Crypto Gathering 2023: Is It Game On? How Hedge Funds Are Positioning

25:32What that shows is that the CME is largely used by traditional financial firms. It's not really used by crypto natives. Crypto natives can trade on Binance or Coinbase or wherever else. It's the non-crypto natives that trade on the CME and a huge spike in trading and open interest on the BlackRock news. You also saw the Grayscale premium or discount narrow quite a bit, right? And why? It's because if you have money sitting in a brokerage account, you can't immediately get it to Coinbase or someplace to buy Bitcoin or ETH, but you can immediately buy a security like Grayscale. Obviously, also because of the fact that Grayscale may be able to convert to an ETF eventually.

26:04But also just the flows we're seeing in stocks like Coinbase, stocks like Marathon and Riot, the miners, stocks like Grayscale, huge institutional flows going into the stocks that they can buy. And you look at those together, and that is a prelude to money eventually working its way directly back into this ecosystem via hedge funds, via direct buys from family offices, et cetera. So this was real. This was not the traditional trope of, oh, the institutions are coming with no data behind it. I mean, there was real flows coming into this market as a result of that. But Jeff, really important comments.

26:41I should say we're running an hour today, so we all have plenty of time to give the kind of depth that you just gave there, Jeff, some very important points you just made. Chris, over to you, your thoughts. If you could respond to Jeff, because I think Jeff made some great points there about the general structure of this market. What's happening with institutional adoption in terms of BlackRock, Citadel, and the EDX exchange? Yeah, as a quant, Jeff's 100 % right in his analysis of there being literally no correlation I would unpack and separate certain macro factors from stocks as being one input to macro, but there's no correlation to interest rates, no meaningful correlation interest rates.

27:22There's no correlation to business cycle. There's no correlation to revenues, cost, HR, etc. So that's a really good point for all investors to think about this as an asset class because we have essentially these cyclical cycles that have been part of essentially what I would call macro or secular cycle one and then a bear cycle two. And we probably are kicking off another secular bull cycle here. The auto harmonics with the charts, as you pointed out on the tech T.A. Be smash on Tuesday was pretty awesome. It does match, but perhaps for different reasons. And I also think that the institutional side that we've all been hearing, both Jeff, Richard, myself have been hearing that since probably before we even launched the funds, because that's why we launched them six years ago.

28:16I think it's definitely picked up in conversations, but I want to make the point that U.S. investors, specifically, they're on and off ramps have been severely impaired. So as Jeff rightly pointed out, what we're seeing here with the stocks that have crypto correlated performance, unlike 2020 and 2021 when they greatly lagged the crypto, the price of crypto assets themselves, they're now way ahead of it. Most of those mining stocks are up 300%, 400%. And now we can see that flip from a lag to a lead. And as Jeff again rightly pointed out, we as hedge fund managers need to recognize patterns, evolve quickly, correlations change, we change and adapt to all the new data.

29:00So it's fascinating as a human being, as a historian, as an investor. And I want to point out that this is still not too late to convert fiat into digital assets. What we do know about fiat is that it is always a race to zero since 71 down 98 % DXY. And then, by the way, Jeff, you've left this little piece out that I think is also a confirmation of bull. How many currencies globally has Bitcoin made a new high in year-to-date? It's almost 10. So I think all of those factors lead into a weighting of the evidence. And I'll quickly say, what's the bear case? Because I always love playing both sides.

29:41The bear case may perhaps be the most long-term bullish case because the structure and fractals of the market would somewhat look similar to 19, where you get an 80%, 100 % rise, and then a truncated double bottom, where figure you retest low 20s. And then there's no other trade but to be max all in. So if it starts running away here, I think people will get on the FOMO buy side, which right now we've got a very neutral sentiment that has flipped from focusing on every call being about FTX, as I'm sure Richard and Jeff have discussed, to, oh, my God, how do I place capital? What banks are you guys on that I can wire money to?

30:24So I do think that that collectively paints a strong case for the bull side. But intermediate term, we've washed off overbought conditions. It does look real pretty right here. It was chopping people up at the high end of the range, which usually is a precursor to another breakout. Yeah, and by the way, I should point out, as you pointed out to me at the beginning of the show off camera, DXY below 100 today, just before we went live this morning. Richard Galvin, we've heard the long, big picture thesis from both Jeff and Chris. What are your thoughts? Yeah, and I should caveat this with, you know, we're a venture and long-only investor.

