Is Now the Time to Accumulate Bitcoin? Cory Klippsten Explains

Are we approaching the bottom of the bear market or we still have to go much lower? What do you think? >> I mean, look. I as a if I if I went deep on any subjects, it was stats both in undergrad and grad school. I probably did the most work on statistics and so I hate small data sets and extrapolating from three or four data points. But, you know, these things have a way of of people trading them if they look like memes. They're kind of hard to break just like people trading, you know, Fibonacci levels and and charts that make no sense except that everybody else is looking at the same things and trading them, too. Uh and so every bull market peak has been followed by a 12-month bear market that bottomed out 12 months later. So far, that's just what's happened. And so if we had a bull market peak in October of 25, then, you know, this this 12-month bear market should bottom in October. And we'll see if we front run that just like we front ran the uh the last bull market and having a new all-time high even before the having, which was basically because of the ETF excitement and we hit 73k in in Q1 of 2024, uh which broke through the previous all-time high of 69,000. So, you know, I I think there's a very good chance that we see 125k, you know, a new a new all-time high in Bitcoin. I don't Maybe it's 126, but you know, I think we'll see 130k or something like that before the having in 2028. You know, before April, May of 2028. I think that's like pretty freaking likely. You'll never go wrong accumulating at these levels even if it has one final flush and we see 57 again or we even see, God forbid, 53. I think that'll be like a very quick V-shaped recovery and you'll be off to the races. I do not see um I don't see that kind of final 50% from the lows flush in the future. It just doesn't seem like it's there. When you look at all of the different sources of demand that are just kind of automatically flowing into Bitcoin now, you know, even in the wake of this cold card thing, you're just, you know, Bitcoin price unchanged in the face of bad news. That's usually the sign that at some point sellers are just completely exhausted and you start to march up again. >> I would like to discuss the situation with the cold card exploit. This event had a big impact on the discussion around self-custody and whether self-custody is the way to hold Bitcoin. Ki Young Ju, the founder of CryptoQuant, said, quote, "Even if everyone learns self-custody, it still wouldn't win. When things go wrong, humans need someone else to blame. Self-custody offers no one. Self-custody isn't the safest option. The safest option is the is the one you can actually handle. Would you disagree with that statement?" Um so, he's partially right and partially wrong. Uh so, there obviously is a need for executives that are not custodying their own funds, companies that are basically spending other people's money, managing other people's money, uh will want to cover their A by outsourcing that responsibility to somebody else. But, you can also look at the numbers. So, there's 1,300 coins lost in this cold card exploit or stolen, and we'll see how many get recovered over time. And then there's something like 1.4 to 1.5 million coins, more than 1,000 X, that have been lost to centralized custodian and exchange blowups. So, 700,000 to Gox, 200 and some thousand to Celsius, 85,000 to FTX, another 75,000 to BlockFi, on and on and on and on. Quadriga, you just keep on going down the list. And to think that there won't ever be another hack of a centralized exchange or custodian in the history of the future world is is kind of ludicrous. Obviously, there will be bad things that happen, and people will relearn the trade-offs of of taking responsibility and and figuring out your own self-custody versus not. Coldcard was really popular with a lot of the, you know, most hardcore Bitcoiners, and they had a lot of advanced safety features. And of course, it's embarrassing that they didn't, you know, basically catch the one thing that matters the most, which was is your seed phrase actually random, or is it easily guessable by somebody with some, you know, decent amount of computing power. That is something that you absolutely can check for. Other wallet providers have proven that they have been checking for that all the time ever since. It's actually very easy to do a check of a a seed creation mechanism to see if the types of seed phrases that come out of it are in fact random enough, and do they contain enough entropy? It is sad. It is small in comparison to the tragedies that have been foisted upon the space by centralized players, usually recruiting people and begging for their coins to do shady things with them. >> Yeah, that's a good argument. I would like to switch topic to the BIP 110 stories. We had this Bitcoin improvement proposal that recently was was rejected because it failed to to gather consensus. I just want to ask you to comment on something that Hodlnaut, who was one of the main proponents of this BIP 110 proposal, wrote after the failure of the proposal. He said that the failure of BIP 110 is Bitcoin's Independence Day. He said, quote, "Those already celebrating Bitcoin dependence day are not simply cheering an outcome they won. They are treating evidence that miners