#786 Every Country Will Mine Bitcoin Soon w/ Kevin O'Leary

Kevin O'Leary is a world-class entrepreneur and investor, and is also the host of the popular ABC show "Shark Tank". In this conversation, we discuss Kevin's growing crypto portfolio, regulation necessary for the Crypto space, Institutional Capital, and where he see's the industry going in 2022. ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= Compass Mining is the world's first online marketplace for bitcoin mining hardware and hosting. Compass was founded with the goal of making it easy for everyone to mine bitcoin. Visit compassmining.io to start mining bitcoin today! ======================= Crypto is all about democratization and freedom of choice. But many companies limit their offerings to centralized trading products. The crypto companies leading the pack in terms of innovation are those that extend access to the industry's cutting-edge products and services — bridging CeFi and DeFi. If you're searching for a platform that reflects crypto's promise of a more open and less restrictive financial future, look no further than OKEx. On OKEx now you can easily switch over to the new DeFi mode, connect OKEx's bespoke Web 3.0 wallet via browser extension and start exploring opportunities at the bleeding edge of crypto. From the DeFi Dashboard, you can monitor your portfolio of self-custodied assets across a range of blockchain networks and generate passive income from yield-farming with top DeFi protocols. In the NFT Marketplace, you can participate in exclusive drops and trade nonfungible tokens without secondary market fees. Meanwhile, the GameFi section is your portal to the latest and greatest in play-to-earn and blockchain gaming. Venture to the forefront of crypto innovation and connect with OKEx DeFi today. =======================

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. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Kevin O'Leary is a world-class entrepreneur and investor, and he's also one of the judges on ABC's hit show Shark Tank. In this conversation, we talk about what Kevin's doing in crypto, what he's excited about in 2022, and what it is going to take to unlock more institutional capital coming into this new digital frontier. I really enjoyed this conversation with Kevin, and I hope you do as well. But before we get into this episode, I want to quickly talk about our sponsors. First up is LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet, underscored by 100% uptime

• 0:47Anthony Pompliano?

  track record through volatility spikes. They leverage LMAX Group's liquidity relationships and ultra-low latency technology. LMAX Digital is the market-leading solution for institutional crypto trading and custodial services. If you've never heard of LMAX Digital, it's probably because you're not an institution. They have no retail, only institutions. They feature a central limit-order book streaming spot Bitcoin, Ether, Litecoin, and Bitcoin Cash, all paired with US dollars, Euro, and Yen. LMAX Digital, they're secure, they're liquid, and they're trusted. Learn more at LMAXdigital.com/pomp. Again, LMAXdigital.com/pomp. Next up is Compass Mining. Compass Mining is the world's largest marketplace for mining

• 1:29Anthony Pompliano?

  hardware and hosting. With Compass, everyone can mine Bitcoin. Their team makes it easy to start mining wherever you want, at home or in one of their 23 hosting facilities around the world. Through the Compass Marketplace, retail miners can access mining hardware with similar prices and purchase plans as the world's largest mining companies. Compass miners own their machines, they choose whatever mining pool they want, and they mine directly to their own wallets. Miners who don't want to host their machines can order ASICS directly to their doorstep. Simple and low-cost hosting agreements, coupled with best-in-class customer service, are the reasons why Compass is the simplest and most popular way to mine Bitcoin.

• 2:09Anthony Pompliano?

  Start mining your own Bitcoin today by visiting compassmining.io. Again, compassmining.io. Go check them out and let me know what you think. Last but not least are my friends over at OKX. Crypto is all about democratization and freedom of choice, but many companies limit their offerings to centralized trading products. The crypto companies leading the pack in terms of innovation are those that extend access to the industry's cutting-edge products and services, bridging C-Fi and DeFi. If you're searching for a platform that reflects crypto's promise of a more open and less restrictive financial future, look no further than OKX. On OKX now, you can easily switch over to the new DeFi mode. Connect OKX's bespoke Web3 wallet via browser extension and start exploring opportunities

• 2:53Anthony Pompliano?

  at the bleeding edge of crypto. From the DeFi dashboard, you can monitor your portfolio of self-custodied assets across a range of blockchain networks and generate passive income from yield farming with top DeFi protocols. In the NFT marketplace, you can participate in exclusive drops and trade non-fungible tokens without secondary market fees. Meanwhile, the GameFi section is your portal to the latest and greatest in play-to-earn and blockchain gaming. Venture to the forefront of crypto innovation and connect with OKX DeFi today. Again, go check them out at OKX. That's where you can find OKX DeFi. All right, let's get into this episode. I hope you guys enjoy this one.

• 3:31Speaker 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.

• 3:54Anthony Pompliano?

  Mr. Wonderful Kevin O'Leary, are you there?

• 3:56Speaker 02

  I'm here. Great to be here.

• 3:58Anthony Pompliano?

  Great to see you as well. Are you in Miami?

• 4:00Speaker 02

  I am. I'm in Miami, right on the beach.

• 4:02Anthony Pompliano?

  Nice. Do you have pants on?

• 4:04Speaker 02

  No pants.

• 4:08Anthony Pompliano?

  I just gotta, you know, I just gotta ask around. All right, let's talk about, you had a recent trip to the Middle East and you talked a bunch about Bitcoin and cryptocurrencies, regulation, infrastructure, et cetera. Tell us a little bit about the trip. Why'd you go and kind of what was the conversation like with the Middle Eastern investors?

