The Breakdown - The Bear Market is Over with Dan Tapiero

Episode Date: June 22, 2023

Dan Tapiero has deployed more than a billion dollars into growth stage digital asset companies in the last few years. He's also convinced that the bear market is over. In this conversation, he and NLW discuss the narrative resilience of crypto with institutional investors; why companies are looking global, and more.  Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribeto the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW  

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. What's going on, guys? It is Thursday, June 22nd, and today I welcome back to the breakdown, Dan Tapiero. Before we get into that conversation, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to Bit. dot L.Y slash breakdown pod. All right, friends, well, today, as I said, I am joined by Dan Tapiero. Dan is the founder of 10T Holdings and one round table partners.

Collectively, those firms have deployed more than a billion dollars into growth-stage digital asset companies, and that's a category that didn't really have dedicated funders when Dan started. Now, this conversation honestly couldn't have come at a more opportune time. For the past few weeks, the big discussion here on the breakdown, and in crypto more broadly, has been the resurgence of the institutional narrative. You've had firms like BlackRock getting involved, Deutsche Bank applying for a custody license, EDX coming online, and much more. Dan and I recorded this last week before the BlackRock news, and yet in spite of that, what Dan shares is that in his conversations,

investors, including institutional investors that you might have thought would vacate the space, are actually quite quietly bullish. In fact, Dan argues that the collapse of FTX marked the end of the market. This is a great conversation. I know you're going to enjoy it. All right, Dan, welcome back to the breakdown. How you doing, sir? NLW. Great to be here. It's been, it's been way too long. Way too long. We were just kind of catching up on a few of the things that have transpired, you know, in the lifetimes that we've lived since the last time you were here. But, you know, where I wanted to start, because I thought it was interesting and it seems like it might be reflective of broader trends is, so I had to reschedule the last time we were supposed

to chat. I had some kid emergency. I don't know. I have a four-year-old and a two-year-old, so there's always a kid emergency. And the email that I got back was, sure, no problem. We got this trip to Dubai, and then right after that, we'll do it. And the interesting thing about that was that was like the third or fourth time that I'd had some interaction or email in probably the last, you know, three or four months, where someone said, sure, would love to either be on the show or let's do that call, but I got to do it after I get back from Dubai. And so let's start. Tell me what is going on with Dubai.

I mean, first of all, what you were doing there. But then I'd love to dig in more just, you know, what's happening there specifically in the region. And maybe from there we can broaden out the conversation to, you know, just the larger global and geodynamics surrounding crypto right now. Yeah, Dubai and Abu Dhabi, really, UAE, I would say, are on fire. And what I mean by that is that their interest in what we focus on, whether it's blockchain or Web 3 or crypto or Bitcoin, is dramatically different than it is in the U.S., not just their interest, but the welcome that they're throwing out to businesses out there, I think, is just tremendous. It's a whole different field. There's the regulator in Abu Dhabi,

but there's also now the virtual assets regulatory authority in Dubai. We just had a company that a deribet, I think you probably know it, a Dutch company. They have set up their home base now in Dubai. And I think most of the companies that we've invested in and others as well, They're setting up offices there. Look, remember, it's right in the middle between Europe and Asia. We can't forget that cryptocurrency is a global phenomenon.

Remember that 85% of total world cryptocurrency volume is outside of the United States. And so now there are these jurisdictions recently. I think you have the UK saying that in the next few months, they're going to provide more clarity on the regulatory framework. You had Andresen opening up their office there in London. You had the Winkle Voss Twins just announced that they're going to open a Gemini office in the European headquarters in Dublin. You have Hong Kong coming back after having been a quiet in the area. I think June 1 was the launch of their framework.

Singapore, of course, Switzerland. And I would just say that these jurisdictions are providing clarity, and it's in stark contrast to what's been going on in the U.S. And so, and, you know, I speak with these CEOs often. As you know, I invested $1.2 billion into 26 different growth stage companies in the space over the past two and a half years. And in speaking with people in D.C., but our CEOs as well, they really are feeling, you know, that the U.S. for at least the next 18 months into the election, you know, maybe even two years, that we're just not going to make progress, you know, towards providing a clear framework. And so look, as normal, you go where, you know, people want you and where the welcome at is thrown out.

And so, again, you're hearing people going to Dubai because, you know, the UAE has a very futurist forward-looking mentality. As does right now, Riyadh as well, MBS, as you know, 38-year-old king of Saudi, very forward-thinking has some. projects, futurist projects, I'm sure you've read about, but they're very open-minded about cryptocurrency and Web 3 and blockchain gaming, all these things they want to embrace. So not to continue to go on so long, but what was I doing there? I have an old friend who has just become the CEO of Bara in Dubai. his name is Henson Orser. And essentially, he had asked me, along his excellency El Mare, who is the economy and tourism minister,

to come and talk about some of the things that I've been doing in the past two and a half years, the types of investments we've been making, they were very interested in the fact that we're not making venture investments, that these are not, you know, early stage speculative bets that we were investing in real companies, making hundreds of millions of dollars of revenue. And I think it's easier also. If you're going to put out the welcome mat, you want someone to stay. You don't want them to disappear after nine months because they're, you know, the code on their protocol blew up or whatever it is.

