2:42Dr. Paul ViottiYeah, no, it’s that we are entering a new era, a new period. And so we had, you know, we don’t have to look too far back, but we can look back to, I guess, about 30 years ago was the end of the Cold War. The Cold War was a long period of time, right, where the United States and its allies were in a bipolar wasn’t a hot war, but a bipolar conflict with the Soviet Union, and everything revolved around that. The Soviet Union collapsed and dissolved, and we saw it divided up into the Russian Federation and its neighboring states. And then we entered this very interesting period where the US was perceived to be the world’s superpower.
2:42Dr. Paul ViottiFrom the early 1990s through, I don’t know, some period of the 2000s, there wasn’t really another competitor out there militarily or economically that could balance against the United States’ power. So we went -- technically, if we look at it from an international relations theory perspective without getting too jargony, we went from a bipolar period where we had 2 fierce competitors, the Soviets and the US and its allies, or the Soviets versus NATO, right? That gave way to something we could call a unipolar period where the United States was the superpower, and now we are going into this very complicated terrain which we will call a multipolar system where there’s a lot of confusion and changing and shifting alliances, right?
2:42Dr. Paul ViottiAnd so now you see, you know, Russia invades Ukraine, a sovereign state. The United States and NATO and allies come to the defense of Ukraine by giving it defense capabilities. China has, you know, if we go back to -- I remember going to southern China in 19 -- I think it was 1995. And the places that I visited then would be totally unrecognizable now, completely unrecognizable. There’s been so much economic development now that China’s overall economy is huge, right? It’s not on a per capita basis, but it compares to the United States, which gives it an ability to boost its defensive and offensive capabilities, and you’ve got new alliances forming.
2:42Dr. Paul ViottiSo it looks like there is at least a tacit or, you know, some kind of alliance emerging between Russia and China, and it’s a pretty normal thing actually if you study the history of the international political system that when one power is perceived by the others to be overly strong, the others will bandwagon together to try to balance against that power. So it -- from, from an historical perspective, what we’re seeing right now makes total sense, that you would find, uh, countries or states that wouldn’t normally be close become closer to each other in order to, to contain a power that’s, that’s greater than theirs. So that’s why you see, for example, this potential China-Russia alliance.
2:42Dr. Paul ViottiAnd you wanted to talk about another thing too, right? BRICS. What did you want to bring up about that? Because I think it’s related to this conversation.
6:13Kamal HubbardYeah, definitely. BRICS and this being a formation of several nations that want to move away from the dollar and Once again, like you said, there’s factions that are beginning to form on various different levels. And from a financial standpoint, you know, we have these hot wars, like you’re saying, that are clearly, you know, utilizing a military offensive, but maybe these colder or warmer wars are utilizing a more financial aggression. And do you see BRICS as that, being that currency war against the United States dollar?
7:08Dr. Paul ViottiYeah, great question. Right. So, you know, the main hot war, of course, Russia’s invasion of Ukraine is one thing. We have a looming hot war in terms of, you know, potential, some would say likely invasion of of Taiwan by China. So that’s on the military side. Thing is, in terms of power, they’re really, you know, we can understand the power of a country to be broken down basically into 3 forms. There’s military, there’s territorial. So the United States has had an advantage of, you know, being -- we’re not Right on the door of France and Germany, right? We’re isolated. We have big oceans which prevent the transmission of other countries’ power across that, right?
7:08Dr. Paul ViottiSo that’s a territorial aspect of power. And then most importantly, economic, because that -- you can’t sustain offensive or defensive capabilities unless you have that economic engine as well. So going back to BRICS, right? BRICS is an acronym for 5 other leading economies, Brazil, Russia, India, China, and South Africa, right? Which is an unusual economic alliance. And so there’s some notion that there could be a common currency held by those actors that would -- I mean, so in the United States, one of the advantages that we have is that if I drive across the border to Nevada or Arizona or Oregon from from California, right? I don’t have to change currency.
