Transcription
All of the venture tokens, they're all down 90 plus percent. And they found ways to go down 90% after being down 90%. It's a good sign.
It's I did not think we'd get down to 60. Many of these things from '21 are down 99%. Bitcoin has really become an ETH institutional asset for AI. When they send value to each other, they're not going to be wiring money through JP Morgan. They're going to be using programmable money, smart contracts embedded on blockchain. If you approach this space with any sort of shorter term view, you're dead.
That's dope. Let's go.
Dan Tapier, take one. Are you Are you now famous? When are you now famous? No. Are you now? Cuz when I first did it, first your first one, I I was very early with you. Yeah. The first time we talked, I scammed you. You what? I scammed you. I was like, I'm important. You call my podcast. No, I just thought you I thought you were just like an interesting guy and I don't remember how many What are you millions of people or what? It's a lot. Is it? Yeah. Most of them are bots. Okay.
I know. I don't know. I can't I can't speak to the humanity of my followers, but Oh, I know. You get any like actual responses to tweets anymore? I I feel like every once in a while, you know, every once in a while. No, I I I do, but yeah, the it's it is quite bot-infested.
It's crazy. But speaking of X, you wrote an incredible thread recently. I guess it was in the article format. But what's going on? Because I'm sure it's the only question anyone's asking at the moment because god forbid Bitcoin not make a new all-time high every 12 minutes. Uh, you know, went down 50%.
Yeah. What's going on? I mean, do you have actually though a thesis?
Well, I think that there are a lot of different things going on. So, that's why I wrote it out. It was actually investors of mine and and people I know with exposure just saying things don't make sense. We we thought we were going to get a 20 to 30% correction uh from 125 down to you know 100 or 90. That seemed okay. Um and also I don't know if you recall or the last time we spoke but for at least during '22 '23 I'd always thought we were heading to 100,000. When we were at 20, 30, 40 I said we're going to hit 100,000 and then it's just going to stop. And I don't know if it's going to stop for days or weeks or months. I don't know. That's a big round number. Everybody essentially who is an early buyer is going to be majorly in the profits. And I thought we would stop and I I thought so we get to 125 expecting a pullback but this pullback has been a little more than I would have anticipated. I mean I today actually as we're speaking I think we're hitting lows uh at 65. It's possible that the low happened last week at 60 in this 50 to 60 zone. I mean, I just I think you're so far below even where we were in '21. It just there's huge fundamental value. And maybe we can talk about that a little later. But in terms of what's going on, I think that there's been a fracturing of what I call investable or speculative capital. And so, um, the tokens, all of the, uh, all of the, not Bitcoin, ETH, Solana, but all of the, you know, the the venture tokens, they're all down 90 plus percent.
And they found ways to go down 90% after being down 90%. It's a good sign.
It's it's it's incredible. Uh, and that's happened while, as I just said on stage with Pomp, um, Bitcoin has really become an ETH institutional asset. We have, you know, the ETFs that were wildly successful. we have, you know, over a 100 companies holding Bitcoin and ETH. Um, you know, whether in debt or some other form. It's it's 5 to 10% of the total supply of those assets is now held in an institutional way. That is very new from, you know, the first time we talked. It's important. It's success. It's what we all wanted. Um but at the same time some of the speculative capital is getting pulled away into other different there's AI there's robotics there's um silver there's silver exactly silver and gold which I'm happy about my gold company GBI has been doing very well physical gold company um but you can see the capital sort of being pulled out that speculative capital um and also again we seem to shoot ourselves in a foot in the space with all of these crappy projects, right? We don't need to have so much supply. There doesn't have to be so many infinite number of projects attempting to do so many different things. Um, and yet at the same time, you've had breakthroughs within this sort of what I call digital asset ecosystem. So, outside of Bitcoin, you've had things grow up that didn't exist two years ago. You've got Hyperlid doing more volume than Coinbase.
