Speaker 1: Hello, and welcome to What Goes Up a weekly markets podcast.
Speaker 1: My name is Mike Reagan, and I'm a senior editor
Speaker 1: at Bloomberg enumbled On Across asset reporter at Bloomberg, and
Speaker 1: this week on the show, Well, if you still think
Speaker 1: that cryptocurrencies are on the fringe, consider this stat A
Speaker 1: recent survey from Fidelity found that more than half of
Speaker 1: institutional investors in Asia, Europe and the US already invest
Speaker 1: in digital assets and expect to invest in them in
Speaker 1: the future. So we're gonna talk about what that means
Speaker 1: for the asset class with the head of asset management
Speaker 1: at one of the biggest firms in the crypto investing world.
Speaker 1: But fill down. I think this is the portion of
Speaker 1: a podcast where traditionally the hosts engage in some witty
Speaker 1: banner back and forth. You know, it's almost never witty,
Speaker 1: almost never. You don't almost them. I want to better
Speaker 1: about while you never read the scripted intros I write
Speaker 1: for you because I don't like to. I'm supposed to
Speaker 1: say I'm Mike Reagan and you go and I'm Dana Banana.
Speaker 1: Oh those are really really good. You've you've been writing
Speaker 1: me really really good introductions. I've just been totally ignoring them.
Speaker 1: I think last week it was I'm Madonna, right, and
Speaker 1: then this week it was banana fan of a fan,
Speaker 1: Total opportunities. Yeah, you had something else to banner about.
Speaker 1: I think what was it? I did because we got
Speaker 1: this really witty tweet you and I did from Tweegy Sunday,
Speaker 1: one of our our fans on Twitter, and uh he
Speaker 1: or or she? I suppose because the profile pictures is
Speaker 1: a doggie. Um, it says craziest thing I saw in
Speaker 1: supermarkets this week and it's the cover of People magazine
Speaker 1: and it's Paul Rodd sexiest man Alive. You know, I
Speaker 1: don't know how I feel about opening the craziest things
Speaker 1: in markets up to supermarkets that supermarket. No, I love it,
Speaker 1: since it's Twiggy Sunday, as you said, a listener from
Speaker 1: day one will allow it. But I don't know. I
Speaker 1: don't know if we want to go down in that
Speaker 1: rabbit hole. I love it. I I I'm all for it,
Speaker 1: and I want to open it up to others who
Speaker 1: have seen something crazy in any market, including the supermarket.
Speaker 1: So um. You know, we close out the show typically
Speaker 1: with the craziest thing we saw in markets. If you
Speaker 1: guys saw anything, give us a call at our hotline.
Speaker 1: It's six four six three two four three four nine zero.
Speaker 1: Leave us a voicemail and maybe we'll play it on
Speaker 1: the show and then you can also hit me and
Speaker 1: my careaging up on Twitter as well. Although needs to
Speaker 1: tweet at us about what's so crazy about all Ruddby
Speaker 1: in the sexiest man in the world. I don't know,
Speaker 1: is it's not true? Right? Sorry Paul rod fans. Anyway,
Speaker 1: enough crazy things. We have a lot to talk about
Speaker 1: with our With our guest this week, it's Steve Kurtz.
Speaker 1: He's the global head of asset management at Galaxy Digital. Steve,
Speaker 1: welcome to the show and thanks so much for joining us. Well,
Speaker 1: thank you both, And my life mission is now to
Speaker 1: help work some crypto Twitter banter into your show going forward.
Speaker 1: That would be that would be really really great. But
Speaker 1: maybe just to to start us out, Galaxy is a
Speaker 1: really big name in the crypto world, as Mike said
Speaker 1: in your introduction, So maybe you can just set up
Speaker 1: for our listeners what Galaxy is and what your job
Speaker 1: is at the company. Yeah. Sure, Well, it's been four
Speaker 1: years since we started Galaxy and it was. It was
Speaker 1: eight people, uh with with Mike Novigrats leading the charge
Speaker 1: in and we had this uh, this idea, um that
Speaker 1: what had been a retail phenomenon, right, crypto started as
Speaker 1: a retail um uh phenomenon, like I said, And we
Speaker 1: thought for this really to grow into what it was
Speaker 1: able to grow into, we would have to have um
Speaker 1: all kinds of developments on the institutional side. And that
Speaker 1: was a little antithetical to the crypto community and in
Speaker 1: a way the crypto ethos, but it was really important
Speaker 1: to us, having worked on the traditional side of finance,
Speaker 1: to help the space sort of grow up and really
Speaker 1: to be the translation mechanism between crypto and the institutional world.
Speaker 1: And so we thought we had a unique ability to
Speaker 1: build a company that looks a little bit like Goldman Sachs,
Speaker 1: although uh, you know that that's a that's a mental
Speaker 1: model that again is not so crypto cool, I would say.
Speaker 1: And so we built out you know, trading as a
Speaker 1: as a as a client business. We built out investment banking,
Speaker 1: principal mining business, a principal investments business. And the business
Speaker 1: that I've been leading for the last four years is
Speaker 1: the asset management business. And so the consistent thread across
Speaker 1: all that is a real need for education and working
Speaker 1: with the regulators and you know, doing things the right
Speaker 1: way as good sort of corporate citizens. Uh, and in
Speaker 1: so doing move the crypto phenomenon into the mainstream. Steve,
Speaker 1: let's get unpack a little bit about the asset management business.
