 What's really interesting about Bitcoin is it's a monetary battery. It's a way of taking trapped energy and converting it into value. Because in this new world, by the way, like, the geopolitical is no longer about physical or access to energy. It's about the access to compute and connectivity. There are these people out there who are yelling about Bitcoin as a systemic hedge. Well, guess what? Bitcoin is not a f***ing systemic hedge. If you hold your Bitcoin at a financial institution. My name is Giovanni. Today, we are going to talk with Meltem Demiros, venture capitalist and chief strategic officer at CoinShares. How are you, Meltem? Hi, Giovanni. I am well. How are you? I'm great. A couple of days ago, we saw prices on oil futures crashing in negative territory for the first time in history. What kind of impact does this event have on the narratives in the investment world and on Bitcoin in particular? Here's what's happened, basically. The last century of human history from a political and economic perspective has been defined by the hunt for natural resources and particularly oil, right? Oil has fueled the growth and development of the modern industrial post-World War II as world as we know it. And what I think has been so interesting to watch. And again, this is my take and I try to be non-judgmental. So if I sound judgmental, I don't mean to be. The access to oil that certain economies have had has resulted in a complete perversion of their markets, of their development. And we see some of the world's most brutal, most persistent dictatorships and tyrannical regimes have been supported by the cash flows that come from their oil. In the U.S., in particular, the advent of post-World War II U.S. policy was really shaped by the drive, the quest for access to oil to fuel American growth. And what I think has been really fascinating to see is sort of three major components. The first is, over the last 10 years, the U.S. has become mostly energy independent. And that has been in large part due to the shale revolution, which is what I worked on in the earliest part of my career, was onshore shale oil and gas production in the United States. So that's been interesting to watch, but that production has all been fueled by a lot of debt and a lot of these companies are now in junk bond territory. They're defaulting on their debt. And a lot of people don't appreciate that the energy industry today, the onshore U.S. energy industry refinery, is that whole energy value chain comprises 10% of our GDP. So it's a big hit to the U.S. economy and it'll be very interesting to see from a policy perspective what the government does to prop up and defend the U.S. energy industry and energy sector, because energy independence is a really important part of the political narrative. The second piece is from a geopolitical perspective, all of a sudden there are a number of states that will not exist anymore. Venezuela has just lost its only source of revenue, its oil, right? Iran, Iraq, two countries that have been in turmoil for a very long time, they've been living in a very precarious sort of piece, if you can call it that, that's now gone. And then the other country that I think people don't talk about enough is Nigeria, right? Nigeria is a country that has grown a lot over the last decade, but still is extremely dependent on oil revenues and that revenue is now gone. The only two countries that can really stand a chance in surviving this current climate in terms of their oil industries are Saudi Arabia and Russia, right? And so I think what you're seeing play out, what started with a price war between those two nations is now playing out in a full-scale global war. And again, the political positioning around this, the new narratives that get created as many OPEC member states sort of cease to function as we know them, I think that's what's going to be really interesting because the world as we know it, that post-World War II world, doesn't exist anymore. It's not going to exist anymore. So there's this huge amount of uncertainty, but also this really fascinating opportunity that's going to emerge. And then the last piece that I really think about is, you know, there have been several repricings of oil and energy in human history, but what I think is really interesting is we're not just seeing a repricing of oil, we're seeing a rethinking of the entire energy value chain. And I think one place where that ties into Bitcoin is the way that Bitcoin functions. When I think of Bitcoin, it's not just money, it's not just a payment network, it's not just a store of value. What's really interesting about Bitcoin is it's a monetary battery. It's a way of taking trapped energy and converting it into value. So you see this, for example, you know, people mining in places where there's access to hydropower, geothermal power, wind energy, or other trapped natural resources like some of the opportunities we're seeing in North Dakota where people are using stranded shale gas to fuel Bitcoin mining. So I think there is this really interesting narrative that's developing around the future of compute and connectivity, as I like to call it, and the Bitcoin network is really a primary