265: Keep it Simple | Pranav Kanade from VanEck on Liquid Venture Investing

00:00:10] Pete Townsend: Hey there. I'm Pete Townsend, and this is Money Never Sleeps. We look inside the minds of entrepreneurs and at the crossover of startups, enterprise, finance, technology, and life as we know it. This week, I'm joined by Pranav Kanade, portfolio manager of VanEck's Digital Assets Alpha Strategy.

[00:00:28] Pete Townsend: VanEck is an American investment management firm headquartered in New York City with over $100 billion in assets under management. Although they're well known for their passive exchange traded funds, or ETFs, they also manage active portfolios such as Pranav's Digital Assets Alpha Strategy. Pranav joined VanEck in 2022 from Millennium Management, where he was a credit portfolio manager working closely with a team of six investment professionals.

[00:00:51] Pete Townsend: Prior to Millennium, he was a founding member of the head of research for the liquid credit investing business at Angelo, Gordon & Co., and he also spent time with Hutchin Hill Capital focused on technology and energy, and also with UBS. In this episode, Pranav and I dig into his jump from TradFi into crypto, the realities of investing in venture through liquid publicly traded assets, and the differences between traditional VC style assessments of early stage investment opportunities and liquid token style assessments.

[00:01:17] Pete Townsend: We also talk about the catalyst for growth in digital assets and how his liquid venture strategy fits into the wider VanEck investment management operation. All right here on Money Never Sleeps.

[00:01:32] Pete Townsend: Well, Pranav, welcome to the show. Great to have you here with us.

[00:01:35] Pranav Kanade: Exciting times. I'm glad to be doing this.

[00:01:37] Pete Townsend: Yeah. Thank you. And in prepping for our chat today, Pranav, I had a quick look at your LinkedIn profile, and I saw some interesting things on there. And it looks like you had been pretty TradFi focused with UBS, Hutchin Hill, Angelo Gordon, and Millennium, who I've got a tiny bit of experience with, before you jumped to VanEck back in 2022.

[00:01:57] Pete Townsend: Can you just give us a look inside your backstory, and what was it that inspired you to jump into digital assets?

[00:02:03] Pranav Kanade: Yeah. It's, it's a great jumping off point, but I... it's pretty funny. So VanEck is a large asset manager with essentially a family that, that controls the entire business. So Jan VanEck is the CEO of the firm, and when he first saw my resume, his response was similar to what you just said, but in a more direct way, which was, "Great resume.

[00:02:22] Pranav Kanade: What does it have to do with crypto?" And as you can tell, I spent 12 plus years in the world of public credit and equities looking at just sort of regulated businesses- Running essentially a long-short strategy across the board. Came across Bitcoin in 2015, didn't really make much of it. Thought it was sort of an asymmetric call option, so got involved.

[00:02:40] Pranav Kanade: But then everything else was introduced to me in 2017. It was kind of expanding on the idea of Bitcoin. You know, Bitcoin was trying to be peer-to-peer money, peer-to-peer cash. And the idea was, well, if you can in- a- add programmability to that, then you can start to build sort of interesting applications.

[00:02:54] Pranav Kanade: And that first application was raising capital, which was the ICO mania. And, you know, I'm a traditional markets guy. I look at all these things and say, "Well, what's the business here? And how do they make money? And, and what does that mean for, for all these projects that are trying to raise capital and have a token?"

[00:03:12] Pranav Kanade: All that was not clear at the time in 2017. There are a couple of prediction market-like platforms that were raising capital at the time. And, and so what I said was, "Look, I'm gonna try and use these products and see if there's something novel and interesting about these products, and then decide ultimately, how do I get exposure to them?"

[00:03:30] Pranav Kanade: Fast-forward 2018, these projects start to ship their products and, and it was extremely disappointing for everyone. You know, most of these things were kind of not usable. And at the same time, you know, obviously the regulators started cracking down on these ICOs. So I kind of more or less, you know, said the odds of this whole vision of applications buil- being built on public blockchains, getting rid of intermediaries, and ultimately having more of the value created accrue to the participants of these networks, that's all a great vision, but, but the products are just not there yet, uh, and it's gonna take a long time.

[00:04:03] Pranav Kanade: And I, and, you know, in my brain, I think of everything in terms of probabilities, and I said, "Probably a 5% chance all this stuff works, you know, uh, goes mainstream one day." But I continued to follow everything and, you know, I came across Binance in 2019 and, and I, you know, looked into the platform. It was essentially this centralized exchange where people could trade different tokens, but also they had this launchpad thing where people could launch their projects.

