The Macro/Crypto Nexus with Dan Tapiero

33:55So it's no longer just about the price of those two leading ones and some of the other cryptocurrencies. So I think that's also attracting institutional people who are understanding that this is a once in a generation type of technology. Yeah, I think if we go back to whenever it was, 2018 or 19, when we had our first conversation on Real Vision about this, the big difference between then and now was the applications layers being built. Big time. Yep. And they get that. They see that. And this is closer to, you know, the last people in will be when it becomes ubiquitous and everybody has it on their iPhone.

34:41but it's this application layer, the consumerization and the integration of blockchain technology that's big. Yeah. And it's not through what we expected. I mean, you see all these name bright ends coming into, you know, incorporate blockchain into their business models. And of course, I know you saw this a few weeks ago. The California DMV is putting licenses and card deed, title deed on the Tezos blockchain. Now, I don't know why they've specifically chosen Tezos, but the point is you have a non-economic, non-capitalist entity basically at the cutting edge. I mean, this is, I think, a fantastic use case.

35:26And so - The Argentinian airline with ticketing. Right. It's something I've been talking about and suddenly there it is. Exactly. So I think you're getting adoption through ways that we hadn't anticipated. Because once you have a digital wallet, it's just a short, quick step to understanding that Bitcoin is collateral. Ethereum is programmable money. You know, that there are different things that you can hold in this digital wallet, right? It doesn't just have to be, you know, your license, right? your license that sits on a blockchain. So I would also say one more thing, because I want to just mention my trip, because you asked me about, has the interest been broadening?

36:13I mean, the Middle East is really on fire. I'm hearing the same from everybody. Tell me about it. Well, look, they get it, and they're embracing it. They see that it's the future. you know Abu Dhabi specifically Dubai too encouraging businesses to set up there you know there is in Dubai and also in Abu Dhabi there is a regulatory framework and you know I think people of course are looking to the SEC regulators around the world but the SEC is going backwards and the U.S. is moving backwards and again I've said this before this is the first time in 50 years that the U.S. has not been leading technological and financial innovation.

37:02You know, we invented the mortgage-backed security market in the 80s. You know, it just, there are things that we always were leading and now we're at the end. I mean, we're in the caboose. Look, I also think other places, and you see this in Australia, they really understand currency. You could stop anybody on the street and ask them where the Aussie dollar is and they'll tell you. Americans don't think about currency and they think about the NASDAQ, but they don't think about the dollar. They don't really know where it is. So the concept of cryptocurrency is there's a hurdle there. And, you know, adoption is just slowed if there are hurdles, any hurdle.

37:50And so crypto and currency, it's just too strange for them, right? But the Australians, they're entrepreneurs. They live on a big island. They look out. They always look for investment opportunities, very wealthy population, generally speaking, and they really get it. And I was there and I had a lunch at one of the larger banks and they've already tokenized an asset and put it on a blockchain. They're pretty advanced in that sense. I don't know that there's any trading volume on it yet, but they have people well-versed. That's not to say, look, JP Morgan has the largest number of blockchain patents in the world.

38:31So even though Jamie Dimon is saying whatever he's saying, under the hood, they're doing stuff. But I feel like in Australia, the things are coming together, the tech innovation, the currency part, the money part, and it's the same thing in the Middle East. Yeah, I get the same because I hear a lot from, I mean, everybody, all of my friends are all in the Middle East all the time on this endless road trip because there's capital and they understand that the fossil fuel economy over time is going to shrink versus the renewables economy. So they're like, well, we need to have a stake in the future.

39:05And they've been very strongly behind this. Yeah. One other interesting thing, because I topped the trip off with a few days, is it Paris Blockchain Week? And what you realize is that every region has its different focus on what they are extracting from this digital asset ecosystem. So you find a lot of the luxury brands in Paris are very interested in figuring out how to issue NFTs to get closer with their community. You know, how do you develop that relationship with a product better? um that's i mean that's someone will focus in the u.s but like for for instance there aren't really any og bitcoiners in france there was no one in 2010 11 12 whereas in the u.s you go to bitcoin miami and you have 25 000 you know bitcoiners guys you know who are also mining it from the beginning um you know if you go to eath denver that's a little different focus uh out on the West Coast is more about the tech.

