Dan Tapiero: Three Key Crypto Investment Categories (w/Dan Tapiero and Raoul Pal)
ASH BENNINGTON: If you love our crypto content or are looking to learn even more about crypto, be sure to checkout and subscribe to our new youtube channel after this video dedicated to all things crypto. Find new videos every week. Be sure to check the link in the description. RAOUL PAL: Dan, look, as ever, always great to be on Real Vision. This time, it's on Real Vision Crypto. We're going to come and leave a bit of the macro world behind.
DAN TAPIERO: Okay. RAOUL PAL: Because you and I have both been down this journey together and it's been fascinating. People have seen it on Real Vision, us both going down the journey of you dragging me back in and that great conversation that we had. Now, things have changed for you, because you've now gone even deeper into this, much like many of the macro guys. You've gone from being an observer of the space to an investor of the space and now you're going all in them of space. Let's talk a little bit about what you're up to. DAN TAPIERO: Yeah, that's true. You've been an intellectual sparring partner of mine for years
and years and, yeah, we really hashed that thesis out together. That was the initial stage of me falling down that rabbit hole. After the initial Bitcoin position in Q1, Q2 2019, I really started to look around for what else I could do and given my background and experience, I really wanted a sector bet. I was blown away like you by how intelligent some of the people were in the space, all the different projects that they were working on. Again, very hard to understand. I don't know that you and I could have a really high level conversation about Polkadot or even Ethereum, it's very high, very complex. I just found myself continuing to hit a wall.
Bitcoin, I could understand because there's very strong macro component to it, a store of value, is very the Bitcoin network that we talked about. The value of that network, especially after the first five, six years, really, I think has become established. There are lots of interesting things going on that are valid, and so I wanted to find a way to dig in and figure out a way to get involved because I'm just sitting there with my Bitcoin and that's wonderful. What else? I came up with this idea for this fund that we launched 10T Holdings, launched just a few weeks ago after a year plus of work. It really is a sector bet. It's a classic bet that I've done before. I did it in the ag space when I was working with Druckenmiller.
We aggregated a whole group of farms, built a farmland rate and that became our bet on the farmland sector. We held that for seven years and had a fantastic exit. I was looking for that sector bet, and I didn't feel that there were enough-- of course, there's Novogratz's Galaxy. That's one public company. I thought about taking a position there, but I didn't feel it had as widespread an emphasis as I wanted. I wanted exposure to several different sectors, and I figured I'd build a portfolio of companies that were active in that space.
I've divided this whole world into three categories, digital asset ecosystem gateways, next -- RAOUL PAL: Hi, I’m Raoul Pal. Sorry to interrupt your video - I know it’s a pain in the ass, but look, I want to tell you something important because I can tell that you really want to learn about what’s going in financial markets and understand the global economy in these complicated times. That’s what we do at Real Vision. So this YouTube channel is a small fraction of what we actually do. You should really come over to realvision.com and see the 20
or so videos a week that we produce of this kind of quality of content, the deep analysis and understanding of the world around us. So, if you click on the link below or go to realvision.com, it costs you $1. I don’t think you can afford to be without it. DAN TAPIERO: -- space. I've divided this whole world into three categories, digital asset ecosystem gateways, next generation financial services, and blockchain infrastructure companies. 10T is very simple. We're just building a portfolio of 10 to 12 companies overall, three to five, let's say, or three to four companies in each space.
They're companies that are mid to late stage. They're larger than $400 million in valuation. They have, let's say, $30 million to $50 million in revenues or larger. They've established moats. They have leadership teams. They've already figured out how to win.
The reason I've done this is because the funds in the space for the most part are all VC and focused on early stage. I don't really have any ability to add value there and I can't compete against an Andreessen or a Polychain or a Paradigm or a ParaFi, any of the guys in the space today. I don't have a programming background. I can't get into the arcane details of the protocols, and frankly, the people I know, and my investors really can't either. This was really a simple way for me to express a bet on the space. For me to be able to explain it in simple terms, these are companies you will own. There is an income statement and a balance sheet,
there is a CEO, there is a team, this is their project. Any 60-year-old guy who knows something's going on in Bitcoin, something's going on in this digital asset world, they're not quite sure, they can't wade in because there's too high a barrier, an intellectual barrier for people to really understand. Try to figure out the difference between Polkadot and ChainLink, or actually how Polkadot works. I listened to a podcast recently with Gavin Wood. I've listened to it three times, and I'm still not exactly sure because- - it's interesting, but I don't really know. However, owning companies that are leveraged to the growth of the overall digital asset ecosystem seems like an easier way for me and other people like me to get exposure.