[00:04:29] Pranav Kanade: They had a perpetuals... Or at, at that time they had a margin trading platform, I think. And so you had this full suite of products, and that, the suite of products generated some cash flows, and all those cash flows seemed to be going to this BNB token, or at least the vast majority of it. And it, and this BNB token was also being used as a customer acquisition tool and to grow the underlying business.

[00:04:53] Pranav Kanade: And, you know, the, the traditional markets guy in me kind of realized, "Wow, this is super interesting." Tokens are essentially, you know, equities 2.0 in some way, shape, or form. It takes a stock and then gives it kind of these superpowers to accelerate growth. And then so I started to think about that. But then again, there was not that many products and projects with tokens that, that made a lot of sense at the time.

[00:05:14] Pranav Kanade: But then fast-forward, 2020 happens, COVID happens, and then you kind of have the first wave of DeFi. And, and that's when you start to play around with the actual products themselves, like a Uniswap or an Aave. And say that, okay, these are pretty good as, as products compared to the 2018 legacy, and then, then the token things make sense, right?

[00:05:33] Pranav Kanade: If it's a va- way to capture value but also accelerate business growth. You know, dots start to connect in many ways for me, and then the thesis I kinda articulated to myself was, the right form of tokens that represent ownership of an underlying business, most, most likely a software business, is a better capital formation tool than a stock or a bond.

[00:05:52] Pranav Kanade: And tokens ultimately will be the evolution of stocks and bonds. And the, the equity and credit market is a $270 trillion market. The token market, even today, is around $600 billion. And there's some probability that a $600 billion market will eventually take ton of, a ton of market share from that $270 trillion market.

[00:06:15] Pranav Kanade: And as that happens, you're gonna have a ton of winners and a much, much larger number of losers. I actually think a lot of that value creation in the token market will likely happen between, you know, 10 to 15 projects. So, so essentially I w- wanted to create a framework for myself to be able to pick winners as that happened, and ultimately, you know, risk manage that portfolio, because, you know, crypto seems to go into, go into these hype cycles of, you know, despair and euphoria, and you wanna sort of manage your portfolio through that.

[00:06:43] Pranav Kanade: Didn't really see a lot of folks doing that. You know, you had a lot of smart people doing VC, sort of pre-seed and seed venture, but the liquid markets were equally interesting. You know, as a nuance in the space. You know, in the public markets, companies go from seed round to IPO in an average of six years.

[00:06:59] Pranav Kanade: In the token markets, things go from seed round to liquid token, you know, in a span of 18 months. So these are venture-like businesses with liquidity, so you can have venture-like upside, but obviously venture-like downside. Again, the liquidity's helpful, because if you can identify when one of your bets is not playing out, then you could actually exit versus, you know, in, in traditional venture markets, it's hard to do that- Yeah

[00:07:19] Pranav Kanade: in that stage. So, so there's a lot of interesting things about this market that, that drew my attention. The biggest one being there's not that much institutional capital really participating in the space. Most of it is retail. And, and for thesis to play out, which was the $600 billion market taking share from the $270 trillion market, the space has to institutionalize and we might as well be, be first was, was kind of the logic.

[00:07:40] Pranav Kanade: So I had this framework, this strategy. I, I ultimately pitched it to Jan Van Eck. We had these long conversations over six months, and he agreed to sort of seed us. We started the strategy under the firm, under VanEck. VanEck had had a pretty long history of being in the crypto space. They've been in the space since 2017.

[00:07:57] Pranav Kanade: I think VanEck was the first B- Bitcoin ETF applicant. So Jan, you know, deeply understood what the space was about. And yeah, so, so we started the strategy in 2022, been running it for about two years now.

[00:08:07] Pete Townsend: Wow. And back to one of your points on Binance, right? Do you ever think much about the, and I'm sure you have, but the centralized context of Binance and the BNB token, and like you said, almost like an equity 2.0

[00:08:24] Pranav Kanade: Yep

[00:08:25] Pete Townsend: versus a decentralized network where the token is truly representative of the value of the wider network, which is decentralized. How much of your thinking went into that distinction versus just, "Hey, this is a new way of capital formation for equity"?

