Dan Tapiero - Crypto Will Grow More Than 30X: How Bitcoin & Blockchain Could Break $40 Trillion

Full transcript: Dan Tapiero on London Real

2:43 This is London Real, I am Brian Rose. My guest today is Dan Tapiero, the global macro investor, entrepreneur and business leader. You are the founder and CEO of One Roundtable Partners and 10T Holdings, a growth equity firm with 1.2 billion dollars under management that’s built a diversified portfolio of private companies which are enabling the digital asset ecosystem. You have 30 years of experience in macro investing, trading, research and economics and have worked as a portfolio manager with the world’s most respected investors including Stan Druckenmiller, Stephen Cohen and Lord Rothschild. You’ve previously described Bitcoin and blockchain technology as historic inventions akin to the birth of the combustion engine that will transform our world. You’ve said that the bear phase is behind us and a bull market is on the horizon while your initial estimation of a 10 trillion dollar market cap for crypto was conservative and that it could be double that or 20 trillion in the next decade. Dan, welcome back to London Real. Thanks Brian. That was a very good introduction. I’ve had a bunch of introductions before but you really nailed it right on there. Yeah, I know you had the high points and the 20 trillion number I guess that grabs attention. Yeah, I want to dive into that today. This is our fourth conversation, first one in person. Great to have you here in London. I think I bumped into you now on three different continents. Yeah. But we were just in Singapore two weeks ago.

4:12 We got spent a lot of time together and we also got to witness this crypto event. Token 2049, 10,000 people showed up there. They said it was the biggest conference of all time. Either way, it was massive. It was buzzing. There were projects everywhere. There were people everywhere. There were 400 side events on top of it. Could you even move around? No, I couldn’t move. It actually took me one point 30 minutes to get in the conference. I’ve never experienced that. Well, people are stopping you, right? They want to take pictures. They want to ask you questions. The level of engagement was incredible. So where is the crypto winter? Where is this bear market? Because if you’re in America like you are or even in Europe where I am, it’s a bit of doom and gloom and a regulation this and this. You go over there and it was like gaming, blockchain, Web three. It all seemed to be on. What did you make of all that? Yeah, it was hair on fire. You know, I was exhausted. I mean, you come back exhausted. It really, really explosive kind of atmosphere. Super people are super interested, engaged. And you know what, they they’ve had their issues over there. You know, the three AC hedge fund that went bust.

5:27 That was a Singapore entity. But it didn’t seem to matter as much. It definitely 100 percent did not feel like any bear market. And as I said, I think the low for Bitcoin and Ethereum was made in Q4 several weeks after the, you know, FTX collapse. I think that that was the moment of max negativity, max panic and fear. And I, you know, wrote as much on Twitter. And I, you know, it was very clear about that. I think it’s it’s an old trading saw that when you have the most amount of negative information, negative news, and the market itself can’t go and make a new low, it’s called the bullish divergence, essentially, and all the sort of old time traders, even traders today in the old markets, they follow that. It just means that the selling pressure has dried up. And look, the market peaked at the end of 21, early 22. We’ve been going down into Q4 22 for a year and it was pretty severe. We had the, you know, the Luna collapse beforehand and then FTX. So that was Bitcoin was about 16,000. And I think ETH was around 11, 1,200. And so that was the end of the bear phase. But it doesn’t necessarily mean that the next day bull phase starts, we have a period of consolidation. But look where we are today, we’re 28,000 in Bitcoin, that’s up almost 100% from that low. So it’s funny that only in the crypto space, can you be up 100% and people still tell you that it’s a bear market, right? I mean, that’s what’s crazy. And there are things that are still down 70, 80%. I mean, Solana was 200,

7:22 And it’s now 20. And what was the low 10, 11, maybe at that moment or whatever it was. So there are parts of, you know, what broadly I would call the digital asset ecosystem that are still in a bear phase, or they feel like they’re in a bear phase. But there are parts that aren’t. And in fact, there are areas that really feel like rip roaring bull market. And I mean, something you didn’t touch on before, but I mean, I’m sure we would have, which is the stable coin market has completely exploded. In 2022, I think the total value of stable coins that were settled was $8 trillion. Now, three years before it was zero, there were no stable coins three, you know, years ago. So you went from zero to 8 trillion. And I think this year, I think will be the same or potentially will surpass that. So you have businesses like Circle, unregulated entities like Tether that are making enormous sums of money. I think Circle is slated to make about 800 million in revenue this year and more next year. These are giant numbers, despite the fact that Bitcoin is still down and it’s still down 50% from the highs, and, you know, the beginning of 2022. So, you know, it’s a big world. And I got into some of that detail, because I think that’s what we were feeling in Singapore, the blockchain gaming web three world or the, which for me, web three is just companies, web two companies trying to figure out how to incorporate the blockchain technology into their businesses somehow.

9:11 That’s the web two to web three. Like that’s how I think about it. I don’t know if you think about it differently, but there’s a bull market there. They’re all trying to figure it out, you know, stablecoins, massive bull market. So I think that’s a little bit like what we’re feeling, they’re pockets in the space that are on fire. And they’re not looking at what’s going on with Gensler or, you know, you know, the US political scene. I just they’re Singapore’s far away. And also I felt very futurist in that hotel we stayed at. Did you stay at the conference?

9:50 Yeah, yeah. And it’s just you kind of feel like it’s not New York. It’s definitely not London. It’s closer to like Dubai. And it just like you feel like this futurist.

10:05 I don’t know mentality. Did you get that? Because I yeah, it is the city of the future. And it was funny because I bumped into Dr. Marwan alzarouni from Dubai, who I know you know. And I said, did you guys copy Singapore? And he said, Brian, I was here 20 years ago, looking at all of their numbers, looking at everything they did. So I think obviously Dubai does it even bigger and better.

10:26 But it’s fascinating being in these cities, especially when you live in a in a western kind of city and look at how they do everything different and how clean it is and how safe it is and how functional it is. And sometimes how like you said, future looking it is, it feels like a different world. Like you’re in a like you’re in a metaverse. It really does. Like in a metaverse. I mean, from the from the moment the Emirates flight landed in Dubai, until I was in the car going to the hotel, I think it was like 15 minutes, meaning I got my I went through the customs, I got my luggage, everything from the moment I stepped off the plane, 15 minutes. So it’s not just, you know, that the brand new sparkly buildings or, you know, you know, that it’s one or two things that are, you know, you know, tapping into this sort of futurist way. But everything does feel streamlined. And I think I really feel like pro capitalist, I really feel like in the US a little bit. And this is I think largely because we have, you know, 80 year old people running the country right now, I don’t think the US is set the way it is today forever. I just think it’s we’re going through a low moment, I think in leadership terms. And I, you know, I think any 40 year old either side of the fence, I think would be much more dynamic, and more engaged in the things that we’re looking at, frankly, right. And Singapore, you know, it’s a small little city state, their focus is on business, and business is about the

12:20 Future, right, you don’t, you know, about taking risk about intelligent risk assumption about embracing new technologies. And so you have an event like token in Singapore. And I brought my bathing suit with me because I had planned to swim, you know, at the top of the sands, they have that nice swimming pool. I couldn’t swim because it was overwrought. I mean, there were, I don’t know, hundreds of people, it seemed like in the pool, meaning it just the energy is constant and all day, all night. And maybe it was like that in New York years ago, I mean, the 80s, you know, we’re pretty go-go. I mentioned you before this talk that I today I think Abu Dhabi released a number, they grew 12% GDP in Q2. So the US seems more now interested in just creating a higher unemployment rate, which doesn’t make any sense to me, you know, this whole Fed, we could talk about that later. But there is a sense in these places that they’re embracing new things. And that’s exciting. When I was in Dubai, I pulled my phone out when I was in the big mall there. And I just did a vlog, you know, impromptu. And I said, Dubai is what America used to be. And I was just thinking about like my grandfather, you know, when he was a kid, he could just go west, get some land, and build something and create something and not necessarily be overtaxed. And there was capital, there was capital markets, there were opportunities.

13:59 And the country was was encouraging that. And I felt like you go to Dubai, and it’s like no taxation, trying to empower the entrepreneur, everyone’s there for a reason, because they all want to increase their quality of their life. And the government just steps out of the way and has a long term vision and builds the infrastructure. And there’s an energy to that. It’s a trading, it’s a trading hub in a way. It’s a place where people come to meet as well. We have one of our companies that just set up move their main office there. And I said, so why did you know, why did you move it specifically to Dubai? And they said, Well, you know, there’s a clear regulatory framework for us. But also, many of our clients are here. And we want to be close to our clients. And, you know, you start building that kind of mentality. People start seeing anywhere that other people are going there, but that they’re prospering. And it’s infectious, right? This stuff, and the opposite is also the case, you know, if you’re in New York, and every day you read some story in the New York Times about how, you know, Bitcoin is evil, or some nonsense like that. You kind of get down on things, and you leave, or you go somewhere else.