• 4:25Speaker 02

  Well, the largest pension or sovereign funds in the world are in the Middle East. And I was, I really wanted, you know, this, there's policies that comes out of the region, but then there's also the opportunity to sit down and talk to the leadership there about what their intentions are. In specifically Bitcoin mining, I was interested to see if there was a way to invest together. Because what they're contemplating in some of these countries are sovereign mining operations. And so, what is that going to look like? And so what I learned, and this is, because you were talking about institutional adoption. So let me tell you what I think is going to happen in the next 24, 36 months on this very topic. Once a sovereign fund decides it's going to invest in Bitcoin,

• 5:09Speaker 02

  it's going to want to mine it sustainably and ethically. Because we've got a lot of controversy, started last year, I remember Bitcoin 2021, and the whole Elon Musk thing, we've talked about it a lot, the conversation around ESG, and is mining Bitcoin going to be compliant with the ESG mandate? Specifically, the Larry Fink letter, the largest asset manager on earth, BlackRock. And so, this is what I'm getting out of this conversation, and the way I think I'm going to invest. Because I've always wanted to open up my own mining operations, and I'm going to probably do it in this calendar year. So number one, is it approved by the community it's set up in? Both politically and by the people that live there? What's the plan to give back to that community?

• 5:52Speaker 02

  So let's take a Nordic country, Sweden or Norway or something like that, where a lot of these adoptions are occurring. It's happening in West Texas too, but the whole idea is that you go to that town in West Texas, and you have an agreement with the mayor and the city council. Like, you're compliant with them to start off with. You're going to give back to the grid, whatever it's going to be. You're going to mine from the stack, heat, maybe you do hydroponics, whatever it is. You get them on board. Number two, can you keep the award? When you get awarded a coin, can you keep it on the balance sheet? So I, as an institution, can buy your equity? I don't have to buy the coin. I don't have to go to my committee and say, "I'm buying Bitcoin anymore." I just buy your stock, and now I own the coin.

• 6:36Speaker 02

  As long as you make the promise to me that you're never going to sell it. Because now I know it's being mined ethically, I know it's being mined with the community in mind, I know the political environment there is on board. I'm not breaching any regulations. And now I own the coin. And I get exposure to the price through the equity. I tell you guys, that's what's going to happen this year. You're going to see a ton of capital go into these new projects. Some of them will use old Chinese stacks because they're all exiting the country, all that equipment, and they're going to be set up in jurisdictions just like the way I described it, with the equity being the way the institution owns exposure to Bitcoin pricing. And those are the deals I'm going to invest in.

• 7:16Anthony Pompliano?

  So when you think about that, are there places in the Middle East that you think this will happen? Or is it too hot there? Is the political climate not ready for it? Like, how do you think of the Middle East fitting into that? Because you mentioned the Nordic countries, you mentioned places like West Texas. Is the Middle East potentially a place? They got a lot of oil, they got a lot of power production going on there. Like, how do they think about it?

• 7:35Speaker 02

  Well, they also have nuclear power there, too. They have excessive electricity available. It's about the cooling, you're right about that. There may be a way, and this is being explored by a couple of ventures right now, to build the facilities way underground, underneath the sand, like way down. So the cooling becomes far more efficient. These are really, really large stacks. We're talking about big, you know, close to billion-dollar facilities. I think in this, the way to start thinking about this, and I've come to the conclusion is, different jurisdictions, let's take, if you're an investor like me, you've got to find jurisdictions where they're compliant with the local regulator. Now, the most advanced in my mind right now is Canada.

• 8:19Speaker 02

  Canada was the first to allow you to do an ETF with Bitcoin as the underlying asset. Then they opened it up for Ethereum. Now they have multiple ETFs in that jurisdiction that people from all around the world are investing in, compliant with the regulator. They just licensed the very first market crypto exchange, the very first in Canada. I know that because a company I'm involved in called WonderFi bought it last week for about $160 million. It's the first of its kind. This allows institutions or individuals, right now it's focused on Ethereum and on Bitcoin, but it's going to expand, the mandate will expand.

• 8:59Speaker 02

  And so it allows for people to set up accounts and actually do price discovery on an exchange. So we're very excited about that. So it's got me thinking, where else is this going to happen? What other jurisdictions are going to open this up and licenses are going to be granted? Eastern Europe, Nordic countries, Middle East regions? So I'm on an airplane all the time now. I'm going to meet with regulators saying, "Look, this is what we did in Canada." Can we do this here? And when they say yes, I'll invest there too. I want to be in the exchange business. Why? Because I'm agnostic to price. The more volatility there is, the better it is for me. So if I make eight or 10 or 12 basis points every time you're trading, I'm in a great place.

• 9:40Speaker 02

  It's the picks and shovels of the future of Bitcoin and digital currencies and payment systems. I want to be part of the exchange.

• 9:47Anthony Pompliano?

  All right. Before we talk about the exchange, I have one last question about the mining. If I tweeted and said Kevin O'Leary is considering investing in an underground desert Bitcoin mining facility, would that be like an accurate statement?

• 10:01Speaker 02

  Not yet. Not yet. Not yet, because the technology has not been proven.

• 10:05Anthony Pompliano?

  Got it.

