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

Full transcript: Dan Tapiero on London Real

2:34 This is London Real. I am Brian Rose. My guest today is Dan Tapiero, the global macro investor, entrepreneur, thought leader, and Bitcoin proponent.

2:53 You are the CEO of 10T Holdings, a 770 million dollar growth equity firm that is building a diversified portfolio of private companies, which are enabling the digital asset ecosystem. You have over 30 years of experience in macro investing, trading, research, and economics, and have worked as a portfolio manager with some of the world’s most respected investors, including Stan Druckenmiller, Stephen Cohen, and Lord Rothschild. Recently you described Bitcoin and blockchain technology as historic inventions that are akin to the birth of the combustion engine, which will have a transformative impact on our world.

3:25 You’ve called Bitcoin’s performance the greatest return of any asset in the world, and believe that one day everything we have a value will be on the blockchain. Dan, welcome to London Real. Thanks, Brian. That’s, that’s absolutely right. Quite an introduction, but I did say those things, and I do believe them.

3:44 Fantastic. I can’t wait to jump into this, and really looking forward to just finding a little bit more about your history. You know, I think we’re about the same age. Maybe you got a couple of years on me, and I think your deep experience, you know, in the investing world is something we don’t always see in this space, and I’d love to tap into some of that, as well as some of your portfolio companies. We just had Yat Siu of Animoca Brands on a couple weeks ago.

4:07 Our audience was blown away by the vision. Congratulations on that investment, by the way. My students used Arabic, the options trading platform, and one of my students hit told me about Helium months ago as far as a mining platform. So I can’t wait to talk about, like, all your investments and your perspective. Also, Dan, you know, I think my dad and my mom might be watching this.

4:27 They’re in their mid 70s and I think that maybe you might be able to explain some of this stuff better than me or some of our other guests. So, so that’s also on my mind while we’re having this conversation. Maybe we can start off by taking a trip down memory lane, and maybe go back to, like, the 90s, where you maybe learned how to trade and invest, you know, sitting with some of the greats in the world. I had a strange experience where I was at MIT. I was studying engineering, and I got to take some classes at the Sloan School of Management in 1992 and ’93, and I learned about options trade, and Dan, I learned about futures, and then I started working at Bankers Trust on the fixed income derivatives desk, and that is where I got an education in trading.

5:10 You know, it was the 33rd floor. I think Dan Morehead was walking around on some other floor on the mortgage desk or something. I didn’t know him then, but I got a real education, Dan, of what real traders were like, how they looked at risk, the foul language they used, the abuse they gave me, but you know, I’ll probably learn more on that trading floor in a week than I did in a year at Sloan. And I’m wondering if you had similar experiences being on these desks, you know, with these kind of great long-term investors, and do you think that part of that will never ever come back, those old school trading floors and some of that knowledge?

5:46 So just some of your thoughts. Yeah, well, I mean, I, that Bankers Trust ’92-’93, I was at Tiger Management then, and I think that, and I was sort of in charge of executing European swaption positions for Julian and the portfolio, and there was a guy there named, I guess, Stephen Hale, who was a salesman, pretty senior guy. You know, I think he must have been the number one salesman at the firm at the time, but you know, many of those bankers, the Bankers Trust at that time, was a breeding ground.

6:22 You had Jimmy Lightner there. You had, there was a guy I remember, Calm Down Vandusseller. You had a whole bunch of Norm Weinstein. I think I’m actually a little younger than those guys. I’m 53, so I’m a little younger than those guys, but they, you know, that’s quite a group of people to learn from.

6:43 I think that was even rare on Wall Street, to tell you the truth. I mean, of course, you had, you know, the Goldman desks, and you had some of the other, you know, maybe more, not even Morgan Stanley at that time, but yeah, no, I had a tremendous early learning experience just like that, but it was Tiger Management, and, you know, at the time Tiger in ’92 was a three billion dollar fund, and at the time, you know, no one had heard of what hedge funds were, and people were thinking, you know, anytime I said to somebody, you know, I’m working at a hedge fund, they didn’t know what it was. It was early days, and again, the focus then was the ERM crisis, and I sort of had trial by fire, I was the young, you know, 23, 24-year-old guy that they hired to come in at three in the morning for Europe, and I would come in and work at three and leave at noon, and I was executing and doing analysis as well on the European bond and currency markets.

7:43 And if you recall, those are the great, you know, days of, you know, currencies breaking out of the ERM mechanism. And so, funnily enough, the first currency trade I ever did, again it wasn’t my idea, it was Julian’s and my bosses at the time, but was the breaking of the Irish punt out of the exchange and ERM mechanism. And, you know, you’re in the UK, but I remember, never forget, you know, I found some liquidity through, I think it was Credit Suisse. There was one guy, only one guy in the whole marketplace that was tapping into the Irish central bank and was allowing us to sell Irish punt, buying D-marks, selling Irish punt.

8:26 And never forget, had the trade on. We weren’t sure when it was going to work, and I woke up on one Saturday morning, early as I did in those days, looked, pulled out my Financial Times, and on the front page across: Irish punt devalues 10 or whatever it is. And as you know, for currency people, a 10 move in one day is just unheard of. And so, you know, being at the front lines there, seeing how Julian positioned, how he thought about investments. At the time, my two bosses as well, David Gerstenhauer, Barry Bozzano, they ran the macro group, and I was sort of the young guy running around getting positions on for the firm.

9:08 And again, the attention of the firm at that time was really almost exclusively on macro, and, you know, you have some of the great names in the money management world who were there: Andreas Halvorsen, Steve Mandel, Lee Ainslie. I mean, it’s a, you know, John Griffin. It’s a who’s who of the greatest portfolio managers on the equity side, but the attention at that time, funnily enough, was really just on macro. And, you know, it could get very heated at times.

9:37 But, you know, that’s how you learn best, right? You know, Julian calling you up at 4am asking you about a position, and, you know, if you get something wrong, I mean, you’re toast. I mean, you were completely toast. So I wouldn’t say I lived in fear and panic at that time, but I really enjoyed it, and that experience was sort of the defining early experience of my career. I would say even the way that I invest now, and the analysis that I’ve done over the years, and the teams that I’ve built to work on analysis, a lot of that was just, early, you know, comes from having that early background at Tiger, seeing the investment memos, the care, the focus that goes into building an idea, a macro idea.

10:27 All came from my early experience, Julian. And so also my sort of longer-term holding period. Look, it also suited my, my background. I’d studied history at Brown. I was a, did a BA in history, and it was really, I did what was called at the time intellectual history, so I was used to reading a lot and then coming up with a thesis, and that’s basically what investment is, and coming up with a thesis that other people don’t see, or or not, you know, or not aware of.

11:01 So my personal sort of orientation fit well with Julian’s style of investment. So that was my sort of great early learning experience. I almost feel like I was there. Were you part of the group that went head-to-head with the Bank of England in ’92 and kind of broke the pound, or were you around when all that was happening? No, not, not really.

11:26 I mean, that was Druckenmiller. I mean, that was Druckenmiller and George and a bunch of the other guys. We were not that active in the pound. In fact, after the pound went, it just made sense to us that the punt would go, because the punt was trading more with the UK than with Germany at the time, so there was a fundamental misalignment. So we kind of expressed the bet in a different way.

11:55 We didn’t. We had a very big position in gilts and in UK swaptions at the time. You know, after the deval, after the break in ’92, we then saw that interest rates had to come down pretty dramatically in Europe, but also in the UK, as growth slowed. At the time, Germany suffered its worst recession since the war. Yeah.

12:20 And this is a great, like, vision for maybe people watching us now that maybe have only known the markets of cryptocurrencies, which are 24/7 public blockchain. You know, what Dan’s talking about is finding that one trader at Credit Suisse that would actually even give you the exposure and the size that you needed to this currency. I mean, back then It was all over the counter, which meant it was all fairly quiet, which means you had to be talking to the right person at the right time, oftentimes putting on a derivative that wasn’t publicly posted, and if you didn’t know the right person at the right fund, you might first of all never know the trade happened, and never even know the liquidity was there.

12:54 Right? Oh yeah. No one, I don’t think anyone knew we had the punt position on, except for the guy who executed it. Again, we then took positions later on, shorting the peseta and the Italian lira, and were part of breaking those, or having, you know, pressuring those. We weren’t, you know, look, we were doing fundamental analysis.

