ELI5 / VC for Crypto – Gleb Davidyuk


The blockchain technology without Bitcoin
is like a human without one arm…
They both are interconnected, and all the
rest of them, as I call them – shitcoins
they are just making noise, like this microphone
that I have right now…
I am usually asking my guests, what kind
of a drink they have brought
that we are drinking today, but since you asked me
to bring this drink, I will not ask you this question
let’s get right to the point – yes, we are drinking
today a white wine, because it is summer time.
Tell me please, in general – what is venture investments?
Because our programme is generally education as well.
And not everyone really understands what venture
investments are and how they differ from
any other type of investments?
– Max, you understand that this question is for
the next two and a half hours…
– 2.5 hours? But you are in a hurry, not me…
Okay, well, first of all – hello!
This is something that we should have started with.
Secondly, if we talk about venture investments, then
the answer can be found in the word “venture”,
because when translating from English, it means
investments with increased risks.
From the other side, there are a lot of investments
with increased risks.
Especially, when considering the segment of
viewers of this channel,
it can also be considered risky.
Still, this term has history of many decades
from back in the day when friends were collectively
purchasing companies that were not
listed on public exchanges
and when you are buying a company that is not
listed publicly, you risk to stay with this company forver.
This is where the idea emerged – how to buy companies,
so that you can sell them later and make a profit on it.
And this is how the direct investment industry emerged.
It differs from the indirect investment industry, because
as I said earlier – it does not have a high liquidity.
An average project lasts 3 – 6 years and sometimes
it can even be 10 years.
And you have to go really deep into
the business that you have acquired
on various different levels – management, finance,
strategy, HR and so on…
So, this means that it is a very long road.
From one side, but if we use sports terms –
it is a marathon.
If traders and many of your colleagues are into sprinting,
then I am doing the marathon…
This is a one way to compare it.
Then, if we talk specifically about venture investments,
then the direct investment industry has split into
two major segments –
the so called private equity – growth capital and venture,
which is more risky.
And the more risky venture investment involves
a large number of deals in your portfolio.
A certain mathematical probability of success
for any given deal in your potfolio.
The success meaning – you purchased for X
and then sold for 20X, for 100X.
This way you are developing your skills as
a manager of this kind of a fund
by being able to do a large number of deals
make them fast, and be able to sell what
you have acquired in a reasonable time frame
These are the mathematical expectations.
There is a story with the direct investments,
where you have a smaller portfolio
not tens of hundreds of deals, but as a maximum
of twenty or so,
then you have to go really deep into these,
because when you have 100 deals in your portfolio
it is very difficult to go really deep into
someone else’s business.
It is not realistic to do within 24 hours per day,
running around with these startups and helping them.
If someone has these expectations that investors
will be helping a lot, then it is not very accurate.
When you have a small portfolio, you have more
time to devote, but risks are greater as well
because you do not have a large number
of deals and mathematical expectations are lower.
This is why you work closer with your porfolio,
go deeper into the bussinesses
you also gain a lot of experience in the industry level
but this distance is also a marathon
it assumes a large base of expenses –
you need personnel, you need to travel, you
need administrators, accountants, lawyers
financial experts and so on, so this requires a
certain level of expenses.
– So, as I understand you are multi-tasking
on a regular basis?
– Yes, always and this is why our industry
is so interesting. I am in it for nearly 25 years now
it will be 25 next year and it has never been boring.
Every time you are learning something new, you are
looking at new deals, meet new people.
You really get into the debris of businesses
and it is very interesting.
– Was this you choice to move towards this
career as far as it can be a choice?
Did you want to become a venture investor? Or
was this choice influenced by external factors?
– Of course, this was not a decision I made, because
during the third year of my University studies
I got into an investment fund as an intern and this
was one of the first investment funds in Central Russia
this was as an experiment in this country.
This was in 1994 and
then I was invited to become an employee –
analytic, manager, director, head of the fund and so on.
As I told you earlier – it is an interesting job,
always something new
so, I haven’t really had a thought to do something different.
– Are there any sectors for you as an
investor that you prefer over other?