example of how that might reshape the world. Because in this new world, by the way, the geopolitical is no longer about physical or access to energy, it's about the access to compute and connectivity. And I think this is where what China has been building is really fascinating because they're very much focused on winning the digital race and they're very much focused on powering the world's compute and connectivity and using that to reshape the political landscape. These dramatical changes that we have been seeing in the investment narratives, do you see them as something that is not temporary, is going to last like in the future for the future decades? Because some people say these changes will just be temporary right after this COVID-19 pandemic will be over, things will just get back to normal, economy is going to just get back to normal, you don't believe so. The idea that there is something called normal and that we will go back to it is preposterous. I think it's absolutely preposterous. The idea that there will be a V-shaped recovery, as people are calling it, is also preposterous because this is the first time in a very long time that every human being on the face of this planet has gone through collective shared experience together that has defied all of our expectations around what normal is. What we're living through is a world where everything that's happening has defied our expectations of what is possible and I don't think you can underestimate the psychological impact that has on people's mental models. And so I think this idea of normal doesn't exist anymore. So what's going to happen here in the United States? We're going to start giving people money. Like we're going to give people monthly checks from the US government. We will never be able to stop doing that. It will be politically impossible to stop doing that. So again, like here's one example of something that will never allow us to go back to normal. Normal doesn't exist anymore. So how is this change in people's mentality going to influence their attitude towards cryptocurrency and Bitcoin according to you? Yeah, I think number one is one of the biggest sort of arguments we've heard from investors, allocators, people who really think about investing in terms of portfolio construction is number one, their concept of risk has changed entirely. If we look at the investment universe, the idea of risk-free return doesn't exist anymore. Bonds fixed income with interest rates at zero, there are really no really low risk, stable fixed income generating assets anymore. So in this world, I think people are moving further out on the risk curve. And that's one component. So when risk gets repriced, when risk fundamentally changes, I think people start to rethink portfolio construction. And the first place we're seeing this argument around portfolio allocation, like what does high risk even mean? A lot of asset classes that we thought were low risk, i.e. ETFs, are actually really high risk, right? Corporate bonds, which we thought were low risk, are actually really high risk because for the last decade, since the great financial recession, people have been levering up and financing working capital with borrowing, right? It's like a complete perversion of how corporate financing is supposed to work. So I think again, this concept of risk is fundamentally changed. Risk weights and portfolios have changed and the yield you can earn for different types of risk has changed. So people are going to have to adjust their portfolio allocation models and that's not going to happen this week or next or the week after. Like no one's convening their investment committee to have a risk review conversation right in this moment and to reallocate everything. But it will play out over the next year or two or three as we start to realize what the new normal looks like and what the price of risk actually is. That's one. The second one that I want to touch on quickly is volatility. So the other thing we always hear about Bitcoin is Bitcoins of volatile assets far too volatile, can be stable store value, blah, blah, blah. I think the Bitcoin store value narrative still has a long way to go but I think what we're seeing right now is volatility is off the charts everywhere. And actually Bitcoin does not look so volatile in this environment. It stayed fairly range bound over the last sort of few months and that's been a consistent trend over the last few years, right? Bitcoin's volatility has sort of been lower and lower and part of that is due to the maturing of the market around Bitcoin. It used to be just like in the oil industry, right? You started with physical trading where people just traded the actual physical crude and then you started to create derivatives. So you started to create a paper trading environment where people could hedge, manage risk, et cetera, but then also speculate. And then now what you see is the majority of volume of trading is actually not the underlying physical, it's the derivative, right? And the same thing in Bitcoin now, you have options, you have futures, you have a lot more sophisticated strategies that people can apply to not only manage risk but also to start to deploy more