And so originally they had said, well, would you come and talk, you know, to people here? we'll, you know, set up a nice meeting. It'll be some of the CEOs of our companies and family offices and potential investors in my fourth fund. And, you know, that's, we're going to have our first close in a few months. So I thought, okay, that's perfect timing. It'll be great. We don't really have many Middle Eastern investors.

If you can believe that, we just don't have many investors. And so I thought, all right, that makes some sense. And then as I was planning my AGM, my annual investor meeting for the first three funds, I was inviting the CEOs to come and talk about some of their companies. And I just thought to myself, would it be a lot more interesting if I went to Dubai and brought some of the guys who are building these companies who are helping build, you know, the space, you know, these new digital rails for the new, for the new world. Would it be more interesting to hear directly from them? And so Barra said, wow, you could,

you could do that. And I said, well, yeah, we could do that. You know, we invested over 500 million in the five companies that we brought with us. And, you know, I mentioned you before. I posted something on LinkedIn and then Vara posted something. We ended up bringing, of course, our largest investment, Pascal Gautier, the CEO, and then Yatsu of Anamoka, my Cagney a figure, John Jansen of Deribet, and the Winklevoss twins both came. And let me tell you, it's not an easy thing to manage to get those five guys in one room at the same time. You can't imagine that scheduling issues, et cetera. But what actually happened was they were all really amenable. They know that the interest in the region is picked up dramatically. They know there's a

welcoming environment there. And of course, there's a lot of capital to invest, but I think that the interest really was more on the strategic front, that the governments there are looking, and they're trying to figure out how to incorporate, you know, blockchain into some of their processes. And they see it as an improvement upon a... existing payment systems, as well as a whole bunch of other things as well. So it wasn't just a capital searching exercise. We really called it an educational, and it was more of an educational symposium. It just was to highlight that these kinds of companies exist and that it's not just, I always say this, it's a 32-year-old rose pumping and dumping tokens, right, which is kind of the

bad rep that the space sometimes gets and especially out there. So I was just glad to, you know, each, each CEO did 10 minutes discussion about the company. And then we had a 20 minute Q&A I did back and forth. And then we had breaks in between and there were about 200 people there. I think originally it was invite only. It was close to the press. It was his excellency invited from his private, you know, a Rolodex. It was 100 people initially. And then it got up to 200. And I think there was a sizable waiting list as well. And that's with no media, no press. No one even knew that this was happening. I think he wanted to just help educate his excellency, some of his colleagues in the government. And we had people, you know, pretty much fly in from all over the

world to come. And it was, as I said, closed venue. So people were comfortable talking about their businesses in a frank way. And it was pretty exciting. And to tell you that maybe the craziest the whole thing was that it was organized like in six weeks. I mean, we went from, yeah, Dan, it would be great if you could, you know, come and do this to like a full-fledged event, you know, at the Museum of the Future, which is this phenomenal structure that they've built there. And, you know, the VARA people really, you know, very well organized. They saw that this was a great venue, great opportunity for them to showcase, you know, the quality companies.

And also, look, I don't know that there's a venue for them to go public in Dubai or Abu Dhabi. I don't know enough about that stock market. But certainly, I think some of our companies are thinking about maybe becoming public. You know, originally it was always thought on NASDAQ, but maybe Hong Kong now, or maybe the UK, or maybe Switzerland. We don't know. Singapore. Those are robust equity markets. So, again, I wouldn't count the U.S. out.

I just think that for the next 18 months to two years until the election, we get some new blood in there, some certainly some young. younger blood would help. Having the country run by 80-year-olds just doesn't seem to me to be the right path for us going forward. And it's in stark contrast to certainly what I've seen in the Middle East, much younger people, lots of energy, lots of focus on the future. So I don't know if that's in a nutshell, but in a in a nutshell, I think that's what that's what we were doing out there. And I think that that environment has brought a lot of other

crypto businesses to the region. You know, of course, CZ and finance has established his home base in Dubai as well. Yeah. I mean, listen, tons of follow up. I guess one is one of the things you said that's interesting is you know, you kind of quoted the stats of the volume that happens outside the U.S. versus inside the U.S. Do you think, you know, holding aside just the sort of negative impulse to look elsewhere because the U.S. has become more hostile, do you think that that's also almost created a context to have a more positive realignment where some of these companies that are naturally U.S. centric because of, you know, where their founders come from, just almost

remember that there's a, you know, a big rest of the world to go pursue? I mean, is that sort of part of the rebalancing happening right now as well? Yeah, I don't think anyone is giving up on the U.S. I mean, that's absurd. I just think they realize that growth is not going to be what they might have thought it would be over the next two years. Even though I do think we have a low end for the space, I suspect by the second half 24, 25, the underlying, you know, Bitcoin and Ethereum certainly will be making new highs. and, you know, I expect the space to be in a much better place. But I think it was a reminder, especially for companies, as you said, that are more U.S. focused. I mean, Cracken, for instance, a company we own, you know, they were, I think they started their business over 10 years ago in Europe.

So there are certain businesses that have global presence, clients all over the world. But then there are other ones, for instance, Gemini has tended to be more U.S. focused. And if you recall, I mean, that's a business that's been around for 10 years, you know, putting aside for a moment that the issues with earn, you know, they really spent, I don't know what the number was, tens of millions of dollars, tens of thousands of man hours, really being focused on being the compliant, buttoned up, you know, fully regulated exchange in the U.S. I mean, that was their plan. That's who they were.