7:08Dr. Paul ViottiLike, I don’t -- I’m not looking at a tariff. There aren’t going to be taxes, right, imposed on me. So the United States for a long time had that advantage economically with the dollar, right? That every state doesn’t have its own currency. We have a unified one. The European Union developed the euro to try to have something similar, and it basically works. And of course, and there are some issues sometimes in terms of maintaining that integration and the common currency. The problem I see with BRICS and the adoption, I don’t necessarily take it seriously at this point. So if you look at the integration of Europe, for example, and before there was a common currency, they had a the European Union, right, for decades, and then eventually implemented the euro.
7:08Dr. Paul ViottiI would think it would, because of the very different kinds of institutions we’re looking at. So Brazil, a democracy, not without its problems, right? Russia is a totalitarian state. India is a democracy. China is a totalitarian state. And South Africa is a democracy. But it would be a strange economic alliance. And I think because they don’t have any other institutions in common, I think it’s -- I don’t see it as a huge challenge to the dollar in the long run. I think it’s easy to write headlines about that being a threat, but without having any other kind of integration, it isn’t something that I lose sleep over.
10:35Kamal HubbardAll right. Well, I mean, I think transitioning to, you know, some other countries worth looking into and their own economic situations, Argentina, they’re going through quite a bit right now. And what are your thoughts on what’s going on there?
10:58Dr. Paul ViottiYeah, so this is great. We can circle back. We got into a little international relations talk, which I always enjoy. there, but let’s get -- we’ll take it back to the economic and then ultimately to sort of what this means for crypto technologies and assets. But, you know, so in the United States, we’ve been looking at 5 or 6% inflation, which is -- I’m noticing it, right? And it’s painful. If we go down to Argentina, we’re looking at inflation at over 100%. per year, right? And that starts to be -- that causes so much chaos in people’s lives that they don’t actually want to hold on to Argentine pesos anymore.
10:58Dr. Paul ViottiBecause, you know, if you, you know, have 1,000 pesos now, in a year it’s only going to be worth 500. And that’s such an astronomical level of inflation that it makes everyday functioning in the economy incredibly difficult. Well, Argentina is not the only one. Turkey is facing, one could say, almost hyperinflation in the same regard. So if you’re a person living in these states, you know, historically you would’ve immediately tried to convert your paycheck into another currency. So you would try to have a connection where you could convert your Argentine pesos to dollars, or maybe you would have a bank account that’s denominated in dollars so that your net worth isn’t constantly eroded by inflation.
10:58Dr. Paul ViottiThere’s a nice tool actually that, that I like to -- it’s a useful one insofar as we can take anything like applied out, out of this. Uh, it’s a simple calculation you can perform in, in your head. It’s called the Rule of 72. And so we can take a particular rate, uh, um, and, um, let’s start off with, uh, say a rate of, uh, 3%, right? How long does it take for something to double when you’ve got an initial rate of 3%? And I’ll show you the various ways that you can apply this. 72 divided by 3 is 24. Let’s suppose you had something in a bank account or some kind of account rendering a return of 3%.
10:58Dr. Paul ViottiIf you do nothing else, that’s going to double in 24 years, right? So, if we’re thinking about that, we can think about that in terms of returns on saving. We can also think about that just in terms of what inflation does. So, if you’ve got an inflation level of 2%, 72 divided by 2, is 36. So it takes prices 36 years to double, right? So that happens very, very slowly. But as we see, let’s say now, but with the current climate, we’ve got 6%. So 72 divided by 6, it takes 12 years for prices to double. So it, what it captures is that there’s a nonlinear aspect of this that’s hard for our brains to grasp.
10:58Dr. Paul ViottiLet’s bring it up to, let’s say, 12%. So 72 divided by 12, prices double in 6 years and so forth. And you can use that as a shorthand for navigating these things. I find it actually to be a great tool. But to go back from -- to return from personal arithmetic to looking at being a person living in these economies, when you’re facing double-digit inflation, you’re doing everything you can just to get out of there. And not everybody has that power. But what crypto offers these days is kind of like every person’s Western Union in effect, right? To use that old name, right? Where you would, you could wire something to somebody in another country.
10:58Dr. Paul ViottiSo I, we had a little detour there talking about the rule of 72 and how we can use that to understand rates in a way that are not intuitive. But if we’re, if I’m a Turkish citizen or if I’m an Argentine citizen, whereas I would’ve tried to get a dollar-denominated account, in the past, not if you -- especially if you’re poor or lower middle class, your access to those financial resources, you know, probably isn’t there. Those are things that more affluent people are able to do. But you have a new, maybe empowering tool available to you in crypto that -- and this is where you have the expertise, right?