The last thing I'd say is I really feel like I'm bringing a whole new investor base, investor class to the space, people who would not necessarily come in, but who are sitting on very large pools of capital. I think the fund is a nice toe dip for our LPs and investor base. Then if they want to explore certain things more, then they can. That's what I've been busy doing. Building that business for the past year, and we've launched. RAOUL PAL: Yeah, super interesting. That latest stage idea, as we're going into the Coinbase IPO, people are starting to see there is massive value embedded in some of these businesses. What I want to cover with you, you talked about the three key areas. I'd love to go through those key areas. We talked about the gateways.
Well, let's go through the three areas that you discussed, because I think that's interesting to dig into to see what your thoughts are on them, how you think about them overall, because again, at a top-down level, you and I can't get into the weeds about the technology, because we just can't, but it's the conceptual framework of what this is all about or where it might be going is going to interest people. DAN TAPIERO: Yeah. Look, these are categories that we came up with. Other people have broken this world down into many different categories, in seven, eight different categories. Some people now have a tremendous focus on the gaming or NFTs. There's of course, also, defi has been on fire, so people are focused on that. There
are people who are Bitcoin only, and they're only looking at things that Bitcoin type solutions. There are many different ways to carve this world up, and I think the reason we came up with what we did was just simply because the companies that are larger fit into these categories for us. Again, there are only 35 companies that we see that have a valuation over 400, we're going to own 10 to 15 of them. The first one is just traditional, I would say,
the on-ramps into the digital asset world. Coinbase, of course, is one. We won't own Coinbase because it's already on path to being public but there are other exchanges that would be any exchanges that you know. A Bitstamp, or an eToro, or Kraken. Any of the exchanges, that would be one category. I might even put BlockFi in that category, too. They've just done a raise of 2.8 billion. I think they really are the blue chip leader in the borrowing and lending space. I would categorize them almost as a gateway as well.
We've broken it, as I said, we've broken it down because those areas are populated with companies at the size that we're looking to invest in. RAOUL PAL: Now, to talk about these gateways, these exchanges, where does the moat lie in these things? Because obviously, you've got fungible products that can trade on multiple exchanges, how do these guys adapt as they move forwards? DAN TAPIERO: Well, it's a little bit as you've talked about before and have talked about recently about network effect. Coinbase, as an example, is the retail interface in the US. In the US, it's dominant. Over 35, or $40 million clients. They've already figured out how to win in that space. In my mind, a lot of these companies are really budding conglomerates, too. Two years ago, they didn't have custody, then all
of a sudden, they see that custody is interesting, they pivot there. Next, they see that borrowing and lending is taking off, so they pivot there. All of a sudden, they offer staking, and so there are all different kinds of things that they do. We think of them as an exchange, but I'm really betting on them as these are the best teams in this category and they will pivot if they need to. RAOUL PAL: Do you think they head towards becoming investment banks? DAN TAPIERO: Some of them, yeah. Look, the space is really evolving and growing at an
enormous speed. I think some of the companies could actually be purchased by some of the existing investment banks. Morgan Stanley is an example, bought E*TRADE for $12 billion a year and a half ago. They could have bought Coinbase at the time for 7 billion. Now, Coinbase could be 30 billion, 40 billion. I know there was an announcement today, it's trading at 70 billion.
