The Pomp Podcast - #1284 Danny Masters | Investing Legend Has BILLIONS In Bitcoin & Crypto

Episode Date: December 14, 2023

Danny Masters is a bitcoin pioneer and the Executive Chairman at CoinShares, a European leading alternative asset manager specializing in digital assets. In this conversation we talk about prior bull markets, bitcoin outlook for 2024, bitcoin ETF, regulation, macro economy, CoinShares, and Danny reveals a surprise at the end. ======================= Auradine, a leader in web infrastructure solutions including blockchain, AI, and privacy, has unveiled the world's first 4nm Bitcoin mining systems, featuring breakthrough EnergyTune™ technology, setting new standards in performance and energy efficiency. The Teraflux™ product line from Auradine offers best-in-class performance, efficiency, and total cost of ownership (TCO), positioning it as the optimal choice for Bitcoin mining needs. With EnergyTune™, a patent-pending technology, Auradine's Teraflux™ systems enable rapid demand response and optimal energy usage, fostering a symbiotic relationship with electrical grids, and contributing to sustainable energy practices. Designed and manufactured in the US, Auradine's Teraflux™ product line not only ensures cutting-edge technology but also mitigates supply chain risks and provides increased supply chain resiliency. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠www.auradine.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ for more information the Teraflux bitcoin mining systems. ======================= Cal.com is leading the charge of scheduling platforms in the open-source sphere, offering you the chance to harness the efficiency previously reserved for elite corporations and tech gurus. That's right, Cal.com is transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface. Discover how countless users are optimizing their time in unprecedented ways. Use code “POMP” for $500 off when you set your team up with Cal.com. ======================= Pomp writes a daily letter to over 250,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Danny Masters is a Bitcoin pioneer and the executive chairman of CoinShares. In this conversation, we talk about what's happened over the last two years, how much of it was due to the macro environment, what Danny is thinking about

over the next 18 to 24 months, how important the Federal Reserve is to Bitcoin and cryptocurrencies. And then we go deep on CoinShares, a publicly traded asset management firm focused on the Bitcoin and cryptocurrency industry. We talk about their principal investing, their asset management products, and much, much more. Danny at the very end saves a surprise for everyone. He quite literally takes off his shirt and shows a brand new thing that he's been waiting to reveal publicly. I always enjoy talking to Danny and I learn something new every time. This conversation was no different. Here is my conversation with Danny Masters. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do

not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only. This episode is brought to you by Aridon. They're a brand new startup led by a number of Silicon Valley legends who just raised $81 million to build the future of internet infrastructure. You're probably wondering what that means. Let me explain. There are numerous new disruptive technologies that are being adopted simultaneously, from blockchain to artificial intelligence to zero-knowledge technologies. In order to ensure that these technologies thrive in this new world, we need new infrastructure, and that is where Ardine comes in.

They just launched their first product line called Teraflux, which is a Bitcoin miner powered by the world's first 4-nanometer silicon chip technology. These air-cooled, single-phase and dual-phase immersion cooling miners have unrivaled speed and efficiency. They have superior uptime and they leverage a brand new innovation called EnergyTune that allows miners to dynamically adjust

the energy consumption and Bitcoin hash rate based on demand response needs of the electrical grids. Auradine is an ambitious company working on hard problems. I'm really impressed with them. And if you want to check out more, you can go to Auradine.com. That's A-U-R-A-D-I-N-E.com.

Go check them out at Auradine.com today. This episode is brought to you by Cal.com. What do I have in common with Chad Hurley from YouTube, Toby from Shopify, and Alexis from 776 and the co-founder of Reddit? We all use Cal.com instead of Calendly, and we are all early investors as well. Cal.com is leading the charge of scheduling platforms in the open source sphere, offering you the chance to harness the efficiency previously reserved for elite corporations and tech gurus if you like to have your calendar organized and be able to have an efficient

exchange when scheduling but you love all of the benefits of open source technology then cal.com's for you they are transforming sophisticated calendar management into an accessible tool for all via a user-friendly interface you can customize it and you can make your calendar work for you. Use code POMP for $500 off when you set up your team with cal.com today. Again, go to cal.com, C-A-L.com, and use code POMP to get $500 off when you sign up. Cal.com, an open source tool that allows you to take back control of your calendar, be efficient when scheduling, and make sure that no one can steal your time. All right, guys. Bang, bang. I've got Danny here with me. uh danny last time we talked about two years ago a lot's happened since then uh prices went up a

