Choosing The Right Crypto Investment For My Portfolio | Anthony Pompliano

[Music] I see you go on CNBC a few times and, uh, getting some, uh, verbal tussles. You know, back in the day you and I used to have some verbal tussles, which I just want to remind people of. But, uh, recently you've been asked about the vaccine mandates and kind of choice versus mandates, etc. Like, what's your general take now that we're in kind of, as you said, like a new version of this whole thing? And like, how do you think business owners specifically should be thinking about this?

Obviously with Shark Tank, there's a lot of small business owners that watch and they like the show, etc. When you talk to those business owners, like how are they balancing the health stuff versus running their businesses? Supply chain, it's just a very complex environment right now. So, like, how do you think about that? How do you talk to those companies?

So I have been talking to those companies because I wanted to get some tonality of their policy and start applying it to ours. In the case where we're a control shareholder, I want to respect people's rights to do what they wish with their own personal health. At the same time, I want to respect the employees that work together. So the way I think it should shake out on private business, you know, this just got tested in the Supreme Court and got rejected. The government shouldn't be able to do a mandate to a private company and tell them what to do.

The private company should be able to decide their own policy, and indeed that's what's happening. There are many companies that have made the decision at the board level that if you're going to work together in an office, in an airplane, in a factory, in a manufacturing facility, whatever, you have to be vaccinated. Now, you don't have to be vaccinated, but you're not going to have a job. So you're going to have to make that decision individually, and some people are going to make the decision they're not going to get vaccinated. They're going to go try and find a job where they can work remotely in perpetuity, or they, you know, a company that doesn't have a policy like that.

But if you go down the S&P 500, slowly but surely since we last talked, Pomp, you've seen many large entities put in place, including Citibank recently, that edict giving people time to get their vaccines, paying for the vaccines, giving them time off to go get their vaccines, supporting them any way they can. But if they don't choose to get vaccinated, they lose their job, and I'm okay with that. I'm okay with it. It still gives you the personal right to do what you wish, but it shows respect to your fellow worker that you don't want to infect them because really we're all in this thing together. It's been said countless times, and we are.

But, you know, if you want, if you want to get sick right now, you just go into a room with 20 people, somebody's going to have COVID, and you're going to get sick. And if you're vaccinated, you're going to survive; if you're not, the outcome's unknown.

Joe, John, what questions you guys got? I'm going to pull us a little bit closer back to the middle of discussing digital assets. Kevin, they don't like that. I like talking about, you know, important topics. They like to talk about, I'm just saying he's here for a reason. We're going to let him, uh, we're going to bring him right back in. Go ahead.

Um, let's talk about some of the investments you're making. I know that you've been public about kind of the specific assets that you're investing in, and it's a pretty diversified portfolio. You've got Bitcoin, Ethereum, Solana, Polygon, and others. I want to talk about, just quickly, if you can run through your general framework of how you determine where you're going to allocate capital.

So I've come to the conclusion on all things digital. The best way to look at it—and I've said this several times—is Bitcoin is not a coin; it's software. What I do is I say to myself, I've seen this movie before. I was an investor in software, you know, engineers 22 years ago at the Learning Company when we made educational software. So the way I used to do it then is the way I'm doing it now.

I'm a very lucky guy; I can make a phone call and it always gets returned. That's the whole Shark Tank thing, and I get all that. But if I want to invest in Polygon, I want to meet the engineering team, which I did in Dubai. I called them up, met them, met the team, heard their vision of what they're doing, looked at the economic reality of the outcome, the potential of it. So first is team. I want to meet the team. If I check the box on team—smart guys, good engineers, good strategy, good group—I'm interested.

Here's the test. The second test: what economic value are they creating? In the case of Polygon, let's stay on that—aggregating transactions to reduce gas fees on each is a smart idea. There's a reason you would do that because you have an economic reason to pursue that. You save money; transaction fees are less. So I think the potential of that is large.

