#1372 Pranav Kanade | Billions Coming To Bitcoin and Stablecoins

Pranav Kanade is the Portfolio Manager for VanEck’s Digital Assets Alpha Disclosure. He is deep in the weeds of crypto. In this conversation, we talk about bitcoin, ethereum, altcoins, memecoins, regulation, the future of stablecoins, and much more. ======================= CrossFi is the Apple Pay for Crypto. For the first time in history, anyone with a web 3 wallet like Metamask can spend crypto through a physical or virtual visa cards anywhere in the world where Visa is accepted. Be one of the first to get your hands on a CrossFi card and a prize pool of $3 Million Dollars by joining and participating in their testnet today: ⁠⁠https://xfi.foundation/users⁠⁠ ======================= BetOnline.ag is a proud sponsor of the the Pomp Podcast. Use crypto to bet on sports, play poker and enjoy casino games at BetOnline. Visit https://promotions.betonline.ag/pomp and use promo code POMP100 to receive a 100% matching bonus on any crypto deposit. BetOnline boasts no crypto transaction fees, and processing is anonymous, instantaneous and secure. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. All right, guys, I've got a really special episode for you today. We have Pranav Khanna Day. He is the portfolio manager for VanX Digital Assets Outfit Strategy. He is deep in the weeds of crypto. He's thinking about Bitcoin, Ethereum, all the altcoins. He's

• 0:44Anthony Pompliano?

  got some thoughts on meme coins, regulation, what are going to happen with stable coins, and much, much more. I really enjoyed this conversation because it is very rare that I'm going to talk to someone who's thought deeply about so many different topics across the industry. Pranav and I spent a ton of time talking behind closed doors. I'm excited to get him on the podcast and have you all listen to some of his thoughts. Go check him out on Twitter at VanXPK, or let us know after this episode what you thought. Here is my episode with Pranav.

• 1:13Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:37Anthony Pompliano?

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• 2:23Anthony Pompliano?

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• 3:09Anthony Pompliano?

  I thought a great place to start this conversation is there is trouble in the water in crypto. One of the things you and I have talked about is there's a bunch of these low float, very high FDB tokens that are out there, maybe even high hype as well. The Bitcoin maximus would be like, you know, it's Bitcoin and nothing else. The crypto people are like, you guys are absolutely insane. Look at all this other great stuff that's going on. Are all coins all going to crash? Is this all going to be zeros?

• 3:34Speaker 02

  I don't think so. I think that's like a, you know, there's a lot of nuance in all of that. The way I articulate it to people is Bitcoin is probably the only asset in crypto that's achieved like true product market fit. You know, it's like 300 to 400 million people in the world on Bitcoin, whether on some centralized exchange or self custody wallet. There's 5 billion people with an internet connection. So you're saying, you're kind of getting to like 8, 9% of internet penetration there, which is to the point where you can say, yeah, like this is true product market fit. Everything else is just a broad experiment, right? It's kind of an extension of this idea that you can build applications on these public ledgers. And ultimately, that's supposed to enhance the user experience, but also create a better, faster, cheaper version of what already exists in the traditional world. So it's kind of recreating a lot of those things.

• 4:17Speaker 02

  And that's still broadly an experiment, in my view. You know, so the right way to measure that, in my view, is look at the number of on-chain unique wallets interacting with these blockchains. That number is probably like 30 million monthly active wallets. Again, relative to like 5 billion people in internet connection. So the entire asset class outside of Bitcoin is purely a venture asset class. And I started following the space outside of Bitcoin in 2017. And if you were to ask me, what's the, what are the odds that this thing becomes mainstream one day? I would have said 5% because it was all just a bunch of white papers then. If you asked me that same question in 2020, 2021, I would have said 25, 30%. And you could have said, yeah, it's maybe DeFi, NFTs, gaming, something's there and something unique will come out of it.

• 5:03Speaker 02

  Today, if you ask me, I think we're close to 50% this thing goes mainstream. So the odds are kind of interesting. The question is, what is the net next domino to fall in terms of product market fit and adoption? My opinion is it's stable coins. No, it could be deep in, it could be social fi, it could be some of these other things that are kind of interesting, but I think it's really stable coins because it essentially has the buy-in from all the constituents you need to get something to go mass market. To be specific, it's more like US dollar stable coins. So, so my general view is for a variety of factors, that's the thing that's going to take us from, let's just say, 30 million monthly active wallets to hundreds of millions. And any project that is somewhat adjacent to the stablecoin adoption story will do extremely well.

• 5:47Speaker 02

  So if you're looking at the altcoin universe, you want to focus in and around that theme. And, you know, then everything else becomes kind of, it is, it is some credit bets around sort of what they're trying to build.

• 5:57Anthony Pompliano?

  So let's talk about stable coins first, which I was blown away. I looked at the Tether transparency report, you know, they have on their website.

• 6:04Speaker 02

  Yeah.

• 6:05Anthony Pompliano?

  The US dollar stablecoin is like 100 billion or 110 billion or some massive number.

• 6:12Speaker 02

  160, I think.

• 6:13Anthony Pompliano?

  The Euro, I think, I think 160 is all of them combined. And so just the Tether US dollar one.

• 6:17Speaker 02

  Oh, it's Tether, right.

• 6:18Anthony Pompliano?

  Was, you know, call it 100, 120 billion, something like that.

• 6:21Speaker 02

  Yeah.

• 6:22Anthony Pompliano?

  The next biggest one that Tether has, according to this website, the Euro stablecoin is 30 million. It's the difference between like 100 plus billion and 30 million. And I was like, wait a minute, is this a sign that like the free market has spoken and people globally, when given the frictionless experience of I could switch between any currency in the world, they all want dollars.

• 6:43Speaker 02

  Yep.

• 6:44Anthony Pompliano?

  Right? And so, um, obviously that's great business, like, you know, Tether's printing cash, USDC, uh, and Circle are printing cash.

• 6:53Anthony Pompliano?

  But man, it does not seem like there's a lot of demand outside of a US dollar stablecoin. And so all of these other ones, are they just, they're cute? You gotta kind of be doing something else other than this dollar stablecoin, but really it's the dollar stablecoin or nothing?

• 7:05Speaker 02

  I, I think so. Um, you know, I grew up in India, in Bangalore and, you know, my parents are doctors, so, uh, you know, kind of grew up around, let's just say, upper middle class. And everyone aspired to have dollars or have some amount of their net worth stored in dollars. Cause you know, it was a diversification away from the rupee. And I, you know, I tried to go back to India every couple of years. I went back in December and, and I was hoping to run around and see folks say, we want some Bitcoin, because the Indian rupee to the dollar has kind of gone from like 50 something to 80 something. I can't, I haven't looked at it recently, but, so it has devalued against the dollar. And you would think that people want Bitcoin. No, people just want dollars, right? People feel like it's been, um, this bright and shining star, uh, out there for a long time.

• 7:50Speaker 02

  People feel safe in it. It's just very hard for the average user, even in like a country like India, that has a pretty high internet penetration to get their hands around dollars.

• 8:00Speaker 02

  And I would imagine it's, it's very similar across the globe. And so, US dollar stablecoins is, is one that I think has product market fit for a broader audience than even the number of people that have Bitcoin in, you know, in very ID these countries, a bunch of these countries.

• 8:17Anthony Pompliano?

  What's interesting to me is, uh, if that is true, right? Which all the data is suggesting US dollar stablecoins are going to continue to proliferate.

• 8:26Anthony Pompliano?

  The dollar's going to strengthen and Bitcoin's going to strengthen. So this whole like Bitcoin is going to succeed and the dollar's going to fall on its feet. Appears to be wrong.

• 8:36Speaker 02

  Yeah.

• 8:37Anthony Pompliano?

  Actually, it looks like the dollar is going to be stronger. Bitcoin is going to be stronger and it's every other currency is going to kind of be the ones that fall because the people who want fiat are going to go to the dollar. It's great for medium of exchange, all the stuff. Bitcoin, obviously, is great long-term store of value. And so then it starts to open up this question of like, okay, well, if the dollar is going to continue to get stronger, we can talk about China and Japan.

• 8:59Speaker 02

  Yeah.

• 8:59Anthony Pompliano?

  Used to buy 22% of all the debt. Now they're buying 7%.

• 9:02Speaker 02

  Yeah.

• 9:02Anthony Pompliano?

  Paul Ryan came out with this recent op ed and he's like, wait a second, guys. There's a net new buyer of the treasuries, which is, you know, these dollar stable coins. But what I found even more interesting than just like they're buying a lot is Circle and Tether are not interest rate sensitive. They are going to hold the treasuries whether interest rates are at 5% or at 1%.

