The Last Trade E070: Bitcoin is the Real Hurdle Rate with Richard Byworth

Jackson Mikalic (00:01.605) Everyone welcome back to the last trade this week we have Richard Byworth and I'm joined by my co-host Michael Tanguma and we have Brian Cabellus this week standing in for Jesse so Richard how are you doing great to see you. Richard Byworth (00:15.152) Yeah, very good. Thanks, Jackson. Great to be here with you guys. Jackson Mikalic (00:19.057) Appreciate it. So Richard, really excited for this one. I know Seas Capital, you guys are doing a lot in the alternative space, primarily focused on alternative investments. And I know you would categorize yourself as a Bitcoiner. So really excited to hear more about your traditional finance background and then talk a lot more about your journey into Bitcoin, how you think about it as an allocator, among many other things, getting a pulse on Switzerland and the European market. So maybe the best place to start, Richard, would just be to get a better sense of your background in traditional finance. I know you've worked in many different capacities for maybe two decades or so, plus or minus. So we'd love to just hear more about your path and ultimately what led you here today. Richard Byworth (01:04.915) Sure. Well, look, thanks and always good to connect with fellow Bitcoiners. so, looking forward to this chat. So look, to give you a quick understanding of where I came from, I was an investment banker for pretty much the first 18 years of my career. I worked in London as a trader. I was trading convertible bonds, predominantly for Japanese underlyings. So you think about MicroStrategy and what they've been using for their capital structuring. They're generally using convertible bonds. That's the most efficient product. That's what I was trading from 2000 basically through to 2005-06. I moved to Tokyo at the beginning of 2005. So I was working for Nomura, the Japanese investment bank. Moved to Tokyo at beginning of 2005. did five years there. The tail end of that was obviously Lehman. I don't know if you're aware, but Lehman Brothers got bought by two banks, essentially. So Barclays bought the US operations and Nomura bought the European and Asian operations. So we ended up merging the most cowboy bank on Wall Street with the most aggressive bank in Japan. And you can imagine the cultural shocks were fairly violent. So it was fun. And I definitely think I could probably write a book about that whole experience. then, you know, interest rates went to zero. I think everyone in banking started to realize that we were going to have a major problem with inflation at some point. And so I bought gold. in 2012 after dismissing Bitcoin from the junior kid on my desk who was talking about it in 2009 in Tokyo. So I was like, can you just stop talking about scams on the internet and sell derivatives to your clients, please? And so, yeah, we, I started buying gold in 2012 just as a hedge, just as a way to just protect against what was. Brian Cubellis (03:10.689) You Richard Byworth (03:26.353) for me at that point, an inevitability of the failure of fiat currencies. And then in 2017, I was getting to the point where I wanted to leave banking for good. I was completely done with it mentally. And I was reading this book called Sapiens by Yuval Harari. And I agreed with a lot of what he was talking about with the future and models for society and humanity, et cetera. But he kept bringing up this Bitcoin thing, which I remembered as a scam from my kid on the desk in 2009. I was like, why is he talking about this? Like, so I figured I probably better find out what it was and started reading about it middle of sort of 2017, which you'll remember was was a fairly frothy period. So I was like, OK, I just got to buy some of this thing. So I turned to my grad on the desk at the time and just being completely tech non savvy. And I was like, Herman, can you just She'd just buy everyone on the desk a Bitcoin. It was trading at thousand dollars at the time. And I then went away for summer and I took a bit of a sabbatical. I came back and Bitcoin had tripled. I was like, Herman, did you buy everyone that Bitcoin? And he's like, I thought you were joking. I was like, this. I was like, okay, fine. I need to do this myself. I need to work it out. So at that point I started working it out. Brian Cubellis (04:42.635) Ha! Richard Byworth (04:51.443) made the usual error that a lot of people made. was like, well, this Litecoin thing is really cheap. I could buy like 20 of these. So I bought some Litecoin. It went up 5X in the period of five weeks. And I was like, okay, what the hell is going on here? So then I started investing in the space. I invested in a mining company, which coincided with me leaving the bank. I was going to join a private equity company. And the mining company founder that I'd invested in said, hey, If you've left the bank, would you come and help me build this business? I was like, how am going to build a mining business? I'm a finance guy. He's like, no, no, He's like, people are running around. I was in Hong Kong at the time. People are running around Hong Kong with suitcases full of cash. They've got no idea what regulation means in this space. If we build a regulated player, you know, we could be very differentiated and track what will eventually be institutional flow. was like, okay, that's a good story. So we started building this firm, was called Diginex. The firm expanded very rapidly and we ended up listing the company on Nasdaq through a SPAC in 2020. At which point, flows were getting difficult and we were competing with FTX and Binance who could onboard people in three minutes. We'd take three weeks to onboard people, so it was a very painful experience. So we were struggling a bit and so we were looking for an acquirer and then my chairman found Binance as the acquirer and I was like, I'm not getting in bed with those guys. So I stepped down and I was sitting on the beach in 2022 when Mark Sees, the son of the family, Sees Capital, obviously the namesake, called me and said, would you come and run my hedge fund business? And I was like, well, yeah, but... I'd want to keep my hand in with crypto. think there's some very interesting alpha in hedge funds using crypto as the arbitrage mechanism. And yeah, that then progressed to where we are today. We're obviously very involved in the Bitcoin space here in Switzerland. I got involved with Relay. I don't know if you know those guys, the dollar cost averaging platform here in Switzerland, which Brian Cubellis (07:13.568) Mm-hmm. Richard Byworth (07:18.269) Probably the biggest in Europe and in fact maybe given the swan situation is probably the biggest in the world now. But yeah, fantastic guys. So I sit on the board of that company, very close to them. And so yeah, that's my sort of Bitcoin focus. Michael (07:35.882) That's an incredible story. You went from one set of cowboys to another set of cowboys in the Wild West. To be in from 18 to 23, you've definitely seen some crazy stuff. Jackson Mikalic (07:36.146) That's an awesome story. Yeah. Jackson Mikalic (07:43.518) Ha Richard Byworth (07:45.13) Exactly, yeah. Brian Cubellis (07:48.79) It's also interesting to me that you sort of stepped into the mining space initially, because at least for me, when I was, so I started sort of understanding Bitcoin roughly the same timeframe, late 17, early 18. And it wasn't until I started really digging into the mining side of things that I started to understand why Bitcoin was fundamentally different than everything else through proof of work and all these other mechanisms. And so it's very curious that you. You were sort of still in your altcoin phase, but then you latched on to mining as something that felt maybe like real and tangible, perhaps. Richard Byworth (08:24.911) Yeah, it's a very interesting comment. And actually, we were GPU mining. So we weren't ASIC mining. So we were GPU mining. And if you remember, Ethereum was still proof of work back then. So we were actually mining Ethereum. was the most profitable to be mining. But to your point, I didn't understand Bitcoin when I started the company. I ended up becoming the CEO of a crypto company at about the same time that I became a Bitcoin maxi. So I'm sitting there just completely Brian Cubellis (08:38.24) Gotcha. Richard Byworth (08:54.299) misaligned value prospect in terms of what we were building. I remember the exchange guys going, hey, Rich, know, we want you to join the listing committee because we want to add XRP to the exchange. I was like, no, never. Shitcoin. And by the way, we have to delist everything else and we should be predominantly focused on Bitcoin and just doing Bitcoin derivatives. And so, yeah, it became a bit of a problem with running the company. Jackson Mikalic (09:23.079) What was it ultimately rich that... led you to the more Bitcoin purist or maximalist position. I don't know if you touched on that in the story, but to Brian's point, it's like you had your 5X on Litecoin, you had, I believe it was Herman on the desk, didn't buy you the Bitcoin, and then you transitioned into the mining space, you were doing some mining, you mentioned of Ethereum and some other coins. Where in that story did you really go down the rabbit hole in Bitcoin and start to fundamentally understand the difference there? Richard Byworth (09:41.244) Yeah. Richard Byworth (09:56.243) You're going to laugh, but for a long time I didn't know that Bitcoin was limited to 21 million. And when I understood that, was like, OK, normal question was, well, how can we be sure that it's not going to be more than 21 million? How can we be sure that that won't get increased? And as I mentioned, in 2012, mentally I'd become a hard money guy. I'd started buying gold. was just like, this is the only way we can escape this fiat disaster that is impending for sure. yeah, when I understood that Bitcoin was 21 million, I think I started listening to a lot of Bitcoin focused podcasts. And I listened to the Pomp podcast with Murad, where he