Crazy. You've got Poly Market all of a sudden and Koshi out of nowhere massive uh markets um out of nowhere. Stable coins last year trade $33 trillion in volume and in January do another $10 trillion. You know five years ago there were no stable coins zero. And those are still only all dollar stable coins. We haven't even begun the period of non-dollar stable coins. Where is the euro stable coin, the yen stable coin, the Juan stable coin? It's all going to happen. And so these new digital rails for the on-chain rails for money and value are still being built. And I think most importantly maybe is that for AI, this independent agentic future that we're uh about to embark upon, when they send value to each other, they're not going to be wiring money through JP Morgan. They're going to be using programmable money, smart contracts embedded on blockchain to send value back and forth. So blockchain is the money of AI. And so you look out, that's pretty exciting. People are saying, "Oh, all the narrators are dead." I I don't think so at all. I think that, you know, we have speculative capital getting pulled out. I'm surprised by the depth of the selloff. To be honest, I did not think we'd get down to 60. Um, and I think now we probably need to have some sort of capitulative event. I don't know what it is. You know, we had FTX in '22. It was relatively simple. The market was going down for a while. FTX blew up. Bitcoin went down a bunch. Ethereum went down and couldn't make a new low. And that was the sign really for me that the whole bare market was over. It was a, you know, it was a a bear a bullish divergence when you have the most negative news event you could imagine without the price making a new low. So that tells you the market is sold out. It doesn't feel like we're quite there and I frankly would like a little bit of consolidation. If we stayed here at this price for 3 months,
Yeah.
I think it would cause a tremendous amount of pain and angst and
the time based capitulation which works just as well as big wick down.
Exactly. Yeah. That's kind of my base case. I have no idea. But I just think
the worst possible scenario for most people is to sit here in suspense.
Yeah. Yeah. With prices way down and no catalyst and no clarity and the tokens just continuing just slowly. I mean, I I've looked at, you know, something like the Helium token, H&T was at 22, you know, a few years ago, then popped up to 10. It's now less than a dollar. I mean, many of these things from '21 are down 99%. And many of them are down from even 18 months ago. Even projects that are valid, you know, A and Jupiter, um, you know, tokens where there's tremendous revenue generation, there's still, I think, a problem about assessing where does revenue accrue does it accrue to the equity? Does it accrue to the token?
Who is getting that?
And, you know, we had that problem with AB a few months ago that I think that they've sorted out, but I think the uncertainty around that has to be resolved. Um and it mostly because we have these more institutional type investors who are coming in saying well what do you mean like this is undecided like what do you mean you know the community is just going to own the token and pray for the for the best right and so I think that with institutional adoption uh happening with Bitcoin and ETH I think that if the token world the venture crypto token world wants to survive. Um, it's going to need to adopt a set of at least internal standards so that every single person doesn't feel like they're getting rugged or destroyed every second of every day
on everything.
It's interesting though because I think about your business in context of all this is that you were always on you was on the boring side, right? They're taking uh later not first round investments and large companies and nothing was public. Correct. And now the entire your thesis has been proven, right? The entire narrative has flipped while you watched 100x's on tokens, right? You could have been in all those tokens going up. I don't know about that.
Yeah. But either way, I'm saying now you have like IPO after IPO after IPO. All these companies you invested in are uh, you know, valued well. And I would argue that all of that liquidity that you say is fractured, a huge piece of it has gone into the crypto adjacent publicity public equity market.
Yes. Some of it went into digital asset treasury companies unfortunately, but you know, real companies going public that you've been in for years.
Yeah. Yeah. And that's right. Circle and Figure and E Toro. Unfortunately, Gemini has had a bit of a difficult run since the IPO. Um, Darabit was purchased by Coinbase. So we had six realizations last year which in the PE world is very rare. Um the stock has been locked up in some cases and some of it is starting to unlock now. Um and our investors will be able to take delivery of that stock. So good for them at at lower prices than before. But the reality is that I think um if the market can stabilize this year, we'll have even more IPOs. And there's been discussions of course of Kraken and Amoka. Those are big companies that we own. Ledger potentially rumored. So I think that that's trend is is not ending.
not every single gone public.
Yes. Not everyone but we own
which I think which ones you missed. Bullish.
