Lyn Alden's BULLETPROOF Investment Strategy

In this moment, looking at the landscape, where are you? You like 100% deployed in Bitcoin? Do you spread things out broadly? Are you holding bonds? Like what where How are you approaching this moment from an investing standpoint? Yeah, good question. I mean, I fortunately have better answers there than on what public policy makers should do cuz that's always the hard part. The way The way that I've approached investing for myself and my clients is I generally say a three-pillar portfolio. So, most people are you know, they think of the 60/40 portfolio. So, 60% stocks, 40% bonds. The problem is that in fiscal dominance, bonds don't do very well. They They generally lose a lot of purchasing power. Um and so, my approach is instead of three-pillar portfolio. So, one pillar is is high-quality equities. So, that part's still the same. Uh one part is um hard money's commodity producers, kind of these the more hard asset type of of approach. And then, the final pillar is cash equivalents. So, that is a section that does get debated, but it can be used to kind of protect against volatility and rebalance into the other portions. And that, of course, will depend on how old the investor is. Another way of kind of thinking about it is you take the 60/40 portfolio, you take out some of the bonds and put something like gold in the the place, maybe not for all of it, but some of it. And you take the equity side, and you take a little bit of the equities out and put in some Bitcoin. That's kind of how I've I've tailored portfolio um because in that fiscally dominant environment, those types of monies, those those types of more hard assets, tend to be winners. Okay, and how do you conceptualize Bitcoin? Do you think of it as gold? Do you think of it as uh money? Um how do you categorize it in your mind? It's some ways bigger than that. I I view it as money. Uh it's also portable capital. I I think more fundamentally what it does is it solves the problem of fast settlements and so it kind of solves a century and a half problem that that humanity had so you know for for all of human history transactions and settlements were roughly the same speed you couldn't really transact any faster than you can move around the world so transactions happen at the speed of foot and horses and ships but ever since we invented the the Telegraph and specifically when we deploy the Telegraph over long distances by the 1860s we reached kind of this new era where people could communicate around the world at roughly the speed of light and therefore could transact roughly at the speed of light but we had no fast settlement so we settlements still took the form of literally sending an auditing gold for example and so we became reliant for about a century and a half on very centralized ledgers to try to bridge that whole gap between fast transaction speeds and yet still very slow material settlement speeds any sort of like final delivery and what what is interesting about Bitcoin is it is basically invention of fast settlements it finally allows value to be sent long distances in a way that's that's practically irreversible in a similar way that you chip gold and it it gets audited and therefore that transaction is done it's not it's not resting on a centralized ledgers ongoing maintenance and so that's basically what that problem solves but then it's up against very large network effects so it you know it starts in 2009 it's tiny it's up against you know the the the hundred trillion dollar fiat currency system and so it's slowly growing into that right now even at a two plus trillion dollar market cap it seems big but it's something like point two percent of global assets gold gold at something like a twenty trillion network size estimated uh around 2% of global assets. So, I I think Bitcoin is going to grow into, you know, kind of the role that gold fills to some extent, uh but then potentially has a avenue to grow further still because it's able to solve things that even gold itself as a as a money can't solve. So, there's certain things obviously gold can do that Bitcoin can't do. You can use it in industry, it has all these kind of practical purposes, but as a money, um Bitcoin is is is in many ways more powerful. It's able to beam around the world in, you know, 10 minutes, uh even faster by using some higher layers. Uh and I think another way of kind of thinking about it is because especially, uh you know, with your audience and in general, anyone who's technologically minded, our first thought is, well, the first technology is going to be the one that gets displaced. It's going to be some later thing that comes and displaces it. Uh and the one the the way that I've kind of conceptualized this is that the really big exception for that is communication protocols. Those so far, uh tend to have a very long life cycle of lasting. So, whether it's Ethernet, whether it's Simple Mail Transfer Protocol, whether it's, um you know, TCP/IP, whether it's USB, once these things kind of become dominant in their fields, uh they tend to, uh one, they update over time. So, what place what displaces USB is the next USB rather than literally a competitor. Um and two, uh the complexity and the fast-moving parts, that tends to happen at the periphery or on higher layers, whereas the core of the system itself is kind of very simple. Uh and I think that Bitcoin's kind of following a similar approach, which is is this new communication protocol that exists. And this in this case, it's a communication of value, uh and it's achieved basically network effect dominance. So, it it it becomes increasingly less likely that something within its own field will displace it in a similar way that Ethernet and USB and others have kind of achieved dominance and therefore it's going to grow into whatever total addressable market has, which I think is is north of gold's current 2% of global assets. Mhm. What do you think about people that aren't um they they either aren't sold or don't care about it as a a transactable thing, uh but they think instead of it as a store of wealth. Does that seem um silly or because I Bitcoin is not transacted like money is right now. Yeah, I don't think it's silly. I think that basically people solve the problem they have. And in for for most parts of