13:18 Okay? And we just said that, based on the fundamentals, the macro fundamentals of the country, the valuation of this currency, as it is pegged today, is incorrect. We weren’t doing anything duplicitous or nefarious. There wasn’t any sneaking around or doing weird things. Nothing.

13:35 It was completely above board. We were taking a fundamental bet, and we were taking quite a lot of risk. I mean, Julian’s appetite for risk is like no other. I mean, he’s and, and that’ll be, you can get that confirmed by anyone who’s worked with him closely. And so, you know, we had very big positions, but we could have been wrong.

13:58 You know, there’s no, it wasn’t that we had any, there was no inside information or anything like that. It wasn’t, as I said, done. You know, in any, there was no nefarious. We were just fundamental investors, building a view that said we really think this currency is worth, you know, X and positioning. So no different than any other fundamental investor investing in any of the other asset classes.

14:26 Lessons that you pass on, try to pass on to people in your firm or the younger kids that join you over the years, that you learn from Julian or some of these other people, or, they’re, I mean, I’m not looking for one word, one sentence slogans, but are there any basics that you try to pass on? Oh boy. I mean, there are so many basics. One thing I like to say to the guys always is, it’s never too late to do the right thing. So it’s a bit of a funny little statement, because, you know, markets tend to trend, that at least the ones I’m involved in, and, you know, often you have to pay the high price, and you sometimes, people hesitate, and then they don’t buy the high price, and then it doubles, and then you don’t buy the high price, and it doubles again.

15:10 Now, if you’ve done your work, okay? If you’ve done your work, it’s okay to pay a high price if you have a fundamental view that you’ve developed and you’ve spent an enormous amount of time on, and you believe in it, and you say, I’m buying this thing at one. I really believe in the next three to five years, it’s going to 10. Then, if you really believe it’s going to 10, then you can buy it at 1.2 and 1.5 and 1.7. And so that’s sort of a little tricky thing.

15:40 I say it’s never too late to do the right thing. The issue is you got to know that it’s the right thing, and that’s a whole other story. And, but there’s a caveat to that, which is that I always also say you only get paid when you do the work. There is no, no one has ever made big money by chance, and if they make it by chance, the odds are that they end up losing it. And so what you need is a repeatable process.

16:08 You need to be able to have a process where you, you know, you have a habit of doing a certain type of work. You’re looking for certain types of things, and I always believe it’s very important to write these things out. Now, look, I come from a period, uh, you know, from a place where, you know, when I was in high school, I wrote my senior history thesis in pencil. You know, we had a computer that took up in my high school the entire an entire building, and there were five terminals around that computer, and we were one of the only schools in the country that had that kind of computer.

16:42 So again, when I mean write it out, I mean, you know, really think through write things down, type things out, and be able to explain yourself clearly. I think that people today don’t value the ability to express a complicated view simply and clearly. There’s not enough value placed on that in the schools in the educational systems, you know, and that of course reflects a clarity of mind, right? And if you can’t explain it clearly, you don’t understand it.

17:21 So those are sort of some basic things that I, I try to get through to people. Yeah, that’s fantastic. Yeah, I learned so many lessons being there at BT for those couple years, and even people, I think Dan Morehead was at Goldman, and he came to BT on the mortgage desk, and he said that was even a rare place, because everybody was pulling the trigger. Yeah, very rare. There was, I mean, I kid you not, Dan, I got there 22 years old, and they sat me down on the fix floating swap desk and said, here’s a phone that goes to the Mercantile Exchange, here’s a phone that goes to the Board of Trade, here’s the box to the Treasury guys.

17:58 Trade. They were like, dumping right in. And then I think the swap trader left eight months later, and I was trading the whole damn book, for like, that’s how it worked back then. Yeah, I mean, and there was, I was sitting on this desk. They were doing the craziest stuff at the time.

18:12 Trades, the this and that. I think I know Steve Hale was on the financial institution desk, probably talking to you guys. He had Sarah Sprung, the prop desk. It had like 15 of the Irish debt at one point. All this crazy stuff was happening, and then not only that, all of the ego and angst and positioning from a social point of view that I got to watch as a 22-year-old.

18:33 It was like a mind-blowing experience that maybe someday I’ll make a movie about. Yeah, I mean, there could be a good movie on that. I mean, of course, I’ve known Dan for over 20, 25 years. He was a Tiger after me, and actually Dan is now, you know, he’s in the crypto space. He launched the first venture fund in the entire space in 2012 or ’13.

18:59 Yeah, you know, he’s a great guy. He’s had massive success. He’s one of the few guys from my world that is pivoted. I mean, of course, there’s Mike Novogratz as well, who was sort of in the same space. And now you’re starting to see, you know, Alan Howard, actually, who’s a bit older than me, also sort of more pivoting more to the space, but some of the older, more traditional guys who I worked with.

19:26 I don’t know. It’s just, if you’ve had such massive success, like they have, thinking about the world in a certain way, you know, there isn’t as much of an incentive. And it’s also extremely complex, this new world, but I don’t want to jump the gun. I’ll let you answer your, you ask all the other questions. And I’m glad you brought up those people, because you know, we had Morehead on the show, and we talked to, spoke to him at length.

19:51 And again, he did his bitcoin fund in 2013 and has had massive success. He was pitching the fund when nobody wanted to hear about a fund for Bitcoin, and did all the hard work. Have some funny old stories about Coinbase when there was one employee. And all these funny things, like I said, Novogratz, he reminds me of one of those kind of old-school traders. But you only know it when you’ve been around it, and he brings a lot of energy to the space and and gravitas, and that’s why it’s great to have you here again, because there’s not many like you guys that are jumping basically into this new space with all of your old knowledge, and bring in a whole different dimension to it, I think, which I think is really interesting and exciting.

20:31 And so let’s jump into this. How did you get to have an almost billion-dollar portfolio in these fascinating companies, like Animoca Brands? Again, we just had Yat Siu on and blew us away. Deribit, a great exchange my students use. You’re, I mean, a bunch of your companies are things that we use here.

20:48 And and I’m wondering how did you make this leap, because we all have the moment when we heard about Bitcoin, then we all have the moment where we bought some, and then we all have the moment where we realized it was important, and then we have a moment where we went all in. So what was your j yeah, you know, that’s, you described at least the thumbnail of it right there. But yeah, I mean, look, I think this is probably the greatest certainly macro trade of all time, or macro investment.

21:17 It’s not even a, a trade. It’s a structural change in the way the world is working and the way the world will work in the future. I mean, look, as I said, you know, you mentioned I spent, you know, almost, you know, 20, 25 years in the macro hedge fund world and worked for those guys who you mentioned and had, you know, quite a bit of success managing a portfolio, but again, coming up with ideas and important ideas that, you know, ahead of other people, you know, structural developments, macro changes in the world.

21:52 So that was, you know, part, a big part of my experience, but I also launched two businesses, and this is a bit different, that probably are not as aware of, when I was working with Druckenmiller and 2006, I was very focused on agriculture. You know, had written our traditional 50-page investment memo about the coming bull market and Ag, Stan and I had very large positions on, and grain futures and swaps, and I just remember him saying to me, you know, like, this is a great thesis. What else can we do with this?

22:25 And I sort of went back to the drawing board and came up with this idea that farmland prices in the U.S. could double in the coming five years, and he loved the idea, and I came up with my own ways to measure to valuation metrics for farmland. I went out there, saw that it was a big universe, you know, certainly more than a trillion dollar market if you added it all up, and came up with this idea for AgCoa, which is, eventually, by 2013, seven years later, what became the largest private farmland REIT in the U.S. We ended up selling it to the Canadian pension fund system, CPP, for 450 million, and then just last year the Canadians sold it to Bill Gates and his firm Cascade, so Bill Gates for a billion dollars.

23:15 So Bill now owns all the original farms that we started buying in ’06, ’07, ’08, etc., and again that was an idea where I thought, okay, we have a position in the underlying how else can we express this? And you know, again, Stan and I owned half, the other half was owned by by the Goldman Sachs partners who we brought in to help us execute the idea. So it turned into really kind of an aggregating business, and then I did a similar thing a few years later, in ’08-’09.

23:49 I founded a company called GBI, Gold Bullion International, with a co-founding partner and today, 11 years later, 12 years later, we’re the third largest vaulter of gold in the world outside of the banking system. I was really trying in ’08-’09 to buy physical gold. I was worried about the banks going under, and I just thought, you know, everyone told me, oh yeah, they stored their physical at JP Morgan or at a bank, and I’m just thinking, if I think the bank is going to go under, why would I ever hold my gold at the bank?

