Kevin O’Leary reveals his crypto investment strategy | Interview

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investment shark kevin o'leary aka mr wonderful used to be among the loudest critics of cryptocurrency such a scam like that's just totally bs i'm not going to take real money and put it into this thing it's never going to happen since then o'leary's views have changed dramatically and now he's managing a highly diversified crypto portfolio i'm a huge advocate for bitcoin i treat it as an asset no different than a aaa office tower in boston in individual tokens and coins and chains i've got 33 different positions what is mr wonderful's current investment thesis on crypto and what are the hottest projects he is betting on find out in another exclusive coin telegraph interview so for a long time you were a vocal skeptic of crypto but then you changed your mind about it and now you're an advocate so what was the turning point that made you change your mind about cryptocurrency the regulator what i started to see i i have many many investments in financial services industries many of them are regulated already because they're issuing indexes and securities and whatever else i cannot afford to be non-compliant that's that's not possible for me everything i do has to be compliant by the regulator otherwise it causes chaos in my business business says i have multiple investments and so there was a period where the regulator was extremely um proactive uh and and you know not constructive on on cryptocurrencies and it was a very difficult time with the sec and the other regulators in the u.s so during that period yes i was a skeptic because i didn't anticipate anything that would change my mind if the regulator didn't and then all of a sudden things started to change i invest globally so i'm very aware what's going on in switzerland france germany australia new zealand canada the nordic countries the regulators there started to open up and i have investments in those countries and in canada for example so where the regulator allowed for etfs that held the underlying being bitcoin and ethereum so when i started to see that happening uh on a g on a global basis i started to allocate towards crypto and have not stopped since then so when facts change i change also i'm not i'm not so rigorous uh that i don't have flexibility and that's exactly what happened and so now i'm extremely active i have a staking desk i work you know very closely with companies like ftx and circle i'm a investor in ftx i'm a paid spokesperson for them i'm very active on the platforms so and and i thought this year here we are towards the end of 2021 i anticipated at the beginning of the year as a three percent waiting in the operating company in cryptocurrencies as a basket today i'm over 10 and a combination of increasing my position in staking and also the capital appreciation of these assets over the last year so um to say that i'm involved in crypto today is an understatement it's it's a very large portion of what we do okay cool and if you had to point at a specific moment that made you change your mind so you talked about the regulators and the change of attitude that regulators um had but did that happen gradually or there was a particular moment in time where you thought okay this is the time i can get in the moment was when the canadian regulator approved the first bitcoin etf everybody knows that canadian regulators are conservative and they don't make moves without talking to their global counterparts for them to do this meant that they'd already had some kind of dialogue with other regulators in other jurisdictions and decided those were the rules for the canadian etf that was the moment okay cool so what is your current investment thesis on crypto if you had to broadly describe what is your investment is on the crypto industry right now i look at crypto not as coins or tokens i look at it all as software it's productivity software the the the projects that are going to last and and be here you know a decade away from now are ones that actually solve problems so let's let's give an example i'm an investor in polygon why because i had a chance i'm you know i'm very fortunate guy i i'm able to call up the leaders of these projects and these teams and they returned my call and i asked to meet them anywhere in the world in this case we met in dubai with the polygon team i'm an investor in in software engineers i always have been i've been in the software industry for 20 years they're very very strong and their mandate what they decided to do is to try and reduce the cost by sitting on top of ethereum and aggregating transactions so the gas fees are a fraction of they would be if you're doing one at a time i thought that was a brilliant strategy and i made an investment in polygon the same with solana the same with with ethereum the same with you know hbar all of these are software if you're investing in for example in google or in microsoft what are you investing in you're investing in software why wouldn't you invest in crypto it's software too and the regulator is is in my view going to eventually support these initiatives because of the tremendous economic enhancement and productivity they provide for the underlying economy so talking about specifically your portfolio in crypto uh can you give us a bit of an overview if you can give us some details about your portfolio construction in individual tokens and coins and chains i've got 33 different positions wide range of diversity you know i look at this the same way i look at managing an equity portfolio never