The Breakdown - Dan Tapiero: Crypto Is the First Truly Global Macro Investment Opportunity of All Time

Episode Date: September 11, 2021

Dan Tapiero, founder of 10T, returns to “The Breakdown” to discuss: Investing $750 million into growth equity for digital asset ecosystem startups The number of crypto unicorns growing from 20 to 70 in a year  How institutional investor questions have changed over the last 12 months How regulatory headwinds are negatively impacting the U.S. crypto industry  Why the long-term macro environment is likely to stay positive for crypto for years to come  Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced by and features NLW, with editing by Rob Mitchell and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Only in Time” by Abloom. Image credit: Boris SV/Moment/Getty Images, modified by CoinDesk.

Let's remember, the Bitcoin network is a security network for the transmission of value. That network extends across the globe. So if the U.S. wants to exclude itself from what is probably the most important financial innovation in the last 50 years or ever, that's not great for us. Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Saturday, September 11th, and that means it's time for the weekly recap. Except, instead of a traditional weekly recap, today I have an interview that I am thrilled to share with you.

It's with one of my favorite returning guests on the breakdown, Dan Tapiero. Dan is probably best known now as the founder of 10T, a mid-to-late-late growth equity fund that invests in private companies operating in this digital asset ecosystem. You're going to hear about 10T, you're going to hear about Dan's perspective on the markets, why growth or mezzanine equity is an underserved role in these markets, how the number of crypto unicorns has increased from 20 to 70 over the past year, plus his thoughts on regulatory risk. macro tailwinds, macro headwinds, institutional involvement in the space, and so much more. It's always a pleasure to have Dan here, so without any further ado, let's dive in. Dan, welcome back to the show. It's great to have you. Great to be here, NLW. It probably has only been a yearish, less than a year since last we chatted, but obviously a huge amount has changed since then.

You're coming off some big news. I guess let's start right at the top. You just, announced a raise for the fund. Let's talk about that. Let's talk about the numbers, how it came together, the fund thesis. Let's get into the meat of it. Yeah. Yeah, it was announced. We've got about 750 million AUM. The fund itself, there are actually two funds, is about 390 million. And then we've done, in addition to that, about 350 million or so in co-invest. And so, were probably about 80% allocated right now. And, you know, the fund, 10T sort of came out of the idea that I wanted a broad exposure to growth in the digital asset ecosystem.

And I wanted to own sort of the more, I wouldn't even say mature, but, you know, some of the larger, more, you know, revenue-producing businesses, you know, we sort of set a demarcation, you know, from mid-to-late-stage company. of about $500 million or more in terms of market valuation that we would invest in. And what's turned out is that we've invested in 11 businesses, and nine of them actually have a valuation of over a billion dollars. And so as far as I know, we are the first fund to exclusively focus on mid to late stage companies in the digital asset ecosystem.

I mean, as you know, of course, there are many venture capital firms and Jocene and Polly chain and all of those guys. And they're working on, you know, a lot of bleeding edge stuff. You know, they're making investments in the early stage protocols and all sorts of different cryptocurrencies. I don't really have that skill set, you know, and I certainly wouldn't want to compete against them. And the idea for Tentie, as I said, just sort of came out a little bit of my, my background. I did something similar in the farmland space in 06 with Standrock and Miller, I launched a company called Agcoa. And Agcoa ended up becoming by 2013 was the largest private farmland reed in the U.S. And that was really an aggregating business.

We wanted to have a exposure to the increase in price of farmland broadly in the U.S. And we were very bullish on the underlying asset, the grains, very similar to now. I'm very bullish still on Bitcoin and Ethereum and wanted another way to express that view and a way that, you know, is de-risk and also I think a lot less volatile. I don't know that I can promise people Bitcoin gains, 250% a year annualized in the last 10 years. Or, you know, I was on a previous call and someone said, well, you know how Solano went from 2 to 180. I'm like, well, that's great. And the guys who capture that, they deserve every dollar of that. And that's great foresight and wisdom.

