Red Pill / Blue Pill: The Two Faces of Bitcoin

Transcript

1. Red Pill / Blue Pill The Two Faces of Bitcoin October 2019 Meltem Demirors | CoinShares @Melt_Dem / @CoinSharesCo
2. This document, which is provided for informational purposes only, is intended to provide a high level overview of the CoinShares investment philosophy adopted by certain investment products promoted by the CoinShares Group only. Nothing in this document should be interpreted as constituting an offer of (or any solicitation in connection with) any investment products or services by any member of the CoinShares Group (and nothing herein constitutes, or should be construed as being, advice relating thereto). Access to any investment products or services of the CoinShares Group is in all cases subject to the applicable laws and regulations relating thereto. CoinShares Co has its offices at 101 Fifth Avenue, New York NY 10003. References in this document to ‘CS Strategies’ should be interpreted as being a reference to a common investment philosophy adopted by a family of investment products promoted by the CoinShares Group. ‘CS Strategies, CS1, or CS2’ is not a reference to any particular investment product or structure. The specific application of the ‘CS Strategies’ investment philosophy, and the actual investments held by products pursuing it, will differ on a product-by-product basis. Each ‘CS Strategies’ investment product may have a distinct structure, including (without limitation) in respect of fee arrangements applicable thereto, and regulatory treatment in the jurisdiction in which it is domiciled. The information presented in this document has been developed internally and / or obtained from sources believed to be reliable; however, no representation or warranty, express or implied, is made as to the accuracy, reliability, or completeness of such information. Predictions, opinions and other information contained in this document are subject to change continually and without notice of any kind and may no longer be true after the date indicated. Any forward-looking statements speak only as of the date they are made, and the CoinShares Group has no responsibility, and does not undertake, to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. The CoinShares Astronaut is a trademark and service mark of CoinShares (Holdings) Limited. © 2019 CoinShares Group. All rights reserved. Note Ms. Demirors herself is an investor in cryptocurrencies and companies, some of which are referenced in this deck for informational purposes only. You can find her disclosures and investments at meltemdemirors.com under “disclosure” and “investments”. Important Disclaimer
3. Red Pill / Blue Pill: the Two Faces of BItcoin Copyright © 2019 CoinShares Group. All rights reserved. 3 “This is your last chance. After this, there is no turning back. You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes.” - Morpheus, to Neo, in the movie “The Matrix”
4. Red Pill / Blue Pill: the Two Faces of BItcoin
5. Red Pill / Blue Pill: the Two Faces of BItcoin Copyright © 2019 CoinShares Group. All rights reserved. 5 The World is Changing Understanding the Context for Crypto
6. Red Pill / Blue Pill: the Two Faces of BItcoin The Times We’re Living In MISTRUST GENERATIONAL SHIFT DISRUPTION • Rising populist tide, trade wars, growing societal unrest • Constant revelations of abuses of power of all types • Balkanization of society in physical and digital world • Largest generational wealth transfer under way – or maybe not? • Failing social entitlement systems • Millennials facing life-long indebtedness • Shift towards open source software and online collaboration tools • Physical jurisdiction less relevant thanks to digital domain growth The preference for crypto is driven by social, political, and economic factors Copyright © 2019 CoinShares Group. All rights reserved. 6
7. Red Pill / Blue Pill: the Two Faces of BItcoin Trust is a Tricky Thing Copyright © 2019 CoinShares Group. All rights reserved. 7
8. Red Pill / Blue Pill: the Two Faces of BItcoin Welcome to Our Digital Overlords Physical World Price of Physical Things = pp Today – our digital world is controlled by a small group of companies VALUE TO BE CAPTURED Digital World Price of Digital Things = pd Copyright © 2019 CoinShares Group. All rights reserved. 8 $800B $500B $900B $1,000B $900B Our Digital Overlords $4.1T in Market Cap / 5% of US GDP
9. Red Pill / Blue Pill: the Two Faces of BItcoin Their Track Record with Trust is Tricky Too Copyright © 2019 CoinShares Group. All rights reserved. 9
10. Red Pill / Blue Pill: the Two Faces of BItcoin A New Type of Trust – Systems, Not Institutions Copyright © 2019 CoinShares Group. All rights reserved. 10 Source: Crypto Graffiti
11. Red Pill / Blue Pill: the Two Faces of BItcoin Copyright © 2019 CoinShares Group. All rights reserved. 11 Enter Bitcoin The First Ten Years of a Social Movement
12. Red Pill / Blue Pill: the Two Faces of BItcoin BITCOIN Innovation in Value Transfer Copyright © 2019 CoinShares Group. All rights reserved. 12 Bitcoin as a Medium for Innovation THE INTERNET Innovation in Information Transfer Network: ISPs Killer App: Email Application Universe: Streaming video and music, data sharing, cloud computing Protocols: TCP/IP, HTTP, DNS, FTP Network: Miners and Full Nodes Killer App: Store of Value Application Universe: Time stamped data, payments, distributed compute, data storage, and more Protocol Bitcoin
