Today’s episode is from a 2018 conversation with Ateet Ahluwalia, former partner and Managing Director at CoVenture Crypto, a cryptocurrency asset management firm. We discuss why developed countries will be last to adopt crypto and why Bitcoin is a cheap or accessible form of trust. For the full conversation, check out Flippening episode 15.
Links Relevant To This Episode
- Nomics on Twitter
- Clay Collins
- Nomics API
- Nomics’ Fully Customizable Daily Crypto Newsletter
- Ateet Ahluwalia
- CoVenture Crypto
- Bitcoin (BTC)
Clay: Welcome to Daily Wisdom from the Flippening Podcast. These episodes feature short, to the point clips from our full-length interviews. We talk to the men and women behind the trades, crypto exchanges, and regulations with the goal of helping you become a better, more informed investor.
Michael: Hi I’m Michael Kaplan, editor of the Flippening Podcast. Today’s episode is from a 2018 conversation with Ateet Ahluwalia, Managing Director at CoVenture Crypto, a cryptocurrency asset management firm. We discuss why developed countries will be last to adopt crypto and why Bitcoin is a cheap, or accessible, form of trust. [00:00:30] For the full conversation, check out Flippening episode 15.
Now without further ado, here’s our conversation with Ateet Ahluwalia, Managing Director at CoVenture Crypto. Enjoy.
Ateet: When I was carefully going through why I had messed up something that I had historically always made money on, which is like turmoil in the Macro Markets. How could I not make money this time? Why was I flat on this trade? When I went through, I actually saw Bitcoin actually had some correlation to the Cypriot crisis where they haircut bank deposits. [00:01:00] I’m like, oh my God, when times are tough and they have no other option, they will put money into this video game token, no pun intended, and they will actually use it as a vehicle to maintain savings when the government has failed them.
That sparked my curiosity enough to start looking into it. But it really wasn’t until I got a real detailed look on Bitcoin from one of my buddies, who’s frankly just magnitudes smarter than I am, and he really broke it down for me. He said two words that just blew my mind. He said cheap trust. [00:01:30] Given my background and my history, the notion of trust is so critical in every form of relationship, financial, interpersonal, whatever it is. When he said cheap trust that’s when I really got involved, especially on the back of the Cyprus bailout.
Clay: I have this hypothesis that the people who are going to get into crypto assets last are going to be poor people and the middle class in developed countries because they’ve always been able to rely on their currencies. Whereas, in places like Zimbabwe, Venezuela, [00:02:00] Cyprus, Argentina, they have distrusted their Fiat currencies for a long time, and got involved fairly early. Have you seen, in general, as a Macro investor, have you noticed that generally when these Fiat currencies collapse, that there is a flight to crypto assets in Bitcoin in particular?
Ateet: Well, definitely. You can see that in the Argentina case, the Zimbabwe case, in the Venezuela case. You can see that just on the [00:02:30] price chart. If you just look at the lead-lag relationship there, that’s definitely a viable relationship. If you actually think about why. I agree with your statement, first of all. I think the middle class in developed markets is the last to the party. I’d say there’s, I don’t know, I think read four to six stories on Bloomberg every single day about cryptocurrency, and that’s obviously a US geared audience on the Bloomberg US site. Only 8% of Americans own Bitcoin. And I think over 90% of them have $500 or less [00:03:00] in Bitcoin.
They haven’t spread their wings, so to speak, amongst the other cryptocurrencies. They’re not really in favor. The media coverage is disproportionate to what’s actually going on under the surface. I agree with you that, it’s almost like a lack of knowledge that causes this issue. It’s in the headlines, and it’s pitched by the media as something inherently untrustworthy, which is ironic to the nth degree. But because of that, not very many people are getting in on it, but if they actually went back in time and looked at the US history, we’ve defaulted twice on our debt in the last 100 years. [00:03:30] When Roosevelt basically confiscated gold from people, the fine was prison time or $10,000, if an IRS agent wasn’t able to march you up to your safety deposit box and confiscate your gold in exchange for US dollars. Now, six months later, what do they do?
They devalue the currency by 50%, i.e. you lost 50% of your savings. That is a default, right? However you want to call it. In 1971 when Nixon cut the US dollar from the gold window because we were bleeding reserves due to a deficit, it’s like, look, Europeans, we just don’t want to pay you anymore, [00:04:00] so we’re detached. We’re de-tethered from gold. It’s not something we’re going to do anymore. That in effect is a default as well.
That actually is an interesting segue to another side point. People talk about cryptocurrency not being a real currency due to the volatility. Well, if you compare the volatility of cryptos to say, the US dollar and gold in the 1970s once we had de-tethered from the gold standard, well, yeah, that’s exactly the same kind of volatility you’re experiencing now, right?
It’s a lack of education on the behalf of the developed market middle class investors, which is a deeper issue. [00:04:30] Like look, we don’t teach financial savviness in elementary schools or high schools, right? It’s only at the college university, sort of the elite level, that people can get involved. Because we don’t do that, people don’t see how viable this asset class is, but just how important it is. Because a lot of people in the middle and lower classes just have been steadily chipped away at by policies that are in place for the last, call it, 30-40 years.
Clay: What strikes me about the way that you view the world, or at least how I perceive you viewing the world, [00:05:00] is that as a quantitative trader with a background in Macro, it’s almost like you coexist at two opposite ends of the spectrum. From the Macro perspective, you’re tracking global trends that are happening, how governments are responding to crises, how the world is changing. At the same time, you’re watching it all happen in a very operationalized way on charts, and watching this stuff play out in a very numerical [00:05:30] fashion. Do you think that’s how you’ve always been, or is that a function of your training?
Ateet: I think that’s how I’ve always been. Because look, since we detached from the gold standard, we’re not a commodity-based economy, right? Frankly, it’s all just a number on a screen. That’s one of my mottos when it comes to trading. If I think of it as just a number on the screen, it’s not being disrespectful. What it is is it forces me to look at something objectively, and then do scenario analysis that’s ridiculous.
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