Why Bitcoin Will Never Displace the Dollar | Crypto Fund Managers Explain

look there's real concerns about inflation right now buy gold buy gold buy gold and basically all the big macro risers are saying that none of them are saying by the prevailing narrative that bitcoin is a story value is the only narrative and that is failing in a world where we've seen two trillion dollars printed overnight for the US government and so I've been thinking you know in the event that the Bitcoin doesn't break out and I actually to come modern gold what what else at all this kind of play out something else close the gap because if there is demand for a global currency Global Payments rail settlement rails and Lieber can fill that gap and people want that then that's where it's gonna go what's up YouTube my name is Jackson today I'm joined by co-founder of multi coin capital Kyle somani and CEO of civic Vinnie lingam how's it going today guys hey how are you Jackson great view on this you know great Jackson good to be on the show thank you yeah thanks for coming on guys so let's get started Kyle you are the co-founder and Managing Partner of a crypto investment firm and Vinnie you made the first ever Bitcoin investment on South Africa shark tank how do you search for companies to invest in in the crypto space yeah so you know we do a lot I mean broadly speaking there's in two ways that make investments in that and outbound so on the inbound side you know we're prettier we've written our are kind of three that get these on our website we published those and share them with the world hoping that obviously companies that you know if they what if they're doing fits in one of these theses it should gotta be obvious that we were against it and we generally make a pretty concerted effort to be engaged in the community online going to events sharing our thought leadership so that you know we can send signals to the entrepreneurs out there that hey these are the these are how we think and why we think these ways and that if you're building something that is aligned and how we think that you should reach out to us and that's been a very effective practice and over the last couple years that kind of covers the inbound on the outbound side you know we internally just like we obviously we were reading and thinking and learning all the time and occasionally we gotta have a conversation internally where we're like hey like this is a big opportunity let's go find a team and when that happens then we will start usually systematically just like calling everyone we know looking at all the companies tangentially you know in that space and trying to kind of try and find the right company to really express that view and we've been fortunate to do that now in honest Vinnie's so I'm curious how do you appraise a company startup token or project you're thinking about investing in is there a certain set of criteria that you use that helps you know when you look at that company that that's the company I want to be invested in look everyone is different everyone has their own sort of mental models for how they look at these things my personal one is I look at the founder the team and what they've done before and so the history and past and the area of expertise and that for me is the most important thing because in the startup world when you're going in really early things are gonna change it's gonna be pivot off the pivot it's gonna be you know it's just there's so much variability right in the tech world and the industries are so volatile as it is so it's always about the team can they stick together all the way through that will they keep fighting for survival and then once that's once it's kid that hurdle okay what problem is this team trying to solve and do I believe they have the background and the technical expertise to go and do it and often I find that they have the passion but not the technical expertise and I always advise them to find the technical co-founder find someone who can help you build this and those are things I I'm an early-stage guy I'm a you know serious AC type investor I'm one addition I want to back the team to go get it done Kyle what does your criteria look like are there any specific or key indicators that you keep an eye out for yeah so many kinds suggest that every investor is different in how they prioritize things and that certainly varies across ages I take it at both myself and two-star my co-founder we are very very focused on market and really understanding the size of the market existing players you know wedges to kind of build a footing in them how can you go the footing what kind of your asymmetric insight about about that and those are the things we spend the majority of our time and effort on it's really really focused on marking it once we can comfortable the market then we the founders because if you can today we're going to be working with you people for a long time and still getting comfortable today or you know they have the right time to market fit pull it all the more time I spent investing the more time I really value the importance of powder market fit because being a founder is really hard and like if you don't have the right story and context for why you're doing what you're doing you're gonna you're gonna get you're gonna give up eventually you're a challenges along the way and so making sure that we really understand what's motivating the founder to pull that off is kind of our next big thing after we really understand the market structure and we mean we saw a lot of projects especially in 2018 and I guess that's sort of tapered out in 2019 how do you see the number of crypto startups and crypto projects how is that number evolved over the past few years and where is it now Kyle yeah so I'd say that the on an absolute basis sure the number of companies has decreased on the peak was it probably calling me at 18 but I there was just a lot of no ways in that and that so I don't kind of put too much you on that today the number of teams is lower their new teams I should say is lower but there's generally higher quality signal teams the people who have bothered to stay in crypto through the Slimer who have gotten interested in crypto even ask the crash or typically the kind of foundries you want to back and so the the signal-to-noise ratio is increased part of it do you agree with that Vinnie yeah I I think so too I always like on Twitter what we spoken about the tourists you know people who come into industry when it's hot and when it when it fizzles out then they just leave and I mean