Bitcoin to Overtake $20K in 2020? | Spencer Bogart & Jacob Canfield

How about instead of trying to launch a new chain, why don't we continue to build up the stack on top of the chains that have traction and have users?

Right now bitcoin is in an uptrend, but it's still got some resistance in play around 11,003.

You know, for us, it's mostly just.

Making sure that we get capital to the most promising projects.

What's up guys? I'm Giovanni. Welcome back to our weekly crypto market show. This week with us, general partner at Blockchain Capital, Spencer Bogaert, and and bitcoin analyst and trader Jacob Canfield. Welcome guys. Let's start talking about the markets. So on Sunday, bitcoin broke through the benchmark level of $10,000. Then it suddenly retraced back to the 9800, more or less. And now in the last couple of minutes, we saw bitcoin going back up to the 8 to 10,200, more or less. So what is happening right now in the bitco? How do you interpret these latest moves and what we should expect in the nearest future? Jacob?

Well, there were a couple different components. There was a combination of technical and a combination of fundamentals. So early on in the rise, we definitely saw some accumulation activity in the 65 to $7,000 range. The support held really, really well and so there was a lot of demand in that area. And then there were some fundamental catalysts. The Iranian 10 that saw gold and bitcoin kind of moving in tandem, which helped to propel us over that $8,000 mark, which that was kind of the benchmark for me from going from bearish trend to bullish trend. And that's when I decided to flip basically full bullish after that. And so once we broke 8,000, I think that now it's just, it's more or less a trend. And we're getting continuous short squeezes to the upside. Volume is picking up, open interest is picking up. So from a technical perspective as well as a fundamental perspective, we're seeing kind of all things line up for bitcoin's continued uptrend and 10,000 level is a psychologically important level. And it broke it easily, but had a nice retrace sell off and then pushed right back up as if it was nothing. So all in all, I see bitcoin continuing to push, push up. And for me, from a technical perspective, we're still in a range. If you take the resistance from the 20,000 and the 13,000, that'll give us a high side resistance for this range of around 11 3, and so if we flip that, then it's highly likely that we break 14,000 and probably push for all time highs. But that would probably be the last level for bears to defend if they've got a hope at defending this bitcoin bullish run. And I've got a couple of other theories, but I'll let Spencer give us his insights and then I'll go over a few other things.

Okay. So Spencer, what do you think about the situation right now in the crypto market? Do you share the same view as Jacob or you have a different kind of interpretation?

I think that's great color from Jacob and I'm looking forward to him diving into a few other things here. I mean, look, for us, any kind of short term price movement is mostly just noise to us. All of our funds and investment activity is structured as venture investments. So we make venture investments out of venture funds and we take a 8 to 10 year time horizon on our investments. So, you know, what happens over any given weekend is always interesting to us. I mean we always watch these markets because they're very close. But you know, what actually happens in terms of price doesn't have a huge impact for us. Now am I constructive on price over the next kind of call it 12 months? Absolutely. Mm.

Yeah. So of course you have a much more long term perspective on these kind of things. Jakob is a day trader, so he is more focused on the short movements.

100%. Leave it to the experts.

So Jakob, did you want to add anything else about your analysis you said?

Yeah, so there's merit to both approaches. And you know, as a venture capital firm that's looking at 8, 10, 20 year horizon, horizon similar to a lot of the other firms in the space. I think that using futures is also a good approach, especially when you get high volume blow off tops like we saw in 13,000, because it can save you from significant drawdown. And so that's kind of how I approach it. I do have a long term hold in bitcoin that I take hedges out against high time frame resistances. And so I look at both short term and long term fundamentals. But for me, ever since I've been in the space all the way back to 2016, I think Spencer's been in longer than I have. But my long term horizon for bitcoin is bullish, both on a macro scale, technical scale and a fundamental scale. For me, Bitcoin makes it's mathematically designed to go up in value based on scarcity. And the way that it's designed Economically, whereas every other currency in the world is designed to go down in value. So for me, macro bullish long term as well. But I like to play the short term movements to compound the profitability of trading Bitcoin.