15:13 And so, I mean, it’s a pretty stark contrast. I mean, I think maybe a little less in London, at least you have the PM here, who is at least on your side, right? I, we don’t have that at the moment in the US. Yeah, you talk about this a lot when you’re on Twitter. And, and yeah, in the UK, we have the Prime Minister at least saying that they’re pro crypto. I haven’t seen a ton of evidence, but that’s better than what’s happening in America, where you’ve got, you know, a lot of uncertainty and kind of Gary on one end. You mentioned Circle, and a lot of these companies that are building these massive businesses, when the price of Bitcoin is, you know, up and down, but behind the scenes, there’s tons of building going on. And that’s a little bit, really talks about your thesis when it comes to investing. Now, I don’t know if I heard you wrong, but I thought one time you said that if you had one hour with Warren Buffett, it would end with him buying Bitcoin. Is that true? Well, I don’t know. But I mean, I probably did say that he might not be, you know, he may be, you know, too far gone, in many ways and age, etc. I would, I would definitely have said certainly Larry Fink.

16:27 And, you know, it’s funny, this space, you know, and I’ve done thousands of investor calls and spoken to all sorts of different people all around the world. And I have never spoken or talked to anybody about anything that is so age dependent. I mean, I can, I can tell you before a meeting, how receptive someone will be to the idea that there is a digital asset ecosystem. Forget about the fact that it’s grown 5x in the last four years and is going to grow, I think, you know, 10, 20, 30 times, but just the existence of it. So Warren Buffett is in his 90s, difficult. And, you know, especially people who’ve had massive success in the old world, of course, that’s what they see and know. Why would he ever take, you know, for me, it was, it took six months, completely isolated myself in my office at home, reading, listening, really thinking about this world. I had to pull myself completely out of, and thankfully, I wasn’t doing that much in the old world at the time. I mean, I had, as I mentioned to you, I had reduced my workload and, you know, was just managing my own money. But I had the ability to pull myself out of the way that I’d been thinking for 25 years. And that’s very rare.

17:56 You, you know, someone like Warren Buffett, he’s running a large, successful business. There’s no reason for him to think that there could be another way or that there’s something growing up side by side to the old world that was literally at zero value, you know, 10, 12 years ago. The total value now in the digital asset ecosystem, so I count that as all the cryptocurrency and all the equity of all the companies in the space, we’ve estimated is around 1.7 trillion. In 2019, the middle of 19, when I had the idea for the fund that we run now, it was 300 billion. And so the peak 18 months ago was 3.3 trillion.

18:40 So yes, we’re down from the high. Yes, Bitcoin is down from the high. But you look at the space, $1.7 trillion of value. That’s enormous. You know, whether there’s fiat debasement or interest rates, whatever it is, $1.7 trillion of holders, people believing that this is the way the future is going to be, and the way it’s going to play out. So I, and I think I’ve said this to you, that if someone under the age of 38, I think, I would say there’s like a 70, 80% degree of probability that they understand that this is the future. People, again, it’s almost a perfect bell curve distribution. People over the age of 65, I would say it’s maybe 10% see it or 5%. You know, over the, I think the middle point is probably like 42 or 43. So the 55-year-olds is probably 25% or 30. And then when you go the other way, a 25-year-old or a 30-year-old, it’s like 90% that believes that essentially all value, things of value, will eventually be tokenized or sit on a blockchain somewhere in this big digital asset ecosystem, or some people call it metaverse. I don’t think that’s, I think the metaverse is one component of this entire digital world. You know, stablecoins, the world of DeFi, you met blockchain gaming, web3. You know, it’s so interesting because we are still so early in the development of this world that we don’t even have a name for it. The names are changing, right? It used to be that there was only Bitcoin 10 years ago, right? And then, sorry, and then in 2015,

20:42 You have Ethereum, but Ethereum was really being attacked even by people in the ecosystem up until, you know, 2020, 2021. I mean, you had a lot of people attacking it and, oh, the supply can be tinkered with and, oh, Vitalik is sitting on a huge amount and he’s going to sell it. And none of that has transpired. And in fact, I think part of the growth in the last 18 months has been as a result of the Ethereum ecosystem blossoming. And the number of developers from the old world moving into blockchain development, I think, has also just hit an all-time high. So when you talk about people building underneath the hood, you know, it’s still tiny, the number of blockchain developers, you know, compared to the total number of software developers out there. But, you know, we’re still making an all-time high, you know, every quarter is higher than the previous quarter. So I think that’s what people miss.

21:47 But I wouldn’t necessarily blame, you know, the press, the traditional press so much, because it is a very high bar. I mean, look at what you do. You spend a lot of your time educating people about Bitcoin, Ethereum, crypto, DeFi. You have your schools. They’re very well attended. People want to learn. But, you know, you’re one guy, and I’m one guy, and it’s still a very small percent, right? I mean, I think of the overall population. Yeah. And when it comes to what you do, you do something really unique in the space.

22:24 Because when most investors came into this space, they were looking at these kind of high-growth startups. You come from this macro world, maybe you can explain that a little bit, and you look at it from a completely different lens, which makes you alone in this space. There’s no one really doing what you’re doing, and maybe you could explain it, and your portfolio is the who’s who of companies in the blockchain space. I mean, it’s the cold wallets of Nana, of Ledger. It’s Circle. It’s, you know, Anamuka Brands.

22:56 It’s these household names of blockchain. Well, they’re household to us. To us, yes. Right? That’s the thing. I always tell people, these are the future Amazons and Teslas and Medes and Googles of the blockchain ecosystem, and you’re investing in them.

23:10 I sort of feel like it’s not the S&P 500 of our space. I think we do a little more than just that, but people outside from the traditional world, and it’s like 99% of people, don’t even realize that there are more developed, more mature companies that are literally making hundreds of millions of dollars of revenue. And they’re doing it, I wouldn’t say completely independently of the cycle in the underlying assets of Bitcoin or Ethereum, but in some cases, they are. And so, we have built a diversified portfolio of 24 businesses that are largely, you know, for the most part, at least when we invested making $50 million in revenue or more, it’s usually B or C stage growth, I would say growth at the growth stage. And what that does is that removes us from the risk of investing in the early stage, which is what many of the well-known VCs in the space do, Andreessen and Polly, Jane and Paradigm. We also probably have less ability to make as much on the return side. And some of those VC funds, they go up 50 times and they lose 80%, and they go up 50 times, they lose 80%. And maybe after 10 years, they’re ahead of where we’ll be, but we have much less volatility. And I still think our portfolio will do a 5 to 10X over the 10-year life of our fund. And so, as you’ve mentioned some of the names, I do think it’s, in a way, maybe some of the eBay’s, Amazon’s of the late 90s.

24:55 Some people then say to me, well, you know, there are a lot of failures. Like, how do you know you’re not investing in MySpace.com? And I always say, look, MySpace.com had $1 million in revenue in 1999. So, I think that’s the surprise for a lot of people, is that a company like Circle is doing $800 million in revenue. And Amoka did, I think, $400 million last year. And that was in 2022. That was up from 100 in 2021. So, 100 to 400 in a year, again, it’s in a little different area. It’s not directly connected to the price of Bitcoin or Ethereum. But, you know, and then we have quick note as well. We actually have board representation on 12 of the 24 businesses. So, we can impact, we’re minority owners, but we can impact the path, in some cases, of the businesses. We’re not going to get everyone right. You know, we had two companies that ran into trouble. They ended up being about 4% of our total assets. So, hasn’t impaired the funds. But, you know, it’s just like investing in any business.

26:13 People make mistakes. But we do a lot of diligence. And I say, when you say, oh, you’re bringing your 25 years experience from the old world, that’s what I’m bringing, which is, you know, months, essentially, of research before we make an investment. We don’t invest in the, you know, underlying tokens or cryptocurrency. We don’t invest in the venture early stage investments. And so, okay, maybe we, as I said, we don’t have the 50X return, but we also don’t have that volatility. And the fund’s performance has been borne out by that. You know, our first fund was up, we haven’t had any realizations yet, but it was up 100% in 21, down 30 in 22, and then flat this year. The second fund was up 30, and then down 9, and then flat this year.

27:04 The interesting thing, and this was sort of case in point for us, the third fund we launched at the absolute peak of the market, January 22, December 21, fully deployed, is up a few percentage points. If you’d invested in Bitcoin or ETH, you’d be still down 50%. Those are core assets. They’re wonderful. I think everyone should have them. But we provide a different type of exposure. If you’d invested in some of the more speculative cryptocurrencies, you’d still be down, you know, 70%, 80%. So, we want to play on the growth of this overall ecosystem that we were just talking about before, the move from $300 billion to $1.7 billion to $10 billion to $20 billion. And I think that, I mean, for us, it seems obvious, but, you know, people still are fighting it, I think, generally. I don’t know why. The Warren Buffett, I’m bringing it back to the Warren Buffett comment. But then, you know, for every Warren Buffett, there’s also a Larry Fink who said two years ago that it was for fraud and money laundering and anti-big card. Now, he says it’s a digital gold and a global asset. He said it’s a global asset. I mean, how many global assets are there? Now, maybe people say, okay, well, he’s speaking his own book because he wants the ETF and he will likely get the ETF. But the reality is, he can’t put his clients of BlackRock into an ETF, Bitcoin ETF, if he doesn’t believe in it to some degree.