But we're really looking more, I think, to make sort of 5 to 10x on our investments. And that's where I actually, the name of the fund comes from. 10T stands for 10 trillion. And in late 19, when the market value of the ecosystem was 300 billion, and that would be the value of Bitcoin, Ethereum, all the cryptocurrency, and all the value of equity value of the businesses in the space was $300 billion, I said to myself, you know, I think we could probably get to $10 trillion in 10 years, right? And so what's happened is we've actually moved to 3T in just two years. And so I completely underestimated the exponential type growth that we've seen.

And that's really why we were, you know, we allocated so quickly. And also, you know, the opportunity set was there. And I didn't really, you know, pay up too much. I was paying, I haven't paid more than 10 or 11 times revenue for any of the 11 businesses we invested in. So we passed on some of the 20 and 30 time revenue raises. Those are good companies, but just not our thing, really. So here we are sitting with this portfolio.

Very happy that we were able to, you know, to execute the initial vision. It's super interesting. It's always fascinating for me to hear how people's on the surface sort of unrelated experiences actually help them find the niche that is needed for them in the crypto space because it is still so young in terms of the landscape of, I mean, everything, right? There's huge concentrations of certain types of capital, right? We index extraordinarily high on extremely risky capital, especially from individuals, but even the funds that we have, the things that they're willing to do.

I mean, you see it even with the big Silicon Valley guys. If they choose to play in this space, it's like, all right, well, you got to learn how to participate in Dow's and make sure that they approve it, you know, and all this sort of things. But this area of, you know, what might have other, in other areas be called mezzanine capital, growth capital, whatever, right? where our companies are pre-public in most cases, obviously, but still kind of on a big growth trajectory, it's just interesting to see kind of you fill that niche.

And I think it's obviously, you know, given the fact that you've been able to deploy to these 11 companies in this span of time shows that there's a lot of demand for it. I think that the other thing that's interesting, just kind of hearing you talk about it is like the Salana exposure question, right? I mean, you're never going to get away from that in crypto. Week over week, you're going to look at the thing that, you know, And it's especially pointed because oftentimes these things get presented to you, you know, kind of when they're early.

But if you have a thesis, you stick with the thesis. I would argue, though, that probably some of your investments based on you being invested in exchanges and other kind of infrastructure businesses are going to actually have a de-risked, you know, perhaps reduced but still de-risk part of Salana gains embedded into the value of those assets, right? Either missed it or you did it. if you make strategic investments in the infrastructure of the space as a whole, you get exposure to the space as a whole, right? Yeah, that's absolutely right. I mean, you know, you really articulated it clearly. We wouldn't have known a year ago, for instance, that, you know, the NFT space would have taken off like this.

You know, Solana, as you know, you mentioned, was at a fraction of where it is today. But, you know, growth even in businesses like the stable coin business, this X tether was tiny only a year ago, you know, borrowing and lending businesses have come a long way. You know, there was no really even concept of the blockchain metaverse. And so I think that the way that we've done it, you know, not only do we get exposure to sort of everything happening in the digital asset ecosystem, but we're also getting exposure to all the things that haven't yet happened that we don't know about yet. And what I'm doing is I'm saying the leadership of these businesses, they are close to the ground. They are going to be able to pivot

when they need to. And in some cases, they sort of act like little venture funds as well because they're doing M&A. They're buying these little companies in the space. And, you know, who better to purchase and to extract value out of something that's nascent. You know, and they can actually incorporate some of those smaller businesses into their operating businesses. So, I feel like one way or another, the way we built the portfolio, again, around these three buckets, digital asset ecosystem gateways, next generation financial services, and blockchain infrastructure businesses. And that was the first and second fund.

We sort of put around 35% roughly into each bucket, which is like two to three businesses per bucket. Look, as I said, the shocking thing has been the speed. I was looking at the teaser the other day for the fund from September. of 2020, there were 20 businesses over a billion dollar market valuation, and today we just redid it. There are 70. So you can imagine the one thing that, you know, the investors in the beginning were all wondering about was, well, you know, Dan, are you going to actually be able to find enough companies to deploy to? Are you going to have access? And it was a real question. I mean, I really sort of debated it, but it's actually been sort of the least of our worries