sophisticated trading strategies. So I think that volatility story starting to evolve and Bitcoin's volatility no longer being viewed as abnormal is something that's really going to impact the mindset of investors. We had Anthony Pompriano not long ago on our channel and he was kind of projecting similar scenarios. He said that eventually the US dollar will fail. You know, the US dollar will fail, right? And whether we like that or not, that's just how history has played out. Maybe you don't have such a maximalist position on Bitcoin and the dollar as Anthony has, or maybe you do. So the US dollar is an interesting one. Look, for all intents and purposes, the US dollar is the global currency. It's what everyone wants to hold. It's what everyone prices their debt in. It's what everyone prices their supply chain in, right? The dollar is what fuels the global economy. And actually, if you look at what's been happening to the dollar, a lot of people didn't notice this, but last year, Rosneft, which is Russia's largest oil and gas production company, actually made an interesting change where all of their contracts, which used to be priced in dollars, are now priced in euros or rubles. Interesting. And if you look at what China's been doing with their Belt and Road Initiative, right? Financing infrastructure in many developing countries through lending and through actual foreign direct investment. I think one of the interesting things that's been talked about for a long time, but is now really starting to become clearer, is China using digital renminbi as a way, right? A renminbi priced debt as a way to sort of drive adoption of renminbi as a more widely utilized global currency. But at the end of the day, again, things take time to change, narratives take time to shift. I actually think the dollar is in a stronger position than ever before, because while the dollar may, oh yes, we know all of these facts about money printer go brew and endless sort of money printing and how that debases the monetary supply. But at the end of the day, the US dollar is still better than everything else out there. And I think what people don't recognize when they make these statements in investing, everything is relative, right? Everything is relative. And if I look at the universe of options available to me, if I have a million dollars that I need to have available to me and I need to hold it in a currency, what currency am I most likely to choose? Today, it's going to be the dollar. It will 100% be the dollar. Maybe the Swiss franc, maybe the euro. You're not holding it in pesos. You're not holding it in renminbi. You're not holding it in rubles. You're not holding it in Naira. I think when people talk about money, people don't recognize you're constantly making choices based on the options that are available to you. So to me, when we talk about the death of the dollar, right, what you have to look at is in the universe right now of available options, the dollar is your best option. And so until that starts to change, I don't see the dollar losing supremacy. Now that could very well happen, right? But it really depends on how our narrative shift again and what happens to people's mental models as the world we live in starts to change. You identified the life cycle of crypto as alternating periods of hype with inflated prices and more sober periods when prices realign with the real values of these technologies. Where are we right now? We've been in a protracted period of realignment, I would say, or revaluing. And I think the jury is still out on how long that will take. I know there's a lot of enthusiasm around the halving, but I actually don't think the halving is a short to medium term price catalyst for Bitcoin. Because again, everything is relative and the majority of inflows that we see into Bitcoin is not people buying Bitcoin directly, they're buying derivatives. And more importantly, if we look at the future curve, the price people are willing to pay for futures contracts or Bitcoin in the future is actually lower than the spot price of Bitcoin today, which is an indication of people's sentiment. Now again, that's not a perfect measure, but if I look at just generally the sentiment around Bitcoin, a lot of the enthusiasm is still retail investors, it's still sort of native to this industry. So I think it's going to take some time for the Bitcoin narrative to play out. The other piece that we can't underestimate is I think if we look at the regulatory landscape, there are a lot of sweeping changes that are being enacted. Governments are using this opportunity to sort of crack down in different ways. If we look at the numerous bills that are on the floor in the US, there are threats to encryption, encrypted messaging, practicing communication, but also there are threats to Bitcoin. There's a bill on the floor right now that would mandate that every Bitcoin transaction that touches a US company or a US client would need to be tracked and monitored, which would mean Bitcoin is no longer fungible because we can track where the Bitcoin came from and we can do a lot of forensic monitoring. So to me, there are still a lot of existential threats to Bitcoin right now that need to be