Cathie Wood: Bitcoin Could Reach $1.5 Million

Anthony Pompliano
3 Apr 202432:54

Summary

TLDRIn this interview, Kathy Wood, founder and CEO of Ark Invest, discusses the current state of Bitcoin ETFs and the impact of macro factors on Bitcoin's price. She highlights Ark Invest's early investment in Grayscale's GBTC fund and the subsequent growth in Bitcoin ETFs. Wood emphasizes the importance of education and research in understanding Bitcoin's dual role as both a risk-on and risk-off asset. She also touches on the potential of blockchain technology and cryptocurrencies to revolutionize the financial system, comparing it to the early days of the internet.

Takeaways

  • 🎉 Kathy Wood, founder and CEO of Ark Invest, expresses optimism about Bitcoin and its growing acceptance as a new asset class.
  • 💡 Ark Invest was an early investor in Grayscale's GBTC fund and continues to be bullish on Bitcoin despite market fluctuations.
  • 🌐 The launch of Bitcoin ETFs has significantly increased awareness and demand for Bitcoin, contributing to its rising price.
  • 📈 Macro factors such as interest rates, inflation, and potential recessions are influencing investor interest in Bitcoin as both a risk-on and risk-off asset.
  • 🔄 The Nigerian Naira and Egyptian Pound devaluations highlight the global economic instability and the potential for Bitcoin as a safe haven asset.
  • 🌐 The emerging market dynamics and financial system shocks are driving interest in Bitcoin as an alternative to traditional currencies.
  • 💹 Kathy Wood sees Bitcoin's price increase as a combination of ETF demand and broader economic factors, rather than just ETFs alone.
  • 🚀 Ark Invest's strategy for Bitcoin has evolved from just investing in GBTC to including public companies like Coinbase and Square, and exploring futures funds.
  • 🌐 The introduction of Bitcoin ETFs and institutional investment is expected to increase liquidity and legitimize the asset class, potentially leading to lower volatility.
  • 🔄 Despite the influx of new investors, Kathy Wood believes that Bitcoin's supply dynamics and its potential as a risk-off asset will continue to drive its unique return profile.
  • 💡 The conversation highlights the potential for Bitcoin to disrupt traditional financial systems and the importance of education in understanding its role as a new asset class.

Q & A

  • What is Kathy's current assessment of Bitcoin ETFs?

    -Kathy believes that Bitcoin ETFs are doing very well overall. She is particularly thrilled with their positioning, and she mentions that they are number three if you take out Grayscale. She also notes that the introduction of 11 ETFs at once has led to an unprecedented amount of energy, research, communication, and interest in Bitcoin and digital assets.

  • Why are people excited about Bitcoin's price going up?

    -People are excited about Bitcoin's price increase for a couple of reasons. One is the demand for Bitcoin ETFs, which is outstripping supply. Additionally, there are macro factors such as interest rates, inflation, and potential recession that are driving interest in Bitcoin as an asset class.

  • How does Kathy evaluate Bitcoin in light of potential economic issues like interest rates and inflation?

    -Kathy evaluates Bitcoin as both a risk-on and risk-off asset. She notes that there are warning signals from emerging markets, such as currency devaluations in Nigeria and Egypt, which could lead to a risk-off approach to owning Bitcoin. At the same time, she acknowledges that Bitcoin has historically acted as a risk-on asset, and its role may evolve as more people understand its potential as a new asset class.

  • What does Kathy think about the impact of Wall Street becoming a bigger player in Bitcoin?

    -Kathy sees Wall Street's involvement as a positive development. She believes it will add more liquidity to the market, which is good for price discovery, and legitimize the new asset class. She also thinks that bringing in a new class of investor is important and that the introduction of Bitcoin ETFs will be a significant moment in history.

  • How does Kathy view the future of Bitcoin's return profile with the introduction of new players and larger pools of capital?

    -Kathy expects Bitcoin to maintain its asymmetric return profile. She points out that Bitcoin has historically provided superior returns compared to other assets, with a compound annual rate of return of 44%. While she acknowledges that volatility may decrease as the asset grows larger, she believes that the superior returns will continue.

  • What is Ark Invest's strategy when it comes to Bitcoin?

    -Ark Invest's strategy with Bitcoin is to buy and hold. They have been looking for exposure to Bitcoin since the early days, starting with Grayscale's GBTC, and have since invested in public companies like Coinbase, Square, and Robinhood that have exposure to Bitcoin and the broader digital currency ecosystem.

  • What is the investment thesis for Coinbase, according to Kathy?

    -Kathy sees Coinbase as the most regulatory-compliant exchange in the world, which gives it an advantage, especially as it expands internationally. She believes that Coinbase's position as a trusted company in the United States will help it gain a foothold in other countries. Additionally, she highlights Coinbase's underlying protocol, which is generating organic demand without its own token, as a significant strength.

  • How does Kathy perceive the role of Bitcoin mining in the context of environmental concerns?

    -Kathy argues that Bitcoin mining is not as environmentally damaging as critics claim. She points out that Bitcoin mining is already more than 50% renewable and is contributing to the development of renewable energy ecosystems. She also mentions that companies are using excess energy from solar and wind or even natural gas fields for Bitcoin mining, which is a more environmentally friendly use of that energy than flaring or venting.

