Transcripts

Chattin’ Crypto with Anthony Pompliano aka “Pomp” – Transcript

This is a transcript of the Podcast – Chattin’ Crypto with Anthony Pompliano aka “Pomp” – You can listen the audio here

N: What is going on everybody, what is going on. Today I am really excited for the new episode of  Evolvement the podcast where we talk about Bitcoin, cryptocurrency and the future of our financial system.  And I’m excited because I’ve got the man, Anthony Pompliano. AKA Pomp.

0:38 | 30:07

N: Pomp how you doing my man?

A: Doing well thanks for having me

N: Glad to have you on you know.  My last guest, or two guests ago was actually Mark Yusko your business partner. And dude is super, super knowledgeable. We had a really, really good conversation and man your like an icon in the crypto space you know. People really look up to you, you bring not only really high quality information but really, really positive vibes in the, specifically in crypto twitter realm and ah man I am appreciative to have you on here.

A: Alright I am ah shilling alongside everybody else.

N: Nice Man nice. So I asked Mark the same exact question when we started off, um and we will start the same way.  

1:26 | 30:07

N: Why Bitcoin? Like, for someone that doesn’t know what Bitcoin is or maybe they have a very little bit of information around it, like why Bitcoin, why is it relevant? Why is it important, why does it potentially…. Ahh game changing for the financial industry and the state of the economy that we are in right now?

A: Yeah I think that there’s a couple of different things right, one is quantitative argument around um its sound money right which is incredibly powerful I think there is a quantitative argument around um it is a non It is a Correlated asset with an asymmetrical turn profile so it should by including it in a portfolio decrease the risk and increase the performance and I think that there is this you know kind of what I call the Psychological argument of the opportunity cost so people under the age of 35-40 years old don’t trust financial institutions and Federal reserve, central banking etc right. Like they’re literally seen these people print money at will, use inflation in very aggressive ways that frankly is the greatest creator of Income inequality in the world. And I think that there’s a loss of trust and so depending on who you are and what situation you’re in what your goals are, one of those three arguments is likely to resonate and I think that we seeing more and more people flock to this decentralized digital currency.

N: Agreed man, agreed. I mean one of the things that really clicked for me the other day, I’ve just been studying and learning as much as possible to be honest with you and one of the things that really clicked for me the other day is currency is an actually kind of a form of trust, it is a form of trust. I have to trust A, the person that I’m exchanging the currency with I have to B, trust the product that they are delivering me or the service they are delivering me for that Fiat for that currency and C, I have to trust the person that’s printing the currency and I think you’ll really hit it on the head when you said people under the 35-40 are losing if not they have already lost trust in the Federal Reserve and the whole banking system.  It’s a pretty big mess.

A: For sure, I mean look –  it’s a thing where folks realize that there’s nothing backing the US dollar right it is just the idea that you and I are going to exchange this piece of paper and when we make that exchange you and I both believe that it has value and therefore we trust it as a medium of exchange. Now, as we get more and more transparency around the issues with that piece of paper I think that there is sentiment shift or trust shifting to a decentralized digital currency. It’s not going to happen overnight it’s going to take years for this to occur but you know in the last 10 years we’ve seen a huge shift and I think we are seeing more and more every day and so that’s the exciting part to me.

N: Super excited dude and full agreeance there.  

4:41 | 30:07

N: How did you get started man, what was the beginning of crypto for you? did you happen to stumble on it one day and immediately fall in love?  Were you a big sceptic when you first started what was the start for you?

A: 2014 I was working at Facebook and it was the first time I ever heard of it, didn’t really do anything about it but it was interesting I moved along. 2016 I started Googling cryptocurrency mining facilities and really found that part to be you know, the idea of taking computers, renting it to the network and getting paid for that was what peaked my interest and from there kinda got deeper and deeper into what was happening and he we are today

5:32 | 30:07

N: Nice, nice.  And how did Morgan Creek capital start? how did you meet your team and how did that whole process happen?

