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Kevin 진행의 Ark Invest 크립토 애널리스트 인터뷰. 비트코인은 0에서 1로 가는 단계가 가장 어려웠으며 가격 변동성은 통화정책 신뢰성의 표현이라고 주장. 네트워크 효과가 비트코인의 복제 불가능한 해자이며 이더리움이 보완재로 매력적이라 봄. 옐런의 비판은 범죄 악용에서 투기 도구로 바뀌어 아직 초기 단계라는 근거로 해석. 채굴은 전문화되어 개인 진입이 어렵고, 블록파이 등 고수익 상품은 리스크가 크다고 경고. NFT는 과열되었으나 디지털 워터마크 등은 5~10년 내 유스케이스로 봄. Ark는 비트코인 ETF/신탁 익스포저를 비중 낮게 가져간다고 언급.
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what you're about to watch is a recorded live interview with arc invest cryptocurrency division where we get to go deep on cryptos nfts and more i do have to add a disclaimer here though so on screen now you're going to see a disclaimer that ark invest requested be added there were also segments of this recorded live interview that had to be removed unfortunately i was not able to post this live but we can blame the sec for that that is not archinvest fault i love arkhanvest so without further ado let's get into the video i do want to quickly mention though make sure to get yourself 30 off using the coupon code down below on those amazing programs for building your wealth that does expire in two days thank you very much for watching let's get into it hey everyone meet kevin here i'm back and super excited today to be talking about the future of cryptocurrency to talk about the future of crypto especially bitcoin and ethereum and i'm sure we'll talk non-fungible tokens as well and multi-layered art oh my gosh there is so much to talk about so much to understand i had to bring in an expert and who bet then an amazing analyst over at arkhamvestia scene please introduce yourself tell us about yourself what you do and how you know so freaking much about the kryptos thank you so much kevin great to be here um i'll start by saying i've watched a few of your videos and and the vibrant energy uh that we can feel through the screen is always just a pleasure so thanks for everything that you do it's all coffee it's funny i don't i don't drink coffee uh so it's it's i can only imagine um how much of a boost that that might be uh but yeah it's it's great to be here um so i like you sort of prefaced um i am a crypto analyst at uh arc invest i joined in 2018 um so actually in the depths of of a bear market uh right after the 2017 crash um so a little bit of context there um prior to arc i i was at the university of pennsylvania studying assistance engineering and finance um and uh actually very early on uh told myself that i don't want to follow the uh traditional route of investment banking or consulting and and going through kind of the traditional recruiting process um so you know ended up being interested in in the venture capital world uh which like as a as a as a graduate or as an as a student is sort of difficult to tap into but cold emailed a bunch of vcs um you know had an opportunity to to intern at one and there they gave me uh the free reign to explore whatever industry i wanted to from both the tech and investment perspective and so that was actually right um during the 2017 bull market um and i chose crypto and told myself that uh this is definitely what i wanted to do full time um so committed to figuring out a way to do that full time um found arc um in in 2018 my senior year actually through twitter um you know we can go into sort of the the open research ecosystem that arc prides itself on um and you know dm'd one of their former analysts um told them i was interested started sharing some random content encrypted myself and then the rest is history so i've been there ever since and it's been it's been quite a fun ride so what you're saying is the way you got your position at arc was by sending them free research in a lot of ways yeah that's exactly uh the mindset at least i think um you know we we often get so much inbound of like okay how do you join arc or or you know what what's this sort of um approach to um making a name for yourself in in the industry and and the real answer to that is by leveraging the internet um the internet is is a tool where you know you can basically share an idea and it's very meritocratic and that if that idea is good other people will share it um and uh and if you keep sharing ideas without any expectation of anything in return eventually someone you want to see it sees it um and uh and so you know that's been that was sort of my approach where it's like i'm just gonna start a twitter page and just start tweeting about random things and actually started by just synthesizing things that were interesting to me it really wasn't original thought it was just a lot of smart people saying really interesting things and maybe figuring out ways to repackage that um and so you know arc uh and you know as you probably might know you know we were pretty active on social media and it's by design it's a an explicit part of our research process um you know where we think that information is increasingly becoming commoditized and you know there's no longer a value add or a competitive edge in being black box in your approach to research rather by sharing your research not as it's complete but as it's evolving um you can really get immediate feedback um and uh be able to sort of battle test your assumptions um in ways that sort of a maybe a five to ten person investment team in internal operations uh might not be able to do as effectively um so part of kathy's reason for founding arc was because traditional compliance teams weren't set up uh to handle um kind of the research involved in identifying disruptive innovation more broadly um and so you know the the sort of social media presence is really more of a research angle than it is like a marketing angle um and so you know i found my my my job because i found a tweet that i thought was interesting and dm'd the analyst and then the rest is history right so um to all that so yeah to all the people who are sort of aspiring yeah to get into this i mean it just goes to show like you can if you provide value to society like good things can come back so this got you uh a seat at arc essentially so you're i imagine a full-time employee pro you know benefits everything uh it which is amazing and i'm speculating maybe you can enlighten that what's the and i want to talk about crypto obviously but what's like the work life balance like i mean do you have set hours or you just always on i mean you got a meeting right after this is you know is kathy on you with the whip what's going on here yeah sure let me just close my door one second yeah yeah take your time i'm so excited to talk about crypto too we'll be talking about everything so yeah i mean that's that's the that's the fun part we'll get into the fun part um but yeah i mean the uh sorry can you hear me i can hear you you're good i've just given you the spotlight um so yeah i mean