They literally had an advertising case. campaign where they put crypto needs regulation on the top of cabs in New York, I think, in 2020. Maybe it was 2021, but it was a while ago. Let's put it that way. Yeah, I find that those guys, that they have quite a good vision to see around the corners pretty well, better than many of the other CEOs in the space. But I, you know, that's impressed me from the beginning. But, you know, to have gone to. all that work and put all that money into it. And then all of a sudden, to feel that your contacts, let's say, in the regulatory space, who you've been dealing with for 10 years, all of a sudden,

maybe are not as eager to pick up your call or whatever, whatever it is. It's just, you know, I think a real bummer in a sense. And it's not just them. It's, you know, others across the space. but it's a wake-up call, just like you said. And what the Winklemas had done is that they've gone on sort of a world tour. We talked about this because we were the largest investor in their last round. You know, you saw the press or whatever it was, that they're establishing their European base in Dublin. My guess is they'll have an office set up in the Middle East.

I'm not exactly sure where. UAE is, I think, leading the charge, but it's not clear. They then went to Singapore. You know, that's a long trip. I think they've probably been traveling for over a month, you know, stopped in different places in Europe, I think in Zurich as well. So I think it's been great for them and for others. It's just too big a world.

There are too many places that really have embraced, you know, the technology. the, you know, the fact that even regular traditional companies that you never would have thought would have engaged, let's say with NFTs three years ago, are today. And, you know, LVMH, of course, French company, you know, leading to charge, they're Italian companies. And so I think there's a sense that, hey, there are all these traditional companies out there. And this is, I think, amongst the regulators and the government officials in Europe and other places. If these companies that we believe in and understand are embracing this Web 3 concept, well, let's certainly not hold it back, right? It's one thing to maybe not go out of your way, but it's another thing to hold it back in a way. And I think the U.S., and it may be that this is really a turning point that Gensler, his actions of really are overreach here.

The Coinbase case is kind of interesting because they were saying that from 19 until 21 that they were dealing with securities. and that weren't registered, et cetera. And that, but yet in 21, they signed off on the Coinbase IPO. So I'm not sure exactly, you know, what happened there. And I don't think they know. And I read today that Coinbase needs four months now. I'm not Coinbase. The SEC needs four months to respond to Coinbase's counterclaims.

I it just it's a very foggy picture and I think most people in this space really do believe that it is politically motivated the and look it's no surprise and and of course being in the space and on twitter you know sbf and ftx terrible fraud uh he was the second largest donor to the biden campaign so i don't know that you can really get around that he gave freely to politicians on both sides, but it does seem to me that their response is very emotional, very knee-jerk, and I just feel like the politicians, along with some of the traditional press, has just not done the work. You know, we have $1.7 trillion of value now today in the space, and that's the value of all the cryptocurrency and the value of all the equity in the space added up.

That's our internal measure. In the middle of 2019, when I had the idea for my funds, the space was $300 billion total. So we're up five times, over five times in four years. You remember at the end of the last bare phase in 18, people were talking about Bitcoin and the Ethereum going to zero. No one's talking about them going to zero, even if you don't think the bare phase is over, which I do. it's big now. I mean, okay, it's small. I mean, it's still less than the value of Google or Amazon or whatever, one stock.

But $1.7 trillion of value globally in the space, it's obviously not about fraud. It's obviously not going away. It's obviously not about money laundering. And so why people don't get this, it's obviously. not entirely their fault. And I say that because it's a very high barrier to entry in terms of understanding, you know, for instance, that code has value, right? Like, you can understand that, you know, the digitization of ideas and information is what was accomplished with the onset of the internet, right? The digitization of value and money maybe is too absolutely.

extract a concept and trying to read that eight-page white paper of Satoshi's, that's not easygoing. So on the one hand, I want to blame the American politicians and media for not really doing their work. But on the other hand, you know, it took me multiple years, many years, and giving up, trying to read the white paper over a five-year period, trying and failing. and, you know, it's a hard concept to understand, especially for older people. I include myself in that who are not digital natives, right? So that being said, you know, I do think the foreign population does understand something about currency that Americans don't, right? Americans don't think about the dollar.

They think about the NASDAQ. But if you go to Australia, every person down the main. main road in the financial center there knows exactly where the Aussie dollar is trading against the dollar, the New Zealand dollar. Same goes for many places in the world that are more developing, right? They, Argentina and Venezuela, people there understand that their currency, Turkey has devalued, you know, 50, 80, 90 percent. And so, you know, Bitcoin as a savings technology or cryptocurrency generally as a place to put your money away from the, you know, fiat money that's controlled by your fiscal and monetary authorities. I think people understand that part of it.

But what's exciting now are all these different sub-sectors that are growing up. You know, you have the stable coin business, which did not exist three years ago, okay? You have $8 trillion dollars of stable coins settled in 2022. It's a huge increase, right, from zero, three years ago. And that's despite a pretty nasty bare phase in Bitcoin and Ethereum. And what price in 22 went down, what, 60, 70 percent. And yet this business was exploding. The same thing in the blockchain gaming arena, the NFT space. If you look at it, sorry, if you look at that space from three years ago, we've gone from zero, you know, to a very large number. DeFi, another area, decentralized finance did not exist three years ago. It's 50 billion in TVL in that space now.