24:21 And I just couldn’t find a really legitimate way to do it. And so, with a partner an ex Goldman Sachs partner who had just retired, we launched GBI. And again, today it’s, you know, it’s done over a million trades for clients, over 300 000 clients. It’s a fantastic platform. In 2014 the gold company integrated with a company called BitReserve, and that’s when I learned about Bitcoin.

24:49 We became BitReserve. Today it’s the Uphold wallet. We were the first place that you could buy and sell physical gold to buy and sell Bitcoin and Ripple, and we spent a year integrating with BitReserve, and so we had a lot of younger guys at the firm, GBI at the time, and I was doing mostly just biz dev for the firm. No real formal role, but I spent a lot of time, you know, thinking about crypto, but I couldn’t really, and Bitcoin, but I couldn’t really get into it because you know, as a macro guy from my background, Bitcoin at the time was a 10 billion dollar market cap, and I’m just thinking, like, it’s just too small.

25:31 I, I, you know, I remember speaking to Barry Silbert about that time, and Barry had just launched Grayscale’s investment trust, and went down to the office and was talking to him, and you know, he was telling me, yeah, you know, this thing’s up and trading. Dan, you got to do some and I’m like, well, what’s the volume? He’s like, well, we’re doing a million dollars a day and that’s just too small. It was too small for me. I mean, a million dollar, you, you know, to put on a starter position would have taken a week.

26:01 So I basically ignored Bitcoin for a while, and it wasn’t until 2017-18, it was really Q4 ’18 that I really got focused on it. You know, we had the bubble, we had the collapse and, you know, I’d seen that in my career where bubbles have collapsed, and usually when something that’s gone up astronomically has an 85, 90 percent sell-off, it actually is going to zero. Like I saw with the Indonesian, many Indonesian banks in ’97-’98 and Thai banks for that matter, or, you know, it’s a buying opportunity because it’s the beginning of a next move.

26:45 And so I did just like you said, six months, 10 hours a day, threw myself into it, and I started to think, oh my god, what an idiot I was for not doing this back in 2014. DTAP Capital, which is my own entity, which I launched in o3 I’d maxed out on my SAC money back then, and they let me take in outside money. DTAP Capital started positioning in Bitcoin and Ethereum in Q1 ’19, and you know, I’m sitting there with a position just like in the old days with my grain position, and I started to think, okay, what else can I do?

27:24 How else can I express a view? There are all these companies in the space. What are they doing? I’ve never heard of them. I’ve only heard of Coinbase.

27:33 The smartest 35-year-old and under guys that I’ve ever met are in this space, what’s going on here? And I started to dig in and dig in, and it was at that time, in the summer of ’19, that I was at an off-site of Raoul Pal. You know, Raoul, Real Vision Television, yeah, we had him on the show, yeah. Yeah, Raoul’s an old friend of mine. In fact, Raoul, when he was at Goldman in the ’90s, used to cover me, so I’d known him for many, many years, of course, and was one of the early founding guys of GMI, you know, his Global Macro Investor newsletter.

28:07 And every year he has an off-site, and there are 10 to 15 guys that get together, usually in the Caymans and exchange ideas, and this year in ’19 it was in Napa. And so I go to Napa, and I’m thinking about this crypto stuff, and there’s a young guy there in his early 30s named Clark Gillum, and Clark was investing for his family office in some of the cryptocurrencies, but also in some of the companies. And I was fascinated by that. We started talking, and he introduced me to a man who helped him build those positions in his family office, a man who’s named Stan Marosh Nick.

28:46 And Stan, at the time, had his own investment advisory firm in the space called Element. He’d raised over 300 million dollars for different companies and different projects in the space and Clark said, you know, let’s get together, three of us, and put the heads together, which is what we did, and came up with this sort of expression of the idea. Really, it was really to build a portfolio that I wanted for myself. I mean, I had wanted to get into the BlockFi round, the 50 million dollar valuation round in the summer of ’19.

29:19 I love the borrowing and lending business. Love the idea conceptually, big macro view that there was going to be tremendous growth, and I couldn’t and I didn’t have access. I didn’t know enough about it. In fact, a year later they raised again at 500 million. I couldn’t get into that round either, so I’m kicking myself I missed a 10x.

29:42 Oh my goodness. Anyway, that just sort of, you know, was, you know, just added fuel to my fire to want to get involved with some of the businesses in the space. But you know, I’m not a venture capitalist. I’m not really interested in early-stage, you know, technologies I don’t have the skill set to be able to decipher the differences in code. I can’t take apart the blockchains and understand, you know, what the minutia is, and I could hire people to do that, but I’m not really interested in that in a way.

30:14 I, I wanted to have a bra. I wanted to build a broad diversified bet, you know, and I, the one thing I knew was that this is a long-term investment, so I thought, okay, the private equity structure, the private equity fund structure, is the right structure, and we’re gonna build a portfolio of 10 to 12 companies that are mid to late stage, that are in a way de-risked. I didn’t want to take technology risk. Companies with hundreds of millions of dollars of revenue, companies that had already figured out, you know, their business model.

30:54 They weren’t sort of in search of a business model as some of these smaller companies are, and so I came up with some criteria, sort of like the criteria that I came up with for AgCoa, and, you know, so we don’t invest in companies that are less than 500 million dollars in market value. In fact, of the 14 businesses that we own today in the first two funds, 12 of them have a market valuation of over a billion dollars. And so that was sort of my epiphany, that back in mid ’19 that the companies are actually a lot bigger than people thought, and they were a lot more profitable than people thought.

31:35 And so I think we’re the first fund in the world that exclusively, explicitly only focuses on these mid to late stage businesses. All the names that you know of, including, you know, as you mentioned, Pantera and Polychain and Andreessen most, most of them, they only focus on early stage seed and angel and A-rounds. Some of them are moving a little bit into the mid stage now, but for the most part, you only have, like, one-off sort of checks that are written by growth equity funds like Tiger or Coatue will drift in and occasionally, you know, lead around, etc.

32:15 But so far it’s just us, and there’s lots of opportunity. Yeah, that’s, it’s really exciting, and now it makes sense with your background how you were able to set those limitations. And, you know, I think Tim Ferriss said this once, when it becomes, when you, when you go to be creative, it’s actually the limitations that allow great creativity. and by you limiting yourself, you’ve created something very unique here, and I think you break down your fund into three areas: digital asset ecosystem gateways, which are kind of like your investments in Kraken, eToro, Huobi, Mercado Bitcoin, next-generation financial services like Deribit, Figure, Animoca Brands, and then blockchain infrastructure companies like Bitfury, Ledger, Helium, Figment, Prime Trust.

32:58 I’m sure I’m missing some of them, but that’s, that’s kind of your thinking on that. Is that about right? Yeah, I mean, we’ve already deployed 90 of the capital for the first two funds, which is originally, I mean, I apologize to my, you know, LPs, but originally we were going to invest the money over 12 to 24-month period. You know, that was, those are the terms that we laid out in early 2020. Again, we were supposed to launch in April of ’20, but then COVID hit, and we were way late for four months, and actually we didn’t really launch until December of ’20, January ’21, and so I had not thought that we were going to invest over 700 million dollars into the space in just seven, eight months.

33:46 But we haven’t paid more than 10 times revenue for any of the businesses that we own. We’ve been very disciplined. You know, we passed on companies that we like. We like FTX, we like Paxos, we like BlockFi, but they raised, you know, 20, 25 times revenue at big valuation numbers, and frankly, you know, when we go into investment into investment, we want to think at least that we can make five to ten times our money, and when you’re investing in something at a 25 billion dollar valuation, it’s just hard for it to go.

34:17 It’s harder for it to go to 250 versus investing in something at 600 million that’s going to go to 6 billion. And so we pass on, on those investments. They’re great investments. We think they’re going to go up in value, but we really sort of stick to our knitting and our evaluation framework. Because, you know, we want to have a portfolio that can, that can go up five and ten times.

34:43 Yeah, something you said that really caught my ear, again, is that you said some of these companies are making real revenues, and people don’t realize how big they are. Maybe you can speak on this kind of weird disconnect, because we’ve got liquid tokens and you’ve got the token market caps, but then you’ve got the equity of the company, which is a whole different animal, and most people in the, invest in the crypto space probably don’t even understand equity valuations, and they think, well, maybe it’s all the tokens. But obviously you come from the background of understanding that’s typically how you would invest in a company, is through equity.