• 9:26Speaker 02

  Yep.

• 9:26Anthony Pompliano?

  That's what central banks do.

• 9:27Speaker 02

  Yep.

• 9:27Anthony Pompliano?

  They don't care what the interest rate is. They're not doing it for just the yield. Whereas a lot of the institutional investors who've been buying a lot of this debt specifically from China as they're offloading it, et cetera. They are super interest rate sensitive.

• 9:38Speaker 02

  Yep.

• 9:39Anthony Pompliano?

  And so in a weird way, the stablecoin issuers are not just great because they're showing up with new demand, but they're going to show up with new demand and they're going to hold the treasuries regardless of where interest rates go, right?

• 9:48Speaker 02

  Yep, 100%. And what's most interesting about it is, you know, if you look at world GDP, 60% of it is driven by consumer. And if you look at another dissection of it, you know, the US is 25% of world GDP. So like 75% of world GDP is like all these countries outside and a lot of that is consumer. That consumer around the world has not had an easy way to buy dollars. And essentially, if you're able to distribute to those people, those people are not interest rate sensitive buyers, as you put it. So which is like fantastic for the US government to want this product to succeed because, you know, actually, the Federal Reserve put out a report yesterday or two days ago that I was reading, which is basically around this topic of the Fed's been reducing its balance sheet, who's been the kind of the marginal buyer.

• 10:33Speaker 02

  And it's like basically like households, broker dealers, you know, to smaller extent, hedge funds and, you know, pensions and those types of entities. Now, all those guys ultimately are interest rate sensitive, right? If all of a sudden the Fed cuts, the households that have been buying T-bills are going to rotate out those T-bills into equities or something that can give them a better return. To your point. The stablecoin issuers are not interest rate sensitive. They have to park it somewhere. And so, and they can't go buy stocks with that capital. They have to buy, buy short-term government bonds or government bills. So yeah, so I think it's like a really good thing for the United States, which goes back to kind of that original point, which is,

• 11:14Speaker 02

  you know, the US regulators slash politicians slash government should like this. Merchants should like this because it, you know, gives you a way to reduce your costs. Like, you know, you don't have to use the credit card rails, banking rails anymore. Stablecoin rails are cheaper. And consumers outside the United States also should like it. So it's kind of got this win-win-win sort of construct. You know, I think, I think the, the reason stablecoins haven't taken off, right? And when I say taken off, that 160 billion of total dollar stablecoins hasn't gone to like tens of trillions already, is because there's been this hesitance by merchants from accepting stablecoins to some extent. So like, if you just, you know, talk to the big e-commerce players in the United States, e-commerce

• 11:59Speaker 02

  is like a trillion of, like seven trillion of US GDP. You ask them like, like, why aren't you taking stablecoins for payments? Or why aren't you trying to figure out a way to make this super user-friendly so that people pay you in stablecoins? The answer often is like, well, we don't know how the US regulators feel about this. We don't want to get caught. Like, our, our core business is like, you know, e-commerce. We don't want to get caught up in this crypto regulatory crosshairs. So if you can change that through like what's happening in DC these days, then I think you can see this kind of big hockey stick adoption curve.

• 12:30Anthony Pompliano?

  Yeah. Now, what becomes more interesting is can the stablecoin issuers collectively become the single largest holder of treasuries? Like, they're, I think, 15 or 16th on the list right now. Paul Ryan, the former House Speaker in this op-ed, he said, if they were a country, they'd be the 10th largest country.

• 12:49Anthony Pompliano?

  But man, the trend seems to be going in their favor.

• 12:52Speaker 02

  Yeah.

• 12:52Anthony Pompliano?

  And so if this stuff becomes, you know, a trillion, $2 trillion market cap.

• 12:57Speaker 02

  Yeah.

• 12:57Anthony Pompliano?

  They probably are going to be, you know, top five, but

• 12:59Speaker 02

  Yeah.

• 13:00Anthony Pompliano?

  There's a world where Circle and Tether.

• 13:02Speaker 02

  Yeah.

• 13:03Anthony Pompliano?

  Are the largest collective holders of treasuries in the world.

• 13:06Speaker 02

  Yep. And definitely possible, right? And it's also probable. What's more interesting to me is then extending that question a little further and say, okay, let's say stablecoin market cap, again, dollars tablecoin market cap is a couple of trillion dollars. That would imply that we have tons of on-chain users, you know, that 30 million is 100, 200, 300 million. All those people have a bunch of stablecoins in a wallet somewhere. And at some point, those people will want access to financial products. The only real available financial products for someone at stablecoin today is either money market funds with, you know, BlackRock and Ondo and a couple of these other issuers. Or the other extreme end of the spectrum, which is like altcoins and meme coins, right?

• 13:50Speaker 02

  You need some assets right down the middle, which to me is tokenized equities. So like I could see a world in the next couple of years where, you know, someone in an emerging market or a developing country has a self custody wallet with a US dollar stablecoin. And then is now choosing to asset allocate and is asset allocating to, you know, US credit? And also like US public equities, right? I would think that if you were to tell people in, you know, Turkey, Argentina, India, you know, Vietnam, that they can all of a sudden very easily own Apple stock, like I think they'd want to.

• 14:26Anthony Pompliano?

  Mm hmm. Now, do you think that they want that over dollars though? Like, one of the things that I keep coming back to is in US equity markets today. And people get really upset when I say this, but I don't think that the historical valuation metrics really matter as much as they used to. Right? And so why is that? Well, there's a lot of people who are saying, you know, this inflation thing is a big problem.

• 14:46Speaker 02

  Yeah.

• 14:46Anthony Pompliano?

  I'm going to actually buy stocks because they seem to go up when inflation is high.

• 14:50Speaker 02

  Yeah.

• 14:50Anthony Pompliano?

  And so now I am not just buying it on the pure fundamentals of like, what is this business worth? There's this like monetary premium that starts to get Assigned. And so when you look backwards over the last 50 or 100 years, you're like, oh, my God, the stocks are so much higher than the historical valuation. I'm not saying that valuation doesn't matter, right? It definitely matters. But what I am saying is like, maybe there's like a 10 or 20% lift in terms of, yes, it is actually still valued at the same plus a 10, 20% monetary premium. And so it looks elevated, but the holder base is shifting. And so like, that is like the quote, quote, new way to value these businesses. But I don't know. How do you think about it?

• 15:27Speaker 02

  So I think it all depends on the marginal flows of capital. So, so I think stats are that 70 to 80% of shareholders in any public companies institutional and the rest is kind of retail. And obviously there's extremes, right? GameStop is probably largely retail. You know, I think if you can look at the Tesla vote from last week, it tells you how much of Tesla shareholders is retail versus institutional. I think it was like a 45% retail, 55% institutional like mix. But also there's a shift going on underneath, which is the boomers have all the money. And over the past decade or two, the boomers have chosen to allocate via passive like ETFs. But as that wealth transitions from the boomers to the millennials and the Gen Xers,

• 16:12Speaker 02

  I think that's that's the generation after us, right? How they choose to allocate might be different. They might say, I don't know if I want to go buy a whole bunch of ETFs, like, you know, I'd rather just own Elon companies because, you know, Elon creates a ton of value and like they'll they might be indifferent to the S and P or sorry, the earnings multiple of that stock.

• 16:32Speaker 02

  You know, this whole like framework around free cash flow based valuing assets is something that I think is something that that is trained or that the existing set of folks that drive capital markets are trained with. But the next generation might not think about the same, these assets the same way. They might sort of think about it very differently.

• 16:53Anthony Pompliano?

  And if we then take equities, we have stable coins, we have kind of the Bitcoin story. This idea of mix between retail and institutional, when the ETF got approved for Bitcoin, I think everyone thought it was institutions. Now there's some data coming out that suggests maybe it was actually majority retail.

• 17:12Speaker 02

  Yeah.

• 17:13Anthony Pompliano?

  You know, we saw recently commentary from someone at BlackRock. Actually, I think it was the CIO of the ETF and indexing business there was like, no, it's 80% retail investors, 20% institutions.

• 17:25Speaker 02

  Mm hmm.

• 17:26Anthony Pompliano?

  That number blew my mind, right? The estimates are-

• 17:29Speaker 02

  It's like self-directed brokerage. People go to their finale account.

• 17:32Anthony Pompliano?

