Interview with Mike Grantis of Satstreet
In episode 14, we cover what Crypto Currency is and what is happening to the market in the early parts of 2021.
Our guest, Mike Grantis, from Satstreet and Cryptoweekly walks us through the current environment and formulated a few predictions. Here are some of the highlights:
- 00:24: Introduction
- 03:10: What is Crypto
- 07:40: Direction of the blockchain technology
- 14:35: Future companies dominating the technology
- 20:45: What causes movement in Bitcoin value
- 31:23: Long terms risks of investing in bitcoin
- 37:08: Recommended resources and contact information
Podcast: Play in new window | Download (Duration: 40:03 — 73.3MB) | Embed
Subscribe: Apple Podcasts | Google Podcasts | Spotify | Stitcher | TuneIn | RSS | More
Transcript
Intro: Welcome to the Mad Profit Podcast where we interview active investors entrepreneurs and experts who left corporate jobs to buy or start successful ventures and live life on their own terms. Listen to their stories, learn from their experiences and heed their advice so you too can create Mad Profits and the life you’ve always wanted and now here’s your host Laurent Truc. Laurent: All right welcome back everybody. This is Laurent Truc and we’re back on with Mike Grantis who we had as a guest before on the Mad Profit Podcast. Mike at the time was telling us about bartering as an old/new way of doing business but Mike, I invited you back on because you’ve had a lot of transition within your life but you are also a huge passionate person when it comes to crypto. I’ve not seen the crypto space on fire as it is right now for years so I thought it’d be a great opportunity to bring you on and have you talk a little bit about what you know, what you’re doing, how this space is going and how we should be buckling or pulling the chute. Where do we stand so thanks for coming on I really appreciate it? Mike: hey man I appreciate you having me thank you so much. It’s always a pleasure chatting with you and looking forward to a good conversation. Laurent: absolutely. So, can you remind us a little bit about your background and what brings you through this journey to us here today? Mike: Sure yeah. Right now, I’m working with a company called Satstreet. We’re an over-the-counter trading desk and we work specifically with high net-worth individuals ultra-high net worth and now starting to do quite a bit of work on the corporate side helping private corporations get access to bitcoin and other digital currencies within their treasury. So fairly new company, only seven months old but actually just yesterday cracked the 100-million-dollar mark in trading volumes so a big accomplishment for the team. Crazy as you said, right yeah, it’s pretty nuts and you know as you said the space is on fire. I think just judging from my lens I think there’s still a lot of upside potential and even though we’ve seen the price grow quite substantially over the past few months I still think there’s quite a bit of upside and not just in the short term but also if we talk broadly five to ten years down the road. Cryptocurrency is here to stay. Bitcoin is here to stay and the genie’s out of the bottle. Now it’s just about maximizing that opportunity that we have in front of us and really taking the bull by the horns. Laurent: Very cool can you give us a one-minute overview? I mean I think most people know what crypto is theoretically but it just had such a roller coaster ride from inception to its peak to its drop to a new peak. Can you give us a little bit of a history lesson of why now is such an interesting time? Mike: yeah, sure and what I would say is a lot of people conflate cryptocurrency with bitcoin. Bitcoin is the first ever cryptocurrency and it’s really the majority of the cryptocurrency market right now. It holds about 70% dominance over the entire crypto market but there are thousands of different companies that are building on top of this base layer protocol that we call the blockchain. Now the blockchain is kind of like the next evolution of the internet. It’s a trust protocol that allows people to transact peer-to-peer around the world with a global decentralized network. Bitcoin was really the first cryptocurrency to popularize that topic and to really bring a decentralized money to the people. I can go all the way back into bitcoin’s history but it was invented in 2008 by an anonymous founder named Satoshi Nakamoto and he released this white paper in 2008 in the peak of the financial crisis because he she or they knew that something different was needed. Something needed to change within our current financial system so he built this beautiful mathematical protocol that allows people to transact value peer-to-peer online without having any intermediaries – no banks, no credit card companies, no foreign exchange rates. It’s a global currency that everybody can use and it is totally permissionless so anybody can create an account, anybody can use this to transfer value and to store their wealth. So, going from 2008 when it was only a few cents to now where it is almost 40 000 US per coin. The big difference between then and now is just adoption. It’s adoption of the technology and with any new technology the adoption cycle is going to be volatile right… imagine