  • What are some of the innovative developments happening with the Bitcoin network that Kathy finds fascinating?

    -Kathy is intrigued by the convergence of artificial intelligence and the Bitcoin network, particularly in emerging markets. She mentions the development of a micro-gig economy powered by AI agents using the Bitcoin network through the lightning network. This is enabling new divisions of labor and economic opportunities in areas where there is a high demand for financial services.

  • How does Kathy view the potential of layer two solutions and sidechains for Bitcoin?

    -While Kathy does not specifically discuss layer two solutions and sidechains in detail, she mentions that there is a lot of creativity in the Bitcoin community, and they are finding workarounds to improve the network. She cites the lightning network and optimism arbitrum as examples of such innovations.

  • What is Kathy's perspective on the four-year cycle of Bitcoin and the impact of new market players?

    -Kathy acknowledges that there have been some deviations from the traditional four-year cycle, but she believes that the cycle may persist, especially as new investors enter the market. She emphasizes the importance of educating these new holders about the nature of Bitcoin as a new technology and monetary system, and she thinks that the halving event, which reduces the supply growth of Bitcoin, will continue to be a significant factor in its price dynamics.

Outlines

00:00

🤝 Introduction and Bitcoin ETFs Discussion

The segment begins with the host introducing Kathy Wood, the founder and CEO of Ark Invest, who joins the conversation remotely. The discussion quickly pivots to Bitcoin ETFs, with Kathy sharing Ark Invest's early involvement with the Grayscale GBTC fund and their perspective on the recent introduction of Bitcoin ETFs. Kathy expresses satisfaction with the reception of these new financial products and discusses the unprecedented energy and interest they have generated. She also touches on the role of macro factors such as interest rates, inflation, and potential recessions in influencing the demand for Bitcoin and its ETFs.

05:03

💡 Bitcoin's Role as a Risk-On and Risk-Off Asset

In this segment, Kathy delves deeper into Bitcoin's unique position as both a risk-on and risk-off asset. She references historical examples, such as Bitcoin's price movement during the European sovereign debt crisis, to support this view. Kathy also discusses the impact of emerging market currencies, like the Nigerian Naira and the Egyptian Pound, on Bitcoin's value and the increasing interest in Bitcoin as a hedge against economic instability. The conversation then shifts to the potential effects of Wall Street's involvement in Bitcoin and the anticipated changes in the asset's evaluation and industry development in the coming years.

10:05

📈 Bitcoin's Asymmetric Return Profile

Kathy addresses the historical performance of Bitcoin, highlighting its superior compound annual rate of return compared to other assets. She discusses the potential for reduced volatility and dampened returns as the asset class matures and attracts larger pools of capital. Kathy emphasizes the importance of liquidity and price discovery, suggesting that while Bitcoin's returns may not be as extreme in the future, it will still offer an asymmetric return profile relative to other investments. The conversation also touches on the strategies employed by Ark Invest in relation to Bitcoin and other digital assets, including exposure to public companies and futures funds.

15:06

🚀 Diversification in Cryptocurrency Investments

This segment focuses on Ark Invest's broader investment strategy in the cryptocurrency space, beyond just Bitcoin. Kathy outlines the firm's approach to diversification, which includes investing in companies like Coinbase, Square, and Robinhood that are positioned to benefit from the growing adoption of digital currencies. She discusses the potential for these companies to become dominant players in the digital wallet space and the importance of identifying and investing in businesses that are well-positioned to capitalize on the emerging digital economy. Kathy also mentions Ark Invest's private funds and the expertise they have brought in to analyze and navigate the cryptocurrency market.

20:07

🏦 The Future of Coinbase and Blockchain Technology

The discussion in this segment centers on Coinbase as a company and its role in the future of finance. Kathy explains Ark Invest's investment thesis behind Coinbase, emphasizing its regulatory compliance and international expansion efforts. She also explores the potential for Coinbase to compete with traditional banks and payment platforms like PayPal, and the unique value proposition it offers in the financial ecosystem. Kathy further discusses the impact of blockchain technology on financial services, likening it to the early days of the internet and the untapped potential it holds for revolutionizing the industry.

25:08

⚡️ Advancements in Bitcoin Network and Layer 2 Solutions

Kathy shares her insights on the developments within the Bitcoin network, including the lightning network and other layer 2 solutions. She discusses the challenges and creative workarounds being explored to enhance Bitcoin's usability and scalability. Kathy also touches on the intersection of artificial intelligence and Bitcoin in emerging markets, highlighting the potential for a micro-gig economy powered by AI agents using the Bitcoin network. The segment concludes with a brief discussion on the environmental impact of Bitcoin mining and the innovative solutions being implemented to mitigate these concerns.

30:09

🌐 Block's Vision for Financial Services

In the final segment, Kathy reflects on Block's (formerly Square) push into Bitcoin and its broader vision for financial services. She discusses the company's strategy in providing banking services to the unbanked and its efforts to build a two-sided marketplace for merchants and consumers. Kathy highlights the regulatory challenges Block has faced and its innovative approach to overcoming these obstacles, including its use of Bitcoin to expand its services globally. The conversation wraps up with a reflection on the potential of blockchain technology to revolutionize the financial system, likening it to the early days of the internet and the vast opportunities it presents.