10:58Dr. Paul ViottiThat you could Tell me about that, Kemal. So let’s suppose -- I want to pass the baton back to you. Let’s suppose that you’re a citizen in one of these countries, you’re getting paid, you’re very aware of the erosive effects of inflation. How would crypto have use value to you? And can you talk about some of the mechanics of what a person would do to convert without -- we don’t have to get into too much detail, granular detail, but -- How would that work, right? I mean, tell if, let’s have that thought experiment and imagine that we’re living in Buenos Aires right now. We just got a paycheck in pesos.
10:58Dr. Paul ViottiWe want to hedge against inflation by putting it in, let’s say Bitcoin. And what would that look like?
16:27Kamal HubbardYeah, I mean, it all depends on what sort of exchanges this person has access to, right? It could be Bitcoin ATM. It could be like an exchange that is very similar to like Binance or what we have in the United States, like Coinbase or something where someone’s able to go take that paycheck that’s either a paper check and get it into their bank account and link that bank account to you know, that crypto exchange and then get Bitcoin, right? From there, they may want to look into stablecoins, right? Things like USDC or USDT Tether or BUSD. All 3 of those stablecoins are very polarizing, but they are meant to keep pace with the dollar. So that would hedge against the inflation that they may see against those pesos. And I know you’re bringing up Argentina. El Salvador, right, is like the use case that so many have looked at in terms of, well, you know, if we’re going to use crypto as legal tender, they just went ahead and did it. And I don’t know. I don’t want to change the subject too quickly on you, but what is your view on El Salvador and what they’ve done? And has that improved things? Has it changed things? Has it been negative in your view?
18:13Dr. Paul ViottiIt’s a great question. And again, I kind of always want to bring it back to the original focus here. So we’ve had doom and gloom, recession looming, there’s an ongoing hot war, a potential uh, uh, you know, another one on the, on the horizon. Um, and, and with it, with the forthcoming economic, uh, contraction, that’s going to affect, um, uh, everything from, from real estate to crypto, etc. But, but after we come out of that, actually, one interesting thing that’s going on right now, and this, this will tie into, um, El Salvador as well, is that crypto itself once a fringy realm that was, you know, what’s the blockchain?
18:13Dr. Paul ViottiWhat is this stuff? I mean, I remember hearing about Bitcoin all the way back in 2010 when it was starting to get some press and it was like, what is this thing? It sounds crazy, right? But it’s gone from being fringe to actually having legitimacy because of -- and it’s not just Bitcoin, that’s the one that everybody knows, right? But Bitcoin, Ethereum, and even the sort of cartoonish Dogecoin. But they’ve become institutions and they’ve been embraced even at, if you, you know, if you’re an elite client of Chase, I think you have access to a Bitcoin ETF through JPMorgan Chase, right? As in that, you know, it’s the most colossal financial actor and the private actor in the, you know, American system.
18:13Dr. Paul ViottiAnd if you are an Argentine citizen that, you know, or Turkish citizen, etc., or let’s suppose, I mean, with the case of Russia, right, they’ve been to some extent cut off from the global financial system, not entirely, but let’s suppose that you are a Russian-American citizen and you have family that is in Russia. and they can’t, they can’t do anything, they, you know, that you need to send assets to them, you would probably consider using crypto as a way to do that because I’m not sure how you would, you know, um, organize that, uh, otherwise. That would probably be a, you know, putting aside the capabilities of states or governments to surveil those transactions, right?
18:13Dr. Paul ViottiIt’s, it’s an avenue available to you. So not only does crypto have use value, at this point and enough price stability, right? That can always change, but it also is acquiring some kind of legitimacy. And so President Bukele in El Salvador instituted Bitcoin City, right? And the Salvadoran government has purchased billions of dollars worth of of Bitcoin assets. And it’s a place that I would actually like to go visit to see how this actually functions, right? But I think things are set up in parts of El Salvador where you -- where even though it’s not optimal to transact in Bitcoin for a variety of technical reasons that you understand better than I do, it’s still possible and it’s going on and it’s set up, you know, it serves as a kind of -- it’ll be interesting to evaluate the model.
