On The Brink with Castle Island - Dan Tapiero (1RT Partners) 2023 Market Recap (EP.489)

Episode Date: December 21, 2023

Dan Tapiero, the founder and Managing Partner of 10T Holdings and 1RoundTable Partners joins this show. In this episode we discuss: The state of the crypto/blockchain markets since the FTX collapse. The impact of the Bitcoin ETF on fund flows in the industry. The market for growth and secondary investing. The LP landscape and how allocators are thinking about the sector. 1RT's strategy and the categories that Dan is finding compelling. To learn more about 1RT visit their website and follow Dan on X.

Today on the podcast, I sat down with Dan Tapiero, the founder and managing partner of 10T holdings and one roundtable partners. Dan's a repeat guest on this podcast, and it's always great to sit down and get his take on the current macro environment, the growth stage market for crypto infrastructure companies, and much more. I think you'll enjoy this one. So without further ado, here's my conversation with Dan Tapiero. Matt Walsh and Nick Carter are partners at Castle Island Ventures. All of these 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 hosts 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. 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 to 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 a Bitcoin. Bitcoin. Dan, thanks so much for coming back.

I think this is your third time on. I always enjoy it. My pleasure. It's been over two, three years. I was on six months ago maybe or nine months. I don't remember. I think you were on maybe. right after FTX, but man, a lot has changed. Definitely changed. What's the past year been like

at 1RT? It's obviously been up into the right price-wise, but what are you seeing on the ground? Look, things have surprised everybody. The companies, for instance, in the portfolio that we have the 24 businesses in the 10T portfolio, for the most part, I think struggled in the first half, But I think that this quarter is going to be, I don't want to say record quarter. Some companies will have a record quarter. It is certainly likely to be the best quarter since the end of the bull, the previous bull face. So it's really been a tale of two halves. And I think you'd agree with the Larry Fink comments in July kind of split the year.

We were initially worried about the SEC suit against Coinbase, Gensler coming out every other. day with something negative. And I think in the summer there, people really got between the Fed raising rates, liquidity being tightened, short rates at 5%, which is attractive for many people. And then on top of it, you had a pile of from Gensler. People were a little bit in a bunker. And I mean across the board, investors, but also the companies themselves. It was just a lot of uncertainty. And Larry Fank really helped to turn that sentiment. But the reality is, that the low for the space happened within a few weeks of the FTX collapse, and most things bottomed in December, and you've had absolutely massive moves in very clear and obvious things like

Coinbase. I think our previous conversation, if we go back to it, there was probably a little more uncertainty out there. And I think generally the companies are in a good place going forward, some of the, what I would call business risk for many people, I think has been taken away. And for us, I would say things again, they picked up dramatically in the last six to eight weeks in terms of interest in my fourth bond. But that interest really is coming from overseas. I don't want to hit on too many topics all at once, but the U.S. really still is a little bit behind. You have power things generally. We were talking about it before.

I've never traveled as much as I have this year. Just the interest and level of excitement about the space is incredible. We saw it in Singapore, Singapore, 2049, you and I both went, Singapore, Hong Kong, UAE, UK, Switzerland. I think these places, at least for the moment, will be their growing hubs, is how I would describe it. I would absolutely agree with that. Within our portfolio, we're certainly seeing the businesses that rely to some extent on trading volumes as a revenue driver. are doing great right now. And curious to get your perspective on why that is in this market. Obviously, the price of Bitcoin factors into that. Is it a rate story? Is it a Bitcoin ETF anticipation story?

What do you think of the narratives driving this market? Why the price has got up and why volume is followed? Yeah, why the price has gone up, why volumes followed. Look, I've been trading markets for over 30 years and markets all have similar attributes. And maybe some exhibit more volatility than others. This is, I think, the greatest bull market of all time and the greatest, maybe, and the biggest, I think, this internet of value I want to call it, or the fact that we're eventually going to put all value on a blockchain, and it's going to reside somewhere in this digital asset ecosystem. I can't think of the digitization of money. There's nothing bigger than that. So that theme is the big structural bull market that continues to drive price,

but all markets evolve in a similar way, whether you're studying Elliott wave patterns or Fibonacci sequences or looking at moving averages. You have huge moves up that overextend, and then you have retracements against those initial trends. And the retracements can be 50%, 61.8% or more. So if you look at this on a yearly basis, I think that it's just completely natural. I think there's so many individuals in this space who are what I call civilians. They didn't manage a portfolio. They don't manage risk for a living. It's extremely dangerous. I fear for them. It's like driving an indie race car or a Formula One race car without a driver's license. It's what this is. And I think it's very scary for a lot of people. But that being said, they see that this is the fastest car that's ever existed and they want