40:08France specifically is this luxury brand focus. The Middle East, I think, is sort of everything combined. But also remember, those currencies are pegged. The real, the dirham, they're pegged to the dollar. So I think for them, they also understand that they need to have a diversification of their assets outside of having 95 % in the dollar and then 10 % in the euro. they get the concept of currency diversification. And then in Asia, they also have a different focus. I feel like that's more in Korea, for instance, blockchain gaming, right? And there's a big gaming universe in Asia. There are gambling platforms that are legal there as well.

40:53And so what's interesting is it's not one thing, this space now. It's many different things, and it's many different things in different areas. and people say, oh, well, the US is just going to regulate it all the way. Well, 85 % of total world crypto trading volume is done outside the US. And my view on this is like, you and I saw this, is the US, after they'd left the gold standard, tried to restrict their currency. So the FX market started in London and became huge. Then the US was like, well, we're not going to lend to foreigners because we're still trying to protect our own economy. So the UK developed the euro dollar market, which became the largest market.

41:39That and the FX market, the largest markets the world's had ever seen. Then the US made the third strategic mistake, which was we're not going to let our banks do OTC derivatives. So we're going to change the capital reserve ratios for banks. And the UK changed it and said, no, no, we're just going to arbitrage you. And they want that entire business. and early after Brexit and other stuff did capital go back, i.e. the financial center moved back from London because if you remember, well if you think how many times have you traveled to London recently it's very few, how many times did you travel in your career it was all the time because all the capital was there and all the people.

42:15But I think what I've heard whispers is that the U of Che is making progress on the regulatory framework for blockchain crypto and I I think, you know, you call, and you may have mentioned this, but I've, maybe I've read this somewhere, but I think that they could do that, what you're calling regulatory arbitrage again. I mean, just think about this for a second. We've invested in 26 businesses over the last two years. And I keep saying to people, I think, look, there is one large crypto business that's public. Only one is Coinbase. It is impossible to think that five years from now, there is only going to be one public crypto business.

43:06And so, you know, part of my focus is going to be figuring out how to get some of our businesses public. And it's not clear that it's going to be on the NASDAQ, which is kind of a shocker in a way. but look, if you took our 26 companies, I think any exchange in the world, they're not going to, but if they were public entities tomorrow, they would overnight become a hub for crypto blockchain. And where are these companies based that you're investing in? In our portfolio, 65 % are outside the U.S. because I diversified. I wanted one-third in the U.S., one-third in Asia, you know, other one-third in Europe.

43:57And so you'd be surprised there are a lot of interesting, great businesses outside the U.S. You know, it makes sense given the focus outside the U.S. So I'm just saying you could have an exchange somewhere, whether it's Dubai or U.K. that if they decided that, wow, some light bulb switched on, or you've got a 37-year-old guy running the regulator, you know, like I met the economy minister in Dubai, he's 41. He gets this almost better than anybody I'd met in terms of, you know, in the legislative area. But if you have someone turn a light bulb and say, hey, we've got a few years, the U.S. is going to get it eventually.

44:42they're not getting it now and it's just as you said with the uk maybe the market really develops there right it's certainly possible that would be a you know it's not that unfortunately for it's not as liquid as it would be on nasdaq etc but it just doesn't seem like the us is coming around it's only less liquid now i mean the footsie used to be liquid they've just got yeah boring old companies that are exactly quality companies a few dead banks and stuff like that So I look at it and the UK has got a problem. It's got no growth industry, a bit of fintech, that's it. It's lost the capital markets to the US.

