The Wolf Of All Streets - Crypto OG Dan Held Talks About Bitcoin

Starting point is 00:00:00 From the outside looking in, many people probably believe that companies in the United States and crypto are competing with one another for supremacy. But the reality is it's a very small industry and all these companies need to work together to eventually get us to mainstream adoption. Dan Held from Kraken is one of the people on the front lines of that battle and is doing his part to make sure that Bitcoin becomes the global reserve currency of the future. Is that your foot telling you what the market's going to do? It's my foot telling me that I need cooler shoes and being jealous of your shoes because you have much better shoes than me. My foot is protesting. I create new ones per conference. I know, you have new ones every single one. The last ones were amazing too. What inspired the western theme here?

Starting point is 00:00:51 Well, being a Texan, I wanted to accurately represent the state, so I got a cowboy riding off into the sunset with a bunch of cactus. Perfect. It's more people's perception of Texas, so I was like, let's just lean all the way in. Yeah, you gotta go for it. The other side actually has a little bit more of a Texas subtlety to it. The come and take it was the first flag that flew over Texas. So the Texans stole a cannon from the Mexican army, and the Mexican army wanted it back.

Starting point is 00:01:14 So they made a flag that said come and take it with a cannon on it. So that's what the other side represents. Nice. If you've seen the movie Pee Wee Herman, you would say they hid it in the basement of the Alamo. But maybe that's a reference for my age. Pee Wee Herman's a big adventure. Have you been to the Alamo? I have been to the Alamo.

Starting point is 00:01:29 It's a lot smaller than you think it's going to be. It's tiny. Yeah, it's like a little church. Yeah. It's a mission. Definitely not the image that you have of this big war versus the Mexican army. Right, right. It's pretty awesome.

Starting point is 00:01:44 So, obviously, Kraken has been on the front lines here banking charter regulation everything it feels like we're at a really major inflection point now probably for the industry but for you guys as well so what's happening well you know Jesse I always like to go back to the founder of a company and look at that culture and what Kraken's developed. You know, Jesse's a very principled man. So with him, we apply and work through regulatory requirements that are required for us in different regions. But Jesse is a principled guy where he goes and pushes back on things that he doesn't like. Some of the stuff that we've been working on, like the Wyoming project, and we're seeing some pretty big steps forward there in terms of us getting approval to be able to finally have that banking license.

Starting point is 00:02:29 I'm not on the regulatory side, so I don't know exactly how far we are, but I know that kind of recently we announced some new things with the Wyoming bank. Can you talk about that? I just don't know as much about it. Right, of course. Superficially. Yeah, I mean superficially. So the Kraken banking, we're trying to get a banking license in Wyoming. Being our own bank is ultimately what crypto is all about, right? And so these companies like Kraken and Coinbase were beholden to the existing banking infrastructure to go build this out.

Starting point is 00:02:55 And that was actually an early growing pain of the industry was having a bank account. Being our own bank would be incredible. It allows us to do more things. It allows us to do more things. It allows us to be more flexible. It also means that we don't have that weird phone call where it's Chase Bank or Bank of America going, hey, we don't want to bank a crypto company. So it's a long-term stability play. If we build on a foundation where we are the bank, then it allows us to do a lot more things. Yeah, Caitlin Long told me that that's her major fear. She says, we're all talking about the SEC and the CFTC and sort of this consumer-facing regulation, and nobody's really talking about the fact that there's basically two major banks that service the entire crypto industry.

Starting point is 00:03:29 And if the FDIC or the Fed or one of the big banking regulators steps in, that's the choke point. Totally. Because if you don't have access to the banking system, that's where it's all over. And we're not talking about it. It's hard to buy Bitcoin with dollars if you can't wire money in. So, I mean, that would be, I guess, the biggest thing they could, quote unquote, it wouldn't stop Bitcoin, but it could certainly stop innovation in this country. I mean, Bitcoiners often say,

Starting point is 00:03:54 hey, we don't care about regulations, these don't matter. They do matter. I mean, Bitcoin is a permissionless system, so it doesn't care about regulations, but Bitcoin's growth trajectory would go from here maybe to here, right? So it all depends on like how fast do we want Bitcoin to grow? And that's where I think it's good that we have folks like Coin Center and others that really go and advocate for Bitcoin and ensure that those moments don't happen. Where there's something really dumb that a government would do where they totally ban Bitcoin or choke it with like one of those regulatory agencies does something that's like really intense.

Starting point is 00:04:25 Yeah. So you've been holding from the very, very early days, obviously. Pretty long time. Accumulated quite a stack. You probably could be living on an island somewhere and chilling and you're doing this. Why do you even care still? Well, I lost all of my Bitcoin in a boating accident, right? Of course, right.

