Background Information
This episode's guest is from 10T Holdings, an investment company focused on the digital asset field, founded by Dan Tapiero. The company mainly invests in mature companies related to cryptocurrency and blockchain technology, rather than start-ups.
Currently, 10T Holdings has a total asset management scale of $1.4 billion. And Dan is optimistic about the crypto market.
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Summary of key points
In this podcast, Dan Tapiero takes a deep dive into the potential of cryptocurrencies and their possible future market cap. Explore topics such as real world assets (RWA), corporate balance sheets, equity investors, memes, and bold predictions for Bitcoin and the broader crypto market.
The cryptocurrency market and the tokenization of real-world assets are attracting more and more attention. Although the total market value has more than halved from its peak, it can also be seen as a huge investment opportunity.
The host and guests agreed that with the development of the market and changes in the legal environment, cryptocurrencies are expected to achieve a market value growth of tens of trillions of dollars in the future. In the next 18 to 24 months, the market value of Bitcoin may reach 3 trillion US dollars.
Regarding RWA (real world assets) and tokenization, Dan believes that the tokenization of real world assets may become an important field in the next few years. Large asset management companies such as Blackstone have shown a strong interest in these emerging markets, and if they allocate part of their assets to cryptocurrencies, it will have a huge impact on the market.
The craziest week in crypto
Dan and Scott discuss some of the biggest stories of the moment, including the presidential debates, the SEC’s multiple setbacks in the Supreme Court, and the charges against consensus.
Scott mentioned that what happened this week was like "ten years happening in one week," covering everything from politics to regulation.
Dan said that despite the decline in the prices of Bitcoin and Ethereum, the overall market conditions remain good. The cryptocurrency market has performed strongly in the past eight months.
Dan mentioned that the 24 companies they invested in performed well and the entire ecosystem was developing steadily.
Dan and Scott discuss recent positive news surrounding ETFs, including the Solana ETF filing from VanEck and 21Shares.
Dan believes that the news has injected positive momentum into the market and further promoted the development of the cryptocurrency market.
The two discussed the U.S. presidential election debates, which Scott found to be chaotic and embarrassing.
Dan expressed regret over some of the performances during the debate, saying the candidates failed to express their views clearly.
They also discussed the potential impact of a future president on the cryptocurrency industry, arguing that at least a “do no harm” policy would be a positive for the industry.
Things are getting better
Dan discussed the normal correction process of the market and mentioned that Larry Fink’s shift from previously negative to supportive of cryptocurrencies was one of the important factors in market price fluctuations.
Dan noted that the market is absorbing those who bought at low prices and are looking to profit, while also clearing out those who bought at high prices with leverage.
Dan predicts that the market will rise again in the fourth quarter and looks forward to more positive policies and innovations, such as the launch of the Solana ETF and the continued development of DeFi (decentralized finance).
Scott and Dan discuss the current market's greed and fear index and believe that the market needs to go through a period of downturn to clean out the speculators.
Dan believes that the market is now in a normal bull market correction phase after experiencing adjustments throughout the past year.
Meme
Scott mentioned the recent launch of 500,000 Memes on Solana.
Dan believes that young people are entertaining themselves in this way, which is a new way of socializing and entertainment. Although he does not participate in it himself, he understands the fun and potential economic benefits of this behavior.
Scott pointed out that most people will probably end up losing money, just like going to a casino. If people view it as entertainment and are aware of the risks, it is acceptable, but the problem is that many young people may mistakenly think it is the only way to get rich.
Dan compares the meme craze to people lining up to buy lottery tickets in the past, saying it is part of human nature, but more interesting in digital form.
Dan believes that memes and other similar phenomena are actually assigning value to people's attention and time in a way that was not possible before.
Scott mentioned that the core value of cryptocurrency lies in decentralization and empowering the people, so it is difficult to criticize those who use these freedoms to do what they want.
Dan hopes that there will be fewer bad actors in the market and believes that the collapse of FTX has cleaned up some of the bad guys. Although there are some speculators in the market, Dan believes that there is huge value and real innovation in the cryptocurrency market.
