Macro Forces Driving Digital Asset Adoption with Dan Tapiero, Chief Executive Officer & Managing Partner, 10T Holdings. Bill Campbell, Portfolio Manager, International Fixed Income, DoubleLine. Matt Hougan, Chief Investment Officer, Bitwise Asset Management.
Moderated by Perianne Boring, Founder and President of the Chamber of Digital Commerce.
SPEAKERS
Dan Tapiero
Chief Executive Officer & Managing Partner
10T
Bill Campbell
Portfolio, Global Bond Strategy
DoubleLine
Matt Hougan
Chief Investment Officer
Bitwise Asset Management
MODERATOR
Perianne Boring
Founder & President
Chamber of Digital Commerce
TIMESTAMPS
EPISODE TRANSCRIPT
Perianne Boring: (00:08)
Hi there. Good afternoon. I'm Perianne Boring, the founder and President of the Chamber of Digital Commerce. We're a trade association headquartered in Washington working on crypto policy, the public policy impacting digital assets and blockchain technology. Today we'll be talking about the macroeconomic drivers impacting the adoption of digital assets. We have an A-class team of speakers here. I'll have each of you just introduce yourselves, name, where you're from, and maybe just a quick overview of your firm's focus in the crypto space. Dan, let's start with you.
Dan Tapiero: (00:47)
Sure. Hi. Hello, everybody. Dan Tapiero, 10T holdings, founder and CEO. We are a mid to late stage private equity firm that focuses exclusively and only on businesses in the digital asset ecosystem, and as far as I know I think we're the only ones out there right now focusing just on the mid to late stage businesses. So we've put quite a bit of money to work in the first six months of the year, and look forward to being involved in the space for the foreseeable.
Bill Campbell: (01:21)
Hi, everyone. Bill Campbell. I'm a portfolio manager at DoubleLine Capital. DoubleLine is a $135 billion multi-asset management firm. I manage the global currency and global interest rate strategies. We like to think of ourselves as a forward thinking macro firm. A lot of my research has been in the crypto space on CBDC, CBDC adoption, and the DeFi wave and the macroeconomic implications across economies, both developed and emerging markets, and how it's developing itself but how it impacts the more traditional investments, and more specifically how it could be a disruptor to macroeconomic models, currencies, and interest rates.
Matt Hougan: (02:12)
Amazing. Hey, everybody. Matt Hougan, I'm the chief investment officer at Bitwise Asset Management. Bitwise is a crypto asset manager, we're best known for having created and today running the world's largest crypto index fund called the Bitwise 10 Crypto Index Fund. We also have the first and largest DeFi index fund. We manage about a billion and a half in crypto assets, mostly for professional investors, hedge funds, institutions, and the advisor market.
Perianne Boring: (02:39)
Thanks, Matt. So let's just start with the basics, when we think about the macroeconomic trends impacting the adoption of digital assets, and just starting with money. Of course Satoshi called Bitcoin a peer-to-peer electronic cash system. Just last weekend, the front page of the New York Times, an article on crypto that started with, "Bitcoin is changing the definition of money. For thousands of years, civilizations have flocked to commodities like gold and silver as money. Today, money looks very different." What is your... And I'll just open this up to either of you. To you, what is money? How is it changing? How is Bitcoin and crypto impacting that?
Bill Campbell: (03:25)
[inaudible 00:03:25] Do you want me to start it off?
Dan Tapiero: (03:27)
Go ahead, please.
Bill Campbell: (03:28)
Well, I think maybe just taking a step back, obviously besides a unit of account, store of value, the legal tender, the unit of exchange in an economy, I think we need to think about money as a public versus a private asset, and a public versus a private good. For a long time, money has been thought of as a public good, and I think that people in general have been willing to accept that premise. Then we hit the global financial crisis in 2008, and we saw the expansion of extraordinary policies by governments, and that caused a rethinking potentially of a lot of the policies that were being put in place that maybe are expanding the monetary base faster than people would necessarily like.
