DAN MOREHEAD: Yeah, so I think the reason I'm excited about Bitcoin is when you have a disruptive technology, they call it a category killer. Bitcoin's a serial killer. It's going to go through 40 or 50 different industries, well storage, cross border money movement, property titles, voting rights, identity. Those are all the biggest use cases on earth.

DAN TAPIERO: Good afternoon, everybody. I'm Dan Tapiero of DTAP Capital, GBI, Gold Bullion International. Today, I'm happy to be here with an old friend, one of the few guys with a strong macro background who is in the Bitcoin world, Dan Morehead, and I have to say we've known each other probably 20 years, so this might be a little lighthearted chat as well. Now, Dan was the first traditional macro fund manager to identify the Bitcoin opportunity.

Just so the audience understands, what that means is that the macro world that we're in is filled with some of the greatest investors of all time, George Soros, Julian Robertson, who we both worked for and Dan was the sole manager in this space to identify it and execute on it in that world. Of course, others followed. Some of our contemporaries as well. I think generally, as a macro guy and looking out at the Bitcoin world, Dan is one of the guys on the Mount Olympus. I know I said that the other day and you chuckled a little bit, but from our perspective, the guys who saw the opportunity but didn't execute and transact on it, Dan really lead the way. With great pleasure, I introduced Dan Morehead. Dan.

DAN MOREHEAD: It's great to be here. Thanks.

DAN TAPIERO: Yeah. Why don't we just talk about that initial moment? There's a lot of-- you've done a few interviews and I've watched them and I don't want to go over the same stuff like, what was your Bitcoin moment, but in a way, having your macro background, what in that allowed you to see that Bitcoin was a great opportunity?

DAN MOREHEAD: Yeah. In macro, we're always traveling around the world looking for asymmetric opportunities. You put $1 in, you might be able to make five or 10, but you can only risk one. There are a few those that come along. Every three, four years there's something like Russian privatization or Argentine farmland or Tesla Motors. There's a trade like that that comes up. That's been a fun experiences. Tiger and my career before that, looking around for those things, and then in 2011, my brother introduced me to Bitcoin. It took a while to get my head around it.

There was only a few things on the white paper and Wikipedia was like a half a page. I thought, oh, yeah, that's really great idea. I hope it happens, but didn't really do much about it. The funny bit is that was back when they were giving away free Bitcoins. Gavin Andreessen, who was the chief scientist of Bitcoin had a thing called the Bitcoin Faucet and all you had to do is log in and get free bitcoins, that's how fuzzy that thing was.

Then in 2013, Pete Berger of Fortress and Mike Novogratz, who I'd worked with and gone to school with, called and said, hey, we're starting to think about Bitcoin, you want to have a coffee and talk about it? After about an hour, my head was starting to spin. I basically just focused on it for the next three or four months, didn't do anything else other than read about Bitcoin and I can't believe it's the biggest trade of our generation, so I'm all in.

DAN TAPIERO: Yeah, but how did you-- I understand you did the digging, but there are a lot of macro guys just as smart, they didn't quite make that adjustment, they couldn't quite see it. Bitcoin to me is different than those other macro opportunities because you could still use a traditional macro framework for understanding it. Yes, a symmetric risk reward etc., but what was it that pushed you over?

DAN MOREHEAD: Yeah, so I think the reason I'm excited about Bitcoin is when you have a disruptive technology, they call it a category killer. Bitcoin's a serial killer. It's going to go through 40 or 50 different industries, well storage, cross border money movement, property titles, voting rights, identity, and those are all the biggest use cases on earth. If you think about somebody who invents like a new medical device, and there's only 100,000 people on earth that have that condition, it's pretty kept on with that medical device's worth.

This is going after the biggest things, 300 billion of electronic payments, remittance. Well storage, gold is your well where $7 trillion market cap, and even currency, currency is 100 trillion market cap. All of the cryptocurrencies combined are a quarter of a trillion. That's the leverage I'm talking about, you're starting with such a small base against an enormous opportunity. Even if blockchain fails that 10 of those use cases, there's still 40 other use cases it's really good at and that's why I think it's the trade of a generation.

