Best Crypto To Buy Right Now | Kitco NEWS

[Music] So in this environment, Roy, give me your top DeFi or crypto investment. Is there an altcoin that you think has room to rally? Give me, in two sentences, your top investment in the space right now.

"I'm going to disappoint you right now because I don't have a pick past the upper tier, which, of course, is Bitcoin and Ether. The reason I don't have a pick there is that when it becomes—when these coins become accessible, let's call them the DeFi top 10, which is, you know, this 10 to 30 billion dollar side chains, etc.—these coins are available to the public, and you're going to hear about them long after the venture capital firms that funded these have bought and pre-mined everything at 1/100 the cost you're going to pay. If you're buying Solana right now, you're going to pay 100 or so what it originally was 15 cents. So we've had massive price appreciation already, and I don't see these as unique and different enough from each other that it's easy to pick a winner. It becomes like picking stocks."

So then let's go to the problem. All right, so then let's go to the Ethereum 2.0 point that I touched on with Kevin, and he makes a valid point that this has been anticipated for a very long time, and yeah, it could also go very wrong. What is your view on how this Ethereum 2.0 merger works out?

"I think it's going to happen, and I think it's going to happen because Ethereum, despite being supposedly decentralized, is actually a lot more centralized than it seems. And I think the people at its core want this to happen. This, by the way, is a reason why proof of work is very valuable compared to proof of stake. So remember, proof of work is what Bitcoin has; that's all the energy utilization. Anyone can go out there and buy miners and buy energy and mine Bitcoin and participate in the governance of Bitcoin. However, that's not true if, in Ether, Ethereum blockchain favors the largest holders, and so it's not as decentralized. So I am not as bullish on the idea of proof of stake as a replacement for proof of work. It's an alternative. It has some advantages and has some disadvantages. And to me, I'd rather—I think it's a good thing that we're using one 500th of all human carbon emissions with the potential to get billions of people decentralized finance."

Okay, but you have also invested quite significantly in other protocols and projects. I'm sure that you're saying that neither are going to trump Bitcoin or Ethereum. But which of these projects do you think will gain—?

"I think adoption, portfolio. Just like in stocks, a proper portfolio should use the wisdom of the market. I always tell people if you want to invest in the stock market, buy the S&P 500. And yeah, you get a lot of Apple and you get a lot of Tesla in there, but those are really, really good companies. Amazon is in there and huge in the index for a reason. And the same thing, if you're going to buy cryptocurrencies for a long-term hold, then you want a lot of Bitcoin and a lot of Ethereum and a lot—much smaller amounts of everything else. So I think the number is about—so you don't have a third pick for—?"

"I do not have a third pick. I think it's fine to trade these things and have fun with them, but I don't see the potential in the others in any one particular coin."

All right, Kevin, what are you identifying as the biggest opportunity in crypto and DeFi at the moment, then?

"Well, I own all of the positions that we're always talking about on an index basis, and I indexed up to five percent weighting maximum across 20 percent old, which is a standard indexing practice for sovereign wealth funds. That's just, you know, milk-bone strategy. But I've gone a little farther; I've decided that I'd like to own some of the infrastructure of Web 3.0. And so I've taken equity positions where regulators allow it, and that's primarily Canada. The NEO Exchange is the preferred exchange. Now, it's been announced the CBOE is buying it. So it's going to be basically an American exchange, but housed in Canada. But it has companies like WonderFi on it, and now that that means Bitbuy is on it too. That was the first license granted by the regulator there. It trades as an equity WNDR, and also Immutable Holdings, a company that's headquartered basically in Puerto Rico where they are building out this huge platform for NFTs. They own NFT.com; they're a blockchain company. You can buy those equities on the NEO Exchange in Canada where the regulator allows it. And so some of these companies get listed in Norway and Germany where regulators allow it. But for me, those are also full weightings. I've got five percent weightings in those names because I want to own the picks and shovels. It's not just the gold that people made money on the gold rush; it was the picks and shovels. So in my portfolio, I've got a lot of picks and shovels. And again, it's all software. You meet these executives in these companies; they're young, really strong engineers in there, and they don't want to work for industrial companies anymore. They want to be on the chain; that's where the future is, and they're the smartest hands, and that's where they make the most money because they're cutting-edge advances in financial services. So that's the investment thesis; it's not just Bitcoin. You know, some of these equities have actually outperformed Bitcoin for me because they've had dramatic moves as markets start to recognize the merits of owning these companies."