  16 billion dollars has flowed into these products, 13 billion of it, they were saying, is, you know, depending on each estimate, some people say 80%, some say 13 billion, some people say, you know, another way they're measuring it is like on-chain Bitcoin that is actually moving into the ETFs. And really just the idea is like way more retail is buying the ETF than institutions or than what people were thinking.

• 17:58Speaker 02

  Yeah.

• 17:58Anthony Pompliano?

  Is that a positive or should we be concerned? Like actually, are the institutions not coming?

• 18:04Speaker 02

  I think our view was that it will take time for the institutions to come, right? These channels need to, you know, have their own internal processes to then approve these products and then try to think about, you know, how does it fit within like sort of an asset allocation framework and then ultimately then recommend these things. If you just think about like incentive structures at these wealth manager, RIA channels or whatnot, the job is to not get fired, right? So like the way you get fired is you buy some asset for your client at some high price and it draws down and then, you know, the client is like, why did you buy this for me? So I think that channel takes time. What's interesting about the quantity of inflows and where it's come from being retail,

• 18:46Speaker 02

  I think, I think there was an interesting reflexive trade that got set up, which was-

• 18:53Speaker 02

  You know, you had a whole bunch of like things that kickstarted the ETF inflows, you know, call it people like larger crypto funds that own Bitcoin that said, you know what? We'll swap our Bitcoin for the ETF that created some inflows. At the same time, you had a bunch of like model portfolios that that said, you know what? For our model portfolio, 1% allocation makes sense. And then that created sort of this buyer that is not as price sensitive. So like model portfolios, you know, when they decide they want to have a 1% allocation, they don't care if they're buying at 43K or 44K. They just need to get through their allocation. So those were like the first movers. And then as the inflows were coming in, retail was like, well, there's this nice tailwind right now. Like there's a whole new buyer base coming in and all of retail or big chunk of retail came in, right, to chase that flow. And that created this reflexive feedback loop.

• 19:38Speaker 02

  So you know, new flow, new retail flows that tracked essentially model flows and that kind of like fed itself.

• 19:50Speaker 02

  Is that a good thing or a bad thing? You know, I think it's net good. The question is, all the retail flows that came in, is it replacement flows? Like, did people sell spot Bitcoin and then go buy the ETF? Or is it in addition? We don't know that. You know, price action would tell you it's probably an additional flow rather than a cannibalizing flow. But that's kind of my guess. What do you think? You're a Bitcoin guy. I'm curious.

• 20:17Anthony Pompliano?

  I think that retail definitely was buying. I think that there is net inflows for sure. I think that I was surprised by how much was retail versus institutional. I agree that it will take a while for the institutions to start allocating. I also think that institutions chase even more than retail does.

• 20:34Speaker 02

  Yeah.

• 20:34Anthony Pompliano?

  You know, retail is very undisciplined. And so price starts to run. They're like, oh, I'm, you know, I can't miss this. And they go in and it further perpetuates it. But I think institutions are not immune to that either. They may be worse.

• 20:46Speaker 02

  Yeah.

• 20:46Anthony Pompliano?

  And so if we go through the summer and Q3 maybe and prices are flat, and then all of a sudden we get a Q4 and in Q4, prices start to run. I mean, there's a world where all the institutions start piling in, which is what we saw in end of 2020. Into 2021, people were just using the grayscale GBTC arb trade. And so right now, there's a lot of people piling in. But when I look at the net inflows, one of the other things that's interesting is there's a lot of basis trade going on. And so you've got, you know, one side, if you just look at the net inflows of the ETF, but you're not looking at the short interest.

• 21:20Speaker 02

  Yeah.

• 21:21Anthony Pompliano?

  And so I think some of that's happening as well.

• 21:24Speaker 02

  Yeah.

• 21:25Anthony Pompliano?

  So it's fascinating to me, right? It's like they approved a product that everyone wanted $16 billion flowed into this thing. Bitcoin's up called about 50% or so. Since then, and people are looking at the data now and they're like, oh, none of the people that we really thought were showing up are here yet.

• 21:40Speaker 02

  Yeah.

• 21:41Anthony Pompliano?

  And so the question is like, are they going to come? If they come, then that'll be good. If they don't, you know, maybe that's a bad thing, right? Maybe actually we wanted them here and we should be concerned.

• 21:50Speaker 02

  Yeah. The other thing that I found relatively interesting was, you know, so we have our global business. I travel to Asia a fair bit. I was in Singapore, Hong Kong, meeting family offices, private banks, those types of entities in September of last year. So before any of this really happened. And I went back in January and the biggest change I noticed was the first time I went, talking about crypto is very hard. You know, it was kind of like, nobody was like that interested in talking about it. You know, any given like asset manager, whether small family office or multifamily office, it's always one of these things where like you have like three or four decision makers. One person loves crypto and then two kind of like, I don't really care about this. And one person hates it.

• 22:33Speaker 02

  So for the one person who loves crypto, talking about crypto is very hard. And convincing the rest of the team for an allocation into the space was also very hard. When I went back in January, what I could see, and this was with a different set of managers, like allocators, was that the one person that loves crypto had like this ammo, like, look, like the Bitcoin ETF has been approved. The US has given you a green light, like we got to do something. And it was not only that, it was that the person that hates crypto and the two people that don't care, they were also like caught off guard. Like it was almost like this unexpected positive. The details of how we got here didn't matter, which is like, oh, we had to litigate to get here kind of thing. But it was just the fact. So I imagine there's been a ton of. Flows that comes that has come out of different parts of the world beyond just the US.

• 23:17Anthony Pompliano?

  Let's talk about Ethereum. Obviously with Ether, I think there's been two things. One, it looks like, and they're now talking about the fact that they're going to approve an E3 ETF at some point. It looks like it'll happen sometime later this summer, kind of July, August timeframe. And then consensus recently came out and said, hey, we filed this lawsuit against the SEC. We've asked for clarification. They have let us know that this investigation around Ethereum 2.0 is finalized and it looks like Ether is going to be classified as a commodity, not a security. This feels like a way bigger deal than people even making it. People are making it kind of a big deal, but this feels like, oh, wait a second. There's a lot of worldviews, a lot of frameworks that people had that just got shattered because

• 24:01Anthony Pompliano?

  Ether is not going to end up being a security. And so talk a little bit as to, was this an expected thing? And then what do you think those ramifications are?

• 24:08Speaker 02

  Yep. So I know everyone is excited about potentially SPY ETF and all these things, but I think there's something bigger happening here, right? Like the entire world that assumed that this ETF might not happen. And this like while like this ETF approval process and this consensus thing is happening, something else happening in DC, which is obviously Trump came out in kind of full support for this asset class, which during his administration, they weren't as friendly to the space. And then that had a bunch of Democrats in the House kind of reevaluate their own positions on this thing, especially the ones that have to potentially get reelected in November. So, you know, so what was interesting to me is like the accounting bill, SAB 121, had

• 24:52Speaker 02

  basically I think like 21 Democrats in the House vote in favor. And, you know, some folks in the Senate, which obviously Biden ultimately vetoed. And that was like kind of a interesting, whatever, nice bill, but it wasn't as important as the FIT 21, FIT 21 bill that passed the following week, which had, I think, 71 Democrats in the House. Like there was an exponential growth in the number of Democrats supporting a more impactful bill, which is I guess like a crypto market structure bill, right? So I think there's like a wholesale shift happening here where crypto went from sort of this, you know, three months ago, we were like this kind of like abandoned asset class that we had no idea who really supported us. And our assumption was we're going to have to fight through the courts to get any amount of clarity.

• 25:35Speaker 02

  And all of a sudden we became this sort of like, are we becoming this like? Asset class that has some bipartisan support to allow us to exist and allow the good projects in the space to thrive. So that's what I think really happening. And you know, the ETH ETF is potentially one manifestation of that, but it's not the main thing. So I think it's interesting to kind of look beyond it, right? So ETH is not a security, it's a commodity. What does it say about all the other L1s? I don't know, like, because theoretically, I could make the case that there are some L1s that you and I have talked about that are better technical solutions to solving this problem of how do you onboard hundreds of millions of people to use these blockchains and ultimately,

• 26:20Speaker 02

  you know, have these things scale. And we can make a case both ways that, you know, Solana is potentially a better solution than Ethereum and these L2s in some ways. So, so I think people need to kind of maybe zoom out beyond the ETF and, and look at what is, what's shifting and what's changing.

• 26:35Anthony Pompliano?

  People are, have been upset that are in the hardcore Bitcoin community because I've said, listen, when the facts change, you gotta change your mind.

