Bitcoin $100K: a game-changer for physicians’ financial freedom? [PODCAST]

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Join us as emergency physician and digital asset consultant Noah Kaufman dives into the evolving role of Bitcoin in investment strategies. From its early days as a speculative asset to its current standing in institutional portfolios, we explore why volatility is a feature, not a bug, the potential of decentralized finance, and how practices and organizations can leverage Bitcoin on their balance sheets. Whether you’re a seasoned investor or just starting out, this episode offers insights into long-term Bitcoin strategies and the future of finance.

Noah Kaufman is an emergency physician and CEO, Starbot.

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome back Noah Kaufman. He is an emergency physician and CEO of Starbot. We’re going to talk about the current state of Bitcoin and digital assets. Noah, welcome back to the show.

Noah Kaufman: Kevin, thank you. I guess this is our third talk now.

Kevin Pho: We have you on every year, and Bitcoin is at a different price every time that we talk. And of course, last night was a historic event: It broke $100,000. Now, before we get into anything, just tell me, for those who may not be familiar with Bitcoin and digital assets, what does $100,000 for one Bitcoin mean to you?

Noah Kaufman: Yeah, you know, it’s a milestone. It’s a stepping stone. It’s hard to talk about something exponential without being hyperbolic, right? And so on your podcast we’ve been telling physicians, or well, I was kind of pounding the table way back in 2019, just because of the Sharpe ratio and just the amazing adoption of this new monetary network. Bitcoin at $100,000 is kind of a stepping stone. When I say it’s hard not to be hyperbolic, I mean that some people are going crazy celebrating, but really this is ultimately a multi-million-dollar asset, and we’re just getting started. So it’s still extremely early. A very small amount of people own Bitcoin and understand what it is.

And so, believe it or not, I think $100,000 is not that big of a deal. I think it was expected. It was expected when I started buying it at hundreds of dollars. I expected $10,000 and then $100,000, and now I expect a million and several millions, and probably in the next twenty years there’s a good chance it gets to $10 million in today’s dollars. I know that sounds crazy, but it’s hard to understand something that’s exponential, that is growing by Metcalfe’s law, and that is so novel and so important for humanity.

Kevin Pho: Well, tell us, what is Metcalfe’s law?

Noah Kaufman: Sure. Metcalfe’s law describes the value of networks. Basically, for every participant that’s in a network, that person or that unit, let’s say, increases in value exponentially. So the larger a network becomes, the more valuable it becomes, exponentially. And of course there’s a mathematical equation and a lot of research behind Metcalfe’s, but in a nutshell, that’s kind of the lay version of describing it. We see it with Facebook, with Amazon. There are different networks that are made. A social network obviously is valued by the number of users and ultimately monetized through advertising and through other means, and that’s how Facebook makes its money.

A monetary network like the dollar system, like the U.S. dollar, has its value intrinsically tied to the value of each unit, but each participant makes the whole system more valuable. And so there’s been no network in the history of the world that has reached an inflation-adjusted hundred million market cap that has failed. That’s never happened. Right now we’re at a $2 trillion market cap for Bitcoin, and so we’re way beyond sustainability. Now there are ETFs, and there’s talk about a strategic Bitcoin reserve, which I’m not sure will happen. If it does, things will go crazy. But that’s Metcalfe’s law, and that’s part of the reason why the Bitcoin network is so valuable.

Whether you agree with it or you think it’s a big fraud or a big scam or a Ponzi, the fact of the matter is all money systems are Ponzis. This is a big legal Ponzi. I mean, it’s crazy, but all it takes is belief and then political adoption and, of course, legal adoption, and we have that now with ETFs. So it’s been de-risked. Compared to the last time we talked, the value of the network has gone up substantially because the risk has been taken away.

Kevin Pho: So we started off this year with Bitcoin in the 30,000s. Now it has broken $100,000 per Bitcoin. What were some of the triggers that led to its rise this year?

