PAUL VERADITTAKIT: Anybody could be raising capital from anybody around the world and there was less limitations. You didn't have to be accredited. And on top of that, you can get liquidity almost like the next week.

And with an ICO, you would set up a website and you would offer your tokens to people, people would subscribe, and you would distribute those tokens back but you're doing all the KYC yourself, you're taking on that liability. With an IEO, you're going through an exchange. They typically had allocations for PE and VC. And so, with our VC fund, yeah, endowments, pension funds, funded funds- they're really more receptive than ever.

TYLER NEVILLE: I'm Tyler Neville with Real Vision. And I'm sitting down with Paul Veradittakit, partner of Pantera Capital. I'm really looking forward to getting his view of the cryptocurrency markets because Pantera has been a premier player in the space for years now.

Paul Veradittakit, partner at Pantera, we're really happy to have you back. We had Dan about a year ago on Real Vision. I'm really excited to get you here.

PAUL VERADITTAKIT: Really excited to be here for the first time. I've heard great things and our colleagues love you guys.

TYLER NEVILLE: Love it. Love it. Great to hear. So, why don't you just give us a recap of Pantera and how you began?

PAUL VERADITTAKIT: Yeah. Pantera's started by Dan Moorehead. He used to be at Tiger Management. He was CFO, head of global macro trading. Pantera used to be a $1.5 billion global macro shop. And then since 2012, 2013, focused exclusively on investing into cryptocurrencies and blockchain companies and assets. Right now, we've grown from a small team all the way up a team of 25 people right now. We're very, very institutional. We have guys with backgrounds from Bridgewater and JP Morgan, et cetera. And a great team of just really experienced investors with a good track record.

Right now, we managed about 600 million of assets under management across four different strategies. So, we have a Bitcoin Fund, which is like a private ETF or a Bitcoin tracker. It just allows people to buy bitcoin through us. They tell us when and how much they want to buy, we do it for them. We manage everything in the backend. They don't even know about it. They send us USD, and whenever they want to sell their Bitcoin, they get USD back. We also have a VC arm, which invest into blockchain companies that are raising equity. Now, the equity is purely equity, but sometimes it could include tokens as part of it, but I think that's going to be a smaller subset of the fund.

And then we have what we call our ICO Fund, which is investing into presales. So, if you guys are familiar with ICOs, initial cloud offering, before, you go out to the public with your token, whether it's just launching it to the public, where they can buy it off exchanges, or whether it's directly selling it through exchanges, before that, you need to raise capital to build up a team, build up some product, maybe do some marketing, solve regulatory issues. And all of that is what institutional investors like us will be investing into before the ICO, it's called the presale round. And so, that fund invest into presale rounds of projects. And then eventually, we'll get out of those tokens and go back into other presale rounds.

So, it's a pre-sale focused fund, call it like early stage fund for tokens versus our fourth strategy, which is our digital asset fund. You can call that our growth stage strategy for tokens, where we're actively investing into cryptocurrencies that are already on exchanges. Just like anybody else, they can go and buy them on exchanges. But the advantages were discretionary picking tokens that we think are going to be successful lease in this short, if not the medium to long term. And most of that fund is discretion, we do have the opportunity to short positions if you want. And we also have the opportunity to layer on different strategies. It is a multi-strat active fund where we can also do some quants, we can also do some fixed income strategies, et cetera.

TYLER NEVILLE: Interesting. Any ARB strategies?

PAUL VERADITTAKIT: We're thinking about that. Nothing is out of the question. I think with ARB, spreads are getting smaller and smaller, and it's not as scalable, but anything's possible.

TYLER NEVILLE: Gotcha. So, why don't you give us a recap of the end of 2017, beginning of 2018 up until now, how's the ecosystem changed in Pantera's eyes?

PAUL VERADITTAKIT: Yeah, it's crazy. I can't even tell you a little bit about like just when I joined Pantera, 2014, and how it's progressed all the way until now. It's been crazy. So, my background is mostly in VC. I'm being a VC now for nine years. And so, that's what I brought the Pantera like the hedge fund experience with Dan, you got Joey with the operational technical experience and myself at the VC experience. So, when it was 2014, when I joined Pantera, I think there's only 10 companies in this space, I could list them all on a piece of paper. And I was like, all right, which ones do you want to hit up right now.

And it grew quite a bit in 2015, we started seeing a lot of exchanges, a lot of cross border companies. And then 2016 was the year where all these enterprises, Goldman Sachs started making investments, JP Morgan started doing their private blockchain stuff and things started slowing down a bit, there wasn't any consumer traction, whether it is speculation or whether it was store of value. And then 2017 was just like you mentioned, it was insane. What really brought that on was- we had Bitcoin as a store of value and then started off as a way to move money across borders, that was like a big use case for Bitcoin and still is actually the biggest use case all cross border payments are done using Bitcoin versus any other cryptocurrency and that's where it most liquidity is at.

