Jürgen Michels

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In this episode, we meet, Jürgen Michels, the Chief Economist of the German BayernLB bank. The bank research team recently published a model that suggests the price of BTC to reach $90K after the halving in 2020. This estimation comes not from some random person, but from a state-owned German Bank. The moment I read the paper I instantly reached out to Jürgen and here he is on the Borderless Crypto.

Episode Outline:

  1. Juergen’s background in monetary policymaking.
  2. BayernLB’s – state-owned bank that is the 2nd largest physical gold trader in Germany.
  3. BayernLB’s interest in Bitcoin since 2015.
  4. “The Value of Bitcoin” conference in Munich.
  5. There is really a concept that could challenge the concept of fiat currencies.
  6. Central bankers’ view on Bitcoin as a competitor.
  7. Central bankers building cryptocurrencies.
  8. The difference between HARD and EASY money.
  9. Stock-to-Flow ratio of commodities and money.
  10. Comparing the Stock-to-flow of Gold, Bitcoin, USD, EUR.
  11. Why is BTC’s zero utility in the real world advantage for BTC? Compare to Gold, which is used not only as a store of value but also as tool in the real world.
  12. Will BTC reach an equilibrium price of $90K in 2020?
  13. When will we know if the stock-to-flow ratio is a valid compass for the $90K price point?
  14. Who will provide the capital to drive the price of BTC up to $90K.
  15. How would banks react to one Bitcoin reaching $90K?
  16. Jürgen’s view on Austrian economics?
  17. How do Jürgen’s colleagues in BayernLB look at Bitcoin?

Jürgen’s Contact:

Full Episode Transcript

(00:02) George Manolov:

This is the Borderless Crypto Podcast.

Hello everyone. I’m your host George Manolov, and in this series; I bring you exceptional entrepreneurs, investors, hustlers and thought leaders from the cryptocurrency and fintech space.

(00:26) George Manolov:

Hello, dear listeners. In this episode, we meet Jürgen Michels, the chief economist of the German BayernLB Bank. The bank recently published a paper where Jürgen estimates the price of Bitcoin to reach $90,000 in 2020. I repeat, that’s $90,000 per one Bitcoin in 2020. This estimation doesn’t come from some random person, but from a state-owned German bank. The moment I read the paper, I instantly reached out to Jürgen and here he is on the Borderless Crypto.

Some of the topics that we cover include; what is the difference between hard and easy money? How do US Dollars, Euros, gold and Bitcoin compare between each other in terms of hardness? And what is the stock to flow model and how can we use it as a tool for estimating the future price of Bitcoin? We also covered the central bankers view on Bitcoin, and why Bitcoin can turn out to be a better store of value than gold?

Please note that anything that I or my guest say in these talks is for informational purposes only and should not be treated as investment advice. Although during daylight I’m part of the team behind the crypto lending platform Nexo, at night when I do these talks, I share only my personal thoughts, which in no way represent Nexo’s opinions.

Now it’s time to get the podcast started in three, two, one.

(02:09) George Manolov:

Jürgen, could you share a bit about your background and about BayernLB Bank?

(02:12) Jürgen Michels:

Yes, of course. I’m the chief economist of BayernLB and head of the research department, where we have 30 people looking at different asset classes, and we also have an interest in the FX side and other assets as well. Before that, I was working for Citigroup in London as a European economist. My background mainly comes from monetary policy making where I hold a PhD, and it is a field of research as well. So, that’s a bit of a background about myself.

BayernLB itself, is a Landesbank (state-owned bank); it’s 75% owned by the free state of Bavaria, while the remaining part is owned by Bavarian Sparkassen. As a bank, we offer services mainly to the wholesaler side for corporates. We do a whole load of transaction on the real estate sector and also in the FX business, and we also own lots of contact with corporate banking activities around Germany and also on a global level.

So, that is a bit about the bank and myself. We actually take a look actually on different asset classes. We are the second largest physical gold trader in Germany, but we also look at different assets as well.

(03:33) George Manolov:

So, are your clients mostly retail or corporate customers?

(03:37) Jürgen Michels:

It’s mostly corporate customers. We have a subsidiary DKB, that is 100% owned by BayernLB. It’s a peer retail business about BayernLB itself, and it’s really dealing with corporate and institutional clients.