28:47 He can’t. And why would he? Now, you can see. I mean, he’s changed. And so, he’s also 30 years younger than Buffett. So, I think that would be easier. He’s 60-ish, right?

29:02 Ish. Exactly. Yeah. Well, Michael Saylor did a tweet when Fink came out and Michael’s been on the show a couple of times. I’m sure you know Michael, who’s got $5 billion of Bitcoin right now. So, I’m like, I just bought another couple hundred million for his public company balance sheet. And he said, yeah, I didn’t realize there was the new marketing officer for Bitcoin.

29:22 You know, and he tweeted out when Larry said that. Well, he’s the marketing officer for Bitcoin. And I respect him. I think he is taking what I would call really an old-time macro, big macro bet. That’s the kind of bet Druckenmiller or Soros or Julian would have taken years ago. He’s all in.

29:44 He’s done all his work. The guy is brilliant when you listen to him. He can be exuberant. And I think that puts off some people. But if you really listen to what he’s saying, I mean, he says quite a few brilliant things. But he’s very focused. And I think for the traditional investor community and the world that I’ve come from before, the hedge fund, macro hedge fund world, as a portfolio manager, having only one bet is just not the way that I’ve lived. And I’m a deep Bitcoiner. I think he’s going to be right. I think Bitcoin is going to be up over 100,000, certainly 18 to 24 months. We’ll make new highs. We’re just talking about the move today. I tweeted something yesterday and I look at charts and I look at fundamentals, I look at all sorts of things. But, you know, I’ve always been a portfolio manager and I guess I’m a little bit not slave to my background, but it would be difficult for me to put absolutely everything into Bitcoin, even though I do think everybody should own a Bitcoin and a little Ethereum as well. The other assets to me are still developing, but I respect him and I think he’s, you know, he’s very creative in how he thinks about Bitcoin. Yeah, he really challenged my thinking of the way he thinks about it. You know, the last conversation I had with him, he talked about it as like digital energy. And so it started as kind of digital property. One of the first guys to get my head around digital property and then it became digital energy.

31:23 And I had a lot more to think about because like you said, he’s all in on this asset class. He literally puts his money where his mouth is, you know, his whole company has been remade as Bitcoin ETF de facto. But also, you know, it’s amazing. He said, you know, our marketing is 100X because of it. And clearly our investors want it. And we float equity to buy more of it.

31:44 We float debt to buy more of it. And it’s really nice having a sailor in the world. But if you look at your portfolio returns, when you told our call that one night when you came on to speak to some of the people in our ventures group, I was blown away when you said Bitcoin’s down more than 50%. Yeah. And you guys are flat to up. Correct. And that’s correct. For me, that completely summarized your vision for what you have for your funds. Yeah. Yeah. I mean, it may end up being, as I said, that sailors exposure, maybe he outperforms us, maybe he doesn’t. I don’t know.

32:21 We’re not in competition. I’m rooting for him to be the number one performing stock in the world. But it’s a different exposure also that it’s a little more, I hate to call it institutional, but if you’re a larger investor and you have assets to deploy, you want to deploy some percent into this space, into this world. And I mean, I think the right number now is probably around, I would say 5%. I think maybe three years ago, I would have said one or two, but it keeps growing. And of course, I’m much larger than that myself, of course. But if you’re a large investor and you’re managing $500 billion, a trillion dollars, and you have no exposure to this space, I mean, I think it’s dangerous, honestly, for your performance over time.

33:15 So I think we offer a more simple way, in a way, for that world to understand and get exposure to this new world. Because many of them can’t get as deep as sailor on Bitcoin. And they’ll say, well, what do you mean Bitcoin turns electricity from the analog world into security in the digital world? Just think about how unbelievable that is. Somehow we’ve been able to bridge our real world to this digital sphere. It’s connected. People are like, well, how does that work?

34:00 Well, you have to read the Satoshi white paper. You have to get through it. You have to understand what the proof of work algorithm is. You have to understand mining. You have to understand how the blockchains come together, how a distributed network works. It’s not easy. Just that one concept, like, oh, electricity into security in the digital world. And sailor focuses a lot on that point. And so I think that not everybody is going to get that, but they will get a portfolio of private companies that are making money, that are successful, that have leadership teams, that they’re building something, they have balance sheet income statement, because it looks a little bit like what they’re used to. Whereas Bitcoin doesn’t look like anything that we’ve ever had before. And it’s a phenomenal invention, as you mentioned in the beginning. And of course, all the other cryptocurrency, the code that supports it is just derivative of the Bitcoin code.

35:04 So I would just say that it took me a lot of work. And I’m not a computer programmer. I’m not a cryptographer. I’m not a mathematician. I didn’t know what the Byzantine general’s problem was, which is what that’s the problem of distributed trust, how to counter parties, trust each other, how they send value without an intermediary. So like, who even knew that that was a thing?

35:30 So I think it’s just such a leap for the old world. I probably like you feel that I’m a little bit of a bridge from that old world to the new world. And I think we give people exposure, and we explain it in a way that makes sense to them. Yeah, I mean, Michael graduated about four or five years before I did at MIT. But it’s a real MIT thing, really, to try to explain, like you said, that connection to energy and security.

36:00 And it’s really deep. And it will be profound the way he’s thinking about it. But if you’re an asset manager, I think it’s easier to understand what you’re saying, which is, hey, there’s this whole ecosystem over here with a different correlation of what you’re investing in. It makes sense to have one, two, three, four, five percent of your portfolio in here. Yeah. And you can talk to the CEO. And he has a plan. And it does seem legitimate. And the team does seem to work. And the company is making more money from one year to the next. I mean, these are sort of basic things that if you’re an investor, you can get. Because they all own private equity. They all have technology stocks. Right. And so I thought it was just too much of a leap to get people to understand the underlying. Many of the companies we own, of course, have Bitcoin and other cryptocurrency on their balance sheet. But that’s not the direct exposure.

37:07 So we do benefit more in full periods. And we’re not hurt as much in bear periods, because, again, we have functioning businesses that are producing cash.

37:24 And it’s diversified geographically. We’re talking about Singapore. I have roughly one third of the portfolio in US, North America, one third Europe, one third Asia, even though sometimes it can be difficult to find companies in specific regions that do specific things. But we’re patient. But I feel like that geographic diversification is very important because you don’t necessarily know where it’s going to take off or not. I mean, we had an exchange, unfortunately, that was connected in Asian exchange. It was a lot of the revenue connected to China. And when they banned Bitcoin two years ago, it hurt the revenue of this business. And we had to mark down our investment. It was a smaller investment.

38:18 But now they’re pivoting. So that business still exists. We took a little bit of a hit. But now they’re pivoting and doing some interesting new things. And some new leadership, so I’m hopeful. But you have different problems, but they’re not the cataclysmic problems that you see in the crypto world where things do go down 99.9%. And some of those things never come back.

38:45 And that’s just a really hard thing for a traditional investor to wrap their mind around, like being long anything that goes down 70%, 80%. And the reality is, yes, Bitcoin is the greatest returning asset of all time, 200% annualized. But that’s with more than eight drawdowns of 70% or more. So every three years or every two years it goes down 50 to 80%. That’s OK for me and you, for ourselves, if we’ve been in it for a long time and don’t just have our exposure. But if you’re a larger pool of capital trying to get exposure to this space, or if you have uncertainty a little bit, you don’t really understand Bitcoin anything, you have a little bit you can understand investing into a business. And I think that’s the, you know, and for some reason we’re the only growth equity fund in the world that is exclusively focused on these Web3, blockchain, crypto businesses, the more sophisticated ones.

39:56 There was a period in 21 and 22 where you had traditional private equity guys come in and Toma Bravo, when you had Tommasic and the Canadian pensions and Tiger, they all came in and they pushed valuations up dramatically and then they got hurt and now they’ve all backed away from the space. And so we have a super opportunity now because we didn’t go in and pay those valuations. We didn’t pay more than 10 to 12 times revenue for any of our businesses. And so we are not feeling hurt at the moment. In fact, we’re raising another fund right now and we’re just about to end our early bird stage and then we’ll have another close in January.

40:43 But the reception I’m getting now, even in this bear phase, is dramatically different than I had, than I got in the beginning. It’s dramatically different. I mean, in the beginning, every other meeting was about, tell me why, oh, there are no use cases for crypto. Then I had, Bitcoin is only about fraud and money laundering. Then I had, you know, it just was all of those traditions. Oh, government is going to ban it. That was the number one thing. The US is just going to ban it. I would go into meetings before I said anything. They said, look, we’ll talk to you because, you know, your background and we know you through a friend or this or that, but we’re going to start the meeting with, we think the US is banning it.

