On The Brink with Castle Island - Adam Guren (Hunting Hill) on Active Management in the Digital Asset Markets (EP.471)

Episode Date: November 9, 2023

Adam Guren, the founder and Chief Investment Officer of Hunting Hill joins the show. In this episode we discuss: Adam's career journey and the path that led him to found Hunting Hill in his late 20s. How he discovered cryptocurrency and the initial digital asset products that he traded. The initial market structure for trading closed end digital asset products and the challenges that it presented. Views on the prospects of a Bitcoin ETF and the impact that it will have on the market when approved. The prospects of a spot ETH ETF. An overview of Hunting Hill today, including a deep dive on Hunting Hill Digital. The opportunities for distressed investors in today's market. Hunting Hill's efforts with Versifi and Base Layer Ventures. To learn more about Hunting Hill visit their website.

Today on the podcast, I sat down with Adam Gurren, the founder of Hunting Hill. Hunting Hill is a New York-based asset management firm that has a number of strategies, including a strong presence in the digital asset space. In this episode, we talked about the origin story of the firm, Adam's views on the various Bitcoin ETF products that are being proposed, and the opportunities that is seeing in the distress space. This was a fun episode to record, so without further ado, here's my conversation with Adam Gurren. Matt Walsh and Nick Carter are partners at Castle Island Ventures.

All Vies expressed by them where the guests on this podcast are solely their opinions and do not reflect the opinions of Castle Island Ventures. Guest and host may maintain positions in the assets discussed in this podcast. You should not treat any opinion expressed by anyone on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of their personal opinion. This podcast is for informational purposes only. Brought down by bad mortgage investments, Lehman, which has 25,000 employees, will be liquidated.

The federal government loans American International Group, AIG, $85 billion. This is a different kind of market, and the Fed is asleep. The federal government is stepping it to stabilize Fannie Mae and Freddie Mac, the two mortgage giants that have been threatened by the housing crisis. The Bank of England has pumped 75 billion pounds more into Britain's ailing economy with a new round of quantitative easing. You print a couple trillion dollars and all of a sudden people start to worry. So out of this worry, we have something called the Bitcoin. Bitcoin. Adam, thanks for joining us today on the podcast. I've been trying to have you on this pod for a while.

Real excited to finally do it. Yeah, Matt, thanks for having me. Also excited to be here, honored. humbled to join you at the team of Castle Island. It's great to catch up and look forward to the discussion. So you guys have been doing some really fascinating stuff in the crypto space and want to get into all of that. But maybe before we do, can you just tee up your background and how you came to start Hunting Hill? I started Hunting Hill back in 2012. I had previously been a partner at a proprietary trading company called First New York. And at First New York, I ran effectively a global

event-driven arbitrage portfolios, so looking for alpha-generating trades that sit in the market a neutral space. And prior to joining First New York, I was a professional soccer player, which I did for a couple of years after playing for Duke, which I really enjoyed. And I had spent a lot of time in my youth playing sports and soccer obviously was the main focus. I was on the national team when I was 18, fortunate enough to get recruited to play in college. And I was drafted to play professionally. I couldn't really pass that off. I did want to pursue a career in finance. I studied behavioral finance in undergrad. After having the opportunity to play, I was eight. able to do that and really enjoyed myself, but found that I was born in the wrong country at the

time to be playing professional soccer and ended up pursuing my career and finance in 2004. And I had done an internship at a hedge fund and learned from the ground up how to start and launch a hedge fund back in 03 and04 and then joined first New York at the prop desk as an assistant trader, getting coffee for partners and learning what they did. And a lot of guys were former South Side prop desk traders at the time and learned the arbitrage and market neutral trades that they had been doing, and I had some good success there, and really enjoyed my time as an entrepreneurial place, and was able to launch Hunting Hill after about seven years there. So how do you actually learn arbitrage trading? Is this just one of these

things where you have to be close to people that are doing it? There's no textbook for learning this stuff. There's certainly different approaches and different styles of trades in the space. From my perspective and what I learned was better understanding how to price certain assets based It's not a fair value. And my expertise really started in derivatives. I had learned a little bit in the options world in that unpaid internship that I had done for an options overlay hedge fund and studied it a little bit in college and was trying to better understand at least in practice, places that did it for professional setting,

like First New York, how they managed risk. And so the way that I learned how to do that was figure out where fair value might be. And that's a model driven or quantitative exercise for any derivative. and then looking to see where that derivative might be trading in the market, and if it's off too rich or too cheap, to trade accordingly. And what that process does, at least for me, was to better hone my skills and learn how to evaluate any derivative. So it's not just options or maybe futures, but also eventually ETFs, which is where

