I Asked Centimillionaire and Prominent Bitcoin Bull, Anthony Pompliano, 5 Questions
Anthony Pompliano, also known as “Pomp,” is a well-known name in the cryptocurrency world. He is a centimillionaire, a prominent Bitcoin bull, and a co-founder and partner at Morgan Creek Digital Assets. With his extensive experience and knowledge in the field of cryptocurrency, Pomp has become a sought-after expert and frequently shares his insights on various media platforms. Recently, I had the opportunity to ask Pomp 5 questions about his thoughts on Bitcoin, his investment strategies, and his advice for newcomers in the industry. In this article, I will share his responses and insights with you.
Q: Currently, the US enjoys the advantage of having the dollar as the world reserve currency. China and Russia are amassing gold. However, this effort could prove misguided if Bitcoin were to become the new world reserve currency. In such a scenario, it would be of national importance for all countries to hold a significant amount of it. Correct? Would the United States holding Bitcoin help with the U.S. debt crisis?
Game theory is in play here, but the basic idea is that if you publicly announce that you have purchased bitcoin and placed it in the federal reserve, this signals to other countries that the US government has lost faith in the dollar, leading to central banks around the world buying bitcoin and thus promoting its adoption. The United States has a vested interest in preserving its supremacy in the global economy, whereas other nations are exploring alternative solutions. This situation embodies the typical innovator’s dilemma. This dilemma is not present in countries like El Salvador, which use the US dollar as their currency. Thus, adopting bitcoin is a simpler process for them compared to the US Federal Reserve, which could potentially spur other countries to do the same. Although bitcoin in a central bank may not necessarily solve the debt problem, it could serve as an escape hatch in case of economic collapse, similar to getting off a sinking ship rather than trying to plug the leak.
Q: In the audio version of “The Bullish Case for Bitcoin” by Vijay Boyapati, it was mentioned that if Bitcoin reaches the market cap of gold, it will likely be used more as a medium of exchange. However, this might be more likely in countries where the local currency is less stable, as there is an opportunity cost to using Bitcoin. In the US, where the dollar is still relatively stable, people may be less willing to give up their Bitcoin for exchange purposes, leading to slower adoption of Bitcoin as a medium of exchange and unit of account. Do you agree?
I believe that financial privilege exists, particularly in the United States, where the dollar is a stable asset and its value doesn’t fluctuate significantly. This stability is not always the case in other countries, which is why people in those places might need alternatives to use as a medium of exchange. While there could be an increase in the use of Bitcoin as a medium of exchange as its market cap grows, data shows that over 60% of Bitcoin is currently being bought and held for the long term, indicating that people are mostly using it as a store of value. My base case for Bitcoin is that it will become 10 times better than gold as a store of value. While peer-to-peer electronic cash is an appealing idea, education about Bitcoin’s benefits will be necessary for countries with stable currencies before it can be widely adopted as a medium of exchange.
Q: Bitcoin is open source which means people can suggest changes to its programmatic monetary policy. However, not all changes will be implemented and it ultimately depends on the consensus of the community and the network participants who use Bitcoin. How much consensus is needed and who pulls those levers to change its programmatic monetary policy? Also, has Bitcoin ever forked?
Simply put, the process of proposing changes to the bitcoin system involves writing a bitcoin improvement proposal (BIP), which can be done by anyone in the world. To implement the proposed changes, three major groups of people must sign off on it: developers who write and change the code for bitcoin, miners who secure the blocks, and node operators who operate bitcoin nodes. These groups work together in a checks and balances system, similar to the three branches of the US government. If a proposal does not work, a fork may occur, where a new blockchain is created with the proposed changes. However, history has shown that these forks have not been as valuable as the original bitcoin software.
Q: Do you think sovereign wealth funds and institutions will actually earmark 1–3% of their balance sheets for Ethereum, given its unlimited supply and the emergence of new platforms like Solana that could surpass Ethereum?
Let me be clear: what follows is my personal opinion. I strongly believe that Ethereum’s unlimited supply presents a significant issue. My argument is that, from a currency perspective, Ethereum shares the same structure as fiat currencies, including an unlimited supply and a variable monetary policy. While Ethereum promises to respond to security demands and adjust the issuance rate accordingly, it is challenging to argue that organizations will put Ethereum on their balance sheets as they do with fiat currencies. For example, Bitcoin is commonly referred to as digital gold, while Ethereum may be viewed as digital silver. While some organizations may participate in staking services to earn yields, it remains unclear how much yield they will receive. Sovereign wealth funds, for instance, may not dedicate one percent of their balance sheet to Ethereum if they can only get a 50 basis point yield per year, but they might be interested if they could get a 12% yield. It is challenging to predict how Ethereum will be perceived, but from my conversations with many sovereign wealth funds, they view cryptocurrency as one big bucket. Bitcoin is seen as a store of value, while Ethereum is viewed more as a venture bet on decentralized finance applications. While they may still buy Ethereum, it may not be for a store of value or as a non-cash-flowing asset that appreciates over time.
Q: Who helped you learn about Bitcoin?
The first person to introduce me to anything related to cryptocurrency was David Marcus, who ran the crypto operations at Facebook and was the former president of PayPal. In 2014, when I worked at Facebook, he joined as the Messenger team lead and began discussing the possibility of in-app payments. Most people were skeptical at the time, but he mentioned this thing called Bitcoin. When I turned to an engineer to ask what it was, he simply said, “It’s stupid.” I trusted his opinion and dismissed the idea.
In 2016, a 17-year-old approached me and expressed his interest in starting a company that involved mining Ethereum. I was intrigued and decided to sell all of my Facebook stock and invest half of it into mining machines. We mined five Ethereum a day, and as the value rose from $8 to $30 to $100 by May 2017, I felt like a genius. When it reached $150, I sold everything.
After Ethereum’s eventual crash, I noticed many people sticking around, and that’s when I began studying cryptocurrency in earnest. In August 2018, I wrote an article predicting that Bitcoin would drop to 3K, and when it did, I invested 98% of my wealth into it (not recommended). I made many mistakes along the way, and it took me a long time to learn. I had to actively study to fully understand the details. I urge anyone considering investing in cryptocurrency to dedicate the necessary time and effort to do so seriously.