Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Mike Novogratz: Galaxy Digital – Bridging Crypto and Institutional Worlds

Episode Date: August 31, 2021

Mike Novogratz is the CEO of Galaxy Digital, an investment bank targeting institutional investors, which he also founded. He was formerly a Partner and President of Fortress Investment Group LLC and prior to that Partner at Goldman Sachs. Considered quite the risk taker, he has made and lost many fortunes over the years.We chatted to Mike about the cross over between finance and blockchain, regulatory affairs, and of course, wrestling.Topics covered in this episode:Mike's background in wrestling and transition into financeHow he got into the crypto spaceHow Mike and Galaxy Digital are providing a link between crypto and traditional financeThe long term impact of crypto on the worldThe vision for Galaxy DigitalMike's views on the market cyclesEpisode links:Galaxy DigitalGalaxy Digital on TwitterMike on TwitterSponsors:Chorus One: Chorus One runs validators on cutting-edge Proof of Stake networks such as Cosmos, Solana, Celo, Polkadot and Oasis. - https://epicenter.rocks/chorusoneParaSwap: ParaSwap aggregates all major DEXs and makes sure you beat the market price at every single swap and with the lowest slippage - paraswap.io/epicenterThis episode is hosted by Friederike Ernst & Brian Fabian Crain. Show notes and listening options: epicenter.tv/407

This is Epicenter, episode 407 with guest Mike Novogratz. Welcome to Epicenter, the podcast where we interview crypto founders, builders and bootleaders. I'm Friedrich Ernst and I'm here with Brian Crane. Today we're speaking with Mike Novogratz. Mike has been a Wall Street fixture for a while and has made and also lost several fortunes. His latest fortune he made with Bitcoin and Ethereum and he's holding onto it. He currently serves as the CEO of Galaxy Digital, an investment. bank targeting institutional investors that you also founded.

And with him, we talked about the crossover and merge between finance and blockchain, regulatory affairs, the market, and of course, also wrestling. So before we go to the interview, let me tell you about our sponsors. Are your crypto assets sitting idle in your wallet? Start earning rewards and contribute to network security by staking with course one, a staking provider securing over $2 billion U.S. dollars worth of assets on over 25 decentralized networks, including Solana, Cosmos, and Ethereum. Interested in running your own branded nodes?

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These orders will then be executed when the price conditions are met, bringing a much-missed C-Fi feature to Defi. So stay tuned. So we're here today with Mike Novogratz. Mike is I remember actually hearing about Mike Novogratz in, I think, 2013 when it was like, you know, Bitcoin was very much under the radar. And then there was just some famous banker guy who was like saying something about like Bitcoin. And this was still sort of a time when this was from page of Bitcoin Reddit, which was like the main source of the Bitcoin community back then. So I remember kind of hearing about him back then the first time. But of course,

Since then, he's actually become very involved in the crypto space through his company, Galaxy Digital, and a bunch of other stuff. So I'm really excited to have you on today, Mike. Yeah, it's amazing how eight years goes fast. Yeah, yeah, absolutely. Maybe you start with wrestling. Like, we heard you speak about wrestling in some other places. I'm wondering if you mind to share a bit, like, what's the impact that wrestling's had on you and on your life? So wrestling makes you tough.

It's not a fun sport, right? You get the hell beat out of you. You exercise to the point of exhaustion. Actually, my wrestling coach from high school, unfortunately, just passed away this past week. And a bunch of us were, you know, online reminiscing. And I was like, he put us through practices that felt like we were to gulag. I mean, we would have four-hour practices where you would start with running miles and push-ups, four hours in a heated wrestling room.

I was like, that's probably torture. But through that hard work and toughness, right, in grit, you end up with a resilience and a toughness. And so the rest of your life, you walk on your front foot. Like, you're just not scared. And it's great for risk-taking because it's like, it can't hurt me that bad. You know, there's a great scene. Once you've wrestled everything else in life is easy, I've done a lot of wrestling charity stuff

because I realized there was this link between making kids disciplined and tough and leadership, right? 14 of the 44 presidents of the United States had wrestling in their background. Abe Lincoln, maybe our greatest president, used to go from town to town and wrestle for a living. Back then they called it Catchus Catch Can. That's what wrestling was called. But it was basically the same thing. And so the guys that took down the plane over Pennsylvania during 9-11, you know, the famous let's roll. both wrestlers, right? And so it allows, it teaches kids, both men and women now, boys and girls,

how to lean on their front foot and not be scared. That's why I like wrestling. Yeah, it's certainly a super interesting background to have and basically being resilient and getting up is kind of what characterizes you as a person. So next you went into banking, right? Well, yeah, I started Golden Sacks right after the army and, you know, I was a money market salesperson. And money market sales is maybe the easiest job in an investment bank. You know, you're selling the simplest of products. Like it's 10 day, 30 day.

When you were going wacko, you'd go 90 day duration commercial paper to very lovely people who ran money market funds. If you know fixed income, the further you're away from zero, the more risk there is. You know, so when you go very low duration, there's very low risk. And so it was a great way to get exposed to Wall Street because it wasn't an 80-hour week. It was show up early. You had to be at the office by like 630 or 7, but I was home by 5 o'clock. And as a young kid in New York, those were great hours.

But learning the yield curve, learning how short interest rates affect all other asset prices, is in some ways foundational for being an investor. And so in lots of ways, everybody should start. in the money markets and then move their way out. And so I look back and I was like, wow, it was a pretty easy job, but it was a really important job. So when you, like, what attracted you to finance back then? You know, the honest answer is I was attracted to politics. And I went to Washington, D.C. after, I always thought I'd be a politician or working in that space.