because the amount of reverse inquiry alone could fill the entire portfolio. And you're right, there is a hole in this capital stack, you know, in this mid to late stage. Three, four years ago, you know, there were very few companies that probably would have, you know, would have, you know, qualified as growth equity investments. But that was sort of my insight initially in 2019 was that, hey, there are a lot of small, guys in this space doing a lot of interesting things and some of them are also making hundreds of millions of dollars of revenue that does not look like early stage VC investing to me and I thought hey you know what if I can put a basket together like a quasi type index in a way you know for myself I

mean because I'm one of the largest LPs in the in the fund myself that's what I would want for my portfolio right and as you mentioned you know part of the it's part of the infrastructure as well. These businesses grow even when Bitcoin is going down. So like this year, Bitcoin went down 50% from the middle of the year and the equity of the businesses barely budged and in some cases kept going up. So you have a different type of exposure. I'm not going to say that, you know, we're going to make a thousand X like some of these VCs. But if you're a guy from the traditional investment world and most of my, my investors are friends of mine and people from my network and my background, they're all from

the traditional world. And, you know, they're not going to figure out how to, you know, access metamask from their ledger and, you know, stake the ETH that they need to on the platform that they want. It's just too much. And, you know, there's too much to learn. And we both know that the hurdle here, the intellectual hurdle, to getting comfortable in the space is huge. And so they say, okay, private equity, I get that. I understand that. I know I need to be doing something in this space. In some cases, you know, we have a large pension fund that is a significant investor. They may not be allowed to invest in Bitcoin or Ethereum, which, you know, for us is kind of basic.

But for the traditional investment world, it's not straightforward. And so, you know, we've come up with this message that really resonates with that group of investors. And as you know, there's a huge amount of capital out there. from my old world. And I really, I really do think that, you know, I'm, I don't want to say shoveling in, but I am definitely putting a lot of money to work from that old world into the new world and really believe that I'm trusting the leadership of these businesses, you know, to allocate it correctly, right? That's really what I, what I'm betting on. Well, you know, it's super interesting, a couple things. One is I did want to ask you about the,

the composition of the fund because I noticed, I think, the municipal Michigan pension fund is one of the LPs. And, you know, one of the things that I talk about all the time on the show are really trying to stress is tradeoffs, right? Like, we forget all the time that things are not usually right or wrong. They're tradeoffs and what you're trying to achieve. And this comes, you know, I talk about it in the context of what specific protocols are trying to do and the tradeoffs they make around decentralization versus speed versus whatever. But there's also, you know, you know, you you know, I mean, risk versus reward. This is the classic tradeoff in markets. And I imagine that part of the upside for you for this fund is the ability to invite a set of participants who, to your

point, can't go farther down the risk curve. This is as far out on the risk curve as they're going to go. Or even if maybe they could push their mandate to, I don't know, get some exposure to Bitcoin specifically, this is a type of, you know, picks and shovel kind of investing that makes, sense to them that is a better bridge into the space? Is that, I mean, did you find that when you went out and took this to market? Yeah. I mean, that's exactly right. And, you know, having been in that world really deep into that world for 25 years, I know what types of things they're looking for also. I mean, that's my, you know, that's where I come from. You know, I know what investment criteria they're looking for. And, you know, I tried to make it really

simple. I mean, I would love to invest in some of the tokens and the early stage protocols, but forget about it because it's impossible to explain and, you know, to the type of LP that we have. And, you know, the more straightforward, the better. I mean, I see myself really still, and I've said this for the, you know, the last few years that I've been involved in the space really as a translator, you know, trying to explain in simple terms what's going on. here because look for a lot of people in their 50s and 60s they've just come from a different world it's impossible they just can't get there and but yet they they know that look the space with zero 10 years ago and now it's a three trillion dollar valuation you know the the ecosystem

is worth three trillion dollars that didn't come from nowhere and you know what it's not going to zero and it's not going away and then they read things like you know master card cipher trace and all of a sudden it's like, holy cow, am I really missing this? Am I not? You know, and that's just the latest thing. So, but the investor community, in a lot of cases, especially with pensions, you know, their hands are tied a little bit. They're still stuck in the quasi, you know, 70, 30, 60, 40 portfolio. They're underperforming dramatically. And, you know, the one thing I keep harping on is that, look, there's 200 trillion. dollars of cash and bonds out there that are basically real, that have real negative real yields.