they you know and then they realize everything's taken off and they want to get back in again and we haven't got to the point where they want to get back in again but the same thing happened in the dot-com era you had people like quitting their jobs as teachers at schools and firemen and policemen all jumping in to start companies and Comm era like literally these are famous stories safely happen in 2017 where people who had no business being in this industry in tech were coming into this tech industry and they were like people from social media and whatever else trying to become technologist in a tech startup and and they just can't easily contribute and the moment things get tough they go back to what they used to doing what they know how to do well and that is definitely what's happened here because we've seen if we saw a huge influx of people and then we saw them all leave and the people who are still behind the guys are still sticking it out through the tough times like myself Kyle the founders that we back etc these are the guys actually gonna build the future and in the day because they stuck out through the hard times because it doesn't get easy it gets harder and if you know wanting to stick it out then you just don't have the passion for the industry and then you should go to the industry you do have passion for so let's let's switch away from talking about the crypto space and let's talk more about crypto itself Kyle you recently tweeted what if the ultimate use case for crypto is not non-sovereign money but just Global payment rails in which all assets are bare assets what role do you think crypto will play in the future of the global economy Kyle yeah so you know one thing that that's right now is a really interesting time thing about crypto if you a lot of the kind of quarterly and monthly heads one-letter none of the big global macro funds are coming out now so Bridgewater oaktree Elliott a lot of these guys and a pretty common theme you're seeing through all of them is they're saying look there's real concerns about inflation right now buy gold buy gold like old and basically all the big kind of macro visors are saying that none of them are saying buy Bitcoin and so that that is a little concerning right now saying is like look like this is almost certainly the largest commit inflationary this is likely to be the largest inflationary crisis of the last 100 years or maybe the last 50 years and people are saying buy gold not buy Bitcoin even though the Bitcoin in our view is objectively better than gold actually being a store value for all kinds of reasons and so that's a little concerning and so I've just been thinking through well what if this just doesn't break through mean golden around for thousands of years and so it's just very hard to break that amount of inertia and so I've been thinking you know in the event that the Bitcoin doesn't break out and not actually to come modern gold what what else can all this kind of play out and the next kind of I'd say very obvious very very large market is in using just the payment rails to just facilitate large-scale global commerce payments and so libros probably bit like the strongest instantiation of this where they're saying look like we're gonna take this this this technical framework that like crypto really pioneered with public key cryptography with an open ledger with all these things by NASA Bayer asset and we're just gonna focus on scaling that out to support billions of people and make it as cheap as possible to make payments work around the world and then kind of enable smart contracts on top of that and that to me is a is a although it's not the saint it's a very distinct vision from just goals for everybody it is a still a massive scale vision with the strong strong focus on enabling people to to change how they interact with money and I think a lot of the crypto people who are just durable gold bugs are kind of missing the missing that just different framing mmm Vinny if Bitcoin continues to fail as this digital goal do you see this outcome as occurring as well well I mean we say the outcome of people using alternative currencies as a rails yeah I think that's what I've been saying for years I said the Bitcoin can't scale lightning Network doesn't exist contrary scale I mean it snowy right after three years of waiting it was supposed to ready you know 18 months time back in 2015 so lightnings on working there's no way to scale Bitcoin for it to become a payment rail so the then prevailing narrative the Bitcoin is a story value is the only narrative and that is failing in a world where we've seen two trillion dollars printed overnight for the US government governments around the world creating money in print but coins failing to rally not even like to its January highest forget its all-time highs right so this is this is a big problem I think that the narrative because like the I don't I never bought the narrative of digital gold but I do buy the narrator that Bitcoin could be a global Global Payments rails but that would mean the block size increases etc which nobody wants to do in the community so stuck in this sort of store of value hypothesis so what happens something else fills a gap because if there is demand for a global currency a global payment rail settlement rails and Lieber can fill that gap and people want that then that's where it's gonna go because ultimately utilities gonna drive value and so if it is utility moving money cheaply around the world and there is also no services that can do it it's gonna take up so to the logic saying I agree with Kyle on that I will say though I do disagree around what the inflationary aspects of the money printing has that has been happening is right because what's really happening is that the US dollar is gaining in its dominance right in its index Ron Coan stronger works other currencies so the covered nineteen crisis is causing governments and other currencies around the world to fail and it's slow failure but it's failing because those currencies were really running very high deficits and very close to the line and it to GDP ratios which are absurd and now the economies are being crippled by over nineteen they have to print more money so 53 Gresham's law kicks in and people start so they'll spend currency but they're going to start putting their savings into US dollars so this is like demand for US dollars globally and because global money supply is 70 trillion you print two trillion dollars it doesn't really make a huge impact in in in doable money supply especially since