"In the 1800s, we had a bubble in the railways and almost all went bankrupt," said "Downtown" Josh Brown, CEO of Ritholtz Wealth Management. "But what has been left as a result of this financial wreckage are the lanes, the trains, the stations and the expertise needed to build more."

This is Brown's analogy with the 2017 bitcoin bubble, as explained by a recent episode of Bitcoin Macro, a podcast series popping up featuring speakers from the CoinDesk Invest: NYC conference on Tuesday, Nov. 12. .

"Ultimately, technology (railways) has found a way to be profitable, useful, and has become an integral part of our society," Brown said. "So it's possible that the cryptographic investments that people made in 2017 are stupid, but that they had the right idea."

The last six months have been marked by a growing dialogue between the bitcoin industry and global finance leaders. People are asking more and more: Is Bitcoin a macro asset? Is this an asset? How will it behave during the next recession?

Brown regularly contributes to CNBC. In this episode of Bitcoin Macro, Nolan Bauerle, Head of Strategy for CoinDesk, speaks with Brown:

  • Why does Bitcoin feel like an asset for protest but does not it see huge amounts of capital flowing in from troubled regions?
  • Why are US dollars and assets such as real estate in Manhattan still the best option for bringing out wealth of countries?
  • Why is it impossible to know how Bitcoin will react during a recession given the unique circumstances surrounding the last eleven years of the market.
  • Why did bitcoin and crypto spaces switch between excessive optimism and too much pessimism.
  • Why do the real technological upheavals tend to happen long after their first promoters have left the scene?
  • Why the impact of bitcoin can be something very different from the macro narrative discourse, not sovereign, in favor today.

Listen to the podcast here or read the full transcript below.


"In the 1800s, we had a bubble in the railways and almost all went bankrupt," said "Downtown" Josh Brown, CEO of Ritholtz Wealth Management. "But what has been left as a result of this financial wreckage are the lanes, the trains, the stations and the expertise needed to build more."

This is Brown's analogy with the 2017 bitcoin bubble, as explained by a recent episode of Bitcoin Macro, a podcast series popping up featuring speakers from the CoinDesk Invest: NYC conference on Tuesday, Nov. 12. .

"Ultimately, technology (railways) has found a way to be profitable, useful, and has become an integral part of our society," Brown said. "So it's possible that the cryptographic investments that people made in 2017 are stupid, but that they had the right idea."

The last six months have been marked by a growing dialogue between the bitcoin industry and global finance leaders. People are asking more and more: Is Bitcoin a macro asset? Is this an asset? How will it behave during the next recession?

Brown regularly contributes to CNBC. In this episode of Bitcoin Macro, Nolan Bauerle, Head of Strategy for CoinDesk, speaks with Brown:

  • Why does Bitcoin feel like an asset for protest but does not it see huge amounts of capital flowing in from troubled regions?
  • Why are US dollars and assets such as real estate in Manhattan still the best option for bringing out wealth of countries?
  • Why is it impossible to know how Bitcoin will react during a recession given the unique circumstances surrounding the last eleven years of the market.
  • Why did bitcoin and crypto spaces switch between excessive optimism and too much pessimism.
  • Why do the real technological upheavals tend to happen long after their first promoters have left the scene?
  • Why the impact of bitcoin can be something very different from the macro narrative discourse, not sovereign, in favor today.

Listen to the podcast here or read the full transcript below.


Nolan Bauerle: (00:09)

Welcome to Bitcoin Macro, a pop-up podcast produced as part of the November CoinDesk Invest New York conference. I am your host, Nolan Bauerly. The podcast and the event explore the intersection of Bitcoin and global macroeconomics with the perspectives of some of the world's leading thinkers in finance, crypto and beyond.

Nolan Bauerle: (00:34)

Welcome to the latest edition of our contextual podcast on bitcoin. This podcast, in particular, is designed to shed light on some of the content you will hear about at Consensus: Invest on November 12, here in New York. Today we have a veteran speaker of our series and a crossover star, Josh Brown, who is certainly known for his role in mainstream financial news, a regular at CNBC, various other networks. Josh Brown has been with us at Invest since it was launched in 2017. He gave fantastic advice to conference attendees and was our last fireside talk with Howard Lindzon, his good friend.

Nolan Bauerle: (01:23)

Last year, he came back to inform the public of the concerns of asset managers regarding crypto-currencies in general. And this year, he will get involved as our Master of Ceremonies and we will introduce all our great members, and we are happy to have him. So I think the cross star is a good way to describe you. Many people know you for cryptography, but you are certainly well known for your financial news.

Josh Brown: (01:48)

Hi Nolan, it's great to be with you.