Dan's portfolio companies are outperforming
Scott pointed out that Dan’s investment strategy focuses on long-term investment and understanding future developments, rather than short-term meme hype.
Dan focuses on companies that demonstrate real value and innovation.
Scott mentioned that many projects tried to launch in the bull market at the beginning of the year, but the price of most projects ended up being lower than the issue price. The current market sentiment has cooled and valuations have fallen, but Dan focuses on investment companies rather than these short-term projects.
Dan mentioned that some of the companies in their portfolio are approaching or reaching 2021 revenue levels in Q1 2024. Some companies like Derebit dominate the Bitcoin and Ethereum options markets and are performing very well.
Dan mentioned Derebit’s market share and profitability, and that Latern has become profitable after the FTX and 3AC crises. Many companies streamlined operations during the bear market and are now coming out of it with higher profitability.
Dan noted that their top companies have improved profitability during the bear market by streamlining operations. For example, Figure and Quick Node have performed very well, with Figment’s assets growing fivefold from Q4 to Q1.
Scott believes that many small projects fail due to a lack of experienced business managers, whereas Dan’s portfolio companies are managed by experienced professionals, making them more stable amid market fluctuations.
Dan admits that not all portfolio company CEOs are top notch, but they have some very experienced leaders. Dan has board representation at 12 of the 24 companies, enabling him to observe and compare the performance of different companies holistically.
Dan mentioned that Ledger and Kraken performed well, and Gemini also performed strongly after solving the Earn problem. They also performed well in innovation, such as early investment in the NFT space.
Although the NFT market has not yet fully recovered, Dan believes this may be an opportunity. They have significant investments in Anamoka, particularly in the blockchain gaming space, which has shown significant growth even though the market is not as strong as it was at its peak.
Scott praised Anamoka’s leader, calling him one of the smartest people in the crypto space.
Dan also pointed out that the leader has a deep understanding and vision for the democratization of digital value and ownership. Some industry leaders have performed well in promoting the democratization of digital value and ownership. They not only focus on technological innovation, but also on how to motivate and empower users through token economic models.
Investing in infrastructure
Scott likens Dan’s investment strategy to the “picks and shovels” of the gold rush, investing in infrastructure rather than directly engaging in the risky pursuit of gold.
Dan explained that he selected businesses with annual revenues between $30 million and $50 million to build a portfolio that could withstand sharp market swings. This strategy ensured that the fund would experience little to no depreciation in 2022 and 2023.
Dan stressed that the portfolio is designed to outperform in down markets, even if that means underperforming in up markets. He noted that most investors panic when the market is down, but his fund prevents that by having a 10-year lockup period.
Dan shared what he has learned about risk management and investor expectations from his more than 20 years of experience in money management. He emphasized that successful long-term investing requires a systematic valuation approach and a good track record, rather than relying on one-time high-return bets.
Dan said his investment approach is to prepare for every upcoming bear market. His goal is to build a portfolio that can rise 5 to 10 times, rather than pursuing a 100-fold or 1,000-fold return.
Dan mentioned that their portfolio companies like Kraken have performed well during market volatility, especially during the meme craze. Quick Node has also benefited from the growth of the Solana ecosystem.
Scott praised Dan’s portfolio, calling it a collection of “crazy winners,” noting that some of them, like Certic and Animoka, had recently raised large rounds.
Equity investors will buy into cryptocurrency companies
Dan mentioned that their fund was launched in late 2020 and early 2021, and although there are no exit cases yet, he expects some IPO or SPAC transactions to occur in the next 18 months.
Dan believes that Coinbase will not be the only large-scale public crypto company in the next five years. He predicts that more crypto companies will enter the public market.
Dan pointed out that there are a lot of stock investors who are interested in the crypto space, but for various reasons, they may not have opened a Coinbase, Kraken or Gemini account. They are eager to own shares of companies growing in this space.
Dan believes that when the price of Bitcoin breaks through $100,000, market interest will increase. Despite its high volatility, Bitcoin is the core asset of the entire crypto space.
Dan and Scott discussed the potential of TON (Telegram Open Network), and Dan was very interested in the product and thought it could have a lot of room for growth in the future.