to drive. So as long as they're positioned in the correct size or they have the right exposure, it's okay. What I'm saying is that the ups and downs are normal. It's price discovery. I think we end up, certainly my first wrestling point for Bitcoin is $300,000, $350,000, whether that's in three years or five years or seven years, I don't know, I can rationally pencil out real math to get there. That's reasonable. And could it go to a million? Sure. Kathy Wood is talking about a million other people. Sure, it could. But look, only I think four percent of the world have digital wallets today. So think about that. Four percent. And it's been tracking the adoption of the internet back in the 90s, in 1998, it was 4% of the world had access to the internet. So 10 years later,

it was between 25 and 30% in 0708 or 9. So do I think that the adoption rate within our space goes from 4% to 25% in the next 10 years? I think that's a reasonable bet. You're asking about the price going up, is that as that rate of adoption continues to track, we know that there's a limited supply of Bitcoin. And for that matter, ETH, I know whatever, those hardcore Bitcoiners are thinking, but it's a pretty tight supply. Like gold, 1% is added every year. It's not like you can buy a lot of gold. There's only so much out there. It's the same thing with EAT, and not like that for Bitcoin, though. So, but to me, I don't know what you think, but look, Bitcoin and Eith are the core assets. For me, the other cryptocurrencies are more venture.

projects, and I think when they achieve network effect, via Metcalf's law, then they become core acid. You would know more about this than me, but it looks like Solana is really making a charge to be the next core asset in the ecosystem. I think that community is really hung in post-FTX through some really dark times. On Bitcoin and ETH, though, it's just a fascinating setup here where you have 12 ETF sponsors that are trying to get this Bitcoin ETF through, And you'd have to imagine there's going to be some pretty heavy-duty ad budgets behind those products. They're not terribly differentiated at the end of the day. So awareness will go up. And this is just a market where the actual market structure is still quite immature when you look at the number of banks

and broker-dealers actually playing in this game. For instance, I think Coinbase is the custodian on something like 11 of these ETFs. So it's not like you have global custody banks even really in the mix yet. So it sets up pretty interestingly just from an access point. of you. Imagine what this market would look like if every bank and broker dealer had a custody in trading infrastructure, which I think will probably be the case in the next five years. Yeah, I think it will. But what's the question that the infrastructure is still immature, and that creates an outsized impact on price? I would just argue that it's an access thing. And so you have $7 trillion in the RIA channel that basically can only buy GBTC if they want

to get exposure to this. And so imagine if you could buy this on Schwab.com. It's an American thing, though, Matt, it's an American thing to want to just have the position pop up in your portfolio that you can get on your screen at your Bank of America, Merrill Lynch account. You can probably, in the form of an ETF, you can also borrow against it easily. And I think that many people with larger portfolios, they do borrow against it. And so maybe that also makes it easier. People like to have everything in one place. But this is an American thing. I think everybody else outside the U.S., I think they've adapted, especially emerging countries. And it's not that difficult to just open up an account in Coinbase or Crackham or Gemini.

I actually think it's just the older people. We talk about this, and I hate to single them out, but I have investors who won't buy Bitcoin in a newfangled way. They just won't. And they keep telling you they're just going to wait for the ETF. I think it's madness. But look, people, they get into their habits and especially wealthy people when they're little older, they don't want to do new things. I think there's a very chunky amount of older wealth.

Honestly, it's in the tens of trillions. in the U.S. that wouldn't mind having a little bit of BTC and ETF, and they can just push a button. I think I saw something recently interactive brokers has now BTC and E. I know those guys are a little more active, those clients. It's not really a true wealth client, at least from my memory. So I think it's going to do wonders for liquidity as well. It's not just price going up. It's just, it could be the sense of being one of the deepest markets out there, like the Eurodollar. I think that's a great parallel, actually.