In a tweet you said that you don't really care whether people think this is a bull run or not and that there is zero guarantee that this is continuing going up. That sounds a little bit of a contradiction of what you just said.

Yeah, so you're taking that tweet a little bit out of context. What I said was if you can take profits and it can eliminate student debt, credit card debt, pay off a mortgage, or upgrade your life substantially, I recommend taking profits. I don't care whether we're in a bull market or not, and you're going to miss out on a few gains. If it can change your life, I would highly recommend taking profits. And then I followed that tweet up with I've watched many friends and many people in the space make millions of dollars only to basically hold back down to zero multiple times whether they're in bitcoin, whether they're in altcoins. And so that was the context of that tweet. And so if you are in debt, if you, you know, are using too much risk in the markets, then I recommended taking profits. So it was more of a tweet thread that that context really came out of. And I think that's pragmatic and I think that's logical. Whereas larger money, smart money, institutional capital, kind of like Spencer's fund, they can have long time, high, high time frame horizons because they have the capital to be able to ignore the low signal noise. Whereas someone with retail who maybe put in too much of their capital in the markets, they might not have that, that time horizon. So that was the point of that tweet.

So going to another topic. So basically, Spencer, in a recent interview with Bloomberg, I believe you said that one of the things you are more excited about in 2020 is a shift from horizontal competition to vertical construction in the crypto space. Can you explain a little bit what you mean by vertical construction and horizontal competition?

Sure, I think probably a little bit of backstory would be helpful here. So I tend to categorize the entire history of kind of bitcoin or I guess broader crypto into five major kind of eras. So the first of those was kind of 2009 to 2012, roughly 2011, which was the bitcoin won't work era. So you know, it's pretty self explanatory Anyone who'd heard of bitcoin pretty much assumed it's not going to work. Pretty reasonable hypothesis, to be honest. But after a few years of operating perfectly, we kind of entered this. We shifted from okay, bitcoin won't work to fine, bitcoin works, but it's for tulips and criminals. So, you know, all of a sudden, everyone starts saying, okay, fine, I can see that it's working, but the only real people that are going to get utility from this are criminals. And by the way, the price action of this looks an awful lot like the Dutch tulip mania. So this was the main popular kind of refrain that we heard. And then from there, you know, a lot of the skeptics in that period are saying, like, look, this thing's going to crash, it's going to go to zero and it's going to disappear. Sure enough, in was that 2014 price did fall substantially. And so, you know, for one, all the blockchain skeptics and pundits kind of said, see, I told you so. And then in terms of the broader industry, things kind of shifted to the blockchain, not bitcoin era, which was, hey, let's take these big open networks with these digital assets attached to them, let's strip away the digital assets and let's make them closed networks for enterprise use cases. You know, altogether not a terrible hypothesis, but after several years of watching a ton of proof of concepts inside of large enterprises and none of those really gaining material traction in the real kind of efficiency, not really bearing fruit there, people kind of shifted in kind of 2016 to 2017 and realizing that, okay, the power here, the true innovation, is these big open networks with a digital asset that's attached to them. But then the common refrain kind of shifted to, okay, fine, we get that it's all about crypto, we get that it's about these open networks, but bitcoin was the 1.0. So let's go find out what's going to be the next Bitcoin or the next Ethereum. And so I kind of categorized that next era as the ICO and horizontal competition era, which was, hey, let's take any perceived shortcoming of Bitcoin or Ethereum, whether it's throughput, privacy, expressiveness, what have you, and let's go and try and address that issue by launching a new blockchain. And so over the past few years, we've seen gigantic fundraisers for these, and we've seen a lot of those blockchains actually get out and launch. And a lot of them, honestly, they're pretty brilliant from a technical standpoint, but they're not really attracting users, they're not really attracting developers. And so, you know, I think that we're kind of seeing an end of the phase where people are thinking, okay, for every perceived shortcoming, let's go launch a specific blockchain that addresses that issue. To instead saying, okay, how about instead of trying to launch a new chain, why don't we continue to build up the stack on top of the chains that have traction and have users? So instead of trying to solve throughput by going and launching a new high TPS blockchain, let's go and create lightning network, let's go and create plasma, let's go and create optimistic roll ups, other kind of scaling solutions. And you can say the same thing about kind of privacy and about some of the expressiveness as well. So the point being that I think here in 2020 and for the years ahead, what we're going to see is a race to kind of build up the stack of a couple winning protocols. So I'm a little bit less constructive on the idea that we're going to have thousands of blockchains that matter, and instead more constructive on the idea that we're going to have one to maybe four blockchains that really matter. And most of the innovation and development will happen so called up the stack of those winning protocols.