Dan mentioned that new business models and protocols emerge in every market cycle, but in a bear market, these new things may be eliminated.
Scott believes that Layer 1 protocols are the only place where venture capitalists can invest at scale. He suggests that investors can capture the growth of the market by investing in these major protocols rather than chasing high-risk individual projects.
Dan emphasized that one of the beauty of the crypto market is that anyone can participate by having a wallet, and once involved, people are usually deeply attracted.
Scott pointed out that although some people were wiped out in bankruptcy events, most people rarely look back once they enter the crypto market. Those who believe that Bitcoin is the fastest asset usually hold on firmly.
10T Fund
Regarding the origin of the name of the $10 Trillion Fund, Dan explained that when he began to conceive of this fund in mid-2019, he estimated that the total value of the entire cryptocurrency market (including all cryptocurrencies and equity in related companies) was approximately US$300 billion, and predicted that this market would grow 30 times to US$10 trillion.
Dan noted that the total value of the crypto market has grown 10 times to $3.5 trillion since 2019. He believes that a valuation of $10 trillion may be too conservative.
Dan believes that if all real-world assets (RWA) were tokenized and put on the blockchain, the total market value could reach hundreds of trillions of dollars. However, he also admitted that this process might take longer than expected.
Dan mentioned that many large cross-border growth funds had planned to enter the crypto market, but due to events such as FTX, they temporarily withdrew. This has created more opportunities for 10T Fund.
Dan pointed out that although large investors have temporarily withdrawn, this has provided more opportunities for ordinary investors. He believes that the market adoption process is slower than expected.
Dan suggested that investors’ portfolios should include Bitcoin, Ethereum, some venture capital funds, and growth funds. He emphasized that 10T Fund is the only fund currently focused on growth.
Dan reviewed the historical price trends of Bitcoin and predicted that Bitcoin may increase by another 3 times from its current price in the future.
Scott and Dan discussed the cyclical fluctuations of the market and believed that although the market will experience fluctuations, it will mature over time. Scott believes that it will take a long time to achieve a trillion-dollar market size.
Stablecoins
Scott mentioned that Circle CEO Jeremy Allaire predicts that stablecoins will account for 10% of the total money supply in the next decade. Currently, the M2 money supply is about $82 trillion, which means that the market value of stablecoins could reach $8 trillion.
Dan agrees with this prediction, noting that Tether has already proven its business model is successful. Tether’s revenue and profit per employee are probably the highest in history.
Scott mentioned that Tethe r was able to benefit due to high interest rates and compared it to Michael Saylor’s investment strategy.
Scott believes that Michael Saylor may one day be viewed as our generation’s Warren Buffett because he employs a similar long-term investing strategy.
Dan noted that while Michael Saylor’s investment strategy is similar to the big-bet strategies of old-school macroeconomists, these macroeconomists do not focus on and invest in cryptocurrencies like Saylor does.
Scott believes that Saylor may be able to understand and be willing to invest a lot of money in the cryptocurrency field more quickly because of his technical background.
Bitcoin on the balance sheet
Scott mentioned that after Michael Saylor invested in Bitcoin in 2020, MicroStrategy held a conference that attracted 2,000 CFOs to learn how to put Bitcoin on the balance sheet. Although many companies did not take immediate action due to accounting standards at the time, accounting standards have now changed, and in theory companies can put Bitcoin on the balance sheet without impairment.
Dan said he never thought the company would include Bitcoin in its balance sheet in large quantities. He believes that investors who truly understand value and currency are the key drivers, and ETFs (Exchange Traded Funds) have proven this. Companies prefer to choose lower-risk investment methods rather than including Bitcoin as part of their balance sheet.
Scott and Dan discussed the current 5% interest rate environment, which makes companies prefer low-risk treasury investments over Bitcoin. Although a 5% return is considered low in the cryptocurrency space, it is attractive enough in traditional investments.
Dan pointed out that if the unemployment rate rises to 4.5%, the Federal Reserve may start cutting interest rates, which will have a significant impact on the market.