45:23And here's a$1.7 trillion business. And it's just a regulatory arbitrage business of which they understand and they want to regulate it. And we know that if Coinbase tomorrow, if the UK said, yes, we're in it fully, Coinbase would relocate like Goldman did and every single investment bank did, their major, all of their talent pool ended up being in the UK. It's easy. It could be. I mean, it really could be. It's an open field right now. And I was going to say, part of the issue in the US is that the leadership is all, they're all 80-year-olds, literally 80 years old. And I think what the US needs really is just younger leadership and it doesn't even really matter which side they're on.

46:08A 40-year-old sort of gets the future. And, you know, you look at some of the Middle East leaders, they're in their late 30s, 40s. And he had a 20-year plan. MBS is 38. He's 38. Yeah, and they have 20-year plans. They have 30-year plans or at least visions, you know. Biden doesn't have a 20-year vision. and I don't think any of them do. So I think, look, don't care. We'll be dead in 20 years. Dan, you can have a 20-year plan if you're all going to be dead. No, that was the point. Yeah, I know, but I was trying to spell that out for people. No, that was the point, right? Like, it's bad now. It's bad.

46:50And, you know, maybe this leads into the next point. If you can't even figure this world out, what are you going to do with ChatGPT? you know I you've been talking about this a little bit I appointed just on Saturday we one of my guys on my team is sort of head of chat GPT within the firm to figure out how do we incorporate into our processes and also how do we incorporate it into our investment decision making not just the process but looking for companies that are integrating you know blockchain with chat. And I think that's something really interesting for AI, because I think the blockchain does have a purpose there.

47:36We're still trying to figure it out, but there are going to be companies popping up. So my two ideas for that, obviously digital ID that we've all talked about, and that's a no brainer. But the other one is, is Emad, I think you might have met him at Global Macro Investor Roundtables. He was a GMI guy who built Stability AI. He was a macro guy. yeah Emad Mostak you must watch the two videos I did with him if you've not seen them it kept mind blowing he's a macro guy building the largest open source AI in the world and I spoke to him I said well why the hell don't you tokenize the use of the data because that allows everybody to participate in it as opposed to having to buy the equity everything else, we can all participate in the ecosystem because it's going to replace humanity in various ways.

48:30You need to offset because it can't just be UBI, but the Yatsui idea of universal basic equity is this. Let people participate in this change and don't just keep it to bloody Google or Microsoft. Yeah. Well, that's a very interesting idea. What did he say? I guess I I think he first wants to IPO anyway, but I think he knows blockchain. I mean, he's all over the space. So I'll just keep working on him because I think it's exactly the right use of a universal data set of such power is tokenize it. So then if you are building an application on top and you're drawing a lot of the data, you pay for it with a token.

49:16And if you're putting data in, you can receive tokens. And that creates an economy. huge. Yeah, no, I mean, that's an innovative thought. I like that. Yeah, I don't think there's so much to theory, or I understand, I mean, Italy banning, it just seems like, you know, the most backwards guy banning it. I mean, isn't that a buy signal? I mean, my goodness, right? It's like the worst trader in the world selling his thing at the low. It's a buy signal. Um, so I, yeah, I, I think it, it's all, it augments our, you know, functioning, right? Yeah. And maybe it's too far into the future to worry about the other side.

49:59I just think it's a renaissance for humanity really, if we leverage it. So let me focus in a little bit on your portfolio right now and what kind of investment opportunities you're seeing. You're seeing mainly secondary. So yeah, there's just so much opportunity right now. I don't think I've ever seen so much. In Q4, so I'm probably one of the few private equity guys that actually likes the cycle. I mean, most guys, as you know, they have a five-year investment period because they want to invest through the cycle. I have a view on the cycle. I thought Q4 was the low. we invested over 100 million into seven different businesses, October, November, December.

50:43Four of the businesses were through the secondary that we bought at 50 % to 80 % discounts from previous rounds. And so who's selling funds that want to get out of crypto for whatever reason, a partner moves on and they have a portfolio they want to reduce. You have founders or co-founders who need money and they want to buy a house or whatever it is. You have seed investors who say, well, I missed the$7 billion valuation, but I'll sell it too. And some of the discounts are pretty dramatic and we're very active in the secondary of the$1.2 billion. We've deployed$600 million of it as in secondary, half.