13. Red Pill / Blue Pill: the Two Faces of BItcoin Bitcoin is a Unique Phenomenon Copyright © 2019 CoinShares Group. All rights reserved. 13 “Financial institutions make people feel safe by hiding risk behind layers of complexity. Bitcoin brings risk front and center and brags about it on the internet.” - Elaine Ou, Global Financial Access
14. Red Pill / Blue Pill: the Two Faces of BItcoin The Most Valuable Companies are… Intermediaries Copyright © 2019 CoinShares Group. All rights reserved. 14 Source: CoinShares Research CREATE DISTRIBUTE RETIRE OR REPLACE MANAGE t = 0 t = 1 t = 2 t = 3 Speculation Utilization Specification $8 B 5 Years $5 B 4 Years $4 B 5 Years $5 B 2 Years
15. Red Pill / Blue Pill: the Two Faces of BItcoin So Where Have the Coins Gone? Copyright © 2019 CoinShares Group. All rights reserved. 15 Source: CoinShares Research Xapo Grayscale XBT Provider Self-stored or held by an un-accounted for intermediary Mt Gox Custodian Assumed lost Top Exchanges Coinbase
16. Red Pill / Blue Pill: the Two Faces of BItcoin A Familiar Picture Copyright © 2019 CoinShares Group. All rights reserved. 16 Source: Office of Financial Research 0 100 200 300 400 500 600 Capital One PNC U.S. Bancorp State Street BNY Mellon Wells Fargo Goldman Sachs Morgan Stanley Bank of America Citigroup JPMorgan Chase US SIFIs (Systemtically Important Financial Institutions) Composite Risk Score
17. Red Pill / Blue Pill: the Two Faces of BItcoin Recall Bailouts Aren’t Unique to Our Legacy World Copyright © 2019 CoinShares Group. All rights reserved. 17 Source: CoinShares Research
18. Red Pill / Blue Pill: the Two Faces of BItcoin The Challenges of Building a New System Regulation User Preferences Service Providers Compliance Requirements Political Pressure Macroeconomic Climate Financing Talent Technology Execution Financial Planning Operational Discipline User Acquisition Idea Distribution Security
19. Red Pill / Blue Pill: the Two Faces of BItcoin An Expanding Range of Options Copyright © 2019 CoinShares Group. All rights reserved. 19 Source: CoinShares Research • High risk tolerance • Unfazed by complex rituals • Some technical competence • Low risk tolerance • Desire convenience • Seek intuitive user experiences CYPHERPUNK MY DAD
20. Red Pill / Blue Pill: the Two Faces of BItcoin Copyright © 2019 CoinShares Group. All rights reserved. 20 The Blue Pill Watering Down Bitcoin’s Promises and Selling “Blockchain”
21. Red Pill / Blue Pill: the Two Faces of BItcoin Copyright © 2019 CoinShares Group. All rights reserved. 21 From Bitcoin to Shitcoin to Fedcoin Cryptocurrency Tokenized Securities Stablecoins ??? THE EVOLUTION OF AN IDEA Initial Coin Offerings COIN FEDCOIN
22. Red Pill / Blue Pill: the Two Faces of BItcoin Company Crypto Move Market Cap Buy and sell bitcoin in $cash app, contributing to bitcoin’s open source $32B Bitcoin futures contracts $63B Bitcoin custody, crypto mining $1.4T AUM Created a subsidiary for institutional trading, custody, and much more $44B Copyright © 2019 CoinShares Group. All rights reserved. 22 Finance Firms are Not Waiting
23. Red Pill / Blue Pill: the Two Faces of BItcoin Corporate Coin Type & Peg Description # Users 1 Libra = 1 unit of stable basket Libra coin backed with a pool of assets, Libra Foundation, and Calibra wallet 2,700M 1 JPMCoin = 1 USD Internal use only, for now – used to settle “smart contract” bonds 30,000 middle market, 1,700 corporate 1 Rakuten Coin = TBD The online giant’s $9B loyalty program will be rolled out on a blockchain 102.6M 1 S Coin = TBD Will allow for mobile phone payments, and also allows others to mint their own tokens Unknown 1 TON = 1 TON Telegram’s TON token allows in application use 250M Copyright © 2019 CoinShares Group. All rights reserved. 23 Corporates Want to Play the Game
24. Red Pill / Blue Pill: the Two Faces of BItcoin Copyright © 2019 CoinShares Group. All rights reserved. 24 But the Results are Mixed
25. Red Pill / Blue Pill: the Two Faces of BItcoin Copyright © 2019 CoinShares Group. All rights reserved. 25 And Now, Governments Too
26. Red Pill / Blue Pill: the Two Faces of BItcoin Copyright © 2019 CoinShares Group. All rights reserved. 26 The Game is On
27. Red Pill / Blue Pill: the Two Faces of BItcoin Not so Much Revolution as Evolution Evolution Early adoption fits the existing regulated structure Revolution Experimentation phase takes time… Decentralized Financial System Centralized Blockchain Applications DENIAL ANGER DEPRESSION BARGAINING ACCEPTANCE *The Kübler-Ross grief model serves as a good index of how incumbents and stakeholders alike will react as we progress through the parallel paths VALUE TO BE CAPTURED
28. Red Pill / Blue Pill: the Two Faces of BItcoin The Stakes Have Never Been Higher Copyright © 2019 CoinShares Group. All rights reserved. 28
29. Red Pill / Blue Pill: the Two Faces of BItcoin
30. Red Pill / Blue Pill: the Two Faces of BItcoin md@coinshares.co