I started. And my career really took off back in 2005. And you can now then apply that obviously into the crypto space. There's different derivatives that trade off of stuff. spot and how do you apply a fair value analysis and some quantitative way to trade and evaluate whether things are too expensive or too cheap. We go through that process, and again, it's a risk management style of understanding what kind of, we call it expected value that we can see in the future. And if we think there's a positive expectancy for a trade because it's too rich based on our models,

then we'll trade it. And over time, if we continue to do that with positive expectancy, then we should be generating some positive returns for our investors. So there's an application of that fair value analysis, which is a quantitative approach, and we try to do that with all things we do. So when you got started with Hunting Hill, you were pretty young in terms of just starting a firm out on your own. What was the original insight? What did you guys set out to do? I was in my late 20s when I decided to try to do this. And on hindsight, it might have been a little early in the career. But I had a very unique situation where I was fortunate enough when my firm would support me in that endeavor. And I felt like at the time when I was there, I really had some

scale. We had just been through the financial crisis. I had some good success trading in that period of time, which was extremely volatile and unknown. And while I could do this with about a hundred million dollar balance sheet and saw trades that we could apply another zero on, and my firm was supportive in a sense that they said, look, you can go ahead and try to scale, but you need to raise that external money. It's not really our business model for to scale that trade. And so I was able to do that. And I started small, which is friends and family capital. And the objective was to generate alpha generating returns and look at fair values and mispricings in the market and different derivatives and securities that we were trading. And I really felt at the time in my late 20s and called early 30s when we eventually launched that I could be a billion dollar hedge fund on day one.

And the big question that I always would get is I was fortunate enough to get my track record. So people would look at it and make that that's a great track record. How do we know that you can do that by yourself on your own? And it's not just the trading aspect. It's also managing the business. It's like understanding the operations and the audit and dealing with staff and personnel and counterparties. That's a very different headspace.

And it takes a lot of different time and energy to do all those things, including marketing. And it's not just trading. Can you prove that? And I was very fortunate to have a couple of good years out of the gate and said, okay, I did it. Here's proof of concept after having a great track and started to raise more institutional capital in year three. It took probably twice as long and cost me two and a half times more than I expected.

at launch, and that might have been partly my age and just been experienced. But I learned by doing, and that's just something I've always called pride myself on, is figuring out as I go and making sure I don't make too many big mistakes. And if I do, make them only once we had a good start and eventually got to that billion dollar number, but it took a lot longer than I expected. You became really prominent, I would say, have become really prominent in terms of people that are not necessarily crypto-native. It wasn't like this was a crypto-hedge fund out of the gate. but you started to get really involved in the digital asset space. So what was that like? Crypto wasn't even really a thing when you're first getting started. When did you become aware

that this was a tradable asset class? Yeah. So we launched Hunting Hill in 2012 and Bitcoin was very early in those days. And I actually didn't really know much about Bitcoin. I was introduced actually through a cousin of mine in 2013. And I definitely looked at that time, but not in a professional setting. And one of the strategies that we ran in the trad-fire space and continued to run is in closed-end funds. And obviously, we do a lot in the ETF world there, even my background. And we started to look at GPTC, which is a gray scale product, which has been in the news a lot recently because of the potential ETF conversion and a handful of other things going on around it. But we looked at it in 2016. It was actually a trade that one of our brokers introduced us to and said,

hey, there's a dislocation here. I don't really know anything about Bitcoin or this investment trust, but I'm sure you'll figure it out. We did look at it. We traded very small at the time. And the reason for the trade was that back in 2016 and 17, GBTC, which is the grayscale trust that holds Bitcoin, was trading in a premium to the fair value or the asset value of the trust. And so it's a Delaware grant or trust, which at the time you could submit a either cash or a coin creation. So it would mean that you contribute cash to put Bitcoin into the trust and then you would receive restricted shares in GBT. And GBTC was trading on the over-the-counter market at a premium to its net asset value. So, yeah, we looked at that trade and determined was there an actual possible way to capture that premium. And if so, what are the risks?

