Mike Novogratz: Galaxy Digital – Bridging Crypto and Institutional Worlds #407

Transcript

this is epicenter episode 407 with guest mike novogratz [Music] welcome to epicenter the podcast where we interview crypto founders builders and boot leaders i'm friedrich ernst and i'm here with brian crane today we're speaking with mike novogratz mike has been a wall street fixture for a while and has made and also lost several fortunes his latest fortune he made with bitcoin and ethereum and he's holding on to it he currently serves as the ceo of galaxy digital an investment

bank targeting institutional investors that you also founded and within we talked about the crossover and merge between finance and blockchain regulatory affairs the market and of course also wrestling so before we go to the interview let me tell you about our sponsors are your crypto assets sitting idle in your wallet start earning rewards and contribute to network security by staking with course one a staking provider securing over two billion us dollars worth of assets on over 25 decentralized networks including solana cosmos and ethereum interested in running your own branded nodes the managed white label node as a service offering leverages course one's highly available and proven

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mike is i remember actually hearing about mike novogratz in i think 2013 when it was like you know bitcoin was very much under the radar and then there was just some some famous banker guy who was like saying something about bitcoin and this was still sort of a time when this was from page of bitcoin reddit which was like the the main source of the bitcoin community back then so i remember kind of hearing about him back then first time but of course since then he's actually become like very involved in the crypto space uh through his company galaxy digital and bunch of other stuff so really excited to yeah to have you on today mike yeah it's amazing amazing how eight years goes fast yeah yeah absolutely

maybe start with wrestling like we heard you speak about wrestling in some other places i'm wondering if you might share a bit like what's the impact that wrestling's had on you and on your life so wrestling makes you tough it is a it's not a fun sport right you you get the hell beat out of you you exercise to the point of exhaustion actually my wrestling coach from high school uh unfortunately just passed away this this past week and a bunch of us were you know online reminiscing and i was like he put us through practices that felt like we were at a gulag i mean we would have four hour practices where you would start with running miles and push-ups four hours

in a heated wrestling room i was like that's probably torture but through that hard work and toughness right in grit you end up with a resilience uh and a toughness and so the rest of your life you walk on your front foot like you're just not scared and it's great for risk-taking because it's like can't hurt me that bad you know there's a great scene once you've wrestled everything else in life is easy i done a lot of wrestling charity stuff because i realized there was this link between making kids disciplined and tough and leadership right 14 of the 44 presidents of the united states had wrestling in their background abe lincoln maybe our greatest president used to go from town to town and wrestle for a living

uh back then they called it ketchus kesh ken that's what wrestling was called uh but it was basically the same thing and so the guys that took down the plane over uh pennsylvania during 9 11 you know the famous let's roll both wrestlers right and so it allows it teaches kids both men and women now boys and girls how to lean on their front foot and not be scared that's why i like wrestling yeah it's it's certainly a super interesting background to have to have and basically being resilient and getting up is kind of what characterizes you as a person so next you went into banking right well yeah i started goldman sachs right after the army and

you know i was a money market sales person and money market sales is maybe the easiest job in an investment bank you know you're selling the simplest of products like it's 10 day 30 day at when you're going wacko you'd go 90 day duration commercial paper to very lovely people who ran money market funds if you know fixed income the further you're away from zero the more risk there is you know so when you go very low duration there's very low risk uh and and so it was a great way to get exposed to wall street because it wasn't an 80-hour week it was show up early you got to be at the office by like 6 30 or 7 but i was home by 5 o'clock and as a young kid in new york that was

those were great hours but learning the yield curve learning how short interest rates affect all other asset prices is in some ways foundational for being an investor and so in lots of ways everybody should start in the money markets and then move their way out and so i look back and i was like wow it was a pretty easy job but it was a really important job so when you like what what attracted you to finance back then you know the honest answer is i was attracted to politics and i went to washington dc after i always thought i'd be a politician or working in that space and i went to washington dc after i finished flight school

and you know i had no money you didn't get paid a lot in the army i didn't grow up with money i owed my college roommate it was rich a lot of money because i was always borrowing money from them and in dc the the young people's jobs paid almost nothing and you know a lot of the people that were getting them or sons and daughters are wealthier people who can get subsidized uh and i remember i ran into a guy who had been the secretary of the army and he said son let me give you some advice he said go to new york city and make some money and when you're 40 and you've got something to add then you should come back here and so i it was like insightful advice i was like okay so i came up to new york and i

lived on a friend's couch i'd gone to princeton a lot of princeton kids work on wall street and so all my friends were working on wall street and i lived on his couch for 90 days and the deal was i could live for free as long as i came back with a good story every night to tell him so i would have to do something silly uh in that case in that time of my life it was probably you know approaching some beautiful girl or or doing something silly that i could give him a story to keep my rent and you know i ran into a friend who got me interviews at goldman sachs and 22 interviews later i got a job and so i i came to wall street really because that's what my friends had done and i wanted to make money i fell in love with it because

the part that i ended up migrating to right macro macro economics macro trading is all about politics policy psychology and so in some ways you know when i was i remember being in hong kong with my team during the 97 crazies and talking to someone in the state department he was like dude you have better information about indonesia than we do like you know we we sit in the middle of this unbelievable information source and so if you're a good macro trader you you know what's going on in nigeria and you know what's going on in the uk politics you know what's going on in the economies of india and china and and so i love the widget

