E175: Dan Tapiero: This Crypto Strategy is Boring, But It Will Make You Rich

0:00Our space, it's the easiest space in the world to make money, but it is the most difficult space in the world to hold on to it. Because anybody can get lucky for a year or two, but to have a defined process, to be able to withstand the volatility, to believe with deep conviction in what you're doing, it's hard. You don't tweet a lot, but when you tweet, you're always super bullish and optimistic. Why? It's very funny. I'm a Bitcoin maximalist. Dan Tapiero, the founder of 50T Funds.

0:26Dan Tapiero:A digital asset fund manager built on a$50 trillion crypto thesis. A macro investor backing Bitcoin, infrastructure and AI blockchain innovation. All value and money will be on chain. There's no way that's not happening. And I think this RWA is in tokenization. These are big themes. For me, I need to be able to say this is our view in the future and they build revenue the way we expect. That revenue will accrue to the value of the equity. Markets have a tendency to do the unexpected. Gold never does what you expect. it will do when you expect it to do it. Traditionally, it's been a very difficult asset to just hold as a result.

1:01There has to be uncertainty. It has to be something that you don't quite expect for it to work. So when you go into an investment and you have full conviction, you know it's a home run, it's probably wrong. Last year, we branded your company 10 trillion fund to 50 trillion fund. What makes you so confident that the crypto industry is going to 50 trillion? Blockchain chain is the money of the autonomous AI agent. AIs will not be calling up JP Morgan and doing a wire. We think that within the next five to 10 years...

1:33Hi everyone. This is the little bit that I know none of you like that can help us make a huge difference for this show and we want to take it next. 71 % of the people who regularly watch When Shift Happens have not subscribed. And so all I'd ask you if you want to make a huge difference is the following. If you've seen this show before and you like it, help me, help my team. Hit the subscribe button and we'll continue to build this show for you. Thank you. Cast is a sponsor? Yes. We kind of like Cast. This is a Cast gold card. Yeah, we kind of like Cast. I wanted to say actually like it's an amazing business, fast growing.

2:14You should. I don't know enough about it to talk about it now. We just started looking at it. I know. But you should. I know. They're a sponsor. I know. I get it. So is Bitwise. So is Bitwise. Okay. Let me know when you want to go. We're going. We're ready. Oh, we're going now? Yeah. Okay. We like Cast. That's the beginning. They're going to be happy about it. No, they know us. They know us. We like them. How are you doing? Good. Good. It's been very busy. you said we like cast so i have to ask you why and and explain with the cast example what framework you put when you look at businesses that you are interested to invest in terms of yeah but i also told you that i didn't have enough we just started looking at it i said we like them um but i don't have enough uh you know in depth i look i have it on my phone i have our little analysis i could look and I can tell you.

3:10But the reality is, is that we are the, as far as I know, really the only growth stage investor in the world exclusively focused on crypto, blockchain, web3, digital assets. We don't do VC, right? We don't invest in cryptocurrency. It's very straightforward. Made 20. We have 22 investments. We had six realizations last year. We own companies, you know, like Circle, and we had Darabit that got bought by Coinbase and Figure, you know, eToro, Cypher that is owned by Bitfury. So, you know, unfortunately, we also had Gemini, which hasn't had a good run in the IPO market, but I think this price is extremely cheap.

3:52But we look at companies, you know, roughly with 40 to 50 million in revenue, and we want to buy them for about, you know, five to 10 times revenue. Now, Cast is a little small. You know, the card, the very nice card you have there, the growth of the business has been tremendous in the last two years. It's a little small for us. It's not quite yet there. So it's on our radar. We think it's one of the higher quality businesses in doing what they do. But it wouldn't quite yet. I mean, maybe next year if they do, you know, we focus more on, I would say, BC round. So they're on the cusp. And that's why I don't have a full answer.

4:32they're not in our, let's say, our direct pipeline. I have two deals that I think just went live today, which is incredible about going to these conferences. You know, everyone, the in-person thing, you know, we have a decentralized firm. The in-person thing is incredible. You know, you're going back and forth with a guy for weeks or months about a deal. All of a sudden, you see him, you say to him, look, this is it. This is what we're doing. Yes or no by tomorrow. and that in-person thing really, you know, I think changes the dynamic. So anyway, that's why we're here in person. Absolutely. Right?

