Cathie Wood: Bitcoin Could Reach $1.5 Million

Summary

In 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.

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

our next guest today is Kathy

[Music]

Wood Kathy uh unfortunately could not uh

join us in person so she's joining us

remotely uh Kathy is the founder and CEO

of Ark invest um Kathy can you hear

Andor see us I can hear you can you hear

me ah amazing there we go all

right uh dramatic entrance um let's

start the uh conver ation with your

current assessment of the Bitcoin ETFs

uh you guys were uh the first fund I

believe uh on Wall Street to buy into

the grayscale gbtc uh fund but now we

have ETFs and so how do you think it's

going uh well I think I think uh B all

accounts is going very well in in the

aggregate we're thrilled with uh our our

positioning um and actually somewhat

humbled I must say um uh so I think

we're number three um if you take out

gray scale so I'm very happy with that

uh very happy with the reception and you

know I think the interesting thing that

happened when you have 11 uh ETFs

approved at the same time that's never

happened before uh the amount of energy

and uh research communication that has

gone out uh around this spot Bitcoin ETF

oper opportunity um you know has been

unmatched and I think uh I think it's

done a great service uh for for Bitcoin

and digital assets generally because

this is just the beginning of a

completely new asset

class now one of the reasons that people

are excited is because bitcoin's price

is going up um some of that is because

there's a lot of people going into the

Bitcoin ETF and so demand is

outstripping Supply but there's also a

number of other macro factors there's

questions around interest rates around

inflation about a potential recession

incoming how do you evaluate uh Bitcoin

in light of these potential questions

and also why are people buying the ETFs

is it just the ETF alone or are there

maccro factors that are driving them to

buy

it well as I as I just mentioned I think

I think there's been a a lot of

communication about what Bitcoin

actually is in this new asset class uh

leading the chart

I know that our research team I know

yasen is there with you um has done an

amazing job uh not only in the last six

months or year uh but we've had research

extending back to two

2014 and so uh and and our first white

paper in 2015 when we took our first

exposure H and so we've been singing the

Praises of Bitcoin for a long time as a

new asset class so that's a start but I

do think there are some macro factors I

know Mike uh mentioned this earlier

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

the Emerging Markets uh right now I

think um with time uh many more people

will understand that the FED with a

24-fold increase in interest rates over

little more than a year's time has

absolutely shocked the financial system

around the world now many people are

looking at very short-term lagging

economic indicators here in the United

States primarily because the FED is

doing that but if you look at other

signals out there they um there there

are um um signals that not all is well

in the world I know Mike mentioned the

the Nara the Nigerian Nara um which has

devalued two by 2third since uh last

June now Nigeria is one of the

wealthiest countries oil rich in in

Africa and um with a new Administration

that's become very business friendly I

think they thought they could let the

currency float and um uh and they found

out you know that it has been very

painful from a purchasing power point of

view and from from a wealth point of

view um we've seen the same uh in in

Egypt that the the Egyptian devaluation

was uh 40% at the beginning of March uh

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

a risk off reason for owning Bitcoin

emanating from the Emerging Markets

we've seen in Argentina with the new

Administration there I I think the the

currency I mean they made it official

what the black market already knew that

the currency was worth half of what it

was reportedly worth so I think we're

getting those warning signals I also

think you know yesterday we got the

Swiss bank cutting rates which was a big

surprise the UK turning a little more

doish the FED now a little more doish

why what are they seeing out there um

and so many people think of Bitcoin as a

risk on asset and it's certainly has

traded like that over time uh but we

have been looking at it as both risk on