I think some of these larger guys in the legacy world might try to step in and purchase them. Some have ambitions of being an old style investment bank, but some don't. Someone like Kraken is really a favorite for active traders. There's great liquidity, all sorts of different products, they're really cutting edge, super secure. Each one of these gateways focuses on different things. I don't think Kraken is trying to be a Coinbase. I don't think BlockFi is trying to be a Kraken. They've developed their own niches. Is there a moat? Well, there's a moat in so far,
as an example, Kraken has been in business for over nine years. They've spent 10s of millions, if not more on building that infrastructure. I don't think an asset like that is actually replicatable today. RAOUL PAL: I spoke to Jesse a while
ago. The poor guy's exhausted. DAN TAPIERO: Well, they've had quite a few blowouts. I heard from somebody recently that a few weeks ago, their Dogecoin trading went up 20x in one day, and it blew out the system there. Don't quote me on that, but the volumes as
we know have exploded. They're built to take that. What I mean is that building that infrastructure, you couldn't do that today. You can't start from-- I think BlockFi is a little special, in that they're a younger company, but they really carved out the borrowing and lending space. They didn't seek to compete head to head with a Coinbase or a Kraken, or Binance. Throw Binance
in there, they really are the juggernaut in the space, but they're not really in the US. They're doing over a lot more than 50% of total world volume, but it's outside of the US. I think Binance would have a very hard time if you talk about moats of competing with a Coinbase or Kraken or even a BlockFi in the US. There's also geographic diversity that we're
going to bring at least to our portfolio, because each of the different areas have different rules, the jurisdictions have also-- the clients have different needs. South Korea is a gigantic market. I can't tell you that I've got tremendous expertise there but there are companies there that service South Korea that are enormous but aren't really active in the US. It breaks down by geography as well in terms of you asked me about the moats in this particular space. RAOUL PAL: What's the next bucket after these gatekeepers? What's the next bucket you have? DAN TAPIERO: Well, you've got next generation financial services and that's a broader category we came up with because there are lots of things going on in the space that are not gateway strictly and they're not infrastructure. Figure would be an example. They are super plugged in,
and they actually use the blockchain technology to power their mortgage lending platform. All of a sudden, within just a handful of years, you've got a billion dollar company run by a Mike Cagney, who's had tremendous success previously as an entrepreneur, and they're really doing some super innovative stuff. I can't get into the weeds on that right now, but I think that it's a unique company, and they are taking that whole mortgage space by storm. We think that they're going to be a powerhouse in the next three, four or five years. Another company, take a look at BitGo for instance. They're a pretty strict custodian, but they're branching out into other areas as well. I wouldn't call it necessarily a gateway, it's more of a custodian. Another company, look at Barry's DCG.
DCG is really a conglomerate. He's not really focused on being a gateway. He's an over-the-counter market make. He's moved into borrowing and lending. He has the Grayscale Trust. He has the publishing and events business. That's really like a financial, I would call it like a crypto conglomerate powerhouse. RAOUL PAL: He's gotten into mining as well,
doesn't he? DAN TAPIERO: He's launched a big mining project as well. He's doing tremendously well. It's not that easy to procure a block of stock in the secondary, and it is expensive, but it is out there and there is evaluation out there. Also, the market for the secondary has improved versus three, four or five years ago, there were very few brokers in the space, some people now are moving to it. I will say this, look, we are the first fund that I'm aware of that focuses exclusively on mid to late stage digital asset ecosystem companies. All the other funds, you have growth
equity funds writing one-off checks into the space, Tiger and KO2 and some of the bigger guys, I think it was in Q4 2018, participated in that large Coinbase raise. I think for most of the growth equity guys, it's a little weird in crypto. They're not quite comfortable with cryptocurrency. I think you need to underwrite a macro scenario, have a macro view, and a lot of these guys don't necessarily, or maybe they do, but they don't really have a lot of comfort. To me, a company that's worth a billion dollars, that's generating $50 million or $100 million in revenue. That's already a business and it's not early stage. It's funny, it's the same realization that you and I had when we were talking about Bitcoin in early 2019. I thought to myself, this is not an emerging asset anymore. This is an established asset, and I don't know why
people don't see it yet. I see this as the same way and so we've waded into this area. So far, I don't think really there are that many competitors out there. RAOUL PAL: My guess is in this space, you're going to get inundated with new companies coming into your criteria, because the space is moving fast and there's going to be somebody in the defi space who makes it into that. There's going to be a bunch of companies that start falling
into this new category where they're larger. It's going to be an embarrassment of riches as this space grows, because it's moving so fast. DAN TAPIERO: Yeah, I think that's right. Look at BlockFi, two years ago, it had a $50 million valuation. Then last summer, it was 500 million.
Now, they've just completed a raise of 2.8 billion. It's one of the fastest rises that I can remember and if you look at who they're backed by, they really are backed by some of the heavyweights in the investment world. You may think that 2.8 sounds like a big number, but it's certainly a number that many of these investors are very comfortable with because they're thinking about the company potentially being worth 10 billion or 20 billion, otherwise they wouldn't be investing. There is a large universe of companies worth under 400. Probably, maybe even 50 to 100 different companies, and we have them on our target list. We're watching them. Market
valuation isn't the only metric, but I feel like if you have to draw a line in the sand somewhere, that's the line where we feel like a business has gotten, has been de risked, has moved out of the developing category. Look, that being said, the VCs, I always say this, the VCs are buying the company at one, and they're going to sell it to us at 100 because we think it's going to 1000. We're not going to make the 50x in a year that some of these defi guys-- we're also not going to have any zeros. It's a de-risked less volatile way to play the growth in the overall ecosystem. Because look, I am a super proponent of Bitcoin. I think it's going to 300,00, 400,000,
potentially even more. Store of value, I think, very clear, also has greater functionality as we've talked about as a network, but there is a whole world growing out there. The Central Bank Digital Currencies are going to be moving on digital rails. The stablecoin business, and the yield, we should talk about this later on, the yield that is being offered in this space, again, there are credit considerations, but I don't think the general population is aware that you can buy $1 stablecoin, and earn 4%, 5%, 6%, in some cases, 8%, 9%, 10%, but I just think that that world is coming to the overall population. I know that's not on Bitcoin, and it doesn't have anything necessarily to do with Bitcoin and people in the space might not like that, but I think that the most powerful-- this is the last thing I would say, the most-- and I've been thinking a lot about this recently, the most powerful things from the digital asset world that are working are things where there's a very strong need.