i always tell people if you want to sell cars you better love cars if you want to work in macro you better love politics and policy and economics and so i love the widget and crypto really fits so squarely in this right crypto is macro it's this giant idea uh of you know when it's got economic history to forget the computer science the computer science enables it but what makes it work is macro right it's his economic idea that people want something different people don't trust governments that generation you know the younger generations right millennials gen z look up at baby boomers and say fu that you've polluted the planet right but the u.n just had this report that

you know we're 10 years away from complete instability who knows if they're right but we know one thing the planet's getting a lot hotter and there's a lot of bad weather happening in america the average weight of both men and women have gone up 30 pounds in 30 years so if you think about baby boomers right bill clinton took office in 92 so from 92 until now we've been ruled by the baby boomers right america's gotten fat the country's gotten polluted and we've blown the debt and deficit out to levels that are unsustainable the rich poor gap has gotten wider than it was before the french revolution and so there's an arrogance a sheer arrogance a complete lack of humility

from our leadership from nancy pelosi from joe biden donald trump from mitch mcconnell from all of these in older politicians baby boomers and even older than baby boomers that oh they should still be in charge right wait wait you haven't done such a good job maybe you should have some humility to say huh maybe there's some other ideas and so when richard shelby vetoed the crypto bill i was infuriated uh and that 80 i told you that you know the 80 80 000 likes on the tweet showed up because i think it tapped into that that anger that's the fuel of this crypto revolution it's can we rebuild the

financial infrastructure and quite frankly the whole infrastructure of the world in some way that is more transparent more egalitarian that doesn't rely on you know old people and their their giant egos right it's sheer narcissism to think in 89 that the world still needs your voice right what grace is and i saw this right i'm on a board up at harvard and the guy that runs the board has worked for five presidents dave david gergen he's an amazing guy and my first board meeting he resigned i'm like dude and he didn't resign but he said us you know i'm resigning from the board but i'll i'll stay as an advisor he said at my age you should advise but not vote i thought there was something really

brilliant about that right it's time to be wise counsel and to let the next generation make the decisions and i think as a world and as a country certainly in the us we're at that point our politicians don't get it yet because they love power right chuck schumer loves being in charge it's his time uh the reality is what crypto is saying is we don't care about you guys so much anymore and the the other reality is though you need politicians crypto won't work without without buying from the from the political structure and so it's our job now and i'm hiring people i'm going to spend a lot more of my own time to educate washington right it drives me freaking crazy that progressives who should love crypto hate crypto i'm like

what you like the banks right the average atm fee in america is four and a half dollars who does that hurt oh it hurts the poor people right there were 12 billion dollars i think last year to overdraft payments how many times have you bounced a check right who bounce checks poor people and so like the the idiocy of not understanding like the banking system isn't good for the poor and that being able to send you you know a bitcoin for 12 cents uh no matter you know uh to transfer money you know freely to have a wallet for free and you're is is so progressive to cut out the the middleman in music and art is so progressive

it's a lack of education it's lack of understanding it's where tom cruise said there are less than four senators of the hundred that even know what a goddamn bitcoin is so you you were working in finance back then when was the point when you started kind of thinking like okay there's like something you know something should change about this or like something's broken here and you know that thing kind of like also triggered your interest when you heard about bitcoin they're like okay this there is you know there's something interesting here well so i bought bitcoin because it sounded like an interesting thing to do it was a pretty simple thesis and i bought it as a speculative asset i

started learning more about it because i ended up in the newspaper in october of 2013 and next the moment i was in the newspaper as the bitcoin guy i got invited non-stop to speak and you know it's terrorizing standing in front of a whole bunch of smart people and not understanding your topic that well and so it forced me to study and learn and talk to smart people and i got it but i didn't really get it until i walked into joe lubin's office at consensus in probably 2015 late 2015 and consensus was maybe a month old ethereum was trading in the 90s cents not dollars

[Music] but i saw and joe really did a great job of outlining this well first i saw all these young people and old people plotting out this decentralized revolution how they were going to disrupt not just the dollar not just finance but music art supply chains and you know joseph been a friend for a long time and he's you know patient and so after like six sessions with him i started getting it but that was the point where i was like this is a revolution this isn't just a speculative game and so then i got more engaged now partly i got engaged because i bought a

bunch of ethereum i didn't want joe to be a lot richer than me and i knew that might go way up so i had to buy ethereum to hedge and it started going up and i hired a young smart kid john west and the two of us you know dug in and he actually lived over in their offices and it was the early days right metallic and vlad and those guys were were all trying to figure out how the system would work and i was still a little bit distant right i was would call every once in a while i'd go there once a while but i was getting my information through john west and you know through joe every once in a while and trading it like i would trade and then as i remember i gave a lecture at the first

ethereal conference ethereum was in 80 and there was this unbelievable energy around it and i started meeting more and more interesting people and that kind of sucked me in more and so i started hiring people at my family office and you know and then i just then then the the wheel just kept rolling and when we started galaxy i never thought i'd go back to work uh but i had like this idea if i'm gonna go back to work a few things have to be true i need to be able to work with young people crypto is young people i need to learn things you know i had been a great macro investor or a good macro investor this was all about venture and i'd never been a venture investor and so

understanding the the venture mindset the venture process uh working with entrepreneurs you know as a macro guy you never meet an entrepreneur and as a venture guy that's all you meet and so i was fascinated i loved it loved that part of it and then the third part was did i have something to offer to the community and i thought you know what there's a lot of similarities between macro and crypto right uh it's crypto is macro i've seen a lot of repetitions and so i think i have something to add on the training side and i originally thought i could be this bridge between the institutional world and the crypto world i i

