Translation: Bihu Blockchain

“Except for the US dollar, all other fiat currencies will depreciate to zero first; and artificial intelligence will become a super accelerator for digital assets to reach a scale of $50 trillion.”

As traditional financial giants accelerate their integration with the native world of cryptocurrencies, the market is undergoing an unprecedented reshuffling. At the London DAS Summit, Dan Tapiero, founder of 50T Funds, which manages $1.6 billion in assets, presented a deeply informative conversation. This Wall Street veteran, who once studied under Julian Robertson and Stan Druckenmiller, not only revealed how he skillfully avoided the FTX landmine three times and exited the valuation bubble unscathed but also threw out a shocking macro prediction: how the deflationary tsunami brought by AI will reshape the labor market, as well as the underlying logic behind Bitcoin reaching $1 million. If you want to see the major wealth trends of the next decade, this conversation is not to be missed.

1. Europe's Regulatory Lag and the Return of the Pro-Crypto Regime in the US

Host: Welcome to Roll Up. Today is the second day of the DAS London Summit, and we are honored to sit down with Dan Tapiero, CEO and CIO of 50T Funds. 50T Funds is a growth equity fund focused on investing in private companies in the digital asset space. He is an equity-only investor and proposed the famous $50 trillion digital asset investment concept. Dan, it's a pleasure to have you here, how has London treated you?

Dan Tapiero: London has treated me well. Although it's been rainy all day, at least we are indoors. But to be honest, I'm a bit disappointed because this seems to be the only industry event worth attending in London, which is a bit unexpected. Four or five years ago, there were still many industry events in Europe, but now the focus has clearly shifted to New York and Miami—like the Consensus conference in Miami and the DAS summit in New York—and to Asia with Token2049 being held in Singapore and Dubai, both of which are massive events. In Europe, there are almost no major events anymore. Although this summit is crowded, it only indicates that the industry is consolidating, with the overall market concentrating towards the top, and top summits like DAS and Token2049 absorbing all the traffic. Of course, our largest holding in the portfolio is Kraken, which is the largest trading platform in Europe and the second-largest in the US. We hope the level of adoption in Europe can improve, and although institutional awareness has grown, the activity level of European investors is far from that of the US.

Host: That makes sense. I'm curious if you think the current state of digital asset investment in Europe reflects a general trend across various asset classes globally? During Gary Gensler's tenure at the SEC, the regulatory policies of the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have forced a significant amount of financial activity to offshore markets. Now, with Trump and the current pro-crypto regime bringing many digital asset businesses back to the US, there is a prevailing view that Europe is lagging behind in artificial intelligence, digital assets, and many other asset classes. Do you think this is true? With the upcoming adjustments in the political landscape, do you think this friendly policy in the US might reverse?

Dan Tapiero: The current heads of the SEC and CFTC show unprecedented support for blockchain, cryptocurrencies, and digital assets. Although we have seen some changes in the political landscape in the recent elections, especially some dramatic upheavals in Texas, I believe that in the field of digital assets, the horse has left the barn, and the overall situation has been settled. There are now many Wall Street giants entering the space, such as Morgan Stanley and BlackRock, and a variety of ETFs have come to market. Just five years ago, we had nothing, and the trading volume of stablecoins was almost zero, but last year it reached an astonishing $33 trillion. Therefore, even those opposed, like Elizabeth Warren, may not be able to do much because the trend is irreversible. In contrast, Europe's excessive regulation has become a long-standing issue, not limited to the crypto industry but spreading across various sectors, which is very unfortunate.

2. Avoiding the Hundredfold Valuation Bubble: The Survival Rules of Growth Equity Investment

Dan Tapiero: From an investment perspective, there aren't many potential targets in Europe that meet our fund's standards. We have a growth equity fund, and in fact, we are the only growth equity fund globally that focuses on digital assets, cryptocurrencies, and blockchain. Most other investors in the market are venture capital firms (VCs) like Andreessen Horowitz (a16z), ParaFi, Pantera, Polychain, and Sequoia Capital. Venture capital firms tend to prefer high-risk investments because the industry has long been in a frontier exploration phase, and the open-source nature allows almost anyone to easily start a blockchain project, which unfortunately has led to countless projects eventually going to zero.