Noah Kaufman: Yeah, well, certainly the adoption of Bitcoin in the ETF world. So BlackRock, and we all know BlackRock is holding hands with the United States government; that was more than a tacit approval of Bitcoin. And then once you had money managers and Wall Street getting into Bitcoin, that really changed the game. It takes a long time for pension funds and for all these different funds to be able to buy Bitcoin, and a lot of them won’t even buy it. It’s such a small asset that a lot of them won’t even buy it until it hits that $100,000 mark. That’s a mandate of a lot of pension funds.

There are countless trillions of dollars that are on the sidelines, that are in the debt market, and that are looking for places to live. There’s so much capital sloshing around in the system that Bitcoin is going to be a recipient of some of that capital, quite a bit of it actually, because of the Sharpe ratio, which is a way to measure risk-adjusted returns, right, against the risk-free rate and the standard deviation of the return. Year over year, Bitcoin has returned, in the last fourteen years, a 147 percent CAGR, compounded annual growth rate. And so it’s the best-performing asset of all time. It was the most-bought ETF of all time, by far. Gold ETFs were dwarfed, and it’s demonetizing the precious metals and taking their place because it’s just technologically better.

It’s completely finite, with 21 million in the schedule, 94 percent of which have been created. So that means from now on, for eternity, there’s only 6 percent of Bitcoins left to be made, right? Every four years, we cut in half the number of Bitcoins that are mined. So this is an absolutely scarce, inelastic supply that’s running straight into an ever-expanding demand. My argument from the early days when we started talking was, look, this is such an asymmetric bet with such a great Sharpe ratio for your portfolio, which again means more return for less risk; that’s all the Sharpe ratio says. I said, “Why not put 1 percent of your net worth as a physician into it?”

Well, myself and a bunch of buddies have been doing that since Bitcoin was $3,000, and we’re mostly retired. We work because we want to. I’ve got a ton of Bitcoin, and I feel really bad for everybody listening to White Coat Investor, because they have been like, “This is horrible. This is bad. This is bad.” But there are actual studies done that show that if you put something with a high Sharpe ratio, at a small percentage, into your portfolio, it can have outsized returns for very minimal risk. So that’s always been the argument. Whether or not you believe in Bitcoin, you need to be agnostic if you want to be a fiduciary for your family and for your financial situation and get out of debt as a physician.

So I think that it’s still extremely early. We’re going to a million and multi-millions per Bitcoin, and it’s hard to believe, but this is the exponential adoption. If you look at the chart, it’s like a parabola, and we’re right here, and it’s going like that. It’s the adoption of a network. You can’t think about it like a stock or like anything like that. It’s like a new money system that is egalitarian.

So, wrapping back to your question, yes, it was the ETFs, but then El Salvador is buying it, there are rumors that the Saudis are buying it, and Putin literally probably pushed it over 100K yesterday by saying nobody can control it and kind of hinting that it’s an important world asset. And then Trump, who is, for better or for worse, president now, is talking about creating a strategic Bitcoin reserve and buying a million Bitcoin. I mean, what do you think happens to Bitcoin if that happens, and then all other countries are like, “Oh, we better get some Bitcoin”? It’s a self-fulfilling sort of thing.

So it’s best to be agnostic about these things. It’s a new, uncorrelated asset class, and sure, it’s volatile. It’s volatile, and it’s going straight up, versus fiat currency, the dollar system, which you buy and it loses value. If you have a million dollars today, in five to seven years it’s worth $500,000 in purchasing price. You need to do something, so we all try and invest. If you invest in the S&P, that suffers currency risk as well, and it suffers from inflation. So yeah, maybe you made a 12 percent CAGR, but what do you really make after you account for inflation? I think we all feel it at the dinner table. So it’s like a Pascal’s wager. Even if you don’t believe in it, the smart thing to do is to buy a little bit and to have it just in case it catches on, as the old saying goes.

Kevin Pho: Now, you mentioned White Coat Investor, and let me just say for the record, I’m a big fan of White Coat Investor. I think he’s done a lot to bring physician financial literacy into the mainstream. But not just White Coat Investor; if you read finance articles in the New York Times and the Washington Post, they’re not as enthusiastic as you are. Why do you think that is?

Noah Kaufman: Yeah, and first let me say White Coat Investor has been, net-net, very, very good for physicians. I mean, I’ve learned a ton from White Coat. We’ve had disagreements, but I really respect Jim and everything he’s built. I think he got it really wrong on Bitcoin, but I agree, all in all, it’s been a very important service for us.