18:13Dr. Paul ViottiI don’t know that we really have enough time. you know, to, in hindsight, to look at it to say if it’s been a success or not. But there are a number of, you know, El Salvador is one of them, right? States actually experimenting with digital currencies, with crypto. These states tend to be the ones that, you know, are not the -- I mean, so they don’t have the dominant currencies. So is the United States government thinking of embracing Bitcoin? Of course not, right? Because it has the dominant currency in the world, the dollar. But if you’re El Salvador, uh, historically, which is -- which has, um, you know, uh, uh, not had the strongest currency, uh, and, and, and very little control compared to more dominant states, right?
18:13Dr. Paul ViottiIt’s something that, that, that you look into. And it’s also what some states are looking into as a way to, you know, rather than have a central bank, control the supply of money. The idea is that, is that, you know, the money supply is built into the, to the crypto asset in terms of growth, right? That you don’t have any kind of, you know, it’d be a lot harder for a committee to get together and, and suddenly increase the supply, right? Of it. In fact, it’s built that, that some say that, that, that was the primary motivation for building it, right? Are there other questions about whether it can work or not?
18:13Dr. Paul ViottiRight? And so, it, you know, in terms of the -- you might actually run into a lot of problems by not having the equivalent of a central bank that can adjust the supply of a currency. And so, it -- there are lots and lots of questions there. If you are an Austrian economist, you probably think it’s, you know, it’s the closest thing to a gold standard, right? If you are a mainstream economist like, you know, Paul Krugman or Larry Summers, you probably think the whole thing is just nutso and crazy. But it is interesting to see the adoption spread. Familiarity with it has increased. And so it has legitimate use value now, and it’s there.
18:13Dr. Paul ViottiIt has been socially accepted to some extent, right? It’s no longer a rogue fringe thing. We have publicly traded companies such as Coinbase, right, that are -- because of that, they’re also regulated where regular people can buy crypto on their phones. I wanted to talk to you a little bit about something I was thinking of. Bitcoin is the thing that always comes to mind, and it’s the main bellwether or marker that we use to look at the health of crypto markets, right? So at least it’s the thing that gets reported on. the most, even though, even though there are innumerable, uh, other, uh, comparable assets. Some of them are technologically more advantageous, but I think Bitcoin is kind of like the, uh, equivalent of the VHS format for crypto.
18:13Dr. Paul ViottiThere were other better -- if we look back to that era of, uh, analog video and being able to watch those things in the home, there were, there were the main competing technologies, right? We’ll read about our And we remember, some of us remember Betamax had higher resolution, was technologically superior in some ways, but Sony didn’t really market it that well. It didn’t get out there. Betamax became the standard. And then for 20 years, when you walked into a now defunct, but was then vibrant and exciting Blockbuster Video, your choices were on VHS, even though you’d have new things come out like LaserDisc, for example, which some of us remember that -- were a whole lot better in terms of resolution, we still stuck with that format for a long time, even though it had a lot of drawbacks compared to better ones, right?
18:13Dr. Paul ViottiSo I want to get your thoughts in that sense, in terms of Bitcoin is the focus. It has use value. It’s socially accepted to a large extent, or certainly a lot more than it was. But tell me about your thoughts on that because I know you’re expert and But, you know, across a wide array of these assets.
25:43Kamal HubbardYeah. Well, clearly Bitcoin is, I mean, it’s number one in the cryptocurrency market capitalization. And, but I think this is a really good analogy that you put out there with VHS because at the same time where we’re talking about almost, you know, 15-year-old technology, right? Or we’re going on 15 years of this technology being out there. And so it’s not exactly cutting edge, but it is something that over time, like you said, it has the trust of at least one nation state to make it what they use. for legal tender. So it’s come a long way in 15 years. It’s definitely gone through its series of upgrades, and we’re starting to see new and promising enhancements to the Bitcoin blockchain, which should be interesting, like bringing DeFi to Bitcoin, which, I mean, honestly, just did You know, this is my personal opinion.
