 Hello and welcome from the Cointelegraph research terminal. I'll be your host Michael Tabone, Senior Economist of Cointelegraph Research. Today's panel's theme will be to discuss how regulations may impact investor sentiment as we move into 2023 and beyond. But before we start today's discussion, I have a quick fire question for today's panel. It's me at Bell Reedy from Keychain Ventures. Quick fire question in a word, how would you describe the current state of the crypto market? I mean, interesting. I would have said I would have used the B world bearish but I would go with cleansing. Cleansing. Dante Fiero from Ten T Holdings. In a word, how would you describe the current state of the crypto market? Basing. Basing. Interesting. Tom Anderson from Deveo. One word on the state of crypto. I think separate from the cycles, the crypto space is still what it is. So I would call it inevitable. Inevitable. Interesting takes everybody. And I think that hits the nail on the head in many ways, in different ways. In Q2, we saw an interesting phenomenon with VC investment. The number of deals increased but the overall capital investment in crypto projects shrink but only slightly compared to the previous quarter. So Dante Fiero, you are the CEO of Ten T Holdings. You got it. All right. A mid-stage private equity investment firm. I'm interested to know your thoughts on this as you have over three decades of experience in investing and trying to interpret the signals of the macroeconomic landscape. Does the overall activity in VC in the crypto space surprise you? Well, you've got a lot of questions in there. I don't really see us as venture. We only invest in companies that are over 500 million dollars in market value. The average is probably of the 18 investments we've made. 12 of them have value. The 13 of them have valuations of over a billion dollars. So not really venture at more sort of growth, as you said, mid-stage. Things have definitely slowed down a bit. I would say there are discounts appearing in the secondary or certain companies, but they're mostly companies that raised astronomical valuations last year. I can think of at least 20 companies that raised between sort of 30 and 100 times revenue. It's not surprising that the air has come out of some of those. I mean, the most well-known probably is Alchemy, which raised it 100 times revenue from Silver Lake. That was at a $10 billion valuation. But there are other companies out there, companies we liked. Fireblocks would be one and Copper and these are excellent companies, but they raised very high multiples. And I think so. You're starting to see those multiples come in. In our portfolio, frankly, we didn't really pay more than 10 to 12 times on any of our purchases. So I find that, frankly, we're in a pretty good position. The fund is, and since we've got quite a bit of cash on hand, we'll be looking to deploy in coming months. So that's sort of my perspective on it. Excellent. Thank you very much. Mr. Belredi, you are the founding partner of Keychain Ventures, an investment platform aiming to provide institutional investors exposure to the blockchain and Web3 ecosystems through funds and co-investment opportunities. What are some of the trends you see in Q2? Well, I think, as you said, Q2 has seen a decrease in terms of a total amount deployed into deals in crypto. And I think it's not a surprise. It's in line with what we've seen globally in the market. However, some interesting facts as well to note, they have been a higher number in terms of count of deals, number of deals, despite a lower number of average checks. But if you look at the, if you double click and you look at the sectors where the money was deployed, there is a notable shift. In Q2, the majority, close to 50% of the capital went into what you might call Web3 or decentralized apps. So basically focusing on the application layer. In contrast to, for instance, what happened in Q4 and Q1, where most of the capital was deployed in DeFi. So I think there is, you know, you can clearly see a shift in terms of focus. And overall, 60 plus percent of the capital has still been deployed into seed and series A type of opportunities. And I think that's not a surprise given the nascent nature of this technology in this space. Absolutely. I thought it was an interesting change from the normal DeFi that I've been seeing over every quarter and then into Web3. In the current state, beyond all the current FUD that's out there, serious VC's, institutions and projects are looking to what will become next. One of the potential boons or obstacles on the horizon is regulation. And Devio is an interesting blockchain project. And I was wondering, Tom Anderson, as the CEO of Devio, do these potential changes not only in the US market, but across the globe play a part in your team's strategy moving forward? Definitely. Devio has been a little bit of a different type of company in the crypto space. So we started about six years ago, so enormous opportunity in the blockchain space, but a lot of challenges in where technology was. So we designed a system that was built for real business use, deployable at enterprise scale. And we've really focused on enterprise level customers from the beginning. And, you know, if you have enterprise level customers and working with real businesses, you have to work within regulation. So for us, regulation is a real positive. We designed our system with fraud theft, loss protections, KYC interactions, identity solutions, all the things that you really need as components to have a regulated system. So I think we're