Bitcoin To $1,000,000 | Meet Kevin Pt 2

Gary Gensler, a few weeks ago, compared regulation in the cryptocurrency market to regulation in cars. When we finally had cars get regulated, we had stop signs, we had crosswalks, and traffic lights. Car adoption skyrocketed. Do you think the same thing is true or will be true for cryptocurrency?

I think you basically just said that essentially once you get more regulation, you'll be able to do a lot more with it. Are you expecting that that regulation would actually broaden how many people will invest in crypto assets and then increase those prices?

Yes, I do, and that's the whole premise by which I'm investing in Immutable Holdings. I think everything to do with the internet, whether it be a minor, whether it be Circle, whether it be Immutable, whether it be a wonderful another recent investment of mine in decentralized finance, these are infrastructure plays for the long term.

Now, either you believe in cryptocurrencies and you believe in decentralized finance, you believe in what an NFT is, or you don't. But if you do, then you have to make an allocation decision, and really what I'm hoping to have happen is the regulator regulates because they are.

I don't think the genie is out of the bottle now. We're not. When you've got 30 plus billion dollars' worth of stable coin out there in just one USDC name, that's a huge indication that there's institutional interest that yet hasn't been met demand. And so the bottom line here is this is software development. The whole thing is software development.

What makes the country competitive is technology, which is primarily a combination of firmware and software development. The regulator knows this. We want to lead the charge in decentralized finance as a country. We want to lead the charge in deciding which of these currencies and payment systems go international. We want to be the developers, and we want to maintain the pace and the innovation and the disruption. We certainly don't want the Chinese doing that.

So it's a competitive race. They've taken a shot with their own currency, which I mentioned I would never own. But at the same time, the rest of the world still uses the US dollar as a settlement vehicle. If we can make a digital version of that in USDC or something similar to it, that will become a standard globally. The regulator knows that, and they will continue to march towards regulating it, in my opinion.

Jordan: Kevin O'Leary just talked about how blockchain technology is really software development. Is it possible that this software development blockchain becomes one standard that just functions so well that it ends up becoming a monopoly and essentially replaces 99% of other blockchains? Or do you see the market as much more fragmented, where certain blockchains will be beneficial for certain things?

People might use the Ethereum network for one thing, or the Cardano network for another thing, and who knows, maybe Bitcoin's future network for something else?

Yeah, so we're already seeing the fragmentation happen. Solidity started as the way to do smart contracts. But if we're being honest, there's much better, more efficient ways to do smart contracts. Solano's come up with better ways to do it. You can have a Java application run a smart contract, which is basically an atomic swap in a much better way than even using Solidity, which is very expensive and burdensome to use, as witnessed by the fees that we're seeing on the Ethereum network.

But what I think you'll end up having is networks optimized for certain things. So have a network optimized just for NFTs. I think you could have networks optimized just for stable coins. I think you'll have networks optimized just for really great governance and really great appliances. One of the reasons we built Hedera was to introduce really great governance and compliance—basically give regulators a tool set to be able to bind policy with a particular platform and a jurisdiction.

The nodes on the Hedera network are run by Google, IBM, Boeing, Deutsche Telekom, Nomura—unlike the anonymous nodes in some of these other networks, which make regulators more comfortable. The nodes are in Nomura’s data center. Nomura is a regulated banking institution running a node on a public blockchain network and can enforce certain policies on those nodes.

So, really, where I think this is going is you're going to have networks optimized and specialized in those areas. Now, you may have multiple NFT networks, but smart contracts and NFTs—mostly NFTs are smart contracts. The big common standard way of doing them is ERC 721 in the marketplace. That's the Solidity standard that Ethereum introduced. That's very burdensome on the memory of a node on that particular network.

The more you have in RAM or in memory on those networks, you deprecate performance—transactional performance. So it's going to be difficult to be really great at micro payments and really great at smart contracts. I think you're going to have networks specializing, but we'll definitely have multiple networks. There will never be another Bitcoin, though. Bitcoin is really our store of value network, and it really is digital gold.

I think you'll have a general-purpose application network like Hedera and Ethereum and Avalanche and Solano. There will be a few, and I think probably one or two win on the NFT side and the stable coin side.

That's fascinating. Yeah, I mean, there's such a public debate and such loyalty—you could feel it, it's almost like your football team—in terms of which blockchain is going to win and do everything. But I like what you're saying, that we're probably going to see that fragmentation continue.

