“At some point down the line, everything we have of value will be on the blockchain somewhere in this digital asset ecosystem.”
Dan Tapiero is the CEO and Managing Partner of 10T, a growth equity fund. He is also the co-founder of Gold Bullion International (GBI), a physical precious metals platform for the wealth management industry that also expanded into the cryptocurrency universe in 2014.
With the expansion of the money supply, gold continues to act as an effective hedge for traditional institutions, but Bitcoin represents an even bigger opportunity. The digital asset class ecosystem will be bigger than gold and its invention is revolutionary in nature. Bitcoin’s invention is akin to the combustion engine and electricity. “The 8-page white paper by Satoshi Nakamoto solved a math problem that hadn’t been solved for hundreds of years, the Byzantine Generals’ Problem- the problem of distributed trust. How do two counter-parties trust each other without an intermediary?”
Blockchain technology as a whole represents the future of value storage. Ethereum has its own unique properties and offers the ability to facilitate smart contracts and more. “At some point down the line, everything we have of value will be on the blockchain somewhere in this digital asset ecosystem.”
LISTEN AND SUBSCRIBE
SPEAKER
Dan Tapiero
Chief Executive Officer & Managing Partner
10T
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darcie: (00:08)
Hello, and welcome back to salt talks. My name is John Darcie. I'm the managing director of salt, which is a global thought leadership forum and networking platform at the intersection of finance technology and public policy. Saul talks are a digital interview series that we launched in 2020 with leading investors, creators and thinkers. And our goal on these salt talks is the same as our goal at our salt conferences, which we're excited to resume here in September of 2021 in New York. And you can find out more about that event@salt.org, and we hope today's guest will join us there. But our goal is to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. And one of those ideas that we focused on heavily starting towards the middle of last year is the digital asset or crypto ecosystem.
John Darcie: (00:57)
So we're very excited today to bring you the latest installment of that series with the great Dan Tappy arrow. Uh, Dan tarot arrow is the chief executive officer and managing director of 10 T, which is his latest venture. He brings more than 30 years of experience in macro and commodity investing in trading research and economics into that venture as well as entrepreneurship in a number of different lanes, uh, before founding 10 T Dan was the managing partner at [inaudible] capital advisors, a global macro investment fund that he founded in 2003. He's the co-founder of the gold bullion international organization, which is a physical precious metals platform for the wealth management industry that has also expanded into the cryptocurrency universe in 2014, which is an interesting dichotomy that we're looking forward to diving into during this talk. He's a co-founder of the agricultural company of America, one of the largest farmland REITs in the U S at the time of its sale in 2013.
John Darcie: (01:54)
So as you can see by his bio, he has a wide array of different experiences within the asset management universe, but a global macro investor at heart, which perhaps is what led him to Bitcoin, uh, hosting today's talk is Brett messing, who is the president and chief operating officer at SkyBridge capital, which is a global alternative investment firms. SkyBridge has, uh, today, I guess maybe it's creeping over $600 million of exposure to Bitcoin through its flagship funds, as well as a dedicated product in the space. And with no further ado, I'll turn it over to Brett for the interview. And I might chime in here or there, uh, Dan would follow up well,
Brett Messing: (02:31)
Uh, I think Sean, Dan, thanks a lot for joining us. Um, I want to spend some time talking about gold and Bitcoin in your journey, but before we do, uh, in the pre-show, we were talking about Coinbase as IPO, some new highs being hit and you were looking at prices and seem pretty excited and said, there's a lot of stuff going on. So of all this stuff going on, like, you know, what do you want to talk about? What, you know, what, what do you think is most significant?
Dan Tapiero: (02:58)
Well, um, it's funny, I, I posed this question on Twitter a few months ago, early in the year saying, uh, asking what would be the most, uh, significant event of the year. And, um, you know, people had different comments and I, I forgot exactly the answers, but the Coinbase IPO I think was either first or, or, or very high up there, uh, in the ranking. And look, I think it's so important because look, it is the brand in the us. Um, it's a large company, as we saw profits are excellent. Um, you know, they're backed by some of the best VCs in the world. It's a real organization. It's very buttoned up. Um, and again, it'll be the first public company in the large public company in the crypto space. So it's definitely going to be a bellwether. Um, all that being said, I have to say that, you know, people forget that crypto blockchain, however you want to Bitcoin, however you want to describe it, uh, is a global business.