When I first entered this field in 2019, I was very clear: I am not a venture capitalist. I come from the macro hedge fund industry and served as a portfolio manager for 20 years, working for Julian Robertson, Steve Cohen, and Stan Druckenmiller. I come from the "old world," so rigorous due diligence is crucial for us. I don't like the venture capital approach of "investing in 100 companies, with 99 going to zero, just hoping one like Google or Polymarket brings a hundredfold return," that is simply not my style.

Our strategy is to invest directly in those winners that have already triumphed in the “startup competitions.” We look for mature businesses with annual revenues of at least $50 million to $100 million and invest at reasonable valuation multiples. At the growth stage, we have relatively few competitors. For example, we recently invested $40 million in MoonPay at a very reasonable valuation. Outside the crypto space, there is still low recognition of these leading companies in traditional finance. Recently, I was invited for the first time to a private dinner for traditional equity investors, all of whom manage $10 billion to $20 billion. I asked around, and besides Coinbase, not a single person had heard of Kraken. Kraken is already a household name in our industry, indicating we still have a long way to go for mainstream adoption.

Host: It sounds like your strategy is very disciplined. I heard your recently launched fifth fund, while still in the fundraising stage, has already allocated nearly 40% of its capital?

Dan Tapiero: Yes, because there are many reasonably valued high-quality opportunities in the market. If a company asks for a 50x revenue valuation, we will outright refuse. Over the past six years, we have passed on over 400 deals. Fortunately, we avoided financing from FTX three times and also declined Celsius and BlockFi, perfectly sidestepping these three landmines. We have also passed on some companies we really liked due to price reasons, for example, Fireblocks; we see great potential in it, but we would never pay for it at an 80x revenue valuation. We try to keep our investment costs within 10 times the company's revenue, with the ideal range being actually between 3x to 6x.

Host: Excellent investors often exhibit the ability to say "no" to temptation. In an industry that experiences 70% to 80% downturns every three or four years, is this discipline the key to your survival and growth?

Dan Tapiero: Indeed. I am older and have been in the industry for a long time. I dislike being trapped in positions; I need to be confident that my investments can deliver a steady return of 4 to 5 times over the fund's 10-year life span. Fund liquidity is very poor, with capital locked up for 10 years. If the entry price isn't right, it can become very passive thereafter. During the extreme market euphoria of 2021, many large traditional fundraising institutions like Silver Lake, Thoma Bravo, Thomas H. Lee, and Sequoia Capital rushed into this area, investing in companies like Alchemy at ridiculous valuations of 50 to 80 times or even 100 times revenue. At such high valuations, it is almost impossible for investors to make money.

At that time, due to the extremely low cost of capital, coupled with Bitcoin soaring from $5,000 at the end of 2020 to $60,000 and Ethereum bursting, the entire market was filled with extreme Fear of Missing Out (FOMO) sentiment. Many founders raised funds in 2021 at a 50x valuation, and even if their business grew later, they were unwilling or unable to accept a “down round.” However, I never fall into FOMO anxiety. We have a strict checklist, and with the help of AI, our due diligence cycle has now shrunk from the previous 2 to 3 months to just a few weeks. Therefore, our portfolio has endured significant market fluctuations. Many venture funds experience a 20-fold increase in valuation during bull markets and then crash by 90% in bear markets; that type of drastic oscillation in profit and loss is absolutely unacceptable for my fund, which includes large institutional investors.

Host: You just mentioned the overall integration of the market. From privacy assets like Bitcoin and Zcash, to the “four core tracks” you mentioned—perpetual contracts, prediction markets, stablecoins, and asset tokenization (RWA)—do you believe in the "Power Law" in this industry? For example, it seems that stablecoins have formed a dual oligopoly, with prediction markets dominated by Polymarket and Kalshi, and Hyperliquid emerging in the decentralized perpetual contract space. Do you think these tracks will ultimately lead to winner-takes-all scenarios, or will there be newcomers that disrupt the status quo?

Dan Tapiero: Among the past 27 investments, only 3 have gone to zero, with losses accounting for less than 5% of the total assets under management. Last year, we exited 4 companies through IPOs, generating $400 million. Currently, we manage about $1.6 billion in 20 to 22 companies. For me, the essence of investing has never changed: avoiding landmines and selecting winners. However, I never believe in the so-called "winner takes all" or absolute monopolies because the industry is still too young.