41:27 So then I would spend the hour explaining why it’s not banable, right? And we saw that. If you remember, I would think even 21, if I had said to you, China is going to ban Bitcoin, I would have thought, okay, the price is going to go down. Like, it’s going to be a problem for the space. There are a lot of miners there. Asia’s been, you know, a big part. You know, Matt Gox was Japan. I mean, this was Asia years and years ago. I mean, the Asians are facile with digital things, digital currency. And what happened? It went down for what, a few days and then continued its March.

42:08 And so, and that was, what was that in 21? I mean, it’s almost three years ago. They’ve banned it a bunch of times. Yeah, before that too. Yeah. And so now I don’t get, no one says to me, oh, the US is going to ban it.

42:26 They say they’re, oh, they’re regulatory hurdles in the US. Sure. The reason everyone’s obsessed with the US, of course, is that a huge chunk of the world’s wealth is there, right? But the difference, I think, between this space and every other one, you know, this is to the question, does it need the world’s wealth? Is that this is the first, I think, truly global asset really of all time. You know, there would be a case maybe to make for gold, but that’s for a different day being the first one. But, you know, people in every country own cryptocurrency across the socioeconomic strata. It doesn’t matter, you know, that we’ve grown to this point without the US. Imagine that, okay? 1.7 trillion without the US, 85% of total world cryptocurrency trading volume, just the trading volume, is outside of the US.

43:36 So, you know, people listening to this today should be thinking, well, what’s going to happen when the US has its light bulb moment? We’re not going to be 1.7 trillion. Like, and maybe like Larry Fink this year, I mean, I think my team, I think we’ve had this, we discuss these things all the time. I think we think this is the most important event so far. There are a lot of important things that happened this year. But so far in terms of what could push the price to a completely new level, you know, the 60-year-old guy sitting on top of $10 trillion, a lot of money market funds. The minute the interest rates start to go down again, which I think really begins in Q2 of 24, Q1, Q2, I think that’s probably that with an ETF for Americans. Because from my perspective, I’m like, what do you need an ETF for?

44:41 Just go on Coinbase, get a wallet, buy some Bitcoin. It’s easy. But it just shows you how resistant the US is. Like the constant discussion every day about the ETF is so boring. I mean, look, I get it. I remember when the gold ETF was introduced. It changed everything because there are a lot of entities that were not allowed to own futures or physical. So I got that.

45:08 But there are Bitcoin futures out there. There’s spot Bitcoin. It’s very easy. And still, Americans somehow are waiting for this ETF so that in the 401k or in the, you know, their wealth manager at Merrill Lynch, you know, Bank of America, they can just push a button and buy that. That shows you how far away we are and how far away the US is. So anybody who is suffering now in this bear phase, I’m just saying people trying to make a decision about whether they want to stay in this world, in this digital asset ecosystem, the flood of capital hasn’t even begun.

45:57 Right. Hasn’t even begun. And I want to talk about what happens when the ETF gets approved and when you think that’s going to happen, just to go a little deeper. And by the way, if people are interested in learning more about your new fund, one RT, they can go to London Real that TV forward slash Dan, we are going to be investing in your fund through London Real ventures. And if people want to know more about that, it’s London Real dot ventures, the ETF.

46:21 Yeah, they say as much as 600 billion could come immediately in on when the introduction of an ETF and in the long run, they say, where did you get that number from? I heard that number very recently. Yeah, I think that’s a reasonable number. I don’t have any particular edge here or in knowing I don’t, you know, I’m not, you know, I’m not involved in the construction of ETFs. I don’t have an estimate. But that’s the same market cap of Bitcoin entirely. I know, I know.

46:51 And you’re not the guy, what happens? I know that’s the wealth of the US. It’s just massive. And I think the only thing that has prevented the price from being at the highs today is just this insane, truly insane federal reserve interest rate move. I mean, I, you know, you, I don’t want to talk too much about this, the old world, but to go from zero to five and to have inflation already at a 3% handle on CPI. It’s pretty scary. Policy works with a lag. This Fed knows that. I don’t think any of us, you know, from the macro really understand why they aren’t, you know, living by working by their own mantra. I mean, if you remember the Bernanke Feds, the Greenspan Feds, how many times did we hear policy works with a lag? It didn’t change. It works with a lag.

47:57 They have overtightened dramatically. And you’re starting to see, you started to see some things come apart with Silicon Valley Bank earlier in the year. You start, you know, the housing market is essentially frozen, commercial real estate frozen. So, you know, the CPI, there’s a risk that we undershoot because we’re at three now, right? And they’ve just tightened recently again. So I think that they’ll be reversing policy certainly by Q2 and some of the growth data, the forward leading indicators are just so weak. I think the Feds own, they have one, and you’ll be seeing this in a slide I have tomorrow, their own recession predicting model, I think is now over 70%. So I’m not saying we have a recession. I just think that we are going to have a period of much slower growth and much lower inflation. And it’s baked into the cake as they used to say. So why this Fed doesn’t have the confidence that the policies, the policy action that they’ve taken in the past, you know, 18 months isn’t enough.

49:23 I don’t know. But think about this. Bitcoin is up 100% this year. Okay, from that low in November, 100% with interest rates having the greatest single move in the shortest period of time ever. Okay, so where would Bitcoin be if the funds rate were two or three and not five?

49:50 So I think the markets are smarter than the Fed. I’m a free markets guy. Let the markets decide, always. I was always a free markets guy. And I don’t think the Fed really believes in the markets.

50:07 I don’t think J Powell is not a markets guy. He’s an investor. He was, he was at a private equity. He is not a markets person. So what I think is happening, you know, even today with Bitcoin and you know, ETH’s at $1,800, like it’s a $1,750 or whatever. It’s a very high price. Bitcoin at $28,000. Some of our company’s record profits, one of our companies just had a record revenue quarter.

50:40 And I just think that the minute the pause is sensed, and I think that’s a little bit part of the reason why we’re having this move today. It is the potential ETH ETF impacting, but the markets are looking out two and three years and saying, well, we know for sure that the Fed will have stopped and that the CPI will be two or one or zero or maybe negative. Right. And so the Fed doesn’t yet have enough confidence in what it’s done to back away, which I just find highly problematic. I mean, like there’s a, like, I could take a sort of philosophical path that says that the Fed is potentially going to a place where their credibility long-term could be impacted, which is partially a reason to be interested in Bitcoin. Right. That there, there could be a, I don’t, this is not my base case, but if what they’ve done leads to a much more severe growth and inflation response, people are going to say, what were you guys doing? Why are eight people sitting around or 12 people or whoever, whatever it is sitting around some oval table in DC, making policy for the entire world, essentially.

52:22 How does that make sense? Those 10 guys really are that good. Right. So I’m just saying, I think that the Federal Reserve founded in 1912, right. It does its best to manage cycles, but in this era of like new technologies and the invention of Bitcoin and other things like that, how is new technology being applied to the management of monetary policy? It’s not.

52:54 So it’s like, are we going to be using ACHs and wires to send money, you know, 10 years from now? I think it’s zero chance. Right. So it’s the same kind of question. Did you follow my, my thought there? It’s the same kind of thing. People might start to say, why are we letting like a bunch, like 10, 10 guys and gals just sit down there and look at the Philly Fed data and make a decision or look at a hundred different pieces of data as macro guys do and make a decision about policy. And now they don’t even trust what they’ve done. You know, they haven’t said policy works with a lag. Every Fed you and I remember, right? Yell and all of them policy works with the lag. So there is this world where people do believe the credibility of the Fed is not what it was, is damaged. And maybe this is also partially why the digital asset world is so robust. And so, you know, as you mentioned, we are focused on investing in the companies that are growing along and building this new world. So we’ve got a lunch tomorrow at the Royal Institute here in London. And I think you’ve got 40 or 50 investors there. You travel the world, you spend a lot of time in Australia and Asia. I think you’re opening up an office in Abu Dhabi.

54:25 Obviously you’re in New York. What’s it like when you talk to people like you’ll talk tomorrow to those people? What, what are the questions? Is it based on region? Is it based on the past? Is it based on the age? What are some of the conversations you have to have? And are those conversations much more productive, as you said, in 23 and easier to talk to them about this as an asset class than it was a year or two ago? Yeah. Well, in 21, there was a bit of euphoria.

54:54 And I think people were, you know, I think they were just chasing a little bit. And now, but I think about like, for me, the degree of difficulty in the beginning versus now. Again, we’ve mentioned age. And I think age is a determinant. locale is also a determinant.