Bill Campbell: (04:13)
So that moves us to the private money side. I know crypto has deemed itself as the new bastion of private money, but in the past we've had private money. We've had bank issued private notes, and some of the issues that have come with that is there's preference of credit between different banks. If you have individual notes that are issued, there's going to be a credit preference between those [inaudible 00:04:37] as so, there's going to be credit preference between different cryptocurrencies.
Bill Campbell: (04:41)
We've also had forms of private money throughout the credit card space. When we think about the transactions from Visa and MasterCard, even though that's thought of as credit, it's transactional. That also has been a form of retail private money. So really crypto is now bridging that gap I believe between the purely public good that we initially thought money was, to maybe more of the idea that private actors, and now decentralized private actors, can be a bigger player in this space, and maybe can provide more institutional credibility than some of the governments. Not to jump the gun, but just to whet your appetite a little bit, I think especially in emerging markets where institutional strength and policies are fairly questionable, and where economies tend to not trust their sovereign currencies anywhere and are dollarized, crypto has a very big window of opportunity to potentially disrupt and transform those economies.
Matt Hougan: (05:47)
Yeah, I agree with all of that. One thing if you study the history of money is that the history of money is never over. I think a lot of people assume that the history of money was over with the dollar being the king, and all currencies being public goods. And crypto is one challenge of that. But really it's evolved many times in the past. As you mentioned, this is not the first time that the relationship of what money is to public and private sectors has changed.
Perianne Boring: (06:13)
Yeah, that's a great point. And we're seeing significant tectonic shifts underway in what money is, how it's issued, how it's regulated, how we use it. And I think one of those big macroeconomic decisions was just over 50 years ago, in 1971, when Nixon closed the gold window, which really launched us into this global fiat experiment. So just in either of your minds, how has that impacted where we are today? And what do you see as the future of fiat, given how much has changed just in the past 50 year timeline?
Dan Tapiero: (06:54)
I wanted to just say a word on the other question just for a second, and I'll link it into this one, which is that money, at least for me, has always been about return. And look, you've got negative 3, 4, 5% interest rates in the U.S. if you're using the CPI as the deflator, and I think that's caused a lot of people to think about the nature of money, that never thought about it before. And one of the interesting things is that crypto really has been a retail led phenomenon. You have average Joes out there who have [inaudible 00:07:34] Bitcoin since 2011, '12, Ethereum from '15, and the institutions have been late. And they're still very late, as far as I can see. It's still early for the general trend.
Dan Tapiero: (07:45)
So I think the idea that there is return on your money or your cash, or however you think about it in this new digital asset ecosystem, is really what's driving it. Bitcoin as a store of value, Ethereum is a little bit different, but also something of lasting and permanent value. So I think that when you're looking for alternatives, there have to be alternatives, and I think this has now grown up as a real alternative.
Dan Tapiero: (08:19)
So, sorry I didn't answer your question. And I'm a gold guy, too, so I didn't answer your question about the Nixon depeg. I'm not sure... What was the gist of... What as the impact?
Perianne Boring: (08:36)
Yeah, and when we went off the Gold Standard, and how that's changed money, and how that has impacted the future of fiat.
Dan Tapiero: (08:46)
Right. Well, I mean...
Bill Campbell: (08:49)
Go for it [crosstalk 00:08:50].
Dan Tapiero: (08:50)
I mean, it's allowed the authorities to inflate in an unlimited way. They're not pegged to anything. So again, another reason for Bitcoin, which is in finite... There's a finite amount of it. And even the other cryptocurrencies, even Ethereum is not really... The supply doesn't really expand in the way that fiat has. And of course post COVID you saw massive expansion in the balance sheets, and again, I think the average person out there is saying, "Hey, I'm losing purchasing power. I used to be able to buy this, and now I can't." And so there's no anchor.