And so, and there, you know, there's a huge amount of bonds of fixed income that are actual negative yielding. And so a lot of the institutions are stuck with money there and they're not going to be able to meet, you know, their obligations. And so it's like they're looking for alpha, you used to have that in the hedge fund business 10, 20 years ago, not really there so much now unless you're invested in, you know, the top 1 or 2% of the guys. And in this space, I mean, my goodness, a volume alone, cryptocurrency spot and derivative volume is up 500% from last year. I mean, you can't find these kinds of growth numbers.

You can't find this kind of alpha anywhere. And it's because it's a new world. early market. I sort of liken it to investing in the mortgage-backed securities market in 1982 or whatever it is. You know, when back then in the early in mid-80s, you know, Lou Reneery and the Solomon crew, I mean, what they were doing in terms of securitizing mortgages probably seemed just as complex to the 50 or 60-year-old money manager back then in the early mid-80s, right? And then forget about, you know, collateralized mortgage obligation, CMOs and all of that I still don't understand PSA speeds and I never traded mortgage bonds for that reason.

So like this is that times 10 on steroids. Yeah. It's super interesting. I always think about, you know, because people are so disbelieving of the volume numbers and the growth. You know what I mean? It's it bugger's belief. But it's, I just think about every single week we have 133 more trading hours than traditional markets do.

And that's assuming no holidays, you know? It's just that single fact alone is so differentiating and wild. This podcast is sponsored by NIDIG, the institutional grade platform dedicated to building a more inclusive financial system through Bitcoin. To find out more about NIDIG and their mission to bring Bitcoin to all, go to nidig.com slash NLW. That's NYDIG forward slash NLW. You've been talking to your peers, investors, you know, for now two years.

longer, if you include kind of just your rabbit hole explorations and journey, how have the questions and concerns changed over the course of maybe even just this year? You know, like, what are the things that people are worried about or concerned with? And is it different that it was or is it kind of the same old greatest hits? No, it's changed a little bit. I think, so we were going to launch this fund in April of 2020, but then COVID hit, and it got way late all the way through till September, October, and then actually the fund didn't actually launch properly until January of 21, believe it or not. So it's been a complete whirlwind. In the beginning, there was a lot of that traditional FUD, you know, those questions everyone asks, you know,

the government's going to shut it down, blah, blah, blah. And I think in the middle of 2020, the discussion really revolved around sort of institutional adoption. Hey, you know, my LPs tend to be, you know, high, sort of high net worth or, you know, quasi-institutional type capital. And when you started to see some of this more institutional allocation, the Northern Trust allocation, the fact that U.S. trust all of a sudden was going to be clearing it and custodying, you have some of those signs, people started to get more comfortable, some of the larger investors, that, okay, you know, someone is signing off on this somewhere in those big institutions. And I think that, so in the beginning, there's a lot of that kind of discussion.

I don't get any discussion questions now about like, oh, you know, is there institutional adoption? You know, we have a foundation that's an investor. We have a union, actually, that has invested with us, if you could believe that. We have, as I said, you mentioned the pension fund. And then, you know, publicly was announced, of course, Alan Howard, who I've known for a long time, you know, running the largest macro hedge fund in Europe. And, you know, one of the most successful macro fund managers, really, of all time. And so people aren't asking that question.

Like it's burned through some of the, is this really valid? You know, that question. So I suspect, you know, we're going to see a lot more capital coming into the space. And also into the mid to late stage, I think would be more inhabited, except that the growth equity guys historically, well, comfortable with technology, not really comfortable with macro, or cryptocurrency or any currency, for that matter. So I think, you know, that should start to change, I would suspect.

I don't know if you found this, but the lack of a macro framework for many venture capital firms, traditional guys, especially the ones who come from Silicon Valley, is quite stunning to me. And I feel it more pointedly because I actually was a VC in Silicon Valley for a while. And we never talked about macro factors as having anything to do with why valuations were rising. It was always, you know, because why combinators here or something else like that, right? All these very micro things, which I'm sure made a part of it. But you never heard anyone say, well, yeah, but I mean, look at all these actors who are being forced farther out on the risk spectrum because rates, you know? Like that those were words that I never heard in 10 years of Silicon Valley, you know, from basically right after the great financial crisis up until 2017.