the world, people when they wake up, they don't have a payments problem, they have a store of value problem. Um uh that's something that people in developing countries have and then even in developed countries, we just have a slower version of it is where we're going to store our value. So, that's that's something that basically 8 billion people in the world have as a problem. Payment problems, uh while some people have them, they're way less universal. You know, most people in developed countries don't think I have all these payment frictions all the time. Now, certain areas do. There has been, for example, debanking um in in certain countries, uh people have the issue like I point out uh that there's over 40 currencies in Africa. There's over 30 currencies in Latin America. So, you can imagine in the United States if every state had a currency, Oof. and imagine all the cross-border frictions, not just in terms of payments, but in terms of cross-state lending and things like that. So, if if an entity in New York wants to lend to an entity in Michigan and you have your your balancing 50 different currencies, um and so a lot of the world actually kind of lives under that type of uh friction-filled system. Uh so, they especially in a cross-border sense, you're more likely to have payment frictions. Um so, I think that that the problem that Bitcoin is kind of filling into, the thing that it's solving is more that portable store of value problem. So, it's portable capital. But then the margins, it can also solve payment problems for those that have it. But, then in addition, that's a that's a crowded field. So, for example, stable coins not not for every person, but for a lot of people, stable coins solve a lot of their frictions, as well. So, going back to that example about Africa, like you'll see a lot of stable coin volumes happening in several countries there, like Nigeria, because especially for shorter-term holding and paying, stable coins are equal or or in some cases better than Bitcoin at that specific task. And where Bitcoin really shines that over that long arc of time, it can't really be sanctioned. It's not centralized. It doesn't debase. It's truly permissionless rather than this kind of centralized node on top of a blockchain. And so, I think over time it grows into more of that payments aspect, but I think in the current time where it's high volatility and it's growing into a its total addressable market, it it more serves as that kind of portable capital aspect. Okay. When I whenever I think about Bitcoin, and my audience will know, but for anybody that's encountering me for the first time, I'm heavily invested in Bitcoin, big believer, but I definitely don't trust myself to be right about Bitcoin in the way that say Michael Saylor does. What do you think about the Bitcoin Treasury companies master in terms of that just massive concentrated bet? So, I think it makes sense for someone to do it. I mentioned before that basically in this current system where you have debasing currency, anytime someone can borrow or short via currency and go long another asset, as long as they manage risk and volatility well, they get rewarded for it. So, I think it makes sense that that someone figured it out you can do with Bitcoin. It was actually written about by Pierre Rochard back in 2014. He wrote an article called speculative attack, and he's like someone's going to figure out that if you can borrow fiat currency and buy Bitcoin, you're just going to keep doing it over and over and over That started 6 years later in 2020 and it's been happening ever since and we're starting to see it in other companies as well. So meta planet of Japan you know a bunch of others. I think that makes sense. I do think that you know this cycle will hit a degree of froth in it and so some of these levered entities will get shaken out. We've also seen you know all coin treasure companies spinning up which I think you know looking back years from now will will probably not be seen as a very positive things to have done that you know use leverage to to you know kind of stick all coins in a in a publicly traded vehicle. Just because they're going to wipe out value. Why would we look back and say bad idea? Because it wipes out value. Yeah, I think basically there's been a long history of you know all coins have one or two good cycles under their belt when they come out they get launched they they get hype but then they kind of roll over relative to Bitcoin and then never really recover. So that's that's been kind of the case over and over and over again and I kind of expect that to keep happening just because of that communication network effect aspect that I talked about before. You think though that with the all coins that people are really fooling themselves into thinking this one's going to be bigger than Bitcoin? Is that the phenomenon or is the phenomenon I'm going to bet against or bet on culture. I'm going to be smarter than the next guy. This is PvP servers all day and I'll just know when to get out. Yeah, I think that that makes sense. I think that a lot of that is PvP. I think when you put it in a in a publicly traded vehicle it gets a little bit more more potentially serious or the scale is bigger. But yeah I think a >> guys you really think like that's wild to me. First of all I didn't know that there were companies using an all coin treasury uh like approach. Obviously if they created their own coin sure but that seems insane. Is this a thing that's happening a lot? Like are there any all coins that you could point to and be like well that was smart? I mean maybe Solana but like woof. Other than that, Yeah, I think a lot of them can make good trades. Um, but I think that none of them really have the quality of a treasury asset, which is different. Uh, basically something that I think there's a there's a difference between a like a hedge fund holding a trade versus a publicly traded company using it as a long-term treasury asset. I think Bitcoin has met that standard. I don't really view others as having met that standard. I think they're more like uh, penny stock tech plays, basically. Where, you know, for example, I'm on the I'm on the record of being bullish on stablecoins. So, obviously any sort of rails that enable stablecoins to function have certain some degree