Hey everyone! I'm Nik. I wrote a paper in 2018 called The Time Value of Bitcoin about Lightning Network and its potential to transform bitcoin. I wrote a book called Layered Money, and I write a research publication called The Bitcoin Layer. I'm a former US Treasuries trader for a large investment manager. You can ask me about bitcoin, global macro, rates, the Fed, or my main interest outside of finance and family: golf and hip-hop!
How to understand in simple way the rippo market and Treasury market
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my book Layered Money is a great place to start on Treasury and Repo 101. lot of basics.
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I'm a former US Treasuries trader for a large investment manager.
Were you in Backoffice, Risk assessment, management or at the trading desk yourself?
Executing other peoples trades or making trades yourself?
What tool did you use? Bloomberg? Python? Custom in-house webapps?
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i spent 1 year in back office, 1 year in risk, and 4 years on a trading desk as a trader. all four years i traded for execution. the last two of those years i also contributed to strategy, including having my own trades on. used bloomberg and my own excel spreadsheets for everything. the spreadsheets were built with help from in house mentors as well as sell side sales and trading and research folks.
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How profitable is trading bonds for these institutions.
It's kind of obvious that buy&hold Botcoin would have done better ...
but would a buy&hold portfolio of bonds&index ETFs have done better? Why do these institutions even bother?
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bonds as an asset class are a fixture of finance. fixed coupon securities have a very powerful effect on financial planning, especially across decades. one year's returns do not make or break an asset class. bitcoin is a very young asset class and quite beyond the mental reach for most institutional investors.
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So should your ex-employer fire all traders and just buy&hold the S&P500? Yes or No?
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my ex-employer is a fixed income manager tasked with short-term capital preservation and hyper liquidity, so no
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What do you think Tom Luongo's thesis that the Fed is acting to protect US Sovereignty? With the UN coming out in favor of money printing, it does seem to appear the Davos crowd isn't aligned with Fed's actions.
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the davos crowd seems to be a group of people that act like they are smart, and have fooled some people and governments, its like they have a filled a vacuum, caus democracy produces lawmakers that probably have no clue how to govern, or what laws to make, so this creates room for the davos crowd to set the agenda. sorry that wasnt really my place to comment on that.
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What was it like to write and publish your book? I would love to hear any insight you are able to share on your process for getting started in Bitcoin/Lightning and then writing, publishing, and driving sales for Layered Money?
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my most comprehensive interview on this process was with John Vallis https://www.youtube.com/watch?v=odrFNIAC8ag
on getting started in bitcoin and LN, you have to get familiar with different types of wallets, send transactions to yourself and to others, and use bitcoin. if you're not fascinated with it by that point, the power of using money without intermediaries, then you probably shouldn't be involved in bitcoin. there is pure magic in that experience of USING bitcoin.
publishing a book was a labor of love. i had to sacrifice a lot personally and otherwise to make it happen. but i had a story to tell that i believe has never been told before, and that motivated me to put it out.
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Thanks for your insight, I appreciate your book and all of the work you all are doing at Bitcoin Layer and will check out that interview.
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Thank you all for your questions! Feel free to reach out @timevalueofbtc on Twitter and check out all our content at thebitcoinlayer.com - thank you for supporting Layered Money over the past two years as well!!
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I am a huge fan, Nik, and I'm so happy to see you here on SN! I have read Layered Money twice, and it has taught me a lot. I do have a question about the recent UK central bank intervention. Your article characterized it as a BlackRock bailout. We got into a discussion here on SN about whether it really was about Blackrock, since Blackrock only served as a conduit for pension fund investments. Can you elaborate on this incident?
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that is a good nuance to point out, and yes it was the pension funds that have the assets, and blackrock was rescued in order to save the pension funds, but it was blackrock's fault that they structured their portfolios in a way that made them subject to a margin call death spiral. too many derivatives on their books. the manager was irresponsible in this case, and the pension funds did need to be protected. it was both, you could say
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Do you have any inside knowledge of large institutions stacking BTC, and what is your Bitcoin outlook for 2023?
