FO256 Opening Keynote: Gabor Gurbacs, Director, Digital Asset Strategy at VanEck

thank you good morning everyone welcome to fo2 5/6 defining digital assets my name is David H and I am your host over six months ago we hosted the first fo two five six with a similar ethos to bring institutional caliber investors family offices high net worth individuals and institutions together with the best and most accomplished investors practitioners and founders and crypto assets to help bridge the education gap that is evident today many on the institutional side have lots of questions concerns and doubts about the validity of cryptocurrency and the technological revolution associated with the underlying technology and blockchain those who have spent months and years researching it investing in it and taking regularly talking regularly with those in the burgeoning community see the spectacular promise of it however understanding it has been plagued with some issues which have delayed more mainstream adoption today we continue to provide that education and address those issues today we discuss real-world use cases for blockchain and digital assets real platforms being developed by some of the most talented people from the tech sector and traditional finance sector today we hope to empower you with knowledge that leads to more curiosity you will hear for some of the biggest and institutional players in the world who are building in this space from family offices investing and building around it from experienced lawyers who are working with state and federal law makers on regulatory clarity and guidelines and from some of the most experienced investors in both public and private markets that have developed now a few administrative issues first and foremost I wanted to thank the folks that rise in New York they have provided this space for us and for this community together so I want to graciously thank them for that it is a beautiful space we hosted it time thank you to rise secondly something that we did last time that I liked and I enjoyed was something that I called that way that is called slide oh now if you were here last time you and you would remember this but for everyone else all you need to do is go to SL I do comm you don't need to download anything you can use it on your phone use on your computer or your smart device and all you need to do at the very top it will ask you for a code and that code is V three to eight what you will be able to do here is submit questions in real time and so when everyone's talking and you have questions you can send it right from your phone or from your smart device and you the crowd can upload and see which ones will be asked to the panel additional link I have a few questions and some things that would be helpful to gain some more education on in terms of your exposure your an interest level in the space so everyone as I said on your phone or a smart device all you have to do is go to SL I do comm enter in that V three to eight passcode third we are enabling those in the family office and high-net-worth community who have not experienced Bitcoin today with a special offering I want Michael and Kelly from Casa please if you can stand up they have a graciously offered to donate it coin to anyone who has not had that before it's a great way to really understand what's happening in the ecosystem to experience in a real-time and you start to you know send and transfer and do all sorts of things with it instead of talking about it academically so please during breaks find Michael and Kelly they will be able to give you some Bitcoin and you'll be able to see how it works Thank You Casa and with that I want to introduce our first presenter couple worm who is the director of digital assets and strategy at Vanek Gabor will be presenting a macro top-down view of what's happening within the industry giving you some precedents and history on that right now and so with that thank you Cora please come up so I can take questions like real old-school questions as well you don't have to put it on the slide at the end so that would be okay thanks again for the invite and it's really nice to be talking with family offices I generally talk with larger institutions and glad to be here so first we're we're good to go go through whoo it's basically a little bit of history about Vanek and what we do how to then how to think about digital assets and some mental models and what allocations you should consider as a family office and then I'm going to walk you through through what I find an invigorating list of tweets that mostly from me that are basically highlighting the infrastructure developments in the digital asset space to start very quickly my bias is Bitcoin and just just so that you know my background is in basically Bitcoin and ETFs I work at Vanek for the past five years previously I was at the PM team the product management team and I head up the the team's physical event ax the true asset work the interesting thing about Vanek is it's a company that was built in 1955 and what we say is that we like to offer we offer forward-looking and intelligently designed strategies the firm is a private firm its independent and focuses on inside execution accessible and accessibility as you may know Vanek was the first company to build a gold equity fund in the United States it's one of the reasons why we got involved in Bitcoin is affirmed the 1955 when the firm was built and in six state we built the first gold fund the Bitcoin box in the room John Vanek the firm's founder was actually a direct student of Olympic for mrs. who is basically the an Austrian economist who believed in hard money it's money that is backed by something and at that point it was gold in the 1920s a gold was an asset that couldn't be purchased and in the 1950s and 1960s when mr. Vanek started King at it people thought that he was crazy and it was looking at gold in the 1960s it was like looking at Bitcoin in basically 2010-2011 that would be the analogy and then in 68 after roughly four years or both the first gold fund and since then we built various strategies mostly in the ETS base the wreck some more updated numbers manager about 50 million dollars and right now our employees is about three hundred