55:22 You know, for instance, right now, US institutions are over allocated to private equity generally. And, you know, technology, at least a handful of stocks have run a long way. If you’re a, you know, older person managing a US pension, I’m not going to be speaking to them, because the reality is that they’re probably not interested. I’m only one guy in terms of size of funds or a small fund billion dollars. It’s a small fund compared to the funds out in the world. For crypto, we’re kind of big ish, but in the real world, we’re small. So I won’t approach. And my team won’t approach an investor like that. I think that the people who we have most success with are, I would say, I always say the 38 year old guy who’s managing the family office and the 80 year old patriarch is sort of handing the reins over. And maybe they were looking at Bitcoin in 2016, and they passed and they, you know, they’re not really sure how to get exposure. And we are a lot of people’s first toe dip into the space. And then we bring them along, we educate them. And then they go off and follow specific interests that they have or invest in things that are maybe, you know, much higher risk. But, you know, we’re very transparent. We write these long investment memos. We do everything we can to bring people along. And so maybe it’s easier now because we actually are a little more focused on the people who we know will have interest.

57:14 But what’s happened is that the interests in certain places, like we bring it back to the very first thing we talked about, Singapore, I mean, I had a handful of meetings there and they were all very good. They’re all very good. There’s just, again, you mentioned Abu Dhabi and Dubai and also Riyadh now is very interesting. Latin America you hear less about, but we can’t forget that the places like Argentina, Brazil, these are places that have had problems with monetary policy. Argentina had a major collapses here. They intuitively understand this world. But it’s not about blockchain gaming for them, right? For them, it’s about store of value. Okay, you go to Korea and blockchain gaming week, which they had, I mean, is a madhouse, just like I went to the Web3 Summit in Tokyo. And that was, they said the largest one in Asia, supposedly 15,000 people there. So different regions have different interests in the space. I don’t know that that’s really been reported properly. You talked about Paris Blockchain Week before, the luxury goods companies there, they are trying to think about how do we bring NFTs into our universe so that we have a connection with our product, because the product has provenance once it’s stamped on the blockchain. But then also we know who owns, who we develop a closer connection to our client, to the person who actually purchased that, you know, expensive item, right? So I feel like

59:09 Paris, they have, like, that’s more their interest. Korea is more the blockchain gaming, Latin America more about, I just want to make sure that I have savings. So that’s, you know, that’s different from, you know, three, four years ago. So if you get one person to understand one thing about this world, then they’re open to seeing the rest of it. It’s the people who think, who don’t even know that this world exists. Those are the ones, and this is why I said, well, give me, you know, an hour with Warren Buffett. He may be too far gone. But I mean, the idea is that once they see one, two, three, four different, like, you want to call them use cases or whatever it is, you know, what sets them off. I mean, I was speaking with a Swiss private banker yesterday, and an older guy, I was just sitting next to him on a boat. And I’m thinking to myself, there’s no chance that he will get it or whatever it is, I’m just, I’m gonna be nice and explain because he’s asked me what we’re doing. But he has two sons in their 20s, who are big time video game guys, and they are doing stuff in the video game world. And they’re also, of course, you know, open to, you know, this concept of digital value and blockchain gaming and, you know, property rights, right? This is what Yat always talks about. So he, he understood, like, you know, my sons, smart guys, they’re in this world, you know, he’s trying to figure out even somebody who I would have not even spoken with, there’s a touch point for him there.

1:01:06 This is why, as much as I love sailor, and, you know, some of the people who are very focused on specific things, it’s hard to reach everybody on only one point. And maybe you don’t want to reach everybody. But if you have, let’s say, 10 different ways or 10 different, you know, smaller sub sectors or smaller ecosystems, once they’re in to the new world, they then can investigate. And maybe they come to the conclusion that this is all nonsense, we just want to be in Bitcoin, maybe the gamers maybe come to the conclusion, well, we don’t need any digital value, we just want to be able to trade our in game items, right? That the 17 year old, you know, playing games in Taiwan, right? So that’s the world that we invest in is the bigger world, because we don’t actually know what area of this world is really going to take off. And as core of Bitcoiner as I am, I’m a gold guy and store of value. And yes, Bitcoin and proof of work, very important.

1:02:25 It will take decades, if that were the only way to educate people. And this is why you also have moved into teaching people about DeFi and about other things going on in this ecosystem, right? Because if you can get them in the digital asset ecosystem frame of mind, then they can figure out, you know, all the other different areas and really see that, I mean, this is the future. Yeah, I used to have an expression on London Real and that was, it takes a village to educate a child in, you know, blockchain web three, because I would have a sailor on and then I would have a tapiero on and then I would have, you know, a layer one CEO on and I would Jeremy a layer from circle on. And you’d have all these different people talking about specific things in their own ways with their own backgrounds. And I figured these are all these little mini attack vectors at someone out there. And one of them is going to connect with them because of a background or something they said, sometimes just the right moment. And then they go a little deeper and then they pull hair. Yeah, yeah. First explain the metaverse back in 21 when I didn’t know what it was. Right. And he really broke it down.

1:03:40 I asked a stupid question. What is the metaverse? And he broke it down. And so yeah, if you put all that surround attack vectors, I like that. Yeah. Have you used that before?

1:03:51 I’ve heard that used in this space, but maybe I have. Yeah, it really is all these attack vectors and one will get through or like you said, one will get through this much and then the other one will take it the next way. And you want to have this surround sound effect of literally educating this child with a village. And that’s how you get. Even though it was Hillary Clinton that said it takes a village and I would never want to quote her. I think it’s an African proverb. Right, it is. But you’re actually right.

1:04:15 I completely agree. And so you want to hit, I think you’ve done a great job of bringing those people in. People can come to you and hear those different voices. And you’re not necessarily ideological about one of these attack vectors, as you call them. And in the space, there’s a lot of that. And I get it. And I think it’s great to have strong proponents of certain areas. But I never think there is only one thing.

1:04:46 Yeah. Right. When you were talking there, you reminded me, we had a CEO on the call on Monday talking to our ventures group and she was doing digital toys and had just done an acceleration with Disney and got an investment from Disney. And it’s spoken to like 70 executives all the way from the imagineers to like the people in ESPN to the people that are making movies, all this. And I said to her, because I asked really frank questions on our calls, I said, how can you get a bunch of execs at Disney to care about what you’re doing? And she said, I’ll tell you why, Brian. At this point, they licensed their IP to like a Mattel.

1:05:23 The Mattel makes the toy and ships it to a Walmart. The toy gets bought by a parent or a grandparent or an uncle and given to the kid. That’s four degrees of separation from the IP to the end consumer. And they have no idea what that kid thinks about it, how they’re using it, how they want future products, etc. We are giving them potentially that zero party data where you can actually see what’s the kid doing with your toy in real time in an AR VR situation. And she said that gets them to turn off their whatever and listen to her in that meeting because they know that’s the key for future product development.

1:06:02 And I was like, I mean, I’m impressed constantly by people in this ecosystem. But I was like, okay, you’ve got my attention. So, you know, we should just for even 30 seconds talk about that because, you know, I think some of the smartest people I’ve ever met, most interesting, like, highest quality thinkers, they’re in the space. So when I hear some of the people from my old world say, Oh, it’s just a fraud, or Oh, it’s just all going to zero, or the government’s going to ban it. I’m thinking, you just haven’t done the work. You know, like, it’s impossible.

1:06:42 I mean, Wall Street traders, portfolio managers, hedge fund guys, there’s no comparison in terms of their level of intelligence. They’re smart guys there. But it doesn’t compare to the geniuses that are in the space. And I don’t say, you know, I used to work for a guy who would call every idiot a genius. Oh, this genius thing, but there really are geniuses, you know, you in this space that and it’s so multidisciplinary. You know, that’s the other thing is like people really are thinking in like a new ways. Like that alone, you would think would encourage people to investigate more. Sometimes it does. But sometimes, I mean, and often it doesn’t.

1:07:31 So I don’t know. I mean, I’m sure you felt the same. So true. I never actually thought about it, Dan, until you just said it now. But like, I’ve had almost 100 people in this space, all the very top, and every single one of them is next level fascinating. Like I get out of here.

1:07:45 And again, I’ve spoken to 1000 people on the show for 12 years. And the, and the, you know, 10% of them are in this ecosystem, because I find them fascinating. Yeah, and so I’m we could talk to some pretty interesting people. And the people in the web three blockchain ecosystem are right up with with the top of the top, you know, from the navy seal to the this to that. And they, they really are, like you said, multidisciplinary, they have to be able to create something when there’s nothing there. And you’re right, they don’t even compare to the people I used to work with, you know, in a nice way. But you have to have a different set of skills. Yeah. And so I would say most people wouldn’t know that unless you’re, unless you’re deep in the system, I know, really interacting with those people.