And on that liquidity point, I guess the liquidity landscape itself, since we last spoke, has really been chucked up. Obviously, you have FTX off the map. You have the Binance settlement. So I'd love to get your take on just what that means for liquidity in the ecosystem. Do you think we'll start to see other players pop up and step into that number one seat? How do you think this plays out over the next few months? Well, I never believed there was ever going to be a number one. I think the TAM total addressable

market size is so large. It would be impossible to only have one. I think C.Z had a strategy was to move quickly and break things. That was his business strategy from the beginning. Get as big as possible, as quickly as possible. And if some rules are broken, pay a fine at the end. So his risk calculation was, that's the way that I can accumulate the greatest amount of wealth. And in fact, if you think about it, in about five or six years, he built his personal net worth essentially from zero to over $100 billion. That company did $10 billion in net profit last year or the year before, whatever. He owns a big chunk of that business.

I don't know in history of anyone else who has made $100 billion in five years or $6. years. So I'm not saying I support the way he went about things, but I think that that was his calculus. And then you have other people like Brian Armstrong who seem to be, I think, good actors acting for the general benefit in a way himself, but building something slowly over time that's compliant. It's a lot harder. It's a lot slower build. And you don't get to accumulate that wealth in that short period of time, but there are other benefits. And Coinbase now we can see. You probably, I wonder what your take on this is, but I've been pretty impressed in the last six to nine months with the number of things that they've rolled out. I mean, three or four years ago,

people would just say, oh, Coinbase is a retail transaction platform, and it's not even that good. Coinbase goes down. I hate it. And they did. It went down all the time. It took forever. and now they come out with base and all of a sudden they were gate-made a defyre. You never would have thought. It's really impressive. I think Coinbase is executing at the highest level of almost any company in this industry right now. It's a very poorly understood stock on the by side from what I can tell because it's looked at as this retail broker, but it has this really thriving institutional business. I mentioned that they're the custodian on, I think, 11 of these ETF filings.

And then this base thing could really be a game changer, I think, in terms of if you, if you have a view that real world assets will come on to blockchains. This could be a really interesting platform to do that. Well, I don't know who doesn't have that view. I think we all, anybody who's been in the traditional world like us, we know it's happening. It's the path. It's been a little slower than we anticipated. And even though it started to move a little bit this year, it's still just so small. It doesn't even really pop up on the radar. But no, you're Right. And Coinbase is going to be positioned nicely for that. They could be the backbone for a lot of that. On the RWA front, these real world assets,

obviously we have treasuries and that's emerging as a real killer use case. What do you see is the logical next step in order to get real world assets on chain? What types of assets? I talked about this on my investor call a few weeks ago. Actually, the number one thing, the number one real world asset that's been tokenized is commodities. So we have this chart, and it breaks down by acid class. Everyone has been talking about the treasuries, but it's in fact commodities. And I guess you could think back to the gold is probably one I think maybe in India.

There are a few places around the world. And again, the U.S. tends to just track U.S. things. It's all about U.S. treasuries. But I think commodities make a lot of sense. I used to trade a lot of wheat back in the day in 06 and 2007. It was a great bull market in wheat. And it was funny, we'd had different prices in different places around the world. There wasn't really a single exchange where you could trade. And I remember I owned a bit of the Minneapolis wheat exchange and the Kansas City wheat exchange. These are things people don't even know existed. The Winnipeg Commodities Exchange was a big, anyway, the liquidity ended up being on Chicago, used to call Chicago. Then there's all this physical wheat movement. But even today, wheat is for bread.

You'd think there would be some liquid place where people could trade wheat. And there isn't. Even today, it's just unbelievable. It's very fractured. It's fractured by jurisdictions, by country, boundaries, by laws, and then there are different kinds of wheat, hard red winter weed, there's soft weed, everyone can get into the whole thing. But it just makes sense that one day we're going to have a digital wallet and you're going to have all the wheat in the world is going to be. It might even be on one blockchain. Maybe it's multi-blockchain. It just doesn't seen, that's of course the end state. So for every guy like me that's traded in the old markets, especially in size too, that's the problem is that it's liquidity. That's always a problem.

And you're thinking, well, how much bread gets consumed in the world? You still don't have a really liquid wheat contract. For me to get a limit long position on Chicago, it takes a while. You can't just push a button. Why move into this space? And I think others, it comes because we've all felt that there's a problem in the traditional markets. There has been for a long time. The world, pre-1990, was really just about the U.S. And then you had China come in in the late 90s. You had the communist countries come in.