And we did try it again, very small, like I said, in 2017. And it was difficult to hold a market neutral mandate actually back then because there was no lending market in the spot market. So you couldn't just go ahead and buy a Bitcoin and put it in the trust to be long trust and short Bitcoin spot equivalent. There just wasn't a lending market in 16. And so we had to find different ways to get that neutral exposure. Eventually in 2017, we shorted a coin shares product out in Sweden, which had Bitcoin in it and was trading net at NAV. So we were short, this coin shares product long, GBTC and would receive our shares 12 months later and in a volatile asset like Bitcoin, it was just hard to know where that would land. That was the original sort of four-way into the space for us.

It was coming out of a closed-end fund strategy and understanding the mechanics and the market structure around how that trade worked and started to become more efficient and proficient call it with the trade. a lot of muscle memory with it and scaled a lot of different ideas after that. So as a guy who has a background in trading ETFs and ADRs, you must be licking your chops here for what potentially is about to happen with the Bitcoin Spot product. What's your just lay of the land right now in terms of the likelihood of us having a spot product? And also curious on this grayscale case. So gray scale winning the case against the SEC on the Administrative Procedures Act, how do you see that product evolving in light of this ETF push? A lot on. there at the moment. It certainly right now seems that there's probably, call it,

85 to 90% chance you get an ETF before the end of the year, even. And I would say it's a when not if at the moment, given the SEC filings that we've seen from different sponsors, certainly a gray scale winning their case and the judge actually making the, or rather the court rather making their announcement earlier this week that SEC has not appealed and that they should move forward with the law and gray scale to with their application. There's still some procedural steps that need to happen and that includes steps not just from Grayscale in order to get their conversion done if they do it, but also even from the other sponsors like the Black Rocks and Investco's of the world that are doing this, I believe it's eight right now

that are pending. They still need to get a few things done in order to get approval. And I would guess one thing to say just as a market participant is that this week at least there's been not a lot coming from the sponsors in a public setting, meaning there's not a lot PR or tweets or anything that's really coming from these sponsors, which I would consider a very positive sign because they don't want to be upsetting the SEC by jumping the gun and saying, hey, we got approval or we're very close or it's just pending one approval, one step recommendation. Quiet is a good thing right now for the potential for an ETF to be approved. And all steps are lining up for something like I said, I think to get done before the end of the year.

So yes, the case that gray scale one is very important for the space. generally it's important for that product to eventually be converted. It's also important for the current sponsors that are outside of gray scale to get theirs done. And like I said, we'll see how it happens. Things could change. But at the moment, it looks like it's happening. It's an interesting setup because I think there are eight sponsors right now that are pursuing. There might even be more by the time we push out this podcast. But how do you expect this to behave? Will this be, there's a lot of trading activity around all eight, they don't seem terribly differentiated in terms of the actual products themselves. How do you think the market will react to these? Yeah, so I agree that they're all

essentially the same from a product perspective, meaning they all hold Bitcoin. There's some nuances between each one, meaning that there's custody solutions. There's also market makers that need to provide liquidity to the secondary market. And that's important actually in this case, because there's not many market makers out there that can trade spot and the security, the ETF, and do it in an efficient way with a lot of balance sheet. Those are maybe market structure and small nuances. The one I think that is pretty interesting, which is not public yet, and we won't know until probably the day or two before these things launches the expense ratio. So what are these guys going to charge? Are they going to charge 50 basis points? Are they going to charge 150 basis

points? I probably think it lands somewhere close to 75 to 90, is my guess. And who launches first? Approvals, I would imagine, I think will happen all at the same time. The SEC, I don't think, is wanting to be in the business of kingmaking. They're going to say, if there's eight applications, they will be eight approved and grade scale, maybe nine. But when do they actually start trading is a bit of a question mark. If they all trade it the same day, where if somebody tries to get out there a little early, that'll be a first mover advantage, potentially.