the the work-life balance well it's funny because the crypto markets trade 24 7 so you know you're you're if you fall into the rabbit hole very quickly it's like you're kind of just constantly working all the time thankfully i enjoy what i do uh but but to be honest it's uh the analyst role is um not really defined um as traditionally as like a maybe a traditional investment shop might define it where you know it's very entrepreneurial um in its approach um where you know analysts are are really able to define the roles as the a as what they want in terms of like the there's a lot of encouragement to take initiative um and the base is obviously you know uh covering your theme so we're not really divided into sort of sectors so i i cover crypto we have analysts that cover genomics and energy storage and dna and and dna sequencing and um ai robotics so you know everyone covers their own theme um and then from there it's just you know trying to figure out new interesting ways to think about the space so coming up with sort of provocative research sharing that research as it's evolving and then of course figuring out ways to translate that research into actual portfolio management and investment decisions so you know every morning we're on a morning meeting with kathy um and she is basically saying okay give us the news uh is there anything actionable is there anything interesting um and then from there she's able to synthesize and sort of uh end up making the the relevant portfolio management decision um so you know it's it's really just uh a front row seat into all things tech uh however you wanted to find that um and balance is it's it's fine it's nothing good yeah it's it's yeah it's fine i mean i guess you can probably essentially work market hours and do your research whenever you want outside of those which is kind of neat yeah what we're even within them so let's touch on crypto though because there are a lot of people who are very skeptical of crypto a lot of people even say that one of the reasons tesla started its sell-off was because they didn't agree with money going into bitcoin i we one of the theories i have is that bitcoin might be very volatile but i don't see it as risky i don't necessarily associate that volatility with risk um i think that the interesting thing is the hardest part for bitcoin in our opinion was to get from zero to one um you have to understand that like the evolution of bitcoin didn't start with like a market price where you can buy bitcoin on exchanges uh it really started as this uh digital like collectible uh that was uh part of a very you know small group of cypherpunk enthusiasts who were just cryptographic uh or cryptography nerds um and that sort of evolved very organically into something that could potentially be used as a mechanism to you know store and transfer value um and create sort of this internet native uh monetary commodity um so you know that's that's the i'd say the first thing of like you know can bitcoin go to zero i mean i think that the strongest bitcoin holders will tell you that uh at any opportunity they see a dip they'll probably be accumulating bitcoin um so there's what's called sort of those buyers or holders of last resort and there's a big enough holder of last resort where you know it's very likely that they're going to be buying before bitcoin goes to zero and then on the volatility i think that's a really interesting point that a lot of people um tend to misunderstand you know bitcoin's volatility right they basically point to it as the store value deal breaker right like why would anyone why would anyone want to store value in an asset that's going to have these dramatic day-to-day price swings um you know it could be crazy stocks today exactly um but if you think about it um bitcoin's volatility in a lot of ways actually highlights the credibility of its of its monetary policy um so there's something um called the impossible trinity which is uh a macroeconomic policy trilemma which you know i urge you um or the viewers to look into but it illustrates that um you know when forming uh uh monetary goals you have these policy makers that are able to satisfy two of three objectives they can never satisfy all three but they can satisfy two of the three and this is called the the trinity i'm gonna write this down yeah trinity it's a it's a macroeconomic policy trilemma if you google macroeconomic impossible trinity um it will basically highlight sort of what policy makers think of when dictating um monetary policy goals so the so the the three options are um you know a fixed exchange rate uh free capital movement and an independent monetary policy so something like the there there you go exactly something like the uh the uh the classic gold standard um the fixed exchange rate and free capital movement were chosen um and uh an independent monetary policy uh was uh uh was was sort of sacrificed um with with bitcoin bitcoin has basically chosen an independent monetary policy so it's not backed by anything really right um and free capital movement meaning that anyone can go in and out of the asset as they please and so as a result of that you don't really have a fixed exchange rate what that means is that it is being priced exclusively as a function of demand um so because there is no sort of stable peg you're naturally going to get these price swings um and it really just highlights that anyone can go in and out of it and that it is not tied to any specific monetary policy um so you know you just have to think of bitcoin as choosing uh a different uh set of trade-offs when dictating its monetary policy um you know the volatility is is coming uh but in in the volatility exists but in return it's really just an emergent property because you have these scarce uh this scarce asset that only has 21 million in circulating supply um that anyone can access um so that's i gotta ask about that i mean though i mean you've got uh like ether and and bitcoin cash and now you've got card i mean there's so many of these other currencies what's to stop like you know the next bitcoin from coming around and people like man btc too slow 10 10 minutes to verify transactions i'm outta here that's a good question um and we we often get that critique a lot right bitcoin is the money space to facebook it's uh it's too slow it's uh it it's just it's just basically not going to sustain itself over the long term um again i i think the framing here uh are is twofold the first is um you know i like the famous quote by thomas soule that where he states uh there are no solutions there are only trade-offs um so that as a framing in the crypto world is extremely important um where you know you can't have this perfect um network um where if you're gonna see like this is the bitcoin