1:08:27 We briefly mentioned, let’s talk about one of those, which is Yatsu, who’s the chairman of Animoka Brands, which is one of your portfolio companies. I’ve gotten to know yet quite well the last couple years, again, he was the first guy to come on and talk to me about what the metaverse was. And then we continue these conversations about his hallmark, which is digital property rights. Now, he recently, I think, had had lunch with Simon Sinek, and Simon Sinek has this concept of start with why and he said, yeah, a lot of people don’t know what you mean. But the concept is something that’s inherent and innate to everybody. If you don’t own it, then you don’t have rights around it or freedoms around it. But also, if you’re a creator, right? If you don’t own it, right? I’m sorry, it’s rough. No, but that’s a good point, because again, creators create that digital property, that digital IP, and most of the times they end up not owning it. And so he’s a huge proponent of that. Obviously, Animoka has grown and grown and grown. I think it’s over 400 or 450 investments and, you know, Web3 heavily focused in gaming. Why was that an important part of your portfolio? And why do you continue to, you know, support that ecosystem? Tell me about that. So one of the difficulties in the space is that there aren’t that many larger, I would say, higher quality companies, I mean, compared to the rest of the world. And so you have to make, you have to make certain decisions,

1:09:57 Sometimes they’re binary. So I wanted to have an exposure to, again, macro guy, to the broad sector, a broad sector called Metaverse NFT blockchain gaming. We have three buckets in our fund. That’s one of the buckets, infrastructure is another bucket, then we have another one, sort of like financial, new era financial type businesses. But those are three buckets. So when I look at the blockchain gaming Metaverse bucket, there really isn’t another company that makes the kind of money that Animoka does in this area that’s at scale, that has proper leadership. There are other companies with higher valuations, believe it or not. I mean, OpenSea, which we’d call an NFT marketplace, they raised money at $13 billion, whenever that was 18 months ago, you can buy that stock in the secondary for a billion dollars now, and their revenue has completely collapsed. So, you know, there are, you know, that’s one business there, you know, probably, I mean, as I think about it, you know, and this is why we took such a big position in Animoka. I stepped back and I said to myself, if there was only one company in the world that was going to make it in that space, if I had to make only one bet, Animoka would be that bet. And it’s also because I think they’re a budding conglomerate of sorts. You mentioned all these VC investments. That’s, you know, one of the reasons we invested. But I also, I like this idea, and this is part of their

1:11:47 Operating business of turning, and this is a little bit web 2 to web 3 before actually that concept even existed, taking gaming businesses from the old world, and I call it blockchain affine them. And so that’s Animoka, I mean, has that as part of their business. They’re bringing in these gamers and, you know, all of these in-game items, they then are block chaining, affine them, putting on blockchains that can then be transferred or traded on other platforms where you can pull the item, the in-game item out of that, I guess, wall garden or out of that, yeah, that specific universe and take it with you, your value, your digital value becomes transportable. And so I just thought, for me, like, wow, that’s really cool. And maybe there are other people doing that to some degree, but no one at scale, no one with this team, no one that has a bigger vision. You know, and of course, Yat then pivoted to this tiny tap, which I think you know a little bit about, and I don’t know that much about it. But I also, and this is very important, when we make an investment, it’s very important for me to believe that the CEO, chairman, leader, leadership can pivot to an unknown future because the space is growing so quickly that the business that they may be in today, three years from now, may not be the business that it is today, probably won’t actually. But this happens in the old world, but it doesn’t happen as fast. And so the leadership teams, I have to believe, are able to pivot to sort of and take

1:13:46 A little risk to an unknown future. And I think that’s what he’s done on multiple occasions. And they were in Sandbox earlier. But you know, Sandbox is now less hyped or less, it’s not that it isn’t growing. And if you talk to Yat about Sandbox, I mean, I don’t know how he keeps track of all the things that he does.

1:14:11 But, you know, it’s not as I think is the growth isn’t as big as what it’s not going away. But he’s also pivoted into a whole bunch of different areas. So that was the key for me that it was a conglomerate, a metaverse conglomerate, that the leadership had the ability to pivot, and that they had a business that I thought was, there was a little bit of a motor on it was complex to turn these old web to video game games into blockchain games. So those are sort of that’s like the high level.

1:14:51 It’s really interesting to see the way you think about those things. While we’re on that same note, you passed on a few companies, including FTX. Yeah, I guess you passed on OpenSea. And when you gave your presentation to our group the other night, you went through and it was just like, wow, wow, wow. You’re like, we passed, passed, passed, passed, passed. And it was like, most of the mega failures of 22. Can you talk about how you did that? Because it was it’s easy.

1:15:16 Maybe it’s easier for people to look at it and say, well, of course he did. But there was so much hype and so much emotion. We saw some veteran fund managers lose a lot of money in those companies. It really just comes down to not wanting to pay up too much. Because when you do, you reduce the probability that you could make a specific return. So every investment we make, we have to believe, may not come true, but we have to believe that within the 10 year period of the fund that we can make a 10x return on that investment. And again, we think we want the portfolio to be up between five and 10. So if we can do the math and apply all those old models and all evaluation models and do all the top down bottom up thinking and come out with 60 page explanation that says, yes, we think you can make a 10x return. The most important thing is your starting point. So a hallmark of a lot of the companies we passed on was that the leadership, the CEOs, wanted ridiculous valuations. 30, 50, 100 times revenue. So like I didn’t know FTX was a fraud. I didn’t. Okay. We passed on FTX three times. We passed on BlockFi and Celsius.

1:16:49 And yes, we passed on over a hundred deals. You also noticed they had no board, no board of directors and there was no, the father was on the board. So they had, you know, but what we, we also know yellow and red flags. And so, you know, FTX, for instance, took forever to let us see their financials. And then they, you know, they always were behaving towards us like they were doing us a favor, but they were coming to us for money. And then, you know, FTX, what’s his name? SBF. I heard his him talk on a podcast about macro. And I’m thinking, my God, I mean, this doesn’t know anything. Who’s on the board, as you mentioned, well, he has his father on the board. That’s another, you know, red flag kind of thing. I remember asking, you know, well, where was, where was your money made? What are your best? What was your best trade? This cross exchange arbitrage. So he was buying Bitcoin in Korea and selling it in Japan or whatever it was.

1:17:59 And like, that’s not investment judgment. Like any, you know, any donkey can do that. Who cares? That’s not, you don’t build wealth by buying something on one exchange on another, not in the world that I came from. So there were so many things like that. I mean, there were just so many, and then he wanted, you know, 30 to 50 times revenue. So if we were going to go into the 20 or 30 billion dollar valuation, we had to believe that FTX was going to go from 30 to 300 billion. And I just thought like he may do it, but that’s a really hard bet for us to make. So I’m very rational, sort of very, you know, cold about this. I didn’t care about the hype and this and that. And look, this is also all we do all day, every day.

1:18:57 Some of the people who made mistakes were really funds and investors in other areas. I don’t do anything else except the companies in this, private companies in the space. So I don’t have a hundred billion dollar technology private equity fund. You know, I’m not, I don’t have 17 different, you know, growth equity strategies. I’m not, you know, I’m not a tourist coming in to just take a little bit of a, of a dabble. And so what really saved us, to be honest, it wasn’t that I thought he was a fraud was just that I thought he was very greedy and it was our process. So it was just our process. That was it. You know, there’s another company, API and node infrastructure business. We really wanted exposure to that area.

1:19:48 They wanted a hundred times revenue at a $10 billion starting valuation. So again, do I think this company could be a hundred billion dollar company? They’re only doing a hundred million in revenue. Like that’s a real tough call. So those are easy bets for us to not make. And so we can’t spend a lot of time. I only have, you know, our team is not that big.

1:20:17 We’re 15 people, you know, I have six analysts, five partners, but you know, the analysis we do takes a lot of time. So we need to not, our skill has to be in what not to spend time on. So we didn’t spend any time on FTX. That doesn’t mean we don’t have problems. We, we have two unfortunate businesses in the portfolio. I mentioned before there’s zero, two out of 26 initial investments. That’s, that’s like, I thought we would have no zeros, but one was a trading error that, you know, the risk management team, their efforts failed.

1:21:06 So that company went under. The other one was just, I think it was a little bit of a fraud, but they misplaced the private keys. So poof, money was gone and, you know, money they, they thought they had, they, they didn’t have. So, you know, that’s unfortunate. Again, around four, four and a half percent of our total assets, not the end of the world, but even being disciplined, even, and we didn’t, in fact, I’ll tell you a funny little story is that both of those companies that we owned that went to zero, we bought at very, very reasonable valuations. They goaded me by offering me something that at least in one case I thought was too good to be true. And I kept asking like my team and the guy who was responsible for this brought us, it doesn’t make sense. Why are we able to buy this so cheaply? I don’t get it.

1:22:13 Yeah, we think the business is good, but how can we buy it? It’s such a low multiple. I don’t understand. And so I got caught there by our own process in a way, because I was so sensitive and I am to valuation. Somebody, they sensed that. And so they showed me something that was a little too reasonable. And I invested. And so like, even we, you know, have two zeros right there out of the 26. And it kills me because I’ve said to our investors and I said to myself, and I have a big chunk of my own money, we should not have any zeros. We shouldn’t.