And I went to Washington, D.C. after I finished flight school. And, you know, I had no money. You didn't get paid a lot in the Army. I didn't grow up with money. I owned my college roommate who was rich, a lot of money because I was always borrowing money from them. And in D.C., the young people's jobs paid almost nothing. And, you know, a lot of the people that were getting them or sons and daughters are

wealthier people who could get subsidized. And I remember I ran into a guy who had been the secretary of the army. And he said, son, let me give you some advice. He said, go to New York City and make some money. And one year 40 and you've got something to ask you. add then you should come back here and so i it was like insightful advice i was like okay so i came up to new york and i lived on a friend's couch i'd got to princeton a lot of princeton kids work on wall street and so all my friends working on wall street and i lived on his couch for 90 days and the deal

was i could live for free as long as i came back with a good story every night to tell him so i would have to do something silly uh in that case in that time of my life it was probably you know approaching some beautiful girl are doing something silly that I can give him a story to keep my rent. And, you know, I ran into a friend who got me interviews at Goldman Sachs and 22 interviews later I got a job. And so I came to Wall Street really because that's what my friends had done. And I wanted to make money. I fell a love with it because the part that I ended up migrating to, macro, macroeconomics, macro trading, is all about politics, policy, psychology. And so in some ways, you know, when I remember being in Hong Kong with my team during the 97 crises

and talking to someone in the State Department, he was like, dude, you have better information about Indonesia than we do. Like, you know, we sit in the middle of this unbelievable information source. And so if you were a good macro trader, you know what's going on in Nigeria and you know what's going on in the UK politics, you know what's going on in the economies of India and China. And so I love the widget. I always tell people, if you want to sell cars, you better love cars. If you want to work in macro, you better love politics and policy and economics.

And so I love the widget. And crypto really fits so squarely in this, right? Crypto is macro. It's this giant idea of, you know, that's got economic history. forget the computer science. The computer science enables it, but what makes it work is macro, right? It's this economic idea that people want something different,

that people don't trust governments, that generation, you know, the younger generations, right? Millennials, Gen Z, look up at baby boomers and say, F you, that you've polluted the planet, right? The UN just had this report that, you know, 10 years away from complete instability. Who knows if they're right, but we know what thing. The planet's getting a lot hotter

and there's a lot of bad weather. happening. In America, the average weight of both men and women have gone up 30 pounds in 30 years. So if you think about baby boomers, right, Bill Clinton took office in 92. So from 92 till now, we've been ruled by the baby boomers, right? America's gotten fat. The country's gotten polluted. And we've blown the debt and deficit out to levels that are unsustainable. The rich, poor gap has gotten wider than it was before the French Revolution. And so there's an arrogance, a sheer arrogance, a complete lack of humility from our leadership, from Nancy Pelosi, from Joe Biden, Donald Trump, from Mitch McConnell, from all of these older politicians, baby boomers, and even older than the

baby boomers that, oh, they should still be in charge, right? Wait, wait, you haven't done such a good job. Maybe you should have some humility to say, huh, maybe there's some other ideas. And so when Richard Shelby vetoed the crypto bill, I was infuriated. And that 80, I told you that, you know, the 80, 80,000 likes on the tweet showed up because I think it tapped into that, that anger. That's the fuel of this crypto revolution. It's can we rebuild the financial infrastructure and quite frankly, the whole infrastructure of the world in some way that is more transparent, more egalitarian, that doesn't rely on, you know, old people and their giant egos, right? It's sheer narcissism to think in 89 that the world still needs your voice, right?

What grace is, and I saw this, right, I'm on a board up at Harvard, and the guy that runs the board has worked for five presidents, David Gergen, he's an amazing guy. At my first board meeting, he resigned. I'm like, dude. And he didn't resign. When he said, you know, I'm resigning from the board, but I'll stay as an advisor. He said, at my age, you should advise but not vote. I thought there was something really brilliant about that, right?

It's time to be wise counsel and to let the next generation make the decisions. And I think as a world and as a country, certainly in the U.S., we're at that point. Our politicians don't get it yet because they love power, right? Chuck Schumer loves being in charge. It's his time. The reality is what crypto is saying is we don't care about you guys so much anymore. And the other reality is, though, you need politicians. Crypto will work without buying from the political structure.

And so it's our job now. And I'm hiring people and I spend a lot more of my own time to educate Washington. It drives me freaking crazy that progressives who should love crypto hate crypto. I'm like what, you like the banks? Right? The average ATM fee in America is $4.5. Who does that hurt? Oh, it hurts the poor people, right?

There were $12 billion, I think, last year to overdraft payments. How many times have you bounced a check? Who bounced the checks, poor people? And so, like, the idiocy of not understanding, like, the banking system isn't good for the poor, and that being able to send you, you know, a Bitcoin for 12 cents, no matter, you know, to transfer money, you know, freely to have a wallet for free. and is so progressive to cut out the middleman in music and in art is so progressive. It's a lack of education, it's lack of understanding.

It's where Tom Cruise said there are less than four senators of the hundredth and even know what a goddamn Bitcoin is. So you were working in finance back then. When was the point when you started kind of thinking like, okay, there's like something, you know, something should change about this or like something's broken here. and that then kind of like also triggered your interest when you heard about Bitcoin. They're like, okay, this, there is, you know, there's something interesting here. Well, so I bought Bitcoin because it sounded like an interesting thing to do.

It was a pretty simple thesis and I bought it as a speculative asset. I started learning more about it because I ended up in the newspaper in October of 2013. And the moment I was in the newspaper as the Bitcoin guy, I got invited nonstop to speak. And, you know, it's terrorizing, standing in front of a whole bunch of smart people and not understanding your topic that well. And so it forced me to study and learn and talk to smart people. And I got it, but I didn't really get it until I walked into Joe Lubin's office at consensus in probably 2015, late 2015. And consensus was maybe a month old. The theory was trading in the 90s cents, not dollars.

But I saw and Joe really did a great job of outlining this. But first, I saw all these young people and old people plotting out this decentralized revolution, how they were going to disrupt, not just the dollar, not just finance, but music, art, supply chains. And, you know, Joe's been a friend for a long time and he's, you know, patient. And so after like six sessions with him, I started getting it. But that was the point where I was like, shit, this is a revolution. This isn't just a speculative game.

And so then I got more engaged. Now, partly I got engaged because I bought a bunch of Ethereum. I didn't want Joe to be a lot richer than me. And I knew that might go way up. So I had to buy Ethereum to hedge. And it started going up. And I hired a young, smart kid John West. And the two of us, you know, dug in.