HBAR, okay, great team, good engineers, what's the economic premise that would keep that growing? Well, Boeing wants a quasi-centralized decentralized platform; they want the best of both worlds. HBAR can deliver that; check the box there. Buy into that one too. Look what's going on with, you know, Solana. I mean, they're trying to solve problems a different way too—speed everything up. Check the box. Who's working on that? Sam Bankman-Fried and his team; why wouldn't you bet that horse?

So it's all about getting positions in all of these, you know, software platforms. That's what they are; they're software platforms. So I say to institutions, you criticized me for investing in Bitcoin; you own a big position in Microsoft, you own a five percent weighting in Yahoo. What is that? That's software. Why don't you do the same thing in Bitcoin? Why don't you do the same thing in Ethereum? Why aren't you in HBAR? Why aren't you in Polygon? Why aren't you in Serum? Why aren't you in Helium? Like, it's all software.

And so with that attitude on, it's hard to say I'll only invest in publicly traded software companies. One day, these, to me, and I really believe this, one day crypto and all these software platforms are going to be the 12th sector of the S&P, and I'm just taking the bet now that we're on our way there, and I'm taking and staking my bets now. Broad portfolio, you know, no one.

Ethereum is my biggest position right now. Bitcoin's had a bit of a correction; I get it, but there's been volatility. But now to offset that volatility, I own an exchange, so I want to own more exchanges. I look at it; it's all software.

Johnson, Kevin, yeah, thanks for coming on. You talk about this industry being the 12th sector of the S&P, and recently Jerome Powell said that their report on crypto and CBDCs is coming out soon. What are your thoughts on the impact that that report can have, and what do you think that report will contain?

I'm encouraged by that report because it shows that they're inching forward and they're trying to do it right. In my opinion about the regulator, they understand the tremendous potential of this technology, the potential of, you know, streamlined payment systems, the potential productivity that blockchain has in smart contracts and all the use case uses for it. They get it. But at the same time, they're well aware that when they rule, it will be the global standard. The Chinese aren't going to do this; no one's going to follow them. They're going to follow the SEC; they're going to follow the U.S. regulator, so they want to get it right.

The first place I would like them to get it right would be on the baseline stable coin as a payment system. I would very, very much like to be able to transact globally, pick a coin; my preference is USDC, but pick one, regulate it, and let me, as an investor along with hundreds of millions of other investors, use it as a form of payment and stability. It would be fantastic; it was backed by the U.S. dollar. They know that. They know that it would be just so much more efficient and so, you know, so less expensive if I could just transact, maintain a centralized-decentralized wallet, um, and just be able to—imagine if I could buy a Swiss stock with a stable coin instead of having to go U.S. dollar into Swiss franc, buy the security, then back into Swiss franc, back into U.S. dollar. You know how screwed I get doing that? How much hot friction there is and how much I lose? It's insane. Same with Euro stocks, same with British pounds, same with Canadian dollars. I mean, I invest in all these jurisdictions and I have to deal with that.

And so that's sort of—that's where I think we want to go first. Once they rule on that, everybody will say, okay, we're moving in that direction. It'll be very constructive for the asset allocation you talked about at the beginning of the hour on institutional follow-through into crypto. There's no question you're right; there's a lot of demand; they just need the regulator on board.

Kevin, what's interesting about that idea is basically the U.S. dollar, if it does get kind of the blessing, right? I think a lot about, like, the regulators are essentially the pope at this point, right? They're just going to give the blessing to the stable coins, especially things like USDC, etc. When that happens, there's not a lot of reason for people to go back into the antiquated technologies of the same currency. So we just have physical dollars; now we have what's called an electronic dollar, which is in a centralized database with, uh, kind of, uh, long settlement times. To eventually, you just move to the digital version, and so monetary policy doesn't change just a new technology upgrade.