Okay, that's down from the high of 200 billion last year, but zero to 50 billion in three years is a big number, a big rate of increase. And look, understanding defy is not that simple. I think stable coins a little more simple. Blockchain gaming, we know there are two billion gamers in the world. If you're not a gamer, maybe you don't understand digital value. I get that. But I really do think it's incumbent upon the leaders in the U.S.

to really sort of open, I don't want to say open the books that shows you how old I am, but to really sort of dig deeper to understand, what is all this commotion in the space? What are all these brilliant guys doing in the space? Why is it that there are places like the UK and Hong Kong

and UAE that are opening their arms to, right? And I think that's really, you know, the close-mindedness of some of the leadership in the U.S. is very surprising, given what's been our historical event. Yeah. I mean, listen, it's, you know, I don't want to overstate this, but I do think that one of the things that is always, always clear, if you watch congressional hearings around crypto, is the common denominator tends not to be Ds or ours. It tends to be the age bracket in terms of the mental elasticity that people have. Even when they're bringing perhaps the native positions of their party.

That's a very, I mean, look, look at you. Yeah, right? Well, if you, but if you go look at like AOC, even asking questions at a hearing, they're just not the same sort of gotcha. Can I pin you to the wall with previous assumptions about finance that you get from Elizabeth Warren, you know, in the Senate, even if in other areas, they are very similar to each other politically, you know? And there is, there is a certain amount.

of just sort of, you know, whatever, you know, openness to different technologies and new ways of being. But I also will validate your point that, you know, it's fascinating to watch, you know, we have this sort of inflection point moment with AI a few months ago when chat GPT hit. And you had 100 million people in the first five weeks, try this thing and say, holy shit, I understand that that is going to change my life in the way that I do. work. Now, money is every bit as impactful on how people live and they work and they do things, but in a way that is for most Americans, hidden, quiet, behind the scenes, not known, right? I think that you're right to identify that if you are an Argentinian who's lived through a 50%

overnight devaluation at the peso, you have a much more acute sense of that, which is not surprising that, you know, these things are kind of more resonant there. But for, but for Americans who basically everyone who's alive now has lived almost entirely under the, you know, post-World War II Bretton Woods regime of the U.S. dollar leading the world, it's just a different scenario. And I think that there is a, it's, there is a certain good reminder of sort of the, the humility of understanding that people just don't necessarily have the basis natively to do this. In fact, I remember the first interview that I think I ever saw of yours was a conversation with Raul, probably 2019 maybe.

2019, yeah. And one of the things that you remarked on was that for the first time you were hearing a whole generation of people talking about Fiat, and that wasn't even a word that people had used before, you know, and it just reflected to you. It seemed like just that people were through this sector coming into actual exploration of these concepts, which had remained just for a highly specialized, you know, professional set previous to that. Yeah, fiat currency was really, I don't, I mean, it's not esoteric. Fiat currency often discussed by, you know, it's like theoretical economists and like market practitioners,

you know, like me, because we were always thinking about the debasement of fiat currency. You could actually debase it. And so part of our job as money managers was to actually they do better than the rate of debasement. If the dollar went down 30% in a year, you know, your portfolio should have done fantastically, right? I mean, I'm just saying that it was something that especially macro portfolio managers, but I mean, the number of people who on a daily basis discuss fiat currency in the late 80s and 90s, I mean a few thousand maximum in the world, right?

And then all of a sudden, all over Twitter, every, you know, 32 year old guy is talking about, oh, you know, I don't want this fiat and the printer go burr and all this other stuff. And it took a while, but you're right. It just, it somehow slowly has entered into the consciousness, you know, but I think it's still, it's a hard. hard a hard thing to understand right like where does money come from and the crisis of 08 really i think galvanized the youth uh the younger people uh to start thinking about well that was pretty bad

and how did we you know not fall into some sort of depressionary period right clearly uh it was the fed started doing quantitative easing And so what is quantitative either? Right? And then that gets you to, you know, what is Fia? Right? What are they, if they're doing quantitative easing, how does that work? What is the impact of that?

And so, O8 was really, I think, the watershed moment, and it's no surprise, of course, that the Satoshi White Paper came out pretty short after that. Staying on the sort of the macro lens for a moment, you've mentioned that you think that the 2020s will be like the 1920s. So what does that mean A and B, kind of how do you see where we are, you know, broadening out from crypto right now in terms of the sort of the broader macro-landscape. Those are two questions. Yeah, two separate questions.

I'll forget the first one or mix it up. So the 20, like I think the whole decade is going to be, now look, look, how many people, people actually have like visibility or even want to say anything about a decade. Look, I like using different frameworks and it's not going to be exactly right. But I do think Kathy Wood and Raul, you know, the exponential age, all of these new technologies hitting. I think that this is a, you know, it's a movement to a new world, massive boom as you know, can at the turn of the century, then into the 20s, you had all these new innovations.

And again, I can't remember exactly, but, you know, refrigeration and, you know, the advent, I guess, of really of automobiles becoming more, you know, more widespread and all sorts of things. But I think today you really see, I guess they call it what, a Cambrian explosion is a phrase. I think it's an explosion of innovation. And you're seeing it, you see it in the dramatic differences between younger and older people. I feel like the businesses that are getting crushed right now by the Fed, you know, mortgage business, housing, real estate, loans, car loans, you know, all of these interest rate sensitive old world. sectors are getting completely crushed. That's how the Fed is bringing down, you know,

growth and inflation by crushing the old guys. And the new guys in the new world, we're like, who cares whether the interest rate is 2% or 4% or 5%? We are seeing exponential growth. And you mentioned chat GPT and AI. That should be clear to anybody's having dramatic effects in their immediate massive income. increases in productivity. Arguably, people have said it's the greatest deflationary force of all time.