In the case of Bitcoin, there was a very strong need for another store of value. We've talked about this, there's a shortage of stores of value. We have gold, there used to be the yen. If you're worried about debasement, if you're worried about not just the basement, but just risks where you feel safe in a way. Now, I don't know that-- Bitcoin has plenty of risks as well but there is a shortage, there's a need in the world for more store of value, let's say, instruments as an investor. Just as right now, there is a need in the world for yield.
This is one of the reasons I think the stablecoin business and yield on stablecoin is really going to explode this year, whether-- RAOUL PAL: Now, here's a question about it, Dan. Doesn't it just force all the banks to arbitrage it? Are they connected to the money markets, or will it stay separate to the money markets? That's the big question. DAN TAPIERO: Well, I think that eventually, they have to get involved, but I don't think the banks even get it yet. All of the banks and the custodians that we've seen in the last three, four months, they're into Bitcoin. It's funny in a way, but they're not into anything else they don't even actually really-- I don't think really understand Bitcoin, but they get it enough and they understand that their clients want them to sell Bitcoin and also in most cases, Ethereum, as well, especially now that Ethereum is also on the CME. It's become more of a first class asset, but the point is I don't think that the banks are even aware of what's going on, and I don't think they understand what's happening in defi.
Of course, there are genius guys within the IT department at banks. I'm talking about the leadership. The guys who can wake up one day and say, listen, I want to put $100 million, I want to hire 100 people, and we are going to arb these yields out. They're way, way, way behind,
and banks aren't really risk taking organizations anymore. That's another reason why this has popped up, because the banks after 2008 vacated the business of really making money and I think also offering interesting products for people. The reason these guys have capitulated in the last three, four months is because the clients have said, are you kidding me? I can't even buy bitcoin through you? I'm going to move my account. All of a sudden, you get a BNY or US Northern Trust,
or any of these traditional people coming on and doing it, but they don't really understand what's going on there yet. RAOUL PAL: No. It's really interesting, even when you look at the Bitcoin futures and the premiums they trade to spot, it's gigantic. The yields implied in the future's like 20% a year. DAN TAPIERO: Right, because people can trade futures who can't trade Bitcoin. Bitcoin is not a security,
so that precludes a huge chunk of people. That's why the Grayscale Trust has been in such demand. I think there are arb opportunities, and I think some of the smarter hedge funds, of course, are probably there. The top notch guys with quant teams, I'm sure they're deep in the weeds on this, but there are very few guys like that. RAOUL PAL: Because they're actually who's driving a lot of the yields by the borrowing of crypto and stablecoins and stuff. It's really interesting. How do you think through the security in the space? Again, it's complex to know what risk you're actually taking to get that yield. Any thoughts on that?
DAN TAPIERO: Yeah. I'm not sure. I think it was on a Real Vision Crypto, someone on your team did an interview with Alex Mashinky of Celsius, and he explained where the yield comes from. I would suggest anyone, listen to that instead of me as a part time hacker in that area. Alex, I think, really explained it well, and along with Compound and BlockFi, those are the leaders in the borrowing and lending space. I think it comes from a bunch of different places, obviously, there's credit risk, and obviously, there is risk there. I think it's also
manufactured differently at different places. That's a whole separate world, that centralized finance, the whole defi world, that's a whole other thing that I can't pretend to explain here. You should have Ben Forman from ParaFi, who I think you have interviewed before. Ben is a phenomenal defi guru. Any questions I would have, I would just ask him.