you put a price on the internet when the internet was first born in the 1950s or 60s. Well the price of the internet would have been extremely volatile in its early days and especially in the dot-com bubble where you know it boomed and busted but overall you know over the long term he value of the internet for society for humanity has continued to increase over time. As more people have gained access to the internet and it’s become more democratized so the same thing will happen with bitcoin. I think it’s a technology that is a step change forward for humanity. It allows us to easily take sovereign control of our wealth and our identities and the more people that use it the more technology that’s built on top of it, the more value it will accrue. So whereas you know it’s been a massive run-up in the last decade. Over the last decade Bitcoins returned over 200% per year on average and I don’t know anywhere else you can find those types of returns I just think it’s still so early right we’re only at two percent global adoption or less. So if we think of the diffusion of innovation and when we start to get to mass adoption then we tart to really think of how far this thing can really run. Laurent: There’s a big difference between something being overvalued and something just growing very quickly and I think bitcoin is still very much in the camp of being extremely undervalued. Now bitcoin or the white paper that was initially drawn up was around bitcoin and a currency. The technology has also now evolved into platforms and other things. Where do you see that heading and how big of a change is that going to be? What kind of adoption does that look like? Mike: It’s enormous and this I keep going back to the example of the internet because I fundamentally do believe the blockchain is just as big of a technology revolution as the internet was. As you said there’s so many different things being built on top of it so it’s no longer just a currency, Bitcoin is very good at storing value because there’s a finite amount of it and it can’t be printed into existence. There will only ever be 21 million bitcoin, so bitcoin has a lot of the same characteristics as gold and the reasons that gold is valuable are the same reasons that bitcoin is valuable. It’s a stores value, it’s durable, it’s transferable, it’s a medium of exchange … those hard money principles. There’s other projects building on the blockchain as well. There’s decentralized voting systems, there’s decentralized platforms for building applications. Just to give you a quick example off the top of my head, imagine we had a decentralized uber or a decentralized airbnb where instead of the homeowner or the car owner driving and renting their house out and paying a fee back to that that company, paying a fee back to airbnb or a fee back to uber instead since the program is decentralized and there’s no corporate entity that has to make their profits, the owner of the car gets 100% of the profits from driving and the owner of the house gets 100% of the profits from renting their space. So these decentralized systems really provide a lot of economic benefit for the end user and essentially the value in the ecosystem gets spread out and gets distributed to the edges. Right now we have a society where the CEOs of the top 500 companies make more than the bottom 50% of the world. So we have this massive wealth discrepancy and it’s because all of the value that’s created in these companies just gets funneled all the way up to the top so when we have a decentralized system or a blockchain based system that can really be the base layer of the new internet that we’re building it allows value to be diffused around society in a in a much more equitable way. I think that leads to a stronger more prosperous society in in my opinion that’s pretty cool. Laurent: So you’re seeing this technology, I don’t want to say replacing the internet, but integrating into so many parts of our lives that at the end of the day at some point we’ll be using it without even knowing it? It’s going to just be integrated into everything we do Mike: Absolutely and I think the big difference between this kind of bull cycle if we want to call 2021 or late 2020 a bull cycle and 2017 the bull cycle back a few years ago is that the 2017 bull cycle was very much based on speculation. What’s going to come … this is an amazing new technology. Imagine the possibilities of what we can build on top of this. That’s what is driving the consumer sentiment on a lot of that investment this cycle. It is very much based in reality. There are companies that are building applications. Here’s a brand new avenue for crypto use called decentralized finance where you can loan your funds and borrow funds in a decentralized manner so there’s no applications to fill out. It’s essentially: if you have the collateral, you can loan and you can receive. You can do all sorts of things that you would do in a traditional financial system just on a decentralized network. So the more we build on top of this this revolutionary new technology the more use cases we uncover just like we didn’t know all the benefits that the internet would bring when we first invented it. We didn’t know all the benefits that blockchain would bring when bitcoin