Mindmap

Keywords

💡Bitcoin ETFs

Bitcoin ETFs, or Exchange-Traded Funds, are investment funds that hold Bitcoin and are traded on stock exchanges like traditional stocks. They represent a way for investors to gain exposure to Bitcoin without having to buy and store the cryptocurrency directly. In the context of the video, the guest discusses the impact of Bitcoin ETFs on the market and their role in legitimizing the new asset class of digital currencies.

💡Grayscale GBTC

Grayscale GBTC refers to the Grayscale Bitcoin Trust, which is a digital currency investment product that allows investors to gain exposure to the price movement of Bitcoin without actually owning the underlying asset. It is a popular way for institutional investors to invest in Bitcoin indirectly. In the video, the guest's company was one of the first on Wall Street to invest in Grayscale GBTC, signifying an early adoption of Bitcoin as an investment asset.

💡Macro factors

Macro factors refer to large-scale economic, political, or social factors that have a broad impact on the economy and financial markets. These factors can influence investment decisions and asset prices, including Bitcoin. In the video, the guest discusses how macro factors such as interest rates, inflation, and potential recessions affect the demand for Bitcoin and its price.

💡Risk on/risk off

Risk on and risk off are investment terms used to describe market conditions or investor behavior. 'Risk on' refers to situations where investors are willing to take on more risk for higher potential returns, often investing in assets like stocks or cryptocurrencies. 'Risk off' describes a shift towards less risky investments, such as bonds or cash, during times of market uncertainty or stress. The guest discusses how Bitcoin is being viewed as both a risk on and risk off asset, depending on market conditions.

💡Emerging Markets

Emerging markets are countries with developing economies that may have lower per capita income and less established stock markets compared to developed countries. These markets often present both higher risks and higher growth potential for investors. In the video, the guest highlights the economic challenges faced by emerging markets, such as currency devaluations, which can influence the global perception and demand for Bitcoin.

💡Financial system shock

A financial system shock refers to a sudden event or series of events that disrupt the normal functioning of financial markets and institutions. This can lead to instability, reduced confidence, and significant changes in financial behavior. In the context of the video, the guest discusses the impact of rapid interest rate increases by central banks, which have shocked the financial system and may lead to increased interest in alternative assets like Bitcoin.

💡Price discovery

Price discovery is the process by which the market determines the price of an asset based on supply and demand dynamics. It involves the interaction of buyers and sellers, market information, and trading activities. In the video, the guest talks about how the introduction of Bitcoin ETFs and the involvement of Wall Street in the Bitcoin market can improve price discovery by adding liquidity and increasing the number of market participants.

💡Volatility

Volatility refers to the degree of variation of an asset's price over time, typically measured as the standard deviation of returns. High volatility indicates large price swings, while low volatility implies more stable prices. In the context of the video, the guest discusses the historical volatility of Bitcoin and its potential to decrease as the asset class matures and more capital enters the market.

💡Layer 2 solutions

Layer 2 solutions in the context of blockchain technology refer to protocols or technologies built on top of a blockchain (like Bitcoin) to improve its scalability, efficiency, and speed. These solutions essentially create a second layer on top of the original blockchain layer, allowing for more transactions to be processed without affecting the security of the primary blockchain. In the video, the guest talks about the development of Layer 2 solutions like the Lightning Network, which aims to enhance Bitcoin's transaction capabilities.

💡Blockchain technology

Blockchain technology is a decentralized and distributed ledger system that allows data to be stored across many computers in a way that ensures security, transparency, and immutability. It is the foundational technology behind cryptocurrencies like Bitcoin and has potential applications in various industries beyond finance. In the video, the guest describes blockchain as a layer for financial services native to the internet, highlighting its role in creating a new financial ecosystem.

💡Cryptocurrency mining

Cryptocurrency mining is the process of validating transactions on a blockchain and adding them to the blockchain ledger. Miners use powerful computers to solve complex mathematical problems that validate transactions, and as a reward, they receive newly minted coins and transaction fees. In the video, the guest addresses concerns about the environmental impact of mining and highlights its potential to use renewable energy sources.

Highlights

Kathy Wood, founder and CEO of Ark Invest, shares her insights on Bitcoin ETFs and the digital asset class.

Ark Invest was the first fund on Wall Street to invest in Grayscale's GBTC fund and is now focusing on Bitcoin ETFs.

The launch of 11 ETFs at once has created a surge in energy, research, communication, and interest in Bitcoin and digital assets.

Bitcoin's price increase is driven not only by ETF demand but also by macro factors such as interest rates, inflation, and potential recession.

Kathy Wood explains that Bitcoin can be seen as both a risk-on and risk-off asset, serving as a hedge against emerging market instability.

The Nigerian Naira and Egyptian Pound have devalued significantly, highlighting the risk off appeal of Bitcoin in emerging markets.

The Federal Reserve's dramatic interest rate increase has shocked the global financial system, leading to a focus on Bitcoin as an alternative.