Dan Tapiero: (04:06)
And actually the, some of the most profitable businesses, larger much larger businesses than Coinbase are overseas. Um, so I would just say that, you know, there is a premium, I think on us companies just because there's scarcity right now. Uh, I suspect that over the next few years that'll change. Um, and also, you know, the degree to which U S companies are regulated and sort of ready for, let's say ready to be public, I think is greater than some of the foreign companies. Uh, yet I just think that as we watch this Coinbase IPO, we should be just cognizant of the fact that the U S really is still, you know, not, not a small percentage, but just not that larger percentage of the businesses, uh, that are in the digital asset ecosystem broadly speaking. Right. I mean, Coinbase is not even close to being the largest exchange. Right. You have Binance Hoby. Okay. Ex um, you know, now FTX, uh, all actually, uh, FTX growing faster, but you know, the, the first three certainly much larger. Um,
Brett Messing: (05:16)
Yeah, I hear that. I agree to have it tell you feel like in terms of, and we discovered spend most of our time staring a Bitcoin, you know, we haven't, uh, we haven't really evolved that far past it, it feels like us adoption is what's sort of driving Bitcoin. Do you do not at least today in 2021, would you not agree with that? Well,
Dan Tapiero: (05:38)
The U S always thinks it's us, that's driving everything. Um, I just, as an example, Hoby, so I should mention a little bit about 10 T so that I just, because, you know, I'll be saying things that maybe people think, well, where's he getting that from 10 T the private equity fund I run, we focus explicitly on mid to late stage companies in the da. So that's, that's all we do as far as I know, I think we're the first fund, um, first private equity fund to explicitly and only focus on these mid to late stage companies. Uh, those are companies that are, let's say over $400 billion in market valuation. They've established a revenue streams. They figured out how to make money. Um, there's a business, there's a mode around their business. In some cases, you know, they have hundreds, if not over a thousand employees, uh, and certainly tens or hundreds of millions of dollars in revenue.
Dan Tapiero: (06:34)
And so most of the funds that we know, you know, that you've heard of, uh, entry, sin and poly chain and Pantera, they all focus mostly on early stage seed, you know, a B round, and we're sort of more BC focused and later, um, and I give you that background just to say, um, that, you know, yes, uh, you know, yes, Coinbase, uh, is important, but, you know, as, just as an example, you know, you talk about then Coinbase has been important in the, in the U S for adoption purposes, but I mean, for instance, uh, Hoby the, the, um, the, an exchange in Asia that has 40% of its business, uh, in China, they did $2.5 trillion in volume in Q1 alone, right. That business made 700 million EBITDA just in Q1 alone. So, you know, and Binance is numbers are, are, are tremendous as well.
Dan Tapiero: (07:32)
I mean, last year, I think they did over a billion in EBITDA. So again, there's a lot of volume that's being traded. There were a lot of interesting businesses growing up all around the country. And I think it's just, you know, the U S yes, the U S institutional, uh, world is now showing interest, not clear to me what percentage they are, let's say of, of volume. Um, and I think you can, you can really go down and dig down into the chain and look at the chain analytics and figure out broadly where things are coming from, but again, Coinbase, uh, and then, you know, crack in, which is the second largest us exchange, um, are still, you know, kind of small compared to those three that I mentioned, right? So I put this more in a global, a global context, you know, so again, I'm excited about Coinbase.
Dan Tapiero: (08:25)
I think it's wonderful. Uh, they're going to do seven or $8 billion in revenue. So a hundred billion dollar valuation, 12 times revenue is, seems relatively reasonable. Um, you know, I, I'm a little concerned in a way for my own business, because if things, you know, as John said before, if Coinbase is going to 300 billion, it's going to make it a little more difficult for me, uh, to build positions in our portfolio. Um, I don't think it's going there tomorrow. Uh, there's some world in the future where it could go there, but, um, you know, I think a hundred billion with, uh, the revenues that they should do this year, I think is, you know, is reasonable.
Brett Messing: (09:06)
Hey, Dan, I'm a golden alum. I'm still digesting the idea of Coinbase being bigger than Goldman Sachs. We'll hold off on the 300 billion for awhile. Like, you know, a hundred is just fine. So I want to take a step back. So we we've just got to know each other. The first time I heard you speak was in the fall. And what, what really struck me was you're a guy who would not just somebody who invested in gold, but build a gold business based brick race Bitcoin. And there are so many people in the gold business, right. Who have not. Um, and so you're sort of, open-mindedness, you know, um, I found really interesting. So you just share that journey with, you know, with others here. Yeah,
Dan Tapiero: (09:52)
Sure. Um, you know, it's interesting, uh, you know, investors who have a hard money bias, um, often, you know, believe in gold and there is an aspect of Bitcoin, uh, that, that, that, that, that is supported by a hard money view. And we know this because obviously Bitcoin, there are only 21 million units or 18 and a half billion already been vined. Uh, there's a finite number of Bitcoin gold. Isn't exactly finite, but it's very scarce. And the supply increases very slowly. So just on a very sort of basic level, it's, you know, if you're an investor and you have a portfolio, those two things are in super limited supply, versus let's just say Fiat currency as an example, uh, where the central banks in the last year even have been really exploding, the money supplies, uh, us, China, Europe, we see central bank balance sheets really exploding.
Dan Tapiero: (10:51)
And I think with, you know, with reason because, you know, post COVID, I think they did the right thing that liquidity needed to be there. We had probably the greatest single shock that I can recall, uh, in my life, uh, to the markets and to the economy. And so they did the right thing, that being said, they've increased the supply massively. And so it doesn't take a genius to say, okay, there's a lot more of this, and there's not more of this other thing. And so the thing that is not being debased or the supply increased can go up in value. And so that's very, very simple terms. Um, I came to it because my physical gold business GBI, um, we in 2014, we integrated with a company called bit reserve, which is today uphold to the uphold wallet. And we were the first place, uh, in the world where you could buy and sell physical gold to buy and sell Bitcoin and ripple.