I think that whenever you have something that’s outside of the current paradigm, it threatens the current power structures. It threatens the paradigm, and most people don’t accept it because we’re mostly conservative and we’re mostly very safe. And so I think that before, when we were talking about Bitcoin, for example, there wasn’t an ETF, there was Gensler at the SEC, and there were questions about regulation, and it was viewed as something that was very worrisome. But Jerome Powell, the Fed chair, just got on the other day and said, “Look, Bitcoin’s not a competitor. It’s a speculative asset,” which it is. “It’s not a competitor to the U.S. dollar,” which it currently is not. “It’s a competitor with gold.” And I agree with that. I think it’s a much better form of gold. And what if it reaches gold’s market cap, which I think it will? Each Bitcoin will be $913,000 per Bitcoin.

But I think that’s the market opportunity: investing and being somewhere where everybody isn’t, right? Seeing something maybe before other people and taking the risk that this is going to be the next big thing. And that’s true with Amazon or buying Netflix stock or Apple or one of these things back in the early 2000s. You had to see something and see the value of it. I mean, Paul Krugman, who’s a Nobel-winning economist, in 1996 or whatever, said, “By the time 2005 rolls around, the internet is going to be seen as something that was just a passing fad and didn’t contribute meaningfully to GDP.” I mean, the internet’s one of the most important inventions of humanity, and so now that’s obviously been proven wrong.

But that’s where investments come in, and that’s why you take a small, speculative part of your portfolio, 1 percent, 5 percent if you’re super ballsy. If you lose 5 percent of your portfolio, especially as a younger physician, who cares? It sucks, but you didn’t go YOLO with 50 percent of your life savings. But if that 5 percent goes up 10x, now all of a sudden it’s like 50 percent of your portfolio, and you’re really talking about something significant. So again, that’s the Sharpe ratio, and that’s why, even if you don’t believe in it, it makes sense to have some, especially now more than ever.

So, lots of information there, but maybe that answered your question of why people have not been bullish on it. But that’s turning now, and actually, right now retail is not in Bitcoin. It is now all institutional. People lost a lot of money with FTX and Voyager. I had over forty Bitcoin on Voyager, and so I lost a ton of Bitcoin. Luckily I have much more, and I’ve rebuilt my stack from some of what I’ve lost. But we suffered really great losses when a lot of these centralized custodians failed. And so self-custody is really important with this asset, and I wouldn’t even trust Coinbase, that sort of thing.

Kevin Pho: Now, you said that retail more or less isn’t in Bitcoin yet. Now that it’s past 100,000, is it too late for physicians to put a speculative percentage of their net worth into Bitcoin?

Noah Kaufman: No, it’s not too late. In fact, it’s still very early. Bitcoin goes through these mathematically defined cycles, and they’re volatile. You can expect 30 percent up and 20 percent down and 50 percent up and 10 percent down, and it stair-steps, and it goes up. There are always these big pullbacks. So we’re over $100,000 now, it’s going to be $70,000 in three weeks, and everybody’s going to be like, “See, I told you, it’s failing, it’s a Ponzi.” But then it’s going to rip to $180,000 a coin. I mean, that’s just how it works. Nation-states are buying, and that’s how it works, because it’s such an inelastic supply and it’s a source of liquidity for the world. If things go bad, if there’s a black swan, Bitcoin is going to crash. It’s going to crash hard. So I always have money set aside to smash buy it then.

But it’s still extremely early. There are a lot of ways that we measure this, but if you look at Google searches for Bitcoin, they’re down compared to the previous cycle tops. They’re way down. I think a lot of people got burned. They had Bitcoin, they had it in Celsius or BlockFi or FTX, and they got burned. I got burned, and I know self-custody is the way, and I still got burned. So retail has been very slow in coming back. It’s a “once bitten, twice shy” thing. But I think it’s like a rug pull from Wall Street, who really wanted an opportunity to get into it cheap, and so they’ve been taking positions over the last few years. Now it’s ready. Now it’s primed, and I wouldn’t be surprised if they shoot it up to 500K a Bitcoin over the next year. It might not stay there for very long, and I have no idea what’s going to happen. I don’t have a crystal ball. I’ve got price targets, but I’ve been wrong so many times, so don’t listen to me. Do your own research.