(03:52) George Manolov:

What caught my attention when I coincidentally came across your research paper, is that I was also reading The Bitcoin Standard by Saifedean Ammous. I find his name very hard to pronounce.

(04:07) Jürgen Michels:

it is hard.

(04:10) George Manolov:

He makes all of these comparisons between gold and Bitcoin. The fact that you are talking about gold here and you say this is a big part of your business, what exactly do you do with gold? You said that you’re essentially the second largest trading company of gold in Germany. So, do help your corporate clients to buy and sell gold, or what exactly do you do? And is this in any way connected to your interest in Bitcoin?

(04:34) Jürgen Michels:

Regarding Saifedean; he was in our bank at the beginning of last year where we looked very deeply in that. Regarding our gold business; we provide them for other banks where you really get the physical stuff. So, we have vaults where we store the gold and then do the whole distribution for them, so that’s the whole thing. We buy it, we sell it, and we do all of the transactions around it for them. At that stage when you’re also able to get very little bits and pieces for institutional clients, such as other banks, we directly ship to their individual clients as well.

(05:13) George Manolov:

At what point did you personally or the bank as an institution start looking into Bitcoin as an asset class?

(05:20) Jürgen Michels:

It was more or less coming from the bank, it was actually our chief risk officer that in 2015 came up with the issue that there was something going on and he wanted to know more. So, I asked Manuel Andersch who is working in my team as an ethics analyst to have a deeper look at this, and together we went on this journey. Manuel did much more digging into all the stuff than I did, and he saw that there was something significant coming up.

So, we wanted to know more about it since 2015, first on the very, very, very low level. But then we started to explore the whole thing much more over time germinating in supporting the first value of Bitcoin conference, which took place in the premises of our bank in June, 2019.

(06:12) George Manolov:

So, you yourself organized the conference about the value of Bitcoin?

(06:16) Jürgen Michels:

We supported it. We were not the organizer, which was a team around it, also based in Munich. But we were not just providing some cash for the whole thing, we were also involved in the whole concept because, honestly, it was very important for us to see how all this goes on, and for me personally, it is very important to know the pros and cons for Bitcoin on this, and that’s what I see in my role as the head of research as well. So, I’m not there to come up and make up some price stuff or something like this in the future. Instead we want to have a proper look at it, see the advantages and disadvantages, and also at the end of the day, to figure out the probability if this whole thing will fly or not.

(06:53) George Manolov:

Tell us a little more about this conference. Who was there? Who joined? Who were the participants? What were the conclusions or things you took out from this event?

(07:03) Jürgen Michels:

First of all, it’s all available properly through “https://vob-conference.com/#videos”, it has all the sessions we had. Saifedean was there as well adding a great presentation. Joerg Hermsdorf was there as one of the engineers. We also had people from central banks who participated. There were people from the Bundesbank. And we had people from institutional investors that were very critical of Bitcoin. We looked at the question of energy consumption. So, it was really a wide range of things that came up. But at the end, similar to the study we did, we came to the realization that there is really a concept which could challenge all of the existing fiat currencies in a way that is designed to be much harder than the original currencies we deal with at the moment, and as a concept which could be a much more predictable and a super safe asset to actually store your value for the future.

(08:06) George Manolov:

This is very interesting for me that central bankers are attending and actively thinking about Bitcoin as an asset. So, how do they look at this? Are they mostly very skeptical as people usually think about it? Because a few weeks ago, I read that Venezuelan Central Bank, and this is obviously a special type of central bank, was starting to stockpile Bitcoin and Ether as its reserves, so there’s also been speculations that other central banks or governments are secretly starting to accumulate some of those assets. What has been the sentiment from these very high-end people in our existing financial system?

(08:51) Jürgen Michels:

They were very skeptical. They still view it with loads of question marks, particularly when it comes to questions like money laundering and all those issues. And of course, they are talking for the provider of the legal tender for the Dollar or the Euro, and they do not want to see this status changed. So, they regard Bitcoin as a competitor, and they still think that they are in a better position, because they’re more liquid and that you can rely on them because there are little fluctuations of the value right now. In that respect, they try to play down the role of Bitcoin saying “yes, this is a concept right now, but it doesn’t fulfill the proper criteria for using it as a substitute for their currencies”. But at the same time, I think they all recognize that there is an increasing need for cryptocurrencies.