Dan Tapiero: (11:46)
And we had some young guys on the team back then they were really into this world, you know, for me, it was a nice idea. Uh, Bitcoin at the time was sort of small. Uh, we spent a year integrating with this company. So, uh, you know, I was part of that journey. And so I was very aware of it, but I wasn't really that engaged or that interested because as a macro guy and having been in the macro hedge fund world for 25 years, I was used to investing in bigger things, right. You know, currency and bond markets, commodity markets, and Bitcoin at the time was still very small. Um, so that was my initial introduction to it. And then in, uh, at the end of 2018, after the Bitcoin price had dropped, uh, 85%, I started getting interested in it because as a, as a macro guy, I've traded many bubbles, uh, and blow offs before.
Dan Tapiero: (12:40)
And so it typical bubble up. And then when something drops 85%, usually it's either going to zero, uh, or it's a buying opportunity. And so I just started buying in my own entity [inaudible], uh, detached capital. Um, again, it took me a lot of work. Uh, I spent literally in Q4 18 Q1, 19, probably six months there, uh, reading, honestly, it was like 10 hours a day read, you know, at least 10 books, hundreds of articles listened to podcasts, uh, really threw myself into this world and sort of fell down the rabbit hole. And when I did that, I realized that Bitcoin and this entire digital asset ecosystem is something that is much bigger than actually just gold. So I think gold is a fantastic hedge for the legacy financial system. And let me tell what I mean by that is that with bonds being neutered as an asset class now, I think, you know, a traditional portfolio that was 60 40, um, you know, from 1981 until now has done fantastically.
Dan Tapiero: (13:50)
And every time you've had a little wobble in the economy or things fell down, your bond saved you. Um, now I think in the next five years or so if we have a slow down, uh, at some point, um, you know, the bonds will not be able to protect you the way that they have in the last 30 years. So they can't really go much below zero in my view, um, and they don't yield anything. And so in my worldview gold, uh, in that scenario, gold could still go up 30, 40%. And so I think, um, you know, some people in the Bitcoin space are saying, oh, gold is worthless. It's being replaced by Bitcoin. I don't see that at all. I think it's a fantastic hedge for the legacy portfolio for the hundreds of trillions of dollars that are in the, you know, traditional or legacy world.
Dan Tapiero: (14:41)
Um, gold will be a great hedge for the asset side of your portfolio. So, however, Bitcoin, while also maybe a hard money, uh, hedge is also something much bigger. And I really think that Bitcoin is an invention. Uh, I say akin to the invention of the combustion engine. I think it's a con akin to the discovery of electricity. And I sort of came to that conclusion, you know, after that six months of work, because what I didn't realize in 14 that I realized when I really dug in was that the eight page white paper by Satoshi was really something miraculous that it solved a math problem that had not been solved for literally hundreds of years, this Byzantine General's problem, you know, the problem of distributed trust and therefore, how do two counter parties trust each other without an intermediary. And, you know, that problem you would think was, was simple.
Dan Tapiero: (15:39)
Like, just how do I send you some value without an intermediary, but, you know, mathematicians, scientists, cryptographers, they were sitting around for years trying to figure out how to do it. And they couldn't until the mechanism of Bitcoin, the Bitcoin network, uh, was explained, and I don't want to say invented, but then also explained in that eight page white paper. And so when you see that as like the crowning moment of 30 years of scientific researcher, like holy cow, all of this work came before the publishing of the white paper. This is something ingenious, something new. Um, and I just, you know, it was at that moment that I just thought, wow, this is much bigger than, uh, a store of value. This is much bigger than a hedge. This is basically the money protocol for the entire internet, right? So the internet, we send information back.
Dan Tapiero: (16:39)
Do you remember in the nineties, we used to be afraid to put our credit cards on it because the internet was invented without a security apparatus on top of it, the Bitcoin network is this Bulletproof security apparatus. It's never been hacked. I don't think I can ever be hacked. Now, the proof of work algorithm is too strong. Um, and so I just think that at some point down the line, everything that we have of value, everything will be on a blockchain somewhere in this digital asset ecosystem. And you'll have central bank digital currencies. There you'll have a whole bunch of different blockchains that do different things. And Bitcoin will be, you know, what role pal calls the pristine collateral of the, of the new system, right? It's the, it's the on, um, it's the, uh, um, undebatable asset that underpins all the other assets in this new digital world.
Dan Tapiero: (17:36)
And importantly, all of it will be fungible with each other. So, you know, there's a world one day where maybe you're walking around on your phone and everything that you own personally, a value will be on that phone. And we'll be divisible into small amounts and fungible with each other and sitting on a blockchain. So that's sort of a little bit of my sort of big picture worldview. And I think gold has a place to play really as a hedge for all those legacy assets, because you know, the dollar isn't going away, the whole world isn't going away. It's just that there's a slow transition to something that's better, right? That's, what's, that's, what's going on. I mean, look, the swift system that we use today for, for wires was invented in the forties or fifties, there is absolutely zero chance that in the next 10 years, we're gonna 10 years from now, we're going to be using a pre-internet technology like the zero chance. So,
Brett Messing: (18:35)
No, I, uh, there's a lot to unpack there. So I want to start with gold. So is gold a hedge because let me ask you something over the last decade, gold is up 10% and we've had two global crises, massive fiscal and monetary stimulus with the fed balance sheets gone from 3 billion to 8 billion, and gold is up 10% in a decade. It feels like it's, it's failed. Is that, is that a fair criticism?