more than five percent in any one name never more than 20 in any one sector so in that theory that mandate means that i can go up to 20 percent in crypto right now i'm just over 10 about 10.7 but i've also made equity bets for example i have a an investment in wunderfi a canadian company that is democratizing defy so they're providing they're launching their product in january they've been working on it for over two years one of the biggest challenges for the individual like my daughter or my son who want to do staking and remain compliant with tax authorities depending on what jurisdiction they're in is it's very complicated to actually do it if you have fourteen thousand dollars in your bank account and you decide that you'd like to stake some of it uh wonderful is working very hard to make that very easy to do and and that that's one of my investments because i think cryptocurrencies are not just for the crypto elite there's a huge demand within the population to solve for the fact that interest rates are so low so just on staking alone that's a huge opportunity i'm a big believer that nfts which are basically digital wallets of information are going to be very big in the physical asset world one specifically that i'm part of the advanced thinking on if you want to call it that i'm funding a white paper on it right now is for the watch industry the watch industry as you may know is one of the fastest growing asset classes in the world right now multi-billion dollar secondary market in trading fine time pieces and we don't have any nfts for authentication and insurance purposes we want that and and so do the so does the watch industry so the idea would be if you take a high resolution scan of the dial you can identify that watch in perpetuity and you could avoid fraudulent trading of a piece that was made to knock it off and that's a great interest to all the great watchmakers just my collection alone i want to do that on so the whole point is there's so much activity on nfts and yes i'm an investor there yeah that's fascinating because you mentioned so many different projects so many different coins but you your attention seem not to be too much focus on bitcoin at the moment so i'm curious to know what is your view on bitcoin has your uh has your view on bitcoin changed since you became a crypto advocate uh and how yes i have a position in bitcoin it is not my largest it is close it's up in the top quartile though um ethereum is larger than bitcoin right now for me um here here's i'm a huge advocate for bitcoin i treat it as an asset no different than a triple a office tower in boston it's a it's an asset i don't consider it a currency now everybody has their own opinion my opinion is it's an asset so i hold it i'm not i don't trade it i do stake it but the point is i'm not selling my bitcoin the challenge i have with bitcoin and the whole industry has this challenge is we've got to deal with these esg issues there's a lot of criticism around bitcoin because the amount of energy it takes to get a coin awarded and in that area i'm working very hard there's lots of initiatives to create bitcoin and i'm not saying we're bifurcating the bitcoin market that onecoin's different than the other but if i'm at a sovereign institution and i work with lots of sovereign institutions because i'm in the indexing business they would like to fund bitcoin mining where they keep their own awarded coins knowing with 100 certainty that they they mine them in an ethical and efficient sustainable manner and that is where a lot of the new capital is going and whether that be wind or solar or nuclear or whatever those all of those projects are happening globally and they're being funded by sovereign wealth because sovereign wealth has esg and sustainability committees on top of their asset decision making so the next generation of coins awarded are probably going to be held in perpetuity on balance sheets of companies that are funded to make them sustainable and you know that's one way to solve that problem but you say that every investor could invest up to 20 into a specific uh sector so uh i would say i would ask you what should happen in the regulatory atmosphere in the u.s to convince you to bring your allocation up to that 20 into the crypto industry what i really want to have happen is i want the regulators to bring policy forward on stable coins that's what i want i want because stable coins are very important to me as a hedge against inflation and specifically the one i've chosen to work with is usdc because i think it's the most advanced in terms of in dialogue with the regulator not here but in geographies all around the world it's a form of payment it's also a form of of hedging against inflation because if i can at least marry my staking program with inflation currently at six percent at least i'm holding value but i can't really do that until the regulator rules because even within my own operating company with my own compliance department they're considering stable coins as an equity no different than a stock so i really can't get past five percent it's not like i can hold a huge 30 cash position i mean you know when we sold off our commercial real estate we had a huge cash position we couldn't it was about 30 percent of the operating company so you know we've been working hard to redeploy that capital but i i really want the regulator to rule on stable coins now you know that there's been some controversy with certain stable coins with the regulator i don't touch any of that stuff anything that's involved in in a in a fight with the regulator i have i want