I think that since the summer and the attempt to go through with Libra, all the central banks have changed their view on crypto in total and are all working on their own solutions to come up with a cryptocurrency. But of course, this is something different to what Bitcoin provides, because all the cryptocurrencies from the central banks will be a crypto sibling of the existing fiat currencies. In that respect, it’s completely different to what Bitcoin means as an asset, which is not based on the trust in one institution, but instead on this decentralized set-up that we have, the trust of an algorithm that works, the double counting system, and not being reliable on the decisions of some people.

(10:40) George Manolov:

That’s totally true. There’s been a lot of talk of creating government issued cryptocurrencies which are essentially just stablecoins. They are just issued by the government, not by companies as it has been happening now. But as you said, they’re fundamentally different, and in your paper and in the book, The Bitcoin Standard, there is this very strict differentiation between hard money and easy money, and that fiat money is essentially defined as easy money, whereas Bitcoin and gold are defined as hard money. Could you please explain what is the difference between those?

(11:17) Jürgen Michels:

I think the main difference is that easy money is always easy to produce, and if you have a shortage or you feel that you have a shortage, you simply increase the press printing the money and you can create a huge amount of extra money in a short period of time. In contrast with that, a hard currency corrects itself because there is really no way to put huge amounts of it on the market, and there are some rigidities. If it comes to gold, there is simply not that much gold available in the soil, and on top of this, it’s hard to explore.

In that respect, we found it very useful. What we did in this study is that we looked at the definition, as others have done before, of what is hard and what is easy. The definition we took is to look at the stock to flow ratio, which simply tries to look at an annual figure of what can be newly produced of that asset. For example, in terms of gold, what can you dig in one year out of the soil and how is this relative to its outstanding amount, and this determines the stock to flow ratio. So, if for example you have the value for gold which is 58 at the moment, it will take 58 years, if you have today’s production, to come up or to equalize the outstanding amount of gold, so, that’s a pretty long time.

While if you were to apply the same concept on the amount of dollars being out there at the moment, in the year 2018 if we do it with an annual basis, if you take into account the amount of money printed or money created by the FED or relative to the stocks, it’s not this figure of more than 50, it’s a current figure of 27.8, so in that respect, the dollar is more of an easy currency than gold. For example, the Euro with 24.4, so it would take 24 and a half years to replace the whole outstanding number of Euros, meaning that it’s even a bit looser than the US Dollar.

(13:47) George Manolov:

In other words, the stock to flow metric measures the speed with which the supply of a particular asset is increased. To exemplify this concept, let’s look at the stock to flow ratio of Bitcoin compared to US Dollars. Now in 2019, we have about 18 million Bitcoins, which have been mined in total until today. So, the 18 million totally mined Bitcoins are the stock of Bitcoin today, and this year, we will have approximately a little more than half a million Bitcoins which will be mined, and they will flow into the system. So, to get the stock to flow ratio of Bitcoin for 2019, we simply divide the available stock at the beginning, which was 18 million, by the flow of a little more than half a million, and this is how we’ll get the stock to flow ratio of a little more than 27.

Now, if you look at the stock to flow of US Dollars for 2017; interestingly the stock to flow ratio is about the same as that of Bitcoin in this year, and the past year as well. You basically divide the initial supply of US Dollars at the beginning of 2018 by the newly printed US Dollars in 2018, and you’ll get about the same stock to flow ratio. In other words, in 2018, the US Dollar and Bitcoin were similar in terms of hardness. However, although 2019 hasn’t finished yet, after doing this interview with Jürgen, I checked the amount of US Dollars that has been printed thus far this year, and it looks like way more dollars have been printed than last year. We still have some time until we see how much exactly will be printed this year. But as of now, it looks like the stock to flow ratio of US Dollars is actually close to 14 for 2019, so in 2019 Bitcoin seems to be about twice as hard as US Dollars.

(15:44) George Manolov:

So, gold has the highest stock to flow ratio of all the traditional assets and commodities which are accepted as money. But then there’s Bitcoin, which is kind of different, right?