And then, of course, there's just the marketing channels that are interesting. So like the Black Rocks and Invescos of the world have a big advantage or leg up on most of the other sponsors because they have these channels through the RAA space, which is where a lot of think, a lot of the lion's share volumes are going to come through. And a fidelity, of course, is another good version of that, right? They have their own army of advisors that can and help push their product. So I think there's just nuances there, but the product itself is effectively the same. You're getting a spot and hopefully at a place that's safe and a custody solution that people can get comfortable with. It's a really good point on the market makers. I hadn't really thought about that

in terms of market makers, maybe not having the infrastructure around spot. Is that a big issue right now, just with the market writ large around spot exposure? It is, there's still market makers that can do the job, so to speak, but there are less than there were two or three years ago. And so I think that it will be a balance sheet question potentially. And these guys are pros, the market makers that are still available and out there. And I'm sure they will be able to manage an orderly market. It's not as easy and clean as just converting a triple Q's product or just an XLE, a classic

ETF that has equities the underlying where you're just using prime broker's relationships and balance sheet for that. It's slightly different. And these market makers are pros, I'm sure that it'll be fine and orderly, but it is unique. And I think that is just something that will be ironed out and needed to take place. I do think that there's a interesting use case around derivatives here because I think within in 48 hours of an ETF launching, there will be options on those ETFs. And that will be interesting because there's just not really a great options market currently in the U.S. I think BITO, which is a

futures-based ETF has the largest liquidity. But I'm guessing that there will be a ton of liquidity that will come into these options. And that's just a whole other set of investors that don't really currently participate in that market. Yeah, that's a great point. The options market, when you just look at the exchanges that are active, it is pretty interesting that Deribit has such a stranglehold on that market for crypto. How do you see that unfolding? I'd imagine some of these bigger players from the legacy TradFi world are going to start to move into this space pretty quickly. I think this is, at least in my circles in the small nichey derivative space, it's a highly debated topic because Deribit has the line share of the options volumes in the

space. They also price everything locally in Bitcoin, if it's a Bitcoin option, or if it's an eth option. And so in order to post collateral, you have to post those coins to get on that exchange. And a lot of the players there are market makers or investors that are not in the United States, certainly not institutions that are in the United States, don't participate in Deribate in any kind of meaningful way from what I understand. And so there is a host set of investors and traders and participants on Derbitt that will probably stay there. But then you'll get this new set that will be in the U.S. that will trade the ETF and the derivatives of that ETAF. ETF, and those are U.S. dollar denominated. So there's actually different margin requirements,

which may or may not, but I'm guessing it will create different ball surfaces, create different opportunity sets, depending on where the fund flows are going and the markets are going. There'll be different tenors on options in the U.S. There'll be weeklies, potentially, or monthlies where Derivet typically trades mostly in quarterlies and monthlies are lighter. The highlight or the point there is that I don't know that it is actually taking away volumes from Derivit. In fact, I think it's just additive to the space and a whole new different set of traders and investors participating in the ETF and the derivatives that come in. Yeah, if you just look at the size of the option market and digital assets relative to

spot or even perpetual futures, it's impossible to not think that's just going to be a much bigger market five years from now. It's a very popular product outside of crypto and why wouldn't it be a very popular product in the crypto industry? I 100% agree with that. So there's been some really interesting activity in the Ethereum-based gray scale products lately, too. I would think that it's part of the thought there from some long-only allocators is probably that Ethereum could be the next up as it relates to a spot product. How do you think about that? What's the likelihood that we would eventually even have an Ethereum-Spot-Eatf here in the next year?

If things continue to move as they are on the Bitcoin side, and let's say an ETF is approved by the end of the year, I 100% believe that you'll have an ETH product within a year from now. And there is first the question of whether or not it's a security or commodity, which I think were probably, I wouldn't say 100% in the commodity answer for the SEC. Genzer said before that it is not as security. And I think that precedent would be difficult to backtrack on. And CME has a reference rate on ETH. And there is an ETH futures product already launched and approved.