overcome by building better tools, better technologies, and people are building them, we're investing in them. I'm very excited about these developments. But again, you have to view Bitcoin through the macro lens. And I think right now the narrative around Bitcoin is starting to form, but it's not mature yet and there are a lot of threats that just haven't played out yet. Actually, your thought reminded me of an interview we filmed recently with Daniel Jeffries, who is like a futurist, and he actually expressed the same concern that in a situation of emergency, the state can become Bitcoin's worth enemy imposing this kind of very draconian laws which will eventually kind of crack down on Bitcoin. If they begin to put in capital controls, for instance, and people try to use cryptocurrencies to evade those capital controls, governments will swiftly move to destroy all centralized exchanges and local Bitcoin operations. So it's interesting hearing the same opinion from you. This is what's been playing out since day one of Bitcoin, right? And it's not just unique to Bitcoin. I think one thing that people don't appreciate is as exciting as Bitcoin is in so many regards, at the end of the day, one of the biggest challenges we have is just human behavior and human expectations. If we look at what we've seen in regards to privacy, right? People don't give a shit about their privacy. Like people are downloading TikTok on their phones. People are uploading content and tagging it with their IP address and all sorts of data about themselves. Like people have zero concept of privacy and take no steps to protect themselves online because it's hard, it's not easy, it's not innate. Same thing with Bitcoin, right? There's a lot of conversation in Bitcoin circles about privacy and security. Most people hold their Bitcoin on an exchange. There are these people out there who are yelling about Bitcoin as a systemic hedge. Well, guess what? Bitcoin is not a fucking systemic hedge if you hold your Bitcoin at a financial institution. Financial institutions are regulated by the federal government and when the federal government doesn't like what's happening, they can seize or freeze those assets. And so what I think is really interesting to see is there are a lot of people who are like, it's trying to sell this narrative around Bitcoin as a systemic hedge when in fact they're taking their Bitcoin and they're shoving it right back into the financial system which effectively negates that sort of argument. I'm not saying that all Bitcoin should be self-custodied or that that's appropriate for everyone, but I think there are these really interesting cognitive dissonance moments in Bitcoin where what we're saying and what we're actually doing don't add up, right? And this is the problem is there's this reality distortion where people are not being very realistic about the path that things will go down. And what I worry about is what are the implications of that longer term? Yeah, I just think that's very interesting. Bitcoin's not going to be a systemic hedge if you give your Bitcoin to BlockFi, right? And again, I think BlockFi is a great service but there are a lot of people who are like, I want to earn interest on my Bitcoin and I'm like, great, well, BlockFi is a bank. So you're effectively doing the exact thing that you didn't want to do in the front. Like we're recreating the exact same system we already have, but we're just using Bitcoin instead of another asset. And that to me is a bit illogical. On the other hand, technologies like DeFi, like MakerDAO also prove themselves not to be ready in a way because we saw on March 12th what happened with MakerDAO, so much money went lost and people don't trust these platforms still like the majority of the people probably don't trust this decentralized platform because they still feel more comfortable with a centralized custodial. Yeah, but I think what this highlights, right? And it's the same thing with lightning, right? Like we talked about, I'm really excited about lightning. I use lightning once a week when I buy stuff on Fold that I'm an investor in that company and I think what they're doing is great. But like lightning is an experimental technology. There's a reason that there's a limit to how much money you can spend on time because it's experimental. And I think one of the things that people don't realize all of this technology is still really experimental. I think it's really important. So I think with DeFi what I'm excited about is we're playing out certain narratives and DeFi is the tool that's helping us sort of explore these narratives. Just like Bitcoin five years ago was a tool that helped us explore new narratives but Bitcoin five years ago is not the same as Bitcoin today. There have been a lot of changes to the protocol. There have been a lot of changes to the applications that people are interacting with to access Bitcoin. And it takes time for things that are experimental and sort of help us understand the shape of this new reality to come to free oition and to be implemented in a way that's scalable, usable, secure, etc. So I think what I just find interesting, people in the crypto community will just throw money