(15:58) Jürgen Michels:

At the moment, Bitcoin, I would say, is similar to the Euro and the US Dollar, and with the current algorithm and the way of how new Bitcoins are created, it has a value of 25.8, so it would take around 25 years, if we continue with this pace of generating new Bitcoins, to replace the current outstanding amount. But the thing about Bitcoin is that the new flow is not dependent on the outstanding price.

Looking at silver for example, there was a massive issue where people thought, “okay, I’ll buy a huge amount of silver, then I can make a fortune of it”. The problem with that was that silver mines are relatively easy to set up to increase production. So, if the price of silver went up, then the production or flow figure went up immediately, which waters down the hardness of the value of silver. Again, something like this might happen with gold. But since the algorithm is set-up, this cannot happen with Bitcoin, because the number of new coins being created is not related to the price, and I think this is the biggest advantage of Bitcoin when it comes to the question of how hard it is? And what we looked at is that what happens around the next halving.

(17:32) George Manolov:

Hey there, this is George cutting in from the editing booth just to briefly explain the concept of Bitcoin Halving for those of you who may not be aware of it. As you probably know, Bitcoin was created with a very strict monetary policy; there will never be more than 21 million Bitcoins in existence. When the protocol was started, there were obviously zero Bitcoins out there, and miners started mining Bitcoins by verifying transactions on the Bitcoin network. Initially, for every new block that was verified by miners, they were rewarded with 50 Bitcoins per block, and this reward schedule continued for several years until 2012 when that block reward was reduced to half. So, miners started getting rewards not in terms of 50 Bitcoins, but only 25 Bitcoins. In 2016, we had the same event, the halving event, where the block reward was again halved from 25 to 12.5, and this is the block reward that miners are currently getting as of 2019.

Next year in 2020, there will be another halving in terms of the flow or the number of Bitcoins that will enter into the system or the number of Bitcoins that miners will get as a reward. After 2020, we’ll have another halving in 2024, and one last halving in 2028. The halving events have been perceived to be quite important, for not just the supply of Bitcoin, but also for its price, since shortly after the previous 2 halvings from 2012 and 2016 happened, we reached an all-time high for that period in terms of the price of Bitcoin. So, this is what Jürgen is speaking about here, and what his research and the researcher of BayernLB are looking at.

(19:40) Jürgen Michels:

In May of next year, we will have half of the production of Bitcoin to come through. In that environment, we would see that the stock to flow ratio of Bitcoin would go up to 53.

(20:01) George Manolov:

So, after May next year, the stock to flow ratio will become pretty much what gold’s stock to flow ratio is.

(20:07) Jürgen Michels:

Yeah, it’s pretty close to this. Gold is 58 and we don’t know what would happen there since the price of gold went up recently, there might be some more mining activity come through, but let’s assume that it stays the same, and there was no big change in the stock to flow ratio as well, so we would roughly be in the same area. In that respect, we would get pretty close to this, and after another four years when the next halving comes through, then Bitcoin will pretty quickly become the hardest currency we’ve ever seen, with a stock to flow ratio above 100.

(20:40) George Manolov:

Maybe talk a little about your model or research in particular; what is the relationship between the stock to flow ratio and the market cap of an asset. If you say that the stock to flow ratio of Bitcoin is going to be similar to that of gold next year, it makes sense, just from a statistical point of view, for the market cap of Bitcoin to become close to the market cap of gold, or is there some other dependency that you’re looking into?

(21:11) Jürgen Michels:

We looked at this relationship, but not in a linear way. Instead, you have to take an algorithmic approach as well. So, if you look at the algorithmic equation of the stock to flow ratio and put this relative to the market capitalization, you will get a linear relationship, which is pretty impressive. If you look at the history of Bitcoin so far, you would pretty much see that it follows this linear relationship.

If you look at other assets, such as gold; it would be on this linear relationship as well, which suggests that gold is really used as a store of value. While if you look at platinum or palladium, they would have quite different ways where the market cap of those readings deviate from this linear relationship, which suggests that the price of those metals is not only described by the use as a store of value, but also for the industrial uses where platinum is used as a catalyst in different industries. You can also put gold in some industrial processes or you put it over onto your neck. That is not really the case with Bitcoin; you don’t put this in your necklace, it’s really just a way of storage. Therefore, I think that the relationship as a monetary storage function is even more exposed than it is with any of those precious metals.