And he actually lived over in their office. And it was the early days, right? Metallic and Vlad and those guys were all trying to figure out how the system would work. And I was still a little bit distant, right? I would call every once in a while. I'd go there once a while. But I was getting my information through John West and, you know, through Joe every once in a while and trading it like I would trade. And then as I remember, I gave a lecture at the first Ethereum was at 80.

and there was this unbelievable energy around it, and I started meeting more and more interesting people, and that kind of sucked me in more. And so I started hiring people at my family office. And then I just, then the wheel just kept rolling. And when we started Galaxy, I never thought I'd go back to work. But I had like this idea, if I'm going to go back to work, a few things have to be true.

I need to be able to work with young people, well, crypto is young people. I need to learn things. You know, I had been a great macro investor or a good macro investor. This was all about venture. And I'd never been a venture investor. And so understanding the venture mindset, the venture process, working with entrepreneurs, you know, as a macro guy, you never meet an entrepreneur.

And as a venture guy, that's all you meet. And so I was fascinated. I loved that part of it. And then the third part was, did I have something to offer to the community? And I thought, you know what? there's a lot of similarities between macro and crypto, right? Crypto is macro. I've seen a lot of repetitions.

And so I think I have something down on the trading side. And I originally thought I could be this bridge between the institutional world and the crypto world. I fundamentally thought then and I fundamentally thought now, crypto won't reach its potential unless the institutional world buys in. And it won't be the exact same as the individual world buys in. the purest one, but we'll make lots of progress. And I think we're at that point right now where every institution is starting to buy in. I saw last week, both Walmart and Amazon put up,

you know, help wanted signs for crypto experts. Think about that. The two biggest retail companies in the world say, all right, you give up. We're coming in. And so I don't think there's almost anyone left. Why I told my staff this morning that I have never been as optimistic is there's complete buy-in now. And now it's about execution. It's about all of us putting our heads down as the computer scientists figuring out the riddles that will speed up the blockchains to make them work as effectively as they're going to need to be to process all the mountain of data that's going to come at them. It's people understanding what decentralized versus not decentralized is, right? A Chinese blockchain is a pretty freaking scary thing. A decentralized blockchain is a

pretty beautiful thing. And so what's decentralized? I mean, there's a real questions that have to get answered for this really to be the architecture that the world gets built on. But I know everyone's now engaged. And so that's really exciting. So on the on the Galaxy Digital website, you know, you say like your mission is to like institutionalize the space. I'm curious if you can like expand a bit on that. Is that is that kind of what you alluded to now that you primarily see like traditional institutions like adopt? in crypto or like what else does institutionalizing the space mean? Yes, you know, first we're going to change our mission statement, so stay tuned. You know, listen, when I started Galaxy, the thought was how can we help credentialize this?

I used to think of what Mike Milken did for junk bonds, right? Jacksville, even though it had a bad ending. Like, he really revolutionized finance. revolutionized, being able to, for companies that didn't have great balance sheets, to be able to borrow money who set more risk. And what we take for granted today, he started. And I thought, wow, can we help, you know, credentialize crypto? Can we convince people that it's not wampom, that it's not beanie babies,

that there's actually something here? Can we explain the technology to people? Can we use our own money to invest and learn, both make great wins, great mistakes and then take those lessons and bring them to our client base, our investment clients, our sales and trading clients, our asset management clients. And that's still in the core of what we do, right, using our capital. Now we're adding, you know, we're merging with BitCo, we bought BitCo, we're going to be wallets in custody and building on shade. And I took our whole team away about three weeks ago. I was like every single business is mandated to figure

how to put more and more stuff on chain. Like we can't just talk about crypto. We've got to be crypto. And so it'll be an amazing journey, I think. But that's really the core of what we're trying to do, is learn this space and then teach people the space. You mentioned recently, I think in the context of the BitGo acquisition, that Galaxy Digital will start building things directly on chain.

Can you talk about your plans there for a bit? So, defy to start with, right, has been complicated for institutions, right? Can you trade on it without being in the regulatory doghouse? And so first thought was how do we actually get our regulators and ourselves comfortable that, you know, we know our customer? And so we're getting very close. We're actually starting to participate for the first time. Lots of other people participated and we're like, hey, what are they going to do? You know, a recipe?

And for the most part, that was a fair assessment if you're an individual. But if you're a regulated entity, you've got to be pretty damn careful. And so I think what's going to make defy explode is solving this KYC issue, right? And there's lots of smart people, right? Scotti and Ave is coming up with his version. Spring Labs is working on a version. We've got what we think is a pretty unique approach. So the challenge is basically,

like, okay, you want to use something like Uniswap and you don't, like, there's no counterparty. Yes. How do I know Kim Jong-il isn't on the other side of that? Right. Right. And so there is no government in the world that, and there's almost no rational person that says, you know, let's build something that really works good for the kiddie porn purveyors or for the ransomware purveyors. Like, ransomware is a terrible threat to the world. Every politician. thinks so. Rational people think so, right? Kidney porn, not so good. Financing, you know, terrorism, not so good. And so, like, you're never going to convince people that those are good things, right? And so you can try the one angle and say, well, that stuff happens in the other

world, too. That doesn't resonate with people. And so in order for crypto to throw to defy to thrive, right? Appear to peer to thrive. There's going to have to be some way that people get confidence that's not being used for shitty things. We hired the ex-head of the CIA, we being a consortium, Mike Morel, who did a report on just Bitcoin, who said Bitcoin's barely used for illicit things, much less than cash and much less than the legacy financial system. So that helped, right, to calm people down that this is not all, you know, a bunch of crooks using Bitcoin, right? is a tiny, tiny piece.

But you're not going to convince the regulators to say, hey, go for it unless there's some way. And it's not going to necessarily be a perfect system, right? And so there are a lot of smart people working at it. There's going to be a system that isn't perfect for a crypto purist, but is pretty damn close for a practicalist, and it's going to work. And I know I'm going to get criticized. People are going to say, ah, the moment there's KYC, there's not DFI. It's just not, you know, listen, you've got, you know, snarks and other ways to think about how who gets, you know, how much information anyone needs to see to, you don't need to know your identity to know that you're a person that I should be able to trade with. So who will decide whether we should be able to trade with Brian or not?