31:03So, you know, I'm biased long deliberately. That's our fund strategy. So, you know, I'm a bullish guy by nature on this disruptive technology. I think, you know, the points around the correlation breaking down is something that, you know, we've had conviction on over the last few years. We think this asset class is, you know, its norm is not to be correlated to most other things that happen in the world. And we think 2022 was the abnormality, not a new new. And, you know, so I'm not surprised that it's, you know, it's reverted back to where it started, which is, you know, hype, uncorrelated, returns basically to almost everything.

31:41And you've got to understand that's in and of itself putting aside all other factors to do with it is a valuable piece in an investing framework when you can have an asset that has such, you know, such low correlations to everything else. We think in terms of the market construct, you know, if you look for a positive that came out of 2022, as we went into 2023, you effectively cleaned up the investor base to those that had real conviction and those that effectively had the strongest hands to hold this asset class through the bottom of the cycle. And that became clear, I would agree with Geoff, in those last two weeks of December was quite an incredible time on market.

32:16There was just forced selling. There's only a few people kind of standing in front of the way of the sellers. It looked a very abnormal market. We went max long into that period. We didn't expect the payback to be in the first couple of weeks of January, but more than happy to take it. But that did seem like an abnormal, that did seem like the kind of key capitulation event around this sort of cycle. So we think the market's relatively clean at the moment in terms of, you know, the owners that want to own this asset class are here for the longer term. We haven't seen the spikes up in kind of hop money or leverage or any of those sorts of things as real people that want to own this real asset.

32:53that I think that what takes us out of this journey and what gets us excited over the next few years is the asset class needs to earn a re-rating. And it earns a re-rating not just on flows of capital or FOMO or whatever it might be. It earns a re-rating on continuing to exist, continuing to innovate and actually continue to attract users and have people paying fees and all those sorts of things. And I think that's one of the encouraging things when we talk to investors through the first half of this year is there's a realisation that it's not going away. There are still users. While fee levels are down or turnover is lower or whatever it may be is lower, it's still quantums above where it was only a few years ago.

33:33So we're getting that step change. It's through a cycle and it's an extremely volatile cycle, but it's a cycle that's got an upward trajectory in terms of user base and fundamentals. And at the end of the day, fundamentals demand that prices move if they continue to improve long enough. And we think we're in that kind of cycle where we're starting to attract investors back because, you know, the rumors of its death are greatly exaggerated. And we're starting to see activity sort of find levels and build upon bases now. Yeah, I think all three of you have just articulated the bull case in the view that you guys see in a very, I think, specific and clear way that talks about the bigger picture of everything that's happening right now.

34:10But since we're having this conversation here in real time, let's take this party right to what Bloomberg has just updated on their website in the last 15 minutes or so since we've been live. The reason I was being so cagey about what I was saying earlier about Ripple is I didn't want to mischaracterize it. I was looking at the real-time flow from our friends over at Blockworks who were analyzing the court ruling on the prong-by-prong on the Howey test. And it actually sounded to me very unfavorable. Meanwhile, I'm looking at the XRP token spiking in price. This is from Bloomberg, and I think this characterizes what's happening pretty well to get a sense of it, and I get a response from you guys.

34:45A federal judge ruled that Ripple Labs token is a security when sold to institutional investors but not the general public, granting a partial win to the SEC in a long-awaited decision that could help determine the future of crypto regulation. U.S. Judge Annalisa Torres in New York on Thursday said that the crypto firm's sales of the XRP token to sophisticated investors met the test for an investment contract under federal securities laws. So this is an interesting, well, I would say ripple in the case, wrinkle in the case, trying to get a sense of what this means. I know that this is all real time here as we come across.

35:26But it is interesting to see that this ruling appears, at least in terms of the Bloomberg characterization, to be asserting that Ripple is a security when sold to institutional investors, but not to the general public, according to this recent lead rewritten by Bloomberg here in the last 15 minutes. Do you guys have any thoughts on this? I know this is very new. Ash, that's bass-ackwards, number one, because QIBs don't typically have to comply with accredited and retail investor-type limitations, right? So if you're a qualified institutional purchaser, you probably know what you're getting into.