[00:08:44] Pranav Kanade: At a very high level, there are several benefits that come from leveraging public blockchains, uh, and smart contract plat- platforms.

[00:08:53] Pranav Kanade: One of them is programmability, and that's the most interesting aspect. So putting an asset on a blockchain allows you to do different things with it that you couldn't do if it was just sitting on a ledger at a DTCC. To me, that is the most interesting aspect of this asset class. Now, at a different level, we look at tokens and we say there's two types of tokens that are, uh, in, uh, at a very basic level here.

[00:09:17] Pranav Kanade: So, so there's cryp- there's blockchain-native tokens, which are essentially software businesses built natively on a blockchain that have a token attached to it, and then there's real-world assets that are gonna get tokenized and they're gonna end up on a blockchain. Yeah. Both have sort of similar properties.

[00:09:32] Pranav Kanade: One is different in the sense that it's saying my underlying business itself can be reconstructed in a decentralized distributed matter such that the end result is a better, cheaper, faster product to the users. And that has obviously this token element attached to it, and that sort of leverages this decentralization element.

[00:09:55] Pranav Kanade: The other side of it says, look, like, you know, a regular, regular way business that produces physical things in the physical world, um, does not need to really decentralize, but it could still benefit from having its ownership instrument be a token.

[00:10:09] Pete Townsend: Yeah.

[00:10:10] Pranav Kanade: So, so those are two distinctions.

[00:10:11] Pete Townsend: Yeah.

[00:10:12] Pranav Kanade: And you know, when I see one try to be the other, then it's kind of like, what are you trying to really do, right?

[00:10:17] Pranav Kanade: Like, an exchange is supposed to ultimately serve a product that is cheap... Is essentially offering cheap trading fees for its end user. The goal is cheap trading fees, high volume, high depth, right? You could achieve that potentially in a decentralized way or a centralized way, but then the key element with the B- Binance case is the token itself, which is the value accrual tool, can be used to accelerate both the liquidity provisioning side as well as the folks coming into trade side, which is what you need both those things for the marketplace to work.

[00:10:50] Pranav Kanade: And, and so the token- Yeah ... can be used in many different ways. I don't know if that answers that question.

[00:10:55] Pete Townsend: No, it does. Yeah. It does. No. And it... I think we're, we're along the same lines in that when I look at a business that's proposed to me and that where it is a centralized company with a token that is part of their strategy, and that there's no hope of it ever becoming decentralized, I'm like, "Well, that's just loyalty points," you

[00:11:16] Pranav Kanade: know?

[00:11:16] Pete Townsend: And that they might have had trouble raising via equity last year, and so they're like, "Well, let's try and raise via token." So th- those are pretty transparent, you can see that. There are some that are, are on the other end, like we talked about, where it's clear that for their protocol to operate, and for that to be able to operate in a decentralized manner where developers can just build on that network, that they need that token to operate the network.

[00:11:42] Pete Townsend: Yeah. And that token is representative of the value of the overall network, and great, that's the other end of it, and that's the, the true decentralized component. Sometimes you get stuff right in the middle, though, that I, I like where it is that it looks like a centralized company, it starts out as one.

[00:11:55] Pete Townsend: They talk about a token, and perhaps launching a token down the road, and that because what they're building underneath everything is a protocol that could be used by other projects, that others could build on at some stage. And so it's kind of you, you need to ride both sides of it and keep an open mind about, well, this could become a centralized company, this could become a decentralized, but there really is-- you have to pick one way or the other.

[00:12:21] Pete Townsend: You know? Yeah. You can't do both.

[00:12:23] Pranav Kanade: I have a more, uh, a little bit of a simplistic view, which is the token is obviously never the product. A great product is a great product, and the token can often act as an accelerant to that adoption of that great product. Mm-hmm. And, and, you know, I don't really care if it's centralized or decentralized.

[00:12:38] Pranav Kanade: The user doesn't really care, right? Like, like everyone gets really hung up on, like, the, the, the 10 to 20 million people using apps on chain today, and, and I keep focusing on, look, there's like five billion people with an internet connection. Like, that's the, that's the grand prize. And, and so the products they wanna use, they don't really care, like, you know, about the details of which blockchain it's on, how decentralized it is, you know, how censorship-resistant something is.

[00:13:05] Pranav Kanade: You know, they just care about great user experience and, like, let me do the thing I wanna do without-- with minimal friction, minimal clicks, and, you know, if there's sort of this token element that makes it even better, great.