fundamentally thought then and i finally thought now crypto won't reach its potential unless the institutional buys in and it won't be the exact same as the purest one but we'll make lots of progress and i think we're at that point right now where every institution is starting to buy in i saw last week both walmart and amazon put up you know help wanted signs for crypto experts think about that the two biggest retail companies in the world say all right you give up we're coming in and so i don't think there's almost anyone left uh why i told my staff this morning that i have never been as optimistic is there's complete buy-in now and now it's about execution it's about all of us putting our heads

down it's the computer scientists figuring out the riddles that will speed up the blockchains to make them work as effectively as they're going to need to be to process all the amount of data that's going to come at them it's people understanding what decentralized versus not decentralized is right a chinese blockchain is a pretty freaking scary thing a decentralized blockchain is a pretty beautiful thing uh and so what's decentralized enough i mean these are real questions that have to get answered uh for this really to be the architecture that the world gets built on uh but i know everyone's now engaged and so that's really exciting so on the on the galaxy digital website

you know you say like your mission is to like institutionalize the space i'm curious if you can like expand a bit on that is that is that kind of what you alluded to now that you primarily see like traditional institutions like adopting crypto or like what else does institutionalizing the space mean yes you know first we're going to change our mission statement so stay tuned you know listen when i started galaxy at the thought was how can we help credentialize this right i used to think of what mike milken did for uh junk bonds right jackson burnham even though it had a bad ending like he really revolutionized finance

revolutionized being able to for companies that didn't have great balance sheets to be able to borrow money just have more risk and what we take for granted today he started and i thought wow can we help you know credentialize crypto can we convince people that it's not wampum that it's not beanie babies that there's actually something here can we explain the technology to people can we use our own money to invest and learn both make great wins and great mistakes and then take those lessons and bring them to our client base our invested banking clients our sales and trading clients our asset management clients and that's still in the core of what we do right it's using our our capital now

we're adding you know we're merging with bitco we bought bitco we're gonna be wallets in custody and building on shane and i took our whole team up away about three weeks ago i was like every single business is mandated to figure out how to put more and more stuff on chain like we can't just talk about crypto we've got to be crypto uh and so it'll be an amazing journey i think uh but that's really the core of what we're trying to do is learn the space and then teach people the space you mentioned recently um i think in the context of the bitgo acquisition um that galaxy digital will start building things directly on chain can you talk about your plans there for a bit

so d5 to start with right has been complicated for institutions right can you trade on it without being in the regulatory dog house and so first first thought was how do we actually uh get our regulators and ourselves comfortable that you know we know our customer and so we're getting very close uh we're actually starting to uh participate for the first time but lots of other people participated and they're like hey what are they gonna do you know arrest me and for the most part that was a fair assessment if you're an individual but if you're a regulated entity you gotta be pretty damn careful um and so i think what what's going to make defy explode is solving this kyc issue right

and there's lots of smart people right scotty and ave is coming up with his version uh spring labs is working on a version uh we've got what we think is a pretty unique uh approach so so the challenge here is basically like okay you want to use something like unit swap and you don't like there's no counterparty or like yes how do i know kim jong-il isn't on the other side of that right right and so there is no government in the world that there's almost no rational person that says you know let's build something that really works good for the kiddie porn purveyors or for the ransomware purveyors like ransomware is a terrible

threat to the world every politician thinks so rational people think so right uh kitty porn not so good uh financing you know terrorism not so good and so like you're never gonna give convince people that those are good things right and so you can try the one angle and say well that stuff happens in the other world too and that that doesn't resonate with people and so in order for crypto to thru to defy to thrive right or peer-to-peer to thrive there's gonna have to be some way that people get confidence that it's not

being used for shitty things like we hired the ex-head of the cia we being a consortium mike morrell who did a report on just bitcoin who said bitcoins barely used for illicit things much less than cash and much less than the legacy financial system so that helped write it calm people down that this is not all you know a bunch of crooks using bitcoin right it's a tiny tiny piece but you're not going to convince the regulators to say hey go for it unless there's some way and it's not going to necessarily be a perfect system right uh and and so there are a lot of smart people working at it there's going to be a system that isn't perfect for a crypto purist but is pretty damn close for a

practicalist and it's going to work and i know i'm going to get criticized people are going to say ah the moment there's kyc there's not defy it's just not you know listen you've got you know snarks and other ways to think about how who gets you know how much information anyone needs to see to to you don't need to know you know your identity to know that you're a person that i should be able to trade with so who will decide whether we should be able to trade with brian or not governments already have that decision power right they just do and so you're gonna still operate within the realm of in in in certainly in western democracies you're gonna operate within

the realm of the rules of western democracies or you're not gonna operate and that's like the reality of it like the long armor of the law if you want to you want to want to ask anybody call arthur hayes right i love arthur and you know he moved offshore and the u.s government got him because he broke the rules at least they said he broke the rules we'll see what the court decides and so not just the u.s government all these governments have tremendous amount of power and so working with them to create a system that continues to provide most of the benefits of crypto and retains privacy like privacy is a huge part of the american ethos