Because, you know, theoretically, well, eventually it puts 30% of the workforce. Or, you know, I don't think it's going to be that dramatic, but it certainly increases productivity dramatically. And then you have, look, I think the innovation and money and value, right? the way, as I mentioned before, LVMH, but the way companies are now interacting with the blockchain. You've got, of course, Starbucks relationship, a partnership with Polygon. You have Alpha Romeo, I think, saying they're putting their parts,

the provenance of the parts on the blockchain. I even read somewhere the, believe this or not, the California State Department of Motor Vehicles is going to put all California. California licenses on the TZOS blockchain. Now, I'm not exactly sure why TZOS, but that's what they've chosen. That's what I've read. I haven't confirmed.

At the end of the last bare phase, no one was talking about the DMV, you know, using, incorporating anything on any blockchain and forget about the, you know, Bitcoin maximalist thing. There's no blockchain. There's no this. There's no that. Just understand what is. right and we've tracked at least 300 traditional companies engaging with partnering you know with specific protocols so look it just is it's not it's not a there isn't a value judgment on

it specifically if that's what they want to do and they see that that helps their business and streamlines things. That's wonderful. Yeah. I mean, it sounds like basically there's this sort of contravailing forces almost. You've got sort of, you know, the Fed kind of grasping to figure out what it's going to do and these sort of, you know, inflation coming down and potential deflationary forces. And then this whole new set of companies that exist in the new world and we're in this weird in between where the streams are kind of crossing, even though they, you know, don't necessarily have a lot to do with one another. Right. I think, yeah. And I mean, there is an H component to it because most of the people in our space, of course, the average age is probably 28 or something,

and you're coming out of school and you're probably not going to work at a utility. You're probably not interested, you know, the smartest guys are probably not going into, you know, I don't know, commercial real estate or whatever it is. I don't know, of course, for a fact, but I'm just saying that those areas are contract. And it's just, it's interesting that the Fed has chosen that method. They're beating up all of the people who are their, you know, I don't want to say supporters, but they're... Poor constituency, almost. Yeah.

I mean, it's kind of odd. And the younger people who are very tech-focused, digital native, I mean, you speak to anybody under 35, there's no conversation about whether Bitcoin, is relevant to the future is a thing. There's just there's no debate about it. Every person you speak to over 60, there is some debate. It doesn't make sense. It's this, it's that. So in a funny way, the Fed is accelerating the bifurcation that's going on.

And I'm telling you, there are young people that are making fast fortunes now. Like, even take a look at someone like Mr. Beast, right? He's built basically an empire, right? 20 years ago, you know, no one would have thought that that was possible. And certainly, if you ask older people, 99% of them probably have never even heard of Mr. Beasts, right? But everyone under 30 has. So it's just, you know, it is a transition from the old to the new. And it sort of reminds me in the 20s because the driver was just,

the the the the the the the town the total addressable market of this world is it i don't say it's infinite but it's an entire new world it's like i feel like i'm an explorer and i've landed in virginia in 1615 and it's all forests right um before you know it was anyone had been there so um it does feel that way that unbounded optimism even now during this bare phase Yeah, people on Twitter are negative on crypto and, you know, the U.S. is pushing back. But look what happens. You know, within a six-week period, I go to Dubai with five of our CEOs. We have 200 people.

We have important government officials. Like, that's pretty dynamic. You know, that doesn't happen in banking or in investment banking or in commercial real estate or those are slow moving a world. You know, as we've talked about, I think, before, our space moves, I think it's five times faster than the traditional space. And I just say that because crypto trades, you know, 24-7-365, the S&P 500, trade 1,600 hours a year.

The crypto space trades 8,000. I think it's 300 hours. So it's five times. the amount of just five times being open five times longer. And just a lot happens, right? A lot happens. And two months ago, we didn't have ordinals. Now we have ordinals.

I mean, things just pop up and then they explode. Right? Like, that didn't happen in the 90s or 2000s. Like, that's why I say this is like the 20s. It's just you go from nothing to something all of a sudden. And then, you know, you have a market cap. In our space, in the middle of 19, there were only 14 companies in the world. In crypto blockchain, Web 3 businesses, there was no Web 3 back then, but let's just say 14

companies in the world that had a valuation of over a billion dollars. And today, there are over 100. Okay, a year ago, there were 150. Obviously, a bunch of fallen away, but 100 companies. Now, that's 10% of all the unicorns in the world across all industry. So I'm not sure that, you know, this is such a secret anymore, but people, I guess, aren't paying attention because they're focused on the other, I guess, 90%, at least that's in the private investment world.

So look, for now, as far as I know, me, my team, we're the only growing. growth equity fund in the world that's exclusively focused on crypto Web 3 blockchain companies. You know, B and C rounds later, companies making at least $50 million in revenue, et cetera, et cetera, sort of midstage type businesses. All the other well-known funds, for the most part, are venture focused. Of course, they every once in a while will move into our area. but I still can't believe that there aren't more people, you know, building portfolios in this space. It probably, you probably need, you know, some of the energy to start feeling more positive.