was invented so it’s very much an iterative process. We’re continuing to grow in the space but the difference with these cycles is that there’s actually projects building and there real world use case for a lot of these functions. The one thing that I would add as well is you know we’re very privileged in North America and in the western world to have stable financial systems and to have infrastructure that we can rely on. The real benefit of a lot of this technology will be seen in the developing world. That’s where a lot of the original use cases are going to come. If a farmer can’t get access to a loan maybe he can do that in a decentralized network. If constituents of a of a certain society don’t have access to banking or don’t have land ownership rights or voting mechanisms, these can all be built on the blockchain and in decentralized ways. I think in the same way that a lot of these third world countries leapfrogged things like coal and copper in telecommunications, they will leapfrog traditional internet and move straight to blockchain straight to decentralization for a lot of their use case. Laurent: Very cool. Is there a fear… if you look at the world today, the internet is run by four or five major companies when you really think about it right. Blockchain being a new technology there are definitely some companies that are at the forefront of creating layers and applications Is there a future where it’s also dominated by a few big developers or is because the infrastructure is so distributed that anybody can build on it and it’ll get easier and easier to build on it that the hope is that it’s not going to be really overly run by a handful of businesses? Mike: That’s a great question. I think obviously the goal is full decentralization but utopias don’t usually come true. So there’s usually going to be, even in the space right now, things like bitcoin and things like ethereum aren’t as decentralized as we’d like them to be. A lot of mining power on the bitcoin blockchain is centralized in or is located in china and I think eventually that’s what might happen. Once bitcoin becomes an asset class and recognizable by global governments and governments start to hold it on their balance sheet just like we’re seeing corporations starting to hold it on their balance sheet now… once it gets to that level I think it might even become a matter of national security to make sure that you have mining power in your own country so it doesn’t get super centralized in one foreign nation. They don’t have rights to change a blockchain if they have over 51 percent of the mining power so I think eventually what might happen is we might see nation states starting to build mining. It sounds crazy but you know building mining farms to make sure that they have a percentage of hash power in their own their own state or they would just provide some subsidies for companies to start mining in their own country. There will be a level of decentralization always I think but you can always get more decentralized. There’s always layers to these types of things and the farther we build on the blockchain I think there’s going to be more ability to create full decentralization. Laurent: Talk about the mining a little bit. You said there’s 21 million maximum amount of bitcoins that will ever be created and bitcoins get created through mining right? What are we at right now? How many bitcoins have already been mined? Mike: Roughly 18.5 million I believe. Laurent: And it gets harder and harder correct? So what does the last three million look like? How does that work? Is there ever a time where we stopped building because we’ve hit that wall? Mike: Yeah good question. I’ll give you a few minutes explanation on my simple-ish explanation on mining. So what happens on the bitcoin blockchain is in order to verify um transactions computers run these programs. Bitcoin miner is just a computer that’s running a glorified algorithm and this algorithm is doing a ton of really complex math problems super quickly and the goal of these math problems is to create a proof (or to prove that a block of transactions happened and that a block of transactions is correct). So you can think of a block of transactions as just a pool of transactions that happened within a certain time frame. Now on the bitcoin blockchain roughly every 10 minutes a new block is mined so there’s a grouping of transactions and they get put into the blockchain and each block gets added every roughly 10 minutes. Now the computer that runs that algorithm and mines the block correctly or first, gets the block reward for that block. The block reward when Bitcoin was first invented in 2009 was 50 bitcoin so every 10 minutes 50 bitcoin was released into circulation. Now every four years this is baked into the bitcoin protocol but every four years the block reward gets cut in half. So then in 2012 the first halving happened so instead of every instead of 50 bitcoin every 10 minutes being put into circulation there was only 25 and then the same thing happened in 2016. Just like clockwork we expected this. It’s built into the algorithm so 2016 it gets cut down to 12.25 bitcoin and then it gets cut. In May of last year it was cut in half again to six point or sorry 12.5 and then 6.25 so every