While our portfolio includes absolute leaders like Deribit, which holds an 80% share of the global Bitcoin and Ethereum options market (it was acquired by Coinbase last year in the largest merger in industry history, providing significant returns to our LPs), it also includes industry leaders like Ledger, which has an 80% market share in hardware wallets and safeguards 20% of the global Bitcoin and Ethereum. But that doesn't mean other tracks will also turn into dual oligopolies. It's like saying McDonald's monopolizes the burger market; in reality, there are still Burger King, Wendy's, and thousands of unique burger joints because consumers enjoy diverse choices.

3. Agentic Finance and the Grand Blueprint of $50 Trillion

Dan Tapiero: To understand the future of this industry, one must realize that Bitcoin and blockchain are essentially the "digitization of money and value," just as the internet of yesteryear achieved the "digitization of thought and information." When I first encountered the internet in 1990, everyone, including myself, was afraid to use credit cards online. Today, we have entered the age of "Agentic Finance."

Autonomous AI agents are executing millions of transactions on blockchain rails. Although the transaction sizes are still small at present, I firmly believe that in the future, every wealth management institution, even every ordinary person, will have their own AI agent to manage their financial lives—whether it's managing stock portfolios, daily payments, or paying monthly bills, these agents will conduct seamless transactions across different blockchain networks on behalf of the users. The companies we invest in are actively laying out their strategies in this cutting-edge field: MoonPay has an excellent agent interaction interface, and Kraken is also making significant progress; just two weeks ago, Ledger launched a new product called Ledger Adam, which has the potential to become the foundational security and identity verification layer for the entire agentic finance era, and I believe people will be amazed by it in a year.

Host: This is indeed a grand vision. You not only favor technological innovation, but you often emphasize that the US must hold a dominant position in this field. What do you think is the deep connection between dollar hegemony, geopolitics, and the $50 trillion market scale?

Dan Tapiero: Since the discovery of gold 5,000 years ago, Bitcoin and the blockchain technology behind it is the greatest innovation in the field of money and finance. The United States has the largest and most liquid financial markets globally; even French companies would prefer to list on Nasdaq rather than stay local. Therefore, the US must play a leadership role in the digital asset space. Although politicians like Elizabeth Warren and Maxine Waters are still stubbornly obstructing technological progress, fortunately, more and more rational voices are taking on key roles. Currently, around 50 million people in the US hold cryptocurrencies, many of whom are young voters under 35, a force that no political party can ignore. Moreover, the passage of the GENIUS Act has brought much-needed regulatory clarity to the industry.

Many people worry that the dollar will collapse, but the reality is that while the dollar will depreciate significantly against gold and Bitcoin in the future, compared to other fiat currencies, the dollar remains the strongest—currencies like the euro, yen, and all other fiat currencies globally will depreciate to zero before the dollar does. The current Treasury Secretary, Scott Bessent, and I have both worked under Stan Druckenmiller, who is well aware of the strategic value of US dollar stablecoins. Making dollar stablecoins the global dominant force can not only consolidate the dollar's position but also attract digital wallet users from regions facing capital controls or currency depreciation risks (such as Turkey, Argentina, Venezuela, and even China) to become new buyers of US Treasury bonds, thus helping the US government offset its fiscal deficits. As Michael Saylor said, Bitcoin is the greatest savings technology in human history.

As for my argument of a "$50 trillion investment thesis," it actually stems from the evolution of the name of my fund. When I was preparing my first fund in 2019, the total market capitalization of the entire crypto market and related stocks was only $300 billion. At that time, I predicted that this market would grow 30 times over the next decade to reach $10 trillion, so I named the fund 10T (10 Trillion), directly embedding the vision into the name, otherwise, no one would believe it. Just five years later, the industry's total market capitalization has reached $4 trillion to $5 trillion. Thus, when launching the fourth and fifth funds, calling it 10 trillion felt outdated. After careful consideration, we upgraded the brand to 50T.

In the $50 trillion landscape of the coming decade, our projections are as follows:

• Bitcoin ($20 trillion): By then, the price of a single Bitcoin will reach $1 million.