[00:13:16] Pete Townsend: Yep. I'm with you. And it, it's funny 'cause when we did our Techstars Web3 Demo Day two weeks ago, like I mentioned to you, I had a couple investors say to me, "What the hell did some of these companies have to do with Web3 and blockchain?"

[00:13:27] Pete Townsend: I'm like, "Exactly. That's what I wanted you to say," 'cause I wanted it so buried beneath the value proposition that all you're thinking about is just, "Where's the token?" And I'm like, "Don't worry about it. What they're building is incredible. Have a look at that deeper and you'll get it." Right? So...

[00:13:41] Pranav Kanade: So I've been a big follower of Elon and Tesla for a long time.

[00:13:44] Pranav Kanade: I'm a, you know, I'm a big fan. You know, I think as y- as everyone knows, Elon, Elon's trying to evolve the company from selling cars to selling rides, right? Through this whole vision of robo-taxis, right? So essentially, you know, your car that you purchase should be able to just drive around like an Uber and pick up people, drop off people, and charge for rides and then, you know, hopefully Tesla will have some take rate on it.

[00:14:05] Pranav Kanade: Now, the biggest problem with, with- You know, getting there is, is you need to have enough like sort of edge case miles of data collected to convince regulators that the robotaxi is like safe and, and it's much more safer than a human driver. And, and at some point several years ago, Elon kind of wrote this thing saying, "When we have six billion miles of data collected, that's when we will be able to achieve full autonomy."

[00:14:28] Pranav Kanade: They're at like something like 1 billion miles today. Imagine if Tesla stock was a tokenized asset in a blockchain such that this very powerful, valuable asset could be used to accelerate that data collection. 'Cause the central problem to Tesla is, is, you know, folks buy the car, they might buy full self-driving, they might not buy full self-driving, but even if they buy it, you know, people aren't turning it on all the time.

[00:14:51] Pranav Kanade: Like I have pa- my parents, you know, have, uh, two Teslas, and they have FSD on it. They're terrified of turning that thing on. They're worried it's gonna crash, and there's no incentive to do it. Well, you have to, you gotta create a really interesting in-incentive mechanism. And so if you tell a Tesla owner, "You'll get streamed some small Tesla stock as payments to your wallet in order to turn FSD on," well, it's a win-win, right?

[00:15:12] Pranav Kanade: It's a win for the Tesla shareholder 'cause they get to FSD way faster, and it's a win for the, the person turning it on as they're kind of helping create that value. So it really... Like, like every business in the S&P 500, if their stock was actually a tokenized asset on a blockchain, can leverage that asset in unique ways that isn't simply just spending ad dollars in Google and, and YouTube and, and Instagram, right?

[00:15:36] Pranav Kanade: So, and then TV ads and all these things. So, so point is like everyone can benefit for their underlying business. The product itself has to just be great.

[00:15:43] Pete Townsend: Yeah, absolutely. There's a, a Techstars company, Natix, graduated a couple years ago, and they're putting cameras on everybody's dashboard and incentivizing them to basically map the world through their cameras, through driving around, with a token.

[00:15:57] Pete Townsend: Yeah. And that if you map this many miles or z- this many minutes, that's the token you get, and it's working really well. They just raised like a $5 million seed round, so they're doing well. Awesome. Yeah. So right, right there with you on, on that example. When you and I first talked, Pranav, we talked about the eye-opening experience of how you're running a portfolio of publicly traded assets by running a liquid venture portfolio, and that you, you touched on that a few minutes ago.

[00:16:24] Pete Townsend: But can you tell us a bit about the liquid venture strategy that you run at VanEck and how that day-to-day process works in terms of managing the upside and downside every single minute of every day?

[00:16:35] Pranav Kanade: Yeah. So, so, so number one, we're, we're kind of hyper-aware that these are venture assets with liquidity, so we don't try to like stare at prices all day and try to make decisions based on what different prices are doing.

[00:16:46] Pranav Kanade: I try to avoid, you know, reading stuff on X or Twitter that makes price predictions and, and those types of things. It just tends to be a distraction. We have a little bit of a more fundamental lens on the space, a-and I'll frame it the following way, which is- There's probably 300 to 400 million people in the world who own some crypto asset, probably Bitcoin or Ethereum, on some centralized exchange.