Dan Tapiero: (09:25)
But that being said, life is better today than it was, for most people, in 1971. So I don't want to say, "Okay, well that decision 50 years ago was a disaster." I think we've had tremendous prosperity. So I think the answer to that's more nuanced.
Perianne Boring: (09:43)
Sure.
Matt Hougan: (09:44)
I want to build on that nuance, if it's okay, and then you can jump in. I think that's exactly right. Studying gold standards through history, they don't work that great in terms of launching economic growth either. The problem with fiat and inflationary fiat currencies is that eventually it ends poorly. And it gets worse in an exponential fashion. So the fact we went off the gold standard in 1970 makes it necessary to have an alternative, which Bitcoin is emerging as an alternative, and it becomes more and more important, and more and more important as a break on the natural tendency for fiat systems to eventually hit a bad state of inflation. I think it's just a time pattern. I think that's the nuance in it.
Bill Campbell: (10:32)
And if I can then further build on it, the inflation point and the debasement point are fantastic points, and depegging off the gold standard allowed the explosion of debt, allowed the explosion of credit. But what we've seen more recently, especially across developed markets, is the explosion of the monetary base, the explosion of all of the central bank activity, has actually caused anemic growth. I don't think anybody can argue that Japan has seen very strong growth, that Europe has seen very strong growth, and then after the bounceback from the recession that we saw in March 2020, I think the U.S. glide path is coming back lower.
Bill Campbell: (11:07)
Now, people can say, "Look, the cause of that might be a big debt burden," but what I really think is happening is, in the quantitative easing policies that have happened, what we've seen is a taking of private assets out of the market, but really the explosion of institutional digital money, which is wholesale reserves. And banks ultimately have not been willing to lend that out, or lend it out beyond large institutions. So I'm getting to the point that I think one of the structural drivers of low growth over time has been the headwind to productivity that large banks consolidating small regional banks, and the unwillingness of them to lend to the SME sector, is actually causing.
Bill Campbell: (11:48)
This is where DeFi and crypto could actually become a potentially game-changer, not only in our economy but other economies in addressing this problem of productivity growth, because if, say through pass-through tokens, small and medium sized enterprises are able to then access their customer base, get new sources of credit, get new sources of lending, and be able to spend that both on new business lines and potentially more hiring, I think that that can both address the productivity problem, but it could also address the structural overhang that we have on the employment side as well. And I'll maybe stop that, but happy to dive in if you want.
Perianne Boring: (12:27)
Yeah, to build on that, Bill, you've highlighted that we're in a really critical moment, and key moment, of government intervention. What are some of those areas where you have government influence on the markets? What type of distortions is that making? And ultimately what are the results of those?
Bill Campbell: (12:50)
Well, I think I touched on a few, but I can't over-emphasize the importance of the central bank policy, not only on being a headwind to productivity growth, but also squeezing out returns. When we look across the risk asset spectrum, a lot of my credit colleagues are telling me that we're back to the historical lows that we saw in spreads prior to 2020. So I think that central banks are unwilling to allow markets to clear. Crypto markets are completely unregulated, but I still think that they're in much of the adoption phase, there's a lot of risk embedded in them, they to me look much more like a VC market that has tremendous potential upside, opportunity, but also a tremendous amount of volatility.
Bill Campbell: (13:37)
But I think that, just sticking on the government intervention side, the other big aspect of it is the amount of fiscal policy and regulatory policy that's been put in place. We're seeing continued expansion of fiscal, trying to actually push money to individuals. And to get back to the inflation argument, this time around is different from prior cycles after recessions. Fiscal policies actually pushing money to areas where we can see inflation, we're seeing higher commodity prices, we're seeing higher housing prices, we're seeing higher wages right now, so all of that is real on the inflationary side.
Bill Campbell: (14:17)
And finally, just my last point on this, I think blockchain is unique in the technological solution that it's providing. It provides low latency, immediate settlement, it provides protection of individual privacy, and it's potentially the new wiring for the financial system. So for people who are pushing the whole DeFi blockchain revolution aside, I think they're missing that this could potentially be the new plumbing for the financial system that we all need to pay attention to.