25:43Kamal HubbardDeFi on Bitcoin, it’s a good thing, but I think it is -- we have so many other places where DeFi is operable right now. So, you know, I’m not necessarily saying why, but there’s other viable options when it comes to that. Obviously, we’ve also seen Bitcoin NFTs, Ordinals recently come out, which is an innovation on the Bitcoin blockchain. And a lot of people saw those as highly sought after. So we’re seeing innovation on the network, which is great. We’re seeing the network expand. by having seen so many of these publicly traded companies that are there to specifically mine Bitcoin, which is another thing when you’re talking about adoption and just mainstream acceptance of Bitcoin.
25:43Kamal HubbardThat is a good thing. You also spoke about JP Morgan offering an ETF to their high net worth clients. So, I mean, we’re starting to see acceptance in mainstream adoption. And to a certain extent, tangentially, you know, FTX, right? When we’re starting to see celebrities on Super Bowl ads talking about crypto, you know, that only helps to bolster trust within the network. Clearly, FTX collapsed. under very dubious circumstances, and Bitcoin and all crypto took a hit there. But the reason why it’s number one right now is not because it’s the most cutting edge, not because it’s the fastest necessarily either, but it’s the most proven of all cryptocurrencies.
25:43Kamal Hubbardis why I think it’s number one and it’s going to maintain its number one status for really the near future. What is the Bitcoin killer? It’s proven its use case, which is just that. It’s peer-to-peer payments. You can do that anywhere on the globe where you have access to the internet. You can participate and facilitate a Bitcoin transaction. So, you know, that’s been done, you know, really millions of times over now. So like I said, it, it’s proven what it can do. There has been no major network failures, um, and, you know, it’s, it’s trusted around the world to move money.
29:58Dr. Paul ViottiExactly. And, and, and even the -- some recent news reports that it is Since 2018, if you did -- if you have an Apple computer, a Mac, and you dig deep into the file system, you can actually find the Bitcoin white paper or prospectus. Some probably clever programmer buried that there, right? That’s just a side note, which is sort of funny. I don’t know if you read about that, but that --
30:24Kamal HubbardYeah, I did.
30:25Dr. Paul ViottiIt’s become -- yeah, it has become mainstream. I think it is fair to call it the VHS of crypto, right? Right? It’s not the greatest. It’s got limitations, and you -- there are tweaks and improvements that, that can be made, right? So just like our, our first VHS decks were like these top-loading monstrosities, right? Then they eventually got smaller. They got more, you know, heads to read the tape and more stabilization and things like that. But you were fundamentally kind of still locked into some of these, these constraints. But it’s the one that everybody knew, and everybody adapted to it in, in started to trust that. I don’t -- can you -- you can’t do smart contracts on the Bitcoin blockchain, right? Is that still the case?
31:05Kamal HubbardWell, they’re working on that. And I think to a certain extent, you know, the NFTs are a type of smart contract.
31:14Dr. Paul ViottiYeah.
31:14Kamal HubbardAnd, you know, I mean, just to be very blunt in my view of all that is like, I mean, it’s more for maximalists to tout Bitcoin when it comes to NFTs and DeFi on the Bitcoin blockchain. But yeah, so when DeFi really gets rolled out, it has to operate on a series of smart contracts. So that’s the next big thing. But then now, once again, this goes back to the VHS analogy. Like, would you rather use a smart contract on Bitcoin or would you rather do it on a network? I mean, clearly Ethereum, right? Like, that makes sense. Or, I mean, I hate to use Solana as an example, but Solana, Solana is a super fast Really, it’s built for smart -- it’s a blockchain that’s built for smart contracts. Excuse me.
32:25Dr. Paul ViottiRight.
32:27Kamal HubbardSo yeah, this is something that will happen. We will see it, smart contracts on Bitcoin, and it will roll out. But I think the biggest question, like you said, is like, well, would you rather watch something on a VHS tape, or would you rather watch something in 4K?
32:50Dr. Paul ViottiYeah, exactly. Eventually we get to the 4K, but it -- if we look at, at, uh, at VHS, it, you know, I don’t know, I think what was it, like 1980 or something like that? And I mean, I was watching VHS tapes as late as 1999, so there was a 20-year period there in that world, uh, of where, you know, even when, when, uh, you know, you had DVDs come out, right, uh, in, in, in the late ’90s or whatever, and they eventually replaced, um, replaced VHS. But it was a technology that, that lasted a long time. And I think we’re going to see the same thing as well.