Okay, that's a pretty interesting theory. So you think that will materialize in 2020?

I think that we're already starting to see it. I think that there is a, there's a few different things here. One, if you're going to go and dedicate the next few years of your life to building something, you want people to actually use it. And so I think a lot of people that went out and launched new blockchains, for one, have not found a terrible amount of users. So, you know, I think the next wave of developers entering the space is thinking about a different strategy to that. And then also just investors are not willing to pay the types of premiums they were for teams to go out and launch a new blockchain that they were in 2017, for example. You know, the returns from these kind of investments in some cases have been okay, in other cases they haven't been so great. So overall, I think that there's less funding going towards it and less developer appetite to do it. So therefore we see this kind of shift that's really already underway, but I think plays out over the next Few years.

Right. And Jacob, what do you think? Do you agree with Spencer's forecast regarding this evolution towards vertical construction?

Yeah, you're already seeing that quite a bit. You're seeing capitulation, you're seeing, you know, infighting amongst developer projects. But I'll expand on that just a little bit. So history doesn't repeat, but it often rhymes. So what we're seeing and what he basically just explained is the.com era all over again had a protocol war then. Most people don't remember it, but we had a similar protocol war where we had our protocols that were designed and then other protocols came along and they had first mover advantage. So even though later protocols came along, they were faster, more scalable and we saw enterprises try to co opt a lot of these protocols as well and make people pay for them, but eventually competition and that vertical construction that he's talking about drove fees really, really low. And so I would agree 100%. But what I think that will also happen is those main protocols that have staying power will have more regionality based on the part of the world that they're in and the support of the governments or regulations or ecosystems that are around them that will give them staying power because of the users, because of the government backings, because of the enterprise level participation on those, on those specific protocols. So I think, yeah, a ton of the protocols that were developed, they might have good architecture, they might have scalability, all that stuff. But taking out incumbents like Ethereum and Eos, Eos has, you know, billion dollar capital to be able to stay for a long time, develop. They can pull a lot of developers away from other competing protocols. So I think that he's completely right in his prediction, but I think that it's going to have a little bit more locality and regionality that's going to play into those protocol developments and in which ones stay. So that's, that's my thoughts on the protocol war that we've got facing.

Okay, so if I well understood your point of view, you are saying, you are saying that this vertical construction that Spencer is talking about is a little bit more, is going to be a little bit more fragmented like you talked about these regional concentrations of capital and resources which are going to make a protocol thrive despite the fact that it might not be like in terms of quality, the best one.

Yeah. So incumbent protocols oftentimes have the network effect going for them. And so they might not be the best technically, but because of that incumbency like Bitcoin may not be the best Protocol, but it has the network effect and it's the strongest network. It's, it's, it's a very powerful network. So it's got the network effect going for it, which makes it the strongest. And we can get into the enterprises that are working with Ethereum and stuff like that, which gives it a massive leg up as far as first mover advantage. But yeah, so I think that a lot of these other protocols will die not because they're not technically better, but because they don't have the network effect or early mover advantage they, that these other protocols have. And they've also don't have the Capital Resources because $25 million isn't going to get you far. We saw that a lot of projects blow through $25 million in less than 12 months and got really not much to show for it.

Spencer, you mentioned this vertical construction. So to get more specific, like what are the, what, what do a protocol or what do a project need to have in order to be one of these few ones which will participate into this vertical construction you are talking about?