lot then they went down a lot seem to be recovering how do you evaluate maybe from the top of the 2021 bull market to today what's happened and more importantly why it's happened well great to see you again paul and um yeah it's been uh two years since we last spoke and uh it seems like an awfully long time but a lot has happened so i guess we've probably been both occupied with the uh with the developments in the marketplace um like me you've been through multiple crypto cycles uh believe it or not this is my uh 11th year in the crypto industry um and you know the industry has changed you know in a dramatic way over that period of time um as i first recall it was populated almost exclusively by computer scientists and

startups called you know blockchain.com and coinbase uh and we've come a long long way since then you know i i think at the the coin shares level you know our approach and we can get into the company and i think a little bit later but our approach was to build something very solid very robust something which would be fit for a public market you know at the top end of the listing spectrum and accordingly you know we built our business quite slowly um and carefully and we have no choice but some of our peers and competitors built their businesses extremely rapidly and as you will well know and our audience will well know we saw a dramatic rise and fall uh for companies like bitmex um for companies like um celsius three arrows you know

because the list is very very very long and those companies were both you know very fortunate to grow as rapidly as they did um but as we were going through that period of extremely rapid growth for those companies my impression certainly was they were running a little bit too fast and i don't think the governance was there i don't think the risk management was there i heard some extraordinary stories about you know people extending credit that no one in their right mind would extend all looks great in a bull market but then you know you have the inevitable unwinding and um i actually posted something on my linkedin uh at the bottom of the market pretty much as soon as spf was was arrested and that was you know the low in psychology it was everybody was not just

force liquidated that was liquidated then there was a sort of a delayed reaction where it wasn't you going bust it was your counterparty going bust that made you go bust and the sentiment just became maximum negative and you know that was the low of the move 16k or something like that basis bitcoin i have seen this multiple times you know in my career on wall street where uh there's been a cycle and it happened in oil it happened in natural gas it happened in copper um and the similarities were incredible there was always you know the big market leading company. It would have been Kanamatsu in copper. It would have been Metal Gazelle Shaft in energy. It would have been Enron in natural gas. It would have been Brian Hunter in Amaranth in the natural

gas hedge fund business. Very big, dominant company. Read FTX for that and maybe a couple of others. There was a poster child spokesman for that company, all the names that we now know in infamy. And when those people ran out of road and the market began to sense they were vulnerable and people all exited the ship and they sank in every case and were arrested in many cases and jailed in some cases, that always represented the cycle low. And in each of those examples I just quoted, yeah, it represented the multi-year cycle low of the asset class.

So, you know, going back to, you know, the SBF collapse, we were talking 16K Bitcoin. That was the wrong price. Given everything, it was the wrong price. It was a victory lap for the haters. There was forced liquidation left, right and center. There was knock on effects from third party exposures that sunk other people. And it was the wrong price. So we had something of a recovery. Call it to the low 20s, mid 20s. And then some other interesting stuff happened where there were a series of enforcement actions,

largely by the SEC, but not limited to the SEC. And I think those in the initial phases had very negative impacts on price. You'd see the latest lawsuit and the market would be down $1,000, $2,000 on the back of it. And as a market watcher myself, and again, having been through these cycles in other commodities, what you're really looking for is the time when those pieces of news no longer move the market and the market then sort of becomes immune and impervious to that kind of news and you need to see that because in any investment you really need to know you know where the bottom is you know it might be a silty bottom but somewhere roughly where the bottom is and when that kind of news can be absorbed without a market impact uh you know that there's a little

bit of a foundation now so you know now we're in the mid-20s and you know we we don't really have much of a catalyst i think it was very instructive to look at a lot of private company stocks not just ours but many many others as interest rates you know got very high uh to the five six seven percent depending on which country you're talking about the valuations of the moles pools of all these private companies collapsed and and you know in many cases haven't significantly recovered and i think you know bitcoin is one of those kind of um risk on assets probably arguably the most risk on asset and therefore um while we were sitting at 25 you know having been too low at 19 we're sort of battling this headwind of really high interest rates and and lack of