Speaker 1: Uh latest number I saw three point two billion. Wow,
Speaker 1: it's uh nice little chunk of change you got you
Speaker 1: got under management there. UM, we're working on it and uh,
Speaker 1: you know obviously uh, you know, maybe you can unpack
Speaker 1: it for as a little bit. A big chunk of
Speaker 1: that I think is in the index type of funds
Speaker 1: and you know, full disclosure, Bloomberg does partner with Galaxy
Speaker 1: on creating the index is uh, And I want to
Speaker 1: get back to the indexes, but I'm kind of fascinated with,
Speaker 1: um the other portion of it, which is the fund
Speaker 1: of funds um where you guys sort of identify, you know,
Speaker 1: more active management type of funds UM. Talking to us
Speaker 1: a little bit about that portion. UM. It was an
Speaker 1: acquisition right, uh, that you guys made in the active
Speaker 1: fund business. Talk us a little bit about that sort
Speaker 1: of what how the fund of fund business works? UM,
Speaker 1: do you look for in other funds to invest in
Speaker 1: and that sort of thing. Yeah. Sure, so we we
Speaker 1: acquired UM Galaxies asset management business acquired Vision Hill in
Speaker 1: May of this year. And and Vision Hill is run
Speaker 1: by two wonderful, brilliant guys, Danzela and Scott Army. And
Speaker 1: for the last three years before that they had been
Speaker 1: building a database and real connectivity to the crypto funds
Speaker 1: all around the world, passive funds, hedge funds, venture funds,
Speaker 1: and UM. You know, when you think about the need
Speaker 1: for a fund of funds, what does the fund of
Speaker 1: funds do? It wraps a number of different fund investments
Speaker 1: under one vehicle. UM. In the traditional world, Uh, maybe
Speaker 1: Blackstone would argue with me, but you you would look
Speaker 1: at that and say, well, why do you need that
Speaker 1: model when people can go find their own managers themselves. Um,
Speaker 1: that's true. Twenty years later, I would analogize the crypto
Speaker 1: funds space too, very similar to the hedge funds space.
Speaker 1: In the early two thousands, there are eight and fifty funds.
Speaker 1: It's a shocking statistic that people don't understand the breadth
Speaker 1: and scope of that. And they're divided out in many
Speaker 1: different ways and when you go to a pension, or
Speaker 1: you go to an endowment, or you go to a
Speaker 1: sovereign wealth fund, and they say, great, we believe in
Speaker 1: the crypto future. We believe in with web three. What
Speaker 1: do we do now? Uh, okay, you can buy bitcoin,
Speaker 1: you can buy ethereum, maybe you can buy a venture fund,
Speaker 1: but what else is there? And and intuitively they really
Speaker 1: go to hedge funds because it's kind of an alternative asset.
Speaker 1: And then they say, well, wait, who are the big
Speaker 1: hedge fund players? And the answer is there really aren't
Speaker 1: big hedge fund players. There are a handful that have
Speaker 1: reached some escape velocity, a couple hundred million here or there,
Speaker 1: but how can someone put two million dollars into that?
Speaker 1: They can't do that. So it was a real pain
Speaker 1: point for large institutions to access this more active body
Speaker 1: of the asset class um. And we we just felt
Speaker 1: that it was really part of our mission, which is
Speaker 1: both education and access, to give that tool in the toolkit.
Speaker 1: And a big part of that is not just the
Speaker 1: access vehicles, it's really defining who those funds are. What
Speaker 1: do we look for? Um, Well, no one's really done
Speaker 1: great operational due diligence in the space until until we've
Speaker 1: come to the market with these vehicles. So we look
Speaker 1: for great entrepreneurs, talented entrepreneurs who have built good fund
Speaker 1: management businesses, and then on the back end, UM we
Speaker 1: look for really robust, thoughtful approaches that can scale, that
Speaker 1: our regulatory compliant and that meet a set of standards
Speaker 1: that were in the process of helping sort of define
Speaker 1: for the asset class. So the same way that we
Speaker 1: do indexing with Bloomberg on the passive side, this hedge
Speaker 1: fund of funds model, both through indices and through great
Speaker 1: data and setting of standards UM is really important to
Speaker 1: more money coming into the space, more talented traders and
Speaker 1: financial services professionals coming to the space, and ultimately much
Speaker 1: bigger a u M s for all of those underlying
Speaker 1: fund managers. We think. And then just to break down
Speaker 1: a little bit more of what you guys do, I
Speaker 1: think Galaxy also has a mining business. Correct me if
Speaker 1: I'm wrong, But maybe you can just break down a
Speaker 1: little bit like what those internally conversations are like for
Speaker 1: you guys. Considering how much in the news, like the
Speaker 1: environmental aspect of all of this has been recently, it's
Speaker 1: a great question, and we we do have We have
Speaker 1: a mining business that's run by a fidelity alumna Amanda Fabriano,
Speaker 1: one of the one of the most brilliant bitcoin mining
Speaker 1: minds out there, and that's part of our principal investing business.
Speaker 1: We've got a large balance sheet that does a number
Speaker 1: of investments and so UM, you know, we're very as
Speaker 1: you say, involved in this UM, this question of E.
Speaker 1: S G and Bitcoin, And I don't think at all
Speaker 1: as a starting point that having passion for UH the
Speaker 1: environment is inconsistent with bitcoin. UM. What happened in May
Speaker 1: really of this year was that bitcoin started to grow
Speaker 1: up as a macro asset, right it hit a trillion
Speaker 1: in UH in overall market cap, and then the kitchen
Speaker 1: sink of macro problems were thrown at bitcoin China band UH.
Speaker 1: You know E s G regulatory and for bitcoin to
Speaker 1: become a five trillion dollar asset, it needs to not
Speaker 1: only meet those questions, but have good answers to those questions.
