Crypto Hedge Fund Managers Break Down 2024 Crypto Market

Boom, people! Welcome back to the show. Today we've got Dan Young with us talking all things crypto. As you guys know, Dan had the largest mining facility in the state of Utah in 2014. Huge mining warehouse, mining what? Dogecoins, Bitcoins, all sorts of stuff.

Lots of coins.

Lots of coins. Been on Intel's board advisor for 16 years. Huge crypto whale. And then now both of us together run Ugly Unicorn Crypto Fund, which is a hedge fund in the crypto space. So this last week everyone's been asking us tons of questions about crypto. What's been going on? We have the ETFs, 11 ETFs now launched. We have an Ethereum ETF maybe coming out soon.

Yes.

So it's a very timely post. Things will probably get updated. We'll add more things to this. But Dan, first off, I want to ask you— Dan's our chief investment officer at Ugly Unicorn— just give us your broad scope of the market right now. What are you seeing with the crypto market? What are the biggest highlights you're looking at?

I think the emotional anticipation up to the ETF caused that rise, and it's been for a while now. Right. And a lot of people thought, bang, that day it was going to just, you know, explode, go to the moon and all that kind of stuff. But it never happens like that, right?

Well, especially when the market goes up, what, 20%, 30% the couple of weeks leading up to the ETF.

Yeah.

There was some pressure to come out of it.

Yeah. And, you know, most of the trading is done with AI or algorithms and things like that. So a lot of times those profit-taking triggers come in and that's why you see a little bit of a dip Post-launch. But the whole ETF thing is really— is black swan because really what we're counting on is the halving happening every 4 years, right?

Yeah. So the halving's in April.

April.

Where it becomes twice as hard to mine a Bitcoin. Now about 19 million have been mined so far of 21 million.

A little over 19 million. 6 million lost where people, you know, forgot their seed key or something like that.

Yeah. So, so yeah, interesting market right now. It's kind of the— obviously the big notes are the ETF, the halving happening right now. You know, when we were talking about the ETFs launching, I mean, we're pretty excited. That's a big— it's just a big day because of the institute, like institutions paying attention, actually like Wall Street playing within the world of Bitcoin.

Right.

Which is pretty cool, pretty significant. Now, it's been a significant sell-off since, kind of some chop. We've even said to a lot of investors, there's going to be chop going forward. Looking at the gold ETF, we looked at this in our charts, was the GLD. So when GLD launched in 2004, very excited, a lot of run-up towards to that ETF. It actually chopped for about a few months after that ETF launched.

Pretty hard, yeah.

Yeah. And then over the next few years, it rallied like crazy. It did really well. It was generally very good for Wall Street. And what we're seeing is, at least the fundamentals, the, the, the ETFs, Bitcoin's ETF is now the 2nd largest ETF next to gold.

It just passed silver, right?

Yeah, it just passed silver, right? So with that, I mean, it's a lot of excitement, a lot of people talking. So, Dan, why is it selling off so hard? Why, why so many sellers? I mean, we're, we're We've fallen off significantly since the announcement of the ETF and approvals. What's been going on?

Selling on the news, you know, once the profit, you know, went up so much for people so quickly, the profit taking is there. But the big thing I think is why you're going to see kind of a consistent ramp up is this. These large hedge funds like BlackRock and Fidelity, these large funds, What they do is they manage pensions funds for different states, right? Huge pools of money. And I would say that those, those fund managers of those pension funds that have BlackRock managing their assets, they're going to tiptoe into it. So they'll go like, hey, let's go 0.1%, see how we do.

Yeah.

And then have a ramp-up plan.

Question I bet a lot of people have is they're always asking. So, Dan, Bridger, cool, I get this stuff. We'll talk about the Ethereum ETF in a minute here. But it's okay, Bitcoin's cool, but Ethereum's maybe a little bit cooler, but also these altcoins. Altcoins, at least last cycle, made a ton of money. Bitcoin did a 20x last cycle. Ethereum did about a 28x, and altcoins did, I don't know, 50x, 100x. Some coins did like a 20,000x, right?

Right.

And so, everyone asks me, Bridger, Dan, what's the next altcoin? What should I get into? And we're probably not gonna give Recommendations here, but how do you and I maybe think through looking through and doing research on altcoins or ecosystems that we would like to get into?