35:16 Maybe speak a little bit more about how these are oftentimes completely two completely different beasts. What you see is the token and what’s actually happening in the company in revenues. Yeah, that’s actually a much more complicated question to answer than you think, because those two worlds are in flux, meaning, so I’ll just first tell you, in terms of companies making a lot of money, you know, Kraken, which we own, last year did 200 million dollars in revenue.

35:53 Okay? This year it’s going to do 1.7 billion. So when we bought the company at a 3 billion dollar valuation in January, you know, we thought it might do a billion in revenue for the year. But you know what? It entered this business that I just call staking as a service, which in January did not even exist for Kraken.

36:20 They’re going to generate another 400 million dollars in revenue just from that business line that we had no idea would even exist. And so the pace of growth in this space, the pace at which new revenue lines, new sectors are being found. It’s just, it’s just increa. I don’t, I guess not sectors being found, but it, you know, the pace at which they’re just new revenue lines, it’s just increasing. It’s something it’s hard to, you know, hard to anticipate.

36:56 And so we also had a rush to get the positions on, because, you know, I still think Bitcoin is going to be over a hundred thousand within the next six months. I think Ethereum could be certainly up near 10,000, and that has some impact on the businesses, not as much as you think. We can talk about that later. But let me get back to your question about equity versus tokens. I mean, the idea, but some of the companies focus on creating value for the equity holders some of them focus on creating value for the token holders, and some focus on both.

37:33 Now, the idea behind increasing network effects through the expansion of ownership in the token, and also in the appreciation of price in the token, is a different business model for the world, and I think it’s a, it’s a business model that focuses on Metcalfe’s Law and the increase in network effects. And so what I usually, for many people in the traditional world, they’ll say, well, what do you mean? They’re not maximizing shareholder value. Well, they kind of are, but in a different way.

38:09 And so if you look, I always give an example of Twitter, because Twitter is a company that people know and understand. They don’t really make much money. It’s a 50 billion dollar business, and people say, well, how could how could it be worth 50 billion if they don’t make much money? And the answer is, because Twitter has focused on increasing network effects, increasing the number of users on their network. If Twitter wanted to charge everyone a dollar a year, or a dollar a month, they could.

38:41 The network itself is extremely valuable. And so many of these businesses, especially early-stage businesses, they focus on adoption of the token as a method for increasing, in the future, their revenue. And you know, you have companies that completely have dissolved their equity, like Binance, for instance, really doesn’t have much equity to speak of that I’m, that I’m aware of. They have their BNB token and so they want users in the digital asset ecosystem, users of the token, people who use their product, to accrue the value that historically would accrue to shareholders in the traditional world.

39:31 Then, on the other hand, you have companies, different companies that really see the value of being able to tap the liquidity that’s in the traditional world, that are issuing equity because there’s huge demand for it, and then deploying it in the digital asset ecosystem. And so that’s another method. I mean, Coinbase is the most obvious example. They don’t have a token, they only have equity, and they obviously, you know, have had tremendous success and they’re using the liquidity that is afforded to them in the traditional world to build their business in the DAE.

40:17 So there’s a bit of back and forth, and some of our companies hold quite a bit of tokens and cryptocurrency on their balance sheets, and so you have to figure out what that’s worth, how to value that. At the moment, the world is pretty small of equity investors in the space, and so traditionally we’re not really valuing that ownership very highly because some of those tokens in theory can still go to zero. And that’s another thing. We don’t own any cryptocurrency or tokens directly.

40:55 We have institutional investors in the fund who legally cannot own cryptocurrency, so we don’t. And I think that’s been, as you said before, about defining our focus and our purpose. I think that’s been a big help for investors from the legacy traditional system to say, okay, I know what Dan’s doing. He’s owning businesses. I can read the income statement, I see the balance sheet, I get what these guys do.

41:25 They have 10 business lines. We like the leadership, you know, fine, I can make that investment. If I start to talk about, you know, the 17 different crypto currencies that I’m going to be trading, or that are on the balance sheet, or are token economics, or blockchain technology, you start to lose, especially the older crowd. And so we try to abstract all of the complexity away. Now, I’m not going to make a 100x return.

41:56 There are funds in the space that bought Solana at a dollar, and it’s not 250, and they, that’s, you know, great. I’m happy for them, but we’re not going to make those kinds of returns. But I also think we don’t have the volatility or the downside risk that those early-stage investments, and those investments in the tokens. And last thing I’ll say is, just this year is a perfect example. Bitcoin sold off 50% from the high, Ethereum almost 60 percent, and our companies didn’t budge.

42:26 I mean, you know, the value didn’t budge. In fact, they probably still drifted up. And in 2018, we looked at a basket of companies. Remember, Bitcoin was down 80, Ethereum down 95, and a basket of companies that we looked at broadly maintained their value. So it’s a different exposure.

42:48 It’s a different risk reward. I don’t have problems sleeping at night. I don’t watch the ticks on Solana or on, you know, Polkadot or anything like that, and we’re not trading it. We want to hold these investments for five, six, seven, eight years as long as possible. Yeah, you’ve already sold me, Dan.

43:06 So, again, you know, I mean, really, because you’re very happy on the show. Yeah, yeah. But I mean, like, the more I learn about what you’re doing, it’s like you said, I mean, trying to get people to understand your model is, is a big chunk of the game in this space, and I think you’ve, you’ve spoken earlier like you’ll speak to a 30 year old that gets it and a six-year-old that needs more education, but it’s a six-year-old with all the money. And so yeah, yeah.

43:33 I mean, it’s so skewed in the, in the money management world. I mean, it’s, it’s incredible. Yeah, and you need to kind of explain also, it’s a nice way for them to get their feet wet, and that way you take everything off the table that would normally be red alarms or signals, you’re probably doing an incredible job of actually educating, bringing up the space, and getting them uncomfortable with what you’re doing, to where maybe two or three years from now, if and when they’re ready, they can go for, you know, more risky pieces.

43:59 Well, that’s exactly, Brian. That’s exactly what happens, and we’re almost like a gateway to the space for these large institutional, large family office clients, because, you know, they all know something’s going on here. You know, if you’re managing a 15, 20 billion dollar portfolio, you’re, you’re watching all the markets. You’re an asset allocator. You see the return, you see the alpha being created, but you can’t really figure this out, and most of these guys will not invest in something that they don’t understand, no matter what.

44:33 They just won’t do it, and you know, that’s a good discipline. So we do spend a lot of our time educating people. You know, as I said, we write these 50-page investment memos to substantiate our positions in the funds, and then in the companies, and then what we do is, we offer our investors, and only our investors, co-investment, and so we’ll do a few Zoom calls. We’ll share the investment research. They go through it, and then I’ll get on a few calls and explain it to them, and then they’ll say, well, you know what, I kind of like this idea.

45:09 You know, and I’d like to, you know, put a little more money into it. And again, most of the LPs in the fund or people are my friends or people who are from my network from my old world, and they’re real investors, and they’re either still, you know, active or they’re running their own family offices. and they like being able to leverage up on uncertain names. They also like the fact that I only charge one in 10 for the co-invest versus 2 and 20 for the fund.

45:39 And, you know, they love watering down their fees, but we do it as a perk for them, because it’s also helping them learn more about the space. And so I think what you do see is that they make an investment here, and then they broaden their horizon. Then they maybe go to earlier-stage investments. Maybe they invest directly in some of the cryptocurrencies. They, you know, get, open up, you know, their wallets on, you know, MetaMask, and they start staking their LUNA or whatever it is that they’re doing.

46:14 They become more active in this world, and so you’re absolutely right. But look, the, the crypto adoption worldwide is only two percent. Okay, only two percent of the world have crypto accounts or crypto wallets. We think it’s sort of like 1997 in terms of the, the adoption of the internet, because it was back in ’97 that two percent of the world had access to the internet. And what we do is we say, well, from ’97 to ’07, how fast was that rate of adoption of the internet?

46:48 Well, it grew by 15 times. And so this is the, we have a chart that our LPs all of them gravitate towards this, because if the adoption rate, again, adoption rate of crypto has been faster than the adoption of the internet was back then, but you know, if you follow the same path, you’re looking at a space that’s going to grow 15x from today. And that’s, we’re at a 3 trillion dollar ecosystem today. 15 times gets you to 45 trillion. Now, I’m not saying that’s definitively going to happen.

