Scaramucci: Exponential demand will grow Bitcoin to $100K by year-end | Interview

Antarami Anthony Scaramucci is the CEO and founder of SkyBridge Capital, an investment firm with around $7.5 billion under management. He also briefly served as the White House Director of Communication during the Trump administration. Last year, SkyBridge Capital launched its first Bitcoin fund with an initial investment of $25 million. Since then, the company has continued accumulating the digital currency.

We now have probably 650 to 700 million dollars worth of Bitcoin across our product portfolio.

Skybridge was the latest firm to apply for a Bitcoin ETF with the US securities and Exchange Commission. Scaramucci is convinced that Bitcoin could realize its full potential sooner than we expect.

It took Amazon almost 20 years to reach that same market value. I think it's moving faster than Amazon, Google and Facebook.

In this episode, Scaramucci breaks down his investment thesis on Bitcoin and explains how the main crypto cryptocurrency will reach 1 billion users by 2025. Welcome to another exclusive Cointelegraph interview. So first of all, Anthony, how did you get involved with crypto?

Well, I mean, to shorten up the story, I met with the Winklevoss's in 2012. Once again in 2014, I was a Bitcoin skeptic. I have to confess that it took me a while to understand the protocol, the technology, the expansion of the network. When I left the White House after I was fired In July of 2017, I bought the URL skybridge bitcoin.com because it became clear to me that the Chinese were going to digitize their currency. Eventually the US will digitize its currency. And I thought that Bitcoin would be a gateway and perhaps sit as a protocol on a platform where you could switch in and out of these currencies using Bitcoin as a potential standard. And so I didn't start buying these coins though, until I was confident that the network itself was scaling. And I had it in my mind that once the network got to 100 million users, that was enough scalability for me. I didn't want to be too late on it. And so today I think we have about 125 million users of Bitcoin, 46 million here in the United States. And back in October of last year, we started accumulating a position. We now have probably 650 to 700 million dollars worth of Bitcoin across our product portfolio. And we have a dedicated Bitcoin fund. We also have a dedicated Ethereum fund and an ETF that's dedicated to the ecosystem of publicly traded stocks around what we call decentralized finance.

Okay, that's interesting. So now I would like to know, how did your experience at the White House influence your decision to embrace these technologies?

So, you know, listen, I was with the President in the campaign. I was also a member of the transition team. I helped staff the personnel at treasury alongside a secretary designee, Steven Mnuchin. And for a three week period of time in June of 2017, I was at the Ex Im bank, its chief strategy officer. So during those times in meetings, there was broad based discussion about what the Chinese were doing with their currency eventually would be doing and what the United States would need to do to stay competitive. And it just became clear to me again, it's four years later, neither the United States or the Chinese have digitized. But I predict that they will inside of the next decade. And with bitcoin being where it is and the scalability of bitcoin, I thought it was important for us to be a part of all this.

So now let's talk about the bitcoin markets. We saw impressive bull run a few months ago, then we had a significant correction, and now we are seeing the price of bitcoin rising again. So what is your view on the current situation in the bitcoin markets? At what point of the price cycle are we at the moment?

Well, I think I want to step back before I address it. I think we're in an early adoption phase of this digital phenomenon. And so you have something like 2% saturation if you say there's 7 and a half to 8 billion people on planet Earth and there's 125 million users. So I think we're very, very early innings. And if Cathie Wood is correct, I think she will be. They'll have something like a billion users by the end of 2025. So recognizing that and studying other securities or other investment ideas that track Metcalfe's law in terms of exponential growth, there's lots of volatility. There was volatility in Facebook when it came public, volatility in Google, volatility in Amazon. Amazon is one of the more amazing investment stories. A $10,000 investment in Amazon on its IPO May 15th of 1997 is worth $21,140,000 today. Yet you would have had to subject yourselves to eight times where Amazon dropped 50%. And so Bitcoin, it being 12 years old, it's still maturing and it's still in early adoption. So I expect a lot more volatility Having said that, this is an asset that's gone up anywhere from 150 to 200% per year. You just have to step back from it. If you're managing it day to day or you're thinking about it week to week even I think that's quite dangerous. And so to me, I see these coins being worth 500 to a million dollars a coin over the next five to ten years. So entry points below 50,000 or 60,000, very attractive to us. And so we try to buy coins every month. As we accumulate cash in our portfolios, we sweep them into bitcoin. That's not to say that bitcoin couldn't experience another 50% drop like it did in May of 2021. So to me, it's very early. There's more upside volatility, more asymmetrical upside volatility to bitcoin. But again, you have to look at it over a multiple year period of time. If you're managing it week to week, you could get caught in a downdraft. And of course, if you're shaken out during a downdraft, you'll be sorely disappointed.