DAN TAPIERO: Why do so many smart guys still resist it? I can go through various examples, while one of my old mentors even went on TV a month or two ago and said, I just don't-- a guy in his late 60s, very well known, I just don't get it. I want no part of it.

DAN MOREHEAD: Yeah. One of the rationales is we already have a currency, the US dollar. Why do we need to currency? My argument to that would be yes, you and I live in the United States, we have solid financial system, we have a currency that only depreciates 90% over the last 80 years, so it's not as bad as some of the other currencies out there. But keep in mind there's 200 currencies on earth and bitcoin's just to a one. There's a lot of people that are--

DAN TAPIERO: But a global macro guy should get that. What's stopping them? You know the crowd? Our old crowd.

DAN MOREHEAD: 6 billion people live in countries with really crappy currencies. They vastly benefited by using Bitcoin or another cryptocurrency. Sometimes, I think people just resent something that's an asymmetric trade that they missed and maybe this is a bit of a West Coast, East Coast thing. Like every Lyft driver in California is talking crypto and Wall Street people are probably more negative than people on the West Coast.

DAN TAPIERO: Right, and that's where traditionally the financial macro guys have been and are so. That's interesting. Is that also an age divide thing?

DAN MOREHEAD: Yeah. I think there's a big age divide, obviously, millennials have grown up, VenMo and everything and totally living on their phone and mobile money makes sense to them. Then the older generation might be a bit more reactionary. A good example of the negative opinion from very famous investors, Warren Buffett has been a fantastic investor but on Bitcoin, he's been super negative. He likes to call it rat poison.

DAN TAPIERO: He's still rat poisoning.

DAN MOREHEAD: I think he caught up, but at least a year ago, he's still doing it. My point would be when he first said that, Bitcoin was trading at 200 bucks, it's now at 10,000. I don't think it's 100% certainty that Bitcoin was going to go up at $200. Even here, I don't think it's 100% certain it's going to go up, but on a risk adjusted basis, it's a fantastic trade. Because if you say it's a bad trade at 200, and it actually goes to 10,000, you needed to be 99% sure it was going to go to zero when it was at 200 to have it not be a rational trade.

That's my view, is it's speculative, it could certainly go down. It's had some periods where it goes down 80% in six months, but it could go up 10x, 50x, numbers you just don't see in any other asset. That's the asymmetry that I think makes it a great trade.

DAN TAPIERO: Yeah. People in the space talk a lot about adoption. That's why I was asking you about when can we get some of these smarter guys imagine -- Xi, President Xi of China comes on TV and he says, well, we're going to be the leaders in blockchain technology then goes up 30%. I don't like attributing news to movement in Bitcoin. I think that's the trade. That was a very supportive comment, when-- we talked about adoption a lot in the space, what's going to be that Netscape moment where guys go, aha?

DAN MOREHEAD: Yeah. A common thing for the negative people on Bitcoin is like, hey, there's no killer app of Bitcoin. There's really two answers to that. The first half ironic answer is well, bitcoin's the killer app of Bitcoin. It's already storing 200 billion of wealth. It's been doing a great for 11 years. It's 24/7 uptime, never been counterfeited, never been hacked. That's the combined value of all the sexy unicorns together. Like Lyft, Uber, whatever, WeWork, that all that were still--

DAN TAPIERO: WeWork disappeared.

DAN MOREHEAD: Well, 7 billion still. You add up all those supposedly amazing apps, it's no less than Bitcoin. Bitcoin's done a great job already. Even when the detractors say, oh, it's just digital gold. Well, if that's its worst case, that's amazing. 7 trillion market, that's fine. That's at least the first layer, but when you peel that onion back, it's really already working great for cross border money movement. In the US, our systems were great. My REI card gives me 1% cash back so I don't think the system's broken.

