Hunter Horsley, CEO of Bitwise Asset Management: Why Crypto Should be on Every Financial Advisors Radar

Hunter Horsley is the Founder and CEO of Bitwise Asset Management. In this conversation, Hunter and Anthony Pompliano discuss his time working at Facebook and Instagram, layout the case for Financial Advisors to get exposure to crypto, address the common detractions, alien invasions, and Mars colonization. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. CRYPTO. COM-----Crypto.com is a pioneering payment and cryptocurrency platform that seeks to accelerate the world's transition to cryptocurrency. With the vision of "cryptocurrency in every wallet", the Crypto.com App offers a full range of financial products with competitive pricing, well designed UX and high security. It is the best place to buy, sell and pay with crypto. COINMINE-----The Coinmine One is like an Xbox that turns your electricity into Bitcoin. You just plug it in, connect to wifi, and tap on the crypto you want. It’s so easy anyone can do it. Everything is controlled from the Coinmine mobile app and the Coinmine keeps getting better with over the air updates that add new coins, features and services to your Coinmine. Visit coinmine.com/pomp to get a Coinmine and earn crypto for powering a new world. ETORO-----This episode of Off the Chain is sponsored by eToro, the smartest crypto trading platform, and one of the largest in the world. Join 11 million other traders and create an account at etoro.com and build your crypto portfolio the smart way.

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

• 0:00Anthony Pompliano?

  Whoa, before we get started, I want to go over the four sponsors for this episode who make all this possible. They're fantastic, so go show them some love. The first is the best URL in the industry, crypto.com. They're a crypto platform with one goal: driving mass adoption. That's why we're all here, right? To get every human on earth a digital wallet and to get them using digital currencies. Crypto.com is helping people do that through buying, earning, lending, and a new card payment. Everything you could want is at crypto.com. They've been longtime supporters of Off the Chain and recently announced a new exchange, so go help them out, download their app from the App Store, or visit crypto.com and tell them POM sent you. There's nothing better in the world than a company helping to drive global adoption of this new technology.

• 0:44Anthony Pompliano?

  Another part of global adoption is making sure that we secure the various blockchains with computing power. Coinmine has built the best consumer experience in mining, hands down, no competition. If you want to help secure the blockchain and get started in mining, you can go to coinmine.com/pom, order a Coinmine, it'll arrive at your door, and you simply take it out of the box, plug it in, and connect to your Wi-Fi. You'll be mining your favorite crypto in five minutes or less. It is honestly magical. I have one running right now here in the office, and it's super quiet, it's got no heat, and every person that comes in the office asks, "What is that?" Every single person asks. It's a Coinmine. The best part to me is that the Coinmine comes with a mobile app that's super slick, and the company continues to push over-the-air updates to the device that add functionality,

• 1:27Anthony Pompliano?

  add tokens that can be mined, or increase the efficiency of the device. Similar to how Tesla does car software updates over the air, Coinmine's sending these passively to thousands of Coinmines around the world on a periodic basis. Pretty damn cool. When Farbood and the team pitched me on the idea of an Xbox or PlayStation-like box that could mine cryptocurrency in your home, I was immediately sold. I invested in the business, have a device personally, and keep telling people to go to coinmine.com/pom so they can save a lot of time if they want to get started mining today. And Coinmine has a partnership with our third sponsor for this episode, BlockFi. BlockFi is one of my favorite companies in crypto because they allow users to deposit their assets in a deposit account and immediately start earning interest. Think about it: if you keep your digital assets on an exchange...

• 2:10Anthony Pompliano?

  Or in cold storage, you aren't benefiting from any yield on the asset. With BlockFi, they allow you to deposit crypto and then get paid interest on a monthly basis in crypto. Deposit Bitcoin and want to get your interest payment in ETH? You can do it. Deposit Bitcoin and want to get your interest payment in Bitcoin? You can do it. The rates at BlockFi are currently some of the best in the industry. You can earn 6% interest on Bitcoin and you can earn up to 8.6% APY on GUSD deposits. I'm an investor in the company and think BlockFi is building really important and compelling infrastructure. So go check them out at blockfi.com/pomp. Again, that's blockfi.com/pomp. And that brings us to the last advertiser of the episode, eToro. These guys have absolutely crushed it over the years.

• 2:53Anthony Pompliano?

  Their founder, Yoni, was one of the original Bitcoin OGs and has been ahead of almost every trend in crypto. He built eToro to help people buy, sell, and trade cryptocurrencies. But he added a few twists: social trading, copy trading, and virtual trading accounts. Social trading is a feature where every asset available on the platform has its own separate social feed where people talk about the asset, share trading ideas and analysis, and even include various charts or graphs. Virtual trading accounts is targeted at beginners. If you're just starting out and want to try trading with play money, eToro will give you a virtual account with $100,000 in it to test, learn, and get comfortable. And so, then that brings us to copy trading, which is by far the coolest feature. This allows you, as a user, to select any other user's portfolio to copy.

• 3:36Anthony Pompliano?

  If you see someone on the platform you like, you can set your account to mimic their trades. They buy Bitcoin with 5% of their portfolio? Your portfolio buys 5% Bitcoin. They sell 50% of their Ether position? Your portfolio does the same thing automatically. Copy trading is awesome, so go join the 10-plus million other traders on eToro and start trading all the most popular cryptocurrencies today. They're one of the largest companies in the space and you can get started by going to etoro.com. Again, that is etoro.com, where the entire team is ready to get you started in just a few clicks. And don't forget, go subscribe to the Off the Chain Daily Newsletter. You can go to offthechain.substack.com. I write a letter of news, analysis, and opinion every morning that goes out to more than 40,000 investors. See you there.

• 4:21Anthony Pompliano?

  What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off the Chain, simply the best podcast in crypto. Let's kick this thing off.

• 4:34Anthony Pompliano?

  Hunter Horsley is the founder and CEO of Bitwise. Management. In this conversation, we discuss his time at Facebook and Instagram. We lay out the case for financial advisors to get exposure to crypto for their clients. We address the common detractions and we even discuss alien invaders and Mars colonization. I really enjoyed this conversation and I hope you do as well.

• 5:01Anthony Pompliano?

  All right, guys. Bang, bang. I've got Hunter here with us. I'm super excited to have this conversation. I feel like Hunter has been on the front lines of talking to investors about Bitcoin and cryptocurrencies for as long as I have and been in deep in the weeds. So thanks so much for coming to do this.

• 5:19Speaker 01

  Hundred percent. I'm so happy to be here with you.

• 5:21Anthony Pompliano?

  All right, before we talk about crypto, though, we both worked at Facebook and the Facebook ecosystem or family. Let's talk about that. What got you to Instagram, I think is where you started, right?

• 5:32Speaker 01

  That's right. Yeah. So I came out of the Wharton School, went to Instagram.

• 5:38Speaker 01

  Worked at Instagram for really a magical moment. There's no substitute for luck. I was there at 70 million in revenue and I left at a billion in revenue. And they gave me the easy projects, which turned out to be the big projects that we just knew would work. And that was about 300 million in revenue that I got to work on. These are advertising products. It's actually funny, just as an aside, I sometimes get little moments of deja vu because in the early days of Instagram ads, something we would hear from big advertisers, Unilever, Procter and Gamble, was we're not sure that these are real ads. You know, we can't, you know, they're not on magazines, they're not billboards, you know, not TV. I know that you're saying that the numbers look good, but how can we know?

• 6:21Speaker 01

  So we would get test checks from these giant advertisers for a year, just to make sure that the money didn't evaporate.

• 6:27Anthony Pompliano?

  What is a test check?

• 6:28Speaker 01

  A test check, yeah. A test check, depending on the size of the advertiser, could be a million bucks or 20 million bucks of ad spend, but not a real allocation of their budget. Because again, it's these ads in an app on the phone. And this is, I'm supposed to take some of my TV budget and put it in an app. I mean, my, my, my, my son, my daughter uses this. But I, you know, I just.

• 6:49Anthony Pompliano?

  I don't have an account.

• 6:49Speaker 01

  I don't have an account. Yeah, exactly. That type of thing. And at the time, I think when I joined Instagram, maybe it was 200 million users or something. So it wasn't a billion, you know, sort of unavoidable like it was today, like it is today. So anyways, it's kind of funny how, you know, that that pattern of sort of skepticism, despite the evidence that existed in ad and digital ads is of course something I think both of us see some symmetry with institutional educators and professional investors as they look at this space. But anyway, so was there was a product manager working with, as you were, with engineers, data scientists, engineers, designers, et cetera.

• 7:29Anthony Pompliano?

  What was your biggest takeaway from working there?

• 7:35Speaker 01

  Well, one of them is there's no substitute for just a giant change in the world, right? You know, when you see something like Instagram and you see the numbers doing what they're doing and you see the conversion numbers on ads and the CPCs, you know, it takes a little while for the emotional realities to catch up, for their competitors to realize, for the advertisers to realize. But it takes a while to slow a train. And so if you see a train that's up to speed, that's a really rare and valuable thing. And I think that's also what's so compelling to many people, especially from the tech world about crypto and Bitcoin. You look at the numbers and you say, this is, this is incredible. This is a phenomenon. I think the second thing, I don't know,

• 8:17Speaker 01

  you know, just problem solving and, you know, how to professionally, you know, work with a team and hit metrics and, you know, just some of the bread and butter like that.

• 8:28Anthony Pompliano?

  It's the one thing that they're really good at that I don't think people can appreciate because it's like, oh, Facebook was successful. Of course it was going to be successful, right? Or I saw recently like Balaji and a bunch of folks were debating on Twitter, the Instagram acquisition, right? People were like, oh, what are you talking about? Like how, that wasn't a contrarian view? And he was like, uh, I don't know. Newsflash, like that was a pretty, pretty controversial thing that they did.

• 8:52Speaker 01

  I can't even imagine. I wasn't, I wasn't there at the time, but how many users did they have? They had 80, 80 approaching 100 million. They shut out a billion. A billion bucks.

• 8:58Anthony Pompliano?

  They only had 12 employees, no revenue.

• 9:00Speaker 01

  That's right. It's so extraordinary. I mean, but in hindsight, what an incredible and prescient deal. I mean, you could argue the same thing, obviously, of YouTube is an easy one to point to. You could argue the same thing of WhatsApp. I think at this point, you probably.

• 9:11Anthony Pompliano?

  But I think that a lot of the, like Instagram and Facebook both had very similar DNAs in the sense of like, we're just gonna figure it out. Right? And like, we can look at the data, we can come up with products, like we can test things, like, but we're just gonna figure it out. And that I don't think is very common in a lot of companies.

• 9:27Speaker 01

  Yes.

• 9:28Anthony Pompliano?

  Um, but these large technology companies, like that is a common theme throughout them.

• 9:33Speaker 01

  Yeah, well said, well said.

• 9:34Anthony Pompliano?

  Um, all right. So you're there. Uh, you're working with, uh, we're both biased. So like, we're just gonna own the bias, uh, the smartest people in the world.

• 9:41Speaker 01

  Yeah, yeah, yeah. Best looking, nicest.

• 9:44Anthony Pompliano?

  And, and these massive user bases, like, I, I always try to explain to people, like, when you go to work every day and you're like, wow, there's a billion people touching this product today. Right? And we're gonna make, we're gonna run a test on 1% of the population.

• 9:57Speaker 01

  Right.

• 9:58Anthony Pompliano?

  And you're like, wait, what's 1% of a billion? Yeah. What's 1% of a billion? Jesus.

• 10:02Speaker 01

  Yeah.

• 10:02Anthony Pompliano?

  Um, what was like the first time you ever heard of Bitcoin or crypto or blockchain? And like, what was your reaction?

• 10:08Speaker 01

  Yeah, well, I just, I actually just wanna, just wanna linger on, on, on that point, the, the testing for a second. I, I do think that's something that's sort of, uh, you're forced to encounter at a place like Facebook or Instagram, that you not, don't necessarily need to encounter it at other institutions is, um, you know, if, so after Instagram, I worked at Facebook. Facebook, 2.5, uh, at the time, it was one or one and a half billion users. Most of your users are not Americans. So you're.

• 10:33Anthony Pompliano?

  When I was there, 87% were not in America.

• 10:36Speaker 01

  Yeah, I think today it's something like 200 million of the 2.5 billion are Americans. So, so it forces you, you know, in, in academic institutions, when you, when you read the news, you know that there are different types of people, different societies, different, uh, you know, legal jurisdictions. Um, but then at, at Facebook, you, you have a small, you know, maybe you're, you're on a, on a team with 20 people. And you're designing for 150 different countries, uh, and, you know, 130 different languages. And, um, I think that that.

• 11:07Speaker 01

  Embeds, you know, an understanding of the sort of scale of the internet and the heterogeneity of the people participating. And there again, I think you can sort of see the insane beauty of something like Bitcoin, that you create this standard layer across all of that cacophony.

• 11:27Anthony Pompliano?

  And I'll even take a step further. It's more of like a 3D view of the world. And what I mean by that is like, a lot of people think, okay, great, you've got to come up with the latest, you know, ad product or something, right? And maybe there's some language component or some like cultural component that you got to be cognizant of. But also, like, one of the things that I took away was, I forget what they called it, you'll probably remember, but there was a place at the Facebook campus that you could go and you could test your product on all sorts of different connectivity environments.

• 11:57Speaker 01

  Yes, yes. It was called the Connectivity Lab.

• 11:59Anthony Pompliano?

  Connectivity Lab, right? So it was like, what is it like to have like an Android phone in Indonesia where they have 3G connectivity?

• 12:07Speaker 01

  A tiny little screen. Yeah, yeah. All that's the standards issues. I mean, to get a clean shot where you have a large group of people on the internet, all with roughly the same interaction is just so, is so.

• 12:19Anthony Pompliano?