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i have no inside knowledge of large institutions stacking. what i do know is that universities are heavily invested in VC, which is somewhat invested in bitcoin broadly. my outlook for bitcoin in 2023 is modestly bullish. i think it can make a charge back to the upper range of where it was in 2021
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Hi Nik—2pac or Biggie?
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What do you think about the situation at british treasuries?
Did the markets b*tch-slap the goverment for being irresponsible? Or was it more complicated?
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milton friedman proposed growing money supply at same rate as the economy. how do you view that monetary policy vs a fixed supply (at 21m)? why is fixed inherently superior? isn't price stability better than inflation or deflation?
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i think this is a very economics-heavy question, so i'll slightly divert my answer. i don't think it matters about current central bank policy being inflationary versus bitcoin being deflationary, because the two will coexist. we will have a choice between the two as people, companies, and countries. both will exist in tandem. the market will determine what is "superior" but even that is the wrong word, in my opinion. is that a fair answer?
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yeah guess so. i agree dollars aren't going anywhere. the question is what will be the core reserve store of value. gold was historically, growing at ~2%/year. now it is US dollar, growing at ~6-8% per year....bitcoiners assume 0 growth is the perfect answer over the long run. could be....
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10 sats \ 1 reply \ @ca 4 Oct 2022
You might find this read interesting
You can download the ebook (.pdf) for free.
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thank you - will check it out.
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121 sats \ 4 replies \ @sb 4 Oct 2022
A lot of Bitcoiners are in their teens, 20's and 30's. Many will have children in the next decades. It is fairly obvious that government led education and fiat academia are inept and corrupt.
How do we set up home school curricula for our children? How can this be optimized for mathematics, economics and history, especially?
I really appreciate your work!
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my wife and I have a 4yr old girl. we teach her a lot at home and are heavily involved in her education. the internet is extremely powerful in this regard. Khan Academy kids, for example, a free resource that has already taught my daughter the basics of reading way before her schooling could have. we are there with her to amplify the ipad, and we read to her all the time.
she also sits with me at my trading desk for 5-10 mins a week and i talk to her about charting and we look at candlesticks together. i guess my advice is, put everything you can into their education, because nobody else is going to teach them what you can.
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in Europe: you can't. if you don't take your kids to school the regime will force you or take your kids entirely.
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Wait what? For real? I grew up in a "third world country" and they don't do that over there! The more I learn about Europe, the more I understand true authoritarianism.
They love government so much over there, their government has a government 🤐
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sadly yes.
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Hi Nik, thank you so much for all of your work in Bitcoin and Lightning. Your book was great, and I appreciate your work on LNRR. Thanks for taking time for an AMA.
Do you have any estimates for how soon it will be for the Bitcoin/Lightning yield curve to begin establishing itself within the "mainstream"? Do you have milestones, KPIs, or other factors you look at that helps you determine adoption and how all of this plays out?
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see reply to @myles below, but one KPI is certainly total BTC in LN, which is above 5k and growing nicely. another milestone that i watch for is companies publishing interest rates on routing activity, in any capacity. that will just attract attention to the LNRR thesis and the idea of LN derived interest rates
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If I remember correctly, you had a thesis about LN returns giving some kind of base rate for BTC?
Does the current reality of LN match your expectations there? It seems like different node operators have very different rates of return. Has your thesis changed at all?
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Joe Consorti and I wrote an update to my original work earlier this summer, The Time Value of Lightning Network. in that, we demonstrate how active the "routing for yield" ecosystem is. the rates are fairly low, and the total capital is "only" 5k BTC, or only $100 million, so the ecosystem is nowhere near institutional yet. the theory has played out way beyond my own expectations, seeing businesses build products that have been inspired by my LNRR thesis is wild. nothing really changed much with my thesis, it will be slow to get to institutional size, and probably beyond my expectations in terms of the impact of my original paper.