36:03And then I don't mind the court's specification of the sale of it could be construed or considered a security, but the asset itself is not because those are two different activities, right? Yes. But I do like that delineation. And I think, as Jeff pointed out, the ruling opens up really a lot of positive for a lot of assets that people aren't even able to separate the lab from the asset itself. So I think either way, it's a positive. But as a QIP, I probably wouldn't like being told that. Anyone else have any reaction? I know this is new and breaking.

36:43Well, no, I mean, just the obvious, right, which is that you can have something that is not a security, but the sale of it itself is a security offer, right? And I think, I mean, you go back to the Howey test, the whole point, like oranges themselves were not securities, but the sale of the orange juice features was, right? So I think that that's a huge differentiation. And again, it may, when we go back to what I said about nothing being illegal about being a security, but it matters if you are an issuer of a security. Well, there's no more XRP tokens that are ever going to be issued. So you can say, okay, here's a fine or whatever for issuing a securities offering, but if the XRP token itself is not viewed as a security, that's a huge win for the platforms and those who are now able to list or relist the XRP token.

37:34So there's nuance. The legal jargon gets boring. But, you know, again, the big win is for, you know, if you notice when I said all the things that I think mattered and should react positively to this news, it was all tokens and platforms that already existed. It's not great news necessarily for a US issuer who is thinking about issuing a token, because it doesn't change anything for them. You still may have to figure out if you're a security or not, and go through a securities offering to issue new tokens. But for existing tokens already out there, your Solana's, your Maddox, your Cardano's, and your existing platforms that are already trading the stuff like your Coinbase's, it's a huge win for them.

38:10It's really interesting. And you bring up an important point here, which is it almost sets up this path to sort sort of legitimize if you essentially pay a fine. I believe it was EOS that did that, paid a fine for the way that the token was issued. But then the underlying token itself is not a security. I know this is complicated and nuanced, and we're parsing this in real time. But Jeff, that really is an important point about a potential path forward for the space, and quite well said. Richard Galvin, thoughts? Yeah, I think two things there. The sale to institutional investors or what a terminology it is, is correct in which part of the globe you're in.

38:52So sophisticated institutional investors, it's a pretty well-worn path. So if you, and we're obviously coming at this straight off the headlines, but if you're in a world where that becomes a more regulated security-like construct, that's something that everyone on this call is used to dealing with and there's millions of lawyers literally globally that go through security sales to institutional investors or some form of sales to institutional investors day in, day out. And that's a well-trodden path that the space can adopt and move to and it's largely what most people do today anyway. I think the key point to come out of that is the point Jeff made earlier and why would be my rationale for why Ripple's obviously responded so positively to this news.

39:41is it's about access to actually trade and the liquidity of Ripple. And it feels like from listening to your description there and looking at the headline, it feels like that judgment, you know, does do what Jeff first mentioned in terms of allowing Ripple to be traded again on exchanges and basically lifting that access. And, you know, if you have security A and security B and they're exactly the same, but security B has, you know, much better liquidity than security A, security B should trade at a, will trade at a premium. And that's tried and true mathematically proven, right? And so today we're basically seeing with this judgment, and it looks like that is the case, that access to XRP is going to be better today than it was yesterday, and liquidity should increase.

40:24And so all else being equal, you see a price reaction. Yeah, I should say we've got a couple hundred people watching us live on YouTube right now. Put down your questions in the chat. We'll ask the best ones. Remember, Real Vision members take priority. If you're not a Real Vision member yet, I've got great news for you. Go to realvision.com forward slash crypto to sign up. It's free and will remain so. Remember, the crypto gathering campaign is taking place all week. We've got more exciting panels to come. So please sign up to stay up to date. And we're going to be asking your questions later in the show.

40:58You know, Jeff, you mentioned earlier there the BlackRock response. And I thought what was really interesting about the BlackRock ETF filing was the comments that I think Larry Fink gave on Fox Business with Charlie Gasparino, where he essentially made the case for Bitcoin, I thought, in a framework that sounded very familiar and incredibly appealing to Bitcoiners. This idea of Larry Fink, this titan of traditional finance, going on a mainstream business show and talking about Bitcoin as an international asset, as an electronic form of gold. I thought that was an incredibly interesting position for him to take.