• 10:05Speaker 02

  It's being conceptualized. But the reason you don't see a lot of stacks in Middle Eastern or desert countries is what you pointed out at the beginning, Paul. The heating costs are brutal.

• 10:18Anthony Pompliano?

  Yeah.

• 10:19Speaker 02

  I mean, the cooling costs are insanely, you know, brutal. So that's not, it's not time yet because it hasn't been proven. But each year, the technology advances. If there is a cooling system that makes sense, they're going to discover it. Because most sovereigns want to mine Bitcoin on their own land, where they have control of it, where they can do it ethically and according to the regulators' rules. Most people would want to do that. Now, West Texas and the governor in Texas, as you well know, has embraced crypto, specifically Bitcoin, and there is a ton of capital going to West Texas right now, right down to the town level. And so there's multiple projects there, and I think you're going to see a lot of capital. And there's a big initiative on right now to find an American manufacturer for stacks

• 11:03Speaker 02

  so we don't have to buy anything from China for obvious reasons. China's got itself in a little hot water here and there, as you know, but we don't have that yet. So there's a lot to have happen. I think this will be discussed all through 2022. This is where the, this is where the puck is going.

• 11:18Anthony Pompliano?

  So I've never told you this story before, but I went to Kuwait, I think it was in 2018 maybe. And while I was there, I was at an event, very well put together, and there was both foreigners that were visiting for the event and also Kuwaitis. And one of them said to me, hey, do you want to see a Kuwait Bitcoin mine? And I was like, you got a Bitcoin mine? And he was like, yeah. And so we went to dinner and then afterwards we went to this Bitcoin mine. And it literally was in a warehouse basement. So like, we went to this warehouse, it was kind of, you know, you're like, all right, where are we? And then they brought me down to the basement and they showed it to me. And it wasn't a huge operation, but it was, it was big enough. And I remember asking him, why are you in the basement? He said, well, you know, one, we might not want everyone to know that we're doing this here.

• 12:00Anthony Pompliano?

  But also two is there's much more kind of cooling capabilities down here. So not quite underground in the desert, you know, type thing. And not quite the skill you're talking about. But, you know, years ago, there was people who kind of, as an individual or a small business, were trying to figure this out. So it's cool to kind of see that it's evolved to the point where now you're talking about large billion dollar facilities, still trying to conceptualize this and put it into effect. Now, tell me about the Wondery deal. So just so everyone understands this, my understanding is that the Canadian regulators went ahead and they said, okay, we are going to actually approve a regulated exchange to trade in Canada, in the Canadian markets. And Wondery and you decided that you were going to be very opportunistic here.

• 12:42Anthony Pompliano?

  And you went ahead and bought that license so that now you own the only regulate, regulatorily approved, publicly traded Canadian crypto exchange? Is that fair?

• 12:53Speaker 02

  It's not the only one. There's two licenses in Canada, but this, the BitBy one, the history of the BitBy deal is Wondery itself had already made a bet on BitBy, became an investor in a private round. And so they, they already were exposed to it. But it was before the license was granted. There was a lot of speculation that they would be granted that license. Wasn't done yet, but you're taking a chance and you're betting on it. Great management team, fantastic guys running it, really knew what they were doing. And it amassed 375,000 accounts because they were just a dealer broker at that time, like any other. But the exchange, the market exchange license was unique and new and the first of its kind. And so we already knew the management.

• 13:34Speaker 02

  I was really attracted to the model, the whole idea of having an exchange. Because if you look around the world, NASDAQ, New York Stock Exchange. The London Stock Exchange, the Zurich Borg, all of these places are where you discover price. And as a result, you are the infrastructure of the liquidity. And so I was really attracted to that idea that they would somehow, you know, get together and they did. And so as an investor, I'm just thrilled. I'm very happy about it. And now, as you remember, the WonderFi mandate was to work in the decentralized space. But what's going on here with BitBy is a centralized exchange with the accounts, so they've combined both. And there's a narrative coming into the institutional investor. Think this through, Pomp.

• 14:19Speaker 02

  When I talk to institutional investors about investing in crypto infrastructure, anywhere. When you acquire a customer, I don't care if you're Coinbase, if you're WonderFi, if you're BitBy, you've spent money to acquire that customer. And if you don't have a full suite of services, both centralized and decentralized, there's a high probability that if they want to go put their NFT on a decentralized wallet, they'll drift out of your sphere and go do that on their own because you didn't provide it. So these new investments, these new companies that are emerging are trying to figure out, okay, if I acquire a customer, how broad a service base can I create? Can I be centralized, decentralized? Can I have brokerage accounts? Can I service them in NFTs? Can I do, you know, stable coins? Can I stake those stable coins for them?

• 15:05Speaker 02

  I'm of the opinion now as an investor, I want managers that are going to bring a really broad sweep of service and products to keep that customer in their ecosphere. This is no different than what Apple thought through decades ago. And I think there's going to be some companies, and I think WonderFi could be one of them, that emerge with a really large platter of services and not just in one geography. I've talked to the management there and told them, get on a plane, do what I do. Go meet other regulators, go find out where you can take this model to other jurisdictions. And I think that's going to happen because Canada's so advanced, a lot of the rules that they've set up there have worked. And I think they're a great model for other countries.

• 15:46Speaker 02

  And so I think Eastern European countries and Nordic countries are potentially great places to set up shop, buy exchange licenses, bring the technology over that WonderFi has. That's my investment thesis and I've in fact increased my position there since we last talked. I've invested more.