Speaker 1: And so E s G was a big part of that.
Speaker 1: UM when when you look under the hood, UH, a
Speaker 1: lot of those initial arguments were somewhat flimsy, and I
Speaker 1: think you have to start with. Before you say how
Speaker 1: much energy can something, uh should something utilize, you have
Speaker 1: to agree that it's worth something. So the first question
Speaker 1: is why is bitcoin valuable to the world. And once
Speaker 1: we agree on that, then you can talk about the
Speaker 1: energy aspect. You know, we've been really active. We've got
Speaker 1: an E S G working group across the firm, uh
Speaker 1: that's continuing to evolve. We were an active founding part
Speaker 1: of the Bitcoin Mining Council, and our mission is actually
Speaker 1: to make bitcoin green much faster than all of these goals. Uh.
Speaker 1: You know that we're hearing broadly. Um, we think that,
Speaker 1: for instance, the ability for bitcoin to utilize renewables is
Speaker 1: a huge and accelerating piece of the pie. Um. We
Speaker 1: think that, um, you know, oftentimes bitcoin is using energy
Speaker 1: that's actually already being wasted by the grid. So yes,
Speaker 1: it's you energy, but that's not net new energy. And
Speaker 1: so but we put out a piece from this research
Speaker 1: group that um that sort of estimates I think it
Speaker 1: was around bitcoin is already uh mind using green sources,
Speaker 1: and that number is going to accelerate very quickly. So
Speaker 1: I think when you look back on this in five years,
Speaker 1: given how much brain power is being focused on that
Speaker 1: exact issue, You're actually gonna look to bitcoin and say, wow,
Speaker 1: that was a great case study for other industries to
Speaker 1: accelerate the adoption of green technologies and becoming fully green.
Speaker 1: You know, Steve, I wanna get back to the the
Speaker 1: passive index funds a little bit too. Um. You know, obviously,
Speaker 1: you know, one of the appeals of UH indexing is
Speaker 1: you get diversity. You know, Uh, it's kind of tricky,
Speaker 1: uh in the crypto world, considering that Ether and Bitcoin
Speaker 1: are just so huge compared to everyone else. And I
Speaker 1: was looking at the the the one index fund and
Speaker 1: it's you know, you cap the holdings at or the
Speaker 1: weights at of each you know, so it's Bitcoin ethereum
Speaker 1: and then and then the other ones make up the balance.
Speaker 1: And in the defy index you're you know about of
Speaker 1: the unit swap token. So I just I'm curious where
Speaker 1: you see that going forward. I mean, will the do
Speaker 1: you think the other coins will catch up to the
Speaker 1: point where you know it will naturally bring down those
Speaker 1: waitings um or you know, is there a case to
Speaker 1: be made for sort of an equal weighted crypto fund.
Speaker 1: Do you think it's a great question? And look at
Speaker 1: for for us UM. We were privileged to start working
Speaker 1: with Bloomberg and when I think, um, you know, crypto
Speaker 1: was in a very different place and that was a
Speaker 1: really important part of the puzzle. In our opinion, indusicries
Speaker 1: are important for a million different reasons, but with a
Speaker 1: new asset class, it's as much about the taxonomy and
Speaker 1: defining that taxonomy as it is anything else. UM. The
Speaker 1: one thing that is uh, you know, very consistent and
Speaker 1: different than other indicries is that cap. UM. You know,
Speaker 1: We've got members of the team that have spent their
Speaker 1: careers in the et F space, and what we really
Speaker 1: wanted to focus on over time was the growth of
Speaker 1: the asset class. And our view was, if you want
Speaker 1: Bitcoin exposure, or if you want a Theorum exposure or
Speaker 1: any single asset exposure, you can go to other places,
Speaker 1: including our single asset vehicles. You don't need to go
Speaker 1: to an index to do that for you for that exposure,
Speaker 1: and we felt that UM, the way to facilitate the
Speaker 1: growth of the space was really to set that cap
Speaker 1: and then really start to educate around forget the waitings
Speaker 1: for now really educate the verticals. And so Bitcoin is
Speaker 1: digital goal thetheroreum is web three right defy as an
Speaker 1: entire construct n f T s UH and so um
Speaker 1: I expect to answer your question that you will have
Speaker 1: a number of very large assets in crypto in our
Speaker 1: large cap index. It is difficult at the moment to
Speaker 1: see how something could compete with a five billion dollar
Speaker 1: market cap and ethereum or a trillion plus in bitcoin.
Speaker 1: But look at how quickly we've seen aspects of the
Speaker 1: space grow. We've got over a hundred billion total lock
Speaker 1: value and defy in less than a year. So we
Speaker 1: just don't know. And anyone who says they know, I
Speaker 1: think is is uh either confused or or or telling
Speaker 1: a story. Uh. You know, you look at something like
Speaker 1: Salana and you could see an ETH competitor come into
Speaker 1: that index at one point and be a really sizeable
Speaker 1: chunk of the index as well. And so our expectation
Speaker 1: not in a month or in a year, but over
Speaker 1: a cycle five ten years, which is an eternity in crypto,
Speaker 1: is that like an accordy and you're gonna have uh
Speaker 1: fewer and then more constituents of the index, and then
Speaker 1: over time you're gonna have different competitive dynamics within the
Speaker 1: index within different verticals of the index, and what will
Speaker 1: be really cool is when we can start to subdivide
Speaker 1: and have a different sub indicries, kind of like the
Speaker 1: Defy index that we launched with Bloomberg in August. So
Speaker 1: you just mentioned having a lot of e t F
Speaker 1: player is working with you, And obviously the big news
Speaker 1: recently has been the launch of the Bitcoin Futures ETFs.