  And you've got to do it. Like, I remember, one of the big things that we had, so I was running the growth team for Facebook pages and we had this huge upshot in usage, but it all came from mobile web in less developed countries. So it was basically, they go to, not an application, not on their desktop, but on their phone, to facebook.com. And we had figured out that they were all using phones, kind of like the T9s, so rather, you know, where you have to click a bunch. And so they would try to scroll over and to get to pages, it was like, three rows down. We literally just moved it up, so it was less clicks for them to scroll over and usage shot up.

• 13:00Speaker 01

  Those types of things matter.

• 13:01Anthony Pompliano?

  And you're like, man, that's pretty simple. Like, you just made it easier for them to get to it, right? But it was the numbers, it was understanding the devices, the connectivity, like all these things. And when you start to think that way, it's, we're still probably too early in a lot of the crypto applications to.

• 13:16Speaker 01

  Layers of friction are immense. You know, if the difference between not having to scroll and having to scroll can make that huge of an impact, then the difference between using MetaMask and not using MetaMask.

• 13:25Anthony Pompliano?

  Pretty big.

• 13:26Speaker 01

  Pretty big, pretty big, giant thing. Yeah, yeah. So, uh, so yeah, I think that that, that, that's definitely a present part of, uh, the friction in, in the crypto space and friction is very real.

• 13:35Anthony Pompliano?

  For sure. All right. First time you came across crypto Bitcoin blockchain?

• 13:38Speaker 01

  Yeah. So my journey into, into crypto, um, we actually had the opportunity, myself, my, my business partner, co-founder and starting Bitwise, a guy named Hong Kim, did software security in the Korean military, uh, worked at Google, knew him from, from, uh, University of Pennsylvania, uh, we're close friends. And, uh, we actually, this, this rare opportunity, uh, to, uh, um, some investors offered us money to quit our jobs and just prototype, uh, something, just to work on something. Um, and, uh,

• 14:11Anthony Pompliano?

  Was this the, uh, the Google slash Twitter slash Facebook mafia?

• 14:16Speaker 01

  It was, uh, it was in, and they were both ex-Google. It was, it was, it was, uh, it was Vichul Garg and Alag Gill.

• 14:22Anthony Pompliano?

  Can we, can we talk about the, the angel investor mafia that's going on there? These, so for those that don't know, there's, uh, each technology company in general, it's overgeneralization, but they all have a group of folks who, uh, have a bent towards, uh, angel investing, towards early-stage technology, and, uh, they are notorious for finding usually younger talent at the company that they don't think is going to stay and be a lifer. And either one saying, here's some money, go figure something out, or, uh, people know who they are and go and pitch them and say, hey, I'm going to leave and go do this. Would you like to invest?

• 14:56Speaker 01

  Yeah.

• 14:56Anthony Pompliano?

  They've been fantastic investors over the years because they've got great talent, very early, like all the ingredients you need to be a good angel investor. And so they, uh, came to you guys and basically said, here's some capital.

• 15:08Speaker 01

  Yeah, I mean, there's, there's a bit of a, a longer story to it. I, I don't want to use up too much of our time. This is going to be a, a Facebook retrospective podcast, um, which, which is fine by me, but, uh, uh, you know, the short of it, so, so, so I left and, and, and Hong and I raised some money. And then we were working out of, you know, a living room, putting our heads together and prototyping different concepts. And if you're too software people in San Francisco at the beginning of 2017, before too long, someone says, hey, do you remember that Bitcoin thing? Yep. And I was like, gosh, I think I bought some on some website at some point. And of course, that website was Coinbase.com. I don't know if you've heard of it.

• 15:46Speaker 01

  I'll look it up. It's like Gemini.

• 15:49Speaker 01

  But I bought some at some point in 2013 or 2014 and had totally forgotten about it. And it was actually a friend from Wharton who was working at a Statar hedge fund. And he said, hey, there are 40% spreads in markets on this stuff. And we were just like, huh, that doesn't seem, that doesn't seem right. So, so our journey into crypto was we started out by arbitrage trading.

• 16:12Speaker 01

  And that's not what we're doing today. But I think that everyone sort of has that one project or experience that gives them pause to look at it more seriously and for a more concerted amount of time. And that was what it was for us in February or April or March, that timeframe. We started arbitrage trading and that gave us the opportunity to learn about different protocols, meet some people who are building blockchains, deal with the ecosystem of trying to buy different assets. If you remember at that time, I think Coinbase was only brokering Bitcoin and Ethereum, I think.

• 16:48Speaker 01

  And also to think about, why would we root for this? You know, I think when you work in crypto for long enough, you forget that at the outset, it's not obvious to everyone if this is like the team you want to root for. Like de novo, it doesn't necessarily sound like something, it sounds complicated. It sounds like it's going to complicate everyone's life. Like, you know, your mom's now going to have to deal with not just cash, credit and her portfolio. But now this is a whole nother set of things she's going to have to deal with. Is that something you want to root for? And so, you know, so it gave us, gave us the moment to think about that. And where we, where we landed was thinking that this, this could be one of those trains that's hard to slow down and could be one of the most important.

• 17:31Speaker 01

  You know, breakthroughs are pieces of progress in technology over the next decade, over the next two decades, and we just felt like we'd love to contribute something to this. We'd love to be part of this. This feels like the type of thing that's going to get a chapter in the history textbook. There are other things that we, you know, we worked on, insurance for cybersecurity incidents, which is a growing industry and a great opportunity, concepts, obviously having come from Facebook and Instagram concepts around entertainment experiences, social media. But then, you know, I think we just looked at this and said, wait a minute. This is not only, not only is there opportunity here to create services that are valuable and build a business in doing that, but also maybe this is, maybe this is going to change the world a little bit. So.

• 18:11Anthony Pompliano?

  Well, it goes back to the idea, you can bet on products, you can bet on teams, you can bet on markets, and when you bet on the right market, the market can carry you pretty far. Even if you mess a lot of stuff up, if you bet on the right market at the right time, you're going to be in good hands.

• 18:26Speaker 01

  Yeah, yeah, yeah, yeah. Andy Rackliff, the founder of Benchmark Capital and CEO of Wealthfront, has a great quote that goes something like, "Bad team, good market, market wins. Good team, bad market, market wins." So, yeah, I do think there's something to that. So, to close the loop, you know, so there we are, feeling like, wow, this is this really exciting thing playing out right in front of us, and we have time, you know, to be building things. And we were talking to people about crypto, and a common refrain that we heard in March, April of 2017, from people who are executives in tech, people who are, you know, in financial services, you know, they have investable money, they're

• 19:10Speaker 01

  tech savvy, they're financially competent, they're confident in making their own decisions. We heard, you know, "I'd like to invest in this crypto thing, but I don't have time to figure it all out and to be constantly monitoring it, and I'm not sure which one I'm supposed to buy." And we heard this enough time from people like that. Again, this is not like your uncle who, and I don't know your uncle, so no, you know, I hope your uncle doesn't take offense. Yeah, he might fit the bill here. But, you know, these are people you would expect to be on the sort of upper tiers of ability to figure out.

• 19:37Anthony Pompliano?

  Yeah, they're folks who are normally in technology, who understand user experience. Experiences, they can deal with some friction. Yeah.

• 19:42Speaker 01

  And the common thing was, you know, I'd like to participate. I just am not going to spend, if I, you know, I looked, it's too complicated. And, and, and so we said, wow, that's, you know, we're here. And, and we realized that there is, from our perspective, a piece of market infrastructure that was missing. At that point in time, you had, and even still today, and this might frame up a little bit how we think about what Bitwise is trying to contribute. You had on sort of one end of the spectrum for enthusiasts who wanted to, you know, trade it throughout the day, or who wanted to pick specific assets or participate in ICOs. You had great tooling being built out. You had, you know, you could download Coinbase, you could, you could get more involved with Kraken, where you could even take margin. You could do esoterics. You could hold it on a ledger or treasure. You could do research on on-chain FX.

• 20:26Speaker 01

  So you had an emerging ecosystem for, for the person who is excited to, to spend the time. On the other end of the spectrum, you know, for very wealthy families, some of them knew a guy who was just spinning up a hedge fund. Like one of their friends just decided to go ahead and spin up a fund. But in between, you had most of the rest of the people who were like, I'm interested enough to consider something. I'm not interested enough to, you know, decide between the following apps, the following coins, to upload a driver's license, to request a, you know, withdrawal increase.

• 20:59Speaker 01

  And I also, you know, so, so what we realized was missing is the ability for their financial advisor. And, you know, for, for them to use a conventional mutual fund, ETF, interval fund, what, you know, what have you.

• 21:11Anthony Pompliano?

  Yep.

• 21:12Speaker 01

  And we said, there's opportunity there.

• 21:14Anthony Pompliano?

  Is it really?

• 21:16Anthony Pompliano?

  And as I previously mentioned in the introduction, right? We're obviously investors at Bitwise, we're huge fans of what you guys are doing. And the way I think about it is it's an access.

• 21:24Speaker 01

  Yeah.

• 21:24Anthony Pompliano?

  Component, right? It's, I've got to do some education. I've got to learn in terms of how do I think about this in my portfolio? Why would I get exposure? How do I size it? All that kind of stuff. But then once I've made that decision, that's where all the questions come in, right? And this is a, uh, something that looks like, smells like, acts like exactly how I get exposure to other assets and therefore I'm comfortable because I'm already taking quote unquote "risk" by going into something new, right? I don't want to take risk by going into something new, plus going into a new type of vehicle, plus having to sign up for a new account. Like, all of that stuff just compounds and makes it harder and harder to get there. I think really, when I look at what you guys are doing, it's just how do we break down the frictions to access and make it look and smell just like everything else that you do?

• 22:06Speaker 01

  That's right. You know, that's, that's exactly right. We, we think of ourselves as, as an infrastructure company or as, you know, from, from my tech friends, you know, I would say we're like an API company. But the API is so important that we put it into a legal structure and call it a fund. But, uh, yeah, we're trying to empower people to lean on the same financial professionals that they use to manage, uh, investment grade bonds, emerging markets, commodities, natural resources, high yield debt, uh, et cetera. And to be able to go to them and say, "I think that I want to do something here." And they say, "Okay, no problem."

• 22:37Anthony Pompliano?

  Yeah, so, um, I want to get into kind of like the argument for crypto in so much portfolio, but before I do that, um, give us an update, just any metrics or kind of milestones you can share from?

• 22:47Speaker 01

  Yeah, absolutely.

• 22:48Anthony Pompliano?

  Bitwise itself to give us a sense of kind of where you guys are.

• 22:50Speaker 01

  Yeah, absolutely. Uh, uh, so Bitwise today, uh, we're about 20 people, based out in San Francisco. We're boutique. Uh, all we do is, uh, index funds and, and access products for particularly today, you know, financial advisors, multifamily offices. We meet with some endowments and, and, uh, and others, but you know, the conventional people are most interested in, in those types of products. Uh, and then we do a huge amount of, uh, of education work. I, you know, I mentioned to you before, we do about 10,000 conversations, sorry, excuse me, not 10,000, uh, 2,000 conversations with advisors a month, uh, between events, uh, phone calls, et cetera. Um, uh, we, we never disclose or historically we haven't disclosed the assets in the fund, but, um, I can tell you that we've had inflows every week for the last two years.

• 23:30Anthony Pompliano?

  And P S for those listening at home, that's good.

• 23:35Speaker 01

  I can tell you that additional subscriptions are well in excess of redemptions. I think that we've seen in the life of the fund, something like 7% of investors redeemed from 2017 to today. And to our knowledge, it's the largest public index fund in crypto today. So that's a little about the firm. You're very familiar with our firm. If there are listeners who aren't familiar with us, you know, the other thing that I usually like to mention is that we've tried to assemble a group of people who straddle backgrounds in software and traditional asset management. So we started this conversation talking about our backgrounds in tech.

• 24:16Speaker 01

  And obviously, your partner, Mark Yusko, marries that with a background in asset management and asset allocation. For us, we today have brought on a number of veterans of the ETF space. Matt Haugen, our head of research, 15 years, is one of the foremost experts on ETFs, co-authored the CFA exams book on ETFs. Tay Vissar, our COO, was former senior vice president, head of portfolio management at New York Life Investments, which is a giant conservative shop before that at Index IQ, which did liquid alternatives before that direction. Mick, our head of distribution, 10 years at iShares from 2001 to 2011. Russell Investments, and then most recently was the head of distribution for Deutsche

• 25:00Speaker 01

  Bank's ETF business, grew that from 70 million to 20 billion assets. So I think that for our clients, and when people think of the firm, what we hope that they think of is a professional group that can straddle those two perspectives and a partner for building their understanding and then deciding how they want to play it. And also, some people don't end up playing it through our vehicles. Some people talk to us to build that understanding and end up investing through venture vehicles, which is, I would say, one of the very popular approaches today. So that's a little about the firm. And yeah, focused on advisors, have this market access vehicles, spend a huge amount of time on education.

• 25:45Speaker 01

  Matt actually jokes that we're an education company that happens to have index funds. And then the other thing we're known for is this ETF filing.

• 25:54Anthony Pompliano?

  So we'll get to the ETF filing in a second. But I want to do... You've spent hours and hours and hours going and talking to RIAs, wealthy family offices, etc. And we are not giving investment advice here, but I basically want to give people kind of a peek behind the curtain. Because most people listening to this are not going to be part of those conversations. And so, help me understand, kind of like, what's the argument? What is the education that's happening? Kind of in those like, I think of this kind of like intellectual hand-to-hand combat? Where you're walking into a room, whether it's a meeting with like an RIA and a team, or it could be walking into like a lunch or a dinner with their clients, etc. What does that look like?

• 26:38Speaker 01

  Yeah. So, let me, I want to tell you the sort of the three things that are motivating advisors to come into the space.