Yeah, but again, it's like Roy said, I bought these in, you know, fractional prices on their first and second rounds, and now they're trading, and they've moved materially. So I'm going to keep doing the same thing that same thing with the Norway project that's private.

What about investors that do not have the opportunity like you did to invest in OneDeFi and Immutable Holdings, which, as you said, have now listed? They can now—if they wish, they can now. Are there other picks that you are viewing as having tremendous growth potential as well in the, as you so call it, infrastructure side of things?

"Yeah, yeah, I would say the other opportunity—it's a short Marathon, short Hive, short HUD 8, and short Riot. Those stocks are going to get killed when they get their carbon audits started on them because there's nowhere to go. There's just no way to audit it. They're not going to get an auditor to sign those statements. It's unfair in some ways; I mean, basically, this is a classic case where the nation industry started just a few years ago by these great pioneer entrepreneurs. They get shot with all the arrows because the president loves climate change mandates, and so does BlackRock, and so does the SEC now, and so does the Luminous bill. So, I mean, that's unfortunate, but sometimes, you know, the pioneers have to get the arrows so that the ones that come behind them can set up shop."

All right, Kevin, you mentioned—I know you're big into NFTs as well. You've said that in five years' time, the market cap of all NFTs will exceed Bitcoin. I'd like for you to explain how you see that happening, and more importantly, if an investor wants to capitalize on this NFT craze, what's the best way to do it?

"You know, I don't buy JPEG NFTs. I'm not in the lazy ape thing or crazy. What I do is I look for use cases that create economic value, and the one I've been talking about a lot lately—I'm not the—there's lots of other ones, but the one that's so obvious and easy to understand because people like watches is the watch industry. So the watch industry about 12x—there's billions of dollars a quarter trading in secondary markets for watches. The Rolexes, Patek Philippe, Adam RPK, FB journal—all these watches; the majority of them are fake. That's what's happened. You know, you see a Daytona like this go from thirteen thousand to sixty thousand dollars; there's a lot of motivation for people to rip them off. That wouldn't happen if there had been an NFT minted at the actual factory, the micro-scan, the dial at a high resolution because every dial has micro imperfections in it and then created an NFT that traveled with the ownership. In other words, give me the ownership papers digitally. There's a tremendous economic value in that, and that's an NFT market that's going to explode to the upside as—once the white paper is released from the horological society. That's where we're going. Same with real estate, same with antique cars, same with pens, same with jewelry, same with all the collectibles that have physical value and asset that will be turned into digital ownership and then can be moved from wallet to wallet as the watch gets traded, and the royalties can go back in the smart contract to the Rolexes and the Patexs and the FP journals because they provided and minted the NFT in the first place. That makes sense to me. The rest of the stuff? Very speculative. Do I need—do I want to pay 360,000 for a lazy ape? No, I believe it's crazy, but I'm not entirely sure about that one—bored, crazy, and lazy—that's a good combination, not really."

Roy, very quickly from an institutional side— and very quickly because I do want to bring in our audience questions now—what's your view on funds being exposed to the NFT sector? What way would they go about doing that? Is that something you're looking at?

"I'm not at all interested in—well, for me, any piece of art has to have craft, beauty, and some sort of transporting quality that enhances your experience. Nothing I've seen in the digital space does that. Essentially, there's an unlimited supply of every adjective followed by 'aid' followed by 'or' any other animal type, and that's—so I have not—no interest whatsoever. Maybe you can make a case for the first set of popular NFTs, and CryptoKitties maybe are—it's like cave paintings in a sense; you might make a case for that as the first NFTs. But regulators are going to come down on this stuff."

What are they going to—exactly?

"Yeah, these are security; there's no question. So anyway, my view is exactly the same as Kevin's, that there are real use cases for these. Real estate, any hard asset can be put on a blockchain, and you can do provenance, you can do fractional ownership. The SEC eventually is going to have to give us the regulatory framework, and plenty of money will be made. However, I don't necessarily think that people are going to pay a lot of money for this process to happen. You know, if you think about it, putting some things on the blockchain is not that difficult, so I'm not sure that there's a hundred billion dollar NFT company, but there's certainly a trillion dollars of potential NFT value that will exist on a blockchain."