But if you do don't live in a developed economy, the system's totally broken. Like if you live in an emerging market current country, you know your currency is depreciating and it's very hard to move money around. In the developing world, Bitcoins are already very well used. I'm on the board, I recently left the board of [indiscernible] in Africa, it's now doing $150 million a month of business helping people move money around Africa with Bitcoin. The funny surprise, when we started the company, we thought it was all about remittance, 300 bucks, 500 bucks. They have huge multinationals using it because it's so hard to move money around Africa [indiscernible].

DAN TAPIERO: Is that right? Like which ones?

DAN MOREHEAD: It's like top10. It's like top 10 multinationals because the banking system is so difficult. The regulations, very expensive. There's only two correspondent banks on earth that can move money into or out of the 29 countries of Africa. It's really expensive. The remittance cost into Africa is 12%. If you have a migrant worker in the United States, they spend more than a month working for their remittance company. Their family only gets 10 and a half months of their wages. It's very expensive.

The other example would be we just sold a company called Coin.ph in the Philippines, they have one out of every 10 adults as a client. That's already totally real. It's totally happening. That'd be a great example of the future of money. There are three times as many Filipinos with a Facebook account, as with a bank account, and honestly, that's where we're heading. That people are used to dealing online on their phone, and the future of money is on a phone rather than with some big ionic column marble bank branch built in every 10,000 islands in the Philippines.

DAN TAPIERO: Right. Where you worked for years before Tiger. That's a nice segue into Libra. You mentioned Facebook and Libra and Culebra. Do you think that's the future?

DAN MOREHEAD: Oh, I think that is definitely the future to have a global, essentially stable coin, a token that doesn't have the volatility that Bitcoin or XRP has. There's different use cases, Bitcoin, XRP are going to do some amazing things, but the global consumer wants something that's not crazy volatility, something pegged to a basket of currencies. I think David Marcus at Facebook did a great job creating Libra and all the partners that came together. It's a brilliant design, I think they walked a fine line between being totally centralized, walled garden, like the data monopolists are doing most of the businesses and that's very difficult to get through. That would be DOA basically.

Then on the other extreme, it would be totally decentralized, which is really hard to organize and probably wouldn't ever get off the ground. They did a federated system where 100 different entities will stand this thing up and then over time decentralize it. Facebook's only one of those hundreds, so they're taking an enormous amount of the attention, but they're only 1% of the ownership of Libor. It's going to be very broad constituent group.

I think they did a genius job picking a basket of currencies. Most stable coins are backed by the US dollar, a few are backed by gold, but this is the first one at least I'm aware of where they picked four or five currencies, the dollar, the Euro, the oldest currency on Earth, the British pound, and one of the oldest currencies, the yen, and gives-- so it gives everybody on Earth a currency that's pretty stable relative to their own currency. They don't really have to think about it. They can store a couple hundred bucks in Libra and if they need to buy something from a foreign merchant, or if they want to do an Airbnb purchase in another country, they can use that as a global payment system.

DAN TAPIERO: Do you think they'll incorporate Bitcoin in there even 5% or 3%?

DAN MOREHEAD: Oh, that's a good question. I don't think there's any current plans to do that. In reality, I think they didn't do themselves as-- by calling it a brand new currency really got the regulators hyperventilate. It's really just a money market fund with a little IOU depository thing attached to it. I think it's funny that Franklin Templeton announced a money market fund that's on the blockchain and essentially, nobody cared. When Facebook announced something that's just a for-currency money market fund, but they called it a new global currency, everyone went crazy.

DAN TAPIERO: I guess that leads into the next thing about regulation. Everyone goes crazy just on a buzzword. How do you see regulation developing, it seems to be more intrusive in the US and less so other places, want to talk about how do you see that developing?