32:50Dr. Paul ViottiHere’s another -- just not to be too economistic here, um, but, you know, Joseph Schumpeter, he was a, um, a an economist, a counterpart of the well-known John Maynard Keynes, where we get sort of ideas about Keynesian economics from, right? But a peer of his. And he -- they were rivals. But one of the things that Schumpeter emphasized, which I agree with in terms of business cycles, is that we tend to get these things called clusters of innovation. So blockchain is an example of that, right? The internet, the beginnings of the internet were that, right? Where we had -- I can remember again in the late, in the mid-1990s, the different search engines that were available like Lycos, Excite, AltaVista, Yahoo.
32:50Dr. Paul ViottiOf course, nobody uses any of those anymore for searching because they were displaced by Google. And then, and And now we actually have OpenAI, right? And, you know, different show, different podcast to talk about the role of artificial intelligence with all of this. But you get clusters of innovation and that’s a key thing. And the early stages of that are interesting because you have hundreds or thousands of actors on the scene and they’re all trying to innovate. They’re all excited about the technology. And we’ll go back to that other model I talked about in terms of bubbles. You get that initial excitement, then you get a huge amount of exuberance where a lot of actors enter the system.
32:50Dr. Paul ViottiThen there’s a kind of crash and it will weed out a lot of these entities, right? Schumpeter coined the term creative destruction. So when you have a down cycle in an economy, It’s going to kill off a lot of entities. A lot of startups, for example, won’t make it. A lot of companies will go belly up and then, you know, those resources get reabsorbed in the economy elsewhere. But then you wind up with the ones that do survive, right? And you get new cycles of innovation. So I think what we’re going to go through right now, where we are still in crypto winter, I personally think don’t be fooled that it’s a return to normal just yet.
32:50Dr. Paul ViottiI think there’s more to go through. And then when we come out on the other side, then there’s going to be another period of growth and refinement where these technologies become mature, right? So if we go back again, I always have to go back to that formative period at the beginning of the internet where we didn’t, we knew it had to do with information and quick access to information, But it was like, you know, we would log on in 1996, 1997 with our dial-up modem and it made that sound and the iconic sound. And, you know, we could read the New York Times on our desktop computer, right?
32:50Dr. Paul ViottiThat was amazing. You don’t have to have the paper be delivered. You can read it online. Oh my gosh, you can order a book on your computer and have it delivered. That’s crazy, right? Well, we went through a a number of bubbles and crashes. And now we have smartphones and we can do so many things with them that are including transact with crypto that would’ve been unimaginable back then. So yeah, I think we’re going into some serious headwinds right now. And again, it’s by design. This business cycle, is not organic. It -- the, the contraction is, is on purpose by the, uh, Federal Reserve and also central banks elsewhere.
32:50Dr. Paul ViottiSo in, in the United Kingdom, they’re doing -- the central bank is doing the same thing, Bank of England, and, uh, the European Central Bank is doing the same thing as well. So you have Europe, Great Britain, and the United States, these coupled economies that are pretty similar to each other, all ratcheting up interest rates to basically -- they won’t say it, but essentially, you know, if I can take a little liberty, to cause a recession. That’s the way that we get back to the inflation target. That’s going to hurt a lot of things, including crypto. But then when you come out on the other side, that’s the period, I think, for the next huge wave of growth and innovation.
32:50Dr. Paul ViottiOkay.
38:06Kamal HubbardSo I hear exactly what you’re saying here. And it’s been a few cycles for me in crypto. And I think, and I’m not trying to disagree with you, but this is just --
38:22Dr. Paul ViottiOh, dude, you disagree with me. I welcome disagreement. I think that’s fun. So, no, go. Any reactions you have.
38:28Kamal HubbardIt kind of diverges from what you’re talking about, but I think what you’re saying is valid because If we’re, like you said, we’re moving towards a tightening in the economy, towards recession or possible recession, possible correction. And yes, the cryptocurrency market cap has taken a very, very marked nosedive since 2022 and what happened with the collapse of Terra Luna as well as FTX. And now, yes, The market has grown cold, but I believe that now is the time for people to really dig in, do research for some of the best projects out there. Also look into dollar cost averaging into blue chip crypto. And now, of course, this is not financial advice because what tends to happen in these cycles is Once the market warms back up, you know, it takes a while, and then boom, FOMO comes, and then everyone’s like, okay, well, which crypto should I buy?