• 26:42Speaker 02

  Yeah.

• 26:42Anthony Pompliano?

  Right? It's a sign of intelligence.

• 26:44Speaker 02

  Yeah.

• 26:44Anthony Pompliano?

  They're not going to be securities.

• 26:45Speaker 02

  Yeah.

• 26:46Anthony Pompliano?

  They are going to be commodities, as we're seeing. There's going to be ETFs. Altcoins are going to come to Wall Street. Again, whether you like it or don't like it, you agree they should or not.

• 26:56Speaker 02

  Yeah.

• 26:56Anthony Pompliano?

  That is all the data we have right now is that is going to happen.

• 26:59Speaker 02

  Yeah.

• 27:00Anthony Pompliano?

  And then also, if you are in those investor, kind of capital allocator seats, you better get up to speed.

• 27:06Speaker 02

  Yep.

• 27:06Anthony Pompliano?

  Because there's a lot of people who I've known for a long time who said, oh, it's gonna be Bitcoin, and now I gotta decide, do I put on Bitcoin exposure or not?

• 27:12Speaker 02

  Yeah.

• 27:12Anthony Pompliano?

  All of a sudden, it looks like, wait a second, there's this very large

• 27:16Speaker 02

  Yeah.

• 27:17Anthony Pompliano?

  investable universe that I know nothing about.

• 27:19Speaker 02

  Yeah.

• 27:19Anthony Pompliano?

  And so I can choose to sit it out, just like I might sit out certain, you know, sectors or kind of verticals in public equities or whatever.

• 27:27Speaker 02

  Yep.

• 27:28Anthony Pompliano?

  But if I want to find risk, because ultimately, that's really what Wall Street's looking for, is where can I take a lot of risk?

• 27:34Speaker 02

  Yeah.

• 27:34Anthony Pompliano?

  And hopefully get a larger term for taking that risk. You're going to have to figure this out, and you're gonna have to get up to speed, not just now on Bitcoin and ETH.

• 27:43Speaker 02

  Yeah.

• 27:44Anthony Pompliano?

  I don't know how far it goes down, kind of the coin market capitalist, right? But it's not the first two.

• 27:49Speaker 02

  Yep.

• 27:49Anthony Pompliano?

  And maybe it's not the first hundred.

• 27:51Speaker 02

  Right.

• 27:51Anthony Pompliano?

  But if it's 25.

• 27:53Speaker 02

  Yeah.

• 27:53Anthony Pompliano?

  That's a pretty big investable universe that people, you know, got to start.

• 27:56Speaker 02

  Right.

• 27:56Anthony Pompliano?

  Um, and if you look at how much work they had to do to get comfortable investing in Bitcoin.

• 28:00Speaker 02

  Yeah.

• 28:01Anthony Pompliano?

  I mean, this is years.

• 28:02Speaker 02

  Yeah.

• 28:02Anthony Pompliano?

  Right of work ahead of these people to, to get up to speed on everything else.

• 28:06Speaker 02

  The only kind of quote unquote counterpoint to that is that a lot of these people have done the work.

• 28:11Anthony Pompliano?

  You think so?

• 28:12Speaker 02

  I've met a lot of, I mean, so, so I think the big pools of capital really are the endowments, foundations, pensions, um, sovereigns. And, and, you know, I've met a lot of these folks and there are always like groups within these larger organizations that have done the work, that have made the internal case, but have been derailed, you know, as you say, because of FTX and all these.

• 28:32Anthony Pompliano?

  But what have they made the case, they're making the case for Bitcoin? They're making the case for Ethereum? Are they making the case for number 10 or 12 on the list?

• 28:40Speaker 02

  So they've made the case for digital assets and they've been allocated to venture funds in this space, um, because they're terrified of the mark to market.

• 28:48Anthony Pompliano?

  Yep.

• 28:48Speaker 02

  Of this stuff, right? Cause again, it all goes back to like incentives. So like, if you think about these large organizations, the people who like crypto, um, you know, they, they don't have an incentive based compensation structure. They make X no matter what. Their job is sustain that job for like, I don't know, 30 years and, and sort of collect that check. So it's only downside. So like, you know, crypto is just like this controversial topic. So if you have an investment committee of 10 people in your XYZ pension, um, there is no real economic upside for you to go in there and say, you know, allocate to this right now, because there's great returns to be had.

• 29:25Speaker 02

  Because what's going to happen is you allocate to a liquid token strategy of some sort. And all of a sudden that strategy goes up and down 25%. This person has now sit in front of that group of people and explain why that is happening. And that's too much work. So they've all kind of chosen to allocate to venture because you don't have to deal with the quote unquote mark to market. And you don't have to explain to someone what a token is, right? It's like, you kind of just say, well, it's like Andreessen or whatever's venture fund. It's easy. So that's all they've all done. And that's, it actually shows up in the market structure of crypto, right? How many times have you heard of a project that's a copycat of where it exists in the, in the token market that is raising a round at a, uh, premium to where it's comp trades? I've, I've seen that so many times and you're like, what, why does that happen? And it's because the venture community that raises these locked up vehicles has too

• 30:10Speaker 02

  much capital and the liquid token market, which is kind of your exit market. Is all retail. There's no real institutional capital there because like the allocators aren't allocating yet. That will have to change at some point.

• 30:21Anthony Pompliano?

  Why?

• 30:23Speaker 02

  Otherwise, you'll have what's happening in the altcoin market today, which is projects launch. You know, the same issue of like low float, high FDB and the venture guys that wrote the seed check, which again is the downstream capital of some pension fund.

• 30:38Speaker 02

  You know, has, you know, vested tokens 12 months out and there is no buyer. Like, who's the buyer? Because you have to just look at the supply, demand imbalance between, you know, the size of the altcoin market and the amount of supply that's coming as a result of all these new tokens launching that are venture backed tokens. So that imbalance has to change, right? I mean, you kind of have this, you know, you have this like, like to draw a comparison to the traditional market, the venture capital market in TradFi is much, much smaller than the size of the public equity markets, right? That's your like, you need that type of a market structure in the token market as well.

• 31:18Anthony Pompliano?

  Is, if you believe markets tell the truth, is the lack of public market crypto, like liquid, you know, hedge funds, et cetera, capital, telling you that outside of some small subset of the coins, most of them are not worth anything?

• 31:35Speaker 02

  Yes.

• 31:36Anthony Pompliano?

  And so basically the venture capitalists are able to generate from zero to one.

• 31:40Speaker 02

  Yep.

• 31:41Anthony Pompliano?

  But some, nobody is willing to say, I'm going to stake enough money on one to 10.

• 31:46Speaker 02

  Right.

• 31:46Anthony Pompliano?

  As an opportunity. And so that's why there's the lack of capital there?

• 31:50Speaker 02

  That could be it. And the other thing I will also say is like,

• 31:55Speaker 02

  pull up all the venture funds in crypto that have been deploying capital, let's just say since 2017, and compare their TVPI to DPI. How much of that actually distributed, right? There's some that have distributed a lot, right? That, you know, I'm sure you and I are LPs in, but a lot of them have like all these great paper like returns and none of them have really distributed because they can't actually exit these things. Like either there's no token yet for the project they invested in, or there is a token and. Even though the quote unquote market cap of that token is higher than where they deploy their capital, if and when they try to exit that position at that market cap, they're going to like crush the price because the order books are super thin.

• 32:35Speaker 02

  Like, like we look at these order books all day. Like most of the altcoins, you know, there's not that much liquidity. So, so

• 32:41Anthony Pompliano?

  What do you think is the average liquidity on kind of a average altcoin?

• 32:45Speaker 02

  So I don't know, the top 50 altcoin, um, if you try to sell five to 10 million or something, you will move the price probably 10, 20%. I would say like, that's to say token number 30 to token number 15 coin market cap. If you try to sell 10s of millions or something, you will meaningfully move the price. And so like a lot of these venture funds that even have a liquid token on their, um, investment, uh, portfolio that has come as a result of an exit or as a result of a token launch. Those things to me are like not, you know, great reflections on, uh, how these venture funds have performed because they actually cannot DPI that.

• 33:24Anthony Pompliano?

  Mm hmm. Basically, it's, uh, it doesn't count till you sell it.

• 33:27Speaker 02

  Yeah, it doesn't count. You can't. Yeah, you can't count. Exactly.

• 33:29Anthony Pompliano?