(22:56) George Manolov:

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Now, back to our conversation.

(24:35) George Manolov:

I’ve come across this other argument that has been made by the famous gold supporter, Peter Schiff, who has actually criticized Bitcoin, and continues to criticize Bitcoin all the time. I think it’s his hobby to be criticizing it all the time. He’s saying that Bitcoin cannot really become a store of value like gold, because gold has a utility function, some people sure buy it just because of its monetary value, but a lot of people use it for jewelry and industrial use cases, whereas Bitcoin is just some digital code that has zero utilities, he says that it’s all about speculation and that you cannot do anything with it. So, how do you reply to this? Do you think that this asset can be valuable long-term despite the fact that it doesn’t have any other utility than just being a unit of speculation?

(25:45) Jürgen Michels:

You can say it in that bad way as a unit of stipulation, but on the other hand, it’s a store of value, because if you can simply consume it or do whatever with it, then you can’t use it anymore. I think this is an advantage, and we see it in gold as well, since it doesn’t have huge industrial uses which makes it much more favorable as a choice of storage compared to palladium or platinum. So, it’s really an advantage rather than a disadvantage that you’re really focused on your value of storage.

(26:18) George Manolov:

So, you’re actually saying that maybe one of the reasons why gold is more valuable and perceived as a store of value as compared to palladium, for example, is because people mostly use palladium for industrial use cases, while a very small amount of gold, compared to its total stock, is used for such industrial cases.

(26:41) Jürgen Michels:

With that in mind, without the use of gold as jewelry, it wouldn’t have been this fashionable store of value compared to other methods of storage, and I think this is probably the problem many people have with Bitcoin that they don’t really know what it is, while you can always put gold in your hands and do something with it, but at the end of the day it’s still there. The question is how much are you willing to pay for this piece of metal. In a way, it’s a question of trust that it is limited, it can’t be taken away, and you can’t replicate it easily. I think this all comes together, and in a way it’s the same credentials which Bitcoin is also offering in a digital away.

(27:45) George Manolov:

I totally agree on that. To get even more particular into your research; as far as I remember correctly, your research statistically comes to the conclusion that somewhere in 2020, it makes sense that Bitcoin could be valued at around $90,000 per coin, right?

(28:09) Jürgen Michels:

First of all, we do not make a forecast on this. We look at this model, we look at the stock to flow analysis, and if we put the new stock to flow value into this equation, then this suggest that if we get there, the value of Bitcoin would be around $90K. That’s what we come up with. Having said that, there are of course other factors that come into play. The question is how the monetary policy might behave. We might have quirks in this equation, there are lots of unknowns in this whole set-up. But taking this analysis that we have done, yes, you’re right. The $90K is the conclusion where we end up with.

(28:51) George Manolov:

When will you be able to say if you were right or wrong? Will you be able to say this in May, 2020 when the halving happens, or at December, 2020, at what point will you be able to know if this analysis was correct or whether it missed something big?

(29:09) Jürgen Michels:

We do not have that much of a history about the halving points so far. But what we’ve seen is that there always is a short-term volatility in the price of Bitcoin. I think to have a proper feeling where there’s a new temporary equilibrium is reached where we would stay for 4 years with this stock to flow value, because that does not change that much in the next 3 or 4 years before the next time halving comes through, we think that it probably will be on May 21 where we will actually know if this new temporary equilibrium is reached or if we have been completely wrong.

(29:55) George Manolov:

Right. Because at the end of the day, you’re making a statistical model which says that the price of Bitcoin has moved so far compared to its stock to flow ratio, and the way that the price of gold has moved so far compared to its stock to flow ratio. But for this to happen, there needs to be real capital that gets in and people buy it. Is this going to be existing holders of Bitcoin? Or is it going to be new holders of Bitcoin who are going to learn about this new type of hard asset that they don’t even know? A lot of people still don’t know it exists or they don’t understand; they may have heard of Bitcoin, but they don’t know how it actually works. So, this money has to come from somewhere, right?

(30:38) Jürgen Michels:

Yeah, it has to. Looking back, we had episodes where Bitcoin prices were going through the roof, at least in a temporary way. Then you find much more traction in the media, more investors look at it, and that may lead to a more sustainable development that after we have seen some peaks, we may go beyond these previous peaks at some stage, so you will see more and more investors thinking about this and it might become a broadly used asset class.