killer it's faster it's more decentralized it's not without explicit trade-offs um so you know to start like bitcoin being slow um is really a trade-off that it makes for being highly secure and highly decentralized and when you think about the value proposition of these networks it's not so much as a convenience of payment it's not to really compete with visa it's to compete as an alternative to central banking where you need high assurances and guarantees to settlement and you can't have those high assurances and guarantees without the security guarantees that bitcoin introduces um that's the first thing the second thing is how exactly um are these assets how do they crew value right what makes these assets valuable why is bitcoin more valuable than another asset because at the end of the day this is open source software um and it is a technology that technically can be replicated um but i think that bitcoin's value specifically is not replicated or can't be replicated by software alone um and you have to actually look at the network effects that bitcoin has built that are irreplicable so an example that we'd like to give is imagine that you were given the source code of facebook right and you're like okay here's the source code of facebook but you can't get the 50 000 employees you can't get the 2.6 billion users you can't get the the leadership and the team but you can get facebook source code so in the same way it's like okay well here's a bitcoin cash or litecoin that looks cosmetically similar to bitcoin but you're not getting the infrastructure and liquidity you're not getting the brand and recognizability um and network effects especially when it comes to a non-productive asset like bitcoin is its most important moat um and it is one that is sort of defensible in ways that technology alone cannot replace um so the better quicker faster cheaper if no one is adopting it isn't going to um you know really yield any benefits to the end user um so you know that's that's sort of that's sort of our take there is that network effects are the most important thing and bitcoin has been able to build a network effect that is frankly um we believe uh not replicable now you invest i believe at arc in the grayscale bitcoin trust because you can't hold bitcoin directly in an etf correct me if i'm wrong on that can you buy the ether or the the new one that just took place number three uh cardano can you buy that uh so there there are questions um that you're you're right uh in that we are 40 act product or etfs are 40 act product um and so you know we can't hold the underlying um but you know there are uh uh securities that like the grayscale bitcoin investment trust that truck that track bitcoins underlying um but even those have you know specific limitations um as well um and so you can imagine a scenario where equities sell off and bitcoin rises and you're basically stuck um being overexposed to bitcoin in this specific product um so all that to say that um you know our our exposure uh to bitcoin um you know in these products have probably been a relatively underweight our conviction and when it comes to other products like the eth grayscale product or the cardano or what what not those even if we were interested in other assets and there are some interesting assets i think ethereum is definitely an interesting complement to bitcoin um the liquidity there um is just is simply you know not something that that is it's not liquid enough for us to gain exposure at scale um to those specific products um in addition to the massive premium that you get on those products relative to nap um so i don't want to go down like a regular regulation like rabbit hole but i gotta ask you i mean it sounds to me like with this qualified income rule or unqualified income rule here's regulation again kind of potentially limiting innovation am i wrong to say that um so with this rule specifically not really uh the reason why is because it's it's actually commodities rule so it's the same thing if you had gained exposure to gold a gold etf in an equity etf but that doesn't mean that your broader point is not uh sound in that um you know we especially in the us uh you know there needs to be careful consideration we believe in um you know promoting bitcoin and crypto and in technology more broadly um in a way that doesn't stifle innovation and that doesn't dissuade entrepreneurs and investors from really um you know deploying capital in in these jurisdictions versus others um you know and with bitcoin being a neutral borderless jurisdiction agnostic asset um you know it's it there's a lot of interesting game theory at play um where for every country that is going to um you know disavow it you will have others that create havens for it um so you know i think that yeah there certainly needs to be more thorough consideration of um i would say open uh being more open or uh to regulation than being more stringent got it i want to talk and it is very interesting too that that you're suggesting that maybe you're you're underweight your conviction on bitcoin i think that's a that's fascinating talk to me about janet yellen is she gonna be a big risk to bitcoin here is she just clueless i mean she's calling this uh you know an illicit activity tool when we know that bitcoin is used less for illicit activity than cash is is she just uneducated is this the you know first two months on the job cluelessness what's going on here and all respect to janet yellen okay but you know i i'm curious that's a great question it's actually something that uh we talked about internally at arc um oh i've got bugs i know it all exactly yeah he's just the guy got the little uh the little chip on the back that had every conversation um but uh it was actually in response to her first point of critique uh which we actually tweeted about um that that was around criminal activity uh in bitcoin being facilitating criminal activity um our response to that was actually this is a very this is a positive for bitcoin if uh if yellen is still looking at criminal activity as the primary point of critique for uh currencies um what is interesting as well is uh the next month so basically the month of february where she she had basically criticized bitcoin for criminal activity in january and in february she's like you know this is a tool for speculation and it's inefficient um so she went from you know criminal activity to you know another recycled common critique of this is just purely as a means for speculation um so it actually gave us comfort um and in a lot of ways i expect uh you know the united states and these uh global hegemonies to one day come out and say uh bitcoin is either one going to be a global threat to our monetary sovereignty in which case we need to figure out a way