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  • Yeah.

  • Something you said that really caught my ear again, is that you said some of these companies are making real revenues and people don't realize how big they are.

  • Maybe you can speak on this kind of weird disconnect because we've got liquid tokens and you've got the token market caps, but then you've got the equity of the company, which is a whole different animal.

  • And most people in the invest in the crypto space probably don't even understand equity valuations and they think, well, maybe it's all the tokens, but obviously you come from the background of understanding that's typically how you would invest in a company is through equity.

  • Maybe speak a little bit more about how these are often times complete two completely different beasts.

  • What you see is the token and what's actually happening in the company and revenues.

  • Yeah, that's, that's actually a much more complicated question uh, to answer than you think because the, the, those two worlds are, um, influx meaning.

  • Yeah.

  • So I'll just first tell you in terms of companies making a lot of money, You know, crack in which we own last year, did $200 billion 1.7 billion.

  • So, um, when we bought the company at a $3 billion January, um, you know, we thought it might do a billion in revenue for the year.

  • Um, but you know what it entered this business that I just call staking as a service, Which in January did not even exist for cracking.

  • They're going to generate another $400 million dollars in revenue just from that business line that we had no idea would even exist.

  • And so the pace of growth in this space, um the pace at which new revenue lines, new sectors are being uh found.

  • Uh it's just, it's just increase, I don't, I guess not sectors being found, but you know, um the pace at which they're just new revenue lines, it's just increasing at something.

  • It's hard to, you know, hard to anticipate.

  • And so, um we also had a rush to get the positions on because, you know, I still think Bitcoin is going to be over 100,000 within the next six months.

  • I think ethereum could be certainly up near 10,000 and that has some impact on the business is not as much as you think, we can talk about that later.

  • But let me get back to your question about equity versus tokens.

  • I mean the idea, um but some of the company's focus on creating value for the equity holders, some of them focus on creating value for the token holders and some focus on both.

  • Now, the idea behind increasing network effects through the expansion of ownership in the token and also in the appreciation of price in the token is a different business model for the world.

  • And I think it's a it's a business model that focuses on Metcalfe's law and the increase in network effects.

  • And so what I usually for many people in the traditional world though saying, well what do you mean?

  • They're not maximizing shareholder value?

  • Well they kind of are but in a different way.

  • And so if you look, I always give the example of Twitter because Twitter is a company that people don't understand, um they don't really make much money.

  • It's a $50 billion 50 billion if they don't make much money?

  • And the answer is because twitter has focused on increasing network effects, increasing the number of users on their network.

  • If twitter wanted to charge everyone a dollar uh you know, a year or a dollar a month, they could, the network itself is extremely valuable.

  • And so many of these businesses, especially early stage businesses, um they focus on adoption of the token as a method for increasing in the future.

  • Um you know, their their revenue and you know, you have companies that completely have dissolved their equity like finance for instance, uh really doesn't have much equity to speak of that.

  • I'm that I'm aware of uh they have their BNB token and so they want users in the digital asset ecosystem.

  • Users of the token, people who use their product to accrue the value that historically would accrue to shareholders in the traditional world, then on the other hand, you have uh companies different companies um that really see the value of being able to tap the liquidity, that's in the traditional world that are issuing equity because there's huge demand for it and then deploying it in the digital asset ecosystem.

  • And so that's another method.

  • I mean coin base is the most obvious example.

  • They don't have a token, they only have equity and uh they obviously you know, have had tremendous success and they're using the liquidity that is afforded to them in the traditional world to build their business uh in the D.

  • A.

  • So there's a bit of back and forth and some of our companies hold quite a bit of tokens and Cryptocurrency on their balance sheets.

  • And so you have to figure out what that's worth, how to value that at the moment.

  • The world is pretty small of equity investors in the space.

  • And so traditionally were not really valuing that ownership very highly because some of those tokens, in theory can still go to zero.

  • And that's another thing.

  • We don't own any Cryptocurrency or tokens directly.

  • We have institutional investors in the fund who legally cannot own Cryptocurrency.

  • So we don't.

  • Um and I think that's been, as you said before about defining our focus and our purpose, I think that's been a big help for investors from the legacy traditional system to say, okay, I know what dan's doing, He's owning businesses, I can read the income statement, I see the balance sheet, I get what these guys do, they have 10 business lines, we like the leadership.

  • You know, fine, I can make that investment if I start to talk about, you know, the 17 different cryptocurrencies that I'm going to be trading or that are on the balance sheet or our token economics or Blockchain technology, you start to lose, especially the older crowd.

  • And so we try to abstract all of the complexity away.

  • Now, I'm not going to make 100 X return.

  • Uh you know, there are funds in the space that bought Salon a at a dollar and it's now 250 they that's you know, great, I'm happy for them, But we're not going to make those kinds of returns.

  • But I also think we don't have the volatility or the downside risk that those early stage investments and those investments in the tokens.

  • And last thing I'll say is just this year is a perfect example.

  • Bitcoin sold off 50% from the high ethereum almost 60%.

  • And our companies uh didn't budge, I mean, you know, the value didn't budge.

  • In fact, they probably still drifted up.

  • And in 2018 we looked at a basket of companies remember big time was down 80% ethereum down 95% and a basket of companies that we looked at broadly maintained their value.

  • So it's a different exposure.

  • Um it's a different risk reward.

  • I don't have problems sleeping at night.

  • I don't watch the ticks on cell wanna or, you know, polka dot or anything like that, and we're not trading it.

  • We want to hold these investments for 5678 years as long as possible.


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B1 equity token revenue increasing network traditional

Equity valuation in crypto? - Dan Tapiero

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    林宜悉 posted on 2021/12/06
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