Perianne Boring: (14:47)
Yeah. Very key point. Just to highlight the point on inflation, when I was a columnist for Forbes, I did a story penned, "If you want to know the real rate of inflation, don't bother with the CPI." And I interviewed a statistician at the Bureau of Labor Statistics, and talked about how they come up with their numbers. And it's very convoluted. Of course they're tracking the price of goods, where as someone who studied monetary policy in college, really it's the monetary base that really is I think the key thing you should be looking at, in terms of inflation. So I think some of those numbers that are put forward to measure inflation are a little funny. But I don't think anybody can argue that there's been this unbelievable expansion of the monetary base.
Perianne Boring: (15:36)
We hear a lot about concerns of inflation. Even Senator Cynthia Lummis has very publicly said this is a huge concern for her and her constituents, and that's why she's bought, invested in Bitcoin, and even encouraging her constituents in the State of Wyoming to do so as well. So Matt, maybe I'll focus on you, given what you guys do at Bitwise, really looking at this as a financial advisor. Bitcoin has really proved itself to be a non-correlated asset. The Federal Reserve Bank of St. Louis published a report in 2018 that said Bitcoin has the potential to emerge as its own asset class, to be used for diversification purposes in portfolios. And I think that speaks a lot to your thesis at Bitwise. However, there's been a bit of hesitancy with financial advisors advising people to use Bitcoin as a diversification tool. Can you speak to how you guys are thinking about that, and how you see that, and where we're at today from a fiduciary oversight perspective?
Matt Hougan: (16:43)
Sure. If you didn't know it was called Bitcoin or crypto, and you put it into a portfolio optimizer, you would definitely want 1 to 5% of your portfolio to be allocated to it. The reason is, over any meaningful period, if you put crypto into a portfolio and you rebalance, as advisors do, it contributes to your absolute and risk adjusted returns. They have a white paper on bitwiseinvestments.com. I mean this literally. Every three year period in history, including periods with 80% drawdowns, if you put into a portfolio it increases your absolute and risk adjusted returns.
Matt Hougan: (17:18)
When we talk to advisors about it, there's really two key things that matter to them. The first thing that they have to get over is that it's not going to zero. The reason it's important to get over the fact that it's not going to zero is that, if you want to put it in a portfolio and rebalance it, you have to assume it's not going to zero in order to harvest the volatility, or you can make a small allocation. The other piece is just to appropriately size your allocation. As long as you keep your crypto allocation at a reasonable level, it doesn't create mass drawdowns in your portfolio.
Matt Hougan: (17:58)
We've seen enormous growth from the advisor market. There's enormous interest from the advisor market. I'll end with one more stat on that interest. In January, we wrote the CFA Institute's first ever guide to Bitcoin, blockchain, and crypto. I believe it's their most downloaded research report ever, just as a sign of how much interest there is. So I think that's the next big market in crypto, it's the advisor space. That's coming soon.
Perianne Boring: (18:20)
Yeah. We represent about 30 private equity funds at the Chamber, so we've gotten the opportunity to see how different fund managers are evaluating crypto, and really the general principle across the board is, if you introduce Bitcoin into your typical portfolio, 1 to 5%, you see volatility go down and performance go up. So I've heard a number of people who had said, once that is more widely understood, it will be seen as almost irresponsible to not recommend for clients to invest a percentage of their portfolio into Bitcoin for that diversification piece.
Perianne Boring: (19:03)
Further, in March of this year, the Chairman of the Fed, Jerome Powell, in his testimony to Congress, he said that Bitcoin is more of a substitute for gold than the dollar. So just to expand on this concept, would love to get, Dan, or Bill, your thoughts on... Since the Fed owns gold, and other central banks around the world own gold, what are your thoughts on the Fed and central banks substituting gold for Bitcoin?