Specific things, he could take you through where all the yield is manufactured. From a bigger macro investor perspective, I think what you have to know is that yes, there is some quasi-- or what we would characterize, old guys would characterize as credit risk. Look, I don't think that there's that risk in investing in the companies in the space. They're operating businesses. Yes, there's credit risk, but I don't need to get into the weeds. I have people on my team who can do that anyway. That may not be as satisfying-- but I prefer to be like perfectly accurate. RAOUL PAL: Honest?
DAN TAPIERO: Yeah, perfectly accurate also. Look, I think Real Vision Crypto, Raoul, is phenomenal. You and I talked about this idea a year ago. I think it's huge, I think it's going to become huge. I think just the quality of the content is awesome. RAOUL PAL: Yeah. There's nowhere else you get this amount of incredible content about every single thought corner of this whole space. DAN TAPIERO: I agree. I agree. It's phenomenal. It's just that now you have to have someone in the legacy world give a crap, and put a nice big valuation on it, which it deserves, which it deserves because it's unique information and no one else is even close. RAOUL PAL: I appreciate it.
DAN TAPIERO: Yeah. The third category. RAOUL PAL: The third category. DAN TAPIERO: Right, is blockchain infrastructure, and that's something very obvious that everyone would understand. If you take a look at a company like Paxos, our old friend Chad who's built that company, as you know, he built PayPal's connection into this digital asset world. PayPal now offers a bunch of cryptocurrency off their platform for their 340 million people because Paxos built that bridge. RAOUL PAL: I bought my first ever Bitcoin using itBit, which was the thing that [?] and Neil built first. They ended up now becoming the engine for this whole PayPal thing. That's where
I bought my first Bitcoin. DAN TAPIERO: You say to me, you can make one bet and you can be long Bitcoin, you can make another bet by being long Chad, and the team and their vision and what they're doing, and he has this vision of tokenizing the world and I it's a legitimate one. There are going to be lots of different ways to go about it, but he's a guy who I would want to have an investment with. I believe in his vision and what they're doing. RAOUL PAL: What a lot people remember is Chad was the person who gave the first tutorials on Real Vision six years ago to get people understand what is blockchain at the time, and Chad is-- well, you and I have known him for a long time. He's phenomenal, him and Millwoods have been introducing [?] into the space. DAN TAPIERO: Absolutely, absolutely. It was at one of those conferences down in the Caymans, where it was just us sitting
around the roundtable talking about stuff. I'm not saying that this concept is a better bet than a Bitcoin or better bet than early stage investments. I just think it's a de-risked bet on the space that I'm comfortable with and then I wanted for my own portfolio, which is really what the driver of this whole thing is, is that this is the broad exposure I wanted for DTAP Capital.
RAOUL PAL: Yeah, and as you said, you did this in farmland rates, and you've done it in gold. It's your chosen way of expressing a long term macro bet that you can't mess around with your trade, because you have to build a business around it. DAN TAPIERO: That's exactly right. There's something to be said for not being able to take profit really, because it's tempting. I'm sure you, just like me, I've put the big claim out of my mind, and it's in a lockbox outside of my daily activity and I don't think about it, and I don't do any computations. It's just there and in five,
six, seven years, or if it hits 300,000, 400,000, or 500,000, then maybe I'll think about something to do, but it's very hard to just do that. Also, when you're building a business, there are other ways to build value, other revenue streams. For me, I hope that this will also lead to-- this is a toe dip for me into figuring out what operating business I might want to start in this space eventually. It's also a way for me to learn more, dig deeper in and hopefully find a way to start another operating business. RAOUL PAL: I think one of the things you touched
upon is that something that I've been thinking about, and talked only a little bit about, is with macro guys, it's pretty easy to buy something that's super bombed out, you've got your thesis. It's pretty easy to buy a breakout and trade that for a bit on a nice chart pattern with some news flow. It's pretty easy to try and short a top and whatever it is. The hardest thing in macro, the literal hardest thing is an exponential curve. We can't do it. I'm seeing it already amongst all the macro guys that I know who's still more in the traditional macro world. Their reliance like has gone too far. You got to start shorting it, the risks are too big.