[00:17:08] Pranav Kanade: And then there's, as I said earlier, 20-something million active users of onchain products. And, and the, the central focus for us is what are those things that will drive that 20 million number to a much higher number, into that 300 million and change? You know, the, the lowest hanging fruit is, like, the people that own Bitcoin and ETH on these centralized exchanges, what products will they also wanna use that are onchain that have helped these token projects one day?

[00:17:32] Pranav Kanade: From, from that perspective, you know, our view is Bitcoin is the only asset that has achieved some product market fit in the world as store value, digital gold. Everything else is still trying to find it. The thing that is on the cusp of finding it are stablecoins at this moment. We think, you know, there's a high possibility that stablecoins that are a $160 billion market cap asset today can grow multiples from this point on for va- variety of reasons.

[00:17:57] Pranav Kanade: And so, so again, we're focused on these use cases that can drive mainstream adoption in the next two years. You know, there's a lot of interesting things that can be built on blockchains five, 10, 15 years from now. And so from that lens, stablecoins is number one. Decentralized physical infrastructure, I know you just mentioned a project that, that sort of fits in that category, but we have several that are in that bucket as well.

[00:18:18] Pranav Kanade: That's one other vertical. Gaming is a possibility and social fi is another possibility. Those four buckets are closest to sort of finding that hockey stick of user growth. And once we have sort of that view, the sort of the thematic view, what we then try to do is find token projects that look like essentially monopolies in each one of those categories that also have a great roadmap and a great team and, and sort of, you know, essentially folks that you can bet on remaining a monopoly or, or a duopoly in the space.

[00:18:46] Pranav Kanade: And that's harder to find, right? Because there are a lot of categories in crypto that are just kinda this open source code software projects that have no moat. There's no, like, you know... And, and the moat is really a network effect in some ways. And so you look at a category and you'll, you'll see, like, 10 different players with about equal amounts of market share, and you don't wanna play in that space 'cause, 'cause there's no pricing power there and ultimately the tokens will be worthless.

[00:19:08] Pranav Kanade: But again, when you sort of then layer in the, the main theme and then go deeper and a level deeper and you say, "I wanna find monopolies and duopolies in that theme, and great teams and, and very clear value," then you can whittle it down to, okay, how do we think about the value of the token itself in these projects?

[00:19:25] Pranav Kanade: What's the upside case? What's the downside case? How does that look relative to other token projects that are, that are also in these categories that we're looking at? And that helps us frame how much of the portfolio something should be. And, you know, we have our initial sizing, and we also take into account sort of market technical factors, right?

[00:19:41] Pranav Kanade: So which is, like, basically supply-demand on the token side, which is how much supply is there? Who's vesting? What's the demand sinks for these tokens? How is it gonna trade over the next 12, 12 to 24 months? And, and so all those things together kinda help us formulate a view on if a token should be in our portfolio.

[00:19:58] Pranav Kanade: If it is- How do we size it? And then we have our kind of core book, and then we risk manage that book from time to time, because at any given point, one of our tokens might be up a lot, one of our tokens might be down a lot, and, and, you know, it might not be justified, so we rebalance things from time to time.

[00:20:14] Pete Townsend: I gotcha. I gotcha. It sounds eerily familiar to the story that a friend of mine who works for a large well-known market maker- Yeah ... uh, shared with me about how they assess projects, is that they do all of the team first, product, does it fit our thesis on how the world will unfold? And then they look at the token and try to understand, is this gonna be something that is going to fit into their market-making model, right?

[00:20:43] Pete Townsend: But obviously a market-making model is vastly different than a portfolio management model. So o-once you get- Yeah ... to that token side of the analysis, are the things that you're trying to say, "Well, this will work more if the token looks like this," or it will work less in, in terms of your strategy if it looks like that, in terms of the way it trades, in terms of the vesting schedule.

[00:21:06] Pete Townsend: How much further into the tokenomics do you go when you're thinking about making an investment?

[00:21:13] Pranav Kanade: We go pretty deep in the tokenomics side. You know, as a team, we have a general view, which is we talk to all kinds of pre-token projects just so we get to know the team, and we try to understand what their vision is, and then that way we can start tracking them against that vision and see if they're executing or not.

[00:21:27] Pranav Kanade: So the earlier we meet a team, the better it is for us so we can track these things. But we also have a view that the way token projects are launched, they always go through a boom and bust cycle. So, you know, the typical token project raises a seed round, launches a token 18-ish months post their seed round, and launches with a pretty low float for a variety of market structure reasons and a lot of hype.