And it's just interesting to hear kind of that, I mean, maybe that's part of the gap in some of these areas for, you know, for kind of the capital landscape. No, you hit it on the head. That being said, I wouldn't be too hard on the Silicon Valley guys. I mean, one is eager to change when, you know, you've got to Google in your portfolio or an Amazon. I mean, they- The model's working, yeah, right? When it's not broken, you don't want to fix it. Fair enough, fair enough.

You know, that being said, the invention of Bitcoin and the development of, you know, Ethereum and this entire broader digital asset ecosystem, at its heart is really deeply macro. I mean, the white paper, it's a deeply, yes, there's technology there, but, you know, the concept of a digital store of value and digital property rights, you know, this is not micro bottom up. The VCs tend to be very micro bottom up. Is this a groundbreaking technology that's going to change the world? And they can look at it and see it. This is more, can you create, can you come up with a macro view on a three to five or five to 10 year basis that justifies being in a position in this business? And I think that's just a bridge too far. It's a bridge too far for many macro guys, you know, who are trading things around.

or trading currencies or, you know, there aren't even that many macro guys who will take a one, two, three year view, let alone a five-year plus view, which is what we have. And I'll tell you, I think it's nearly impossible to approach this space in a productive way without a long-term view because the volatility, you know, even if you're the best trader in the whole world, the volatility is really difficult to manage. And, you know, I can't tell you that I know where Bitcoin's going to be six months or a year from now or even 18 months. But I've got a pretty strong view on the sort of a five-year view that it will be significantly higher. And that was my view in, you know, late 18 and 19 and 20.

And I still think, you know, 50,000, which is one trillion market value was where I thought we would go and then take a rest. But I see in the next two, three, four years, I think we definitely heading up to three, four hundred thousand, which would be around five, six trillion in market value. And, you know, guys on Twitter always say, Dan, you're so darn conservative. Like, you know, it's like you're kind of ridiculous. It's like, is that all? Well, I don't want to throw something out there that's ridiculous. But do I think that something ridiculous is possible? Yeah.

Could we hit a million in the next five to ten years? sure, you know, it depends. I don't want to have to make that bet. I'm okay not making all of those gains if I can structure an investment that I can hold, that I'm not going to have to deal with like weekly or monthly mark to market. I'm going to be an investor in a business that I believe has longevity where I can make multiple return on my money in the next five to seven years. So as you mentioned before, it's a different risk reward, a structured investment. But what I really like about it is that it really is a free option in a way on all the things that could exist in the future that have yet to exist, right?

Like, no one could have predicted that NFT volume growth would be up 40 times in the last year. Not 40 percent. 40 times. That's nifty gateways. increase in volume. I mean, it's just mindbar. Yeah, no, it's super fascinating. I do think, listen, I think it's interesting. I'm very excited to have you in this space because I also think, you know, it'll attract more people. Like that number that you cited from 20,

from 20 unicorns, basically, to 70 in a year is phenomenal. And I don't really see any signs of that slowing down. In fact, I think in some ways, one of the things that, that is the most bullish for this space is, to your point, last year, so much of the narrative was, are the institutions coming because that's got to be the next catalyst? And in some ways, you know, I obviously think that the continued entrance of institutions is going to be a key part of the space. But there's so much money now in crypto that is fueling itself. I mean, almost a sort of oroboros of people who are just making that 10-year bet on this industry, that if you make the right plays, you know, again, to your point, even when things go down,

traders are trading both ways and they're figuring it out and they're going to keep doing that throughout the cycle, you know? Well, and the ecosystem is really growing. I mean, this probably, you'd have to say that this bull leg has really been an Ethereum bull leg, you know, from last year, Ethereum's probably up, you know, over 25 times. Bitcoin's up, you know, 10 times. But, you know, I don't know how you can complain about that. certainly no one from the traditional world will complain about that.

But it's the kinds of things. It's the deepening and broadening that's going on in the digital asset ecosystem. You've got, you know, defies exploded, staking, you know, even staking as a service has exploded, borrowing and lending. The stable coin business, you know, last year was pretty much just ether. And now you've got a whole, you know, new world growing up there. Liquidity has improved dramatically. derivatives volumes is exploded.