to stop it or uh we need to figure out a way to complement it uh with our existing operations so whether that be allocating it as a portion to in their central bank reserves or or whatever the case is um and we're starting to see that in other emerging markets like nigeria outright banning bitcoin um and then senators coming out and saying you know this is basically making our own fiat currency worthless um you know that that's the sort of the tone that we expect or the narrative shift that we expect um so for yellen to come out uh and use you know fun or fear uncertainty and doubt um that has been recycled over the last decade now um means that yeah we're still early and they're not really paying attention to this i like that uh that argument and i love how you turned it around because really one what i love is when i talk to people about how phenomenal tesla is and how undervalued their energy business is for example uh and and i get people going what tesla i'll never drive a tesla i need a gas car i think to myself like still early that's a good thing i i don't know if you saw the elon's tweet uh like a few days ago but showing like a a horse carriage uh newspaper uh that basically said like it was basically saying are you really gonna drive uh automobiles uh and you're gonna have to do maintenance and change tires like how much more expensive is that going to be uh versus just you know riding a horse carriage um and so you know the analogy was okay well electric vehicles uh to to the internal combustion engine is is going through that same evolution and skepticism that is so brilliant i love that i want to talk to you about energy with uh bitcoin this is a big issue uh obviously currently the the energy usage is is it's high but it's been relatively flat like it seems like its usage has been going up but it's it's uh consumption has been relatively flat uh relative to that increase in usage so it looks like there's some kind of efficiency built into the system i don't understand that how how can they make it more efficient when it becomes harder to mine can can you speak to that a little bit or you get less when you mine yeah sure so um i'd say it's taking a step back and and sort of uh providing some sort of um explanation for the use of mining um so mining is basically um the mechanism by which you can eliminate that trusted third party or intermediary right where if you think of a traditional set centralized system like a paypal you have a single authority that is able to facilitate transactions and secure the network and add credibility to the institution for participants who are involved right if i get frauded on paypal i'll email paypal and let them know and they'll issue a charge back or they'll say yeah there's an error in your account and they will facilitate transactions from one paypal account to another um the the value proposition of bitcoin is that it eliminates that need for a trusted third party um and instead instead replaces it with um you know economic incentives um by which anyone can uh if they see an economic incentive to do so contribute to the network and contribute to the network means facilitating transactions and securing the network so miners have have a dual rule of basically bundling transactions in a block and verifying that those transactions are indeed legitimate um and uh in return for that uh are issued with uh newly mined bitcoin or newly issued bitcoin so in return for their services um they are the um they they they receive a compensation in the form of bitcoin now the energy consumption which many deem as inefficient is actually a fundamental feature um in adding credibility to bitcoin um the analogy that i like to give here is is with gold right uh gold uh is is valuable and has converged as a universal store of value not because it's shiny and it looks nice as a tooth replacement um it's because it had specific properties that deemed it suitable to uh preserve wealth over space and time in addition to being fungible and and something universally recognizable it was also something that was very hard to produce and still is there is a clear explicit proof of work that gold miners have to go through that adds to sort of the unforgeable nature of the asset right unlike the sort of u.s dollar which can be printed with like a stroke of a keyboard um gold you need to basically prove and create an explicit cost to uh to mining gold so in the same way it's bitcoin requires that prolific resource consumption and that poor computational scalability to unlock the security guarantees that make it this global uncensorable monetary system now when it comes to sort of the the the misconceptions that we're seeing today and i think the biggest one is that energy consumption does not necessarily equate to pollution or co2 emissions right um so there is a question of the energy mix that uh that miners are using to secure the network the mining industry specifically is a perfect competition and it is a ruthless it's ruthlessly competitive um in that they are exclusively profit maximizing entities and they are looking for the cheapest access to electricity um in order to mine their bitcoin to optimize their their operations and it so happens that uh renewables are converging as that cheapest access to electricity as well as stranded energy assets that otherwise would have been dumped um as being a mechanism to basically unlock stranded energy assets to mine bitcoin um so all that to say that the um energy source that is being used to mine bitcoin is a either would have already been wasted right so like basically in natural glass natural gas flares or peaker plants right during the off season uh where they're where it costs more to dump than to mine bitcoin or um as renewables so in in china you know most of them bitcoin mining is actually hydro um and so i i just think in general there just the reason why bitcoin's energy footprint is kind of their hands-on and eyes on the energy footprint is because it's just much easier to quantify than traditional banking systems but if you were to buy kind of the lights on at a jp morgan at every bank branch and the number of computers that had to to go on and and and and the amount of resources and that that that are required um to sustain a traditional legacy system um an apples to apples comparison would actually show that bitcoin is far more efficient i mean think about it like the federal reserve has like 2 000 economists at it you know that's 2 000 people with houses air conditioners and and computers and they're just they're just talking about printing money no i don't want to oversimplify their role okay i respect the fed a lot but uh okay so this is interesting because ordinarily when you hear oh well bitcoin's using renewable you think