Scott and Dan discuss slowing economic data in the U.S., Europe, and China, and the deflationary impact of a strong dollar. They argue that despite rising prices for some commodities, overall inflation is likely to continue to decline.
Dan mentioned that despite rising prices for some commodities, prices for products related to computing technology continued to fall, showing the deflationary effect of technology.
Scott and Dan discussed the difficulty of macroeconomic forecasting, especially timing. They believed that the stability of interest rates could provide opportunities for future market growth.
Dan speculates that if the Federal Reserve cuts interest rates from 5% to 3%, this could provide a significant boost to the price of Bitcoin, potentially even pushing its price above $100,000.
market prediction
Scott mentioned that without the Bitcoin ETF, the market would have likely fluctuated between $35,000 and $45,000. The launch of the ETF accelerated the growth of Bitcoin, but did not boost other cryptocurrencies in the same way. Investors buy Bitcoin through the ETF, but are unable to transfer funds to other cryptocurrencies.
Dan believes that the inflow of funds into ETFs is real and sustainable. The launch of ETFs allows a large number of asset management companies to easily purchase Bitcoin, which will greatly accelerate the adoption of Bitcoin.
Scott and Dan discussed market volatility and believed that even if the price of Bitcoin drops, there will still be investors buying at different price points. In addition, as the price of Bitcoin rises, more investors will flock to the market.
Scott and Dan discussed the potential of an Ethereum ETF, believing that the launch of an Ethereum ETF could boost the development of decentralized finance (DeFi).
Scott and Dan believe that although Bitcoin and Ethereum are core assets, other cryptocurrencies are more like venture capital projects. Many cryptocurrencies with higher market capitalizations may have no actual value and are merely speculative investments.
Scott and Dan discussed the differences between Bitcoin and other cryptocurrencies, arguing that Bitcoin is a unique asset class while other cryptocurrencies are more like speculative venture investments.
Dan pointed out that although some cryptocurrencies have a high market capitalization, they may not have actual value and there is still a bubble in the market.
The next big thing
Scott mentioned that people always ask him which token will be hot in the next cycle. He believes that it is likely to be a new token that does not exist yet, rather than existing tokens such as XRP or EOS. He pointed out that looking back at the top ten tokens in 2012 or 2017, many are no longer hot. New hot tokens may fall 99% in the next bear market, but they will attract great attention in the bull market.
Dan said he uses a specific investment strategy that appeals to a certain group of people, including himself.
Scott added that he has no problem with the various approaches others are taking in this space, whether it's to capture value, contribute, or build this future world. He believes that we are all moving towards this future, it's just that some are moving faster than others.
RWA and large investment funds
Scott mentioned that excluding Bitcoin and Ethereum, the total market capitalization is about $550 billion to $600 billion, and this figure reached $1.1 or $1.2 trillion at its peak. Although the current market capitalization has been reduced by more than half, this can also be seen as a huge opportunity, especially if retail funds enter the market.
Dan believes that within the next 18 to 24 months, Bitcoin could reach a market cap of $3 trillion, which would attract global attention, including from large investment firms like Blackstone. They believe that reaching a total market cap of $10 trillion (including stocks, etc.) is possible, but it would require some market drivers, such as Elon Musk talking about Doge on Saturday Night Live.
Even just inflows into Bitcoin ETFs could push prices up significantly because there isn't that much supply on the market. As prices increase, more supply will become available, but overall supply remains limited.
Large asset management companies such as Blackstone will be very interested in the $10 trillion market. Currently, there are many companies in the United States that manage $1 trillion in assets. If they allocate 1% to 3% of their assets to cryptocurrencies, it will have a huge impact on the market.
Scott and Dan discussed the tokenization of real world assets (RWAs) as something that would be attractive to asset managers because they deal with transactions of value every day and pay middlemen. The idea of trading directly and quickly at scale makes sense to them.
Asset managers love liquidity, and many assets like real estate are illiquid. If these assets could achieve instant liquidity through blockchain, it would be very attractive. While this won’t happen immediately, it is possible in the future.
Scott believes that while tokenization of RWAs is not a major trend yet, it could become a significant area within the next four years.