Okay, you both mentioned regulation. I just want to wrap up this portion before we bring in our audience questions. Kevin, with regulation—and you touched on the executive order from the Biden administration that was released on digital assets—and it stated that around 16 percent of adult Americans, approximately 40 million people, have invested in, traded, or used cryptocurrencies. Now, Kevin, we've had guests on the show saying that because of that, a Bitcoin ban is now impossible, that it is political suicide to alienate that proportion of voters. Can we lay the Bitcoin ban concept to rest? Can we safely say that the U.S. outright banning Bitcoin and other cryptos is no longer an existential threat?

"Yes, we can. There's no chance that we're going to be banning Bitcoin or anything else that holds economic promise in terms of developing new technologies for financial services and payment systems. That's always been the hallmark of American entrepreneurship. We're not going to ban that. Most of the engineers today that are working on these projects see tremendous potential—transparency, audits, everything they provide. So much upside that they'll remain going. But the one thing that's 100 percent sure is they're going to be regulated—100 percent. But I'd argue that's good news. We get this regulation in place; the institutions will pour in trillions of dollars. Those that have been speculators, like Roy and I, will benefit from the fact that these will get indexed, and that will be a great upside. And then what happens after that is based on market demand, based on indexing, the majority of the ownership will shift to the institution. The majority of the S&P is on my institutions. People think retail owned stocks? No, they don't. You know, it's like Facebook—the reason it got crushed was that it got re-indexed from five percent down to two and a half, and it took four weeks to flush all that out because of the new perceived risk. And the metaverse and everything else that is not a retail stock? That is an institutional stock. It was one of the FANGs, still is, but it's all institutional. And that's the upside and the potential of Bitcoin."

So Roy, do you think there's going to be—do you think there's going to be like a moment of definitive clarity where it's made official that some ban is not going to happen? And if so, what do you think that does to the price?

"No, I think there's always a chance for a ban. I absolutely think there's a chance that Bitcoin could be banned. Look, private ownership of gold was banned in many, many countries, including the United States. So could it happen? Absolutely. However, were that to happen, it would be such an environment of chaos and hyperinflation that Bitcoin would be worth even more money at that point. If they're going to ban it, it's going to be the time when you absolutely want to load up on Bitcoin because it will only be in such a chaotic situation that the only thing you can transact is Bitcoin."

All right, Kevin, we have a question from someone in our audience for you. Riley Bington, I believe, is asking when you think a U.S. Bitcoin spot ETF is going to be approved. Do you think we'll see that by 2022?

"No, not in 2022—not until the bill is voted on that the Senator Loomis is putting forward. So that's going to be probably after the midterms, 2023, 2024. And it'll also include a mandate for other ETFs; they'll just copy the Canadian order which has worked so well. There was such a concern to be massive tracking error; there isn't. It trades in uniform with the underlying Bitcoin, Ethereum, so the same idea can be put onto the NYSE or the NASDAQ. That's coming, but it simply won't happen until some of these mandates and these regulations have been put in place and become law."

Okay, we have another question for you, Kevin, from Genie in a Bottle. It's about the crypto winter. There's concern that we're deep in a crypto winter, which, as we know, is defined as a prolonged period of stalling price action after a big price rally. We know that that's happened several times since Bitcoin's inception in 2010, and the last time we had such a winter was in 2018 to early 2020 after the price on Bitcoin crashed about 70 percent from its December 27 highs. Genie in a Bottle Kevin would like to know whether you think we're in a crypto winter now, and when do you expect spring to start? What would trigger a crypto spring?

"So the reason we're not going to be in a crypto winter again is that the last crypto winter had no possibility of policy or regulation; that is not the case today. There's enough believers that this regulation will be a good thing. Watching these bills go through, it's very rare to see a bipartisan bill in today's Congress, but you have one here, which means both sides understand the merits of cryptocurrencies. And so you have a Ted Cruz, you know, sitting right beside a Democrat, which never happens. So I look at it and say to myself, that's one of the reasons there's a bid—an underlying bid—on Bitcoin and other cryptocurrencies, because there's an assumption in the next two years, something will happen that did not exist in the last winter."