and thirty in everywhere from orange Australia China Germany Switzerland and we bought think ETS and Amsterdam which is really cool okay so that's about Vanek for you the room if you think about investing in digital assets I urge you to know the three types of digital assets out there and those are cryptocurrencies platforms and applications cryptocurrencies are basically like digital gold or Bitcoin and it's important to know that they are used to transact value but not all of them are effective to do that and then there are platforms and most of it actually the ones that are competing with Bitcoin are platforms so there those are fat protocols what we call them and their applications which are very specific to carry out one thing like allocate Wi-Fi bandwidth Internet of Things devices and think things like that so cryptocurrencies platforms and applications are the three areas that you should keep in mind as you're invest the when you must and people will probably tell you otherwise in the following panels but I urge you to only invest about half a percent there percent of your portfolio maximum that's our firm view its these are very early stage assets in the your asset allocation bucket is either really venture investing or your store or your basically store of value category the Gold's competitor but half percent 2% as what we would say you know considering maximum though mortgage the house don't invest 10 20 percent don't take out loans or all that and you'll see that the subsequent presentation what 1 percent of us to your portfolio I think it's boring so I didn't include that the Chipettes and markets are sort of growing up right now but the three major issues that I like to focus on is that it's really hard to know what's the price of Bitcoin it's not as easy as as you might think for basically it's easy for securities and there's reg NMS in the US there's no such thing for crypto it's different by jurisdiction the ecosystem is fragmented and there are these things called Forks which is basically a new type of corporate action that after runes values for digital assets and the third thing that I focus on is custody the you'll hear some custodians in the room but I think that the custody ecosystem is not yet in place through the support mainstream digital assets okay so you should know the rest there's a lot of hacking unintentional coding errors governance is not great maybe a miners can run a ruin the system there are encryption issues quantum computers might be able to hack some of the encryption algorithms during relation to thank for another digital asset so those are all issues that you should be in a variable these you guys probably know at this point but this is a snapshot of the crypto compare website I don't use coin market cap that's in the news a lot because it's not a good data I work with the crypto Canberra guys for about three years now but our fully regulated and next provider to bring transparency to pricing of digital assets and the numbers that you see there in the crypto comparing abacus and this site which I'll show later is our basically financial standard and definitely not the point market cap alone performance you seed a lot of Bitcoin lost 80% value and so on if you look at just zoom out a year today most digital assets the top ones are out roughly 25 to 50 percent some even a hundred percent in through in the past three years most digital assets are out between a thousand and five thousand percent and then basically in the last six months to a year we have seen a correction in the twenty to fifty percent range roughly for digital assets and one year one year is basically twenty two seventy but that's the short I want you to remember the long term now when you hear stories that bitcoin is home by only a you know people if you if you look at these lines that are their big wheels so oops basically there's about 15,000 people who own 62% of all bitcoins that's actually fairly well distributed the worst billionaires 4500 of them own about 83% of total wealth so if you just look at a linear rate but the Bitcoin is four times were sort of like well this treated them well in general and then these are the platforms that you should be aware of like when trading wise you might ask is trading Bitcoin legal at all it is actually and in the US it's defined as a commodity and a lot of places to find as a virtual currency Japan made Bitcoin legal tender so if you go to Japan and you would like to pay the Bitcoin and and the is able to accept Bitcoin they can't reject it I think that's a big deal basically you probably you shouldn't know that this point is not banned around the world it's just the definitions of Bitcoin that have changed okay so and now I'm going to just go to the segment what has taken place in the Bitcoin markets and why we should look at it as a legitimate and and quickly growing market its first I just want to let you know that not everyone likes to call her and traveled a lot is one of Hungary raised in Germany and there's a recent sore rebelling against the US dollar globally and it's the Volcker rule try to fix the status of the US dollar the recent sort of developments in our international relations didn't talk so just keep that in mind the dollar might have might be in trouble and the onions grew up in tokens and digital assets my brother and I used to run a bank in World of Warcraft in the in Stormin city and it was it was actually a fairly good deal we realized that around four or five o'clock when students come home they they would buy different weapons and and so we meet rated tokens for real sort of like gold tokens and Warcraft and then we paid our memberships and got real dollars outfit that was more than ten years ago pretty much it's my even my generation I'm about to turn 30 grew up with tokens the newest newer generation is completely clean the dope in the world yet our financial system doesn't interact with this generation I think it's very important and all this and so that's one that's one aspect and the second aspect is there a lot of centralized failures that we the experience across the board like Equifax hack different exchange that just being had countries being hacked it's all because there is a central point of failure