Name: Balancing the Ledger: Why Barry Silbert Wants You to #DropGold and Buy Bitcoin
Uploaded: 2019-05-20
Duration: 12 min 39 s
Description: The CEO of Digital Currency Group stops by to talk about Grayscale's new ad campaign, the latest bitcoin price surge, and how blockchain could transform the path to the IPO.

[ MUSIC ] Welcome to Balancing the Ledger, where tech and finance intersect. I'm Jen Wieczner. And I'm Robert Hackett. And today we're lucky to have Barry Silbert, the CEO of Digital Currency Group. Thanks so much for being here, Barry. Hi guys. So do you see G as a bit of a crypto conglomerate? Tell us a little bit about what you have going on now. So, yes, a DCG to our company, as opposed to a fund. And we do three things. We invest in early stage companies. So we've now invested in 145 companies within the cryp- Crypto blockchain space. Second thing we do is we invest in digital assets. And so we make some very, very large concentrated investments. We don't trade, we don't use leverage, we don't short. We just go long, and then we help try to, Accelerate the the awareness and utility of the ones we're excited about. And the third thing we do is we owned three companies and so we own graceful investments, which is the largest asset manager in the space with about about 2 billion and am right now, we own Genesis which has both a trading and a lending business. Which is again one of the largest OTC trading businesses and certainly the largest lender out there in the cryptospace and then we own Coin Desk, the events and media company. Barry you've said atht you want to build a Berkshire Hathoway of crypto before. Well we just released the Fortune 500 list and Berkshire Hathoway came in at number four When are we going to see DCG on there? Well, when I set up digital currency group, I set up as a company really that have flexibility wanted to be able to invest in companies want to be able start companies by companies. I wanted to be able to raise money from strategic investors. I wanted permanent capital. Then I don't have to worry about having to go raise money a bunch of times. And I wanted to be able to go public one day. So, at some point in the future, DCG may be publically treaded. And at that point in time, I would love to appear somewhere on that list. It was right up there with Warren Buffett's Berkshire Hathaway. That's right. That's right. So BitCoin is surging again actually. You have some insight into the markets based on just everything you manage. I'm curious, are you seeing any trends? What do you think is driving the price? What. If you follow the price of BitCoin over the past five, six, seven years, it goes through these patterns. It goes up, and then the price goes down 60 %, 70 %, 80 %. And then I guess now for. At least four times it's hit record highs. The difference though between where we are today relative to before the last bubble in 2017 I mean it's really night and day from an infrastructure perspective I mean think about. The custody providers, and think about the trading infrastructure and think about the compliance offer and think about the awareness and think about the on ramps and the off ramps. And so if we are in fact entering crypto spring, it seem that we are, When you start adding the fidaleties and the Robin Hoods and the [ UNKNOWN ] and all the others as an on ramps it's really just a matter of how quick the retail [ UNKNOWN ] will come into the space and so you know what we see behind the scenes people are ready, starting to open up their checkbooks. Our asset management business, Grey Scale Put out its first quarter report not too long ago. And what's really interesting is one, the majority of the money that came into Grayscale in the first quarter was from institutional investors. And we saw a really, really large pickup in hedge fund Fund money coming in. What was also interesting is most of it went into Bitcoin like over 90 % of the money raised by Grayscale in the first quarter was into Bitcoin. So not much interest on the out [ UNKNOWN ] side at least from institutions. A lot of interest in Bitcoin. So really interesting thing to me about this latest Bitcoin rally is that it's happened at a time when stocks are falling. There's a lot of concerns about the trade war that seems to be ongoing. Have you seen any patterns in terms of Bitcoin, the way that Bitcoin moves compare to stocks, I mean are they moving in opposite directions? Well, it's certainly interesting that the price started it accelerated move up right when the trade discussions broke down. It certainly has performed better than other historical stores of valid investments like Gold, and so I think it's serving as a bit of a non correlated asset, which I think people Certainly always expected Bitcoin will be and I think if you look at over the past five years, when Brexit happened, Bitcoin went up when Brexit happened Bitcoin went up but ultimately I think the the volatility that exists in Bitcoin I think there's plenty of examples we can find where certainly when down when these when these macro events happened as well. You tweeted flight to safety and Bitcoin Do you believe that. Well you know certainly a bit tongue in cheek. I do think that as a non correlated asset class I think. I think people investors are starting to appreciate that when things do turn down when there are these macro events. The institutions that are going to be selling off their treasuries, they're selling off their gold, don't today have the BitCoin to sell off. And so it doesn't necessarily mean that the money will move into BitCoin, but it just means you don't have the forced pressure of people selling the BitCoin. You just came out with a majornational broadcast advertising campaign talking about dropping gold. Making this into a little bit of a zero sum game between Bitcoin and gold. Tell us what's your thinking behind that campaign and what are you hoping to get out of it I grew up hearing these gold commercials hearing about how you know gold should perform well when you know kind of things are kind of going poorly And as BitCoin has matured, as it's become more resilient, as the on- ramps have been built, I really wanted to start a conversation around the possibility that, maybe for our generation, for a younger generation of investors, gold is not going to play the role that it did for our parents or grandparents. And perhaps it's digital currency, and BitCoin in particular, that would play that role. Bitcoin is certainly much more accessible, so anybody who has a phone now in the world can access Bitcoin. But really more importantly, Bitcoin has real utility. Whereas gold, it's look, it's used in