Dan Tapiero: (19:09)
Um, you know, yeah. Yes and no, because, um, you know, gold, I always say this, and I've said this before gold never does what you wanted to do when you think it should do what it should. It just never does. And so in over the short term, gold can be extremely frustrating, but over longer periods of time, uh, gold has really done, uh, you know, excellent. And it really just depends on what your starting period is. Uh, if you started looking at things from 2015, uh, you know, 14, 15, 16 gold was at 1200, I think, uh, or even less now it's at 1700. So it's up roughly 50% in the last, you know, five, six years if
Brett Messing: (19:54)
You have your well. Right. I know,
Dan Tapiero: (19:57)
But I mean, that's the thing is if you look at assets from 2000 gold is go, is up 600%. If you look at, from January, 2000 until today, uh, I think gold is up even more than the S and P 500. So it really, I think it is. So I think it really depends where you, you know, where you start your holding period. Um, look, I, I it's been disappointing the past nine months. There's no question. I would have thought it would have done better. Um, but it hasn't, but I still think it's going to go up and make new highs within the next year. Uh, I just think it's one of these things. Sentiment is terrible. You know, a lot of people are thinking that Bitcoin is replacing gold. Uh, as I said, I think Bitcoin is something much, much bigger than gold, like eventually, um, you know, as is the da. So I don't, I'm disappointed, but I, I think if you're, um, you're trying to manage, uh, uh, a broad portfolio, let's say if you're an institution, uh, I think you need to have about 5%, uh, in gold, you know, as a, as a hedge. So
Brett Messing: (21:05)
I think the goal narratives been super helpful for Bitcoin, but, but, but I agree that I think it's much bigger than gold. I also think if you, if you took the owners of gold as one circle and the holders of Bitcoin of another, those there's very little overlap. I mean, I've been doing this a long time, I've known gold, right? And if I hadn't bought Bitcoin, that money would be in stocks and real estate, I would not have bought gold with it. I really, there are people like yourselves, other macro guys, you know, tutor Jones who would be in gold, right. Cause that's just, you're used to moving across these asset classes, but I think the overlap is really small. Do you agree?
Dan Tapiero: (21:42)
Well, I do. But again, you know, you speak from a completely American perspective. And so understand that only 8% of total world physical bar demand comes out of the U S so the U S is an irrelevant player on the world stage, um, on the gold world stage, uh, China and India consume about 60% of the world's physical gold. And if you throw in the emerging markets as well, that's probably up to 80%. So again, we, we have a us centric way of thinking about things about the dollar and about NASDAQ, but I think that's, that's basically over, it's not that the U S isn't a great place, but look, you and I both remember, I remember 1980, very clearly, 1990, uh, you know, 2000. So 1990, you had the entire communist block. They just emerged from zero. Uh, China was barely a country as an economic entity in the year 2000.
Dan Tapiero: (22:39)
And so relative to the growth in other places in the last 20, 30 years, you know, the world has grown up in the U S is, has not grown as much. So we come from a background where there really was only the U S and maybe Europe, and maybe a little bit of Asia. Um, but now that's changed. And this is a fully global world, um, where there are other parts of the world, especially Asia that are growing much more quickly that have different habits, different regulations. Uh, I don't think the Chinese are going to stop buying gold. I don't think the Indians are gonna stop buying gold and Americans never really had a strong proclivity for it. Um, I actually think that might even change, you know, as currency, um, you know, as currency, I don't want to say becomes worthless, but continues to not yield anything and as bonds okay. Which reflect currency plus duration, I think bonds potentially could end up being worthless, like as an asset class. Like I haven't owned any bonds for many, many years, and I don't know why anyone would own any bonds. And so for me out of bonds, one of the natural moves out of bonds. I'm talking about treasuries, of course, is, uh, is into gold. So do you see what I'm saying?
Brett Messing: (23:58)
Yeah. I want to make one point, then I've hardly left my house in 13 months. So I think you have to excuse if I have a parochial and not a global things. Yeah. But it's not you specifically. I think it's everybody
Dan Tapiero: (24:11)
And tutor and guys like me, we lived our life so much as global macro people in terms of, you know, focusing on opportunities all around the world, that really didn't matter so much, you know, where the opportunity was. We were looking around the world. And so, uh, you know, maybe that meant we missed a Google's move or Amazon's a rally or whatever it is. But, um, I think that framework is very helpful and understanding why also Bitcoin and the digital asset ecosystem are so important that global. Yeah.
Brett Messing: (24:49)
So, you know, in, in a prior life, I actually was deputy mayor of LA and I served as the ex-officio member on lasers, which is the LA city pension plan. And I was involved. And this was a decade ago in reducing the target return for the pension fund, which, you know, requires making adjustments to the budget. Um, as you point out the 60, 40 portfolio is dead. Right. I don't know how they could be making fixed income allocations. Uh, w w where does that money go? Right. And, and how does that money find its way into Bitcoin or does it, I
Dan Tapiero: (25:25)
Think it has been finding its way into Bitcoin. I mean, look, I'll just tell you my personal experience. Uh, I run the investment committee for an endowment, you know, as part of my charitable, uh, you know, time and, uh, it's, it's a relatively large endowment for a school. Um, and we went to zero bonds about three years ago and Q1 19, thankfully, um, you know, I was able to, with some other people on the committee to convince the committee to put 1% of the entire endowment into Bitcoin and the digitalized ecosystem. So we followed the Wences Casares, uh, get off zero, you know, just put, you know, mark use, go and Pompe talking about, get off zero, just put 1% of your portfolio into Bitcoin. And so we did that. Um, and you know, it's been fantastic obviously from that period till now, but in a way that was sort of a little bit of our replacement of bonds.