1:22:54 But you know, it’s been tough for, and again, our overall performance has been fine. But I’m still, those two things really bother me more than the things that are doing well. They’re on autopilot, right? So I think process from the old world, being careful on valuation, not ignoring red flags, and understanding that we, I really think we really do more work than other people. And if I can see somebody making an investment, and I know for sure that we do more work than them, then I don’t have that FOMO thing that I think caused a lot of the problems.

1:23:37 I had actually investors that were pressing me to invest in FTX and like on multiple occasions. And after I said no, they went around me and made those investments themselves. That’s how deep the FOMO was. And I was like, well, I’m hoping good for you. Maybe I’m wrong, right? But we just have to stick to our process. You just alluded to it and you mentioned to me, I think one of our conversations that you should be careful about investing in anything where the investor doesn’t have his own money in the fund. Oh, well, you can’t do that.

1:24:19 A lot of people don’t know that. That’s the most basic thing of all time. And you have a chunk of your wealth in this fund. Yes, I do. And I will have in the next fund as well. And it’s not just me, it’s also my partners in the GP. I mean, we all are committed. I, of course, more than everybody else, but never, ever invest in a fund, ever, or in any entity, or any business, or any stock, or anything, where the guy or the team that’s running the show doesn’t have a large amount invested. If they have a small amount, that’s not enough.

1:24:59 That’s personal money or just equity in the company. Personal money, forget equity. I know equity is what some guy at one point decides it’s worth, right? We have a partner in the GP that bought a 5% stake. He bought in, he’s not involved in the day to day.

1:25:17 He put a valuation on that company, on our company in April of 2021. It’s a great valuation, but that’s meaningless. That’s not what I’m talking about. Okay. It’s not meaningless. It’s great.

1:25:33 It’s wonderful, but that doesn’t mean anything. Your people, people listening, never invest in anything. Again, where the CEO, the leadership, the founder doesn’t have a very large amount of personal money invested. That’s great advice. Very large. Large in dollars and large in percent of their total assets. Is that most of the companies you invest in?

1:26:03 I have to say most, but because this space is so new, there’s some times where we don’t have a choice if we want a specific exposure. I am trying to build this diversified exposure. Specifically, I mentioned just now these two problems we had. They were both also as a result of me wanting to get exposure to that specific function or use case or sector, however you want to call it, within the digital asset ecosystem. Yes, for the most part, that is absolutely the case. I’ll tell you if a CEO or a founder uses the raise to pull out a large chunk of money or wants to, forget it. I had a big battle with a group of three founders who wanted to pull out a bigger chunk and I was like, forget it, then no way. We put a limit on, I don’t mind that they make some money, but you don’t want to see your CEO in Central Pay, in the 300-foot yacht and racing Ferraris on the circuit. That’s fine to do, but it’s just you don’t want to invest in that. We are very careful in each deal that we do to make sure that they maybe can sell some of their equity a little bit, but that they are fully financially committed. I’m a little disappointed in the specific company I’m thinking about now. The fact that it was even a discussion is a problem and they’re not doing as well as some of my other companies. There’s a real correlation there.

1:28:17 It’s deep. It’s really deep. This is good because I wanted to finish on asking you some questions about trading and trading advice. I think you once said, quote, it took me probably 15 years before I truly felt confident. You had been successful with that, but you didn’t feel confident until 15 years. I was wondering if you could tell us some of the things that you learned over the years, especially working with these massive legends like Druckenmiller and Cohen and Rothschilds, guys that literally went in and moved markets when that actually meant something.

1:28:51 I’m curious if you can tell us what those experiences are like. We’ve had lunch before where you’re telling me stories and I’m just like, my jaw has dropped. I grew up in the 90s in the training world and still your stories make my jaw drop. If you tell us a little about that, also, if people are interested in learning more about One RT, it’s LondonReal.tv forward slash Dan. Of course, London Real Ventures is investing where LondonReal.ventures. Tell us a little bit about what you learned over the years. I would just say that 15 years was about having full confidence in your abilities. I think what happens in your 20s and early 30s is you’re just constantly questioning yourself. So you can have a big hit. I was up 100% in 1997 in my portfolio because I caught almost, I mean, essentially every single Asian currency devaluation, starting with the bot and then Rupee and Ringit and Sing and Koreanwon, all of those.

1:29:51 But it was because the analytical framework for understanding what was happening before the Asian crisis happened was the RM crisis. It was just a similar analytics, which was in 9293. So you can have outsized performance like that, but that event happens. You make the money and then you’re looking at another set of opportunities, maybe ones where you don’t have the background or framework. As a macro portfolio manager, you’re jumping around looking for what is the best sort of, where’s the best asymmetry? Where’s the best risk reward? Where can I have a defined amount of money that I’m risking to make a certain result? So I want to risk $1 to make five. And if I’m completely wrong, I lose one, but I have 10 in my portfolio, so I still have nine left. And so you’re looking for that asymmetry where the probability is skewed in your favor to making that one to five or one to three, or however you set your portfolio up.

1:31:01 So I think in the first 15 years, you have a portfolio. Mine was marked every day, every week, every month, every year. It’s very clear. This is the performance. These are the dollars you made. This is the percent you get. There’s no waffling. There’s no fake it till you make it kind of thing. I worked with a guy once who said that I was like, Oh my, this is the worst dumbest thing anybody’s ever said. There is no faking it. There’s a number every single day.

1:31:33 You either have judgment or you don’t. And in the beginning, no one does. So it’s trial and error over and over and over and over and over. And you’re reading a million things. You’re trying to come up with new ideas and then you’re trying to research your own ideas. And then you’re trying new items. Then you’re trying to also risk manage. For me, I would have core positions in a portfolio and then, you know, carrying those positions, there’s a volatility assume with that.

1:32:05 So if you knew there was an event happening next week that was going to hurt your core position, and you didn’t want to sell your core position, you might hedge it for a week or two or whatever. You know, so they was also doing all of that. So it’s a very dynamic process. And, you know, you’re always making mistakes. So that’s sort of the problem is that, and sometimes they’re real mistakes. Sometimes they’re just little ones.

1:32:33 You have to constantly be correcting yourself. And so you also have to be looking for different sources of information and digesting them in a creative way. And so that was keeping all of that together. It’s just like this, you know, car, it’s moving 200 miles an hour and it’s moving up and down. It’s just totally crazy. And you’re not really sure at any one time that what you’re doing is right. You think it’s right, you get paid, for instance, for being right.

1:33:15 But, you know, you could just as easily maybe have been wrong or was your idea wrong, but you made the money anyway, because there was some other reason, right? Like that’s just, you know, it’s just constant. So what finally gave me confidence was, I guess I was about 38, I was working for Druckenmiller. And again, it was about 15 years. And I saw that the things that he looked at to make judgments about markets were very similar to the things I had looked at.

1:33:57 We both respected like a certain number of economists who did a certain type of work. There were certain analysts who we always read, right? And I had come to a similar place. Again, it was just that I had some overlap. And so I thought, my goodness, I guess I wasn’t so crazy all these years, because there are times where you really meet your maker.

1:34:28 I mean, I was down, of my 16 years of active money management, like where I have a track record, I was down in 04 and 05. I was down about 4% each year. So that’s not the end of the world, right? But I had investors, I had people who were looking to me and they’re like, Dan, do you know what you’re doing? And like, I’m like 8% over two, it’s not good.

1:34:55 But I wasn’t having an existential crisis, but they were forcing me to have an existential crisis. So that’s another problem, is that when you have outside investors, they don’t really understand in a deep way what you’re doing often, okay? So they wobble at the drop of a hat. You go down on something and they think you’re an idiot, and you have people in the hedge from this, they pull their money. Oh, you’re down 4%, I’m out. Like the other fund that I’m investing ends up 20, right? So external pressure also forces you to question yourself.

1:35:36 I hit 38, I was working at Duquesne and I just, that was it. Like I saw that what I had been doing, my process was the right process, to be able to consistently make money. Not at Stan’s level, of course. I mean, he’s a unique unicorn off the charts there and the size and complexity of his portfolio, infinitely greater than mine. Size is incredible, how he manages it, it’s multi-layered and I didn’t have as many positions.

1:36:15 I mean, I still had 20 or 30 positions in the portfolio at any one time, but the fact that there was overlap, that I had come to similar conclusions on my own and respected the same people and this kind of thing was very helpful. And then I didn’t really care what any external person or what any other investor period ever thought, because I worked closely enough with him and I think he’s probably, with Soros, the best in macro, probably ever. So, that confidence, I didn’t have. And then even when I went back to work with Steve after Stan, I carried that confidence, it didn’t matter. Steve is phenomenal, but he’s not a macro portfolio manager. He’s an equity trader, maybe the greatest equity pure trader ever.