Governments already have that decision power, right? They just do. And so you're going to still operate. within the realm of in in in certainly in Western democracies you're going to operate within the realm of the rules of Western democracies or you're not going to operate and that's like the reality of it like the long armor of the law you want to you want to want to ask anybody call arthur hayes right i love arthur and you know he moved offshore and the u.s. government got him because he broke the rules at least they said he broke the rules we'll see what the court decides And so not just the U.S. government, all these governments have tremendous amount of power. And so working with them to create a system that continues to provide most of the benefits of crypto and retains privacy.

Privacy is a huge part of the American ethos, right? Like, we're a country about freedom. And so crypto is about freedom, right? Bitcoin is about freedom. Are we a country with 100% freedom? no, no country is, right? When you get together as a community, you by definition make concessions, right? I'm not allowed to kill you as a concession. I'm not allowed to, you know, have sex with animals. That's a societal norm. Like, you know, there are concessions, right? And so there are

going to be some concessions. And so the pure libertarians, I think, you know, I used to say I eat libertarians for lunch. It's a, it's a, it's a fantasy world. It's not, it's not reality. Well, cannibalism is also pretty frowned upon, so it's, uh, not sure whether I would record, but, uh, so Arthur and Bitmax. I mean, obviously Bitmax is not really Defy, right? I mean, uh, Bitmax is, is a centralized exchange. So basically if you look at, but, if you look at defy and.

But my point on Arthur in, in, in, in, METMEX was, you know, the U.S. said they thought he broke the rules, even though he was overseas, even though he was not living in the U.S. and dealing with most of the non-U.S. customers. And they said, no, no, no. And they're able to reach out and get him. Oh, yeah. I totally see that. I mean, the U.S. authorities are very good at enforcing U.S. law abroad. I totally see that. But for DFI, where there's conceivably actually an operatorless system, How do you see that linking in with KYC? Well, it's who uses it, right?

So they can regulate who uses it. And so they can't regulate. Like, it's interesting. Why I think DFI is going to explode is the moment regulators are comfortable with the KYC. There's nothing else to regulate. And it's transparent, right? I think D5 is going to work because it's a better system, right? It's not atomic settlement.

It's composable, right? You can build on top of it. It's transparent most long. Like the single best part of it is it's transparent. Right. You can. And so I think regulars will end up loving it. They're just panicked about it right now, mostly because who's using it.

And so they can pass a simple rule that if any institution uses it, you're in big trouble. If they say that, we won't use it. Like, you know, like, I don't want to go to jail and have my company shut down. Though the institutional part of the world still dominates where capital is, just dominates it. Crypto is a tiny piece of the world. It's $2 trillion out of $400 trillion of wealth. And so for us to grow, you need institutional buying. If they wanted to go, they could, if they really were panicked about it,

they'd say, hey, it's illegal for individuals to use it. Oh, you can still do it, but then you're breaking the law. Most people don't like to break the law. I'm struggling a little bit with your argument, you know, because there's a bunch of reasons, right? So first of all, you know, I think government, like control, right? And guns like to be able to, yeah, control their people.

I think we're seeing that, you know, in, of course, China is one extreme. But, you know, even in Western democracies, and if you see, for example, the COVID response, right, is very much around, like, curtailing freedom as well. So I think there's that aspect. There is the aspect of, you know, you have this legacy existing financial system, which is so deeply ingrained in politics, has so much influence, regulations all around that. And, you know, that's massively threatened. And then you have Fiat money, right?

And the ability to print money that's like, you know, one of the most valuable things, probably that many governments have. So I'm struggling to see how they're just going to be, go ahead with all this DFI stuff. So let me, let me, the way I pitch it and it actually resonates with people is there's two different. pieces to this. They have a responsibility to be good stewards of our finances. And if they're not, hard assets are going to appreciate your value. If they continue to print money, real estate is more expensive every year. Bitcoin is a hard asset. So Bitcoin really is a report card against how the central banks are doing. Defi and blockchain itself is a venture.

innovation. It is an efficiency gain. It's a transparency gain. And so most regulators don't want to be anti-efficiency, don't want to be anti-progress, right? Listen, the banks have a vested interest to fight this and they're going to be using all their muscles to slow it down and stop it. I had a fascinating conversation. I was brought to one of the biggest banks and they had their 100 most senior executives for a day. And the guy who organized and said, we're really debating, do we fight defyre, do we join it? You know, like they were literally having that debate. Should we use all our lobbying to slow it down or should we actually just throw ourselves in and figure out how does it help us? And so I'm not naive. I just think you can separate the fiat piece of this, right? It's why all the

governments know they need a stable coin, right? Every single one now. I'm just on the phone with Brazil. They're all moving towards a central bank issue digital currency. The world's going digital. this, you know, phones are going to be our wallets, not bank accounts. You're going to have a crypto wallet that has your Bitcoin and your, if you live in Brazil, you're your digital Rai and your opera tickets. And so I don't think any regulator wants to stand in the way of that progress or quite frankly any politician publicly. And so no one's going to give up the power to print money and the power to tax your

currency, right? And so in some ways, Bitcoin is a threat to bad governments. And crypto really isn't. I'm sorry, blockchain really isn't. And all the other NFTs is an innovation. Now, if they were really intellectually, you'd say, well, fuck, NFTs is just money too. Like, this is all money.

What crypto is doing so brilliantly is the exact opposite of what the Internet did, right? If you think what the Internet did was make all information broadly free. Right? I used to have to buy the Encyclopedia Botanica to figure out that the GDP at Kenya was $95 billion. And now I pulled it up yesterday in eight seconds on Google. GDP of Kenya is $95 billion. Right? And we're going to be able to put value on everything.

Everything that deserves value. So if you kind of like, let's say, zoom out 50 years into the future, you know, and like historians look back at this time and they write about, okay, there was this crypto paying Bitcoin. thing that came along. What do you think will end up being the impact, you know, like on a large historical scale that crypto has on the world? That's a great question. I think there's two paths, right? So we go down a gradualist path, right? That's the way that history works until it breaks. So let's just think about the U.S. deficit for a second, right? What Janet Yelland and Jerome Powell and all the guys in D.C. are trying to do is run our economy hot enough that creates enough inflation, but not too much inflation, to deflate away our debt slowly, which will slowly erode the value of your dollar, but not enough that it makes you panic, not enough that civil society breaks down.