speculative capital and liquidity you know shrinking and shrinking and shrinking not just in the macro environment but in the crypto environment as well um and that was true of counterparties going out of business it was true credit lines that people were offering and could receive and so on and then all of a sudden you know following July you know July was kind of you know crept up to near 30 following that you know two things start to happen you started to see a little bit of a chink initially in the energy price which took some of the heat out of inflation because the you know Russia Ukraine spike started to kind of wear off then you sort saw a little bit of backing up in inflation as well and all of a sudden we're not sitting here

thinking rates are going to god knows what number with thinking actually the worst might be over that's good for another little bump you still don't really have a catalyst at that point okay you're just trying to try to avoid the bullets as it were and the catalyst was really I think you know let's call it broadly institutional interest in crypto something that we've been after for a long time you know you had a confluence of a number of events we've got some forward process forward progress in in regulation in europe through the market legislation makes some sense you know switzerland's still a very solid jurisdiction the uk is a little bit sort of uh negative generally with crypto but trying to make steps to go forward in fact if you listen to the

politicians it sounds a lot better than it actually is when you talk to the regulator but moving in the right direction and so that started to look a little bit better rates start to look a little bit softer and then we have some tangible input you know the black rock etf and i think that was you know that was the catalyst to really move this and what it's saying is okay we've kind of exited all the bad actors uh we've put at least the seeds of a regulatory framework in europe in place and outside of america um and that's a base on which you can build and i think that is a legitimate catalyst i think the impact of that kind of thing people need to understand that where blackrock has a product black has three trillion of assets that

they can deploy their clients can make a 10 basis point allocation for bitcoin that's a huge number and those clients probably wouldn't buy something outside of that environment because you know they deal with the biggest and the best clients in the world so that I you know that I think is where we are and that I think now continues because you know another thing I've learned about markets over a long period of time is when there is an event horizon and the event horizon in this case is the approval of such an ETF the market tends to move into that vacuum while it's happening that's why I'm not really in a hurry for a judgment I kind of like to see this all all next year would be just fine because i think the anticipation of that

is a positive and um and also you know we're seeing for the first time i would say um you know institutional interest and to be involved in the marketplace from really quality companies who may want us to white label products may want to buy our products for the first time you know we're seeing and it almost seems to me like you know these institutions are going right we had a big backup in price we had a big clean out of bad actors we've got some regulatory framework which we can kind of hang our hat on we've clearly got the client demand larry fink will tell you that directly and so we're going to try and get involved and um hey this is this is what you know you and i have been sitting around waiting for for many years and i i truly

believe that is happening as we speak how impactful if we kind of look forward maybe the next two to three five years how impactful can this be and i'll give you kind of a couple of things i've been thinking about i don't yet have kind of a strong opinion about right one is if somebody wanted bitcoin badly enough they probably went and figured out a way to get it is one argument a second one is even if the etfs gathered 50 billion in assets it's an 850 900 billion dollar asset and so how much could you really you know it's not like it's gonna triple overnight Another argument is, no, this is the signal that everyone gets in, right? Every asset manager, nation states, kind of it is this time is different.

And there's the breakout of this kind of four-year cycle and kind of having process. Where do you sit and how are you thinking about this right now? Well, I was around for the creation of the gold ETF in the beginning and to date myself. And do you know what the narrative was at the time? it was okay you know this capital is in theory going to come into this space but the day-to-day trading volumes of gold are actually not large enough to sustain that kind of capital inflow you know what happened the daily trading volumes of gold went through the roof and and you know when we at coin shares and i'm not sure how publicly available this research is you might

have to call james butterfill our head of research and ask him nicely uh if any viewers are interested It could be on a website. I'm not absolutely sure. We lead the industry in terms of providing data on institutional inflows into crypto. And so we have some very granular data on that. And we did a research on our own and we said, OK, we think we know the price elastic response to inflows to the price of Bitcoin. We can correlate that back over time. Half our marketing and research team, by the way, came from the gold business, funny enough, because we hired them from wisdom tree actually to come to the crypto industry and so they're very familiar with that whole um that whole uh development back in the gold etf beginnings and so you know we modeled what we reasonably thought the inflows would be that you multiply the inflows by the price elastic response and you end up with a price and that price i think came