41:34We've heard lots of CEOs in the asset management space, in the banking space, talk about asset tokenization in the dollarized terms. But this idea of thinking of Bitcoin as an asset, as a store value off the grid, as an alternative to the US dollar coming from Mr. Fink, I thought was quite compelling. Yeah. And, you know, I think, first of all, anybody who has been in finance, especially traditional finance, or has been an investor has a tremendous amount of respect for Larry Fink and for BlackRock. So obviously, when he's going to speak, you want to listen. If you actually listen to the whole thing he said, though, it's worth a listen, I guess, because of who it was.

42:13But honestly, it wasn't very insightful. He fumbled between the term crypto and Bitcoin a few times, often conflated tokenized assets versus Bitcoin and more equity and utility like assets. And quite frankly, that's probably to be expected. He's the CEO of a$100 billion company, which oversees$9 trillion in assets. I wouldn't expect him to be the world's foremost expert on all things blockchain. And that's why I think what was more interesting than that was the 100-page report from Bank of America, the 30-page report from Citi, all these other research reports coming out of the big bulge brackets, where it actually did a much better job of differentiating between Bitcoin and Ethereum and RWAs and real-world assets, tokenized real-world assets, as well as DeFi and things like that.

42:57So I think, yes, Larry Fink, it's himself. That's a huge win for Bitcoin and for crypto in general because it was him. But I also think underneath the surface, there was a lot more going on. And specific to Bitcoin, which I think really was what Larry Fink's focus was meant to be on, because that's specifically the ETF that they're filing is a Bitcoin ETF. You have to go back to like, I mean, I put in one of our recent articles that I wrote talking about like, go back to some of the things that people said about Bitcoin back in like 2019, for example. I remember, and I wrote these specifically, this is what Edward Jones investment strategist said, that we don't like the specifics of Bitcoin.

43:31And we really think the price is moving around purely on speculation. When you think about Bitcoin, you're looking to buy something that you hope to sell for more. We would not advise investing in it. Literally a week later, there was the CIO of Aliens who said the same thing. As an institutional investor, you could not actually explain a position in Bitcoin. The valuation is not possible. They have no income. It's not an investment. And then immediately after, it was, I forget who wrote it, but another one was like, the value of crypto is in the eye of the beholder. It's unsuitable for investing.

44:00So the biggest takeaway was not necessarily his words. It's just that in just four years, we went from this being an untouchable asset in the minds of institutional investors and the big asset managers, to all of a sudden, everyone's trying to figure out who can be first, or at least not last, when it comes to offering these projects. products. And I think that's probably the biggest thing here, that if you are an asset manager in any way, shape or form right now, you have a decision to make. Either you find a way to offer these products to your clients because they want it, or you start sending them to someone else who is.

44:35Yeah, I think you hit the nail on the head, Jeff, but also let me add, there's a big differential between Larry Fink's reaction and why he's reacting, right? It's first off, that $9 trillion isn't his money, it's pension fund, retirement account, mostly 401k money, right? So totally different than Bill Miller saying, I have XYZ amount of Bitcoin since the last five plus years, right? So that's a very different commitment as an investor and as a human being. So smart investors like Bill Miller, who invests their money alongside their clients, like the three of us on this call do as well, make a move early, take the risk and understand it.

45:15This is a reaction because, but still positive, right? A reaction because he's getting so much demand from his clients that he will lose business if he doesn't create product to sell to them. Like, that is why all of these listings have occurred for no other reason, right? It's not like they want to have, you know, the G7 go away or G20 go away. It's only client demand that's driving that, which is fantastic. Secondarily, what I like is it will offset some of the negative convexity and adverse selection that the futures ETFs have. So you have all of these kind of really retail, destructive, constructed ETFs, ETNs, commodity ETNs, VIX ETNs are a good corollary or comparison that are just not healthy.

