From the rapid growth of crypto to the dramatic volatility of the asset class, governments around the world are responding through regulatory and legislative actions. Some jurisdictions have announced clear and accommodating frameworks in the hope to create the crypto hubs […]
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“There’s a thousand people in the audience and a million parties going on tonight.”
— Anthony Lewis, Temasek, on DAS NYC and the surprising energy of crypto winter
DAS NYC: Day 1
At a restaurant, if the free bread they start you with is good, you know the rest of the meal will be, too. Same goes for crypto conferences: If the breakfast bar is good, the conference will be, too.
The breakfast bar at DAS NYC was excellent and the first day was even better.
There were lots of great people to chat with over breakfast as well. Many of whom were in suit jackets, which made this TradFi refugee feel right at home. As did the average age, which was much closer to mine than the average age at Permissionless. This is not to say it was a stuffy bunch, it wasn’t: The first thing I learned today is that sneakers are perfectly acceptable to pair with expensive suits, especially if they’re retro sneakers. (All the excuse I needed to go nuts on StockX when I get home.)
The intro music was similarly hip, retro and age-appropriate (carefully curated classic rock). So I was feeling in my element and looking forward to the panels, which didn’t disappoint. The only challenge was the distractingly amazing view of the Hudson river. But I knew you were depending on me, so I fought the urge to watch the boats go by and kept my focus on the speakers. Here’s some of what I heard.
The Macro Crystal Ball: What Comes Next
The first panel struck an appropriately bearish tone for a day where CPI data sent stocks and bonds dramatically lower. Macro has been the black cloud hanging over crypto and today’s panelists suggested it’s going to stay stormy for a good while yet: The Fed would not be a friend to risk assets anytime soon.
Danielle DiMartino Booth said the Fed will keep fighting its “credibility crisis” until people stop believing they will pivot.
Jurien Timmer agreed, saying the Fed has no choice but to “beat everyone over the head with a bearish message” right up until the point they pivot.
“Powell is embarrassed,” Mike Green added.
Alf Peccatiello predicted the Fed won’t stop tightening until inflation is back down to 2%, and Mike Green thinks the result will be that they end up “blowing way through the 2% target.”
The problem, all agreed, is that the Fed is making policy based on lagging indicators. They are “hanging their hat” on housing and employment, DiMartino said.
Timmer said, “They got so many things wrong they’re just now-casting it.”
There was more along those lines, but all you need to know was that it made me feel pretty good that the Nasdaq was down only 5.2% today.
The Verge of the Merge
Anthony DeMartino of Matrixport said a successful Merge “will lead to bigger institutional adoption,” in part because it demonstrates Ethereum’s “ability to evolve.”
The founder of Synthetix, Kain Warwick, agreed, saying, “Ethereum needs to be adaptable.” He compared ETH favorably to BTC by noting that “most of bitcoin’s utility is as a token on Ethereum.”
Brian Mosoff of Ether Capital also expects that institutional involvement is coming, but thinks it’s still maybe 5 years away. He noted that a lot of institutional capital is still only investing in picks and shovels because they’re not yet ready to touch tokens directly.
But the crypto crash has been helpful, he added, because “it proved the asset class wouldn’t go away.”
A conversation at the first break reinforced the message on institutional adoption: I spoke to Copper's business development team, which assured me the instis are coming. Despite crypto winter, the provider of digital asset infrastructure is "still seeing really strong institutional interest in digital assets.” They expect prime services to be the next growth area for their business.
Regulatory Clouds on the Horizon
Despite the title of this panel, the speakers were notably upbeat on the outlook for crypto regulation.
Valerie Szczepanik of the SEC said regulators aim to make crypto “safer, sounder and more transparent.” Regulation in general, she said, is there to make people “feel safe to invest.” (Which would certainly be great for the industry, although I kind of think it would be better to make people feel less safe about crypto.)
Kristin Smith of the Blockchain Association applauded the bipartisan approach to crypto regulation being taken in Washington, noting that the dialog has been “more constructive” recently. Asked what she was looking forward to, she mentioned a resolution to the Ripple case (which may be the first time I’ve heard Ripple get a mention anywhere outside of Twitter in at least a year).
Robert Materazzi of Lukka said he sees crypto businesses making “a lot of effort to do things the right way.” I was glad to hear that as it doesn’t always seem that way from the outside looking in.
