Where to Look Beyond the U.S. for Crypto Growth?

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1:27what's up guys it's ash bennington welcome to real vision crypto daily briefing joining me today is mateo dante perruccio mateo welcome thank you for having me it's a pleasure to have you here lots to talk about we'll be back in just one second but first we want to talk about a quick programming note we often get questions from our viewers about which real vision membership is right for them. So we're hosting an AMA on it with Maggie Lake and Raoul Pal. That's 10 a.m. Eastern time this coming Wednesday. Now, let's take a quick look at price action happening right now in Bitcoin trading at 29 ,192.

2:05It's up, oh, call it about three-tenths of 1 % here in the last 24 hours, basically flat. Seven days, it's down about two and a quarter percent. Ethereum trading right now at$1 ,858 on my screen. Trailing 24 hours, it's up about 85 one hundredths of 1%, call it about 1%. Trailing seven days down about 2 % on Ethereum. Mateo, welcome to the show. It's great to have you here. Excited to talk to you. I should have said at the top of the show, you are, of course, President International of Wave Digital Assets. You've got a very long history in the traditional asset management business, traditional investing business.

2:44Tell us a little bit about your background and how you made the transition into the digital asset space. Thanks. Thanks for having me. It's a pleasure to be on here, especially given the color of my beard. I'm probably not the average age of most of your participants, but it's great to be on. Yeah, my journey was an interesting one. So my past experience, you know, I've run some very large asset management companies, was on the board of directors of FTSE regulated, listed asset managers, traditional and active asset managers. And then I had my own boutique. I managed$2 billion of the British telecom pension schemes, alternative assets.

3:24So in the hedge fund world for a long time. And about in 2016, 17, I was approached by, I was starting to back away from the traditional world for a whole host of reasons, primarily because it was becoming arduous as an industry. And I was, you know, sort of feeling a bit stale. And then, and then I got involved in, with a group that was very early in wanting to create, they had seen that this industry was going to need an institutional infrastructure, and they were trying to build a managed account platform for crypto hedge funds. But, you know, things have moved so fast, if we think back to what this world looked like in 2017-18, what a crypto hedge fund meant was, you know, a guy in a hoodie managing a portfolio and up a thousand percent with no stop loss, risk management, compliance.

4:24So it was a different world. It was a wild west, as we remember. And it was exciting, but I had no knowledge of crypto. but they wanted my assistance in counseling them about how to create an infrastructure that would resonate with institutions eventually because they were convinced about five years too early that institutions would eventually want to get access to the space and in order to do that, they wouldn't have the knowledge base to understand how to do due diligence on managers to understand their strategies and so on so they wanted, if you had institutional quality due diligence being done on the managers that would help.

5:06So fast forward, I was super skeptical of, I was very bullish on the blockchain as a technology. I understood the blockchain. I understood, you know, harshly the possibilities of the blockchain. I didn't understand crypto and tokens. And so I decided to dive into it. And like many people you hear, you know, I went down that rabbit hole and came out and said, Oh my God, this is just a light bulb went off. So many similarities to things that I remember some innovations in my past experience and remembering how people talked about those innovations. And it just resonated. It was, it was, it was such a metaphor.

5:44You know, I, people forget about things like, um, you know, even something as, as, as mainstream now is emerging markets 30 years ago. Right. And when you talked about investing in Russia or investing in South Africa or investing in Ecuador, that was like investing in the moon. And people didn't have a knowledge base. They didn't have the skill sets. They weren't in proximity. And so, and I remember people saying, this is never going to take off. And I remember, I remember a very specific conversation of someone saying to me, you know, I'll never invest in China and Chinese equities. It's the wild West.

6:20And, you know, now you can't even imagine not having exposure to China, right? So I think that hit me about crypto. I was kind of like, wow, this is really going to change the way we transact in the financial world, and I want to be part of it. So I just kept learning and learning and decided I wanted to get involved personally and professionally in the industry. Right. I spent a bit of time early in my career working in the tech space. I think a lot of us who were interested in the blockchain, who really wanted to explore the underlying technology. We're just fascinated by some of the utility of the blockchain, some of the potential use cases.

6:58Let me ask you this. How do you tie together in your mind the utility, the functionality on the blockchain with the valuation component of the digital asset token universe? See, that's a super complex and problematic question. I know. There's lots of people that are trying to associate. And by the way, it merges, as you know, it merges into the latest rulings on XRP and the whole conversation about what the token represents. And I heard a fascinating interview that you did, I think, with the chief legal counsel of Kraken. And, you know, talking about how focused we were on the asset. You know, the concept of the token itself representing a security as opposed to the transaction.