But look, I'm a guy that likes to buy into weakness, and I like to buy into fear and panic. And we've done plenty of work. And if we can get companies that we like at three to four times revenue, versus 10 to 12 last year, I'm just thrilled about that. Forget about these companies that were raising it 50 times revenue, et cetera. We never, you know, we passed on all of those high flyers. But there are opportunities now, and for the first time also, there are funds that are in distress or funds that need liquidity

that are selling positions in very high-quality companies. And, you know, I think that, you know, if they, you know, if they fall within our bailiwick, that, you know, we are the buyer. Yeah. It's interesting. A couple of times I've thought you must be enjoying a return to valuation rationality. Yeah. Yeah. No, I passed on a lot of deals that I didn't want to pass on.

There are companies that we love. We just could not invest in. I mean, consensus, fireblock. copper, some of the company blocked them in Alkamee. They raised enormous valuations. And even though we like some of them, we just had to pass. And so maybe now, at least in the secondary market, I don't know that any of those companies really need capital. So it's not clear to me that they'll be raising. And I know there's probably zero interest in doing down rounds. So again, many of these companies have plenty of capital, don't need to raise now. But there's certainly a lot of

activity in the secondary. And actually, I suspect in the next 12 to 24 months that a lot of the venture companies that were funded in 21 and 22 will be graduating and moving into our space and need growth equity. And hopefully we'll be, you know, I don't think we'll be the only one there. we are at the moment but you know i i don't i don't mind being alone in the crowd i i it's a terrible thing to have to compete uh with others on valuation right i like being able to set the price and so that's our our fourth fund is going to launch in uh my fourth fund will launch in july the first close will be july and we have already a few hundred million dollars uh coming in So we'll target a larger number by the end of the year.

But things are, at least from my perspective, things look pretty good. You know, I'm not seeing any investor like pushback or panic, et cetera. But again, we're a 10-year life fund. And our fund's performance didn't, we didn't really get hurt in 22. So, you know, we have a diversified portfolio. We've got five or six companies that actually made more money in 22 than in 21, which is pretty incredible if you think about it. That was not the case in, you know, 17, 18, 19. Pretty much everybody went down.

But now the space is more diversified. They're companies that make money regardless of whether Bitcoin or Ethereum go up or down. So anyway, that's pretty exciting stuff. And I'm just, you know, going to put my head down and continue to reach the people who are interested and, you know, go from there, right? Sounds pretty good. I mean, it sounds like you kind of, you answered this previously in terms of the sort of, you know, brands that you're tracking who continue to be interested in Web3 and NFTs and things like that. and you know, you're seeing sustained interest there. It sounds like you're also finding that there's not sort of some mass exodus of, you know,

LPs and investors interested in this space. Is that the case? Yeah, I'm not seeing any mass exodus at all. I'm seeing the opposite, actually. You know, I speak to existing LPs, many of whom are friends of mine for many years. And, you know, I'll look at how much they've invested in the funds. And I'll think, oh, that's a pretty significant amount. Now, yeah, we have, I'm doing another fund, but, you know, maybe that's enough for them, right?

Like, I'm totally happy they've invested enough. And then I do a call for an hour, and then they tell me they want to invest in the next fund. And I'm just thinking to myself, okay, I guess I underestimated, you know, the total value, the total A-U-N. But the calls are all going that way, not the other way. Every once in a while, someone will say, yeah, I have enough allocated to the space. You know, I'm not really sure now, Gensler, this and that. But I would say 80% of the calls or maybe higher are the other way. And then there are new investors who, you know, are looking for a way to enter the space

because the rate of adoption has definitely increased. There are new investors. And, you know, for us, we are like the first step for many a larger type investors. And what I mean is that, you know, we don't buy or trade cryptocurrency or tokens. We don't invest in venture. And so larger investors, to get a toe dip in the space, often will come to us first and then they explore, because we're a broad, diversified portfolio that we're building across the entire digital asset ecosystem. And so I'm actually finding because the space is broadened out into some of those areas that we've discussed,

that I'm reaching many, many new investors at this stage. So it's pretty incredible. Not what I expected, but that's okay. People keep telling me, oh, how difficult it is. I mean, yes, it's difficult, but, you know, anything that's worthwhile is difficult. So, however, you know, I'm not getting the pushback that you might I think if you were just reading the New York Times or something.

Fascinating. I mean, listen, if we're going to have a narrative violation, I want it to be in that direction, not the other way, right? Yeah, and I think it's because of what I've been calling the broadening and deepening of the digital asset ecosystem. The number, do you remember three years, four years ago, everyone would say, well, there are no use cases. It's just speculation.