right like we're a company a country about freedom uh and so crypto is about freedom right bitcoin is about freedom are we a country with 100 freedom no no country is right when you get together as a community you by definition make concessions right i'm not allowed to kill you it's a concession i'm not allowed to you know have sex with animals it's a societal norm like you know they're concessions right we and so there are going to be some concessions and so the pure libertarians i think you know i used to say i eat libertarians for lunch it's a it's a it's a fantasy world

it's not it's not reality well cannibalism is also pretty frowned upon so it's uh not sure whether i would write but [Laughter] so arthur and bit max i mean obviously bit max is not really d5 right i mean bit max is a centralized exchange so basically if you look at a bit if you look at but my point on arthur in in bitmex was you know the u.s said he they thought he broke the rules even though he was overseas even though he was not living in the us and dealing with mostly non-us customers so they said no no no no and they're able to reach out and get him oh yeah i totally see that

so i mean the u.s authorities are very good at enforcing u.s law abroad i totally see that but for d5 where there's conceivably actually an operator-less system how do you see that linking in with kyc well it's who uses it right so they can regulate who uses it and so they can't regulate like it's interesting why i think d5 is going to explode is the moment regulators are comfortable with the kyc there's nothing else to regulate and it's transparent right i think d5 is going to work because it's a better system right it's not atomic settlement it's composable right you can build on top of it it's transparent most likely

the single best part of it is it's transparent right you can and so i think regulars will end up loving it they're just panicked about it right now mostly because who's using it and so they can pass a simple rule that if any institution uses it you're in big trouble if they say that we won't use it like you know i i don't want to go to jail and have my company shut down though the institutional part of the world still dominates where capital is just dominates right crypto is a tiny piece of the world right it's two trillion dollars out of a 400 trillion dollars of wealth uh and so for us to grow you need institutional mind if they wanted to go they could if they

if they really were panicked about it they'd say hey it's illegal for individuals to use it oh you can still do it but then you're breaking the law most people don't like to break the law i'm struggling a little bit with your argument you know because there's a bunch of reasons right so first of all i think governments like control right and guns like to be able to control their people i think we're seeing that you know in of course china is one extreme but you know even in even in the western democracies and if you see for example the kobit response right is very much around like uh curtailing freedom as well so i think there's that aspect there is the aspect of you know you have

this legacy in existing financial system which is so deeply ingrained in politics has so much influence regulations all around that and you know that's massively threatened and then you have fiat money right then the ability to print money that's like you know one of the most valuable things probably that many governments have so i'm struggling to see how they're just going to be go ahead with all this d5 stuff and so so let me let me the way i pitch it and it actually resonates with people is there's two different pieces to this there's they have a responsibility to be good stewards of our finances and if they're not

hard assets are going to appreciate in value if they continue to print money real estate's going to get more expensive every year bitcoin is a hard asset so bitcoin really is a report card against how the central banks are doing d5 and blockchain itself is a is a venture innovation it is an efficiency gain uh it's a transparency gain and so most regulators don't want to be anti-efficiency don't want to be anti-progress right listen the banks have a vested interest to fight this and they're going to be using all their muscle to slow it down and stop it i had a fascinating conversation i was

brought to one of the biggest banks so they had their 100 most senior executives for a day and the guy who organized and said we're really debating do we fight d fire do we join it you know like they were they were literally having that debate should we use all our lobbying to slow it down or should we actually just throw ourselves in and figure out how does it help us and so i'm not naive i just think you can separate the fiat piece of this right it's why all the governments know they need a stablecoin right every single one now i'm just on the phone with brazil they're all moving towards the central bank issue digital currency the world's going digital this is you know phones are gonna be our wallets not bank accounts uh you're gonna have a crypto wallet

that has your bitcoin and your if you live in brazil you're you're digital right eye and your opera tickets and so i don't think any regulator wants to stand in the way of that progress or quite frankly any politician uh publicly and so no one's going to give up the power to print money the power to tax your currency right and so in some ways bitcoin is a threat to bad governments and crypto really isn't i'd say blockchain really isn't and all the other you know nfts is it innovation now if they were really intellectual you'd say well nfts is just money too like this is all money what's what crypto is doing so brilliantly is

the exact opposite of what the internet did right the thing what the internet did was make all information broadly uh free right i used to have to buy the encyclopedia botanica to figure out the that the gdp of kenya was 95 billion dollars and now i pulled it up yesterday in eight seconds on google gdp of kenya is 95 billion dollars right encrypt we're gonna be able to put value on value on everything everything that deserves value so so if you kind of like let's say zoom zoom out 50 years into the future you know and like historians look back at this time and they write about okay there was this crypto ping bitcoin thing that came along

what do you think will end up being the impact you know like on a large historical scale that crypto has on the world that's a great question i think there's two paths right so we go down a gradualist path right that's the way history works until it breaks so let's just think about the us deficit for a second right what janet yellen and and jerome powell and all the guys in dc are trying to do is run our economy hot enough that creates enough inflation but not too much inflation to deflate away our debt slowly

which will slowly erode the value of your dollar but not enough that it makes you panic not enough that civil society breaks down so that's their goal put that in bucket one that can ha if that happens crypto can still do fine bitcoin will appreciate slowly uh we won't replace the dollar as a payment currency we'll still use the dollar you'll have a digital dollar instead of you know using your credit card you'll just you know shift dollars from one account to the x like it like we do with usdc uh it'll be abroad uh and we'll start trans we'll start storing value in lots of other ways