All right, Roy, we have a question for you. It is from Virtual Console, and they'd like to ask you your thoughts on the future of Polygon. Roy, what's your thesis on Polygon? Where do you see that going?

"I own a lot of MATIC. I think it's a very good coin, very good token. So it's not that I don't have these things; it's a very easy blockchain to use, it's inexpensive. I would say the developer network is not as strong as what we're seeing in some of the other ones, like Solana, like AVAX. But I think it's a fine thing to have some of—again, I don't necessarily see the appreciation potential that I see for the largest things in the space. And I think, in general, I want to make—a to reiterate a point that we touched on before; right now, there is an incredibly motivated minority—16 percent of Americans who hold cryptocurrency—who will be furious if anything goes wrong in their industry. And there's no one who is, I think, pounding the pavement and rioting because they want to ban cryptocurrencies. And when you have that situation, I think we're going to see very benign legislation and benign regulation. I think you could even feel it in the announcement of Biden's announcement, where he said basically, we're going to have a committee to develop recommendations. That's what organizations do when they want to slow play and basically don't do nothing. And so I feel like we are in—that was an extraordinarily positive development. You could easily have seen fiery language like, 'This is the world of money launderers and wasteful carbon emissions, and we have to take action against this danger.'"

So, Roy, we have a question for you from Cassius Cuvee. He's a big fan of Kitco. He says, "I'm asking basically about the flow of overall money. If you think it will disproportionately flow back into crypto more than what came out—more than gold? Was it more than what money came out of crypto?"

"Oh yes, I think we're going to see far more acceptance as institutions—trillions and trillions of dollars of total assets, of which some percent will be placed in the largest cryptocurrencies because of the chance that my thesis might be correct. I just want to reiterate that I'm not suggesting that this is a likely outcome, that we're going to have 10 percent inflation forever, we're going to have 15, but it's certainly a pretty good possibility. And it's a lot more of a possibility when we've actually had inflation of about 15 or 20 percent. And what I mean by that is, if you calculate inflation the way they used to do it in 1990, our inflation rate is already over 15, so we're already there at my middle case."

Okay, Kevin, a question for you from Patent Expert. He'd like to know how does HBAR and Hedera play into the crypto market software scenario again?

"You're trying to guess the use case and if you believe there's economic value—you may allocate. And so these are not my largest positions by any means, but in the case of HBAR, the easy way to understand it is it's a quasi-decentralized, quasi-centralized chain. And the reason you—I'm sorry, it needs to be that way is when you're a Boeing or a large global manufacturer, you want some element of centralization because you're trying to control supply chains, which has become a big buzzword in the last two years because of the pandemic and indeed has slowed down some manufacturing, including the aerospace industry. So HBAR is being used as a use case for actually making it easier to track and control and make the supply chain more productive. Now, if you believe—and as I do—that's going to work to some level, well, there's a lot of economic value there. In other words, if it works for Boeing, it'll work for others in that space. They'll standardize on that industry, on that particular chain. That's what happens with these chains—once a player in an industry says, 'Well, this is great for me,' like Solana, they're trying to make the number one chain for NFTs, and that may happen because it's very fast—way faster than what's going on in Ethereum—before it goes to proof of stake. And who knows if it really will speed up if that happens, if it happens. And so a lot of this development work going on is being funded by the foundations. And I know in the case of FTX where, you know, I'm a shareholder—and I'll disclose again I'm a paid spokesperson—they have billions of dollars to put to work to develop these chains for their benefit and the benefit of everybody on their platform. And so these are behemoth platforms. You think about—it's kind of interesting because FTX is a centralized platform that's investing in decentralized wallets. Why are they doing that? Because it's smart to do that—acquire the customer once, never lose them, provide them with decentralization for maybe NFTs or whatever else they want, but keep a centralized wallet for large holdings that have to be audited, and they need the infrastructure for compliance. So I think all of this is to come. But I'll just tag it again by saying it's all just software—all just software."