I haven't heard that phrase in a while. are no use cases. That used to be, you know, a mantra. All right. We have two full pages in our deck listing many, many different, probably more than two use cases. And so that sort of puts that to bed, right? You just say Starbucks is just partnered with Polygon, right, for their membership rewards program. So they're like, well, what does that mean? Well, why don't you read up a little bit about it and figure out what it needs. Starbucks figured it out. Why can't you? Right? So we weren't having those conversations three, four years ago. And you know what? We always thought that adoption was going to happen because, oh, some institution was going to buy, you know, Bitcoin or I know

Sailor was big on corporate, U.S. corporate adoption. They were going to put their balance sheets into Bitcoin. I never thought that was possible because those, the, the, corporate CEOs, corporate America, it's just too conservative. I just didn't think they were going to get there. What's happened is we've had adoption. It's been happening. It's happening just not in the way we expect it, right? Blockchain gaming, NFTs. You know, you get a digital wallet and the whole world opens up to you. So it's not really about convincing some institutional, you know, money manager, hey, allocate, it was initially, get off zero. You shouldn't have zero allocation. Okay, invest one percent, invest five percent. And there are many that have done that, or at least some.

And again, more overseas. But the broader wave of adoption has happened through these other of what I call sub-sectors, right? The spreading of the word has happened in these other areas, and it hasn't been what people thought even two, three years ago, would be the drivers of adoption. It never is what people think. That's the secret of markets is that it's just work in ways that are not clear, at least in advance.

They are clear in retrospect. So speaking of markets, you know, by way of starting to round out, you've said that you thought that the bear market was over. Do you still feel that way? You know, I think the last, I think the interviews that you gave that in were, you know, we were doing slightly better than we are now. But that's pre-Binance and Coinbase lawsuits. But, you know, broadly speaking, do you think that the bear market is over? Yeah, the bear market is over. And it ended a few days after, or maybe even directly after the FTX announcement.

Look, we went from believing SBF was the genius, you know, wonder kid and the whole wonderkind

of the space and, you know, innovation, et cetera, poster boy, to complete fraud in six weeks in a six week period.

I don't think we'll ever, I mean, that was the most negative piece of information. for the most shockingly negative piece of information that I think we're going to get. And the Ethereum price couldn't go down and make a new low.

Bitcoin went down and then came back. Those are, for the old trader guys, those are called bullish divergences. And so when you have an extremely negative piece of news and the market does not confirm by making a new low in price, it tells you that the selling has dried up. So the selling from the bare phase in 2022 dried up after that announcement. And in fact, in the following weeks, I deployed $120 million of the remaining money in my third fund into eight different businesses. And we were able to buy

stock in the secondary at 50 to 80 percent discounts from previous rounds. We were able to lead a few rounds, essentially uncontested. And of course, Bitcoin was like 16,000, then, Ethereum was 1100. It doesn't correlate directly to the value of the equity in the space. And I'm probably one of the few private equity guys that actually, like the cycle is my friend. Most private equity guys, you know, they have five-year investment periods because they want to invest through the cycle. I never want to do that. I don't want to say I want to time the cycle, but I have a pretty good handle on the cycle.

So we want to allocate as much as possible at the low, and we want to exit, you know, at the high. And, of course, the funds have only been in existence since the beginning of 21. So we don't have any exits yet, but I suspect in 25 and 26, we certainly, by then we certainly will. So I don't, you know, this pushback on Coinbase and finance, this is kind of like old news. Like, tell me something that we don't know already. If you want to talk, you want me to put my trader hat on, I can't imagine anything more negative. You know, people after the, and we've had plenty of confirmation points since after the SBF news, all the bears were saying, okay, now, now Genesis is going to go bankrupt, and that's going to be negative. So then a few weeks

later, the bankruptcy of Genesis was announced, and the market rally. It tried to go down and couldn't. And if you look at the day of the announcement, the next day, was an explosive rally. Because investors who've been around a long time know that, you know, that maximum So when, you know, if the market can't go down on what is very bearish news, it's finished. So there were a whole bunch of times. Then it was Gemini was going under, right? Then the earned product was, I mean, there were probably 10 or 15 different negative news points, all the negativity on Twitter, all of them, people coming up with new things.

And the price kept marching higher. And the reality is we're 26,000 in Bitcoin, we're 1700 and E. We are significantly above the lows. We've digested a huge amount of negative information. You know, this is kind of why I think that it's a very funny market, the cryptocurrency market, because it is by far the most difficult market I've ever seen. It is the great of market with the greatest volatility where the amount of not, knowledge and information you need to have is infinitely greater than anything you need to manage

and invest in traditional markets, right? It's opaque, it's complex, scientific, cryptographic, mathematical. It's very complicated. And yet, you have a huge retail base that has never traded. And, you know, I just really, I say that this market really is not for civilians. Right. I, you know, I was managing money actively for over 20 years and had many stumbles and starts and big hits and losses. And, you know, it's tens of thousands of hours of just watching markets and researching, investing, trading. And so to come to this market, what is the most difficult one I've ever seen by many degrees, without all of that experience, I just, I don't know what people do.

I mean, I just think it's a very difficult market. It's one of the reasons that I've approached investing in the space the way that I have. I wanted to create a portfolio that gave people exposure to growth in the overall. digital asset ecosystem, but without all of the underlying volatility and angst and pain. And so, you know, look, we don't trade the cryptocurrency of the tokens. We don't get involved in venture projects that go up 50 times and then lose 98%. You know, again, we probably won't end up being the best performing fund in the space. but I think from a risk-adjusted perspective, we might be.

And I still think we're going to be making multiples return on some of our investments, many multiples. It's just that we're not taking as much risk as many people are in the space. And so it's just, it's really a tough thing to understand. And I feel for the guys without the experience, they're pretty bold. But look, I mean, why not? You know, many of them are young. That's how you're going to learn.