was talking about Bitcoin and it was October 2018. And I remember I listened to it just before going to bed and I woke up that morning and I was like, I need to buy Bitcoin. I need to buy a lot of Bitcoin. And so I went out and bought it at 6,000 and then it immediately halved to 3,000. And then I was like, okay, no, this is an opportunity and just kept going. So it was good. But yeah, that was my moment. Michael (11:13.987) That. I've never heard anybody else recently bring it up for years, because that's an old school pod. That single handling might be the best podcast that's ever been done about Bitcoin in 60 to 75 minutes. It's absolutely fantastic, and it's very prescient. Like everything has literally happened to a T that was described in that podcast, from like the market structure forming to the adoption cycles. And the unit bias is a funny thing that you reference, because I think that's most people in 17, you get in and then you just buy all this other crap. Richard Byworth (11:25.479) Yeah, it was very strong. Yeah. Michael (11:45.05) And similar to you, you look at it you're like, well, this all can't be valuable. Like, what's actually happening here? And you quickly find out, OK, there's some value here, but it's not everything. Richard Byworth (11:54.629) Exactly. think the unit bias was another thing that progressed me further down the road. It's like when you get to the point of thinking of everything in Bitcoin, like, you know, when you're in banking, you're kind of a slave to this ridiculous salary that you've got. You can never leave. You're locked up in stock, right? As a managing director in a bank, you've got a shit ton of stock. If you leave, you lose the stock, right? You have to get fired. to be able to hold on to your stock, which is a fairly ridiculous incentive structure. But that's how it is. And so you're kind of a slave to this system. when you, you know, I mean, I remember when I was back in 2015, I would have a spreadsheet with my US dollar value of everything. you sort of, you've got your investments and you're working out, you open your spreadsheet every day and night. How am doing today? Brian Cubellis (12:27.253) You Richard Byworth (12:51.75) But when that denomination moves from dollars to Bitcoin, everything changes. Everything just gets much more simple. you know, we do an annual summit here for investors in Zurich. And I had Jeff Booth at the summit this year. And I sat with Jeff at a table where we had a panel on asset allocation. you know, you had this group of experts, titans of the traditional financial industry going, know, I think this year, you know, private equity, we probably want to see another 5 % allocation and probably, you know, be dropping private credit a little bit because that's become a little bit overheated. And we sat there and we're like, you know, it's just so easy, so simple just to be a Bitcoiner, you know. It just makes life so much easier. You're not messing around with it. Just most of this nonsense. And it is nonsense, right? because it's all dollar denominated at the end of the day. So, you know, you're just like scrambling up the hill trying to beat that debasement rate. And yeah. Jackson Mikalic (13:57.916) Yeah, Rich, it's a great point. I have a question on that. Because you were brought in, I think you said in 2022 to lead the hedge fund business at Seas. So are you still doing that type of work at the company? And then how do you how do you balance your investment philosophy or savings philosophy personally focused predominantly on Bitcoin with having to also be able to speak the language and be knowledgeable about all these alternative investment strategies? Like how do you manage that personally? Richard Byworth (14:07.89) Mm-hmm. Richard Byworth (14:28.978) Well, look, I I traded against hedge funds and sold to hedge funds for my entire financial career. So I know the product very, very well. So I can speak about it. like, you know, being a Bitcoiner, as you all are, I'm sure you've had the same experience. There are some people that are just not ready to go on the journey. Right. And so, you know, when you're talking to a guy, he's a billionaire and he's looking to allocate capital and he's looking to put 10 % of his money into hedge funds, you know, You can say that maybe you could think about some of the alpha prospects that are available in this different asset class and start to move him down the track towards that. But, you know, I mean, I had a meeting this morning with a guy who's who's starting off with 20 million allocated to hedge funds. And he was like, don't ever talk to me about crypto. I don't want to hear it. Super smart guy, double PhD, like, but it's just not going to happen. So, you know, you have to. understand that some people are ready and some people are not. you know, I think this is this is what I'm trying to do here. You know, when I do the summit, the Investor Summit every year, I have a Bitcoiner come and speak at the summit. This year, obviously, we had Jeff Booth. Last year, we had Dan Tapiero and Scaramucci, which was fun. And then we had Willy Woo the year before that. So just gentle education of these more traditional mindset investors. because you can't just throw everything at them all at once. mean, it's a big journey. mean, we've all been on a journey. You guys mentioned 2018. I'm a 2018 vintage Bitcoiner as well. It's taken a long time to get to this point, right? So you can't expect these guys to get there all at once. Michael (16:16.067) Yeah, it's It's incredibly exciting to have someone like yourself with your background. involved because it's like a cheat code when you have professional experience in a different domain and you come in because you can understand the frame of reference so you don't hit them over the head with the hammer because historically in Bitcoin's first call of 10 to 15 years, it's the have fun staying poor. It's just pushing people actually away from the asset even though we just historically didn't recognize it as such. And we see this in the West specifically with the registered investment advisor groups. You can have the resident Bitcoiner, the resident rationalist. that understands this stuff and is all in, but then it's very hard for them to put their investment advice or gives any kind of acknowledgement of like, maybe you one, two, three percent because of this historical stigma. that comes with crypto or Bitcoin. And so it's a very, you have to be very convicted to be able to like even start to have that conversation, which requires tact and discretion that I think is required from somebody that understands that cohort. You can't come from outside and be like, need Bitcoin because you don't know what their pain points are and what their like incentive models are. So it's a really exciting next, I think decade we're gonna see because this 18 to 23 vintage is really brought in professionals that I don't think historically were in the space. Jackson Mikalic (17:37.788) Yeah, and Michael to that point, yeah, I was gonna say, good Rich. To Michael's point as well, it's interesting because there's a, you have to be able to effectively communicate to people and speak their language, right? So one of the challenges as it relates to Bitcoin in an asset allocation framework is that, Richard Byworth (17:38.31) Yeah, I'd say it's spot on. Sorry. Jackson Mikalic (18:01.19) Bitcoin, you can make the case that Bitcoin is its own asset class. But if you go back to folks who are allocated to public equities and private equity, real assets, venture, whatever it may be, you get stuck in this conversation where you're trying to fit this new asset class of Bitcoin into an existing bucket. And we've done some work around that, right, and trying to figure out and it'll depend on the investor and their framework and how they're approaching it. They may say Bitcoin is more into a real asset because they see value or properties that exist within gold, right, in terms of scarcity. But you could also make the case that Bitcoin has like more of a venture feeling, not in the same way that we'd say that, you know, cryptocurrency is venture capital, but in the sense that Bitcoin as a protocol is following an exponential adoption rate, which we do see with other tech plays, right. So I'm curious, Rich, like when you mentioned earlier communicating the alpha prospects of Bitcoin to some of these traditional allocators. Do you typically try to fit Bitcoin into one of these buckets to speak their language or do you really just make the case that Bitcoin is a standalone asset class and does that resonate with the folks that you're speaking with? Richard Byworth (19:21.604) It's a really good question. It's something that I've sort of changed tack on a little bit recently. And I think the problem is all of us are capable of sitting down at a dinner and convincing someone they need to buy Bitcoin. You you can talk about price, you can talk about exponential, exponentiality, you can talk about adoption of the internet, you can talk about digital gold, all of these things. But the problem is that it always comes down to the same problem. I had this exact example with a friend of mine recently. We sat down to dinner. He'd just sold his business and he'd made several million and he was like, hey Rich, know, we hadn't seen him for a few years. hadn't seen him for a few years. And he was like, hey Rich, should I put all my money in Bitcoin? It's a joke. It's a goofball joke. I'm like, OK, yeah, but by the end of the dinner, by the way, you're going to say, yeah, I want to put all my money in Bitcoin. And he did. And at the end of the day, was like, OK, so, yeah, no, I need to. Like, what should I do? I was like, look, first of all, you can't put all your money in Bitcoin because if you do, when it goes down 50 percent, your wife is going to call me and she's going to go, Rich, you're an asshole. Right. And what it needs for you is to go on this journey. You need to understand why I'm so convicted, so convicted that you are now completely convicted, even