And all of a sudden, you had demand from places where you never had demand. I'm not talking just in commodities, talking about overall. So all of a sudden, you have all that demand, but you don't really have global market structures that are liquid. I'm sure there's a Chinese wheat exchange, and it's liquid in China to some degree. I'm just saying the idea that everything should be in one place, let's just be really simple about it. It's made intuitive sense to a lot of guys like me for 20 plus years since I was first

in the business in the early 90. So I think that RWAs can create a light bulb moment for a lot of traditional people about just moving into this digital asset ecosystem. And then once you own assets in your digital wallet, then it's an easy jump to say, oh, well, maybe I'll have a little bit of this Bitcoin. And then once you own a little bit of it, you then start to learn about it. And then you're like, oh, my goodness, this is one of the greatest things of all time. How did I not get this 10 years ago? Or even programmable money. I keep going back. It's just old guys like me sitting back in the 90s looking at our Bloomberg's and trading currencies and bonds and emerging market debt and equity and thinking that you could have a currency that's programmable. That's like a

flying car. It's not something that made any sense to a market guy. So I think RWA's can be a backdoor in a way also towards greater adoption. I think that's right. I often think about it in the context of what is the minimum viable ecosystem to get an asset onto a chain. So if you just think about that from a technology perspective, certainly three years ago from just a performance perspective, these things weren't ready for prime time for that type of thing. But for your example, for wheat, that's not that exciting if you can't also have a US dollar on a blockchain to settle it with, because not everyone's going to want to settle it in BTC or E. So the industry tackled that first. And now I was looking at some data on certain days, over 70% of every blockchain

transaction is moving a US dollar on a blockchain. It is undeniably the killer use case right now. That's why the U.S. authorities' position is just so unbelievably absurd because they should be using that fact to really build their position. It's unbelievable the opportunity that's sitting right in front of them. As an America, you can't even believe it. We're not that dumb. Well, maybe we are. I don't know. And if you just look at stablecoins, 99.5% of stable coin flow is a U.S. dollar stable coin. So it's not like there's any opportunity. for any other fiat currency on these chants? Well, there will be for euro and there will be. But look, I've always said people complain about the dollar. And yeah, I think the dollar's probably entered a bare phase now.

But it's always going to be the best fiat currency. It's just that it's still going to go down 99% against Bitcoin in the next 10 years and against E. That's what it's done. It's gone down 99.9% against Bitcoin and E. and some of the other crypto currencies, even Ripple, which for me, I struggle to understand it. I'm not saying it's valid or invalid. I think they've been around 10 years and it's got a $40 billion valuation. So maybe Ripple has achieved network effect. I don't know. I don't understand that.

But it's remarkable to think that the dollar is down 99% against even something like Ripple, which just tells you that it's the technological application. of technology to money that is the value proposition. Whether it's Bitcoin or Eith, I know we always talk about that, but no one has been able to explain to me why Ripple is in the same category. You can't deny a $40 billion asset that's been around for 10 years. If it was going to go to zero, it should have done it all that. You know what I'm saying? And that's important to me because it informs my broader view, which is that everything in the digital, asset ecosystem, only. It's seen in its entire, all the value of all the cryptocurrencies and

the value of all the equity of the businesses in the space is going to appreciate 99% against all of the value in the traditional fiat world over the next 10 to 15 years. And that realization is a very big picture macro view. But if people in the traditional world, understood that, especially in the U.S., that's what's happened in the last 10 years. Even if I'm half long and everything only goes down 50% or 70%, I don't know how you don't at least investigate. It's a great dovetail into some of what we're dealing with from a narrative perspective from some of these politicians.

So you and I are seeing this on the ground where you see this plethora of remittance companies that are popping up and really providing great service to folks. that want to pay less for remittances using stable coins. You have the power of the dollar narrative, which I think is super powerful, the ability to export the dollar at global scale in a way that really entrenches the dollar. Then you have all the wealth creation that this industry has had just to folks that have been able to front run the institutional crowd and buy Bitcoin and Eith. Even that's a powerful narrative to some degree. So there is this financial inclusion element to this that is completely not addressed when you listen to the Jamie Diamonds of the world

or the Elizabeth Warrens of the world. Do you think we're failing as an industry to get that message across, or is it just not ever going to resonate? Well, it seems to me Elizabeth Warren, I mean, is not a capitalist. So I'm not surprised. I don't know that many people that take her seriously, honestly. Jamie, on the other hand, I think waffles back and forth, and we both know that J.P. Morgan has the greatest number of blockchain patents in the world. And I think to start talking about, well, Well, again, the silly thing, I don't believe in crypto, but I believe in blockchain. Okay, I get it, but there is no blockchain without an incentive mechanism. It just is not a proper network.