in the corporate layer now control Bitcoin as if it were a grand cypherpunk victory while ridiculing the people who fought for decentralization and for Bitcoin as money. In my opinion and my heart, legacy Bitcoin is not what I signed up for. Captured, centralized, led by suits, no longer about freedom, sovereignty, or the mission of separating money from the state." Um what is your take on this? >> First of all, I I consider Hodlonaut to be a good actor. Uh he's he's a heck of an amateur journalist as well and has done a nice job uh uncovering um scandals and patterns in the space and writing pretty eloquently about it. So, I appreciate his contributions. Um I consider him to be a very very good guy. Uh I don't think he'll be gone for long. I think he'll be back to Bitcoin. Not the the the main chain, not this little tiny soon-to-die altcoin that some of the BIP 10 BIP 110 proponents are about to launch in a few weeks. I just don't think that has a chance in in hell of being anything meaningful. And uh I don't think there's any way that somebody like Hodlonaut will be selling his Bitcoin for any for any reason. So, you know, he'll he'll be uh in Bitcoin and will be a Bitcoiner uh once he kind of gets gets past uh the emotions of what's happened is is probably my guess. And that's probably true of almost all the the BIP 110 proponents other than uh a very small handful of people, including some of the most vocal proponents. I think we'll just come back around. Whether they do it silently or publicly is kind of up to them. >> Yeah, I mean, basically what happened is they they kind of I I think have a uh a fundamental misunderstanding represented in that statement that just because they couldn't get most participants in the Bitcoin ecosystem to go along with them, the miners, the businesses, uh the node runners, you know, didn't all go along with them. Doesn't mean that it's controlled by any one of those three groups. The game theory of Bitcoin and the incentive structure is such that uh just like we saw in 2017, the miners don't control Bitcoin. We've already proven that. And if the miners alone tried to jam something through right now, they would be blocked again. So, they don't control it. I think it all kind of worked out for the best, as often happens in Bitcoin. Like that's kind of the magic of the game theory and the incentives that Satoshi set up. And the way that it's continued to develop is is we have something that's really, really, really hard to change and it tends to have mean reversion when it goes too far off in any one direction. >> In a recent interview, you said that altcoins are basically dead. But on the other hand, there is a narrative according for the next bull market, there are a few cryptos, a few crypto protocols that are capable to generate real revenue, real businesses, and whose tokens are able to capture value, for example, hyper liquid, that are likely to outperform Bitcoin. So, what do you think about that specific narrative? >> Uh so, hyper liquid is a business. Hyper liquid has a token. I mean, I mean, if if it's a business that's centralized and yeah, it will eventually just get sucked up by TradFi and just be kind of thought of as an exchange and a bank and it has, you know, different technology or whatever, but you know, if they're allowing people to trade, eventually everybody will be KYC'd and you know, usually these these things are kind of flash in the pan because they operate in a gray area kind of outside of regulation for a period of time, but as soon as they get size, they get people's attention and then eventually regulators come for them and basically put them under the tradfi regime. So, I think that's probably inevitably where hyperliquid ends up and that's cool and all that, you know, I guess value kind of accrues to the token or whatever. The the reason I say altcoins are dead is like all I really care about is Bitcoin as money. And there were lots of altcoins saying that eventually they could pass Bitcoin as money for various reasons, you know, uh Ethereum, um primarily being the one that would run those narratives of ultra-sound money and if you're ETH is money and stuff like that. And that's just kind of sounds funny now. Nobody ever actually says that anymore. Even altcoiners don't even say that. So, you know, I've been saying for 7 years, since 2019, I kind of developed this thesis and started talking about it that the bull the bull case, the the best possible outcome for all of crypto, blockchain, DeFi is to become part of tradfi and make incremental improvements to financial IT and that's what's happening. You know, I I I did um the story is a little long in the tooth cuz it was in it was in Q2, but I think it was June I did a a banking conference and I was on a panel with three crypto executives. Uh and I was expecting it to be a little contentious or whatever. And all three of them would have been very clearly defined as Bitcoin maximalists like 5 years ago. They they believe in Bitcoin and crypto infrastructure and they have no thesis for altcoins at all and spend 0% of their time on altcoins. Um and that's not surprising cuz the market has spoken and it's just kind of like these things are for gambling and maybe they're fine and they're kind of like trading cards or whatever. Um or they are trading infrastructure. In which case, you