though when you go and buy it and see it drop 50%, you go, what the fuck was I doing listening to Rich? Sorry, excuse my language. But yeah, I mean, this is the problem. If you get people excited about the potential for price appreciation, because we do all know where it's going. and we can all be very convincing about that, then they're going to buy it and they're going to sell it at the wrong time. So what I try to do now, and this also works well with that very, I know everything kind of person. Richard Byworth (21:19.664) which are much harder to orange pill. You these are the guys, you can't tell them anything. They know everything about everything, right? Of course, Bitcoin is just some idiot project that you're involved with. So with them, this also works well. So the way that I present it is, look, you spend your whole life working for, you know, that moment where you're able to walk away and go, I'm free. I've made enough money and I can retire and I can go and live on the island or do whatever it is that I want to do. So you have a vote right here, right now. You have a single vote and you can make that decision. You can vote to store the time and energy of your labor in a system that can constantly be debased without your control by the control of a bunch of old guys sitting in a room deciding. you know, what they're going to do with monetary policy. And debasement rate is normally around somewhere between 10 and 15 % in recent years. Or you can put your time and energy into a system where that cannot be debased, that is purely algorithmic, is controlled by no one and is 100 % finite. And you know what everybody says when you say this to them, yeah, of course, but. And you're like, of course, but what? Like that is the vote that you have right here right now. But the challenge is understanding what I've told you about that second system. It's understanding that everything I've just told you is true about that second system because the answer is of course, if you just understand that what I've told you is correct, then the answer is of course. And that's been very effective with people lately. Brian Cubellis (23:07.584) Yeah, I really like that framing. guess one thought on that, and I'm sure you've experienced this as well, I started my career in traditional finance space. And like you were saying, there's a lot of those people who are very, very smart, intelligent folks in their own right. But I think that leads them down this path of hubris to the extent where even if you make that argument that you just laid out, They won't believe that second system because in their minds, well, one, they just haven't done enough research as you. So it seems too good to be true, right? Like on paper, if this second system existed to your point, obviously you would store your time and energy in that system. But there's that hurdle of really, I think it's just like ego and hubris for a lot of these folks. And at this point of the, the, the sort of trajectory of the saying we're 15 years in those folks have seen multiple cycles. They must have heard about Bitcoin within the past five to 10 years, at least once or twice. So they've seen these cycles play out. And now they have an inherent bias because they didn't act on it prior. They didn't do incremental research last cycle or the cycle before. So now when someone tells them, hey, maybe you should consider this, it does take a massive amount of... killing their own ego to some extent and admitting maybe they were wrong in the past. And I think that's particularly hard for a lot of folks in the traditional finance space because they have made very successful careers in their own right and done amazing things. So it's particularly hard for those folks. And then the other piece, which you mentioned earlier, which I like, and I think maybe as Bitcoiners, we just need to do a better job of doing public service announcements that there are only 21 million because that's That's something I hear a lot too is if you haven't done any work and you've only heard of Bitcoin, there's a good chance you actually don't know that there's only 21 million. And then the other component is also the unit bias. It's like those two things. If we could just try to eliminate those, that would get past a lot of hurdles for folks. Richard Byworth (25:17.811) Yeah, the unit bias is a problem. will always say, well, I was in a very senior guy, runs an asset management company, billions and billions of dollars. And he was like, so how much is one Bitcoin? We got to the point in the conversation, was like, okay, I'm thinking about buying one for each of my kids. How much is one Bitcoin? And at the time it was $70,000. He's like, $70,000? He's like, I'm way too late. I've missed it, right? And that's the problem, yeah, it's the unit bias. Michael (25:47.386) Yep. Michael (25:51.097) Well, so that's what's fascinating. I think we're at an inflection point because Jackson brought it up. And this comes across, think, anyone that's having conversations with a traditional financial crowd, traditional finance crowd of where does it sit? What bucket? How do I think about it? And I think a component. of all of this is in any cell is you're competing with the status quo. So what are people used to doing and how do you get them to move? And if you're looking at Bitcoin, you're like maybe there's some room to go or run, but it's like at best one, two, three percent. It's magic internet money. So why do I care? Like I'm willing to miss out. But yesterday with what BlackRock and Larry Fink came out with that it's like, I don't know the exact quote, but it is referencing mortgage, the mortgage market and anywhere between 10 to 50 trillion, whatever the cap is saying. a loan asset, that's something we've started to coalesce around here at OnRamp when we talk with, whether it's pensions or just any institutional allocator and referencing, let's segment Bitcoin from crypto and then let's segment that this is its own bucket as you would think about in a traditional like 60-40. This is its own asset class by itself. Because once you start looking at it like that, it's like, how much room can it move? And so once that narrative starts to grow coupled with, I'm convinced that the six figure mark, that 100K, really what gets like friends like yours that looked at it at 70k and it's like it's gone too far gone because at 100k you're like wait where does this train stop it doesn't stop at 10 like a million 10 million but right now the psychological barrier 70k maybe goes to zero but at 100k it's like what would cause this to go back to zero and then now you start looking at on the in the other direction Richard Byworth (27:30.944) Yeah, I definitely agree. think the problem for a lot of people is that unit bias. think that I wasn't exactly sure what Larry said. Did he basically say that it is going to take a chunk of the mortgage market? Jackson Mikalic (27:43.9) I think he said Bitcoin could grow to be as large as the U.S. housing market, if I'm not mistaken, which was about a $50 trillion number. Michael (27:51.163) Yeah, I'll find it. And you know he said this after because his bags are packed and that's why we're sitting like at $67,000, $68,000 because he's like, all right, it's go time. I'll find the tweet and I'll pull it up. Brian Cubellis (27:52.726) You Jackson Mikalic (27:56.456) Exactly. Richard Byworth (28:02.298) Yeah, no, I saw the headline pop up. just don't recall. I didn't read it. But yeah. Yeah, BlackRock coming into the scene has been significant for a lot of our investors. You know, this I remember, you know, going and meeting with investors and, know, you get introduced as the Bitcoin guy and they're like, yeah, Jamie Dimon says it's a scam or Christine Lagarde says it's a scam. And now when they see one of these folks, i.e. Larry Fink saying, no, no, this is legit, this is an asset you need in your portfolio, this is now changing conversations quite significantly. So Larry's arrival is very, very helpful for the institutional orange billing. Jackson Mikalic (28:53.902) Absolutely. Yeah, no, that's a great point because this time last year it was still uncertain that... if the US ETFs would be approved. I think we were kind of nearing certainty just based on how that court decision went, I believe in August, but it certainly has helped from our conversations with the traditional allocators thinking family offices, registered investment advisors, institutional allocators. When we were reaching out to those folks in summer of 2023, a lot of them were kind of like get lost, right? Because the Bitcoin price is $25,000. There was really no expectation that there would be ETFs approved in 2024, but now the conversation has changed materially. And one thing that we plug into a little bit is the 13F filings and just taking a look to see under the hood who actually owns these financial products. There's, as we all know, there's pensions involved in the asset class. There's a lot of registered investment advisors that, you know, they prioritize their fiduciary duties. that in a lot of cases, that means that either their clients are asking them directly for exposure and they're having to do their due diligence on these various products, or they recognize that Bitcoin presents an opportunity to differentiate their business and... Richard Byworth (30:15.026) There's something happened to the sound. I can't hear them. Hello? Yeah, I got you back. Sorry, something happened. You dropped out. Jackson Mikalic (30:20.712) You good, Rich? Jackson Mikalic (30:25.865) You got us now? Okay. Yes. was just, yeah. So no worries. so the 13 F filings, right? It allows us to take a peek under the hood and see what type of investors own the Bitcoin ETFs. And we have pension funds that have shown up this year, right? Very large ones in the United States that are only just dipping their toes in with a 10 basis point allocation, but that's Richard Byworth (30:27.602) I got you back. Yeah, sorry, I lost you at 13F Firelinks. Jackson Mikalic (30:52.968) you know, much