5:10That's why last time you said, no, I want to do the podcast in person. Yeah. It's a big difference. The Zoom thing is okay, but it doesn't, you know, it doesn't capture the essence of the conversation. Yeah. Was that okay for the cast? Beautiful. Okay. One thing very interesting is if we look at, we talked the first time a bit more than a year ago, which was kind of like, people didn't know it, but kind of like shortly after the previous stop of like the previous kind of bull run. We talked the previous, so. It was in March last year, I think. Or I don't remember, something like that. And you have this approach of saying we do equity only, right?

5:54Yeah. And most people, and you've always had this approach for many years. And most people in crypto would probably, this kind of more crypto native crowd would be like, this is a boomer. Why would not buy these tokens? These tokens have so much more upside, all that stuff. He's boring. Yes. And what happened? Well, what happened is that all this shitcoin went to zero. And you just said before, we had six realizations last year. Yeah. Which proves your thesis. Yeah. Yeah, and we have more coming. It's the right one. We have more coming. Kraken just announced. And Ledger will probably be next year.

6:28but should I let you finish your question or should I keep going? Well, for me, it's where did you learn and how did you learn to like say, let's do it the infrastructure kind of more boring way, but this is going to work. Let's put that to the side for a second. I look for clarity and it's not that we're against tokens. That's not right. Like I think that what I call there are some growth stage protocols. So there are businesses in our space, real businesses producing real revenue where there is no equity. There's only a token. So, you know, Aave, Jupiter, these are real things. These are not pump and dump.

7:08They're important to the space. You know, hype is real. Hype is fantastic. But the reality is there's still a bit of confusion as to where revenue accrues. So, You saw that with Uniswap. You saw the last six months with Aave back and forth on governance. Again, I'm from the old business. I was in the old world business, in the macro hedge fund business for 20 years, and you know my background and all of that business. We do a huge amount of diligence that's very deep in a very specific way. We try to model all of our investments for a 5 to 8x return over a 10-year life. Okay. So I'm looking out 10 years.

7:57We have a 10-year life fund. I need to buy at a price that will give me the belief that we can make a five to eight times. Okay. So if I buy a token, just as an example, and I'm looking out 10 years, do I have certainty that the revenue that I expect to accrue to it will accrue to the value of the token? Now, Now, in some cases, yes, but there's still too much uncertainty and there's still too much room for interpretation. And so what I always believed was that equity was never going away, that maybe there would be a transition where all value eventually ends up accruing to tokens, everything.

8:45Now, I believe, and I've said this from the very beginning, all value in money will be on chain. It's moving on chain. There's no way that's not happening. And I think this RWA is in tokenization. These are big themes at this conference. You know, I think Larry Fink was very important in changing people's minds in the summer of 23. We had the ETFs in 24. You have the corporate balance sheet stuff in 25. And Saylor, like, I'm not really a big DAT believer, but, you know, Saylor, I think, is sort of a special guy. And he's doing something fantastic in a way. We're not involved in that space. We don't invest in DATs.

9:24We invest in operating businesses. And I think DATs really are, you know, it's an equity wrapper around a cryptocurrency, which is fantastic. It pushes forward adoption. I love it. I wish them all success. I hope they all get super wealthy and build great businesses, but that's just not what we do. So for me, I need to be able to, with my team, I need to be able to say, this is our view in the future. If this view happens and they build revenue the way we expect, that that revenue you will accrue to the value of the equity. And I think in the crypto space, people change the rules on you. Look, it happens in equity too.

10:11We made an initial investment years ago into Kraken at a$2.8 billion valuation. But five years later, we've gotten diluted. Arjun has been very aggressive out there, the CEO of Kraken. He's been doing a wonderful job buying businesses. But again, we get diluted. So my entry price has changed. I don't have any control. We're a minority owner. I'm hoping that the businesses that he's bought have been accretive. We think they have been. But the reality is, is that even as an equity owner, you don't have that kind of control. So, again, the legal precedence, the legal infrastructure and architecture around token ownership is just not there.