out to between 115 and 140 000 now i have never in my entire crypto career been the guy saying the moon and 500k and you know all that kind of rubbish but this is just math right this is just like a reasonable assumption for these kind of inflows moves it that way now what's the causality there you can't just say that the creation of a gold etf and the inflow of institutional clients who wouldn't have otherwise invested in gold was the only factor because once they start doing it the retail starts doing it as well so so i do think that um it will be you know maybe the type of people you mentioned in your first comment those who figured out how to do it first it's probably where we are right now second you know you get the actual announcement there's maybe a

little profit taking usually the rumor by the room to sell the fact thing is a is a is a good strategy to trade uh and after that you're sitting there waiting for inflows to come into this into the actual etf and and i think that will be a real driver um happened also in the silver etf which came after the gold etf and barclays who used to own the silver etf before they had the problems in 2008 had to sell it to blackrock and used to publish a very useful spreadsheet showing you how much silver had been accumulated into the etf week by week by week and after six months of this you could draw a line through it and kind of go there's not enough silver and silver reacted you know accordingly so so yeah i think it's real and i think it starts with the guys that can

already do it it's followed by the institutions and then it's followed by the retail guys who probably got a little bit burnt you know in a couple of the dips um particularly in 21 um but it's it's a green light across the board i think now when we look at um what is happening now there's some people who are front-running federal reserve potentially moving back towards monetary policy, cutting rates, the whole narrative that I think people are grabbing onto. How important is the Federal Reserve for the movement of Bitcoin's price? And on one hand, we see these like Bitcoin over global M2 supply. On the other hand, we see the Fed still committed to destroying investor demand and Bitcoin's up 150% on the year. And it seems like it could

care less what Jerome Powell says in his press conferences. I think it makes a huge impact. you know it's just looser credit you know bitcoin is a very responsive act uh asset class um to lose a credit um i'm surprised it didn't do a little bit better under the inflationary kind of regime um but you know for all those who said oh it was disappointing that bitcoin didn't rally more you know during the inflationary cycle because bitcoin had been touted as an inflationary asset well we didn't really know that because Because we'd never seen an inflation recycle before in the history of Bitcoin. It was too young.

So I think, you know, what we've learned, and we do keep learning as time goes by, about how Bitcoin responds. To me, it is a risk on asset, you know, backed by some technology tailwind that slowly kind of permeates it out amongst, you know, many, many more users. As you can see from, you know, wallet adoption and the amount of Bitcoin in wallets, it just diffuses out into space continually over time. So, yeah, I do think that we're clearly on the shallow beginnings of a down cycle in rates. And, you know, the Fed has not done a great job of reducing the size of the balance sheet to date. Neither have any other central banks. Not quite sure how good they're ever going to be doing that. and you know as cycles happen maybe we'll do some more money printing at some point in time so so i think there's you know a modest tale when all other things being equal um and as you know

as we see failure to reduce the balance sheets and arguably in some extraneous circumstance more money printing it seems to be unavoidable over time politically unavoidable um then then you know we start we ratchet higher still so you know look this is not a crazy bull market like it's going to be up ten thousand dollars in a day as it has been you know from time to time in the past i think it's a really broad base or potentially broad base and very solid rally that could go on for some time now coin shares i think is very interesting business because you basically have exposure different parts of the market right you know i've seen reports that say hey look at they're principal investing. They're fantastic investors. There's others that say, wow,

this asset management business is going to do really well as prices go up. There's even been some coverage, I think, from some of the research analysts that are like, CoinShares benefits when ETH goes to proof of stake, right? There's just kind of all kinds of different things being written or covered about the business. How do you think about CoinShares? And when you think of, okay, this is a business we have today, how do you describe it people yeah um well two ways to describe it really it's it's one what do we do from a qualitative perspective and two you know how do our earnings actually you know respond to different market conditions um so if i had to describe it in a few words it's an asset management business

um we currently have around four billion and we have it in a wide array of products now We have our legacy XPT provider products in Sweden, which are incredibly popular from the day they listed. We have CoinShares Digital Securities, which is a platform of a different kind. It's a little bit more institutionally focused, a little bit more institutionally structured, a little bit cheaper fee-wise, multiple products there and multiple listings on different exchanges for those multiple products. We have a couple of private trading funds run by a chap that works for us called Lewis Fellers that do relatively sophisticated Bitcoin and ETH strategies for high net worth and private and institutional investors. We have an equities fund, the Block Index, that we joint ventured with Invesco. So we have CoinShares Fund 2, which is now four years old and is a 10-year duration private equity fund, closed, run by Melton Demers.