and risk off uh and I can tell you when

we first uh when we first learned that

in

2015 uh when we took our first position

in uh Bitcoin via

gbtc Bitcoin was about

$250 and many people were making fun of

us at the time thinking oh they're

they're new we had just started our

funds in October 14 oh they're new

they're just trying to gain attention

this is a marketing gimmick and so we

were really on the spot first of all we

had done a lot of research we didn't

think uh we thought there was real

investment Merit but we were watching

like a hawk its moves and it back then

uh Greece was threatening to leave the

European Union and every time there was

a flare up uh you know and and a fear of

another European sovereign debt crisis

Bitcoin inched up and so we've been

looking at it as both a risk on and a

risk off asset for quite some time and

the Regional Bank crisis last year uh

kind of uh confirmed uh that point of

view that here Bitcoin um more than

doubled I think more than doubled as

Regional Banks were imploding so uh I

think many people are beginning to say

as they learn what this is wow could it

be both a risk on and a risk off asset

we think so now one of the interesting

things is uh individuals and maybe

family offices have been really excited

about Bitcoin being outside of the

system kind of this alarm system that

you're talking about with issues within

the traditional Financial system or the

banking system but what happens if Wall

Street becomes a bigger player within

Bitcoin it's kind of pulling Bitcoin

into the system to some degree and so

does that change the evaluation you have

of the asset or how you think think the

industry actually develops in the coming

years well it's certainly going to be

adding more liquidity that's good for

Price Discovery um I think it's

legitimizing this new asset class uh so

that's a very good thing I think

bringing in a new class of investor is

important and you know one of the

reasons that we wanted to do a Bitcoin

uh ETF even or a spot Bitcoin ETF even

after

um we we decided that it would probably

be very low fee given the way the

competition was going to evolve was you

know we're looking at uh Bitcoin as you

know the technology as well it is you

know a financial superhighway a public

good uh and so we think uh educating and

offering access to as many people as

possible uh in a less friction filled

way I mean many people just didn't want

to deal with you know uh wallets and so

forth is uh is is going to in hindsight

uh and when history is written I think

it's going to become a very important

moment in time now you mentioned that a

lot more liquidity will lead to or help

in price Discovery um there's a school

of thought that as these large pools of

capital come in and the asset gets

larger uh volatility will dampen and

returns will actually go down how do you

think about the asymmetric return

profile of Bitcoin historically and will

that continue in the future or does that

change now there's new players and

larger pools of

capital well asymmetric I mean uh there

aren't many assets out there that I

think can claim that they're both risk

on and risk off so uh for that reason um

uh we think that uh the the the return

profile is going to be uh certainly

relative to anything else out there you

know yasen and and team have done the

returns to bitcoin um I think this yes

is over the life of Bitcoin or um I

forget exactly he'll he'll tell you that

the period of time that we did we put in

our big Ideas uh

2024 um and if you look at bitcoin's

compound annual rate of return it's 44%

over that time time versus I think it's

4 and a half % for all other assets

combined uh so we think the superior

returns uh uh are going to be there this

is the beginning this is just the

beginning of this new asset class um yes

and the volatility is coming down um as

we look at are we going to have the same

returns from Peak to trough going

forward perhaps not um but we've come a

long way and and we still think we have

miles to go are you all doing anything

different since you first bought or has

it pretty much been Bitcoin is good Arc

is buying holding and that's the

strategy when it comes to bitcoin

specifically um well since we first we

were looking for exposure very early on

and the first exposure we could find was

gbtc but then as time went on um of

course uh public companies uh uh became

available with some exposure to uh to

bitcoin um coin base uh actually we had