• 26:48Speaker 01

  And it might be fun to talk about some of the common questions we get, and I know that you get as well. Before even doing that for a second, I want to sketch out, who is this advisor person? If their advisor's listening to the podcast, we love you and you know what you do. But, you know, believe it or not, in crypto, I think very few people are actually familiar with financial advisors. And I actually tell you, you might get a kick out of this. You know, there's a number of venture firms invested in our company. And you'd be surprised by the number of venture firms who aren't aware of financial advisors. So, with that having been said, I want to, you know, before I describe how they think about the space, I just want to describe who they are. So, if you sort of draw out the landscape of cohorts that are investing in crypto today, I think by and large, you can map them into four buckets.

• 27:32Speaker 01

  The first is self-directed individual accounts. So, these are people who are investing their own money, making their own decisions. They might have bought Lyft's IPO through their Robinhood account because they like Lyft and they heard good things. They trust themselves with their money, they're nimble. These are the first movers into crypto. Some people call them retail. But, it's also you and me, like, it's people making, everyone does this in some amount. That audience in the US controls three to four trillion in assets. And by and large, they use Coinbase, Gemini, if they get more involved, it's cracking. Yeah, exactly. They might use a ledger, they might do research on coin market cap. Then you have financial advisors, who I'll come back to. Then you have institutional asset owners, the pensions, endowments and foundations. They manage 24 trillion in the US. That's 600 billion with the endowments,

• 28:17Speaker 01

  800 billion with the foundations and 22 trillion with pensions, which are giant. And Morgan Creek Digital is famous for having the first partnership with a pension that had the courage to publicly undertake adding this to the portfolio. That audience tends to prefer active managers, is happy to take the liquidity in many cases. And today, they work with a lot of venture managers, like Morgan Creek Digital, like Andreessen, like Paradigm, Electric, etc. Then one over, you have, so 24 trillion there, one over, you have the institutional asset managers.

• 28:57Speaker 01

  So there would be like, you would think of like DRW or, but DRW is actually a different beast. So we'll set that aside.

• 29:05Anthony Pompliano?

  Blackstone.

• 29:06Speaker 01

  Yeah, exactly, exactly. And those people by and large today are not yet in the space. Okay, so those are different cohorts. And the reason I say that is because I think sometimes in crypto, when we talk about investors, depending on who you're imagining, you intuit differently how they'll react to something, what might be on their mind, what else this might be trading off against, and what solutions they're looking for. So we have the self-directed guy, you know, first into crypto. We have the institutional asset owner, which we talked about, and you can add sovereign wealth funds and insurance companies and hospital systems, etc. to that. In between, the financial advisor manages 22 trillion dollars in the US on behalf of individuals, wealthy families, and high net worth individuals.

• 29:50Speaker 01

  And that can be anything from a Wells Fargo advisor that's down the block, or a JP Morgan private banker. But a huge portion of it is also what we would call RAs or independents. Mark Zuckerberg famously works with Iconic out in San Francisco.

• 30:05Speaker 01

  The Rockefeller family works with a firm in New York called Rockefeller Capital Management. Those are advisors or multifamily offices. And what they're doing with their clients is, you know, in some ways, the same way you work with Physician on your health, you work with this financial advisor on your money, which is, I think for everyone, three priorities are their family, their health, their money. And so many people choose to work with a professional on their money, and that's the financial advisor. And the financial advisor is helping you think about what are your cash needs this year? Do you have retirement goals? Is somebody going to college? You're gonna have to support aging parents. And then they're orienting the investments you make around those liquidity time horizons, etc.

• 30:46Speaker 01

  And so that is just the frame that I want to set for describing the conversations we have with those people. But what we are working to do, that audience generally doesn't use venture funds, and they're definitely not using apps. It has to go through their existing workflows, their infrastructure, and that tends to be ETFs, mutual funds, and then a whole set of workflow. So we're working to build a bridge to that audience. It's a giant audience, and from my perspective also, crypto cannot be successful as an asset class if mainstream people can't rely on that financial professional to handle it for them. I think it's a beautiful thing that individuals like ourselves have the enthusiasm

• 31:29Speaker 01

  to create accounts, to make investment decisions on our own, to interpret the volatility. But I do think that that enthusiasm has a half-life. And we even see this sometimes, you know, people who invested some money in 16, 17, 18, getting a little worn out and exhausted, something else in life becomes busy, and then they ask their advisor to handle it for them. The same way the advisor, again, handles, you know, the options they have from some tech company, the high-yield debt, the private credit, that, you know, everything else. They say, can you just, can you handle this? So that's the audience we're focused on. That audience has a lot of clients. They're very busy. They're thinking about everything. They're thinking about equities, you know, up 20% plus this year, gold up 18%. They're thinking about, you know, we're 10 years plus into an expansion.

• 32:12Speaker 01

  They've been worried for the last three years that the party's over and, you know, we need to start to get defensive. But you can't come out of risk assets because then you miss the 20% return on equities this year and your client is, you know, confused about you. So that's all swirling in the backdrop, and it's a very busy time for the advisor. And then we come along and say, you know, we'd love to be helpful and talk to you about crypto, if that's something that you're interested in. So that's where they're starting. There's a huge setup to your initial question, which is, what is the case for them? There's three reasons that advisors think about crypto today. The first is, in relation to sort of what I just described, their client's doing it,

• 32:55Speaker 01

  and they work for the client. We do a survey every year, we commission a survey, that's a benchmarking survey on advisor attitudes and decisions around crypto. We'll have a new one coming out in January. Last year's survey, advisors reported, one-third of advisors said that their clients were investing in crypto without them, without their oversight. Another third said that they don't know. So the first reason, and there's three components to what advisors are thinking about, but the first reason that advisors are thinking about crypto is because their clients are doing it, and they're there to help their clients.

• 33:26Anthony Pompliano?

  Their clients are pulling them into it.

• 33:28Speaker 01

  They're pulling them into it. And also, what can sometimes happen is the client gets in trouble, like they get simported, or they get locked, they forget their password, or they get busy, and they say to the advisor, can you deal with it for me? Or they have to pay taxes, and they say to the advisor, can you pay taxes? And then the advisor's, oh my gosh, what is this? When did you buy it? What was the cost basis? How did you decide this? Do you want to keep it? Do you not want to keep it? You know, all these things. So advisors are incrementally, month after month, getting pulled into it because of their clients. And they want to protect the client. They want the client to achieve their financial goals. They want their clients to pay their taxes. They don't want their clients to get hacked, lose their passwords, etc. I was chatting with this one advisor, who was telling this funny story about his client said, hey, I'm gonna buy some,

• 34:12Speaker 01

  I mean, this is a very wealthy client, I'm gonna buy $10 million to this Bitcoin thing. I just downloaded the Coinbase app, but I'm kind of confused. Can you help me? And so he sent his password to the Coinbase app to the advisor, and then the advisor's in the Coinbase app, trying to like, get the withdrawal limits pushed up, so you can wire 10 million. You know, so this sort of like-

• 34:30Anthony Pompliano?

  Newsflash for those that don't have $10 million and trying to get in on Coinbase. Coinbase will not let you put $10 million on the app.

• 34:36Speaker 01

  That'll be difficult. Yeah, yeah. You know, or just one other case is another client who she had $400,000 in Bitcoin and she did get simported. So her phone got hacked and she lost control of her Coinbase account. And then she asked her advisor for help. So the first reason that advisors are looking at crypto is because they serve the client and the client, there's 40 million Coinbase accounts, like the client is doing it already. And they want to know, okay, how can I, if they're going to do it, I want to support them doing it. How can I do that in a sustainable, no risk? You know, it's hard for them to discern the difference. Coinbase is an incredible service. In their minds Coinbase and Quadra CX are like the same thing.

• 35:22Speaker 01

  And so they're like, I just don't know which of these things. So they want to help. They want it to be sustainable. They want it to be secure and they're dealing with a lot of complexity. It's not their expertise and they don't have time. Because they're also dealing with the equities and figuring out fixed income and figuring out 2020. First reason. Second reason is what I think you read about. It's more theoretical, more academic, which is just objectively what it can do in a portfolio. You do a portfolio analysis, it does very compelling things. So.

• 35:52Anthony Pompliano?

  And this is the argument for non-correlated asymmetric assets, blah, blah, blah.

• 35:55Speaker 01

  That's exactly right. So we have a study and others have done studies. If you do a 1% allocation into the Bitwise 10, the BitX, over the life of the index and you rebalance it into a 64 portfolio, so very standard portfolio, 1% allocation. It added 1.3% to the annual return of the portfolio and it reduced the volatility.

• 36:18Anthony Pompliano?

  It's funny how like modern portfolio theory works, huh?

• 36:21Speaker 01

  Right, right. People are surprised by that. And so, you know, I think some people look at that and say, wait a minute, this can help me accomplish my goals. I'm sure that this is what's going through the pension mind. It's not that they picked a team. They're not rooting for something. They're saying, we have a funding goal. We have something we're trying to accomplish this portfolio and I'm looking at the math and what I'm seeing here is that I can take minimal risk. I can even diversify some of the portfolio and I have reason to believe that there's upside here. So the second reason is that. I'll append to that, for financial advisors specifically, there's this thing looming in the background. And the thing looming in the background is markets are in a very weird place right now, more generally. This year, actually, I think just a month or

• 37:05Speaker 01

  two months ago, Morgan Stanley came out and said they think that 60-40 is basically dead, as a standard asset allocation.

• 37:13Anthony Pompliano?

  Why?

• 37:14Speaker 01

  Their view is that assets are way overpriced, and that correlations are gonna... conventionally, bonds are negatively correlated with equities. That hasn't always been the case. That wasn't always the case in the 20th century. That was mostly the case in the last 30 years of the 20th century. They predicted over the next 10 years, a 60-40 portfolio will return 2.8%. That contrasts with historically, the historical average of the last 100 years is 8%. So what they're saying is, this time it's different. Something has changed. We could discuss what might have changed, asset prices, the injection of capital through quantitative easing and other measures. But Morgan Stanley saying

• 37:52Speaker 01

  this, Bank of America came out and said this, GMO, which is a macro analyst firm, expects negative returns from US large-cap equities, as well as US bonds, over the next seven years. You've probably read the pieces by Ray Dalio this year.

• 38:09Anthony Pompliano?

  Ray Dalio is a Bitcoiner and doesn't even realize it yet.

• 38:11Speaker 01

  It is really, sometimes you read that stuff and you think, gosh, well said.

• 38:18Speaker 01

  But you know, a statement is most recent, I think it was from November, 6,000 words on LinkedIn, God bless him for publishing on LinkedIn, especially given how difficult it is traditionally to get Bridgewater Research. He says, something to the effect of, you can't rely on cash and bonds as a safe store of value for your money. So the advisor is thinking about all these things. And what a lot of them are seeking to do in response is, you know, you can't hide in cash, for a few reasons. You just heard the case that you can't hide in bonds, and yields are not attractive anyways. And there's anxiety about inflation in high yield.

• 38:58Speaker 01

  So what do you do? Alternatives is what a lot of people are looking to, particularly in the advisor community. It's in that context that crypto becomes a solution to a much bigger problem that advisors have right now, which is, okay, like, so I'm naive, I'm gonna look silly if I just stick 60/40 for the next three years, despite all of these credible sources telling me that that is not a legitimate strategy for what's coming. But what are my options? You look at alternatives, and in that consideration set, crypto is this magical thing. You don't have to reallocate your entire US securities portfolio, you don't have to, you know, diligence

• 39:42Speaker 01

  specific venture firms, you can simply take a 1% exposure, get off zero, as some people say. I can't remember who came up with that, but they're deeply influential. And introduce, you know, these favorable things to the portfolio, demonstrate to the client that you're doing something, and it's liquid. It's liquid. So that's the

• 40:07Anthony Pompliano?

  And do you feel like the advisors, as they're thinking through those three reasons for crypto, they're further ahead than the clients, or the clients are further ahead than the advisor? Right? Like, where do you see the enthusiasm?

• 40:22Speaker 01

  The client has done more action, and the advisor's done more thinking.

• 40:24Anthony Pompliano?

  Okay, interesting.

• 40:26Speaker 01

  So, you know, the client, the client heard that XRP is the next big thing, or that Ethereum is the next big thing. This, of course, I'm generalizing. So this is not always the case. So very sophisticated individuals directing their own portfolios and accounts. But I think, you know, the advisors have approached this from a position of, oh, whoa, whoa, you know, different counterparties, it's moving, you know, a lot in short periods of time.

• 40:49Anthony Pompliano?

  And do you find that the advisors are, hey, okay, I get this, I think I should have my clients have exposure to this. Let's start with like 10 basis points, let's go to 500. Like, how do they think about, I've gotten over the hump of whether I should do it or not, now I've got to think about sizing it?

• 41:09Speaker 01

  Yeah, yeah, yeah, yeah.

• 41:12Speaker 01

  It depends a lot on the advisor, but it also depends a lot on the client. So what we usually see actually is the firms that we work with, they have one to five clients that they know are like, are the ones that are investing in crypto, who have the right risk appetite. And from there, it's like 25 to one and a half basis points. There are a few who are very, either the client is very passionate about it, but we don't see, I think, you know, one to two and a half, we don't see much outside of that. The third thing I want to mention, so advisors, I have a million things to say about advisors pomp. The first thing, but this is what we do all the time.

• 41:53Anthony Pompliano?

  I love it. I'm here to learn.

• 41:55Speaker 01

  We're traveling around the country, you know, doing that today. The first thing is that they're responding to, the client comes to them and says, taxes, lost, you know, lost my password, trying to buy it on Coinbase, not being successful.

• 42:07Anthony Pompliano?

  I'm gonna pull you in.

• 42:08Speaker 01

  Yeah, so they pull them in. The second is, they're looking at the numbers and they're going, I gotta do something about the asset allocation I've got here, but I'm not sure what to do. If I go into cash, again, I'm gonna miss the returns and then, you know, my clients can ask me, why is my portfolio not returning as well? If I go into alternatives, this is a, this is a pretty, you know, uncharted territory and I'm gonna have to deploy into things that maybe aren't liquid. And, you know, small sizes, I can do interesting things for portfolios. And so that's the second thing. The third thing for advisors is advisors care about attracting new clients by demonstrating, particularly for the independent advisors, things that they can do that the old guard can't. So if you're an independent, you're trying to win clients from UBS.

