156 - Investing in Waves with Chris Burniske

When I'm looking for a spot to surf on any given day, I'm always looking for the best spot that has the fewest number of people.

Because I'm not going out there to compete with other people. I'm going out there to ride a wave. And I think that you can draw a parallel to how I invest and how placeholder invests in that we're not so much in competition with other funds, we're not so much in competition with the leaders of these ecosystems. We want to be intellectually drawn to certain projects and certain value sets, and we want to ride that wave with that ecosystem.

Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Guys, the episode title Investing in Waves. Are we talking about surfing? We're talking capital deployment? The answer to that question is yes. David and I are chatting today with one of our favorite crypto investors of all time, Chris Berniski. A few takeaways from this episode. Keep track of them. Number one, Chris uses the term trashy to describe many 2022 projects. Why did he use this word? And he means it. He also describes, uses that word to describe their founders. Number two, why crypto is like surfing and how you catch the best waves. Number three, we talk about the advanced warnings in 2021 that we should have all seen that crypto was in a massive bubble. Number four, Chris's rules for staying sober. Don't fall in love with your coconuts. You have no idea what that means. That's why you should listen to this episode. Number five, the current crypto market cycle, why Chris has suddenly flipped bullish. He's bullish now in 2023. And finally, we discuss Chris's bull case for Solana. We end with that and a few other things. This is a fantastic episode, David. What should folks pay attention to?

A while ago on a weekly roll-up Ryan, I gave the take that polymaths really understand crypto better than anyone stuck inside of one vertical. Like economists don't understand crypto, but people who understand economics and computer science and psychology understand crypto. And Chris is really the embodiment of that. He understands so many different ways to evaluate crypto and he applies them. And that's really, I think, the magic behind Chris Berniski. In this episode in particular, we really carry through psyche, psychology, individual psychology, market psychology, groupthink, and how it changes throughout the cycles, how groupthink is different during the bear market versus the bull market, and how you can understand groupthink, ride the waves of groupthink, but not fall victim to groupthink. And so thinking about this episode through the lens of individual psyche, it's individual psychology, is going to be very useful to just making it through the bear market and also not falling victim to the virus of the bull market.

Some housekeeping for you before we get in. This episode will be released as an NFT collectible. It's the second of the year that we're doing. So stay tuned for that. That is coming on Monday. So the day this episode releases to the public, you can pick that episode up as an NFT, collectible NFT. Also, of course, stay tuned for the debrief where David and I will give our thoughts on the show after the show in order to access the debrief, which you can do now.

You can upgrade your membership to become a bankless citizen. We used to call that bankless premium. We're now calling it a bankless citizen. So you can upgrade

Citizens of the nation.

You can upgrade it and access that episode right now. Guys, we're gonna get right to our episode with Chris Bankless Nation. Excited to introduce you to Chris Bernitsky once again. This is our second full episode with Chris. The last one we had with Chris was actually over two years ago, two and a half years ago. So this one's been a long time coming. Now we had Chris on with Kathy Wood from Arkinvest in the meanwhile, but we've been wanting to pick Chris's brain for a while. He is, of course, the co-founder of Placeholder VC. He's the author of Crypto Assets. Dave and I consider him as one of our mentors in this space. In fact, I would credit Chris as one of the three people most formal into getting me into crypto, and particularly after I read his crypto assets book back in what was that, 2017, I believe. Chris, it's great to have you back on Bankless. How are you doing?

Thanks, Ryan, and thanks for the warm intro. Good to see you both.

You know what? I just wanted to glow you up there because thanks. I'm really happy to be in crypto. And, you know, I first started getting interested in Bitcoin in 2014, but there wasn't very much else there in crypto for me. And I think that changed partially after I started getting involved in Ethereum, and then I started to understand the asset space after the book Crypto Assets. So thank you, my friend. I probably didn't say enough good things about you. I'm glad to be in crypto, and it's in no small part because of you.

Well that warms my heart to hear, and you know, the reason Jack and I wrote crypto assets at the time was

uh because there were really only Bitcoin books.

And the space was growing to be much larger than Bitcoin.

And of course, writing a book we started writing that book December of 2016 and we finished the first draft March of 17.

And March of seventeen was actually right when everything started going crazy. Like I remember through March we're like watching the prices like 2X, 3X, 5X, like I think Ripple went crazy, all this kind of stuff, and we're like, oh my God, like how do we how do we cover this in a book, right? Because things were moving so fast. But we just proceeded, you know, with the core things that we thought were important to investigate. And I think in time it will just be viewed as a history book, right? It's a point in time, it's kind of between 16 and 17. Lots of people asked for an update. I think we could write a killer crypto assets v2. It's just finding the time.

I think the decision to not chase what was currently happening in crypto in that present moment and stick to your guns about writing for the original tent, the book Crypto Assets, and not adapting it to whatever that was the present moment of crypto at the time is very on brand for you. And something I appreciate about you, Chris, is that no matter what's going on in the machinations of the crypto cycles, you always seem to be able to keep a level head on your shoulders and kind of see through the short term noise and the crypto Twitter conversation of the moment and keep yourself focused on the long term. So I guess we weren't done glowing you up enough in the introduction.