done our first no our second white paper

with coinbase when I think it was either

doing it series a or doing it series B

uh so you know we were casting far and

wide uh for exposure to bitcoin and we

didn't have a private fund at the time

like we do now um so uh bitco coinbase

is now uh obviously a big part of our

portfolio Square as well uh Robin Hood

so um we're we're looking for the

companies that could potentially have

that uh that digital wallet that is um

probably going to become a winner take

most opportunity and so you've got

coinbase coming at it from the crypto

angle you've got uh uh Robinhood coming

at it from well starting with equities

and options and uh square with cash app

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

have launched uh some um Futures funds

uh I think that's pretty well KN known

three of which are actively

managed uh so one is Bitcoin cash uh one

is Bitcoin eth and these are all Futures

and then one is Bitcoin and all of these

digital wallet uh opportunities

potentially uh and then um we also have

uh private funds a cryptocurrency fund a

crypto revolutions fund which will you

know which will take us Far and Beyond

Bitcoin so we're doing a lot and getting

more and more excited about it and uh we

now have four uh four people uh

including yesin focused uh on the space

and one of them uh I might add is David

P puel many of you may know him if you

are in into onchain analytics uh some of

them are named after him because he

created them we hired him uh because uh

uh we can tell a lot about the market we

do a Bitcoin monthly piece examining the

health of the network and where we are

in the bull or the bare Market what

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

in midphase right now based on onchain

analytics and onchain Analytics also

help us with our trading strategies in

active management you mentioned coinbase

what's the investment thesis for a

company that obviously is the most kind

of regulated well-known brand in the

United States but why buy the stock here

and and what do you think the future

holds for them well we were buying it

when uh Regulators were torpedoing it or

attempting to at least um we post our

trades every day and um um I think many

people were very surprised to to see us

buying when uh coinbase got the wells

notice and the stock price went down 20

or 30% and then again when the the the

SEC sued them um coinbase is the most

regulatory compliant Exchange in the

world uh some of its competitors have

gone out of business FTX of course being

an important one uh binance has had its

share of issues as well uh CZ having to

step aside and the fines and so forth um

and coinbase is now going International

very importantly uh and uh I think as as

uh as The

Trusted um company that it is here in

the United States I think it will catch

hold uh in uh in the rest of the world

we're seeing it with an offshore

derivatives um exchange which is taken

off and is doing I think a lot better

than a lot of other people expected and

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

got an underlying protocol which is

generating organic Demand with millions

and millions of people already on it uh

compared to and and you know it doesn't

have its own token like ftt or B&B uh

it's truly organic demand so uh I think

it's got a lot going for it and again

you know it's a great way to capitalize

on a new asset class that um that is

going to create a new class of asset

managers we're all going to become power

users uh as as we participate in this

ecosystem we're not going to be you know

as much the I mean we call ourselves an

active manager but uh as you say we you

know Buy and Hold a stock if we really

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

this ecosystem as as an asset manager so

that's pretty exciting as well and

Yassin and his team

are really gearing up uh gearing us up

nicely for that when you look at

coinbase do you feel like um it could

compete with the banks in terms of you

know taking a 100% or a very large

portion of uh wallet share um or is it

something that's more Ain to competing

with the paypals and kind of payments or

maybe it's something that would be

competing more with like a Charles

Schwab and like an investment account

like where where does it kind of slot in

from a competitive standpoint with the

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a.com talk well I think I think all of