• 42:51Speaker 01

  All the people who are, who are, who are turning their nose up at crypto is, are your competitors for winning new advisory clients.

• 42:59Anthony Pompliano?

  It differentiates the RIA from the RIA down the street.

• 43:02Speaker 01

  Yes, exactly. From the wirehouse in particular, from the Wells Fargo, UBS, Bank of America. And at some of these firms, the advisors at those firms want to do it, they're just, hands are tied by the much larger institution. So the independents, the reason that they generally went independent was to be more nimble, to be able to serve the, the needs of the client in a more bespoke way and to be more More progressive in what they could offer and not have to conform to JP Morgan wants you to distribute JP Morgan funds to JP Morgan advisory clients. And so the third is business considerations. They want to, they want to win clients. The other aspect of that is they want to retain the next generation of their aging clients and the next generation is a millennial. And the millennial uh is almost more bullish on crypto than they are on T bills.

• 43:43Anthony Pompliano?

  I uh see two groups that are pulling those advisors in. The first is I'm a young, I'll put in air quotes self-made. Cause I don't even know what that means anymore in this world, but uh there's somebody who has uh become wealthy without inheriting the wealth.

• 43:58Speaker 01

  Right.

• 43:58Anthony Pompliano?

  Right. And uh they're usually on the younger side. And so they're into this stuff and they're pulling their advisor in. The second is what the situation you're describing, which is somebody else made the wealth. The person now is inheriting.

• 44:10Speaker 01

  Yes, that's right. Yeah.

• 44:11Anthony Pompliano?

  And hey, my family made all their money in real estate. I want to do something else. I want to make my own name, right? Or I'm personally interested in this. I want to divert some funds.

• 44:19Speaker 01

  Yeah.

• 44:20Anthony Pompliano?

  You know, my, my grandfather died, so he's no longer around. He, you know, he, he would buy Bitcoin if he was here, right? That type of stuff. Um, and it feels like the common thread through both of those is that these clients are usually on the younger side.

• 44:32Speaker 01

  Yes.

• 44:33Anthony Pompliano?

  More so than the 60 year old client who's, you know, retired and, and you know, quite wealthy. But they're still pretty much asking a lot of the questions we'll get into. And I don't see them jumping in as much as maybe the younger people.

• 44:46Speaker 01

  I think in general, yeah, at this point, you know, well, well, uh, well trodden uh thing, but you know, millennials tend to be the, the driving force. The millennials stay 23 to 38, something like that. Um.

• 44:58Anthony Pompliano?

  23 to 38. Wow.

• 45:00Speaker 01

  Yeah.

• 45:00Anthony Pompliano?

  That's a big gap.

• 45:02Speaker 01

  It's a wide window and it's about, yeah, so.

• 45:04Anthony Pompliano?

  All right. So um, let's go through, I want to play a game of, I'm going to throw out detractions that I've heard.

• 45:10Speaker 01

  Okay.

• 45:10Anthony Pompliano?

  In a lot of these rooms, some of them.

• 45:12Speaker 01

  I've never heard a single detraction about crypto.

• 45:13Anthony Pompliano?

  RIAs uh and some come from the endowment world. Um, but I think you and I have spent a lot of time doing the same thing of just get people in a room.

• 45:21Speaker 01

  Yeah.

• 45:21Anthony Pompliano?

  Here's the kind of the case for this. Ask me your questions.

• 45:24Speaker 01

  Yeah.

• 45:24Anthony Pompliano?

  Right? Uh, the first one is um, uh, security and custody.

• 45:29Speaker 01

  Yeah.

• 45:29Anthony Pompliano?

  So uh, I heard that some. Somebody stole somebody else's Bitcoin. Why would I buy Bitcoin or other crypto if it can get stolen from you?

• 45:36Speaker 01

  Right.

• 45:36Anthony Pompliano?

  Well, how do you think about that?

• 45:37Speaker 01

  Yeah, so I mean, so this comes up quite a bit. And oftentimes, people will point to a story like QuadricX. Literally today, in one of our sessions, QuadricX was brought up. This, you know, some Canadian exchange getting hacked. Or, you know, somebody lost their their USB and lost their funds.

• 45:56Anthony Pompliano?

  My favorite has been the guy in Korea. I say, what? The guy in Korea? And I had to ask him, in North Korea or South Korea?

• 46:02Speaker 01

  Yeah, yeah, yeah. So, so, you know, I think the beautiful thing about crypto, you know, for much of your audience is you have the option to hold these things yourselves. I think to the advisor, you say, this is one of the ways in which you can add value. You, the advisor, is helping your client parse the landscape of different ways to hold this exposure from, you know, the exchanges to the brokerage apps, to the venture funds, to the, today, the sort of enterprise-grade institutional custodians like Fidelity, BitGo. I gotta give shout outs to all my favorite custodians now, don't I?

• 46:44Anthony Pompliano?

  They're all in there. They're all in there. Anchorage.

• 46:47Speaker 01

  Yeah, yeah, yeah. I mean, there's tons of great custodians. They're all super, you know, super sharp. But so, so, but to many, taking a step back, many professional allocators, they're operating off of a snapshot of the world that they took in November of 2017. And in November of 2017, you know, there was basically King Trust, which they hadn't heard of. King Trust pioneer for the industry, great firm. But they hadn't heard of it. And so all they really knew of is people holding things on USBs and on these, on these apps. They're not aware that today, you can hold it in an insured, regulated custodian, and that they'll hold it offline and they won't even put it into a trading environment.

• 47:30Speaker 01

  And so, so there, you know, I think the point that we make is just that

• 47:36Speaker 01

  for many clients, it makes sense to work with an industrial custodian like that. Skrt, skrt. Wanna know who has the best URL? Crypto.com. That's right.

• 47:46Anthony Pompliano?

  Crypto.com. They're a crypto platform with one goal, motherf***ing mass adoption. That's why we're all here. We're trying to get crypto in every wallet. Crypto.com is helping people do that through buying, earning, lending, and card payment. Everything you could want at Crypto.com. Go help your boy out. Tell him POMP sent you. Download the app or visit Crypto.com. POMP's got you, always. Ever wanted to get into mining and didn't know how? Don't worry, your boy POMP's got you. Everybody got some electricity and wifi? All you gotta do is go to CoinMine.com, you buy a coin mine. It's like an Xbox or a Playstation that helps you turn your electricity into Bitcoin. That's right. You purchase it, it shows up at your doorstep, you pull it out of the box,

• 48:31Anthony Pompliano?

  you plug it in, connect to your wifi, five minutes or less, you're mining Bitcoin. All you have to do is control it from the mobile app they provide, and then you receive over-the-air updates that add new coins and new features on a consistent basis. Kinda like how Tesla does over-the-air updates and updates the car software. Just your update in your coin mine. Consumer mining made easy. That's right. Go to CoinMine.com, tell them POMP sent you, and thank me later. One more word from our sponsor BlockFi. Their new interest account allows you to securely deposit your Bitcoin or Ether at BlockFi and receive 6% annual interest paid monthly in cryptocurrency. This rate actually compounds, so you receive a 6.2% APY,

• 49:14Anthony Pompliano?

  which is very attractive given the alternatives. So you can actually take your Bitcoin, you can deposit it with BlockFi, and get paid an interest rate of 6% in return. Go check out BlockFi.com/POMP, again, BlockFi.com/POMP, to sign up and start earning interest on your crypto today. A lot of people will argue, it's so volatile, right? It went down a bunch recently, right? They won't exactly know. Price movements to a T, but just it's really volatile and a bunch of people lost money or somebody I know lost money.

• 49:51Speaker 01

  Yeah.

• 49:51Anthony Pompliano?

  Thoughts?

• 49:52Speaker 01

  Yeah, um, how about that? Thoughts?

• 49:58Speaker 01

  Volatility isn't in of itself an indication that something is a bad investment.

• 50:04Speaker 01

  You have to ask yourself, why is the volatility happening? What does the volatility mean for me? Volatility is happening because people don't agree on the value of these assets. And it's a very nascent and controversial space. The analogy we like to give is, you know, people often compare Bitcoin to gold. We wrote about this over the summer. You know, I think the apt comparison is Bitcoin to gold, but not gold of today, but gold of the 1970s. When the Bretton Woods system ended and the US came off, the US dollar came off of gold as a backing for international redemptions. It was unclear to the investment community if gold would stick around. Keynes called it a barbarous relic. Maybe it was time that we would shed, you know, this piece of antiquated

• 50:46Speaker 01

  monetary history and just move on from it. And so there was a period in the 70s where there's a lot of volatility because some people said, no, no, no. This is a thousand years of a track record of being valuable. This is an independent, you know, store of value. And other people said, no, no, no, this is worthless metal. And now it's not even, you know, being used to back the dollar. And in the 1970s, there was a year where gold was up 120%. There was another year it was down 30%. It ended the 70s up 1300%. After the 70s, those discussions, those arguments were had, the volatility played, you know, people, you know, expressed their points of views in the market, created the volatility, and we landed on the understanding of gold that we have today.

• 51:29Speaker 01

  And since then, gold returns on average, you know, something between 1 and 2% a year. So the volatility in crypto, I think, is similar. It's that people are working through, what is this thing? What is the value of this thing? Is it here to stay? And that's causing, causing the price to move. The price is, the volatility is moving in one direction. Over the last 10 years, the average daily volatility of Bitcoin has come from 10% to around 3%. So we are forming a tighter band of consensus. The other point I make about volatility, which we talked about a bit earlier is viewed in the portfolio context, it's a real boon. What's important is that it's being volatile in different moments than your equities are and that your fixed income is.

• 52:14Speaker 01

  And as a result of that, as mentioned before, 1% allocation rebounds quarterly of the Bitwise 10, reduced the volatility despite the volatility of crypto, reduced the volatility of the portfolio.

• 52:25Anthony Pompliano?

  This is a really important point, because I think a lot of people who aren't well versed in finance or just haven't spent the time to kind of learn about this. Modern portfolio theory, there's a really big importance on non-correlation. And on if you put a lot of assets into a basket that have the non-correlation or are all volatile at different times, you actually are diversifying the risk, right? So the idea that, hey, I take this hyper volatile thing and I put it into my portfolio. Well, the odds that you have a bunch of other things in your portfolio that are all hyper volatile and are driven by the same value drivers is very low, right? And that's where you get the correlations.

• 53:06Anthony Pompliano?

  And then obviously, my favorite example is in May of 2019, when the trade wars are all raging on, I mean, literally the world leaders are tweeting at each other, all this crazy stuff, right? There's a lot of political and geo uncertainty. The Bitcoin correlation to stocks and gold went negative.

• 53:28Speaker 01

  Oh, interesting.

• 53:28Anthony Pompliano?

  So it went negative 0.9 to the S and P, negative 0.8 to gold, and it was up 55%.

• 53:33Speaker 01

  Wow, wow, wow, wow.

• 53:34Anthony Pompliano?

  And so it was this weird situation where we talk about non-correlation, but it actually went the opposite, right? It went to the negative correlation. And so when you see those moments, it goes back to this idea of like the insurance, the smuck insurance or the chaos hedge. All these kinds of things that I think in the crypto community now have become more accepted. Advisors have never even heard of this stuff yet, right? And I think that's some of the work you guys are doing is trying to get them to understand that.

• 53:58Speaker 01

  Of course, yeah. And so, and to your point, in those moments, that's really valuable to have that negative correlation. And the other thing about volatility, you know, I have a million thoughts on everything, but the last thought on this is Obviously, we feel this way because we serve advisors. Those are our clients principally. But it's also one of the reasons that it's so valuable to have advisors managing this for clients. If you open the, I have the Coinbase app, I'm sure you have the Coinbase app. The first thing you see, will see is the price, the 24 hour price chart of the movement of the price. People are not well matched against daily price volatility. They don't know what to expect. It is emotionally scary.

• 54:41Anthony Pompliano?

  2% drop looks big on 24 hour chart.

• 54:43Speaker 01

  Yeah, that's exactly right. Yeah. So I think the other meaning, the other implication of the volatility is advisors can really add some value, some very basic value, which is just to insulate their clients from bad trading behavior. In the same way that, you know, if they were day trading their Netflix position, they probably would have a suboptimal return for the year because they sold at a bad moment. So I think volatility is really essential to the asset class. I think it doesn't intrinsically make it a bad thing. In fact, because of correlations, it's a good thing for portfolios. But it's also a reason that advisors can add a lot of value.

• 55:17Anthony Pompliano?

  The government won't let this happen. They're gonna lose power and regulators or the law enforcement, somebody's gonna step in and shut all this nonsense down.

• 55:29Speaker 01

  Yeah. Well, I mean, so I think there again, we live in a sort of a very different world in 2019 than we did in 2017. So if, you know, the mental model people have is that, you know, regulators or the government are sort of a parent who heard a loud noise in their kid's bedroom in 2017. They started walking towards the door. At the end of 2018, they opened the door and they saw the mess. And, you know, the SEC subpoenaed everyone and the 25 charges.

• 56:00Speaker 01

  But today, where we are in 2019, so that's happened across, of course, there's lots of different regulators in different places. But FinCEN, NYDFS, the SEC, the CFTC, even, you know, this summer, Congress through the lens of Libra are all.

• 56:21Speaker 01

  Staring it in the face. They know what's happening. Obviously, the SEC set up FinHub, the CFTC set up Lab, Lab CFTC. So I think that regulation today is in a dialogue with the industry and sometimes the industry is happy with the progress it's made. Sometimes they wish it would go faster and that's a natural tension between private sector and regulators. But I think that sometimes the concern that, you know, the intuition that as soon as the regulator walks in the room, they're going to be livid and everyone's going to jail is just not the state of affairs in 2019. We met with the SEC eight times over the course of this past year. And I think, you know, for many others, this is ongoing dialogue. So I think that that is in a really good place and that's really important for people who want to participate as investors as well.