Bullish. Bullish. We don't own bullish. That was it. Right. And um, you know, there are few you know, there a spack here or other but look we invest in companies generally with 50 to 100 million in revenue or more larger more developed as far as I know we're the only still after 5 years we're the only growth investor PE in the world exclusively focused on crypto blockchain web3 digital assets however you want to describe it I think
because everybody else is either precede VC. They're all VC. Or you have sometimes you'll have tourists. So you'll have a technology investor like Silver Lake come in every once in a while, but that's not what they
never goes well
and then it doesn't go well unfortunately for some of them and then they don't come back. And so it's very interesting because if you think about it like the most successful VC investments and there will be 99% will go to zero but there will be some good ones and after they do their seed and their A and their B there really aren't people around to do their C or their D. And that's sort of that's our focus. We we um, you know, our our ticket size can be, you know, on average 50 to $60 million. Uh, we, you know, we have 10 board seats. We do a lot in the secondary. We leave rounds. I mean, we do all sorts of of things but one thing we I tell my guys all the time we don't do venture. We can't do it because it's too hard. It's not that we, you know, we'll give up the upside that the venture guys will will make, but you know, they make 10 investments, nine go to zero, and then maybe hopefully one is Google. And our view is look, we're going to focus on trying to make a five to 8x over the 10-year life of the fund. And that's another very important thing. I think if you approach this space
with any sort of shorter term view, you're dead.
Dead. You will not three years, five years.
Even if you make it, you'll lose it.
Correct. Even if you make it, you'll lose it. Like we we've seen it in stock that we've had that has been locked. It was at a great spot and now it's less good. It, you know, and if we hold on for another two, three years, it's going to be great again. So, or maybe not. Or maybe this is the bottom here and we'll be great by the end of the year.
Yeah. But if you have to, if you're forced to take that shorter term outlook, that's why I have a 10-year fund. That's why the the structure of it is 10 years. I want to lock my investors in to that concept so that they're not looking at their mark every month or every quarter. And just knowing we're investing in quality companies that can survive a bare face. All my companies will like likely knock on wood survive this little bare phase. Um, we have many companies with years of cash on the balance sheet. Um, you know, that are cash flowing, you know, that are that are profitable. And so those companies when they're grown up eventually they go public and I think you're going to see, you know, 50, 60, 70 public blockchain crypto businesses over the next 10 years. And so we want to own those in the private market today. Obviously lower valuations.
Toro bullish, Gemini, Kraken, Coinbase is public. How many exchanges can the market uh support?
Well, I think that's enough. I mean, I there could be maybe Crypto.com. Uh, maybe there there a few. But I mean, think about it. like the United States is now, you know, I I I I feel that we're entering this period that I call the Americanization of crypto that Trump and Genius and Clarity and all of this gender gone. And I think Coinbase really is a generational type company like an Amazon, like an eBay. I think it it could be a trillion dollar company.
And did I take a beating when I was saying that when it was down 90% from IPO? But I think it should be one of the 10 biggest companies in America.
Yeah. And the earnings will come out and if they're they miss by a penny, the market will destroy it or who knows what. But I think that's a trillion dollar company in 10 years. And you know, I think Kraken is is right behind is excellent. And I think in the US, you can have a much bigger crypto blockchain business. Still remember this, Co Binance is still 40% of total world crypto trading volume. Coinbase is only two or 3%. Y so in a world where America is definitely taking the lead, there's no question that we can have more than two or three public crypto exchanges. And then there are also Dexes. Now I don't know how that plays out. Um the whole like digital asset on-chain world as value and money moves on-chain has really just started in the last two years.
Yeah. So I think you know you just have to be able to withstand the volatility and have an exposure to a business and have a long-term view on that business. think that's how at least an old guy like me is going to extract, you know, wealth from the space.
Are you actively deploying now?
Yes. Well, we are. We had a first close for our fifth fund um that was of significant size, but we're having more capital coming in in March, and those investors are thrilled because things now are
down. Correct.
And I I have yet to invest any of the new money. I'm waiting patiently. Some of the valuations of of some of the businesses haven't come down and the founders are saying, "Oh, no. My last round, which I did in July, I won't do a down round. I won't do this."
Exactly. I mean, it's
RP to all the people who invested in that one, but that's Yeah.
I I mean,
it's life.
I mean, look,
that's not unique to crypto. I mean down rounds have been the uh
standard for for years when nobody could get public and I mean yeah
or you know or companies that have not raised before you know think their company is worth you know 60 times revenue.