DAN MOREHEAD: Yeah. There's a great line that the former chairman of CFTC, Christian Carla, said at our conference couple weeks ago in San Francisco. He called Libra and then the Chinese announcement, the Sputnik moment for global currency. I really think that's a great line. For the youngsters out there, Sputnik was when the Soviets launched the rocket and the US was way behind in the so-called space race, and really got the entire government, Eisenhower and Kennedy, to engage.

I think we're there now. Facebook put us on notice that they're going to launch a global payment system slash currency. Then the Chinese announced essentially similar and competitive venture. It is essentially game on for blockchain. I think that Facebook's announcement's fantastic, because it basically started the clock ticking. Somebody has to get this done, whether it's Libra or something like it, or even the Chinese version, somebody will get this done in the next couple of years. I think I'd love to see the United States continuing to lead. The US basically led the development of the internet, we should hopefully lead the development of a global currency.

DAN TAPIERO: Oh, so you think that's where we're heading? We're heading towards a global currency in some form or another?

DAN MOREHEAD: I think so. There's a great line I've always loved from the Watergate era, Haldeman told the White House Council, once the toothpaste gets out of the tube, it's going to be really hard to put it back in. Satoshi got blockchain out of the tube. I feel like regulators right now were trying to stuff that toothpaste back in the tube and it's out-- so it's game on, somebody's going to do it. There will be I think a handful-- I'm not a maximalist, there's just be one global currency.

I think there's going to be a single digit number of global currencies. There's going to be probably the existing ones, Bitcoin, Ethereum, XRP but there will be some stable coins, like Circles, USDC or Libra. Then obviously, there's going to be Chinese version of those.

DAN TAPIERO: Yeah, but what about other countries getting involved? The market now is still relatively small. If you think the entire market cap, including the value of the equity, the old coins, it's close to 400 billion. Big number versus what it was. Does Russia get involve? Does the EU decide that they want to get involved? What's the chance that you have some other countries really start to focus on it and that it really is a global Sputnik moment?

DAN MOREHEAD: I think you're right, is that it's now game on. All the countries are going to try and figure out their digital currency strategy but digital currencies don't make things better just by being digital. Russia's announcing bit ruble. It's probably going to be episodically terrible as the ruble, ruble. By just making it a token doesn't make it something you'd want to store your global currency reserves in.

Tokenization has only a few advantages. One is speed of transfer and in the US, Fed wires is three hours. Antiquated. There are countries like Korea where you can do domestic payment like two nanoseconds, whereas in the US, it's three hours. Even if you want to send your counterparty a million dollars, it would still take you three hours to get it done. A token can do it in seconds. That's great.

The other one is borderlessness. US Fed wire only works in the United States. If you want to send money to Japan, it doesn't work. Then you have to click into SWIFT or some other really slow system and so those are really the two principal advantages, borderlessness and speed. The principal value still-- of what's backing it like US dollars or a basket like in Libra, I think it's what people are going to be comfortable with rather than getting some new currency like the bit ruble, I don't think it's going to be huge.

DAN TAPIERO: Right. I often say that if Bitcoin is 20 things, digital gold, for instance, is just one of those 20 or payments is another one. What about the whole concept of programmable money or the leverage off of the security network? How do you think some of those things projects in those spaces are looking and what do you see in the future?

DAN MOREHEAD: Yeah, it's really exciting.

DAN TAPIERO: It's other use cases in ways.

DAN MOREHEAD: Yeah, Bitcoin has collective communities decided to keep it very stable, not change it, which is an advantage if you're storing a couple hundred million dollars of wealth in it. Disadvantage if you want to do higher order things like smart contracts. Ethereum has essentially taken that use case.

It is like you said programmable money, so you can do really cool things where you have conditional payments that only a computer is activating, so you take out all those middlemen, the Escrow agents, the casinos, all the people that take a rake from helping conditional payments be processed. Those have not been as successful as people had hoped essentially because of the very small throughput of both the Bitcoin blockchain and Ethereum blockchain. Each of those can do