So that's their goal. Put that in bucket one. If that happens, crypto can still do fine. Bitcoin will appreciate slowly. We won't replace the dollar as a payment currency. We'll still use the dollar. You'll have a digital dollar.

Instead of using your credit card, you'll just shift dollars from one account to the X like we do with USC. It'll be abroad. And we'll start storing value in lots of other ways. Right. So that's kind of the base case that people in D.C. hope for. And in some ways, we all need to hope for.

Because the second case is inflation picks up much more severely than we think. Governments get nervous. Confidence breaks down in governments. They try to ban Bitcoin at one point. We go through this, what an emerging market country looked like. I was in the center of the storm when Thailand went bust in 97. And the way their government reacted was one of a caged tiger, you know, slashing out at the speculators, trying to screw people jamming interest rates up to

1,000 percent and then to negative 500 percent to try to make traders lose money. In the long run, it was all for not, right? They had terrible policy and their currency went kaput. And so if we see that happen in the Western economies, Europe, Japan, U.S., you see a breakdown of the financial system. It's devastation. Then you would see a step function where it could get replaced by Bitcoin or some other version of what value is. Like, we don't want that. They've had a devastation that would cause amongst people's lives and fortunes. And the funny part is the guys who are wealthiest that are in the center always seem to be able to

survive that, right? You know, and it's the masses that get wiped out. Their whole savings get wiped out. And so I was on the phone yesterday in Kenya with like 100 young kids. And I was like, Bitcoin specifically is important in the West. Crypto is important in the West. But in the developing world, in Kenya, in Venezuela, in Argentina, it should be seen as a human right. the ability to store your wealth and something that is kept out of global leisure should be a human right because think about these people in Afghanistan

mark my words within a day or two they're going to freeze accounts and confiscate money right and it's like what I just worked for 20 freaking years to make this bit of savings so I can send my kid to college and it's gone and so when you talk to Wences Kasserice about why he's so passionate about Bitcoin

it's because his family's fortune was wiped out twice with hyperinflation with big devaluations. And so we buy, I own a lot of Bitcoin, Galaxy does, not hoping the U.S. has a hyperdevaluation, hoping it has a slow devaluation, but knowing there's some optionality built in that the politicians really screw it up. And I think the speed of adoption of this

is going to be somewhat targeted by how well the stewards of our economy do. Listen, the rest of it, NFTs using blockchains for supply chains, that's going to be on the same adoption curve as the Internet was. Right, right now it's faster. But better technologies always went out. I shouldn't say always, often went out, and I think they will. But the macroeconomic piece is going to be determined in a lot of ways by how well the people in charge do.

Every single macro thinker, and I spent 30 years, as a macro thinker, I know, is really worried that we've left ourselves such a tiny landing space. You know, he's told about landing a plane. Well, it's easy to land a plane on a giant runway. They've left themselves a tiny runway to land the plane on. You know, Ray Dalio, who's one of the great macro thinkers, he told me he doesn't see how the U.S. gets out of this without 15 years down the road, some kind of debt restructuring. Think about the U.S. doing a debt restruction like Argentina.

it's unheard of, right? And so we'll see to be determined. Interesting. How do you think this is going to play out for the finance sector? So do you think all finance is going to become crypto-based? Or will that still be, you know, two systems that run in parallel? Will they interconnect? I think it's going to take a while, right?

This is transitions take a while. So first we need stable coins. once you have stable coins, which are coming, then every one of the big banks is going to need to be able to train them because you can't make so much money in currencies and not be able to trade your stable coins. And so then they all invest lots in the infrastructure of, you know, custody and security and blockchains and wallets and everything else, or they buy companies. And it slowly starts morphing in. There will always be a role for advisors, right? It's not like overnight I'm going to wave a wand and the whole population is going to be educated on how to think about investing, right? We don't want doctors to spend their entire life understanding what a yield curve is and why the shape of the yield curve should impact the price of equities, right?

And so there will be plenty of room for specialists, for advisors for people to say, hey, trust me on this. That's broadly been what finance has always been about anyway. And so I think they'll have to morph how they deliver their services. And there'll be different banks that win and different banks that lose. But they'll still be a vibrant financial sector, right? Artists can care less about investments. Most of the artists I've met, not all. Doctors, lawyers, military people, judges, right?

We don't want the whole world to be investors. And so we'd like them to have a little more education on how the world works and how investing works. But there's going to be a big, big industry for people to give advice. And that's broadly what finance is. Maybe to speak a little bit more about Galaxy. Where do you see Galaxy Digital and like where do you want to take the company? I want us to be the marquee company or one of the three marquee companies in this space.

I want us to, you know, I love our venture business. It is getting better by the week. I want us to continue and invest in the best product projects. We have an interactive business run by Richard Kim and Sam Engelbart. That is just on fire right now, right? So if you want to learn about the Metaverse, I have not met anyone better than Richard Kim to really explain it and how it's happening so fast. So social tokens, generative art, that whole space of, you know, how we're monetizing community, how we're this intersection of culture and currency.

And so that piece, I think, is going to continue to be a really important piece because that's the food for the rest of the machine. I want us to be the one-stop shop for individuals, corporates, institutions, and corporates to come to and say, hey, help me with my crypto. You know, be the service provider, create my engine, so it makes it easy for me. or help me understand which crypto is to invest it. You know, so I want us to stay on the cutting edge. I want us to be a big asset management.

