Dan Romero on Coinbase's early days and crypto cycles

Transcript

[Music] GM good morning welcome to the milk Road show The Daily the crypto show that'll keep you in the loop like your mom forwarding you every article she reads happy New Year everyone I'm your host Jay Hamilton and today we're joined by Daniel Romero guys this episode is so good we actually had to split it into two because Dan and I ended up going deep into so many areas okay here's why you want to listen to Dan first of all Dan was employee number 20 at coinbase okay he bought his first Bitcoin in 2013 for $97 97 imagine okay and now he's the co-founder or forecaster one of the leading decentralized social networks this episode okay so this is part one

that we're going to do today and then tomorrow we're gonna come out with part two in part one we're going to talk about Dan's experience of what was it like to work at coinbase in 2014 to be there through the Bull Run of 2017 and then we're going to get Dan's thoughts on this cycle where are we at in this cycle what does he expect for 2025 what are the major catalysts he see coming Dan is just a absolute gigabrain because he's been in the space since the beginning he's been through so many cycles he understands things he's able to predict and see trends that most of us and many of our guests are not able to because it's just not not many people have been in crypto for that long now before we jump in it's the new year and

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monthly trades start making smarter swaps today at milroad docomo Dan Welcome to the milroad Road Show thanks for having me yeah really excited to have you my man okay I got to start with something I've heard you talk about in other interviews and that is your first job at coinbase back in was it 2013 or 2014 tell us what you 2014 so 10 years what were you doing at coinbase in 2014 so I joined the the BD team the business development team initially and my first job was trying to get Merchants to accept Bitcoin payments uh because at the time people were pretty stoked I mean this is like pre ethereum so bit Bitcoin was the only game in town

everything else was called an altcoin or you might even a more derogative Tory term and so the company was a Bitcoin base was a Bitcoin company and we were really focused on using Bitcoin as a payment method over the Internet which if you just kind of think about that now took 10 minutes to confirm you know you have like price fluctuations during that period like there's no easy like standard like there was no version of metamask at that point like just like or you know Phantom like just there was no like way to click on a page and then get it like it just was a total cluey experience and to think that we were even spending time on that 10 years later is just crazy but what's what's ironic is like now with stable coins and

some of the more recent developments on on kind of like ethereum and salana like we're getting to a place where using crypto for actual like e-commerce payments starts to make sense so it's just taking a lot longer but but that's what I was first working on when I started at coinbase it didn't last for too too long we had me start working on other things but uh yeah what what was it like to work at coinbase in 2014 H how many people were there yeah so we were you know like I was employeed 20 but we got up to about 50 people at that point um it was definitely a weird thing like telling people you worked at a Bitcoin company was you know it's still probably weird today but uh it was it was a hell of a lot more weird most people didn't know

like they might have heard of Bitcoin but they didn't like crypto as a term didn't mean anything I think like the association was still very much um the primary thing people would think of with Bitcoin if they knew about it was Silk Road right it's like Ross who you know few weeks away from being probably pardoned which is kind of a crazy cycle to think which is wild actually yeah you're right when I first got into crypto you know Silk Road he goes to prison and then now you know seems likely he's going to be pardoned but I think like that was that was the reputation and there had been few bumps in price um there's a pretty famous video from that period actually coinbase last month did a um kind of like when when Bitcoin hit 100,000 they got the

same guy that who was freaking out about Bitcoin hitting $100 and looking at the screen but like that's like roughly that era and it was it was unclear like most people in Bitcoin at that point were very focused on if you read the Satoshi white paper peer-to-peer electronic cash so it's like this payments made sense like this is what it's for the kind of conventional you know take on Bitcoin today that it's kind of like a backfill in terms of like what people think about it it's like oh it's digital gold it's like competing against the US dollar from an inflation standpoint that very much was not like what people were trying to do with it they were trying to turn it into like internet money and have it be useful to be say like I think Bitcoin is useful today like obviously there are plenty of people who want to

own it as a hedge against you know traditional Fiat currencies but I think that there was a lot more of a builder culture in bit coin when I first joined uh coinbase and I think that that has since shifted to a lot of other ecosystems ethereum salana and you know kind of all the stuff that gets built on these other blockchains when I joined that it was all happening on bitcoin I mean at a much smaller scale very interesting and then what was it like through 2017 and the first time that Bitcoin really ripped and had that big run yeah well it's all relative because if you were there 2013 like you saw Bitcoin go probably even more extreme in terms of the up but in terms of the I