  And what are you seeing now with a lot of these, um, high F D V but low float? The low float part, I think, is actually one of the most interesting things that you've told me recently, which is, um, if I have something that is a billion dollar market cap, uh, but the F D V is actually, I don't know, 5 billion or 10 billion, right? There's still 80 to 90% of the tokens have not entered the market. Uh, how do you see those tokens entering the market if they ever do?

• 33:56Speaker 02

  Yeah.

• 33:56Anthony Pompliano?

  Uh, and then what is the impact? Do you just need five or $10 billion of capital? Or how do you think about like a way where that those tokens can enter? You can get a higher float percentage, uh, and these things not get destroyed?

• 34:10Speaker 02

  Yeah. So, so as the current market structure holds, there's only one way to support all that, all these tokens hitting the market, which is Bitcoin whales have to sell their Bitcoin and go buy that, right? To support that price or money has to come in from the outside. So again, the pools of capital we're talking about, they have to decide they want to allocate to token strategies. And those token strategies have to then buy those tokens at a substantially different price, right?

• 34:34Speaker 02

  Neither of those things seem to be happening. So. You know, just taking a step back, most tokens draw down 90% after they launch. Like, it's just a matter of when. Because, you know, most of these tokens launch with some airdrop campaign, give some tokens away free. And then they have a six-month lock and at the end of six months, or six or 12-month lock, depending on the project. And at the end of the time, the original venture investors that wrote that seed check and the team and founders that worked on this project start to vest. And on paper, they've all had this massive wealth creation event. And, you know, then it's like, they're all kind of looking around and saying, you know, who's going to sell first, right?

• 35:18Speaker 02

  And someone's going to start selling and this thing goes down 90%. So, so in our view, the sweet spot to invest in token projects is like 18-ish months after they launch. Because that's when you've kind of had this boom and bust. And then you can look at it and say, okay, is the original team and founder still focused on building this shipping products that people want to use? And is the thing gaining traction? Or is it kind of just going to fizzle away to zero over time? 99.5% of these token projects will kind of fizzle away to zero. Because what happens is, most of these founders in crypto are generally low quality. And they're all in it for like, sort of this get rich quick scheme, which is what a lot of these things are.

• 36:00Speaker 02

  And they will, you know, vest some of their tokens. And even if they've only vested 10% of their tokens, that's like a couple million bucks for the founder and the team. And like, they'll cash out and they'll go do something else, right? Like, why like live through this like, brain damage of like, having to ship products when like, your retail holder base that is in the token is now like, really angry at you because it's drawn down 90% of this stuff. So, most, like, most of these projects will go through this like hype cycle, like this boom and bust. And then will sort of slowly fade away to irrelevance. There'll be some small cohort of projects that continue to ship through that painful time and make it on their side and have become like a great project. Obviously ETH was one of those. I think Solana was one of those, right? Solana went through its boom and bust. And there are going to be several others that go through that.

• 36:45Speaker 02

  So, one of the ways we approach it is, we're excited about all the crazy things that are launching, right? In the last six months, we're going to meet those founders, meet those teams and understand what the roadmap is and what their kind of vision is. And then we'll evaluate it 12 months from now when they've drawn down 90%.

• 37:00Anthony Pompliano?

  What about the meme coins? Like, it feels like, on one hand, it's insane, like, completely waste everyone's time, almost entertainment to some degree, or like gambling or something.

• 37:10Speaker 02

  Yeah.

• 37:10Anthony Pompliano?

  On the other hand, this idea of like, a fair launch, a token that plays into, you know, some theme or some trend on the internet. Some of these are starting to get like, real market caps.

• 37:25Speaker 02

  Yeah.

• 37:25Anthony Pompliano?

  And because 100% of it's out there.

• 37:27Speaker 02

  Yeah.

• 37:28Anthony Pompliano?

  It tends to be fairly real.

• 37:29Speaker 02

  Yeah.

• 37:30Anthony Pompliano?

  So how do you guys think about that? Or how do you evaluate them?

• 37:33Speaker 02

  Yeah. This is actually one I want to pick your brain on a little bit, but when Bonk and Biff and all these other meme coins were kind of playing out in the second half last year, first half of this year, my view is, look, like, this is how, like, the younger folks like to gamble. They don't want to go to Vegas, they don't want to go to like, casino and then play blackjack or whatever. They'd rather just engage with their friends in the social, like, guess the next meme type thing and then gamble on that. What's been interesting to me recently has been observing what some of the quote-unquote influencers slash, like, celebrities are doing. It's only interesting because, on the one hand, you have this other one theme here, which is how products are discovered has changed from like, people watch ads on TV

• 38:18Speaker 02

  to then like, search-based ads, to then social media-based ads, to now like, this creator economy-based way to product or discover product. And a lot of creators have realized, look, my flywheel is, I build a core audience that trusts me and trusts what I'm saying, and, you know, I'll either partner with an existing brand or launch my own brand and launch my product, and then I will monetize that product by selling it to my current audience, and then I will reinvest all those profits into making more content. Like, Mr. Beast is like, the great example, right? He's got this like, chocolate bar company, or...

• 38:56Speaker 02

  What's that energy drink that?

• 38:57Anthony Pompliano?

  Prime.

• 38:58Speaker 02

  Prime, yeah. And if you look at like sort of the growth curves of those like influencer launch brands, it's way faster than like what Pepsi and Coca-Cola can launch or Hershey's can launch, right? That's kind of interesting to me. And then I think about these creator tokens and I say, can you kind of pair the two? Can you also let your audience in some way participate in the success of the products you're launching? Again, you need a regulatory framework to allow this, but could you have a token that accrues its value from the products that creators launching and really not only by the product that from an influencer you trust, but also participate in the financial success? So the first experiment we saw with this was so Iggy's Zelia's like mother meme coin, I believe can be used as a token to pay for the cell phone plan that she launched last

• 39:43Speaker 02

  week, right? Obviously, like, you know, people would rather just pay with fiat if there's no benefit of paying with a meme coin, but you can start to see how that experiment goes further, right? If like that token has some value that comes from the cell phone plan itself.

• 39:56Anthony Pompliano?

  Describe a little bit about what she did. I think there's a lot of people who don't even know this this happened to probably watching this.

• 40:01Speaker 02

  So, so I'm not deeply, deeply in the weeds of like what Iggy's Zelia is doing, but from.

• 40:06Anthony Pompliano?

  Me either.

• 40:06Speaker 02

  Yeah. My, my basic understanding is like, she's got like seven and a half million followers on Twitter. People think she's like this authentic artist. She launched a meme coin called Mother, which clearly has no value, but it seemed like she did it in a pretty authentic way, like she was hosting Twitter spaces and speaking about crypto and engaging the Slana community in a very native way where she was demonstrating people she understands what the stuff is about. She's not just here for some grift. And that sort of garnered this massive audience. And I think a week later or so, she launched a essentially what looks like a cell phone business. So I don't know if you remember a couple of months back, like Ryan Reynolds sold Mint Mobile for like a billion something dollars.

• 40:49Speaker 02

  That business model is pretty simple, like Ryan Reynolds has an audience, he can sell cell phone plans probably cheaper than some of the big telco, but he's like leasing everything from the telcos, right? It's called an MVNO. So yet he doesn't own any spectrum or cell phone towers or anything. He's just a customer acquisition wrapper around like it's like a white label thing for a cell phone plan. I think you could easily launch something similarly, but the nuance be you can pay for your cell phone plan with the meme coin, which on the surface you're like, why would anyone want to play with a meme coin? And that's true. But you can kind of use your imagination and say, well, what if that meme coin got some of the profits from the mobile business? Probably becomes a security at that point. Again, I don't think our securities laws would allow this, but you could see how this evolves. If the regulatory regime

• 41:32Speaker 02

  changes, then isn't Mr. Beast better off monetizing his quote unquote equity through a token rather than, you know, trying to IPO his business one day, right? It's a better way to like, connect with your direct audience.

• 41:46Anthony Pompliano?

  Is that where the world's going? You think that it's all going to be tokenized equities?

• 41:49Speaker 02

  Yeah, I think tokenized equities are better than regular way equities. Like tokens, a crass way to put it is tokens, ultimately well-designed tokens are equities on steroids. Like equities are just ownership on some ledger. If you can ultimately give that instrument superpowers, which is programmability, then you can do a lot more with it than you can do today.

• 42:12Anthony Pompliano?

  Yeah. And part of it is right now, we use the dollar as like the common unit of account. So if I want to, if I have Amazon stock and I want to buy a house, I go from Amazon stock to dollars to the house. There's probably a world where I just go from Amazon stock to the house.

• 42:30Speaker 02

  Yeah.