47:23 I actually thought something different, which is that, and I, you know, two years ago, when I was coming up with the thinking behind this fund, I thought it was a 300 billion dollar ecosystem, and I said, you know what, I’m going to do something really bold, something that I’ve never heard anyone do before, which is, I’m going to put my view into the name of the fund. And so I said, it’s 300 billion today. I’m going to say we’re going to be a 30x from here in 10 years, so we said 10T in 10 years.

47:59 So I mean, I made a call that the ecosystem was going to be 10 trillion, like back then, and I put, I, like, nailed myself to that cross and said I mean, I’m calling for a 30x, and I’m going to call my fund, I mean, it was crazy, right? But you know what, we’re going to end up being wrong, because it’s 3 trillion today. It’s already 10x’d in 2 years, and so 10T is not going to be right, because we’re going to be well beyond 10T over the next eight years.

48:31 And so I think you’re looking really more at, like, something like a 40T type of number. Is it bigger? I mean, is it bigger? It probably is bigger, but again, how much, you know, how, I don’t want to, like, how crazy can you go? But, you know, it’s me, Dan Morehead, and Mark Yusko, you know, we did a panel a month or two ago, and they asked us this question.

48:58 And, you know, they started off with, oh, how many T can it go? And Dan throws out 40T, and Yusko throws out 30T, and I was still thinking, okay, well, I called the fund 10T, and, you know, whoa, I’m going to be the, the lowest guy out here. So I doubled my view to 20T. But the reality is that you know, you start sounding a little ridiculous, but look, that’s the reality. Right?

49:27 I think it’s probably 40T. Is that the 10-year projection from today? Roughly, yeah. Okay, and yeah, well, it’s just that, I said, if we use the comparison of the adoption of the internet over the next 10 years, right? You went up 15 times, so 15 times from today is 45, right?

49:48 From three? Yeah. But the, the right answer is probably 100T, if you had a couple, a couple of drinks, and we’re honest with you. Yeah, it probably is. But then some people think you’re crazy, and you start talking about Bitcoin going to a million.

50:01 And right, you know, we just want to get investors to understand that they need to have a toe dip, that we have a broad, diversified exposure that we think is de-risked to the ecosystem. We’re not trying to make 100x. We think we have risk-controlled in a pretty manageable way. These are all more developed businesses, and just put something in here. You know, just do a toe dip, and again, you know, when Casares had that mantra for a while: get off zero, just put, put one percent of your portfolio into the Bitcoin, into the crypto space, and, you know, get a toe dip.

50:43 And so we’re a toe dip for many people. Yeah. And so if, as the toe dip person, you shouldn’t even be on record saying 100T, because that’s kind of not what you’re trying to do. You’re trying to get my dad comfortable with this right now, and I hope Dad, if you’re listening, that you jump in. The website, by the way, is tntfun.com.

51:00 And I wasn’t gonna even mention it, but it’s really interesting what you’re talking about here, Dan, and I’m sure one of people want to go check this out. Let me ask you a question. Raoul Pal was on the show, and he said, Brian, you know, the rate of adoption of the internet and mobile phones, roughly like 62 year on year, which was the largest adoption of technology in human history. And again, I’m paraphrasing, but Raoul said, look, for the metrics, I see this is happening at about, like, 113 rate year on year.

51:29 He said, maybe I’m a little wrong, but, you know, a lot of people are predicting a billion users by 2025, including, you know, Catherine Wood of ARK, and a lot of people nod their heads with that number. So this is growing so fast. Again, when you think about, even if it’s over 100 year on year, I mean, that is exponential growth by definition, right? And again, we can’t even process that as humans. I was in the dot-com startup.

51:51 I was in New York City. I was a CFO of a company called Luxuryfinder.com. We sold luxury goods on the web. We didn’t do a very good job, and a couple years later we sold assets to, I think, LVMH. But I remember the feeling, Dan, and it was exciting, and I was telling my banker buddies this was Columbus in the New World, and they were like, yeah, yeah, yeah, and then nobody wanted to hear about tech after that.

52:11 But now I’m in this space. This does feel 50 times bigger than even that space. How do you compare this to those dot-com days? Yeah. I mean, look, one thing, you know, as I said, we haven’t paid more than 10 times revenue for any of our businesses.

52:28 That’s not really that frothy. You know, so I look at valuation as a guidance, as a guide for us. If all of a sudden you know, to own some of these companies, we have to pay 40 and 50 times revenue, that’s discounting the future, and then you’re going to have a pretty massive bust. Is my, is my view. The difference here is that the number of applications is just, I don’t want to say unlimited, but it’s enormous, and it’s increasing almost every month.

53:07 And for me, there’s one thing that, you know, someone like your father should understand, because they’re, it’s, it’s hard to get your mind around, you know, what a digital money or Bitcoin price is, or what exactly is it. It’s very important to understand, as you mentioned in the introduction, that Bitcoin is an invention akin to the, and as important as the invention of the combustion engine. It’s something as important as the discovery of electricity.

53:38 And when you step back and look at it in that framework, now, why do I say that? I say that because the eight-page white paper, Satoshi white paper, that explains how the function and the mechanism of Bitcoin, capital B, Bitcoin the network works, really is a historic solving of a math, science, computer programming, cryptographic problem called the Byzantine Generals Problem, and that’s the problem of distributed trust. How do two counterparties trust each other?

54:13 How do they send value to each other without an intermediary? Now, I was a macro investment guy. I’d never heard of this thing. I was like, who cares? Like, why is this even a thing?

54:25 Right? And what you realize when you start digging is that this was a problem that math students basically sat around for hundreds of years trying to solve. No one solved it until Satoshi in the white paper, and the white paper is also a result of 40 years of, you know, scientific and cryptographic research, and you can see, and we have a timeline of that research in one of our presentations, where we show you all of the inputs that had to happen, discoveries, fines, mathematical problem solving that had to happen before Satoshi could publish his white paper.

55:08 And so when I saw it as that as a scientific discovery, it sort of blew my mind. Right, like, wow, it is something. It’s like, you know, we’re all riding around in horses, and then all of a sudden you’ve got cars 10 years later, and it’s that kind of thing. And then the value of it. I mean, if you think about, like, what’s that worth okay?

55:36 At the time, I thought, okay, well, when I did my rabbit hole, and falling down my rabbit hole in 10 hours a day for six months, I thought, well, you know, Amazon was worth 2 trillion, and Google’s worth 2 trillion. Bitcoin was worth like 200 billion, and I was like, well, how is this possible? The most secure, most decentralized network ever invented in the history of man. A finite record, okay? An immutable record where all things of value could eventually reside.

56:07 I thought, that’s got to be worth more than two or three trillion, right? That was it. I’m like, I don’t know what it’s worth, but it’s worth more than two or three trillion, and that’s why I thought 10T was an easy name to call, because it was 2,300 billion. I thought, oh, it could easily 10x. But the reality is that you’re seeing disruption not just in the financial world and store of value, You know, with Ethereum you have programmable contracts.

56:37 The number of use cases in the last 18 months has literally exploded NFTs, digital property rights. I mean, I’m not even going to talk about that, because you had Yat Siu on for an hour of Animoca. You can let Yat explain to you the importance of digital property rights, and the metaverse, etc. And so the exponential growth rate is now happening in some of these sub-sectors. Just as an example, the NFT space has grown over a hundred times in the last year.

57:12 The amount that’s staked in the decentralized finance world, the dollars locked in DeFi, is up over 100 times. All right, the value of Ethereum and the proof-of-stake protocols is up over 20 times. And so people in the traditional world have no idea about this, and the last thing I’ll say, because I can tend to drag on about this, is, you know, I was speaking to an investor yesterday, and I said to him, you know, very, actually, pretty well-known guy, and I said, you know, I’m not sure that you understand how big this world is, and not in a negative way or anything.

57:51 And I said, listen, give me a guess. What do you think the cryptocurrency total cryptocurrency trading volume will be for this year, 2021? So, Brian, I’m going to ask you, I’m going to put you on the spot here. What’s your guess as to what total volume is going to be? So, according to CoinMarketCap, there’s about 3 trillion in total assets, right?

58:14 Liquid assets. I guess that, that doesn’t, probably, do the equity, now, volume of that. There’s a lot of volume out there. It can’t be a hundred percent of that, and so it’s got to be a factor of that, right? So it can’t be 100.

58:29 I’m not crazy. It’s not going to be a trillion. It’s not going to be 500 billion. Am I on orders of magnitude, or is it much less? Because I’m thinking Ethereum and Bitcoin.

58:37 All right, just throw a number out there. All right, total crypto trading on the blockchain. Oh gosh. All right, half a trillion. I’m way off.