• 16:03Anthony Pompliano?

  All right. And so when you think about how this is all playing out, the last time we talked to you, it said that you were spending more time, I think in partnership with Circle, if I remember correctly, with the stablecoin yields. And you were also looking at some of the decentralized yields that you could generate. Walk us through kind of the yield generation, how you're looking at that in your portfolio today. Are you still doing both centralized and decentralized? What does that look like?

• 16:24Speaker 02

  Right now, I'm primarily centralized on my staking and lending. And so I'm using two platforms, and soon will be a third with BitBy. FTX is my largest platform. Obviously, I'm an investor at FTX and a paid spokesperson, I have to disclose that. I do a lot of staking on there. Pretty well any asset, I'm constantly putting it out and generating yield there. Specifically to USDC, though, I have worked with Circle. Circle just updated their platform with a new treasury feature. The biggest problem we've got, I got to tell you, Pomp, this is still a nightmare for institutions, and it's a nightmare for me. Let's just take staking for a second, all right? So I'm regulated. I'm a regulated entity. I have so many investments

• 17:08Speaker 02

  in other standardized financial services companies and indexing and everything else. So I'm regulated. I have an auditor, an external auditor. They mark to market my internal compliance marks to market my position every day and every stock and bond I have. It's checked by compliance, and then it goes out to the statement that the auditor signs, and then we file our compliance reports to whichever jurisdiction we're in. So think about staking. What a nightmare. How do you mark to market that at 4:05? There's no such thing as a... The market doesn't stop at 4:00 in the afternoon in crypto world. It's just

• 17:47Speaker 02

  24/7. So getting this thing approved just for the staking, because I'm writing contracts all the time, 30, 60, 90 days, whatever it is.

• 17:59Speaker 02

  Just getting the compliance guys' head around what we're doing took six months. I've told you this before. And what we needed was an audit trail. And Circle just added that with the treasury tab. You can go back and see every single transaction on the centralized platform. When it happened, when it closed, what interest you made. So now, the compliance guys are saying, "Oh, this looks like something I'm used to. I get it. I'm more comfortable now." Because they were treating USDC as an equity, as a stock. Because we haven't had the regulator approve. I mean, this is another problem, right? What is USDC? It's not an equity to me. It's a form, it's a payment system. It's software. But we don't have that ruling yet.

• 18:42Speaker 02

  And that's what I hope the regulator does this year, is rule on stablecoin.

• 18:46Anthony Pompliano?

  What do you think the ideal kind of framework or sandbox for the stablecoins are? Do they basically just say, "This is a currency and treat it like a currency"? Do you think it's some sort of regulated asset? How do you think of like the ideal scenario?

• 18:58Speaker 02

  I would like them to rule it. This is what I personally would like. This would solve my problem, and I think a lot of other institutions would agree with this. Let's take Circle. Turn it into a bank, FDIC. Turn it into a bank. And let my compliance people say, "Oh, that's a currency. It's a currency, and it's regulated currency, and it's backed up by X amount of assets, just like every other bank has to comply with the amount of leverage they put on their balance sheet." And then, all of a sudden, I wouldn't be bound by the fact that I have to treat it like an equity. So I can't have more than 5% of it in a mandate. The typical mandate's 20% in any one sector, 5% in any one name.

• 19:42Speaker 02

  Very few institutions, you mentioned earlier, any of those funds that they're managing. You're not going to find a whole lot of the funds that are holding a position up to 20% in one name. They're kind of maxed out in the 5%, 6% range. But when you're dealing with cash, or a currency, a Swiss franc, or euro, or British pound, there's no limits. You're basically, you can have 30% in cash, 40% in cash, 50% in cash. If we could get stable coins regulated that way, we could now keep our liquidity. In my case, I'd like it to be USDC so that I could be constantly rolling it. Because think of the problem I've got. I've got cash. Inflation, 7%. I'm getting 20 basis points on US dollars.

• 20:26Speaker 02

  I'm getting taxed at 6.8% right now. There's nothing I can do about it. I'm losing 6.8% of value. The way to stop that is stake out my USDC at 6% and 7%. At least I'm keeping intact with inflation. But we need the ruling. We've got to have that done. For my compliance, people let me do that. Because I can't have more than 5% USDC right now. They're treating it like a stock.

• 20:50Anthony Pompliano?

  Yeah, it's incredible to think about. How is the macroeconomy playing into all of this? In terms of, you mentioned inflation. Obviously, there's a lot of talk right now about the Fed interest rates and kind of tapering. What's your general thought process on what happens there with the Fed kind of decisions in 2022?

• 21:07Speaker 02

  I think Bitcoin and gold are the two assets that institutions are eyeing for a hedge against inflation. And so many of the institutions cannot hold Bitcoin, so they're exploring owning the equity of the miners, and they run into the ESG problem. So, and you know, one of the discussions going on these days about the ESG. If you're buying carbon credits to offset, which some are doing, some of the big public miners, who's auditing that book? In other words, is there somebody that can show to the ESG committee of an institution that there really is a true offset? The way to avoid that is what we talked about earlier. Simply get a miner that is not, that has zero emissions from the beginning and that is mining and keeping the coin on their sheet, and you just own the stock. I think that's where we're going.