Starting point is 00:04:40 It sucks. You have to go get a job. I have to keep working. I have to keep working. I don't know what else I'd do. This is my culture. This is my tribe. This is everything I think about. So, yeah, I could go play golf every day for the next six months. And then I'd probably be pretty damn bored and I'd probably want to come back. So, you know, being at Kraken, love the team, love the company, love Jesse.

Starting point is 00:05:03 Love our mission. So, like, being involved there, too, at, like, Kraken, you know, a huge, huge crypto company feels fun. I've done the startup side as well where I've been at Kraken for three years. You know, certainly like, oh, is there a new fun idea I could go to? I think that maybe someday, but I'm pretty happy where I am now. I think when I look at the space, like I didn't run this marathon just to get to where I am now. I want to see it all the way through. Like I want to see Bitcoin go from tiny nerdy group of hackers to mainstream adoption where it's like a Coca-Cola, you know? And so we're

Starting point is 00:05:36 on that precipice right now where we are entering into mainstream adoption. So I've been waiting for this moment the whole time. Yeah. So A, I'd be bored. B, I've waited for this moment. And this makes it a little bit more fun. Yeah, it'd be like just leaving the race at the finish line. Exactly, yeah, yeah. We're right there. We're right on the verge of mainstream adoption. So what do you think takes, I mean, you've obviously believed that was going to happen. So I can't ask you if you're surprised that we're here.

Starting point is 00:05:59 But what takes us, you know, we've done zero to one. Maybe we've done one to five. What takes us from five to a thousand? That's a great question. I mean, I'm not exactly sure what that catalyst might be. I do know that now is a very interesting time with COVID and the financial markets kind of being crushed by, you know, the Fed raising rates. Certainly with inflation, those high stressors, the war in Russia, Russia and Ukraine, all of these coming together, I think, erodes people's trust of the government, which ultimately Bitcoin is about developing a new thing that you trust. So if you trust the dollar completely, you probably aren't interested in

Starting point is 00:06:36 buying Bitcoin. But the more and more events that occur where people lose trust in their government, that means that there's more and more moments where people start to wake up or get orange peeled or go, wait a second, what if there's an alternative money that I could have? Yeah, and I think we had some unexpected examples of that of late. I mean, it's hard not to point to the Canadian truckers. Absolutely. That's a fantastic moment where money became politicized. And so Bitcoin's a permissionless money, and that's where the more and more events like that that occur, that leads more and more people to Bitcoin. Right, but I don't think anyone would have been surprised if that had happened in Russia.

Starting point is 00:07:12 But in Canada, that was the first time I think a lot of Americans who maybe even superficially believed were like, this could be us. Totally. It was a very surprising move by Trudeau. I was like, this feels very draconian, 1984-esque style. And I think that's a wake-up call for people. I think also, I mean, you sort of touched on, at least economically, the war in Ukraine. I mean, all of a sudden, the crypto industry kicked in a few tens of millions of dollars there in a matter of weeks or two, weeks. And everyone said everyone said wait this is actually also a faster way for fundraising or for sending money into a war zone where it's needed I had a friend and he's got his girlfriend who's a Ukrainian and she's

Starting point is 00:07:54 got I forget their currency it's a Havar or something or something like that and they she's like how do I get my money out now and I'm like I don't know how you get your money out but if And I'm like, I don't know how you get your money out. But if someone had Bitcoin, you could just walk across the border, leave Ukraine and start your life over somewhere else or protect your wealth. You don't have to trust the Ukrainian banks. So really, I think Bitcoin in these moments really shines as this permissionless money that can't be seized, can't be censored. And the monetary policy can't be changed. And then there was the flip side of that, which is that Russian citizens were effectively being punished for what their government did

Starting point is 00:08:27 and were completely cut off from banking systems themselves. Yeah, and I feel bad for the Russians. You know, they didn't necessarily vote Putin in. He's an authoritarian dictator. And so it's just unfortunate that they have to go through that. But yeah, if they had Bitcoin, they'd be able to access Bitcoin and be able to access the financial system. As a business for, I mean, Kraken, the industry in general, we're now talking about being

Starting point is 00:08:50 at the precipice of mainstream adoption, but also of actually having some clarity maybe for the first time in history. Are you guys hopeful with what you're seeing that this will make it easier, certainly for you to operate in the United States, but for innovation in general? Yeah, I think when we look at what the White House put together in terms of that kind of brief, it was the executive, they wanted to do a research. They basically said, hey, agencies, come back to us and tell us how we should think about Bitcoin. It looked pretty positive from what I saw.