A: Yep my partner Jason Williams and I had a venture fund called Full Tilt Capital and earlier this year Morgan Creek acquired the management company of Full Tilt, really with the idea that we could take our kind of focus on direct investing and partner up with their institutional quality, you know back office sales and marketing, relationships etc. And together we could go build a business, something in the cryptocurrency industry and that’s what we’re doing

N: Nice man nice, I mean you guys are absolutely killing it. I see you I see Mark I see both you guys on CNBC and other news networks constantly being huge advocates of crypto of Bitcoin so thanks for really stepping up and leading the way with that.

A: Yeah look we’ve got a third partner Jason Williams who is probably the most intriguing out of all of us so it’ll be dangerous if we start getting him on TV too.

N: That’s awesome, that’s awesome.

6:44 | 30:07

N: One of the big arguments right now in the cryptocurrency space specifically with bitcoin is what is it’s value you know, and right now the community’s kind of split. There’s a large portion of the community that believes, and these are more the older guys – They really believe it’s going to be used as a currency.  And then there’s the kind of the newer people, I don’t want to say newer but there’s the people who have come into the space who already have a lot of experience in the financial world and they look at Bitcoin and they say No’ this is a store of value this is something like a digital gold. Do you have a specific stance on that or an opinion?

A: No, I think that there’s two buckets right. It’s either a ‘medium of exchange’ or a ‘store of value’ It can actually be both or it could be one or the other in my perspective, it doesn’t really matter right.  The beauty of Bitcoin is it is a fixed supply asset and we give a fixed supply asset supply and demand. Economics tells us if demand increases the price will increase in value and so that leads us to this kind of store of value argument.

Then obviously medium of exchange, if I can take something and transfer it to you and you accept it and I agree with you that it has value, then it becomes a medium of exchange. The part that, you know to me I think is less talked about, (Someone) tweeted about it the other day, where he said  ‘Look at 2003 when the US invaded Iraq, we destroyed their central bank as part of the invasion so we literally took away their ability to print more money. When we did that the Iraqi currency exploded in value right. It happened almost overnight and the reason is that people all of a sudden knew that it was a fixed supply asset there was no ability to devalue the currency by printing more. So I think that Bitcoin specifically it has this element of it is a deflationary asset there will only be 21 million ever created, the other part of this though is it has this disinflationary supply schedule so there is still more that is distributed every day but that goes down every four years with the halving and then at some point all of the Bitcoin is distributed and so I think that it’s almost like slowly a people are realizing even though there’s is disinflationary supply schedule, this is a fixed supply asset and anytime you have a fixed supply asset and that demand increases the price is going to go up and so to me that is the key understanding you have to have with bitcoin in order to realize that it is worth putting some of your wealth into this asset.

N: I love it, I love it.

9:55 | 30:07

N: What’s your opinion on what’s going to happen when there are no more Bitcoins to mine you know?  I think that’s a huge discussion people are obviously, ahh a lot of people like miners specifically (for people that don’t know one of their main incentives is  A, to mine more Bitcoin and receive more Bitcoin as reward) When that is gone do you think they’re going to keep up the same mining operations as they would just for the fees and things like that or is that not an issue you see?

A: I don’t think that’s going to be a huge issue the way the system is designed the ability to support transactions etc will kind of leave miners is in a perfectly fine position, you know mining’s been a great business to date and will continue to be a great business I am less worried about that than others

N: Cool I like it. I mean one of the big things you speak about whenever I hear you speak whether it’s on Twitter or on TV is fundamentals, you know Fundamentals of Bitcoin a key phrase you always use is ‘the fundamentals have not changed’ we may have a different price than we did the last year and last December but the fact is the fundamentals haven’t changed in fact they’re most likely even improved, progress is still happening technology is evolving.

11:34 | 30:07

N: What in your opinion is the most important fundamental or are the most important fundamentals for Bitcoin and for this whole industry?.