10:59And around equity, you have 100 years of case law and it's very clear what your rights are as an equity owner. Sometimes it's not so clear, but it's a lot clearer. And so when it becomes clearer in the token space, yeah, there are still projects or growth stage protocols that are your businesses, I don't know how you'd call them, that we'd be very interested in. I mentioned Jupiter, Aave, Stani, I think is doing a great job there. There's the core things that aren't going away, but we can't really invest in them yet. Absolutely. It makes a lot of sense, actually. But it's not the boomer thing.

11:45I am sensitive. I'm not a boomer. I'm younger than a boomer. I miss the boomer. But I hear you on the boomer thing. Well, you know, you're being proven right. Well, you know, that's for now. That's true. But I, you know, like I'm not like I would. I'm, you know, there's still plenty of time. We have 22 investments that are still private. so there's still plenty of time to be tested again, right? Quick one. I want to thank our partners who help us make this show possible. Thank you, Treasure. My favorite cold wallet to store my Bitcoin and crypto and make sure I sleep well at night. If you want to sleep well at night too, you can order your Treasure wallet with my promo code WSH10 and get a 10 % discount.

12:36Check out my Treasure link in the description down below. Big thanks to my good friends at Bitwise Asset Management for backing today's conversation. Bitwise is a global crypto asset manager with$11 billion in client assets and more than 70 crypto solutions. That includes ETFs, index funds, SMAs, custom option strategies, staking, vaults, and more. However you want to invest in crypto, the experts at Bitwise have you covered. You don't tweet a lot, but when you tweet, you're always super bullish and optimistic. Why? Well, I would tweet more. The reality is, is that I really like tweeting. I used to try to tweet three times a week, two, three times a week.

13:24And it would always be about, you know, macro or trading or crypto or Bitcoin or whatever it is. And I started really only on Twitter in 2019, after I did this interview with Raul Powell that had hundreds of thousands of views. It was the first time that I spoke about why I was bullish on Bitcoin. And they basically said to me, you have to have a Twitter account because there are all these people who want to reach out to you. And I was like, what is this? Why? How does this world work? I had no idea. And I find Twitter very interesting. I think at the moment, it's a little toxic, which I don't like.

14:01A lot of the young guys probably have gotten hurt in things and they're upset. It's very painful. Investing, making money is an extremely difficult process. You know, and I always say, look, I didn't feel comfortable, completely comfortable in my skin as a portfolio manager for 15 years. It took me until I was 38, really. And I started immediately after college. You know, I was a tiger management, of course, very early in my career in 92 and 93. And it wasn't really until, you know, I was 24 then, it took me about 15 years to really feel that I was in complete command of what I was doing. And even then, like, you still make a huge number of mistakes.

14:48You have to live with them. It's extremely painful from an emotional perspective. You have to learn how to manage that. Managing a portfolio, executing an idea towards a conclusion is not, you know, it's just not easy. our space hasn't even been around 15 years. So I think the young guys who are YOLOing into meme coins and pump this and that, and this and that, you know, I've said this, I probably even said this the last time I was on your podcast. I think our space, it's the easiest space in the world to make money, but it is the most difficult space in the world to hold onto it. because anybody can get lucky for a year or two or this or that.

15:34But to have a defined process, to be able to withstand the volatility, to believe with deep conviction in what you're doing is hard. The reality is, I think if you just own Bitcoin and you hold for 10 years, I've said this in 2019 and 2021, you ask why am I bullish? Because I do believe that Bitcoin is the core asset. I am, it's very funny, I'm a Bitcoin maximalist, and I also believe in a multi-chain future. And people think that that doesn't, that's not consistent. It's very consistent. I think that Bitcoin, you know, and the code is the core asset. Everything else sits underneath Bitcoin. Every belief system, everything.

16:20Ethereum solved for programmability, Solana for speed, and we'll have other cryptocurrencies that solve for different specific niche things. But Bitcoin is the gold, is the core. You don't spend it. You have it on your ledger in a safe and you don't look at it. I don't stake it. You don't lend it. You don't anything. It's just, and again, I come a little bit from the physical gold space. I have my physical gold company, GBI, that I started in 08, 09. And so I come from that gold world of really believing that having your bar with your name on it in a vault, that type of security and ownership is very important.