distributed ledger is which basically may be able to disrupt these systemic issues and may be crucial to our national security as well and we'll see that playing out in probably ten years alright so the cool tweets now there's groups like they're Goldman Nasdaq they enact fidelity that the CME Group there's so much going on in the space real institutions are participating it's not just a family offices Wall Street will have a role in in crypto we have seen a lot of market structured development and I think the next three years will see that crypto will actually grow more on Wall Street than anywhere else and you shouldn't overlook it so we we're sort of leading the efforts of building a Bitcoin ETF another regulator instruments as you likely have seen in the news hopefully we'll get this ETF approved I don't have a timeline for you I can tell you to the outside of the 80s you keep your ears open because you might hear from us we are building a number of other regulated structures that might be actually in turn off interest for this group and we can talk about that later so yeah I lost about two inches of hair to regulators and it might work together PDF approved and I hope that we were going to call me at some point to to get an idea to market and you know kind of ours we have received the most number of comments in the history of the SEC for any fund it was sixteen hundred comments and this was about nine times as many comments as the second ATF proposal got so there's a lot of public support and we really appreciate that there's surveillance coming to market we announced last year with Nasdaq that we are going to bring Surovell futures to the market so it's not the underlying stock markets to grip the exchanges that we don't trust today are getting surveilled and I think that's an important stat so information-sharing know who's trading on those exchanges no funky business and it needs to sort of happen products to market and this our index provider and in Germany we group to compare the bill is compliance and actually under that's an exemption a new benchmark law compliant indices for crypto two three years ago roughly and so there's a way to monitor funds and proper price of digital assets we have also provided them the export of first multi-asset EPP in Switzerland the on-loan product as you may have heard of it so Switzerland actually and in Sweden are ahead of the curve and a half of the u.s. for regulated products and that and so we are hoping that eventually we'll catch up but so it's fine there's a small market so we didn't want to participate there or we help another provider and I think it's an important step we also built transparency to do over-the-counter markets which I think people underestimate but about some somewhere between 35 to 60 percent of the volume of Bitcoin that's actual wine is trading over to cancer that's what our ETF is cracking working within the largest and most regulated to readers or decanters and then there was a Bitcoin celebration attend your birthday celebration in the US and a major television charges I just thought that was crazy like I never thought that that will happen that a major news channel will cover Bitcoin and guess what happened are there presidents throughout my session and it was very uncomfortable to say the least all right so I have a few more things I don't know how much 10 more minutes okay I do a lot of surveys on Twitter and I urge you to follow me on Twitter and add me on LinkedIn if he catch up and one of the surveys say to say I ask people that what type of asses do you write down in the future besides Bitcoin and digital assets and most people said it's gold emerging emerging markets and it's on broad and diversified work and I can reach me this but the in the comment section there's a lot of real estate and there's a lot of the organized securities and and it was just very interesting to me that the kind of people who engage in this space are generally interested in gold in the emerging markets so that's kind of the the more forward looking into international the sort of value type of space that engages with digital assets this one as I don't know how accurate this one is but I got a lot of comments Florida it might have been an army that held them that would so basically people are looking at you know other digital assets as well an extra P and he th is one of them but I think some of those may be think of the past once tokenize securities come to market I'm a big fan of stable coins as in ones generally did earning market but the first one tether ladder has significantly increased the speed of the US dollar and crypto was pretty much unbanked and when crypto was on bang this thing has created banking for crypto encrypted exchanges cooperated the US dollar why don't we give the audience a kind of 101 oh what a stable point is okay yeah yeah definitely so staple gun is basically the the it's it's like your US dollar it's the idea is that bitcoins will attend some of the digital assets have higher volatility than traditional assets like three times higher volatility and so you want if in order for a digital asset or crypto currency to be effective efficient you do on there its price to be stable so you can create different mechanisms to keep it that way and basically tether which is us need is tether good ties through did price of US dollar so when when you redeemed header it's about one to one relationship but USD and basically you can get move significant chunks of money without having to touch US dollars it was a big improvement for those crypto exchanges that did not have banking relationships and it was a sign how the financial system in banking failed and crypto innovated and that's there was a very important stuff to me today debtor still banks about two billion how much referred to facets yes so that's me I have one more slide I think it's at my conservative estimate for the next twenty years roughly I think that your glasses will be about ten trillion dollars right now ETS ETS it's around six point eight seven trillion that market came about in twenty years roughly given the breadth of things that digital assets and tokens can access and the just a general promise of having Bitcoin as a non-sovereign issued