If that was to happen, do you think that the other currencies around the world would suffer? And what I mean by that is, if you have U.S. dollars rather than be forced to go into Swiss francs before you go and buy a stock, now you're just going to go straight from USDC into the stock. Do some of these weaker currencies, and maybe not in developed nations, especially in like developing countries, start to suffer at the hands of the more dominant fiat currencies? Or how do you think about that?

Yeah, the way I look at it is there's going to be, um, four or five currencies that will be digitized. So there will be a digital version of the Swiss franc, there will be a digital version of the Euro, there will be a digital version of the British pound, there will be a digital version of the Canadian dollar, there will be a digital version of the U.S. dollar. It may be a stable coin in that case, but the reason I think that happens is you allow the economies to compete with each other on productivity and interest rates.

So that if I'm going to go buy something in Switzerland, there'll be a spot exchange price from my USDC or whatever the stablecoin is into the stable version of the Swiss franc, and I may elect to keep a portfolio, as I do today, of multiple currencies. Because basically, I want to own Swiss francs. That country is very, very efficient; it's a very good currency. They don't have a lot of debt, so how do I own the digital version of that? Because right now, if you want to own native Swiss francs, you practically can't do it because if you want to open an account in Switzerland as an American citizen, you can't. You can't do it; they won't open it for you.

I think all of this political border stuff goes away with digitization of the currency, so I'm very optimistic for that. Now, the reason you'd only have four or five of them—the Chinese one? Yeah, that's going to be digital at some point, but I own a Chinese one? Probably not, if the government's watching, you know, my wallet address, and it'll be an unfavored currency for that reason. But I'd happily own Swiss francs, happily own the digital American dollar. It's going to play itself out, but you're saying, you know, if it happens? 100% is going to happen; it's just when the efficient—if we just digitize our dollar, or we got a stable dollar, like a bank—if Circle became a bank, I don't need anything else.

I'll just own that and I'll piece it off digitally whenever I need to buy some other kind of asset. And I'll be staking it at whatever the current rate is. I'll be rolling my contracts just like in the old days when you could make five or six percent interest, which you don't get anymore. And so I think there's a really big use case and why there's so much pressure on the regulator to rule on this thing, and you guys are dead right; the efficiency brought forward is just insane. It's so powerful, an economic reason to pursue this.

Agreed. Last question, then we'll let you get back to, uh, Miami Beach, you know, get a little tan going because it's 70-something degrees here for anyone who's stuck in New York at 12-degree weather. Is, um, when you think about your portfolio, I think previously you were kind of two, three, four percent; you had aspirations, but not quite at—I think it was like eight percent, nine percent, somewhere in that range is what you were kind of targeting, and eventually you said that you could see going up to like 20 in a single sector—but that would take some time to get there. Where are you today, and how have your thoughts around, uh, kind of portfolio allocation percentages, how has that changed since last time we talked?

At year-end last year, we thought we'd be at seven. Where we were at 10.7 percent in the operating company portfolio. And today, I just, this morning, I got off with our compliance guys, um, because of our recent investments, uh, additional investments in some of the equities that we bought. I increased my position in Hold Immutable Holdings, the Jordan Freed company that owns NFT.com. I bought more of that, and I also bought a lot more of, on the deal of, uh, the wonder if I did, buying blockchain or Bybit. By we're now today at, um, 16.5 percent, and so we're on our way to 20, and it happened really, really fast, and I'm comfortable with it.

It's more volatile than our traditional book because when you look at what else we own, it's, you know, commercial real estate, it's large-cap S&P companies, dividend payers—a lot of them. This stuff is volatile, but the underlying potential and the growth of it, um, and I know that a lot of institutions are going through the angst I'm having. I can't find better opportunities than these companies like they are really—this is like investing in the earliest days of the internet, the earliest days, because we're in the first inning of this stuff. And so you got—you have to find your opportunities where they are, and, you know, probably by the end of this quarter I'm going to be at 20. That's what's happening here.