a little unique where it's a positive for us. I also think it's kind of indicative of where the whole space is going. The crypto space is growing up. It's not going to be just the Wild West forever, right? So the overall trajectory I think is real positive for everybody. So I believe that, you know, there's a little bit of say is law going on here where supply drives demand. And the analogous for us, I think would be the gross output in instead of GDP, the gross output that the indicator is a lagging indicator, where VC and different investment funds being involved in this space can kind of give you a path forward maybe in the future or a little insight into what might come of the overall space in general, the drive demand in other words. So does the blessing from governmental authorities to regulation create this supply that drives demand scenario in a way? Or is it going to always be that society itself moves the ball first? I don't really think about things in those terms. Frankly, I think the market, you know, the crypto currency market is to me the only true free market that exists out there, at least in the financial universe. You have central banks and governments interfering in all the other markets, bond and currency markets, probably most obviously and severely. There's no intervention from any authorities in the cryptocurrency world. We've gone to almost $2 trillion in total value. I include the equity of all the businesses there as well as all the cryptocurrency. And there's been no governmental guidance interference. And so I think that the market, you know, is going to drive it. And if the NFL all of a sudden is issuing, you know, all of these NFTs, that's their, you know, that's their method for, I don't know, guaranteeing secure transfer of tickets, then, you know, that's the market deciding. Right. And so, you know, you're starting to see, you know, these things creep in, blockchain gaming. If you see what Anamoc has been doing, that's been pretty incredible. A lot of, you know, to me market driven, I guess you call it market driven demand that's driving the uptick. And the regulators, I don't think they even really understand this world yet. So I don't know that the world is going to wait for them to figure it out. Again, those are the regulators in each of these different countries. I mean, it's very, you know, it's hard enough to find people. I don't know what Tom and Smead think, but it's hard enough to find people who are qualified and with a skill set to hire. That's on our end. You know, are the bureaucratic regulators going to have the skill set necessary to lay down that framework? I think only in working with, you know, the active people in, you know, in the market itself. So maybe that answers your question a little bit. Absolutely. Yeah, I agree. And having experience in the space, we do know that there's people are reaching back in, you know, hiring people right out, not even out of college and saying, oh, you have experience with crypto and you have a little bit of marketing, great, you're the CMO now. And let's go, let's go full force into the trying to get some funding and get this ball rolling. So we see that a lot. Smead, do you have anything that you'd like to add? Yeah, so I will definitely agree with that. I mean, there is an element of education actually before regulation, right? So the regulators and, you know, all the people that make this regulation needs to understand the innovation and be able to regulate it to protect the consumers and, you know, protect downside, but still enable the innovation and still keep the upside. And I think that's the challenge is putting the right framework of regulation to still enable all of that. And there isn't a big element of education that maybe is incumbent on us to, you know, to go and try to educate those regulators about, you know, the use cases and what this technology is supposed to do. Also, Michael, the innovation in the space is happening so quickly. You know, I agree with Smead. Yeah, we do have a responsibility to educate. And I spend a lot of my time speaking to those old guys in the old world, the TradFi legacy world where I, you know, where I came from. But to be honest, you have like complete phenomenas, for instance, the whole board 8 phenomena, the other side metaverse. A year ago, there was none of this, like zero. And it's a scramble for us to figure out and to stay in touch with it. So I mean, I don't, you know, I think the regulators, they're going to have to work with us. I mean, we're, you know, we're just trying to keep up with it. I don't see how they're going to be ahead of us, right? And that's a real world. I mean, you know, even I, a year ago, six months ago, board 8, you know, you know, not, not really sure what was really going on there. And then, you know, really did a deep dog with my team. And we invested in Yuga Labs, the round that was done led by Andreessen recently. And I actually think, you know, we paid a $4 billion valuation. I thought going into it, I thought that was total madness, that there was no way I could do that. And then after spending weeks and weeks digging into it, I thought, well, $4 billion is too cheap, given what they've done and their business model and their, the revenues that they were creating. So, you know, we're right on the line there and we're learning every day. So I think, Smea, it's really, you know, right about, you know, incoming upon us to help via education. One of the things that's best about the crypto space is the way it can grow and expand and it's grown organically and just exploded