51:23And I think that's the largest amount by multiples and multiples of anybody else. So we have tremendous reverse inquiry. Anybody who wants to sell a stock in a business that's sort of on our radar above five, 10 million, we're the buyer. And it's uncompetitive at the moment. We are basically just saying, this is our price. We want to pay X multiple of revenue and we're a 10 year life fund. So we can buy now and take advantage of it. And that's the reason for raising money now for another fund. The first close is going to be at the end of June is because these discounts are dramatic. I mean, I can just, you know, you have companies like OpenSea where there's stock in the market now at, you know, you can just call any broker at 90 % discount and you've got, you know, some of these other bigger companies, you know, even Alchemy.

52:21A lot of these companies that raised at 50 to 100 times revenue in 21 and 22, you can buy their stock in the secondary at very attractive valuations. We also led two, three rounds, in fact, of companies. And I wouldn't say that, I mean, we set the pricing. I wouldn't say it was super cheap. It wasn't. One of them was reasonably, I think there are more reasonable prices. These are businesses, well, one of them, QuickNode got some press. We invested$40 million in QuickNode,$720 million pre-money valuation. I think that's an API node infrastructure business that competes with Alchemy. Alchemy raised it 100 times revenue.

53:11And so we paid a fraction of that. I think 100 is crazy. I think even what we paid was a little rich, but very happy to own that business. And that's one of the few businesses in the space that actually made more money in 22 than in 21. So in the portfolio, we've got five or six companies that made more money, if you can think about this, in 22 than 21, even though the space had that massive correction. And so this sort of speaks to my general thesis, which is that the fund and what we do, we're not going to be the number one performer in the space, but we're not going to have the volatility. And our target is still to make a 5 or 10x on the portfolio over 10 years.

53:57That's going to underperform probably some of these other funds. But many of those, especially venture funds, are down 90 % or were down 90 % in 22. So the one thing I would say that's still surprising to me is that as far as I know, we're the only, still the only growth equity fund that exclusively focuses on crypto and blockchain businesses in the world. Like, I don't know why the other guys haven't come. I mean, I don't know. It doesn't make any sense to me. You know, you had some of the traditional guys come in like, you know, Tiger and Toma Bravo, but they've sort of moved out. and I don't know.

54:43I think I just, I'm counting my days till Blackstone decides they're interested and then it's over for us. I have no errors about that. I think if some of the big guys really decide that they need exposure in this space, the growth has been crazy. When we started this in the middle of 19, there were only 14 businesses in the world that had a valuation of over a billion dollars in the space. Now they're over 100. At the peak, there were over 150. So I think that there's going to be not only just more money coming into it, but by the end of 24, I think 25, you're going to see these companies, many of the better ones is public entities.

55:32The founders want to become public. These guys, they're not quite ready In some cases, they need to be a little more corporate. They need to figure things out on governance. They need to build a board. I mean, remember FTX? I mean, FTX had one board member, and that was his father, right? Like, if that wasn't a red flag, thankfully, we passed on that three times. But you have companies that are making a fortune, but still aren't quite ready for the public round. But I think by the end of 24, 25, there are going to be quite a few. and I think we're going to be very involved in that whole process.

56:11So look, lots of opportunity, not just in the secondary, but we're not really competing against other people in these raises. So yeah, it's not like you're overpaying. There's nobody else showing up. It's not like, oh, we've got no competition because we're SoftBank and we overpay. I know, I know. So look, I don't look. this is one of those inexplainable things, I guess. I mean, I can explain it. Look, traditional private equity isn't terribly comfortable with macro. They're not comfortable with currency, right? A lot of them don't even do tech. So this is sort of like the really big money. I mean, Blackstone is still buying more real estate, right?