7:49the investment contract, which is the more important component. But going back to your point, when I look at this universe, it's just so broad. It reminds me a little bit, again, and I apologize if I speak in analogies, but it's a weakness I have. But it reminds me so much of when I used to go to speak to people who didn't know much about hedge funds. They would say something to me that I found just so incredibly frustrating. And they would say, I don't like hedge funds. and I'd say to them, well, what does that mean? I don't know what that means. Do you not like long, short strategy? Do you not like merger ARB?

8:26Do you not like event? Do you not like, what don't you like about it? And I hear the same thing about, I don't like crypto, or I don't believe tokens have value, which token, and which underlying technological infrastructure. So I think there's an argument to be made to sort of split. I do a very, you know, I'm not a programmer. I don't come from the tech world. So I apply a very, very simplistic, if I may, simplistic filter on that, this universe. And I kind of split it up into three types of tokens, you know, and there are tokens to me that are easier to value because they represent an underlying business model.

9:08And those tokens, you know, like Solana and I can, get my head around easier understanding why Filecoin or Solana, we could create a valuation model for those because there's a business model that is dependent on that token, the token dependent business model. Whatever the success or failure of the underlying model, it's very clear to be able to see how the cash flows relate to the underlying valuation. You can apply sort of traditional metrics and analysis on that. Again, not suggesting that they're all going to be successful, but at least you understand the parameters for how they would succeed or fail in theory.

9:51Right. I totally agree. I think the problem is because this industry moves at such a fast pace, and I think I heard you say one time, we're constantly talking about the next, this is it, moment in crypto. I think they have been this is it moments. These are all this is it moments where we're living through something that we have never seen a velocity of change in a financial industry like we've seen in crypto. The evolution of, you know, if you think you're, you know, many of your listeners will not remember the advent of derivatives when they first started. But, you know, derivatives when they first started were black magic, you know, until we had contracts to solidify those relationships in order to trade derivatives and to transact in a trusted way between two parties.

10:44And then it accelerated exponentially. But even that acceleration was slow by the standards of the world today. And so I think we need to realize that there will constantly be new tokens, but I am absolutely convinced that the landscape that we look at today will be entirely different in 10 years. I don't believe that 80 % of the tokens that we're talking about today will be meaningful in a conversation in 10 years, much like social media platforms, much like other tech platforms, the things that we're talking about. And I guess I just finished by saying, you know, I always remind my audience about BlackBerry.

11:26And, you know, at the height of BlackBerry, if I told you, you know what, it's not going to exist in three years, you know, you would have laughed me off the show and said, this guy's a nutcase. but that's what happened, right? So technology is a fickle thing and it's amazing. Well, there's still, you know, BlackBerry, interestingly enough, they're still kicking around, right? It's like they're making hands. I mean, the usage should have been more precise. I mean, everyone, you know, in my professionally, and I ran a firm with, you know, about 25 ,000 people and, you know, we all had BlackBerrys and that's how you did business.

12:01Nobody had a mobile phone. Nobody, you know, worked on an Apple phone. Right. So. Yeah, it's a fascinating story. They just made a great movie about it. It's on pay-per-view now or on Amazon, whatever. And you can watch it. It's fantastic. But I did some research about what they're doing today. And apparently they're involved in back-end security and encryption software, which is really fascinating. But as you point out. It's probably going to give them a huge, I mean, the crypto advent of the crypto industry is probably giving them a huge, you know, new approachable market. Hey, everyone, we're going to take a quick pause and hear a word from our partners.

12:39We'll be right back.

12:44So let me ask you this, because I think it's a fascinating topic that you brought up, which is this landscape of sort of trying to get out of the day-to-day price valuation, day-to-day price fluctuation type of mindset, and to think about what the space looks like more broadly in, say, a decade. What can we say about that? How do you think about that framework for where we're going in a decade's time, other than saying it's probably not going to look the way it does today? Well, look, I can give you an idea of why Wave Digital appealed to me. By the way, I should say our compliance people are very serious and we are SEC regulated.

13:24So any opinions I give on this show are my own personal opinions. They don't reflect the opinions of Wave Digital. But, you know, Wave, when it was born, from the first day we were founded, we were regulated in the state of California. So which which at a time when people weren't searching out regulated counterparties didn't really matter. It was a highly unregulated industry. But we understood from the very beginning that that was going to be really important. And and I think when we also looked at this, this asset class from a wealth preservation and wealth management perspective from the very beginning, which is if I can explain that, why why that's so different.