So I think that we’re still very early based on previous cycle tops, and Bitcoin has really shown a cyclicality. If you look at the charts, there’s a beauty in them, and we think that there’s a mathematical reason behind this, and it probably has to do with network adoption mechanisms. So there are power laws; people are talking about stock-to-flow, all these different things. But where we’re at in the cycle is we’re still very early, so most people think we have another six months of running. Are there going to be big pullbacks? Yes, probably. And then if you buy at the top, you’re going to have to wait four more years to hit another top, that sort of thing. So when you buy a Bitcoin, I wouldn’t trade it. Bitcoin is something you buy and never sell unless you have an emergency, or you just wait till it’s a few million dollars a coin and then get out of, you know, sell one of them.

But there are only 21 million Bitcoin, of which like 4 million are lost, and then guys like me own a bunch of Bitcoin, so there are even fewer. I mean, there’s less and less Bitcoin on exchanges every day, so there’s going to be a supply shock. If there are 21 million Bitcoin, let’s say now there are like 15 million Bitcoin left, there are over 60 million millionaires in the world. So as this gains adoption, and we haven’t even experienced the steepest part of the adoption curve, when we do and Bitcoin goes to $2 million or $3 million a coin, everybody’s priced out. Not everybody can have one Bitcoin.

And look, I know I sound evangelical about Bitcoin, and I admit, quantum computers, maybe it gets hacked, or maybe something happens. I don’t know what’s going to happen, but so far it’s the only network in human history that’s never been hacked. And it’s such a beautiful system. If you look into the technology behind it, it’s so simple. It’s a distributed ledger, and it’s based on consensus, and each block is based on consensus, and so you can’t double spend it. It’s just a fascinating technology that I think ultimately will be used for just about everything.

I mean, we’re going to tokenize everything. We’re going to tokenize stock, we’re going to tokenize real estate, we’re going to liquefy the real estate market. We’re already securitizing and tokenizing the bond market through MicroStrategy, which is a Bitcoin holding company that owns 2 percent of the Bitcoin, which is nuts, and they have like an unlimited amount of demand. I have MicroStrategy in my Roth, and I sell covered calls against it, and the premiums are the most ridiculous. I mean, it’s insane. My cost basis is well below zero just because of selling covered calls. But anyways, I digress.

Kevin Pho: So let’s talk about Bitcoin on a balance sheet specifically. You mentioned, say, private practices and medical groups potentially having Bitcoin on their balance sheet. So talk more about that, because I actually never heard of that potential before.

Noah Kaufman: Yeah, and I consult with groups on how to do this. There are entities you can set up; there are ways to do this. It’s very, very interesting. Private practice groups can take a portion of their funds, and instead of, you know, oftentimes in our groups we distribute 100 percent as bonuses or something along these lines, imagine if you just started disbursing 50 percent. I’m just going to simplify this as much as possible. There’s legal, there’s accounting; groups consult with me, and I tell them how to do it and hook them up with these companies that help. But imagine if, instead of taking distributions the way you do, you just put that into a repository of Bitcoin to keep on the balance sheet. There are favorable accounting rules coming out for that that have tax implications, and groups can win in multiple ways even if the Bitcoin price doesn’t do anything.

And you could do this with gold or silver or equities. Certainly groups have all kinds of profit-sharing plans and cash value plans, and groups have looked at a lot of different ways to expand their bottom line. Bitcoin is a very good way for a group, and sticking your toe in the water with like 5 percent of the disbursements is like a no-brainer. Entities can own Bitcoin, and you can put it on the balance sheet.

And for me, philosophically, when I used to practice med, and I still practice medicine a little bit because I’m too young to give it up, I mean, it’s a really important skill, I can tell you that I enjoy medicine so much more now that I don’t really have to do it for money. I don’t think doctors should have to think about money, and I think that it used to be that way. Even when I started practice twenty years ago, I used to feel very wealthy. I never really thought about money. But I know kids are coming out of residency these days with, I just talked to a husband and wife, he’s ortho and I think she’s peds, and they have $900,000 in student loans at like a 7 percent interest rate.