So, you know, a pretty wide spectrum of investment products. And, you know, you've seen the news recently that we are involved with Valkyrie and we're hoping to also be a player in the US ETF market now. So quite a wide, a wide different array. it's it's been really interesting to see how loyal certain customers are to certain geographies and certain structures they know this ticker i mean that ticker is cheaper and it's the same exposure but they don't really move and um and our capital base is very very sticky and i'll tell you an interesting fact which is of our of the assets that we currently have i think we have given back way more than the invested capital that we ever received in other words everybody in our network

en masse, in sum, is trading with house money. And I've never seen that before in an investment product. And the truth, one of the sort of unspoken truths about the asset management business in crypto is you never really raise that much money. You kind of got to have money from three years ago that's multiplied significantly. And that's actually by far the best source of fresh AUM. I mean, the last month or two, I think our AUM has gone up by like 600 million dollars and that's purely you know there might be 10 20 50 100 million you know here or there coming in or out but basically it's because the asset class is going up so that's where we are actually synthetically quite long bitcoin because the more bitcoin goes up the more

iam goes up the more our fees go up very simple and um that's a good exposure to have so that's that the second part of the business which has been really evolving over time just changed so many times actually over the years is CoinShares Capital Markets, which is our market-making business, which was started back in 2015, probably 2014, because no one else would make markets in our securities because no one had the securities leg

and the crypto leg simultaneously. Crypto guys and securities guys, but nobody did both. So we started that business. It's been through a number of cycles. Broadly speaking, we make markets in our own products and as conditions permit, you know, we'll make markets for third parties and we do an amount of arbitrage trading, whether it's, you know, buy on this exchange, sell on a number one,

buy a derivative that's underpriced versus another derivative that's overpriced and, you know, no outright exposure or stuff like that. But, you know, these days we're probably doing between $1 billion and $2 billion a month. In the peak, we're probably doing $5 billion a month in that business. it is represented over time anywhere from 25 to 50 percent of our overall revenue so in some cases almost matches the fee business that we have and um and what's happened you know despite the fact that volumes have gone down the competitive landscape has shrunk by at least 50 percent and so margins have gotten higher and i don't think we're quite where we were but it's

as bad as it sounds when you talk about a 50 drop in volume um it's uh you know the the the money that can be made is is actually um more than you know it's more than that so and that that business it sounds simple but you know you have to set up all kinds of banking lines and exchange facilities and and really be able to actually operate it you know manage the risk measure the risk and uh and have the sort of liquidity and the partners around that you need to to make that work so you know know that's that's quite a mature business at this point it's it's run quite professionally and it's a big contributor um the third part is as you say you know we have investments in probably 40 companies if you if you look at all of the pockets we have

um some of those are actually side pockets and ex-investors and pre-ipo investors that pretty much mirror the current cap table um we have a fund with that group we have a coin chest fund too um we have um you know some stuff on the balance of significant stuff on the balance sheet as well and um and yeah you know those are generally you know we've had a few losses like everybody else a few write-offs like everybody else but you know dotted around there are some real winners a great example was block demon uh we had a position in block demon you know one of 25 positions in coin shares from two and we managed to return all of the invested capital to the investors by selling a piece of that position um when you know in 2021 which is obviously a wise

thing to do in retrospect so there's been some uh good winners there and you know more importantly than that that's nice but more importantly we've done lots of business with our significant private equity position so you know we do a lot of business with kimenu our custodian that we launched with numero and ledger we do a tremendous amount of business with flowbank in which we're a a big you know client a big a big shareholder and we've done a lot of business with 3iq in canada you know issuing etfs with kingdom trust who have recently gone through a buyout process which was a good deal for us so and in all of those cases you know we're either clients of theirs or created and co-marketed products with them or they became clients of ours