So now I would like to dive a little deeper into this comparison with Amazon you are making. So it didn't take Amazon 10 years to become a globally recognized company with a lot of use cases, while bitcoin seems to be a bit slower because it's been already 10 years. And we cannot say that bitcoin reached mainstream adoption. Don't you think so?

No, I actually don't think so because look at where bitcoin is today. The 800 plus million dollar market cap. If you go back to when it was trading at 65,000, Bitcoin reached a trillion dollars in market capitalization in 12 years. It took Amazon almost 20 years to reach that same market value, that same market capitalization. I think that we gotta go back. It's easy to see Amazon as established as it is today. But I'll take you Back to year 12 of Amazon, which was 2009, Amazon had dropped 90%. There was an article in the paper, Amazon being 12 years old, Amazon bomb that this company was not going to make it. And so we see Amazon Today at age 24 with its capacity and its standing and it's lacking volatility on a relative basis compared to its historic volatility. So you know, to me bitcoin is moving faster. And I think it's moving faster because it's decentralized. There's no corporate office, there's No C suite where there's that intrigue and bureaucracy and the weaknesses of human beings. This is a decentralized protocol, decentralized network. It's amazingly efficient. It hasn't been hacked, it's been attacked. For 12 years. There's been 8,400 or so coin competitors of Bitcoin. And yet bitcoin remains the apex predator in the space. So I don't see it that way. I think it's moving faster than Amazon, Google and Facebook, actually. And I can just prove it to you by the charts.

Okay, so now I would like to talk about institutional adoption. After major players like MicroStrategy and Tesla getting involved with crypto months ago, we are seeing the institutional flow coming into crypto slowing down a bit. You also said that the institutional adoption story is overhyped. So can you expand a little bit on this thought? And when do you think that we are going to see the next wave of institutions coming into space?

Yeah, well, I do believe that. And that's also grounded in evidence. If you ask somebody like Larry Fink from Black Rock, he would say that his clients have very little to no demand for bitcoin. If you go to the large scale institutions, there's a general reluctancy to adopt. Now, the good news is we've had some recent wins in the community. Ray Dalio, who was a skeptic, now is an investor. Dan Loeb, running a $25 billion hedge fund, was a skeptic. He's now a bitcoiner. Steve COHEN at point 72, the same thing. And of course there's Paul Tudor Jones and Stan Druckenmiller. So there's very smart people that have institutional scale assets that are in bitcoin. But the very, very large pension funds, the endowments, the public employee retirement systems, I would say they have small to little interest in bitcoin at this time. And I think that's a scalability issue. And it would be the same thing for many of those stocks that we just mentioned, those Fang stocks today, which are making up trillions of dollars of the overall market cap and a very large weighting of the S&P 500. In the early days as they were being adopted, very few institutions were willing to buy them. And so institutions have a tendency to be the latest of adapters to an investment story. And listen, last year at this time, people were talking about institutions entering the market. There was a fever pitch of that discussion in January of 2021, but the evidence just hasn't borne that out. We don't have large scale institutions. Now the good news is many of the banks that were in the early stages skeptical of Bitcoin are offering Bitcoin products. Jamie Dimon as an example, was once a critic of Bitcoin. They now have a series of Bitcoin and other crypto offerings at JP Morgan that would be the same for Wells Fargo and Bank America. So the very good news is the process itself is starting and the institutional demand I think will emerge. But if I'm guessing, I still think we're two to three years away from that.

Okay, so in your opinion, what exactly is preventing pension funds, large endowments, from getting involved with cryptocurrencies and Bitcoin?