know, they'll have to hack it out with regulators cuz trading infrastructure gets regulated and we'll see where value accrues and who gets screwed and who gets put under the thumb of the government and who kind of you know, is able to continue doing something cool. But, I of course, as a tech guy, I have a love of financial innovation. And, you know, I love people working on cool new and finding new ways to generate liquidity and improve access to financial tools and products for people around the world. Like, all of that's awesome and I don't have any problem with that. And, I do think that, you know, whether you want to call it tokenization or just like a new a new way of digitizing records of securities and assets and whether you want to call it on chain even though it's not really on what, you know, for the most part on decentralized chains. It's just kind of on things that we're calling blockchain. Um, that are just kind of shared databases among a bunch of companies and consortiums and whatever. You know, it's all it's all improving liquidity and access to capital, etc. etc. Like, somebody used to call me shitcoin PI. >> [laughter] >> That was kind of a common nickname for me a few years ago. Like, I don't care anymore. It really just doesn't matter because, you know, Bitcoin is money and there's nobody pretending to the throne anymore. >> You have been criticizing the financial engineering behind the MicroStrategy. Um, you recommend your clients or in general people to hold at least 90% of real Bitcoin versus paper Bitcoin which which are all these financial products connected to Bitcoin that MicroStrategy sells. So, why do you think so? >> So, not all accurate of my views. So, first of all, I actually appreciate the financial strategies of strategy, um, the company. And, I am still a believer that and I think the right term for these companies of whom there are only two in the US that are actually at scale and doing the thing. It's just strategy and strive. I've called them leveraged Bitcoin equities since fall of 2023 because I think that accurately describes what they're doing. And all it's supposed to do is through active management and selling to the market is to try to provide something like 1.15 or 1.2 x exposure to Bitcoin in a ticker in your brokerage account. And if Bitcoin goes up by a lot over time, that excess exposure compounds and you end up with more Bitcoin per share. That's still very possible, very doable. I think it's been proven that it is possible. It does come with a lot of risks. Where I started to quibble was uh in the marketing of the securities associated with strategy and strive and using for instance for um for stretch the language of savings accounts, comparing them to money markets, you know, not recognizing that these things are free floating and that you can't actually enforce peg at $100 for these things. And so some of the marketing language, you know, really started to sound like Mashinsky in '21 '22 with Celsius. Obviously, there's a lot better backing pool cuz he was just a Ponzi scheme and you know, it was his balance sheet was mostly his own token, etc. And you know, he was just like an absolute criminal fraudster. Um very different from having the largest pile of Bitcoin, you know, 800,000 plus Bitcoins on your balance sheet like strategy does. So there's, you know, something actually backing these. Um the other quibble, again, you know, probably two more. One minor, which is just, you know, I I I believe that leveraged Bitcoin equities should be marketed to institutions, but if it's not good enough for smart for smart money, it really shouldn't be good enough for retail. And so I think that they should be spending and should have for the last few years spending a lot more time uh educating Wall Street and getting real funds and real money managers to see it. And if they can't see it and can't do it, then, you know, I'm just not a fan of them turning around and doing a lot of AI videos and you know, kind of I just don't like the marketing. I think it's a bad look for my industry and I have to answer for it. For a long time, had a recommendation of, you know, don't have more than 20% of your kind of Bitcoin price exposure outside of real Bitcoin. Um, I've I have upped that just watching the risks and watching people just get way out over their skis and, you know, I think strategy hit 540 in after hours one day, you know, I think it was 450 at the close in late 2024 and obviously it it struggled under 100 here for most of the summer and just kind of recovered 100. So, there's a lot of risk with that. And that was the best of the bunch, you know, the fall for all these other gambles uh was way way worse. I have friends that had uh you know, taken out HELOCs and picked up big bags of Meta Planet and, you know, watch that go, you know, down another 80, 90% things like that. So, I think people just got kind of um enamored of the uh apparent alchemy that turned out to be fool's gold. >> Yeah, that's that's interesting. So, essentially, mostly it's about the marketing and the way these companies are presenting their products versus Bitcoin, for sure. Um, okay. Yeah, Corey, it's great to talk to you as always. I hope to see you soon on our show. >> Yeah, me too, Giovanni. It's so nice to see you again and uh let's do it again soon. Not wait 2 years.