38:28Kamal HubbardWhich one’s going to make me a millionaire, right? But it’s now when things are cold, when things are quiet, where you can do research, find some gems. And I mean, of course, you know, being as very as careful as possible and keeping all of your overall expenses in check. And, you know, if you do have something that you once again are willing to, you know, not afraid to lose and you want to, you know, grow a crypto portfolio, now’s the time to do that research. So then when the market does turn around, you’re able to ride the wave and not get hit by it.
40:22Dr. Paul ViottiYeah, exactly. No, I don’t disagree with that at all. I think another metaphor is that if we think of crypto as kind of like a garden, right? A garden that’s overgrown with lots of different plants. And, you know, I mean, these metaphors are kind of fun, but, you know, what recessions do, what down cycles do is they prune the garden, right? And they cut back a lot of the deadwood and, you know, allow for, you know, new shoots to sprout up. But we can, I think you’re right. You can find that stuff now. So the garden, I think it has been and will continue to be pruned for a little while, but you can find -- no, I think you’re right.
40:22Dr. Paul ViottiAnd you can do that research. There’s always a risk, right? But that puts you in terms of the cycle we were talking about last time in that early phase 1 where you’re an early participant in something and you don’t want to put all of your eggs in that basket. And yeah, I don’t give financial advice either, and I have very little exposure to the things that I’m talking about. But the other thing that you can do now, part of the reason that Bitcoin is a lot more stable and, you know, I can’t make any predictions. I don’t think we’re going to have a repeat of 2018, right?
40:22Dr. Paul ViottiSo right where we had a run-up of Bitcoin to $20,000, right? And then it popped and that was like, Was that December 2017, January 2018 timeframe?
41:50Kamal HubbardYeah.
41:51Dr. Paul ViottiThen you get that huge correction where it goes down to $3,000 or something, right? And then kind of dances around that area for quite a while before it goes through the next cycle. I think some of the things that are providing more stability, if I want to hedge against, you know, let’s suppose that, and I’m just talking about Bitcoin, I’m sure that there are comparable resources. Let’s suppose that I, that I, I’m bullish on Bitcoin and I, you know, I want to buy it directly, but I’m also worried. Well, that you have resources. You can, you can use Bitcoin futures to, to hedge against the downside risk, right?
41:51Dr. Paul ViottiSo you can actually, you can use puts for the intended purpose, which is that you can buy puts on, I think one of them not an endorsement, just the one that I know of is BITO, BITO, which is a Bitcoin futures ETF. You can buy puts on that. And then so that if you do experience a crash, you’re not going to totally lose your shirt. Essentially, you know, it functions as a kind of insurance policy. It comes with a premium. You have to buy that option, but then if you use it to hedge, you you may come out less scathed. And putting aside these kinds of intricacies, the fact that we actually have crypto futures and that you can buy options in various combinations, right, on them, I mean, also illustrates that it’s mainstream, right?
41:51Dr. Paul ViottiIt’s not fringe at all. If I can invest in futures on something in a regulated ETF, then It’s no longer in a fringy domain. It’s mainstream and I think here to stay, right?
43:37Kamal HubbardYeah, absolutely. I mean, I think this line of conversation is touchy, right? Especially with everything we just went through. But I think on both sides of it, we’ve been conservative in talking about the entire international implications of what’s going on in the economy. But then also looking on the bright side of, hey, well, if now is where you really apply your, your research and figure out what kind of investor you want to be when it comes to cryptocurrencies and do it now, um, it could, like you said, when it goes -- comes to the garden analogy, yield very, uh, nice fruit. So, um, I’m, I’m glad that we were kind of able to, to talk about both sides. I mean, A lot of people just go into, oh, make money now, make money now. This is how you do it. This is how you do it. And I hate to have those sort of conversations without also looking at everything overall. And that’s why I think this is always, it’s always good to have these sort of conversations and you bring a lot of value to the table.
