Episode 018

SkyBridge Capital On Bitcoin & Coinbase

  • In Conversation With
  • Market Spotlight: Building Coinbase’s Institutional Bridge
  • Onchain Reaction

In Conversation With

Skybridge Capital is currently investing in gold amid an economy in which the Fed is printing money, which the firm expects will drive the price of the store-of-value asset higher. Anthony Scaramucci, founder and managing partner at SkyBridge, discussed how the firm views digital assets, saying:

“At the fund level, we have yet to buy digital assets. But what our firm has been doing since I returned to SkyBridge in 2018, we’ve done a deep dive into the digital asset space. I am a fan. I believe that digital assets have a future. Obviously the blockchain has a future. And digital assets, because of the way our generations work, the millennials are enraptured by digital assets…that bubble of demography is going to push digital assets up in my opinion into the stratosphere.”

Scaramucci also addressed the blend of fiat and digital currencies and the role of central bank digital currencies, saying:

“I think that the digital yuan is a transformative moment. The US is reluctant to do that…They want to be able to control the picture. They’ve been using the US dollar as a foil against our political adversaries, you know whether we’re sanctioning North Korea, we’re sanctioning places like Iran or freezing dollar assets around the world for our adversaries. You can’t do that in the digital marketplace as we both know. And so I think that’s where the general reluctancy is from the United States and I think that’s the reason why the US Treasury came so hard at Libra.”
Scaramucci said there’s a very large group of the population that is willing to define value in Ethereum and bitcoin in the same way they would a dollar. He said the question is how do you invest in it, adding:

“I have been slower moving on it because I’ve got my own complications in my own business. Will SkyBridge someday have a digital asset fund or be affiliated with a digital asset fund? I think that’s a distinct possibility. I’m waiting because I’m tied to a lot of these old firms. You know my marketing platform is tied to places like Merrill Lynch and Morgan Stanley and UBS. And so I don’t want them to think I’m losing the investment discipline that I have in my core business by reaching into that area yet. But as it starts to mainstream, we’ll definitely be more involved.”

Market Spotlight: Building Coinbase’s Institutional Bridge

Coinbase recently acquired Tagomi for its institutional trading business, where the exchange has been growing its business. Nisa spoke with Brian Foster and Ben Floyd, institutional coverage and head of OTC sales at Coinbase, respectively. Coinbase recently published an institutional review for H12020. Ben Floyd fielded a question about changes in sophistication in terms of trading, saying:

“We’re getting a whole new customer segment coming into now. And I think…it’s been a long time coming. They needed good custodians, they needed to get comfortable from a regulatory perspective. But now that they are into this space, they are demanding a lot of the same tools that they would get in traditional markets…And I think that the conversations that we’re having with these more sophisticated traditional asset managers, it might be a global macro hedge fund or a pension or endowment, is much more typical of the conversation that we would have had in traditional finance when dealing with these kinds of participants. So I think it’s been a huge step forward.”

Fidelity recently published an investor survey that showed an increase in direct crypto asset exposure in comparison with derivatives. Nisa asked how it compares with Coinbase clients, in response to which Ben Floyd said,

“With regards to volumes and derivatives growing, a lot of the traditional funds have access to CME futures by their FCM already. So the step for them to trade bitcoin is just another [tick up?]. So it’s very, very easy for them to do that. Trading spot is a very different conversation. And it’s one that requires their security team to get involved, their compliance, a whole range of different people. So we’re seeing fantastic growth in the spot side of the volumes.”

Nisa asked the type of involvement they’re seeing in institutional investor experimentation across areas like DeFi, staking and stablecoins, in response to which Brian Foster said:

“I would say that DeFi in particular, I think there’s a lot of buzz around this category right now. For the institutional players, I think they’re very far away from DeFi. So this is a super interesting phenomenon and we’re excited about it at Coinbase and supporting these protocols and everybody that we can. I think stablecoins are super interesting. We’ve seen very strong growth there. USDC is something that we’ve invested in a bit at Coinbase…What’s encouraging to me is that when given a choice, we basically see that crypto traders and investors will use stablecoins rather than exiting the crypto economy back into fiat.”

Onchain Reaction

Charlie Morris, chairman of ByteTree, joined Teana Baker-Taylor for this week’s onchain reaction. They discussed bitcoin and the correlations between interest rates and bond yields.

  • “Basically bitcoin spent a lot of time going up and some time going down and then some time consolidating. And the time it’s been going down has been the same time when global central balance sheets have also been contracting mainly 2014 and 2018. It’s as clear as mustard.”
  • Bitcoin has responded to falling real interest rates.
  • “You could argue that bitcoin is becoming a bit more gold-like. And I’ve been tracking this for several years now and I can tell you that it hasn’t been gold-like at all. But recently there’s some indication that it might be happening.”
  • Bitcoin benefits from rising inflation.
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