Darren Kleine

The Bitcoin tidal wave is coming, Mark Yusko says.



The Morgan Creek Capital founder claims the combination of Bitcoin network’s upcoming halving event and the potential approval of BlackRock’s spot bitcoin ETF will bring “tens of billions, if not hundreds of billions of dollars of demand into the physical spot market.”



On the Forward Guidance podcast (<a href="https://open.spotify.com/episode/2cTPX4iQBMWcvZMDv1tAwv?si=kGAU2lCGRsCS4_LaRwNadQ">Spotify</a>/<a href="https://podcasts.apple.com/ca/podcast/mark-yusko-macro-doesnt-matter-for-crypto-permissionless/id1592743188?i=1000628169601">Apple</a>), Yusko claims the current bias against the crypto industry that is prevalent among traditional investment entities is “all going to go away” following an ETF approval.&nbsp;



Many barriers are currently in place to keep institutional investor hands off crypto, but that will change, says Yusko. “No one’s going to be able to say no,” he says, “not UBS, not Merrill Lynch, no one.”



Read more: <a href="https://blockworks.co/news/sec-delay-decision-bitcoin-etf-blackrock">Delays mount: SEC defers ruling on BlackRock, Fidelity bitcoin ETFs</a>



But sentiment has faltered considerably since the last crypto bull run, when many more institutional clients were clamoring for access, Yusko says. “They&#8217;re saying it less now than they did two years ago because people buy what they wish they would have bought.”



“Now that it’s <a href="https://blockworks.co/news/bitcoin-daily-death-cross-bearish-market-conditions">on sale</a>,” he says, “they run out of the store.”



In every “other business in the world” outside of stocks and crypto, people will “knock each other over” to snag a good deal, but investing exhibits the opposite behavior, Yusko says.



Podcast host Jack Farley observes, “demand for something is always highest at the top and lowest at the bottom.”



“Humans are really simplistic animals,” Yusko replies. “They buy what they wish they would have bought and they sell what they’re about to need.”



<h2 class="wp-block-heading">Volatility is your friend</h2>



Shifting the conversation to focus on stocks and bonds, Yusko claims the irrational behavior pattern is objectively observable over the long term. “Here’s the proof,” he says, citing JPMorgan twenty-year data that shows “stocks made eight and a half percent over that period compounded. Bonds made five and a half.”



“All you had to do,” Yusko says, was simply “pick one.” But over the same timespan, the average investor only made 2.9% gains, he says.



“How’s that possible?” he asks. “All you had to do is pick one, or a little of each.”&nbsp;



“No. They bought stocks when they were hot and sold them when they were not.”



Yusko argues that young investors should “<a href="https://blockworks.co/news/bitcoin-hodlers-market-volatility">embrace volatility</a>” rather than playing it safe with “risk-free investments” like bonds. 



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG5427708500" width="100%"></iframe>







“Literally, it should be against the law for people from 20 to 65 to own bonds,” he says. “If you’re 20 years old and you can’t touch the money for 50 years…you should be in the highest volatility asset.”



So-called “risk-free” investments still end up netting the cautious investor near-zero profits because “<a href="https://blockworks.co/news/central-bank-heads-talk-inflation">inflation chews up what you make</a>,” Yusko says.



“Volatility is your friend.”



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bitcoin etf

Bitcoin is ‘on sale,’ Yusko says, but customers are running out of the store

Knowledgeable crypto enthusiasts — most of them, anyway — would generally agree that the Bitcoin network, thanks to its highly competitive and tamper-resistant proof of work blockchain design, is the most secure decentralized blockchain network in the world.&nbsp;



And for many, the competition isn’t even close. According to its strongest loyalists, sometimes referred to as <a href="https://blockworks.co/news/bitcoin-ethereum-toxic-maximalism">bitcoin “maximalists</a>,” all other protocols are nothing more than inferior knock-offs that will inevitably fall into irrelevance, given enough time.



While Mark Yusko, founder of Morgan Creek Capital doesn’t consider himself a maxi, he does contend that the next closest competitor is, at the very best, a distant second in the rankings.



In an interview with Mike Ippolito on Blockworks’ <a href="https://www.youtube.com/watch?v=7QDamp7xL10&amp;list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu&amp;index=1" target="_blank" rel="noreferrer noopener">On the Margin podcast</a>, Yusko asks, “What&#8217;s the safest, <a href="https://blockworks.co/news/bitcoin-network-secure-fees">most secure</a> computing network the world has ever known?”