Nolan Bauerle: (01:50)

Nice to have you on board. So we will start. The podcast is really focused on bitcoin. And the first question concerns the fact that Bitcoin behaves like a macro asset. So you have seen a lot of what is happening in the world today. You are pretty hip. How do you see Bitcoin integrating here? Is this a real asset that you can consider as a way to cover macroeconomic changes? Or is he still waiting to be built and mature a little more before he really gets into the major leagues of macro assets?

Josh Brown: (02:24)

As I told you right before the recording, I consider myself more as a student than as a teacher in this field, but I am a fit pupil, and I try to pay attention to various opinions and, of course, to look at charts and price action. And I do my best to understand what's going on. To answer this question directly, I would say that I do not believe that bitcoin behaves in any way like a macro asset. And the only reason I say this is that we have no evidence that it correlates with any other macro development. In other words, I would like to be able to say when … Think about gold. When people worry about inflation and I do not say that gold is an excellent protection against inflation, they cause concern, but there are transactions in which we can see flows approaching. of this asset class. It's demonstrative.

Josh Brown: (03:21)

So you can tell if you think or not that gold is a hedge against inflation, you know that others are doing it, and this is going on well. Think about public service stocks. Throughout the year, the Federal Reserve was on the verge of lowering its rates, and is now reducing them. Maybe they will lower rates further. And during this process, you have seen money flowing into utility stocks, which are prized for their high returns. So, if you do not get a return on bonds, what's the next best thing or the next best thing? These are high-yielding stocks, and utilities are considered one of the safest high yielding stocks. We can say that it is a macro asset. What can we say about bitcoins that are almost comparable? In October, I think this is the world record of people involved in various events, whether Santiago or what happens in Hong Kong. Millions and millions of people around the world are taking to the streets.

Josh Brown: (04:20)

Why not Bitcoin up to 50% if it is actually a protest asset? Well, that's not the case, so I do not know. If we are worried about disinflation and are saying that maybe people, if they are afraid of their own currency, there will be such a bitcoin rush. Well, where is it going? This is not the case. I would therefore like to be able to answer yes and say, "Yes, bitcoin has now become a pantheon of asset classes that people can use to express a macro point of view." But this It's just not, there is no proof of that, so my answer to you is no, but maybe it will change at some point.

Nolan Bauerle: (04:57)

Yeah. And the fact that you focus on the behavior is the most important part here. Many people understand what they want and will fall into a kind of bubble, where they see it behave in a way that may not really be, given the facts, and that you have emphasized here that his behavior, given all these conditions, is quite clear. This sounds like a speculative asset on which people are interested in making money, and it certainly requires a high risk tolerance to be exposed even nowadays.

Josh Brown: (05:29)

If we say that the most obvious use case of bitcoin is the ability to get out of a currency and transfer money from a country, or … there is a fierce competition. US dollars are what people want around the world. In Asia, they may want the yen when they fear for the security of the currency, the capital markets or the economy in which they live. It's a fact and if we say, "People will use bitcoin to get out of their country's denomination" or their jurisdiction. They want, I do not want to use the word hiding money, but they literally want to move money where it can not be touched. Well, real estate has been a much more important way to do it. Look in Vancouver, half of the buildings are in Chinese currency.

Josh Brown: (06:21)

Look at the towers they erect in New York. They just put the cornerstone, I think it's called, or whatever. They have just put the cap on something called the Central Park Tower. I think it's 1400 feet tall. It is the tallest residential building in the Western Hemisphere. There will only be 70 apartments left. So who buys these apartments? Well, it's not like a lawyer in New York. These are apartments of 7, 10, 20, 50 million dollars. You might think of it as safe for the Russians, the Indians, the Chinese, the people who are trying to have assets outside the country. Nobody will even live in half of these apartments. And this is only one in five that I could quote right away.

Nolan Bauerle: (07:10)

The one they built on Lexington, the thinnest that was built earlier, I do not remember the name yet, but you can see that the windows are empty. The lights are off every night.

Josh Brown: (07:19)

Of course. Do you want to laugh? When they built the 437 Park, which was the largest until this one was the largest, they did something for New York City, a traffic study. So, if you want to build something big, you have to spend millions of dollars and a few years to study the impact on local traffic. And the joke is that there will not be any traffic, because no one is going to live there. This is how you see foreign nationals withdrawing money from their currency or the jurisdiction of their government to place it in what they consider a safer place. And you just do not see the dollar coming into Bitcoin to the same extent. So it's hard to argue that, functionally, that's really what's going on there.

