Bitcoin in the Banks! What this means for Price! & Adoption? | Hashpower Academy

Video Transcript:

When you make mistakes, people die. That’s what was told to me in the first lecture, first year of university studying aerospace. And it’s a very memorable lecture because he was trying to make a point. This lecturer was referring to the fact that a serial killer can kill 5, 10, 20 people. But if you mess up with an engine, with an aircraft, you can make a plane of 400 people drop out the sky. That’s not a place you want to be in. And so the information he was trying to convey, which is still memorable to me today, is if you make mistakes within certain industries, there is serious consequences. Now, that’s from studying engineering. And interestingly enough, the majority of engineers don’t actually graduate and go into engineering. They go into industries such as finance and banking, problem solvers, figuring out all different technical things, market risks, everything across the board. And yeah, they go into different industries such as insurance and finance and tech as well. But where this brings across to the discussion of Bitcoin in the banking system because the Federal Reserve in the US and the US regulators put a joint statement up to say that banks can now custody Bitcoin within existing frameworks with obviously high-risisk parameters I’m sure. Now what that does for four different things is what we’re going to cover in this video. And the first one first and foremost is adoption. If Bitcoin adoption right now, just the percentage of people that are holding Bitcoin probably in a meaningful amount, having a person with $5 of Bitcoin in a wallet is not the same as someone that’s quite dedicated, shall we say. And the the premise I’m going with this is if if adoption is very very early, it means that as we fly up the Scurve of adoption and the volume of people flood in, they’re probably going to do it with existing systems, existing wallets and platforms and banks. And so the first riskto-reward on the banking side of things is if there’s hundreds of millions of people out there that have banking apps and now their banks are on the path to being able to custody Bitcoin, provide Bitcoin related products, market services, loaning and all these sorts of things. They’re going to offer lower interest rates, a more seamless experience because they’ve got teams of developers, not one team, teams, multiple teams. And across the board, they are just going to outpace, outperform, out compete Coinbase, Binance, Bybit, all the big ones. And and what this means for adoption is that that flood of people may not necessarily have that first Bitcoin experience going into Coinbase like the majority do or the the early cyber punks that went into mining first, which is the more uh educational way of learning about Bitcoin more fundamentally. So when it comes to adoption, what’s to stop the next 5% of the planet just logging into their banking apps and being able to go and buy. So if that’s what the existing industry is competing with with banks that have a regulatory mo and every license that they would ever need in comparison to any uh businesses that would be considered more on the startup side or established crypto and bitcoin related financial service providers. They’re either going to be gobbled up by the banks to access their technology and combine it with their infrastructure and scale, but just purely from an adoption sense, we’re just going to see the majority of people have Bitcoin in the banking system. Why? Well, it’s because the majority of people in the world have their money not on their own persons, which is the educational approach of Bitcoin. The one thing that has stood the test of time is cold storage with your own private keys. Self- custody. That has stood the test of time through everything. So yes, there is these opportunities to hand your Bitcoin off to Michael Sailor and sell shares to you at double the price and he’s going to pay you back even more Bitcoin over time into the future. That’s that’s the risk and reward there. But those products, markets, services, companies, technologies, the existing framework of investment is completely entrusting it into a financial sector versus the self-custody aspect. So the flood of people going into just having their Bitcoin custodied by others is just going to increase. Now there’s a centralization risk there. And we’ve seen uh platform after platform blow up with problems. Whatever went wrong, the vulnerability led to thousands of Bitcoin out there into the ether in someone else’s hands and not the actual customer that spent time and energy acquiring it and holding it over time. But that’s just on the adoption aspect. in terms of price. If that is an incentive for people to be able to want to buy Bitcoin just because they trust their own bank and trust that their bank is now providing said services and facilitating an offering as such in a way that is just easy and seamless, well, we’re going to see price absolutely take off. But this introduced risks and this is the other reason why I made this video. My background is engineering, aerospace, but also a good amount of risk management. And so I’d like to just raise some risks and risk awareness for you because there is going to be some interesting risks when it comes to the price taking off when it comes to everyone wanting to offer financing and the hyper collateralization of Bitcoin. That’s the next phase in a few people’s eyes. The the path to okay, we’ve got this this asset that just keeps going up in value. let’s loan against it and that has some