Bitcoin's historical performance shows a compound annual growth rate of 44%, significantly outperforming other asset classes.

As Bitcoin gains more mainstream acceptance, its volatility is expected to decrease, potentially affecting its return profile.

Kathy Wood discusses Ark Invest's strategy of buying and holding Bitcoin, and how it has evolved over time.

Coinbase is a major part of Ark Invest's portfolio due to its regulatory compliance and international expansion.

Kathy Wood addresses the potential of Bitcoin mining to utilize renewable energy and reduce environmental impact.

The Lightning Network and other layer two solutions are being explored for enhancing Bitcoin's functionality.

Block (formerly Square) is pushing into Bitcoin with a focus on providing financial services to the unbanked and global reach.

Kathy Wood sees Bitcoin and blockchain technology as the foundation of a new, global financial system.

The conversation emphasizes the importance of education for new investors in understanding the potential of Bitcoin and digital assets.

The discussion also touches on the potential for Bitcoin to serve as an alarm system for issues within the traditional financial system.

Kathy Wood shares her perspective on the four-year cycle of Bitcoin and the impact of new market players on this trend.

The interview concludes with a look forward to future conversations and the ongoing evolution of Bitcoin and digital assets.

Transcripts

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our next guest today is Kathy

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Wood Kathy uh unfortunately could not uh

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join us in person so she's joining us

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remotely uh Kathy is the founder and CEO

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of Ark invest um Kathy can you hear

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Andor see us I can hear you can you hear

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me ah amazing there we go all

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right uh dramatic entrance um let's

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start the uh conver ation with your

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current assessment of the Bitcoin ETFs

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uh you guys were uh the first fund I

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believe uh on Wall Street to buy into

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the grayscale gbtc uh fund but now we

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have ETFs and so how do you think it's

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going uh well I think I think uh B all

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accounts is going very well in in the

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aggregate we're thrilled with uh our our

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positioning um and actually somewhat

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humbled I must say um uh so I think

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we're number three um if you take out

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gray scale so I'm very happy with that

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uh very happy with the reception and you

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know I think the interesting thing that

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happened when you have 11 uh ETFs

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approved at the same time that's never

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happened before uh the amount of energy

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and uh research communication that has

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gone out uh around this spot Bitcoin ETF

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oper opportunity um you know has been

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unmatched and I think uh I think it's

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done a great service uh for for Bitcoin

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and digital assets generally because

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this is just the beginning of a

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completely new asset

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class now one of the reasons that people

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are excited is because bitcoin's price

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is going up um some of that is because

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there's a lot of people going into the

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Bitcoin ETF and so demand is

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outstripping Supply but there's also a

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number of other macro factors there's

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questions around interest rates around

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inflation about a potential recession

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incoming how do you evaluate uh Bitcoin

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in light of these potential questions

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and also why are people buying the ETFs

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is it just the ETF alone or are there

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maccro factors that are driving them to

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buy

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it well as I as I just mentioned I think

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I think there's been a a lot of

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communication about what Bitcoin

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actually is in this new asset class uh

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leading the chart

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I know that our research team I know

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yasen is there with you um has done an

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amazing job uh not only in the last six

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months or year uh but we've had research

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extending back to two

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2014 and so uh and and our first white

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paper in 2015 when we took our first

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exposure H and so we've been singing the

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Praises of Bitcoin for a long time as a

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new asset class so that's a start but I

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do think there are some macro factors I

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know Mike uh mentioned this earlier

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we're very focused on what's going on in

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the Emerging Markets uh right now I

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think um with time uh many more people

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will understand that the FED with a

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24-fold increase in interest rates over

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little more than a year's time has

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absolutely shocked the financial system

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around the world now many people are

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looking at very short-term lagging

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economic indicators here in the United

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States primarily because the FED is

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doing that but if you look at other

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signals out there they um there there

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are um um signals that not all is well

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in the world I know Mike mentioned the

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the Nara the Nigerian Nara um which has

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devalued two by 2third since uh last

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June now Nigeria is one of the

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wealthiest countries oil rich in in

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Africa and um with a new Administration

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that's become very business friendly I

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think they thought they could let the

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currency float and um uh and they found

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out you know that it has been very

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painful from a purchasing power point of

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view and from from a wealth point of

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view um we've seen the same uh in in

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Egypt that the the Egyptian devaluation

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was uh 40% at the beginning of March uh

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so I think I think that there's a bit of

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a risk off reason for owning Bitcoin

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emanating from the Emerging Markets

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we've seen in Argentina with the new

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Administration there I I think the the

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currency I mean they made it official

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what the black market already knew that

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the currency was worth half of what it

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was reportedly worth so I think we're

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getting those warning signals I also

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think you know yesterday we got the

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Swiss bank cutting rates which was a big

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surprise the UK turning a little more

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doish the FED now a little more doish

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why what are they seeing out there um

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and so many people think of Bitcoin as a

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risk on asset and it's certainly has

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traded like that over time uh but we

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have been looking at it as both risk on

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and risk off uh and I can tell you when

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we first uh when we first learned that

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in

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2015 uh when we took our first position

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in uh Bitcoin via

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gbtc Bitcoin was about

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$250 and many people were making fun of