Dan Tapiero: (19:33)
Well, I don't know that they're ready to substitute it. I think he was really talking more theoretically, that the principles behind Bitcoin as hard money are similar to the principles behind gold as hard money. People don't generally think of the dollar really as hard money, it's used to transact, and it's the currency of the world, and it's super liquid, and it's not physical. So I think he was thinking about it in those terms, but I think that's very right, that store of value... Bitcoin as store of value as a high form of collateral. I think that's absolutely right. There are other cryptocurrencies potentially that you might use for other purposes, but in terms of that pristine collateral, and again it's all laid out in Satoshi's white paper, and I think he's acknowledging this too, that it really is an invention, Bitcoin is an invention, and I always say it's an invention akin to the invention of the combustion engine or the discovery of electricity.
Dan Tapiero: (20:48)
That paper, people don't I think understand, solved a problem, the Byzantine Generals' problem, that had been unsolved for hundreds of years, and the problem of distributed trust. And so that aspect of Bitcoin as a solid, secure, backed by the proof-of-work algorithm, I think is absolutely right. But not necessarily a replacement for the dollar.
Perianne Boring: (21:18)
We'll come back to that thought. Bill, I want to focus on central bank digital currencies for a moment. We've all seen the Grayscale Drop Gold commercials, and just this past month El Salvador adopted Bitcoin as legal tender. So looking at it from the central bank perspective, there's now, according to the Bank for International Settlements, over 80% of central banks around the world are already experimenting with CBDCs. So how do you see things like Bitcoin, ETH, other cryptocurrencies living in a CBDC world? Are these a threat? Are these a complement? Will they be interoperable? What does this look like, fast forward 10, 20 years from now?
Bill Campbell: (22:03)
It's a great question, and I think in my mind we need to start segmenting different parts of the market out to try to get a framework for understanding and thinking about it. I think that central back activities, the way that they really control markets and economies are through controlling the monetary base, setting interest rates, and controlling credit. And DeFi in general, and blockchain technology, is actually disrupting each one of those. For the monetary base, obviously you're having new cryptocurrencies come out that are being accepted as legal tender in El Salvador, for example. Interest rates are obviously manipulated across the globe, and you're having new interest rate markets via staking. And then when we think of credit creation, I do think there is a lot of potential for credit creation in the crypto and blockchain network.
Bill Campbell: (22:57)
In emerging markets, you're seeing about... Especially across Latin America where we think Peru, Colombia, even Mexico, about half the population is unbanked. So crypto is actually... You see a lot of DeFi protocols being picked up fairly aggressively, because it's permissionless and you get a lot of the debit card style transactions, that come with that... I would call it Banking 1.0. But you can imagine that there's going to be a lot more banking services that are going to be provided across the globe across these different networks. So I think that central banks are looking carefully at... I don't think they want to stifle this growth, but they also don't want to lose control of the credit making mechanism in that.
Bill Campbell: (23:41)
As far as the currency itself, when we think of CBDCs, I think you're just thinking of... This is true retail digital money, and right now we have that in the form of stablecoins. And when we look at digital transactions, I'm sure Dan you've seen this, 85% of one side of all transactions are very a stablecoin, whether it's USDC, USDT, or the like. So once you introduce the digital dollar, and you don't have to have the issue of trying to understand the collateral backing of the stablecoin, and I know there's been some questions about Tether, there's a big debate, but would the CDBC or the digital dollar become the preferred stablecoin in this ecosystem, as long as it didn't do what China did and set a centralized blockchain that removes your privacy. If it truly is in the form of a stablecoin that's settlable on ETH, that's settlable on any other of the blockchain networks, potentially it becomes the superior solution.
Bill Campbell: (24:38)
And then the final point is, I think that the U.S. dollar's reserve currency status is threatened by the DeFi revolution. And just to quickly expand on that, we're seeing... I think it's more the digital payment systems and the cross-border payment systems that provide the threat more than the CBDC itself. So the BIS through Project Dunbar is looking at, in Asia, between Australia, Singapore, Malaysia, and I think a couple of other banks, trying to integrate the payment systems via blockchain, in that region.