Nolan Bauerle: (08:05)

And you mentioned something that I had not really heard before. We call it a safe haven, but you also call it a protest asset. And I think it's a really interesting label, and its behavior has not really mimicked what you'd expect from a protest asset. Now, I saw him trading at a premium when the Hong Kong protests began, but about 100 dollars. And it was really because people were worried about using their Oyster cards, their Metro cards to go home to China if they went to the mainland because they were going to be followed, but they feared really that the local money is not followed. . But we have not really seen this premium stick, nor that kind of flow allowing to use it so as not to be polled or spied, so that they know where was your simple consumption money.

Josh Brown: (08:52)

Someone was talking to me about Venezuela and I am aware of what is happening in the economy there and it has been going on for years. And hyperinflation, the collapse of institutions, starvation. It's a horrible, horrible situation. Now, if you told me that 30% of all Venezuelans transferred their money from the local currency to bitcoin, then I would close my mouth and I would say, "Okay, there is something there. important here. "But I do not think so, and you?

Nolan Bauerle: (09:24)

No, I mean, and we've seen that Turkey, for example, has seen a lot of users, say buyers (inaudible 00:09:32).

Josh Brown: (09:32)

Yeah. Excellent example. Another inflationary situation where people for political reasons want assets out of this country, and that the currency and the local economy collapse.

Nolan Bauerle: (09:44)

Yeah. But, as you say, we have never seen this type of use.

Josh Brown: (09:48)

Yeah. Where is he, where is he? When does it start? So, I'm not saying that it can not, I'm just saying I do not see it.

Nolan Bauerle: (09:54)

Let's move on to the recession now. Many rumors of recession, we are still doing pretty well here in the United States, but it is certainly the case in other countries. So we have seen this kind of cheap money around the world for a long time, and it seems that even because of the high risk tolerance on the venture side, because the money is simply available and all the ideas that come up are financed. and the risk tolerance has increased to a certain extent here. Now, if it changes, if a recession causes some sort of liquidity crisis, or an inability to access that cheap money again, how do you think bitcoin behaves?

Josh Brown: (10:34)

I guess we do not have …. In the United States, we do not have a previous story, so we'll say we've been expanding for 11 years. Expansion is the longest ever. So I do not know the answer.

Nolan Bauerle: (10:49)

Yeah, well, they're-

Josh Brown: (10:50)

We will find out.

Nolan Bauerle: (10:53)

And my last question for you, and it's really a way to tap into your exposure to traditional media, to the traditional financial world. Bitcoin really made its way into everyone's consciousness in 2017 when I met you at this great dinner we had near Chinatown. And you wrote a nice blog. I thought it was … I really realized how much you were a fantastic writer.

Josh Brown: (11:16)

Ah thank you.

Nolan Bauerle: (11:17)

I think it was something in (inaudible 00:11:18), and it was awesome.

Josh Brown: (11:19)

Yeah. Yeah.

Nolan Bauerle: (11:21)

So this is it. This made its debut in the consciousness of the world in 2017. Everyone has started to talk about it, and it has already mutated several times since in the minds of people. However, in the last six months, have you noticed that this has changed or is it just the same old story?

Josh Brown: (11:35)

So, when I was one of the keynote speakers in the Consensus Closing Group: Invest 2017 the first year, the audience was filled with young people, mostly guys, who had earned a lot of money. I think the price of bitcoin was $ 15,000 or $ 16,000, and my message to that audience was then, "Calm down". It's nice to feel like you're missing. You do not have to do anything just because everyone does it and they seem to get rich. And of course, it only takes a few weeks for it to sound like a very good piece of advice. But it's always good advice. Perhaps we are now in the extreme opposite situation, where, instead of fearing to miss opportunities, there is simply this incredible pessimism that all people thought to be true regarding digital currencies and cryptography, and that the blockchain now looks like a traditional financial media joke, or at least, you make fun of every day.

Josh Brown: (12:47)

And maybe now things have become too pessimistic. And the only other example of this kind of thing that I can think about for my own career and for my own experience, I remember my formative years in the area where we were doing the internet bubble, and everything clears up pretty quickly. Let's say that it only took March 2000 to, say, the end of 2001 for people to be completely eliminated, not just in financial terms, although they were, but emotionally and mentally. And nobody ever wanted to hear about technology again. And in the ashes of this experience, Google is born. In the ashes of this experience, very discreetly and without great fanfare, Steve Jobs joined Apple as CEO. The seeds of the technological boom that we have known for some time, let's call it 12 or 15 years old, were born in the ashes of this earlier mania.

Josh Brown: (13:52)

So, I think statistically, spiritually, regardless of how you plan to look, there was a bubble absolutely in everything that was related to crypto from the end of 2017. I do not not think that anyone would deny that it was crazy like the internet craze, but the thing is that all the predictions that have been made about the transformational power of the internet have come to be a reality. It took longer than expected and the companies involved were very different. If you think of the original Internet bubble, we venerate fiber optic pieces such as JDS Uniphase and Nortel at the altar. And we bought stocks like AOL, Excite, Lycos and Yahoo. None of them is particularly relevant. But all predictions, we will buy food on the Internet. It happens. We will buy pet food on the Internet, it happened.