larger than zero, I think in terms of nominal value, it's 160 or $180 million investment. Now there's a couple of pensions involved. And then there's the registered investment advisors that are fiduciaries for their clients. So they're either recognizing that there is a big value proposition in allocating the Bitcoin further clients as an uncorrelated asset, you know, an emerging asset class. Or that means also that their clients are reaching out to them directly and asking for Bitcoin exposure. So I just wanted to touch on the point that you made that having the CEO of the world's largest asset manager being now an advocate for Bitcoin and having a product and having skin in the game, right, and having an incentive for Bitcoin to be adopted by his business and his clients is a huge tailwind that really hasn't, has only started to materialize. It's really just the first inning. I think a lot of people don't understand that yet. Richard Byworth (31:45.799) Yeah, and I think, you know, we talked about podcasts before. I think the work that you guys do with this podcast and just having more and more education out there. If you remember when we were talking about that Murad podcast, it was actually quite hard to get good quality Bitcoin content back then. And I think what's interesting is now there's just so much, you know, even we at Seas Capital, we launched a podcast recently, obviously not a Bitcoin podcast. But what we do is we focus on a particular issue in the world, be it climate change, food security, energy security, something like this. And then we'll dig into the problem. We'll talk about a solution. And more often than not, the investment proposition by the expert that we've brought in ends up being Bitcoin, amongst other things. So it's quite funny that we've got this podcast. We're trying to address real problems. Obviously, we've designed it for institutional investors and alternative investors. And the conclusion often at the end is, well, probably need a bit of Bitcoin. Jackson Mikalic (32:57.862) Yeah, that's fascinating. I all roads do lead to Bitcoin one way or another. I'd be curious on that vein in particular, Rich, I know. So I had come across your podcast this week just taking a look and seeing what you've been up to in preparations for this. And was it Eric Sees that was on the podcast recently? I caught a bit of that episode and that was interesting to hear just his entrepreneurial background and, you know, all the work that they've done over the decades with Sees Capital. One thing that you mentioned that's really interesting to me and if you could share it that'd be that'd be fascinating just like the investment case for Bitcoin in the fiscal perspective and well the fiscal perspective and then also just the asymmetric opportunity that exists within Bitcoin due to its properties are pretty easy to explain or for someone to understand if they are willing to do the work and pay attention but Maybe in terms of geopolitics or energy, like some of the conversations you've had early on in the podcast, how have you found those lead into Bitcoin or how did these people come in with their background and maybe not see Bitcoin before and now after having a conversation, they're willing to open up their eyes and see a new perspective of how this could be a technology that could help to solve a problem there. Richard Byworth (34:18.003) Yeah, I think the energy security one is probably the most interesting. I always talk about the fact that El Salvador's volcano bond, when it eventually launches, will be a complete game changer for broad energy security for energy rich nations or resource rich nations. Because if you think about a country like, say, Argentina. So Argentina is extremely rich in energy resources. in resources in general, but also has huge amounts of hydro in the north, huge solar panel farms up in the north as well, with the propensity to grow massively. And they're still taking, you know, loans from the IMF, right? So if you could imagine a way that you can monetize all of that clean energy, and start to use that for the benefit of the nation and then even do a sailor and raise even more money on the back of expansion of that infrastructure, making you even more energy secure, you actually move to a point of actually being. you know, having the IMF's involvement being completely redundant. And so freeing these countries that have been really held in poverty for a very long time due to not being able to have, you know, a monetization of their resources that they're having in their country. Like you look at much of Central Africa, it's the same situation, you know, really heavily reliant on IMF loans to stay afloat. but you know, very resource rich countries. So this is the gap that we discussed actually in the first episode with a brilliant guy, a guy called David Legge who we had on the podcast. He is a Bitcoiner now as well. So he was at the summit with Jeff Booth. yeah, we've... Richard Byworth (36:19.939) We got him over the line as well. But yeah, I think a lot of these experts come at this space, come at their particular problem. And look, we all know, we all know that meme, fix the money, fix the world, right? And it's actually really true when you have a lot of these issues. Bitcoin does have a propensity to be able to change it. And one of the people that I want to get on the podcast to talk about environmental problems and climate change, I have young kids and they... They're very worried about the environment and that's something that is being focused on in their schools and we see it more and more. If you think about Bitcoin as a methane capture tool for gas flaring or landfill sites, this is actually a very, very interesting way to monetize Bitcoin mining with stranded energy. So again, you actually reduce the amount of methane going into the environment because it's it's cheaper and quicker for the landfill to burn it all off as opposed to potentially combust it in a way that will create energy because no one's going to take that energy. But now you've got Bitcoin miners that can turn up and reduce that climate change impact. yeah, lots of different avenues to that point, Jackson. where Bitcoin can fix the issue. Michael (37:43.404) Yeah. Yeah, it's incredibly bullish for humanity and productivity because I don't know what is the most energy dense or oil rich. I think it's at least top three is Venezuela and Latin America. But the problem is that they don't have any currency or the currency continuing to be debased. They can't coordinate economic activity. And that's a very extreme example to get the energy out of the earth. But that's an extreme example we experience this here anywhere, right? Where if you don't have a good form of capital, you can't plan for the future. If it's continuing to be debased, you cannot take a loan out plan. see, and again, micro example, a restaurant goes out of business because their inputs are constantly changing, and so they don't change them fast enough on the output, on the price for the customer, and they get off sides. But what you just described bypasses that because ultimately you can source capital, Bitcoin, from anywhere in the world. You can structure a product. You can hold the capital in a unit that's not being debased. You can coordinate that capital to go and pull the energy out of the earth, mine the BTC, and then get it out. And that's just like the, again, extreme example, but that plays anywhere. You don't even need any, you you can figure out your legal constructs, obviously in different regions. It's going to matter. But even setting the mining to set up a wallet, we see this a lot in Texas where a lot of our teams base that Texas and Middle East are primed to get Bitcoin because they understand commodity. Michael (39:11.011) And a lot of these investors maybe don't really want Bitcoin per se to hold, but they want to mine it at a price less than the spot price and then auto convert into fiat. And they set up their own wallets in these like limited partner structures. So they'll mine to it. So you can imagine you can start to set up some of those structures in any market to invest and bring resources that historically would not have been able to because you didn't have the financial structure in place. It's incredibly exciting. Richard Byworth (39:21.542) Mm-hmm. Richard Byworth (39:40.058) It is, we're in a completely new paradigm and I really do think that volcano bond is the catalyst to really start to change things with these IMF indebted countries. Michael (39:51.75) Yeah, because you don't have to touch the traditional banking rails, which is important. I'm not sure if you're familiar. So Brian and I are partners at a, I believe it's the first Bitcoin denominated venture fund. we invest across, you know, we're agnostic. So we invest in the Bitcoin ecosystem because we've been very close to it and we kind of are building. So we spot a lot of gaps that need to exist in the market structure, which is why I'm interested in talking about Switzerland, because we've been looking at, you know, different companies looking to get set up there. But we're also agnostic. We're looking at anything that's looking at the world through a lens of, well, can I produce more Bitcoin by delivering value to the world and then sweep it into BTC? But when we invest, from our LPs invest in Bitcoin, we invest in the companies in BTC, and then the companies, this is the kicker, they value... the underlying unit more than the dollar, so they hold their treasury or at least a portion in BTC, which extends their run weight and gives them an unfair advantage because they're more discerning with how they allocate capital. And you never have to touch the banking rails in a situation like that. You can because some people want to allocate dollars or some people need to accept dollars, but something like that had never been able to done before. And so when you don't have to touch the traditional financial rails, all sorts of... different manifestations can come in that are effectively more