as this, you know, self-growing system. And, you know, seeing smart contracts starting then, you know, DeFi and then on into NFTs and gaming and how each exploded and got to such big numbers, you know, is great. But I also think, to Smea's point, it's a bit of a shame, as Dan said earlier, that the U.S. is only, you know, 10% of the overall crypto trading volume. And I think that does kind of show where regulation has affected, you know, some of the growth. Imagine if we had, as a country, you know, regulated the internet to a point where you couldn't really do anything without being able to, you know, be worried about, you know, getting sued, how many companies wouldn't have gone into it, you know, that kind of thing. And I think a little bit of that could be happening, you know, in the crypto space. So, to Smea's point, I think it would be great to see clarity, you know, so companies can move ahead. But, you know, and regulation to protect consumers, I do think that's good. But do it in a way that does allow growth. And I don't think we've, in the U.S., found that balance yet. Tom, Michael, let me just say, I love that point. And I've been trying to make that point since, you know, 2019 that the U.S. should see this area as, you know, in their traditional framework, as a job creator, as, you know, if you recall, in the late 90s, I'm sure you do. I mean, there was no, I remember there was no sales tax on things you bought online, because they wanted to encourage people to purchase online. And I think that only changed, what, five, six, seven years ago, I don't recall, but I do remember that. And could you imagine if the U.S. decided to incentivize projects and companies to come here? I mean, you know, we would be, we would be the leader, in my opinion, really quickly. But look, I think it's just a problem with our, you know, with the politics right now. We just, you know, I think they're the people who are making decisions are frankly, just too old. I mean, I, you know, on either side, they're just too old. You know, we shouldn't have an 80-year-old president. It just, it doesn't make any sense today. You know, and if someone's going to call me agist or whatever it is, look, the average age in this space, as we know, is 28 years old. And I've got seven analysts, and they're all under 30, well, one of them is not, but they're all under 30, basically. And I'm learning from them as much as, you know, they learned from me, which is a complete, you know, completely a new thing in my career. You know, it's phenomenal in that sense. So if we had some younger people with just a little bit of vision running things politically, you know, I think we could turn. I'm not, Tom, I'm not giving up on the U.S. I think that we do have the ability to turn and pivot. We just need, you know, some younger people in there. Yeah. I'm an Austrian economist. So I don't actually fear the bust. I fear the boom, because to me, the boom is where malinvestment happens. And we over, we get so hyped about certain things like, we were, like Dan, you just mentioned the board ape thing. And people might think that that might be an over-hype when you look at it at first. And then we have to do real deep dives and do it to really get to the heart of the matter. And there are other projects that tried to capitalize on the growth of the board eight yacht club for as an example. And they were just overhyped, right? So I like as bad as this might sound, busts are good for me, because I can actually find where the real value is. And it seems like throughout history, when there is a bust in a particular market, that's when innovation has to happen. I would even be a little bit more assertive in your statement. It's not likely it's for sure we're going to see great companies being built during this downturn. I mean, the last downturns, we all remember some of the names that came out from the global financial crisis, including, you know, Airbnb, PayPal, Venmo, Slack, and others. And I feel the downturn provides an environment for the strong builders to actually be able to, well, less compete on talent, be able to focus more on their product. And if they have the right runway, of course, come out from the downturn with a very successful business. From an investment perspective or an investor perspective, I would say as well that downturns present the opportunity for the best vintages. I mean, this is historical. If we go back, downturns have always provided the best vintages from an investment perspective. And that is driven mainly by, as you said, less hype, less noise. You are able to spot more of the signal. You tend to be able to spend more time looking at or deligencing your investments before pulling the trigger. And that's usually, you know, obviously combined with the correction and the lower valuation, you know, provide the best, let's say, ingredients for the best vintages from an investment perspective. So, yes, I would say definitely there will be some very successful companies coming out from this downturn. I think the crypto space has had these really interesting boom bust cycles. And when you look at it, you know, each time new and different types of money have come in. I personally think there's probably one more cycle that's going to happen, maybe two, but I'm envisioning one. Because you look at, you know, the big asset holders in the world and big financial institutions, like Goldman Sachs has a crypto desk that they didn't have even a year ago. You know, and so, you know, these boom bust cycles can't go on forever, right? You know, they go up to a level that's quite