thrust minimize of staff money I think we'll we'll see a lot of facets flowing into this industry and I could be you know off by an order of magnitude I don't know I do decide but again I think this is a space that you should keep in mind and before we open up to questions I just ordered you to do your due diligence very similarly about the space as you do for other asset classes demand demand regulated institutions demand basically what you would do math any other assets else you might get burned and that's my sort of finer one let me know if I can be of help I'm on LinkedIn and I am fairly active on Twitter as people know in the room we do have a question yes you guys are using and thank you so a question just came in now obviously you are not someone that can necessarily pontificate about why things happen within Bitcoin but there was a lot of speculation on why the recent run-up has happened we crossed over 5,000 recently over the last week so in your opinion Vanek what are the things that are you're seeing that might have caused the recent rally within Bitcoin and where do you if you could if there is any kind of you know relative forecasts or projection that you are more akin to we're doing to see it you know Bitcoin happening within the next one pricing out of the next 12 months okay so first price is not the most important thing to watch I think it's the structural transformation that's taking place and how the financial system gets this and generated that's more important but on the other recent price jump it's a much less sexy answer than you accept expect what happened so and at the end the last Friday people say that there's a mystery buyer someone is buying I don't believe that's true so in the last Friday of every month at I think it's 4:00 p.m. London time poetry p.m. London time the CMA Bitcoin futures expire which was New York time a lot of the basically reverb around that timer at four thousand three thousand nine hundred eighty then the front contracts got rolled into the new frontline contract they were some buying price went up to four thousand fifty their subsequent buying over the weekend price twenty four thousand one hundred fifty three million dollars of shirt shorts were liquidated and leveraged trading platforms and we went through a short squeeze and from between four thousand two hundred and four thousand nine hundred the order books were pretty much they were super thin and the price ran out very quickly is about twelve to thirteen million dollars arbitrage between exchanges so it was a short squeeze induce Valley and my Bitcoin goes I am I'm not in a position to comment but I think there's a lot to look forward to if there are things like ETS after market another another question this came in do you think digital assets are perceived as a risk on or risk off asset now and how would you change how would that change in the context of a future recession so we like to say a mannequin and this is young Matt Garcia I borrow this term from him he says that Bitcoin today acts about basically two-thirds as a tax stock and one-third as gold and that's the sort of the correlation that we have observed over time a lot of the buyers are tech oriented people it's a Bitcoin dance to trade but sometimes especially during rallies following tech stocks in the market and sometimes to access gold I think the longer term it will be more like a certificate Gold's type safe-haven asset so move against the different direction compared to no more so basically against a market how would you expect digital assets perform in a case of global recession you guys are really draconian out there right now I think it will actually people will re explore gold and Bitcoin so about 0.7% of any managed portfolios in the world own gold that's a very small and the gold is about seven point eight trillion dollars in outstanding value I think in the next global recession people were very explore gold and Bitcoin and what's the price impact that there's a lot of buying I think the price is going to go up but I don't know how much I think there's definitely going to be new investors looking for basically rescue risky assets that are move against a market okay one more unfair question your common untethered means positive I don't know you want to say that but okay please comment on tethers unrelated unredeemable characteristics and what risks might exit exist from that non-transparency so I'm this is group war now Vanek the I think the the other guys have not failed anyone yet and they said they managed to billion dollars take a banking relationship they don't have a traditional audit because American firms actually can audit them technically and the this is this is this is important if you're in the crypto business and if you're a crypto firm doing business you have no access to banking you have no access to auditing most of the services will turn your back to you the very basic things that we get done in financial services are unaccessible it's ridiculously that is 10 times harder more to do businessman crypto and if managed to find a bank they manage to satisfy redemptions I think they are doing a good job some of the crypto businesses if regulators were friendlier and more clear with their guidance would actually come out and would want to work and getting a bank know that like you know Wells Fargo which was a partner right in in Taiwan and they cut them off literally the bank cut their lines off and they can redeem money for their clients not because of them but because of the bank so that that's a team that I've been seeing that regulators are not not giving guidance to this space and in fact actually industry's driving it against a regulatory push with the Nasdaq future slide that I showed there's a number of crypto trading platforms or changes that are property license that I actually want to come fully in the green and in the US and that's actually a very positive market development I think actually some of these exchanges in the next two years will probably run a securities trading platform and become fully licensed exchanges that's that's my thought about that and with that Gabor thank you very much everyone thank you [Applause]

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