“The <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> blockchain. And it&#8217;s not close, right?”



Ippolito pushes back, asking, “You don&#8217;t think <a href="https://blockworks.co/tag/ethereum" target="_blank" rel="noreferrer noopener">Ethereum</a>&#8216;s close in terms of the settlement guarantees?”



“I don&#8217;t think it&#8217;s close,” Yusko replies.



It’s like comparing prestigious business schools, Yusko says. The top schools are recognized and agreed upon by everybody: “Harvard,” then gesturing downward, “Stanford — and then everybody else who thinks they&#8217;re number three.”



“I will argue, bitcoin&#8217;s number one. Ethereum&#8217;s a pretty big step down.”



“I&#8217;m still not convinced — and I&#8217;m willing to be convinced — that <a href="https://blockworks.co/news/proof-of-work-vs-proof-of-stake-whats-the-difference">proof-of-stake is as secure as proof of work</a>.”



“It could be that I just don&#8217;t understand the technology well enough,” he admits, but “proof of work is at least one order of magnitude more secure than proof of stake.”



<h2 class="wp-block-heading">Different roadmaps</h2>



Ippolito argues that the two <a href="https://blockworks.co/tag/blockchain">blockchains</a> serve different purposes. “I like both of them. I just don&#8217;t view them as being competition. I think they&#8217;re very different things.”



“In order to really, truly love bitcoin and have it be the vast majority, like, the only holding that you have,” Ippolito says, “you have to have a pretty dim view of what&#8217;s going to happen in the future.”



Ippolito admits, “there&#8217;s probably some sort of reckoning coming and that&#8217;s why I like bitcoin.”



“That said, there&#8217;s not much to do on that network.”



With Ethereum, Ippolito says, so many applications are being built for a variety of purposes including borrowing and lending for yield, money market funds, and so forth. “That, to me, is more intellectually interesting and draws a lot of my mindshare.”



What makes the Bitcoin network such a great store of store value also makes it very difficult to build applications on top of it in the same way as Ethereum, Ippolito says.



“They&#8217;ve pursued two different roadmaps,” he argues.



<h2 class="wp-block-heading">One chain to rule them all</h2>



“Look, we are tribal at our core,” Yusko says.



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG5876851634" width="100%"></iframe>







“I hear the maxis drone on, and I just ignore the nonsense of it, the toxic part of it.”



“If <a href="https://blockworks.co/tag/defi" target="_blank" rel="noreferrer noopener">DeFi</a> can be built successfully on the bitcoin blockchain,” he says, with functions built on top that resemble traditional finance layers like Fedwire, ACH, and Visa, “then we can have one chain to rule all chains.” “But I&#8217;m open,” Yusko says, “I&#8217;m not going to ignore the fact — there&#8217;s <a href="https://blockworks.co/news/tokenized-vault-standard-ethereum">lots of interesting things</a> being built in Ethereum.”



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Bitcoin

Can Any Blockchain Compete on Security With Bitcoin?

Shalini Nagarajan

<div id="highlights-block_62b9533f16ccb" class="highlights">
 <ul>
 <li>FTX’s proposal gives it the option to acquire BlockFi at a price of zero, Mark Yusko told investors</li>
 <li>He said he’s working on securing an equity offer for BlockFi</li>
 </ul>
 
</div>



Asset manager Morgan Creek Digital wants to compete with FTX’s support for troubled crypto lender BlockFi.



The investment firm is looking to raise $250 million from investors to acquire a majority stake in BlockFi, <a href="https://www.coindesk.com/business/2022/06/25/morgan-creek-is-trying-to-counter-ftxs-blockfi-bailout-leaked-call-shows/" target="_blank" rel="noreferrer noopener">CoinDesk</a> reported on Sunday, citing a leaked investor call. 



Morgan Creek, a longtime BlockFi backer, reportedly came up with this plan after FTX last week announced a <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">$250 million credit line</a> for the lender. According to the leaked audio, Morgan Creek Digital’s Managing Partner Mark Yusko said he had been “making calls all day.”