Dan Tapiero: (26:25)
We also have between a five and 10% allocation to gold, whereas five years ago, we didn't. So I think balancing the Bitcoin, no, no, no, we're not gonna, I, you know, I've said, look, we'll look at it when it hits three, 400,000, which has been my target, you know, and I've said that publicly for, you know, at least two years, um, you know, if it gets there, we'll think about it. And then maybe in five years, uh, we'll think about it again, but it's allowed the endowment to outperform as well, because as you know, these very conservative, uh, endowments, uh, and we're maybe a little less conservative, but you know, they're not, um, uh, they're not used to actually making much alpha, right. You know, you stick to your benchmark and if you outperform it by a percent, that's a big deal. And all of a sudden we have this asset class that's outperforming, you know, that's driving that, uh, the performance like significantly more.
Dan Tapiero: (27:23)
So I think slowly the money does come out of bonds. Um, and some of it will go into equity. There's some defensive equities out there you can own, um, maybe a little bit moves into some corporate bonds. I don't really love that, but I do think gold could potentially have a Renaissance in the next five years. And I know no one's saying that, but that's largely because there are no advocates or very few advocates for gold out there because the average age of the owners is like 65. And many of them have just, you know, they've just sort of checked out of the day-to-day world. Whereas on Twitter, you have, you know, 10,000 people talking about how great Bitcoin is, uh, you know, every minute of the day and how it's going to replace gold, et cetera. And there's some, I don't want to say replace, but you know, it's certainly one alternative, but I think you should own both. And I think they have different functions in your portfolio. It's not so crazy. And to be ideological about investment should tell you that there's a problem there, right? Because you shouldn't be ideological about investments, you should make right investments that make sense for your portfolio. So then I
Brett Messing: (28:34)
Want to merge a couple of these things, your macro background, the big Bitcoin and the psycho, which is, it seems like many people I speak to in Bitcoin are expecting this cycle to be like past cycles, right. Where we had the having and May, 2020, what's the peak going to be? How far is the pull? Gack back going to be other share my own perspective. I know you won't, you'll give me your years, regardless is all I know is, is not going to be the same. You know what I mean? I'm not, I'm not, it could be shorter. We get of a bear market next week. It could be, there's no evidence to suggest that, but I just think it's very, very unlikely that the cycle is substantially similar to the prior ones. Um,
Dan Tapiero: (29:20)
You mean, in what sense that, you know, we've had five or six corrections of 80%, is that what you're
Brett Messing: (29:25)
Talking when people are saying, well, the peak usually comes between 14 months and 18 months after having right. Go up this amount. So there's a, there's a, there's a time aspect to it. There's a price and decline aspect to it. Um, and I think there's there, you know, it's, everyone's got the same trade on and whenever I see everyone at the same trade, it usually worked. Doesn't go that way. And, but what do you think?
Dan Tapiero: (29:50)
I, I completely agree. I mean, you know, I completely agree that, uh, there'll be some correction at some point, but, uh, I don't know that it's following any specific route or path. I mean, the surprise would be to be honest, the surprise would be if we got up to 100,000 and just stayed there for a few years, you know, more or less like give or take 20, 30%, uh, or whatever, 40, I mean, just up and down around that number, that would be the surprise. Um, so I sort of think a little bit the way you do, uh, but could we also go up to 300,000 and then correct back down to 50? Sure. I mean, there's no, you know, it's still, you know, I say an emerging asset class because only like one to 2% of the world have crypto wallets or accounts. Right.
Dan Tapiero: (30:43)
And so that sort of reminds me more of like the internet in its early stages, 19 96, 19 96, 1% of the world had access to the internet. Right. So, and by 2006, it was 15%. So that's a 15 X in 10 years. I think that this world, this digital asset ecosystem I think can grow certainly 15 times over the next 10 years. Like I, that's why I still think it's relatively early, it's an early asset class. And therefore you can't discount that it could do that 300 and come back down to 50. Right. I just don't know. Um, I just recommend people not to trade it. I think you have to allocate a percentage of your portfolio, have a target and come back to it. And even as a professional money manager, having traded, you know, global macro for all those years, I think, unless you're doing a 24 7 and you're professional, you should not be sort of moonlighting trading crypto. I mean, it's, it's very, I think it would be very difficult.
Brett Messing: (31:50)
It seems untradeable right. It seems like, I mean, you know, you also have event risk, right. You know, you, you have your position on, and then a line Musk comes in, right. Or name whatever event may or may not happen. It, you know, it just doesn't seem like, uh, like anyone who's winning, winning, you know, I think, you know, you just, just, just gotten lucky. Um, w what, what do you see driving us to your price target? W w what events are you looking forward to see, to know that we're on pace for that?