A: Yeah this is a really, really important point because everyone gets distracted by price right. Everyone is looking and saying ‘the price goes up, the price goes down what’s going to happen with the price?’. The amount of hashrate, so the security of the Bitcoin network has 4X in the last year. The number of wallets that are active right, the number of wallets that have been created in the last two years there have been 20 million wallets created, that’s is twice as many as the 10 million wallets that were created in the first 8 years. So the growth rate of the wallet is increasing, the hashrate has increased 4X in a year and then the number of transactions right, so the number of transactions actually hit an all-time high in December of 2017, it fell with the price until March 2018 and since March 2018 it’s been slowly increasing throughout the bear market. So there are actually more transactions in December 2018, then let’s say March 2018 and then the last part that just blows my mind is estimates now are showing that 400 Billion dollars have been transacted via Bitcoin in 2018. That’s huge traded volume, this is 400 Billion dollars of transactions on chain. Now to give you kind of a comparison of that, MasterCard does 11 billion dollars a day and so Bitcoin is about one-tenth of the annual volume of MasterCard. Now some people look at that and say that’s still small. I look at that and say ‘Oh my god in 10 years we went from not existing to already having 10% of the size of Mastercard and it’s growing faster, it’s actually accelerating. Does that mean in three years 5 years it will eclipse Mastercard? I don’t know but it’s likely and so I think that’s when I talk about the fundamentals it’s all of these underlying data points, the health of the network right, the lightning network going from 0 to 19,000 lightning channels right. All of that stuff is incredibly important and it’s all the work being done today that is going to be baked into the price two or three years from now. So people really need to be patient and focus on those underlying metrics and not worry about what is the price is doing today.

N: I love it, I love it and I think one of the big things is as well, I 100% agree with you, I think price is one of the lesser relevant things in the conversation of crypto and especially Bitcoin, it is where pretty much almost all of our user bases come you know.  

Unless we have those Bitcoin enthusiasts and ‘take down the government’ enthusiasts. Like the people who pretty much helped to start with mining and Bitcoin and getting the Bitcoin network off the ground, the majority of retail investors have come in over the last two years and they have come in because of price you know.

14:58 | 30:07

N: So I guess my question for you is – What’s the mentality these people should have if they want to come into Bitcoin? you know cause there’s a lot of people who’ve come in and bought over $10,000 some at $15,000 some sadly at $20,000 and they’re probably pretty frustrated that we’re sitting a little below $4000 right now.  Should they still be believers should they still hold on to that $10,000, $15,000 Bitcoin or should they just either exit or average down what’s your opinion on all of that?

A: Yeah you know, look I am probably less in the bucket of giving direct advice on buying and selling etcetera and more so in the mindset of look, If you believe the Bitcoin is going to be worth more in the future than it is today – probably an attractive opportunity right. With that being said it’s all about the size of the investment in your portfolio so you know, today I was giving an interview on CNBC and they asked me about kinda Bitcoin vs public equities.  And in that debate people forget that look, Bitcoin is likely to be a small percentage of most people’s portfolio right. It is a speculative investment for many people so they are going to size it appropriately you know, kind of 1/2 a percent 2 maybe 5, maximum 10% of their portfolio. Public equities is going to be 40, 50, 60% right and so in that world it’s just understood this is still risky. Bitcoin can go to zero right, I don’t think that is likely so I think if the price is going to be higher in the future and we believe that now is probably an attractive time to invest.

N: I dig it, I dig it.  I mean we are in a very speculative industry and we have been seeing the effects of that over the last couple of years, but specifically over the last year with the booming of ICO’s and things like that.  I know that you’re bullish on the idea of tokenization, I know that you have publicly said that you are not investing in any ICO’s in the past, and, I mean I just want to talk to you about your opinion on all of this because you know.