at things as we saw with ICOs and then when they blow up in their face they get upset and I'm like, well, what did you expect? And it's not a criticism. I think what people are doing on the experimentation side is amazing but I do think some of the investors who are throwing money at these things, particularly retail investors and people who've just been around crypto, they're not necessarily being very pragmatic when they're throwing money at these things. So it's sort of a two-sided thing. You know, for every market you have to have a buyer and you have to have a seller and the great thing about this is permissionless financial innovation. So if people want to build something and the people who are buying or putting their money in it aren't going to do their due diligence and they don't care about the security of their assets. I don't know what to say about that because that's the whole point of permissionless innovation. We're not going to tell people what they can and can't do but at the same time, if you lose your money because you made some poor decisions you need to take responsibility for that. So it's interesting. Again, it's one of these great narrative violations, one of these great contradictions of cryptocurrencies. It's like we want it to be permissionless and we want to have this medium for financial innovation, these new cryptographic financial primitives. But at the same time when things go wrong people don't want to be responsible and they want the government to build them out or they want to sue someone. Like those two things are contradictory to one another and you can't have it both ways. Of course. So you have been branding yourself for a while as a shitcoin minimalist. Can you explain what that means? Yeah, I absolutely can. So look, a lot of different protocols out there, a lot of different coins out there, a lot of different stuff out there. I think one of the interesting things that I've been watching when I started out is just Bitcoin, just Bitcoin. And then Ethereum came along and then Ethereum grew and grew and there was a lot of excitement around Ethereum and things built on top of Ethereum as ERC-20 tokens or other representations. Then there was this whole wave of new protocols and ICOs and then it was SAFTS and now it's utility tokens and all these other sort of iterations of this. At the end of the day, I still think Bitcoin is the heavy hitter. Bitcoin is where the liquidity is. Bitcoin is close to 70% of the market cap of the overall crypto market. And Bitcoin to me is still what makes the most sense because you can't replicate Bitcoin. And what I think is so interesting is everybody, anyone can make something and call it a cryptocurrency. Facebook's a great example, right? They came out with Libra. They're like, we're creating a cryptocurrency. It's just like Bitcoin, except it's the fucking opposite of Bitcoin. So when I say I'm a shitcoin minimalist, I think just ideologically speaking, what I'm trying to articulate in a humorous way because I like to have fun and maybe be funny. I also make fun of myself. So it cuts both ways. But I think really what I'm referring to there is there is only one Bitcoin. You can't recreate it. You can't replicate it. There is no better Bitcoin. There is just Bitcoin. And then there are other things, but don't call them Bitcoin. And what I take issue with is it's very sad actually. I have people who are new to Bitcoin who come to me and they're like, oh, I bought Ethereum. That's just like Bitcoin, right? And I'm like, no, it's not that it's bad. It's just that it's not Bitcoin. Being a shitcoin minimalist, then it's pretty much the same as saying being a Bitcoin maximalist or is there a difference? No, it's not. I'm not saying that all of these other protocols shouldn't exist, right? Like of course they should exist. That's the whole point here. Like I am not the judge. I'm not the jury. Again, if someone wants to create something and sell it and someone else wants to buy it, great. I don't... That has nothing to do with me, right? It's not my role to judge that. A lot of those things are not for me. Some of those things maybe are for me. I don't know, but they're not Bitcoin. And so to me, there's what's happening in Bitcoin and then there's everything else. And everything else is far less interesting to me than what's happening in Bitcoin. But I'm not saying that Bitcoin is the only thing. What I'm saying is everything that's happening over here is just not Bitcoin. But if I'm not mistaken, you also disclose your investments into several other cryptocurrencies which are visible on your website. These are... Can it be also considered as shitcoin? Sure, yeah. And I'm very open about that. I think I'm one of the only people in this industry who actually discloses my own interests. And look, I think everyone who's involved in Bitcoin, almost everyone who's involved in Bitcoin has dabbled with shitcoins at some point. It's interesting. It's fun. Some of the projects I think are interesting. I'm investing in them as someone who is investing as speculator but also someone who's curious about what's going to happen with these projects. Tezos is a great example, right? But I would never