Dan Tapiero: (32:21)
Uh, I think there are so many, um, look, one of them, uh, uh, one of them, I think obviously will be central bank and government adoption, right. Um, corporate adoption, which is what sailor has been pushing, I think, uh, is sort of one level. Again, he's a very advanced, uh, tech focused guy and to have Elon mosque and, you know, Jack Dorsey and sailor putting some of their bounds sheet into Bitcoin, they're at the very cutting, cutting edge of it, right. Massachusetts Mutual's allocation. Um, last year, I think it was a huge sign that you could have the beginning of sight, very conservative people. You ask, what are these guys doing, you know, with all their bonds? Well, here, Massachusetts mutual is doing a toe dip. So I think that it's just the first ending for the institutions, the corporate end. I don't think it's even started, uh, in terms of central banks, um, you know, and government.
Dan Tapiero: (33:26)
So that could certainly very easily take us up to 200, you know, potentially 200, 300,000, um, you know, just that forget about even, you know, increasing global adoption and all these places forget about even, you know, um, you know, uh, banking the unbanked, right? That's the whole idea that, you know, in the emerging markets, they'll take up crypto more easily because, you know, they'll bypass the, you know, the first stage of, you know, the banking of being, you know, countries that don't have proper banking systems will, you know, jump through that and, and, and go straight to crypto. Um, there, there are a whole bunch of variables, but just those two alone could probably take you up there, uh, to 300, because I'll tell you where a $1 trillion valuation now. So it's just saying, going to 5 trillion, right? And if you look at total assets out there they're $500 trillion of value in total assets. I think they're $192 trillion of cash. Plus cash flows, fixed income in the world. So we're talking about going from 1 trillion to 5 trillion, not that big a deal, that would be a 3% exit as of a two and a half percent exit is from cash and from bonds, right. Just that right.
Brett Messing: (34:47)
So Dan, on the micro strategy corporate event, I thought Ross, Steven said something very interesting, which is, he said that where we are in Bitcoin is that the left tail has gone, right. We've taken zero out of the equation. I guess my question is a two-part one is, do you agree with that? Uh, and his view obviously was if you, if you cut the left tail off and Bitcoin is massively undervalued, um, and secondarily, if we're wrong, and this is like a video that we wish would never, you know, be seen again, because we're just so wrong. Um, why are we wrong?
Dan Tapiero: (35:23)
So I agree with him that it's impossible for it to go to zero. That was the reason that I sort of decided to focus on this or deciding that I was going to focus on this rule for the next 10 to 15 years. Because, um, you know, after doing my research, I just thought some intervention of this significance just can't go to zero. And that, that, you know, people are wrong really just because they haven't done the work and they haven't realized the significance of, you know, of what's been invented. So I completely agree. That was sort of one of the main reasons I really got stuck in, because I believe there's zero chance that go to zero now. Uh, so I don't think it can go to zero and you're saying, so what would be, what would be something, uh, that could happen that would, I would be wrong? We would be wrong about what about it going to zero?
Brett Messing: (36:17)
Oh, about, you know, not, not, not zero necessarily, but, you know, it's, you know, it becomes, it returns to being a niche asset trading between a couple of thousand and 10,000 in perpetuity like this, this, this, this turns out to be just a moment, right. You know, assets.
Dan Tapiero: (36:36)
Well, you know, I would have said in the first five or six years, that that was possible. Um, but I really, I, you know, the, the network effects have been too big. Um, I think the first five, six years it was vulnerable and it was still small. And, you know, maybe, you know, it could have been, uh, attacked and hacked potentially, but it really survived already. So it's really like, at what point do we actually stop saying, Hey, where are we wrong? We're going to go back to 10,000. At what point do we say, this is an invention akin to the invention of the combustion engine. And in fact, maybe this thing Bitcoin can go to 10 trillion in value or 20 trillion. And that the digital asset ecosystem is going to encompass $500 trillion of value. I think that's more rare. You know, when, when you said to me before, you know, it's not going to happen the way that it is before when everyone thinks something.
Dan Tapiero: (37:38)
I mean, I've done hundreds of calls and meetings for 10 T you know, my fun. And very often I get asked this, the, you know, the same questions can the government attack. It will, they will. They ban it. It uses a lot of energy, all these typical things that on Twitter, they call FID. Um, and these questions have been answered by guys a lot smarter than me in pieces, a lot longer than any of us are gonna reap. And so to me, all of that still is a sign that we're right about things, right? Like there's still so many doubters, there's such a wall of worry to climb. Um, I see zero chance of zero. And I think the more, you know, the, the other, the flip side question is how many people have you spoken to the talk about the DAA and Bitcoin in those terms as the money protocol for the entire internet one day.