the above uh right um and and we'll see

over time where where where it has the

most success and where it chooses to to

focus

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

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

in our um in our Flagship strategy uh

even bigger than Tesla now and you know

how positive we are on

Tesla now Tesla went up a lot people

were very excited uh people are

expecting Bitcoin to go up a lot they're

excited before this even happened um but

one of the big questions is will the

four-year cycle persist we obviously

broke a number of rules including we

went below the previous all-time high

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

having how are you thinking about

four-year Cycles Andor big draw Downs

now that these new players are in the

market um so you're asking me are do we

have a lot of weak holders and is this

going to disturb the cycle after that

the having is is that the nature of the

question we can call them weak holders I

like that

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

trying to educate the the new holders

but by definition you know they they

haven't been doing this as long as we

have and so innately they they they Pro

they're not going to have the confidence

that we have that this is a new

technology

a new asset class a new monetary system

three very big each a big idea uh it

unto itself um so um as far as the

having I think what we're trying to do

in in terms of Education uh as we have

this new investor base is say you know

what for the first

time uh the the the supply growth of

Bitcoin it it as it drops from 1.9% per

year to roughly

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

going it's hitting an important

Milestone um the the supply of uh gold

has been growing very long term on

average

1% so now I mean it's just marginally

but it is below the supply growth

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

use that um to uh help people understand

a lot of the reason that gold became

such an a successful asset class is

because the supplied growth was fairly

controlled especially relative to uh

money growth out there in various

regimes including our own um and uh and

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

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

Dynamic that it has in in the previous

Cycles especially as we're going out

there with that message um it doesn't

happen right away April and boom uh and

it it usually doesn't happen that way so

maybe they'll develop some impatience

but um uh we think that it um it

emphasizes one of the core features of

Bitcoin and the reason it is

uh a a a riskof asset as well as a risk

on asset how are you all thinking about

the lightning Network um some of the

layer twos or some of the side chains

things that are being built on top of

Bitcoin yeah um well it's interesting to

watch some of uh the layer twos optimism

arbitrum uh maybe taking some share here

um I think that the lightning uh Network

demand too much collateral and so uh you

know this is a very uh creative and uh

uh a creative community and they try and

find workarounds and and those seem to

be finding some success uh so but you

know one of the things that in terms of

the lightning Network that's been

fascinating um actually this was on one

of our Bitcoin brainstorms we do a

Bitcoin brainstorm every month uh I

think we've done it for seven months now

yasen uh and uh and the team with h

Bitcoin Park I don't know if you know

Rod Ruby from Bitcoin Park but we do

this once a month and uh the the second

one we did was just mindblowing to me I

I was wearing my economics hat the

Emerging Markets I understand about

those as well but there's a convergence

between artificial intelligence and uh

uh Bitcoin and the Bitcoin Network

that's taking place now and it's taking

place in the Emerging Markets we had for

those of you who know the uh the the

people involved in in the uh lightning

Network um his name is roast beef he's

one of the developers and he was telling

us uh in that in Africa what he was

witnessing was you know a a completely

new division of labor um we've gotten

used to Gig economy that concept here in

in the United States with Uber and

Airbnb and uh and other things uh but

you can turbocharge that into micro uh

the micro gig economy and uh uh AI

agents using um the Bitcoin Network

through lightning so um it's happening

but as as as so much is when it comes to

bitcoin um we're not seeing it as much

here as in the Emerging Markets where

you know there's more of a

need what about the mining businesses

obviously you all um really understand

Bitcoin and are enthusiastic are the

mining businesses more or less

attractive and and how do you think

about them in the

portfolio well we don't own any mining

stocks uh we have a very strong point of

view on on what many people criticize as

the environmental damage that uh Bitcoin

mining is doing you know it's

interesting I remember the dawn of the

internet um maybe not the John Dawn that

was DARPA and I didn't have anything to

do with it but as as it was beginning to

commercialize and we were beginning to

understand what it was um there was a

big controversy back then as well do you

know how much uh uh electricity the

internet is taking uh or using this is

this is terrible it's so wasteful it's

for criminals it's for uh pornography

it's for all of this stuff so this this

typically happens uh with uh with uh

Innovation um many people think it's for

nefarious uses and uh and they do not

see the the the bigger picture I think

the same is through here and we did a

seminar I think it was in 2020 um was

right after Tesla had put Bitcoin on its

balance sheet and received a lot of