17:03And so for me, I'm not active. Like all my guys are very active in DeFi, you know, all of them. But I'm not. I have, you know, my Bitcoin and ETH are away. I don't think about it. I don't look at it. I have my view. And I think that's very hard. I think it's very hard to have the patience and distance from the success of Bitcoin and Ethereum. And I call them together because they're the sort of two core assets. And Solana now, I think, is approaching that. It's very hard for people to believe that, oh, all I have to do is just buy this thing and come back in 10 years. And I'll have made money.

17:45And I won't have to do anything. I'll have made much more than if I do all the shit I do. Correct. Correct. And it's a very hard thing for a human to believe, but hold on a second, that you absolutely do nothing because our mentality is you work hard, you make money. And the reality is you are getting paid for something. You are being rewarded for having a vision about the future that will be right. And so why you say, oh, I'm always bullish when I post. I've been posting less now because I've been inundated and I just have too much going on. Whereas, you know, four or five years ago, I had, I was able to, we weren't invested in so many companies.

18:24I have eight board seats. I already mentioned to you, we have all these companies and we've just launched our fifth fund. We had our first close. We have more money coming in. I have more investments to make. I told you today, we closed, I think on two deals for our fifth fund, not closed, but we've, you know, it's lined up. So I have less time to sit back and think about, you know, saying something interesting. Like, I like to point something out that's interesting. But the reality is that people have to be reminded that they are getting paid to sit. You know, you're getting paid to have patience.

19:02You're being rewarded for having vision. And it's like this from this great book, Reminiscences of a Stock Operator, which is Paul Tudor Jones's favorite book on trading. Many traders from the old world, macro traders, this is their favorite book. And one of the things that he says in the book is that he says, all of the money is made in the sitting. And this book was written 70, 80 years ago, or whenever it was written, it was post the 20s. And so every portfolio manager, you know, trader, of course, is read, reminiscences of a stock operator is what it's called. And it's about a very famous, you know, speculator in the 20s.

19:46But there's some nuggets of wisdom in there like that. You know, all the money is made in the sitting, right? You said before, I needed 15 years to fill in command as a portfolio manager. Yeah. This podcast is called When Shift Happened. what's the shift in mindset that's needed in an universal career to become or to feel more in command and actually start to understand i know i finally know what the hell i'm doing here yeah well look i was very fortunate to work with some of the greatest uh money managers of all time and so and you know steve cohen julian robertson stan druckenmiller or in the old world, these are some of the greatest investment money-making people of all time.

20:39And so I was able to learn from them and see how they operated and also understand how my natural style was very different. Steve is much more trading-oriented than I am. He's very much on the go. I don't move as much. I'm looking for bigger structural changes. You know, Julian Robertson, the risk appetite of that individual was greater than I've ever seen of any person ever. The comfort that he had with risk, giant risk, was unbelievable. I witnessed it. I lived it firsthand. Okay. And, you know, Druckenmiller. Do you have an example? Well, yeah. I mean, I'll give you an example. Something that seems crazy to you in terms of his thinking.

21:24an example. In 1993, when I was there, we had a$3 billion AUM hedge fund, Tiger. It was the second largest in the world after Soros. And we built a swaption portfolio. So that's options, long-dated options, one - and two-year options on swaps. Those are interest rate swaps in Europe. We believed there was a big recession in Europe. Interest rates needed to come down. and Germany was in its weakest position since the war. Economically, it was a very clear bet, and there was also the ERM compression of yields. And so Julian had a very high degree of conviction. The AUM was$3 billion. We put on$50 billion of notional exposure.

22:15We put$1 billion of the$3 billion into option premium. Okay. $1 billion of one year and two year options on two and three year interest rates in Germany, France, Italy, Spain. Okay. And I was responsible at the time, extremely young for actually executing many of those trades and getting the size on. And, you know, of course, Julian and of the two guys who I worked for in the macro area, It was just a small little group of us, three of us. And I used to come in at 3 in the morning to buy these swaptions in Europe. OK. And there were days where we were up or down$300,$400 million. So the fund itself would swing$300 to$400 million in a day.

23:11This is in 1993. So that's like a more than 10 % swing for the whole fund. Yeah, but the dollars, okay,$300,$400 million, this is 30 years ago, right? Yeah. And Julian, you know, he wasn't thrilled about it, but he didn't wince. I mean, you don't never see anything like that. Steve Cohen, you know, has built a massive business, massively successful, guy's worth over$30 billion. The fund is probably$50 billion or whatever it is. He doesn't have that risk appetite. He would tell you that. You know, Stan Druckenmiller had enormous risk appetite and also, you know, arguably the greatest macro portfolio manager of all time, you know, with Soros, but probably on his own.