56:58Look, they have a trillion dollar business they can do whatever they like um but even the tech oriented guys like toma bravo said recently um you know a few months ago that you know they're they're they're not finding you know companies of the quality that they need or expect and i don't know we we think that they're there maybe we're a little further out the risk spectrum than they are um but we also think it's an opportunity to help them get there. And so this is the only thing that you do all day, every day. And again, we don't invest in the underlying cryptocurrency. A lot of our institutional investors are legally not allowed to.

57:40And so what we have is a much lower volatility. Our portfolios, for the most part, hardly mark down, mark down a little bit, but not that much. and we're able to withstand the kind of volatility that's in the space. And look, as you know, that's always been my main concern. How do you get stuck in and hold the position for 10 years in a space that every three years has a 70 % to 85 % correction? You're going to get blown out. We know this from our old portfolio management days in the traditional world. You could get blown out or your boss doesn't like it when you have a you know, a down year, right?

58:25Or your investor. Because there's only family offices or individuals like us who can stomach the cycle. We kind of know the cycle's there. You add more when it sells off. Right. That's it. But yeah, I mean, the amount of hedge funds who were in the space and now left the space because suddenly it doesn't go up in a straight line. Yeah, it doesn't go up in a straight line. And if you can take a five, 10-year view, you're going to make money. This is inevitable, inexorable move up in the value. And we think, I mean, I think we've built a fund structure and a way to tap in to that value accretion without the panic and fear and all that other stuff that a company's holding, you know, the rocket fuel.

59:12Because this is really the hardest market I've ever seen to trade. And, you know, I'm a professional at this. and you have a lot of non-professionals. I don't know how they hold on. I mean, I'm glad they do. It's fantastic. They're true believers. That's great. But let's be clear. It's very hard. And so I call our strategy a sleep well at night strategy. And if you're a little older and you want to put$50 million to work, it's just very hard. It's not straightforward. And we actually have quite a few investors of that size putting big chunks of money to work in these businesses. And sometimes we get a little lucky and we have businesses that even make more money during bear phases, which means that during a wolf phase, they could go up 5x, 6x in revenue.

1:00:04And so I'm thinking that we end the year higher. I don't know what your forecast is for Bitcoin and ETH for this year, but I think post the having in the second half of 24 in the 25 we're certainly looking over 100 000 yeah i think this cycle is not 2019 so i don't think we get the long pullback correction i think we'll get a running correction sideways much like 2013 16 those kind of ones so that leads me into the final question is clearly you were like fox with this 20th century fox you had the name 10T, you're like, this space is going to be bigger than 10 trillion pretty soon. Yeah. It's going to look out of date.

1:00:49Yeah. Right? Yeah, I think so. But you know what? When it was 300 billion, right? The name of the first three funds, I called it 10T because 10 trillion, I thought we'd make it 30X in 10 years. But I'll tell you something. I was already realizing that the name wasn't going to be actually the right name. that was last year I was on a panel with Dan Moorhead and Mark Yusko. And the final question of the panel was, what do we think the value in this ecosystem is going to be? The digitalized or the whole thing. And Dan all of a sudden throws out 50 trillion. Okay. And I'm like, I'm thinking to myself, I was going to say 10 because that was my view.

1:01:33And then Mark is next. And Mark's like, well, you know, I think it'd probably be more like 30. And so all of a sudden, here I am on this panel as the most bearish guy. And I said, well, realistically, okay. I mean, 10 is, I think, a realistic view. It's probably 20. I said 20. But you know, the reality is, is, you know, Dan is, you know, I think she's probably right. And I just, the timing on it is not, you know, you don't know. That's the hardest thing about macro. I always tell people, It's just sometimes macro takes longer to play out than you expect. And you really have to be stuck in, you know, you really have to.

1:02:18And that's part of the reason for our strategy is that I just want to be there 10 years from now with the portfolio I have. I know we're going to make multiples on our money. and I think we're going to be able to do it without having to panic every three years because something happens or the space collapses or whatever. But we're in a good position now and I think it's empty. Think back and you were earlier than me. I remember that round table that we did in Cayman in 2013, I think it was where Bitcoin was your number one choice. I mean, if we go back to 13, and I think you were bullish even before 13, do you think now is sort of the best time that you can recall?

