Co-Founder of Multicoin Capital Says Bitcoin Is The Catalyst For Next Crypto Bull Run
Bitcoin will catalyze the next crypto bull run, co-founder of Multicoin Capital, Kyle Samani, said in an exclusive interview with Bitpush News this week.
Bitcoin, the largest cryptocurrency by market capitalization, has topped $19,000 in price approaching its all-time-high value of $20,000 reached in 2017. Samani told Bitpush News that Bitcoin’s price rally is fueled by inflation fears as central banks around the world are printing money to buoy economies during COVID-19.
Samani added that Bitcoin does not yet threaten the status of fiat currencies such as the dollar, euro or yen, so there is no reason for governments to ban the cryptocurrency. He outlined that Bitcoin is currently used as a speculative store of value rather than as a day-to-day currency.
He believes cryptocurrencies will create the biggest transfer of wealth in history as individuals transfer wealth from holders of fiat currencies to holders of new non-inflationary currencies like Bitcoin.
As for the DeFi craze this summer, Samani does not think DeFi will cause a bubble like initial coin offerings did in 2017, although the new space will get a lot of attention. He added that most of the current teams working on liquidity mining are not doing well. This model will not be in the next few years, the current profit of almost all projects will decline.
Multicoin Capital is a celebrity-like presence in the blockchain investment field, with about $75 million under management at present. Samani and his partner, Tushar Jain are thesis driven investors. These thesis not only formed the investment philosophy of Multicoin Capital, but also made the two famous in the crypto space. The duo soon built a robust network of contacts and funds.
PC: Multicoin Capital Logo via Medium
Kyle Samani graduated from Stern School of Business, New York University. He was already an entrepreneur before jumping into the crypto world. Prior to launching Multicoin, Kyle Co-Founded Pristine, an enterprise software company that enables desk-less workers with solutions for smart glasses. During his tenure as CEO, the firm grew to millions in revenue and raised over $5 million in venture capital before being acquired by Upskill in 2017.
In 2016, he became interested in Ethereum’s smart contract and joined the crypto industry. Samani founded his crypto asset investment company Multicoin Capital at the right time, just before the 2017 crypto bull market.
Multicoin has attracted whale investors including David Sacks Bill Lee of Craft Ventures, Marc Andreessen and Chris Dixon of A16Z, Elad Gil and many New York and Silicon Valley well-known venture capital firms and their core staff, according to Block123.com.
Two of Multicoin Capital’s higher return investments have been in Solana, a high-performance public chain, and Serum, a decentralized derivatives exchange.
Samani is quick-thinking, talks fast and has an impressive knowledge base. He is so dynamic that he says he wakes up every morning immediately thinking of something to do, but has to remind himself to stay calm. He works to find a balance between his eagerness and the need to do nothing.
Bitpush: You said, crypto assets will create the largest transfer of wealth in the history of the internet?
Kyle: Yes, so what’s amazing about crypto is the market cap of the whole industry today is 200 to 300 billion. And there’s a pretty clear line of sight for this to become 10, 20, 30, 40, 50 trillion. Yes. And amazingly, institutions are slowly showing interest. And individual investors act fast.
Bitpush: Why will it create the largest transfer of wealth, by what means?
Kyle: Two ways. One, the retail that’s in early crypto gets profits too. Second, is that all these fiat currencies over the next 10, 20, 30 years are going to be devalued.
We’re seeing all these governments print all this money to try and fight covid. People are going to go for crypto. So it’s going to transfer wealth from holders of fiat currency to new holders of non inflationary currency, basically. So we’re actually non-sovereign currencies. So that transition will happen. That will be trillions and trillions of dollars of value.
Bitpush: Is it this belief that makes you particularly interested in the intersection of crypto and internet infrastructure? Is this one of the reasons you’re very interested in this area?
Kyle: So we’ve made two investments in the intersection of crypto and internet infrastructure. Those two were Serum and Oxio. Yes. If you think about the nature of internet access. So it’s kind of a few things that are universally true.
One, every single human on the planet will have internet access and they will have internet access everywhere they go at all times, whether it’s through the ground or the air. So it’s an extremely large commodity market, one of the largest commodities is internet access.
Second, internet access is not a fungible commodity, meaning my internet access here is not useful for you.. And so you need to have physical distributors.
Third is the way you don’t have infrastructures deployed, whether it’s people running wires or people setting up radio towers, is very permissioned and top-down. So the people who are permissioning that and setting it up are saying we want to have some statistical probability that we’re covering this service area to some degree of coverage, but they don’t actually take a bottom-up view of it like I need the internet in my room or at the bike store, whatever. It’s something that should really be designed on the bottom-up basis. But the way that it’s deployed with these big telecom companies is very top-down.