• 42:30Anthony Pompliano?

  Right? And although that's a very simplistic example, you can imagine, you know, I can go instead of from mother token to dollars to cell phone plan.

• 42:39Speaker 02

  Yeah.

• 42:40Anthony Pompliano?

  I can just go mother token to cell phone plan.

• 42:42Speaker 02

  Yeah.

• 42:42Anthony Pompliano?

  And so I do think it becomes pretty interesting because it's almost like merging these equities with currencies, but also almost like airline miles or something, right?

• 42:52Speaker 02

  Yeah.

• 42:52Anthony Pompliano?

  And so in a weird way, like airline miles do serve this purpose today.

• 42:56Speaker 02

  Yeah.

• 42:56Anthony Pompliano?

  Is you can buy things.

• 42:57Speaker 02

  Yeah.

• 42:58Anthony Pompliano?

  Although I didn't know this, I have held on to almost all of my airline miles. And I was like, you know, I look at my airline miles, I can't wait to go, you know, get more. And so I was like, you know that that's like, one of the most inflationary things is no matter how many airline miles you have, you basically have $1,200.

• 43:13Speaker 02

  Right?

• 43:16Anthony Pompliano?

  Like, you can have 100,000 miles or a million miles. Somehow it's always like $1,200, right?

• 43:19Speaker 02

  Yeah.

• 43:20Anthony Pompliano?

  It's just enough to maybe take a domestic flight, but not like a really far flight.

• 43:24Speaker 02

  Yeah.

• 43:24Anthony Pompliano?

  And so.

• 43:27Anthony Pompliano?

  There are elements of this that we've already been experiencing. I think what's new here is now you can go and take the equivalent of those airline miles and there's a ticker.

• 43:35Speaker 02

  Right.

• 43:35Anthony Pompliano?

  There's a price.

• 43:36Speaker 02

  There's a deep transparent market.

• 43:38Anthony Pompliano?

  Yeah, and you can tell.

• 43:39Speaker 02

  Yeah.

• 43:39Anthony Pompliano?

  Yeah, you can tell.

• 43:40Speaker 02

  Yeah.

• 43:40Anthony Pompliano?

  Right? And I do think that there is something really powerful about the fare launches. It takes away a lot of the critiques from the Bitcoin community. Because now you're saying, well, wait a second here. If somebody launches it and it's available for anyone.

• 43:57Speaker 02

  Yeah.

• 43:58Anthony Pompliano?

  And everyone is putting the same money in.

• 44:00Speaker 02

  Yeah.

• 44:00Anthony Pompliano?

  Sure. The people who launch it know about it, right? Other people don't.

• 44:06Anthony Pompliano?

  But that does feel fairer, right? Maybe it's not the perfect thing, but it's fair.

• 44:10Speaker 02

  Yeah.

• 44:12Anthony Pompliano?

  It definitely seems like that helps in terms of it not being a security and being able to be used to these other things.

• 44:19Speaker 02

  What's I actually have a different take on this, which is a lot of like the crypto world has optimized

• 44:27Speaker 02

  not only their product roadmap, but also how they run their quote unquote business and how they use a token for this idea of not being a security, right? And I think then it's like this convoluted like thing that like most of the world doesn't understand. Like, you know, I'll give you an example. So like, I always found the Filecoin project interesting. Like, I spent a lot of time trying to understand Filecoin's tokenomics and it's like, gives me a headache. Like, good luck trying to explain like a Trifid person how Filecoin works, right? And then you're like, well, like, why is it so convoluted? You know, like the business model of Filecoin is simple, which is you have a set of data centers that are plugged into a storage network and those data centers can be used for essentially what looks like a decentralized storage network. Money should come in, money should go out, right? And what's probably this convoluted because they're trying to,

• 45:13Speaker 02

  you know, avoid being a security, trying to be a commodity. I get it. But I think the world's kind of heading this other direction, which is at least FIT21, which passed the house, establishes that there's only two types of assets. There's obviously crypto commodities and there's essentially, I think they called it restricted digital asset securities. And everything is probably a restricted digital asset security outside of, you know, maybe a handful of tokens. But it's not a bad thing. It just means that you have a set of reporting requirements as a project. And you have the ability to then decentralize and become a commodity one day, but you don't have to. Because like for certain businesses, like running it as a centralized. Organization makes a lot of sense. Like, imagine if Elon had to decentralize SpaceX. It just makes sense.

• 45:58Anthony Pompliano?

  Or Amazon. The entire point of Amazon is efficiency.

• 46:00Speaker 02

  Yeah.

• 46:00Anthony Pompliano?

  Right? If all of a sudden it was a decentralized Amazon, it wouldn't be effective.

• 46:03Speaker 02

  Yeah, it just wouldn't work. Nobody would use it. The product experience would suck. So, some projects might choose to remain somewhat centralized and be restricted to digitalized security. And obviously, like in this bill, all the exchanges that list these tokens also have to register with both the SEC and CFTC. And projects that list on their platform has to fall within one of those two buckets. So like, an ambiguous weird project that tries to like straddle some gray lines won't get any listings. Market makers won't provide liquidity for it and will not exist, right? So I think where the world is going is sort of this sandbox or commodity world. And so that will then allow folks to really play around with the creativity around how to grow their businesses faster than they normally would.

• 46:49Anthony Pompliano?

  Let's talk about Trump and Biden. They seem to be in a chess match. Maybe it's checkers. I don't know. But there's a little bit of like, Trump makes a move, Biden makes a move. Trump makes a move, Biden makes a move. I think Trump seems to be all in on supporting crypto at this point. I mean, every rally, it seems like he's talking about, you know, "I will protect you against the Biden war against crypto" or whatever. Biden seems to be becoming more sympathetic. The administration seems to be kind of loosening up a little bit. Do they end up in the same place? Is it just like now all politicians are going to be pro Bitcoin and crypto?

• 47:28Anthony Pompliano?

  Or do you still think that we may get kind of, you know, one side of the political aisle being anti-crypto and they cede the point to the other?

• 47:38Speaker 02

  I don't know. But I do think a good outcome would be if this was bipartisan. And I think that's where Congress generally is. That's where the House definitely is. And that's where the Senate seems to be going, right? Like, the version of the FIT 21 bill that's in the Senate is the Lomis Chilla brand bill. That's a bipartisan bill. So if Congress kind of ends up there, then I don't see why the White House should have a very different opinion.

• 48:06Speaker 02

  So I could, you know, the tinfoil hat speculative guesses like this is kind of like this Elizabeth Warren far left type view. To the extent the Biden administration can get away from that, then I could see how this is just a bipartisan thing. And that in the long run is probably a good thing, rather than having to like be like politically in one side of the party. I mean, just like, not to bring this into politics, but someone's shared this Financial Times news article with me recently, which basically shows that young men are moving far and like further and further to the right in their political views and same demographic, but younger women or young women are moving further and further to the left. And I generally notice in my own marriage, like, you know, I'm personally,

• 48:50Speaker 02

  I'm generally center right, and I couldn't continue to hold those views. And my wife is, you know, center left and she and we both are like, kind of unintentionally drifting apart in some of our views. And then it's happening across the country in many ways. And crypto is one of those issues, right? Like, many of us in crypto are single issue voters, and it shouldn't be that way.

• 49:10Anthony Pompliano?

  Why not? I think that's always been the case. I think people are full of shit. When when people walk into the ballot box,

• 49:16Speaker 02

  Yeah.

• 49:17Anthony Pompliano?

  I think for decades, if not centuries, people have voted for their wallet, even though when they walk out of the ballot box, they say something else. Right?

• 49:27Speaker 02

  Yeah.

• 49:27Anthony Pompliano?

  Not everybody.

• 49:28Speaker 02

  Yeah.

• 49:29Anthony Pompliano?

  But a bigger percentage of people than we probably would be comfortable with.

• 49:35Speaker 02

  Yeah.

• 49:36Anthony Pompliano?

  They ultimately are saying, who's best for me and my family's economic security? Who's going to help me make the most money from a economic policy standpoint, a tax standpoint, all this stuff?

• 49:46Speaker 02

  Yeah.

• 49:46Anthony Pompliano?

  And then who is going to allow me to use that money to grow my wealth, my financial security, etc.?

• 49:52Speaker 02

  Yeah.

• 49:53Anthony Pompliano?

  And if you think some of the other issues are tied into that, even though they don't appear to be like crypto is a good example of like crypto is that.

• 50:00Speaker 02

  Yeah.

• 50:00Anthony Pompliano?