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Thanks! I'll check out the update!
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121 sats \ 1 reply \ @kr 4 Oct 2022
how much higher do you think benchmark interest rates in the US will go over the next 12 months?
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i think they are going lower across the curve over a 12 month time horizon. 12mo target is probably sub 3% on 10s and mid 3%s on 2s
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What in your opinion is the US governments next move in regulating or adopting Bitcoin?
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Favorite Sci-Fi novel?
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Contact or anything Michael Crichton, although it has been probably 15 years since I've read a full sci fi novel :(
non fiction only reader now but i hope that changes over time
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Contact the movie or the book? Why is that your favorite? Frankly, Contact is my in my all-time top 3. Love that story.
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the book. the movie was something i watched as well and enjoyed, but you asked for the novel!
something about the way Sagan described it made it so believable that we could have interplanetary interaction.
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Is it possible that bitcoin is the greatest form of money ever invented, but that it will still fail due to factors pertaining not to its intrinsic qualities, but to how people perceive it?
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yes, but i don't believe failure in that situation is the best word. it could just be limited in its use, not really expanding beyond its role as a somewhat-outside-the-mainstream digital gold. would bitcoin staying at $19k for the next 10 years constitute failure? or just disappointment? that's how i would frame it
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What's Bitcoin missing if anything?
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i almost feel like it's a trap to say that bitcoin is missing something. in my opinion, it's one of the most incredible innovations of our lifetimes, and certainly one of the most powerful applications of the internet ever. trying to say something is missing from bitcoin can only lead to "don't bite off more than you can chew". i'm in awe of bitcoin's maturation. holding 400bn of market cap 14 years in.
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Nik Bhatia is here, from The Bitcoin Layer My flow is medicinal, like pills from Bayer Love MF Doom, but I'm not a doomsayer Don't bet on dollars! They don't have a prayer
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What's something you believe about bitcoin that few people, including bitcoiners, agree with you on?
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it won't replace the dollar, only live side by side with it. doesn't matter what time frame
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Do you code?
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I know I'm late to the game but....
I just finished reading your book "Layered Money" a few days ago and I loved it! The history was spot on (I didn't feel like it was a rehash of Bitcoin Standard) and I liked the grafts and explanations of how central banks fund themselves.
Why didn't you include much of anything about the Lightning Network?
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Big fan!
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What are your top 3 bitcoin books?
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No question just a huge thanks for your contributions. I feel very fortunate to have people like you orange pilled. ❤️
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Do you keep contact with your colleagues from back when you worked with "traditional" markets? If so, do you see them having any interest in bitcoin beyond just NGU?
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As someone who hasn't played much golf, what's the appeal? Seems like people who love, really love it.
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golf is one of the best mental exercises. teaches patience. i learned how to compete in life via competing in golf. it's also an amazing place to clear your mind. sometimes i'll forget about everything else in the world for a few hours.
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I'm betting that there is one topic that does occasionally interrupt those few clear minded hours, Bitcoin! ;)
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i have been known to check levels (across asset classes) between shots ;)
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I know you didn't ask me but....It's one of the 3 most important games to learn in life. 1)Chess (it's the game of Kings and all the pieces go back into the box - you also learn about consequences REALLY fast) 2) Texas Holdem (it's the Cadillac of poker and one of the only games I know of that it's against the rules to tell the truth...you can't say I have two aces to your opponent...it teaches you to bluff and min/max your winnings as well as how to gamble and what your limits are) 3) Golf - 100% what @bhatiaipc said but also...take someone you don't know out golfing and learn what kind of person they are...do they cheat? give themselves a mulligan? not follow the rules or common currencies? do they get pissed off because they aren't as good as pros or couldn't make a ridiculously hard shot? How do they treat the staff? Do they just want to gamble and BS? Lots to learn about others as well as yourself.
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