Throw yourself in. Try to figure it out. Get knocked down a few times, but hopefully, you know, stand up and live for the next bull face. And I think that that's what's going to happen now is that the bull face hasn't started yet. We're going to have this consolidation that is just going to be mind-numbing up and down in a thousand point Bitcoin range. People are going to give up. We'll bump along the bottom. We'll have scares. And six months from now will be at the same price. And people will say, oh, this is terrible. I give up. I can't do this. I got to go back to my old job or whatever. And then 18 months from now, you'll have a day

where the thing's up 10 percent and then 30 percent in a week. And if you weren't just structurally long and just there, you will miss it. And that's sort of my, from all my experience, that's sort of the one thing that I tried to do with our funds is to make sure no matter what, we're not going to get shaken out because that's the greatest risk. It's not that the returns won't be there. The returns are going to be there. It's just who is going to survive, you know, the non-bull phases, right? I was, you know, I was going to ask you as the last question, what's your advice for, for people in this long consolidation period? But it sounds like it's just continued to exist here for long enough to wait for it to come back.

Or if you can, just turn your screen off, go away. And, you know, if you're a builder in the space, this is a great time to build the entry sin thing. I do think that that's right. I hate that everybody parrots that just like Web 3 was not a thing. 18 months ago, but now it's a thing. It's fine. You know, the space is so young that it's still trying to find language to define itself. So that's fine. But I think if you're going to live on the day-to-day angst of the market going up or down, or as you saw a bunch of these alt coins, or I don't even know what they call them now, just I call them more venture projects, got completely annihilated the last week.

Well, you know what? Maybe you shouldn't be in those. I don't know. Being the ones that you love and stay there, I don't know, it's not something I do. I think, look, Bitcoin and Ethereum, you should have in your portfolio. You should allocate a percentage of your portfolio,

whether it's 5% or 10 or whatever it is you want to do, I would buy, do it the DACA method once a month, just go in on some day, or once a quarter and put a little money to work and just not think about trying to trade these markets. These are for professionals. It really, you know, and I think people who haven't trade work, they just don't know how long it takes. I mean, it took me probably 15 years before I truly felt, you know, and I had made lots of, you know, I had been successful before then, But I didn't feel supremely confident in my abilities for at least 15 years.

It took me 15 years from 23 till about 37 or 38 to not question myself anymore. I mean, of course, you question yourself. You have a thesis and you're questioning. But I'm just saying that it took me 15 years to get to a place where I had command and control of what I was doing and I was confident that I could succeed in any scenario

and that was a lot and again and those were great years for me. I had some great years trading in those years in managing the portfolio but it's a long time and it's a lot of hard work so

I would say if you're not going to spend your entire waking life doing this just decide dollar cost average, buy over an 18 month period or two-year period, and then just come back seven, eight years from now, and just leave it. And I think you're going to be very happy, right? That would be my advice. Well, listen, I appreciate the optimism. I think that there's a, there is a lot of negativity and doldrums and boredom and fear and all of the above going on right now.

So it's great to hear the narrative violations, the counterperspective, especially because you're experiencing them. It's not just what you feel, but what's what you're seeing in the market. So thank you for hanging out and sharing some of those insights. Yeah, no, my pleasure. And I'm just relaying to what I'm hearing. I'm not some, you know, congenital optimist. I'm not.

I'm a practicalist and realistic. And even I'm surprised at some of these developments. But I think that just the main core thing to remember, and for all your listeners too, is that the space has gotten really big. And the value that's in the space, the focus, it's not going away. So don't give up.

Just stay focused. and you'll be fine. Awesome. Thank you, Dan. Good to chat, as always. Yep. All right, back to NLW here for a quick wrap-up. There are lots of different themes to pull on from that conversation. The first, I think, is putting a pin in what we kicked off with, this resurgent institutional narrative. What I think matters about Dan's testimony on this front is that it's very easy for those of us who are hanging out on Twitter who see the news about BlackRock

or interpret commentary that we've seen from some analyst report from Bank of America, and turn that into a whole way of seeing everything that's happening. Dan, on the other hand, is just out there having conversations with people who are deciding whether or not to deploy capital. And as you heard, it's a lot more bullish than you might think. The second theme that I want to note is this idea of use cases that Dan no longer hears the, well, what is it useful for critique? We're going to put a fine point in exactly that on tomorrow's interview, so keep your ears

tune for that. The third and final theme that I want to come back to is just this idea of the big wide world that is crypto and digital assets. Obviously, I live in the United States. The U.S. is the context that I am in politically, and so I naturally spend more time there. What's more, the U.S. is the biggest market in the world, and so I think naturally coverage of financial anything tends to revolve around the good old U.S. of A. But it's interesting, and I think in a lot of ways, unsurprising, that as the U.S. has become more hostile, hopefully temporarily, companies even from the U.S. are remembering that what makes digital assets great, what makes Bitcoin so interesting, is that it is not subject to any one jurisdiction. It's not the province of any one market. It is a native institution of the internet.

And that means the companies that build on it, to some extent, get to decide where they're going to flow. Anyways, it was a good little reminder for me to see opportunity as well as frustration in everything that we're dealing with over here right now. So guys, that will wrap it for today. I want to say thanks one more time to Dan for joining us on the show. Always great to have you here. And of course, thanks to you guys for listening. Until next time, be safe and take care of each other. Peace.