productive if you ever had to send a wire or anything that has to do with, you know, Swift Rails. Richard Byworth (41:07.106) fascinating. So you charge a performance fee on the returns over the Bitcoin allocated. Michael (41:13.839) Yeah, so hurdles are all, everything's nominated in BTC. Yeah. Richard Byworth (41:20.498) We should chat offline about that. Michael (41:22.511) Definitely happy to. Richard Byworth (41:24.654) I'll probably have some people that will be very interested to look at this. Michael (41:29.583) And we honestly think this is just the future as well. We were the first, but ultimately when you go back, everybody kind of knows this, but the past hundred years have effectively been an anomaly, right, on this fiat standard. If you go back and you think about even allocation and capital, I like to joke and say, Richard Byworth (41:41.746) Mm-hmm. Michael (41:46.775) It never would have been like Henry Ford is a great example that built all of his wealth with his bare hands Give all of that money to somebody that's never built anything or allocated It doesn't make any sense somebody that was investment banking or you know academic to say here's money to go find net new builders To build because you've never built anything. So how would you know how to back test any of the process? But that's effectively what exists in venture today. And that's where we see a lot of capital just burned or Richard Byworth (41:58.802) Yeah. Richard Byworth (42:04.21) Mm-hmm. Michael (42:14.423) And so the angle is you take existing builders, but then with the lens of the alignment of a unit that can't be debased and you're not trying to play hot potato. Because an LP wants to get rid of the dollars because they're on fire all day long. So they need to go and find any allocator to put the capital to. And then the allocator needs to get rid of the dollars because they want to get more management fees. They want to raise a larger fund. Like people try to raise hundreds of millions of dollars in Bitcoin. It's like, don't need a hundred million dollars. There's There's not that many companies invested to make that kind of money. Richard Byworth (42:31.932) Yeah. Michael (42:45.681) So you try to raise a capital, then you have a hammer, everything needs to look like a nail. So then you're out there just looking at companies, and this is where you see these companies get bit up without naming names, and now they're like crazy valuations that can't produce the returns. Richard Byworth (42:51.705) Mm-hmm. Richard Byworth (42:57.628) Yeah. Michael (42:59.581) And then those people get told by the allocators, hey, run, go higher as many people, go scale as possible. But it's just like that doesn't make any sense. Bitcoin's cyclical. So you literally go higher, expend all that energy, destroy all that Bitcoin. Well, what if you just change that whole dynamic? Now, the LP is more discerning with the BTC. The GP is more discerning with the BTC. And the most important part is the actual entrepreneur or the allocator is the most discerning with the underlying. It's not to say you don't spend the Bitcoin, you just don't misuse it. Richard Byworth (43:08.594) Mm-hmm. Richard Byworth (43:18.022) Mm-hmm. Michael (43:29.935) you look at the opportunity costs on AdWords, Hires, through that lens of is Bitcoin's growth, will this outpace Bitcoin's growth by the derivative returns? Richard Byworth (43:39.773) think this is very interesting when you think about value alignment as well when you factor value alignment into this obviously when you're doing venture you're backing a founder right and I think what's very interesting for you is you're backing founders that are Bitcoiners like they have that mentality or at least you know where their mentality is going right because Bitcoiners tend to end up in the same place You've got a long term mindset, low time preference. As you say, you're very careful where you're going to allocate that Bitcoin because it's so precious. Right? It's not, it's not those dollars. Okay, fine. Let's do this. Let's do that. Let's run around, try and create some frenzy. No, when it's Bitcoin, you're allocating extremely carefully. Michael (44:24.991) And that's insanely perceptive because it's something Brian and I talk about where individuals in the Bitcoin venture space will talk about, well, you allocate, it's kind of like leverage on top of Bitcoin. And I look at that as a negative, not as a positive, because outside of a few things like buying and custody Bitcoin, there's not really a of venture type returns, but... So you're basically layering at risk on risk because like lightning's a great example. We never really found a use case You're layering on how do I like potentially find a use case? So you get the risk of? Venture plus you get the risk of the volatility of Bitcoin and trying to find it I Think he lost his sound you're back. No, it's okay. I was just referenced Richard Byworth (44:58.626) I've lost the sound again, have you done? I got you back. Sorry, Mike. Yeah. So you were talking about risk on risk. Yeah. Michael (45:08.03) Yeah, risk on risk because if you invest in venture that's already risky but then you invest in the perceived or the potential use case for a new form of Bitcoin's use which generally outside of buying and holding from a venture perspective it's not it's very hard to justify a return but what Brian and I talked about and this is the firm's called early writers in us being agnostic to it's not dedicated to just solely Bitcoin infrastructure is to your point, is that as individuals like yourself that come from backgrounds of 10 plus years professional experience, they're gonna look at their existing firms and look at it through the lens of understanding Bitcoin deeply. And they're gonna say, is full of fat and bloat and inefficiencies, especially with deflationary tools. And now I can go and out-compete them because I know all of where all the gaps are, use a better form of money. So you get the benefit of underlying better form of capital from an entrepreneurial perspective and then you get the upside of them looking at the world through the lens of understanding Bitcoin but not the risk of I'm gonna go find the next way to scale Bitcoin the next third layer and all the things associated. So it's interesting you picked up on that because that's where we're really excited. The number of entrepreneurs or LPs that we have in the fund are just like world-class because when you have high signal the right people find you because it's like this is what's been missing. Richard Byworth (46:29.816) Absolutely. Absolutely. I think it almost might be the ultimate hack for venture capital is Bitcoin only companies allocating in Bitcoin. Michael (46:36.108) You know, it's... Michael (46:39.862) And you're right, because this is the ultimate hack to actually getting back to efficient use of money. Right? It's just like, it's just money doesn't grow on trees and we forgot about it. And so, but now everybody thinks money grows on trees, everybody wants the next round, you all the stories, but the reality is... Richard Byworth (46:46.953) I really like it. Michael (46:59.116) Bitcoin doesn't grow on trees and Bitcoin has opportunity and Bitcoin has, you know, there's a cost of capital, it's Bitcoin. And as everyone starts looking at the world through that, you literally get to the most efficient use of that capital. And the kicker is, I like to joke, it's like on a scale of one to 10, whether it's listed companies or unlisted companies, there's a certain amount of fat that exists because we've been on this fiat standard. So the goal is to, as Bitcoin, you start to look, you start to look in the most. And those people will outcompete all the other people over a long enough time horizon because it's just the most efficient use of that money, even if it takes longer. And this is what Henry Ford figured out very early on. When there would be deflationary periods, he would sell everything, even though he had to take it at a loss. And then he'd close down the factory, get more efficient. and come back and outrun everyone because that's what you're supposed to do when misallocation of capital happens, not continue to paper over. And we just somehow all forgot about this. Brian Cubellis (47:52.168) You really picked up on it. You picked up on one of the core things to me is just the sort of realignment of incentives in private investment venture, whatever it is. think those incentives got very distorted over the past 50 to 100 years as we had basically, you know, free money that could be printed infinitely that distorts all the incentives down the line from LPs to GPs to founders. Jackson Mikalic (47:52.546) You really picked up on it. Richard Byworth (47:52.626) Yeah, I need to read some of the history on that. Brian Cubellis (48:18.632) We're just sort of going back to a time when those incentives were more aligned. And the other really fascinating thing about this for particularly the entrepreneur and the founder is you might only need to raise capital once, maybe twice, but you might just be able to do it once and extend your runway as your Bitcoin treasury grows. And then you can avoid further dilution into the future. it's again, it's fully just aligning the incentives between all the different parties involved. and really just rethinking how capital should be allocated within a Bitcoin lens. Richard Byworth (48:55.73) Absolutely. Absolutely. I like it. for me it really comes back to the values as well. Because you want to make sure you're investing in a founder that is honest. And I don't know why, but it just Bitcoin leads you to more of a honest, purist. Jackson Mikalic (49:02.632) Ready? Richard Byworth (49:17.348) way of thinking, right? Bitcoin is truth. It leads you to truth. You want to represent that same truth in you, right? So when you're backing a founder, you need a founder that you can trust, obviously, that you can trust him to make the right decisions. And that, that truth aspect, that long term mindset, all of these things