Maybe fintech, proptech or adtech?
See, we started our investments initially with adtech.
If we are speaking in English terms.
This is because where the most money is, or
at least was back then.
and understanding of the digital advertising sector
makes dialogues easier with any potential partner.
Because, as you know, there are two expenses in
any internet project – salaries and advertising budget.
And if you can deal with salaries yourself, then
with advertising budget, you need to understand where
the money of investors is heading.
This is why after investing in companies from
this sector, we worked out mobile advertising,
context advertising, CPC, CPA, metrics which are
used in this sector –
Yandex Metric, Google Analytics, Facebook channels,
what is tracking and a lot of other intstuments.
And it is separate discussion – what works
and what doesn’t and what works and with what efficiency.
Considering that evolution is very rapid in this segment,
there are new channels every two years
and new rules of the game, so you must
be involved constantly.
So this is why we are strong in adtech.
In the sector of digital advertising, one of the key
variables is data.
Because data processing leads to correct targeting
and then re-targeting.
A correct re-targeting increases conversion,
which increases your profits.
And this is where we jump into the sector of Big Data.
Some years ago there was a revolution in this sector.
Those who have the data realized that they have it,
those who know what to do with this data were looking
for those who have it.
Then they met each other.
And people started making money.
If evolution in oil and gas was 100 years,
then this industry was formed in five years,
forming analysts and mathematicians
teams working on data, knowing how to process data
programming languages that work with Big Data,
capable of processing and calculating
and so, seemingly not needed by
anyone mathematicians and geeks
suddenly became the kings of the World,
because everyone needs them
if 10 or 20 years ago everyone was laughing at you
in the school, then now everyone is looking to hire you.
– And a lot of people want to work for you.
Then, we realized that where you have Big Data and
money, you have a certain movement
this movement is also within the servicing
of these financial flows
so we moved slowly into Fintech.
We entered this sector through one of our investments –
Tradingview.
– Yes, this is a popular platfrom among crypto investors
and traders. I belive it is one of the most popular ones.
– Yes, I think so and currently it is not just
the crypto community.
And we were concerned when at the end of the
last year crypto community was on the decline
but the community stayed strong, it is still growing
it means that our users grew along with the platform
and Tradingview is becoming a standard, which is
growing the capitalization of a business.
Especially in the long term.
This is one of the ways how we understood
what is Fintech. And we are still monitoring the market
in terms of investments, but we are very careful, because
it is highly regulated, profit margins are low
you have to invent new bicycles all of the time
but we clearly see how Russia has taken over
the old Europe in finance sector development
products and services, which are considered usual are
non-existing in markets like Latvia or Europe
and if you speak about Revolut as an example
leader project in Europe, then
it repeats just some of the innovations done in Russia
by companies like Tinkoff, Alfa and even Sberbank.
So, there is an obvious niche in this market.
What are the reasons why banking fintech
is so advanced in Russia, while
in crypto and blockchain industries Russia still lags behind?
– I already told you earlier that this
industry is highly regulated.
The Russian regulator fears the crypto world
and crypto rules.
And I don’t think that this is only the Russian regulator.
Regulators in general are affraid
of the word decentralization.
Because regulators are the opposite –
centralization of everything.
This is the first reason, secondly, Russia is also
a big country and a big market and
evolution of the crypto world during the past
I wouldn’t say 10, just the last 5 years
it has changed rapidly and the crypto world
has gone through a number of serious events
which were first developing the industry, then
killing it off, then developing, then killing again
and this is why a lot of regulators, including the ones in
Russia have taken the wait-and-see approach.
Then you have pioneers that you always have.
They appear from certain circumstances –
when you have nothing to lose, it is easy to raise the flag
and say let’s go guys, because we
don’t have anything anyway.
– The hungry ones beat those who are full?
– Not always, but very often.
And in this sense, that increase of pioneers that we saw
in crypto space can create the rules for the rest
with time… This is why Russia is not a base for regulation,
but I don’t agree that there is no product story.