Ah, very good question. So I think it remains to be seen, I don't think that there's any one set of kind of criteria that you can apply that would say that like okay, this is going to be a critical part of the Bitcoin stack or the Ethereum stack, so to speak. You know, and I think in a lot of ways, I mean, you know, speaking again from the venture perspective, it's not even necessarily that any or all of those layers will be directly monetizable. Right. So those might not be investment opportunities at all. You know, I mean like the lightning network itself is not an investment opportunity. There are companies that build around the lightning network that are investment opportunities. But my guess is that a lot of the kind of functional layers that we see here are actually not direct investment opportunities at all.

Jacob, what is the most exciting event or thing that you are excited about for 2020?

How much time do I have? There's a, there's a lot. The halving event is probably the most exciting event. It's only happened two other times. It's the third time it's happening. That's a massive, massive deal. As far as reducing inflation supply, it'll get Bitcoin lower than most currencies of the world as far as inflation is concerned. It'll reduce supply, reduce mining cell pressure. That's a, you know, that's a massive event. You've got ETH 2.0 that is potentially trying to launch Moving from proof of work to proof of stake. I think they're in one of the best positions to do a proof of stake model that is decentralized custody services. I just saw a new story today. There's 40 German banks that are offering custody solutions, which means we're starting to get into the financial product era of investment advisors. And that's where you really start to see a lot of retail capital coming in. You've already seen Fidelity and some of these guys that are in the space, you know, they've got I think 8 trillion or something in capital that as far as retail is concerned. So when you start to see custody services open up, not just backed and futures, but actual like retail services open up, I think that's incredibly exciting because that's in order for a market to go up, you need buyers and you need, you need capital. And so far we haven't seen the retail market really Entertainment after the 20,000 to 3,000 drop. We never saw Google interest really spike up. And so that's a big thing for me. I love watching the defi space and how that's unfolding. Almost a billion dollars locked in the defi space and I could go on even more. But that's just a few of the things that I'm excited about for 2020.

Yeah, we hope that all of those like all that list is going to to be fulfilled in 2020. But we are mainly interested at least like a lot of people are very much interested in the bitcoin halving. So I would like to know from you guys, what is your expected outcome from this bitcoin halving? What are you gonna see? We're gonna see the price of bitcoin really spike because of this or do you think it's something that is going to be a known event? What is your expectations, Spencer?

Sure.

So look, I mean most of the conversation around the having kind of revolves around this idea of is the having priced in or not? This has been kind of the big debate over the past six months or so. I think that in the truest sense of saying is in a particular event priced in. The answer is absolutely yes in the case of bitcoin in that there is no risk free return to be had from buying bitcoin a few months before the halving and selling it a few months after the having. Now that does not mean that I don't think the price will rise in the kind of months before and after the having. And the reason why is really a little bit softer. It's not because nobody expects this, you know, decline in inflation. Nobody's, it's not that nobody's expecting the decreased selling pressure from miners that's associated with that. It's really just because the having acts as a, as a shelling point or a catalyst or a spark for a lot of capital that's sitting on the sidelines. So I mean, if we zoom out, a tiny percentage of people own bitcoin today, but a much, much larger percentage of people have become quite knowledgeable about it and are interested in purchasing some bitcoin and owning it. And so I think that for a lot of the capitalists in the sidelines, the question is really just when. Right? So like, okay, you know, I think I'm getting increasingly comfortable with this. You know, we're now in Bitcoin's 11th year. I now don't think it's as crazy as I did, you know, six years ago. So I'm thinking about purchasing some, but I don't know when. And so I think the having and the entire discussion that revolves around it because we have to keep in mind this kicks off a pretty big media cycle for people covering this particular event. Like you said, it's only the third one to ever happen. So, you know, you're going to see major media outlets starting to cover the bitcoin having, which again, just acts as a spark for people's intrigue and to go ahead and go learn a little bit more and maybe get all the way across the line and make a purchase. So, you know, overall, I'm very constructive on price around the halving. I think it'll be another interesting event to watch, but I don't think it's any kind of risk free return of just buying before the halving and selling afterward.

Right. So basically, if I well understood, you expect the halving to have a positive effect because of the media hype, which is going to create and which is going to make more people interested in bitcoin. Is it correct?