And you need that incentive mechanism. So I understand within the Wall Garden of JP Morgan, he may say, I don't believe in Bitcoin specifically, but the code that underpins Bitcoin is very similar to the code that they've adapted for their internal use. So in terms of understanding value, I don't know how you don't see the value of that. That code is value. But I don't think J.B. Diamond thinks that way. He's got a big organization Iran.

It might be that when he finally understands it, it's when you should be selling. I think it's in a way healthy that there are people out there. It's healthy for us. It's healthy for the market. They always said on Wall Street, this goes back years ago, where they say bull markets, climb a wall of worry. Let me tell you, when you have no worry, you're going to get killed. And I've experienced it a bunch of times in my career where you had a big move. You're thinking in your head, okay, I can finally get the wife that extra whatever kitchen or something. I don't

know. Whenever you feel comfortable and confident that your idea is now being understood, it's close to the end. So I go back to this 4% of the world have digital wallets. And again, you know what we do. I only invest in the larger companies, companies with over 50 million in revenue, etc. And part of the reason for that is, again, I'm not a venture capitalist. I don't have your skill set. I can't really take apart the code and figure out which blockchain is going to be used for which use case, at which one is going to survive. I just don't. And I feel like I don't really need to take that risk because if only 4% of the world of digital wallets, it means that if you're a company now and you're making $50, $100 million in revenue and you have a mode around your business,

the leadership team is solid, it just means that the likelihood that with that winded your back, the likelihood is pretty great that your business is going to be just fine. It may not 100x like Solana, but it can certainly 5x or 10x in the coming five to 10 years. I'm less geared. I'm happy to make less return and I'm happy to have less volatility and I'm not losing any sleep. Now, I wouldn't necessarily think that was the right strategy if things were more developed. If Jamie Diamond or Steve Schwartzman or someone came out and said, oh boy, the digital asset ecosystem, that is the future. My business probably toast. I can't compete with those guys.

But it's early enough that I think I can have an optimal exposure, at least for me and my LPs, and less risk than trying to divine the tea leaves like you guys do with these pre-seed tokens and things that can go up 100, 200 X. I'm not in that game. But the larger point is simply that, at least from my perspective, you want to hear that there's an entrenched negative view. Yeah, you just want to hear less on Senate panels would be nice. Yeah, and I think there's always a tell. You just travel outside the U.S. Singapore was, I'm sure you were mobbed. I mean, You can't even walk 100 feet without somebody wanting to come and talk to you about an idea, an investment, get your view. I mean, it's very intense.

And the places where there's some regulatory clarity, people are being drawn towards. So I think that that also should tell you that the U.S. is a little bit an island at the moment. even though, as you just mentioned before, it's remarkable that last year, $8 trillion of stable coins were settled. So if you think about that, three and a half years ago, it was zero. And how many things in the world that we've ever known them go from zero to $8 trillion in three years? It reminds me of the reason why Jeff Bezos started Amazon. I know if you see it on the internet sometimes, there'll be a video and they'll be a video. And they'll be a reason. I'll ask him about that. I think he was at Princeton or he just left Princeton. And he said that

the internet adoption growth rate was 240,000 percent or something crazy. And he just said to himself, I want to go where things are growing that fast. Yeah, he was at D.E. Shah. Remember, he was studying the trends. It was very data-driven approach to starting that business, which is fascinating. But it's interesting that that was the key observation. And I would make the same observation. what is growing faster than that? Zero to $8 trillion in three and a half years. Of course, that's a thing. How could that not be a thing? I agree with you. It's got to be a really interesting time for your business. I think about this in the context of just the ebbs and flows of generalist funds that don't have a strong conviction over the years. So 2014 and 15, I saw a number

of generalists come in with the thesis that Bitcoin was a credit card killer. And obviously, that didn't pan out. And that's not what Bitcoin was. And those generalists by and large went away for a few years. They might have come back for the ICO bubble. They went away after that for a few years. And then certainly a lot of them got involved in FTX and a couple of those transactions. So my sense is that you're probably in a pretty interesting perch in terms of not having a ton of competition from these generalists that might not have as strong of a thesis at your stage. I think the generalists came in, they pushed up prices, and they moved out. And there are very large private equity funds, growth equity funds. You had some of the sovereign guys come in and invest directly in things like