of value. Um, so I think it's not to say that there's no value in the space. Uh, but generally speaking, it's inflated because there is this really big speculation element and this PvP element kind of built on top of it. Um, and so I think and I think over time you've kind of seen the narratives play out. And now the the narratives in that whole space are pretty weak outside of stablecoins and certain other forms of of tokenization. Do you use debt to buy Bitcoin? I do not. Um, but I I mean, I've been long MicroStrategy since 2020. Um, I I view it I I treat it as much smaller position than core Bitcoin. Uh, and then anyone who has optional leverage uh, that doesn't get rid of it is in some ways using leverage to buy assets. So, for example, you know, I I have uh, purposefully I have mortgages attached to properties because if I if if I if if I can short fiat currency at 3% for the long term, I figure instead of, you know, selling stocks or selling Bitcoin uh, to pay that off, uh, I'm kind of indirectly slightly leveraged on assets. Uh, but for the most part I let other proxies do it for me. I let you know, MicroStrategy do that for me rather than myself hold Bitcoin in debt. And do you have a like philosophical stance that you use to explain to yourself or to other people like this is why I don't go all in like Michael Saylor. Because if if Saylor is right, he is going to make himself one of the wealthiest people on planet Earth. Like if this continues to, you know, 10x from here or more, like he's really really going to be upper echelon of wealthy. Not that he isn't already, but I mean it will just be absolutely absurd. Um but boy oh boy, the reason I don't do it is I just don't trust myself to be that kind of right. Uh while I have high risk tolerance, clearly not that high. Uh and there could be a black swan event or whatever. And so I just as a philosophy go, I'm going to spread myself across a broader basket of um risk on assets to be sure, but I I want that more diffuse take because who knows? Yeah, so my my approach is when I'm very high convicted bullish on something, uh I size it so that if I'm right, I materially benefit from it. But if I'm wrong, it's not like a financial kill shot. It's just a major setback. And so with Bitcoin, it is my largest individual asset, uh but it's one of many assets. Uh and there's also difference between someone who, you know, say sticks half of their net worth in Bitcoin versus someone who bought some Bitcoin and then because of superior performance, it's become half of their net worth. Um and and they they psychologically treat it somewhat different. So, uh I I you know, I have a lot of Bitcoin exposure, um but it's in that kind of broader mindset of more broadly that I want to own multiple types of high quality assets, short fiat currency where I I or let other, you know, let let my assets do it for me on their balance sheets. Um and I think that you know, to to uh quote Paul Tudor Jones, I think Bitcoin's the fastest horse in the race. Um but I don't think it's the only horse. And I think that it's I have a clearer head by not being 100% in on something. Uh it gives me kind of a uh Zen aspect in bear market. So, for example, in in November 2022, when Bitcoin was what had collapsed from 69,000 all the way down to like 16,000, uh I was at the um Pacific Bitcoin conference. Uh and you know, we were having a good time. We were on stage. We were laughing. Uh you know, the the energy there was high. Uh and I think because one, people knew what they own. And two, anyone who wasn't leveraged uh or or didn't size it uh inappropriately relative to their volatility and risk expectations, uh use it as a buying opportunity. So, um I I think it makes sense for someone to be all in. Um but not necessarily everybody. And not even necessarily most people. Is how I'd put it. Another way of kind of putting out is that that, you know, Michael Saylor does have other assets in his personal life. He he does have properties and things like that. And this particular vehicle obviously represents the vast majority of his net worth. Uh but uh he'd still be okay if if Bitcoin had a problem. So, I think people, you know, you want to put yourself in a position where you know, if Bitcoin doesn't perform the way you think you will, it could be, you know, obviously very damaging to to someone financially. Uh but it's not necessarily an an irrecoverable thing. Uh you know, if if they encounter an issue. And and it's going to partially depend on their level of conviction and their level of research that they've done on it. Yeah, agreed. Do you see the volatility of Bitcoin coming down? And would you celebrate that or be sad? Uh so, historically it has mildly decreased cycle after cycle. And I think that's normal. I think that when you go from a one like a, you know, a million-dollar asset to a billion-dollar asset to a trillion-dollar asset, uh it's naturally that the the holding of it gets more diffused uh and there's kind of less kind of tail optionality uh going on. So, I think that uh over the next 5-10 years, I do expect volatility will decrease. Uh and I I view it as a good thing uh because it it as it kind of gets higher toward a total adjustable market, uh we'd expect volatility to decrease. And also part of why people don't use it for payments uh at scale is that volatility. Um so, you can't really price things in it because of that high volatility. Uh we we still live in a very fiat world. Our our liabilities uh either in debts or in just ongoing obligations, rent, mortgages, uh things like that, our expenses are in our in fiat currencies around the world. Uh so, people can't really price things in Bitcoin. If Bitcoin does get much larger and more liquid and the volatility goes down, that actually opens the possibility where people could price things uh more readily directly in Bitcoin. Especially when you're talking about a context where, you know, a continent with 40 currencies um and it could become more of a standard uh that that people use. So, um I do expect volatility to decrease and while it the downside is it takes away from the explosive return potential over time, uh I think the upsides outweigh it, but I also think we have much more to go most likely before that volatility gets, you know, to what we consider low like gold.