46:00You pull it, but oh, you look at that chart. You look at any chart of the so-called exchange traded products that have futures in it. they cost 15 % to 20 % just to own the thing. That's not a safe, productive vehicle for retail investors. So this spot ETF, in my opinion, a constructive well will be. And then as Richard well knows, the US is the only one without ETPs and ETFs. It's all over Europe and Canada and Asia. So I don't think it's going to be materially impactful for any other reason than there. like yeah yeah i think that's i think that's a key point that the you know we we look at the the blackrock filing and subsequent filings as more of a more of a regulatory signal as opposed to a you know a game changer in terms of flows so i think that the marginal benefit in terms of flows from you know bitcoin etf in the u.s is obviously much smaller now than it was back in say 2017 when Winklevoss twins had their sort of first run at it you know access to bitcoin access to crypto has come ahead in leaps and bounds now it's still you know it's it's still a step forward it's still you know it brings uh it brings uh you know an easy way to an easy way to trade an asset within a current construct of your brokerage accounts and that sort of stuff to the world's biggest market but I think the incremental benefit of that is you know less than it used to be would have been three or four years ago.

47:27And from a global perspective, it's very US-centric. I think for us, the bigger reaction is it's the signal of, well, the regulatory scorched earth thesis is probably a little overblown. It's not so much around killing the asset class as opposed to determining who are the actors that are effectively controlling or trading or putting products around it. And I think for us, an interesting data point that we sort of saw coming into the end of last year. And I think it was literally just a week after the collapse of FTX was an article David Solomon, the CEO of Goldman, wrote in the Wall Street Journal where he sort of did a, which was an interesting time to put it out in the press back then when it was obviously calamity for the industry around the FTX collapse and the like.

48:11We actually put forward that they still believed in the technology and the benefits that provided and the innovation that was possible there. their push was, but it just needed to be in the hands of, you know, traditional regulated institutions like themselves. And that's kind of the roadmap, I guess, we've seen, particularly in the US, play out since he sort of put that article in. We have seen a swing towards these regulated, I guess, institutions that are large, have that relationship with regulators going over decades, have that sort of back and forth with regulators that I guess the regulators sort of know and trust, starting to take a bigger, starting to take a bigger foot forward into the space.

48:51And it's interesting, sort of kind of all come from the collapse of FTX, which, you know, in a few years ago, or in another dimension, could have basically blown up all that interest in the technology, but it hasn't, right? It's basically just changed the field of players that are looking to take the lead in it. Yeah. Well, what have large financial institutions ever voluntarily interrupted themselves? Well, look, growth is hard. We've all worked in financial institutions before. There's not a lot of areas for financial institutions to find growth. It's generally kind of low growth, grind, compressed fees, all those sorts of things, right?

49:30And it's just been a grind for decades. So new potential kind of asset classes, new markets, a few and far between in the financial services industry. So it's no surprise that big institutions want to get involved and see how they can sort of extend their services into it. You've seen it plenty of times before, though. I mean, don't go back seven years ago when Betterment and Wealthfront started the robo-advising. If you go back to the initial headlines there, it was financial advisors are dead because robo-investing is going to take over. And instead, three years later, what happened is every big financial advisor from Morgan Stanley to Merrill to you name it, They just started to create their own robo-advising platforms that, you know, we are still going to offer you our financial advisory service, but here's also a piece of it, which is now robo-investing on behalf of you, right?

50:21So it's rare that new technologies completely displace the financial institutions. They do disrupt, but they don't displace. The big firms just find a way to get their share of the pie, and that's what we're seeing right now. And I would actually push back a little bit on what Richard and Chris said in terms of I actually do think this BlackRock ETF, if it gets approved, will have a meaningful effect on flows for the sole reason that investors and people in general are just inherently lazy. When you can do something within the ecosystem that you're already doing, it's just easier. For example, I was never a huge gamer.

50:57I would never just seek out games. But once I got an iPhone and the games were right there, it was easy. And Angry Birds ended up on my phone. Similarly, you go back and look at like, you know, internet browsers, right? The initial ones like Netscape and Mozilla and Firefox. Well, who's winning it now? It's Google with Chrome and Safari from Apple because you're already in those ecosystems. There's a ton of investors out there that are already in the brokerage and bank system, which includes, obviously, a lot of BlackRock products. It's just easier. So even though Chris and Richard both said, and it's true, that it's not hard to get access to Bitcoin right now across the globe, it's still an extra step or two.

