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Kevin O鈥橪eary reveals his crypto investment strategy | Interview - YouTube
Channel: Cointelegraph
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investment shark kevin o'leary aka mr
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wonderful used to be among the loudest
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critics of cryptocurrency
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such a scam like that's just totally bs
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i'm not going to take real money and put
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it into this thing it's never going to
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happen since then o'leary's views have
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changed dramatically and now he's
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managing a highly diversified crypto
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portfolio i'm a huge advocate for
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bitcoin i treat it
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as an asset no different than a aaa
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office tower in boston in individual
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tokens and coins and chains i've got 33
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different positions what is mr
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wonderful's current investment thesis on
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crypto and what are the hottest projects
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he is betting on find out in another
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exclusive coin telegraph interview
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so for a long time you were a vocal
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skeptic of crypto but then you changed
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your mind about it and now you're an
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advocate so what was the turning point
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that made you change your mind about
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cryptocurrency the regulator what i
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started to see i i have many many
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investments
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in financial services industries
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many of them are regulated already
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because they're issuing indexes and
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securities and whatever else i cannot
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afford to be
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non-compliant that's that's not possible
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for me everything i do has to be
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compliant by the regulator otherwise it
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causes
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chaos in my business
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business says i have multiple
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investments and so
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there was a period where the regulator
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was extremely um
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proactive uh and and
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you know not constructive on on
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cryptocurrencies and it was a very
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difficult time
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with the sec and the other regulators in
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the u.s
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so
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during that period yes i was a skeptic
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because i didn't anticipate anything
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that would change my mind if the
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regulator didn't and then all of a
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sudden things started to change i invest
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globally so i'm very aware what's going
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on in switzerland france germany
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australia new zealand canada
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the nordic countries the regulators
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there started to open up and i have
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investments in those countries and in
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canada for example so where the
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regulator allowed for etfs
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that held the underlying being bitcoin
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and ethereum so when i started to see
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that happening uh on a g on a global
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basis i started to allocate towards
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crypto and have not stopped since then
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so when facts change
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i change also i'm not i'm not so
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rigorous uh that i don't have
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flexibility and that's exactly what
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happened and so
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now i'm extremely active i have a
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staking desk i work you know very
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closely with companies like ftx and
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circle i'm a investor in ftx i'm a paid
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spokesperson for them i'm very active on
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the platforms
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so
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and and i thought this year here we are
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towards the end of 2021 i anticipated at
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the beginning of the year as a three
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percent waiting in the operating company
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in cryptocurrencies as a basket
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today i'm over 10
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and a combination of increasing my
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position in staking
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and also the capital appreciation of
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these assets over the last year
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so
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um
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to say that i'm involved in crypto today
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is an understatement it's
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it's a very large portion of what we do
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okay cool and if you had to point at a
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specific moment that made you change
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your mind so you talked about the
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regulators and the change of attitude
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that regulators um had but
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did that happen gradually or there was a
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particular moment in time where
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you thought okay this is the time i can
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get in
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the moment was when the canadian
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regulator approved the first bitcoin etf
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everybody knows that canadian regulators
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are conservative and they don't make
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moves without talking to their global
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counterparts
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for them to do this meant that they'd
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already had some kind of dialogue with
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other regulators in other jurisdictions
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and decided those were the rules for the
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canadian etf
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that was the moment okay cool so what is
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your current investment thesis on crypto
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if you had to broadly describe what is
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your investment is on the crypto
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industry right now i look at
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crypto not as coins or tokens i look at
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it all as software
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it's productivity software
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the the the projects that are going to
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last and and
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be here you know a decade away from now
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are ones that actually solve problems so
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let's let's give an example i'm an
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investor in polygon why
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because i had a chance i'm you know i'm
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very fortunate guy i i'm able to call up
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the leaders of these projects and these
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teams and they returned my call and i
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asked to meet them anywhere in the world
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in this case we met in dubai
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with the polygon team
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i'm an investor in in software engineers
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i always have been i've been in the
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software industry for 20 years
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they're very very strong and their
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mandate what they decided to do is to
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try and reduce the cost
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by sitting on top of ethereum and
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aggregating transactions so the gas fees
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are a fraction of they would be if
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you're doing one at a time i thought
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that was a brilliant strategy and i made
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an investment in polygon
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the same with solana the same with with
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ethereum the same with you know hbar all
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of these are software if you're
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investing in for example in google or in
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microsoft what are you investing in
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you're investing in software why
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wouldn't you invest in crypto it's
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software too
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and the regulator is is in my view
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going to eventually support these
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initiatives because of the tremendous
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economic enhancement and productivity
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they provide for the underlying economy
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so talking about specifically your
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portfolio in crypto uh can you give us a
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bit of an overview if you can give us
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some details about your portfolio
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construction
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in individual tokens and coins and
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chains i've got 33 different positions
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wide range of diversity you know i look