Bill Campbell: (25:06)
And by the way, there's a new trade agreement, RCEP, that is looking at the regional cooperation of trade in that region. So as countries begin to develop this technology, as you have new regional trading agreements, isn't it logical that 60% of reserves being denominated in U.S. dollars might not be necessary? Don't you think that you as a country would prefer to settle the majority of your trade on a bilateral basis with your balance of payments trading partners? And I think that removing the dollar as that fundamental denomination for trade, fundamental denomination for commodity settlement, runs the risk in the long term of being a potential dethroning of the dollar's U.S. reserve currency status.
Dan Tapiero: (25:54)
Yeah, I'm not so sure about that. I just think that... Look, 60% or whatever the number is too big. After the war, it made sense, all the other economies were at zero, they were flattened. And for many years, I think people just got used to having the dollar in the center. But if you just look at GDP, the U.S. is I think, what, 25% of world GDP? [crosstalk 00:26:20]
Bill Campbell: (26:19)
It's actually come down. It's closer to 20, and China's gone up to 20. And Europe's about 22.
Dan Tapiero: (26:26)
Right. It's been inconsistent for years, that the dollar was overweight in everyone's portfolio. So I think it's just a slow transition. As a macro guy for 25 years in the hedge fund business, I always remember the quip that macro always takes longer than you think it will. Sitting there with investments, and you think it's going to be three months, and it's three years. And I think this is perfect case of this. I don't think the dollar's going away, I don't think America's going away. I think, and this might segue into the next question you want to ask, but I think that if we start to make some very poor decisions on the regulatory front here, vis-a-vis the digital asset ecosystem and blockchain technology, I think that is dangerous for us, because the U.S. is already behind I think the rest of the world in adoption and understanding. 90% of total world cryptocurrency volume is outside the U.S.
Dan Tapiero: (27:29)
So there is a chance here that the world moves forward without us at the lead. And that worries me a lot more than...
Perianne Boring: (27:39)
Yeah, is that the real... [crosstalk 00:27:40]
Dan Tapiero: (27:42)
Okay, I stole a little bit your thunder there, because I know you wanted to talk about that, but...
Perianne Boring: (27:42)
No, no. Especially in my role as an industry advocate working with public policymakers, very careful not to pin the crypto against the status of the U.S. dollar as the world reserve currency. In fact, I don't think it's a helpful argument to say they're competitors, especially with something like Bitcoin that's really operating as a store of value, akin to a digital gold. That serves a very different function than payments. And I think both can coexist, and you have U.S. dollars and stablecoins as your transactional layer, and Bitcoin as that store of value.
Perianne Boring: (28:21)
Dan, I did want to come back to your thought on the combustion engine. You have said Bitcoin and blockchain, they're a history invention, akin to the invention of the combustion engine, and will have a similar transformative impact on our world. I think what you're getting to is that this isn't just about money, there's a revolution beyond just money in the crypto and blockchain technology. So one of the things I really challenge our members to help articulate better is how this technology is going to have an impact on the daily lives of normal people, not necessarily just your hedge fund managers and your investors, but the citizenry. How is this technology going to impact the average person for good?
Dan Tapiero: (29:10)
Yeah, I'll just say one quick thing and then I'll let the guys answer as well. But I think it's a revolution in trust, and so it's a permanent record. I've read, and other people have also called it, a truth machine.
Perianne Boring: (29:24)
The cover of The Economist a couple of years ago.
Dan Tapiero: (29:26)
That's right. And there was a book also. But I think that's what the real... If you want to be abstract, think about all of the things in the course of human interaction that rely on trust. And a lot of times there isn't that trust there. And so I think that's the really big revolution. I don't know if you guys...