Yeah, you know, like I would kinda echo that because it it just didn't yeah, I mean it wasn't just that it interested me in crypto after kind of reading that book more, but it also informed how I view the space, which is I think uh, you know, we're of uh

Similar viewpoint in that crypto assets was very much a kind of a thesis-driven investment type book. As David said, it wasn't about kind of the narrative at the time of you know XRP is going to be the new SWIFT or whatever it was back in 2017. You really laid out a framework for how you actually evaluate the value of these things. And I think that thesis-driven investment is really what we've tried to instill in Bankless is this is about long term perspectives, you know, three to five to ten to twenty year perspectives, not the current narrative in the moment. We're not traders, we're not narrative investors and traders. Rotators, yeah. Rotators. We are fundamentals investors. And that kind of framework I think still applies very well.

Definitely. And I mean,

you know, society is a string of generations that all learn from each other. And I learned

a lot of that from Kathy Wood, you know, working at Ark Invest. In the time that I was writing that book, I was getting to know my two partners at Placeholder, Joel Monegro and Brad Burnham.

Who are both very strong thesis thinkers or thesis crafters. And then also around when I was finishing crypto assets, Joel and I were completing our thesis summary for Placeholder itself. And so there were a lot of people around me as well. You know, no book is written by an author just sitting on an island. And I learned a lot from all of those folks that bolstered, you know, my own conviction,

added pieces to it, and you know, all those people remain in my life and continue to ground me, you know, as we proceed through crypto. And then I'm sure we'll get into crypto Twitter and how I use that. I think that can be destabilizing if you're not careful.

Yeah, I felt destabilized that time to put it mildly on crypto twitter. Well well let's start here though, because I want to provide some continuity. So the last time we had you just solo on an episode was over two years ago, in fact, almost three years ago. Can you believe it?

I think that's the record for the longest gap between repeat guests

Yeah, and this was episode number twenty when we were just getting started. Okay. Now we're in the hundreds.

and fifty.

Probably drawing closer to the thousands.

Guys you've built a huge brand, you know, my hat off to you. Like I watched you guys rise all through the last bear market and become stars in the bowl, and you know, here we are back in the bear.

Well, thank you for taking a risk on us by coming on this uh obscure podcast back in twenty twenty. But I want to ask you now, so reflecting on like the last two and a half years or so, I remember the episode we did at the time where you described kind of this bullishness on crypto, bullishness on Ethereum. You described crypto as this infinite white space was a line you used. And I want to ask you about the last two and a half years. So what do you feel like you got the most right

over the last two and a half years?

Sure.

I'd say the most important thing I got right, which was not easy to get right at the time, and that was right around when we spoke as well, was just Ethereum.

In 2018, 2019, around when I started noticing you guys, and I'm sure you recollect this as well,

ETH was crashing, right? It was going through an ICO deleveraging event. Um, Bitcoin dominance was rising rapidly to the upside, Bitcoin maxis were out with the pitchforks. Um, the narrative was that ETH was dying, ETH was irrelevant. Even if you talked with a lot of

VCs, you know, say traditional VCs were just like, up, you know, crypto's doing that thing again, it's you know falling 80-90%, just forget about it and move on to the next thing.

And then even crypto specific or crypto savvy VCs were losing conviction in Ethereum. They're like, you know, it's taking too long to process network upgrades. You know, is the transition of proof of stake ever going to happen? Um, you have all these next generation

L1s coming about that are gonna eat Ethereum's lunch. And you guys remember this, right? You remember it.

This is where I was born.

How hard 18 and 19 was. And so ETH fell sub 100, you know, that was pretty shocking. Like the first day that ETH fell sub 100, I like I just didn't even want to look at Trading Few. You know, it was like so painful. And, you know, that's actually part of my own journey, right? Is like getting better and better on those horrible days at just being able to withstand it and actually just keep buying, as opposed to being so disgusted that you can't handle it.

So that

You know, hardening process, say, of having conviction and bolstering conviction in Ethereum while most people were running in the other direction was really important for myself, really important for placeholder. And it allowed us to, you know, have a very large ETH position itself, but then also do a ton of venture investing around Ethereum. Seeding teams like, you know, we seeded ZK Sync, we seeded Balancer, we seeded UMA, and a number of other core Ethereum names.

And the valuations were amazing, the teams were top-notch, there wasn't really that much competition for it because most VCs were looking in other places. So, you know, directionally, that was, I think, the most correct thing, you know, from a financial perspective, but more importantly, you know, from a values based perspective and what it brought to the crypto space.

And uh, how about the flip side of that? So I got to ask the other question of over the last two and a half years what did you miss? What did you get wrong?

Well,

I'm always surprised by how much the trashiest projects can pump.

Um

Trashy.

Yeah.

Trashy. You know, I think an easy one to just say

would be Luna.

And

I remember speaking with the Luna team. It was the DevCon that was held in Japan. I forget when that was, but it was in that timeframe, the last bear. And Luna was sub a dollar. And I remember specifically

I just wanted one question answered, and that was did the price of Luna have to keep going up for the system to remain stable?

And

It was danced around a lot, but ultimately the answer was yes. Luna has to go up in price forever.

And that's so clearly

a broken system.

Right.

Like nothing goes up forever. And