• 57:06Anthony Pompliano?

  Crypto is just speculative assets. It has no real value to it and no one's using it.

• 57:11Speaker 01

  Yeah, yeah. So on the using it front, I think that

• 57:21Speaker 01

  the analogy I like to give is, so first of all, a lot of people are, you know, again, we're talking about mainly people who are not working full time in the industry. So for the listeners who work full time in the industry, we're not talking about you. You know, I think for many others, for individuals, families, institutions, advisors, you know, as silly as it sounds, it's called currency. So you start from, okay, well, if it's currency, show me how it's being used like currency. And this manifests itself and I'm not buying coffee with it. And the reality is, you know, I don't think that we've got you backed is going to work with Starbucks to make that possible, but that's not the most important thing. And the mental model that I

• 58:03Speaker 01

  would suggest for looking for use cases is not what are all the places where it's not better than the US dollar today, but rather there just needs to be one thing that it's good at. And here's the analogy. In 2007, everyone's using laptops and desktops and along comes the iPhone, a new computing platform.

• 58:22Speaker 01

  It's not the case that the iPhone replaced all desktops and laptops. We still use desktops and laptops for spreadsheets. You know, I pity the individual who's doing spreadsheets on mobile. For PowerPoints.

• 58:37Anthony Pompliano?

  Writing, a bunch of stuff.

• 58:38Speaker 01

  For writing, email. Mobile, there's some other things that are just way better on mobile. Maps, Uber, taking photos wherever you are. And you do email on both. And I think similarly, when we think about public blockchains, the heuristic we should have is not, has it wiped out all other payment systems, all other currencies, you know, has it replaced everything? It doesn't have to. It's going to coexist, just like the iPhone coexists with your laptop. It just needs to do, it needs to find its Google Maps. It needs to have the one thing that, oh my gosh, is so much better. And there, I think we see burgeoning examples. Specifically, the most obvious one is people using it to transport money across borders. That could be, you know, fleeing inflation in Venezuela.

• 59:22Speaker 01

  There was that great op ed in the New York Times, this Venezuelan economist who talked, the headline is, and you can look it up, Bitcoin saved my family. And, you know, he's talking about moving out of, you know, a million percent annualized inflation is going to destroy his family savings. That's very real. So being able to get it. But also, you know, if you just, this, I think, two weeks ago, you know, $500 million has moved across the Bitcoin blockchain for 36 bucks or something, a de minimis fee. So I think the thing it's doing a really great job at is, you're not buying coffee, you're not registered in every second counts. You're happy for, to wait 10 minutes.

• 59:55Anthony Pompliano?

  Well, and people forget to, you're not using dollars to buy coffee usually.

• 59:59Speaker 01

  Right, you're using kind of, yeah, yeah.

• 1:00:00Anthony Pompliano?

  This is one of the things that we go pretty deep with people and just say, listen, it feels like dollars, right? It's denominated in dollars. It's a great user experience, but don't forget that you actually are paying it off at the end of the month.

• 1:00:12Speaker 01

  Right.

• 1:00:13Anthony Pompliano?

  That's a pretty long settlement timeline.

• 1:00:15Speaker 01

  Yeah, yeah, right. That's actually, that's a great point. Yeah, yeah, yeah, yeah.

• 1:00:17Anthony Pompliano?

  And now there's great advantages as to why to do it. There's a very, very good argument as to the impact, the positive impact this had on society, etc. But you are actually not using dollars in that scenario.

• 1:00:28Speaker 01

  There you go. That is, that is a perfect example. So, so, so. To the to the to the use cases, I say first, as investors, you know, I'm worried that we'll miss the vote, the boat if we wait for coffee. Uh, what we need to see is just a great use case for a or multiple public blockchains. And I think the leading candidate today is some version of you call remittance, capital expatriation. There are 260 million people who change the country they live in each year around the world. You know, if you're moving from, you're moving your family from, I don't know, I'm gonna say Indonesia to Spain. Oh, my gosh, you know, is there any moment where you could simplify that? Or if you, of course, there's a giant remittance corridor between the US and the Philippines, is it easier to send some money that way?

• 1:01:13Speaker 01

  Is it easier if your limit on Venmo is 2,000 bucks? And you have a friend or you have, you know, a kid in college, is it easier to send him 5,000 bucks some other way? So.

• 1:01:20Anthony Pompliano?

  And most of those platforms, a lot of people don't know this, but Venmo, Apple Pay, PayPal, they're not available in these other markets.

• 1:01:27Speaker 01

  Oh, that's, I mean, that's also a very good point, yeah.

• 1:01:28Anthony Pompliano?

  Right, so, so it's in the US, we sit and we say, hey, I'll just Venmo you, right?

• 1:01:32Speaker 01

  Right.

• 1:01:32Anthony Pompliano?

  But I forget, we did the analysis and it's like, the countries that it's not available in would shock you, right? Because it's just now they have something else, right? But Venmo can't get sent to, you know, M-Pesa, right? For example, like, like those two don't, they're not compatible with each other. Whereas when you look at something like a Bitcoin, right? Now you've got something that is global globally available, as long as you have an internet connection, which I think is really important as well.

• 1:01:58Speaker 01

  Yes, absolutely. So that's, you know, that's, that's how we think about what even to be looking for is the heuristic for progress. And it is, it is important that people are looking to see progress. You can't just close your eyes. But I think it's important that you're being realistic about what success looks like. And I think it's, you know, seeing one, two, three of those use cases, and I think we're seeing this today.

• 1:02:18Anthony Pompliano?

  Okay, fine, you can miss me, people use it, but they're just terrorist drug dealers and, uh, and, uh, bad people.

• 1:02:25Speaker 01

  This is simple, this is simple. So, I mean, the two things there, first of all, the DEA said, I believe this year, that less than 10% of activity on blockchains is today illicit activity. It's, it's fair to point out that that is a part of the origin story of crypto and in, in, you know, Silk Road and, and that history. But, you know, the D, just take the DEA's word for it.

• 1:02:48Speaker 01

  So, you know, and then I think, I think that the second thing that, you know, we point out depending on the interest level of the audience is, depending on the blockchain you're using, it's pretty trackable. And so I think what a lot of central banks and governments are coming around to, and one of the reasons people are excited to sort of sprint into central bank digital currencies is, oh, wait a minute, we don't have to deal with cash. We can give people the flexibility of cash, the bare instrument that they can exchange wherever they want, whenever they want, with whoever they want, but we can track it. We can't track the hundred dollar bill.

• 1:03:22Anthony Pompliano?

  The, the choice currency of the drug dealers is still physical cash.

• 1:03:27Speaker 01

  Right. So, so, you know, so if you said to a regulator, you can, you don't have to restrain any of those use cases, but you can witness them all. You can surveil them all. You know, then I think the regulator feels good about that. So, so, you know, I think increasingly, this notion that you can hide nefarious transactions through the Bitcoin blockchain, say, or, or, or another, with the exception of the ones that are specifically trying to facilitate that, will, will fall away and people realize it's not, it's not the best way to do that. And, and it's a permanent ledger. So they don't have to get you this year. They don't have to get you next year. They'll get you in 10 years. Like,

• 1:04:11Speaker 01

  so, so, so anyways, so, so, so that one, I say, relevant consideration. There are AML requirements in place for interacting with the regulated part of the, of the ecosystem. You know, if you work with a counterparty like us or like you, you know, they're diligencing who they're trading with and, and who they're buying and selling from, and there's AML requirements there. But more generally, that has reduced in part because it's not a, it's not the easiest way to get away with something.

• 1:04:39Anthony Pompliano?

  For sure. Last one for you. I heard that countries that are not great with the United States are heavily involved. So mining's controlled by China, or Russia is really interested in this, or some other country in the world that is trying to avoid sanctions, for example, et cetera. Why do I want to have something in my portfolio that is being used by, you know, someone who's not an ally of the United States in some cases?

• 1:05:13Speaker 01

  That's an interesting question. I mean, I do think here, it's a bit like oil.

• 1:05:21Speaker 01

  You know, or even the dollar. It's, it's, it can be surveilled, it can be enforced on, the US can extend its jurisdiction. You can limit the counterparties that you interact with to ones that are regulated. Ultimately, if somebody wants to take a hundred dollar bill into North Korea, or if somebody uses oil to fund a terrorist effort.

• 1:05:45Anthony Pompliano?

  Well, my favorite is, I think it was the Drug Office of the UK, or something like that. They did a study, and Bloomberg published a big report that said, $2 trillion of, $2 trillion US dollars per year is money laundered.

• 1:05:59Speaker 01

  Yeah, wow.

• 1:05:59Anthony Pompliano?

  And when they started looking through it, they've got all the numbers, whatever, and you look at it, and you're like, wait a minute, $2 trillion is laundered, and the entire crypto market cap is like, at the time, it was like 250 billion.

• 1:06:11Speaker 01

  Yeah, yeah, yeah.

• 1:06:12Anthony Pompliano?

  Right? So we're talking about literally 10x the entire market cap of all of crypto is being laundered in the legacy world.

• 1:06:17Speaker 01

  I do think that the thing that, to many people, they're like, okay, fine, you've pointed out a blemish on the existing system, but we're in the existing system, so that's what it is. But I don't have to step into this new system, and if the new system is as bad as the existing system, why would I, you know? So, but I think that the improvement in the new system is what we discussed, which is, it's a transparent ledger. Everything that's taking place in the ledger, either now or in the future, can potentially be acted on, enforced on, and that is an advantage public blockchains have towards existing in compliance, existing in above-board context. So, the other one that you didn't ask, that

• 1:06:59Speaker 01

  we get all the time, got today, was, is, look, people say that this thing is scarce, but I hear that people are just creating dozens of new Bitcoins. You know, there's hundreds of these Bitcoin things now.

• 1:07:17Anthony Pompliano?

  Thousands, there's thousands of them.

• 1:07:18Speaker 01

  Yeah, thousands, is what, you know?

• 1:07:19Anthony Pompliano?

  I went on CoinMarketCap, you see how many Bitcoins are on there?

• 1:07:21Speaker 01

  Yeah, yeah, there's a bunch of them now, there's a ton of them now. And, you know, there, what we try to articulate is, it's a little bit like saying, my uncle just launched a blog, Wikipedia's in trouble.

• 1:07:38Speaker 01

  Like, there are, there's something like, uh, 3 million apps on the App Store. People mostly use 10. There's like 350 million websites on the internet. People mostly only use Google, Amazon, Wikipedia, YouTube, um, Facebook. The mere, because it's software, the marginal cost of creating a new one is de minimis. Uh, and so the same thing will happen with crypto. People are gonna create new ones. That doesn't have any bearing on the reality of the existing ones. Uh, I think that the, the, the mental mode that, uh, one has to, um, be in to understand. So, so there's, there's two types of technology companies, generally. One is Intel.

• 1:08:20Speaker 01

  They make some breakthrough in IP and they figure out how to put more transistors on a smaller nanometer of silicon. They create like the world's first fabrication lab for doing that. And then they go to you and they say, would you like more speed for less money? And you go, dang, that sounds good. Um, and, uh, and that's the sort of IP hardcore technology type of tech company. There's another type of tech company, which is the Uber, Airbnb, WhatsApp, Facebooks, Ebays of the world. There, it's not explicitly that they made some scientific breakthrough, but rather they've, they've gathered a multi-sided marketplace that has sort of a centrifugal flywheel that causes it to just be superior.

• 1:08:59Speaker 01

  As a simple example, uh, uh, HP created WebOS, a mobile phone operating system. You know, have you ever heard of it? Yeah, yeah, yeah. You know, what you have to imagine is, um, uh, you know, the, the, the, uh, consumer isn't gonna buy it unless it is apps. And the app developer isn't gonna write an app for it unless they're consumers. You and I could create, you know, could rewrite some of the Uber software, but the driver's not gonna download the app, uh, unless they know they're gonna get calls from riders. And the rider's not gonna make calls unless the driver's on there. So, so, uh, similarly with public blockchain, they're not. I think that because it's so unfamiliar and there's so much jargon in crypto, people have an inclination to believe it's the Intel type of tech,

• 1:09:42Speaker 01

  which is like this patentable, it's not.

• 1:09:47Anthony Pompliano?

  It's a network effect.

• 1:09:48Speaker 01

  It's a network effect type of tech. It's the Uber type of tech. And so if somebody forks Bitcoin and makes a modification or somebody writes a new protocol and expands on the prior art, you still have to go get all of the constituents. You have to get the miners. You have to get the app developers. You have to get somebody to create futures on top. You have to get the custodians to support it. You have to get people to actually want to buy it. And so that creates a lot of defensibility. So to summarize, like the App Store or the web, the mere creation of a new one

• 1:10:25Anthony Pompliano?

  Doesn't matter.

• 1:10:25Speaker 01

  in and of itself doesn't change anything. And the defensibility doesn't come from sort of novel IP. It comes from the network effect that emerges around the protocol.

• 1:10:35Anthony Pompliano?

  Got it. Before we wrap up with a rapid fire, you guys are one of, I think, two or three now who have been slowly beating down the door for the Bitcoin ETF approval in the United States. Maybe just give us kind of a why are you guys interested in getting that approved? And then where do we stand today with various applications?

• 1:10:56Speaker 01

  Yeah.

• 1:10:59Speaker 01

  So the why is two things. One, it's a very simple piece of infrastructure that would simplify for a lot of investors getting access to the asset class. You know, there are many investors who say, look, we're interested. We see it could do something in the portfolio, but we can't do it through these other structures. We use mutual funds. We use ETFs. This is going to be a 1% allocation. We're not going to rewrite our compliance manual. We're not going to rewrite our workflow. We're not going to hire this new personnel. We're not going to undertake a two-week-long. It needs to slot in, just like the same bar that we applied to everything else. So it's sort of a bridge that needs to be built for some people to come across. And that's a really big deal.