come together for Bitcoin and the value system that it creates. So I'll say it again, I think you guys have found an interesting hack here. Michael (49:44.956) It's impressive how fast you picked up on it because I don't know how quick like a sharing because it's obviously a little bit novel but you hit the nail on the head. There's nothing more scarce than the human capital. like scarcer than Bitcoin. And that's the component, the way to execute on this. And the beautiful part about Bitcoin is when you meet somebody, you know, right off the bat, I like to joke and it's like, we all agree that on, we agree on 90 % of things. We don't want people taking our money. The last 10 % is on the margins on like, you know, you know, what's happening here in local politics. And once you cut through all that noise, you just immediately know like where somebody stands and then you can start to build on the merits of like, you know, the professional experience and things like that. So it really is an interesting kind of cheat. code to find the right operators. From a founder perspective, just like folks that have joined our firm, you kind of know right off the bat where they they sit. Richard Byworth (50:36.378) Yeah, I was in Amsterdam with the boys at Relay and they had a lot of the team there. And it's just, it's so good to see them so enthusiastic and so driven and so excited about what they're doing because they're so behind passionately what they're building because they believe so much in the underlying Bitcoin behind the whole system. So yeah, it's... Jackson Mikalic (50:36.904) I was in Amsterdam with the boys over at... Richard Byworth (51:06.34) It just creates the best outcomes, I think, for venture investors. Jackson Mikalic (51:12.348) Yeah, Rich, maybe on that vein, I'd be curious to hear more about what you're seeing in Europe as it relates to Bitcoin only businesses, Bitcoin institutional adoption, wherever you want to take it, but maybe a perspective that you have that we don't necessarily have being based in the States. again, whether you want to touch on specific companies or specific countries within Europe that you're seeing more adoption, more favorable regulatory environment. But really, I'd be curious to hear what you're seeing in your seat. Richard Byworth (51:47.98) Yeah, I mean one thing that I'll mention which I think is quite interesting, can you hear me? I've lost my headphones again. Okay, well one thing that I found quite interesting in Switzerland is that you have this crypto valley in Zug which has been around for a while and there's some big, big Bitcoiners that live there and stay there and what I found is though that not a lot of them are purest Bitcoin Maxis because I think that because they've been in crypto, I was talking to someone about this the other day, because they've been in crypto for so long, they get the inside track on, you know, this new token that's going to list or whatever. And so they can make the 500X and then convert it back into Bitcoin. And so In a funny kind of way, they're still shit coiners. And so they're not quite of the Bitcoin mindset that you see much more in the international community. So I always go to the Bitcoin conference in the US. I just, as I said, got back from Bitcoin Amsterdam. You know, that mindset that you get at a Bitcoin conference and the people that you're likely to meet there, they're pure Bitcoiners, right? Whereas when you talk to someone at Crypto Valley and Zug, where even though these guys are massive holders of Bitcoin, they're still shitcoining around and mucking around in this nonsense, which is something that I find quite weird. Even if you say to a Bitcoin, look, you can go and invest in this token and make a quick 500%, they're not going to do it. They're pretty much not going to do it because they're like, well, yeah, but no, thanks. I don't, I don't want to run the risk of losing my Bitcoin and I'm very relaxed with my Bitcoin. We talk about asset allocation. You don't even need to bother with it. I know that I'm to be making, you know, significant multiples in a dollar based system anyway, so I don't need to muck around. So I think that's quite an interesting thing that I've discovered here being in Switzerland. I would say. Richard Byworth (54:05.935) In terms of Bitcoin only companies, they're quite rare. Obviously, Relay is one. I think Relay's competitors, mean, Relay have done a very, very good job of marketing across Europe and being out there and being trusted. And, you know, they're just so passionate about what they do. I think most of their competitors have disappeared or fallen away. So those are Bitcoin company or they were Bitcoin focused companies that have sort of gone away just because they've been out competed by Relay. But yeah, it's not so robust over here in terms of Bitcoin only companies. What we are starting to see and obviously again through my involvement with Relay is we're seeing more more corporates real estate companies through to just general, know, carpentry companies putting Bitcoin on their balance sheet, slowly starting to understand that this can be a very interesting way to manage the treasury of the company. So this is something that is somehow getting out there. I don't know how it's getting out there, but people are discovering it more and more. Jackson Mikalic (55:16.486) This is something that is somehow getting out there. don't know how it's getting out there, but people are discovering it more. Richard Byworth (55:27.354) Yeah, so corporate adoption in the small and medium sized enterprises are getting getting au fait with Bitcoin. yeah, Bitcoin only companies is they're still quite rare. And as I say, the Swiss community is still a little bit shit coiny. Jackson Mikalic (55:27.976) So corporate adoption in the small and medium sized... Jackson Mikalic (55:43.706) The Swiss community is still a little bit... Michael (55:48.471) That mirror is pretty much very similar to the US. It's very hard to be Bitcoin only because unless you're going to sell fund and have been holding Bitcoin or like we said, reference finding on the Bitcoin allocator side, it's very hard to convince institutional capital to look at that because they're still looking at it as a diversification, multiple asset sector versus how can you build a strong business, which to their credit, it's very hard to build a very profitable or any kind of profitable Bitcoin business because there's not a lot of things to do with it. than buying and holding. But Cura's rich on the banking and lending side because in the West we're still, or like in the US specifically. We still haven't seen, well there's obviously a lot of the regulatory hurdles that have been in place that are starting to get lifted. I think there's like two SEC exemptions being one one other from a banking perspective that are letting them custody the asset. But it was shocking to me to find out that there's multiple Swiss banks that allow clients to, custody and then allow them to lend against the asset, which I think is just a natural part of the market structure for folks that don't want to sell and want to do other things with the underlying. Curious like what's built into that and is that just part of Swiss and being very forward thinking or is there any other kind of factors involved? Richard Byworth (57:04.794) It's not. mean, the Swiss banks, you know, they've been watching their pie get reduced, obviously, by US regulation, in terms of how you deal with US clients and just being very clamped down on the whole banking secrecy side of things that really impeded the Swiss banking advantage that they had for many years. Now they are having to push into being more innovative. And so that's why you've seen many of the Swiss banks adopt crypto and be more broad. I think that what they're doing on lending on Bitcoin is impressive. We still bank C's. So we have as part of the overall group. We actually have a private bank as part of us as well and We haven't got to the point of lending money against Bitcoin yet that requires obviously a system that is 24-7 and so this is You know, it's quite far away from the way that the traditional banking infrastructure works. You know, it's very hard to imagine. bankers working on a Saturday or Sunday and dealing with margin calls and dealing with this type of thing. And so I'm not actually sure how the banks that are doing it in Switzerland are actually doing it yet. It seems very early and very nascent. And I think they probably only do it with clients that have significant assets where they're not going to have a margin call and the LTV loan to value is very, very low. But yes. Richard Byworth (58:55.006) it's not something we've got comfortable yet in our banking division. Michael (59:00.379) Yeah, it's not for the faint faint of heart Jackson Mikalic (59:00.562) So. Michael (59:02.632) Maybe we can chat when we talk about earlier. I was offline my my previous company I think we're the only retail lender left standing in the 2022 Space and it goes to your point though the loan to values have to be right and then it's a year. It's a 24-7 Game and you have to have really good relationships with your clients and really protect them from themselves And then the kicker is not rehypothecate where generally people get in trouble is with the rehypothecation especially in traditional finance because they're not used to the volatility Richard Byworth (59:18.962) Yeah. Richard Byworth (59:27.818) yeah. Michael (59:32.586) profile of Bitcoin. And so they think it's not risky to go get some interest on that lending in one or two hands removed, but then that happens. Do we lose again? Richard Byworth (59:34.887) Yeah. Richard Byworth (59:43.334) Dennis, has something happened? I don't know why this keeps cutting out. There seems to be something wrong with my setup. Apologies. Michael (59:51.008) It's all right, Brian's gonna have a lot of fun with the editing. Brian Cubellis (59:56.52) It's all good. Jackson Mikalic (59:57.284) Rich on the so your point about just Swiss banking