And all of those factors, I think, really point to, yes, you'll have an ETH within a year. The timing is somewhat unknown. For Grayscale, they did apply for the ETHE, which is their Grayscale closed end fund to make that conversion into the ETF. So they've already put that hat in the ring. And the other sponsors are also involved. We'll also, I think, shortly follow once they get the Bitcoin one to get that going. I would imagine you're talking about an end of Q2 type of timing and maybe it's Q3, depending on how long it takes to get the SEC's attention to get this done. That's just a very light guess on when you get a timing for that product. But I think that lines up and I think Grayscale would do that conversion, given all the things

that we've heard from them to do it around that same time. That's going to be fascinating. So maybe just to back up a little bit and talk about what Hunting Hill looks like today. What are the lines of business that you guys were in? How do you segment the firm in terms of what people are working on? We have evolved over time and currently I would consider our asset management business in the hybrid model. So we have this TradF5 strategy that is market neutral and again, we're looking for alpha generating ideas and opportunities and we still have the ETF strategy that we work on. We still

trade in the event space. So we look for hard catalysts. We look for share class trades. We do some credit trades as well and fall. It's a big component of it. And then we have our crypto dedicated strategy, which again, we run market neutral, and we're looking for this dislocations and alpagenering ideas and opportunities that are solely dedicated to the crypto markets. And we've started to also launch a few different long-only products. And so we have those liquid strategies. And then we have also looked at the distress space, obviously post-FTX and everything that is unwound in the bankruptcy and solvency issues around a lot of the platforms and brokerages and different funds even. We've been participating in the distress space on the back end of that. So looking to buy certain things

that we would consider have high complexity premium and things that fall under our core competency to potentially buy what we consider below fair value. And then the third component is investing in operating businesses in the space and the crypto space specifically. And our thesis there is looking for a practical use case that not just financial services, but also everyday folks in the U.S. and outside of the U.S. that will participate in blockchain and other different technologies, that will hopefully create a positive use case for them in their everyday lives. And that thesis is really born because we think that the next bull market will come from true value, true unique use cases in the world where blockchain is highlighted as a part of that.

We have invested in a company called Versify, which is really a fintech services company, and we have partnered with a group base layer ventures, which is an awesome partnership for us, the main focus of the company, which we're calling now Hunting Hill Digital, focuses on consumer brands and looking to find use cases there. We can use blockchain technology to help certain consumer brands that BaseLayer is interested in supporting. And that's, again, going down the use case scenario. And we're looking to make more public announcements, hopefully in the next quarter on how that's going. But it's really looking interesting, and especially now as the space is turning and looking positive. So many interesting things in what you said there.

When you talk about distress, I certainly see that all the time in our business, where you come from TradFi world where there's this big infrastructure around distressed players, even secondaries. So fund secondaries as well as company level secondaries, there just aren't that many players in the digital asset space. How are you guys thinking about what are the categories that are interesting from a distressed opportunity space, just given the carnage that we've seen over the past year? Yeah. So I think initially earlier this year, we're looking at claims on some of the bankrupt companies to see just where the market fit. And there was a lot of the market fit. And there was a There's plenty of players that were just to looking to get liquidity, so we're looking to buy

claims. I think now, actually, it's starting to get a little rich in that space, and we've exited those positions. And we're now looking at different liquidity events. So there are actually bankruptcies that will go through their liquidation process, and we look to find things that we have a full understanding of and really can get our head around what the risk might be. To your point, there are secondaries out there in LP stakes or different projects or

protocols and FTCX, I think by that self, just with that, it has about 185 or 180, some big number where it's hard to sift through. And for us, for LP investments like that, it's not really in our wheelhouse to try to sift through those. I think that maybe even VCs probably have a much better idea on where those markets might sit than us, but for the liquid versions of some of these projects, and those are, it can be coins, or it could even just be some of these big bankruptcies that are just trying to unload some of the top, call it 10 by market cap coin, those are trades that we can be involved with. We understand, again, where the fair values might be and what it would take to buy a big chunk of those holdings all in one slug. That fits more with what we're

looking at. And in maybe one other version of this for us, actually, is in the operating companies that we've invested in, looking for distressed assets that we could potentially buy to help support and really launch those businesses. And there's a punch of good tech and really good people that are out there and looking for a place to land at the moment. And I think that's a great opportunity for those operating companies to get off the ground quickly. Those have been the spaces that we've navigated in. I'd love to do more in the distress space, but there's a limited amount of capital that will get involved. And we can try to drag some more people involved and get in because there is edge in those types of trades. And I think they will pan out over the next year or two.