You know, we didn't talk about the metaverse at all last year, did we? And all of a sudden, you know, it's like gaming led innovation, you know, in the blockchain space. And so it's really incredible. You're right. There is a self-perpetuating, you know, momentum that is being driven by, you know, what you call more sort of crypto-native players. But again, there's also a tremendous sort of push from, I would say, the institutions as well, who are buying Bitcoin, who are buying Ethereum, who are supporting the market. They may not be, you know, playing around on Metamask, but they're definitely supporting

with capital inflow. And then, you know, look at us. We, you know, we put almost $700 million into the ecosystem in the last five months. You know, it all adds up. What do you think, as you kind of survey this, obviously you've got that five-year horizon or five-year plus horizon. Obviously, I think your horizon is longer than that. But what are the risks that actually concern you, if any? Well, I'll tell you what the risks that every single investor I speak with is concerned about or asking about is, of course, regulation.

And my thought on this is that people, especially Americans, come from a very narrow perspective. They think everything is about the U.S. And looking back in the last 30, 40, 20, 30 years, you know, all financial innovation and technological innovation. I don't say all, but a lot of it came from here. Certainly financial market innovation in the, you know, 80s and 90s, mostly all the U.S. at the banks and brokers. But let's not forget. Cryptocurrency trading volume 90% is outside of the U.S. 90.

So the U.S. is tiny right now. And the regulatory noises that are coming out of D.C., unfortunately, I think, just sort of, I really think show that the authorities haven't done their work. they haven't done the deep dive. They haven't fallen down the rabbit hole. It feels very knee-jerkie to me. They should be figuring out ways to incentivize innovation in the space in America, not constantly, you know, look like at least they're pushing everything away.

The attack on Coinbase, I don't know the absolute facts, but what I've read, I mean, is crazy to think that, you know, they're getting a threatening language from, you know, from the authorities for something you haven't even done yet, right? And apparently they requested the investor list for people who are interested in that product. I mean, I just think it's kind of wrongheaded. And so what I tell people is, look, this is a big world. This is the first truly global macro investment of all time.

There are probably node operators in every single country in the world, right? Even the global currency business, I don't think, was as global as this one. We had like 10 or 15 large sort of currency pairs to trade, more or less. This is incredible. The vast number of not just cryptocurrencies, but these are all networks. Let's remember the Bitcoin network is a security network for the transmission of value. That network extends across the globe. So if the U.S. wants to exclude itself from what is probably the most important financial innovation in the last 50 years or ever, that's not great for us.

So I'm like more concerned that the U.S. doesn't get up to speed more, more quickly. You know, we still have all the brains, all the innovation here. We have it all. but the regulatory environment is just not being friendly. You know, everyone wants to increase their KYC and AML and everyone, you know, no one is interested in nefarious activity, but the impression that the U.S. authorities are giving right now to the world, to innovators in the space is not a positive one.

But big picture, will that matter for Bitcoin? No. Will it matter for Ethereum? No. Will it matter for the D.A. no, it won't. So I just hope that we get our act together here. Sorry, I digressed a little bit, but, you know, I read Brian's, you know, Armstrong's, you know, missive as I'm sure you did. And it's pretty shocking. I mean, I know it's one-sided. We haven't heard from the SEC,

but that's just not what we should be doing in this country. Yeah, I mean, one, the threatening to sue for a product that hasn't come out yet seems insane to me. And two, the request for the list of people who are interested in that product is just beyond the pale. But, you know, I mean, it's interesting. I've been, I've been tracking the response to that story closely. And of course, the folks in crypto, this is a pretty unanimous response, you know, which you just articulated really well. The folks who dislike crypto, the argument has been basically, you should just assume that everything you do or want to do is a security until the SEC tells you that it's not. So basically, The response is just assume that how he's clear. Reeves is clear. Assume that it's all falls under that.