four years the amount of bitcoin going into circulation gets cut in half. What happens over time is we have a circulating supply that kind of does this negative exponential curve where it approaches 21 million but never actually gets there. It just keeps getting cut in half, cut in half, cut in half. This is also the brilliance of Satoshi, building this into the protocol so many years ago. It is amazing but he also built in a difficulty setting so depending on how many computers are actively running the program the difficulty of each block gets varied so there’s always going to be an economic incentive for miners to mine blocks. If more miners join the network the blocks get more difficult if miners leave the network the blocks get easier and so there’s more economic incentive to mine and pay your electricity to verify these blocks. I hope that explains quite a bit but I know it’s a lot of information. Laurent: I’m glad you said that because I did want to kind of pivot around what creates movement in a bitcoin value. Initially you said there was a lot of hype and so in 2017 it went up because of promise of how this technology can be used. Today there’s people just acquiring it and the technology’s starting to come to life but there is also a correlation if I’m not wrong with some of the halving. At least from a symmetry of growth maybe not logic. Can you dive a little bit into what your analysis and I’m assuming it’s general analysis, of how bitcoin value moves as the halvings happen? Mike: Sure and great question. think it really goes back to supply and demand economics, right? If you’re mining bitcoin you’re paying a lot of electricity to mine those coins. So at some point you’re going have to sell off that bitcoin in order to pay for your electricity bills. So think about miners as net sellers of bitcoin they’re getting this bitcoin for mining and then they’re selling it into the market. What happens is when a halving occurs that output into the market gets cut in half so we don’t see this right away it’s not like it’s baked into the price kind of like a stock split. It’s not baked into the price because we haven’t seen the projected reduction in outflows before the halving so if these miners are suddenly only getting half as much bitcoin and then only half as much bitcoin are being released into the market, even if the demand stays the same the price goes up because there’s a finite amount of bitcoin. It’s very much a concept of just inflows and outflows into the market. The halving is one thing and we usually see a price spike about three to six months after the having because that’s where you know the real supply starts to be felt in the market with the reduction in selling. On top of that we have massive new interest from different constituents. What I would say is every new technology needs to be adopted by three constituents in order to get to mass adoption. It needs to be adopted by people, by corporations and by government in order for a technology to really get to global scale. So bitcoin started with people. It was invented by a pseudo anonymous inventor we don’t really know who it was and it was really championed by people and built by the people. So the first constituents to adopt it were people. Now we’re starting to see the second constituency starting to adopt bitcoin and that’s corporations. So in in the aftermath of everything that’s gone on with Covid, we’ve even seen governments around the world print trillions of dollars and put all this stimulus into the economy which is essentially just causing the value of each dollar to decrease. If you add a new dollar into circulation it steals purchasing power away from the other dollars that are already in circulation so companies are starting to look at this and say hey well if we have a bunch of dollars in our treasury reserve we’re pretty much sitting on a block of ice that’s melting. The first domino to really fall in the corporate space was Michael J Saylor of Microstrategy. He realized this he was sitting on you know a billion dollars in his corporate treasury and he said “let’s put in 450 million dollars in bitcoin in our treasury” because it doesn’t inflate (it actually deflates) so it gets more valuable in price. He was instantly rewarded for that with the price spike that doubled and he made it a billion dollars over the course of a couple months. He was the first domino to fall and the next was Square. Jack Dorsey put one percent of squares balance sheet or their treasury reserve into bitcoin but what they also did was they filed an open source patent that showed businesses how to allocate a portion of their treasury reserves into bitcoin. From there we just started seeing these dominoes fall and fall in all these different businesses. Mass Mutual which is a major insurance company about a hundred million dollars in bitcoin, Reuters bought over 700 Million of bitcoin, Galaxy Digital holdings bought hundreds of millions of dollars in bitcoin. I see it every day. We work with a lot of corporations at Satstreet to help them get exposure to bitcoin. I’m hearing these conversations on a daily basis and it seems like more and more businesses are starting to wise up to the fact that this is a sound money that’s stood the test of time over the