So there's a theory we have at our fund, you know, as we manage our investor money, is we look at crypto and blockchain as a whole as software. And it's funny talking about Jamie Dimon, in a way, he's looking at it almost like software. Software play in a way, and really that's really important to look at because if we just see a dog or a frog on a coin and there's all this excitement, then you're going to have an artificial emotional speculative pump, right? But if it's software, we can see how many projects are being developed under each ecosystem. And so, like if you had a programming language, right? If somebody was working within a certain ecosystem, that those development of those projects are really what's going to. Cause it to flourish.

Okay, so to wrap up this conversation on altcoins, if you were giving someone advice here, not financial advice, but just advice on approaching crypto markets, you'd say number one, find good ecosystems, right? Find good ecosystems that people are building on that has good underlying technology that's actually benefiting the companies that are building upon it.

Yeah, and there's a shortcut for you guys. You can just go to like CoinGecko. It's just a listing of like every crypto out there. Yeah, and they have this little info tab. with every link to all their white papers and projects, business plans. And that's a good place to study. And really, you know, we spend a lot of time, and our whole team does, reading all these boring papers. What does this thing do? Is it functional? Is it just a scam? And that diligence is important.

Yeah.

But the larger the ecosystem is, and if it's been around for a while, it has more resiliency, and you have more developers engaging With that. Yeah, right. You have less chance of a rug or something scammy happening.

Yes. Speaking of rugs, let's talk about security.

Yeah.

So I know, Dan, you've done a lot with security work. I think some people love— you've gotten hundreds of thousands of views on your videos and other stuff with people asking you about security work in crypto especially. You've done a lot, had a lot of experience with your technology companies in security. Our fund does a lot with security. So for home gamers, people at home, what's— what would you tell them for crypto security? It's one of the biggest and actually one of the, I think, benefits of having ETF is you just buy it on the block. Like, if for a big institution, they don't have to worry as much about security. They can just buy an ETF on a brokerage account.

Right.

But for people that are actually buying actual coins, hosting them in a wallet or having Coinbase or Crypto.com, what's your recommendations around security for crypto?

So here's, here's some big tips, though. First, one thing I recommend is try to avoid loading all your crypto on your phone. You should have a dedicated computer for it that you're not Usually lug it around with you, right? And you're going to do your transactions there unless you're some sort of trader or something, right? But for most people, that's better. You never want to get on public Wi-Fi. You want to use your phone and use that cellular connection.

Yeah, use data.

If you must get onto public Wi-Fi, use a VPN. NordVPN is one that I like, but there's so many out there. And what that'll do is give you some level of encryption, Protection. That's important. If you're using Coinbase, and I'll flip them back to Coinbase, make sure you have Google Authenticator at a minimum or the hardware key. But you can set what's called a whitelist delay.

Yeah.

And what that does is you approve the addresses that it goes to. And what I recommend doing is doing a test send. And then once you do a small test send, then you can send larger amounts. But the problem right now, there's this big hack, Tyler, one of our analysts, senior analysts, were talking about there's malware now that can get it in a phone or a computer, and a millisecond before you send your crypto, it changes the address. So you don't even see that. It's like your brain doesn't even— Yeah. And then your money sends to oblivion. And this is like with our fund, we have all kinds of crazy security, but one of them is whitelist. Yeah. We have to verify that, then our analysts will look at it and go, okay, that matches where we're going.

Send a test transaction. On Coinbase, the whitelist too, it takes 48 hours.

Yeah.

To connect, which is a delay. So, if someone did hack your account, they would have to connect the whitelist. And then it would notify you, sends you an email, text, hey, someone has connected a new wallet to your account. Do you approve this or not? And it gives you at least 48 hours to log in and maybe freeze your account or something if someone was trying to move money out of your account, which is cool for Coinbase specifically.

Yeah, yeah. So that's good. Now, for long-term storage, the Nano Ledger X or whatnot, hard wallets, but even they were hacked by them.

Yeah, walk through that for a second. So what happened? So a lot of people were like, cold storage, you have a Nano Ledger X, you'd have these little USB keys that you could like use. I've got one, but they got hacked. They had some malware.