• 21:51Speaker 02

  But, you know, inflation's scary because it's, we did something in this country over the last 26 months that's never been done before. We basically printed $3 trillion. I don't care what you want to call the program, you know, the relief program or the PPP or whatever it was. We got out the machine and we printed $3 trillion. Never been done in any country ever before. Never been done here ever before. And then we thought to ourselves, so we don't have to worry about inflation? Are you kidding? Like, look what happened. It spiked up to 7% in a matter of weeks. Of course, it's going to do that. And now we have to live with that. And the idea of another $3 trillion is suicide. I mean, that's ludicrous. We can't do that. We can't. The Build Back Better is

• 22:35Speaker 02

  dead. I mean, you can't put that out in the market now. It would destroy the people it's trying to help. You'd have, right now, we have on protein and meat, 24% inflation. I mean, it's crazy. And so that's gasoline, $5 a gallon in San Diego. Like, that's, people are getting pissed. That's what's happening. And they're going to take it out on the polls.

• 22:57Anthony Pompliano?

  Yeah. One of the things that I don't have an answer yet to, but seems to be happening, is there is a political appetite, obviously, for some tapering. Let's get this inflation down. Let's do some things to maybe have people forget how bad the economic situation is going into election season. But at the same time, inflation is still 7%. Gasoline's up 50%. Food's up. All these different things. Even food at home or out of the home is up 6% each. Like, this is a really dire situation, according to the official numbers. We're not even talking about the unofficial numbers. When you think of that, is there a world where regardless of what the political will is, that the central banks could be talking

• 23:41Anthony Pompliano?

  about tapering, could be talking about raising rates, and actually back off of that, and their actions aren't as severe as the language? Or do you expect them to follow through with what they're actually saying in terms of kind of taking a tough stance against some of this stuff?

• 23:53Speaker 02

  That's a great question. That's why we have volatility back in the equity markets, because there are some pundits out there talking about six hikes in a row, and some saying two. So somewhere between those numbers is reality. But you've also got this new pandemic, whatever you want to call this. This is kind of a different one than we had 12 months ago. But wow, there's a ton of cases. I mean, it's really sweeping through. Here in Florida, we have extraordinary numbers. They've shut down the province of Ontario and Quebec, virtually shut it down because they've got such a raging pandemic going through there. Switzerland In the same boat, I'm just talking with my dad over there. I wanted to go and visit him. They've got over 30,000 cases a day. That's close to what it was at the height of the original pandemic.

• 24:37Speaker 02

  So there's issues that I think, you know, the Fed is looking at saying, I gotta balance this against what's really going on and trying to figure out how fast does this latest round of pandemic burn itself out? I would like to think by July of this year, we're through this thing. And the economy is going to come roaring back. What I find so interesting, and this is probably a great way to look at it. In Q4, when analysts started printing, and Q4 was almost 6% GDP growth, extraordinary, extraordinary GDP growth. But they pulled back assumptions for Q1 down to just over three. They basically cut it in half.

• 25:17Speaker 02

  I think this quarter that we're in right now, every index I've got, including private companies I've invested in, so I see their tear sheets on sales. The economy is on fire. It's just booming. I bet you we're going to print north of 5% in this quarter. It's going to be much better than people thought. This is my own take on it, and it's going to really buoy the equity markets back up because when you've got, we've talked of 7% inflation, you do not want to be in fixed income. You want to be in something that at least keeps pace with inflation. That's equity. So I think, I think it's going to be a pretty good quarter, but it also may mean that the Fed is hiking. But why are they hiking? They're hiking because we've got such a strong economy. And that generally does not offset the pace forward on constructive ownership of equities.

• 26:01Speaker 02

  The first few rate hikes generally do not destroy a bull market, and we are in a bull market.

• 26:05Anthony Pompliano?

  Yeah, I agree. My brothers have questions here in a second, but the other question I want to ask you is, I saw, I see you go on CNBC a few times and getting some verbal tussles. You know, back in the day, you and I used to have some verbal tussles, which I just want to remind people of. But recently, you've been asked about the vaccine mandates and kind of choice versus mandates, et cetera. Like, what's your general take now that we're in kind of, as you said, like a new version of this whole thing? And like, how do you think business owners specifically should be thinking about this? Obviously with Shark Tank, there's a lot of small business owners that Watch and they like the show etcetera. When you talk to those business owners, like, how are they balancing the health stuff versus running their businesses, supply chain, like, just a very complex environment right now. So like, how do you think about that?

• 26:50Anthony Pompliano?

  How do you talk to those companies?

• 26:52Speaker 02

  So I have been talking to those companies because I've wanted to get some tonality of their policy and start applying it to ours in the case where we're a controlled shareholder. I want to respect people's rights to do what they wish with their own personal health. At the same time, I want to respect the employees that work together. And so the way I think it should shake out on private business, you know, this just got tested in the Supreme Court and got rejected. The government shouldn't be able to do a mandate to a private company and tell them what to do. The private company should be able to decide their own policy. And indeed, that's what's happening. There are many companies that have made the decision at the board level