Speaker 1: I was looking at some of the notes that, uh,
Speaker 1: some of the research that you had done recently, and
Speaker 1: you said in order for digital assets to continue to flourish,
Speaker 1: they must be accessible to all investors, but that the
Speaker 1: launch of the futures ETFs concerns you and I want
Speaker 1: to I wanted to ask you why why that is? Yeah, Look,
Speaker 1: it's it's a nuanced um. It's a nuanced discussion, and
Speaker 1: I think on some levels as a crypto company, Galaxy
Speaker 1: looks at something like this from the SEC uh favorably, Right.
Speaker 1: It's it's important that there's an engagement and that there
Speaker 1: is for the first time, you know, this regulated public
Speaker 1: fund construct that's available in the United States. So as
Speaker 1: at a broad level, we think that's progress and we
Speaker 1: applaud the regulators for that. And we think it's another
Speaker 1: in many recent developments around not the cool stuff that's
Speaker 1: on crypto Twitter, but the guts of the market and
Speaker 1: the actual infrastructure that's being built around the markets that's
Speaker 1: really foundational. So so that's great. Um, when you when
Speaker 1: you look under the hood as a fiduciary business, so
Speaker 1: now not with the galaxy crypto had on, but with
Speaker 1: the galaxy asset management had on, and you think about um,
Speaker 1: something like USO. Uh you know, and I think you
Speaker 1: might have talked about this on a recent podcast. You know,
Speaker 1: the role dynamic is a real issue. And when you
Speaker 1: when you bring new participants to a new market in
Speaker 1: a volatile asset that's already enough you don't need to
Speaker 1: have structural uh questions on top of that, like leverage,
Speaker 1: which is obviously a feature of of the products that
Speaker 1: are that are approved and out there. And it reminds
Speaker 1: me a little bit of the trust structure. Uh. You know,
Speaker 1: we chose not to do a trust structure for bitcoin access,
Speaker 1: just like we're choosing at the moment not to engage
Speaker 1: with the futures product. You know, the tracking relative to
Speaker 1: bitcoin hasn't been great. That doesn't mean that a company
Speaker 1: like gray scale isn't very important for the space. When
Speaker 1: when when the market really needed something like that, just
Speaker 1: like the market needs the futures et F right now.
Speaker 1: But I would call that more of a trading vehicle
Speaker 1: as opposed to an investor retail vehicle. And so we're
Speaker 1: focusing on the spottyt F and putting all our energy
Speaker 1: into that project in partnership with Investco. All Right, Steve,
Speaker 1: I got a multi part question for you, and Vilton
Speaker 1: is gonna give me a hard time about that, probably
Speaker 1: as she always does this. This is trademark. Well, if
Speaker 1: I thought I was listening you ever heard of the
Speaker 1: smart List podcast with Jason Bateman and um uh Will Arnett.
Speaker 1: Uh He Jason Bateman asks like three minute questions. So
Speaker 1: I think I think I'm onto something here. I think
Speaker 1: this is the way it's done. To me, Steve, it's
Speaker 1: been fascinating watching over recent years sort of the evolution
Speaker 1: of traditional finance. Uh. And that's sort of the big
Speaker 1: bold face names of the banking world. In the way
Speaker 1: they talk about crypto. You know, it sort of went
Speaker 1: from all they roll the rise at it. You know
Speaker 1: that this is digital toolips five years ago too. Well,
Speaker 1: we're kind of warming up to it now. So okay,
Speaker 1: we're diving in know with two feet now. Um. So
Speaker 1: so part of of the question is, know, what are
Speaker 1: your conversations like with the institutions, Um, you know, what
Speaker 1: kind of allocations are are sort of typical for say,
Speaker 1: I don't know a pension or we're an endowment. What
Speaker 1: kind of allocations are they looking at? And the one
Speaker 1: person who keeps whose evolution of thought on this topic
Speaker 1: to me that's really fascinating is Ken Griffin of Citadel.
Speaker 1: You know he uh, he's he's warming up. You can
Speaker 1: tell he's warming up to it. Um, he's still a
Speaker 1: little uneasy about it. And one of his some of
Speaker 1: his recent comments were like, I just don't know how
Speaker 1: to value this, you know, other than um, it's worth
Speaker 1: whatever the next person is willing to pay for. We're
Speaker 1: so hopefully that's not too much for you there. But
Speaker 1: if you can answer my questions and and Ken Griffin's questions,
Speaker 1: you know, uh, what's the sort of climate among the
Speaker 1: institutional investors, what kind of allocations are they thinking about?
Speaker 1: And how do you what would you say to Ken
Speaker 1: Griffin if you if you got him in the elevator
Speaker 1: and he said, how how do I value this stuff? Uh? Great,
Speaker 1: I'll try not to answer the last question first because
Speaker 1: then I'll go down the rabbit hole. The rabbit hole,
Speaker 1: but uh, why don't I start with it? So, first
Speaker 1: of all, when you mentioned the banks, I I worked
Speaker 1: at a bank. It was called Lehman Brothers. Uh it didn't.
Speaker 1: So yeah, well we'll spare my leaving story for now.
Speaker 1: But uh, I empathize a bit. It's there. There's there's
Speaker 1: what there's what you can do. There's what you want
Speaker 1: to do. There's what your your clients are asking you
Speaker 1: to do. There's committees. It's just it's a complicated process
Speaker 1: that necessarily is going to take time. But I think
Speaker 1: that they're getting there when you look at the institutional
Speaker 1: allocators first of all, hunter trillion dollar plus market globally. Uh,
Speaker 1: you know a number of of necessary structural impediments to
Speaker 1: doing anything different in place, whether it's the investment committees
Speaker 1: or the consultants or the O D D work. Uh.