I see this narrative because it's really hard in macro to ride that reflexive exponential rise. DAN TAPIERO: Yeah, it is hard, but to be honest, that's been my thing. I've been less interested in catching squiggles, and I think actually, unless you're doing it 24/7 as your full time daytime job and you have x number of years' experience, I think trading crypto is insane. I think it's totally nuts. I think you have to allocate a percentage of your portfolio, and you have to leave it and you have to give yourself parameters, and just put it out of mind. To tell you the truth, one of the reasons that I don't find it that difficult is because probably the most formative experience I had in my career, of course, was working with Druckenmiller, but was early in my career working with Julian Robertson at Tiger. Julian had that
long term hold mentality. He could hold things for years and years. I saw him-- and this is, again, I was almost right out of college, I was very fortunate to be to be given that opportunity to sit there on the frontline of watching massive, literally gigantic positions being put on. We used to have-- the fund at the time in the early 1990s was $3 billion when I was there. We would have $300 million, $400 million daily swings. Think about that. In our swaption portfolio, we had all these European interest rate bets on, as you remember 1992, 1993. He never flinched. If anything, that was where I learned the value of having that long term hold. RAOUL PAL: How did he have the conviction,
because you know what it's like. As soon as you put a trade on, every broker is trying to get you out of it, and half your friends are. Everyone calls you an idiot and holding on is actually difficult because of that, all of the contrary news flow. I've learned to filter it out, but how do you do it? DAN TAPIERO: Yeah, it's hard to filter out and it's experience. Well, at least in Julian's case, when Julian,
the people he's listening to are four or five of the greatest other investors or analysts in the space. At least when I was growing up, there was never much wavering at all. Again, sometimes that can get you into trouble if things really change and you miss it, but the conviction is built up through lots of hard work and research, and really believing that you have an edge, you see something out there that the world doesn't see. I think, for instance, if you're a Bitcoin holder today, I was thinking about this-- when we were talking about it in 2019, or for you in 2012 even, or in March or April of last year, it was pretty clear below 10,000. To us, it was very clear, given what was going on in the macro that you had to buy it, and basically just hold as much as you can handle. Now, it's up 10x from when we were pounding the table, and you've got all sorts of people coming out acknowledging it. Of course, as a macro trader, you think, oh, well, now, everyone acknowledges it, I've got to get out because I bought at 5, it's now at 50. Thank you very much. What's different about this bet is that
the people who are buying it now, they still don't understand what the big driver is to take it to 400,000 or 500,000. Not really. Some of them do, of course. Of course, but I think, generally speaking, they don't. It's the importance of this Bitcoin network capital be the mechanism of how the Bitcoin machine works and what it does, and that really it is the value protocol potentially for the internet, and that it is, as you've said and I've quoted you before, this pristine collateral. Bitcoin is so many different things. It's not just a store of value. I think the digital gold narrative is a nonsense in a way, but it almost limits people's thinking about what Bitcoin is. They say, oh, it's digital gold, I get it, okay,
I either believe it or I don't. They don't actually understand what's been invented here by Satoshi and what lived through five or six years in the beginning of just like the wildness of just the environment, meaning it took quite a few years for it to become established in a way that at least I felt comfort that it was passed its hey, could go to zero phase. Whence this famous thing, just put 1%, that was put 1% in your portfolio, because a lot of people thought it could go to zero, and so you're only going to risk 1%. I think there's zero chance it's going to zero. Certainly now, and even when we've talked, I think that was my insight. The reason why 50,000 doesn't really mean much to me is because I don't hear people talking about some of the things that I think are really valuable about Bitcoin, number one. Number two, I think only 1% to 2% of the entire world have crypto accounts or crypto wallets.
What that actually is, it's more akin to 1995, 1996 in the development of the internet, because at that time, only 1% of the world had internet access. For me, I feel like this space is around there in terms of development. If you look at the rate of the adoption of the internet over the following 10 years, so from 1995 to 2005, it grew by 15 times. I think this digital asset ecosystem is going to grow at least 15 times.
I think it's growing at a faster rate now. 10 years from now, I don't think it's crazy to think that 15% or 20% of the world have crypto accounts or crypto wallets. That's how I'm thinking about it. That's why I'm ignoring the fact that it's moved 10x and that people who are parroting things that we discussed a year or two ago, it's not a trade. This is not a trade. RAOUL PAL: Okay, so let's fast forward. Let's say it gets to where I think it's going to finish this year, let's say it gets to 250,000+. DAN TAPIERO: You're more bullish than me,
I wouldn't put a 250,000 number on this year. I don't know where it could go this year, it could be 70,000 this year, or it could be 250,000. Yeah, go ahead. I'm sorry. RAOUL PAL: I've just done a lot of work that gives me some confidence, could be dead wrong as well. Now, let's say it does get there. We both think it's going to go much further over time. We get to the point in the halving cycle where historically, we've seen prices plummet. Now, how do you think with institutions coming into the space, that the halving cycle is
going to play out-- the negative side of the halving cycle, do you think it's going to be cushioned somewhat by institutions? How do you think it plays out? Just the structure of that. DAN TAPIERO: No, this is nature, this is nature. It is going to go up to the number that it's going to go up to, and then it will have a massive correction. It will have a message, and my guess is that a lot of those institutions will be selling it at the low. Because I think that it's the right exposure for certain institutions, endowments, for instance, or funds that have a long term view, but a lot of the world isn't set up that way. Certainly not corporates.