58:45 So, total cryptocurrency volume for this year, as we measured it on all platforms everywhere, 60 trillion. Okay, and that’s versus 10 trillion last year, in 2020, and 4 trillion in 2019. So I don’t think there has ever been anything that has grown that big in those massive numbers so quickly. And again, every person I say says, oh, about a trillion, and I’m like, no, no, trillion of trades. That includes derivatives, right?

59:21 That includes spot. That includes, that’s everything. Okay, all that, that’s everything. That’s what we do. I mean, we, we spend, you know, we, we track this, you know, monthly, and we have, I don’t want us, we have a huge amount of resources to track exactly what that is.

59:39 And so the companies that are growing up around this exponential increase, not just in, it’s not just volume, trading volume. It’s interest. It’s focus. It’s usage. Is enormous, right?

59:54 And how much about his spot versus the derivatives? If it’s 60 trillion, okay, six trillion? Stop spot, because I’m just trying to get it. No, no, no, no. It’s a lot bigger.

1:00:05 If you want, I can send you a breakdown. Yeah. After the show. How’s that compared to equity markets too? How does that compare to equity?

1:00:14 Like, total size versus volume, is it so much more magnified in crypto? Well, so gold, for instance, trades 50 trillion a year. Okay. Got it. And, okay, 10 trillion market cap, right?

1:00:24 And currencies trade 7 trillion a day. So there’s sort of a good sense for equities. So equities, I don’t know the number, but it’s really, if I Google it right now, it’ll come up. I mean, it’s very easy to find number. I mean, you know, it’s certainly it’s, it’s more than, uh, yeah.

1:00:48 I, I’m gonna, I’d have to get it. Uh, oh, no. All right, so usually, Dan, you made so many interesting points. Uh, first of all, as a UK citizen, I’d like to take credit for the internal combustion engine. Thank you very much.

1:01:00 You can go see it at the Science Museum here as well. It’s very impressive, and before that, we had fire, and we had horses, and we never figured out you could put one and turn one into the other, right? Into horsepower. So you’re right. It’s this technology that empowers humans in a way, and then values everywhere, right?

1:01:17 That’s the way you kind of look at the ecosystem, and that, yes, you’re creating all these things. And again, at being through the dot-com startup. when you see real revenues, that’s a different picture as well, and that’s one of the reasons you’re like, Brian, these companies are making real revenue. And I had, uh, uh, Richard Mearhead of Fabric Ventures in here, who’s invested in Sorare and a bunch of these others. He said, Brian, these gaming companies are making a lot of money as opposed to in the dot-com era, when it was a lot of potential money.

1:01:45 Right? Well, you could say there’s potential money, um, in terms of, you know, the tokens. Right? So some companies have two 300 million dollars of tokens on their balance sheet. Those don’t sort of get valued, at least from our perspective, that highly.

1:02:06 Um, but there is that aspect where it’s still a little nebulous what the actual value is. And before I forget about it, SoftBank came in I think on The Sandbox venture or Animoca Brands, I’m not sure, but we saw a, you know, again, a huge massive fund, you know, coming into a metaverse space, you know, a blockchain space. How important is that? Or how do you see that, or how can you put that in perspective to anybody listening? Well, the metaverse didn’t exist.

1:02:36 I mean, the open metaverse, which is a very important difference, and yet I’m sure discussed with you. He did the closed metaverse, versus Zuck, and us in the open world are not, you know, thrilled about all that. And again, I’m not really the person to speak in detail about that, but you know, this space didn’t even exist a year ago. So I mean, it’s nice to have some big investors in it, but we have an NFT and metaverse bucket in our new fund, and you know, there really aren’t even more than five to ten companies that we think are investable based on our metrics in the space.

1:03:19 You know, you know, and even that’s pushing a little bit. So it’s so early there that, you know, whether there’s a SoftBank or not, I don’t, again, I don’t really think it’s, it’s that important. But let me, I did just Google market cap, so if I want to get back to early question, total market cap of equity-backed securities worldwide, is 83 trillion. So the trading volume is, as you said, probably a multiple of that. Not sure what it is, but that’s what the, uh, you know, and it’s probably a little more.

1:03:55 That’s 2019, so you’re looking at around 100 trillion anyway. I’m sorry, get back to the metaverse. That’s good, and I appreciate you saying that, and you blow my mind with that 60 trillion dollar volume, and that’s, that’s really important. Let me just, let me tell you just briefly my, my history of why I’m even talking to you right now about this stuff, and then I want to ask you a little bit about regulation, and your thoughts on Gary Gensler and Snoop Dogg, to the more important figures in the space.

1:04:24 First of all, I was in 2013. I had Max Keiser on my show, London Real, and he came over, and he was screaming about Bitcoin, and I just met Max on Twitter. We were kind of fighting back and forth, and he came and he kind of being a good friend, I went on his show, the Keiser Report, back in ’14 or ’15. And he talked about Bitcoin. I bought a couple, and we were complaining there was no liquidity, and I bought him for like 85 pounds or something, and that’s how I started my journey again.

1:04:47 At the time, obviously I didn’t pay attention, but then I had Andreas Antonopoulos on the show in 2015 and 2000 guys is very smart, amazing, and, but I had him in ’15, ’17, and ’19. I sat down having a conversation like this, but he was here in the studio two hours. I have, I have six camera HD, and I’m telling you, Dan, to watch those things back now. It’s, it’s eerie, because I learned a huge amount from him. His book, The Internet of Money, Volume Two, was really a game changer for me as well as Saifedean Ammous’s book, and then Jan Pritzker’s book, Inventing Bitcoin, those three things really explain things to me in an important way.

1:05:31 Antonopoulos is, one, I mean, a brilliant guy, and I think he, every OG guy in the space owes some sort of debt of gratitude to him. Definitely. I mean, he was really put in the hard yards traveling around the world and having these conversations back in the day. And again, I know everybody has watched his videos. I know we have Michael Saylor on here.

1:05:54 I know everybody’s gone back and learned from Andreas when they go down the hole, the rabbit hole. And again, it’s weird, Dan, ’cause I’m watching these videos. It’s ’15, ’17, and ’19. He’s talking about the future of money, the Internet of Money. The word DeFi has not been coined yet.

1:06:07 The DeFi summer hasn’t happened yet, and so Andreas is basically telling you what’s going to happen, and he’s saying, Brian, Bitcoin’s like email. He’s like, your first experience of the internet was email, and I sent my first email in 1989 at MIT, and I didn’t use it for three more years because nobody replied. Right? And so, but then you said, then you got the browser, and then you got to this, and so Andreas was doing that then. I, I again didn’t do much about it at the time.

1:06:33 I was still listening, and we had a big fight for freedom of speech last year with some of the digital platforms and trying to get messages out. I ran to be Mayor of London this year. Six months hard. Didn’t win on May 8th. I was at City Hall, got the results and then I said, what am I going to do now?

1:06:50 And I took a look at what was happening in DeFi, and I said, oh my god, look at the value locked, look at the DeFi summer, look what Stani Kulechov is doing, who’s been here in the studio, and I thought, this reminds me of Bankers Trust, except there’s no balance sheet, right? It’s open source, and there’s like 20 guys and a dog in Tel Aviv, or 10 girls and a cat in you know, Singapore, creating these protocols, and I just thought, wait a second, this, this is insane. This is not what Andreas was telling me about, and then I thought, we’re all in.

1:07:22 So, we, I haven’t stopped doing an episode about something crypto or DeFi related. We started DeFi Academy. I’ve trained 500 students, and I pushed them through the protocols of DeFi, really, so they all do hot and cold wallets. They do yield swaps. They do option trades, oftentimes on Deribit and they do liquidity pools.

1:07:41 And since I used to do that stuff at Bankers Trust, I’m very comfortable pushing them to do this, because I’m not saying everyone should trade options, but you should understand that it’s a risk management tool, and then experience it on a small, emotional, and then I talk about trading principles that I learned on the trading floor, and this is, you know, these old-school things, you know, these long-term views, these concepts of stop losses, these whole slow it down to the things I learned back in the day, not the things that people learned on Robinhood and crypto trading these days, which is a mess. So that’s been my journey, and I’ve been lucky enough to sit down with some of the people you’re talking about. Actually, I mean, the Antonopoulos interviews back then, I mean, wow.