Yeah, I think so. I think it's partially the media hype and then partially just solving for the question of when.

Right.

So if I'm already interested in purchasing bitcoin and otherwise I'm relatively indifferent between do I buy it today, tomorrow, a year from now, two years from now, like when am I going to buy this thing? All of a sudden having is just like, I'm not sure exactly what's happening here. Maybe I'm just going to go ahead and pick it up beforehand.

Right.

Like, I mean, if I was interested in making a real estate purchase and I found out that, hey, by the way, the rate at which new real estate is going to be created is going to fall in half this year. I might want to pick it up before that event. It just acts as kind of a forcing function for people to decide when. So it's a very soft kind of catalyst, to be honest.

Yeah, actually that works even with me because I still haven't bought any bitcoin in my life. But right now I am really thinking about buying it because of the halving. So probably this psychological effect is affecting even me.

Yeah, definitely.

So Jacob, what do you think? Do you agree with Spencer's theory about the halving?

I think that if you look at previous halvings, there was always some sort of 20, 30% drop. I mean we've only. The problem is the previous halvings aren't a good metric of what's going to happen in the third halving because it's a very small sample size. So as a trader I use data and a lot of data to be able to make the best and most educated decisions back testing and forward testing strategies. And so in almost all markets it's buy the rumor, sell the news. And so sometimes that works and sometimes that doesn't work for me. Right now bitcoin is in an uptrend, but it's still got some resistance in play around 11,300. And so right now there's no reason to not trade the trend or at least be spot long until that trend shows any signs of weakness. And right now there's no signs of weakness. And so I think the halving is potentially priced in, but it depends on how crazy the FOMO gets on bitcoin where it could create some significant psychological FOMO from retail. But still, insofar I don't think we've seen that retail participation. I tweeted not too long ago, smart capital will trick you into thinking that bitcoin is a scam until they've accumulated enough and then the price will rise, the price will rise controlled, but it'll be priced out of the. Priced out of the hands of a regular consumer to own at least one bitcoin or something to that effect. And so we saw this with the dot com era. A lot of retail sold in the 90s and then we saw this massive decade.com boom and they picked it up in 2008. A lot of smart money bought. There was significant volume purchases on some of those big tech company plays. And so I think that we probably saw something similar around the 3000 region with bitcoin where retail got completely shaken out. And I don't, I don't even think they were on board to the 14,000. I don't think they're on board now. And so I think we'll have to probably break 20,000 before we see that psychological retail FOMO back into the the markets.

So among Blockchain Capital 2020 predictions, you said that bitcoin will blow past the all time highs in 2020. That is a quite daring prediction. What does it make you think? So what does it make you think that we will go through the all time highs this year?

Yeah, I mean look behind the scenes, we're seeing a lot of large credible companies entering the space. So you know, that's very encouraging. Perhaps even more encouraging than that though is just the level of talent that we're seeing enter the space. So I think that all of these things kind of combined are priming up to set up for the next kind of market cycle. So you know, whether it's the halving, it's the number of large kind of fintech and financial institutions that are serious and moving into the space, the level of talent that's entering and then also just the increasing kind of comfort with bitcoin itself. So one of my favorite things is to see bitcoin just discussed not as this novel new thing that we need to, you know, write a separate news article about, but something that's mentioned just, you know, in a Bloomberg news article where it's, you know, the S and P gold and bitcoin rallied on the day. Right. As just like one quote in the middle of a paragraph. So this normalization of bitcoin I look at as, as very constructive, particularly when you think about, I mean as recently as a couple months ago, we've probably been in the depths of our kind of bear market.

Right.