criticism about uh the environmental

damage uh that Bitcoin was doing and so

with Jack dorsy and Elon we pulled

together it was a half day seminar I

think I I know it's still up somewhere

um and at that time we had written we

had done some research saying wait a

minute you know whether you know utility

ecosystems could um could use Bitcoin

mining for a very important purpose that

is all of the energy that's wasted when

storage units are filled with power from

the Sun or the

wind uh use that that that excess and

put it into Bitcoin mining and then

overbuild solar and wind

and that's exactly what's happening the

other thing that's happening that is

fascinating is um Exxon uh had I don't

know how much it's rolled out but I know

it had six it put Bitcoin mining

machines into six natural gas fields

around the world um and and basically

instead of flaring or venting the gas

and venting is much more uh damaging

environmentally um

them flaring uh they put it to use in

Bitcoin mining and uh and now companies

I know Caruso is another company doing

this so uh we actually I think if if if

I'm not mistaken um uh I think already

Bitcoin mining is uh the the energy use

is more than 50% renewable and now is

contributing to building out that uh

that ecosystem

how are you thinking about uh block

formerly known as Square uh they

recently um or last couple years made a

big push into Bitcoin uh a lot of their

revenue numbers seem to be tied to

bitcoin purchases at certain times and

now they've also come out with a

hardware wallet and so I know you guys

have uh been excited about that business

and maybe the investment thesis

there uh you mean block alog together or

the Bitcoin uh or the the wallet both

work okay uh sure

uh you know it's been fascinating to

watch this two-sided Market uh uh system

uh platform um you know in the beginning

we we did our very early research uh on

this and and we were

tracking where uh where cash app was

having

success relative to to PayPal uh that

was its main competitor at the time and

we saw that if you mapped uh where it

was having success it was in lower

income

areas and um and uh so uh and and it was

growing

virally uh and part of the reason was

this Merchant consumer two-sided

Marketplace uh so it was very early on

in fact I remember back then um in the

same quarter Jack dorsy and Mark Benny

off talked about this concept that there

would be no difference between consumers

and

businesses and I I heard them say it in

the same quarterly call and so it's like

wow okay what's going on here and so as

we traced this we said oh okay this is

providing services to the unbanked in

the case of cash app uh and uh

peer-to-peer uh and and and enabling

Merchants um to uh because block can see

every second of the day how well a

merchant is doing because most of the

payments go through it uh it was then

able to help these Merchants build their

businesses give them working Capital

Loans give them you know loans to make

new capital Investments uh um and then

it got into payroll and then of course

now it's offering consumers who stay

Within in its Network very lowcost uh

banking services so this is an ecosystem

that's evolving and you can see that

with Bitcoin this is a little bit of a

trojan horse I know a block or Square as

it was called at the time was just

running into one regulatory obstacle a

after another as it tried to enter new

markets and it basically said to heck

with this and uh is using Bitcoin now to

get into um other markets in fact it's

sell or shutting down or maybe selling

off uh some of the properties it bought

in Europe in order uh in order to do

this so I think um I think this is the

you know the world of offering uh access

to financial services broadly and as as

broadly and as inexpensively as possible

and going global doing it and you you

know it's very interesting when we try

and again this is all about education

explain to new investors what this

movement is um in the words I'll use

Chris berisi who was our uh first

analyst uh in 2014 on bitcoin and went

on to write a book I think he published

it in 2017 called crypto assets the

Innovative Investors Guide to bitcoin

and Beyond um he

recently um is helping to bring to life

I'd like to think his Arc Roots helped

him because he's bringing to life for

you know the average investor what this

really is this is the internet Financial

system really that's all this is the

developers in the early days of the

internet did not uh expect any Financial

Services or Commerce in fact the

internet was illegal for consumers to

use in the 80s I remember that and um

and then email was connected to the

internet in

1993 and uh and and it and it took on a

a new life but we still didn't expect no

one was going to put their credit card

on even when people were trying in those

early days I remember saying I wouldn't

do it and of course you see see what's

happened well what really should have

happened is developers should have added

in a a a lay a a layer uh for financial

services native to the internet that's

what blockchain technology is that's

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

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

idea and a company like block and some

of the other of course coinbase um they

understand this um it's a very big idea

um think about how big the internet is

now and it has miles to go because we've

just begun I I appreciate your time

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

we'll definitely do it again in the

future next time yes thank you so much

for for letting me do this online I'm

I'm really really honored to have been a

part of this all right we'll see you

later okay bye pom