Speaker 1: And so really, uh, you can't fake it with this crowd,
Speaker 1: nor should you try. And so for the last four years,
Speaker 1: why do we focus on indexing first? And then we
Speaker 1: literally treated service providers like Deloyd, like clients, we had
Speaker 1: forty meetings with them before we would have them as
Speaker 1: they would have us as as their auditor for our
Speaker 1: fund for our for our crypto funds, And you needed
Speaker 1: all those pieces in line before you could even have
Speaker 1: a credible conversation. So a lot of that between the
Speaker 1: period of time when crypto was down where we are
Speaker 1: today was happening behind the scenes. The conversations, the product
Speaker 1: structure is being developed. Uh, even sort of the valuation
Speaker 1: frameworks we're being tooled around with a little bit so
Speaker 1: that when you came out of this and the world
Speaker 1: exploded and had a catalyst for crypto to really matter,
Speaker 1: which we can talk about and which is covid um,
Speaker 1: you're not starting from zero. In every single institution that
Speaker 1: you can think of, in every vertical, they have people
Speaker 1: who have done work on this. It's been socialized with
Speaker 1: their committees, and they're much further along than than you
Speaker 1: would expect. Um. As an example, there's a there's an
Speaker 1: endowment that we spoke with recently and I'll not say
Speaker 1: their name obviously, uh that actually has now six percent
Speaker 1: crypto exposure because the bet has done so well over
Speaker 1: the last few years. And so that's a whole different
Speaker 1: risk management challenge. Um for those who haven't participated yet,
Speaker 1: there's a lot of reasons why they haven't, but there's
Speaker 1: a real pull for them to now make that step.
Speaker 1: And the reason is that cryptos now a three trillion
Speaker 1: dollar asset class. If wealth broadly is fo fifty trillion,
Speaker 1: the index for crypto is now sixty or seventy basis points.
Speaker 1: So if you're at zero, you're actually short the crypto
Speaker 1: participation in the global economy, and that no choice is
Speaker 1: a choice. One of the hardest things for these institutions
Speaker 1: is that crypto goes up and then you feel like
Speaker 1: you're buying at the highs and it's gonna mean revert
Speaker 1: and you're an idiot if if that to your to
Speaker 1: your committee. If crypto goes down where you thought you'd
Speaker 1: buy the dip, actually you feel like it's going away forever,
Speaker 1: so you don't have the conviction to buy it, and
Speaker 1: you end up getting stuck in the middle. And that
Speaker 1: has been the problem over the last two years for
Speaker 1: some of these pensions. I was in a spirited debate
Speaker 1: two nights ago at dinner where a couple of very
Speaker 1: large pensions were saying, if only we had a bucket, right,
Speaker 1: we don't have a bucket for crypto. How do we
Speaker 1: do this, Where do we put it, how do we
Speaker 1: think about it? We want to do it? And so
Speaker 1: they're almost begging for someone to step in and say,
Speaker 1: you know what, this is the index. This is the benchmark.
Speaker 1: Bitcoin goes in a hard asset bucket. Ethereum and the
Speaker 1: future of the Internet probably go in a venture bucket.
Speaker 1: Defined maybe goes in an equity bucket because it's it's
Speaker 1: competing with traditional finance in a way. And so you
Speaker 1: really have to take these mental models, uh and and
Speaker 1: and try to make it sound like something that already exists,
Speaker 1: because that's the only way that you're gonna get to
Speaker 1: the bucket. You don't get new buckets by going and
Speaker 1: pitching the committee and saying, I think we should have
Speaker 1: a crypto bucket. You have to get off of zero,
Speaker 1: you have to have trusted partners to do that. You
Speaker 1: have to have use cases that make sense, and then
Speaker 1: you grow into the asset class. And when that happens,
Speaker 1: you're gonna see the really big dollars start to come in.
Speaker 1: I think is gonna be a seismic gear for those
Speaker 1: dollars coming in. I didn't hit the Ken Griffin. I
Speaker 1: don't know if there's anything in that aspect that you
Speaker 1: want to elaborate on, but I'm happy to go into
Speaker 1: the cana as well. Some of these institutional players have
Speaker 1: been making the argument that bitcoin is a hedge against inflation,
Speaker 1: and this is a topic that actually has just come
Speaker 1: back quite a bit more recently, just because we are
Speaker 1: seeing a lot of these hotter than expected inflationary prints.
Speaker 1: So I'm wondering what you make of that theory, because
Speaker 1: you know, I spoke with Cam Harvey at Duke and
Speaker 1: and he has been doing this long term research on
Speaker 1: gold and bitcoin, and he's sort of his argument is, well,
Speaker 1: the history is just not long enough to to to
Speaker 1: say definitively that bitcoin is an inflation hedge. So I'm
Speaker 1: wondering what you make of that. Well, that's true, um,
Speaker 1: you know the history from but but time is not
Speaker 1: necessarily the right metric in an exponential age, right, These
Speaker 1: are these are networks and there's a generational turnover that
Speaker 1: that's happening, and bitcoin's the top five holding for millennials.