most of that is is dollar based or dollar denominated and there's demand for more so as we see the rest the world moving towards dollarization effectively I think role I'll call it that you the inflationary pressure the dollar is actually very muted at the moment and they could probably print another two trillion dollars and not see inflation rates as we head just yet so you know it's too soon to tell when inflation kicks in but for now the dollar is the store of value for the world mmm do you think that Krypton will ever have the power to displace the dollar as the dominant global currency potentially I think there is potential for it but like the real question is is it crypto native which is like something like Bitcoin or aetherium or is it tokenized currency is there two to two very different things right tokenized dollars is not replacing dollars in a sense it's just moving into a transportable you know you know form factor right it's moving from bank accounts to a distributed ledger it's still the same amount of dollars where something native like Bitcoin or aetherium is a totally different asset class what are your thoughts on this Kyle yeah I'm pretty skeptical that crypto is gonna replace the dollar on any time scale in the event the dollar is not the global reserve that has a scary scary scary world to live in and I have to live in that world if that transition will be very painful I think I think crypto can challenge a lot of longtail fiat currencies but I think the dollar is out of the question how do you see the current kovat 19 crisis affecting cryptos role in the global economy now and as we move as we potentially move out of the crisis I think that kind of there's a few lenses the big obvious lens is that governments around the world are engaging in large-scale quantitative easing and they're monetizing their any money like crazy and monetizing their debt by printing new money this is definitely the largest mall Terry experiment ministry and I'd say it is relatively intuitive that there's a lot of risk here and this could really backfire and just kind of create an inflationary spiral it does not happen they're not saying it will happen but it is a pretty reasonable conclusion to draw that the the risk of that happening is increasing by the day and if that happens they'll probably give a Bitcoin because the coin is disinflationary fixed supply so the idea it's a pretty obvious case for crypto coming out of this crisis I think the other ones that are a little more interesting that are more nuanced is looking at you know as consumption patterns changes travel patterns change how can you use this technology to kind of ride those trends so like video is booming right like zoom and and all these things are blowing up right now there's some unique crypto enabled technologies of his life here then make it dramatically cheaper to transcode video that scale and so like that's very under discussed and we're fortunately large investors in life here you know music right like concerts are like in like large-scale public gatherings are not gonna be a thing for a while and so artists are looking for new ways to like new channels for distribution in new ways to remix their work and other artists work and one of our and there's companies like audience that are super focused on trying to kind of facilitate that kind of new creative consumption and so I think there's while those aren't nearly the same kind of macro scale as gold or digital gold I think there's a lot of kind of tail use cases where crypto is gonna be a really powerful enabling new technology and we're really excited about some of those Vinny do you also see kovin 19 as spurring the integration of these more niche use case tokens yes and no I think is there's definitely some some of that and agree with largely what Carl said there I would add that I think covert 19 does bring in some concerns around government's being undermined in the efforts so imagine this right imagine you have an isolated economy I'll use South Africa for example is I'm South African imagine that that that you know the government's printing money to keep Social Welfare going because people are you know starving right now the country's in lockdown it's a total crisis the giving them eighty billion rand etc etc there's a five hundred billion rand stimulus package about 30 40 billion dollars toy lists are the change at fluctuations but the the point is people they are using the Fiat on-ramps to go from the local currency into Bitcoin okay all into whatever cryptocurrency they want to sort of protect their wealth from the government's eroding the currency what happens when the government sees that this is happening at such a large degree that it's undermining the efforts and it's weakening the currency even further and and it creates a hyperinflationary sort of spiral right is it everybody if nobody locally within a sort of controlled geography once the local currency because the government is failing and the economy's in trouble does occur with 19 governments have to stop the fiat on-ramps in to crypto for that market they going to if they haven't already in some countries and another they have they're going to in other countries the moment they see this far out of control so it is interesting that there's this like barrier right so if it becomes even slightly too much of a threat for a government they gonna shut it off in certain countries now that doesn't mean that it you know globally doesn't have an impact but this means in that country demand it'll become a black market currency in those countries and talk about bitcoin in particular but it is interesting how there is probably some sort of limits on what the institutional buyers would just be locked out in that country where institutional buyers right now could legally go and buy a Bitcoin to hate themselves against Rand evaluation if the government outlawed it they just couldn't do it right so you'd only have retail buyers and black market traders and that reduces demand you know all that currency so it's kind of a weird I mean car the like what do you think do you think that I don't think that's what's going to happen in some countries when people start fleeing out of their currency yeah I think that this kind of global monetary experiment the first-order implication is not the crumbling of the dollar it's the crumbling of long till fiat and those people are probably going to flee their local currencies for the dollar and and so that that's a me seems like they've kind of first ordering back and I think Libra