Bill Campbell: (29:53)
Yeah, I completely agree. The other interesting aspect of blockchain is being able to protect privacy and anonymity while still having a vast amount of publicly available information. So far, we've been lagging China as far as AI development, and network effects, because of the concerns about privacy. So blockchain, moving outside of finance, has the potential to allow network effects, the Internet of Things, like take off medical records, there are a lot of potential use cases that can come out of this technology. And I think that all comes from your point that the key element is trust and keeping privacy.
Dan Tapiero: (30:34)
And this also is a massive decentralized network that, from a security perspective, is really bulletproof. It could end up becoming... And I'm not saying which network specifically, could be the Bitcoin network, could be another one, ends up becoming the value layer for the entire internet. And so, I don't want to bring it back to this again, but I worry just now about the U.S. not being innovative enough and not seeing these bigger picture concepts.
Matt Hougan: (31:08)
Yeah, I'll agree with that, and then I want to talk big picture as well, because that's fun. I think we're already blowing it from a regulatory perspective. To put one very narrow, maybe controversial dot on it, if I agree with Dan that the U.S dollar and the U.S. position is in a slow fade as a relationship to its GDP, we had this sterling opportunity, once in a lifetime, to delay that and extend it if we had embraced Libra as a dollar backed stablecoin. What better way to get the entire world to use dollars in every transaction than to put a huge amount of money in a dollar backed asset? And we just turned up our nose at it. It was literally a once in a lifetime opportunity, and I think we totally blew it, and we can't get that back.
Matt Hougan: (31:54)
What will your daily life look like is something that crypto struggles with. And the reason it struggles, I think, is that the primitives that crypto introduces are so large. Dan, you mentioned trust. You can talk about digital property rights, you can talk about instantaneous settlement, and the landscape of possibilities that are created by these primitives is so massive that the crypto industry typically falls back on small examples, like improving the remittance system, or lowering fees, or allowing people to make their financial assets more usable. And those are all true, and those are all the baby steps, but just like in the early '90s, predicting all the things that the internet would do was very very difficult, it's often good to dwell on one or many of those primitives, and just spend a week thinking about what is digital property rights mean 20 years from now?
Matt Hougan: (32:43)
It's easy to look at $3 million digital JPEGs of rocks and laugh at NFTs, but if you stop thinking of it like that and start thinking of it as the first instantiation of digital property rights, and allow your mind to wander for a little bit of time, thinking about what that means in ten years is huge. So it's hard to make them very specific, because it's hard to predict the future, but the primitives in crypto are so powerful and so world changing, it's very exciting to think out five, ten years.
Dan Tapiero: (33:10)
I would say one thing is that older people, they say, "What do I need digital property rights for?" Versus the under 30 crowd that are gamers, and it's very natural for them to think about digital property, because a lot of their assets are already digital. And so... Go ahead, what were you going to...
Matt Hougan: (33:31)
No, I had this great conversation with a reporter, and he was like, "I don't understand why someone would spend $5,000 on a sword, and it's not even a real sword, it's digital." It's got so much more utility to people than a physical sword. When's the last time you used a physical sword? Been a long time. But these kids are using digital swords all the time to create status, to win rewards...
Dan Tapiero: (33:54)
It's also because they're spending eight hours a day online, and that's something that none of us older guys can really... We're on the phones and everything, but literally, I think it's eight hours a day is the average usage, and these gamers are on even more. So they are going to the Metaverse, to these virtual spaces, to actually meet people and hang out and live in digital land, and all of this stuff. People are living their actual lives. We're not, but it's more and more that way. So for them digital property rights, that's not even a jump. Right?
Matt Hougan: (34:35)
Exactly. Yeah, that's exactly right. And it is hard for older people to get their head around that, I agree.
Bill Campbell: (34:42)
But the digital property rights is such a huge concept, and I think we need to figure out on regulation or litigation what exactly is protected when we start writing individual code. But when that's figured out, it has the ability to provide a lot more liquidity to venture capital space, private equity space, a lot of spaces that historically maybe haven't been accessed as widely. But also we need to think about, now we have these new entities that are digital autonomous organizations that are made up of a bunch of individuals that vote on what the platform should do. So what rights are afford to those organizations? How can they link into the true economy? Can a DAO, a digital autonomous organization, make a contract with a private company? And then what happens if the DAO does something that harms an individual? What liability do all of the holders in the DAO actually face?