[00:21:51] Pranav Kanade: And what that means, it has this sort of very inflated valuation in the first 12 months of its launch. As the 12-month period typically comes to an end, tokens begin to vest, original investors begin to vest, founders begin to vest, and they all probably believe that their token project is very overvalued.

[00:22:08] Pranav Kanade: They, they've just observed a big theoretical wealth creation event for themselves on paper. And if that wealth creation event kinda holds, they begin to reduce their exposure, and, and, you know, the hype is at that point also dying, and what you have is a project that goes down 90%. So most token projects typically go down 90% after, you know, 12-ish months after they launch.

[00:22:28] Pranav Kanade: And we're very aware of that, so as a result, we try to avoid projects that are just hot off the shelf that just launched a token. We use that as a opportunity to really learn about them and, and spend time with them. And then what we try to do is observe what happens after they drop down 90%. We try to then ask the question, is this thing achieving product market fit?

[00:22:49] Pranav Kanade: Are the original team and founders still committed? Are they still building things that are useful? And is it actually gaining adoption? And, and this gives, kind of gives us like a six to 12-month window to actually ask those questions, observe it in the data, and then begin to establish our positions. So really the sweet spot for, for us is like 18-ish months after a project has launched in, in the token form.

[00:23:10] Pranav Kanade: And, and so that gives us sort of this optionality to say, "Is this project gonna go to zero, or is it actually gonna make it out on the other side?"

[00:23:17] Pete Townsend: I gotcha. That makes sense. And y- y- you know, I like to say that when I see a early-stage founder and their tokenomics spreadsheet more or less, that it's just- Yeah

[00:23:27] Pete Townsend: a spreadsheet. And original tactics that you deploy when you are selling your token in the pre-sale and the private sale and the public sale- Yep ... and then into the TGE, and then releasing post-vesting, that those are just all artificial constructs to prime the pump of liquidity and to get yourself, to get your product really into the shape where you can have true supply and demand for your token, and that it is operating based on market forces rather than, again, these artificial constructs.

[00:24:01] Pranav Kanade: That's when you have, like, real sort of movement of tokens and you have more market-clearing prices that, that you can say these are real prices and not sort of this fake inflated price. But more importantly, you know, because these are all venture assets, you're still really betting on the team, the original team, and, you know, the, the labs entity in most cases to deliver and ship.

[00:24:20] Pranav Kanade: And, and one of the things I've observed is a lot of these founders, if you think about it from their mindset, they've raised a seed round, they don't have any, like, large, uh, amounts of liquidity personally, and they go kind of build this thing, they launch a token, and all of a sudden on paper they wake up and, you know, typically we have an estimate of how much founders and teams take of the token supply, and these guys typically begin to vest somewhere between six to 12 months after token launch.

[00:24:44] Pranav Kanade: So anyway, they wake up and they have this massive, like, liquid wealth creation event where they're like, "Crap, I have tens of millions of dollars I can go sell and, and go buy houses and cars with." And, you know, then there are some founders that go do that, and, and they stop really caring about the product, right?

[00:25:00] Pranav Kanade: I mean, look, I, I, you know, my team and I go to, like, oh, probably six to 12 crypto conferences a year, and we're talking to these teams, you know, on a weekly basis. You, you start to observe a change in the founder behavior as they begin to vest their tokens. And when you start to see that, that's kind of when you're like, "Look, I don't know if I wanna bet on this team anymore-" Yeah

[00:25:18] Pranav Kanade: as, as much as I like them. I know. 'Cause, 'cause, yeah. 'Cause they're gonna now, like, either not build what they wanna build, or they're gonna build based on ideology and not what's right for the market. They don't take the market signals into account 'cause they're already rich, right? So, so they'll just base...

[00:25:32] Pranav Kanade: build often based on- Yeah ... their ideology.

[00:25:34] Pete Townsend: Yeah. I kinda always use, "Hey, what hotel are they staying in as a benchmark," right? Is it necessary to have that nice of a hotel?

[00:25:42] Pranav Kanade: Yeah. Or, or, you know, if you show up to six conferences in six months and you see them there over and over again- And, and they're kind of at, like, every kind of cocktail event, and, you know, just socializing constantly.

[00:25:55] Pranav Kanade: Like, well, who's building the thing? Like, if you're always at these conferences.