and um and and that's been um that's been you know a good activity not nearly as impactful as the trading and the investment management business um but but we shall you know we're still in the game you know with a lot of those and see we'll see how they go the final point i'll make and this is a new one so i would say what i just said six months ago the new one is is really in two pieces there's money on the edge of crypto that is either crypto money so just to throw out a couple of names you know the binances the tethers the you know the the even dcgs arguably of the world and you know these guys may in some cases not be deemed experienced enough to operate a regulated crypto business um that's kind of a requirement in many many cases now and you know

if you don't have the track record and you don't have the infrastructure or you've made missteps in the past it's very hard to obtain those kind of licenses we have a lot of licenses and um and you know they've been hard hard for three four years to get some of them and um and so we find ourselves in a position where we can actually form a buffer between capital and regulated businesses where those that capital cannot directly access and we'll find ways you know to make that work you know within the appropriate regulatory framework the second thing uh that's going on is you know there is there is a a cohort of asset managers who can't make it pay because believe it or not you know and i've seen some examples of this you know you can

have a few hundred million dollars in a crypto asset management business and still not be able to make it pay because of you know relatively low fees and relatively high regulatory costs and staffing costs and so there's an opportunity for us and you know i think the valkyrie deal is probably in that in that flavor where you know we can bring our scale um we can operate some of these businesses very little incrementally and so there was a roll-up trade going on where um you know the bigger managers can can take out the smaller managers and that can be on an outright purchase or on a buyout on a jv basis um so and that's that's a new activity you know that that to me is us finally getting paid for the gold-plated infrastructure that we spent so long

and spent so much money on building. Now, on this part of, I'm going to call it, there's like the systematic stuff, right? Where you either are passive in the market or you're not making decisions yourselves versus what I'll call maybe more of like the past in terms of understanding macro understanding markets uh making private investments how much of um crypto is different maybe than let's say in the traditional financial system where uh you know people see everyone from uh the citadels all the way to the point 72s to you know even dalio and um uh bridgewater like a lot of these folks i think have really driven home this idea that the machines are making the decisions, we don't seem to see that much of it. Obviously,

market-making maybe is a little bit different than some of the private investments. And maybe there's the two extremes. But how do you think about human intervention versus machines, software, AI, and this rise of the machines are smarter than the humans? Something that's been a growing trend throughout my entire career. When I started, it was 100% humans. And that is definitely not the case anymore. In the company that predated coin shares, the commodity fund that me and a couple of my partners ran, we actually ran both strategies. We had a purely quant strategy and we had a purely discretionary strategy. And I ran the discretionary strategy and one of my partners ran the quant strategy. And I have to say, I think

they were very complimentary and but the style could not be more different um it's an entirely different activity um so you know i don't think there's any even even in the companies you just mentioned the d shores the citadels the all these you know the the millenniums of the world um you will find actually if you go below the surface that both of those styles still exist the difference And when it gets a little bit, let's say, what's the word, camouflaged, is in execution, you almost need an algorithm these days. Like in my day, you pick up the phone and say, you know, buy 1,000 lots of crude oil. And then someone would scream onto the floor that you buy 1,000 lots of crude oil. Nobody does that anymore.

So, and the reason you need algos is that there are so many other algos that as soon as you put in an offer, someone's going to be ahead of your offer, they're going to be ahead of your offer, and they're going to game you. So you shouldn't really be confused that in a way you might have a Stan Druckenmiller sitting there going, you know, I want to buy, you know, 100 million or 10 years. But he's not going to pick up the phone to the Chicago Merc and say those words. He's going to give that to Goldman or Whomsoever, and they're going to run a smart algo that's going to do that. And it's just a cat and mouse game. You know, there's no, I don't think there's any intellectual input into that. We run a ton of algos in CoinShares to do exactly that.