I think it's wonderful that Michael Saylor is doing what he's doing, and the guy is a godsend, and I think a phenomenal risk taker and actually a phenomenal macro guy, but I don't think that that's appropriate for like 90% of the corporate world. They're never going to be able to do that. The people that are going to buy bitcoin are the people who are looking for not only just a store of value, but who understand its value proposition-- and to me, that will be investors. I think it's a nice thought, great that Elon put some on the balance sheet. Great that Jack put some on the balance sheet, but these guys are at the cutting edge of the cutting edge. Some company out in the middle of whatever that makes widgets, they're not putting their money into Bitcoin. They don't even own gold. They probably are still sitting in bonds at 50 basis points. That's a case where I think they're a little ahead.
To me, it's not the corporates that are going to be driving this next leg, it's the investment community. As we've talked about, the $190 trillion that are sitting in cash, or bonds, or cash plus duration out there. You don't need much of that $190 trillion to move into Bitcoin and into the ecosystem, generally, to get you to the numbers that you're talking about. Now, I think this is nature. It's like the Fibonacci sequence of rabbit herding.
It's the same-- rabbit meeting, it's the same thing. This is what guys like us who are in the markets understand, but people out there in the business world have a very hard time dealing with. By the way, this is one of the reasons that I've set up 10T as well, because in the last correction, when Bitcoin went down 80%, of the value of a basket of these companies did not go down that much. In fact, some of them didn't go down at all, because some of the companies actually are not really correlated to the price of Bitcoin. That's another reason
why we've had very good traction, because the volatility profile was different. RAOUL PAL: Another couple of things I want to flip by just to get your thoughts is that you love art. We're now seeing the rise of NFTs, which is not only just for art, but that's one of the things that's happening. What are your thoughts of NFTs? It seems like
this is maybe the defi for the next cycle. It's the next big thing that's coming on the horizon. DAN TAPIERO: Yeah, it's very recent. As you can tell, I have this painting behind me. I do focus a little bit on some things going on in the art world. Look, I think it's
going to be very big, and actually Pomp has written a nice note about this as well. He published something maybe a month or so ago, the auctions that are on the Winklevoss's platform was at Nifty gateway. I think that's a great business. It's not even the first inning, it's like the first pitch of the first batter. My initial sense from speaking to my friends in the art world is that the quality of the art for people who have a proper eye, let's say, is not very good. At the moment, you're looking at Christie's is going to auction off some of [?] work, and I think that you should follow some of the leading artists on Twitter, they're there. There's some other people who you can follow to learn a little bit more.
I think that once the quality of the art becomes what I call proper art, so that someone who's been a dealer for 30 years who has a great eye says that's really an innovative vision, or that's really done in a very interesting way, then I think the market will really take off. Because a lot of it is just not really nice to look at or a lot of it isn't-- I'm not saying it has to be aesthetic necessarily, but I think that's when you get, again, the legacy world-- RAOUL PAL: Yeah, if the new banker turns up as a digital artist with NFTs, it's going to explode. DAN TAPIERO: Right, and I think there might be some people out there potentially, but look, as the dollar value goes up, you're going to see some really quality artists move into the space. I'll just say as an aside, I actually am involved in a project. RAOUL PAL: [?] the right person. DAN TAPIERO: Well, not really. It's really maybe
the next time we chat, we could talk about that. I think again, the real whoosh, the inflection point in the hockey stick comes when the 95% of the world, of people in the traditional world, whether it's in the traditional banking world, or in this case, in the more traditional art world, once they have their lightbulb moment, then it will get lifted up. I think that comes when pieces hold what they call more artistic merit a little bit. RAOUL PAL: A little bit of a thing I saw today, a friend of mine sent me on WhatsApp that he had bought a bunch of these NBA clips at an auction with NFTs. You could buy like 40 of these things for like 15 bucks, and he's already up by 100 times his money. DAN TAPIERO: Yeah, I don't really know much about that. I'm not really following it that closely. It is hyper speculative.