So we had a conversation like that a few weeks ago. The guy wanted 60 times revenue. So I said we passed and we passed on over 300 deals in the last few years. I passed on FTX three times. I passed on Celsius. I passed on Blockby and I passed on companies even that I love. Like we love Fireblocks. We think that's a phenomenal company. We think eventually they'll be public. But in '21 they raised at like I don't know 50 to 80 times revenue. So we didn't invest.
So if there's a possibility to invest in Fireblocks as an example at a more reasonable valuation now that the market's come down, we'll do that. And if there isn't a possibility then we won't. Our focus is we want to make a five to 8x on each of our investments for our LPs over 10 years and that's how we underwrite all our investments. It's a very you know as you said slow boring you know approach but I really feel like we have structural wind at our back. This is like the early days of any market. This is like in a way being involved in the mortgage back security market in 1982, right? It's that kind of thing or the asset backed market in 1982. And so we are embarking on now the digitization of value and money. I've said that three times. Tokenization, tokenization of real world assets, programmable money, all of this is happening.
Okay. So when I ask Yeah. When I ask if you're deploying I I don't know that you can specifically tell me companies, but I guess you've got kind of these buckets, you know, tokenization, uh, you know, securities, whatever. What's interesting to you? Like where where are you excited about uh the next 10 years?
So, I gave you a little bit of a hint before. I think that um entities that will be launching non-dollar stable coins is very interesting because they don't exist today.
99. So
and and it's a proven proven concept is that why aren't there euro stable coins people will say regulation anyway it is going to happen in the traditional world so traditional and I come from of course that world of hedge macro hedge fund business trading bonds commodities currencies etc. Um currencies in the old world trade $7 trillion of volume per day. Okay, last year stable coins traded for the full year $33 trillion. So basically
stable coins today are 4 days of traditional currency volume.
Okay. Right.
All right. Like let's not be a genius.
I mean, let's not make today 99% of all stable coins are dollar-based and over 50% of them are on Ethereum. So, I think it's pretty bullish for ETH long term that they really are the place where stable coins reside. And I think they're going to be a lot more uh stable coins than just dollar based stable coins. And January, remarkably, we they did 10 trillion just in January.
I mean, it's like Jesus's year in in a month or something.
Exactly. Imagine like so what that growth rate that's like. So let's say we're annualizing five 10x growth this year. I mean I don't know 10 if you multiply that and whatever
it's not going to slow down. So now you're talking about probably 150 200 trillion conservatively for the year,
right? And so what's interesting is you know Bitcoin, ETH, Salana, they're all down in the last few months and yet growth in the digital asset ecosystem and in the companies that we invest in, it's still going fine. So maybe there's a delay or maybe, you know, maybe like um I think who is it this morning? Was it Kathy Wood said that she expects Bitcoin back at 200,000 at the end of the year? I I don't know.
Maybe we're at 200,000 in the year. Maybe we consolidate down here for months. I don't know. But
maybe both.
Maybe both. But some of the things that I mentioned today, I mean the charts of growth are all up and uh up and to the right. And so we are looking for the companies that are benefiting from that growth that are that are putting down those rails that are servicing um, you know, the institutional providers
plumbing
the plumbing right like Fireblocks is a perfect example or potentially a company like Anchorage or a company now again, it has to be at the right valuation we're not investing at 50 times revenue but if we can get those core companies at a billion, 2 billion dollar valuation. If they're doing a hundred million, 200 million in revenue,
we tend to pay 10 times or less, then we feel like if we can hold that for 10 years, we're going to be uh in the money significantly. And the risk-reward of that bet is very different than the risk-reward of investing in crypto or blockchain projects and and etc. And so, you know, we have 24 businesses we invested in. We have, you know, we sit on 10 board seats. We have a purview, a a bird's eye seat into all of these things going on. We get approached to lead deals all the time. Um, you know, we had a deal we almost did, would have been very high-profile for an acquisition. Uh, it would have been, you know, a very large very well and it the deal broke apart in the last minute. the acquisition didn't happen unfortunately. Um, but we spent months on that. So sometimes you know you spend a lot of time working, you know, everything lines up and then on the one yard line something doesn't happen but we'll make 10, you know, 10 to 12 investments a year. Um, and this fund will have a significant amount of capital in it. Uh, and our fourth fund has done wonderfully. Even though it was our smallest, it's up multiples because it was invested all during '23.