24:01And, you know, to witness the way those people looked at markets, it was Julian and then Steve and then Druck. And I learned a lot of different things from Druck. But it was seeing that his global macro analytical framework was very similar to mine gave me a huge amount of confidence. And it didn't mean we didn't lose money. It didn't mean that I didn't make mistakes. But after that experience, and I did well there. and had some unique ideas, executed them, turned them into money. And Stan also showed me how you could use a macro idea to start a business. And so he and I started a company together called Agcoa, which eventually became the largest private holdings of farmland in the United States.

24:57And we sold that in 2013, seven years later, to the Canadian Pension Fund system. And then, you know, three years ago, Bill Gates bought all those farms that made him the largest landowner in the United States. But the fact that you could have a macro idea, and this is a time at the time we're very focused on agriculture and corn, soy and wheat. And he loved that idea. But he wanted to express it in a different way. And I came up with this idea that farmland prices in certain locations producing certain crops could double in the coming five to seven years. and we were right about that and we expressed it in a different way through a business and I think that's very very powerful you know to start something from zero it was an idea in my head and truck thankfully got behind it and we were partners in that thing for seven years and that's sort of what we do with the funds now like I had this big macro idea about the digital asset ecosystem being a thing, right?

26:00Not just Bitcoin, not just ETH, but the digitization of all money in finance and RWA's tokenization, stables. I thought all this was, you know, potentially going to happen. And we, you know, express it by taking, you know, 10-year investments in businesses, you know, that we think are capturing that, you know, that macro, you know, that captured the macro wind at the back, you know, and all, but then it's more complicated. You have to have good CEOs and, you know, it's, it's, it's not that it's not just a macro bet on the space. We do a huge amount of, you know, bottom up diligence. So, um, to answer, I think I answered the, the, the question, um, I would say a lot of failure, uh, you have to have a lot of failure to get to a place where you have a lot of confidence.

26:52And even when you have a lot of confidence, And we had two companies that went to zero. I never thought I would ever have a zero in my whole life. Because in macro, you don't have a zero. No, in macro, you bet on interest rates or currencies or commodities. Gold is never going to zero, right? But we had two companies that went to zero. And that's not acceptable. And the people involved with those of my team were removed. and I'm very clear about that. We should never have any zeros. It's my responsibility at the end of the day, and that's also largely why I can't really do venture because I'm not comfortable having something go to zero.

27:40And that style of investment can be very successful. You have 100 investments, we say, 99 go to zero and one is Google and you've made a 20X or whatever on the fund. But that style is very different from what my natural style is. Quick shout outs to our legendary long-term When Shift Happens partners, without whom none of this would be possible. Thank you to Cast, my go-to global money app to store, earn, move, and spend stable coins across 170 plus countries directly with Apple Pay or a physical card. On top of that, I can also get paid in USD and Euro with my Cast virtual account. Use my promo code SHIFT, S-H-I-F-T, and my link below to get 10 % off your membership, earn up to 3 % instant USD cashback on every card spend, and get up to$250 in cash for referring your friends.

28:40No banks, no borders, just money that moves with you with stable cash rewards. You said something some time ago, markets have a tendency to do the unexpected. Why? Well, I didn't exactly say that. I think what I said was that, you know, it was about gold, you know, because I'm still very involved in gold, of course. And I always say gold never does what you expect it will do when you expect it to do it. Traditionally, it's been a very difficult asset to just hold as a result.

29:27Surprise, and it has to be that all markets that are strong, all bull markets, there has to be uncertainty. It has to be something that you don't quite expect for it to work. So when you go into an investment, whatever it is, and you have full conviction, massive, you are so comfortable, you know it's a home run, it's probably wrong, which is a weird thing because you have to have massive conviction to put a big bet on, but you have to also know and believe that there are areas where there's risk, where you could be wrong. And it's that risk that keeps people out of it. It's an example, Deribit, which we invested in in 2021, a little bit over a billion dollar valuation, you know, was just bought by Coinbase.