As you already know, Russians or Russian language
speaking, let’s not measure with passports,
those who speak this language are by far not the last…
– I am not saying last or not, but when comparing with
the USA market or Asian market, where
you have huge infrastructre projects used globally,
Russia for now has interesting projects or exits or Russian
speakers who base their projects in different
jurisdictions and countries. Of course, they are a big
force like in any other IT sector
as it is known that the post-soviet area is full of
geeks who are revolutionizing not only the crypto industry
but as a whole, maybe it is because of the regulation.
But, tell me, please, given the current sanctions
banking limitations, don’t Russian regulators and banks
find Bitcoin or crypto as a solution in this situation?
– It is difficult for me to reply for them.
Moreover, on provocative questions.
That’s why I won’t answer a provocative question.
This is from one side, but from the other side you are
underestimating the level of
involvement in the crypto industry by Russian
government officials.
This is on the level of the Central Bank and all sorts of
bodies servicing registries –
patents, ros register, securities market and so on.
Sberbank is pioneering in this area by having a
number of projects and innovations
large corporations like airline companies and other
have pilot projects based on the blockchain technology
in most cases these are sidechains, because bitcoin
has a shady reputation in the country
thanks to the same government officials forming their
opinion during the early stages
which in my opinion is a good instrument.
– You just earned a bunch of likes below this video
with this phrase!
Well, it is like that…
So, in defense I can say that I have spoken with
a lot of people and the level and depth of development
of various technological solutions – there is an issue
that is not just in Russia – the World is looking for standards.
The World is still looking for the railroad standard
that will be used by trains and there is still chaos.
Everyone is building their railroads based on their own
standards and until the World settles down
on a certain standard for these railroads, there
will be a level of chaos.
Considering the pace of this evolution,
I don’t think we have much left to wait.
We have gone through the hype, ICOs, first
regulation, a creation a wealthy crypto class,
and crypto bankruptcies.
– More of the second than the first.
This is because the industry is new and
participants are young as well.
Being young is good, but the life experience
comes only with the age.
This is why the second category is in bigger numbers,
because there is not enough life experience.
The apptite for risk is big, especially if you have
nothing to lose.
And when you have nothing to lose,
you can go all in.
– You touched the ICO topic briefly…
For you, as a traditional investor, how did you view
this hype during the years 2017 and 2018?
Did you have a feeling that it will end like that?
– Of course, absolutely.
It was understandable. We were one of the first
to invest in the Bitfury company
and so it happened that we were getting a large number
of offers to invest.
and it is still happening.
We had the option of choice where to invest
and where not to invest –
we didn’t invest almost anywhere.
Largely this was thanks to intuition, rather than
a reasonable decision.
Because the mad house that we saw on the capital
markets fueled by crypto platforms
and instruments was causing a lot of fear
during the summar and spring of the last year.
It inflated rapidly and then deflated rapidly.
So, we had to wait over – as I told you earlier
this is marathon,
when you had people doing sprints joining the marathon
race it is obvious that they will exhaust themselves fast
so this is tradtional for every new industry
where those who have longer term view and
more experience based on fundamental science
rather than intuition – those will survive.
Is there any form for ICOs that you consider,
as an investor, that could work?
– I think yes. The main problem for ICOs is not in the form
of existence, but rather
in the large number of unqualified participants
in this mad house.
Who are making decision that are not fully thought through
and as a result, suffer from their own mistakes.
This is from the category as what are your thoughts on
MMM – financial pyramids?
Most likely negative and most likely you
can even answer why.
Be the first, earn on top and go take your rest.
But still you view them negatively
and in this case it is the same.
You view them negatively, because there is
deception and with ICOs it is self-deception.
Of course, there are plenty of scammers as well,
but in most cases it is self-deception.
– OK, let’s move on to a question that is more
related to our industry…
– Are we going to drink? – Sure!
Good wine! – I tried…
iTech was the first fund from Russia that
invested in a Bitcoin project?
At least this is how it was positioned on various
media channels?
– Yes, we were the first most likely…
But we did not invest in a Bitcoin project – we invested
in a company that works in the crypto industry.
and it was and is producing equipment for bitcoin mining.