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us at the time thinking oh they're

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they're new we had just started our

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funds in October 14 oh they're new

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they're just trying to gain attention

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this is a marketing gimmick and so we

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were really on the spot first of all we

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had done a lot of research we didn't

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think uh we thought there was real

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investment Merit but we were watching

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like a hawk its moves and it back then

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uh Greece was threatening to leave the

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European Union and every time there was

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a flare up uh you know and and a fear of

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another European sovereign debt crisis

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Bitcoin inched up and so we've been

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looking at it as both a risk on and a

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risk off asset for quite some time and

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the Regional Bank crisis last year uh

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kind of uh confirmed uh that point of

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view that here Bitcoin um more than

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doubled I think more than doubled as

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Regional Banks were imploding so uh I

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think many people are beginning to say

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as they learn what this is wow could it

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be both a risk on and a risk off asset

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we think so now one of the interesting

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things is uh individuals and maybe

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family offices have been really excited

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about Bitcoin being outside of the

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system kind of this alarm system that

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you're talking about with issues within

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the traditional Financial system or the

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banking system but what happens if Wall

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Street becomes a bigger player within

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Bitcoin it's kind of pulling Bitcoin

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into the system to some degree and so

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does that change the evaluation you have

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of the asset or how you think think the

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industry actually develops in the coming

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years well it's certainly going to be

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adding more liquidity that's good for

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Price Discovery um I think it's

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legitimizing this new asset class uh so

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that's a very good thing I think

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bringing in a new class of investor is

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important and you know one of the

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reasons that we wanted to do a Bitcoin

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uh ETF even or a spot Bitcoin ETF even

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after

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um we we decided that it would probably

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be very low fee given the way the

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competition was going to evolve was you

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know we're looking at uh Bitcoin as you

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know the technology as well it is you

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know a financial superhighway a public

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good uh and so we think uh educating and

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offering access to as many people as

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possible uh in a less friction filled

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way I mean many people just didn't want

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to deal with you know uh wallets and so

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forth is uh is is going to in hindsight

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uh and when history is written I think

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it's going to become a very important

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moment in time now you mentioned that a

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lot more liquidity will lead to or help

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in price Discovery um there's a school

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of thought that as these large pools of

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capital come in and the asset gets

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larger uh volatility will dampen and

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returns will actually go down how do you

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think about the asymmetric return

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profile of Bitcoin historically and will

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that continue in the future or does that

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change now there's new players and

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larger pools of

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capital well asymmetric I mean uh there

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aren't many assets out there that I

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think can claim that they're both risk

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on and risk off so uh for that reason um

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uh we think that uh the the the return

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profile is going to be uh certainly

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relative to anything else out there you

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know yasen and and team have done the

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returns to bitcoin um I think this yes

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is over the life of Bitcoin or um I

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forget exactly he'll he'll tell you that

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the period of time that we did we put in

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our big Ideas uh

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2024 um and if you look at bitcoin's

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compound annual rate of return it's 44%

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over that time time versus I think it's

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4 and a half % for all other assets

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combined uh so we think the superior

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returns uh uh are going to be there this

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is the beginning this is just the

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beginning of this new asset class um yes

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and the volatility is coming down um as

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we look at are we going to have the same

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returns from Peak to trough going

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forward perhaps not um but we've come a

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long way and and we still think we have

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miles to go are you all doing anything

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different since you first bought or has

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it pretty much been Bitcoin is good Arc

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is buying holding and that's the

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strategy when it comes to bitcoin

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specifically um well since we first we

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were looking for exposure very early on

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and the first exposure we could find was

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gbtc but then as time went on um of

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course uh public companies uh uh became

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available with some exposure to uh to

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bitcoin um coin base uh actually we had

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done our first no our second white paper

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with coinbase when I think it was either

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doing it series a or doing it series B

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uh so you know we were casting far and

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wide uh for exposure to bitcoin and we

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didn't have a private fund at the time

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like we do now um so uh bitco coinbase

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is now uh obviously a big part of our

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portfolio Square as well uh Robin Hood

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so um we're we're looking for the

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companies that could potentially have

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that uh that digital wallet that is um

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probably going to become a winner take

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most opportunity and so you've got

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coinbase coming at it from the crypto

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angle you've got uh uh Robinhood coming

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at it from well starting with equities

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and options and uh square with cash app

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so um yes we're we're doing that we also

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have launched uh some um Futures funds

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uh I think that's pretty well KN known

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three of which are actively

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managed uh so one is Bitcoin cash uh one

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is Bitcoin eth and these are all Futures

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and then one is Bitcoin and all of these

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digital wallet uh opportunities

play12:26

potentially uh and then um we also have

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uh private funds a cryptocurrency fund a

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crypto revolutions fund which will you

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know which will take us Far and Beyond

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Bitcoin so we're doing a lot and getting

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more and more excited about it and uh we

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now have four uh four people uh

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including yesin focused uh on the space

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and one of them uh I might add is David

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P puel many of you may know him if you

play12:59

are in into onchain analytics uh some of

play13:03

them are named after him because he

play13:05

created them we hired him uh because uh

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uh we can tell a lot about the market we

play13:13

do a Bitcoin monthly piece examining the

play13:16

health of the network and where we are

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in the bull or the bare Market what