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at this the same way i look at managing
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an equity portfolio
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never more than five percent in any one
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name never more than 20 in any one
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sector so
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in that theory that mandate means that i
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can go up to 20 percent in crypto right
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now i'm just over 10 about 10.7
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but i've also made equity bets
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for example i have a an investment in
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wunderfi a canadian company that is
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democratizing defy so they're providing
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they're launching their product in
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january they've been working on it for
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over two years
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one of the biggest challenges for the
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individual like my daughter or my son
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who want to do staking and remain
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compliant with tax authorities depending
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on what jurisdiction they're in
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is it's very complicated to actually do
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it if you have fourteen thousand dollars
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in your bank account and you decide that
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you'd like to stake some of it
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uh
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wonderful is working very hard to make
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that very easy to do
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and and that that's one of my
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investments because i think
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cryptocurrencies are not just for the
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crypto elite there's a huge demand
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within the population to solve for the
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fact that interest rates are so low so
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just on staking alone that's a huge
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opportunity i'm a big believer that nfts
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which are basically digital wallets of
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information are going to be very big in
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the physical asset world one
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specifically
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that i'm part of the advanced thinking
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on if you want to call it that i'm
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funding a white paper on it right now is
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for the watch industry
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the watch industry as you may know
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is one of the fastest growing asset
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classes in the world right now
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multi-billion dollar secondary market in
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trading fine time pieces
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and we don't have any nfts for
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authentication and insurance purposes
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we want that and and so do the so does
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the watch industry so the idea would be
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if you take a high resolution scan of
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the dial you can identify that watch in
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perpetuity and you could avoid
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fraudulent trading of a piece that was
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made to knock it off and that's a great
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interest to all the great watchmakers
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just my collection alone i want to do
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that on so the whole point is there's so
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much activity on nfts and yes i'm an
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investor there yeah that's fascinating
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because you mentioned so many different
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projects so many different coins but you
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your attention seem not to be too much
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focus on bitcoin at the moment so i'm
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curious to know what is your view on
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bitcoin has your uh has your view on
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bitcoin changed since you became a
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crypto advocate
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uh and how
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yes i have a position in bitcoin it is
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not my largest it is close it's up in
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the top quartile though um ethereum is
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larger than bitcoin right now for me
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um
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here here's i'm a huge advocate for
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bitcoin i treat it
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as an asset no different than a triple a
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office tower in boston
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it's a it's an asset i don't consider it
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a currency now everybody has their own
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opinion my opinion is it's an asset so i
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hold it i'm not i don't trade it i do
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stake it but the point is i'm not
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selling my bitcoin the challenge i have
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with bitcoin and the whole industry has
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this challenge is we've got to deal with
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these esg issues there's a lot of
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criticism around bitcoin because the
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amount of energy it takes to get a coin
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awarded and in that area i'm working
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very hard there's lots of initiatives to
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create bitcoin and i'm not saying we're
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bifurcating the bitcoin market that
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onecoin's different than the other but
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if i'm at a sovereign institution and i
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work with lots of sovereign institutions
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because i'm in the indexing business
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they would like to fund
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bitcoin mining where they keep their own
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awarded coins knowing with 100
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certainty that they they mine them in an
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ethical and efficient
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sustainable manner
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and
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that is where a lot of the new capital
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is going and whether that be wind or
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solar or nuclear or whatever those all
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of those projects are happening globally
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and they're being funded by sovereign
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wealth because sovereign wealth has esg
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and sustainability committees on top of
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their asset decision making so the next
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generation of coins awarded are probably
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going to be held in perpetuity on
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balance sheets of companies that are
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funded to make them sustainable
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and you know
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that's one way to solve that problem but
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you say that
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every investor could invest up to 20
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into a specific uh sector so uh i would
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say i would ask you what should happen
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in the regulatory atmosphere in the u.s
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to convince you to bring your allocation
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up to that 20
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into the crypto industry what i really
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want to have happen is i want the
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regulators
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to
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bring policy forward
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on stable coins that's what i want i
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want because stable coins are very
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important to me
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as a hedge against inflation and
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specifically the one i've chosen to work
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with is usdc because i think it's the
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most advanced in terms of in dialogue
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with the regulator not here but in
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geographies all around the world
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it's a form of payment it's also a form
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of of hedging against inflation because
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if i can at least marry
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my staking program with inflation
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currently at six percent at least i'm
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holding value but i can't really do that
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until the regulator rules because
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even within my own
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operating company with my own compliance
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department
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they're considering stable coins as an
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equity no different than a stock so i
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really can't get past five percent it's
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not like i can hold a huge 30 cash
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position i mean you know when we sold
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off our commercial real estate we had a
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huge cash position we couldn't
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it was about 30 percent of the operating
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company so you know we've been working
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hard to redeploy that capital but i i
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really want the regulator to rule on
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stable coins now you know that there's
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been some controversy
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with certain stable coins with the
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regulator i don't touch any of that
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stuff