• 1:11:40Speaker 01

  The other, for some, you know, there's some large institutions who said to us, even hedge fund manager selection people said, we'll probably first allocate to a Bitcoin ETF. I said, why? That's crazy. And he said, well, realistically,

• 1:11:57Speaker 01

  If Bitcoin ETF launches, it means that the SEC did diligence on all of these aspects. Custody, market manipulation, volume, pricing. And the exposure is enough for us. So it'll just, but it'll be really valuable to have the SEC stamp on it. And so I think those are the two reasons that it's so high stakes. It opens up, you know, a huge group of people who just can't walk across until that happens. And then the second is it does, it does, and this is why it's, you know, it's such a big deal to the SEC and they don't take it lightly. It does represent the SEC's done homework and said that this is feasible. And that that matters to other investors. So where is, where is the Bitcoin ETF journey at? The wink of loss has kicked off the journey back in 2013 with the first filing.

• 1:12:42Anthony Pompliano?

  Crazy, by the way, that's how early they started.

• 1:12:45Speaker 01

  Incredible, incredible. Yes. In some ways hard to imagine. And then our filing is the most recent. So our filing was, had a disapproval order in October. And then that was stayed. So the staff that works for the commission issues the disapproval order. And then the commission stayed the disapproval and is now examining it. So that's, that's sort of the latest with Bitcoin ETFs is our filing and that. The backdrop, I would say, so, so this year we did it. We tried to contribute a huge amount to helping the SEC build, build their view and address the concerns they have. We wrote 500 pages of white paper. We went, you know, eight times.

• 1:13:30Speaker 01

  There are over half a dozen industry constituents who wrote letters advocating for our filing and the ability to do this effectively today. That includes Coinbase, Blockchain Association, a number of others. And, you know, what we saw in their response was what we've experienced. I think what everyone understands by the SEC, which is They're paying attention, they're spending time on it, and they have a nuanced understanding, and they still have some concerns. There's not much more you can ask for from a regulator. Their job is to protect investors, and the gift that we all get as an industry is the fact that they've staffed people on this. It's a budget-constrained organization.

• 1:14:12Speaker 01

  People were furloughed at the beginning of this year when the government ran out of funding.

• 1:14:16Anthony Pompliano?

  People forget.

• 1:14:17Speaker 01

  People forget, yeah. So the fact that they've even staffed people on this is a huge gift to crypto and obviously to the ETF efforts. And I feel grateful for the people internally at the SEC who are doing this work. It's not easy, but it's also not easy for a pension to allocate to crypto. It's not easy for an endowment to decide to allocate to crypto. And so it's definitely not easy for the SEC to say, "We're comfortable with this, but they're moving along." So then the question is, okay, well, they've been moving along for a long time.

• 1:14:45Anthony Pompliano?

  Yep.

• 1:14:45Speaker 01

  What should we make of this? And truthfully, I would like them to move faster, even though I really respect the work they're doing, because I think that this, for many investors, would save people from a lot of pain, a lot of harm, and a lot of the risks embedded in the other services that people are using because they can't do it this way. So they're sort of being forced, through omission, are being forced to the fringes of solutions. But you could say, okay, so they're spending time, what should we make of the journey here? Where are we in the journey? And here, we like to provide his context. Matt, our head of research, one of the foremost experts on ETFs, wrote the

• 1:15:27Speaker 01

  ETF section of the CFA, a great partner in educating on ETFs, leads our work on the ETF, points out that the first gold ETF took two to three years. The first fixed income took like four, five, six years. First leverage took seven years. First non-transparent, which was just approved this year, took nine years.

• 1:15:55Speaker 01

  Crypto is five to six years in, depending on how you count. For all these novel, different novel structures, it's taken time. And so the question is not, you know, will they disapprove this filing? The question is, are they, are they, you know, is the thinking moving along? A devastating outcome would have been on the filing if they demanded that we withdraw it. If they said, do not make us write a public memo. Or because they don't want, you know, they just don't care and they don't want to spend the time. Right? Or another, another bad outcome would be if they wrote a two-page memo. Says, you know, not safe, it's manipulated, you know.

• 1:16:39Speaker 01

  They didn't. It was 112 pages. When is the last time you were at 112? I mean, you acutely know how long it takes to write things. Now imagine writing 112 pages and having 30 people weigh in on it.

• 1:16:49Anthony Pompliano?

  About something that you don't care about.

• 1:16:50Speaker 01

  Yeah, yeah, yeah.

• 1:16:52Anthony Pompliano?

  Not gonna happen.

• 1:16:53Speaker 01

  Yeah, yeah, right, right, right. And, and it's public precedent that you'll be asked about for the next five years. That's a huge undertaking. So why do you do that? You do that because you're working through a lot of issues and you want to communicate out. We're working. Help us solve these things. So, so we're grateful for that response. We, you know, we think that the market would really benefit from, from something coming to market. We think that you can securely operate an ETF. Just to be very clear about that, we've been operating funds for two years. We believe that you can securely operate in the market. We've written a lot to that extent and we're committed to seeing this thing through. So that's the latest on that.

• 1:17:28Anthony Pompliano?

  Yeah, we're all cheering for you, man. Come on.

• 1:17:33Anthony Pompliano?

  It's, it's one of these things where I think that people will look back and say, oh, of course an ETF was going to get approved, right? And they'll kind of forget all the hard work that goes into it.

• 1:17:43Speaker 01

  Yes.

• 1:17:44Anthony Pompliano?

  So it's important to kind of talk about the hard work that goes into it.

• 1:17:46Speaker 01

  I do think that's true. I mean, it took, it took a little while to get fixed to get bond ETFs approved. That's what I'm saying. I'm saying it took a while to get bond ETFs approved. You know, and exactly to your point, you would say, what?

• 1:17:56Anthony Pompliano?

  Yeah, of course they were going to do that, right? All right, rapid fire. What's the most important company in crypto other than Bitwise?

• 1:18:03Speaker 01

  It's, I would say it's hands down Coinbase.

• 1:18:05Anthony Pompliano?

  Why?

• 1:18:06Speaker 01

  I think that Coinbase provides air cover for.

• 1:18:11Speaker 01

  So many other companies in two ways. Number one, it demonstrates to capital allocators that you can build a giant business, a giant valuable business. And you need those tent poles, those success stories for people to fund new businesses. And I think that is sort of the shining example that people look at today and say, wow, I wish I'd invested in that business. And look, they've successfully built a giant business in this space. The second is that they, you know, they, they're above board. They play by the rules. They interact proactively with regulators. They register, they get licenses, and they have massive scale. And so they're doing all of that with massive scale. And, and I think that that is a, I think it's, I think sometimes they're, you know,

• 1:18:54Speaker 01

  like so many other things, once it becomes familiar, start to take it for granted, start to, you know, notice the things that we're frustrated with. But I think if you remove Coinbase from crypto, I think that, that the, on the regulatory front and on the private capitalization of new ventures, you lose a lot. So Coinbase, I would say, for those reasons.

• 1:19:16Anthony Pompliano?

  What's the one regulation you would change or improve if you could?

• 1:19:22Speaker 01

  Wow.

• 1:19:28Speaker 01

  You know, so Commissioner Clayton's looking at it, but I do think that there's this interesting aspect of the 33 Act, the Securities Act of 33, which divides the universe into accredited and unaccredited. And it defines accredited investors as having over $200,000 in income, over $1 million in net worth in 1933. Materially, what it means today, there's about 11 million accredited investors today, is really you have sort of like the people who can do what they want, and then you have, and then you have everyone else. And as increasingly...

• 1:20:08Speaker 01

  You know, this gets to a much bigger trend that's playing out right now, but in 2000, in the year 2000, there were 8,500 publicly listed exchange traded companies. Today, there's 3,500. The Wilshire 5,000 index does not have 5,000 companies in it. So companies are not listing, they're staying private for longer. The amount of time the average venture backed company stays private has gone from 4.2 years to 5 and a half. They're getting their capital privately, they're staying private. People take them seriously privately. You know, nobody, nobody questions how serious Airbnb is because they're private.

• 1:20:38Anthony Pompliano?

  Of course.

• 1:20:39Speaker 01

  And, and so a lot more is happening in private markets, but private markets are only available to accredited investors. And so, but Commissioner Clayton is specifically looking into this, which is how can we, how can we provide the protections that prevent people from, from, from losing their shirts, which are very important, and at the same time allow people access to the fact that a lot, that a lot of value is shifting to these alternatives, to, to private markets. So I think that's the one that feels to me like, there's a sensible, there's a sensible opportunity to, to improve. That's the one that jumps out at me. I'm sure that there's a lot of others.

• 1:21:15Anthony Pompliano?

  I agree. I agree. The accredited, the accredited investor laws are a violation of the American dream, in my opinion.

• 1:21:22Speaker 01

  Wow.

• 1:21:23Anthony Pompliano?

  What's the most controversial thing?

• 1:21:25Speaker 01

  That's a hot take right there, baby.

• 1:21:26Anthony Pompliano?

  It's true.

• 1:21:27Speaker 01

  Yeah.

• 1:21:28Anthony Pompliano?

  We wrote into law, you have to be rich to get rich.

• 1:21:30Speaker 01

  Ooh.

• 1:21:31Anthony Pompliano?

  Right?

• 1:21:32Speaker 01

  Yeah. There, there is definitely something to that. I mean, I, I think what, what has really, has really become, you know, in sharp relief over the last 20 years is there's two ways to make money. You can make money from capital and you can make money from labor. And they're two very different ways. They're taxed differently. It's two different tax codes for capital gains and versus waiver labor wages. And.

• 1:21:54Anthony Pompliano?

  Which one's more advantageous?

• 1:21:55Speaker 01

  Yeah, right, right. Exactly. And so, so, you know, times change and I think that, you know, while maybe the mix of capital gains versus wage labor in the 30s was one thing, you know, I think today it's.

• 1:22:07Anthony Pompliano?

  What's the most important book you've ever read?

• 1:22:09Speaker 01

  Oh, most important book I've ever read.

• 1:22:15Speaker 01

  That's a great question.

• 1:22:18Anthony Pompliano?

  All I do is great questions.

• 1:22:19Speaker 01

  That's right. That's what I was just thinking. I was like, shit, how do you have so many great questions?

• 1:22:23Anthony Pompliano?

  Boy, I've done this 200 times. Go ahead.

• 1:22:24Speaker 01

  Yeah, right, right.

• 1:22:27Anthony Pompliano?

  Joe's laughing in the corner for everyone who didn't hear him.

• 1:22:30Speaker 01

  Yeah, there's a, there's a...

• 1:22:33Anthony Pompliano?

  Now his face is ready to be embarrassed that I called him out.

• 1:22:35Speaker 01

  Yeah, now we're looking at Joe. He's been mostly laughing at my jokes, though, as he promised to.

• 1:22:41Speaker 01

  You know, not, not, I'll tell you, I'll tell you the book more recently. That's such a big question, and I love reading so much opportunity. There's a book called Engines That Move Markets. Have you heard of that book?

• 1:22:52Anthony Pompliano?

  Engines That Move Markets. I have not.

• 1:22:54Speaker 01

  It's written by a former, I believe, CIO or Chief Economist for Franklin Templeton.

• 1:23:00Anthony Pompliano?

  Okay.

• 1:23:01Speaker 01

  Alstair Narn, I believe. Now I'm embarrassed to not have said it correctly, but it's called Engines That Move Markets. And it looks at some of the most important technological breakthroughs of the last 150 years through the lens of an investor who was there at the time. So it looks at the railroad. It looks at the electrical grid. It looks at the telegraph, looks at the telephone. It looks at the automobile. It looks at the PC. And it looks at things like gross margins. Did the investors that backed these companies make money? Were the businesses profitable? Were there a bunch? Were there a few? Was it the first mover? Was it the incumbent?

• 1:23:40Speaker 01

  And I think it, you know, most people are familiar with the stories of many of these different platforms. And some of the characters involve Edison and the railroads, Rockefeller, etc. But they're not, they've never actually thought about it from the lens of, you know, of allocating capital. Someone comes along and says, "I have the, an idea for a telegraph that transmits voice, and I'm raising $100,000." There's a great quote from the CEO of Western Union who said, you know, who turned down for $100,000, Alexander Graham Bell's offer to sell the patents. He said, "What is anyone, what use does anyone have for a toy like this?" And within 10 years, AT&T bought Western Union, which at the time had been the largest company in the country. So I think one of the reasons I love it...

• 1:24:21Anthony Pompliano?

  Crazy.

• 1:24:21Speaker 01

  I love it. Yeah, it's totally, it's totally crazy. I love history more generally. I had the opportunity to TA the history of business class at Wharton, and I love, love history, love, love business history. I, I love this book in particular because I think it, it just shows you the behind the scenes of how a lot that feels fixed in the world came into existence and how uncertain it was and the sort of arbitrariness of the, of the path, the path that things took. So I highly recommend that book.

• 1:24:51Anthony Pompliano?

  Engines that move markets.

• 1:24:52Speaker 01

  Engines that move markets.

• 1:24:53Anthony Pompliano?

  Aliens, believer or non-believer?

• 1:25:02Speaker 01

  Believe it or non-believe it. I, I, I think if I was betting money, that I would bet money on there being aliens.

• 1:25:09Anthony Pompliano?

  Why?

• 1:25:10Speaker 01

  There's two, two, two, two things I'd point to. Number one, humans always think that they know, and then they're always wrong. That is like the only thing that humans are consistently good at. The world is flat. Oh, no, it's not.

• 1:25:27Anthony Pompliano?

  Yeah, small detail.

• 1:25:28Speaker 01

  Yeah. Oh, yeah, yeah, yeah. We, we botched that one for a little while. You know, bloodletting, cure for, you know, ailment. Oh, no, actually not at all. So.

• 1:25:36Anthony Pompliano?