And 2017, or actually, late 2016, was where we started diving deeper into Ethereum and the ecosystem started going, a lot of developers started building on it. And the first use case was being able to issue a token to have a function within your product and technology and be able to actually raise capital for your open source project, from not only private investors, but retail and community investors. And that's a great way to give skin in the game or give value of your project to early adopters and have them go out there and promote and sell your product and your company. And that just turned into wild mania. 2017-

TYLER NEVILLE: Liquid venture capital.

PAUL VERADITTAKIT: Liquid venture capital. And I think on top of just like the liquidity part, but it was the global part too. Anybody could be- any retail investor could be investing to any project all over the world. So, traditional venture capital, it's about like companies looking at certain way, companies being built in certain locations. Now, anybody could be raising capital from anybody around the world, and there was less limitations, you didn't have to be accredited. And on top of that, you can get liquidity almost like the next week. And so, you put that all together like, over 20 billion has gone into this space, so a lot of it went in on 2017.

And we're seeing projects go out there, hit the market, and raise their private sale, raise their crowd sale. And a week later, they're already up 5, 10, 20X. I've seen some, like, within the span of weeks, hit 100X, in terms of return. It's insane. I still remember like we did a sale, or we participated in a sale, and it was up 3X, and we were just so disappointed.

TYLER NEVILLE: Triple my money?

PAUL VERADITTAKIT: Triple my money. This is not great compared to the norm.

TYLER NEVILLE: The government came in and started hovering.

PAUL VERADITTAKIT: Exactly. So, what happened in late 2017 and early 2018 was the government started sniffing around, the SEC started cracking down on some really obvious scams. I think it's the combination of the taxes to the SEC stuff, which also- and then basically investors getting smarter and then I think the fourth thing is the exchanges themselves. They're being targeted by regulations, because those guys are the gatekeepers in terms of who gets to access these cryptocurrencies, in which cryptocurrencies are being offered to investors. And so, once the exchanges started to slow down the listing of tokens, that in combination with projects, like actually putting up lockups and investing schedules.

So, one of the big things that you mentioned that was really appealing about this space to investors was to be able to make money, but in a quick way, generating high IRRs. And once that became gone, and there was a lot more requirements and a lot of regulatory uncertainty, a lot of this scam projects started to back away. And what we saw in 2018 was the prices dropping, people are selling, uncertainty around the space, and then capital just starting to back away.

TYLER NEVILLE: As someone who is in the space and is, well, probably the most venerated firm in crypto, did you guys know it was just so much shit at the time? Or was it just like, oh, my God, the capital's coming in, if we don't participate, we're going to underperform? Was it a little bit of both of those?

PAUL VERADITTAKIT: Yeah, there's definitely pressure to deploy capital into exciting projects, and knowing that there was liquidity there, you can really just act more like a hedge fund a bit. But nevertheless, we had a ton of capital that was coming in, and we wanted to make sure that we were getting it out there and helping our company succeed, and really just taking advantage of this momentum. Nevertheless, we've been long term investors in this, we come from more of- I come from more of a VC background. So, every single project that I invest into, I want to try to help them maximize their potential. Obviously, some projects aren't going to get there and then you take a step back and you recalibrate and go into projects.

But yeah, there was definitely a lot of pressure to really go out there and hunt for these deals. And it's tough, because at the time, there was just a ton of capital, capital was a commodity. And I think for us, being Pantera and having that reputation, having all that value add that you can bring to projects, we always had the opportunity to participate at least in some way. But the clock was ticking, because every project had so much available capital that they'd rather not spend a lot of time on fundraising. So, sometimes we get projects, and we would have two or three days to make a decision. And if not, we lose our spot.

And that's not great. Because, as an investor, it's hard to do great diligence in two, three days and make sure that you are covering all your bases, and so a lot of times that you really had to just work really, really hard to get these deals done. And you're right, there's a ton of noise out there. We were getting maybe 60 or 70 white papers a week. And so-

TYLER NEVILLE: Just a pure supply of it, probably.

PAUL VERADITTAKIT: Just a pure supply of it. And you know how you get your best deals mostly from referrals. I think that's where that channel really mattered more than anything else. A lot of the cold email is we'd have to- we look at everything, but we really prioritize papers that were coming from really strong referrals and really strong connections, because you just can't go through like that type of volume.

TYLER NEVILLE: Yeah. Especially with five, 10 people at the time, probably, more.

PAUL VERADITTAKIT: Exactly, and only three or four guys in the investment team and just focusing on investments, but then also trying to help your companies. To be able to do all of that, it was it was really tough.

TYLER NEVILLE: And since it's calmed down, the one message that you guys have had throughout this whole time is, this is a long, we might be in the first inning of a nine-inning game. And you guys have been there consistently saying this is a long term investment. Can you talk about that, your competition, like what happened to all the capital that was fast? Are those funds now just under? And are there more giant institutional funds coming up to the plate where like you have Fidelity, I believe, is starting a crypto fund, there's a lot of giant mega financial managers getting in this space? Can you talk about that a little bit?