Crypto billionaire and FTX CEO Sam Bankman-Fried has been labeled a “lender of last resort” for attempting to rescue the struggling industry. In a <a href="https://twitter.com/SBF_FTX/status/1539268638791696385" target="_blank" rel="noreferrer noopener">tweet</a> on Tuesday, he said his company is committed to protecting the digital asset ecosystem and its customers.



Multiple venture capital funds are reportedly casting around for ways to provide BlockFi with funds and bolster its balance sheet amid the shaken market.



According to Yusko, FTX’s $250 million credit deal with BlockFi raises a point of concern for existing shareholders, including Morgan Creek — it provides FTX with the option to acquire BlockFi at no cost. If the crypto exchange goes ahead with this option, then BlockFi’s existing equity shareholders, investors in prior venture rounds, management and employees with stock options would all be liquidated.



If FTX were to exercise that option after extending its credit line, only investors in the most senior tranche of BlockFi’s latest fundraise would recover a minimal amount on their investment, Yusko said. Morgan Creek would be among those caught in a tight spot.



This might make the FTX deal look tricky. But there was a rational reason BlockFi’s founders accepted the terms, Yusko said, according to CoinDesk. Of the many emergency financing offers the firm reportedly received, FTX’s deal was the only one that wouldn’t diminish the role of client assets.&nbsp;



That means if BlockFi went ahead with another offer, its depositors would have to stand by until the new lender was repaid first. Yusko didn’t mention which other firms approached BlockFi with bailouts. Furthermore, the lender hadn’t received any equity financing options by then.



The only other option, Yusko told investors on the call, is for BlockFi to raise an equivalent amount in equity. He said he expects a 10% chance for this idea to work out, “but not zero.”



Yusko also told an investor he’s open to a deal that would allow FTX and Morgan Creek to each put up a portion of their capital.&nbsp;



So far, Yusko has reportedly spoken to an investor that could issue a $100 million check and two others who could finance up to $50 million. He warned that efforts toward securing an offer are far from certain.



Morgan Creek declined to comment. BlockFi didn’t immediately return Blockworks’ request for comment.



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BlockFi

BlockFi Has a New Bidder in Morgan Creek, Report Says

Jacquelyn Melinek

<div id="highlights-block_615e0c6ea8714" class="highlights">
 <ul>
 <li>“If you look at the migration of talent into this space, it’s like nothing I’ve ever seen except one other time in the 90s, coming into the internet, people were leaving great jobs,” he said</li>
 <li>“The money has been flowing (into crypto) for years and the talent is flowing, you have to embrace it and you have to have exposure to digital assets,” he said </li>
 </ul>
 
</div>



Mark Yusko, CEO and chief investment officer of Morgan Creek Capital Management, sat down with Blockworks for an interview at our Digital Asset Summit: NYC conference after he spoke on the closing fireside chat with Pantera Capital’s Dan Morehead and 10T Holdings Founder and CEO Dan Tapiero. 



In the interview, Yusko shared his thoughts on digital assets and discussed:



<ul class="wp-block-list"><li>Increased institutional exposure to digital assets</li><li>Migration of talent and money into crypto</li><li>Solving risks associated with digital assets</li><li>Future regulatory framework </li><li>Disruption of financial services through blockchain technology</li></ul>



Watch the full interview below and all of the panel videos from DAS <a href="https://cms.blockworks.co/events/digital-asset-summit-2021-2/#videoslider0" target="_blank" rel="noreferrer noopener">here</a>. 



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="DAS NYC 2021: Morgan Creek Capital’s Mark Yusko Says You Have to Have Exposure to Digital Assets" width="1024" height="576" src="https://www.youtube.com/embed/RSt-GTYNHWI?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<hr class="wp-block-separator"/>



Are you a UK or EU reader that can’t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



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DAS 2021

Morgan Creek’s Yusko: You Have to Have Exposure to Digital Assets

Ben Strack

<div id="highlights-block_61435b111102e" class="highlights">
 <ul>
 <li>Pantera CEO Dan Morehead noted that while bitcoin’s market cap could grow by 10 times in half a decade, he expects other crypto segments to go up even more</li>
 <li>Executives counter argument of Bridgewater Associates CIO Ray Dalio that governments will “kill” bitcoin if it becomes successful </li>
 </ul>
 
</div>



The cryptocurrency market capitalization could continue to roughly double in size each year over the next half decade to reach $40 trillion by that time, <a href="http://v" target="_blank" rel="noreferrer noopener">Pantera Capital</a> CEO Dan Morehead said during a panel at Blockworks’ Digital Asset Summit (DAS) on Wednesday.