Well, you know, it comes down to not wanting to be embarrassed if Warren Buffett is saying that it's rat poison. And then they ask him again, he says, no, I was wrong, it's rat poison squared. His 97 year old partner says, it is the greatest destructive force in our civilization. And you are an institutional investor whose number one personal priority is not to lose your job. Why do you need to be putting money into Bitcoin when some of the elder statesmen in the investment community are saying things like that? And so until bitcoin is more saturated, until there are more wallets, until there is more activity across the Bitcoin network and other cryptocurrency networks, until there's a more robust exchange business, whether it's XTF and Coinbase and Blockfi and these companies that are working in DeFi. I don't think the institutional mindset, the psychology around somebody that's working in an institution is going to stick their neck out and be willing to take the risks that say an entrepreneur like myself or, you know, you mentioned Anthony Popliano, who I have a tremendous amount of respect for. He's a young man in our industry with an old soul. And I think he really does see the future correctly.

I think it's mainly a generational problem. I think with more and more millennials getting into position of powers within these institutions, we're going to see more and more of these institutions coming into the space in the next few years. So now I would like to talk about one of the most important stories of the latest few weeks, which is the crypto tax bill. What do you think of the current status of the crypto tax bill? Should the crypto community be satisfied with the results?

I am, actually. I am satisfied because I'll start out by saying the good news is the Senate itself is accepting the idea of cryptocurrency and the existence and the long term durability of bitcoin, one of the old timers said to me, this is reminiscent of the junk bond market in the early 80s in terms of the regulations that were put in place in the junk bond industry. It was a new asset class. People weren't super familiar with it. Some people were frankly scared of it. And when the administration, the Congress, the House and Senate tried to regulate it, it was assigned to everybody that they were accepting it. And so even though those amendments were dropped, and of course I was in favor of the more progressive amendment as Senator Loomis and Senator Portman and Wyden were proposing, but when those amendments got dropped and we're now in a situation where there's a lot of interpretation necessary by Treasury, I take that as a good sign. I think that that is a sign to the American people and to the world that the US Is going to have a presence in crypto and is allowing these cryptocurrency platforms to exist in the United States.

That's interesting. So what do you think about these controversial points that were at the center of the debate? So mainly the definition of broker. So the fact that the definition of broker in the bill is too wide and it includes also miners node validators, transaction validators, and categories that should not be forced to comply with these tax reporting requirements. What do you think about these controversial points?

Yeah, well, it's not, it hasn't been decided yet. Remember, that bill also has to go through the House of Representatives. And so there's going to be ample opportunity for coiners and lobbyists associated with coiners to have some input. And I'll just point out when it looked like it was going the wrong way for the bitcoiners, or let's say crypto and moss, there was a tsunami of people calling the Congress. I'm of the opinion that there's lots of room for interpretation and lots of room for activity for lobbyists in the crypto space, the miner space, the bitcoin space, to have influence on what the final definitions are and what the final rules will be and how they're interpreted. I will also say that I was amazed by the bee swarm of activity by people that are interested in digital assets calling the Congress and influencing the members of Congress. There's nothing more powerful, frankly, in the American legislative process than thousands, if not millions of people lighting up the phone lines in Washington, letting people know what their feelings are on a topic.

Okay, now let's switch topic to the environmental impact of bitcoin. So you claim that bitcoin mining was will be fully relying on renewables by the end of the current decade. How are we supposed to get to that point?

Well, let's start out by saying that the Bitcoin Mining Council now has it at 56%. And so one of the ways that we're going to get there is through the natural ESG regulations that are being put in place by most of the major governments. The fact that the Chinese have gotten out of the mining business and removed Bitcoin from their society has eliminated a lot of those coal fired electricity plants that have driven bitcoin mining. And I think people like me that are in the industry that are supporting the bitcoin network with nodes are doing what we're doing, which is buying large scale carbon offsets. We bought enough carbon offsets now at Skybridge to make our funds carbon negative, not carbon neutral. And you know, today's 2021, that's nine years from today. I think that there will be a steady progression of people and incentives to move bitcoin into what I would call green, renewable, non carbon emitting energy. And so it's already happening. I bet you if you and I have this interview three years from now, we're at 56% now. My guess is we'll be close to 75 in the next two or three years.

So let's talk a bit more about these carbon offset strategies. As you mentioned, Skybridge Capital recently bought a large amount of carbon emission offsets in order to compensate for the emissions produced by your Bitcoin holdings. Still, there are a lot of environmental activists that say that carbon emission offset strategies cannot be a substitute for the direct reduction of emissions. And that a lot of companies are using carbon emission offset strategies as an easy way out in order to continue producing these emissions and not solving the problem at the roots. So what do you think about that?