51:35It's still an extra workflow to have to open up a Coinbase account or open up a Binance account or to have a self-hosted wallet. But that's just for the lazier or just maybe the better word is just those who prefer an easy workflow, it does matter. It is going to be a lot easier for traditional. I mean, take our fund, for example. We trade across crypto native platforms like your Binances and Coinbases. We trade on the CME. We trade on brokerage accounts. We do it all. It's still torture moving money back and forth. There's still no great easy way to do everything in one place. But as that democratization happens, as you start to be able to do everything in one place, your commodities, your stocks, your bonds, your crypto, that's a huge deal.

52:21And that does change workflows. Totally agree. And the UI, UX in the space right now is terrible for traditional users. And by the way, also not just ease of use, but also to your point, Jeff, the trust factor. I think there are a lot of people who are interested in these assets, but are very skeptical, hesitant, afraid, whatever word you want to choose to go in and set up a self-hosted wallet. I think it's just an additional barrier to entry. You know, it's fascinating, and I love having conversations like this. You guys are all broadly bullish, but slightly different shades of view in terms of this perspective on the space.

52:53And I think it makes for an incredible conversation. I wanted to bring in some of our questions coming in from YouTube. The first one comes to us from JP Stanley on YouTube. This is a question for Chris, but I'm going to ask it of all of you. If you could only have one, Solana or Polygon? Very specific question, obviously. There's no one ring to rule them all. So I'll do bull bear. Chris, can you get that on a T-shirt? Yes. Stand by. I will send it around to everybody. There's got to be a Lord of the Rings one with it already. But, you know, there are just pros and cons to each. I own both, full disclosure.

53:32Fund owns both. Mark and Bakes both. Stakes both. So full disclosure there. I was hypercritical of the hype cycle of Solana. I didn't like some of the VC pump, B dump marketing crap that was going on. And I also didn't like the consensus mechanism, which is called proof of history. That being said, what I can say of the dev team that the GitHub updates and them holding was super alpha. and it is what people who can survive the space and evolve, despite maybe making previous mistakes, have done. And then I believe that their recent hackathon had over 10 ,000, 7 ,000, some insane amount of hackers join.

54:20So I think that those are monster positive coming out of a 242 price high, I think was a price high somewhere in that range down to, down 95 %-ish. So I think Solana has had survivorship alpha, essentially, and has improved and done good deals, done good things with the chain. The inflation rate has narrowed. So again, long both. I haven't digested today's MADEC to Paul move yet. So I'll reserve comments on that. But there are just pros and cons. And those are different assets and different use cases and different theses to own them. They're both L1s and that's really all they have in common, in my opinion, and the proof of stake side.

55:05Here, they're basically equal weight in my eyes. Jeff, Richard, any thoughts on Polygon versus Vose's Solana? Yeah, we've been a long-term holder of Solana since kind of the sub-dollar level, since back in 2020. So, and that remains a core part of our long-only portfolio. We think it's pretty unique tech. We think it's journey over the last sort of year or two is kind of a microcosm of crypto in general, right? And, you know, we think the room of its death are greatly exaggerated as well. And when you look at activity and, you know, people still building on that chain, and we've been active on the VC side as well, backing a number of projects there as well.

55:51We think it's one of the sort of core assets that provides really differentiated kind of user experience and capabilities to build on that are really unique for crypto. And so we think it's got a long term future in the space. Jeff, you want to weigh it in there? Well, I'm very curious what investment mandate this question comes from that only allows you to own one. But full disclosure, ARCA does own both right now, although Solana is more of a long-term thesis, whereas Matic is more of a short-term trade just around some of the technicals and oversold conditions. But I guess the better way to think about it is, in general, when you do thematic investing, which is what we do, you try to figure out first what is the theme, what is the investment thesis, and then you try to figure out the best way to express that.

56:37So, for instance, over the last couple of years, there's been a lot of themes. First was just Bitcoin and blockchain. Then it was stable coins. Then it was DeFi. Then it was NFTs. You could say AI and real world assets are in there thematically now as well. And you can obviously go deeper on all those as well. Like within DeFi, there's plenty of subcategories as well. So within those themes, you generally want to own the number one leader in those categories. And then you probably want to own one or two of the challengers. Because if you were right on the thesis, chances are you're going to get more bang for your buck on the second or third or fifth place who gains market share.