right so that's kind of the base case that people in dc hope for and in some ways we all need to hope for because the second case is inflation picks up much more severely than we think governments get nervous confidence breaks down in governments they try to ban bitcoin at one point there right we go through this what an emerging market country looked like i was in the center of the store when thailand went bust in 97 and the way their government reacted was one of a caged tiger you know slashing out at the speculators trying to screw people jamming interest rates up to a thousand percent and then the negative 500 percent to try to make traders lose money

in the long run it was all for naught right they had terrible policy in their country their currency went kaput and so if we see that happen in the western economies europe japan us you see a breakdown of the financial system it's devastation then you would see a step function where it could get replaced by bitcoin or some other version of what value is like we don't want that the amount of devastation that would cause amongst people's lives and fortunes and and the funny part is the guys who are wealthiest and are in the center always seem to be able to survive that right you know and it's the the masses that get wiped out their whole savings

get wiped out and so i was on the phone yesterday in kenya uh with like 100 young kids and i was like bitcoin specifically is important in the west crypto's important in the west but in the developing world in kenya and venezuela argentina it should be seen as a human right the ability to store your wealth in something that is kept at a global leisure should be a human right because think about these people in afghanistan mark my words within a day or two they're gonna freeze accounts and confiscate money right and it's like what i just worked for 20 freaking years to to make this bit of savings so i could send my kid to

college and it's gone and so when you talk to wences casares about why he's so passionate about bitcoin it's because his family's fortune was wiped out twice with hyper hyperinflation with big devaluations and so we buy i own a lot of bitcoin uh galaxy does not hoping the us has a hybrid evaluation hoping it has a slowed evaluation but knowing there's some optionality built in that the politicians really screw it up and i think the speed of adoption of this is going to be somewhat targeted by how well the stewards of our economy do listen the rest of it nfts

using blockchains for supply chains that's going to be on the same adoption curve as the internet was i quite frankly right now it's faster but better technologies always went out i should say always often win out and i think they will but the the macroeconomic piece is going to be determined in a lot of ways by how well the people in charge do every single macro thinker and i spent 30 years as a macro thinker i know is really worried that we've left ourselves such a tiny landing space they always talk about landing the plane well it's easy to land a plane on a giant runway they've left themselves a tiny runway to land the plane on

you know ray galio who's one of the great macro thinkers he told me he doesn't see how the us gets out of this without 15 years down the road some kind of debt restructuring think about the us doing a debt restructuring like argentina it's unheard of right and so we'll see to be determined interesting how do you think this is going to play out for the finance sector so do you think all finance is going to become crypto based or with will that still be you know two systems that run in parallel will they interconnect no i think it's going to take a while right this is transitions take a while so first we need stable coins once you have

stable coins which are coming then every one of the big banks is going to need to be able to trade them because you can't make so much money in currencies and not be able to trade your stable coins and so then they all invest lots in the infrastructure of you know custody and security and blockchains and wallets and everything else or they buy companies and it slowly starts morphing in there will always be a role for advisors right it's not like overnight i'm going to wave a wand and the whole population is going to be educated on how to think about investing right we don't want doctors to spend their entire life understanding what a yield curve is and why the shape of the old curve

should impact the price of equities right and so there will be plenty of room for specialists for advisors for people to say hey trust me on this that's broadly been what finance has always been about anyway and so i think they'll have to morph how they deliver their services and they'll be different banks that win in different banks that lose but they'll still be a vibrant financial sector right artists can care less about investments most of the artists i've met not all doctors lawyers military people judges right we don't want the whole world to be investors and so we'd like them to have a little more education on how the world works and how

investing works but there's going to be a big big industry for people to give advice and that's probably what finance is maybe maybe just speak a little bit more about galaxy where do you see galaxy digital and like where do you want to take the company i want us to be the marquee company uh or one of the three marquee companies uh in this space i want us to you know i love our venture business it is getting better by the week i want us to continue to invest in the best product projects uh we have an interactive business run by richard kim and sam engelbart that is just on fire right now right so if you want to learn about the metaverse

i i have not met anyone better than richard kim uh to really explain it and how it's happening so fast so social tokens generative art that whole space of you know how we're monetizing community how we're we're this intersection of culture and currency um and so that piece i think is going to continue to be a really important piece because that's the that's the the food for the rest of the machine i want us to be the one-stop shop for individuals corporates institutions and corporates to come to and say hey help me with my crypto you know be the service provider create my engine so it makes it easy for me or

help me understand which cryptos to invest in you know so i want us to stay on the on the cutting edge i want us to be a big asset manager we've crossed over 2 billion in assets under management you know i want that to be 100 billion one day and so let's bring in the the best people to help people both understand and manage this new asset class you know we're going to be close to 500 people i think by march of next year once we could you know big go gets closed and we just figured fill out the wrecks we have for hiring takes a while to digest that to to get it firing all cylinders but it's exciting to me because i literally think all the previous laps around the track you know when you go to a race

the cars run 10 15 laps around the track and then they bring out the checkered flag to start the race i think literally just last week the checkers flag went down when walmart and at amazon said we're looking when the congress said oh god uh i think that was the checkered flag that the race is starting like the crypto revolution is starting now all the rest of this stuff has been warm up and so it's pretty exciting and by the events last week you're referring to um the infrastructure bill right yep i don't think you could underestimate how important that was and i know maybe from a non-us perspective people like what what the hell is he talking about from the u.s perspective where a