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phase we're in we believe we're kind of

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in midphase right now based on onchain

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analytics and onchain Analytics also

play13:29

help us with our trading strategies in

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active management you mentioned coinbase

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what's the investment thesis for a

play13:36

company that obviously is the most kind

play13:38

of regulated well-known brand in the

play13:41

United States but why buy the stock here

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and and what do you think the future

play13:44

holds for them well we were buying it

play13:48

when uh Regulators were torpedoing it or

play13:51

attempting to at least um we post our

play13:54

trades every day and um um I think many

play13:58

people were very surprised to to see us

play14:01

buying when uh coinbase got the wells

play14:04

notice and the stock price went down 20

play14:06

or 30% and then again when the the the

play14:10

SEC sued them um coinbase is the most

play14:14

regulatory compliant Exchange in the

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world uh some of its competitors have

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gone out of business FTX of course being

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an important one uh binance has had its

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share of issues as well uh CZ having to

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step aside and the fines and so forth um

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and coinbase is now going International

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very importantly uh and uh I think as as

play14:40

uh as The

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Trusted um company that it is here in

play14:44

the United States I think it will catch

play14:46

hold uh in uh in the rest of the world

play14:49

we're seeing it with an offshore

play14:52

derivatives um exchange which is taken

play14:55

off and is doing I think a lot better

play14:58

than a lot of other people expected and

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then we've got base uh you know they've

play15:03

got an underlying protocol which is

play15:05

generating organic Demand with millions

play15:08

and millions of people already on it uh

play15:11

compared to and and you know it doesn't

play15:13

have its own token like ftt or B&B uh

play15:17

it's truly organic demand so uh I think

play15:20

it's got a lot going for it and again

play15:22

you know it's a great way to capitalize

play15:24

on a new asset class that um that is

play15:28

going to create a new class of asset

play15:31

managers we're all going to become power

play15:33

users uh as as we participate in this

play15:37

ecosystem we're not going to be you know

play15:40

as much the I mean we call ourselves an

play15:43

active manager but uh as you say we you

play15:46

know Buy and Hold a stock if we really

play15:48

like it uh we'll get to do a lot more in

play15:52

this ecosystem as as an asset manager so

play15:55

that's pretty exciting as well and

play15:57

Yassin and his team

play15:59

are really gearing up uh gearing us up

play16:02

nicely for that when you look at

play16:04

coinbase do you feel like um it could

play16:06

compete with the banks in terms of you

play16:08

know taking a 100% or a very large

play16:11

portion of uh wallet share um or is it

play16:14

something that's more Ain to competing

play16:15

with the paypals and kind of payments or

play16:18

maybe it's something that would be

play16:20

competing more with like a Charles

play16:21

Schwab and like an investment account

play16:22

like where where does it kind of slot in

play16:24

from a competitive standpoint with the

play16:26

Legacy players today today's episode is

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r

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a.com talk well I think I think all of

play17:31

the above uh right um and and we'll see

play17:35

over time where where where it has the

play17:37

most success and where it chooses to to

play17:40

focus

play17:42

um but uh we think it's a very big idea

play17:46

that's why we own it it's the top stock

play17:47

in our um in our Flagship strategy uh

play17:52

even bigger than Tesla now and you know

play17:54

how positive we are on

play17:56

Tesla now Tesla went up a lot people

play18:00

were very excited uh people are

play18:01

expecting Bitcoin to go up a lot they're

play18:03

excited before this even happened um but

play18:05

one of the big questions is will the

play18:07

four-year cycle persist we obviously

play18:11

broke a number of rules including we

play18:13

went below the previous all-time high

play18:15

we're now at an all-time high before the

play18:17

having how are you thinking about

play18:18

four-year Cycles Andor big draw Downs

play18:21

now that these new players are in the

play18:24

market um so you're asking me are do we

play18:28

have a lot of weak holders and is this

play18:30

going to disturb the cycle after that

play18:32

the having is is that the nature of the

play18:35

question we can call them weak holders I

play18:37

like that

play18:40

better um and and you know we're we're

play18:43

trying to educate the the new holders

play18:46

but by definition you know they they

play18:48

haven't been doing this as long as we

play18:50

have and so innately they they they Pro

play18:53

they're not going to have the confidence

play18:55

that we have that this is a new

play18:58

technology

play18:59

a new asset class a new monetary system

play19:03

three very big each a big idea uh it

play19:07

unto itself um so um as far as the

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having I think what we're trying to do