We absolutely agree with that. I'm not even suggesting that it is. I'm suggesting it is a small measure. It's a small step to help the current situation and the current environment. The right steps will be to move our automobile industry, airlines, etc. Everybody into the world of renewables. We have to protect the planet. We put the planet at risk. Now, 150, 180 years of carbon emission and 7 1/2 to 8 billion people. We put ourselves in a very dangerous place. So I'm not making light of it and I'm not pooh poohing. Oh well, I bought carbon offsets, therefore I'M environmentally sound. I'm not saying that at all. I am saying though, we are taking that measure as a short term step to a much broader long term measure.

Okay, so let's go back to the markets now. I would like to know, what is your price target for Bitcoin for the end of 2021?

Good question. So I started the year with a $100,000 price target when Bitcoin was at 65,000 in April. It seemed very likely. And then bitcoin went to 29,000 and now it's back up to 45,000. There's four plus months to go, roughly three and a half plus months to go in the year. I still see Bitcoin nearing 100,000. So I'm going to stick to that price point. I think it's a combination of factors. But the bottom line is you have limited and fixed supply of bitcoin and you have every month exponentially more demand. And so as long as I see that, I see those prices rising. So we're going to stick with $100,000.

Price start researchers at SkyBridge Capital predicted that Bitcoin will reach 1 billion users by 2025. How are we supposed to get there? What does bitcoin need in order to reach that benchmark?

Well, you know, on the margin there's always some technical improvements. All of these cryptocurrencies are going through levels of upgrades. Bitcoin, the network recently upgraded some protocols related to bitcoin. But I actually just see it in terms of interest and demography. And so I just point out to you that our children. I have adult children. I have five children, some of them are young, but my adult children ages range from 22 to 29. And I can tell you that they're fully versant in bitcoin and fully versant in the, what I would call the crypto ecosystem. Just imagine those people 10 years from now at 39 or 49, how conversant and how easy it will be for them. And I will say this to you, that this is a technology and a product of the future. And the future is going to come more quickly than people expect. And that's really what's going to drive the price and drive the exponential growth. As younger people get older and take positions of power, they're going to have accounts related to bitcoin and other cryptocurrencies.

Okay, so 1 billion users by 2025. How much would bitcoin be worth by then?

Well, you know, I would say the low end of that would be 500,000 a coin. But the higher end of that could be upwards to a million dollars a coin by then. But remember, we don't have to do that. You know, let's say that we got to 750 million users or 700 million users. These coins could easily trade into the 250 to $300,000 range. And so if you just take where prices are today and you maintain your patience and your long term perspective, I think people will be well rewarded that own Bitcoin today.

Okay, so now final question is about Ethereum. We saw that you launched an Ethereum fund not long ago at Skybridge Capital and you're also planning to apply for Ethereum etf. So what is your investment thesis about Ethereum? How, how do you think Ethereum will evolve alongside Bitcoin in the next few years?

Well, I like Ethereum. I think that if you look at the digital applications associated with Ethereum and Ethereum's use case, there's a tremendous amount of demand for Ethereum. But remember, Ethereum is not a fixed supply currency like Bitcoin. There's some latitude in terms of the way Ethereum is going to be produced over the coming years, but there's also going to be a proliferation of use cases. And so as we see the NFT markets explode and we see Ethereum as the backbone of those NFT markets, I think you could see a $10,000 coin. Having said that, some people have suggested to me that there are coins out there that have faster clock speeds, that are cheaper to transact in, and in fact are greener. So anything is possible. You know, I know that we at one point were super excited about a copy machine and then that proliferated. We were super excited about the world of faxing. And now of course all of us have the ability to fax off of our smartphone. And so I'm not saying that Ethereum is going to be a permanent, forever use case transaction currency, but I do see over a multiple decade period of time there being a tremendous amount of demand for Ethereum. I just don't see it eclipsing Bitcoin primarily because of Bitcoin standing and the brand frankly, associated with the Bitcoin network.

Awesome. Thanks, Anthony. That was a great conversation. Thanks for coming on our show.

Thank you very much. It's great to be here.

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