jewelry, which is fine. It's used very, very small amount of electronics and that number is going down very, very quickly. And so the biggest buyers of gold have been central banks recently, whereas with BitCoin, BitCoin is creating a new financial system. It's eliminating middlemen and friction and cost. It's removing barriers and And if you think about the ability, the value you can bring from a remittance perspective and from you know banking the under banked and the unbanked. That is real true utility. It's like saying okay what is the value of the Internet. What's the value of email. Bitcoin has the potential to not just save society hundreds of billions of dollars but also create real economic opportunity around the world. Gold just The more expensive it gets the less useful it becomes. So there was something you said there that was a little bit ironic. You said central banks are buying a lot of gold, and that's contributing to its value. Dig into that, because a lot of people buy gold as a hedge against central banks presumably, and other currencies. The bull case for gold is, the investment thesis is the destruction of the value of [ UNKNOWN ] And then the reason why that would happen is in their opinion is that, central bankers making bad decisions around fiscal monetary policy. Yet as you mentioned the largest of the most aggressive buyers of gold over the past five years have been central banks namely China and Russia. So essentially Goldberg's are saying We think that central bankers are idiots, but we also think they're really, really smart for buying gold. So then the question is, in that financial apocalypse situation they're talking about, what will really happen? What will the IMF do with all of its gold? What will China, and Russia, and all those other countries do? And the bet that Goldbugs makes is that we're gonna go back to a gold standard. Which I think, look, maybe it's possible, but I think the chances of that happening are very very small. The more likely thing that's gonna happen is the first thing that gets sold Is the gold to prop up your currency. Countries are gonna sell their gold before they sell their ports and their airports. So with Bitcoin, I think it could perform really, really well in that. Financial apocalypse situation. But really more importantly I dont wanna bet against the US dollar. I wanna bet on innovation and growth and an investment in BitCoin gives you the potential to invest. Or gives the option to invest. In this new financial system so you kind of get the you get the upside but you also get the downside production as well given what you said about 90 percent of the inflows coming into bitcoin at grayscale this past first quarter. I mean does Bitcoin have a kind of an insurmountable lead. Do you see it as the long term winner. There's a lot of use cases out there that these different protocols and tokens are targeting The digital gold use case. I dont see BitCoin having much competition for that one use case. And again if that is all BitCoin is ever is, if all it ever does is displace the. eight trillion dollar gold market. One, I think that that's a very big success from an investor perspective. But I also think that that's also very, very good for society. Having a digital store of value that anybody can access with their mobile phone, I think is incredibly enabling for people around the world. Now, I do think that Bitcoin will be more. I do think it'll be a financial rail. I do think it'll be a remittance tool. I think it'll Provide the infrastructure for a new financial system, but if all it ever is is a replacement for gold, that's good too. Your previous company was Second Market, where it was people could trade shares of private companies. Many of those companies in the past few weeks have either gone public, Uber, Lyft, or are planning to go public like Slack Do you ever miss that business? I don't, after I sold it to NASDAQ, I've certainly watched from afar what's happened in both the private market and the public market. And I continue to think that the public markets are broken in that they are no longer accessible for smaller fast growing companies. The number of publicly traded companies is down something like 15 % over the past 10 years and I think that that's a shame but what I am excited about is innovation that is happening in the block chain in the digital currency space. So do you think there is really interesting experimentation around ways to raise money and then ways to invest in ideas and projects. I wasn't a fun of ICIOs we didn't really participate in that. And that craziness but I do think an experimentation like that is important to things like security tokens and. I guess the latest flavor is IEOs, I don't know, initial exchange offering perhaps. So I think that that's interesting innovation that I'm philosophically supportive of. And I do think that, in the next 10 or 20 years, when you talk about capital formation, taking an idea To market and getting it funded and giving investors liquidity, I think it'll look a lot different than raise from seed investors and then VCs and then you take the company public on the New York Stock Exchange. I think it'll look much different. That'll still exist, but I think it'll look a lot different, enabled by this technology. You mentioned that you would like to go public with your company. Well, I said I might go public. I'm not sure that I want to go public, but I might go public. Okay, you might go public. What is the process by which you would do that? Would it be different than the typical sort of going out on NASDAQ or NYSE? It's a good question. I actually haven't spent a lot of time thinking about The process, and really, ultimately, we would only do it if there was a reason to have public equity that we could use for acquisitions, as an example. We're a very, very profitable company, we have what I feel like are unlimited resources available to us right now. So a going public process would really be as a way for us to become perhaps more acquisitive. But as of right now frankly there aren't a lot of companies that I would want to buy. So, I don't spend a lot of time thinking about how to fund them Well, we'll have to see. Thank you so much for being here Barry. Good seeing you guys. Thank you. I'm Jen Venshner. And I'm Rober Hacket. For more balancing the ledger, go to fortune. com. We'll see you next time. [ MUSIC ]

Balancing the Ledger: Why Barry Silbert Wants You to #DropGold and Buy Bitcoin

Finance

The CEO of Digital Currency Group stops by to talk about Grayscale's new ad campaign, the latest bitcoin price surge, and how blockchain could transform the path to the IPO.