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in in terms of Education uh as we have

play19:16

this new investor base is say you know

play19:19

what for the first

play19:21

time uh the the the supply growth of

play19:27

Bitcoin it it as it drops from 1.9% per

play19:32

year to roughly

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.9% uh per year um come April uh it's

play19:41

going it's hitting an important

play19:43

Milestone um the the supply of uh gold

play19:48

has been growing very long term on

play19:51

average

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1% so now I mean it's just marginally

play19:56

but it is below the supply growth

play19:59

uh of gold so um we're we're trying to

play20:02

use that um to uh help people understand

play20:07

a lot of the reason that gold became

play20:10

such an a successful asset class is

play20:13

because the supplied growth was fairly

play20:15

controlled especially relative to uh

play20:19

money growth out there in various

play20:22

regimes including our own um and uh and

play20:26

so I think I I don't see any reason why

play20:29

the having won't be won't cause the same

play20:33

Dynamic that it has in in the previous

play20:35

Cycles especially as we're going out

play20:38

there with that message um it doesn't

play20:42

happen right away April and boom uh and

play20:45

it it usually doesn't happen that way so

play20:48

maybe they'll develop some impatience

play20:50

but um uh we think that it um it

play20:54

emphasizes one of the core features of

play20:56

Bitcoin and the reason it is

play20:59

uh a a a riskof asset as well as a risk

play21:02

on asset how are you all thinking about

play21:04

the lightning Network um some of the

play21:07

layer twos or some of the side chains

play21:08

things that are being built on top of

play21:11

Bitcoin yeah um well it's interesting to

play21:14

watch some of uh the layer twos optimism

play21:20

arbitrum uh maybe taking some share here

play21:25

um I think that the lightning uh Network

play21:28

demand too much collateral and so uh you

play21:31

know this is a very uh creative and uh

play21:36

uh a creative community and they try and

play21:39

find workarounds and and those seem to

play21:41

be finding some success uh so but you

play21:44

know one of the things that in terms of

play21:46

the lightning Network that's been

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fascinating um actually this was on one

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of our Bitcoin brainstorms we do a

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Bitcoin brainstorm every month uh I

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think we've done it for seven months now

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yasen uh and uh and the team with h

play22:04

Bitcoin Park I don't know if you know

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Rod Ruby from Bitcoin Park but we do

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this once a month and uh the the second

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one we did was just mindblowing to me I

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I was wearing my economics hat the

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Emerging Markets I understand about

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those as well but there's a convergence

play22:25

between artificial intelligence and uh

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uh Bitcoin and the Bitcoin Network

play22:31

that's taking place now and it's taking

play22:33

place in the Emerging Markets we had for

play22:36

those of you who know the uh the the

play22:38

people involved in in the uh lightning

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Network um his name is roast beef he's

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one of the developers and he was telling

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us uh in that in Africa what he was

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witnessing was you know a a completely

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new division of labor um we've gotten

play22:58

used to Gig economy that concept here in

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in the United States with Uber and

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Airbnb and uh and other things uh but

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you can turbocharge that into micro uh

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the micro gig economy and uh uh AI

play23:19

agents using um the Bitcoin Network

play23:23

through lightning so um it's happening

play23:27

but as as as so much is when it comes to

play23:31

bitcoin um we're not seeing it as much

play23:34

here as in the Emerging Markets where

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you know there's more of a

play23:39

need what about the mining businesses

play23:42

obviously you all um really understand

play23:44

Bitcoin and are enthusiastic are the

play23:46

mining businesses more or less

play23:48

attractive and and how do you think

play23:50

about them in the

play23:52

portfolio well we don't own any mining

play23:55

stocks uh we have a very strong point of

play23:58

view on on what many people criticize as

play24:04

the environmental damage that uh Bitcoin

play24:07

mining is doing you know it's

play24:09

interesting I remember the dawn of the

play24:12

internet um maybe not the John Dawn that

play24:15

was DARPA and I didn't have anything to

play24:17

do with it but as as it was beginning to

play24:19

commercialize and we were beginning to

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understand what it was um there was a

play24:25

big controversy back then as well do you

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know how much uh uh electricity the

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internet is taking uh or using this is

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this is terrible it's so wasteful it's

play24:37

for criminals it's for uh pornography

play24:42

it's for all of this stuff so this this

play24:44

typically happens uh with uh with uh

play24:48

Innovation um many people think it's for

play24:51

nefarious uses and uh and they do not

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see the the the bigger picture I think

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the same is through here and we did a

play25:00

seminar I think it was in 2020 um was

play25:03

right after Tesla had put Bitcoin on its

play25:06

balance sheet and received a lot of

play25:08

criticism about uh the environmental

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damage uh that Bitcoin was doing and so

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with Jack dorsy and Elon we pulled

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together it was a half day seminar I

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think I I know it's still up somewhere

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um and at that time we had written we

play25:26

had done some research saying wait a

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minute you know whether you know utility

play25:32

ecosystems could um could use Bitcoin

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mining for a very important purpose that

play25:41

is all of the energy that's wasted when

play25:45

storage units are filled with power from

play25:48

the Sun or the

play25:49

wind uh use that that that excess and

play25:54

put it into Bitcoin mining and then

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overbuild solar and wind

play25:59

and that's exactly what's happening the

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other thing that's happening that is

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fascinating is um Exxon uh had I don't

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know how much it's rolled out but I know

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it had six it put Bitcoin mining

play26:12

machines into six natural gas fields

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around the world um and and basically