1:08:21 I, I wish I’d been a little more focused. But, you know, as I said, one of my maxims: it’s never too late to do the right thing, and basically I think we both realize now that it’s not too late today. People listening to this, just go out and buy ten dollars’ worth of Bitcoin, or ten pounds of Bitcoin well, on Gemini or whatever platform that you like, and just see how it feels. Do it, right? And this is really about doing, you know, it’s, it’s easier to explain DeFi once you’ve done something in that world, right?

1:09:01 It’s just, it’s so abstract in some ways, and it can be extremely complex, and so, you know, you gotta dip that toe, take that leap, and you gotta spend the time. You have to spend the time, and it’s not too late. I think I’d, uh, I had Scaramucci here, and he said, Brian, it’s not, it’s not even the first ending of the ball game. It’s pre-season training camp. It’s like it’s so early, and it’s easy for my students to see Bitcoin at 60-some thousand and think, I could have bought it for a pizza, but it’s like, you still don’t understand, like you said, one to two percent of the world is owning these things.

1:09:35 Nobody knows what an NFT is. Just you and a couple of your friends know what an NFT is, right? It’s still so early that it’s not too late, like you said, to get involved. Just one, you mentioned, the crypto thing. I had Silvio Micali on last week, the professor from MIT who basically created zero-knowledge proofs and worked on cryptography for so long, and it was great to actually hear from someone who had worked on this technology for decades before it was used as cryptocurrency, and to see how he explains it.

1:10:06 It was really what I took away from that, Dan. He said, Brian, cryptography isn’t about trying to keep a secret from someone else. He said, any system over a long enough timeline will face adversity, and if it’s not bulletproof, it’s going to break. So he said, think of that what cryptography is really about, keeping the system strong. And when you look at, at that point, everything needs that security.

1:10:28 And it was really interesting to hear about it from that point of view, because most people think crypto cryptography was invented with cryptocurrency, but it was really the other way around. Right? Oh yeah, of course, yeah. Just wanna finish with some thoughts. Regulation.

1:10:44 Gary Gensler taught a course at MIT Sloan School of Management in 2018 on blockchain. I’m about 20 hours into it, and it’s really good, and he’s really smart, and it’s on OpenCourseWare on YouTube, and he clearly is quite knowledgeable about these things, and yet nowadays we’re struggling to find clarification from the SEC on regulation as a security. Is it not a security? What do you think we, we need from regulators? What do you think we should do?

1:11:11 And also, is it just a difficult job to be in? He’s called stable coins the poker chips of the Wild West, but at the same time I know he knows better. What do you think we need to talk about when it comes to regulation? What do we need from regulations? Let me just first price, saying one thing.

1:11:27 90% of total world cryptocurrency volume is outside of the U.S. Americans always think everything is about them, and in the last 40 years the U.S. has been at the head of you know, all technological and certainly financial innovation. Okay, and that’s because we’ve had in my view open and free markets, and we encourage we’re excited to encourage growth, etc. So when you say regulation, there’s a very big world out there, and take for example China. They ban Bitcoin mining.

1:12:04 They ban Bitcoin market. Didn’t care. The market has rallied enormously since that event. I think it’ll go down as probably the biggest mistake Chinese political, geopolitical, financial mistake that they’ve made in the last 20 years, but that’s good for us, because that’s fine. People were worried that they were going to manipulate the Bitcoin network because all the miners were there.

1:12:27 Well, that piece of FUD is out the window. Like, that’s not happened, and so what’s happening is that there are places like Singapore and Portugal and Tsug and Puerto Rico and places out there that are encouraging people in the crypto blockchain, Bitcoin business that are making regulatory rules clear. And I think that’s all that needs to happen, is that we need to have clarity. And what will happen is, if the U.S. continues to dawdle and not make up its mind about what it wants to do, companies will just reside in other jurisdictions.

1:13:11 You know, people have got to understand this is not a U.S. bet. Okay, this is the most decentralized global network that has ever existed. There are people in every country in the world who either own cryptocurrency or are mining or are node operators, or whatever it is. I mean, there are more node operators in Germany than in the United States, and so, you know, we have to make a decision about, you know, to what degree do we want to maintain our leading role in technology and financial innovation?

1:13:52 And the people in the legislatures need to get up to speed very quickly. Ted Cruz shockingly has been, I think, has been phenomenal. You know, I think if you read some of the things that he has written. The mayor of Miami, another standout in understanding the value. So we’ve got to come to our senses and come up with some rules, and the way to do that is to work with the people, you know, work with the successful businesses in the U.S.

1:14:25 You know, you’ve got Brian Armstrong. He’s out there saying, look, reach out to me. We have a big team. We’re a big public company. What is it, 60 billion dollar market cap?

1:14:36 This is not a fly-by-night organization. This isn’t something Gensler can say, oh, it’s, you know, it’s the Wild West, it’s this, it’s that. I have no idea what’s driving and what’s motivating him. Obviously a very smart guy, but clearly, you know, stumbling now and falling behind, and other countries are, are taking, are going to take the lead, and are taking the lead. So again, when I, when you say regulation, again, there are a lot of countries, a lot of places in the world, and I’m just hoping the U.S. gets its act together, because it’s not something we want to fall behind in.

1:15:23 You know, I, I suggested in another podcast that I did, an interview I did with someone, that, you know, like, and you’ll remember this from your Bankers Trust days, there’s the Federal Reserve, and then they have a sort of chat, a private sector shadow committee, and the Federal Reserve speaks to this committee. There are 15, you know, men and women that are on the committee from the private sector, and they say, hey, what’s your view of the economy? Hey, what should we be doing to increase employment in the retail sector or whatever it is?

1:15:53 Just like, here, Gensler and that crowd, they should say, hey, let’s get a body of 15 of the prominent guys in the space together, and let’s figure out how to create the right regulatory framework. There’s no one who wants to run away from it. It’s absurd, and you know there’s a very small percent of cryptocurrency that is, in quotes, fraudulent, and I think there have been lots of studies that have been put out there. There’s more fraud done with hundred dollar bills than on cryptocurrency, because if you’re a smart criminal, you would never want a transaction on the blockchain, because you’ve got companies like Chainalysis and CipherTrace.

1:16:36 They reverse engineer it. They can go back into the blockchain and find you, right? So it’s the last place that nefarious activity really should, should, you know, flourish. So I just think that, you know, every moment that we wait we’re wasting, because things are changing, at, you know, lights, at warp speed. Do you think they’re nervous about stablecoins, because it’ll be a predecessor to the digital dollar?

1:17:09 And you already see China with the digital yuan, and I had Alex Mashinsky of Celsius saying, World War III will be a currency war, and everyone around the world will have to decide between digital one and digital dollar. Do you think that’s why they’re being hesitant about making a decision on one of the most important liquidity providers in this space, which is stablecoins? Well, yeah, I, I think it’s just, you know, challenging the dollar. I mean, come on.

1:17:37 I, I don’t, you know, look, there are a lot of things that we have going for us in the U.S. Okay, I mean, the legal system here. There is no other legal system like this in the world. Property rights are respected, safety is important. We more or less are a free-market economy, less so today than when I remember growing up under Reagan, but, or, you know, in that period right after Reagan, but I’ll tell you, you know, forget even talking about the military and all these things.

1:18:21 The U.S. is not going away. The value of the dollar is not going away. What is happening, okay, is that the entire legacy fiat system globally, so all fiat currency and fiat assets, so bonds as an example. There are a hundred, over a hundred trillion dollars of bonds that are negative real yielding. Okay, those are worthless in my view, an entire asset class, the ones that you grew up with at Bankers, that everyone, they don’t have any value in a portfolio anymore.

1:19:02 What’s happened is that the new digital asset ecosystem, this new digital world that is growing up next to the fiat world, is increasing relatively at exponential speed. So a very simple thing for people to understand is that if you look at the last 10 years, Bitcoin has gone up 99% against the S&P 500. Bitcoin has gone up 99% against global bonds. So if you are residing and sitting in the legacy system with your real estate, with your bonds, with your equity, you are losing purchasing power in a dramatic fashion against the assets growing up in this new world.

1:19:53 And so, what is the right portfolio balance? It used to be 60 40. You obviously don’t want to put it all on the digital assets in tech. It depends what your risk appetite is. The problem that people have is they start with 1% or 5% and in pretty quick order, it goes to being 20, 30, 40 percent of their portfolio because they’re buying, or it’s appreciating.

1:20:17 Both. It’s appreciating, not by buying more, by just appreciating. Yeah, and so it just depends what your age is. It depends who you are. I think that everyone should have some exposure: every institution, every company, every person, because it is the future, and you can decide you know, the one thing I always think about is, you think about the SWIFT system, and everyone knows what a pain it is to wire money back and forth, and they call you back, and it takes three days or whatever it is, the SWIFT system for transferring money around the world.