We think there’s a really unique opportunity to basically enable people to set up their own wireless internet access, to make it easier to streamline internet access, whether it’s access, speed, cost, whatever. We think there’s a huge opportunity to do that.
Bitpush: What’s the biggest successful story of your investment?
Kyle: Probably Solana and Serum and those two investments go hand in hand. So for some context, ETH launched in 2015, I got interested in 2016. As the bubble happened in 2017, a lot of very smart engineers around the world, database guys, they said, smart contracts are a big deal. Then they looked at ETH and they said, ETH is really suboptimal in a lot of ways. So they said, okay, how can we figure out how to scale ETH?
So in 2018, a lot of teams raise a lot of money to basically build a kind of ETH. We made a really outsized bet on Solana and we did so because we believed early on that trading was gonna be the most important application for blockchain. The solana team from inception has been focused on building the best blockchain for trading.
Actually, the original pitch deck that the founder sent to me the title slide said “nasdaq for blockchain,” which is very corny and they don’t use that terminology more. But from the very beginning, that was their focus. We understood the power of that, I think, earlier than most and made a very large balance investment. They are going to build the best trading infrastructure in the world.
Our investments in Solana and Serum are both done exceptionally well. Our first entry price for Solana was 4 cents. Our blended cost basis is 11 cents. We entered Serum at 3.3 cents. And we put on both of those positions in size today, Solana is trading around $2.3. And Serum is trading for around $1.27. So both have been very strong performers in our funds. Solana now has the foundation on top of which developers can build large scale applications that serve hundreds of millions of users. And we think that’s just incredibly exciting.
Bitpush: That’s great. You just mentioned about DeFi. We just had a DeFi frenzy this summer. Which parts of DeFi are you bullish on?
Kyle: There are a few things. One Serum, what’s special about Serum is the central limit order book. I think automated market makers will always be around, they will be a majority of the market. So Serum is extremely interesting. And we believe firmly that exchanges are the most important financial primitive of all finance. The second most important financial primitive in finance is borrowing and lending.
So like Compound we have a pretty large position and we’re very, very bullish all day. zooming out a little bit further, we are interested in financial primitives. So ways to exchange risk in fundamentally new ways, whether that’s futures or options or interest rate derivatives. But we really like those core DeFi primitives. We’re less interested in aggregators and DeFi middleware and more interested in the kind of deep core primitives.
Bitpush: What do you think about the liquidity mining this summer? The very, very popular things like liquidity mining or yield farming?
Kyle: Liquidity mining is cool. We think most of the teams who have done liquidity mining are doing it very suboptimally. They have a few goals. Get the tokens in the hands of people who care about governance goals, but for the most part the way these systems were structured is they just encourage whales to liquidity mine and then dump on retail. And that is for the most part what’s been happening. The implementation was very poor. In our portfolio companies we work pretty closely to help them design much better systems. Liquidity mining is very expensive.
Bitpush: Do you think it is sustainable? Sustainable in the long term?
Kyle: I don’t think it is going to go away over the next few years. But the yields are gonna come down. Most of the yields are coming down.
Bitpush: We know that the last bull market was based on the smart contract. A lot of people argue that the next bull market will be based on the DeFi development, what do you think?
Kyle: The last bubble was caused by ICOs, which was people bought in current ICOs and got the token. I don’t think DeFi will cause a bubble in the way that I see ICOs caused the bubble, okay? That seems quite unlikely. I think DeFi will be noticed and will be huge but will not cause a bubble.
I think the most likely cause of the bubble is Bitcoin. Global central banks are printing a lot of money and people are scared about inflation. I think that is causing the price of Bitcoin to go up.
Bitpush: So right now Bitcoin is almost above $18,000. A lot of institutional investors are showing interest in Bitcoin. But just when we heard that Ray Dalio, the fund manager from Bridgewater, said that even if a cryptocurrency becomes successful enough to compete with central banks’ currency, the government will ban Bitcoin. Do you think that is possible?
Kyle: What he is saying is possible. But what you’re saying is too far in the future. Bitcoin is not used as currency today. It’s used as a speculative store of value.
It’s like a commodity. It’s kind of like a commodity that this is a speculative store value. Bitcoin, I don’t think, will threaten dollars or euros or yen any time soon. So governments don’t have a reason to ban it because it doesn’t threaten their currencies.
By Susan Feng