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instead of flaring or venting the gas

play26:23

and venting is much more uh damaging

play26:26

environmentally um

play26:28

them flaring uh they put it to use in

play26:31

Bitcoin mining and uh and now companies

play26:34

I know Caruso is another company doing

play26:37

this so uh we actually I think if if if

play26:40

I'm not mistaken um uh I think already

play26:45

Bitcoin mining is uh the the energy use

play26:49

is more than 50% renewable and now is

play26:53

contributing to building out that uh

play26:56

that ecosystem

play26:58

how are you thinking about uh block

play27:01

formerly known as Square uh they

play27:03

recently um or last couple years made a

play27:05

big push into Bitcoin uh a lot of their

play27:07

revenue numbers seem to be tied to

play27:09

bitcoin purchases at certain times and

play27:11

now they've also come out with a

play27:12

hardware wallet and so I know you guys

play27:14

have uh been excited about that business

play27:16

and maybe the investment thesis

play27:19

there uh you mean block alog together or

play27:21

the Bitcoin uh or the the wallet both

play27:25

work okay uh sure

play27:28

uh you know it's been fascinating to

play27:30

watch this two-sided Market uh uh system

play27:34

uh platform um you know in the beginning

play27:38

we we did our very early research uh on

play27:42

this and and we were

play27:44

tracking where uh where cash app was

play27:48

having

play27:49

success relative to to PayPal uh that

play27:53

was its main competitor at the time and

play27:55

we saw that if you mapped uh where it

play28:00

was having success it was in lower

play28:02

income

play28:04

areas and um and uh so uh and and it was

play28:11

growing

play28:12

virally uh and part of the reason was

play28:15

this Merchant consumer two-sided

play28:18

Marketplace uh so it was very early on

play28:21

in fact I remember back then um in the

play28:23

same quarter Jack dorsy and Mark Benny

play28:27

off talked about this concept that there

play28:30

would be no difference between consumers

play28:32

and

play28:33

businesses and I I heard them say it in

play28:36

the same quarterly call and so it's like

play28:39

wow okay what's going on here and so as

play28:41

we traced this we said oh okay this is

play28:45

providing services to the unbanked in

play28:48

the case of cash app uh and uh

play28:52

peer-to-peer uh and and and enabling

play28:56

Merchants um to uh because block can see

play29:02

every second of the day how well a

play29:04

merchant is doing because most of the

play29:06

payments go through it uh it was then

play29:09

able to help these Merchants build their

play29:12

businesses give them working Capital

play29:15

Loans give them you know loans to make

play29:18

new capital Investments uh um and then

play29:21

it got into payroll and then of course

play29:25

now it's offering consumers who stay

play29:27

Within in its Network very lowcost uh

play29:31

banking services so this is an ecosystem

play29:35

that's evolving and you can see that

play29:38

with Bitcoin this is a little bit of a

play29:40

trojan horse I know a block or Square as

play29:44

it was called at the time was just

play29:47

running into one regulatory obstacle a

play29:50

after another as it tried to enter new

play29:53

markets and it basically said to heck

play29:55

with this and uh is using Bitcoin now to

play29:59

get into um other markets in fact it's

play30:03

sell or shutting down or maybe selling

play30:06

off uh some of the properties it bought

play30:08

in Europe in order uh in order to do

play30:11

this so I think um I think this is the

play30:15

you know the world of offering uh access

play30:18

to financial services broadly and as as

play30:22

broadly and as inexpensively as possible

play30:25

and going global doing it and you you

play30:28

know it's very interesting when we try

play30:29

and again this is all about education

play30:32

explain to new investors what this

play30:35

movement is um in the words I'll use

play30:39

Chris berisi who was our uh first

play30:42

analyst uh in 2014 on bitcoin and went

play30:46

on to write a book I think he published

play30:50

it in 2017 called crypto assets the

play30:54

Innovative Investors Guide to bitcoin

play30:57

and Beyond um he

play31:01

recently um is helping to bring to life

play31:05

I'd like to think his Arc Roots helped

play31:08

him because he's bringing to life for

play31:10

you know the average investor what this

play31:13

really is this is the internet Financial

play31:16

system really that's all this is the

play31:20

developers in the early days of the

play31:22

internet did not uh expect any Financial

play31:26

Services or Commerce in fact the

play31:29

internet was illegal for consumers to

play31:32

use in the 80s I remember that and um

play31:36

and then email was connected to the

play31:38

internet in

play31:40

1993 and uh and and it and it took on a

play31:45

a new life but we still didn't expect no

play31:48

one was going to put their credit card

play31:50

on even when people were trying in those

play31:52

early days I remember saying I wouldn't

play31:53

do it and of course you see see what's

play31:56

happened well what really should have

play31:58

happened is developers should have added

play32:01

in a a a lay a a layer uh for financial

play32:08

services native to the internet that's

play32:11

what blockchain technology is that's

play32:14

what it is it's as simple as that and uh

play32:18

so it's a very big idea it's a global

play32:20

idea and a company like block and some

play32:24

of the other of course coinbase um they

play32:28

understand this um it's a very big idea

play32:31

um think about how big the internet is

play32:34

now and it has miles to go because we've

play32:36

just begun I I appreciate your time

play32:39

we're sad that you couldn't be here and

play32:40

we'll definitely do it again in the

play32:41

future next time yes thank you so much

play32:45

for for letting me do this online I'm

play32:47

I'm really really honored to have been a

play32:49

part of this all right we'll see you

play32:51

later okay bye pom

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