you know if we get lifted on a market making offer somehow there'll be some algo running on how you're going to get that you know that position back again um those are those are written by humans by the way not an ai at least not yet so so in a way you know you're just really codifying what you would do if you were sitting there and you could do it that fast which you can't um but a lot of the you know our cons will sit around and they will write those algos but logic behind those algos you know would be no different to what a good discretionary trader would be doing and executing an order so it's really what's your strategy is is it a discretionary strategy there's a place for that is it a quantity there's a place for that but pretty much either

way you're executing with an algorithm what are you most excited about thematically in crypto so not like products not coin share um you know in terms of business lines but are there certain themes or areas of the market that you feel like uh are either under you know um scrutinized at the moment and will be bigger than people think or maybe even areas that everyone's talking about that you're less excited about and think could be overhyped i think the most interesting observation pump has i never really understood how there was room for the proliferation of different crypto assets that occurred you know for quite some time uh i was active in crypto when it was only bitcoin and then i think there might have been uh litecoin and i think there might have been ethereum

but it seemed like a long time to get to like three cryptos and we somehow went from three to twenty thousand in a very short period of time and and what what i realized finally was crypto is is you know very very very low hurdle of entry very high hurdle of success um and it's been you know it's been frustrating but you know i've been involved with the tezos foundation for some time now tezos is a great blockchain it's a very secure very sophisticated blockchain it's one of you know in my view probably the top five in terms of its its functionality um But it is very, very tough to unseat Bitcoin as a store of value and Ethereum as a utility at this point. And there are some other promising candidates for sure.

But it just seems that, you know, the longer time goes on, the more the infrastructure built around the legacy, old legacy coins becomes more of a factor for that longer term survival. And that makes sense in a way, because, as we know, improvement protocols are there so that the community can improve the network on which they're working. And if they're getting an idea from the NEO protocol or the Avalanche protocol, why not, you know, if it's a good one, bake it into, you know, into Ethereum. So what I think what I think I'm learning here is that I wasn't sure how this would all unwind. But it does seem to me that, you know, there will be some sort of Darwinian extinction of a large number of cryptos. And unfortunately, a lot of those cryptos are the ones that, you know, the uninformed retail investors might have piled into in 2020 and 2021. You know, some of them shocking, you know, shocking in terms of performance in 95% declines and stuff like that. And I think a lot of those things are walking dead.

You know, I think we may be now reverting to, you know, a very limited number of meaningful crypto networks. and you know i think we just need to sort of circle in around those and kind of forget about a lot of this other stuff and that you know that kind of evolution doesn't happen in normal financial markets normal financial markets things are built behind a wall to last very robustly very inertly very feature-less and they'll be there for 20 years like my hsbc bank account is pretty much the same as it was 20 years ago um that's not the way crypto works and so we had to find another creation extinction mechanism. And I think that's what we've been seeing. So this may sound boring, but I'm most excited about Bitcoin and Ethereum for those reasons. I think that

majority of the market probably feels exactly the same way. Another question I have is you've been doing this for 10, 11 years now. When you first did it, you've told me a lot of your peers kind of looked at you like, hey, Danny, you okay? What are you doing? A decade later, have they capitulated what are some of your peers doing what are they saying behind closed doors i think what my and i'm talking about my peers outside you know my financial market peers okay not not my you know not my inside crypto uh kind of peers but but yeah they're a cycle or two behind me you know they'll get there when you know you come to realize that you know there's a particular a kind of heartbeat to crypto um that is more volatile than other asset classes and you know

just because you lost 40 on your last purchase and might have been ill-disciplined in how to deal with that potentially um you will learn and and you know i felt like you know post 2021 there a lot of my kind of outside crypto network um kind of gave up on it was like oh you know that's done you know that's over and now all of a sudden like my doctor called me up and it's like talking to me about do I like Bitcoin more than Ethereum but how do I you know get involved you know in this current marketplace and I want to hold my own keys so I don't have exchange risk and so they're coming back now no doubt about that and it's always when my phone's ringing with those kind of people that you know you realize you're in a different cycle and and I

suffered the same thing i mean my first exposure to bitcoin i bought it at 100 it went to a thousand over the course of the year and it went to 80 and my reaction was oh that was fun but it's over right it's over and then you learn so cycle number four or five you know you kind of figure it out and it might not be an investment you want to hold all the time but when it's good it's better than anything and and i think people you know are now dusting themselves off from you know the 2021 debacle and getting back involved now you know what they should have done is read my linkedin post from you know right after sam was arrested where i was like this is the wrong price yeah so another guy that sort of blew up the world and um and and and you know it's like seven out as they