We've crossed over $2 billion in assets under management. You know, I want that to be $100 billion one day. And so let's bring in the best people to help people both understand and manage this new asset class. You know, we're going to be close to 500 people, I think, by March of the next year. Once we could, you know, Big Go gets closed and we just fill out the wrecks. hiring. Takes a while to digest that and to get it firing all cylinders. But it's exciting to me because I literally think all the previous laps around the track, you know, when you go to a race, the cars run 10, 15 laps around the track, and then they bring out the checkered flag to start

the race. I think literally just last week the checker flag went down. When Walmart and at Amazon said, we're looking. When the Congress said, oh God, I think that was the checkered flag that the race is starting. Like the crypto revolution is starting now. All the rest of this stuff has been warm up. And so it's pretty exciting. And by the events last week, you're referring to the infrastructure bill, right? Yep. I don't think you could underestimate how important that was. And I know maybe from a non-U.S. perspective, people are like, what the hell is he talking about? From the U.S. perspective, where a tremendous amount of, you know, global wealth resides and a tremendous amount of crypto infrastructure, intellectual infrastructure resides, there was a wake-up call in this

country. Read the New York Times article. There was a wake-up call in Washington that this is a real industry, that it's going to be here for a long time. It's going to help shape this country and it's not going away. That is what you should take from those 10 days. So do you think we will see, you know, I mean, so far, right, maybe there's a few politicians that have been, you know, somewhat crypto-friendly, but do you think we'll see a shift there that there's, you know, like starts to be kind of like a widespread support for, and also like a change in terms of regulations? So I would tell you that most politicians were just, are just crypto uneducated.

And I think every single person I've taken on the crypto journey all starts and all's like, wow, this is cool. Wow, this is interesting. None of them come back and like, oh, you're out of your mind, dude. Right? It's my job for the last nine years has been to bring people into the tent to take people on the journey. And now there's an army of people doing that job. There was a small army when I started, like Dan Moorhead, Joe Lubin.

There's my friends, you know, Brock Pierce. I mean, Brock Pierce probably turned more people on to Bitcoin than almost anyone I know, right? There was a lot of people doing it. Now there's armies. Margot Staling just put 4,000 salesmen on the job. And so we've gone viral. And so I think it's important for people to understand. When we take Congress and the Senate through this crypto journey,

they're not going to come out and say, I hate it. They're going to come out mostly the same way most people do, the way Paul Jones and Stan Druckenover came out and said, hey, unbelievably cool technology. Got to make sure we're using it the right way. Let me understand it more. And so they go down the rabbit. as the crypto people like to say, most people, the great majority, come out optimistic.

And so I think it'll go the same way. They just haven't taken the time at all. And that's what Ted Cruz was saying. He was like, how dare we try to regulate an industry and put people out of work when none of us even know what it is? And so it's our job as a community to help educate that. It's their job as our leaders to educate themselves. Yeah, Ted Cruz's speech was actually pretty interesting. How do you think the addendum to the infrastructure bill that basically posits that crypto should be used as a way of footing part of the infrastructure bill that was going to be run up?

How do you think that got there? So basically, who put that there? I think Gary Gensler put it there. And Gary is my friend, and I'm not positive he did. Listen, it came from the White House. The White House is the Treasury Department, the SEC. They wanted to regulate crypto. It's not about a pact.

Listen, everyone thinks you should pay your fair share tax. You can't not argue that in the U.S. You might argue tax rates are too high or we should have much lower tax rates, but it's inconsistent to say, I shouldn't pay tax and he should. It's not fair. And so this was not about tax. I mean, if you think about we've got a government spending $120 billion a month on treasuries. This was $25 billion over 10 years or $2.5 billion on a $1.9 trillion infrastructure bill.

So it was a, you know, a fly on the elephant's ass. this was a way of them wanting to regulate crypto and they got caught. No one, I think, in the institutional space, thinks crypto is going to be completely unregulated, right? And in some ways, puts some light boundaries, but don't overregulate a young industry because we don't even know what it's going to be yet. NFTs didn't exist in lots of ways in people's mind until about five months ago. And now it's one of the most dynamic, fast-growing industries in the country. that's impacting sports and music and anything full of culture. And pretty soon you're going to see NFTs for healthcare.

And so you want to have light regulation to start with. And I think that philosophy is going to win out. The bill got through. It will get through the house. It will be a shitty law that doesn't start until 2023. And it will be fixed before that. And I think that's what the market believes. I think that's what will be true.

So the bill still got through, right? At least in the Senate. Yeah. Yeah. Because in some level, it's just so completely unenforceable and detached from anything. Yeah. It shows you how little DC understood about what's happening here. So at this point, do you think there are major risks for crypto?

Or like, what can go wrong? Listen, there are always risks. Right? Did we think China was going to literally ban crypto and throw mining out? We went from 60,000 to 29,000 in large part because the market got carried away a little bit. And then China said, oops, we don't like crypto anymore. I think the good news is crypto took a lot of stomach punches, right? Yeah, it had shiny, you had regulators, you had all kinds of negative news and were higher. And so I'm really optimistic both on the price.

Listen, trees don't grow to the moon. You don't have huge moves and then have another huge move and another huge move and another huge move. Like the law of large numbers catches up to you. And if you look at adoption where crypto is being adopted really fast, market cap of the space has to kind of grow with adoption. And so, you know, people say, oh, my God, we can get to a million Bitcoin next year. No, we can't. We can't. We can't.

We can go higher. We're not getting to a million Bitcoin next year. It might get to a million Bitcoin in seven years. Who knows? But we're not getting there next year. You just don't add a trillion dollars of market cap overnight. And so I think, like I said, I'm more optimistic today than I've ever been. A lot of shit can go wrong always, right?

Can we get, can I be wrong on my assessment of government? Can you get bad legislation? Can you, like there's going to be midterm elections coming up. My guess is Republicans take some seats back. and that actually just stops any, you know, regulation, which is probably a good thing. But I can be wrong on that. You know, what's interesting is I don't think a hack does it. But I can come up with some terrible, like, bizarre scenarios that would scare the shit out of people in crypto, right?

I don't even talk about them because you don't want to throw them out there in the universe. Okay, what's the worst scenario you can come? I'm not putting it out there in the universe. I'm sure your bright mind can think of them. You know, people don't understand all the people. It shocks me how many crypto wealthy guys walk around with bodyguards. I know 10 guys who walk around with bodyguards. And I'm like, what are you talking about?