Now, you hold public companies. Do you hold any Robinhood? They make some money off crypto transactions.

Personally, I don't publicly disclose the public equity plays or investments that I make. Immutable Holdings is a structure where we're not making balance sheet investments. Think of us like a publicly traded venture studio. We like to make bets. So, for example, we acquired NFT.com at the beginning of this year, and we decided, hey, you know, one, it's got to be one of the most highly sought-after domain names in the entire world right now. I literally field conversations and inquiries on a daily basis to sell that.

Well, we have built an incredible engineering team. These are former Facebook, Google, and Stanford engineers that have joined our team. It's a tremendous effort behind building what we think is going to be a really amazing consumer product for collectors and creators, and that's our specialty. We're business builders. I built consumer software brands. That's where we're focusing, in terms of just making bets.

Maybe we'll do a venture fund where we make early-stage equity-based investments. We haven't ruled out—likely that wouldn't be on a balance sheet. That probably would be in our asset management business at a certain point in time. But for us, it's, you know, we're the diversification play. We're the blockchain holding company, the first one to public markets.

Got it. Kevin O'Leary, do you hold any altcoins directly or are you mostly investing in funds, for example, like Immutable Holdings?

No, Immutable Holdings I've invested in as an infrastructure play through their equity and inherent on the value that equity is what they have on their balance sheet. I also own multiple positions in various coins and tokens and other chains and level ones and level twos.

What I've decided to do with this situation—I recently got involved as an investor and then a paid spokesperson for FTX—is I was looking for a platform to manage all these assets on that I could get my compliance department on board for. I described what I went through just to get USDC on side with Circle’s infrastructure. I did the same thing with FTX.

And so, at some point in the near future, before the end of the year, what I don't want to be accused of or ever be associated with is this idea of promoting some coin that is unknown and very thinly traded and all that kind of thing. I don't do that. I'm an investor. I buy these positions for long-term reasons and really don't rebalance outside of just keeping the weightings under five percent or whatever.

And so I've decided to disclose my holdings—all at once and say, here's what I own. I own a lot of things now, and then just keep it transparent because I don't like a lot of this cowboy stuff that goes on in the crypto space, promoting this or that that you've never heard of. That's not good for the long-term stability of crypto. It's fun, almost game-like in some nature, and I'm not against it. But that's day trading to me versus long-term enhancement of productivity.

Again, I look at all of it as software. I invest. I came out of the software industry. I understand it. I've been involved in it my whole career life. But now I'm looking at it in terms of enhancing productivity in all kinds of different sectors, and it is my stern belief—and it's a personal opinion—and the reason you would want to do this: my target is to get to seven percent of the operating companies' holdings in crypto and in equities of cryptos by year-end.

But you would do this because you believe at some point that the 12th sector of the S&P will become crypto and decentralized finance. I believe that. I'm not saying it's going to happen at any time soon, but there's 11 sectors in the economy, including real estate which was added recently, and I think crypto will make it there too. So you're investing—or betting, if you want to put it that way—that this will become a new sector in our economy, and it'll be here forever.

Got it. Wow, so no Shiba Inu shoutout from Kevin O'Leary, but that's all right. So, we're running out of time. I want to ask both of you—I want to start with Kevin O'Leary and then Jordan. I want to ask both of you about 45 to 60 percent of folks mention that they invest in cryptocurrency as a hedge for inflation or against inflation.

Obviously, inflation has been much more persistent than it has been transitory. However, there are some concerns that at some point in the future we might head towards low inflation or potentially deflation. If we go into a deflationary environment, is there a risk to cryptocurrency prices falling substantially?

Jordan: Well, I'm not a macro economist. Let me be the first to disclose that. What I see happening now—and you have to go back to read the Bitcoin white paper and understand the commentary. There's a great book called "The Book of Satoshi," where a group of people collected literally all the comments of the people that use the Satoshi Nakamoto handle and the Bitcoin Talk forums.

And really just curated all of it. People were really upset during the 2008 financial crisis, leading into all that bank stimulus and all of those bailouts. Bitcoin is absolutely reactionary to the 2008 financial crisis, where people felt disenfranchised—that the bankers that literally took us to the brink of a financial Armageddon were getting all of this bailout money when people lost jobs. There were people committing suicide—just absolute tragedies—being wiped out, financial institutions, people losing their entire life savings for honestly reckless decisions made by the people managing some of the biggest banks in the world.