It's like, well, if everyone didn't try anything different and never try anything because they thought that it was sort of under the purview of something that couldn't exist, it's just that you would never have anything new happen. And it's certainly within the SEC's right to engage in that dialogue with Coinbase's lawyers and say, hey, here's why we think. it's a security. Here's how we think it should be regulated. The idea that they had this two or three month dialogue were never given an explanation. They just kind of kept pointing to the word howie and saying figure it out. That's not engagement from a regulator. They're not doing their work. Like, you know, they haven't done the deep dive. They haven't done their work. And this is a $3 trillion dollar world now. I mean, the three, a three trillion dollar sector.

Coinbase is one of the most valuable financial services businesses in the world. And the way that they've been treated just seems, you know, inconsistent with, you know, what type of business that is, the value that's been built. Honestly, he's one of the great entrepreneur. You may hate, you know, Coinbase. It goes down all the time, whatever it is. But he's been one of the top entrepreneurs in the space. you know, if you listen to him speak, he's had his trials and tribulations and almost near

failures. You know, he's as great an entrepreneur as any of our great entrepreneurs. And so, yes, there's a very high hurdle to understanding what is going on in this space. But it is incumbent upon the authorities in the U.S. to get to that level of understanding. And clearly, I don't care, you know, who taught what at what college and thinks that they know X, X, Y, Z about blockchain technology or whatever it is, we need teams of people, teams of people. And the hiring that needs to be done at the regulatory bodies, at the regulatory authorities, I think needs to increase dramatically. And I think there have to be thoughtful guidelines put together. And if the U.S. doesn't want to do that and, you know, they want to continue to have 60 and 70-year-old

men who haven't really understood what's going on here, which is the truth of the matter. And it's complicated, so I'm not faulting anyone. But if they want to continue to have that sort of approach to the space, it will not grow up here. And whatever innovation, technology, jobs, I mean, the only businesses I know that are hiring every single business that we look at is hiring and looking to hire hundreds of people, right, across the spectrum. It's this space.

And I said this in that interview I did with Raul back in 19. I said, this sector could be a massive jobs generator, right? It's not just that we want adoption and we want people to increasingly be facile with cryptocurrency. But it was a $300 billion sector two years ago. It's now $3 trillion. And at this pace, you know, we'll be $5 and $10 trillion sooner than I'd anticipated. And I just think it would be a shame if, you know, we as the U.S. lost out on this innovation because we hadn't done our homework.

I think that's a good way to put it, too, because it's not people in most cases who have dug in deeply with the ability to put aside their priors and come to these conclusions, reinforced it, right? You know, I'm going out on a limb here, but I don't think that Elizabeth Warren dug all the way in, herself, you know, in her apartment in Massachusetts for three months, read everything and came out and said, nope, I was right. I still hate it. You know, it's try, it's interesting. It's almost like it is, DC is trying to pull this into the political Borg. And it's really fighting. I mean, I think if there's one promising thing, it's that this whole infrastructure battle, you know, I watched this thing go

down. And it would have been so easy for it to just be Dems on one side, Republicans on the other side and it almost wouldn't matter which side it was if it had broken that way, like who was on what side because, you know, they were to kind of just shifted whatever narrative it was to fit for themselves. But it wasn't. It was Dems and Republicans on one side and Dems and Republicans on the other. And I think that if it could keep fighting that sort of the partisan hackery a little bit, it has at least a chance to win more, win more people to its cause in D.C. But that could also be over-optimistic. Yeah. You know, I... value comes from doing hard work. There's never been any value created, never any great judgments

ever made without a lot of hard work. And in my experience, in my 30 years in the investment world, there is no sector that has needed more hard work than this one. It is hard. Okay. And you can be the smartest guy in the whole world. You could be the most plugged in regulator in the whole world, you could know more about the, you know, legalities and wording of all of the rules that govern, you know, securities the United States. It's just not enough, you know, so I'm just, I just hope that, you know, we continue to dig in and there are a lot of thoughtful people in the space who are willing to help out. I mean, I, you know, I know that. It's a much more, you know, collaborative community, the crypto space, than any other sector I've ever seen.