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anything that's involved in in a in a
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fight with the regulator i have i want
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nothing to do with i am not a crypto
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cowboy i work in a compliant environment
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i don't want to get on
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you know some kind of a mission saying
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we have to sue the regulator that's
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insanity that's crazy and and that's
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really bad idea and so uh i think all of
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us in this industry should understand
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that we work with the regulator
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to to generate the most advanced policy
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we can get and that it the reason we do
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that it's in our self-interest of
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sustainability and also it gives us way
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more
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in terms of what institutions can
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allocate into these asset classes so we
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should definitely be thinking about that
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that's interesting because you choose
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stablecoins as one of the main tools to
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get value out of your out of your assets
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while cash if you hold cash you end up
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losing value
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but a lot of people would say why don't
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you use bitcoin then why you choose
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stable coins instead of bitcoin well the
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challenge i have and many institutions
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have with bitcoin is volatility so when
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you are managing or your fiduciary for
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for capital
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volatility is not your friend because
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you're marked to marking value of a
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portfolio every 24 hour cycle so if you
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have been given a mandate by an
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institution uh and you most of these
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mandates are based on diversity and
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stability your number one mandate is
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preservation so if you're managing for a
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pension plan or university or state fund
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or whatever it is
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that volatility really hurts you when
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when you're being graded in terms of
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your mandate and so i don't think you're
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going to see
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um there's nothing wrong with putting
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bitcoin in in a five percent waiting up
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to a five percent waiting and treating
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it like an equity um or an alternative
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that and i see tremendous interest in
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doing that from a one to five percent
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generally on average a three percent
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weighting with where you find bitcoin
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but you're not going to get there uh to
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a 20 30 percent in bitcoin in an
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institutional or sovereign mandate
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you're just not uh stable coins have
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that potential if they were regulated
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you seem to be pretty confident that the
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regulators will eventually enable crypto
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to thrive
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on the other hand uh there i had a
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conversation with with mark yusuko a few
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a few months ago who was
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expressing his very common narrative in
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the crypto space which goes like um
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there are the incumbents of traditional
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finance like banks
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uh and the final financial intermediate
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intermediate intermediaries that are
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going to
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lobby the regulators or still use their
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influence in order to slow down this
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this crypto revolution that we are uh
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looking forward to happen so don't you
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see the role of the incumbents as
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a major issue for for crypto to develop
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further and to get the regulators on on
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their side
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i don't
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i don't agree with that positioning i
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don't think that's going to happen
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either the only
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entity that can control the pace of
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regulation is the regulator themselves
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and it doesn't matter what the
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incumbents say or do they will they will
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go with the flow of productivity and
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innovation
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banks you know are winning and losing
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all the time in terms of who makes more
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money who has a higher return on assets
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i can tell you what motivates a
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traditional
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money center bank is return on assets
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they they spend their whole day trying
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to figure out how do we optimize for
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return on assets and
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if they're not looking at
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cryptocurrencies they'll be left behind
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that's what's going to happen because
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when the regulator finally rules just if
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it was just on stablecoin alone they
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would have to open a stablecoin desk of
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course they would now are they going to
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start from scratch are they going to be
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working on it quietly in the background
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my guess is they're working on it
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quietly in the background they would be
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foolish not to be i wanted to ask you
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another question regarding
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the
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situation with inflation so
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as you said inflation u.s is hovering
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around the six percent points and the
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fed now intends to win down the stimulus
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measures
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uh
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in order to contain this uh trend
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so how are these macro economic dynamics
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going to impact the crypto industry the
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crypto prices in the months to come
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according to you you're being taxed at
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effectively six percent if you hold cash
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maybe you don't want to call it a tax
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but when inflation's six percent your
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buying power 12 months from now is six
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percent less and that's a lot and so
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we now have added pressures and i'm no
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different than anybody else trying to
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figure out where do i deploy this
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where can i get stability in the in this
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cache where can i find a way to hedge
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and it brings me all the way back into
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stablecoin so i'm a huge advocate for
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solving this problem with stablecoin it
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doesn't mean i don't want to invest in
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the other blockchains or the other coins
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or tokens or other ideas i do
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but
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i can't i can't do 30 percent positions
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in mandates of of any of them that's too
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volatile so
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these issues are not going away the
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dialogue is not going to change you're
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going to see
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a lot of discussion about this in the
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first and second quarter
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of next year and you're right on the
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money to be covering this
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there's no question this is going to be
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very important
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and and i think we're going to start to
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see some moves with the regulator very
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shortly not just in the u.s so we talked
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about canada we talked about germany
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talked about switzerland the same those
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regulators are all talking to each other
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they're all talking to each other if we
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could just agree on one stable coin
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between those jurisdictions that would
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be huge productivity enhancement and i
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anticipate that will happen awesome okay
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um
[1061]
kevin that was a great conversation
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thanks a lot for jumping on our show you
[1066]
got it
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