– But Bitfury is currently more multifaceted, but initially
and during the time when you invested
they were focusing on bitcoin and it was the only
asset that they were mining
as far as I know and equipment is produced to
mine bitcoin and farms are mining bitcoin
all of the side projects are related to bitcoin as well.
Was this intentional or intuition and why was this mining?
And why a mining company, why not an
exchange, for example?
And while you are right that margins are low,
they are still high in this industry in some cases…
In the year 2015, when we were investing –
we were getting into uncharted waters.
Everything was completely uncertain and
we were investing into the team
that promised to develop hardware that included
mining as well, or more precisely for mining first of all…
Accordingly, we invested into engineering and
manufacturing of chips, rather than mining.
Mining was a side-effect – if you have the hardware
then, of course, you can have mining farms as well.
Within the mining farms that I have visited, they have
a lot of technological innovations
starting from immersion cooling, ending with containers
that emerged a little bit later.
– You have got really deep into the industry…
– I told you at the beginning of the interview
that we have to go really deep into our investments…
and most likely we did not invest in MoU
of course, for me as the person who found the business
and invested in this business
believed, which was the key factor,
in those opportunities that were opening and
are still opening within this segment
only afterwards everyone else started to support this
belief, which is still alive for me
and the World changed its attitude for the industry…
It took some years, but again, if this was not
the IT industry, then it could take tens of years…
Since we are living in a World that is changing rapidly
from both the perspective of information and technology
Moore’s Law doesn’t work anymore, the blockchain sector
seemed like an interesting area for capital investments
– In the year 2015 after investing in Bitfury, you said an
interesting phrase in an interview with CoinDesk …
I will cite it – “there are not so many things on the Internet
that can be called groundbreaking,
so, do not invest in blockchain, so I have more
opportunities to do it myself.”
Do you still have the same opinion in 2019?
Or do you consider that more market participans from
traditional segments…
– First of all, you read the answer, but you did not
read the question that I was asked…
So, as every journalist… – We are taking out of context…
– But I am not a journalist. – But in this case
you are in the role of a journalist…
So, you have to look at this together
with the question and the answer.
When I said this, I was obviously joking.
Answering in a context that for
me, personally, it is very interesting…
in both the segment and investments. I, as an
investor still like this sector.
The year 2019 is a lot more interesting than 2015 was,
because within these years we saw a lot of features
that the crypto industry gave to the World –
both positive and negative.
And next year, or after five years,
we will be able to say that the industry is cleaning up…
The weak ones are leaving and the strong
ones become even stronger.
The smart money is entering the market
and the easy money is leaving.
Still, there is a large amount of
grey money in the industry
and it is also accused of accumulating
a large amount of grey money, but if
you compare the crypto industry with the
traditional fiat World, then the grey and dark money
is a lot more in the fiat world – Significantly more.
So, again these are opinions of those who do not
entirely understand the value of this technology.
And the potential opportunities for both investors
and the market participants in the next five years.
– Tell me, please, we hear this often from people outside
of the industry saying – blockchain, not Bitcoin
is this caused by them calculating their risks carefully
or is this an opinion that is commong among
tradition investors?
– I, personally, think that it is simply lack of understand
what is blockchain and how it works.
That is first, but you can also simplify the answer
to this question.
And I get asked this very often, so
I simplify this answer in the following format –
If today Bitcoin and blockchain, despite all
of its technical disadvantages, which
actually are no longer considered disadvantages
because they were solved a long time ago
and they are dragged along by speculators
who do not understand that they have been solved
it is the most stable and realiable ecosystem
in the crypto World
– honey for my ears – It really is like that.
This is where the most of the fiat funds are,
most of the brainpower, coders are there and
inventing the bicycle for me, as an investor,
is not interesting
– this is first, secondly when someone invents this
bicycle and has technology that is built on blockcain
and has something that is better than Bitcoin
blockchain, as soon as it is filled up with assets
it will be broken by the smart guys, who only
focus on breaking stuff that is made by other smart guys
or not so smart guys, so for me, as an investor to risk
on technology that hasn’t proven itself
it is not worth it – I would rather make less money, but
reliably than a lot of money unreliably.