And another non-crypto market, you'd see middle market buyout firms or distressed private equity firms being active, but this crypto thing is new to so many of those players. So you're not going to see a middle market private equity firm or just stress shop buy an exchange or a lending desk or something like that. So it must be a really interesting market dislocation just based on the number of potential buyers of some of these assets. There just aren't a lot of them. Yeah, there's not a lot of them. And at least in our experience, when we go into these bankruptcy processes and we speak to the bankers or we're speaking to special committees, et cetera, there's a reverse due diligence. So to make sure that were legitimate and making sure we are actually real. And there's not many that they do

reverse due diligence on. They just already sift out maybe the 10 that come through and find two or three that they think are viable. So yeah, to your point, there's not like there's 50 showing up to these bankruptcy procedures. It's pretty limited group. I think for me it's maybe counterintuitive, but that actually makes me feel more comfortable as a buyer because I'm not chasing and competing with 50 others. I don't want to be by myself because you never want to be hunting in the jungle by yourself, that can be dangerous too. But yeah, certainly a few familiar faces around, but not many is a good spot for us to be in. The Versify business is really interesting to me. So what was the idea behind investing in Versify and what's the focus of that

company? Yeah. So we have been participating in the space, like I said, since 2016. And the partnerships and called platforms that we've participated with in that space have always been great from a service providing perspective. The people have been great. A lot of positive energy from the crypto markets generally and those platforms. But what we always found is that there wasn't a lot of great technology, very much run on what we could tell at least the businesses were run on Excel or basic solutions. And there weren't a lot of great reporting. There weren't a lot of great execution management systems. So when we were looking into the space, and this was actually back in 2021, we said, look, is there a way to build these businesses but have good tech and look like

an institutional service provider. And obviously, in 21, it was not a great time to be investing. And we just put everything on hold because we didn't feel like we wanted to chase. But after FTX, we were like, okay, this is a good time to build. And we saw where all the problems sat, not just with potentially reporting and being an institutional service provider, but there was certainly a lot of lack of control. There's the lack of compliance. There was a clear misunderstanding of how to manage risk. And all of those things, I think, are important in the next round of hopefully cycle where you get a bull market. And if you're buttoned up and you're able to learn from those mistakes and what other companies have made and build a good business,

that's interesting proposition for us. And Versify is a reflection of that looking to build or help them build an institutional-based financial services company that at the onset can provide liquidity in the derivatives world for institutions. And that's something that we know very well. we know how to manage the risk. We can help them with, of course, the lending side, which is another component to this where we haven't really fully talked about here today, but there's not much on the lending side today that is available and I would consider commercial terms. 21 lending and leverage was super easy. Now it's pendulum has swung the other side and very difficult and conservative, which I think is healthy for the market. I think that's a

good thing. But I also believe that there's some white space there that can be filled and versify is looking to do that. Yeah, it's crazy to just look at the lending market and just how it just basically doesn't exist right now. You're coming off of this just crazy run-up in asset prices in 21. A lot of it was powered by lending, but it seems to me, at least from an outside view that a lot of the spot moves we're seeing right now is just there's no leverage in the system. Yeah, which I agree with. And I think there's a lack of liquidity on exchange, which is causing more of the moves up and down than leverage at all. But like I said, I think a lack of leverage is a healthier version of the market.

for now, I do think it will come back, but we'll come back in a hopefully a more prudent way and in a way that is managing risk properly. Counterparty risk is first and foremost there. And there's different platform solving for that. And like I said, VersaGai just is one of them. And we're excited to partner with that team. It's a great team. So you talked a little bit about opportunities that you see for real world use cases and brands. And I know that you guys are active there on the base layer side with the ventures. What do you actually see as the bigger opportunities in that category. Yeah. So specifically with consumer brands, I think that there's low-hanging fruit around different loyalty programs, different ways to engage with consumers where there's a natural

feather between digital and physical. So a physical good that can be sold to the consumer, that consumer can show their preferences and have potentially a digital version of that consumer product and have it maybe tied to a game or a mobile device in a way that is unique and unique to that consumer and to the brand. And what's funny is that I think that process of combining or call it tethering the digital and the physical, the consumer may not even know that is using blockchain technology to do that. And I think in 21, everyone that was trying these types of things were really hyping the idea that this is crypto and this is a new technology and this is going to change everyone's world. I think today even, there may be brands that may not even say that