So I think, I've said this to you before, on the show, but if not, in 2018, you forbid me. It was garbage, the whole nine yards. I knew before the day was over you were going to bring that up again. Hold on; hold on. This is a compliment, though. But from there to essentially, let's call it three years later, or less, so within three years from that perspective, which actually I will, uh, admit was a fair perspective for most people to have at the time because they had just watched Bitcoin go from twenty thousand fall to three thousand dollars, etc.

To now have sixteen percent of your portfolio in the industry and not only have what I'll call like true skin in the game and in a growing percentage, but to be able to talk about it with such detailed nuance, the understanding of the regulatory side, the technology, etc., I got to say kudos, man. I'm very impressed. I think that you not only understand what's happening here, but, uh, you're kind of not sitting back letting it, you know, like pass by you. You're jumping into it, and I think there's a lot of people who you would consider your peers that they may say, okay, yeah, he's probably not wrong, but like, let's figure out what to do, let's go read some white papers, whatever, and they're going to take another two years before they jump in, and they're just going to miss a huge piece of this.

So it's not only the willingness to change your mind and all that, but it's also the courage and conviction to kind of act in a way that sixteen percent—like that's not going to sneeze your nose at, especially because you have these like weird rules, like no more than twenty percent, uh, uh, single sector, no more than five percent in a single stock. It's, you know, it's like almost like I know all your talking points on that stuff.

Yeah, no, you're right, but that is the way the mandates work out there globally and sovereign and pension everything else, you know, it's sort of, um, one of the challenges I've got is I have to include, uh, my holdings and my contracts on USDC as basically an equity, as I said earlier, which to me is frustrating, um, because I would—you know, I can't get past 20, but it should be treated like what it is; it's a currency where there are no rules like that, but we're not there yet, and it's a push.

I will say one thing in closing: watch what happens this year in the amount of capital that comes into that new mining model that we're going to solve this CSG problem in 2022. You're going to see a lot of institutional capital come into this idea of mining within a community, supporting a community, doing an ESG compliant, ethically compliant, all that stuff, and they'll own the equity just like they own any other equity, but they'll be exposed to the vol of Bitcoin—that's how they're going to do it.

Yeah, I think that, uh, I think that people are underestimating how, uh, violently institutional capital moves when it moves. We saw this with Bitcoin in, um, 2020 into 2021. There was really a lot of the price was driven by, uh, the arbitrage for the Grayscale Bitcoin Trust. I mean, there was just massive capital inflows there, and because that capital couldn't be redeemed, uh, there ended up being this huge price increase. At one point, I think Grayscale was buying like 150% of all Bitcoin being mined every day, right? So it's just—they were just sucking liquidity out of the market, and that was just institutional capital. And it frankly wasn't the big boys; it was hedge funds and family offices, etc.

I do think that once the really, really large firms, whether it's the sovereign wealth, the, you know, large trillion dollar asset managers, etc., when they start to allocate, you know, I mean, if you really think about it right now, if a trillion dollar asset manager said, we're gonna go put 100% allocation of Bitcoin, they could buy from a price concept all the Bitcoin that is liquid traded on the market. Now of course they can't actually get because someone's going to sell it to them, but like they have enough money to buy the entire market cap.

And so I think people just—they don't understand how much money these people have and how quickly. I agree with your analysis; what happened there, that was not healthy for the market. I prefer more transparency, more liquidity, and I think we're going to get it through, you know, massive amounts of capital going into the equity of miners. That's the way it's going to first manifest itself, and that'll have much more liquidity, much more transparency, much more disclosure, and it'll be compliant.

I think it's a trade of 2022; I think you're going to see a bunch of deals announced, a lot of them in West Texas. I'm aware of a lot of these deals and certainly looking at them, and I'm planning on investing in some of them so I can make claim to owning direct ESG compliant coin, and that's what every other institution wants to do.

If you liked that video, where did you see my next one? Don't forget to click right over here and subscribe.