57:11than you will on number one. For example, like both McDonald's and Burger King succeeded. And even though McDonald's was a clear number one over Burger King, at certain parts in the investment cycle, Burger King would have been a better investment because they gained market share on McDonald's over time, right? Or Pepsi, Coke, same kind of thing. So if you're thinking about layer ones, Ethereum is clearly the number one right now. It's$235 billion in market cap. It does somewhere about 65 % to 70 % of all of the transactions of blockchain. Well, Solana and Matic are both at about$7 billion to$7 to$9 billion right now.

57:44So your question is, if you believe there is a future where layer one blockchains have a lot of economic activity happening on them, do you believe that somebody is going to eat into Ethereum's market share? Or said another way, should they be less than 5 % of the market cap? I think Solana is a pretty safe bet to certainly gain market share versus Ethereum over time because they are number two in just about every category right now, from DeFi to NFTs, maybe not in stablecoins. I think that's probably Tron. But to me, that's just a safe bet on convergence, that if you're right on the overall theme that layer one blockchains are going to grow and continue to be a very big part of financial and economic growth, you want to own Ethereum and you want to own probably both Solana and Matic in terms of that conversion.

58:37Richard, any thoughts? Yeah, they're partly competing over a pie of smart contract compute capacity and demand. But also something like Solana has the ability to expand that as well, right? So we don't have the thesis around, you know, we're buying Matic or Solana or Avalanche or whatever it may be because they're an ETH killer. And, you know, we'd contest that thesis. We actually think through something like Solana and the differentiation it's got over Ethereum can actually expand the whole space as opposed to fighting over just the one sort of market. Now, of course, there will be some competition where they cross over.

59:11But we take the same sort of view to Jeff in terms of owning a number of players across the layer one sort of space because we think that they can operate and sort of find different use cases and specialize in different use cases and help expand the overall, I guess, user base and the overall capability of blockchain technology together as opposed to just fighting over the one sort of thing. Yeah, what's not really occurred on those two assets, which I think they both can learn from the path on EVM and Ethereum, is L2s are 80%, 90 % focused on Ethereum now. Well, what if 10 % of that shifts to the rest of the L1s?

59:55Because Solana is actually outperforming most of the basket of L1s year to date, probably because it got so extreme on the downside. But I think like looking at it from a very narrow pathway is not going to yield the best result for any investor because you've got no comparison in terms of the quality of the asset between Matic, Solana versus Ethereum because Ethereum 100 % issued, right? It went through its proof of stake move in the middle of a giant bear market and has proven itself to be, I hate using this term too many times, but ultrasound money. It's got a real yield of near seven, and there's no asset on the planet that has that.

1:00:36So it is special, and nothing can really touch specialness, just like Bitcoin in that same manner, just for different reasons. So the ability to earn market share, developer eyes, et cetera, is there for smaller assets that aren't going to maybe get there as ultrasound money in the next two to three years. Well, nothing can touch the specialness of this panel. This has been an incredible conversation. But I want to end on one final question, because this is kind of a generalization of the prior question. And I really want to get this from each of you. The question comes to us from Paul from the Real Vision website.

1:01:10Put on your retail investor caps and tell us how you would position yourselves right now. Richard Galvin, let's start with you. Yeah, look, I think the crypto is a cyclical asset and it's a volatile asset. And I think one of the things that I've done through both investing my own money and then managing our funds as well is to try and buy assets in the space that are real that can live through that cycle. You don't want to get the investment decision right of, you know, I think blockchain technology is an incredible investment opportunity, but then end up owning the two or three assets that don't make it through a cycle.

1:01:48and you might have been writing 10 years' time, but you didn't make it through because the projects you owned or the assets you owned kind of petered out before they kind of came to fruition and the space continued to grow. So, yeah, we spend all our time trying to buy real assets or real projects that can deliver sort of longer-term user growth and fee growth or whatever it may be that they're looking to drive and hold those. And they're the sort of assets you can hold through a cycle and you need to be conscious that you're going to get cyclical price outcomes in crypto. own. So you need to own things that are real, that are tangible, that you can hold conviction through the dark days, like through 2022, and then hopefully benefit from as they start to sort of grow and sort of deliver on their promises as the cycle starts to turn.