Dan Tapiero: (38:31)
And I would say, you know, one out of a hundred, and then how many people say to me, can it go to zero? It's probably like 30 out of 130 to 40, 30% think that, you know, it still has this problem or that problem. Um, so I know that doesn't really answer the question, but I sorta think we're beyond that, uh, question. Like it's already with us, we have central bank, digital currencies. They're going to move around in this new digital world. Like the central banks have already validated it for you. So I don't know why it would go to zero, right. Although
Brett Messing: (39:12)
I have to tell you just, just, just today, you know, we were in contract with a pretty large wealth management firm. You know, we have a Bitcoin fund, that's conditional investors. And they were basically, NFW no crypto. We think Bitcoins go to zero. And I was like, really? I mean, this is a, this is, you know, I'm not going to out them because it would make them look really stupid. So I'm not going to say who it is, but you know, it's a pretty name brand place, so it, it's still out there. Um, but you know,
Dan Tapiero: (39:43)
Let me tell you what, when it's not out there anymore is when we have to work. Right. Well,
Brett Messing: (39:49)
The thing is interesting, you know, we were trying to, because we're mandated by regulators to provide quote balance, right? So I was looking for, you know, thoughtful anti-big coin pieces and they don't exist. In other words, if, if you do the kind of exhaustive research that you've done in iPod, you find ad hoc attacks, right. By folks on Bitcoin, you won't find a 20 page paper on why Bitcoin isn't, isn't a, you know, attractive investible asset. Or if you have, please send it to me. Cause I haven't found them.
Dan Tapiero: (40:23)
Yeah. I mean, look, I think in the first five or six years, there were some things out there. I mean, no, I know I, and I just think that, and maybe in the first five or six year, their fixers, there were some valid complaints. I mean, for a long time people said, no one uses Bitcoin. I can't buy coffee with Bitcoin. Right. It's not worth anything. Um, like it's not transactable, but that really wasn't, you know, that's not that w that's not really why it's important that that's not the sort of dominant narrative. Um, and I think it took going through many questionable use cases in narratives before getting to where we are now, right.
Brett Messing: (41:05)
In the early days you couldn't buy coffee, but John and I bought meth with our Bitcoin. So John, do you want to launch a few questions at Dan before we wrap it up?
John Darcie: (41:17)
I would love to. Um, so then you launched 10 T it's a, from what I understand, the $200 million fund to invest in crypto companies, you were talking about, you know, your concern that if, if Coinbase goes off at 150 or $200 billion valuation, which by the time this airs Coinbase will be trading live, uh, so we'll either look really smart or really dumb, uh, when that takes place. But you're, you've raised this fund to invest in the digital asset cryptocurrency ecosystem is that over-complicating things, should people just be investing in Bitcoin and Ethereum, and if there's any other blue chip products or protocols out there, why invest in the picks and shovels rather than just the pure play, you know, apex, predator, coins. Yeah,
Dan Tapiero: (42:03)
Look, I think, uh, and I tell this to all my perspectives, you know, uh, have 50% in Bitcoin, uh, and 50% in 10 T because it's a different, it's a different exposure with a very different risk reward profile. So like, as an example, in 2018, when Bitcoin went down, 85% of basket of these companies would have broadly maintain their value. So also, you know, a private equity fund invests over 12 to 24 months and we have a 5, 6, 7, 8 year holding period. And so, you know, a lot of people, uh, are not comfortable holding one thing. Um, you know, look, yes, Bitcoin is the thing. Bitcoin is fantastic. I would even say if you want, maybe do 85% Bitcoin, 15 or 80, 20, you know, 20 in, in Ethereum. Um, you know, I think the other cryptocurrencies are really more like early stage technology projects. And I think they're for VCs, uh, I don't know that they're for the average sort of retail guy out there who certainly doesn't have the capacity or capability to do the deep, the deep dive, and you don't know how to take apart, uh, you know, have the background in, uh, you know, programming.
Dan Tapiero: (43:20)
And I just, just, there are so many it's so discipline, interdisciplinary, this, this area that, um, there's more stuff that you don't know than what you know. And so the picks and shovels bet, um, I liked because it has just a very different risk profile. Uh, yeah, maybe we underperformed Bitcoin, maybe we outperformed Bitcoin. I don't know. Um, but for a guy from my sort of traditional, uh, background to really believe that I could make a five or 10 X on something, uh, is incredible and I'm happy with that. And I'll let the, you know, the young guys can play an Ave and uni swap and, you know, in graph and make 20 bucks
John Darcie: (44:05)
RP at 20 cents or, and
Dan Tapiero: (44:07)
Make, you know, 2500% return or 25000% return. I think that's wonderful. But again, you know, the VC model is more invest in 10 things, nine go to zero and one is Google. And my approach and my background is a macro investor. I want to make a broad sector bet because I want to, you know, I want to have exposure, uh, to this, to the value in the digital asset ecosystem going up. That's my, that's my bet. And I don't want to have any one thing I don't want to just don't exchange as we've divided the world up into three buckets for us, it's digital asset ecosystem gateways, uh, next generation financial services companies, and then blockchain infrastructure companies. And we're going to have a portfolio of three to five companies in each bucket. And my bed is, is that over the next five, six years, that that will appreciate, and that I'm not going to have to, you know, worry about the volatility or the businesses going under, as I said, they're already, I think mature, some of them are coming public soon. Um, so it's just, you know, different investors have different risk profiles, but if you were to say to me, Dan, you know, I'm just going to have everything in Bitcoin. I'd be like, oh, that's good too. Right. It just depends. You know what you're trying to do with your portfolio.