say on the craps table um but you know this this this is coming back and i i just think this is going to be a feature of crypto forever and and maybe one day we'll we'll reach a point where nobody is a naysayer. Nobody thinks it's worthless. Nobody says it's backed by nothing and therefore is useless. And it's, you know, just a hotbed of criminal activity. Once you do not hear that anymore, we may well have reached the terminal price, but those voices are still pretty loud. And that's what makes me, you know, optimistic for the future. Now, my last question is, if we had talked five years ago, maybe, definitely, you know, further back than that. And somebody said to me, hey, who is Danny? Most of the description of

your career would have been in the traditional financial world, if not all of it. When your career is done, when you decide, hey, I've had enough, are you going to be known as a crypto investor or as a traditional markets investor? And do you see pros or cons of either one of those? Well, I'm going to reveal something to you tonight, Pomp. And we'll see what you want to do with it but um so in July of this year I turned 60 and um I'm I feel like I'm very you know young in body and young in mind but the math is the math okay and I went on a I went on a I want to say it's like when you renovate your house um I went to a clinic for two weeks and I had every test known to man and every therapy known to man i had a nagging shoulder injury for a long time

you know i had um all kinds of stuff done i may or may not have had a little bit of face work done we don't need to publish that too much but i just wanted to i wanted to sort of go okay we're gonna this has been the family house we've been living in and we want to live in it for a little bit longer so uh so that's what we're going to do and one of the things on my list was something that um i promised uh jean-marie our ceo and my good friend um we made some promises to each other back in 2014 and one of them was if bitcoin ever got to a thousand dollars i would have a bitcoin tattoo and um and many years later um so that must have been uh you know nine years later uh i delivered on the promise and part of part of the part of the thought process because i'm

not a tactic guy as you can imagine but part of the thought process was i wanted a kind of a memorial to bitcoin and what it's done for me and but that wasn't enough you know when i thought it through i thought that wasn't really enough and and what i what i thought was you know this is something i wanted to do for what bitcoin is going to do for me and for the world going forward and That was a really conscious choice. I'll show it to you if you want. No way. That is amazing. How long have you had that? I had it July 4th. Wow.

I'm telling you something. I had to think long and hard whether the Bitcoin market would rally because I don't want to fall into the same trap as Novo. Novo and you're going to compare notes in five or six years to see who made the better tattoo choice. I think here's a long way to catch up. But anyway, so to answer your question, and that is the answer to the question, I think Bitcoin is a magical thing.

I will never cease being fascinated with it. You know, I kid you not when I say, Obviously, you know, I have a lot of my net worth tied up in the company. I have a lot of net worth tied in, you know, some illiquid investments, 100 percent, well, 95 percent to do with crypto. And I can never get it right. I can never get liquidity at a good price in my stock to get any cash to buy Bitcoin, because by the time Bitcoin's up, you know, it's a chicken and egg. But if at any point in time, you know, I do get meaningful liquidity for my rather large position in coin shares, um i am seriously thinking about just because you know i'm doing you know the ultimate thing

you know we know it's a store of value we know it's a medium of exchange but is it a unit of account i want to make it a unit of account i wanted to i know there are some people that already do that more than more than maxis than the normal guys but i actually want to do that because i really do believe in it and um and that's as much as believing in bitcoin as disbelieving fiat but um but i plan to do that ultimately that's a fantastic answer i did not expect that so that may be one of the best answers we've ever had oh danny where can we send people to find you on the internet or learn more about coin shares if they're intrigued by what you guys are building and want to learn more sure well uh you know uh dm or coin shares.com uh or danny l masters all

letters on Twitter. Awesome. Well, Danny, thank you so much for doing this. You are an investing legend. And I think you've been a pioneer in Bitcoin and cryptocurrencies for a long time. So people are very excited to hear your thoughts on where we are in the market. And we'll definitely do this again in the future. Awesome, my friend. Keep well. I look forward to seeing you next time. Hopefully, you'll have this discussion at a big high price. Thank you.