Gabby Kusz of the Global Digital Asset and Crypto Association said that building a new financial system will require an “Amish barn raise,” which I had to include here just because I’m a sucker for a great metaphor.
HODL to BUIDL: How Institutional Web3 Drives Growth
Joel Edgerton of Ledger said he’s starting to see crypto solve real problems, citing proof of insurance for trade finance and nonprofits using NFTs for supply chain management, among other examples. Big companies are moving into NFTs, he added, not just to engage customers but to manage their business, as well.
Morgan McKenny of the Provenance Blockchain Foundation said crypto builders should seek out the pain points of finance: Markets for listed assets work well enough, so the opportunity in crypto is to improve on markets for private assets.
Didier Lavallee is seeing some of that already: He said customers are coming to Tetra Trust for help in tokenizing real estate. Adoption is still “really early,” but he sees a lot of upside: “Our children won’t bank the way that we bank.”
Fireside Chat: Dan Morehead & Anthony Lewis
Dan Morehead shared that his investment firm, Pantera Capital, recently raised a $2 billion fund. As a measure of how far the industry has come, he noted that Pantera’s 2016 fund raised $2 million.
Much of that new money will go into seed-round investments, which is where they see the best opportunities at the moment. (I’m not sure how big their seed rounds are, but it’ll take a lot of them to add up to $2 billion.)
Dan may have had the most bullish take of the day, saying that, despite the bearish macro outlook, he believes crypto can decouple from risk assets on the upside “within a period of months.”
The second most bullish take on crypto may have been the presence of Dan’s chatting partner, Anthony Lewis, who is the director of the Blockchain Pod at Temasek. My first thought on seeing Temasek on the agenda was, that’s funny they have the same name as the Singapore government’s investment company. My second, more correct, thought was, Temasek invests in crypto?!?!
I’ve been a skeptic of bluechip TradFi institutions getting into crypto, but you don’t get much more bluechip than Temasek, so it’s great to find out they’re already here.
Equally as good as breakfast. If you’re attending Day 2, I recommend the sweet potato fries.
Bridging the Gap Between Speculation and Fundamental Value in Crypto
Amy Oldenburg of Morgan Stanley started the afternoon session off with a warning that “you have to be close to the market day in, day out to stay on top of these themes.”
Matthew Sigel of VanEck agreed, saying, “It’s a participatory asset class and you have to get your hands dirty to know what’s going on.”
Alex Thorn of Galaxy Digital added a warning that a majority of cryptos are not going to be valuable in the future.
How to pick out the winners? “Tracking durability of usage” is one way he tries, as well as applying SAAS-type user metrics.
Sigel described cryptos as a “collection of series A companies that happen to be liquid” and trade “50% on fundamentals and 50% on speculation.”
Longer term, he thinks DeFi can take 10% market share from TradFi by 2030 (vs. 0.3% now) and the metaverse can take 20% or 30% of eCommerce and advertising.
If these numbers are even a little bit right, we shouldn’t be worrying about whether Fed Funds is 2% or 4% or 6% — a nice message to hear after today’s first panel on impending macro doom.
Spotting Opportunities in Crypto’s Investment Landscape
Peter Najarian of RW3 Ventures kept it real by refusing to cheerlead for crypto: “It’s gut check time for the industry to actually do something.”
He’s not a believer in “build it and they will come,” noting that people will only come to crypto if we build things they want. He sees it as an open question as to whether the move from Web2 to Web3 will be as transformational as that from Web1 to Web2: Are we solving people’s problems and creating a-ha moments as Web2 did?
Ultimately, though, “we will live in a world” where everything is tokenized and “everyone will be able to peer-to-peer trade some version of every asset.”
Amy Wu, head of ventures at FTX, was a bit more optimistic on the near-term outlook, noting that “there’s billions of dollars” of VC capital that’s yet to be deployed. She’s also encouraged by the higher caliber of entrepreneurs she sees starting crypto businesses.
Vanessa Grellet of Aglaé Ventures brought things full circle to the day’s first panel by asserting that “the reality of macro is that we’re going to be in bear markets for the next few years.”
That’s a wrap for Day 1: There was more, but newsletter deadlines don’t wait for conferences to finish, even great ones.
And I’m miles over my word count, anyway.
Thanks for reading all the extra words and I’ll see you tomorrow for Day 2.