– OK, your interest for this technology was sparked initally
because you found out about Bitcoin or blockchain?
– Blockchain. Bitcoin was just a consequence and
initially it was the only instrument
within the blockchain industry. Moreover, I think that
the blockchain industry without Bitcoin is like a human
without one arm. These are two interconnected factors and
all of the rest of them, as I call them “shitcoins”
they are just making noise – like this microphone…
but they are not making sound so far. When there will
be sound, which I don’t believe that there will
because the key element of the ecosystem
is decentralization
but since decentralization / democracy / ungovernable
environment is difficult to tame to new rules
and adaptation of new features takes time then
I don’t think it will be created within the coming years
maybe in the decades to come, but not in years
something that can beat Bitcoin blockchain
there will be other technologies – three or five, but not
500 like now or 5,000.
The corporate segment will still be serviced
by the corporate giants –
Hyperledger or similar projects. Banking Consortium
will be working within their rules
and I am not sure if they will remain within consortium
because that which is decentralized and independent
must win those who are centralized and dependant
because decentralization is key in the blockchain technology.
– Who will have to adapt in the end? Traditional system
or the new financial system?
– Good question. If I was a regulator or a central bank
I would have to say that we will figure it out
and everyone will adapt according to us.
But I work with a lot of regulators and I see that
no-one has really figured it out.
And I am not saying that these are stupid people,
they are actually very smart
and teams building blockchain solutions
within governments are very smart,
but the industry is still binary.
You have either 0 or you have something and it works.
And everything that is working currently is
working exclusively on the Bitcoin blockchain.
Of course, you have Ethereum, smart contracts and side
chains, but this is all tiny and uncomparable with Bitcoin.
– OK, tell me please, returning back to the investment
culture, investors from post-soviet countries
are less keen to invest in blockchain and bitcoin
companies.
We always hear that Andreessen Horowitz is investing
in large exhcanges, Bitcoin and crypto exchanges
and many guys from the Silicon Valley are investing a large
amount of funds into this industry.
Is this lack of regulation or lack of understanding?
As you say – we will sit and wait and then join later?
– I think it is the second option what I said earlier…
I was lucky back in the day, because I met my friend
who I had some beer with and he explained what is
blockchain and introduced me to Velery Vavilov.
– But you understand that luck is relative –
those who do something are lucky…
But if you look at the stories of success, most of them
are based on random events.
almost all and as a system to
generate luck is extremely difficult
even for the marathon guys, so this deal with Bitfuty –
I just met a friend.
Yes, we knew each other a long time ago,
yes, he told me about the opportunities opening up
yes, the team did a good job to persuade not only me,
but also my partners to invest,
but this was later – initially, it was just luck.
Just as I was lucky to get into an investment fund
in my third year of Univeristy studies
so, how could I know that I will
become an investment expert?
A professional? Of course, not.
This cannot be relevant for sportsmen – someone has
wanted to be a hockey player since he was a kid
or someone who wanted to be a spaceman,
you just do everything to become one.
But I was just lucky…
– Tell me, what is an ideal blockchain
startup for Gleb Davidyuk?
– There are none, because Gleb Davidyuk does not
invest in startups.
– OK, an ideal business that Gleb Davidyuk would invest in?
– Yes this sounds better, if we talk about crypto
then it has to be a global story,
and a story that makes about $1M today annually, not less
from this point I would start to talk with people
how are they earning, how to make it so that
they earn $10M, what needs to be done,
how can I or my team be useful and so on?
– What if they are earning without abiding the standards
of the current market?
Bitcoin was invented to preserve privacy,
to work against governments, KYC/AML
there are startups making more money by not following
the rules of the market
would you consider these companies?
Or is it important for you as an investor that companies
play by rules since these are risks for you?
– Max, it seems that you have answered your own question…
Do you think that I will say it in an interview that I
am investing in companies that work on the dark web?
