#772 Free Market Solution To A Broken Cost Of Capital w/ Dylan LeClair
1/5/2022 · 28 min · transcript via mlx
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Key topics
— Bitcoin's perpetual futures markets and quarterly contracts are creating a free-market cost of capital independent of central bank manipulation, contrasting sharply with the $300+ trillion fiat debt system built on negative real yields.
— Global debt exceeds $300 trillion (some estimates reach $400 trillion), while real 10-year Treasury yields are deeply negative at approximately minus 5%, distorting asset valuations across all markets.
— Bitcoin derivatives markets remain small (~$20 billion open interest versus ~$900 billion Bitcoin market cap) but are growing and could eventually force central banks to confront the consequences of centrally planned interest rates.
— On-chain data shows sustained outflows from exchanges since March 2020, indicating organic adoption and self-custody as more individuals recognize Bitcoin's sovereignty attributes.
— Catalysts for 2022 include spot ETF approval, additional nation-state and corporate adoption (beyond El Salvador), improved accounting standards, and potential pension fund accumulation.
— Bitcoin's 13-year journey reflects Satoshi Nakamoto's altruistic gift to humanity—a censorship-resistant monetary alternative to centuries of fiat currency manipulation.
Market & price signals
— Bitcoin is trading around $45,000–$47,000 at the time of this episode (early 2022). On-chain metrics show sustained exchange outflows since March 2020, suggesting strong hodling behavior and self-custody adoption. Perpetual futures funding rates have ranged from 0.88% every eight hours (96% annualized) in early 2020 to much lower levels by late 2021, indicating cooling speculative leverage. Quarterly futures contracts trade at a small premium to spot (e.g., March 2022 contract $1,000 higher than spot), allowing yield capture of 9–10% annualized on long-duration carry trades, with rates reaching 45% in April 2021 before liquidations. Funding rate volatility and liquidation cascades remain a key mechanism for price discovery in crypto derivatives versus traditional markets' central bank bailouts.
Actionable insights
— Do not buy Bitcoin futures ETFs due to the monthly rolling cost and contango structure; instead, acquire spot Bitcoin and move it to self-custody to capture full upside and establish true monetary sovereignty.
— Recognize that negative real Treasury yields and centrally planned interest rates create an unprecedented opportunity for Bitcoin derivatives to offer free-market cost of capital; monitor futures markets and on-chain data to gauge institutional capital flows and sentiment shifts.
Episode sponsorships
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— Today's episode is brought to you by Bitcoin 2022. Bitcoin 2022 is the largest Bitcoin event in the world taking place April 6–9 in Miami Beach, Florida, featuring four days of exclusive content, speakers including El Salvador President Nayib Bukele and CEOs like Michael Saylor and Elizabeth Stark, industry day for entrepreneurs, and Sound Money Fest with rapper Logic and other artists. Visit b.tc/conference and use promo code POMP for 10% off tickets, which increase in price on January 14.
— This episode is brought to you by Brave. Brave Wallet is the first secure crypto wallet built natively in a Web3 crypto browser with no extension required. You can buy, store, send, and swap assets, manage NFTs, and connect other wallets and dApps—all from the security of the best privacy browser on the market. Download Brave at brave.com/Pomp and click the wallet icon to get started.
— This episode is brought to you by Brave. Brave Wallet is the first secure crypto wallet built natively in a Web3 crypto browser with no extension required. You can buy, store, send, and swap assets, manage NFTs, and connect other wallets and dApps—all from the security of the best privacy browser on the market. Download Brave at brave.com/Pomp and click the wallet icon to get started.