FTX. Look, as far as I know, we're the only growth equity fund. I want to say in the world, maybe there's one out there, but that exclusively focuses on crypto, Web3, blockchain, digital assets. And we've deployed $1.2 billion since the beginning of 21 into these. 24 businesses. And as I said, we now have board representation on 11 of them. And I'm really finding that what's exciting is that I think in the next 18 to 24 months, we are going to start seeing some of my company's IPO. And the interesting thing is it may not be on next step. It may be in Hong Kong. Did you see last week this Bitcoin miner that has 11% of the world hash rate in Abu Dhabi had an IP?

that was 33 times oversubscribed. And on the first day, it moved up 50%. 33 times oversubscribed. So I stayed up all of my prospective investors. I say, listen, I will never say anything with a 99% degree of certainty. But I will say one thing with a 99th degree of probability. And that is that there is no way that in the next five years, Coinbase is going to be the only large, crypto, blockchain, Web3, business that's public. It's impossible. By our accounts, there are over 150 businesses in the space that have a valuation of 400 million or more. And that's down from 230 or 40 at the peak. So we're not gaming it. There's no way that they can all stay private. I think that we have a role to help shepherd some of these companies towards IPO. But there's also

a lot of basic blocking and tackling on governance that needs to be done. Many of these companies don't really have proper boards. Having your dad on your board is just not really a thing, but a lot of these guys insist on it. Now, on the FTX case, there was only one guy on the board and it was his dad. At least where I know the situation where there's a dad on the board, it's more than just one person. But anybody else, in any, of the industry, that would be laughable. But the reality is you have a lot of 35-year-old guys who've had great business ideas. They've stuck to their businesses. And all of a sudden, five, six years later, they're doing 50, 80 million in revenue, but they've never really run an organization

or they've run a large organization. And I've brought in now two partners, very senior partners who are, I think, going to help with our companies on that front. And I've already transferred five of my board seats to one of them is Tad Smith. Tad is the ex-CEO of Sotheby's, the ex-CEO of Madison Square Garden, probably one of the few, if I don't want to say the only, I would think Cagney's out there too, but people who have actually run a large public business. and that skill set is different from the skill set of the founders and CEOs in the space. So I think we, one RT and 10T, I think our focus, we have a lot of work to do, is going to be in helping our companies with some of those.

I don't want to call them basic operating processes, but many of these companies, as you know, want to be public. But it's not straightforward. because Goldman and Morgan Stanley and some of these other companies aren't really focused on our space. Certainly, some of these companies going public outside the United States, talk about a narrative. That would be start to see a world where it's actually easier to take a company public, not in the U.S. speaks to really the state of affairs here. That's unfortunate.

But I'm curious just around the categories that you're the most excited about right now. Obviously, you have a real nice portfolio diversification in terms of the types of businesses that you're investing in. But are there any areas that you're more drawn to than others right now in terms of new deals you're trying to look at? Well, that's two different questions. I think that there are certain areas, sectors or sub-sectors that are interesting. RWAs, we mentioned, stablecoins, we mentioned. I don't think that we're going to live in a world where there are really only two stablecoin, call them providers. And actually, there's only really one regulated, buttoned up. one. I think Tether is heavily used outside the United States. It's actually a real lifeline for a bunch

of people outside the U.S., but not really applicable here. It can't be that, again, five years from now, they're only going to be two players. We're not really looking at exchanges right now. We have the exposure we want. Centralized exchanges are going the way either. They will continue to be a bridge to the traditional world, and then eventually later people will bridge into DFI, into the DFI world. It takes some education, but we still really like infrastructure plays. We led quick notes around. We really like them, and they're doing very well. So we like that business. I think the NFT Metaverse, let's call it space, blockchain gaming space, had extreme volatility, but there's some very interesting opportunities there. People have bad.

backed away from that a little bit. What's going on, I don't know how to play just yet, but the whole increase in the revenues on Bitcoin is interesting with this push and via ordnals. And that's interesting. I just don't know how to get there. I don't know what we would do today there. So there are lots of interesting developments. But the thing that is really sticking out to be now relates to something you mentioned before, which is that for the moment, there aren't that many people that are active in our space. I don't want to say none, but people who would lead me and see rounds, who can write a 30 to 50 million dollar check, who are active in the secondary.