interesting risks but we’ll also introduce the the depths of economic density here. So the banking layer and the the customer interface, that’s the first stage. The commercial banking system, they’re going to be able to have a path and scale up into investing into the infrastructure layers of Bitcoin in a way that’s probably closest related to say the mining side of things as a key example. And the the final boss being the central banking layer, the issuers of the money who don’t hold dollars, they give them out as quickly as possible. They hold gold. They hold hard, scarce assets that outperform. Sounds like Bitcoin is going to be eventually as part of that discussion. Now, going back up the chain, lending rates. This is the risk. For example, and this is I’m going to explain it in long form afterwards and give you the quick easy answer to begin with. If the price is $120,000 and the production floor is $60,000. So miners are spending $60,000 on electricity as an average to mine one whole bitcoin. Please, please, if you are a banker or work with banks or know a banker, send this video to them. Please do not offer loantoval rates uh any higher than the production floor of Bitcoin. So, take price just the asset and its value as the collateral. Take production as the highest recommended loan to value you ever use. 60 50%. 60 divided by 120 50% in this example because if you get this flood of adoption and the increase of price doubles and now the production floor for miners is 25% 60 divided by 240 25%. Please do not loan more than that. Why? It’s because the price of Bitcoin in dollar terms is a premium and that premium has the opportunity to drop at the peak of the bull market or it’s just continually going up. There’s people wanting to sell and that intention of when they sell, they’re trying to think about when’s the bottom. It’s the the age-old game of all crypto traders. When’s the top, when’s the bottom? And the when’s the bottom part has a lot more understanding when you contend with the fact that there is people producing Bitcoin by exchanging it with electricity. Running a computer produces Bitcoin consuming electricity. You dollarize the whole group. You get an understanding of a floor price because Bitcoin miners, if you are new to the channel, Bitcoin miners, they can arbitrage the energy market. They buy power, run it through a computer, produce Bitcoin, sell it on. So it’s buy in the energy market, sell in the financial market. They can inverse that trade. They can sell in the energy market if the price of Bitcoin was to drop below production. And if if you can sell 70,000 or $60,000 of electricity, say at the same price that you’d paid for the energy in the contract, and the price of Bitcoin is 50,000, you’re getting an extra $10,000 worth of Bitcoin on top of the one whole Bitcoin, there’s an arbitrage there that goes both ways. So, which means at scale, the continual adoption of um the miners on the energy side of the network, they become natural buyers on the energy market to stabilize the grid. the sort of chaos and order of energy and financial markets is the Bitcoin blockchain bringing orderliness to well both sides the the energy market wanting to bring stabilityness and managing the chaos of the financial markets all in one system with hash rate as the boundary layer. So that’s that’s the boiled down thing. We’ve got adoption where we could see a massive flood of yeah 25% we could see a massive flood of the scurve into people that already use banks have money in those banks credit and financing lending loans mortgages all of it. There’s going to be a flood of adoption into the banking system beyond just wallets and nodes and people holding their own private keys. most important the commercial banks having that expression of different financing options with people such as Bitcoin miners because they produce Bitcoin into the future not treasury stocks and the central banking system is that final aspect um as to what lending rates are created and the other questions about the banks is what are they going to have full reserve like uh custodial bank which is trying to be a full reserve bank you pay fees so there’s a fair clarity is we’re not lending out your money so that when you all come rushing in to get your money, oh, sorry, we lent it all out. No, we want we want banking systems that that shift away from trust and become as trustless as possible. Are the banks going to demonstrate proof of reserves? Are they going to show the Bitcoin on chain? There is a path to that as well where they can still do transactions in a private way. Reach out to me if you are a banker. Um, so there’s all different there’s all different changes that are going to happen, but yeah, the flood of adoption into the banking system, price going crazy, them offering crazy amounts of lending and loaning products, which could be dangerous if they are higher than the production floor for miners. So, if you are interested in that sort of content, please take a look at the Hashpower Academy. I also have several websites. Yeah, hashpower.academy, terraash.inance, finance and I’m sure there’ll be another one which focuses on my research branch which is Bitcoin as a unit of account. So we just get rid of this part and we have this and this directly priced to energy. That is a very interesting story where the production inputs of society are prod priced by the economic outputs of society and the whole system revolves around the compute that prices it all in the middle. Thank you for listening. I hope you enjoyed this video and I will see you in the next one. Goodbye.