past decade and has really been the best store of value that humanity has ever known. They’re the second constituency that has really started to adopt blockchain. Now governments being the third constituency are getting there. As a result of all this Covid stimulus we’ve seen the IMF made an announcement that there needs to be a new Bretton Woods system or a new global monetary standard in relation to everything that’s gone on in the past few years. What what’s going on around the world is all these national governments are building central bank digital currencies which are really most likely going to be built on some variation of a blockchain. It won’t be decentralized; it’ll be a centralized blockchain but it will allow the central bank a lot of more levers in monetary policy to work with. So they can have different interest rates for different constituents in the population. If you’re a business owner you might get a loan that needs to be spent within three months or else it goes away. There’s all these different things that he central bank can do with this new central bank digital currency system but since it’s built on a new technology it’ll be built on something very similar to a blockchain if not on the blockchain. It will allow payment rails and it will allow a lot easier flow of value from decentralized blockchains like bitcoin and ethereum to the centralized central bank digital currencies so when governments start to adopt these that’s when the doors fly open and we really start to see the floodgates of how much value can actually flow into a decentralized currency. I keep coming back to his topic but two percent world adoption. We are so early and there’s no signs of slowing down. Laurent: Let’s go back to these banks for a second. If they’re going to create their own centralized coin for their currency, is it like today’s world of: Bitcoin = gold and then the US dollar is the US dollar and there’s always going to be that FX? Is that how you’re envisioning it? Are you seeing governments actually saying like today you there’s countries buying up as much gold as possible. Will there actually be countries buying up the true pure bitcoin? Mike: I made this this kind of prediction earlier on last year but I think it still holds true in 2021. This will be the first year that we see a central bank buy bitcoin on their balance sheet. It’ll most likely be a country that’s struggling with hyperinflation or tumultuous times but they’ll be looking for an asset that they can get their hands on that’s appreciating in value and that can actually store some of their wealth in. I think this year is going to be the first year that we see that and just like microstrategy was he first domino to fall and then it paved the way for more and more businesses to buy bitcoin, the first country will be a big step. And it doesn’t need to start with a country. It will most like the mayor of Miami who wants to start holding bitcoin in his in Miami’s treasury and they’re working on essentially ways to help their population start to pay taxes in bitcoin or other cryptocurrencies. Or even nation states start to adopt the technology as it gets easier and easier and there’s less career risk for anybody else to start adopting the technology. I think we’re well on our way as that macro stage is set and we’ve got ourselves into this hole and we need to find a sound money that can bring us out of it. I think bitcoin has been that of bastion of hope for the last few years and I don’t see it slowing down Laurent: Very cool. Is there some sort of looming risk out there where this whole thing unravels? Like is there some doomsday discussion points out there? Do you see anything that could happen that could kind of light it all on fire? Mike: It’s a valid question. For bitcoin for example it’s been around for over 13 years or over 12 years and has never been hacked – the network the bitcoin network is the most secure network on earth. There are over 8 million computers mining the bitcoin algorithm right now so with every added computer adds more hash power adds more security to the network. So we have the most security the most secure network humanity has ever seen. Now what are some external factors that could that could put it at risk. Regulation which is definitely a concern. I think the difference is with bitcoin being a global currency even if one government regulates it. It just opens the door for other countries to start going full throttle and so it actually puts the country that regulates the currency at a disadvantage on the global scale because they set themselves back on an innovation scale. Remember the three constituencies right, people, corporations and government. If you have corporations and people already, governments are almost forced to participate because they need, they need to make the other two constituents happy. So, regulation i don’t think is too much of an issue. Sometimes what gets brought up is quantum computing. Now there’s already cryptographic coding techniques that can be used to offset the risk of quantum computing. That’s still years out and we already figured out those schemes to make sure that we can secure the blockchain over or through cryptography. The reason they’re not all implemented right now is just