Of course, not, because of a lot of reasons, including
regulatory
in terms of carma, I have also grown and I have
money to buy wine and I don’t want to support criminals
as I don’t simply need this.
They can live their life without me. I am not
going to catch them, this is also not my job.
But I will not support them either.
I ask all of my guests the same question –
who do you think Satoshi Nakamoto is?
No need to name specific persons, while some do.
Who do you think it could be?
– I think it is a team of developers.
I think they are American.
– What is the reason they are hiding themselves?
– This is a difficult cryptographic development
that is not likely to be done by one person.
At least I think so, but if it was an idea of a single person
then he deserves a Nobel prize as a minimum.
Which is not given to mathematicians, right? – Yes
Then they would have given already. – But they could
have given for economics…
We will see now the price climb back to $20,000,
so those who bought that high recover their losses
and they will vote for the Nobel prize…
I think it is somehow related to the federals,
Americans and military definitely.
In this case this not knowing who is behind this protocol
is an advantage?
It is a huge advantage, because you have this
intrigue, which is kept alive.
Image can be exploitet in both a good and a bad way
and no-one will be insulted – there are a lot of benefits
because the inventor is unknown
so I think it was all well planned.
If you had the chance to know – would you?
– Of course! – But if you had the chance to tell the whole
World who this person is?
No, I would not do this. I work in this kind of business –
money loves silence.
I know the principles of confidentiality and the
rules of the game – I follow them.
So, telling the whole World – of course not!
Even if I knew – the World wouldn’t believe anyway.
If you meet an alien and start running around the streets
saying that you met one.
No-one is going to believe you…
– For Bitcoin to become used massively like
Revolut, for example,
what is needed? What qualities alongside regulatory?
Are these convenient software solutions?
Or government support of some sort?
– If we talk about the role of governments, then it has
to be limited to the level of creating ecosystem.
The technological foundation is ready, it does
not need to be changed – it works.
Creation of ecosystem over this foundation – like
programming languages, products and services
people who know how to code and use these languages
protocols that solve system’s weaknesses –
throughput, the number of transactions etc.
We already have all of this – Lightning, Exonum
as a programming language
a lot has been done, but it just needs implementing
and the function of implementation is the missing piece.
And on this level governments, SMEs, corporations
they have the tools – there is no need to
reinvent the bicycle.
Take the solution that is ready and solve your own issues
by using a solution that is ready.
Forget about the private chains,
or create private chains, but on top of Bitcoin blockchain
by using Exonum, for example
I am suggesting this one since it is developed by Bitfury
but it is an open source solution…
It is a new digital century for us – 21st…
Can Bitcoin become a global reserve currency?
The short answer is – yes, but when you asked me
who created Bitcoin
I think that it was integrated into the World
exactly in this context.
Why Americans? Because today the US Dollar
is the reserve currency.
Considering the geopolitical trends that we are seeing
there is a high probability of moving away from
the US Dollar as the World’s reserve currency –
Yuan or anything else, Euro or even Ruble
Bitcoin emerged as a foreign and independent
alternative to the US Dollar.
And if I am right, then it is a genius plan by Americans.
– The limited supply of Bitcoin that can be mined –
21M is it an advantage, considering that
central banks love printing money?
This is why I told you that this is a genius concept
that is difficult to come up with for a single person…
You have a lot of instruments and rules incorporated
into the protocol and
they solve a lot of issues, including macroeconomical,
monetary policy and so on.
The limited emission increases demand
we know that bitcoin can split – up to 100M subfractions
or satoshi, but people are still mining
Let’s say the missing option to print something extra
gives value and it is a positive feature.
– The crypto trading market is still in its early stages
volatility is high, scaring off some of the investors, but
during the past year we see big players, like
Fidelity Asset Management, Wall Street banks
are entering the market, opening their OTC desks,
brokerages or exchanges
will the institutional players lower volatility, increase mass
adoption or will this concentrate this asset
in the hands of a limited group or as
they are called – whales?
– If we talk about institutional investors – you named
a few, but there are a lot more. The market is
accepting this asset class as an asset.