PAUL VERADITTAKIT: Yeah, so you're right. In 2017, we saw a lot of capital that was looking to make a lot of quick money in this space, and a lot of it was coming from Asia, but actually, a lot of it was in the States too, and all around the world, but definitely a high proportion of them were in Asia. And once 2018 hit and liquidity went away, and the ability to more easily make money in a short amount of time just went away, a lot of those funds have just pulled back and shut down. And that plus when the market's down like that, a lot of their positions were in Bitcoin and Ethereum and other tokens, and their LPs are not institutional. And so, they're not going to be backing them up and those things.

So, a lot of those funds have gone away, and the ones that have survived are funds like Pantera that have been doing this for a long time. And I think the great thing that we've done is we've continued to be very transparent, not only with our LPs, but with the community, and we tried to educate the market on what is going on. I think the first thing that we educate them on is we are stewards of your capital. And we've been doing this since 2013. We've seen Bitcoin go up to 1300, we've seen it go down to $139, where everybody was pinging saying, hey, man, like I told you not to look at this Bitcoin PE. It's going down to zero.

TYLER NEVILLE: Is that your indicator to just cut a scoop some knowing Dan's background as a trader?

PAUL VERADITTAKIT: Yeah, exactly. So, for us, we've seen these cycles, these cycles don't faze us, we know what to do in every single one of these cycles. And that's continue to invest, good prices to get in, good valuations to get in, this is a time when most of the buildings can be done. This is a time where the best companies are going to come out of, and that's how we see it. So, this is great. The competition is moving away, and we're going out there, and we're getting the best prices, getting into the best companies. But you're right that the best thing about 2017 was it brought a lot of awareness about this space, in a good and a bad way. The bad way is my mom, during Thanksgiving in 2017, was like, hey, I heard about all these ICOs, my friends is telling me to get into it. And I was like, Mom, stay away, stay away. This is definitely at the peak of the hype.

And so basically, it's gotten a lot of attention to institutions. And that means that great entrepreneurs that are trying to create infrastructure to help institutions get into this space, it also means that institutions are thinking about ways to participate, whether that means like starting to think about how do we hedge in trade derivatives to maybe even setting up funds to be able to participate in this? And maybe the investing into funds, institutions, endowments, funded funds, and now looking at Pantera and other folks. And that means other experienced investors are also starting to branch off. We've already seen some other folks leaving some of the top VC funds to start their own crypto focused funds.

And so, we're seeing the institutionalization of the fund space too which is great. Your next question is like, how do we differentiate from all these new guys maybe? I think for us it's the track record. We've done this before. It's the network and being able to provide more resources than anybody else, whether it's Dan's background in institutional finance, to Joey's operational and technical background, to my connections doing VC for the last nine years, especially in this space, where I think compared to any other US fund, Pantera has invested quite a bit outside the United States. 30% of our investments are outside the United States.

So, that means that we're looking at geographies where we think distributed ledger technology and cryptocurrencies make a lot of sense. And therefore, we're building up really deep connections in all of these different communities. And what that means is we can provide a lot of value add when companies want to scale their teams globally, or want to market globally, or want to get liquidity, which again, most of the top exchanges are outside the United States and all the exchanges doing IEOs are out of the United States. So, those global connections are really helping us stand out from all the rest of the firms that are based in Silicon Valley.

TYLER NEVILLE: What's an IEO?

PAUL VERADITTAKIT: Yeah, it's a new thing. And actually, it was funny. Also, I'll tell you what an IEO is. And I'll tell you something that happened today, which is pretty interesting. So, an IEO an initial exchange offering. And it's the new version of the initial crowd offering. So, the two goals are the same. Both strategies are wanting to get tokens in the hands of consumers or retail traders or day traders, or just mainstream folks. And with an ICO, you would set up a website and you would offer your tokens to people, people would subscribe, and then you would distribute those tokens back, but you're doing all the KYC yourself, you're taking on that liability. With an IEO, you're going through an exchange. Yeah.

So, you're basically telling the exchange, hey, we want to sell this amount of tokens at this price. We want you guys- you guys have already done all your KYC. You know who all those users are. We want to target these type of users. We don't want the US because of regulations. We don't want China because the regulations over there. And we don't want any of the other. But we want these folks and then basically, let them subscribe to it. And it just gets chopped up in small chunks. And it's offloading the liability and the process. And maybe even the technical and security risk of doing a crowd sale to these exchanges that already have the license and the process to do it. And right after they do the IEO for you, they also listed on your exchange. So, that two-step process gets molded into one.

TYLER NEVILLE: So, almost like the brokers Morgan Stanley, Goldman Sachs just got boxed out in exchange, the New York Stock Exchange.

PAUL VERADITTAKIT: Bingo. Bingo. And so, it's a pretty big trend now. Because before that, there was just uncertainty on how do you get your tokens out to the