Very interesting, but I think you probably-- Novo probably is the guy to talk to about that. RAOUL PAL: Yeah, I think Barry is probably because of his understanding of decentraland and all that stuff. He was pretty early on with telling me about and telling you as well about the tokenization, and what this all means, because gaming is the other huge space. Again, I haven't got the bandwidth to take in all this stuff. There's so much going on. DAN TAPIERO: Look, we're not micro guys at the end of the day. I think after 30 years
of being macro guys, I think we've made our bed in a way. We can do a deep dive into specific things, but we can't do a deep dive into every specific thing. That's the difference. Our strength has been focusing on the macro and the big tidal wave that's coming in whatever area that is. I want to stay really focused on my current project, and once that really gets to a place where I want it to be, then we can maybe look at some different things but yeah, I'm probably not the right guy. RAOUL PAL: Final question, how are you dealing with Ethereum, and any of the other larger interesting protocols? You invest in it all yourself? DAN TAPIERO: I didn't. I don't know if you recall, but I run this investment committee for
an endowment and we did put money into the space, we actually did 85% of Bitcoin and about 15% or maybe it was like, 80/20, into Ethereum. That was Ethereum was at $180, so someone is going to be getting a scholarship to the school, I think, or at least a few, meaning that back then I saw that that would be a good way to make that allocation, but I did not. I just left DTAP in Bitcoin. Look, I think it's valid, of course. It's just your analysis that it's five years behind is probably a good mental model. I know there are lots of naysayers, and I know all of that. Some of the lookalikes, as you said, like a Polkadot or the improvements or however you want to call it, Ethereum killers, I think they'll find their way or maybe they won't.
Basically, I don't want to make a bet on that, because that's not my expertise. If we had a team that I built of people who could do in-depth analysis on it, then I'd have an opinion, but I think the way that I'm playing that, through the gateways or the next gen financial services or the blockchain infrastructure people, through the companies and the smartest guys in that space, it's just easier for me to say, listen, do I want to bet on myself in blockchain infrastructure, or do I want to bet on Chad Cascarilla? It's a pretty easy decision that I don't have to kill a lot of brain cells over. RAOUL PAL: This is the most important thing, I think, of this whole interview.
You've been all the way through totally honest. It's like, I don't know, it's not my job to know. I'm a macro guy. I'm looking for what is the easiest, cleanest way to represent my macro view. I understand that there's all these exciting flashy things in their corner, I'm just going to assume that someone's going to turn one of those into a business that I can invest in, so I don't have to take the risk in picking stuff, and I'll keep with my Bitcoin.
That's a very, most people can't do that. It's really interesting to say, and to be honest and say, I don't know, it's not my job to know everything, because as you know in this space, it's ludicrous. People are so smart. DAN TAPIERO: Yeah, it's just crazy. I've never seen anything like it. That's another reason why I see myself in this world for the next
10, 15 years. I said that even two years ago, I could tell, and look, I'm not trying to be the number one performer. I don't care about-- I don't need to make the most amount of return, I just don't care. I think that these businesses-- RAOUL PAL: Just enough returns, that's the point, just enough returns. DAN TAPIERO: There's enough there. If you look at, just as an example, where Coinbase raised money in their early rounds, it's done pretty well. I don't know how it can go from 80 billion to 800 billion. Maybe it does, I don't know. That's not a bet I would make either, but
from a billion to 10 billion, or 3 billion to 15 billion, I think that I want to have a de-risked bet, what I would call it, even a picks and shovels bet exposure to the space. Look, there's a lot of flashy things there. Look, as an example, I mentioned before the explosion in the trading of Dogecoin. Dogecoin is ridiculous. I would never own that or even think about it for one second, but look, one of these companies had a massive boost because of it and actually profited from it. In a way, I would have exposure to Dogecoin, it's just not the direct exposure.
I feel like the 10 to 15 guys who I'm betting on, I'm betting on them to be smarter than me. I like that bet, I like that be. RAOUL PAL: I like it too, I like it too. DAN TAPIERO: Would you bet on yourself, or would you bet on Jesse, in that case? RAOUL PAL: Actually, I bring nothing to it but he's in the trenches forever. He knows his game. Dan, super interesting as ever just to pick your brains on this. Really exciting what you're up to, and again, I just love the way you've structured the whole thing.
It's just really smart. Well done. DAN TAPIERO: Thank you Raoul. Love chatting, talk to you soon. RAOUL PAL: Yeah. I'll see you very soon. NICK CORREA: Thank you for watching this interview. This is just a taste of what we do at Real Vision. To learn more about the complex world of finance, business, and the global economy, click on the membership link in the description. Give us 7 days to change your life. This will be the best dollar you'd ever invest.