Author: Professional Capital Management CEO Jennifer Sanasie, Melissa Montañez, CoinDesk; Translator: Tao Zhu, Golden Finance
Jennifer Sanasie:In this episode, we're going to explore the current shape of the cryptocurrency market and provide insights into the broader financial landscape. Whether you're actively trading or just fascinated by the volatility of the cryptocurrency market, this episode is your compass to understand what's going on, where we are, and where we're going. Good morning, everyone. Our guest today absolutely needs no introduction to venture capital or podcasting. He really does it all. Anthony Pompliano, welcome to Markets Daily. Of course, thank you for coming. So as you know, in this episode, we really want to delve into the cryptocurrency market. We want to hear from people who have successfully navigated the cryptocurrency market. So the first question I have for you is, How are you allocating your portfolio this morning, or if you look at what's happening in the cryptocurrency market this morning, how are you going to allocate your portfolio?
Anthony Pompliano:Thank you very much for having me. Yeah, so I'm actually not just thinking about the cryptocurrency market. I think more broadly about general financials and all asset markets. We do have a dominant position in crypto, over 50%. But we also have a significant allocation to Osage Ventures. And then we have some real estate as well. And then we're doing more and more in the public markets as well. On the crypto side, I would say, you know, the majority of it is Bitcoin. That's a long-term position that we hold. We've been accumulating Bitcoin over the years, and we look at it as a 20, 30-year-plus investment. We don't actually trade at all. We don't think about selling based on price levels. It's really just buy, hold forever a great asset, and then hopefully I'll leave it to my grandkids. The second largest position in the portfolio is Solana. That's a relatively new thing. We started that position last year at around $45, $48 and then kept adding to it as it went up. The position size has grown significantly and it's now the second largest position. And then I would say something else that we're very excited about in the crypto space is that earlier this year, we sold a company called Reflexivity Research to a public company called DeFi Technologies. DeFi Technologies does ETPs all over Europe to find the long tail of crypto assets.
And, they have a very strong business and they seem to be doing very well. So, you know, if crypto is an area that we want to invest in, how do you get exposure in a lot of different ways, including liquid crypto, private companies on the venture side, and some of the public companies.
JS: You mentioned Sol, most people on this show hold Bitcoin and Ethereum, the two largest cryptocurrencies. But you just said Sol is your second largest cryptocurrency. I know you're bullish on Sol. Talk to me about your investment thesis for Solana as opposed to Ethereum.
AP: Yeah, I mean, you know my experience investing in Solana, we're an LP in Multicoin Fund I, Multicoin Fund I invested in Solana. I think they did it for less than a dollar, like pennies. So there was an explosive move in the bull run of 2020 and 2021. I think those guys managed that position very well, made a lot of profits there. And then, you know, when they gave us the physical allocation, I said to myself and my partners, I don't know what this is, right? We haven't actually spent any time researching it, don't understand it, and don't know what to do with Solana. Are we going to hold it? Are we going to sell it? Where are we going to go? Obviously, in the bear market, it went down pretty significantly all the way, I think it went down to $8. And then it started to go back up. One of the things that interested me when I started researching was, why isn't it dead? It reminded me a lot of Bitcoin, right? Multiple times. Why isn't it dead? But secondly, I started to see the start activity on Solana start to cannibalize some of the Ethereum activity. Not because Ethereum isn't going to get stronger or the token price isn't going to go up, but because of the opportunity for mispricing, right? If you think both of those activities are going to increase, then Solana activity is probably going to increase at a faster rate. They could actually cannibalize Ethereum's market share in certain areas like DEX activity or token issuance, etc. So if that happens, then you can expect the price of the sol token to rise more than the ether token. That's really an analysis. As I shared before, I sold all of my personal ether holdings at the end of last year or the beginning of this year, when sol was trading around $70, $70, $73 or so. So far, it's over. And, I still believe that Solana's activity data and various macro factors will continue to have a pretty attractive performance for the asset. So we're just holding.