is you know could potentially over the next few years just line up as the kind of perfect way like the heard actual rails to make that happen but not button so that the government's not banning Libre right whether it's Libra or Bitcoin like this is reflexivity sort of thesis in this effectively that the more successful these kryptos become against local currencies the more governments are going to just react viscerally towards it and block it so then it doesn't actually gain traction in that market because of that that reflexivity as we move forward with Cova nineteen and from an investor's perspective what do you think is the most important aspect of the crypto space that needs to be developed in order to enable growth of the space I mean I think that the most bullish thing that could happen would be a large number of the global macro hedge fund saying they buy Bitcoin I think the next most coolest name that could happen with the CPI consumer CPI increasing which for the last decade it is really not and I think those two things would really drive the drive that kind of narrative for crypto at this point the axle market structure is there the exchangers are there the Fiat on ramps for the air the derivatives markets are there they're mature you have futures you have options you have spot you have global access like the of custody you have prime brokerage you have thinking like all of the market infrastructure is finally there to support large-scale capital inflows and so I actually feel pretty good that if you know people wanted to move a trillion dollars in the crypto it would be doable today with the kind of infrastructure that's there what's not there is people recognizing the need for this and why this is why this is a step function better than the kind of technology solutions it passed like old Vinnie do you see those same points of growth I'll add one I'll and one thing that I think what what I think that we're still needed is you know the scaling of all transactions and transaction fees in construction cost reductions if you look at Civic wallet launching soon you know we're in we're in testing right now beta testing and one of the biggest issues we really do have is the cost of etherium transactions or able coins can be quite high especially in the micro transaction side and so a theorem needs to figure out scale or someone else needs to replace it with a more scalable cheaper solution so you know we're obviously backers in Solana we think Solanas technology is fantastically well suited for this sort of environment and but this is one of the biggest issues in crypto for over a decade is how do you scale crypto and so until we get the point we can scale this so the transactions are – puts on the issue and costs are you're reasonably low I think it's one of the difficult things to build in use cases in the market right now because how do you how do you use something which is yeah of T 100 times more expensive than a simple database transaction or even more in some case so speaking of development Kyle you recently tweeted that over the next 36 months Asia will become by far the most important market for defy and promotion list crypto more broadly why do you think Asia will become so important in the crypto space okay I think it's already the most important market for crypto all the mining is there most of the mining is there almost all exchange activity happens in Asia the substantial majority of retail users today are in Asia there's not much retail in the US and so I think already definitively today in Asia is actually the hub of crypto I think over the next 36 months I'm really been thinking a lot about defy and they grow that defy and I think the problem in the u.s.

Is that people in the u.s. do not want to offer the US dollar and they don't they're very happy with Visa MasterCard PayPal you know the kind of tools they have today I think the opportunity for defy is going to be in serving people who are unhappy with some part of their existing content services infrastructure whether it's the currency they have or whether it's the surveillance that they're they're undergoing but the people who want for some reason to opt out of the current angel either either Fiat regime or either the payment rails themselves those are the people who defy are going to appeal to the most and I don't think any of those people basically live in the u.s. I think almost all of those people live in Asia and so I think with a pretty high degree of confidence that over the next 36 months defy is going to become just absolutely not like the ratio of defy consumption in Asia in the u.s.

Is going to just balloon many do you also see Asia becoming the continuing to be the defy hub of the world so maybe on the technical side that's possible I study disagree with Kyle I think that the interest rates that the defy can offer would be attractive to people around the world and more even more in the US where interest rates are super low zero at the moment if you could if you look at build safer more secure insured smart contracts for example with the you know we and the liquidy pools exist already that even though the biggest crisis we had in crypto like last month you know there was given the size of the market there was relatively few hiccups in in the TFI space right even when the market dropped 20-30 percent you know in a matter of hours so I think that if you can package good defy offerings to consumers and you don't have to call a defy if it's something like hey deposit my coins dollars in this this wallet and 5% and your interest or 8% and your interest that's appealing to anyone really and what they all they care about is you know is it safe isn't insured is it you know a recoverable what I lose my money and how safe is the money like this is things it goes through consumers head so I think it's more about what is the product offering as opposed to whether or not Asia will win or not it doesn't matter like you're the part is offering a solid in its global people around the world will adopt it great well thank you guys very much for coming on the show I appreciate your insights and the future of crypto looks bright thank you guys okay Jack thanks so much for having us on the show hey guys thank you everyone for watching that was Kyle Somani co-founder of multi coin capital and Vinnie lingam CEO at Civic my name is Jackson and if you guys enjoyed the video hit that like button and subscribe to our YouTube channel coin Telegraph like subscribe and huddle [Music]

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