Crypto came. You have to understand that crypto came from that. These people call themselves cyberpunks. They're native. A lot of them operate anonymously on 4chan and on Reddit. As you mentioned, Kevin, crypto's tribal. That's not going away because this is the latest space race. It's a modern space race in a war of adoption and people trying to become the de facto platforms out there.

It is well known and talked about in the crypto ecosystem that 40% of all dollars in circulation right now were printed in the last 12 months. People are monitoring the US money supply, and people are very concerned—very, very concerned. People are voting with their dollars right now. They're deciding to take stimulus money or to take the money that they're making from the major appreciation in their public equity portfolios and to move it in things like this new BITO, the ProShares Bitcoin ETF.

People are betting $100,000 Bitcoin. It's well talked about. I believe that we're going to see it either by the end of this year or Q1 of next year. I won't speak for what I think will happen in a deflationary period. Again, I don't see myself as somebody who's qualified to comment on that. I look at the asset class over a 10, 20, 30-year period.

Where I think we're going to continue to see adoption here is with a growing mistrust for institutions and people managing central banks—a growing mistrust among the citizens of many different economies. I agree with Kevin; I don't think that this digital, remember, this digital Chinese currency is gonna gain adoption.

What people want in a central bank digital currency is transparency into the money supply. They want scarcity. That's why people are buying Bitcoin. That's why people buy HBAR. That's why people buy Solana, Ethereum, and all these coins—they're scarce.

Whereas dollars can be recklessly printed, shares, by the way, Tesla stock—Elon can capitalize and issue new Tesla stock. And by the way, gold and silver—they can always find more gold and silver. So when you look at cash, more can be printed. When you look at gold and silver, more can be discovered. When you look at shares, you can obviously dilute a cap table.

You cannot do that in digital assets. You cannot do that in cryptocurrency, at least for most of them. And that is the tremendous property that people are demanding. That's where the demand for this is coming from. So I can only see this growing from here.

Well, yeah, I mean, it's very interesting. I mean, you're right. I mean, we printed 40 percent—upwards of 40 percent of all the currency that's in circulation now. Our velocity of money has plummeted—the amount of times people are circulating money—because maybe they're saving or investing more. But it makes you wonder, Kevin O'Leary, if people rotated back to the amount of spending we had back in 2019, velocity of money would pop back up.

We'd see inflation off the charts. It'd be incredible. Kevin O'Leary, your thoughts? I know we've talked about it before, but I want to hear your updated thoughts. And now that we've got the taper coming, this inflation's lasting longer—do we care if we see inflation continuing in a deflationary environment? Any risk to crypto, or are we going to a million over the next 10 to 20 years here?

I think the value of Bitcoin will continue to increase over time, and maybe we'll beat the indices—the traditional equity and fixed income indices. And that's why you should, if you consider that, have some allocation to it, which would not be a bad idea. And I don't think you have to put, you know, bet the farm and only own Bitcoin. You can own a lot of different coins, tokens, and infrastructure equities, as we talked about.

But, you know, having no allocation to it at all in a portfolio—an operating company like mine—is to say that you don't believe in any of it, and I'm simply not that person anymore. I was very skeptical at the beginning, but as things changed and the regulators changed and became more open to it, so did I.

And I think regarding the inflation debate, there's a huge discussion going on with money managers globally as to whether this is transitory inflation caused by broken supply chains. For example, if you're building a car in America and you used to get all of your parts from Asia and now 30% of them are no longer available or stuck on a ship outside of the LAX airport or, you know, outside of the port in Los Angeles, which is a horrific situation—you’re going to source those same nuts and bolts stateside at a 30% increase in cost, and that's part of what we're seeing in the inflation run.

But if that's true and we fix the supply chain—which we're hoping we're going to be doing over the next 24 months—that will be, you know, transitory. However, not everybody agrees with that scenario, and that's why the debate is ensuing. And maybe that's one of the reasons you're seeing this new fresh highs or close to it on Bitcoin and some of the other digital assets starting to move as well.

You really don't know because Bitcoin has not yet proven itself to be an alternative asset class or counter-cyclical asset class to a correcting market. If the market were to go down 5,000 points tomorrow, you would probably see a correction of Bitcoin as well.

So it hasn't made that transition yet. Whether it will in the future is unknown, but to have zero allocation to it seems, you know, a bad idea. I think you need to decide what your risk tolerance is and your tolerance for volatility itself and then make your decision on what you're going to own. I've done that and my target I've disclosed will be seven percent of the year, and it could go to 20 in the years ahead. We'll see what happens.