  Right. But we just call it crypto. So I don't know. I just think that.

• 50:08Anthony Pompliano?

  Human nature is to be self-absorbed.

• 50:12Speaker 02

  Yeah.

• 50:12Anthony Pompliano?

  Right? And to say, I'm voting not because of who I think is best to run the country.

• 50:16Speaker 02

  Yeah.

• 50:16Anthony Pompliano?

  But who is going to be best for me?

• 50:19Speaker 02

  Yeah.

• 50:21Anthony Pompliano?

  And it's pretty selfless. Like, it's commendable to walk in and say like, hey, actually, I'm going to vote for somebody who's going to do something that's going to hurt me, but it's good for the country.

• 50:27Speaker 02

  Yeah.

• 50:28Anthony Pompliano?

  I just don't think that, you know, we're like joking ourselves.

• 50:30Speaker 02

  But I do think there's several variables in that question of what's good for my family and, and my kids or future kids, that, that question, right? Uh, which is, on the one hand, there's like a very clear financial angle. And then there's like things like social issues and, and, you know, climate and whatever else, right? Everyone's got like all these issues and you have to like make like this priority checklist.

• 50:55Speaker 02

  And, and we ultimately prioritize and say, this is the one issue I care about the most and I'll vote based on that.

• 51:00Anthony Pompliano?

  That's what I'm saying.

• 51:01Speaker 02

  Yeah.

• 51:01Anthony Pompliano?

  I, I think people say that that's what they do.

• 51:03Speaker 02

  Yeah.

• 51:04Anthony Pompliano?

  But, uh, in my experience, uh, what we have seen are the people who tend to check a lot of the boxes on the social side.

• 51:12Speaker 02

  Yeah.

• 51:12Anthony Pompliano?

  Actually, uh, end up hurting, especially the upper, uh, kind of income folks.

• 51:18Speaker 02

  Yeah.

• 51:18Anthony Pompliano?

  Uh, on the economic side.

• 51:19Speaker 02

  Yeah.

• 51:20Anthony Pompliano?

  And so, um,

• 51:23Anthony Pompliano?

  there are people who do it.

• 51:24Speaker 02

  Yeah.

• 51:24Anthony Pompliano?

  But I think it's a smaller percentage than the people who say they do it.

• 51:27Speaker 02

  Yeah.

• 51:27Anthony Pompliano?

  Because what they're ultimately doing is they're voting for someone who is going to hurt them financially.

• 51:32Speaker 02

  Yeah.

• 51:32Anthony Pompliano?

  For some other non-economic reason.

• 51:34Speaker 02

  Yeah.

• 51:34Anthony Pompliano?

  Um, and that essentially would just argue that like market economics don't exist.

• 51:39Speaker 02

  Yeah.

• 51:40Anthony Pompliano?

  Right?

• 51:40Speaker 02

  Well, let me, let me reframe it for a second then. Okay. So let's, let, let's just say you've accumulated a certain amount of like wealth. And at which point you'll say, is there a point where someone says, I'm willing to give up X percentage of my future earnings power if it means that I improve like the odds that I don't. If a nuclear war is a little less, right? Like, I think some people would make that choice.

• 52:05Anthony Pompliano?

  For sure.

• 52:06Speaker 02

  Yeah.

• 52:06Anthony Pompliano?

  It's just as many people, you know, let's say 100 people say they do that.

• 52:10Speaker 02

  Yeah.

• 52:10Anthony Pompliano?

  I think it's 70, right? And like 30% are just, you know, they're, they're morally like grandizing or they're, they're trying to like virtue signal or whatever.

• 52:18Speaker 02

  Yeah.

• 52:18Anthony Pompliano?

  And so what I think is really interesting about the upcoming election is like, I think it was David Sacks. I had a great point. He goes, we had an A B test.

• 52:25Speaker 02

  Yeah.

• 52:25Anthony Pompliano?

  Right? We had like one president, then we had the second one, and now they're both on the ballot.

• 52:29Speaker 02

  Yeah.

• 52:30Anthony Pompliano?

  And I do think that there's a lot of people who are like, well, wait a second here. Either candidate is better for me and my financial situation, regardless of, you know, which candidate and who you are. And it's fascinating to me because if you actually extrapolate it out to crypto, that's what people do on a daily basis. Right? They're allocating their capital based on what they think is best for them financially.

• 52:51Speaker 02

  Yeah.

• 52:52Anthony Pompliano?

  And now you're almost getting this like weaponization where, you know, the Trump token and the Boden token or whatever

• 52:59Speaker 02

  Yeah.

• 53:00Anthony Pompliano?

  have become a quote, quote, prediction market to a degree.

• 53:02Speaker 02

  Yeah.

• 53:03Anthony Pompliano?

  Right? And so again, it's this merging, like as technology usage and penetration goes up, as the friction between all these things goes down.

• 53:14Anthony Pompliano?

  What's more accurate? The individual coins? The polling? Or the prediction markets? And I don't know if we know the answer.

• 53:24Speaker 02

  We don't know the answer. Yeah.

• 53:25Anthony Pompliano?

  But there are now like three different data points suggesting readings on who is going to be the next president.

• 53:32Speaker 02

  Yeah.

• 53:32Anthony Pompliano?

  And we won't know till hindsight, but like you'll be able to look back and somebody should go do this who's smarter than me and say, okay.

• 53:37Speaker 02

  Right.

• 53:38Anthony Pompliano?

  In the two years leading up to it, here's what each one of these metrics said, which one ended up being more accurate?

• 53:43Speaker 02

  Well, they're all three kind of saying the same thing at this point, right?

• 53:45Anthony Pompliano?

  Now.

• 53:46Speaker 02

  Yeah.

• 53:46Anthony Pompliano?

  But, um, for example, polling in 2016

• 53:54Anthony Pompliano?

  did not predict with any degree of accuracy what ended up happening.

• 53:57Speaker 02

  Yeah.

• 53:58Anthony Pompliano?

  2020, I probably don't know enough of the details as to whether it was accurate or not.

• 54:02Speaker 02

  Yeah.

• 54:04Anthony Pompliano?

  The prediction markets, the coins is the first time we're gonna have it, right? Like, as you see this stuff play out, you're like, okay, well, what would it tell us if all three of them say Trump's gonna win and Biden wins?

• 54:16Speaker 02

  Yeah.

• 54:17Anthony Pompliano?

  Right? Like, all three are wrong.

• 54:18Speaker 02

  Yeah.

• 54:19Anthony Pompliano?

  And, you know, what if the odds change between now and November and the coins say that Biden's gonna win and the other two say Trump's gonna win? Like, there's still so much room to go. So I'm just very interested in this idea of, in a digital world, there is now more optionality for an individual, both in terms of data points, right? In this example, but you and I have also talked about, there's now mirrored coins for equities.

• 54:43Speaker 02

  Yeah.

• 54:43Anthony Pompliano?

  So Reddit goes public, there's a Reddit coin.

• 54:47Speaker 02

  Yeah.

• 54:48Anthony Pompliano?

  Again, the coin should not be valuable, right? You don't have cash flow, you don't have assets, you don't have shareholder rights, like all the things that make equity, you know, valuable.

• 54:57Speaker 02

  Yep.

• 54:58Anthony Pompliano?

  The coin went up more.

• 54:58Speaker 02

  Yep.

• 54:59Anthony Pompliano?

  GameStop saw the same thing, right? I'm sure there's a Tesla coin out there somewhere, right? Like, you just go through this and you're like, okay, in a world where historically, value investors have said, what's the downside?

• 55:12Speaker 02

  Yep.

• 55:13Anthony Pompliano?

  If you remove risk from the market because they're always gonna step in and print money and, you know, save the market, they're always going to bail out the banks and, you know, kind of do all this stuff. Is the question now, like, how high can the thing go? Right?

• 55:28Speaker 02

  Yep.

• 55:28Anthony Pompliano?

  That violates every timeless investing principle in the world.

• 55:31Speaker 02

  Yep.

• 55:32Anthony Pompliano?

  But again, we now have choice. And so when you add choice, you go one of two directions. Either choice equals like, no, there's one choice and a bunch of stupid stuff.

• 55:41Speaker 02

  Yeah.

• 55:42Anthony Pompliano?

  Or we actually do end up in a world where there's multiple ways to play, you know, these developments. And I don't have answers, right? I just like, I'm watching this play out and I'm fascinated by the fact that now if I want to bet on Tesla's next earnings call, and I say, I think they're gonna beat on deliveries, I can buy a coin, I can do a prediction market on just deliveries, I can buy the equity. Like, I have multiple options now.