We’ll get into STO’s in a minute, but specifically with ICO’s – with seeing all of these ideas to tokenize different models and make them into utility tokens essentially fail. Essentially take a good stab at an attempt but most of these companies are actually seeming to not be able to manage their money you know we are almost 12 months into a bear market and things aren’t looking super good for these things

17:47 | 30:07

N: are you bullish on utility tokens at all? do you think they have any space in the industry or in the future of the industry, or is it just too early for ICO’s and is it a good model to even raise money?

A: Since day one we’ve come out and said and that we are not going to invest in ICO’s. We think that they are great opportunities for entrepreneurs, they can do all kinds of interesting creative things there. We don’t feel like it’s a great Investment opportunity for us as investors. There’s a lot of concerns around governance, recourse value all of those things and so for us it just doesn’t make sense. I also think that we got a lot of concerns around them being unregistered Securities. The beauty of 2018 when I think back on it it was the year of vindication right. That was a call that I think a lot of people disagreed with and it was quite unpopular but now is proving to be have been pretty smart so I think that’s great, now what were believed for a long time and still believe today is that every stock-bond currency and commodity will get digitized or tokenized and so what it does it takes this kind of ICO mania if you will, and it kind of professionalize it. It says look ok maybe we’re not going to sell these digital assets that don’t have intrinsic value to the company or network, instead we’re actually going to sell a stock. You know what, let’s create some recourse debt and actually sell a Bond in a similar format. That’s the kind of stuff we can get really excited about because it’s the intersection of the traditional financial markets with this new technology on a global basis and really that’s the beauty here we talk a lot about. I don’t care about replacing the legacy financial system I don’t want to burn Wall Street down, instead what I think is really important is this idea of building an alternate financial system, a second option right. But when you build a second option you take the best things from the first option, and so option 1 The Legacy system and the new system are actually going to have a lot of overlap right. There’s still going to be elements of the old world and the new world it’s just that we’re making improvements, we’re evolving it and I think that’s really shown best in this idea of comparing ICO to you know the tokenized or digitalized Securities.

N: Awesome awesome. So you think obviously security tokens and security token offerings- it’s going to be a big market.   I sat down with I mean you’re probably pretty familiar with Polymath I sat down with their vice president of business development and it’s really interesting man, I think it’s really interesting, I’m not sure if it really fits for a lot of retail investors I think only in time will really be able to tell but I do think that it’s,or at least the current retail investors  I should say, but I really do think it has a spot in the space I think there’s something that’s going to be very important about it and and I know you’re really bullish on the tokenization of Securities and other assets

A: Yeah it definitely feels to me like the tokenization of assets is going to be where most of the value occurs. Every stock, Bond, currency, commodity getting tokenized. Were talking about hundreds of trillions of dollars of assets right and so I think if I remember correctly it’s like just real estate alone is like 200 trillion dollars globally that’s the world where there’s big dollars at play at a global scale and so if blockchain technology  Digital digitization or tokenization can occur in those assets that to me just feels like it’s such a big opportunity that it would be dumb not to be excited and look in there

N: I love it, I love it. So what day is it today?, it is December 26th and we are deep in a bear market at the moment you know we’re a little bit over a year now into this bear cycle. Personally I think it’s a good thing you know, we’ve been clearing out a lot of spam, clearing out a lot of the money grab projects from the space, I think people are more getting a lot more clarity on what really happened at the end of last year – beginning of this year in terms of price movement in terms of new players entering the space and things like that.

22:50 | 30:07

What are your thoughts on this bear market, do you think it’s a good thing do you think it’s a bad thing any predictions on when it’s going to end any thoughts on that?