Speaker 1: So I respect the track record of gold. I don't
Speaker 1: have anything negative to say about gold. I do think
Speaker 1: that it's interesting that UM gold is down two percent
Speaker 1: year to date and bitcoins up, and I don't think
Speaker 1: that's an accident. I think that UM, as Paul Tutor
Speaker 1: Jones said in May ofwy in his piece, bitcoin is
Speaker 1: the fastest force in this inflation race. Inflation is obviously
Speaker 1: a problem, and it's particularly a problem if you're uh,
Speaker 1: in the unfortunate situation where you're poor, or if you're young.
Speaker 1: And so I think cryptos are response to that. That's
Speaker 1: that's systemically different. UM Bitcoin has all the characteristics of
Speaker 1: a hard asset and of digital gold. Obviously, it has
Speaker 1: a provably, verifiably scarce number of bitcoin. No one can
Speaker 1: ever change that. Only twenty one million will ever be mind,
Speaker 1: even gold has a supply response. If gold goes to
Speaker 1: you know, five thousand or ten thousand dollars an ounce, Uh,
Speaker 1: maybe we won't be mining asteroids for gold the way
Speaker 1: Elon said, but will certainly be going into the cbed
Speaker 1: or at other places where we know there's gold at
Speaker 1: higher prices. There's no mechanism, there's no supply mechanism for
Speaker 1: bitcoin by which you could do that. So I think
Speaker 1: it has all the properties of of of a macro hedge,
Speaker 1: of an inflation hedge, and I think the market is
Speaker 1: speaking very loudly on this. What's interesting is that it's
Speaker 1: not just a macro hedge, it's also a growth asset
Speaker 1: because of the adoption curve. So what I think that
Speaker 1: does for a portfolio is you also can play offense.
Speaker 1: If gold is a defensive hedge against inflation, Bitcoin is
Speaker 1: that hedge in addition to being like a tech growth stock,
Speaker 1: because we're so early in the adoption cycle. So it's
Speaker 1: very rare that you get both of those in one
Speaker 1: asset um at a time where the market is valuing
Speaker 1: both of those themes separately. And I think that's why
Speaker 1: you've seen that explosion of bitcoin. Steve, let me get
Speaker 1: one more and then I think, then when I think
Speaker 1: we got to go to the crazy things uh as
Speaker 1: his ar actrition. You know, when you think about you know,
Speaker 1: Galaxy's role as sort of one of the one of
Speaker 1: the leaders and indexing in crypto, you know, I'm thinking
Speaker 1: back to how long it took Tesla to get into
Speaker 1: the SMP five, and you know how they're there's certain
Speaker 1: criteria that it it didn't meet until it's market cap
Speaker 1: had just become enormous UM, so it really came into
Speaker 1: the index with with full force, you know, with a
Speaker 1: with a big thud. And I'm wondering what, you know,
Speaker 1: how would you view something um, say like a doge
Speaker 1: coin or a sheba you know, you know that that
Speaker 1: you know, just from pure momentum, suddenly is one of
Speaker 1: the biggest cryptos. I mean, is there a role for
Speaker 1: you guys to sort of, you know, be a gatekeeper?
Speaker 1: And I hate to pick on those two, you know,
Speaker 1: I I honestly I already have the the Sheba, you know,
Speaker 1: tweet storm. People are already after me about something else,
Speaker 1: so I don't I don't want to pick on them.
Speaker 1: But but just that notion of you know, you know,
Speaker 1: how how do you do do you know, how do
Speaker 1: you sort of protect the integrity of the index or
Speaker 1: is it is that not your role as a as
Speaker 1: an index provider? No, it's our role. It is our
Speaker 1: It is our role. And I think you know, the
Speaker 1: rules fit together like pieces of a puzzle, and it's
Speaker 1: you know, it's it's regulated exchanges and and there's you know,
Speaker 1: there's there's a there's a consistency in terms of how
Speaker 1: long something has to be at a certain size, and
Speaker 1: volumes and and all kinds of things that I think
Speaker 1: sort of naturally sort out what you described as as
Speaker 1: much as I also uh laugh at at some of
Speaker 1: those coins you mentioned. What I think is really important
Speaker 1: and it's separate from the Ken Griffin question. Right. If
Speaker 1: I'm answering Ken Griffin, I would say, uh, digital gold
Speaker 1: is going to catch a physical goal because of the
Speaker 1: generational turnover, and that's a five potentially in dollar market potential.
Speaker 1: And then I would say, you know, Ken, what's Web
Speaker 1: three worth? Because that's what's being built right now, and
Speaker 1: Web three is really important and really necessary. There's this
Speaker 1: other bucket that you're talking about, and it's it's dog coin. Uh.
Speaker 1: It's also game Stop, it's identity investing, it's it's this
Speaker 1: patch that we wear, uh, and and it's Army that
Speaker 1: we we are a part of. And you know, yes
Speaker 1: it's momentum driven, and yes it's easy to laugh at um,
Speaker 1: but it's it's it's real. Right. Game Stop has been
Speaker 1: trying to be shortened for a year and here we are,
Speaker 1: and I think where where this is actually going to
Speaker 1: happen the right way, because I don't think those are
Speaker 1: the right long term answers. Having you know, been around
Speaker 1: markets for a while, I think the n f T
Speaker 1: space is actually gonna get that identity investing right. It's
Speaker 1: gonna flip the fundamentals of that. If you're part of
Speaker 1: a network and that's your identity, and you're early to
Speaker 1: that network like board a yacht club, uh, you're you're
Speaker 1: you're an owner, you wear that badge and you own
Speaker 1: a piece of that network as it grows. But there's
Speaker 1: also real world crossover uh into some of the second
Speaker 1: order applications of that. That's where it gets really interesting.