[00:25:58] Pete Townsend: Exactly. I know, I know. Yeah, I, I hear you. And we talked a little bit about already, Pranav, some of these catalysts that you see for growth, and that you're looking at stablecoins, SocialFi, gaming, DePIN, or decentralized physical in- infrastructure networks.

[00:26:18] Pete Townsend: When you step back a bit, are there kind of some societal factors that you think will drive towards getting this 10 to 12 million of daily onchain users up to the 300 to 400 million, or even the billion that people- Yeah ... are talking about?

[00:26:33] Pranav Kanade: I think stablecoins are where things are just ripe for that mass adoption moment.

[00:26:38] Pranav Kanade: Mostly because it has buy-in from... or at least is getting buy-in from most of the important constituents. And, and to be more specific, I think US dollar stablecoins are the ones that I think will dominate in the next three years. You know, if you think about it, politicians and governments in the US, or regulatory bodies in the US should like it because stablecoins have become a large purchaser of US Treasuries.

[00:27:00] Pranav Kanade: So as, you know, stablecoin market caps get greater from creations, those creations drive purchases of Treasuries, T-bills most, more specifically, and that's great because politicians want to run budget deficits, and someone's gotta kind of fund that budget deficit. The bigger sovereigns that used to buy US Treasuries are slowly stepping away.

[00:27:19] Pranav Kanade: You can just look at how much of US Treasuries- Yeah ... China used to buy and what they're buying today. You know, someone's gotta kind of step in for that, and what's interesting about that is most of that stablecoin interest could be international. You know, folks in developing markets that want exposure to dollars that have historically had a hard time getting dollars, this is a very easy way to get them dollars.

[00:27:41] Pranav Kanade: So, so you might almost be, you know, let's just say certain governments who want to buy US Treasuries, the population of that country through this proxy stablecoin way could still buy and buy, become a buyer of US Treasuries. Governments want it, people want it for this reason, and merchants ultimately for commerce should want it because it reduces the fees they pay to the credit card companies and the banks.

[00:28:03] Pranav Kanade: So there's sort of this, I think, perfect lineup of interests on US dollar stablecoins. What's been holding that space back has been the regulatory side, which is, you know, look, big businesses, e-commerce players, or brick-and-mortar players that have an operating business today, I'm sure they're sitting there saying, "Look, like, I, I see these headlines about different crackdowns happening in the crypto space.

[00:28:26] Pranav Kanade: Do I really wanna burden myself with all of that by, by starting to kind of experiment with stablecoins?" That's kind of been part of the issue. So to the extent you can solve that, I think, I think that's something that can go widely, you know, mass adopted-

[00:28:39] Pete Townsend: Yeah ...

[00:28:39] Pranav Kanade: quickly.

[00:28:39] Pete Townsend: Yeah, I think so too, that stablecoins have gotten this far as an unregulated asset, and imagine if it were to be regulated, then where is this gonna go?

[00:28:48] Pete Townsend: Yeah. And it's kind of like trying to hold it similar to Bitcoin, even though Bitcoin is not regulated, it's the products, the ETFs that now hold Bitcoin are regulated, that it, it's gone through the roof. Yeah. So I'm, I'm trying to look- Yeah ... at, at, at the regulatory path for stablecoins in the same light as the crypto ETFs, and holding up on this side of the pond in Europe, MiCA, the, the first part of MiCA that is going live at the end of this month is the stablecoin part of it.

[00:29:15] Pete Townsend: But as we know, stablecoins are, in the overwhelming majority, US dollar, not euro. So we need the US-

[00:29:24] Pranav Kanade: Yeah ...

[00:29:25] Pete Townsend: story to unfold in terms of the legislation around this, and there have been some positive green shoots recently. But I'm very excited to see where this all goes when stablecoins do become regulated in the US.

[00:29:36] Pranav Kanade: So the story this year has been, you know, Bitcoin's up 50-something percent. The altcoin market's actually down in aggregate. So you're seeing this big dispersion, and everyone's really focused on, you know, this, this stuff happening with prices. I, I... And, and what I'm telling folks is, like, let's focus on the bigger picture for a second here, which is something interesting has happened on the l- on the regulatory side, which was when Trump was president, he was not the most crypto-friendly president, but all of a sudden, early May, he comes out swinging and he's very supportive of the asset class.