because they’re harder to build and they take more time but the physics is there like there’s nothing stopping us from building those things to be quantum resistant. That’s not as much of an issue now. What about the threat of global destruction? Then we have bigger problems. Kim Jong-un pushes the red button and the whole world goes up in smoke. Well actually blockstream sent up satellites into outer space that are actually running the bitcoin algorithm so bitcoin is here to stay. Laurent: Man it’s not going away. Mike: I think there’s a lot of fear, uncertainty and doubt which we call in the industry that mainstream media wants to kind of push out and you know it scares people and rightfully so right with something so volatile. People have gotten hurt in the past and you know people have definitely gotten burned just on price movement. But I think the long-term outlook is still extremely bullish the technology continues to grow. The use cases continue to increase, the community continues to grow. If you believe there will be less people interested in bitcoin tomorrow than there is today it’s a bad bet, don’t buy bitcoin. If you believe that there will be more people interested in bitcoin tomorrow than there is today then there’s in my opinion never been a more asymmetric bet in history than this. Could it go to zero, hypothetically sure but what is the upside potential? Could it go to a million dollars? Yes Could it go even higher than that? Yes. Right So if you lose forty thousand dollars that sucks but if you know you could get up to some astronomical prices and I’m not going to put a short-term price target on it but the sky is really the limit. Laurent: Got it. So this big spike over the last 60 days is part of normal movement volatility from your perspective and it’s just the beginning. Mike: Yeah man. It’s just the beginning and as i said with the halvings it goes in these cycles and even within the cycle that we’re in right now, the parabolic move that we’ve seen… it’s not even the beginning of it. With every new cycle every four years it grows on an exponential scale. So you know this cycle might be 10x the last cycle and the last cycle was 10x the previous so it’s not a linear growth pattern. It grows exponentially so humans are very are not great at thinking exponentially but when you look at it on a chart it really boggles your mind how quickly this thing can actually take off if we get to that network effect that we’re talking about. Laurent: Very cool. So there’s probably people from all different levels listening to this. What are some recommended resources for newbies or people that want to start doing some trading on a daily basis? Mike: If you’d like to get a little bit more informed and if you’d like to learn a bit more about the space i actually just launched a course on Udemy. It’s called bitcoin 101. It’s an introductory course. There’s no prior knowledge needed so you can head over, there’s probably going to be a link I’m sure we’ll link over to the to the course. You can head over there if you’d like to start trading you can reach out to me via email: mgrantis@satstreet.com. As I said, I work with mostly high net worth individuals to ultra high net worth. Our minimum trade balance is $25k so if you can meet us at that point we’d be happy to work with you and even if you can’t right, reach out to me, shoot me a message and I’d be happy to point you in the right direction. I always love to talk bitcoin, as you can tell, so that’s where you can find me. Laurent: very cool and Satstreet you said, it’s been around for seven eight months and it’s already hit a major milestone. You guys are growing extremely fast so that awesome… sounds like the right space to be in right now. Mike: Absolutely, I hope it’s just the beginning. It’s been a wild ride thus far. I’m new to the team so I can’t take credit for the massive explosion that they’ve had but I hope to be here for a long time in the future. I look forward to watching the space develop. Laurent: Perfect…Mike thanks for your time today and all the great information. I’ll put all those links in the notes and like you said I know how passionate you. We can sense it through the screen so if anybody has any questions and really just wants to pick mike’s brain, he’s actually a blast to talk to. So I highly recommend it. Cheers Mike: Thanks a lot man I appreciate it. Laurent: Thank you.. have a great one. Outro: Thank you for joining us on this episode of the Mad Profit Podcast. We hope you enjoyed the show don’t forget to subscribe on itunes, google play, or the listening platform of your choice. Also check us out at madxcapital.com for more useful information and resources to help you achieve your investing entrepreneurial and business goals see you next week on the mad profit podcast Notes: If you’re looking for more information on bitcoin, consider Mike’s new course Bitcoin 101 on Udemy. For listeners of this podcast, Mike is offering 60% off on the course! Use the link below to redeem your discount: https://www.udemy.com/course/bitcoin-blockchain-cryptocurrency-101/?couponCode=FRIENDSANDFAMILY For more information on Satstreet and investing in bitcoin, visit: https://www.satstreet.com/ or connect directly with Mike at mgrantis@satstreet.com |