Like, during the 08 crisis, and this is not known, but it is public, I mean, you know, Bernanke called down to D.C., let's just say two or three very well-known, you know, macro investors, macro traders, some of the greatest of all time, and asked in their opinions about what you should do. It's very clear. The Federal Reserve Open Market Committee they have a shadow FOMC that is comprised of private sector actors. So, you know, the head of prop trading at Goldman Sachs used to sit on the shadow FOMC committee. And they used to, you know, have meetings and weigh in. That's what's needed here.

I think you could have a committee of, you know, fire five to ten of the guys who are really deeply involved in the space, running multi-billion dollar businesses. And, you know, they could, they should come together as an advisory body to help, you know, the authorities and the regulators, you know, come to common ground. We have it in the financial markets, right? So I don't know. You know, there are some of the smartest hedge fund operators in the world sit on that shadow committee.

So I don't know why we wouldn't do that here. It's just that this business is growing so quickly. You know, that it's just, you know, a year ago, no one maybe thought there was a need for it. And now there is and there's an immediate need. So I really would counsel, you know, the D.C. crowd to reach out to some of the leaders in the space. And we all know who they are. You know, Barry Silbert and Mike Novogratz and the Winkle Voss and Brian Armstrong and, you know, the whole list of other people who are operating huge businesses in the space. That is my vote for a way forward. Listen, it's always awesome to have you on the show. You're a macro guy. Let's close it out with a macro question. Obviously, the tailwinds for this industry and institutions coming into this industry last year were massive expansion of balance sheets, massive government printing. How do you see that macro landscape changing? How do you see that interacting with how people view the crypto space?

Look, I don't think rates are going up in any significant way, you know, for years. The gross debt outstanding is too large. If we went up one or two percentage points, it just makes it difficult. It'll, you know, it'll be so much more expensive to fund that debt. I just don't see it. Look, also, post-08, you know, there's that Ryanhart, Rogoff-Reynhart thesis. And I think there's something to that. that you'll have negative real interest rates for a considerable period for a very long period of time

because we don't really have any other options in a sense. I don't think the stock market could handle higher rates to tell you the truth. And we seem to be running more on a stock market framework at the Fed. And again, this is a global macro question, not just a macro question. You look at Germany. You look at Japan. You look at all of the negative interest rates there. Rates have been negative in Japan for over 10 years.

You know, you look at the demographic trends coming out of China, the deflation that's coming from all of this technological innovation. And now I think the post-COVID workplace where there's huge productivity gains happening because people are able to work a lot more in a lot easier, more well-balanced fashion. I don't think business travel will ever come back to what it was. My only point is that we're still kind of in a structural deflationary environment. There are one-off things, yes, that pop up. There are shortages in certain things, yes. Prices are elevated for now. But big picture, I just don't see what the really big impetus is.

And so as long as there are negative real interest rates, people will want to move their cash. into alternative places. It's just natural. They'll want to try to generate yield and return in new areas. And of course, the best new area that I can think of is this one that we're both focused on. And frankly, if interest rates went up 1%, I don't know how that changes anything. Or 2%, it's hard.

Bitcoin has been up 250% annualized for 10 years in a row. So one or two percentage points. I mean, I don't know if that's enough to get me excited. So I think the macro backdrop will stay supportive for quite a while. Awesome. Well, Dan, appreciate your time. Congrats on the fund. Excited to have you back in like six months when you've had to raise a fund twice the size to keep up with demand.

But for now, keep doing what you do. And thanks again. You too. Love listening to your podcasts. And I think you're one of the premier guys out there. good luck with everything as well. Cheers. The line from that conversation that stands out to me,

and will almost certainly be the title of this episode, is Dan's argument that this is the first truly global macro investment opportunity of all time. I think it's hard to overstate what a phase shift that is, that this is something that is not the product of one region like Silicon Valley or even one country like the U.S., but is growing up simultaneously in various versions, and overlapping with itself

ageographically across internet networks, digital networks that are truly digitally native. It is hard when I think about it through that lens to feel like any other lens accurately describes it. And it's hard when I view it through that lens to see it as anything less than the start of something that is truly a world-changing trend, the type of thing that will be looked at

by historians for years to come. For now, I hope you enjoyed hearing Dan's perspective on bringing new audiences in, why there's so much room left to grow in this space, and what to look out for in the years and months to come. Until tomorrow, guys, be safe and take care of each other. Peace.