  There's nine planets. Wait, nope, now there's 1400.

• 1:25:39Speaker 01

  Yeah. So I, I default to, to, you know, unless there's, there's strong evidence that something is not possible, I default to possible. Yeah. The, yeah, what else? I mean, there's, there's what? There's Fermi's paradox or Drake's equation.

• 1:25:50Anthony Pompliano?

  So the reason why I asked this question is it started out as if aliens are real, so you have to just, okay, they're real.

• 1:25:57Speaker 01

  Yeah.

• 1:25:58Anthony Pompliano?

  Do they have pets? Or are they all one single species and there's no concept of alien pets?

• 1:26:06Speaker 01

  I love this question.

• 1:26:07Anthony Pompliano?

  That's where that question came from originally. People forget. I used to ask every single person, do aliens have pets?

• 1:26:12Speaker 01

  You also, you would define the, the smallest unit. What is the minimal criteria at which you would consider something an alien?

• 1:26:19Anthony Pompliano?

  This is your show. You define.

• 1:26:22Speaker 01

  Man, you're a pro. I, I mentioned consciousness. Just anything with consciousness, regardless of form, size, something like that.

• 1:26:29Anthony Pompliano?

  Yeah, that's fair.

• 1:26:31Speaker 01

  And then, you know, on a different planet. I mean, dude, they're definitely aliens. There's gotta be aliens.

• 1:26:36Anthony Pompliano?

  But are there alien pets?

• 1:26:40Speaker 01

  I'm on the side of alien pets.

• 1:26:42Anthony Pompliano?

  Alright, so am I, so am I. But I'm, I'm just, that's my thing is if you, if you've looked at all the movies.

• 1:26:47Speaker 01

  Yeah.

• 1:26:48Anthony Pompliano?

  Every sci-fi.

• 1:26:49Speaker 01

  Yeah.

• 1:26:49Anthony Pompliano?

  There's no, there, there might be aliens-

• 1:26:52Speaker 01

  Maybe that's why they're always invading.

• 1:26:53Anthony Pompliano?

  That are together.

• 1:26:54Speaker 01

  They're sad, you know, if they had dogs.

• 1:26:57Anthony Pompliano?

  Well, here, here's a good one for you. Uh, do we want them to come in contact with us?

• 1:27:04Anthony Pompliano?

  In all of human history-

• 1:27:06Speaker 01

  Yeah, yeah, yeah.

• 1:27:06Anthony Pompliano?

  The invaders have had a huge advantage.

• 1:27:08Speaker 01

  Yeah, yeah, no, yeah, 100%. I mean, I think they're, yeah, uh, no. Probably the answer is no. The answer realistically is, is no. And, and you know, it, it's actually interesting right now. Um, there's sort of a burgeoning, you know, private space sector. Uh, that's emerging, commercialization of, of space undertakings. But you, you, you even simply, you could see this through the lens of, of, um, SpaceX and Blue Origin and Virgin Galactic, and these are private. Um, and it, it's, it's funny because in, in my mind, there's, there's some, some parallels to, um, uh, explorers in, in, uh, European explorers. Uh, you, you know, if you, if you imagine what Christopher Columbus or, uh,

• 1:27:52Speaker 01

  some of the other names for Francis Drake from that period were doing, that, you know, they're, they're going on very long journeys where you could easily die just in the process of getting in the direction of where you're going. And you don't know what's on the other side. Um, and, uh, some of those journeys were, were financed privately by merchant banks and, and essentially wealthy families, uh, but, but, uh, nobles. Um, and, and it is kind of interesting to draw a parallel. The, the, the form has changed. It's not sailboats, uh, but, uh, now it's, uh, rocket ships and, and they're, they're going, you know, uh, the journey is perilous today. It's being privately financed. Uh, the jurisdiction that countries have over the, where they're going is kind of unclear.

• 1:28:35Speaker 01

  So it's likely to be the Wild West in terms of how rule is enforced.

• 1:28:38Anthony Pompliano?

  Yeah, who gets to claim Mars first?

• 1:28:40Speaker 01

  Who gets, oh, yeah, yeah.

• 1:28:41Anthony Pompliano?

  You can get into all kinds of questions that, uh, I don't think people really want to know the answers to.

• 1:28:45Speaker 01

  Yeah, I, do you, do you think, uh, do you think, uh, do you think in, in our lifetime, um, people are living either in-

• 1:28:54Speaker 01

  Space in some, you know, sort of on an international space station type. So obviously, Virgin Galactic is pushing the frontier of space tourism. Do you think people are living in space or on another planet in our lifetime?

• 1:29:09Anthony Pompliano?

  I think humans will make it there in our lifetime. So let's, I'm 31, I'm assuming you're a similar rate. So let's say that we've got, let's be real ambitious, let's say we got 80 years in our life.

• 1:29:22Speaker 01

  Yeah, yeah, yeah, great, great. Yeah, average is 78.

• 1:29:26Anthony Pompliano?

  Yeah, alright, so, so, perfect, so we're...

• 1:29:28Speaker 01

  We're both gonna get hit by a bus on the way out of this building.

• 1:29:30Anthony Pompliano?

  Yeah, I'm not walking out with you.

• 1:29:31Speaker 01

  Yeah, yeah, yeah, yeah. Joe's laughing.

• 1:29:34Anthony Pompliano?

  Don't make Joe tell you about Clocus luck. But, no, so the, um, long story. No, but if you think about that, so 50 years, we are, what, 60 years, give or take, since man went to the moon? So the odds that we can get to Mars probably happens in our lifetime. I don't know if it is like true colonization. Like, there's a difference between like, can we basically probe? Or is it possible to get somewhere? And then like, hey, are you sending your family? Right? And the colonization, I think, is, uh, so that was a little bit tougher for me to see that happening.

• 1:30:19Anthony Pompliano?

  But getting there for sh- I'm like, pretty confident that we'll, uh, we'll get there in our lifetime.

• 1:30:23Speaker 01

  I'd love to know some of your other predictions about the future. Can I ask, can I ask you two more questions?

• 1:30:28Anthony Pompliano?

  Yeah, well, actually, that's how we end. You get to ask me questions, so go ahead.

• 1:30:30Speaker 01

  Oh, great. Well, I've got a crypto question, but I want to ask you two other questions about the future. There's 170 odd countries today in nation-states. Do you think we have more or less than 100 by the end of your lifetime?

• 1:30:45Anthony Pompliano?

  170.

• 1:30:46Speaker 01

  170 today. The Moratius, this is island country.

• 1:30:49Anthony Pompliano?

  Yeah, yeah, yeah.

• 1:30:50Speaker 01

  Obviously.

• 1:30:51Anthony Pompliano?

  So, uh, I've got a nuanced answer. I think that there will still be the quote "country", but the definition of a country will change. And what I mean by that is it won't be so much tied to the physical borders of like, "This is my land, get out." Uh, it'll be much more a, uh, a group of people who choose to have themselves governed under a collective rule. Right? So like Estonia is a good example of this. Like, all of a sudden Estonia is taking citizenships from people who have never even been to Estonia.

• 1:31:18Speaker 01

  Is that right?

• 1:31:19Anthony Pompliano?

  Yeah, they've got like a digital citizenship. So like, you could become a digital citizen of Estonia and never go within their physical borders.

• 1:31:28Speaker 01

  That's incredible, yeah.

• 1:31:29Anthony Pompliano?

  And so like, I don't think that the country of Estonia goes away. But all of a sudden, wait a minute, like, their sovereignty and how they think about citizenship, like, all that starts to shift.

• 1:31:41Speaker 01

  Yeah.

• 1:31:41Anthony Pompliano?

  The harder part is like, what does it become? I'm not sure, but I do think that the, the idea of what a, what a country is changes.

• 1:31:49Speaker 01

  In that environment, where you no longer have the physical constraint, which is you don't have to co-locate these people, but you just have to share a set of values, a set of standards, um, you would actually expect there to be more of these, right? Because the, the barrier to entry would be lower and you could also potentially have multiple membership. I mean, that would, that would depend, but you, you could actually see like, um, that's so interesting.

• 1:32:09Anthony Pompliano?

  Well, California's gonna be a country by like the next election, right?

• 1:32:12Speaker 01

  I don't know about that.

• 1:32:14Anthony Pompliano?

  Or what is it, what is it, uh, who, who is it? Tim Draper's got three, three countries coming out of California.

• 1:32:20Speaker 01

  Yeah, yeah, that's right, that's right. Well, you know, that, that is right.

• 1:32:23Anthony Pompliano?

  But the thing about the internet, the internet's a country, right? Like, like, I think a lot about this idea of everyone is a citizen of the internet and uh, it's the largest country in the world. And yeah, there's some ramifications of the physical place in which you access the internet. But it's kind of like the Ready Player One, like, you go into the portal, right? And once you're in the portal, here we go, right? And so I think that, uh, it's, you know, is Twitter a digital country? Because it has its own fiefdom, its own rules, it's, everyone's a citizen, we all act along it. There's a quote-unquote government, right? But it's Twitter censoring us and deplatforming.

• 1:32:59Speaker 01

  Well, you say the same thing about, you know, so you have nation-states, then you just say you have na- you you could say the same thing about Islam, or Judaism, or Catholicism, or, um, yeah, it's sort of an interesting spectrum there. But, you know, conventionally, the internet allows a long tail, uh, a fragmentation to emerge. That's, you know, Uber allowed a long tail of people to become drivers, Airbnb a long tail of people to open a hospitality, YouTube, a long tail of talk shows, and WordPress, a long tail of publications, Facebook, a long tail of communities. So you could ima- you could imagine sort of a long tail of more formal human organizations. There's a great article, do you know Jesse Walden at Andreessen?

• 1:33:40Anthony Pompliano?

  Uh, I know who he is, yeah.

• 1:33:41Speaker 01

  He wrote a great article on, on, um, crypto networks as co-ops, uh, as a digital way of instantiating a co-op. So, um, uh, you know, Land O' Lakes is a co-op, there are a number of other co-ops, sort of, you know, among us today. But the preferred way of organizing humans is a corporation or a limited partnership. But, you know, his argument is that a, a protocol is a way of forming a, a co-op is shared set of rules.

• 1:34:04Anthony Pompliano?

  You mentioned Airbnb, I'll give you a great quote somebody said to me. They said Airbnb is the largest hospitality school in the world.

• 1:34:12Speaker 01

  Wow.

• 1:34:13Anthony Pompliano?

  Because what'd they do? They taught people how to run hotels, right?

• 1:34:16Speaker 01

  Yeah, no kidding.

• 1:34:17Anthony Pompliano?

  Or run rentals.

• 1:34:18Speaker 01

  Yeah.

• 1:34:18Anthony Pompliano?

  And they're usually people who had no formal training.

• 1:34:21Speaker 01

  Yeah.

• 1:34:21Anthony Pompliano?

  And Airbnb said, here's some best practices.

• 1:34:23Speaker 01

  That's so fascinating. Uber. Kind of trained the, the labor force, yeah.

• 1:34:27Anthony Pompliano?

  The largest taxi.

• 1:34:28Speaker 01

  Yeah.

• 1:34:29Anthony Pompliano?

  Uh, school in the world.

• 1:34:30Speaker 01

  You know, there's so many parallels. I mean, once upon a time, Ford, uh, in the, in the early part of the 20th century, in, in, you know, like, 1918, had a school. There's a Ford school. Ford, by the way, also had a bank and also built housing.

• 1:34:42Anthony Pompliano?

  Crazy.

• 1:34:43Speaker 01

  Uh, and you, so you have Ford Credit, uh, there's a Ford store, so, um, yeah, it's so interesting. I mean, the, the reason I love business history is because nothing is new. Nothing is new, it just changes colors and it just changes clothes. But, uh, so, um, you know, yeah, the idea, the way of conceptualizing Airbnb is, is both a labor training program, as well as a, as well as a business is, is a fascinating way of looking at it.

• 1:35:08Anthony Pompliano?

  What other questions you got?

• 1:35:09Speaker 01

  Um, uh, another question I want to ask you, um, uh, it was on, on the crypto front.

• 1:35:18Speaker 01

  And, uh, I was curious to ask you from, from your, from your venture seat, um- How do you think about, what, are there particular pockets of crypto that are most interesting to you today? And has it changed over the, over the last year?

• 1:35:35Anthony Pompliano?

  Changes all the time.

• 1:35:36Speaker 01

  Yeah, I'm sure it changes. I'm sure that changes all the time. And, and, you know, I remember there's a lot of enthusiasm for

• 1:35:44Speaker 01

  new protocols, obviously at one point.

• 1:35:48Speaker 01

  There's a lot of enthusiasm for custodians at one point.

• 1:35:53Speaker 01

  I'm curious, I'm curious.

• 1:35:54Anthony Pompliano?

  Yeah.

• 1:35:54Speaker 01

  Is there themes there? Does it tend to be more?

• 1:35:56Anthony Pompliano?

  So I tend to think of it as, we've got some very core thesis. Those thesis plays out in a lot of different ways. So two of the core, like probably the, the two core thesis we have is every stock, bond, currency, commodity will be digitized over time. And the second is that humans will trust algorithms and software over other humans. So take the algorithms and software of our other humans first. That plays out Bitcoin as a store of value. Like I trust that this software system is going to correctly store and secure my value for long periods of time. Okay. But then you can also go to, well, what about DeFi? Right? There's a whole world there of me trusting software over humans, right? But again, to your point about like, nothing's new.

• 1:36:39Anthony Pompliano?

  Well, like I trust Google Maps for directions. I don't trust the person on the street anymore, right? Like I'm going to ask somebody a question, hey, do you know, you know, how many World Series did the New York Yankees win? And you ask three people in New York and literally you might get three different answers. Google always right. Right? And so it's like, I trust that algorithm or that software. And so if you go down the line, I think that that's like a really key theme, but it plays out in a lot of different ways. When you go to every stock, bond, currency, commodity gets digitized, that is playing out in people who are digitizing them. People who are providing custodianship for them, people who are providing marketplaces for them.