tremendous amount of you know global wealth resides and a tremendous amount of you know crypto infrastructure intellectual infrastructure resides there was a wake-up call in this country read the new york times article there was a wake-up call in washington that this is a real industry that it's going to be here for a long time it's going to help shape this country and it's not going away that is what you should take from those 10 days so do you think we will see uh you know i mean so far right maybe there's a few politicians that have been you know somewhat crypto friendly but do you think we'll see a shift there that there's you know like uh starts to be kind of like a widespread support for

and also like a change in terms of regulations so i would i would tell you that most politicians were just are just crypto uneducated and i think every single person i've taken on the crypto journey all starts and i was like wow this is cool wow this is interesting wow none of them come back and like oh you're out of your mind dude right it's our my job for the last nine years has been to bring people into the tent to take people on the journey and now there's an army of people doing that job there was a small army when i started like dan moorehead lubin there's my friends uh you know brock pierce i

mean brock pierce probably turned more people on to bitcoin than almost anyone i know right there was a lot of people do it now there's armies morgan stalin has put 4 000 salesmen on the job and so we've gone viral and so i think it's important for people to understand when we take congress and the senate through this crypto journey they're not going to come out and say i hate it they're going to come out mostly the same way most people do the way paul jones and stan drucker motor came out and said hey unbelievably cool technology got to make sure we're using it the right way let me understand it more and so they they go down the rabbit hole as the crypto people like to say most people the great majority come out optimistic

and so i think it'll go the same way they just haven't taken the time at all and that's what ted cruz was saying he was like how dare we try to regulate an industry and put people out of work when none of us even know what it is and so it's our job as a community to help educate that it's their job as our leaders to educate themselves yeah ted cruz's speech was actually pretty interesting how do you think the addendum to the infrastructure bill um that basically posits that crypto should be used as uh as a way of footing part of the infrastructure bill that was going to be run up how do you think that got there so basically who put because i think gary gensler put it there and gary is my friend and i'm not

positive he did listen it came from the white house the white house the treasury department the sec they wanted to regulate crypto it's not about tax unless everyone thinks you should pay your fair share of taxes you can't not argue that in years you might argue tax rates are too high or we should have much lower tax rates but it's it's uh inconsistent to say i shouldn't pay tax and he should right it's it's not fair and so this was not about tax i mean if you think about we've got a government spending 120 billion dollars a month on treasuries this was 25 billion dollars over 10 years or two and a half billion dollars on a 1.9 trillion dollar infrastructure bill so it was a you know a fly on the elephant's ass this was a way of them wanting to

regulate crypto and they got caught no one i think in the institutional space thinks that crypto is going to be completely unregulated right and in some ways puts some light boundaries but don't over regulate a young industry because we don't even know what it's going to be yet right nfts didn't exist in lots of ways in people's mind until about five months ago and now it's one of the most dynamic fast-growing industries in the country uh that's impacting sports and music and anything full of culture and pretty soon you're going to see nfts for healthcare uh you know and so you want to have light regulation to start with and i think that philosophy

is going to win out the bill got through it will get through the house it will be a shitty law that doesn't start till 2023 and it will be fixed before that and i think that's what the market believes i think that's what will be true but so the bill still got through right at least in the senate yeah yeah because in some way on some level it's just so completely unenforceable and detached from anything it shows you how little dc understood about what's happening here so at this point do you think there are major risks for crypto or like what can go wrong

listen there are always risks right did we do we think china was gonna literally ban krypto and throw mining out like we went from 60 000 to 29 000 in large part because the market got carried away a little bit and then chyna said oops we don't like krypto anymore i think the good news is crypto took a lot of stomach punches right you had china regulators you had all kinds of negative news and were higher and so i'm really optimistic both on on the price listen trees don't grow to the moon you don't have huge moves and then have another huge movement another huge move but another issue like the law of large numbers catches up to you and if you look at adoption

where crypto's being adopted really fast market cap of the space has to kind of grow with adoption and so you know people say oh my god we can get to a million bitcoin next year no we can't we can't we can go higher but we're not getting to a million bitcoin next year we might get to a million bitcoin in seven years who knows but we're not getting there next year you just don't add a trillion dollars of market cap overnight and so i think like i said i'm more optimistic today than i've ever been a lot can go wrong always right can we get can i be wrong on my assessment of government can you get bad legislation can you

like there's going to be midterm elections coming up my guess is the republicans take some seats back and that actually just stops any you know regulation which is probably a good thing but i could be wrong on that i you know what's interesting is i don't think a hack does it but i think i can come up with some terrible like bizarre scenarios that would scare the out of people in crypto right i don't even talk about them because you don't want to throw them out there in the united states what's the worst scenario you can come i'm not putting it out there in the universe i'm sure your your bright mind can think of them you know it people don't understand it shocks me how many crypto

wealthy guys walk around with bodyguards i know 10 guys who who walk around with bodyguards and i'm like what are you talking about like i'm a pretty well-known figure now i'm on tv so goddamn much and you know i don't have a bodyguard well why don't i there's a fear that someone's going to get them and kidnap them and put a gun to their head and give me your codes and you know that no one will be able to find the money and that's it's not true to start with doesn't happen and so but you can see those fears play out the same fears that have those guys walking around with body guards could play out on a much bigger scale and that could scare the heck out of people i also wouldn't be afraid if i were wrestler