Speaker 1: So it's it's hard to say an institutional indexing. Yes,
Speaker 1: those things do get filtered out. But I think that
Speaker 1: we have to imagine a world where identity investing has value.
Speaker 1: And it's possible all that like Facebook, where we didn't
Speaker 1: know what the economic model of the valuation was going
Speaker 1: to be until well after the network had grown, It's
Speaker 1: possible that we're just in the early stages of some
Speaker 1: of this, and I think it would be um silly
Speaker 1: to dismiss the value of some of that, or the
Speaker 1: potential future value of some of that stand clearer of
Speaker 1: the craziest things we saw in markets this week, I
Speaker 1: think we gotta go crazy things now. I'm looking forward
Speaker 1: to Steve's crazy things build. As you know, crypto is,
Speaker 1: there's always something crazy talked about. But let's go with
Speaker 1: you with old Donna first, what's yours? Yeah, So I
Speaker 1: saw a lot of crazy crypto things this week, and
Speaker 1: I wrote up some of them, but I'm not going
Speaker 1: to go with them because I'm hoping that maybe Steve
Speaker 1: touches on some of them. I'm going with this story
Speaker 1: that I saw in the Wall Street Journal, and the
Speaker 1: headline is is Santa Claus coming to town? Maybe not
Speaker 1: blame the labor shortage. So if anybody as little kids,
Speaker 1: maybe you want to shield their ears from this. But
Speaker 1: the tight labor market means that there's a really small
Speaker 1: supply of Santa claus Is making their rounds. So it's
Speaker 1: really really difficult to book a Santa Claus for a
Speaker 1: party or an event or a mall or whatever. And
Speaker 1: that even back in July for Christmas. In July, all
Speaker 1: of these places were basically overbooked with you know, people
Speaker 1: asking for for Santa Claus. So I don't want to start.
Speaker 1: It's not even Thanksgiving. I don't want to start having
Speaker 1: to worry about this. I don't want to start a controversy.
Speaker 1: But it's not like they were promote top of the
Speaker 1: labor force food chain to begin with. You know, so
Speaker 1: I'm not weighing in on this. That's all you. That's
Speaker 1: all you. Yeah, I would have the shiba you know
Speaker 1: people after all? Right, my crazy things related actually one
Speaker 1: of them, I've got a triple crazy thing. But Steve,
Speaker 1: let's hear what you got for crazy things this week? Well,
Speaker 1: I I know it's supposed to be one, but there's
Speaker 1: there's two, and they're both Twitter Twitter related. I can't
Speaker 1: I can't avoid the maybe it's Elon's biggest Jedi mind
Speaker 1: trick of all time in having and having Twitter decide
Speaker 1: whether he's gonna be able to monetize twenty six billion
Speaker 1: dollars of Tesla stalk. I thought that was weird, fascinating,
Speaker 1: a sign of the times. Uh, that sure was? Yeah, yeah,
Speaker 1: considering he put the program into place in September, you know,
Speaker 1: a lot a lot of questions. I got a lot
Speaker 1: of questions, but maybe maybe maybe not, maybe not for
Speaker 1: today and the more crypto native one is you know,
Speaker 1: I alluded at the beginning of the podcast, there's a
Speaker 1: there's a whole vernacular on crypto Twitter, and one of
Speaker 1: them is is is GM. It means good morning, and
Speaker 1: you can say good morning to each other. But it's
Speaker 1: more of a as Twitter would say, a crypto Twitter
Speaker 1: would say, it's a vibe check. Uh, And so you
Speaker 1: could say GM if you're feeling fresh in the afternoon
Speaker 1: or in the evening. And um, there was a a
Speaker 1: venture adventure capitalist named Sam Lesson who criticized that language,
Speaker 1: and Uh, the co founder of Salona, threatened him jokingly
Speaker 1: in in reply, and was subsequently banned from Twitter for
Speaker 1: doing so. Um. This happened three hours before he went
Speaker 1: on stage in Lisbon and announced the launch of a
Speaker 1: Web three competing social media platform in partnership with Reddit.
Speaker 1: So to recap, you had Uh, one of the founders
Speaker 1: of the biggest Web three tokens banned from a Web
Speaker 1: two protocol hours before launching a direct competitor. So I
Speaker 1: found that to be again fascinating, weird and a sign
Speaker 1: of the times. It's it's pretty good. Yeah, it's funny.
Speaker 1: You know how important the conversation You know, you think
Speaker 1: of Twitter is just this poof off time point it
Speaker 1: really can be important, uh, parts of the conversation. And
Speaker 1: as to your point elon muskin and stuff like this,
Speaker 1: it's uh, never tweet Bila. I think you never tweeked,
Speaker 1: do you? No? I I don't like tweeting you rarely.
Speaker 1: Our colleague Katie Garfield is so good at it. I
Speaker 1: just can't keep up. So I just don't even try.
Speaker 1: Just retweet stuff. I'll give you my my crazy things, Steve.
Speaker 1: I know people consider crypto an alternative as a class.
Speaker 1: It's not quite alternative enough for me. I like to
Speaker 1: go even deeper into the alternative world. So all right,
Speaker 1: so I got three things I and this is you
Speaker 1: know I love the art and collectibles and memorabilia markets. Uh,
Speaker 1: so I've got three. I couldn't boil it down to one.
Speaker 1: So I've got three for you. But we can still
Speaker 1: play prices, right, because I want each to you to
Speaker 1: tell me which one you think is the highest price
Speaker 1: that that went at auction, and and give me the
Speaker 1: price you think it went at as a tiebreaker. Okay,
Speaker 1: so first you'll answer highest, and then we'll circle back
Speaker 1: and you'll give me the highest price Okay, first one
Speaker 1: and this is current courtesy of the Independent newspaper. Back
Speaker 1: to the mall, Santa Claus is. Uh. Will Ferrell in Elf,
Speaker 1: great movie from my think, what about almost twenty years ago?