think like mainstream media awareness 2017 the run up to 20,000 was like that that was pretty big so you also had ethereum and just like crypto generally and for coin Bas was huge because we kind of like 100 xed all of our metrics that year so we went from 10 million a billion revenue and you know in one year yeah it was it was it was a really crazy year and we had no no idea like going into the year we right you know there there's actually the the the big news going in the beginning of the year was like maybe the Winkle boss Twins were going to get their ETF approved which no way much longer people forget that that they like yeah oh Bitcoin ETF was a thing from 2014 people were talking oh it's just six months away it's like yeah

it took took a while but um I think uh 2017 was a little bit of a surprise and I think it really changed crypto because the overall yeah you had this big runup and then a correction but every time you have one of these Cycles in crypto you kind of almost settle at like a multiple higher you know used to be 10x and now I think it's usually like two or 3x but you have this big run up and then this correction but there's just more money in the ecosystem more people building in the ecosystem more companies more more applications and so I think that that was a big inflection point like crypto started to be less of this like odd thing off to the side and it became kind of its own industry it's like you had dedicated you investment

firms and and and I think it's only professionalized even more since but um that was that was like the big inflection in 2017 it ceased to be this like bunch of Internet weirdos to a like okay this is like a real real industry and everybody must have just I can only imagine the like The Vibes in the office like going from like all of a sudden 10 Xing all your your Revenue all your 100x 100x sorry 100 Xing like everybody must it must was it just like a 247 party like was no because you had to keep the website up like pretty pretty notorious at that point I mean coinbase even the last cycle had some uptime you know issues but it was like

coinbase would go down and then like people would be really mad I mean the customer support cues were were massively long those that were actually porting into me so that was a whole disaster I had to deal with but I think yeah no people were excited right like there was a period 2014 when I joined till 2017 it was just it was like flat like not even like it corrected but then it just like didn't do anything there's a famous Bitcoin meme with the guy holding a stick and then like Bitcoin it's like do something and like that that was like very much a like okay like it it's not continuing to go down but it's not going up it's just like kind of sideways so I think that that was uh I think quite exciting for people is like the people there are a lot of

people who left coinbase during that period like that kind of like bare market and so the people who stuck around to kind of see the growth happen but only then in 2018 to have it like kind of peak and then massively correct I think it started to build this like sense for people who've stuck around in crypto for a while is like it's a pretty cyclical market and it's much more cyclical than frankly a lot of other like Silicon Valley style markets right it's like SAS hasn't really had like crazy ups and downs it's mostly been a like um okay like more people are coming on the internet people are going to want to buy software over the Internet great the market has expanded and and like yeah you have the overall economy but I think um crypto itself has kind of had

its own ups and downs independent of the like overall macro environment so I think that like one lesson for being in crypto whether you're building in crypto or investing in crypto is you have to have kind of a a bit of a longer term Horizon and this idea of like kind of having conviction through Cycles is useful sure there's the and I'm by no means a trainer so like I actually like I'm actually quite good relatively in picking things early and then like sticking with them if if I had to be a hedge fund Guy where I'm like constantly thinking of like should I be exiting or entering today I would I would do terribly versus like kind of seeing the kernel of an idea and then seeing how it can grow pretty pretty massively over a 10year period but I would say is like if

if you're you know then the day-to-day trading there always going to be some opportunities to catch some momentum for one reason or another but I think generally if you kind of look at the vast majority of people that have done really well in crypto like you know kind of like okay I made a lot of money in crypto it's people who get in early and then kind of hold right and yeah I think like that mentality sometimes gets lost a little bit in the day-to-day because that's much harder to like cover right like it's it's it's fun to look at look at Dex screener or Quin gecko or whatever it's like what's up what's down like should I be moving in and out there's like stuff to do but but um I think there are a lot of quotes about this like you know whether it's Charlie