In the depths of the last prior bear market. There was still a widespread assumption that bitcoin was going to zero and that it was going to disappear. Now when I talk to even skeptics, they very few say I think bitcoin is going to go away and be worthless. Almost all of them. They might have different takes on what its role in the future plays, but nobody's counting it out. So that alone to me is very, very significant. And then the last thing I'd mention here is just, you know, again, because we're thinking about things on a long time horizon, we care about things like demographic shifts over time. So we've commissioned a survey, we've done two of Them actually through Harris poll to survey the American public. And what it shows is, you know, consistently the age group that is 18 to 34 is by far the most aware, most knowledgeable. They have the greatest conviction, they have the greatest propensity to purchase Bitcoin. So as that particular age demographic continues to comprise a larger portion of the economy, they will have a more significant impact on financial markets than they do today. And I look at that as like a major mega tailwind over the next kind of decade or so. But you know, I think things line up pretty well here even in the short term in 2020.

Okay, Jacob, do you agree with this prediction? Do you see bitcoin breaking the all time highs in 2020?

In 2020, maybe at the tail end? I don't know if we go straight to 20,000 at this point. There's still some other fundamental catalysts in view in the markets that I think need to be shaken out. But because we still have cloud token and plus token that still have some bitcoin reserves and have a pretty massive Ethereum treasure trove that they could dump on the market at any point in time, similar to how they did in, in mid 2019 there, they have far less than they did. But I think that if we see, you know, it's possible, we see other Ponzi schemes exchanged hacks, you know, all kinds of other things that, you know, we're, we're still in a, in a nascent market that has those types of events that they can come into play with that are, you know, more black swan that can be predicted by either fundamental or technical reasoning. And so we are on pace right now. We're moving right along, but there's still lots of key resistance levels to get back to 20,000. 20,000 is, you know, it's still 100% away from where we're at. And so do I think it'll break 20,000? I don't think it'll break 20,000 in 2020, but it's Bitcoin. And so what I would say just play it level by level and yeah, don't expose yourself to too much risk because you know, the rate of return right now, if it breaks 20,000, then people will move 100% up on their money. And so it was much better to buy at a lower price, especially when we're, you know, this overbought in a market. But with the halving coming up, I think anything is possible. But there are definitely some fundamental events to watch out for overall in the market from a risk side.

So Talking about altcoins, do you think, Jacob, that this is a good time to invest into altcoins and if so, which ones we should keep an eye on at the moment?

Well, there's yes and no. So I think that there are, I think the right time to invest in altcoins was probably a month ago or two months ago. And right now a lot of them are coming up on high time frame resistances. And so would I say buy into all altcoins right now? I don't think so. I would expect some form of a pullback first. And so it really depends on your time horizons and what exactly you're looking for. But most of the altcoin projects that I'm in are up over 100% in USD on the, on the year and a lot of them are up over 40, 50% up on Bitcoin on the year. So from a, from a trader standpoint, a lot of them are getting, you know, a lot of them are in high overbought markets that are in the trades are getting pretty crowded. A lot of people are taking the long side. And so I do expect some sort of an event to wash out those late, long traders or investors. And so I would wait for a pullback to enter a lot of these altcoins at the moment.

And Spencer, I read your end of the year predictions and among the predictions you were talking about altcoins as well and you were saying that privacy coins will be delisted on major exchanges. So why do you think so?

Yeah, so I mean, look, I like privacy coins. I think they have a real place in our industry. I think that of all the various types of altcoins they're probably one of the few that may have a real purpose in the industry. But that said, they're certainly a huge target for regulators. You know, I, I think the regulators are absolutely more concerned about Monero and potentially zcash than they are about bitcoin at this, at this point. So you know, I, I think it's really just regulators are getting much more serious about the space and I think that privacy coins are a, probably the first major target to get delisted. And I think for exchanges, honestly it's not a very substantial portion of their trading volume that comes from privacy coins. So you know, if regulators are going to be, you know, causing some headaches for you by supporting them, then I think it's a pretty easy decision to just delist them. It's not the outcome that I would like to see, but I think it's there's a decent probability of that happening this year, next year.

What you're saying is that you wouldn't invest your money, I mean the money of your company into one of these anonymity focused coins.