A: I would love if the bear market continued and that might be unpopular, but I think that 1- low prices allow people with deep conviction to accumulate more and more which is obviously a good thing. 2 is, there are a lot of benefits to a bear market when the tourists are driven out. And it really allows the entrepreneurs to focus on building sustainable value, where all of the noise goes away, people really say hey! do I want to build here do I really believe this is going to be sustainable, where can I build something that will last. And I think that we seen that today, the longer the bear market persists the more we will see that. And to me that that’s the beauty of this thing you know, let it kind of ride out into Q2 Q3 of 2019 let’s keep building stuff that will drive value and everything else will take care of itself

N: I’m with your man, I’m with you, I feel you. I really think that the next thing that we’re going to see is hopefully some actual physical use cases for these things, you know I think we’re going to be seeing a lot more progress with development and we’re going to see it over the next six to months 8 months and  I’m with you man. I’m not super worried about price it’s getting the opportunity to set up some structures with my business and keep building so I like it!

A: That’s the important part.

25:08 | 30:07

N: Agreed, agreed. So the big topic recently is the SEC, and they’ve been stepping up their enforcement in the industry you know they came in they shut down EtherDelta the decentralized exchange. They’ve been fining influences and finding influences like Mayweather and DJ Khaled. They’ve been coming after a few of these ICO’s that they’ve been labeling as not as utility tokens but rather as illegal Securities and it seems like it’s only the beginning. What’s your opinion on this, is it a good thing do you think that they have the best interest in mind for the crypto space because there’s a lot of people that are really hesitant about that. Yeah what’s your whole thoughts on this?

A: Yeah look they’ve done a great job right, they really have in terms of they continue to refrain from any heavy-handed regulation, they continue to try to learn and understand and I think that while it may happen a little slower than everyone would like, there is going to be a positive outcome and will look back and will say you know what they actually ended up in a place that we all like and we think it is really important

N: I agree, I love it, I love it and yeah really just one more question for you man.

26:09 | 30:07

N: This space is not only very exciting but also stressful there’s a lot of fear involved, there’s a lot of different types of emotion. How do you manage your emotions in this mess? you’re one of the most public people, one of the most public leaders of the cryptocurrency, Bitcoin movement and I’m just wondering how you deal with all of that?

A: The key to all of this is just doing your homework and so, we’ve done an incredible amount of work we’ve built a thesis that we’ve got deep conviction in and when people agree with us that’s great, when they disagree with us we’re unfazed. And I joked to someone the other day I said I really do feel like we know a secret that so many other people don’t know and that feeling is one that tends to make me think, if we act as we are. We either will end up with one or two scenarios we will either be legends or will be idiots right. One or the other bucket there’s no middle road and that’s the trade-off I’m comfortable with right. And the reason I’m comfortable with that trade-off is, we’ve done the work, we’ve reached a conclusion, we have full conviction in it and we’re acting on it. If the work we did or our conviction is wrong we will be wrong but I don’t believe in kinda half doing things, right, so I tell folks all the time- If we’re wrong I’ll probably be the first one to say we’re wrong because we’re paying attention right. We’ll actually be able to say oh that assumption we made was incorrect. Does that actually kinda shake our thesis. So to me controlling your emotions is less about responding to movements in the market or anything like that, it’s much more about being disciplined and remaining kinda focused on your plan and so whatever your plan is whatever you’re going to do to execute your thesis that’s where kinda an emotional control comes in, but it’s not so much controlling your emotions it’s just staying very, very disciplined on what you want to do.

N: I love it, I love it. I mean, It goes back to one of my favorite quotes ‘’If you don’t stand for something you stand for nothing’’

A: Exactly

N: Yeah exactly, I’m right there with you man I am staying at  it as well and I appreciate your voice, appreciate what you share in this space. It’s really good to chat with you for the first time, really good to have a little conversation on here and thank you for joining us.

29:06 | 30:07

N: Where can the audience learn more about Morgan Creek Capital and more about yourself what are some good links for the audience?

A: Just find me on Twitter @APompliano, everything is kind of linked from there, and or I tweet pretty regularly so that’s the best place

N: Awesome man, appreciate you coming on appreciate you spending half an hour with us and chatting about some basic things you’re a good guy appreciate it!

A: I appreciate you spending so much time putting this all together and happy to help.

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