Kyle Davies of Three Arrows Capital on Conviction & Concentrated Bets

In this episode of UpOnly, Cobie & Ledger talk to Kyle Davies, co-founder of legendary crypto firm Three Arrows Capital. We discuss a range of topics from Bitcoin and Ethereum macro, China, Defi, and more.

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Show Notes

China FUD

 ⁃ Matty: there will be some clamp down on leverage and futures trading but spot will be fair game. It’s about financial stability in China at the centre of it all, not crypto. Article: https://decrypt.co/72276/heres-how-chinas-crypto-fud-will-play-out

 ⁃ Sicarious: intro to crypto was during a wave of China FUD, right after his wedding, the same night there was a China ban and 50% drop. Has seen the ban so many times now it isn’t scary.

FloodCapital – State of the Market

 ⁃ Firmly in the “this is a correction” camp. We’re not going into a bear market.

 ⁃ US are printing money to pay their debt interest. 130% debt to GDP. Needs anomaly GDP growth in order to de-lever. Going to light a fire under the bond market. Money will flow into other markets

 ⁃ Matty: disagree (in the strongest possible terms). US has a huge underinvestment problem for e.g. infrastructure, R&D. Yield curve implies a different position on inflation. US debt is denominated in USD which makes a big difference – rock bottom interest rates, use it.

Sino Bull Thesis for $COPE

 ⁃ Shout out @cyrii_MM

 ⁃ COPE whitepaper: https://www.unlimitedcope.com/whitepaper/

 ⁃ Matty: Fully backing the team, if they don’t get the engine right first time they’ll pivot to something amazing.

 ⁃ Full Thesis: https://sinoglobalcap.medium.com/why-we-invested-in-cope-8dc920caeffe

VCs & Raising Money in Crypto

 ⁃ Cobie: If you have an awful project you can adjust the tokenomics to make it favourable to Vulture Capitalists and raise now, easy. Funds race to dump on other funds. Don’t buy pre-sales!

 ⁃ Hate the game rather than the players as if they players stop, they will be replaced with different players.

 ⁃ Will see a divergence in the types of projects raising. Good projects can raise what they want with long lockups – whole team get Castles if they want. You’ll be able to judge a projects quality by looking at their terms.

 ⁃ Matty: A lot of Crypto VCs are not actual VCs. They’re not acting in a VC capacity and servicing projects for the long haul. Sino are trying to do something different.

 ⁃ FloodCapital: There are rare opportunities that retail can get in at similar prices to VCs, those are always worth searching for.

Layer 1 Solutions

 ⁃ Matty: We’re still extremely early, comparing BTC penetration rate with Internet penetration rates.

 ⁃ Bullish on ETH and the moat they have created with their developer community.

 ⁃ ETH is the family car. SOL is the high performance car. They can coexist and both see enormous growth, as can other projects.

 ⁃ Cobie: What’s ADA? Matty: What’s the worst car you can think of?

 ⁃ Ledger: What’s Bitcoin? Chat says it’s a Tank.

What Sicarious looks for in a project?

 ⁃ Long term investor, if he likes a project he holds it long term e.g. One of the first investors in HXRO and still holding.

 ⁃ Doesn’t care what the team is building as long as he can trust them.

 ⁃ Got into DeFi “late” so it was important to look for long term fundamentals. Even if something is up 100x it can still be a good place to enter. Has to actually read white-papers now!

Bull Market? Over?

 ⁃ Flood: This is a mid cycle correction.

 ⁃ Sicarious: Hell no. Going to be taking profits this cycle compared to other cycles but items not over yet.

 ⁃ Cobie: Give the most likely scenarios weighting and trade on that. Just as likely that there is a 2013 style double bubble as it is that it’s over. Or maybe it really is a super-cycle, and it is UpOnly (lower probability but still possible). ETH might be able to prop up the market enough for ATHs. Looks for the narrative that would upset the most people Up(set)Only.

 ⁃ Ledger: Looking at charts on linear and it can get very scary. Thinks there will be a new high this year especially on ETH.

Final Alpha

 ⁃ Matty: Stop saying you don’t need sleep. You need sleep. 8-10 hours of sleep, don’t wreck your mental capacity. Get your sleep!

 ⁃ Sicarious: Don’t burn bridges needlessly. Even if someone screws you over, things might be different in future and the relationship will be beneficial.

 ⁃ FloodCapital: Be patient and a long term thinker. It’s so easy to be distracted. How much time do you spend a day thinking original thoughts? Longer term you can achieve what you want financially by growing year on year rather than needing to 100x.

Music by GiovanniPickle