1:37:26 I mean, honestly, when I was working with him, his, what was it, his sharp ratio, and this isn’t, I haven’t even said the word sharp ratio in 10 years, but I think his sharp ratio was 10. It was a number that was not on any plot chart. And some people say, well, you know, he had the whole run-in with the authorities. The guy has run a portfolio for 35 years, there’s no luck involved there. I mean, he’s, you know, very few people who live, work as hard as Steve does. And the same thing for Stan. Stan was in the office at, you know, 7 a.m. and I mean, worked, I mean, constantly. I mean, he was, and that’s another thing, is that in the trading world, you can work and work and work and maybe not get a result, or as I said, not get a clean result, not get a, that also makes it very difficult, right? So, that confidence that you are, what you are doing, what your process is, yeah, it just took me, it took me a long time.

1:38:51 But it’s transferred to what I’m doing now because the most important thing I realized in 19 is that the only way to build wealth in this new area, like think about, I kind of feel sometimes like it’s 1620 and I’ve stepped onto the Virginia shore, right? And all I see is forest, right? It’s a very dangerous world out there. There are lots of wild animals, there’s total chaos. And the way to build wealth is to be stuck in, in a way where you don’t get shaken out. And that’s the, that’s really the reason why 10T and 1RT are structured the way we are.

1:39:44 Not to be shaken out. Not to be shaken out, not to lose your conviction by the volatility. Right. That’s the problem. This is the most, as I mentioned before, 200% annualized, but with eight drawdowns of 70% or more. No person can live through that, not even stand, no one is sitting through, you know, I’m saying with a real portfolio, nobody. It’s too much.

1:40:11 So how do you construct a portfolio? I don’t want to see that as impervious to the volatility, but that can withstand and live through because you want to make that 200% annualized. But when you’re down 70% or 80% or when, you know, and there are a bunch of funds that are still, you really, especially if you’re young under 40%, you’re going to be saying, oh, am I right? Maybe I shouldn’t be in this business. You don’t ever want to, once you’ve done the work, you want to believe in your view, but you want to structure your portfolio in a way that if you’re right, you make the money at the end. And that’s sort of why I gravitated towards the growth equity, why I don’t like venture. I don’t want my external investor to feel panicked at any moment, to feel nervous that he’s going to lose his investment. Like that’s the worst feeling ever.

1:41:21 Not just being wrong, but you’re going to lose all your money on top of being wrong. So what we do, everything we do is to limit the probability that we’re wrong, to limit the probability that we’re going to lose the money that we’re investing. So my background is, I mean, is very connected to what we do, how we do it, you know, being so concerned about risk. I mean, you sit next to Steve for five years, Steve Cohen. And I mean, he is, you know, you’re overly sensitive to, you know, risk and to movements. My natural way as a macro investor is to absorb more volatility than he would.

1:42:11 And Stan, of course, is further out. He’s been able to build macro portfolios that couldn’t withstand tremendous volatility. But I think we’ve done that in this space. And I think if you can just just like people always say, if I just held on to that Bitcoin, I bought in 2016. Yeah, you’d be up 100x. Right. So I think that’s what we’re doing. We’re giving people a way to get exposure to the space without having those existential like crisis moments.

1:42:47 Wow. You think they’ll ever make them anymore? Like those kind of icons that you learned from I don’t think so. But they’ll I think that potentially they will exist in this new world. There’s got to be some people coming up. I think it was a unique moment in time. I mean, if you think about the 60s and the 70s, I mean, Soros started quantum, I guess it was 68 or 69 when he came up with that Curaçao master feeder structure where you could defer.

1:43:20 So everything about the hedge fund business early on was about deferring your profits into the future so that you could then take those profits and put them into your fund, but not pay any tax until the end of the 10 year life or whatever period you determined at the end of the deferral. So it was the hedge fund business, I think grew up at a time when markets were becoming more liquid and tradable. And then the deep egg to gold was very important because then you had all the fiat currencies trading. And so you have guys like Kovner who grew up as great currency traders and Soros to and Stan. They were trading Julian, one of Julian’s biggest bets, you know, the dollar had a massive move into 85. And many of the hedge fund guys actually made their big chunks of early money into that extreme move into 85. And then down afterwards, the Plaza Accord was a very clear macro is really about when geopolitical events impact the valuation of certain assets. And these assets that are, you know, that are very big, that are very liquid, can generate a huge amount of wealth, if you can trade around or understand the geopolitical event affecting that asset. So also the Nikkei move into 1989 was a massive wealth generator. So you started having these, you know, with the gold deep egg, all of these markets start to trade that didn’t trade in the 50s and 60s. So it’s a specific moment in time where macro analysis and then you had the ERM crisis. So you had all of Europe in 91 in

1:45:26 Deep recession, Germany had its deepest recession since the Second World War, because they were incorporating East Germany, right? You had the fall of the communism. And then all of a sudden, you had Polish bonds, Brady bonds started trading. So there was a moment in time, right? It was the deep pegging, but it was also geopolitical events, the fall of communism, all of these things opening up. And actually people in the 80s and 90s, I felt, believed in free markets. So there was that Reagan was more of a free markets, whether he was or not as a different, but the idea was generally pro-capitalist. So capital was moving across borders and things were opening up.

1:46:14 And so if you were able to sort of divine the tea leaves, and maybe go to lunch with the finance minister of Germany, like I was fortunate that I had a dinner or, you know, have a relationship with the central banker. This is not insider trading. You were just building your thesis, right? Currencies are not regulated also. So I think it was just a specific moment in time.

1:46:48 And then by around 2010, 2012, I just think the opportunity set that was there in the 90s and 2000s diminished. And, you know, the mispricings that were there just became less so. And then also many more people started doing macro. I mean, I used to, when I was at Tiger in the early 90s, I would say I was at a hedge fund and literally no one knew what that was. It was about 10 years. It was about 10 years of no one knowing what that was.

1:47:34 And then in the early 2000s, after the NASDAQ collapse, many hedge funds sort of rose to prominence because they made money on the short side. And then you had then all the pensions and all the institutional money moved into the hedge fund world. And when all the money moves into a space, the opportunity set decreases, the return potential for those assets decrease dramatically. So there were years where Stan and Steve, where they would be up 50, 80, 100% return.

1:48:09 Those guys don’t do those kinds of returns anymore. They’re a bigger pool of capital now, but the opportunity set is not there. The opportunity set for large gains is in this new world. Right. Digital asset ecosystem. Again, if people want to learn more information about 1RT, it’s LondonReal.tv forward slash Dan. We are investing via London Real Ventures and we very much appreciate that opportunity. It’s LondonReal.ventures. Final thoughts for you, Dan. Final thoughts. I don’t know that I have another thought in my brain. You pulled it all out. There’s nothing left. We have been talking for quite a while. Look, I just want to say it’s been incredible getting to know you the last couple of years. It’s been fun. And I love what you’re doing. I do. And I think it’s especially for this space, this education component is so important. It’s fine if people are not interested. It’s fine if they don’t want to invest in the space. It’s fine. But they should at least make that judgment after having put in the hours and done some of the learning. And that’s sort of why I was drawn to you to begin with because I feel like that’s the right approach. You have to act as a bridge to the old world, have to explain things in plain English, straightforward, sometimes the language in the space. Even my analysts, you can hear them talking to me and I’m like, hold on a second. I know what you mean, but not a single other person that’s an investor

1:50:00 Of ours does. So let’s turn it back and say it slowly in English. And so I think that we’re both involved in that mission, if you will. And I think it’s an important one because I think this world is a better world. We didn’t even talk about all the different things that we think eventually will be put on this global distributed ledger. But I think it’s going to revolutionize potentially even the way humans interact. And I say that because it is a truth mechanism.

1:50:40 Once it’s on that blockchain, it’s stamped there forever. There are not that many things in life that are that permanent. Just think about that. I said this the first time I ever did an interview, it has the potential to eliminate all fraud and all lying and all exaggeration. All the things that humans are prone to, all of us. So it could be something that really changes. We’re not all prone to fraud, but everyone fibs every once in a while.

1:51:14 I’m just saying that there’s a mechanism out there that can change the way we all deal with each other. It’s really fascinating. So to get people to understand that is all education. Yeah. It’s a shift in human paradigm is what Sandeep from Polygon said to me.

1:51:35 My first interview with him, he said, this is not a technology, this is a shift in human paradigm. It’s true. So keep doing what you’re doing. We love it. We’re going to keep the attack vectors coming in. We’re going to keep the village from the Africa proverb. And yeah, with our Crypto and DeFi Academy, we’re just going to keep bringing people up the curve. And again, my group is really excited to be a part of 1RT.

1:51:58 And I’m glad you could be involved through your entity. I’m very excited about that. No. So hopefully, the first many good things. Really excited. Thank you so much.

1:52:07 My pleasure. Onwards. And let’s do this again sometime. Dan Tapiero, thanks so much, sir. Thank you.

1:52:12 All right. Thank you.