And if you look at Medicare reimbursements, and if you look overall, inflation-adjusted, and I know there are articles and this is a point of contention and there’s some debate about this, but I can tell you anecdotally that we are making less money, or that our money goes less far. Maybe notionally we’re making slightly more money, but I can tell you that overall, the administrative burden, the burdens in medicine, have made it so that if you have to work more, compassion fatigue and burnout are real things that we’re suffering from, and physician depression. You are not an effective healer or provider if you’re not happy and you’re not fulfilled and you’re jumping through a gazillion hoops. The administrative bloat in medicine, I mean, this is a whole different topic, but it’s just mind-boggling. Physician pay only makes up like 8 percent of the cost of health care, and we spend more per GDP than any other first world nation, basically for worse outcomes. And so this is a big problem.

But I think that if physicians can have their financial house in order, and if they don’t need to be worried about their finances, and if they can be out of debt and they can work and find a good work-life balance, I think that’s better for our patients. So I’m a strong advocate of Bitcoin and other financial literacy for physicians just because it makes us better providers and it’s better for our patients. I mean, I want to go rock climbing. I want to ride my motorcycle around. I love medicine, but I don’t want to practice it more than five or six days a month at this point in my career.

And certainly the years when I was young, when I was doing like nineteen shifts or twenty shifts to pay for the house and pay this and the other thing, those killed me, and all the nights and stuff. I mean, it depends on your specialty, I guess, but it is a grind. It’s a marathon. And I think it’s become harder and harder for young physicians to get ahead or see a light at the end of the tunnel, and a lot of us are W-2 productivity slaves to the system. So I think that’s where Bitcoin and financial literacy come into play.

Kevin Pho: We’re talking to Noah Kaufman. He’s an emergency physician and CEO of Starbot. We’re talking about the current state of Bitcoin. Noah, as always, let’s end with some take-home messages that you want to leave with the KevinMD audience.

Noah Kaufman: Yeah, absolutely. I think the most important thing for physicians to understand is that Bitcoin is a Pascal’s wager. If you don’t believe in it, you hate it, it’s the worst thing ever, it’s a Ponzi, look, it still makes sense to put 1 percent of your portfolio, up to 5 percent or whatever, in, because it’s an asymmetric risk. Because have you ever been wrong before? You’ve been wrong. We’ve all been wrong. And if it goes up to $2 million or $3 million a coin, it’s going to really help your financial situation. Sell it then. And if you put in 1 percent and then you lose it, who cares? OK, yeah, Noah is an idiot, we were all wrong. All of you take responsibility for your own financial situation, but it’s like a no-brainer to have some.

And now that it’s been de-risked, and I think it’s been substantially de-risked, I think more and more countries are going to buy it. I don’t know if we’re going to get it on our balance sheet for the United States, but pension funds are going to be accumulating, nation-states, sovereign wealth funds. You should have some too, and I think physicians should have some, and I think it will ease the financial burdens and combat inflation. And so I highly recommend Bitcoin, whether or not you believe in it. And I think that I’ve been proven right over the last ten years of my involvement with it, but especially since being on your show, Kevin, and this is now our third conversation.

And if it ever fails, I will come back on, and we can do a postmortem, and we could say, “OK, well, people lost 1 percent or 5 percent of their portfolio, and that sucks, and here’s what happened: Quantum computers came and made it obsolete, and it didn’t work, and they had to invent something else, and everybody lost.” So it doesn’t come without risk, but 1 percent is not a big deal. I would recommend everybody learn more about it. But I appreciate the chance to come on here, because I get bottles of wine from physicians who listen to me. I think you listened to me four or five years ago when we started, or whatever, and people who have bought Bitcoin and who have held Bitcoin over the years are very happy. So I think we’re still very, very early, and I think that’s the message: There’s a long way to go.

Kevin Pho: Noah, as always, thank you so much for sharing your perspective and insight, and thanks again for coming back on the show.

Noah Kaufman: Thanks.

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