• 56:07Speaker 02

  I think prediction markets are the end state.

• 56:09Anthony Pompliano?

  Okay, explain.

• 56:10Speaker 02

  I think most people want to make these very isolated bets on very specific things.

• 56:15Anthony Pompliano?

  Isolated, meaning I don't want to buy Tesla stock going into the earnings because I think they're going to beat on production. I want to bet specifically just on production.

• 56:25Speaker 02

  Yeah, even simpler. Like last week, for example, if you wanted to bet that Elon's shareholder compensation plan was going to go through, you want to make a bet on that single prediction rather than try and guess what the stock does the next day, right? It has so many different variables. It's just that prediction markets at scale hasn't been necessarily feasible until very recently. Because the biggest problem is like, everyone wants to create a prediction market. Who's going to provide the liquidity for it? But if you can then have this global ledger where liquidity can be provided by like your average Joe, because until, until, you know, recently, until DeFi, liquidity providers were the banks, right? Like the market maker or, you know, liquidity provider for any stock or bond or whatever

• 57:10Speaker 02

  are the big banks. So that market making function has been kind of consolidated to these large institutions. But if you can democratize that, where you can, you and I can take our small little PAs and start providing liquidity, and whatever we want to provide liquidity on, because we can earn fees, because we think there's people that want to trade it, then we can be experts or domain knowledge experts in that one thing and provide liquidity in an intelligent way. So this market making function kind of extends, it becomes this like open source thing. And so that allows it, global prediction market to exist. And I think that's where we could theoretically end up at some point.

• 57:45Anthony Pompliano?

  I do think that the prediction markets are drastically underestimated at the moment. And it is a story as true as time, where you continue to get more accurate outcomes, leads to liquidity, leads to participation, does all this. And so if you're able to say to someone, you don't have to bet on all the variables of the stock price, you can just bet on this one specific data point, specialization, right, becomes much broader. But also too, I do think that a lot of liquidity flows there. And it doesn't have to be cannibalizing, you know, public equities. It can just Be net news.

• 58:20Speaker 02

  Very different. Yeah. Cause, cause you're, it's interesting. Like I, I started my career on a trading desk at UBS. And, you know, there were like eight traders. They all had big balance sheets and the things they provide liquidity on. It was my job to have a fundamental view on it. So, cause, cause when you're providing liquidity for especially in bonds, which is where I was, you might get stuck with the inventory, right? So you need to, you need to know what you're essentially providing liquidity on.

• 58:46Speaker 02

  That little function is not scalable across random prediction markets. See, otherwise you have to grow headcount massively. So banks and institutions cannot do that. But you pomp can be an expert on very specific things like, because you're interested in that topic. And it might be that there are other people in the world that also want to make bets on those things. And so you might be specialized enough with some balance sheet to provide liquidity on something. And you might be able to aggregate liquidity from other people to expand your balance sheet to provide liquidity in that one specific thing. So that's, again, all of this is only possible because of public blockchains. And if someone's like, why do you need to care about things beyond Bitcoin? It's for something like this to exist one day.

• 59:27Anthony Pompliano?

  Talk about fundraising. You've been fundraising for a couple of years now. You've kind of gone, talked to all these different institutions, et cetera. What are some of the lessons that you've learned in those conversations?

• 59:36Speaker 02

  Hmm. It's a great question.

• 59:42Speaker 02

  I think the biggest lesson I've learned is, is don't sell, you know? Cause, cause if you're trying to sell to someone, there's, in their brain, at some point, they're like, hmm, what am I missing here? Right? I think generally I've learned to be authentic and be truthful and be transparent. So with all my meetings, I generally tell folks whether or not they have exposure to crypto. I generally start by telling them that I think there's a good 50% chance none of this amounts to anything. So they could lose a lot of money because that's the truth. And then I also talk about all the potential negatives in the space, which is, I think, when I, cause I have them from the traditional markets. When you compare founders and then just say it.

• 1:00:27Speaker 02

  Outside of the crypto world, the quality and caliber is probably higher than the quality and caliber founders in crypto. And so, so I generally try to give people the objective view and because that's kind of what I do, you know, I'm a, I'm personally a pretty big investor in the space, including in my own strategy. So I try to be as objective as possible as an outsider looking in and I give all the people I meet those facts. And then I try to build a relationship with them over a long time and eventually if they think they want this exposure, then they can come talk to me. That has seemed to generally be the thing that works for me.

• 1:01:01Anthony Pompliano?

  Um, has there been any, any negative surprises in the way people think about the asset class or what they're worried about?

• 1:01:08Speaker 02

  Hmm. Well, I think what I maybe didn't, didn't fully grasp before starting this thing was, was like just how you have cold start problems in all, all networks. You have a very similar problem in this space, um, which is, you know, if you want to get like, let's just say the world of endowments, like university endowments to deploy capital into token strategies, um, they're all kind of looking around and saying, is that guy doing this? Is the other guy doing this? Like they're looking at their competitors saying, which of my competitors are doing this? And if none of them are doing it, there's no like real incentive to move and do something.

• 1:01:49Speaker 02

  But the moment one or two of those guys, you know, deploys capital into the space and does really well as a result of that, then that really triggers like this huge wall of money needing to come in because they can't continue to underperform their competitor in some ways. So just the way you have, I think cold start problems and, you know, social networks, you have a similar ish thing in the fundraising side of things.

• 1:02:14Anthony Pompliano?

  Yeah, that makes sense. Where are we in the cycle of crypto? You know, there's this kind of having bull markets, bear markets. Are we in a bull market? Are bull markets and bear markets going to go away? How do you think about it?

• 1:02:30Speaker 02

  I always wish that these kind of cycles of boom and booms and busts go away, but I don't, I don't think it's gonna go away because you have such a large retail base in the space and, and retail often, often behaves very differently than, than, than institutions do, right? Institutions never wanna like buy the new all time high. They always wanna pick, find value, quote unquote, and value is often like, how much cheaper is it than the last, you know, a couple of years ago, whatever. Retail is like, hey, this thing's going up, like, you know, it's my chance to hit my hundred X and I'll chase. And I think that psychological behavior is what creates these boom and busts in crypto markets. The bust often happens when you oversupply

• 1:03:11Speaker 02

  the market, right? So like, if you look at, you know, the NFT market, for example, it was great when it was just like the board apes and crypto punks and some of these high quality, like, NFT launches. And then we just, every week, you had this new 10,000 PFK PFP project that launched. And at some point, you just saturated the market, like the supply of stuff far exceeded the demand and the market collapsed. And then the demand even went further away because people were like, well, these things aren't going up anymore. I don't need this. Same thing happened in the ICO mania, right? So I think the cycle ends when like, the market gets oversupplied with stuff. Where are we in the cycle? I personally think we're still relatively in the early innings.

• 1:03:52Speaker 02

  You know, again, retail hasn't come back to the same extent it has come back in the previous cycle, right? So the, the retail trading volumes at last cycle highs were multiples of the prior cycle highs. And we haven't hit last cycle highs. You know, just as a proxy, you can look at Coinbase, consumer trading volumes and compare those two and see where we are. And you would think that, you know, like, you would, you would, you would expect this cycle to be far greater than last cycle. Now, I do think you need use cases and something new and exciting for people. And we haven't seen that yet. Like, there hasn't been anything new and exciting. Like, last cycle, we had DeFi and NFTs and this prospect for gaming and play to earn. This time around,

• 1:04:33Speaker 02

  it's sort of been meme coins and social pie stuff, which is interesting, but not as like, big and exciting. I do think stablecoin market cap going from, let's say, 160 billion to a few trillion will then get more people to come in and want to build things for that stablecoin market cap. And there'll be, again, all these beneficiaries around it. And I think that's what's going to drive this new cycle.

• 1:04:57Anthony Pompliano?

  Got it. Where can we send people to find you on the internet or find out more about what you're doing at VanEck?

• 1:05:02Speaker 02

  You can find me at VanEckPK. It's probably the easiest place to look me up.

• 1:05:08Anthony Pompliano?

  On Twitter?

• 1:05:09Speaker 02

  On Twitter, yeah.

• 1:05:10Anthony Pompliano?

  And then anywhere on the VanEck website?

• 1:05:13Speaker 02

  Yeah, I don't know where I am. Yeah, I don't look at the website, really.

• 1:05:18Anthony Pompliano?

  All right. We'll definitely do it again in the future.

• 1:05:20Speaker 02

  Yeah, that's good.