Speaker 1: His costume. His Elf costume recently went up for sale
Speaker 1: at auction in London ball places. So that's one item
Speaker 1: that went up for auction. Uh. The other one courtesy
Speaker 1: the BBC the volleyball used in the Tom Hanks movie
Speaker 1: Castaway Wilson. The volleyball that went up for auction. Yes.
Speaker 1: And thirdly, uh, courtesy I've both the l A times
Speaker 1: in BBC. I saw this an Apple one computer, the
Speaker 1: original Apple. Uh. Wadsniak and Steve Jobs built them. I
Speaker 1: think literally in the garage. They only brought a couple
Speaker 1: of hundred of this first batch in the seventies. Um.
Speaker 1: One of these just sold for auction. I will tell
Speaker 1: you it's made of wood. It still works. I don't
Speaker 1: think you can hook it up to the web talk
Speaker 1: about no Web point three. That was web web point zero,
Speaker 1: but you know you could. I guess you could do
Speaker 1: some word processing on it or something. But it still works.
Speaker 1: It's made of CoA. Hawaiian CoA would is the casing
Speaker 1: of it. So well down you go. First, You've got
Speaker 1: Will for old self costume the original Apple one computer
Speaker 1: or Tom Hanks's volleyball Wilson from Castaway. Sounds like you're
Speaker 1: you're setting us up for failure by making it sound
Speaker 1: like it's the computer. So I'm gonna go with the volleyball. Volleyball,
Speaker 1: all right? Yes, Steve, what's your call? And that Will
Speaker 1: As much as I love Elf, that that's got to
Speaker 1: be out because those I mean Wilson's Wilson. Um. I
Speaker 1: I as someone told me what the Apple ones were worth,
Speaker 1: but I can't remember. I'm gonna go with Wilson and
Speaker 1: go head to head on the on the price with uh,
Speaker 1: you know, to see who, to see who wins with Labana.
Speaker 1: All right, Bildona, what's your bid for the for Wilson
Speaker 1: and volleyball? Oh my gosh, I don't even know. I mean,
Speaker 1: I can't Steve remember. Maybe maybe I'm way off. I
Speaker 1: actually I thought I thought we were like at five
Speaker 1: thousand for Wilson. Oh, I'm sure we are. No, I'm
Speaker 1: sure we are. I'm really bad at this game. Remind
Speaker 1: you prices right, rules are in effect. So that's true
Speaker 1: that you know. Okay, but that's easy. Let's let's let's
Speaker 1: go closest, closest, closest to the pin. All right. The
Speaker 1: volleyball went for three d eight thousand, Uh, Steve, but
Speaker 1: was it? But the Apple one computer went for five
Speaker 1: hundred thousand? Is the most valuable question? ALF costume went
Speaker 1: for three hundred thousand. So the volleyball beat ALF by
Speaker 1: about eight thousands. So this is Yeah, I thought Apple
Speaker 1: one was. I was thinking in my head that would
Speaker 1: be three hundred thousand, and then I thought Wilson's got
Speaker 1: to be more than three d thousand. Hey, look, these
Speaker 1: are these are hard assets to value. Uh, good luck
Speaker 1: to Ken Griffin trying to value these things. I'll have
Speaker 1: to get him on the show one time. You shouldn't
Speaker 1: You should ask him about it. To take a look
Speaker 1: at open see open see just hit ten billion dollars
Speaker 1: of volume, and uh, you can see they're worth at
Speaker 1: the moment. And I'm sure he'll have something to say
Speaker 1: about some of them. Now, now is that f T
Speaker 1: s up to you? Guys will start dabbling in or
Speaker 1: are you already? Oh yeah, we Galaxy bought a punk
Speaker 1: last week. We're in the we we are out owners
Speaker 1: of a crypto punk and we have uh yeah, in
Speaker 1: our asset management business, we have six fifty million dollars
Speaker 1: of venture capital money that's really focused on this entire space,
Speaker 1: the creator economy and n f T s and gaming
Speaker 1: and esports and it's fascinating stuff. How much did you
Speaker 1: buy it for? No comment? It's it's it's it's it's
Speaker 1: on the blockchain. Now we're I have to be careful
Speaker 1: about that one, but it's I'm sure it's it will
Speaker 1: be public at one point. I'm thinking it's more than
Speaker 1: the Apple one computer. From from what I've read about
Speaker 1: the punks, that would have been the right the right metric.
Speaker 1: Great stuff. Steve, really appreciate your time. I think that's
Speaker 1: all the time we have, uh but fascinating conversation. We'll
Speaker 1: have to get you back sometime if you're available. Thank
Speaker 1: you both so much. I really appreciate what goes up.
Speaker 1: We'll be back next week. Until then, you can find
Speaker 1: us on the Bloomberg Terminal website and app, or wherever
Speaker 1: you get your podcast. We'd love it if you took
Speaker 1: the time to rate and review the show on Apple Podcasts,
Speaker 1: so more listeners can find us, and you can find
Speaker 1: us on Twitter. Follow me at Reaganonymous. Bildonna Hirich is
Speaker 1: at Bildonna Hirich. You can also follow Bloomberg Podcasts at
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Speaker 1: Up is produced by TO For foreheads ahead of Bloomberg
Speaker 1: Podcasts is Francesco Levy. Thanks for listening, See you next time.