Munger or Buffett and they obviously don't even like crypto but this idea of like actually the hard hard thing to do more than anything else is like pick something you have belief in and then have conviction and then hold it to the point of conviction and I look back at like you know the first Bitcoin I bought is actually I think 90 I looked it up the other day was $97 97 yeah and I you know bought whatever amount I did which at the time I didn't really have any money and so today that would be worth a massive amount of money but I sold I mean crazily like at the time when it went up to like 300 and something dollars thinking like okay a 3X that's great right but like just think about like 97 to 100,000 um that's a THX and so that's

like the difference between like you know the short term 3x is still nothing to sneeze at but like conviction in a new category assuming you're kind of buying something that has staying power and and is built on some fundamental premise like there's there's a lesson in there and so I think um same thing happened for me for eth and so at a certain point like and again I've never been oriented towards trading I just stopped like selling most things so like if I buy something I like really try to have like a 10-year time Horizon and so like arguably this is when I should be thinking about selling that Bitcoin that I bought 10 years ago and so like to think you know the the other crypto that I own and I don't actually own that many individual cryptos I'm not going to say

on the podcast I don't want as investment advice but my point is I I actually just tried to like hold myself to like let's say if I can hold this 10 years and I'd rather have something potentially go to zero then like try to time it and then actually miss that that compounding that really happens towards the end and it's not going to be for everything but like I think it's like a mentality that when I just know the people who've made the most money in crypto as investors it's just like long-term conviction on on things and and Bitcoin probably is is the most prominent of that yeah 100% it's it's possibly the greatest investment advice is conviction and patience and it's also the hardest thing to do especially right now so you're you're in you know you've been here for

a decade in the space which is I mean hey shout out to you man it's a freaking lifetime in crypto you've been through a lot been through the Bulls and the Bears um as as we go into this year of 2025 what do you think where do you think we're at in the cycle how do you feel about where you at what do you what do you expect in 2025 what what is giving you the most excitement or what do you think the catalysts are going to be for the next year yeah so predicting where the market is or what the market will do is always a little bit of an astrology exercise and and if I was really good at that I would be to going to the point running a hedge fund and trading because it would be

like really straightforward in terms of making money if you knew you were going to be correct that said like in in my 10 years like there have been certain things that just like I think naturally correlate with like more of a bull market or an up market so the first is like Bitcoin having like does actually I think have an effect in my opinion is just like it's a monetary policy it's the biggest asset in the space and if if you believe that like miners are okay business like they have costs they have to pay for then there is some amount of sell pressure that you have with those asset uh with Bitcoin on an ongoing basis so if you cut that pressure every day so prices aren't cratering you you you probably have some beneficial impact to bitcoin but what's interesting is

it's always hard to time that like it's like oh does the having happen right away is it priced in is it like later so I think like I focus Less on that but much is just like every cycle for the most part has had a Bitcoin having happen we had one so there's that I think what's a little tricky with what's going on now is most of my career with crypto has been in a very low interest rate environment for those who like kind of understand like Risk assets which crypto is one of those when interest rates are higher people like there's a risk-free rate of return so you're less likely to go into risk assets so I'm curious how that plays out with everything in in in 2025 although if rates get cut a little bit then that that is a little bit more dampen but I

think that the more concrete things that you can actually look at are one um you know besides where prices are today right and it's like whether they're X or Y like that that can change overnight and you don't you don't really have an inclination of why I do think that there are some other big uh changes that are going to happen here in 2025 so one is the regulatory position in the US I think is going to significantly improve and I don't think most people appreciate how bad the position has been and it's it's a combination of um starting you know kind of like from the White House like who's running the SEC that has a huge impact on crypto

companies and and it's not companies that are just trying to like run scams like that that there are a lot of legit companies that have literally tried to do the right thing they've asked for guidance they've tried to go in the front door and they've just kind of gotten the stiff arm and I think that that's that's going to significantly change right I think there's going to be a much more collaborative SEC and they're still going to have laws that they're going to enforce but for the companies and projects and coins or you know whatever way you want to Define it that want to play by the rules there are actually finally going to be some rules like that hasn't existed in the 10 years I've been in G though which is kind of crazy I think a second thing is just like the whole like banking