Kevin, we have a question for you. Although you've already touched on it, we'll let you reiterate that point because the challenge is one of the things you said about carbon credits and mining companies. It's from Zak G, and he'd like to know your thoughts on investing in crypto mining companies that use renewable energy. You've already given us those versus fossil fuel-powered miners, saying that Hive Blockchain uses 100 percent renewable energy to power their operations.

"I know you said that Hive Blockchain is going to be in for a main audit—"

"Well, I'm not investing in any blockchain mining company that answers the question about carbon credits with, 'Yes, we use them.' So, in other words, the way to avoid disaster, in my view, as a personal opinion, is ask the company—you claim you're carbon neutral, but are you using carbon credits to get there? And the answer is yes, avoid like the plague because that's going to have a horrible outcome in just a very short period of time. The only companies that can claim that they're really clean are hydro and nuke, and there's more hydro opportunity right now than nuke. So if the only ones I'm investing in can show me with 100 percent auditability that they're getting all of their power from hydropower."

All right, thanks for that, Kevin. Roy, we have a question for you from Onion Farmer, and he'd like to know what is the best way to create yield using your Bitcoin and other altcoins if there are any platforms that you prefer?

"That's a very, very good question. And I haven't mentioned this, but one of the things that makes cryptocurrency so interesting is actually their yield play right now. Your baseline yield in places like Celsius is about three or four percent on investments in—if you just give them your Bitcoin to custody, like a bank, but they'll pay a lot more than a bank does. There are other ways to get a lot more yield, and many of them involve providing liquidity in liquidity pools and also taking advantage of what I would call the DeFi subsidy, which is related to the millennial lifestyle subsidy that brought us Uber and DoorDash and all these companies that are providing services below cost right now. There's a tremendous race to see who's going to be the Amazon of DeFi; who's going to be the one financial services company that provides those billions of people financial services? VCs are throwing money at projects to see if they can get the one that really succeeds, and in order to do that, to get those projects going and scale, they're subsidizing the investments in these projects with enormous amounts of money, and you can capture that. So there are two different types of trades that are pretty interesting right now. One is to provide money into market makers—essentially, people that want to be decentralized exchanges. And another one is incentivized leveraged lending platforms where you basically get paid to invest in the platform and then get paid to borrow against the capital that you've just invested in the platform. Rinse and repeat, and you can get some pretty interesting yields, and there you can go way above five, ten percent into the twenty, thirty, forty percent, and depending on how they call it, Degen you want to be. You can get even higher than that, with, of course, you can measure a risk."

All right, Kevin, to Roy's point and as someone that invests in these companies that are trying to provide these DeFi solutions, what do you think could be the Amazon of the space?

"I think it's too early to tell, which is why there's so many different bets being put out there. It really is the outcome of different geographies. I mean, you think about the behemoth FTX has become—they did it all outside the United States. They didn't come here because the regulatory environment didn't provide for what they needed for their clients. And so it's not clear to me who's going to be the winner in the long run. It really will depend when and if the U.S. regulator defines global policy, which I think the SEC will do; it's done in every other market. You look at the policies in European markets or Asian markets around equities; they mirror very close to what the SEC has mandated. And so I think we're going to get the same thing happening in crypto. It's going to take a little longer. In the meantime, there'll be lots of volatility, lots of opportunity. But it's a little different than stocks and bonds; you need executional skills as a software engineer to pull this off. You can't just say, 'Well, here's my vision for my blockchain.' You gotta actually deliver it, you gotta test it, you gotta prove it has scalability, and you've got to prove it has scale in terms of number of transactions per second. All of this stuff is not easy to do, which is why I take a multi-bet approach. You know, maybe it'll be Solana, maybe it won't be; maybe it'll be Polygon, maybe it won't be; maybe it's Avalanche. I don't know; maybe it's Helium; I don't know. I have some of that too. So, you know, it's all about outcomes; you just don't know."

And Kevin, what are your thoughts on platforms like Celsius, for example, that allow you to get yield on your coins?