1:02:32Chris Sullivan, over to you. I'm perhaps not as rosy as Richard. I would ask yourself one primary question. Is my goal of investing to have more fiat? And if so, develop a trading plan and an investment thesis around that. And if it is not that, then it is back to how wealth is actually built. The wealthiest people on the planet, and the strategy will work for perpetuity, is whoever gets fiat into assets fastest wins. That is not an arguable thing. So to me, I think it's more about how you want to invest in the space. Are you going to take a trade or YOLO assessment of it? Or are you going to diversify your asset base and have it be a meaningful part of it as you're converting fiat to real estate or stocks and bonds or precious metals and commodities?

1:03:29If you're going to add crypto to that, then the thesis should be more in line with what Richard said on quality assets. And I definitely know Jeff and his team are one of the best on the planet at that because there are incredibly high quality assets that already exist that have infrastructure that can replace or augment both government and Wall Street and can solve real problems for very, very, very little cost. So I take that view versus seeking more fiat. Jeff Dorman, same question to you. If you put on your retail investor hat, what's your allocation look like? Yeah, I mean, I think first and foremost, It's really important to separate your retail investing versus your retail trading.

1:04:10Trading is a lot of fun. You learn a lot from trading. There's very few people who get rich trading. You get rich investing and investing for a long period of time. And to Chris's point, you want to have as much of your assets invested as possible at all times, whether that be equities or crypto or something else. So even if you like to trade, separate your piece of money that you're trading for fun versus the investing. From the investing side, it's really simple, right? I mean, have a thesis. Have a thesis on what part of this industry you think is actually going to win and diversify your bets within those theses, right?

1:04:47If you believe in layer ones, own one or two of them. If you believe in DeFi, own one or two of them. If you believe in Web3 or NFTs, et cetera. I mean, spread your bets around your long-term theses and for the most part, just hold them. And then on the trading side, get smarter, get better, whip things around, try to learn a little bit about technical trading, learn a little bit about which news and macro factors affect markets. Learn from the trading, but don't expect to get rich on the trading. You get rich by finding your themes and your good tokens and the ones that are still going to be around in five or 10 years.

1:05:19And just one piece of advice, don't ever say, it's already up, I'm not going to buy. Take something that is down, say, 90%. If it goes up 100%, it's still down 80%. If you start at 100 % and it's down 90 % to 10 % and it goes from 10 % to 20%, you didn't miss it. It's still down 80 % from where it was. So definitely, don't prevent the real long-term 300%, 1 ,000 % winners because you got caught thinking you missed a trade. That's a really good point because eventually, we probably won't be counting in fiat or we'll be counting in different fiat than we're counting in now. But I do want to augment a little of my answer, Ash, because I think despite the UI UX difficulty, every retail investor should commit to Ledger and MetaMask and commit to learning what it's like to be your own bank.

1:06:12The freedom that this space offers is to be a sovereign. Unless you learn how to do that, you're not even embracing what the wealth building or diversification attributes could even provide you. So I think I'd maybe change my answer to learn how to benefit yourself with the technology of the space first, and then worry about what you're investing in second. Yeah, really important distinction, self-sovereignty, a different point from the upside potential of the underlying asset valuations themselves. Guys, this has been a spectacular conversation to have three hedge fund managers here on the same panel to have this talk.

1:06:48Really incredible. And thank you both. Thank you all, I should say, for helping parse through what was happening with Ripple in real time. Just an incredible conversation. I wish we had three hours for this, but there is a solution. We're going to have to have you all back one-on-one to have this conversation in more depth with each one of you. But thank you so much. Really a great conversation. Thanks for having me, Ash. Thanks, Ash. And thank you, Richard and Chris. Thanks, gents. Thanks, guys. That's it for now, but there's more to come. Go to realvision.com forward slash crypto gathering for all sessions.

1:07:20The conversation continues on Twitter spaces at 5 p.m. Eastern time today with ARCA CEO Rain Steinberg. Tomorrow is the final day of our campaign. Raoul will close it out with OSF. You don't want to miss that one. See you at 9 a.m. Pacific, noon Eastern and 5 p.m. London time tomorrow. Thanks for watching, everybody.

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