okay fine but they're taking away potential renewable energy that could be going to something else uh you know somebody else's use but what you're saying is because it's a perfect competition and we're constantly looking for ways to reduce our electricity costs it actually makes sense to produce more solar fields in vegas or hydro dams in china because that's going to give them a one percent com or you know even let's just say extreme here a one percent competitive advantage over the next dude mining and so it incentivizes them to build this infrastructure and really they're creating something that wouldn't have been there otherwise is that what you're saying yeah that that is exactly what i'm saying but in addition to that i'm also saying um you know you you and that's really interesting that you bring that up you're like well it could have been used for something else right right and what the market has told us is that there is a clear demand to use it for uh in order to back a non-state synthetic monetary commodity in in in a lot of like bitcoin bitcoiners views i i would say that there's like no more noble of a use of energy than to back this permissionless open monetary network that exists outside the purview of legacy systems and so ultimately yeah it is and it is a twist and it's like it's something that bitcoiners like to bring up but it's like it it it's really just a matter of opinion as to whether something like bitcoin should exist and if something like bitcoin should exist which clearly the market is telling us it should uh then then it just converges towards perfect competition i can i can promise you that if miners uh see that there is a no means to be profitable um by mining bitcoin uh with traditional fossil fuels then they're going to go to renewables or whatever the case is so um yeah that's the framing i maybe have i maybe took the most extreme stance but uh i i feel like it doesn't really uh doesn't really um you know get married to that stance i know i it's totally fine no i get that i want to talk about that though so non-state money personally uh i don't ever see the dollar going away you know i do think there will be a digital dollar i do think that the federal reserve will have the fed coin or the dollar coin or whatever they call it i do think the blockchain or just blockchain technology excuse me in general is is phenomenal and i do think that that'll probably get incorporated into our monetary system but i don't ever see them getting rid of something that they can use to print as a primary source of currency you know i could see the bit uh i could see bitcoin in general being treated like a gold but not as this sort of it's everything that we use how much i mean isn't it a risk factor that maybe people are pricing in that bitcoin is going to replace the dollar and when that doesn't happen bitcoin crashes uh yeah so that's a that's a good question um and and and that goes back to like basically what you define as success in bitcoin right i think that the massive spectrum of opportunity that bitcoin presents um you know on one hand you have you know the the early days of just okay this is just a weird internet magic money for just the nerds um and then i would say in between that you have um you know a digital gold right where it's a five to ten trillion dollar market cap as being sort of this internet native store of value doesn't necessarily compete with fiat currencies um but uh but it is it is something that is used as an alternative asset um like real estate or or just general commodities um and then and then i would say one step further is as a potential uh alternative to uh fiat currencies and in weaker regimes uh so you know we actually rise bitcoin's opportunity as a catalyst for currency demonetization in emerging markets yeah yeah so i i would say 10 15 years ago uh we had a a venezuelan version of meet kevin who was basically saying that the boulevard would probably never go away um and you know as we know that that that didn't turn out to be the case and so the argument is that yeah human humans uh we should we should basically remove the decision-making um uh when it comes to monetary issuance away from humans and into something that is open uh predictable and verifiable um you know do i think that bitcoin is going to replace the us dollar um no uh not maybe not in our our lifetime uh i don't think that's the case uh but uh do i think that it's that that bitcoin potentially replacing the us dollar is priced in at these levels absolutely not um you know if you look at bitcoin at a one trillion dollar market cap at the high i think now what what is it 800 900 billion um you look at sort of just uh gold as a 10 trillion dollar market cap if you look at the m2 based money outside of the top four currencies so if you think of yeah if you think outside of the yuan the yen the euro the dollar so you assume that those aren't going to be replaced but that there's there's a mechanism by which bitcoin captures the the some share of outside of those top four currencies that that m2 based money that's a 46 trillion dollar base money and if bitcoin captures about five percent of that that's a two trillion dollar opportunity in there alone um so there's a lot of room for bitcoin to grow before it becomes a threat uh to u.s monetary sovereignty but at its full potential it ends up basically being a black hole for fiat currency um and if you think about fiat currency i'll push back what you said a little bit and saying that it's really only a hundred year phenomena um you know if you just look at the us dollar it was once backed by gold that was about 50 years ago only um and so to think that you know in the next maybe century we're not going to see a mishap uh um and if you look at the evolution of global reserve currencies over time you know the frank was at one point the pound um so so you know and the sterling those end up basically um you know trending towards obsolescence um over the long part are you uh taking a peter schiffian approach here of of the dollar's gonna crash big time and you need to get out of the dollar asap uh not really one i'm not really a macro expert so i i i'm not i'm not gonna i'm not gonna make speculations on the strength of the dollar uh i i will say what's funny is peter schiff is a massive bitcoin skeptic which is very which i think is quite ironic and kind of funny um yeah but but uh i i i would say that the macro uh tailwinds that we've seen in the last um call it few years has really made a compelling case um for bitcoin um as a hedge against uh general currency devaluation um so you know it's i think starts with you know emerging markets it's very interesting to even see like correlations between yuan devaluation and inflows into bitcoin um it ends