JS: Anthony, what is the worst investment you've ever made?
AP: The biggest investment mistake would definitely be the investment I didn't make, which is kind of like a stupid answer. But if you look at it in terms of capital that was never gained or capital that was lost, there were a lot of different companies that I looked at early on and just didn't make. I remember when I was working at Facebook, I met with an executive at DoorDash. It was a very small, very young company. I had the opportunity to invest, but I didn't. So when you see these things, you learn over time that very large asymmetric bets, sometimes it's worth the risk because the risk reward is so lopsided. But those are definitely the things that have cost me the most money, the things I didn't do but should have done.
JS: Let's take DoorDash as an example. Why didn't you invest? Walk me through your analysis...what was it about DoorDash that turned you off?
AP:I had never done any investments before. I was very much an operator's mindset. I was working at Facebook. I was focused on my job. And frankly, if I was going to work with them, I might have thought, hey, maybe I should go work there and help out on the growth team or something like that. But, now that I know, I would talk to them from an investor's perspective. I would say, hey, can I put my money in this? So when you look at this, part of it is not just evaluating a particular investment, but also your mindset? How many different early-stage startup founders did I talk to before I realized maybe I should put my money in these companies as well, and whether I've helped founders over the years. So that was a huge unlock for me personally, to have a career that was meaningful, to put capital to work, not just to help, but obviously to deliver financial returns. The other thing I would say is understanding portfolio construction. One thing to say is... Hey, I'm pretty confident in something like Bitcoin. It might not go to zero. So maybe I might lose 10, 20, 30% of my money, but that doesn't mean I'm going to lose everything. In venture capital, you can lose everything. So really understanding that dynamic, that you have to build a portfolio to drive overall returns, you know, took me a while to learn. Once I understood it, you know, I was able to allocate capital better.
JS:You mentioned at the beginning of the show that you plan to hold Bitcoin for 20 or 30 years. Over the weekend, we heard from Senator Lamas at the Bitcoin conference in Nashville. She introduced a proposal that the government hold Bitcoin for about 20 years to start to address the national debt. I know you saw those comments. I know you commented on that. But I'm curious to hear your thoughts on Lummis's plan and the idea of putting Bitcoin in the national reserve to begin to address the country's $35 trillion debt. AP: Yeah, I see what Senator Lummis is saying. I think it's a very smart idea. I think whether the United States holds Bitcoin on its balance sheet as a strategic reserve or a strategic reserve, actually backing the dollar, I think that's separate and distinct from the national debt conversation. It's hard to imagine that the United States' Bitcoin holdings would have a significant impact on that. You know, if you think about buying a million Bitcoins, that's $68 billion, $70 billion. If that number went up substantially, let's say 20 times, it still wouldn't cover 10% of the national debt. In fact, our debt is growing faster than Bitcoin is growing. So the debt will continue to grow. But I do think that's the right mindset. Frankly, I think it's commendable that Senator Lummis had the courage to not only do this work and write legislation but to propose legislation and to invest his own social capital to do something like this. So now, whether you think it's for the national debt or for other purposes, there's a consensus that people across the party want the U.S. government to hold Bitcoin. And then you see it with some of the leading presidential candidates, and now you're seeing it with senators and representatives. You see it among regular voters, whether they're Republicans, Democrats, and independents. They're all interested in this. So we may not have reached the point where consensus is enough for it to happen tomorrow. But I do think that in the next five years or so, there may be enough consensus that you'll start to see this happen on a national level. JS: You know, we talk about the election almost every day on this show. I'm curious to know what you think a Trump presidency would mean for the crypto industry as opposed to a Harris presidency. AP: Yeah, I mean, it's one of those things where there's a lot of narrative and then there's facts and data. If you look at the current administration, they've made more progress in crypto than any administration that's come before them. Coinbase went public. We got the Bitcoin ETF, we got the Ethereum ETF. Those three things have probably done more for the crypto industry than all the other things that have come before it combined. In terms of regulators allowing certain activities. So even though the industry rightfully views the current administration as being abrasive, there's still a fair amount of progress being made in that abrasive environment. So if we had a president, whoever it was, who said, hey, we're going to be friendlier, you would expect a whole bunch of positive developments to come out. Now, just follow that thread. So, what are some of the other things that you really want regulators to do? Right. Maybe approve more ETFs. So you start looking at things like token market cap lists or ETFs. Maybe there's some clear guidance for early-stage startups, you know, around token issuance or token usage. But that list is probably only five or fewer things that regulators can actually do specifically. Now, if you add Congress, the Senate, and even the president.