nothing to do with i am not a crypto cowboy i work in a compliant environment i don't want to get on you know some kind of a mission saying we have to sue the regulator that's insanity that's crazy and and that's really bad idea and so uh i think all of us in this industry should understand that we work with the regulator to to generate the most advanced policy we can get and that it the reason we do that it's in our self-interest of sustainability and also it gives us way more in terms of what institutions can allocate into these asset classes so we should definitely be thinking about that that's interesting because you choose stablecoins as one of the main tools to get value out of your out of your assets while cash if you hold cash you end up losing value but a lot of people would say why don't you use bitcoin then why you choose stable coins instead of bitcoin well the challenge i have and many institutions have with bitcoin is volatility so when you are managing or your fiduciary for for capital volatility is not your friend because you're marked to marking value of a portfolio every 24 hour cycle so if you have been given a mandate by an institution uh and you most of these mandates are based on diversity and stability your number one mandate is preservation so if you're managing for a pension plan or university or state fund or whatever it is that volatility really hurts you when when you're being graded in terms of your mandate and so i don't think you're going to see um there's nothing wrong with putting bitcoin in in a five percent waiting up to a five percent waiting and treating it like an equity um or an alternative that and i see tremendous interest in doing that from a one to five percent generally on average a three percent weighting with where you find bitcoin but you're not going to get there uh to a 20 30 percent in bitcoin in an institutional or sovereign mandate you're just not uh stable coins have that potential if they were regulated you seem to be pretty confident that the regulators will eventually enable crypto to thrive on the other hand uh there i had a conversation with with mark yusuko a few a few months ago who was expressing his very common narrative in the crypto space which goes like um there are the incumbents of traditional finance like banks uh and the final financial intermediate intermediate intermediaries that are going to lobby the regulators or still use their influence in order to slow down this this crypto revolution that we are uh looking forward to happen so don't you see the role of the incumbents as a major issue for for crypto to develop further and to get the regulators on on their side i don't i don't agree with that positioning i don't think that's going to happen either the only entity that can control the pace of regulation is the regulator themselves and it doesn't matter what the incumbents say or do they will they will go with the flow of productivity and innovation banks you know are winning and losing all the time in terms of who makes more money who has a higher return on assets i can tell you what motivates a traditional money center bank is return on assets they they spend their whole day trying to figure out how do we optimize for return on assets and if they're not looking at cryptocurrencies they'll be left behind that's what's going to happen because when the regulator finally rules just if it was just on stablecoin alone they would have to open a stablecoin desk of course they would now are they going to start from scratch are they going to be working on it quietly in the background my guess is they're working on it quietly in the background they would be foolish not to be i wanted to ask you another question regarding the situation with inflation so as you said inflation u.s is hovering around the six percent points and the fed now intends to win down the stimulus measures uh in order to contain this uh trend so how are these macro economic dynamics going to impact the crypto industry the crypto prices in the months to come according to you you're being taxed at effectively six percent if you hold cash maybe you don't want to call it a tax but when inflation's six percent your buying power 12 months from now is six percent less and that's a lot and so we now have added pressures and i'm no different than anybody else trying to figure out where do i deploy this where can i get stability in the in this cache where can i find a way to hedge and it brings me all the way back into stablecoin so i'm a huge advocate for solving this problem with stablecoin it doesn't mean i don't want to invest in the other blockchains or the other coins or tokens or other ideas i do but i can't i can't do 30 percent positions in mandates of of any of them that's too volatile so these issues are not going away the dialogue is not going to change you're going to see a lot of discussion about this in the first and second quarter of next year and you're right on the money to be covering this there's no question this is going to be very important and and i think we're going to start to see some moves with the regulator very shortly not just in the u.s so we talked about canada we talked about germany talked about switzerland the same those regulators are all talking to each other they're all talking to each other if we could just agree on one stable coin between those jurisdictions that would be huge productivity enhancement and i anticipate that will happen awesome okay um kevin that was a great conversation thanks a lot for jumping on our show you got it

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