Kevin O’Leary: NFTs Are Going To Be Bigger Than Bitcoin

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In recent years, Shark Tank host Kevin O’Leary has transitioned from a crypto skeptic into an enthusiast, investor, and campaigner. He has held several positions in the industry and has also become a paid spokesperson and endorser for the crypto exchange FTX. In this interview we discuss how his background as a venture capitalist and software investor informs his financial decisions, the way the regulatory landscape has evolved over the years and where crypto fits into a diversified portfolio. He has some very interesting ideas related to NFTs as to how investors should weigh bitcoin versus ether.

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Businesshala: How do you view your crypto investments?

O’Leary: Ether is my biggest position, bigger than bitcoin. This is because a lot of financial services and transactions are happening on it. There is even new software being developed like Polygon that consolidates transactions and reduces the overall cost in terms of gas fees on Ethereum. I am an investor in that too. So for me, the best way to look at it, and I get questioned all the time on this issue, is do you prefer bitcoin over ether? Do you like Solana on Polygon, Hedera, all that; I see things differently. I don’t think of bitcoin as a coin or token, I think of it as a software. Bitcoin is software. Ethereum is software. Hedera is software. I grew up investing in software development teams throughout my career. That’s what I did at The Learning Company and beyond. I work with software developers, coders, and programmers, and that’s where I capitalize on all the time. So I’m looking at the entire crypto industry as software development teams and I spend my time talking with them – I just got back from Dubai where I met the Polygon team – and based on the skills of those software engineers. But I make investment decisions. I know the market is going to be the market, it will determine the winners and losers of these platforms. But at the end of the day, it’s really strong creative software engineers you want to bet on. And that’s what I’ve done.

Businesshala: What does your portfolio look like today?

O’Leary: I get asked that all the time and what I have decided to do is just publish it, which I am going to do at the end of this month. I have several posts now and am going to reveal everything because I never want to be accused of promoting tokens or coins. I don’t like it. I do long term investments here, and so I will disclose that shortly. But I have mentioned some of them which I have. I myself Hedera, Polygon, Bitcoin, Ethereum, Solana, SerumThese are bets on software development teams and there are many, many use cases for them. I think we’re going to come across a lot of different use cases over time. For example, I am not sure that Ethereum is the best platform for financial services transactions because it is very slow. So how do you fix it? Or you use polygons to consolidate transactions. Maybe it is too expensive for some countries like India, so I want to bet differently.

Businesshala: What characteristics or qualities will separate winners from losers?

O’Leary: At the end of the day, what determines the speed and level of adoption is the success and value of the platform. That’s when the team has developed a platform that solves an economic problem. This is what I always say about digital currencies and digital platforms. What problem are you solving? Are you increasing transactions, reducing friction in the financial markets? Accelerating transaction speed or accuracy? Or authenticating them? What are you doing that has economic value? That’s why I would argue that long term coins that have no economic value, because they do not resolve anything or create any value. I am very skeptical about meme coins. The reason Ethereum is so big now is because it was before and was widely adopted. Now, because some of its shortcomings are being noticed by some sectors of the economy, these other parties, Polygon, Solana and others are saying, well, this is not enough for what we are doing. And we’re going to make some changes here. It is very much worth investing in.

Businesshala: How would you define a bubble and do you think we are in one?

O’Leary: This is a good question. I’ve seen bubbles grow and explode and everything else. The thing to understand is that the market is the market. No one can manipulate it, even if people claim they can. Millions of decisions are being made every second as to what the cost of something is. And this applies to every market, be it tulips, watches, bitcoin, real estate or gold. It’s the same dynamics when you have a large stake in the asset class and millions of people buy and sell it. The only thing I trust is the market price. Because you can’t say whether it’s overvalued or undervalued, the market determines that for you. You can make a long-term bet that it will appreciate over time for a variety of reasons. But when you start saying something in the form of bubbles, you’re effectively saying you’re going to do some market timing; That you know something that not everyone knows. And sometimes you can be right. But in the long run, it’s a fool’s game and you can’t win. My approach to this is allocation and diversification. So if you tell me that bitcoin is in a bubble and is overvalued, you might be right. But it doesn’t really matter to me in terms of allocating bitcoin, it’s being allocated because it’s an asset that is owned by millions. And its market price is being decided according to 24 hours. I think it’s an asset, not a currency. I like software development underneath it. I think in the next few years all the issues related to ESG are going to be resolved. And it’s going to be mined more efficiently. But I like the market to be the market. So this is a really long answer to say, you can’t know when it’s bubble, you just can’t. And if you think you do, you are absolutely wrong.

Businesshala: How do you think crypto fits into a diversified portfolio for my readers?

o’leary: My answer is always the same. It is a binary decision. Firstly, many people are still skeptical about it and are not in the board so they don’t have any problem of allocation. For those of us who have changed our mind, and I am one of those constituencies, I have decided that this is a real asset class, that software development has economic meaning, and that I should be an investor in it. So diversification is my number two issue. Now in the world of stocks and bonds, where these assets have been around for hundreds of years, I have very simple rules that mandate how I own them. I’ve never allowed a single stock in any portfolio to be weighted more than 5%, and I’ve never allowed a sector (of which the S&P has 11) be over 20%. I’m using the same rules I use for them now. Some people tell me, why don’t you just own bitcoin and ethereum, everything is related to the price of them. I don’t believe it to be true. First, there are many other economic applications, software, level 1/2 blockchains that have nothing to do with bitcoin that I want to invest in. So what I’m trying to do is build up a portfolio—at some point it might get 20% of my operating company—but right now, it’s about 10.5%. But within that portfolio, there is no single token coin or chain that exceeds 5% of that portfolio. So yes, I am actively adding and trimming based on volatility. And we’ve had a lot going on in the past few weeks. And secondly, I’m doing a lot of staking. Most of my positions are now being staked, and I use the FTX platform for that (pay attention: O’Leary is a paid spokesperson), And I also hold a significant and physical position in USDC, as I am now starting to pay for assets and receive payments in stablecoins. So it has become another currency in my portfolio. And I bet it too. I’m working on that with Circle. I was one of the first corporate accounts to open there.

Businesshala: As we conduct this interview, Circle CEO Jeremy Allaire is testifying before the House Financial Services Committee not only to address crypto in general, but also on some major hot button issues, such as stablecoins. are discussing. Circle has become more transparent about its USDC reserves in recent months. How do you see the outlook for USDC and stablecoins?

O’Leary: I am glad that Jeremy is catching this bull by the horns and wants to be part of the policy making for stablecoins. They are here to stay. I remember when I bought my first USDC, I think it had 2 billion under management or was issued, but now it’s over 30(Note: The market capitalization of USDC is now $40.2 billion), Hence it has been widely adopted by many corporate entities as well. But I would prefer that it be regulated, I would prefer that the rules be set by the regulator so that I can increase my exposure to it. And to be honest, I am not speaking on their behalf, I am just speculating. If they had to be regulated like other banks, they probably would (Circle applied for banking license on TK), To be transparent, I’m going to be an investor in Circle’s PIPE (private investment in a public entity—plans to go public through the SPAC merger next quarter). I have already decided that the stablecoin I am going to use is USDC. I don’t want to own any assets, and I don’t want the SEC to investigate or sue. I have nothing to do with it, I am not a crypto cowboy.

Businesshala: There’s always a chance that the SEC could determine some of the other assets you mentioned, such as HBAR, SOL or Matic, as securities. Do you still feel comfortable holding…

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