• Ethereum and Solana ($10 trillion): These two, along with Bitcoin, constitute the three core assets of the industry, while other altcoins, in my view, are more like early venture capital experiments.

• Equity in Blockchain-Related Companies ($20 trillion): Currently, there are only about five to eight influential publicly-traded blockchain companies, including Coinbase, Circle, and smaller players like Securitize, but I estimate that over the next decade, 50% to 80% of quality companies will go public. Coupled with the deep integration of artificial intelligence with blockchain, as analyst Dan Ives stated, AI will become a super accelerator for the development of digital assets, bringing tens of trillions of dollars in incremental profits to investors.

4. AI Deflation Shockwave and the Macroeconomic Outlook for 2027

Host: Since we've talked about macroeconomics and your old field, at the end of the program, I would like to ask for your views on the current macro situation. The Federal Reserve is currently led by Kevin Warsh, but recent geopolitical conflicts have led to the closure of the Strait of Hormuz, with oil and diesel prices skyrocketing (even seeing $6 per gallon at gas stations in Greenwich), and the market is discussing a possible 50 basis points rate hike by the Fed in December, resulting in a loss of about $5 trillion in US stock market value. How do you view the Fed’s policy path and the macro outlook for 2027?

Dan Tapiero: To be frank, I underestimated the hawkishness of the Fed previously, but I firmly believe that considering a rate hike at this moment is a huge policy mistake. I think humanity is about to usher in the largest productivity boom in history, and the widespread adoption of artificial intelligence is essentially a severe "deflationary event."

We can feel this in our daily operations: six months ago, I planned to hire two analysts, but now it has become completely unnecessary; the due diligence and investment memorandum writing that used to take two to three months can now be done in just two weeks with AI; even when we recently set up a special purpose vehicle (SPV) for co-investment, previously the legal fees alone would cost around $30,000 to $40,000, but this time I let the team use AI to complete all legal documents internally, and the legal fees were zero. I even believe that within the next three to five years, half of the existing lawyers will be eliminated by the market.

While war and rising oil prices have pushed up short-term energy prices, remember that 75% of the weight in all core inflation metrics comes from wages. Under the enormous pressure of AI replacing human labor, wages will face significant downward pressure in the coming years, which just hasn’t been fully reflected in the data yet. The Fed’s choice to raise interest rates in the face of huge structural deflationary pressure is basically repeating the historical error of the summer of 2008—when the ECB blindly raised interest rates amid soaring oil prices, directly triggering a financial crisis.

Currently, the non-AI “simulation economy” in the US (such as real estate, traditional manufacturing, and construction) is actually quite weak. Many people don’t realize that truck drivers are the most employed profession in 90% of US states. The reason the national unemployment rate hasn’t skyrocketed is solely because the massive construction of AI data centers has absorbed a large number of electricians and construction workers. Considering the enormous government and private sector debt in the US, what we really need are lower interest rates. The market currently prices an 80% probability of a rate hike in December, but I think the actual likelihood of that happening is minuscule. Warsh is simply using hawkish rhetoric for expectation management, and the market has overreacted to CPI data that exceeded expectations by just 0.1%.

Host: So, as inflationary pressures ease, we are likely to see monetary policy shift back to accommodative in 2027, which would again confirm your argument about the depreciation of fiat currency and the explosion of digital assets. What is your prediction for the overall market sentiment in 2027?

Dan Tapiero: There have been many black swan events in the past couple of months, and I think market sentiment is nearing panic extremes; the feel is quite terrible. Coupled with the market turmoil I've been emphasizing for the past six months before the elections, the election results (especially the unexpected situation in Texas) indeed turned out to be worse than expected, as the Republicans lost some ground.

However, I believe the overall macro backdrop remains sound; the market just needs a bit of time to digest these political and geopolitical uncertainties. Once the short-term panic clears and the situation stabilizes a bit, investors' attention will refocus on the strong growth prospects driven by AI and blockchain over the next two to four years. I believe the Bitcoin bear market ended a few months ago, and what follows will be a golden age for builders and long-term investors.

Host: Very insightful insights, Dan Tapiero, it has been a pleasure chatting with you today, thank you for being on our show!

Article link: https://www.hellobtc.com/kp/du/11/6499.html

Source: https://www.youtube.com/watch?v=xUqlu9Uxmrc