that's true too part of that is being a wrestler you always you always think you're tougher than you are too then you run into something like oops where do you think we're in the market cycle right now i literally think we are like i said i think the the training laps just ended and the and the race is beginning to start i i think we're that early uh that doesn't mean we're gonna go from 46 to 100 in the next month in bitcoin or i mean i'm looking at luna which is one of my favorite projects that guy goes up every day but i think we're at this acceleration of adoption we can't hire people fast enough and i know every one of my competitors is hiring just as fast and so this is going to be a big

industry in 24 months i mean think about it walmart and amazon the same week said we're looking to hire senior people and for crypto that means they're going to explore at very least and most likely accept at least dollar stable coin payments and if you do dollar stable coin payments you might as well take everything else because you can just hook into someone like us and we can we can instantly trust you know shift your bitcoin into into dollars or shift your luna into into dollars or right and so once you take one crypto payment you take them all you think when that's gonna happen the regulators will say

okay kyc and then you're good because to me that seems unlikely i think you'd be surprised like in lots of ways crypto is a payment system right stable coins is just a payment system if we believe it's a better payment system which i think it is it's gonna win out now the people are gonna fight it isn't it telling that both mastercard and visa are big into crypto now right how about this was a stupid idea when dan morgen and i first started talking about bitcoin we're like oh my god let's buy bitcoin and short mastercard and ibiza like what have been one of the worst trades of all time you know smart companies you know first of all

it took a long time for bitcoin adoption and you know that never even indented mastercard visa and mastercard visa a couple years ago said hey the world's going to go to this new payment system and we're going to be part of it and so mark my words if we have a crypto based payment system mastercard and visa are not going to not be good companies right and so it's interesting i think we're at this monster adoption phase i don't know how fast i'm not a good enough technologist to understand how fast these things happen i can just tell you what i feel that we're in an acceleration phase right now and so is it three years before like the world looks a little different

or is it five i mean remember you know the internet bubble was 99 and we didn't get facebook to like about 0.506 of the iphone about the same like takes long to build well uh we still don't have the novi wallet like when facebook opens their crypto wallet which they're dying to do and my hunch is they're now gonna do it with usdc instead of their own claim right it's just a stable coin they were only going to do a stable coin anyway right they originally were going to do their own currency right and then they switched to a stable coin or a series of stable coins my guess is this is just a guess no inside insight uh they end up using someone else's stablecoin because you don't make a whole lot of money in the stablecoin

business anyway you make it in the transaction business and all of a sudden two billion people with crypto wallets pretty freaking cool so you mentioned okay this kind of acceleration at the moment i think you know we all we can all see it and feed that and encrypt the space but like what we've had in the past right so there was like 2013 there was a big uh bull market adoption and then there was this bear market you know and for a long time it was kind of depressed and you know not so much new people came in activity slowed down a similar thing happened in you know 2017-18 and then you know 1920 and it was like slower like do you think these

kind of cycles continue and like what do you think are the determinants yeah what i would tell you i would tell you is you've got to be very careful you should have two graphs you should have a graph of the price of bitcoin and ethereum which were cyclical and you should have a graph of how many people are working in the industry and you'll see how less cyclical it is right and so every once while prices will jump ahead because enthusiasm because of macro forces but what i'm telling you is it's been a pretty steady and it's accelerating the amount of people coming in if you saw my analyst class we just gave six offers to you know some of the analysts

we had summer analysts one's smarter than the next these are the kind of guys that you know when i was in goldman sachs we would die to hire and so the human capital coming into this space every day is amazing like shove human capital into a space and they become productive our space is at the acceleration point and so i i don't think you're going to have this big cyclical move of of innovation development right it's going one direction it's just taking off right now we should make a bet how long does it take for walmart they've just posted their job offer to be part of the crypto community one year two years or three years right we know it's not three months it's probably 18 months two years

so the future is lined with all these forward adoption think about you're trying to decide we have all this ford adoption that's coming right very few like a few insurance companies have bought bitcoin a very few and they bought a tiny amount of it but they proved that hey bitcoin is a long duration asset in their mind right someone sold it to him ross stephens give a heads up uh right great sales guy from new york dig a friend of mine and competitor like why i don't even see my competitors as competitors as they were so early we're all collaborators right we're all bringing people into this ecosystem and so again it doesn't mean prices will get carried away and solana will go up and come down and go back up and in the long

run i do think the projects that win will have the highest value i've been getting killed on twitter because i took some shots at uh i didn't take some shots i just don't really understand cardano's appeal is the third largest crypto i understand why it's you know they're crypto communities are like british soccer fans right they become so passionate about their thing that there's not even a rationale hooligan i think i i think in the long run the real big market gaps are going to be things that have the most usage right now it doesn't mean i'm right about carnado and maybe it replaces ethereum i don't think it will uh or maybe cordano becomes just another

version of bitcoin where it's a store of value for that community i don't under i don't know anyone in that community which is weird because i know a lot of people in the crypto space institutions and i don't know people but there is a committee of cardano it wouldn't be worth 80 billion dollars if people didn't care and i can tell you every time i tweet about it i get attacked by 500 1 000 people violently you know and so we're in a weird world where value is being subscribed to things that make sense to some of us and not to others and so again it's impossible to predict exactly the rhythm of prices but the rhythm of this industry is going one direction mike um you've been in finance a long time um and a lot of the crypto

fogs are not finance native so what do you think is the most important thing that people in crypto miss about how finance works that's a good question actually so there's been a lot of growth in you know the credit markets in in uh crypto right companies like blockfi and celsius and hey you get you can get yield for free the one rule of finance is there's no free lunch right you're getting yield because you're taking credit risk in a counterparty that's unregulated that's very leveraged you might be fine