having to be more innovative Just given some of the US regulatory environment changes over the years. I'm curious like for bank seas or just for other private banks in Switzerland that are Rolling out Bitcoin and crypto related services. Is that more so demand driven? Are your private clients asking for these types of products directly with their existing banking relationships? Or is it more of a proactive and aggressive move by private banks to differentiate themselves among the banking sector in Switzerland? How do you think about that? And maybe what are some things that you're excited about within the bank if you can share or just about Swiss banking in general as it relates to Bitcoin related services? and adoption. Richard Byworth (01:00:52.732) Yeah, I think it's a bit of both. So when we get through the bull market cycle, which is probably going to happen next year, you're going to have a huge amount of clients wanting to get access to Bitcoin directly. you're going to have a whole host of shitcoins that they're going to want to trade and they're going to want to trade it in custody at their bank rather than at an exchange that they probably don't trust as much. So, you know, Jackson Mikalic (01:00:53.32) think it's a bit of both. So when we get through the bull market cycle... Richard Byworth (01:01:22.098) I think the conversation at CEE started in 2020, 2021, and the product was launched in 2022, where obviously there wasn't a lot of demand by then. I think it launched just a few weeks before FTX. then, you know, now that's building again, obviously being a crypto bank, they've had onboarding of clients that have crypto holdings. CES is a very respected name in Switzerland. It's not very well known outside in the US, but it is a very respected name. If you look at the other providers, they're predominantly crypto firms. So CES is actually one of the very few actual real banks that existed prior to crypto that's actually offering crypto services. But I would say, yeah, it's a little bit of both. There's a little bit of... having to innovate, having to drive things forward, having to find ways to compete in the back of banking secrecy going away. But then there's also that little bit of the demand side coming through the bull market cycles. But also you've got a generational change happening in wealth as well. You're starting to see the millennials, the Gen Z start to inherit money. Switzerland's a really interesting place because it doesn't really have inheritance tax, which is why you still have some very wealthy families here because they're not getting destroyed every generational change through inheritance taxation. So, you know, that's obviously not the case for the U.S. It's not the case for the U.K. where I'm from. So it's been quite another culture shock for me here is just how wealthy some of these families are. I mean, just like everybody's worth tens of millions, which is at least, you know, so yeah, there's some very wealthy families and we're seeing that generational change now. So the Gen Z, the millennials are starting to pick it up and they are paying attention to this space. They're interested in Bitcoin, they're interested in crypto. Unfortunately, they're interested in, you know, NFTs and other nonsense as well. And, you know, every time I hear Jackson Mikalic (01:03:32.072) to this space. They're interested in Bitcoin, they're interested in crypto. Richard Byworth (01:03:43.994) one of them sit down and say, talk to me about Web3. I'm like, please, I can't. But yeah, it's again, it's a bit like how do you sit in a meeting and talk about hedge funds with a guy? It's the same sort of thing. You've got to kind of come to an investor where they're ready and help guide them to the right place. Jackson Mikalic (01:03:52.776) Again, it's bit like how you sit in a meeting and talk about hedge funds with a guy? It's the same sort of thing. You've got to kind of come to an investor where they're ready and help guide them to the right place. Yeah, Rich, on that point too, it's fascinating just on the inheritance tax and lack of in Switzerland and how that relates to the alignment of Bitcoin as a generational asset class. Richard Byworth (01:04:19.356) tennis. Sorry guys. Sorry. I've got you back. I'll put my hand down and you can go again. Jackson Mikalic (01:04:23.56) It's alright, we can cut that out. All good. Jackson Mikalic (01:04:29.082) Okay, yeah, so was just... So Rich, I thought that was an interesting point that you made about there not being inheritance tax in Switzerland and just the idea of generational wealth there and that being more prevalent than in other countries. And that ties into something you mentioned as well, just as it relates to Bank C's getting into Bitcoin and crypto related services and being a trusted name and a traditional finance firm, a banking partner that these families are already familiar with, whereas the other companies that are participating in the space are more crypto native and don't have the same brand recognition and level of trust that your firm's established. And we've seen that a lot too as it relates to our business and how we think about expansion plans. Just one anecdote is that we have a sister company in the Middle East in the UAE, Onra Amina. And part of the idea there is that people want to work with businesses that are local to their region and that have trusted partners in the traditional finance space. I just wanted to react to that because I think there is, we would all agree that Bitcoin has a ton of alignment as it relates to generational wealth. And there's obviously much more of a bias and interest in Bitcoin by millennials in Gen Z than there are in baby boomers. And then there's this massive transfer of wealth happening that's really just underway now and will happen over the next 15, 20 years where you have somewhere between like 70 or 80 trillion dollars of wealth that's being transferred from the baby boomers to these younger generations. and they all have a more of an inclination toward Bitcoin and digital assets. So I think that's a huge tailwind and it really positions well for bank seas because you're ahead of the curve as it relates to being a really trusted name in banking and traditional finance and being early to the Bitcoin and crypto native services as well. Richard Byworth (01:06:23.228) Yeah, no, absolutely. I mean, we're excited about being positioned where we are. And I think Seas Capital is obviously very well positioned to help advise some of these families in terms of the way that they want to allocate. The product that we currently have is a US dollar denominated product that provides a return in dollars. So I'm very interested about what you're saying because we've had some interesting demand from Bitcoin, Bitcoiner clients. Jackson Mikalic (01:06:24.114) Absolutely, we're excited about being positioned where we are and think this is going to Richard Byworth (01:06:53.426) where they're like, look, love the fact that you can deliver a 15 to 20 % return product, but in dollars, but I'm never gonna sell my Bitcoin for dollars to get a 15 to 20 % return. So what can you do in Bitcoin? And so we're at the point where we're starting to say, is there something to do here if we were to deliver a product? Denominated in Bitcoin, maybe a lower return than 15-20%. Take the risk right down, as you said, Mike, you know, want to make sure that you're super careful with the allocation of that Bitcoin, like you must not lose the Bitcoin, right? So maybe take the volatility of the fund down, be much more cautious with the strategies that you're allocating to, and then, you know, maybe you can get a 5-10 % return. with a volatility around two and a sharp around two as well. That then becomes a very interesting product for a Bitcoiner. yeah, we're kind of, going down and seeing what we can offer in terms of these types of products. But I think, coming back to the comment that we were discussing earlier about what you guys have done in having a BTC denominated venture fund. I think that's something that we could have some sort of discussion about as a product that we would be not officially promoting, but when people come to us and say they're looking at venture, I think that this could be a very interesting thing to be looking at. Michael (01:08:33.33) Yeah, and you guys are in a really interesting spot. maybe one of the best because I didn't recognize that C's was historically a traditional bank and then adopted Bitcoin as a strategy because then it allows for all sorts of like esoteric cross-collateralization products which can help you get to those returns because it's generally really hard just to get to a BTC return if you're like lending it out for other people to trade it because they're the problem with all that is they're denominating their return of dollars and that's where people get off sides but if you're able to structure products where BTC's infused in some kind of debt facility or whatever you would create for that return because you have the clients and the assets. You can do that. Michael (01:09:16.628) Awesome for a sec. It was no question. It was basically a recognition that you guys are in a unique spot to do some kind of Bitcoin denominated return profile because you have other assets that you can incorporate into a structured product. You're not sitting at a hedge fund or Richard Byworth (01:09:17.397) I the question, Mike. I'm sorry. Jackson Mikalic (01:09:31.218) you Michael (01:09:33.31) crypto lending desk, lending out Bitcoin to traders to swing it around to potentially give you back your two to five percent or whatever you're You can structure it in traditional products that are less volatile, have like, you know, claims on it from other regulatory, you know, relationships that you know that this asset's sitting infused with these other assets when you make loans out or however you would, you know, source the additional capital for investors parking that Bitcoin with you. Richard Byworth (01:09:37.895) Yeah. Richard Byworth (01:10:00.411) Yeah, I think I couldn't quite hear you perfectly. But what I would say is that one of the things that we're obviously doing with the dollar based fund is we're allocating to strategies where hedge funds can use it as collateral. Right. So they're using the dollar as collateral. They're doing a basis trade or they're doing a volatility arbitrage trade. But now we switch that out and we say, OK, it's Bitcoin like your startup companies. We say take the Bitcoin, make the return on the Bitcoin and then that then is providing you, as I say, you know, maybe you're not going to make the same spread as you might make with the dollars, but we don't care. If it's you know, three, five, eight percents return in Bitcoin, then I think, you know, any Bitcoiner I know will be pretty happy with that as a return profile delivered to you by a Swiss banking group. And that's, that's the thing that's starting to be of interest and I think that's why what you guys are doing is also of interest. Do you have any target IRR on the fund? Michael (01:11:09.087) That's a good question. Brian may be able to speak to it a little better on the, when I look at it, I look at it a little. I look at it from the opportunity cost of the Bitcoin that's being given up and then where we look at from an equity perspective. So the percentage of Bitcoin, like we basically have a higher hurdle rate when making allocation of looking at double digit equity percentages in businesses. And to Brian's point, because ultimately we look at a company raising once, if not maybe twice total. And so it's less from a total, like when you look at IRR from a acquisition perspective. most companies from venture are looking to get acquired. And a lot of this thesis was based on building on ramp where we built with Bitcoin as its nomination because we were spending our own money to build the fund. And so the way we looked at it is from a downside, how do we protect? And the downside is from a Bitcoin positive business. So we can pay our bills and feed our family. And the upside starts to look like venture from equity value being delivered to the enterprise value of the company. So you get the downside protection of a solid business and the upside of anything where can go. It's it's in congruence with like how you would build in general because you would, don't know, I like it like a baby. You don't know if it's gonna be Michael Jordan or it's just gonna play high school basketball. You can only foster. the environment in which it's been brought into the world. And same thing with an entrepreneur. And so to your point, the downside is protected by reoccurring revenue to return the BTC back to the investor. So the downside is protected by the reoccurring revenue to return back to the investor from the allocation perspective. The upside is the equity value from an acquisition perspective. And then just dependent on the type of firm, you may be able to buy hold that you're returning capital to Michael (01:12:54.605) LPs investors similar like something how we think about honor and building this as a generational like private banking firm And then the upside for certain investments would be like well. It's bright for a bank This is partially where we're looking at certain lending businesses because banks are just gonna need to buy this because it's very right for acquisition versus Building because the custody is really fundamental to all lending that even though nobody talks about it because you got to make sure the underlying is secure transparent or You basically get what you wake up one day and you're off sides And it's what I don't know if Richard Byworth (01:13:19.687) Yeah. Michael (01:13:24.381) Jackson shared if maybe we can pull it up but our models really like the cornerstone of all this because we feel that we have this in Bitcoin's adoption this inflection point where the market believed The market effectively is believed, especially on the Bitcoin side, we're going to scale with self custody. We're going to scale with plastic devices. And if you really think about it, it's just like literally impossible to do simply because at a certain point people just start breaking in everybody's houses and like robbing their families. Like that's just what happens when you hold billions or hundreds of millions of dollars. But then the other alternative was you leave it all on Coinbase, which also can't happen. And so that's really a big component of this is that nobody's really bringing solutions to the market. Richard Byworth (01:13:45.714) Hmm. Richard Byworth (01:13:54.598) Yeah, that's true. Michael (01:14:09.117) create structured products when somebody's holding, which we all probably on this podcast believe somebody's gonna hold anywhere between 70 to 100 % of their wealth in BTC. Well, that's not gonna happen on a plastic device. Like people will never get there. You'll just hold debased dollars because at least they can't burn down or get hit with a hurricane. The other side of it is you're not gonna leave it on Coinbase because we all know that's probably the worst thing you could ever do if you're holding your wealth in BTC. And so that's where this multi-institution model comes about. But then you can start to really with a new design service Richard Byworth (01:14:33.234) Mm-hmm. Michael (01:14:38.917) create other structured products. So lending is a great example because now you have, it's basically governance built into the custody model, which you can't do with gold, right? That's kind of where gold failed is you had to leave it with a central entity. Richard Byworth (01:14:50.982) Yeah. Mike, I have a question for you. terms of this debate I had in Bitcoin Amsterdam, I was on a panel talking about both venture and hedge fund strategies in crypto and Bitcoin. And the question came and the way I answered it was, the question was, can you invest in a non-profitable company and have them put Bitcoin on the balance sheet? So my question to you is, is your funds series A? Are you targeting cashflow positive businesses or are you still at very early stage seed for these businesses in terms of what you're doing? Michael (01:15:33.219) So it's a great question. I don't think non-profitable businesses should put background on their balance sheet. Not to say non-profitable, it's just... Richard Byworth (01:15:40.067) Great. Michael (01:15:44.495) It's actually more of an art than a science because if you don't have any more bullets in the chamber, you can't do it. If you do have bullets in the chamber, then you can because you have to basically price the risk. And what I mean by that is this is similar. We weren't profitable when we started on-ramp, but we put all of our treasury in Bitcoin because we had bullets in the chamber. We know people. We can raise capital. I hold Bitcoin. I could lend it to the business. So you have to be able to have bullets. It's an art than a science. Richard Byworth (01:16:03.9) Yes. Yes. Michael (01:16:09.917) But then to your other point, we're pre-seed seed, but ultimately, I would say less of a round. We're, at the end of the day, value investors. And so when everybody talks in venture about access, it's like, there's no such thing as access in Bitcoin. People will take your money if you go to them. If you put on Twitter, I'm restarting a company, any Bitcoin, unless it's some crazy fund that is just completely unaligned, people will take fiat money. But where access really comes out is if you've built and you know how to build and people don't need your money, they need your expertise. And so one of our recent companies that's come in is already cashflow positive, generating about three to four million dollars. Doesn't need the capital, they've been approached, but they've been hitting their head against engineering design and all the things that you need to when you're trying to scale. And so they're literally giving us a double digit percentage of their business to incorporate all our things. And so we're gonna just start generating BTC right into the fund. Richard Byworth (01:17:00.743) Nice. Michael (01:17:05.68) right off the investment. And so that's the idea there. Brian Cubellis (01:17:12.754) And going back to your earlier question, Rich, just on the sort of target, I would think of it more as like a multiple uninvested capital of like 1.25x in Bitcoin terms. That would be in Bitcoin terms. So that's sort of what you were sort of alluding to around like, it's perfectly fine if the numbers themselves are smaller, if they're in Bitcoin terms, right? And so it's like, that's sort of the mindset you have to get behind. Jackson Mikalic (01:17:13.166) and going back to your. Richard Byworth (01:17:22.908) Okay, nice, yeah. Richard Byworth (01:17:37.339) Absolutely. Mm-hmm. Yeah, no, I'd agree. Completely. Jackson Mikalic (01:17:45.106) Well, Rich, I want to be mindful of your time. We're closing up here. Anything we didn't touch on that maybe you just wanted to share some quick thoughts on or if not, where's the best place to direct people that enjoyed the show today and want to either follow your work or your podcast or get in touch with you? Richard Byworth (01:17:45.81) Very good. Richard Byworth (01:18:06.61) I appreciate that Jackson. Yeah, the podcast is called Seize the Future S Y Z. One word you can find on Twitter, it's on obviously on YouTube and Spotify and all of that. And then I'm at Richard Byworth on Twitter, and I think on LinkedIn as well. LinkedIn is I think I'm the only Richard Byworth in the world. So you'll be able to find me. It's a bit of a rare name. But yeah, if I'm not the only one in the world, I'm the one that's working at Seas Capital. So there you go. Jackson Mikalic (01:18:42.884) Awesome. Well, it was a pleasure, Rich. Really enjoyed getting to know you today and appreciate all the perspectives you shared. So thanks for coming on. Michael (01:18:50.534) Yeah, this was a great chat. Thanks for joining Rich. Richard Byworth (01:18:51.142) Guys, it was a lot of fun. Thank you. Thank you all. Brian Cubellis (01:18:52.682) Yep, thanks Rich.