I mean, listen, every investment case is made on a case by case basis. We do think that there's going to be some concern for very strictly oriented privacy coins. So that would definitely be present a major, major headwind, but I can never say that we absolutely would not do that. Yeah, so it kind of remains to be seen, but I certainly, I hope they don't get widely delisted, but it's very possible. And like you said, it's largely a focus around kind of U.S. regulators. Regulators. And so, you know, they've been among the more active in terms of expressing concerns. And I think that if we're going to see any kind of broader delisting of privacy coins, it's probably as a byproduct of some FATF guidelines. So FATF being the Financial Action Task Force, which is a multi country international financial crimes kind of fighting force. So that's probably where we'd see it from. But we'll see if that happens this year, next year, or maybe never.

Yeah, because actually we saw that even not only in the US but also in Europe lately. They implemented a new regulation against money laundering and terrorism financing which is touching upon anonymity and personal data issues. And that's potentially worrying for, for privacy coins in Europe as well, I guess.

Yes, exactly. And all of those recent moves are a byproduct of FATF releasing new guidelines in summer of last year, laying out the fifth anti money laundering and anti terrorist financing guidelines. So we're seeing the repercussions around the world.

And what about you, Jakob? Do you agree with this prediction? Like will privacy coin be delisted from major exchanges? And if so, like what, what is going to be the impact on your trading activity?

Yeah, I mean, you can't say, you know, with certainty these things are going to occur. I think it's a very pragmatic prediction. We've already seen it. We've seen a lot of privacy coins get delisted already from, from certain exchanges. But then at the same time you're seeing tokens like zcash be approved by the New York State financial licensing to be sold on Gemini. And so you're seeing kind of a mix where, you know, zcash has the ability to turn on and off private transactions. And then the Jerome Powell of the Fed came out today and said it's not a good thing that you can see transactions publicly on a ledger. So it's kind of an odd nod toward privacy coins in a weird context. But yeah, I think the government wants to be able to track everything. I think with companies like Chainalysis, you know, we saw the child pornography sting where they took down a whole network using Bitcoin Chainalysis, where they were actually able to trace all the people anytime they cashed out to USD. So Bitcoin in and of itself is probably one of the best currencies in the world for a government to to applaud or not get. It's not of approval approval for because everything's trackable. Especially if you want to be able to move into fiat currencies. The only way you can track it is with like clean coins from a miner and that those are, you know, non trackable because they were just fully created, you know, but anytime you move to cash, you're still going to have an ID wallet on a non kyc exchange. But I think that privacy coins are interesting, but I think that stable coins and if they create, you know, privacy stable coins, I think that's probably where you're going to to see more interest because they're stable or they're pegged to some form of currency.

Right. So are you trading some of these privacy coins at the moment?

If it moves and is volatile, I will trade it. Do I hold them long term? The only one I hold long term is Zen Cash. I like Zen Cash. I like what they're doing. It's an offshoot of zcash and it's got a whole switch suite of products behind it. And Barry Silbert has a trust that's kind of backing ZenCash. So I like ZenCash. There's a couple other privacy coins like Beam and Grin that have some interesting mimblewimble technology. Zcash itself just came out with some new innovations on the ZK Snarks protocol. So there's some really cool innovation going on in the privacy. But I'm mostly excited to see some of these companies build privacy layers onto Bitcoin. And that's kind of what I'm really hoping to see overall.

Okay, so moving on, we recently knew that Blockchain Capital is raising $250 million to launch a fifth investment fund, which will be investing 25% of its assets into crypto and the remaining 75% into equities. So can you tell us a little bit more about this fund, Spencer? What are the projects that are on your radar that you want to invest this money into.

Well, from a regulatory perspective, I'll probably decline to comment specifically on what we'll do with Fund five, just so I don't cross any boundaries as far as like advertising for it, but instead I'll just talk about. In general, we've followed a very consistent strategy over time, which has largely been to invest primarily in the equity of companies in the industry and then also to take exposure to the digital assets that might be native to any of these particular protocols. So in some of these cases, the only way to get a direct investment opportunity is via a native kind of crypto asset. And so we always reserve some level of flexibility there in general across all of our funds. Seed and Series A investments are kind.

Of our bread and butter.