Bill Campbell: (35:39)
And these are the things that need to be sorted out, and when they are, I think you'll have a tremendous amount of institutional capital chase it, because I think the scope for expansion is tremendous. But right now we're just not clear on a lot of these key issues, and I think those are where rubber meets the road issues.
Perianne Boring: (35:58)
So coming back to the public policy arguments for crypto, this year has been a year of transformation in Washington, D.C. We have the Biden administration, of course a change from a Republican to a Democrat administration. Both the House and Senate, Democrats have the majority. So there's a very strong focus on the social issues today, and how those are applying to crypto. We are not a partisan organization at the Chamber, we're very, very careful to make sure this technology is not seen through partisan lenses, and we don't think it should be. However, it does seem that there's a more critical view from the left than the right. So as we're trying to think of the social case, what is the social case for blockchain technology? What are the benefits from a progressive perspective, in your view, for digital assets and blockchain technology?
Bill Campbell: (37:05)
I think the most basic item that I would say is it's the democratization, a way to democratize finance and lending. The permissionless aspect that is provided by all these DeFi protocols, and what that opens up for people in underserved communities in the U.S. and underserved communities in emerging markets, is tremendous. And just putting the proper protections in place to prevent bad actors from hurting people. I think a light touch would be the right way to do it. Defining what exactly activities are between credit and lending securitization is also important, but I think from the social aspect it's the true permissionless democratization of providing that access to everyone.
Matt Hougan: (37:58)
I live in the People's Republic of Berkeley, California, so I have some [inaudible 00:38:02] the thing from a liberal perspective is that they hate banks. And our financial system is built so that the poor people pay the highest fees as a percentage of assets. So the story for how crypto improves that is by making that not true, by democratizing access, by lowering fees, by opening opportunity. The examples we have today again are either isolated, like remittances. The cost of sending remittances home is about one twelfth. In other words, you work one month a year just to pay those fees, and those can go to zero. But there are more and more examples. In the DeFi space, it's not just Jane Street that's making markets and earning money from that, you could be too. Anyone could be. And people are doing that today. So I do think there's a progressive story to crypto that's maybe poorly told, but I think it'll gather steam.
Perianne Boring: (38:53)
So we've got about a minute left, so I'll just do quick closing statements from each of you. We've talked about macro, I'm going to come to micro. Within that 12 to 18 month period after the Bitcoin halving, there's different theories different investors have on what's going to happen. Between now and the end of the year, are we going to continue to see a bull market, or will we see a correction like the past two halvings? 20 seconds each. Dan, we'll start with you.
Dan Tapiero: (39:23)
I think you have to be a long term holder in this business, so what it does now over the next three or four months is sort of jump ball. But I think we're going to head up over 100,000 probably in the six to nine months in Bitcoin, and Ethereum could also continue. But it's more long term, I think in the next five, six, seven years we can be at three, four, five hundred thousand on Bitcoin, and I don't see why not 20, 25,000 on Ethereum.
Bill Campbell: (39:54)
I'll just say I think it's a long term play, and I completely agree with what Dan said.
Matt Hougan: (39:58)
I also agree it's a long term play, but I'd remind people that crypto is the single best performing asset class in the world this year, and it went down 50% this year. So I think...
Dan Tapiero: (40:09)
Well, the 10 year is 250% annualized, so the greatest return of any asset in the history of the world that we could find, going back to, I don't know, caveman times. So you just need a little bit, right? Just a few percentage points.
Matt Hougan: (40:22)
Yes. And then you need to not panic when it sells off.
Perianne Boring: (40:26)
Very macro answers from the macro team here. We'll end on that high note. Please help me thank each of our speakers. Thank you Dan, Bill, and Matt.