So, I think it will be a mixture between existing and new holders of Bitcoin. But my guess is that there will be more both private institutional clients and maybe, as you mentioned before, central banks. We have heard Mark Carney at Jackson Hole suggesting that the dollar is no longer the best global reserve currency. There might be other thoughts coming through, I think in that way the central banks will probably come through with their own stuff, but it could be a wide range of investors that look at this, once we see a persistent increase in crises, that will, in my view, attract new groups of investors to step in.

(31:50) George Manolov:

If that happens, because I personally think this would be a huge shock or surprise to some people to see this asset once again rising and going up to let’s say $90,000 per coin, how do you think the central banking system and central bankers would react to it? Will they continue to ignore it? And overall, would it, in your opinion, present any sort of threat to the way the financial system works?

(32:17) Jürgen Michels:

Taking the example of Libra, which is a stablecoin issued by Facebook, it’s an entirely different story, but I think we can learn a couple of things from that. If something gets truly successful and might jeopardize the role of the existing currencies both central banks and fiscal authorities are likely to come through with measures of restriction, and I think that it’s likely to happen. There might be some arbitrage, where some countries allow Bitcoin, maybe even as a legal tender, but others will do everything to prohibit this currency or asset; they would probably come up with lots of regulatory changes that will make it much harder for Bitcoin to continue. At the same time, as I said earlier, we might see more activities from central banks to come up with their own crypto currencies. In a nutshell, the more successful Bitcoin will be, the more dangerous it will become for the existing currencies, and the more restrictions we will have from government institutions to prevent the success of Bitcoin from continuing.

(33:44) George Manolov:

Do you think this is viable long-term, can they stop it?

(33:47) Jürgen Michels:

The question will be, how stable would Bitcoin behave in all of this? And I guess it will. If the algorithm holds, and if everything really works, it will probably get through this. But that would also mean that it’s unlikely to stay at $90K. So, the value of Bitcoin might fall substantially again, then everyone will come up and say, it’s all a big joke, that it’s just burning money, and so on and so forth. Surely, there will be no smooth path to some evolvement over time. The question will be, does it really hold? Do we have other alternatives? Is the thing that everyone really wants is to have a super hard currency or do you just want to have convenience? All of those questions will be out there, and the more volatility you have in the value of Bitcoin, the more difficult it will be for this success to continue in a shorter period of time.

(34:46) George Manolov:

Absolutely. I totally see this, now that you’re drawing this picture. Since in the past few days, the Chinese president announced that they’re going to be pursuing their own cryptocurrency, and I’m just waiting for Trump to say, no, you’re not going to be the first, we’re going to be faster. So, if crypto goes up a lot and then drops, there will be so much speaking of, “hey, don’t use this scam, come use the trusted digital cryptocurrency provided by your country/government or whatever”.

(35:20) Jürgen Michels:

Correct. If that happens and other things work smoothly, then many companies, that want to have this smooth way of protection, would probably take away quite a bit of business off Bitcoin. That might happen, but if they overdo it, and I think that very much depends on the policies of the existing central banks, if they want to flutter with liquidity or create a very inflationary environment, then that of course would support the move into super hard currencies such as Bitcoin. I think we will have a huge amount of volatility in there, where the price of Bitcoin will be determined by the probability if this currency will become a broad-based use of money.

(36:18) George Manolov:

Jürgen, you mentioned that you studied policy-making and that you have been advising policymakers in the Eurozone specifically, right?

(36:29) Jürgen Michels:

I’m talking to them and advising; they listen to different opinions.

(36:33) George Manolov:

As an economist yourself, how do you look at the Austrian economics? This type of movement that I myself who have a bachelor degree in economics, but never really came across this school of thought until Bitcoin, until I started listening to other podcasts, and reading about it. So, I keep asking myself, exploring, learning more, and thinking about, Hey, does this make more sense? This Austrian economic world where government money is not existent, but we have money, such as Bitcoin or gold, that is completely running on free market principles. What are your thoughts on this? And do you think that an Austrian economics type of world can provide for more progress?