infrastructure I don't know if you guys have heard of operation chuko which I think popular Mark and Dre Joe but he he he talked about it on Joe Rogan and I think it's like Nick Carter has talked about this within crypto but like basically crypto companies have just had a really hard time interacting with the traditional Financial system and actually that that is an important aspect of just like making crypto work is like you need the value to flow from viat into crypto in order and that needs to be easy and accessible on a variety of different Services it needs to be something that institutions like where a lot of money sits they need to feel comfortable and not like oh crypto is this like weird compliance like uh I don't want to touch it it's like scary and so the normalization of crypto at

the federal government level across a variety of agencies and then potentially some legislation which last year 202 4 the House of Representatives which was Republican control but was bipartisan vote passed this thing called fit 21 and and The Details Matter less as much as it was the first time in 10 years that there was going to be legislation that helped put a regulatory framework those rules that you're talking about or you know that crypto companies can follow to like actually do things the right way and that got blocked at the Senate level but I think that that's probably going to change you know this year and and so as a result you're going to have kind of a more collaborative executive branch in terms

of like the people doing the enforcement the legislative branch may pass some some legislation which just creates like clear set of rules a playing field that actually people who want to do the right thing can do and then I actually think that the other thing that's like massively bullish is the fact that ETFs have been approved and that was under a you know in 2024 under a hostile crypto Administration they kind of were forced by the courts so in that world you have this like kind of natural flow of capital into the like I would call Majors right like you have Bitcoin and eth it would wouldn't be surprised if you see a couple of other like big market cap coins get a an ETF no guarantees on that but the important thing there is that that wealth coming

in those dollar inflows from institutions into those big assets that has a ripple effect throughout the rest of crypto right because if you're uh kind of like a crypto native Trader and you have a position in Bitcoin and the institutions are buying the ETFs that's like raising the price for the underlying asset for you and then maybe you diversify some out into some upand cominging project or or something else and nft or what whatever you choose to do with the the kind of like gain and as a result that that kind of cascading flow has a really big impact on overall prices in crypto and prices going up in crypto for a sustained period of time is the most consistent thing that will draw attention from from Builders right so Builders are always kind of like they

show up when prices are hot it's almost like they're top ticking the market and they start to build and one thing that's also been really challenging is in the last few Cycles every time you get these like all these talented people who could otherwise be building some AI app or um you know Instagram or or like pick pick your kind of favorite non- crypto thing they come and then they realize like the infrastructure is really clunky it's like prior to basically 2023 2024 with so many of the improvements that have happened at the technical layer right like l2s so much of the Innovation that's happening in the salana ecosystem like you're finally at a place where crypto and this has been 10 years for me where the infrastructure underneath is finally ahead in terms of

like it's your ability to build is not limited by the infrastructure which I think for a very long time it was always like you had smart people come into crypto and they'd be like this is too clunky this is like you know too complex like I can't build the experience that I want see yeah I'm going I'm leaving now that prices are there and so what I'm optimistic about is you have a good 2025 for a variety of different reasons hard to predict exactly how prices will move but lot of inputs that seem positive and then you attract a group of people you know class of builders that all of a sudden can actually go build whatever they had in mind and that further kind of like contributes to the cycle because now there are new things in the same way that if you think about

like the 2021 cycle nfts and like the the the general class and the like Innovation and you know experiments people were doing with nfts was a result of a the prices generally were up but then that felt like an accessible thing to actually go build something that you could actually like do and now I think with like the the improvements to all the infrastructure I just think you're G to see that much more activity and crazy Innovation because now you can actually go like you could legitimately build an onchain game people are doing that now with l2s and so the stuff that people wanted to do before they're actually able to do so I I'm just generally very optimistic about 202 yeah I bullish Vibes man I'm feeling

feel real hyped on everything you're saying one specific question I have for you is do you think this is the Sovereign cycle like we talked you talked about more institutions buying Bitcoin you know Sovereign Nations and governments buying Bitcoin is obviously something that's been discussed with you know Trump talking about a strategic reserve and Senator Lumis proposing that in the past year but it's not just the US it's other countries as well are talking about this and possibly already doing it we just don't know it yet do do you think this is the cycle that we see Sovereign Nations really lean in well let me just give you the history I show up to coinbase in 2014 the US didn't even know what to do with Bitcoin at that point right so when they seize the