you might not be and you won't learn that lesson until you get burned and so i think there are some times there's an ayat today that there's a free lunch out here uh there isn't a free lunch it feels like it right now because we're so early on and all this water is rushing into the pipe and the pipe's not that wide so it's spitting out you know really fast but the rules of the universe still hold too much leverage will get you killed asset liability mismatch will get you killed what is asset liability mismatch when you borrow short and len long those are the two biggest ways to go out of business and lose your head and so kind of the rules there it's not like a new set of rules that we've

created right euphoria and fear existed traditional financing will exist in crypto and so in a lot of ways it's a new weapon for investors it's a new instrument a new asset but it's the same rules so no free lunch in in a way is very antithetical to the you know positive some words that crypto people you know keep dreaming up right well well listen again there is a positive side to this right how does value get created right like why does gold i always tell the story

you know gold's worth 11 trillion dollars and you can melt it all down all the gold has ever been found in the history of the world from africa to egypt asia africa egypt is in africa uh the incas the aztecs you know my wife's jewelry collection and it literally fits in a 50 foot by 50 foot cube right a a 15-meter cube that would be a sculpture in central park that would look very shiny and be like that's a 10 trillion dollar sculpture that's ludicrous ludicrous right it has value because we invested it with value bitcoin has 900 billion dollars of value because it's a social construct because we say it has value picassos are worth

20 million dollars because a small community people say it has value and so if we say it has value and now it has value because we say it has value and i trust that value because it's been there for a while then i can borrow against it and i can lend against it and i can use it to to do other things that's where it's a hugely positive some we've created magic internet money in 13 years that is awesome awesome breathtaking almost inconceivable and it's why a lot of the early crypto guys sold my god this was a great run it's really hard to hold it's just hard because you're like

what's happening is so awesome right you know i give joe lubin credit he never sells anything because he's had this unbelievably unshakeable vision i'm a trader i'm i'm a macro guy he was like though this is religion damn this is going to be the way and so i remember when ethereum was up at 1200 i was just begging him sell some just and then went all the way back to 90. and he never said god i wish i'd listened to you and now it's at what 3 000 very few people do that most sell because it's hard to have the imagination that this could actually be happening a trillion dollars bitcoin is probably the single greatest brand created ever and no one owns it

one little girl once asked me if i was a ceo of bitcoin i was very proud because i had that bitcoin goes to the moon song she liked that song and i was like i had to tell her i really wasn't i was just you know one part of a giant army michael saylor i'm sure people asked if he was the ceo of bitcoin he's not either uh there is no ceo of bitcoin right there are hundreds of thousands of them there's literally 130 million of them that's a pretty cool experiment yeah absolutely well one last question before we wrap up like what are the the questions that you're thinking about the most that you know like you feel like oh this is something i need to figure out to learn like that's going to be important but like i don't understand it yet

you know i literally go through that almost weekly uh it was funny i i got asked to keynote christy's big nft art symposium and i'm like oh god and i do what i always do when i get asked i call my two smartest people and the other three smartest people i know in the space and i get them to tell me everything that they know and then i kind of synthesize it and i did a fine job and i was you know honored to be there and thrilled and you know the other panelists were all far seeked more nft and they built all the projects and so it was a little embarrassing being the the macro guy but but what was funny is three weeks later i

was like wow things have shifted so fast in three weeks you know the industries are moving so fast uh that it's literally a monthly re-education to keep up if you're gonna try to be broad if you're gonna try to understand like you know what ringers are in the generative art world and why you know alexi cherniak is a in some ways an extension of of uh saul dewitt in the 1950s and why real art people are collecting generative art versus let's say avatar art right like the kind of real art community is looking at the generative stuff is kind of an innovation on on art

right and the the crypto punks are really being priced as collectibles not as art like that there's a i don't know i'm not sure if i'm right on that even that's my interpretation but the nuance of trying to understand how this nft world is working you know gamified stuff versus non-gamified stuff you could spend 24 hours a day just trying to keep up with nfts then you got okay what the hell's happening in d5 like what's the level one battles like why in god's name is luna and solana skyrocketing like what's happening with cardona like polka dot like how in the hell is this whole level one thing gonna fit together i i i'm sure i got four guys on my

floor is gonna come in and explain it to me in the next you know 24 hours but it's complicated and it changes all the time uh and so i think if you're going to be in this industry it is an industry of a lot of homework luckily so much is on the internet like youtube i told these kids in kenya yesterday it's like the lucky abs there's unbelievable great stuff on youtube and on twitter but you have to actually spend two hours a day not just skipping it but actually working and reading and you know it's 56 years old we got a lot of other stuff to do that's a it's not an easy task yeah absolutely well thanks so much mike it was uh great to have you on and i'm excited to see

where you know you'll take things next with galaxy and in general in your journey in this wild new world i certainly hope it's to the moon thank you for joining us on this week's episode we release new episodes every week you can find and subscribe to the show on itunes spotify youtube soundcloud or wherever you listen to podcasts and if you have a google home or alexa device you can tell it to listen to the latest episode of the epicenter podcast go to epicenter.tv subscribe for a full list of places where you can watch and listen and while you're there be sure to sign up for the newsletter so you get new episodes in your inbox as they're released if you want to interact with us guests or other podcast listeners you can

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