(37:16) Jürgen Michels:

I think it’s a very far reach where you reduce the power of governments in a quite substantial way, and instead give free market the way to take away all boundaries. As an economist, it would be a world that I pretty much would love to see, where having a currency put into place that might actually cause a few boundaries to be taken away.

Having said that, I think that’s exactly the reason why it will most likely be difficult to get there. As I mentioned earlier, the existing governments will try to keep their power, and that is on the national level. Globally, if you have just one currency, namely Bitcoin, that will cause huge, and in some places devastating, effects when you move from the existing very inflationary fiat money world. Let’s take Zimbabwe for example, and put it on a super hard currency environment; there are lots of nominal illusions that we have out there in the world, that will take them out straight away.

So, the transition from a world where we have those nominal influences to a world where just pure real development count is a very, very, in my view, long lasting thing, and it is probably only evolving in stages. But yes, the Austrian world is a very revolutionary world where you go back to the interactions between private entities, there might also be some official players in this as well, but it would eliminate the distortions created by policymakers.

(39:09) George Manolov:

Right. It will be very interesting to see. Myself, when I think about Austrian economics, I find it to be very interesting, but then we never had it in practice in the very modern times, so you don’t really know how it would work. Maybe now with Bitcoin, and as you say with Zimbabwe or some other country that may decide to make it a legal tender, we could possibly see for the first time how an Austrian economic world could look like.

(39:35) Jürgen Michels:


(39:36) George Manolov:

I also wanted to know how do your colleagues in the BayernLB bank look at Bitcoin now that you have publicly hosted a conference and issued a paper about his digital asset? How do your colleagues look at this asset class? Are they mostly skeptical or is your bank an Island of open-minded people who are looking at this asset class with a curious eye, so to say?

(40:00) Jürgen Michels:

I think it’s not just among bankers that there is lots of skepticism around this, and BayernLB is not that much different from other institutions. But we actually look at some of the opportunities with Bitcoin in particular, but also with other cryptocurrencies. We think about the role that banks can play in such an environment, and we also think about the DLT Blockchain technology.

I think the problem with this among bankers, and other ultra-institutional and corporate clients is the same that central bankers have, which is that we don’t know if it really holds, or is it just a scam? What is it in the end? Is it just a big Ponzi scheme where at some stage someone comes up and says surprise, surprise? So, the criticism is there, but at the same time as we are looking at these issues in the research department, a few people come up and have a very open-minded debate about it. We are at the stage of exploring ideas about how the bank can put itself with some business ideas in this sector as well.

(41:21) George Manolov:

So, we should be looking forward to some digital asset products coming from BayernLB as well, I imagine?

(41:27) Jürgen Michels:

We are considering a couple of things there and we are working on some stuff.

(41:32) George Manolov:

That will be very interesting to look out for. So, awesome. Jürgen, this was a true pleasure. Thank you very much for your time. Where can people follow you and learn more about the research that you do? And actually, will you be publishing more research connected to this crypto asset class.

(41:49) Jürgen Michels:

We will continue publishing stuff on this and you can find it on “BayernLB.com”. We’re also available in short periods of time on Twitter. I myself am on LinkedIn, as well as Manuel and some of the other guys as well. So, you will see it on our social media platforms or at our website.

(42:12) George Manolov:

A couple of things before you take off. First, if you enjoyed this episode, be generous and share it with your best friends. They deserve it, they will appreciate it and they will be grateful to you.

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Finally, if you have any suggestions, feedback, or anything that you want to tell me, you can find me on Twitter at “@BorderlessBTC”, or on my website “Borderlesscrypto.com.”

Thanks for tuning in, and I’ll see you again, soon.

georgemanolov Written by:


  1. […] Borderless Crypto guest Jürgen Michels suggested that the price of Bitcoin could reach $90,000 after the Halving in 2020. The statement is significant because Michels is not a crypto project founder or a Twitter personality. He is the Chief Economist at BayernLB, a state-owned German bank. [Link] […]

  2. […] L'invité Jürgen Michels de Borderless Crypto a suggéré que le prix du Bitcoin pourrait atteindre 90 000 $ après la réduction de moitié en 2020. La déclaration est significative car Michels n'est pas un fondateur de projet de cryptographie ni une personnalité de Twitter. Il est économiste en chef chez BayernLB, une banque allemande d'État. (Lien) […]

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