"Yeah, I mean, Roy gave a good use case of how yield works. I prefer to stay a little bit more conservative. I'm using Circle; I have a corporate account there. I'm writing 30, 60, 12-month contracts; yields are about 4.2 percent today, and my auditor and my compliance department are willing to allow me to hold up to a five percent weighting in any one mandate, even though I must tell you it took me six months to get them on board even for a stable coin. The problem is there are stable coins being litigated by the SEC right now—not USDC, but while that litigation is unresolved, it puts a taint on the entire stablecoin industry. And so really, you should view stablecoins as no different than a Fidelity money market, but they are not the same because the regulator says they're not the same. So what is the underlying? If it's not a US dollar? Well, I have to tell you something—money markets have lots of non-US dollar assets in them, but they've been regulated for decades, so there's a lot more comfort there."

All right, we're going to wrap it up with a final thought from both of you regarding central bank digital currency, speaking of stable coins and such. Because I'll start with you, Kevin. You've said in the past during our interviews that a Fed coin, a central bank digital coin from the U.S. government, is not going to happen, that you think there are very, very low odds of Fed coin happening and that governments will likely just adopt or modify an existing stable coin. Is that still your position there?

"Yeah, it is. You don't see government mutual funds or money market funds because they let the industry innovate, and the same thing is going to happen here. They'll license between five and ten stable coins and let them compete with features because, again, it's software and how well the platform works. I mean, if you looked at Circle as a software platform eight months ago and looked at it today, it's completely different. They've advanced so many different features because they've had to. I mean, even I've had feedback to them saying, 'Look, my auditor wants this, my auditor wants that, my compliance department wants this; add this treasury tab, all this stuff.' So, I mean, they're doing all that. I would be very encouraged by one index that I don't think enough people have considered. Bitcoin 2022 is, you know, came out of nowhere and has become the de facto global gathering of Bitcoin—the granddaddy digital asset. This year, it's going to run for three days; it's taking over the entire convention center in Miami where I live—that's a big facility. But what's remarkable? The first day, the sixth, it's all institutions and it's totally sold out. That has never happened before. That'll be 1500 to 2000 institutions from all around the world there to hit—to listen to different thoughts about where we're going with this thing. I'll be doing a keynote exactly on this ESG issue because it's top of the line for everybody, and I'm going to lay out the data I've got, and you know we'll have that discussion. But it's institutions only; that is remarkable."

All right, well Kevin, we will see you in Miami again. Looking forward to it. Roy, I do want to get your thoughts, though, before we wrap on the likelihood of Fed coin, a central bank digital currency, coming out of the U.S.

"I think, in general, governments love to exert power and control over their citizens. I think we're going to see the Fed try to have full transparency over a stable coin. Maybe it will be one they develop, maybe they'll license one, but what we see in China right now with social credit—can you imagine a U.S. government that has the power to look at every single financial transaction you make? Prohibits some of them and, yeah, extracts taxes automatically. They can have negative interest rates very, very easily by just taking your stable coins away. This is a extraordinarily nefarious development, and it doesn't solve anything because, of course, a Fed coin can be printed just like the U.S. dollar because that's all it is; it's just a U.S. dollar, and you have in digital form and it has the same supply problems that has caused me to be so bullish on Bitcoin and Ethereum."

Yeah, I personally find the idea of Fed coin terrifying for many of the reasons you listed and more. Yeah, I certainly don't want to be a Canadian or U.S. trucker with a Fed coin in my wallet. But that, of course, just bolsters the case for Bitcoin. I think we all agree on that.

All right, well, you know, I just want to say something about that, Roy. As a Canadian citizen, I'm also Irish; I'm also Emirati. I'd like to apologize on behalf of all Canadians. We will be getting rid of Trudeau very shortly. Don't worry; we're going to vote him out of power. That was an absolutely abysmal performance, and he has been rebuked recently in the General Council in Europe. They're very pissed at him, and so am I.

Well, Kevin, I know we have had the pleasure of discussing your political aspirations in the past. So, I'm just going to say, is that something we can look forward to in the future?

"No, I'm going to support John Charest. I think he'll be Prime Minister of Canada. He's a centralist; he's a moderate, and he supports Bitcoin and policy that has already been developed. And even more, he's going to be, I believe, the crypto prime minister because he knows that's on mandate for so many young Canadians are going to vote for him on that platform alone, and we will finally get rid of—we need adult supervision in Canada. We need to get rid of Trudeau. He's just a miserable manager—very successful politician in longevity, but the worst manager I have ever seen ever."

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