So we've already started for my fourth fund to buy stock in the secondary of companies we like because there are special opportunities that have come about, or any number of reasons, at discounts of 70 and 80%. whether it's a seed investor wants liquidity or whether there's an employee that needs to raise cash for paying their taxes or whether even a CEO has 75% of the company and wants to reduce some. So we have direct access to massively discounted deals, largely because of our position in the marketplace and also every broker, any block of stock of $5 million or more, any broker, is showing us immediately.

We're in a great position, and we're trying to buy as much as we can now. Now is the opportunity, and I'm just afraid that it moves away from us. I'm very careful about valuation, and we passed on over 100 deals in the last 18 months, and I have no problem passing on companies that we even like if I don't think I can pencil out a 5 to 10x return on the investment.

So if you're coming in at 100 times revenue, it's just hard to make money. You guys, I don't know, you invest in things in zero revenue that go up 100x. I don't have that skill set. That forces us to pass on a lot of deals. But today, we have more deals that we should be doing than we have cap. That's just that's where it is right now. It's a fascinating part of the market. I continue to think that these secondary opportunities are just,

such a great opportunity that is completely overlooked by the traditional secondary players. And it's huge. Of the $1.2 billion I deployed, $600 million of it. I think I said this on the last time we talked because you were surprised, but $600 million of it was in the secondary. So it's the most inefficient market. Maybe it's not as inefficient as physical Kazakh, Stanley Wheat or something. But I think it probably is the most inefficient market. I've ever been involved with because there literally is no bid or offer. And the price just trades at the price that the two parties agree on. Well, it takes a lot of work to get in there and actually understand these businesses too. So it's not something you can parachute into.

No, it's not. So maybe as we wrap up here, Dan, just love your take on the broader LP community. I know you're super plugged in. What's the vibe out there post-FTX? How are people thinking about this asset class from the LP perspective? Well, FTX was over a year ago. I've ever forgotten about FTX, tell you the truth. Look, as I said earlier, into the summer, people were really hunkered down in a bunker, honestly. Again, they were being hit by the Federal Reserve hiking beyond what they should have, and then therefore having a 5% cash rate, having no risk on a T-Bill in 5% that's a 15% equivalent return in the S&P risk adjusted, something like that. That's really tough to pull you out of cash for people.

So you have that. And then, again, mentioned before you had Gensler and the attack from the SEC and just the barrage of negative things. But I think people have really turned. I'll give you just a live example. In the summer, let's just say for one month in that summer, I probably had no reverse inquiry. Let's just take them on June or July.

There was not one person who reached out to me and said, hey, Dan, I'd like to invest in your fund. Okay, now some of those people sometimes, they're very small and we can't take them. But I just, as a measure of inquiry, zero. And I would say just in the last few weeks, we get somebody almost every day and multiple people. So that changed pretty much in September, October.

And that's a good measure of interest because that's people reaching out. Maybe they hear me on an interview. Maybe they start digging around, trying to learn a little bit about Bitcoin or either about the ecosystem. And then they actually make the inquiry. So it's hard data. It was pretty tough in the summer. And then I actually think it's completely changed.

literally within a span of a few weeks, it's completely changed. And we're in undated again. I'm just hoping that some of these larger funds don't come in again and drive these multiples. Give me a chance here. Well, if there's one thing I'm certain of is that they'll be late. So I think you got a nice window here. Well, Dan, it's always great to have you on the podcast, enjoy the insights. Where can we send people that want to learn more about what you're doing? Well, you can go to our website, 1RTfund.com. And if you want to see what I've done in the past, our existing portfolio, you can go to the 10Tfund.com site. I'm the founder, managing partner, CEO, all of those words, those letters for both of those entities. Or a lot of people just

send me emails directly. It's the old-fashioned way. I love it. Or they DM me on Twitter. That's another D-TAP cap on Twitter. I make pretty clear my views. I like that as a record so people can see where I've been right and wrong. I know you do the same. Yeah, most of my tweets are about obscure accounting guidance from the SEC, but try to get it out there.

Well, it was great chat, Matt. Thanks for having me on the show here. It's great to see you, Dan. I'll talk to you soon. Thanks for listening to another episode of Oneson. On the Brink with Castle Island. To find out more about Castle Island, visit castle island.V.C. To listen to all of our podcast episodes, please go to On the Brink-Podcast.com

or just click on the tab in our website. Thanks for listening.