14:05And if we think back, it was all about capital appreciation in the early days of crypto. You bought your crypto and you held it, right? And it appreciated, you know, a thousand times and everybody was getting rich and it was an exciting time. So the solutions were mostly trading and momentum driven strategies. We identified the volatility as a really interesting characteristic of this industry very early on and started to, you know, to work in derivatives to create yield. and looking at the yield possibilities of crypto. And so I think that mindset has served as well because the industry has morphed and changed as we've gone through two winters now.

14:49And now we're in this band where it's very hard to extract capital appreciation without actively trading. So I think what we really need now is, and what's happened, and I'm, obviously saddened by many of the events that have happened in the industry, but I'm not surprised by them at all. It was an unregulated industry, and I think they were necessary. And, you know, we were very fortunate to have avoided all of those debacles. And I kind of would argue if you had good risk management and common sense and feet on the ground, a lot of the stuff didn't look like it made a lot of sense at the time.

15:33So we were very fortunate to avoid that. And so to me, I think now we're getting, you know, some of the survivors of this phase, this very difficult phase in crypto, who are the good players, good actors, most of them have learned lessons or already knew what to do. So we've got that component, which is continuing to grow. And I would put us in that category. And then you have a lot of TradFi new entrants coming in now. And I think that's going, it's hard to change, distract people from, you know, something that made them so much money, right? Watching the price of Bitcoin was an exciting day-to-day endeavor, you know, five years, six, seven, eight years ago.

16:23I mean, every day it was a new high and you're making money and it was exciting. Now it's, you know, now we have to look at it as maturing industry. It's still very immature in the natural evolution of a financial industry. But it's, yeah, so I think it'll come. And I think as we get more serious actors involved, their focus, like ours, is going to change the way people think about their crypto. And so thinking about risk managing crypto, about it as part of a portfolio and not just a speculative investment. So talk a little bit about just that point, which is interesting to me. How do your clients sort of ask these questions of you about the risk management component, how you guys think about your time horizons, and some of the other points that you just made?

17:15So it changes a lot depending on the moment in time, what the fixation is. If you remember the post-Madoff, everybody focused on custody and administration because that's where the money was hidden, right? There was no money there. And then they found that out. So then all of a sudden that became the number one question on the due diligence questionnaire. That's what clients wanted to know about where, how is my money custody? How is it held? And, you know, it's not dissimilar in the crypto context, right? As we have a, you know, an event which flares up, you know, if you were creating yield in CeFi and then the Celsius happens, the clients are incredibly concerned about counterparty risk on CeFi, right?

18:07So the good news is that we've always been very attuned to the fact, having been crypto native, very attuned to the fact that counterparty risk is everything. And understanding, being deep in the ecosystem and understanding the risk parameters of your counterparties, how they're operating, are they operating in a way that when you, because we would do due diligence in all of our parties. So I would say that's a long-winded way of saying most of our clients first now are, it's about security. It's about, you know, what do you, how can I be sure that you helping me invest my money, that you're doing it in a way that I'm not, it's not going to disappear, that it's safe, that you're using institutional quality parties.

18:56And of course, being SEC regulated, that's an important component for us anyways, right? Right. Well, it's so interesting as you frame that with the Madoff example and also with the example over at Celsius and C5 more generally. It's interesting because it almost sets up this situation where it's the case of generals fighting the last war. Obviously, there's a tension that's raised. There's focus for places where you've seen these breakthroughs in the past. But it almost makes you wonder, what are the new risks that might be coming down the horizon? How do you guys think about that? Do you have a view about what the next potential risk parameter might be?

19:32Well, I think DeFi is a super interesting area. I am not an expert. I want to put the caveat. But we are. and being deep in that ecosystem of DeFi, that's a place where you really need to understand your counterparty risk, technology risk, hacking risk, security. So anytime there's new technologies and the new technology, the frustrating thing is the new technology is what makes this industry so exciting. Right. And it gives it so much potentiality. It's also what makes it so risky. Right. Because, you know, anything new put together, any new innovation as we see in all industries, not just this industry, put together with financial incentives, kind of a bad recipe, usually, because people push things out before they're ready to be pushed out.

20:20And, you know, we've seen it with some of the best companies where their products crash, or they have bugs, because they, you know, they have commercial objectives. So I think the risks are constantly changing the risk horizon. Obviously, we have a very complex world regulatory environment, which we have always said, and I think is overdue, we need regulation, we need clarity. I think that's the hard part, is clarity. I've seen you've done a couple of shows on XRP and what that means. Everybody talks for a half hour and then ends it with, but we'll see, still not clear right so it's a bit frustrating you know you we all are begging for this confirmation bias moment where they say this is how everything's treated now get on with it and do business yeah i guess i mean the only way it seems to me at least that that's going to be definitive is when you get actual law from congress which doesn't seem to be forthcoming anytime soon well you know it's a fascinating i mean you know it's fascinating to watch you know I can speak more to what's happening around the world.

