bitcoin.

Marty Bent [1:35:40] Yeah. And so I think it's another, like, so if you go back to November 2023, what was it?

Matthew Mežinskis [1:35:45] 130, 134 times. Yeah.

Marty Bent [1:35:48] And what is it today?

Matthew Mežinskis [1:35:49] 50, 40, 48, 47.6. It's better by 3.

Marty Bent [1:35:55] And so I'm just like eyeballing the price chart right now. November, we were at November '23, we were at between $33,000 and $39,000. So the price is depending on where you're looking, doubled. But I guess the ratio is way less than half.

Matthew Mežinskis [1:36:15] So ratio's better. Price is even down, right, from say 2025, and the ratio's still getting better. Yeah.

Marty Bent [1:36:29] So pretty high signal right there.

Matthew Mežinskis [1:36:31] Yeah, absolutely. This is a great chart, I think, to show You could call it the money chart. It's literally how much money is going through Bitcoin versus how much money's going through Fedwire. And it's certainly the trend on log scale is good. If you take log scale off, it's actually got in the realm of something looking normal already back in 2014, which is still 5,000 times smaller than Fedwire. But if you look at it at a log scale, you could start to really put these sort of orders of magnitude in perspective. And Bitcoin operates in log space anyway. It's going to take time, power law. But, but this is where we are. One more before we go. I'm going to show you, this is, this is log periodic. I got to credit Giovanni on this. Giovanni actually made a great call in— I can't go over this too much, but in, in 2025, he was doing something like this and he published a paper on it at the start of this year. But basically he's trying to measure Again, through math, can we measure sort of the wiggle within the wiggle or the cycles, right? Can we measure? So the power law is the main trend. Go log-log, you see it again, that nice straight line appears in log-log, so we can tell it's a power curve. Can we measure the wiggle within the wiggle? And this is, again, I usually like to calculate this stuff myself, but thanks to the power of AI, I just let this one go because this is, this is not, this is more directionally than I've ever been when you actually look at these cycles. And I'll just run through this very quickly. You see here, I got a few different— I've actually, I just told the computer, give me the best cycles that you can possibly get with the log periodic formula. Don't put a limit on or whatever. So it found 5. I would say maybe only the first 3 are, well, they're ranked by amplitude basically. So 26, 23, 11, and then it goes down to 10, so maybe 4. The 5th one is 8. Anyway, they all have decent amplitudes, but the point is, look what it finds. And Giovanni worked on this a lot and published a paper, so all credit to him for thinking to do this. But basically it finds a 2-year cycle, 2.11. It finds a 3.7 and it finds a 7.6. Now these are just not doing anything but looking at the changes of Bitcoin's price in log space. That's it. We don't have to go into the math more than that. So you're trying to track the wiggle, and then when you sort of squish it all together into one formula, it's still a power law, but you can get these— what basically starts to look at these curves, and you see how it goes out in the future. And this is why I'm fine talking about cycles. Again, I always thought the 4-year was the shelling point because of the halving, obviously, but So far they're still there. I'm less, let's say I'm less bullish on this idea because of just being directionally right is quite difficult. And just letting the math go on this, I would say is this can be volatile. If I calculated this like a year ago, it would be more volatile than the good old power law, which I showed you, which is like $15,000 off over 10 years difference of data. So this is a different story, completely different story. I want to make that caveat. But having said all of that, Again, you can see that we're way outside the bands of probability here to the downside. And this actually shows slightly a little bit of a faster next top. But again, it's showing end of 2028. So the pure 4-year would assume 2029. And this is showing end of 2028, but it is showing like a bottoming.

Marty Bent [1:40:07] Give the people what they want. Give them the bull juice. What is, what is that?

Matthew Mežinskis [1:40:10] The bull juice is by the end of 2028, The log periodic. So the power curve itself, by the way, which we've been talking about the whole episode, is 300,000. That's the power curve. That's that more flat-looking black line, straight, the straight line, the nice beautiful straight line.

Marty Bent [1:40:28] If we're on trend at the end of 2028, 300,000.

Matthew Mežinskis [1:40:30] If we're on trend, 300,000. Now this thing tries to track the cycles and its log periodic is 520,000 and the Q90 Let's just put the Q100 in for fun. The Q90, which would be, again, 90% of observations would be below that based on all prior data, assuming this cycle holds, $778,000 by the end of 2028.

Marty Bent [1:40:54] You heard it here first.

Matthew Mežinskis [1:40:56] There you go. And the Q100, which would mean it would hit the max all-time log periodic sort of oscillation, Amplitude 2.2 million, which is the Super Bowl juice, and we haven't been to that sort of a level since 2013, in fact. So I would be very, very cautious of that number. Never financial advice, as always, but it is kind of fun to look at these cycles. And I'd say, yeah, this is the most directionally I've ever tried to look at price. But yeah, so far there is something to the cycles. And I'm also on board with that idea.

Marty Bent [1:41:36] 2.2 million by the end of 2028. Get your stuff.

Matthew Mežinskis [1:41:40] As an extreme upside. As an extreme upside.

Marty Bent [1:41:43] You already know what people want to hear. They don't want to hear leveled statistical analysis.

Matthew Mežinskis [1:41:47] They don't want to hear based probabilities with sound statistical backing. Yeah. No, but look, I love exploring all this stuff, Marty. Love exploring it with you. I got lots more economic data here and I just want to tell people thanks for Follow me over the years, I've been saying it for a long time, but I finally in the fall will get something where people can play around with these numbers.

Marty Bent [1:42:09] I'm going to hold you to that. You've been saying this for years. I'm going to hold you to it this time.

Matthew Mežinskis [1:42:12] This one's actually, it's going to be real. Okay.

Marty Bent [1:42:16] Yeah. You, you go enjoy your weekend, grab your daughter, and we'll do this again end of summer.

Matthew Mežinskis [1:42:23] End of summer, probably even into September, October.

Marty Bent [1:42:31] Okay.

Matthew Mežinskis [1:42:31] It's a long way to go with the old central bank publications, but yeah.

Marty Bent [1:42:37] It seems like Warsh is looking to change that. We need immediate data. We'll see if that happens.

Matthew Mežinskis [1:42:41] Well, we got weekly Fed data anytime. We can look at that all the time as we did here.

Marty Bent [1:42:47] Awesome.

Matthew Mežinskis [1:42:47] But thank you, buddy.

Marty Bent [1:42:48] This has been great. Thank you. Enjoy your weekend. Enjoy your night, and we'll do this again. Peace and love, freaks. Okay. Thank you for listening to this episode of TFTC. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can leave a rating on the podcasting platforms, that goes a long way. Last but not least, if you want to get these episodes a day early and ad-free, make sure you download the Fountain podcasting app. You can go to fountain.fm to find that. $5 a month gets you every episode a day early, ad-free. Helps the show, gives you incredible value. So please consider subscribing via Fountain as well. Thank you for your time, and until next time.

Matthew Mežinskis [1:43:47] Okay.