• 27:31Speaker 02

  that if you're going to work together in an office, in an airplane, in a factory, in a manufacturing facility, whatever, you have to be vaccinated. Now, you don't have to be vaccinated, but you're not going to have a job. So you're going to have to make that decision individually. And some people are going to make the decision, they're not going to get vaxxed, and they're going to go find it, try and find a job where they can work remotely in perpetuity, or they, you know, a company that doesn't have a policy like that. But if you go down the S and P 500, slowly but surely, since we last talked, Pump, you've seen many large entities put in place, including Citibank recently, that edict, giving people time to get their vaccines, paying for their vaccines, giving them time off to go get their vaccines,

• 28:12Speaker 02

  supporting them any way they can. But if they don't choose to get vaccinated, they lose their job. And I'm okay with that. I'm okay with it. It still gives you the personal right to do what you wish. But it shows respect to your fellow worker that you don't want to infect them. Because really, we're all in this thing together. It's been said countless times, and we are. But, you know, if you want, if you want to get sick right now, you just go in a room with 20 people. Somebody's going to have COVID, and you're going to get sick. And if you're vaccinated, you're going to survive. If you're not, the outcome's unknown.

• 28:44Anthony Pompliano?

  Joe, John, what questions you guys got? I'm going to pull us a little bit closer back to the middle of discussing digital assets. Kevin, they don't like that I like talking about, you know, important topics. They like to talk about money. I'm just saying, he's here for a reason. We're gonna let him, uh, we're gonna bring him right back in. Go ahead. Um, let's talk about some of the investments you're making. I know that you've been public about kind of the, the specific assets that you're investing in and it's pretty diversified portfolio. You've got Bitcoin, Ethereum, Solana, Polygon and others. I want to talk about just quickly, if you can run through your general framework of how you determine where you're going to allocate capital.

• 29:18Speaker 02

  So I have come to the conclusion on all, all things digital, the best way to look at it, and I've said this several times, Bitcoin is not a coin, it's software. Ethereum is not a blockchain, it's software. It's all software. H-bar, software. And, and so what I do is I say to myself, I've seen this movie before. I was an investor in software, you know, engineers 22 years ago at the learning company when we made educational software. So the way I used to do it then is the way I'm doing it now. I'm a very lucky guy. I can make a phone call and it always gets returned. That's the whole Shark Tank thing and I get all that.

• 29:57Speaker 02

  But if I want to invest in Polygon, I want to meet the engineering team, which I did in Dubai. I called them up, met them, met the team. Heard their vision of what they're doing, looked at the economic reality of the outcome, the potential of it. So first is team. I want to meet the team. If I, if I check the box on team, smart guys, good engineers, good strategy, good group, I'm interested. Here's the test, the second test. What economic value are they creating? In the case of Polygon, let's stay on that Polygon for a second. Aggregating transactions to reduce gas fees on ETH is a smart idea.

• 30:35Speaker 02

  There's a reason you would do that because you have an economic reason to pursue that. You save money. Transaction fees are less. So I think the potential of that is large. H-bar, okay? Great team, good engineers. What's the economic premise that would keep that growing? Well, Boeing wants a quasi-centralized decentralized platform. They want the best of both worlds.

• 31:01Speaker 02

  Bar can deliver that. Check the box there. Buy into that one too. Look what's going on with, you know, Solana. I mean, they're trying to solve problems a different way too. Speed everything up. Check the box. Who's working on that? Sam Bankman-Fried and his team. Why wouldn't you bet that horse? So it's all about getting positions in all of these, you know, software platforms. That's what they are. They're software platforms. So I say to institutions, you criticize me for investing in Bitcoin. You own a big position in Microsoft. You own a 5% weighting in Yahoo. What is that? That's software. Why don't you do the same thing in Bitcoin? Why don't you do the same thing in Ethereum? Why aren't you in Hbar? Why aren't you Polygon? Why aren't you in Serum? Why aren't you in Helium? Like, it's all software.

• 31:44Speaker 02

  And so with that attitude on, it's hard to say I'll only invest in publicly traded software companies. One day, these, to me, and I really believe this, one day, crypto and all these software platforms are going to be the 12th sector of the S and P. And I'm just taking the bet now that we're on our way there and I'm taking and staking my bets now. Broad portfolio, you know, no one, Ethereum is my biggest position right now. Bitcoin's had a bit of a correction, I get it. But there's been volatility, but now to offset that volatility, I own an exchange. So I want to own more exchanges. I look at it, it's all software.

• 32:25Anthony Pompliano?

  John.

• 32:26Speaker 03

  Kevin, yeah, thanks for coming on. You talk about this industry being the 12th sector of the S and P. And recently Jerome Powell said that their report on crypto and CBDCs are coming, is coming out soon. What are your thoughts on the impact that that report can have? And what do you think that report will contain?

• 32:42Speaker 02

  I'm encouraged by that report because it shows that they're inching forward and they're trying to do it right. I, my opinion about the regulator is they're, they understand the tremendous potential of this technology, the potential of, you know, streamlined payment systems, the potential of productivity that blockchain has and smart contracts and all the use, the case uses for it, they get it. But at the same time, they're well aware that when they rule, it will be the global standard. The Chinese aren't going to do this. No one's going to follow them. They're going to follow the SEC. They're going to follow the US regulator. So they want to get it right.

• 33:21Speaker 02

  The first place I would like them to get it right would be on the baseline, stablecoin as a payment system. I would very, very much like to be able to transact globally. Pick a coin, my preference is USDC, but pick one. Regulate it and let me, as an investor, along with hundreds of millions of other investors, use it as a form of payment and stability. It would be fantastic if it was backed by the US dollar. They know that. They know that. It would just be so much more efficient and so, you know, so less expensive.