up and ends up towards you know a potential weakening of the dollar um and if that's the case uh taking that um sort of hedge against economic apocalypse by allocating into bitcoin i think is is a sound uh as a sound uh case you mentioned i mean this is this is very interesting because i kept thinking about bitcoin as as maybe being something that can be worth a dollar but we're not so worried about that we're worried about the zimbabwe the venezuela where basically what what happened here is you had this complete collapse of trust of of central banking authority in these countries or even government authority because many many central banks are linked they're not independent of their of their governments like they are here in the united states supposedly but we won't go down that rabbit hole uh so what you're saying is what if you have a bitcoin you don't have this risk of uh these these crises in maybe venezuela or zimbabwe because there's no way you can have hyperinflation because you're really pegtile uh you know supply and demand driven economy and you could actually stabilize emerging markets by using bitcoin outside of the big four as you mentioned that's exactly right um and there i think really interesting points that you bring up um that we can break down a little further um i'd say the first thing is uh yes bitcoin being uh a borderless um sort of asset and network right where it works in the exact same way it works anywhere around the world and it's in one that what the one that no one controls um i i'd say the second is in talking about the hyperinflation in the zimbabwe in venezuela really just brings up the broader point of how all of the monetary discretion that humans have is a slippery slope um i can tell you that zimbabwe never really considered that they were that their currency was going to be hyperinflated it was just the complete mismanagement of that um and so if you even think of like the argument of the recent injection uh of stimulus um where you know even you know the usd's base is exponentially increasing it's gone parabolic just this year um you know what's not to say we're not going to see even more unconventional monetary policies and you know what people like to call qe infinity right it's just going to we're just going to sort of inflate our money away and obviously that's that's definitely you know much more simplistic than than than reality but it's to say that like you know this is a new paradigm the economy is going physical to digital i i think that we're going to look back at this and believe that like fiat currencies in general was just such an absurd concept where we're going to tell ourselves really we i can't believe that we left the decision of monetary issuance in the hands of a few people like that's that's sort of the that's sort of the i think the framing and call it you know past our lifetimes um and and then finally uh sort of where how bitcoin can sort of evolve as this grassroot movement in emerging markets is what what we're starting to see where you know you have these parallel economies emerge um uh that end up demanding a more uh predictable asset uh than what their current uh regime offers um you know if you were to ask a venezuelan what they would love they would love the dollar if they could get the dollar they would love the dollar um but there are strict capital controls and they're you know very sort of difficult um avenues to access it um you know bitcoin perhaps provides a second alternative where businesses start to demand uh bitcoin instead of you know their fiat currency and it just becomes a spiraling effect from there um another reason why it's so compelling and i'll finish off by saying this in in what you alluded to is bitcoin represents more than the separation of money and state bitcoin represents the separation of property rights in state where wow the enforcement of ownership in bitcoin is not from a top-down local authority it is enforced by cryptography you have access to a private key you own bitcoin and no one but that private key is going to dictate whether or not you own bitcoin and so it goes back to bitcoin being this sort of borderless um neutral platform where it doesn't distinguish identity based on ip address or geography or email it is private keys um and uh it doesn't rely on a local authority to enforce the property rights or that ownership it has a completely independent property system um and so that's sort of why i think in emerging markets specifically uh we're going to start to see um a compelling case to just hold bitcoin especially because you can just do it on a hard drive unlike gold where you know it's you got to carry chunks of it if you want to own it yourself yeah unless you lose that in a landfill but uh topic for a different video that one with that big story what was like a quarter of a billion dollars or something feel bad for that person excuse me for a second so uh kathy uh she sees this potential for the federal reserve to have to adjust their interest rate policy much sooner because of this belief that potentially we could see inflation happening sooner which is one of the reasons kathy sees bitcoin as as a hedge what if she's wrong and what if the fed's right and what if what if there is no inflation you know we see these spikes inflation goes away and people are like well dang i was holding bitcoin for inflation to come it's not happening we're back to no inflation we're back in our deflationary you know spiral uh with thanks to technology and reduction of velocity of money we'll screw it let's dump bitcoin so i i would say bitcoin as an inflationary hedge is only one of the multitude of use cases for bitcoin um i think the very unique thing about bitcoin and its value accrual dynamics is that all use cases are positive some and additive so what i mean by that is if you're owning bitcoin for an inflationary hedge then that means that the bitcoin that you own cannot be owned for using bitcoin as a remittance mechanism or using bitcoin as uh protection against arbitrary asset seizure or using bitcoin as a catalyst for currency demonetization and emerging markets so there are all these um use cases um in which i think that the inflationary hedge use case even if we were not to see uh bitcoin uh the the u.s dollar um you know in inflate the way that you know maybe some are expecting um there's still there's still a compelling enough case in compelling enough demand drivers by which that that ends up being uh a small portion um of the bigger pie um again we're not really talking about bitcoin at a 20 trillion dollar market cap here you know what bitcoin is like a 900 billion dollar market cap and kathy likes it just feels big relative to what though it's like it's a big it's like a it's it's a large cap