Yeah. So what happened is an ex-employee uploaded some code that he had altered. And it didn't just steal everyone's money out of all their wallets. They had this thing called WalletConnect built into their interface. And when that was used, money could be skimmed or hacked with that. So that was kind of dangerous. What I recommend people do is when they buy a Ledger, they generate their seed key on the device. So don't like use MetaMask or something or a hot wallet and just put your keys in there because they could already be compromised. You make a fresh one, you write it down, and you only use that for deposits. So it's like a one-way street. Yeah. So hey, I bought Bitcoin to keep for long term, fire it off in there. And then when you fire it out again, make sure you do the whitelisting and a lot of the testing. Yeah.

So generate those keys there one way and just leave it. Don't connect it to— because we've seen problems with if you connect that wallet to scammy protocols, you can have open Approvals. You want to talk about that for a minute? People don't realize they have open approvals on a lot of their hot wallets.

Yeah.

You have to actually pay a gas fee to revoke those. You want to talk about that for a minute?

Yeah. We do this big revoking procedure every time we do any sort of engagement with the market. And the big thing is when you, let's say, use a DeFi exchange or you bought an NFT or any of that kind of stuff, you're opening a gateway and whatever token you're using, let's say you're using Ethereum, The default setting typically is infinite, meaning you've given them permission forever to use that, even without clicking approve on your hardware wallet, right? And so I've seen people have hundreds of thousands, some guys millions of dollars hacked 5 months later because they didn't revoke that contract.

Yeah.

So that's crazy.

That's wild. Yeah, that's wild. Okay, so security. Let's shift gears for a second. How do you see blockchain, or let's call it crypto technology, as one of those technologies working with these, let's call it AI, quantum computing, robotics, other technologies as well.

Let's bring that into interstellar space travel too, right? Because think about this. Elon will probably in our lifetime get us to Mars and probably have little colonies going and maybe giant ones 50, 100 years from now though. But when you start traveling these interstellar, you know, these intergalactic, however far you go, You can't use traditional money and transaction systems to transmit transaction. We'll have to have a faster way to do that.

Interesting.

And so, obviously, the software of blockchain will have to integrate into that.

Speaking of Elon, he's— he said X.com, PayPal CEO just came out and said they have a huge announcement in things, looks like, in crypto space. A lot of other companies, Amex, Visa, have been building crypto blockchains as well. Any comment on just software or payment companies right now evolving to crypto?

Oh, they have to. I mean, just like now you're seeing the institutions starting to get on board.

Yeah.

They're going to be, you know, like a yellow taxi or whatever if they don't adopt blockchain. But they're not dumb. We were sitting at a couple, a few years ago even, and we heard that Amex was developing all this stuff.

Full backend blockchain system, yeah.

Yeah, and everyone's like—

Chase Bank, all these banks were developing all their blockchain stuff. Visa, all the credit card main processors were all under. And this guy had he was he was working with them and helping them as a consultant on all their projects. He's like he he was a majority of the Fortune 500 companies right now are building some type of blockchain material on their backend to service payments or something like that inside their systems.

If if companies don't develop and adopt this, they're going to end up like Blockbuster, you know, or something.

Yeah, they'll just be left behind. And you've done this for years now, almost a decade in the crypto market specifically. Crypto markets are very volatile. How have you managed emotions? As yourself as a trader or as a fund manager running through the crypto market?

Well, psychologically is the base fundamentals of what's being developed, what's in the oven. Because people tend to look at like the cake when it's baked, not while it's in the oven. But if you know what's in the oven, you know eventually it's gonna go ding, it's gonna be ready to go, right? So that patience is tough, especially in this like TikTok type of world where we want short 15-second, you know, Quick hits of dopamine and that delayed gratification is is tough. It was interesting. We had a potential investor. I think they're coming to join us, but they asked, "How long do you guys plan on being in Bitcoin? Like a year? Like two? Or crypto as a whole?" We're like, we're like, like decades. Like we're gonna yeah. Like this is a long-term thing. Yeah, yeah. Like Warren Buffett and Munger. We want to do that in the in the block.

Well, it's a pretty fun market we're in right now. We're excited. We've been putting more money in and allocating, and it's been really fun to be a part of this. So we'll probably do another update call here in a few months to see what's going on. But Dan, thanks for coming on today.

Appreciate it.

Good to have you here. Kaboom! And we'll update. Drop comments down below. Let us know what you think. If you have comments, questions, we'd love to do follow-ups or more info on this, probably updates on this as we go. So thank you guys so much.