That's incredible. That's an incredible evolution, and thank you for having a flexible mindset. It's fascinating to see you increasing your allocation. One very quick follow-up, and then I want to ask your final thoughts, Kevin O'Leary. Last time we spoke, you said you were somewhere around 30% cash. Have you allocated more to crypto now since we last spoke, or where's your cash going?

No, my cash remains very, very high because we've also changed our allocation between equities and fixed income from 50/50 to 70/30. So we had to sell a lot of fixed income assets. I'm working hard to deploy this cash. I mean, when you're deploying a significant position like that, you don't do it overnight. You weigh it into the market in different asset classes.

It's primarily driven by the very large sale I made in commercial real estate over an 18-month period, down from 31% of the holding company to 8%. And so we spent decades building that portfolio. Cap rates got too low for my comfort, and I decided to sell the majority of it. And so it's going to take me a while to deploy this capital.

In the meantime, I'm very frustrated with the cash desks that I use, and I use them all over the world, offering me 21, 22, 23, 24 basis points on an annual basis, which is why I've gotten involved in USDC and continue to work with the Circle people to develop that platform to be compliant for my needs.

For clarity for folks watching, that is less than one quarter of one percent of a yield on Kevin O'Leary's cash, and that is very frustrating.

Jordan, I want to hear final thoughts from you. Cryptocurrency, hundred thousand, you know, Bitcoin, hundred thousand Bitcoin, a million. I wanna hear a little bit more about how people can invest in you—ticker symbol, company—tell me more about that.

We'll go to Kevin O'Leary for his final thoughts, and then we're off.

Again, thanks for having me, Kevin. It's been a fantastic conversation. We're Immutable Holdings. You can go to ImmutableHoldings.com. Our ticker symbol is HOLD. This is not financial advice. Do your own research. What we're merely saying is that beyond just owning cryptocurrency, having equity exposure to whether it's the Bitcoin miners, whether it's Voyager or Galaxy or Hut, as kind of mentioned on the show, do your research, speak with a financial advisor.

There are equity exposure plays for you to take indirect exposure to the sector. I do agree with Kevin O'Leary that I do think that we're looking at what is going to become the 12th sector on the S&P. I do think we'll see trillion-dollar blockchain businesses at some point in the future. If you look at where Coinbase is, they're only at 20x from where they are right now, and when you look at 68 million global users on a platform like Coinbase or FTX, that Kevin O'Leary is now involved in here in the United States, getting their compliance licenses in place, growing their team, sponsoring things like the Miami Heat stadium, I really think that you're gonna see a tremendous growth in this particular sector.

Sure, there will be market cycles, Bitcoin corrections, ups and downs, but companies like FTX and Coinbase make money when crypto prices go up and down—they make their money in volatility. So we're really excited about that, and you can follow us on social. And yeah, I think Bitcoin's gonna go to the moon, and I'm excited to just be along for the ride.

Jordan Freed is the best place to follow me on Twitter. I tweet about the market—Immutable Holdings, HBAR, all the above. Okay, awesome.

Yeah, that's actually very interesting. Coinbase is a $68 billion market cap right now. Tesla just crossed a $1 trillion market cap, and you're thinking we're gonna see basically cryptocurrency companies the size of Tesla—very, very bullish. That's incredible, Kevin.

And not to interrupt you, if you guys remember Palm Pilots, I just saw this article literally 20 years ago. Palm Pilot, the company behind the Palm Pilot, was valued at more than Apple and Google combined.

So when you look at where we've gone, like, no one uses Palm Pilot anymore. Think about 20 years from now. I think it's out of the realm of possibility that Coinbase could be as valuable if not more so.

Wow, Kevin O'Leary, final thoughts—cryptocurrency to the moon.

I think the key to getting involved in it, regardless of your age and what demographic you're in, is education. I feel the same way about investing. There are certain principles of diversification that you should always adhere to, regardless of what asset class or what sector of the economy that you play in.

The same for crypto. So we've discussed many different ways during this conversation to be involved, from the equities of companies that mine Bitcoin to those that are building infrastructure, like Immutable Holdings. That is another way to do it.

Wonderful is another one. There's lots of different companies that are involved in this, but it's really about educating yourself and getting diversification in your portfolio. It's not just about Bitcoin and Ethereum anymore—it just isn't. There's just too much other software being developed that has tremendous productivity potential, and I think exposure to that makes sense.

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