Silk Road Bitcoin the US Marshals like they auctioned it off Tim Draper famously bought you can look the story up it's like he's this like VC he's investor in coinbase yeah yeah yeah but he just like bought it from the government at this insane discount because he was willing to buy it all in like all the Lots at the time and it was something crazy it was like $300 or $600 of Bitcoin insane trade like just go look up like Tim Draper US Marshals like Bitcoin and then you can you can see this story so like alltime crypto trade but but so like that's how nent was was like can the government even should should the government destroy it like you know like government doesn't sell cocaine when they seize it right that that was always the like little quip at

the time it's like no if it's illegal illegal like they just destroy it you could send it to the zero address instead the government was like no we're gonna sell it but you could think about like if the government still had that today and then any other Bitcoin that or crypto that has been seized over time if the government just kept that effectively is like you don't have to buy the Strategic Reserve but like even if there's like a 1% chance of like hyperbitcoinization Sovereign like it seems like a pretty good trade it's like you don't really get that much money in the scheme of things relative to the US government but actually just like having an ongoing position that gets built and in the case that it does actually displace gold as like kind of like the world Reserve currency you didn't even have to buy it

so that's like an interesting like thought wait wait wait a second but didn't they sorry just going back to the sale to chim Draper they I thought they because they still have like 200,000 Bitcoin I thought that was from Silk Road so did no no no no they've sold a bunch of bit you can look at like the Marshalls they've been using coinbase for a lot of like the storage like that's what you know they've been public about that so so my point is in this scenario where they do have this additional seiz Bitcoin I actually don't think like you could say oh it's never will happen if you told me that the government would buy Bitcoin I I would be way less uh likely to believe that like I think there' just be too much opposition it would you know stuck in the Senate

like whatever and there would be a variety of reasons where people say the government shouldn't be in this business to be fair the government doesn't also buy the S&P 500 and all these other things like it just you know prints money but in a world where they already have it this is a little bit different of just like don't sell it like okay maybe you can convince enough people to be like is is someone really G to like in the Senate like say okay I'm filler bustering this and maybe there's an executive policy that you can do it and so so here here's the thing if the US actually formalizes the Strategic Reserve I think it's very hard to model what will happen to other countries because all it then takes is to say wait a second so the wealthiest country in the world has Bitcoin on their balance

sheet they also have gold in their balance sheet right we have the largest supply of known supply of gold in terms of like a like a balance on on the balance sheet what happens if Japan says you know what we're going to do the same policy and and the EU or you know England says the same is so all of a sudden you have this Cascade and then people are like wait well if if the US has some well we should we should make sure we have the same percent of the balance sheet because we don't want we don't want to be out of whack and so the mimic like Cascade that can happen I think people don't appreciate how fast that could happen now whether it's going to happen or not I I have no idea and like that that's the Sovereign cycle bet

but I think that like it doesn't seem implausible in a world where all you have to do is say don't sell the stuff that you've already seized right which you can get into this whole other argument by the way and like political philosophy of like these like asset seizures whether that's legal constitutional whatever but put that to the side the point is the government has this pile of Bitcoin and a you know kind of presidential Administration that's going to be Pro crypto plus a Congress that for the first two years of the administration is going to be majority you know the the same party as the president I I think it could happen and then I think it's very hard to model how fast the Cascade could happen on the other side and if that did I I do think

that obviously that would probably have a pretty big uh you know Boon for probably just Bitcoin but I think you know anytime Bitcoin moves everything else benefits everything flows down for sure yeah you get I I I I I I you know Matt Hong um from Paradigm who's an investor uh and forecaster wrote short piece called The Sovereign cycle I think I think it's an interesting idea to consider right yeah and the way the way he talks about gunpowder or AI or drones and that you can't be left behind if one I think you nailed it when you said If America does it then it's that meme everybody else kind of has to do it so I think though you're you make a good

point that there's a big difference between them actually going and buying it that would be very difficult to I don't think I don't see that happening in 2025 versus just continuing to hold it and there's a good chance that they continue to seize more over time and that they collect it through that that that model in that way sure yeah and and look I think that there's a obviously El Salvador has some and then Bhutan I actually think has is like the known public so so you already have two so it's not even like we're going zero to one we're we're we're waiting for a big Domino to drop and so yeah I I I think it's plausible whether it happens or not who knows as always if you liked today's episode

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