If it is so, then on top of all of the technical advantages
of the blockchain technology like
registries, identification, property rights – so software.
We are then adding a large sector in the form of a currency.
A cryptocurrency or capital
and this only enriches a technological
stack that is already strong.
What concerns crypto concentration in the hands
of whales – of course, it is not like that.
It will never happen.
There are just too many willing to bite the pie.
We already have the infrastructure like exchanges,
tools for OTC trading and so on…
Taking it all into one hands – it is extremely difficult.
Maybe Buffett will figure it out –
so far he is not on our side…
– Yes, he does not like it yet…
So, I doubt that this is a realistic scenario.
Furthermore, we already have instruments
that allow participating without actually touching crypto
– Still, if the market participants view bitcoin or crypto
as an asset, why can’t the SEC approve
the ETF, which would bring in more liquidity?
So, retail customers are ready, but the
government is cautious towards this asset class?
– Again, you answered your own question – I do this often.
This is what I said – governments must be careful.
It would be strange if they said – yay, let’s do whatever
is trendy and then
it would be in an extremely inconvenient position, considering
all of the negative stories surrounding
crypto industry by legalizing.
Don’t you think that a government, like
less economically developed
– I already told you – only for those who have
something to lose.
If you have something to lose, then yes, it is a tool
to try to strengthen your economical position.
To attract funds to your country.
Becase today we are… I am reading a science fiction book
by a Chinese writer
it is called The Three-Body Problem
and there is this situation when starships
enter from the third into the fourth dimension
but not always, and this transition is always difficult
for them and this is the same…
Moving from the third to the fourth dimension is
extremely difficult.
This border is invisible, but it exists and
obviously with time this transition will be easier.
All we need is time – time, will and balls of steel.
How much time has to pass for us to understand that
this story was successful or this experiment failed?
I think this is a very good question –
Max, I think that you are a good journalist.
The story has already taken place, there is no waiting
and I don’t think that it will disappear within the
next 10 or 20 yyears.
it has taken place and it is as an asset class
then there is the period of getting used to and adoption
and we are currently in this period…
there are mathematical theories that answer the question
how much time has to pass for adoption
this is a theory that is taught in all of the business schools
and I don’t there there will be something new in these terms
The only thing I can say is that adoption of technology
will be a lot faster than we think…
And it will take place on the backend… It solves
a large number of issues –
issues with trust or lack of trust, identification,
transaction speed, government ecosystem costs,
cross-country relations and so on…
All of these issues grew from geopolitical
difficulties within the World in the 21st century
and the costs of the financial ecosystems, because
they are no different from 17th, 19th and 20th centuries…
Almost no difference and it is obvious even for kids that
something must change in the 21st century.
– I agree…Many analysts working in the traditional finance
sector compare the crypto boom with pyramids,
tulip sales in Netherlands, which is a famous
analogy even for Nobel prize winners.
Obviously, there is a need for opinions, but
is this analogy correct?
– I think it comes from a lack of understanding. Most of
these experts don’t understand the purpose of this tech
as a journalist, you understand that media of today
stopped doing fact checking
the media of the 21st cenutury is oriented towards
a fast thesis and fast reaction towards events
without any kind of due dilligence as we call it.
This way, the more scandalous the thesis,
for example tulips and
the more confident speaker then more realistic
the statement sounds.
And this is fundamentally incorrect, because a lot of
respectable people haven’t figured out what
cryptography is and how the technology works.
And they didn’t understand – it is just convenient
to express their thoughts.
Because this is a simple and understandable allegory.
This is first, then secondly you say that many
speculate on this and I agree with this opinion.
I think it is very convenient to say that everything
around us is shit,
the World is going to die, and we all will die
and everything will be bad
it is always easy to say the negative things and it is
a lot harder to carry the positive message.
Why is it so? Because if the negative event actually happens
then you are the genius who predicted it.
If the negative event doesn’t happen,
then no-one will remember about you.
It is a lot harder to predict the positive events.
Let these people predict something positive.
And then we will check if they were right. No-one
does it like this, because when it is about the positive.