• 34:01Speaker 02

  If I could just transact, maintain a centralized, decentralized wallet, and just be able to... Imagine if I could buy a Swiss stock with a stablecoin, instead of having to go US dollar into Swiss franc, buy the security, then back into Swiss franc, back in the US dollar. You know how screwed I get doing that? How much friction there is and how much I lose? It's insane. Same with Euro stocks, same with British pounds, same with Canadian dollars. I mean, I invest in all these jurisdictions and I have to deal with that. And so it's sort of, that's where I think we want to go first. Once they rule on that, everybody will say, okay, we're moving in that direction. It'll be very constructive for the asset allocation you talked about at the beginning of the hour

• 34:45Speaker 02

  on institutional follow-through into crypto. There's no question, you're right. There's a lot of demand. They just need the regulator on board.

• 34:54Anthony Pompliano?

  Kevin, what's interesting about that idea is basically the US dollar, if it does get kind of the blessing, right? I think a lot about like the regulators are essentially the pope at this point, right? They're just going to give the blessing to the stablecoins, especially things like USDC, et cetera. When that happens, there's not a lot of reason for people to go back into the antiquated technologies of the same currency. So we used to have physical dollars. Now we have, let's call it, an electronic dollar, which is... In a centralized database with kind of long settlement times to eventually you just move to the digital version. And so monetary policy doesn't change, just a new technology upgrade. If that was to happen, do you think that the other currencies around the world would suffer?

• 35:33Anthony Pompliano?

  And what I mean by that is if you have US dollars, rather than be forced to go into Swiss francs before you go and buy a stock, now you're just going to go straight from USDC into the stock. Do some of these weaker currencies, and maybe not in developed nations, especially in like developing countries, they start to suffer at the hands of the more dominant fiat currencies? Or how do you think about that?

• 35:54Speaker 02

  Yeah, the way I look at it is there is going to be four or five currencies that will be digitized. So there will be a digital version of the Swiss franc, there will be a digital version of the euro, there will be a digital version of the British pound, there'll be a digital version of the Canadian dollar, there'll be a digital version of the US dollar, it may be a stablecoin in that case. But the reason I think that happens is you allow the economies to compete with each other on productivity and interest rates. So that if I'm going to go buy something in Switzerland, there'll be a spot exchange price from my USDC or whatever the stablecoin is into the stable version of the Swiss franc. And I may elect to keep a portfolio, as I do today, of multiple currencies.

• 36:36Speaker 02

  Because basically, I want to own Swiss francs, that country is very, very efficient. It's a very good currency, they don't have a lot of debt. So how do I own the digital version of that? Because right now, if you want to own native Swiss francs, you practically can't do it. Because if you want to open an account in Switzerland as an American citizen, you can't, you can't do it. They won't open it for you. I think all of this political border stuff goes away with digitization of the currency. So I'm very optimistic for that. Now, the reason you'd only have four or five of them, Chinese yuan, yeah, that's going to be digital at some point. Would I own a Chinese yuan? Probably not if the government's watching, you know, my wallet address.

• 37:21Speaker 02

  And it'll be an unfavored currency for that reason. But I'd happily own Swiss francs, happily own the digital American dollar. It's going to play itself out, but you said, you're saying, you know, If it happens, 100% it's going to happen, it's just when. The efficiency, if we just digitize our dollar, or we've got a stable dollar, like a bank, if Circle became a bank, I don't need anything else. I'll just own that and I'll piece it off digitally whenever I need to buy some other kind of asset. And I'll be staking it at whatever the current rate is. I'll be rolling my contracts. And just like in the old days, when you could make 5%, 6% interest, which we don't get anymore.

• 38:05Speaker 02

  And so I think there's a really big use case and why there's so much pressure on the regulator to rule on this thing. And you guys are dead right. The efficiency brought forward is just insane. It's so powerful, an economic reason to pursue this.

• 38:19Anthony Pompliano?

  Agreed. Last question, then we'll let you get back to Miami Beach, you know, get a little tan going because it's 70 something degrees here for anyone who's stuck in New York at 12 degree weather. Is, when you think about your portfolio, I think previously you were kind of 2%, 3%, 4%. You had aspirations, but not quite at, I think it was like 8%, 9%, somewhere in that range is what you were kind of targeting. And eventually you said that you could see going up to like 20% in a single sector. But that would take some time to get there. Where are you today and how have your thoughts around kind of portfolio allocation percentages? How has that changed since the last time we talked?

• 38:58Speaker 02

  Yeah. So at year end, last year, we thought we'd be at 7. We were at 10.7% in the operating company portfolio. And today, just this morning, I got off with our compliance guys. Because of our recent investments, additional investments in some of the equities that we bought, I increased my position in hold, Immuneable Holdings, the Jordan Freed company that owns nft.com. I bought more of that. And I also bought a lot more of, on the deal of, I wonder if I did, buying blockchain or buy a bit buy.

• 39:39Speaker 02

  We're now, today, at 16.5%. And so we're on our way to 20. And it happened really, really fast.