1:03:10I mean, I'm just saying the price is lower, but yeah. Yes, I think it's the best risk adjusted reward ever. And I said that last cycle, but I think it's that the risk side of the equation has shrunk. Yeah. Wood side is still unknown, but ridiculous. You know, when I first did that first ever macro strategy piece, I said, look, I think Bitcoin's worth a million bucks. By when? I don't know. Right. And it feels like, well, probably. By when? I don't know. And so therefore, here we are at 30 ,000 today. Well, find me another trade on earth that's as good as that. And Bitcoin will underperform some of the others in this.

1:03:48Yeah. I think, ETH, you pointed out the chart. I also looked at it. We go from 30-year view to, or 10-year, 20-year view to the daily, because we can do that. But that chart looks like it's about to explode. I mean, Ethereum looks to me like it's about to go up 500 points imminently. Then if you look at the ETH-Bitcoin cross, the monthly version of that, it's just a huge wedge. I'm like, okay, this. Yeah, but they're both going up. They're different uses. And, you know, I think that the difference now, and this is the last thing I'd say, from every other side goal is that there are so many things going on in this universe.

1:04:36It's not just, you know, 17 was just this pump and dump with the stupid ICOs and people ripping people off. Like, it was terrible in a way. this is not what it's about anymore it's a large space with a large amount of value and many many use cases and it's incumbent upon the traditional people to do the work right and look if we go back to when we first had our chat on camera like obviously you and i've talked about bitcoin and crypto 19 i think summer 19 and so we look at that since then real vision has integrated nfts um digital wallets digital ids all sorts of stuff then i built an entire asset management business which is a fund of funds just investing in that space and then i built another business which tokenizes the world's largest cultural communities with all the big brands that's how fast this has changed right you've pivoted your entire life i've pivoted my entire life alan howard's pivoted his entire life i mean it's unbelievable how much has been built here and we're all building different parts of this ecosystem out and we've all got friends who are building other parts of the ecosystem out it's ridiculous right and it's still incredible don't forget only four percent of the world have digital wallets and so you know you think when is this going to end but maybe in a way it hasn't even started yet i mean i hate to say what ended it just ended up coming what's that yeah so that never ended it just became ai in the end yeah Yeah, I know.

1:06:10It's incredible. We're living in great times now. And I don't know, there's so much negativity. I posted last night, Twitter, the most negative for the longest period of time that everyone's ever been. That's why I say, is this the best time that you've ever seen? Because I can't remember when people were so diabolically negative, and yet the opportunity was so clear in a way. I wrote that GMI that you just got yesterday. Yes. I think this is the best macro setup of all time that I've ever lived through. It's incredible. Yeah, but. All right. Well, hopefully we get some of your listeners inspired to dig deep and do the work, the ones who have it.

1:06:55Exactly right. Brilliant, my friend. As ever, we'll try and catch up in person somewhere in the world. Absolutely. You've missed the GMI round table. It's in Majorca this year. Oh, whoa. Oh, next year. All right, my friend. Good to see you. It's really interesting, having not spoken to Dan for a while, to see his line of thinking is very much in line with mine. Where we are in the macro, what this means for this adoption of the Bitcoin life raft or the digital asset life raft. He completely concurs with my view that it happens over time. We get these accelerated moments in the booms, and then they pull back.

1:07:34But each time there's more people in Noah's Ark or the life raft. And I think that's really interesting. Really, also Dan is like on his fourth fund. I mean, incredible business he's building there. Really interesting to see his unwavering belief in where this space is going, seeing through the volatility, seeing through the macro and saying, let's just keep going there. It's a matter of time. It's all about time horizon in this space and how to structure your life that you can accept the volatility. so again as ever amazing conversation with Dan I hope you got a lot out of it what's up revolutionaries thanks for tuning in to the real vision daily briefing for more content like this head over to realvision.com and get unfiltered access to the very best brightest and biggest names in finance