this is a crypto-based technology that's supporting this service or this product. It may just be using blockchain in the background. And consumers may love it and they may not even know it. They may even have a white listed wallet on their phone and they may not even know it. That's important distinction today is that brands are just trying to get smart on how to use the technology properly and how they can engage their customer in a way that they haven't in the past. And that can be either through a new market segment or it can be just a new product itself, they may not care that it is crypto or using blockchain technology. They just want it to work. So there's so many good practical use cases out there that we're seeing at least in consumer brands and the nikes of the

world and some of the big brands have started that idea. And there's just a bunch of other brands that we're talking to and working with that are looking for something similar or unique potentially in the gaming and mobile space. One of the more fascinating things about NFTs is if you just divorce the speculative run-up of these pictures of monkeys and things like that. Ultimately, this is just a new file format. So I'm sure you're seeing this, but we're certainly seeing a lot of consumer brands look at NFTs as just a new file type where they can create provably scarce digital files, sometimes tying back to physical objects. I've often wondered if this will just become a way to tokenize esoteric assets at the end of the day and create liquidity in certain

types of asset classes where historically you haven't had really robust markets. Obviously, there's a lot of regulatory questions there, but do you imagine that this NFT file type will eventually lead to markets that you could eventually be trading in with these esoteric assets? It's a great question. I think that there is a debate to be had there. And the debate, at least from my perspective, comes from whether or not a asset that is not naturally liquid, all of a sudden becomes liquid because there's an NFT.

And I'm not sure that's the case. I think obviously there's been proof of that in, like, let's say the Treasury market or money market type funds. And those are very liquid, deep markets. And yes, if you apply an NFT or NFT-like application to it, then those NFTs and those markets will also be liquid. If you have something that is rare and unique, I think it's important to have providence. It's important to prove that there is a uniqueness to it. And that is what NFTs can do, or a version of it. That is, I think, practical use case. Will that become a liquid market? I'm not 100% convinced that It'll be fully liquid because it's all of a sudden tied to a digital asset.

But that said, I do think it does open up a marketplace for something like that to be traded, where it otherwise may be questioned, especially these days, whether or not it's real, quote unquote, real. And that's important. It's really important, especially now in AI, the world that we live in and different generated, either photos or even physical, if things are real or not. So, yes, I do think that there's a good use case there will become liquid. I'm not sure yet. Yeah, it'll be really interesting.

We've seen companies that are focusing on the restaurant industry, for instance, and trying to ascribe value to being able to get your favorite table at the restaurant or trying to describe value to the reservation that you weren't able to get, but maybe you could bid to get that reservation. And all of a sudden, you have this marketplace. It'll be really interesting to see if liquidity actually comes to these markets, though, to your point. I do like that as an instance.

So restaurants and seating and reservations, I actually do think there's a market there. and I would parallel that almost to secondary market and tickets for concerts and music venues, where there's obviously a stub hub and all the other big companies that do that in the secondary market, and that's a liquid market. People access and traffic there all the time, and there's certainly a high commission to be paid now to the stub hubs of the world, and do we all want to pay those? I don't know.

Is there a version here where blockchain can help with disintermediating that, maybe? And for restaurants, to your point, I do think that there is a market there too. and it's certainly finding the right platform and channel for a consumer to get involved there. But blockchain solves that problem, I think. All right, Adam, there's so much we could talk about. I could keep you on here for hours, but time to wrap up. I guess as just the closing comment here, you guys are doing a ton. There's a lot to learn.

Where can we send people that want to be in touch with you or learn more about Hunting Hill? Hunting Hill is a NASA manager that's based here in New York, and certainly can reach out to us through our website. and if there's any questions or comments or thoughts around the crypto space, we're always open to discussing them and how we think about the world and how we apply our core competencies and strategies to investing. We're excited about this next year in particular in 2024. I think there's a lot of tailwinds coming in the space and we are setting up hopefully for another push, not just from price, but for practical use cases in the world. And we appreciate your time.

And thank you for having me on, Matt. It's good to catch up and have a conversation around this stuff. Enjoy the time. Yeah, it was great to catch up for the end. for coming on. Thanks for listening to another episode of On the Brink with Castle Island. To find out more about Castle Island, visit castle island.Vicc.com. To listen to all of our podcast episodes, please go to On the Brink dashpodcast.com or just click on the tab in our website. Thanks for listening.