44:47Dr. Paul ViottiThanks. Yeah, I appreciate that. And just a few remarks to close out. The things I agree with you that in the garden you can find some gems, right? And you don’t want to put all of your eggs in one basket. And And it’s always a mistake to approach something with the understanding that, you know, you’re trying to get rich quick. That doesn’t happen too often, right? And contextually, there are only very specific times where people can be lucky like that. But the other thing to look at though, right, is cryptocurrencies are transnational assets. You know, they’re these -- an asset class that, you know, can be exchanged easily transnationally.
44:47Dr. Paul ViottiThey’re not regulated by states. The problem is that, you know, we are seeing that states, you know, crypto is banned in certain countries, right? I don’t know what the latest list is. We have in our own, you know, country, there are some major opponents. I know that Senator Warren is anti-crypto and you’re starting to see some hit pieces too against crypto in terms of energy use. There are, for a future show, you know, before too long, you know, what about states releasing their own digital currencies using blockchain technology. A number of them are looking into that and piloting that. So the -- but in, in, so in terms of, of, of looking at that garden and, and, and, and, and choosing what you’re going to pursue, you also have to be aware that states don’t like to see things unregulated for too long.
44:47Dr. Paul ViottiAnd so what does that actually mean in the long run, right? And it’s, it’s something that has to be put into everybody’s calculation.
46:22Kamal HubbardYeah, well, you’re absolutely right. There is a show coming about just that, like state and local currencies, right? And what that could possibly look like. And I’d definitely like to get your take on that when that’s ready. But I do think that that’s the biggest risk right now is the regulatory risk. And, you know, because we don’t know, like, how will Congress definitively regulate cryptocurrencies? We had this recent hearing with the SEC chairman, and he got attacked pretty aggressively by the Republicans, right? In terms of, hey, well, you know, the lack of overall guidance in terms of blockchain and cryptocurrencies means that the United States is losing its ability to innovate, right?
46:22Kamal HubbardAnd not having that clear guidance is also hurting our economy. But then, like you said, on the other side, you have very staunch opponents like Senator Warren, who doesn’t like it at all, sees it as having zero value. So we’re definitely in line for a collision course in terms of where this will meet, right? In terms of compromise from both sides of the aisle. And I think that’s really, it’s causing a major chilling effect. It caused me to kind of sit out for a little bit and say, okay, in a post-FTX world where the United States is looking to, uh, regulate cryptocurrencies, what’s going to happen?
46:22Kamal HubbardUm, but I just had to kind of brush that aside and say, hey, this has always been out there, right? And if it’s going to happen, it’s going to happen. And, um, you know, just be prepared for the consequences. That’s, that’s just all part of this whole thing, right, that I needed to accept to get back in. And, um, you know, so hopefully That may cause people to sit out a little bit longer, but that may cause some people to say, okay, well, hey, it’s, this has always been a risk and I choose to assume it accordingly.
48:47Dr. Paul ViottiYeah, exactly. And from the public administration side, right? You, if, when, if you don’t regulate something enough, you can wind up with FTX, you know, blowing up and hurting a lot of people. But if you, if If you regulate too much, it stifles financial innovation or financial engineering, right? So what is that sweet spot there, right? And I don’t know that, we don’t know what that is yet, right? But it’s going to be an entertaining time too as we also watch China, possibly the United States, although that’s another conversation, you know, roll out their own digital assets. So there’ll be plenty of fodder for us to discuss in future shows.
49:31Kamal HubbardYeah, absolutely. I mean, I’m surprised we did not get to CBDCs, but we’ve spent quite a bit of time. So next time, that’s, that’s definitely on the list of things to discuss. But Dr. Viotti, thank you again for taking time out to join my audience here and, and talk economics and crypto. I appreciate it. And like I said, I think this has been a very valuable discussion. And I’ll let you get the last word here.
50:00Dr. Paul ViottiWell, I just want to say thanks, Kamal, for having me on the show. And it’s a, it’s great. It’s a great exchange we’ve, we’ve had going on for a while now and in a pretty unknown but exciting domain. So I look forward to being back.
50:16Kamal HubbardAll right. Well, thank you for listening to Crypto with Kamal, and be sure to make it a great day with crypto. We’ll see you on the next one.
