Top Crypto Investor Looks Forward
Featuring Barry Silbert and Raoul Pal
Published on: June 17th, 2019 • Duration: 48 minutesBarry Silbert is the founder & CEO of Digital Currency Group, a company that has helped build the foundation of the digital currency and blockchain technology industry. DCG has been so successful to date that its investment trust is worth as much today as the whole asset class five years ago. But what comes next? In this interview, Raoul Pal tries to get to the bottom of how viable cryptocurrencies are over the long-term. In addition to talking about cryptocurrencies’ viability and volatility, Silbert addresses the need for crypto to serve as a speculative vehicle, policing fraud and illegality. He also speaks to the utility of blockchain outside of the currency realm. Silbert then discusses his views on bitcoin versus gold, and on the generational divide driving changes in the thinking about stores of wealth. Filmed on June 4, 2019 in New York.
BARRY SILBERT: Younger generation investors do not view gold the same way that my parents or grandparents did.
There are still very few break out examples of how blockchain can or will be used for non-speculative, non-financial use cases.
The thoroughness that you see in other asset class research does not yet exist.
If history repeats, which doesn't always- but if it does, you would expect that the all-time high of 20,000 will be taken out in this next run.
RAOUL PAL: At the very beginning of Real Vision, we cared about cryptocurrency. We thought there's a future in it that was going to be an important future of the financial system. And we've gone through some booms and busts. But that whole narrative is still very important to me personally, and I think to Real Vision, and to many of you in the financial world. We know it's not going away. And one of the first guests we ever had on that brought us into this crypto world was Barry Silbert.
Barry's an old friend, and he's a great thinker in this space. He understands the juxtaposition between financial markets and the digitization of assets and cryptocurrencies and blockchain and all of these things. He's been a pioneer in the field. And it's super nice to get him back on so we can just kick around the tires of this space, and really see what's going on. It build on from the Mike Novogratz interview that we did back in October, where it starts to build on the story of where this is really going now.
And as we know, this is not a very straightforward journey. It's a very complex world we're developing here, but an exciting one. But one of the key things is Barry started an advertising campaign that to many of you is going to be the worst thing ever. It's questioning the value of gold and raising the value of cryptocurrency versus gold. And I think just to start off, I want to show you that commercial, because it's going to get some of your blood boiling and others thinking, yeah, this is dead right.
SPEAKER: Why did you invest in gold? Are you living in the past? In a digital world, gold shouldn't weigh down your portfolio. You see where things are going. Digital currencies like Bitcoin are the future. They're secure, borderless, and unlike gold, they actually have utility. Leave the pack behind. It's time to drop gold. Go digital. Go Grayscale.
RAOUL PAL: Barry, good to get you back. We figured out just now that it was what? December-
BARRY SILBERT: 2014. December 11 of December '14.
RAOUL PAL: Wow. So, it's a long time ago. Because we've been massively big supporter of crypto, blockchain, the whole thing. And you were really almost our entry into that world.
BARRY SILBERT: Right? You guys have figured it just launched, right?
RAOUL PAL: Exactly, three months prior. And so, where was Bitcoin then?
BARRY SILBERT: 350 or so.
RAOUL PAL: And where's it today?
BARRY SILBERT: About 8000. So, I got to re-watch the interview. And I guess we'll do a victory lap right now and say I was probably pretty, right.
RAOUL PAL: Yeah, I think you can say that. And that's with a huge spike up and a huge drop as well. And it's still being very right. Once to get you back, just to pick your brains to find out where we are. We're on this journey and it's a long journey. We think we know where we're going. But we don't really know. So, let's start with where you think the journey is going. And then we'll back up to where we are now. And the stuff that you're looking at.
BARRY SILBERT: Right. Well, so I think let's go back to the for the past, I guess, four and a half years. So, in 2014, I would imagine the asset class was probably only worth a couple of billion dollars. Today, Bitcoin is worth about 125 billion. I would imagine that there were only a handful of exchanges-
RAOUL PAL: In fact, your investment trust is worth- now?
BARRY SILBERT: 2 billion.
RAOUL PAL: The same size, different times.
BARRY SILBERT: Indeed. Yeah, that's true. And, yeah, good to be a first mover, I guess. Yeah, so there were probably only a handful of exchanges that you could trade off of, there was no institutional involvement in this space. When Bitcoin was discussed on popular media, it was always described as tulip bubble Ponzi scheme. So, still quite a bit of that, I guess. And then, yeah, you fast forward-
RAOUL PAL: And it was also the criminal element, it was always going to say, it's the currency of criminals.
BARRY SILBERT: Silk Road, probably, yeah, Silk Road probably existed at that point. And there was this perception that Bitcoin was only used by criminals. And so, fast forward to today, it's different. I think the asset class, look, the asset class is here to stay. The asset class, as defined as digital assets, which would include both digital currencies and these token investments. So, the asset class is here to stay.
I think it's now being looked at as potentially an important part of a diversified portfolio. There are thousands of digital currencies and tokens that are out there, most of them we'll talk more about- you don't want to touch, but there's thousands of ways to play the asset class. And the infrastructure, the infrastructure comparing it then versus today, you've custody solutions now like institutional grade custody solutions, you have trading software, you have data and analytics, you have fantastic media editorial coverage.
And so, I think the asset classes really ready for the next phase, which it seems to me is institutional money moving into it. We've seen hedge funds dabbling. We've seen family offices dabbling, but the pension funds and the endowments and the insurance companies and the central banks and all the deep pools of capital haven't really touched the asset class yet. And I think that that's next.
RAOUL PAL: Do you not think it needs a clearer use case for them? Because there's so much theoretical use case. You and I was just talking off camera, everybody we know involved is investing in companies who have use cases. And it's in that dark period of everything's being developed, nothing's really come to market yet. What do you think about the use case for all of this? Or does it just become a trading asset?
BARRY SILBERT: So, we, as a digital currency group, my company we've invested in 145 companies now. And so, we're the most active investor in this space and so we have pretty good visibility and insight into what's working and what's not working. And I continue to believe that the number one use case is speculation right now. And that is not a bad thing. In that one, I think Bitcoin is going to controversial opinion here is going to displace gold over the next couple decades in terms of the role that gold plays in a portfolio.
RAOUL PAL: We will come back to that.
BARRY SILBERT: Yes. But separate from the story value gold play, I think that in order for Bitcoin and digital currency to provide the utility that people are excited about from a cross-border payment perspective, remittance perspective, all the friction that could be eliminated by the free movement of money around the world, not possible unless the asset class- the size of the asset class is larger, unless there's more volume and velocity in the on ramps, the off ramps. So, initially, the number one use case is speculation. As a market cap grows, you have