Starting point is 00:09:18 It looked like they were pretty open and positive about Bitcoin being this new way for them to, this new asset that they don't view with fear anymore. Before, like years ago, it was all fearful sort of comments of, oh, it's illicit, use for illicit activities, money laundering. And this seemed much more permissive and open-minded. It's a very small industry still, right? I mean, we're in it, and so we're like deep down the rabbit hole and think that everybody

Starting point is 00:09:41 cares. But there really aren't that many big players. Do you find that it's competitive between you and Coinbase and the other sort of majors in the United States, or do you find that it's more of a collaborative effort? I think it's definitely collaborative. Look, we're all same team, same dream, and a rising tide raises all boats. I've got friends over at Coinbase, Gemini, and other exchanges. We all in the industry too we mean it work

Starting point is 00:10:05 at one place for forever so people hop around to different startups I mean I've been in the space almost 10 years and worked at five different companies so I think it's all same team same dream sort of yeah I mean I think 10 15% of Americans have exposure to this asset if it goes to 30 40 50 percent there's gonna be plenty for everyone I would imagine exactly yeah I think it's all it's all same team, same dream. In fact, I doubt that one platform would be able to like onboard at scale. We saw last bull run.

Starting point is 00:10:31 I know. It was like the CEOs of companies were doing customer service calls. Yeah, I mean servers are crashing. We can't hire support people fast enough. And these cycles are so fast too. You know, it'll be kind of quiet for a long time. Then all of a sudden we're in a bull run, and to spin up a hiring process for thousands of people

Starting point is 00:10:49 would be really, really tough. I mean, Kraken has 3,500 people. That's crazy. Yeah. I mean, I joined when Kraken was, I think, around 800, so it's pretty incredible to see how fast we grew. But it's funny, I've never been at a company with this sort of like going from 800 to a couple thousand,

Starting point is 00:11:04 where you see like, oh, there's a lot of infrastructure that has to be developed just to support the hiring. So to scale and build at Kraken's level and Coinbase's level requires like a whole different set of architecture. Do you find it surprising that some of the companies are scaling back now? I don't want to pick on Coinbase or Gemini, but obviously Gemini set a 10% reduction. Coinbase famously sent out their rescinding people's jobs after saying it wouldn't be rescinded. Which, by the way, happens everywhere all the time, and I don't see why it was such a big deal. For some reason, they got shit on for that. But, you know, I think it's probably healthy. I think there was a lot of, like, probably overextension in the bull run.

Starting point is 00:11:41 So it's not surprising at all that these companies are cutting a little bit of the, or maybe trimming a little bit of the fat. For you, is it easier to operate in a bear market? I like the bear market. It's less, you have less anxiety about going out and executing because you can catch your breath. Otherwise in a bull run, it's just like servers are on fire. Your competitor is doing this. You're wondering why we aren't scaling fast enough. And in a bear market, you just catch your breath, focus on your objectives, and it's a lot less distracting. Do you find it at all annoying that it's been so utterly correlated to the other markets?

Starting point is 00:12:12 Because I find it absolutely. The decoupling narrative. Decouple, hopefully, Bitcoin decouples from the S&P, starts to resemble more of a safe haven asset rather than just a higher beta equities play. But the funny thing is that it's a great narrative when you're sitting here in our little glass house in the United States and we have the luxury of the global reserve currency and stocks. If you're in Venezuela right now, you're not going,

Starting point is 00:12:37 wow, this is a terrible store of value or hedge against inflation. It's a little rough. I mean, Bitcoin's volatile. It's becoming a global store of value, but that takes time. And to get there is a lot of volatility. So it's certainly for, I think, emerging markets, it's a little bit different of a value prop. A lot of them use it for censorship-resistant transactions rather than storing wealth. Whereas folks like us, where else are you going to put your money? Gold, equities, real estate. I mean, you only truly own gold and Bitcoin. Those are bearer assets. So in a high inflation regime,

Starting point is 00:13:11 where are you going to put your wealth? And historically, equities were a great place to put your wealth when inflation is high. Well, equities have sold off a lot. So I think on a very short timeline, everything's kind of selling off. But on a longer timeline, I think Bitcoin is still a good inflation hedge. When I have guests who are from hedge funds or big investors, I always love to ask them, well, if someone handed, if you had nothing, someone handed you $5 million right now, what would you buy? And they're always like, don't know. Right now, I wouldn't buy stocks. They basically end up at bitcoin yeah what are you going to buy so um and then dan mccardle formerly at massari had a really great tweet storm where he

Starting point is 00:13:50 like walked through he's like look it is a good inflation adjusted hedge i mean bitcoin over the last couple of years has gone up you know from six thousand to thirty thousand yeah we're still five x we're still five x yeah people get i think a little bit i think the term is myopic where it's a little too focused on the near term. But yeah, Bitcoin is still, I would say, a great inflation edge. Well, I think there's a psychological phenomenon where your natural instinct is to compare to the all-time high. Like your portfolio, you could be up.