equity stock if that like to think that something as neutral and permissionless and as monumental as bitcoin is like half of apple like i i think that that's like you know it put things things into into perspective uh for sure um so yeah i i think that you know bitcoin has had a very nice run it really has and there are these insane cycles and some people say that they've never really seen these parabolic rises happen as frequently or as condensed as we've seen bitcoin but you know i think that it that this is a new paradigm for wealth transfer and the preservation of wealth um and you're not talking about like a new paradigm like a ray dalio uh the great d leveraging crash is coming no no yeah i'm talking like just a new monetary paradigm uh like you look at the context of monetary systems we started at barter and we went to gold and we went to fiat i think that bitcoin in crypto currencies uh seemed like sort of the next logical evolution in how we um and how we settle economically incredible why why not use staking instead of energy transfer or is that the direction we're going to yeah again that that goes back to there are no solutions there are only trade-offs uh so proof of stake is uh is an unproven security model relative to proof of work um in you know we've seen ethereum as uh kind of the the the the poster child of some of the difficulties in transitioning from proof of work to proof of stake um and how it becomes much more of a technical risk um and then it is sort of this hard base money asset that is predictable and reliable and does a few things right um so i think perhaps the future for alternative networks that might complement bitcoin um we could see a proof of stake um we could see a proof-of-stake-like alternative but for something that necessitates um high security guarantees proof-of-work in bitcoin um is unmatched why like what i mean like i mean it has ethereum had had issues or or like i mean if ethereum hasn't had issues i mean ethereum ethereum ethereum has tried to transition to proof of stake uh since 2017.
uh four years later it's still uh it's still reliant on proof of work um the issue um in proof of stake um you know there are a lot of uh there are a lot of unanswered questions um to basically um successfully transitioning from proof of work to proof of stake um in a lot of ways uh i'd say the simplest um explanation for why there are questions around proof of stake is because um of its perpetual motion machine like security guarantee what i mean by that is whereas proof of work has explicit costs that are independent of the network mechanics that are being used to secure the network proof of stake relies on kind of this internal snake eating its tail where it relies on the underlying assets themselves to secure the network but the security of that network is only a function of the value of those assets and so it's this sort of back and forth where to bootstrap that becomes very very difficult um in the incentive spiral exactly you effectively can yeah it's you can spiral or or it's basically so quote unquote secure where you have everyone staking it and the value so high that it becomes unusable as a store value or mechanism to transfer because most of it is being staked um and so there are definitely questions uh around proof of stake i'm definitely not the i would say an expert in the mechanics of proof of stake so i i don't want to you know talk beyond just um you know what what we've laid out there but uh but what i can say is that it it offers nowhere near the censorship resistant guarantees that a proof of work offers because there isn't that provable explicit cost right miners for instance uh improved work are spending billions of dollars up front to build out this network whereas uh proof of stake ends up perhaps even converging towards a plutocracy where you have just a few stakeholders buying up all of the liquidity of the network um and and and bonding it uh to secure the network uh but then it becomes a matter of just who has more money versus who's willing to take more risk and have skin in the game in explicit costs to secure that network so it's important if they call themselves the fed and then start manipulating the currency by being able to release stakes or not when you in when you incorporate on-chain governance into that aspect and that's part of why bitcoin is is again um so interesting is because the governance mechanism is just so dispersed that it's hard to centralize control but if you you can imagine a scenario where you have a network that also has a governance on-chain governance mechanism baked into the network where the largest holders are the ones dictating the future of that network and so to your point it basically ends up returning to status quo um where the the people who are able to buy it up are the ones who are controlling the network whereas with bitcoin it doesn't matter how much bitcoin that you hold um you are no you you're not going to change the way that the network works because your security is not bound to your holdings why can blockfi or some of these other companies voyage or whatever why can they pay me six percent interest just for holding bitcoin there is this is this bit connect all over again is this a ponzi what's going on here yeah that's a good question uh i i would say a few things that the first is there's a there's a mis a misperception between offering annualized rates and annual rates so like what's funny is like the six percent annualized it's at any given time but you're going to see massive fluctuations that might end up converging towards two or three percent over the year um the second thing is that you know there is huge custody risk um and people are taking massive risks by custodying it um in um you know a in in sort of a counter party and so i mean we and we've seen we've seen like hacks and leaks um and security leaks from users who end up trying to generate yields by going to these more esoteric products um with blockfi specifically um again i'm not i would say i'm not the perfect person to speak but i i've like followed zach prince who's their ceo and and they've done they've done tremendous things they're doing uh they found an inefficiency in the market um and i think because we're so early and crypto first companies aren't actually as integrated into the traditional financial system as what we might see you know in a few years there's still some significant arbitrage opportunities that users are capitalizing on i expect those yields to basically converge to kind of traditional savings yields on on checkings or savings accounts and and traditional banks but uh the risk it's just you know much much higher risk than like you know putting it on a jpmorgan you know two percent uh uh savings account or