There's also some legislation that can be passed. We've seen multiple bills around accounting rules and so forth that weren't necessarily written by the SEC or the CFTC. That list might expand from five or fewer things to maybe 25 things that can be done. So I do think that most of what people want to be done is actually in the legislative process, not necessarily from regulators. Although the three to five things that people want regulators to do are also very, very important.
So what we're talking about here is really an institutional shift or a mindset shift, not just around regulation, but across the political class. If you look around the world, you'll see that this has happened before. People kind of ignored it, and then they fought it, and ultimately, the industry won. So I think that's ultimately going to happen in the U.S., and we're about to move out of the fighting phase and into the winning phase for the industry.
JS: I want to expand the conversation and talk about outside of the U.S. I know you tweeted recently that after your speech over the weekend, governments around the world might be talking about what benefits Bitcoin might bring to them. But do you think governments are watching the U.S. election progress and starting to think about how their policies might affect crypto innovation there, and how they can start to hold Bitcoin as a reserve? AP: I definitely think governments around the world are watching the U.S., right, not only to understand what's going on, but maybe even to emulate it. You see, central banks are a great example of this. The ECB at one point said, we're not going to raise rates, we're not going to raise rates. And then they raised rates after the U.S. did. So I think the U.S. is a leader on the global stage, especially in financial markets. People are looking to us for guidance and leadership. If you were the president of some place in the world and you heard that two of the three leading presidential candidates were talking about building a strategic reserve of bitcoin for the United States, you would start asking your team, what is our bitcoin strategy? What should we do? Should we buy some before they do? If they buy bitcoin, the price goes up. It's going to be more expensive for us to buy bitcoin later. So the global game theory between governments will eventually come into play. I think that eventually presidents around the world will say to themselves, you know, I'm not going to sit on the sidelines and just be a follower.
Maybe we should be the leader ourselves. So, you know, whether that actually happens remains to be seen. But, to me, what's interesting is that if you're a country and you want to build a strategic reserve, then you should buy bitcoin and then tell people that you did. You shouldn't tell them you're going to buy it and then just go buy it because you might have a negative impact on the price.
JS: Makes sense. What do you think the likelihood is that the United States will have a strategic reserve of bitcoin in the near future?
AP: Well, the United States already has about 210,000 bitcoins. The United States has had more Bitcoin over the years, but their strategy has been to sell those Bitcoins and get cash. So, does the U.S. government hold Bitcoin now? Yes. Is it a strategic reserve? I don't think they think of it that way. But I do think that over the next 10 to 15 years, the U.S. will certainly have some Bitcoin on its balance sheet, or some kind of strategic reserve. I think the question is really just, how aggressive are we in this? What else is possible, you know, obviously Robert Kennedy (RFK) said that the U.S. should buy 4 million Bitcoins. I think that's mathematically impossible given the lack of liquidity in the market, this trend towards lack of liquidity, and the amount of capital that would be required to buy Bitcoin over a 15 to 20-year period. You know, it's hard to imagine a world where we could spend that much money to do it. So it's more likely that, you know, it's a smaller number, but I think it's definitely going to happen at some point.
JS: It's interesting that you mentioned that you think it's mathematically impossible. That brings me to this question. Do you think that politicians are talking about Bitcoin to get the attention of the industry without really having a plan to take the drastic measures that they're talking about. Because like you said, in a lot of cases it's not mathematically possible or doesn't actually make sense to address the country's growing debt problem.