Josh Brown: (14:51)

Toys, books. We will communicate all day. All these predictions came true. It's just that the investments were not correct. So, if there is a future for crypto and blockchain, it is quite possible that the first competitors, who came in 2015, 16, 17, 18 and 18 are not part of it. And a lot of the investments will turn out to be zeros. But that does not mean that the future is written. So, if I could maybe go back and give it this year, I know it's not so encouraging, but it's a bit optimistic for the public. Then I will feel like I have said something that makes sense.

Nolan Bauerle: (15:33)

What you are essentially saying is that today's world is recognizable to entrepreneurs and visionaries 25 years ago. They will recognize what we are doing today as what they have predicted, but as you said, maybe approach the subject from a different angle, with different names, on a different platform. The details may be different, but all of them are quite consistent with what these people had imagined.

Josh Brown: (16:00)

You know, it precedes what I just talked about. In the 1800s, we had a bubble in the railways and almost all went bankrupt. But what has been left as a result of this financial wreckage are the tracks, the trains, the stations and the expertise needed to build more. And I mean we have trains to date and high speed trains. And what they build to connect … I was in Orlando, and I saw all the facilities they built for the high speed train that will transport passengers from Miami to Orlando in 15 minutes.

Nolan Bauerle: (16:37)

Jeez.

Josh Brown: (16:37)

But this system they build is a descendant of money that was lost during an overly ambitious investment in the 1840s. So, I know that people do not have much patience to wait 160 years before see their dreams come true, but I point out that after the railroad bubble, there were probably a lot of people running around saying, "See, it's all silly. No, it was not all stupid. And we had functional railroads of the Civil War. So, finally, technology has found a way to be profitable, useful, and has been integrated into the fabric of our society. So it's possible that the crypto investments people made in 2017 are stupid, but that they had the right idea. And this in the bursting of the bubble burst, new businesses, new ideas, new entrepreneurs, new uses, and everything is rebuilding.

Josh Brown: (17:34)

And suddenly, people make profitable investments. And just as a Coda, I took the long Island Island Railroad to Manhattan today from Long Island. And in every car, there are advertising posters. And in a car I was in today, there were posters for the Genesis cryptographic exchange. And I know it's Tyler and Cameron (Winklevoss) and I'd imagine they spent a lot of money on it, but everyone who was riding in that car was surrounded by posters for this new currency exchange or brokerage. or what you want to call. And most people who looked at this poster were, "What does that mean?" But some people know it. And I just find it interesting that there are still people ready to invest, to advertise and to market new products. And as long as it continues, there may be a near future in the short term that I think now for this type of technology.

Nolan Bauerle: (18:32)

So, as you say, the tracks have been set to take you from Miami to the happiest place in the world in such a short time. And maybe the tracks are still there to bring Bitcoin to the Moon and report on

Josh Brown: (18:48)

When the moon.

Nolan Bauerle: (18:48)

When moon, when moon.

Josh Brown: (18:49)

Well, listen, I think we could separate what we think the price of the thing done is compared to what we think the utility will be. This is where I have been since December 2018. We wrote a blog post basically saying that I had finished speculating on the price of bitcoin. I think it's a mania. However, I am open to the possibility that the blockchain will become a transformational technology. The caveat is that it could be very non-sexy. This could show up in the income statement of a company that has managed to save a few million dollars by switching from a database to a blockchain. I do not know if that implies that the price of a digital coin will increase, but I try to remain open-minded.

Nolan Bauerle: (19:34)

It's not the pamphleteers' novel about the French Revolution or the American Revolution that everyone was sort of –

Josh Brown: (19:42)

No, all right, it could just be a cost savings for the company. And again, it's a kind of revolution. It will not just be that people wave flags and storm the barriers.

Nolan Bauerle: (19:54)

Well, Josh, thank you for your time today.

Josh Brown: (19:56)

Have I brought everyone down? I do not want to do that.

Nolan Bauerle: (19:59)

No no. It was fantastic and we can not wait to hear more in a little over a week now. So thank you for your time and see you soon.

Josh Brown: (20:07)

Okay, Nolan. Thank you.

Nolan Bauerle: (20:08)

Goodbye, Josh.

Nolan Bauerle: (20:14)

Appreciated this episode? I would personally like to invite you to come to Invest: New York in November. The event presents not only the speaker you just heard, but also a whole range of extraordinary thinkers. Go to coindesk.com and click on events or simply follow the link in the description. Thank you for your attention and see you soon in New York.

Image Josh Brown via the CoinDesk Archive

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