1:20:51 Okay, is a pre-internet technology. That’s something that’s invented in the ’40s and ’50s. I don’t even know when, but, okay. In 10 years from now, there is zero chance, zero, that SWIFT will still be around given that we have this new digital network, this new digital framework that’s available to everybody out there. And so, you know, someone like Gensler and these other people who are seemingly throwing up roadblocks should understand that this technology will happen, and if they don’t want it to happen in the U.S., it will happen everywhere else.

1:21:35 My guess is they’ll figure it out. But the value of the dollar the one who knows what that’s worth. You don’t have property rights there. Yeah, they’re growing. They change their mind about things you think you own it, you don’t own it.

1:21:51 You think you own land, you don’t own it. You know, real money honestly, I thought that that wasn’t going to be the case with China, but unfortunately they’ve shown through their actions that the law there is arbitrary. And it’s unfortunate. Our law here is not arbitrary, and I don’t, you know, the naysayers out there, the anti-America whatever. You know, it’s not arbitrary, especially compared to China.

1:22:19 The value of our system that’s grown up over 200 plus years is enormous, and the currency that this country will print or not print will still, you know, I think have value, certainly within the legacy world. However it is going to go down 99% against the assets in the new world. So yeah, that’s a fantastic way to finish this. Dan, just wanted to ask you, what are you doing 10 years from now? What do you think your day looks like?

1:22:53 The size of your fund looks like? Are you just doing the same stuff, just more of it? Yeah, I mean, I, I think I’m firmly in this space. I don’t know that I could continue to work at the pace that I’m working at now without expiring. I mean, I’m doing 10 Zoom calls a day.

1:23:12 I work out every day. You know, I look, I just think that now we’re early. It’s time to focus on the investments that I want to have in my own portfolio, and I want to do it in a controlled way. I have no idea what this space is going to look like five years, eight years from now. I mean, I have a sense, but things are changing so rapidly.

1:23:40 It’s just, it’s hard. I know I’m gonna be in this space. I don’t think there’s anything else to do there. There’s certainly no alpha anywhere else. You know, this is the birth of a whole new system, and it might be the birth of a new way for humans to interact with each other, because as I call it, you know, it really is a truth machine.

1:24:04 You know, and maybe you know, any place in the world where truth is needed, where people need to know for sure that something is true you know, will incorporate the blockchain economics, or, you know, some have some sort of derivative of the Bitcoin code or invention or blockchain, or however you want to describe it. You know, I think and when I start to think about that, there are unlimited number of applications, right? I mean, in theory, this could sort of eliminate, you know, lying or eliminate yeah, you know, I, so what does that even mean?

1:24:49 Right? Like, I don’t forget about tokenization of all assets and art and everything. You’ve got that coming. What does it mean beyond that even for the way humans interact with each other? Right?

1:25:02 Are we going to all just, you know, live in in the metaverse? Are we going to go to a bar in the metaverse to meet people, but in fact those people are going to be in France and in China, not, not, you know, next-door neighbors? And then, you know, how is that all going to work? I’ll tell you one last thing, is that, look, I, I saw a statistic that people under the age of 25 spend eight hours a day online, and so for us that’s crazy to think. But you know what?

1:25:33 Doing all these Zoom calls, etc., looking down at my phone, maybe it’s getting to that for us too, and so people will really live part of their lives in this new digital world, which they call, you know, the metaverse. So yeah, that’s maybe what’s ahead. Those are some great thoughts. You know, when you and I were a kid, the biggest thing to get was a car, at least it was for me, because that meant I had independence. I could do what I want to do.

1:26:00 Yeah, go see my friends. My daughter, she’s 17 I couldn’t give her a car, honestly. Like, you know, she has it all via the internet, right? Via her various forms of metaverses, right? And so you’re right.

1:26:13 These, these people are now growing up where their digital identities are more important than their physical identities, unlike when we grew up. So it is a completely different shift, and, you know, just to finish, I was getting ready for the Yachts interview a couple weeks ago, and I was talking to someone here, and I was like, you know, the pay to play, and that someone’s job is to play a video game in the Philippines. It just doesn’t make any sense. And then, yeah, it’s like, well, Brian, you know, we’re talking right now on a Zoom call.

1:26:38 Most of us now work remotely. You will, you know, you interact with everybody through a screen. He was like, how’s that very much different than this metaverse concept? And then you know, they get points. You get a paycheck every month, like you start to understand that it’s not as far-fetched as it might seem.

1:26:56 It’s not a science fiction movie. Yeah, like you said, it’s kind of the reality we’re living. You’re on 10 Zoom calls a day, you know, it’s, it’s, it’s, yeah, I think it is. I think it is the future. The future is here, and it’s just a matter of how fast we embrace it.

1:27:13 Yeah, and I had Jeff Booth on the show, who wrote the great book about deflation, and he said, Brian, Bitcoin could save humanity. And if you know Jeff, he’s a very mild man, or Canadian guy who doesn’t, he’s not prone to hyperbole, and I think his point was, is something that you just said, Dan, that maybe it means in the future, all this transparency, this blockchain, maybe we actually become the best versions of ourselves every day, because maybe there’s no line. Maybe we have to show up and do everything we say we’re going to do and be the best version of ourselves every day, where sometimes it’s easy to not do that every day, and maybe this blockchain will bring this new vision of humanity.

1:27:48 Like you said, well, there’s no, there’s no line. What kind of world would that be? Like, you know, as I said, I think it’s limitless. And I think it’s coming, and the decentralized nature of it. There’s never been anything that’s ever existed that is so decentralized, so it’s going to exist no matter what.

1:28:11 Like, if you try to shut it down in one area, it’s not going to matter, because there are many, many people around the world who are getting tremendous benefits from being involved in this world. Not everyone has a stable currency. Not everyone has proper monitoring fiscal policy, emerging-market countries. For some of them, this is a godsend. So again, we need to have a little more, a little less of a parochial perspective here, and really embrace embrace the unknown.

1:28:45 Yeah, I really appreciate those thoughts. Dan, how can people learn more about you, follow you, are you, is can they still get in on your fund? What’s the minimum investment? Are you doing another fund? Well, I can’t talk about the new fund.

1:29:00 So, you know, the, we are registered with the SEC, so I can’t solicit, but you can go to our website and look at what we do. You mentioned it already, www.10tfund.com, and I’m on Twitter. I’ve been a lot less active because of all these Zoom calls, but, you know, I used to tweet like one comment or one thought a day. I’ll get back to doing that. I like that as a discipline.

1:29:30 That’s where the community lives. The community, the crypto world, really lives on Twitter. So yeah, and you know, I guess you can hit me on interviews like this. I did an interview with Raoul a few weeks ago that should come out in the next week or so, too, so Yeah, yeah, that’s fantastic. Yeah, I appreciate all the content he creates as well, and thanks for the, the companies.

1:29:55 Obviously big fans of Animoca and Yat. Deribit is one of the options platforms of choice in our DeFi Academy. The reason I like my students to use it is because it’s got the two ways. It’s got the bid, offer, and I’m always saying, you know, what, you can always see where you can buy and sell. The other one, it reminds me of just, it’s kind of an old-school platform.

1:30:14 Yeah, it reminds me of the Wall Street Journal, old-school days, but it’s great for me to show people liquidity. Where are there other places where you can buy options, but sometimes you can only buy them and you can’t sell them? And again, I really appreciate Deribit. I happen to find it independently, do my due diligence, and it’s great, and then, like I said, one of my students hit me up and showed me your whole Helium network the other day, and everyone was like, wow.

1:30:34 So, some great companies. Dan, really appreciate your thoughts. It’s, it’s fascinating how your whole history is as a macro investor. You’re studying European history. All this really plays into this market, where, like you said, 90% of it’s happening outside the U.S., and it’s a real macro play.

1:30:50 Again, strangely enough, I think you may be built for this space, you know. And so yeah, I appreciate it, appreciate this insight. So really good stuff. Thank you everybody for listening. Follow me on Twitter, check out the website, and let’s do this again sometime, maybe in London next time.

1:31:05 Dan, absolutely. All right, and I’ll be dressed a little snappier. You really all right, thanks again. All right, I was used to my tailor as well. Thanks, Dan, appreciate.

1:31:15 Thanks everybody for watching. We’ll see you next time on London Real. Bye.