a bit higher than they were before. And so, so I think, you know, part of the game in the crypto space is timing around those things. And I think you can get cash, you know, when things are hot, but you can grow better when things are, you know, more on the bear cycle. And we live that we, we brought in some cash, we're the kind of company you want to be in, and these kind of bear markets, right, we brought in some cash, you know, when the markets were hot. A lot of the partners we would want to talk to and work with were hard to reach. All of a sudden now they're getting in touch with us that, you know, you couldn't reach them six months ago. So it's definitely a lot of ways easier to grow things. I also want to go back to my kind of first point early on is that the crypto space is maturing. And I do think a lot of what's happened in the past isn't going to be as reflective in the future as what is going to happen when new bigger areas come in. And again, in the ESG space, you look at how much, I mean, the biggest, the single biggest challenge in all of ESG, environmental social governance, is trust and provenance of data. And there's there's more money there by more than an order of magnitude, the entirety of the crypto space. And blockchain solves the big problem there. So when you start getting big industries working on more kind of real world projects, I think that's going to, you know, really change things as well. But overall, as I said, it's been, you know, in the bear market, it is a good time to be able to grow. So Dan, how are you working with your portfolio companies to help go through this market cycle? Well, that's interesting. I mean, look, we've made 18 investments in each of the companies. You know, there are different issues. You know, we have one company in the portfolio, unfortunately, that's having some serious difficulty. But we're not really a major stakeholder there. We've got companies actually, they're doing better this year than last year, if you can believe that. One of them is our actual largest investment is ledger. We invested 170 million into ledger. I sit on the board there. There, I think they're up this year from last year, which is incredible. You know, a testament to their CEO, who's doing a fantastic job. He doesn't really need my help, you know, in a sense. So I, you know, we offer our help when needed. But, you know, often the companies we invest in, they're already at scale. They already have, you know, product market fit in a niche and, you know, some of the exchanges we own revenue, you know, exchange volume is down 30 to 40%, depending upon where it is. But most of our, I would say all of our companies have a significant amount of cash on the balance sheet did not get extended, you know, in this, in the, you know, Luna mess and, you know, weren't really hurt by, you know, Celsius, etc. So it just depends every, you know, we've got companies in different buckets, our company in our blockchain gaming metaverse NFT bucket. And a mocha, which I mentioned before, they've already beaten our estimates for the year. So, you know, I, again, I, I think you what's interesting and Tom sort of alluded to this that there's a lot of new money coming, bigger money coming into the space. But the space is also growing in a way where it's not monolithic, just because Bitcoin is down from 50,000 to 20,000 doesn't mean necessarily that let's say a company that is, you know, building infrastructure in the space doesn't necessarily mean that, you know, revenues are going down across the portfolio. So I just think it's, you know, that's, that's a big change probably from three, four, five years ago. You know, I don't know what the other guys would say about that, but I'm not, I feel like it is growing in a way that it's not like one monolithic trade off of Bitcoin or Ethereum. Another interesting thing along those lines that I've seen myself, again, we've been focused on more enterprise scale applications for blockchain, you know, high speed, high throughput, low cost. And talking to enterprise customers over the past nine months, they're interested in crypto and feel like they could get legal buy off and things that wouldn't have even been conceivable, you know, a year ago. I mean, you hear, you hear people in companies saying, well, Tesla bought some Bitcoin, right, you know, and it opens the door. So again, even, even outside of the big, you know, asset holders like BlackRock and State Street or the big financial institutions, investment bankers, I think enterprises more broadly are going to, you know, get more involved with crypto. And I think it's going to become less wild west, have more practical applications that enterprises are used to. And that's going to be a lot more money coming into the space. 100%. Smeet, do you have anything you want to add? No, I think I definitely agree with what Tom said in terms of, I think for me, one of, you know, the most exciting enablers or triggers for this space is large corporate adoption. And as the technology gets better and as, you know, the corporate use cases could be enabled on the blockchain, I think that would be definitely a key boost to this ecosystem. This has been a great interview. I really appreciate it. I thought it was, I thought it was excellent. I'd like to thank everyone who joined us on the panel today. It's been extremely interesting hearing everyone's different takes. And from all of us at Coining Telegraph Research, thank you guys for being part of this. Thank you for watching, and we look forward to presenting you with another great panel very soon.