See, through the prism of my work – I have tens
of companies in the porfolio.
My partners don’t call me when everything is good.
But when something goes wrong – who can help me?
You are sitting there and getting phone calls…
And you start to react to these calls and help.
And in the same context you have speakers
who are talking about tulips,
because it is easy, convenient and fast. And charts
are actually similar as well.
Do you agree with the statement that Bitcoin is the
biggest experiment of wealth distribution?
Well, I agree partially, but I wouldn’t say that it is
moving the wealth from one hands into another.
It is a nice and good experiment of
wealth creation.
Into hands where wealth has never been before.
And this tool and experiment has made a large
number of millenials wealthy.
– Many are saying, if I knew, it is so easy –
you were just lucky
– Of course, if people would know they would
do things differently, but you did not know
and on top of that, you did not do anything.
“If only I knew” does not work when talking
with serious men…
it can work with old ladies, but they have already lived for
80 years and they have the rights to say “if only I knew”
To hold a volatile instrument like bitcoin, it can
move up and down by 10% daily
and daily minuses outnumbered gains recently.
Is it difficult mentally? I understand that you have
experience and you have seen a lot of things.
But many are saying – just hold the asset,
it is not difficult at all,
but many reply – you should try it. And then they say
if only I knew I would have bought for $10
to which I reply that you would have sold for $100,
you would not have held on to the asset.
Is it difficult or is it easy like many are saying?
– I think you are making the problem bigger than it
actually is. Of course, it is easy.
It is easy, because when we talk about bitcoin or crypto
in general, consider it as something that
they have written down in their heads as a class,
while investing. So, they understand
that they are stepping into a high risk environment,
which the “tulip people” say that it has no coverage
and that it is a financial pyramid and if I am in this
pyramid, then if you lose, then you lose.
Very often it is similar to going to a casino.
But there is a group of people like me, who do not
look at this asset class like a casino.
And there is more and more of us now.
This is where rotation and adoption theories come at play
with things that are fundamental for base economic
principles through the crypto industry prism.
I am a person who treats fundamentals seriously. And
these are for me – revenues, profits, dividends
it is not users or conversion or LTV of some sort
with long term,
for me fundamental metrics is something
that I can put in my pocket.
This is why I am treating them seriously.
Being a fundamentalist, I can say that this is a good asset
class, which can become good inheritance for your kids
– A couple of tips from you for people who are just
looking at the crypto asset class?
– I just said, it is a good tool for inheritance in the
ideology of preserving,
considering the volatility of ecosystem at large.
You shouldn’t rush into buying or selling,
and if you are buying, then buy for the long term.
If you are a broker or a trader, who is ready to take fast
decisions and track the volatility then it
is the perfect environment.
Daily volatility of +/- 10%, where else do you have
markets like this?
If you are ready to lose your sleep at night
and run sprints instead of marathon, it is perfect for you.
If you want to see what will happen with
the analogues of Bitcoin,
then it is perfect timing, considering how volatile
the market is and depending on personalities
when a person or a group of people can move the
market up or down by 10% just by an agreement
or through the way of a scandal – this makes this time
very unique.
The was first and also in this context, many of us
like you and me
have got extra benefits by monetizing
scandals between Chinese
as with every fork we get the new currency for free.
It dies the next day for one or another reason, but
somehow our wealth increases.
And this is a unique feature – nowhere else you will
get something for free.
Then you decide – to hold or sell and make this
free asset into a real asset.
This is the case where the concept of free cheese
only in the mouse trap, doesn’t work.
– OK, and finally…
I always ask my guests to make a price predicition
for some point in the future.
You can choose some point in the future, the currency
a price level and say it will be above or below.
This is easy – end of the year, more
than $10,000 per bitcoin.
– 31st of December? – Let’s say 10th of January.
10,000 Euros or Dollars?
– Euros, we are in Latvia…
10th of January, more than 10,000 EUR per bitcoin?
– Yes. – We will put this prediction on our
platform and someone can match it
-Amazing! Something free again!
Not only wine, but this as well.
Thanks for the chat, it was great!

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