• 39:53Speaker 02

  And I'm comfortable with it. It's more volatile than our traditional book because when you look at what else we own, it's, you know, commercial real estate, it's large cap, S and P companies, dividend payers, a lot of them. This stuff is volatile, but the underlying potential and the growth of it, and I know that a lot of institutions are going through the angst I'm having. I can't find better opportunities than these companies. Like, they are really, this is like investing in the earliest days of the internet, the earliest days, because we're in the first inning of this stuff. And so you have to find your opportunities where they are. And, you know, probably by the end of this quarter, I'm

• 40:37Speaker 02

  going to be at 20%. That's what's happening here.

• 40:40Anthony Pompliano?

  So I think I've said this to you before on the show, but if not, in 2018, you forbid me, it was garbage, the whole nine yards.

• 40:50Speaker 02

  I knew before the day was over, you're going to bring that up again.

• 40:54Anthony Pompliano?

  Hold on, hold on. This is a compliment, though. But from there to essentially, let's call it three years later or less. So within three years, from that perspective, which actually I will admit was a fair perspective for most people to have at the time because they had just watched Bitcoin go from 20,000 fall to $3,000, etc. To now have 16% of your portfolio in the industry and not only have what I'll call like true skin in the game and in a growing percentage, but to be able to talk about it with such detailed nuance, the understanding of the regulatory side, the technology, etc. I got to say kudos, man. I'm very impressed. I think that you not only understand what's happening here,

• 41:36Anthony Pompliano?

  but you're kind of not sitting back, letting it, you know, like pass by you. You're jumping into it. And I think there's a lot of people who you would consider your peers that they may say, okay, yeah, he's probably not wrong, but like, let's figure out what to do. Let's go read some white papers, whatever. And they're going to take another two years before they jump in and they're just going to miss a huge piece of this. So it's not only the... The willingness to change your mind and all that, but it's also the courage and conviction to kind of act in a way that 16%, like that's nothing to sneeze your nose at, especially because you have these like weird rules, like no more than 20% in a single sector, no more than 5% in a single stock. It's, you know, it's like, almost like I know all your talking points on that stuff.

• 42:17Speaker 02

  Yeah, no, you're right. But that is the way the mandates work out there globally and sovereign and everything else. You know, it's sort of, one of the challenges I've got is I have to include my holdings and my contracts on USDC as basically an equity, as I said earlier, which to me is frustrating because I would, I would, you know, I can't get past 20%, but it should be treated like what it is. It's a, it's a currency where there are no rules like that, but we're not there yet and it's, it's a push. I will say one thing in closing, watch what happens this year in the amount of capital that comes into that new mining model. That, we're going to solve this ESG

• 42:58Speaker 02

  problem in 2022. You're going to see a lot of institutional capital come into this idea of mining within a community, supporting a community, doing an ESG compliant, ethically compliant, all that stuff. And they'll own the equity, just like they own any other equity, but they'll be exposed to the vol of Bitcoin. That's how they're going to do it.

• 43:19Anthony Pompliano?

  Yeah, I think that, I think that people are underestimating how violently institutional capital moves when it moves. We saw this with Bitcoin in 2020 into 2021. There was really a lot of the price was driven by the arbitrage for the grayscale Bitcoin trust. I mean, there was just massive capital inflows there. And because that capital couldn't be redeemed, there ended up being this huge price increase. At one point, I think grayscale was buying like 150% of all Bitcoin being mined every day. Right? So it was just, it was just sucking liquidity out of the market. And that was just institutional. Capital and it frankly wasn't the big boys. It was hedge funds and family offices,

• 43:59Anthony Pompliano?

  etc. I do think that once the really, really large firms, whether it's the sovereign wealth, the large trillion dollar asset managers, etc. When they start to allocate, you know, I mean, if you really think about it right now, if a trillion dollar asset manager said, we're going to go put 100% allocation of Bitcoin, they could buy from a price concept, all the Bitcoin that is liquid traded on the market. Now, of course, they can't actually get a someone's going to sell it to them, but like they have enough money to buy the entire market cap. And so I think people just they don't understand how much money these people have and how quickly.

• 44:31Speaker 02

  I agree with your analysis of what happened there. That was not healthy for the market. I prefer more transparency, more liquidity. And I think we're going to get it through, you know, massive amounts of capital going into the equity of miners. That's the way it's going to first manifest itself. And that will have much more liquidity, much more transparency, much more disclosure, and it'll be compliant. It's in it. I think it's a trade of 2022. I think you're going to see a bunch of deals announced, a lot of them in West Texas. I'm aware of a lot of these deals and certainly looking at them and I'm planning on investing in some of them. So I can make claim to owning direct ESG compliant coin. And that's what every other institution wants to do. Anyways, listen, I've really enjoyed it. Another great session. Let's do it again soon.

• 45:12Anthony Pompliano?

  All right. I appreciate you very much. Where do you want us to send people?

• 45:16Speaker 02

  You know, follow me on social. It's Kevin O'Leary TV on any platform. I do. I talk a lot about our projects on Instagram, Twitter, LinkedIn, you know, Facebook. It's a communication with, you know, my followers that and I love to hear their opinions about this stuff. People are getting very interested in this asset class at every age group. I mean, it's the future. It's the future of our economy. That's how you started this whole show. You're right. That's what it is.

• 45:44Anthony Pompliano?

  It's true. The official channel of Kevin O'Leary dropping cold, hard truths. That's amazing. All right. Thank you so much. I appreciate it. We'll do it again soon.

• 45:54Speaker 02

  Take care. Bye bye.