This week on the podcast profile we listened to Unconfirmed by Laura Shin, where she and CNBC Cryptotrader host Ran NeuNer talk with Olaf Carlson-Wee, founder and CEO of cryptocurrency hedge fund Polychain.
Carlson discovered Bitcoin in the summer of 2012 and wrote his undergraduate thesis on the world’s first decentralised cryptocurrency. As he learnt more about Bitcoin he realised that it was going to probably be the greatest technological revolution that he would see in his lifetime and figured it was the best opportunity for him to attain a successful career.
When he finished his degree he had no expert skills in the the cryptocurrency space and so spent the next Summer working as a lumberjack, before moving to the Bay Area in San Francisco and applying for a job at Coinbase. He was the first employee to ever be hired by Coinbase and was paid exclusively in Bitcoin for his role in risk management. In 2016 he left Coinbase to start the hedge fund Polychain Capital.
Carlson started Polychain in his bedroom and likened the the early days of navigating the crypto landscape to drinking water from a firehose.
Many of Polychain’s early customers wanted the navigating done for them to invest. Some of Polychain’s early investments were into Tezos and the MakerDao, and now Polychain is worth over $1 billion. When asked how he manages the emotions of his customers in such a volatile market he said:
We are as transparent as possible with our clients that it is a volatile market, and since we are long term investors we also encourage our clients to be long term investments too.
The future of blockchain
Laura Shin asked Carlson what he thinks this technological breakthrough is and what Polymath is building with its investments:
I think that cryptocurrencies are building the second business model of the internet. The first business model is an old model where massive central silos with huge user-bases extract rent from their services. Buisnesses like Facebook, Etsy, Twitter, Uber, and Airbnb. The second business model on the other hand can lead to massive wealth creation for all participants, as the users of a network like Ethereum are also the owners of the network.
Carlson went on to say that he believes that the future of the blockchain space will be filled with a variety of blockchains rather than one dominant blockchain. He makes the case that you wouldn’t necessarily want to build a social network platform on the same blockchain as an aerospace tracking system, as some blockchains will be more efficient for different applications.
2018 crypto winter
The conversation shifts to the recent Bear market and Carlson’s experience with multiple crypto market crashes. During the time of writing his undergraduate thesis on Bitcoin it crashed from $31 to $2. His professor at the time said to him:
Ok, now that Bitcoin is dead, what are you going to write your thesis on?
Carlson made the point that the 2018 bear market Bitcoin would have to drop to $200 to come anywhere close to comparison:
There is a short term perspective towards the crypto market and I ask, why are you here? Is it to make a profit in this quarter or are you seeing it as a new technological paradigm the likes of which we haven’t seen since the internet? And if you do think it is a new paradigm shift, then I don’t understand why you would be so caught up on month to month price movements.
He continued on to say:
This is the third proper crypto winter I’ve experienced. The first was in 2012 and the second was in 2014/1015. Market winters are really the times where most of the hard work gets done behind the scenes. Those of us that are in this for the long term just keep building during those times, and we get it done with a lot less distraction.
Should we be worried?
Ran NeuNer asks Carlson if this winter is in any way similar to the other two winters, and if we should be worried about it. Carlson replies that:
It’s hard for me to emphasize just how much smaller the cryptocurrency space was in those previous winters, and how the narrative in them was very much that ‘crypto is dead’ and ‘just a flash in the pan.’ I no longer feel like that is now the common perception, I think that people think it is here to stay now, and now the question is about how big it is really going to be.
In response Ran NeuNer asks if Carlson if he thinks the ‘crypto naysayers’ have all gone away. Carlson finishes by saying:
I think that is now the contrarian perspective, in the past it was easy to say that Bitcoin will die because it still hadn’t really had a chance to live. I think now when you see CEOs of various institutions and banks saying that Bitcoin is a fraud and that it will fade away is like the people at the Hilton talking about Airbnb, or like the postman talking about email. These days you wouldn’t have to make a statement unless you felt threatened. So to me for the first time these people are forced to comment on cryptocurrency, and the fact that they are against it is very unsurprising. I think the sentiment now among the common people is that crypto is here to stay.
Listen to this fantastic Unconfirmed podcast episode here.
Laura Shin @laurashin
Ran Neu-Ner @cryptomanran
Olaf Carlson-Wee @polychaincap