21:34And it's really interesting phenomenon to see the difference this time around between how the Anglo-Saxon, and I don't put, the U.S. is obviously the largest, but the U.K. is in some respects similar. And I'm not as familiar with Australia, but I think it's kind of similar. The Anglo-Saxon approach has been quite different from most of the rest of the world. you know in Europe with Mika they've they've kind of decided to define you use definitional regulation so to say we're defining these things as this and they'll be treated this way so once you've got those three points cleared then you know how to handle them and now you might disagree you know you might disagree if they define stable coins in this way or that way where they want to tax him his income or capital gains.

22:30But at least you can go forward with the business. And I think, you know, the MENA region, Middle East, Dubai has, and I don't know how much they talk about it in the US, but VARA, the regulation in MENA is quite avant-garde and really thoughtful. They have the virtual asset regulatory authority they created. They created a separate authority for it. And they've staffed it with people expert in it. And, and I think it's, and, and they're, and it's not a surprise that they're attracting a huge amount of inflow from all over the world of new startup projects and blockchain and crypto, because, you know, there, there's an environment where you can have a dialogue, you know, and, and, and build.

23:17And I think, you know, we're just seeing a shift around the world of, of domiciles that weren't really substantive in the past sort of taking their slice of the pie, you know, because this industry is global. Hey, everyone, we're going to take another quick break and hear a word from our partners. We'll be right back to the Real Vision Crypto Daily Briefing.

23:40I'm kind of curious if this sort of different regulatory framework elsewhere in the world internationally versus the United States can change potentially the degree of asset allocation, Meaning, will you see allocators from places where you have greater regulatory clarity feeling more comfortable around the asset class and therefore investing in it to a greater extent? Yes. Yes, you will, I think. However, let's not forget the U.S. is still a, you know, it's the leading economy in the world and it's the largest capital market in the world. So, you know, I don't want to overstate the fact that it is really important that the U.S.

24:21get it right. And I'm sure in time we will. But, yeah, I think what you're finding is you're finding those allocators, you know, where there are pockets of capital that are outside of the United States are going to allocate to this space much easier. We've seen it a little bit in Switzerland and Germany. I don't know if you're aware, I'm sure you are, but Germany, I think now it's two years ago, they allowed their special pension, I can't pronounce it in German, but their specialist pension to invest in crypto. And, you know, of course, that's going to help. It's going to help adoption. It's going to help advance the cause of crypto in that geography.

25:10And Switzerland has also been very, you know, we're expanding into Switzerland. And it's purposeful. It's our hub, our international hub. And the reason we're doing that is because crypto has been a leader really uncharacteristically. Generally, Switzerland is a follower market, both from a regulatory and financial innovation perspective. It's a very conservative market generally. In crypto, with Crypto Valley and the regulators being very ahead of the game, you know, they were the first domicile to actually codify in law NFTs so that you can actually go to court and sue trademark infringement and so on.

25:54And it has a juridical status in the country. and you know they have they have they've been very open to to sort of letting the market operate they've been very focused on licenses and making sure that the players that can act in that space are good standing in good standing and then they let them act and you know see how that market evolves so it's a it's a different approach but but so far it's been been pretty interesting to watch. Yeah. I should say, by the way, viewers, put down your questions in the chat. We're already asking the best ones on air. Remember, Real Vision members take priority.

26:37If you're not a member yet, go to realvision.com forward slash crypto to sign up. That's realvision.com forward slash crypto to sign up. It's free. I should say, we've already got questions coming in. First one comes to us from Ralph from the Real Vision website. You mentioned Wave Digital using crypto to create yield with derivatives. Can you expand on this, please? Yes. I can, again, for SEC reasons, I can't speak about any specific product or performance, but I can talk in generalities about the fact that, for example, in a market very much the same way that in the equity markets, if you have a stock which has a degree of volatility, you can sell COVID calls on that stock out of the money.

27:20So let's say, you know, at the beginning of the month, a stock is worth 100, and somebody else thinks it's going to be worth 110, you write a 10 % out of the money, cover call with that counterparty. If the stock goes to 109.9, you pocket a very attractive, either way, you pocket an attractive premium, and you keep your gains up to 109.99. If it goes to 110.1, then it gets exercised, you've earned up to 110, but you've lost any upside if it goes to 120 in that same month. And Bitcoin, if you thought, you know, very early on, we kind of thought about Bitcoin and now it's a quite a, I think a relatively common strategy that some people employ, but we thought about it and said, this is a perfect asset for this.