While he noted that bitcoin could grow by 10 times during that span, he expects other crypto segments to go up even more. More than 100% of the returns in the cryptocurrency industry have come outside of bitcoin over the last six months, Morehead added.



“Money protection or a digital gold is one of the things blockchain does, but there’s hundreds and hundreds of different use cases — NFTs, DeFi, all that and that’s why it’s so exciting,” he said. “It’s going to go through so many different industries and end up being worth so much value because it’s disrupting things that weren’t touched. Basically all of finance wasn’t touched by the internet.”



The global cryptocurrency market cap today is $2.28 trillion, according to <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">CoinGecko</a>, as cryptocurrency trading volume in the last day was at $144 billion, as of 12:30 p.m. eastern on Thursday. The market caps of bitcoin and Ethereum were at about $900 billion (39.8% of overall market) and $425 billion (18.7%), respectively, the data shows.



Morehead was joined on the Manhattan event stage by Mark Yusko, founder and CIO of <a href="https://www.morgancreekcap.com" target="_blank" rel="noreferrer noopener">Morgan Creek Capital Management</a>, and Dan Tapiero, founder and CEO of <a href="https://10tfund.com" target="_blank" rel="noreferrer noopener">10T Holdings</a>.&nbsp;



Yusko, who estimates a $25 trillion crypto market in five years, said he expects a burst in the crypto market value over the next 24 months, followed by a bust.&nbsp;



“People will [say] it’s over, it’s the end,” he told the crowd. That’s the beginning.”



Yusko noted that he also expects the dominance of bitcoin to decline to about 20% of the overall crypto space, perhaps reaching $5 trillion by 2026.



Meanwhile Tapiero estimated that the crypto market value could hit $20 trillion and said bitcoin reaching a price of $500,000 is “very reasonable” within five years.



Bitcoin’s price was above $48,000 on Thursday afternoon, according to CoinGecko, up 4.3% in the last seven days.&nbsp;&nbsp;&nbsp;



“I don’t know that bitcoin dominance will fall … because there is a world in which things start getting built on bitcoin,” Tapiero explained. “There’s so much innovation happening at such a fast pace that, at least for me, I find it hard to be specific on the bet.” 



<h3 class="wp-block-heading">Can crypto be stopped?</h3>



Ray Dalio, CIO of hedge fund manager Bridgewater Associates since 1985, said Wednesday in an <a href="https://twitter.com/SquawkCNBC/status/1438122407965954054?s=19" target="_blank" rel="noreferrer noopener">interview</a> with CNBC that though he has a small allocation to bitcoin relative to other investments, the growth of crypto could lead to its end.&nbsp;



“It’s an amazing accomplishment to have brought it from where that programming occurred to where it is,” he said. “&#8230;I think at the end of the day if it’s really successful, they’ll kill it. They’ll try to kill it and I think they will kill it, because they have ways of killing it.



“It doesn’t have intrinsic value,” Dalio added. “If you put cryptocurrencies, or let’s say bitcoin, in the historical perspective, there are so many things in a historical perspective that didn’t have intrinsic value and had perceived value and then became hot, and then became cold.”



Taperio called Dalio’s comments “ridiculous” during the DAS panel, noting that older investors who are choosing to ignore the benefits of crypto are having their wealth devalued.&nbsp;



Yusko called bitcoin the “greatest money ever invented,” noting that it and gold are the only two forms of actual money.



“That money … will displace all of the bad, crappy money, and that is inevitable and there’s no way to stop it,” Yusko said. “Ray Dalio is crazy to say they can shut it down. No, you can’t.”



The Morgan Creek founder noted China’s first crackdown on bitcoin in 2013, which sent its price tumbling.&nbsp;



“The price fell from $1,400 to $1,000 in two weeks,” Yusko noted. “Where is it today? Is it higher than $1,000? Last time I checked it was, right?’



<hr class="wp-block-separator"/>



Are you a UK or EU reader that can’t get enough investor-focused content on digital assets?<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a>&nbsp;in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket.&nbsp;<a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



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