Like, I'm a pretty well-known figure now. I'm on TV so goddamn much. And, you know, I don't know the bodyguard. Well, why do I have a point? there's a fear that someone's going to get them and kidnap them and put a gun to their head and give me your codes and, you know, that no one will be able to find the money. And that's, it's not true to start with. It doesn't happen.

And so, but you can see those fears play out. The same fears that have those guys walking around with bodyguards could play out on a much bigger scale. And that could scare the heck out of people. I also wouldn't be afraid if I were a wrestler. That's true, too. Part of that is being a wrestler. You always, you always think you're tougher than.

you are too. And you run into something like, oops. Where do you think we're in the market cycle right now? I literally think we are, like I said, I think the training laps just ended and the race is beginning to start. I think we're that early. It doesn't mean we're going to go from 46 to 100 in the next month in Bitcoin. I mean, I'm looking at Luna, which is one of my favorite projects.

Like, goes up every day. But I think we're at this acceleration of adoption. we can't hire people fast enough. And I know every one of my competitors is hiring just as fast. And so this is going to be a big industry in 24 months. I mean, think about it. Walmart and Amazon the same week said we're looking to hire senior people for crypto. That means they're going to explore at very least and most likely except at least dollar stable coin payments.

And if you do dollar stable coin payments, you might as well take everything else because you can just hook into someone like, and we can instantly, you know, shift your Bitcoin into dollars or shift your Luna into dollars. Right? And so once you take one crypto pay me, you take them all. You think when that's going to happen, the regulators will say, okay, KYC and then you're good. Because to me, that seems unlikely. I think you'd be surprised. Like, in lots of ways, crypto is a payment system.

Right? Stablecoins is just a payment system. If we believe it's a better payment system, which I think it is, it's going to win out. Now, the people are going to fight it. Isn't it telling that both MasterCard and Visa are big into crypto now? Right? How about this? It's a stupid idea. When Dan Moorhead and I first started talking about Bitcoin, we're like, oh my God, let's buy Bitcoin and short MasterCard and Visa. Like, what have been one of the worst trades of all time? You know, smart companies, you know, first of all, it. It took a long time for Bitcoin adoption. And, you know, that never even dented MasterCard and Visa. And MasterCard of Visa a couple years ago said, hey, the world's going to go to this new payment system and we're going to be part of it. And so, mark my words, if we have a crypto-based payment system, MasterCard of Visa are not going to not be good companies. Right. And so it's interesting. I think we're at this monster adoption phase.

I don't know how fast. I'm not a good enough technologist to understand how fast these things happen. I can just tell you what I feel that we're in an acceleration phase right now. And so is it three years before like the world looks a little difference or is it five? I remember, you know, the internet bubble was 99 and we didn't get Facebook to like 2005 or 06 of the iPhone about the same. Like shit takes long to build well. We still don't have the Novi wallet. Like when Facebook opens their crypto wallet, which they're dying to do,

And my hunch is they're now going to do it with USDC instead of their own coin, right? It's just a stable coin. They were only going to do a stable coin anyway, right? They originally were going to do their own currency, right? And then they switched to a stable coin or a series of stable coins. My guess is this is just a guess, no inside insight. They end up using someone else's stable coin. Because you don't make a whole lot of money in the stable coin business anyway.

You make it in a transaction business. And all of a sudden, two billion people with crypto wallets. Pretty freaking cool. So you mentioned, okay, this kind of acceleration at the moment. I think, you know, we can all see it and feel that in a crypto space. But like what we've had in the past, right? So there was like 2013, there was a big bull market adoption. And then there was this bear market, you know, and for a long time, it was kind of depressed.

and not so much new people came in, activity slowed down. A similar thing happened in, you know, 2017, 18, and then, you know, 19, 20 again, it was like slower. Like, do you think these kind of cycles continue? And like, what do you think are the determinants? Yeah. What I would tell you is you've got to be very careful. You should have two graphs. You should have a graph of the price of Bitcoin and Ethereum.

which were cyclical, and you should have a graph of how many people are working in the industry, and you'll see how less cyclical it is, right? And so every once in a while, prices will jump ahead because of enthusiasm because of macro forces. But what I'm telling you is it's been a pretty steady and it's accelerating the amount of people coming in. If you saw my analyst class, we just gave six offers to, you know, some of the analysts we had, some are analysts. One's smarter than the next. These are the kind of guys that, you know, when I was in Goldman Sachs, we would die to hire. And so the human capital coming into this space every day is amazing. Like, shoved human capital into a space and they become productive.

Our space is at the acceleration point. And so I don't think you're going to have this big cyclical move of innovation development. Right. It's going one direction. It's just taking off. Right. Now, we should make a bet. How long does it take for Walmart?

They've just posted their job offer to be part of the crypto community. One year, two years or three years, right? We know it's not three months. It's probably 18 months, two years. So the future is lined with all these forward adoption. Think about it. You're trying to decide we have all this forward adoption that's coming, right? Very few, like a few insurance companies that bought Bitcoin, a very few, and they bought a tiny amount of it.

But they proved that, hey, Bitcoin is a long duration. asset in their mind, right? Someone sold it to them. Ross Stevens, give a heads up, right? Great sales guy from New York, dig, a friend of mine and competitor. Like, why I don't even see my competitors as competitors? I was thinking we're so early. We're all collaborators, right? We're all bringing people into this ecosystem. And so, again, it doesn't mean prices will get carried away. Salana will go up and come down and go back up. And in the long run, I do think the projects that win will have the highest value. I've been getting killed on Twitter because I took some shots at a, I didn't even take some shots at, I just don't really understand Cardano's appeal is the third largest.

Crypto, I understand why it's, you know, there. Crypto communities are like British soccer fans, right? They become so passionate about their thing that there's not even a rationality. Except more hooligan. I think, I, I think in the long run, the real big market caps are going to be things that have the most usage, right? Now, it doesn't mean I'm right about Cardano and maybe it replaces Ethereum. I don't think it will. Or maybe Cardano becomes just another version of Bitcoin where it's a store of value for that community. I don't know anyone in that community, which is weird, because I know a lot of people in the crypto space, institutions, and I don't know people, but there is a community of Cardano. What if it would be worth $80 billion if people didn't care?