go out and say, Tezos is just like Bitcoin. You should buy... I'm not telling people to go and buy these things because they're going to make money. I'm not telling people that Tezos is like Bitcoin. Tezos is its own thing and it's going to develop and mature and grow and maybe it'll succeed and maybe it'll fail. I don't even know what those things mean because there are many different ways you can succeed and fail all at the same time as we saw with ICOs, right? You could have ICOs that had great returns but were terrible and achieved nothing from a technology perspective or a practical implementation perspective. So again, what I'm just saying is those things are not Bitcoin. I'm not going to spend a lot of brain power and energy on those things. They're interesting and they're fun but the majority of my time and energy goes into Bitcoin because I think that's what's most interesting to me. In an interview with Glamour, you said that the cryptocurrency world has become dominated and driven by greed. In another interview with Coindesk, you said that what keeps you in the industry is the passion, the intellectual horsepower, the curiosity, the ability to connect so many different ideas. But how can these two souls coexist in one industry? Well, humans are full of contradictions first of all. Look, I think what's been interesting is there are people that I call Bitcoin tourists and then there are sort of Bitcoin lifers. And in each success, when we talked about narratives earlier, the narrative around Bitcoin and cryptocurrencies has evolved a lot since I first got involved. And it's funny because I talked to some of the people who I met in 2012, 2013, 2014, and one of the things we talk about, like, does this industry still feel like the industry we started in? What keeps us here? Why are we still doing this? Has it changed for the better? Has it changed for the worse? When we started in 2013, 2014, we had no money. Nobody thought we were cool. We were all poor. Like, I had no money. I was in debt. It was not cute. Companies had no money. They were on the brink of death. They had been pouring their energy into Bitcoin and then the gox crash happened and it was just a very difficult time. And then 2017 happened and everyone went crazy and all of these new people poured in. And some of them evolved and adapted some of the ethos of the original Bitcoin crowd but a new ethos developed and all of these new sub-communities formed. And that keeps happening. And then all the corporates came in and they wanted to enterprise blockchain. And then all of the traders and Wall Street people came in and they wanted to do regulated Bitcoin exchanges and then all the custodial people. Like, every iteration, there are these new people who bring their own lens, their own viewpoint and kind of evolve the culture. And yeah, a lot of it now is about speculation. It's about speculative trading. It's about making money, trading cryptocurrencies. And that's fine. You know, we live in a... We supposedly live in a capitalist society. I really think it's a socialist society but that's another topic. Like, we live in a country in America where people have the right to engage in free enterprise and make money. So, like, great. If you want to be greedy and make lots of money, great. Like, have fun doing that. But I do think for a lot of people, like, they are here because they are very, very, very passionate and very excited. And they spend a lot of their time and energy doing things that don't necessarily make them money. But that fuel their passion for why they're here. Like, look at me, for example. I'm sitting here talking about all sorts of stuff that is not me trying to sell my business. I'm talking about the things that I'm passionate and excited about because in addition to working in this industry, I'm genuinely passionate and excited about creating a narrative and creating, like, a future reality where some of the things that I care about become true. So I do think the two can coexist at the same time. It's just when one takes over, you get what happened in 2017. Which will happen again. It will happen again in the next Bitcoin boom. It won't be ICOs, but it'll be another idea that people use. You are saying that this speculatory side of this technology is like a necessary evil for the whole space to move forward on these cycles. But it's also human, right? Like, we're humans. That's what we do. That's how we behave. I don't know. Like, look at people buying. Look at Robinhood, right? If you look at, like, these investment communities, people are just on the internet. They're like, buy this option. Short SPY. Buy puts on this. And people just do it. Not because they know what they're doing, but because they think they can make money. Like, that's, we gamble. People buy lottery tickets. People go to casinos. Like, why do they do these things? They don't make sense. But it's part of human nature. I don't know. I can't explain it. That was Meltem Demirers, venture capitalist and chip strategy officer at CoinShares. Thank you for being with us. Thanks so much for having me. And hopefully we will see each other in person somewhere in the world when things go back to not normal.