Starting point is 00:14:16 You could have started with $100,000, gone to $1,000,000. Now you have $400,000. You talk about how you're down $600,000 when you're clearly up from $100,000. People don't like to lose money. Loss aversion is a classic human psychological problem where investors would rather not lose money than trading off, okay, I'll lose money, but I'll make more money if I make higher risk bets. Most people like to choose a less risk, less return bet.

Starting point is 00:14:41 But if you were to go just allocate efficiently, if you were to be more risky, you'd make more money. But most people just are, they have a fear of losing money. And so they would rather not take that risk. Why do you think the narrative, when it's so obvious mathematically, is like, yes, we were at six, we're at 30. Why is the only narrative that we see on TV how far down we are? And by the way, why don't they mention that Facebook, Netflix, Snapchat? Of course. It doesn't drive clicks, doesn't drive interest. I think people are looking for that grabby headline of Bitcoin's down 50%

Starting point is 00:15:10 rather than, oh, a very boring headline would be Bitcoin's down, but so are your stocks too. Yeah, another boring headline would be Bitcoin's been trading super sideways and is doing absolutely nothing while everything burns. Just chopping there at 30. It's just chopping there at 30 for a long time. But it really does feel like maybe it's not the decoupling we wanted. Right.

Starting point is 00:15:30 Yeah. But boring when everything else is exciting maybe is a decoupling sort of in and of itself. I think a little more worrisome, I don't really care about the price action short term, but a little bit more worrisome is volume dropping off. Volume has plummeted. That's not good for crypto businesses and also not good for liquidity. If volume drops, we could have more volatility. If volume drops and then some size starts to move back in, things could get a little

Starting point is 00:15:57 bit more choppy. Yeah, I mean, we love to talk about how coins don't move and how more people are holding for a longer period of time, but that really does decrease the float. So the active supply, to your point, is there's less active supply. That's great long term, but short term, that means when somebody comes back in,

Starting point is 00:16:16 price is very, very easy to move. It's all supply and demand. And when we look at the market currently, if you've got volume drying up, that means less and less counterparties are willing to trade with each other, which means if someone really starts to do market moving trades, it could get more choppy and more volatile. And implied volatility is also really low, too. So investors are pricing in low volatility. Basically, investors have priced in low volatility, which I find very surprising. Yeah, considering the whole reason that we can't get an ETF and that people have been avoiding Bitcoin is because we're too volatile and now we're far less volatile than

Starting point is 00:16:49 tech stocks. Yeah, I mean, I think Bitcoin's implied vol is at like 60, which like is pretty low for Bitcoin. So it's usually 80. And with the macro markets with a war going on and inflation and all this stuff, I find it pretty wild. So is there anything at the moment that you're super excited about still that you're super excited about still that you're looking forward to maybe into the end of the year or next year? Yeah, I think, you know, I've been in the space a long time.

Starting point is 00:17:12 I think some Bitcoin DeFi or Bitcoin DeFi projects are kind of interesting. Bitcoin can't do a lot of what these other smart contract platforms can do. I'm not trying to say it's trying to compete. Which is fine. It's totally fine. But we can bring some of those things back to Bitcoin.

Starting point is 00:17:25 Lightning is a good example of that. Lightning is a smart contract. Lightning, for example, is adding Taro. Taro is an ability to put different assets onto the Lightning network. That's pretty cool. You've also got DLCs, discrete law contracts. They brought options onto the Bitcoin blockchain

Starting point is 00:17:40 with Atomic Finance. And then you've got Stacks, which is a little bit... Stacks is super cool. Love Moon even and that team. And they're, you know, with Stacks you can do a lot more things. Now, of course it introduces a token, but it's kind of like a Bitcoin gas token, if you will. It's hard to come up with an analogy that makes sense with it because it's got a couple ways it's tied to Bitcoin, but it's unique and it has its own token. So I think there's a lot of really cool things there between like those three pieces of to where we're going to see a lot more things

Starting point is 00:18:06 built on top of Bitcoin over the next year. I'm excited to see it happen, man. Always a pleasure to sit down with you. Thank you so much for taking the time again. I won't copy yours, but I'm definitely going to go get some custom. I highly recommend it.

The Wolf Of All Streets - Crypto OG Dan Held Talks About Bitcoin

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