AP: Yeah, four million is probably impossible. One million is probably possible, right? So we're still talking about the same thing. It's just that the magnitude or the scale ends up being slightly different. The bottom line is, look, politicians are politicians, right? Part of what they're supposed to do is represent the will of the people. One thing that most people misunderstand is that they feel like, I'm trying to judge politicians based on what they believe. Actually, politicians are supposed to represent what we, the people, believe, so you know, the negative perception is that they're pandering to us, they're basically saying what we think we want to hear, and then they get an office to do whatever they want. The positive perception is no, they're listening to their constituents, and their constituents are telling them, I want you to support Bitcoin. So the smart person would say I support Bitcoin. So, you know, anyway, yeah, their campaign promises, the promises play a big part in that. So do they have to deliver on their promises? Not necessarily. But I do think there are a lot of people who will walk into the ballot box and they'll say, okay, I have two candidates, I'm going to vote for three candidates, I'm going to evaluate the promises today. One of them promised me something I like, the other one promised me something I don't like, whatever they're going to do. I can only evaluate the promises today. So obviously I'm going to go with the one who promised me something positive. So it's weird, you know, people always get hung up on whether politicians will deliver on their promises? Well, you should expect that they may not deliver on their promises 100 percent of the time. And one of the things that I always point out is how many presidents have talked about, you know, releasing some kind of information.
With regard to the JFK assassination dossier, I think Trump said, hey, I'm going to release this information, but then he didn't do it after he took office. According to people I know who are close to the administration, he basically got new information and then decided not to release it. So if that's true, and that's what happened, then, we don't know what that information is. So how do we assess that? Maybe if we had that information, we would also agree not to release it. So that creates this weird dynamic where voters and the public want to criticize politicians, but we don't have all the information that they have. That doesn't mean we should trust them, right? We should actually be skeptical of the promises that they make and the things that they say they're going to do. But I do think that sometimes we should also understand that if we had all the information, we might actually make the same decisions, which is a little weird because I think most people have a lot of disdain for the political class.
JS: I think these are all great points to make ahead of the November election. I know we only have a few minutes left, and I've been waiting to ask you this question because I know you're a former Army sergeant, and it's not uncommon for former military personnel to now be founders or hold senior positions in venture capital. I'm curious what you think makes people with military experience become such successful founders and CEOs.
AP:If you think about the risks that they take when they're training. It's often life and death. So when you bring that risk into the business world, you need leadership. You need to be able to understand and be resilient and thrive in that kind of uncertain environment. But the risk is much lower. So I think people have been exposed to some of the extreme stresses of the military or combat deployment. They end up thriving in the more relaxed environment of the business world, where the stress is a different type of stress. So, you know, I think it's a very natural progression because at the end of the day, business is just about guiding people to get something done. There's a lot of similarities to what the military does.
JS: When you're looking for businesses to invest in, do you look at the founders and their past experience? Maybe not military experience, but do you look at the founders' extraordinary experience when you're considering investing in their company?
AP:We're looking for achievers, and success can come in many forms. But when you're evaluating a founder, you want to find someone who can get the job done. And that can vary a lot depending on the industry, the stage of the company, the many competitive elements that they're working on. Sometimes you need someone who's a very type A personality, someone who has a long track record of success. But other times, you actually need someone who's more introverted, younger, more technical, and frankly, too naive to understand if what they're trying to do is possible. So really understanding what the task at hand is and what type of person is most likely to succeed here. Here's a specific case.
JS: Okay, one minute. I have to ask you, I asked you what was the worst investment you ever made. What was the best investment?
AP:Probably investing in my family. You know, if I kept a scorecard of all my financial investments, you know, I'd probably be proud of it. But frankly, all the financial investments don't compare to investing in relationships and making sure you're happy every day. You know, if you can remember that, all investments are just games that we play on the Internet. It's a lot easier to not get too excited when things are going well and not get too upset when things are not going well.
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