And I can tell you, every time I tweet about it, I get attacked by 500,000, people violently. And so we're in a weird world where value is being subscribed to things that makes sense to some of us and not to others. And so again, it's impossible to predict exactly the rhythm of prices, but the rhythm of this industry is going one direction. Mike, you've been in finance a long time and a lot of the cryptophogs are not finance native. So what do you think is the most important thing that people in crypto miss about how finance works? That's a good question, actually. So there's been a lot of growth in the credit markets in crypto, right?

Companies like BlockFi and Celsius and, hey, you can get yield for free. The one rule of finance is there's no free lunch, right? You're getting yield because you're taking care. credit risk in a counterparty that's unregulated that's very leveraged. You might be fine. You might not be. And you won't learn that lesson until you get burned. And so I think there sometimes is an I have a day that there's a free lunch out here.

There isn't a free lunch. It feels like it right now because we're so early on and all this water is rushing into the pipe, but the pipe's not that wide, so it's spitting out, you know, really fast. but the rules of the universe still hold. Too much leverage will get you killed. Asset liability mismatch will get you killed. What is asset liability mismatch? When you borrow short and lend long,

those are the two biggest ways to go out of business and lose your head. And so kind of the rules, it's not like a new set of rules that we've created, right? Euphoria and fear exist in traditional finance and will exist in crypto. And so in a lot of ways, it's a new weapon for investors. It's a new instrument, a new asset, but it's the same rules. So no free lunch in a way. It's very antithetical to the positive some words that crypto people, you know, keep dreaming up, right?

Well, well, listen, again, there is a positive side to this, right? How does value get created, right? Like, why does gold, I always tell the story, you know, gold's worth $11 trillion, and you can melt it all down, all the gold that's ever been found in the history of the world from Africa to Egypt, Asia, Africa, Africa, Egypt is in Africa, the Incas, the Aztecs, you know, my wife's jewelry collection, and it literally fits in a 50-foot-by-50-foot cube, right? a 15 meter cube. That would be a sculpture in Central Park.

That would look very shiny. It'd be like, that's a $10 trillion sculpture. That's fucking ludicrous, ludicrous, right? It has value because we vested it with value. Bitcoin has $900 billion of value because it's a social construct, because we say it has value. Picasso's are worth $20 million because of small community people say it has value. And so if we say it has value and now it has value because we say it has value,

and I trust that value because it's been there for a while, that I can borrow against it and I can lend against it and I can use it to do other things. That's where it's a hugely positive sum. We've created magic internet money in 13 years. That is awesome. Awesome. Breatthaking, almost inconceivable.

And it's why a lot of the early crypto guys sold. My God, this was a great run. it's really hard to hold. It's just hard because you're like, what's happening is so awesome, right? You know, I give Joe Lubin credit. He never sells anything because he's had this unbelievably unshakable vision. I'm a trader.

I'm a macro guy. He was like, though, this is religion to him. This is going to be the way. And so I remember when the Ethereum was up at 1,200. I was just begging him, sell some. Just. And then went all the way back to 90. And he never said, God, I wish.

I listened to you. And now it's at, what, 3,000? Very few people do that. Most sell because it's hard to have the imagination that this could actually be happening. A trillion dollar asset. Bitcoin is probably the single greatest brand created ever. And no one owns it. One little girl once asked me if I was a CEO of Bitcoin.

I was very proud because I had that Bitcoin goes to the moon song. She liked that song. And I was like, I had to tell her I really wasn't. I was just, you know, one part of a giant army. Michael Saylor, I'm sure people ask if he was the CEO of Bitcoin. He's not either. There is no CEO of Bitcoin. There are hundreds of them, thousands of them.

There's literally 130 million of them. That's a pretty cool experiment. Yeah, absolutely. Well, one last question before we wrap up. What are the questions that you're thinking about the most that you feel like, oh, this is something I need to figure out to learn? Like, that's going to be important. But like, I don't understand it yet.

You know, I literally go through that almost weekly. It was funny. I got asked to keynote Christie's big NFT art symposium. And I'm like, oh, God. And I do what I always do. When I get asked, I call my two smartest people and the other three smartest people I know in the space. And I get them to tell me everything that they know. And then I kind of synthesize it.

And I did a fine job. And I was, you know, honored to be there and throw. And, you know, the other panelists were all far more seeped at NFT. And they built all the projects. And so it was a little embarrassing being the macro guy. But what was funny is three weeks later, I was like, wow, things have shifted so fast in three weeks. You know, the industries are moving so fast that it's literally a monthly reeducation to keep up. If you're going to try to be broad, if you're going to try to understand, like, you know,

know, what rigors are in the generative art world and why, you know, Lexi Cherniak is a, in some ways, an extension of, of, uh, Saul DeWitt in the 1950s and why real art people are collecting generative art versus, let's say, avatar art, right? Like the kind of real art community is looking at the generative stuff as kind of an innovation on, on art, right? And the, the, the crypto punks, are really being priced as collectibles, not as art. I don't know, I'm not sure if I'm right on that even.

That's my interpretation, but the nuance of try to understand how this NFT world is working. You know, gamified stuff versus non-gamified stuff. You could spend 24 hours a day just trying to keep up with NFTs. Then you got, okay, what hell's happening in D5? Like, what's the level one battle?

Like, why in God's name is Luna and Solana skyrocketing? Like, what's happening with Cardana, like Pocodon? How in the hell is this whole level one thing going to fit together? I'm sure I got four guys on my floor. It's going to come in and explain it to me in the next 24 hours. But it's complicated and it changes all the time. And so I think if you're going to be in this industry, it is an industry of a lot of homework.

Luckily, so much is on the Internet, like YouTube. I told these kids in Keddyazjasjas, like the lucky you have is there's unbelievable great stuff on YouTube. on Twitter, but you have to actually spend two hours today, not just skimming it, but actually working and reading. And, you know, it's 56 years old. We've got a lot of other stuff to do. That's a, it's not an easy task. Yeah, absolutely. Well, thanks so much, Mike. It was great to have you on. And I'm excited to see where, you know, you'll take things next with galaxy and in general in your journey in this wild new world. I certainly hope it's to the moon. Yeah.

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