• 1:37:19Anthony Pompliano?

  You almost have to think of it as like, the thesis is a bucket and within those buckets are the applications or the execution of that idea. But one that I'm becoming much more.

• 1:37:32Anthony Pompliano?

  I think excited about that people aren't talking about is using

• 1:37:38Speaker 01

  Until now.

• 1:37:38Anthony Pompliano?

  Well, it's using this technology, this being decentralization, governance, etc. As the escape hatch for privacy and individual freedoms. So, like you were talking about earlier, governments historically have done nothing but continue to encroach on individual freedoms. Everything from simple things like there used to not be a federal income tax.

• 1:38:05Speaker 01

  Right.

• 1:38:06Anthony Pompliano?

  Got introduced in a time of need, right? And it never went away.

• 1:38:09Speaker 01

  I should have known that. That's fascinating.

• 1:38:11Anthony Pompliano?

  Things around surveillance state, you know, you just, why do we need that security camera on the street corner? Now there's 20 of them, right? You know, all that kind of stuff. So what ends up happening is

• 1:38:22Anthony Pompliano?

  there's usually pretty decent explanations as to why to do this at some point. It's just that the slippery slope is slippery, right? And you just don't go back.

• 1:38:30Speaker 01

  Yeah, right, yeah.

• 1:38:31Anthony Pompliano?

  The only way to go back or to reset or to give back freedom. It's not to argue with the government or fight the government, etc. Because actually they're doing what the rational thing for a government to do is they actually are trying to protect people. It's just that there's a balance between protection and freedom. What you have to do is you have to give people tools that they then opt into, right? And so if you look at like Bitcoin versus a central bank digital currency. There's going to be tons of people who use a central bank digital currency because it's easy, their government backs it, blah, blah, blah, whatever. But then there's going to be a group of people who opt out of that system and opt into the more individual freedom, privacy type world. And so like, I don't know exactly how that plays out, but it's something that I'm starting to pay more attention to.

• 1:39:11Anthony Pompliano?

  Because it feels like it's applicable to money, it's applicable to surveillance, it's applicable to your data, it's applicable to the way that you interact with things, right? So, you know, if we move to this automated world, and let's say that you're driving your car down the street. And rather than pay your taxes, your car just pays for what it uses.

• 1:39:30Speaker 01

  Yeah.

• 1:39:31Anthony Pompliano?

  So as you're just paying sensors along the way, well, like, who's getting that data, right? You know, you could really quickly see this like kind of Orwellian dystopian type world that I don't think is like five years away. But like if you walk backwards, let's say it takes 30 years to come.

• 1:39:51Speaker 01

  Sure.

• 1:39:52Anthony Pompliano?

  Eh, we're doing some things today that are gonna accelerate us getting there.

• 1:39:55Speaker 01

  Yeah.

• 1:39:55Anthony Pompliano?

  Um, so I think that's a big one.

• 1:39:57Speaker 01

  Yeah.

• 1:39:57Anthony Pompliano?

  And then the last one is, um, this idea of, uh, the people who have nothing can leapfrog the people who have something.

• 1:40:05Speaker 01

  Huh.

• 1:40:05Anthony Pompliano?

  And so if you look at like mobile banking in, uh, like Eastern African countries, right? Um, M-Pesa did a great job going from we have nothing to we have better mobile banking than most people in the US. Right?

• 1:40:18Speaker 01

  Yeah.

• 1:40:18Anthony Pompliano?

  Um, and so like, money's one thing, but there's a whole bunch of other things around technology. And you and I were both at Facebook around a time where like they were running out of users on the internet.

• 1:40:27Speaker 01

  Right.

• 1:40:27Anthony Pompliano?

  What do they do? Let's go give a bunch of people connectivity.

• 1:40:29Speaker 01

  You mean the internet to everyone, yeah.

• 1:40:30Anthony Pompliano?

  Yeah, like, you know, and, and let's go give internet to everyone. Well, now-

• 1:40:34Speaker 01

  Time to increase the population of the world. We're gonna, we're to-

• 1:40:36Anthony Pompliano?

  Yeah.

• 1:40:36Speaker 01

  Yeah.

• 1:40:37Anthony Pompliano?

  So like now as these technologies get built, whether it's a Bitcoin, whether it's, um, you know, the financial services or some protocols or whatever, they're going to be built and scaled on the back of that connectivity that didn't exist 20 years ago.

• 1:40:51Speaker 01

  Hmm.

• 1:40:51Anthony Pompliano?

  So I actually think that companies can grow faster now.

• 1:40:55Speaker 01

  Yeah.

• 1:40:56Anthony Pompliano?

  Right?

• 1:40:56Speaker 01

  Of course, yeah.

• 1:40:56Anthony Pompliano?

  Um, and they can become global from day one. Because people forget already, you know, we talk about history of business.

• 1:41:02Speaker 01

  Yep.

• 1:41:03Anthony Pompliano?

  A company in the US used to penetrate the US market.

• 1:41:05Speaker 01

  Yep.

• 1:41:05Anthony Pompliano?

  And then like, let's have a board meeting. Should we have international expansion this year?

• 1:41:09Speaker 01

  Yeah.

• 1:41:10Anthony Pompliano?

  Right?

• 1:41:10Speaker 01

  Yeah.

• 1:41:11Anthony Pompliano?

  Well, now like you just turn a website on and bam, you're global.

• 1:41:13Speaker 01

  Yeah, yeah, totally.

• 1:41:14Anthony Pompliano?

  And so I think like those are all trends that come together. And then I'll, I'll summarize it with one other piece I think is important is it's not just about blockchain or crypto.

• 1:41:22Speaker 01

  Hmm.

• 1:41:22Anthony Pompliano?

  It's the melding of a lot of different technologies. So machine learning is not going to be, uh, siloed from a blockchain or from voice or from, you know, some other technology. It's really going to be the culmination of a lot of these or the melding of them together. And if you go and you look at, you know, Amazon's a great example, Google's a great example, you know, even Facebook, et cetera. It wasn't just like, hey, I'm gonna build this internet company.

• 1:41:47Speaker 01

  Yeah, yeah, yeah.

• 1:41:48Anthony Pompliano?

  There was a whole bunch of other technologies that were all getting integrated with the quote internet.

• 1:41:52Speaker 01

  Yeah.

• 1:41:52Anthony Pompliano?

  That allowed some of those companies to be successful. And so I don't think that's gonna change now either.

• 1:41:57Speaker 01

  Hmm. Wow. Do you think, um-

• 1:42:01Speaker 01

  And what, when you think we'll see a country where people just start using,

• 1:42:07Speaker 01

  maybe it's a stablecoin, maybe it's some other coin, but it's integrated into what they do and...

• 1:42:15Anthony Pompliano?

  I think that we're gonna see two different types of countries be the first. We're gonna see like the China, the government is heavily incentivizing, a little surveillance action going on, you know? This is good for you, wink, wink, stomp, stomp, you know?

• 1:42:31Speaker 01

  Yeah, yeah, yeah.

• 1:42:33Anthony Pompliano?

  We're watching type thing. So I think that's gonna be one attack vector to get there, which I think most people in the democratic kind of American values world disagrees with. But the other one is going to actually be the countries that have very innovative leadership, but realize they have very little to lose. And so you see like BVI recently tried to digitize or tokenize their currency. You've seen countries that are under heavy sanctions, basically throw the Hail Mary. And so I think like that's the world where it goes back to, was it the, is it Jim Collins' book, Good to Great? Which basically, or I'm sorry, what was the saying?

• 1:43:17Anthony Pompliano?

  The good is the enemy of great, I'm sorry. So good is the enemy of great. And like if you think about the US...

• 1:43:23Speaker 01

  Great is the enemy of good.

• 1:43:24Anthony Pompliano?

  No, good is the enemy of great.

• 1:43:25Speaker 01

  Oh, okay.

• 1:43:26Anthony Pompliano?

  So like, the US is good. But we don't have great payment infrastructure. We don't have great, you know, monetary policy, all this stuff. It's good enough. It serves the purpose you and I need, right? It's worked for so long that we get complacent. Somebody who has nothing, who has no infrastructure, who has no, you know, disciplined monetary policy, etc., they are able to leapfrog us and become quote-unquote "great." But if you go back, the US was great at one point, right? In the sense of when we came and the Industrial Revolution and all this stuff, like, we leapfrogged others.

• 1:44:00Speaker 01

  Yes.

• 1:44:01Anthony Pompliano?

  And so it's this constant competition in a free market globally that we've gotta remain, I think, vigilant.

• 1:44:08Speaker 01

  Yes.

• 1:44:08Anthony Pompliano?

  And Mark Yusko has this thing, and I'm gonna mess up the numbers, but you'll get the general gist. For every one engineer that graduates in the United States, I think that there are 12 engineers that graduate in South Korea. But for every one lawyer they graduate, we graduate 45.

• 1:44:29Anthony Pompliano?

  Right? And the, and his point is, and again, those, those data points probably, somebody's gonna tell, you know, tweet me and say, hey, I got the data wrong, but that general trend, right? And the point of the story or the joke is they're a country of wealth creation.

• 1:44:42Speaker 01

  Yep.

• 1:44:43Anthony Pompliano?

  Whereas we are starting to become a country of wealth redistribution.

• 1:44:46Speaker 01

  Yeah, yeah, yeah.

• 1:44:47Anthony Pompliano?

  Right? And I think that, um, you know, it all goes back to this, uh, one point kind of in closing, which is, uh,

• 1:44:54Anthony Pompliano?

  I have the fortune to talk to a lot of investors, right? And investors that frankly, uh, one shouldn't be in the same room as me, right? And two, that, uh, I admire because they're good at the thing that they do.

• 1:45:06Speaker 01

  Yeah.

• 1:45:06Anthony Pompliano?

  Right? And I'm usually there to try to convince them about Bitcoin or crypto or, you know, whatever. But I always ask them one question.

• 1:45:14Speaker 01

  Yeah.

• 1:45:14Anthony Pompliano?

  And I say, what is the thing that separates the top two or three people in your strategy from the top 1%? So the absolute world-class best from the people who are really, really fucking good.

• 1:45:27Speaker 01

  Yeah.

• 1:45:28Anthony Pompliano?

  And historically, the most common answer is something to the effect of they cut their losers faster than everyone else and they press their winners harder than everyone else.

• 1:45:38Speaker 01

  Wow.

• 1:45:38Anthony Pompliano?

  Right? So pretty much that strategy across the board is the common thread. The second best answer or the most common answer has something to do with following demographics.

• 1:45:47Speaker 01

  Wow.

• 1:45:48Anthony Pompliano?

  Which is very similar to the market conversation when you're building a company. Pick the right market.

• 1:45:53Speaker 01

  Yeah.

• 1:45:54Anthony Pompliano?

  Well, when you're investing.

• 1:45:55Speaker 01

  Yeah.

• 1:45:55Anthony Pompliano?

  Follow the demographics, pick the right market. And so I think that there's a lot of parallels there that, um, just people forget, right? We all think we're smarter than, than we really are, all this kind of stuff, but.

• 1:46:07Speaker 01

  It's hidden in plain sight to, to some extent, demographics. Yeah, yeah.

• 1:46:10Anthony Pompliano?

  I, I mean, like, imagine if it's just, hey, I'm gonna invest in the public equities in countries that have fast growth rates and young populations.

• 1:46:16Speaker 01

  High skilled.

• 1:46:16Anthony Pompliano?

  I have no clue what that's looked like over the last 50 years. My guess is it's probably performed pretty well.

• 1:46:21Speaker 01

  Linear regression over the last 400 years of history, if you, either through subjects or population, had the most, you know, you generally did well. And I think we're about to see that with China. It's definitely the story with the US. It's easier to get per capita from 30,000 to 40,000, uh, on a larger number of people.

• 1:46:36Anthony Pompliano?

  Absolutely.

• 1:46:37Speaker 01

  So, yeah, I think demographics are huge.

• 1:46:38Anthony Pompliano?

  So it makes sense.

• 1:46:39Speaker 01

  Yeah.

• 1:46:40Anthony Pompliano?

  All right, man. Listen, thank you so much for coming to do this.

• 1:46:42Speaker 01

  Absolutely.

• 1:46:42Anthony Pompliano?

  I'm a, I'm a huge fan of what you guys are building, obviously. Uh, we have invested, we are partners.

• 1:46:47Speaker 01

  Thanks for being a great backer.

• 1:46:48Anthony Pompliano?

  Everything. Um, where can people go find out more about, uh, Bitwise?

• 1:46:51Speaker 01

  Bitwiseinvestments.com. Uh, our Twitter is at Bitwise Invest.

• 1:46:55Anthony Pompliano?

  Where can they find you?

• 1:46:56Speaker 01

  I'm Hunter at bitwiseinvestments.com and I'm at H Horsley on Twitter.

• 1:47:02Anthony Pompliano?

  H O R S L E Y.

• 1:47:04Speaker 01

  S L E Y. Wow, wow, that's extraordinary. You got that. People mess that up all the time.

• 1:47:08Anthony Pompliano?

  Where they, where they switch the E and the L?

• 1:47:10Speaker 01

  That's right, yeah.

• 1:47:11Anthony Pompliano?

  Yeah, well, they just don't pay attention. Tension, no detail.

• 1:47:14Speaker 01

  Until now.

• 1:47:15Anthony Pompliano?

  All right, man. Thanks so much.

• 1:47:16Speaker 01

  Thank you. Thank you. This is great.

• 1:47:19Anthony Pompliano?

  Hey, everyone. Pop here. If you liked this episode of Off the Chain and want to help us take crypto to the top of the apple, Spotify and other podcast charts, please do us a favor and rate, review and subscribe. To review, simply go to the Off the Chain homepage, scroll down until you see the five blank stars. Taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts. I appreciate you listening and see you next time on Off the Chain.