But as the, as our funds have gotten larger over time and as the industry has progressed and we see more credible late stage rounds, we've been increasingly active at the, you know, Series B and we'll probably participate more in series C and later financings as well. So we tend to be stage agnostic, but industry specific. But even within that stage agnostic, we still tend to focus a lot on seed and Series A.

And you Jacob, as part of your products at signal profits, you offer investment breakdowns on what projects to invest in. So what are the most promising crypto projects an investor should keep an eye on, according to you at the moment?

As far as the investing, obviously DEFI is a huge one in the space. So NEXO and Lend, both of those are two to keep an eye on. But, but again, like I said, I mean NEXO is already up almost 100% on the year in USD and almost up 40% against Bitcoin. I really like exchange tokens. I've liked exchange tokens that have, those have been a really big part of my portfolio as far as my investing thesis for quite some time. So Binance Exchange Token, Huabi Exchange Token and the FTX exchange token, those three comprises, you know, about 10% of my overall investing strategy portfolio. And you know, EOS is one that I was very heavily critical of in the beginning. But the one thing you can't knock against EOS is their, their capital reserves. They've got a significant amount of capital reserves for building out their protocol and improving it and pulling developers away from the Ethereum ecosystem and other places, top tier developers. And so I like eos and from a technical perspective it's looking really strong on the year. That's one of my larger positions. I think that's up against 50% almost against Bitcoin and Bitcoin's almost up 40% on the year. Cardano isn't as big of a position, but they've got their Shelley launch that's coming up very, very strong protocol in regards to the, the scientific approach to it, the way that they've done it. What I'd like to see more out of Cardano though is the business marketing operational standpoint. Because you see, you know, a protocol like Tron where it's pure marketing, you know, less development technically than something like Cardano. So you know, when you find one of those that has the hybrid. But Bitcoin and Ethereum honestly are two of the, two of the best long term fundamental plays. Just because of the first mover advantage and the network effect and the amount of developers that are building on both protocols.

What do you think is the main role that blockchain capital should play in terms of making this industry grow faster?

When one project grows, it tends to benefit the industry as a whole. So whether it's a particular protocol or whether it's a company providing infrastructure to make it easier for other new entrepreneurs entering the space to go ahead and spin up a company without dealing with every piece of underlying infrastructure, you know, these are all kind of critical pieces going forward. So, you know, for us it's mostly just making sure that we get capital to the most promising projects that makes sense.

So if you had to mention three characteristics for the most promising progress, just three, what would you mention? Like in terms of characteristics?

Yeah, fair. So I mean, like, given what I.

Said before, that early stage tends to be our bread and butter. So for seed and series A look, anytime you're investing very early stage, particularly what you're really betting on is a team. So we're really investing into is this a team that we think is going generally in a fruitful direction, and do we think that they have the kind of vision and awareness to be able to adjust their course as needed?

So I mean, if we look through.

At the most successful venture investments of all time, whether it's crypto or not, most of those companies did not originally set out for the exact product that ultimately made them wildly successful. So most of them, they might have had an intermediary product that was mildly successful before they got to a bigger opportunity. But the point being that ultimately you're putting a lot of conviction behind the founding team of any particular company or project. So team is one. It's also just going to be in terms of timing. So we see a lot of investment opportunities that I think maybe the industry is not quite at that stage yet. Over the course of the past six years, some popular ones in that category.

Have really been things investment opportunities that.

Revolved around pain with crypto. Obviously what we've seen over the past seven years has been that people don't really want to spend their crypto.

So having a startup that revolves entirely.

Around the notion that people will want to do this hasn't been fruitful yet.

But I think it can be in the future.

So again, team timing and then probably just the size of the market opportunity they're going after so regularly. We'll see things where, listen, it's a good team. We think the timing is right. But given that we operate venture funds, we really need to see teams going after very, very large market opportunities and not ones that can be kind of middling outcomes. So if you look at the breakdown of returns across any successful venture fund, as opposed to a situation where maybe all of the investments do decently well. So to turn that into a baseball analogy, typically you have a few companies that end up being grand slams and.

Those drive the vast majority of returns.

As opposed to a bunch of investments that kind of became singles and doubles. So, you know, again, we're looking for team timing and market opportunity.

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