John Darcie: (45:30)
It's amazing. The way the conversation around Bitcoin has evolved. We're talking about it right now as sort of the equity sleeve of a traditional portfolio. Whereas the venture investments are almost like the, you know, the alternative sleeve and it's amazing how quickly Bitcoin has gone from this speculative asset to a that's the bellwether, you know, steady, you know, allocate most of your, your capital to that, um, to that asset. We'll talk about Ethereum for a second. So we spent a lot of time talking about Bitcoin. Ethereum is sort of the silver to Bitcoin's gold, you know, deputy here in the cryptocurrency world, but it's obviously performed incredibly well over the last year, uh, including in recent days, we're taping this, uh, on, on Tuesday, April 13th. But, um, what do you view a theory of in terms of it, the, the pluses and the minuses relative to Bitcoin, obviously Bitcoin's immutable supply of 21 million Bitcoins is a very attractive to people. Uh, but what about Ethereum? Do you like, and not like relative to Bitcoin?
Dan Tapiero: (46:29)
Yeah. Um, you know, I don't know so much that it's silver. Uh, I think it's its own thing. I think it's a phenomenal, uh, you know, I mean, I call it an invention as well, but I mean, it's unbelievably complex. I mean, it's programmable money. Uh, you know, you can embed smart contracts into money. That phrase there, uh, is probably not understood by 99% of the people out there. What does that even mean? Embedded smart contracts, uh, you know, in programmable money, it just, it's crazy. It's like, um, so I mean, I think it's quite a phenomenal thing. It has a different use case really then than Bitcoin, as I said, Bitcoin, I think is that pristine collateral of the new system. It, you know, as you mentioned, it is defined, the network effects are unbelievably powerful. It's the brand of what it is. Uh, but I think a theory, its own thing and is equally phenomenal in its own way.
Dan Tapiero: (47:33)
So I don't, and you know, you know what some of these things are, you know, programmers find it easier to, to build on. It has a lot of flexibility. Yes. Maybe there's a little more supply that's out there, but we'll see what happens with ease too. You know, there's talk about it becoming a deflationary currency. I don't know why they're doing that. I guess they want to try to outbid coin Bitcoin, which doesn't make any sense to me. Uh, you know, a theory should be what it is and, and stay with the integrity of that. Um, but that one is clearly, you know, it's where sort of Bitcoin was maybe four or five years ago in terms of its maturity. Um, I don't see that as a science project anymore. Look, even Vitalik said, uh, on one of the interviews I listened to a podcast a few months ago, he said, look, Bitcoin is 100% complete.
Dan Tapiero: (48:23)
It's done, it's mature. He said it theory is like 60% there. We still, you know, we still have things that we need to, you know, overcome et cetera. But, um, I mean, I think it's a super powerful thing. I mean, just look at what's happening with the NFTs. Those are all on mostly ERC 20 tokens. Right? So, um, the, the reason I just want one thing I didn't mention regarding your last question, I would, I would say is that the bet that I have on this da eat, you know, why I like it is because it's also a bet on all the things of value, uh, or all the things that will be moved into the digital asset ecosystem that we are not even aware of yet. So as an example, NFTs didn't exist really six months ago. Now you have NFTs going from a hundred to a thousand dollars to a hundred thousand dollars, you know, to millions, of course, people 69 million. So like no one could have predicted that a year ago. And so Bitcoin is wonderful. Bitcoin can go up a lot, but you know, having a bet on all the things that are going to develop in the future that we're not even aware of yet to me is a different type of bet. So anyway, I just bring that back in. Then
John Darcie: (49:43)
We could go on for probably hours with you talking about the global macro and geopolitical situation with Bitcoin, Peter teal had some recent, interesting comments on that front. We're going to wrap that up for today. We'd like to keep these around 45 to 50 minutes. So it's been a pleasure to have you on salt talks. We'll hopefully have you on again in the future. And we'd love to have you at our live salt conference in September. We're getting back to our live in person gatherings, assuming everything continues on the same trajectory it is with the pandemic. So thanks again for joining us. Brian, you have a final word for Dan before we let him go.
Brett Messing: (50:14)
No, it was feeling great. You know, I was looking forward to it and it, uh, it's been fantastic. Thanks Dan. Thanks.
John Darcie: (50:21)
So you guys are two, two brown guys, uh, you know, bonding here, so great to have you guys together, but thank you again, Dan, and thank you everybody for tuning into today's salt talk, uh, with Dan Tappy arrow. Um, just a reminder, if you missed any part of this talk or any of our previous talks, including we have an entire series of these conversations on cryptocurrencies, Bitcoin, digital assets, uh, you can access those on our website. It's salt.org backslash talks and on our YouTube channel, which is called salt tube. And we have an entire playlist again, that's dedicated to these digital asset oriented talks, which I might add are generally our most viewed episodes. Even though we've talked to Titans across hedge funds and private equity and venture capital and public policy, these Bitcoin and digital asset oriented talks continue to be the most popular, which I guess gives you an idea about why we're seeing the price action that we're seeing in Bitcoin, Ethereum and other digital assets.
John Darcie: (51:15)
We're on Twitter as well. Please follow us at salt conference is where we're most active in the social media sphere, but we're also on LinkedIn, Instagram and Facebook. Please spread the word about these salt talks. We love educating people about what's taking place in the digital asset ecosystem. And like Dana said akin to the invention of the combustion engine. We could be at the very early stages still of this revolution, but on behalf of Brett and the entire salt team, this is John Darcie signing off from salt talk for today. We hope to see you back here again soon.