Yeah. And well,
24% discounts.
Yeah. Yeah.
Yeah. And this fund, fund five, which is still open,
will also have the benefit of investing during this period of because I think some of the private market uh valuations have to come in.
They have to. Yeah.
It's interesting because I think it once again validates your approach which you know in the early days of crypto like I said everybody wanted to be 100x a month right so like you were like the boring old guy trying to do a casual 8x in 10 years but when you talk about stable coins of uh of other currencies
that's not really investable on the token and crypto side for retail like how do I you know like I'm I'm just a guy who believes that the blockchain uses.
You could you could own Circle and just hope that Circle benefits from that or maybe there there's another company in our portfolio that is focused on uh producing stable coins in certain regions in a certain region. I can't get into it. It's not public and I can't talk about it, but we have one that's focused on it. Um, you know, you have retail investors can come into my fund uh if credited. Yeah. Through No, through We have a retail SPV that takes less than $1 million investments because most of ours are all, you know, qualified purchasers. Yeah. But we have a we have an entity that that takes them. So they could and then we have co-invest opportunities so people can leverage up independently on certain stock that we have available beyond what we invested because we only put 15% into any one company in in each fund. But I don't know. I'm going to keep doing exactly what I'm I'm doing until like we until we have competition until I feel like the opportunity isn't there. I'm the single largest LP in this fund. Um I will, you know, I'm obviously one of the single largest LPs in all the funds. You know, I own a 100% of the the management company. I'm all in.
Yeah.
I'm all in. And
but that's what investors want to see.
Yeah, I'm all in. And uh because I think this is the best way to build the exposure that I want and I don't have FOMO. If another fund does great, I'm thrilled. I'm happy for everybody to do great in the space. It's just, you know, I personally would have a little too much fear, you know, being in some of these things where just it's very hard to define the risk-reward, you know, like as an example, I mean, there are some tokens that we would look at. We we haven't yet but where there the the businesses are making hundreds of millions of revenue but there is no equity and there's only a token right there's only a token okay however and there are others
Jupiter however it's not exactly clear how the revenue will accrue and when and maybe it changes and so like it's hard for We, you know, we want to invest in those in that token world, but until someone creates some framework that you can believe in, uh otherwise it's just the insiders selling uh all of their stake and it goes up and then it goes down 90%.
I mean, there's so many examples of it. Like I I think like chain link the company is incredible. I have not gotten a convincing answer and I'm not saying there's I think a token should be very valuable but I just don't know how that value occurs to token XRP obviously is it Ripple is it XRP where's the value go that's another one but there's hundreds of examples of those
right I still can't figure out a single tokens
maybe we need to do more valuation yeah we just find that framework
so we do we do that fundamental valuation even though we don't invest in the tokens we have and we see things trading at like two three times revenue multiple and we want to buy them but then they go down 50%. So like there was
more than the value it's who's holding it and what are they going to do with it like that's yeah
you know or it's
we're trying to analyze the tokens in our traditional way
because
but since we're the only ones or let's say there are 10 other people doing it that way too it's like the tree that falls in the forest but it
cures Yeah. Right. So if we're going to sit there and value these tokens this way and it's going to be us and like 10 guys then and the token then goes down another 50% and then goes down another 50% from there like what are we doing right like it's too early is what that tells me. So, I let I I'm patient. I wait for there to be clarity and then, you know, we'll move when we have confidence that we're not going to get rugged and everything is because something that we could love that we think is going to change the future. If we if we if we can't figure out, you know, why it's going to be worth some amount in five years or eight years, then we just can't do it. And so I think the VC liquid crypto VC which is a specific area I think is really having uh I wouldn't say a come to Jesus moment but it needs to have an existential is having an existential moment.
Um and they're buying at a discount still getting rinsed. There's tremendous value in certain pockets, but if no one else sees that value, then I just
if one whale decides to sell, your valuation doesn't matter.
Maybe I'm just too old. I mean, life's too short or I'm too old or I don't know what. But I'm going to stick to my infrastructure companies that I think are like, you know, building this new digital future. And that's my that's my story and I'm sticking to It's a good time to do it because I'm not your PA, but I know that you got to leave.
All right. Thank you very much, Dad. Always a pleasure. That's dope.