whatever it is now they they say that they take this uh that 95 of their crypto or the crypto you have with them is put onto like a gemini cold storage uh account or whatever wallet uh and that five percent is in a hot wallet which then they have insurance for is this just like marketing bs or or no there there's merit to that there there there's yeah most exchanges so you can think of that in the context of like uh block fi uh i'm sorry you can think of block find the context of like a traditional exchange right where most exchanges are also storing their um their bitcoin and cold wallets um and are projecting what sort of liquidity um uh on a daily basis would be required to be stored on hot um that um that would that would basically allow them to facilitate withdrawals if uh if users request it um but you can kind of see a slippery slope here where um if you saw a potential equivalent bank run on exchanges uh it would be very interesting to see whether or not they could meet that demand so imagine every single user on like block buy wants to suddenly withdraw all of their assets you know could could block fight potentially meet that meet that request um and so that's why in general you know users tend to um you know are are encouraged to um keep as much of it in self-custody as possible uh and then ultimately play around with you know generating yields on exchanges or service providers that allow for that um with a much smaller portion of total uh holdings got it got it that makes sense uh so another question that i have is let's see here is it just impossible basically to get into the business of mining because there's so much competition like it can can somebody just go on amazon and buy a you know a miner or whatever i don't know wherever you might buy it and actually be competitive no i definitely cannot go on amazon and buy a miner and be competitive and that goes to show and we've written research about this but the evolution of the mining industry which really started off as like a hobbyist activity where if you had asked me this question 10 years ago yeah you could mine bitcoin from the cpu drawn from desktops and then as soon as people start to see the evolution so we went from cpus to gpus to fpgas to now asics or application specific integrated circuits who um the hardware has a sole purpose of just mining bitcoin so mining has evolved from a hobbyist activity to um a professionalized industry uh where you have extremely large-scale data centers that are in like the tundra mining bitcoin in these plants that require you know specialized services for maintenance for operation uh you know long-term leasing and purchase power agreements um so yeah mining bitcoin is definitely an industry in and of itself and one that requires um extreme expertise where you know your typical enthusiast you know has no business uh being involved in got it okay i know you've got to go soon so i want to ask you one more question is there a future uh and i don't know if you can answer it is there a future of expanding your investments uh into other cryptos or are we sticking to the btc yeah i think um we we're certainly interested in other crypto assets um we're also interested in in figuring out ways to gain more efficient exposure um to the opportunity um and so um you know that's that's sort of part of my role is thinking about it um uh but i think in in general you know bitcoins the reserve asset of the crypto asset ecosystem uh for institutional investors um you know getting in on bitcoin is is is is likely the sufficient enough to gain exposure to the entire opportunity and i think ethereum specifically is a is it makes an extremely compelling case for being a compliment um and in general you know other assets that are being built on top of ethereum um as well make a compelling case uh and you know any asset that provides monetary assurance but that is unique enough in its ability to provide that monetary assurance than bitcoin is um you know we're not smart contracts oh sorry i was just gonna say will smart contracts at ethereum come to bitcoin um i don't think so as i don't think as as effectively as as ethereum has because again ethereum has made explicit trade-offs um where it is not nearly as secure decentralized but it is much more composable and you can have a lot of feature sets i think that we're going to see a bridge between bitcoin and ethereum um i think that there are certainly efforts uh to build smart contracts on bitcoin but ultimately i i believe ethereum will end up taking most of the share um of sort of smart contract applications 60 seconds on nft's and then we got to go logan paul raised three million dollars on a trading card he digitally created why like can he just make five more and then dilute the value of that one i mean like how about and i know you guys are logan paul logan paul gets it i think he's one you have to think of it in the context of he's a content creator he's on the cutting edge i don't know if you've been following his sort of pokemon rabbit hole uh in general you have to think of these as uh actually in a lot of ways philosophically aligned with bitcoin in that value is subjective people like what others can't have when you have a world of abundance especially in the digital world and you can have provable scarcity even if that scarcity is issued by a single individual like a logan paul you know people want the next big thing they want to feel like they are the status symbol it's like the same thing of like why are you gonna buy picasso can't picasso paint a ton of other paintings well it's like well no picasso has a life uh and he's now passed away and he's only had a finite number of paintings and people render his his art as being valuable but all of that is subjective um so that's more of a human psychology question than it is is logan paul crazy i think nfts um are are definitely uh there's there's definitely a case to be made we've definitely gotten overheated we're seeing a lot of exuberance here um but i expect uh digital watermarks uh that are provably scarce uh to be uh an up-and-coming use case in the next uh five to ten years amazing absolutely incredible interviews super insightful i know you've gotta run how do people get in touch with arc uh and give uh give a shout out to the company sure you can just go to arc-invest.com we have a website we publish blogs uh and then we obviously have our twitter archinvest and you can follow all the analysts as well on twitter absolutely amazing thank you so very much for your time uh folks if you've enjoyed this consider subscribing and sharing thank you so very much again i look forward to having a conversation again in the future thanks kevin great for being here you
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