[00:30:09] Pranav Kanade: And that results in several Democrats in the House and the Senate starting to become more friendly and wanting to pass legislation. And the FIT21 bill, which is a crypto market structure bill, passed the House. The question is, like, is there a version of that that passes the Senate and then makes it to the White House?

[00:30:26] Pranav Kanade: Still kind of like, you know, open for debate. But there is a window here where c- a crypto market structure bill can pass, pass this year pre-election because there's data points out there that suggest that, you know, one in five voters in swing states are single-issue voters around crypto. So, so it's, it's become an election issue, which is now forcing this thing to be a bipartisan thing.

[00:30:50] Pete Townsend: Mm-hmm.

[00:30:50] Pranav Kanade: So I think there is, there's this window here where if the legislative piece plays out in a favorable way, then, uh, there are certain assets within the crypto space that can perform really well as a result of true adoption.

[00:31:05] Pete Townsend: Yeah. And I, I'm hopeful as well that FIT21 does make it through. Speaking of the bigger picture, Pranav, I was listening to, uh, the head of product from a large centralized crypto exchange talk recently about custodying, or pr- providing custody for crypto ETFs.

[00:31:26] Pete Townsend: And w- wasn't even just hinting at it, was saying it outright, that, listen, the vast machines that they've built to be able to handle this in a 100% automated way, providing custody of crypto for ETFs and dealing with all the market mechanics of that, that- It's not just crypto they're thinking of. They're thinking of tokenized securities, and when mass-- when major market assets get packaged up as tokens.

[00:31:56] Pete Townsend: And that always gets me thinking again about the growth of this area and the growth of all of this infrastructure that folks have been building for the last 10 years. But do you see any reusability of the processes that you guys have put in place at VanEck for managing portfolios of digital assets, obviously as a liquid venture portfolio, but when the volume of tokenized security issuances does eventually pick up, is, is this going to be transferable, what you've done so far?

[00:32:25] Pranav Kanade: I would hope so. Okay. You know, I think the one thing that's interesting about us is, you know, most of our business is TradFi, and then there are several crypto verticals, right? So just kinda put some numbers around it. We have over 100 billion of assets under management as a firm. Close to 2 billion of that are, is in crypto-related strategies.

[00:32:43] Pranav Kanade: And it's the same middle and back office that supports the entire business. Okay. So it's the same operations team, same tax team, same accounting team, same IT team, right? So our entire, let's just say, infrastructure has had to learn the nuances of not only crypto custody, but also accounting and tax and, and especially the, the legal side of things.

[00:33:04] Pranav Kanade: So we've, over the last several years, kind of built up this know-how. When the day does come where we can have, let's just say, tokenized ETFs on chain, then I would think that we've built this sort of institutional knowledge on how we can kinda be fast and first to market with things like that.

[00:33:21] Pete Townsend: Great.

[00:33:22] Pete Townsend: Great, yeah. It's, it's, you know, the basis of this is once you start to think about the trade is the settlement, that makes a back office- Yeah ... context much different than it is in the traditional financial markets, right?

[00:33:36] Pranav Kanade: Yeah, and then there's also, like, you know, other, other aspects of it, right, which is the settlement processes today are, are a little manual, so, so because, I mean, for our strategy, for example, we use qualified custodians.

[00:33:47] Pranav Kanade: Yep. So, you know, like an Anchorage is a, is a qualified custodian. But when we have to move assets for settlement, th- that's a, that's... You have these digital approvers that have voice and face recognition and that whole thing. That's very, very different from the settlement of how you settle a stock or a bond.

[00:34:02] Pranav Kanade: And the entire organization has had to learn about it, and then we're all kinda used to it at this point. I think most people would prefer to settle the way, settle all assets the way we settle crypto. 'Cause one of the things about big organizations is when there's a whole new thing introduced to the, to the organization, there's so many people that have to, that have to get trained and learn.

[00:34:20] Pranav Kanade: And then, you know, I think at least for us, we've done that at this point because of l- having these strategies. And so if and when there is a day where you have tokenized securities, then- Yeah ... everyone kinda knows how it all works.

[00:34:31] Pete Townsend: Absolutely. What, what's one thing you'd like to see more from your TradFi asset management brethren when it comes to crypto and broader digital assets?

[00:34:41] Pranav Kanade: More push towards- Very good ... tokenized equities Like that's... Like, I, I think, you know, a lot of people I talk to are, like, trying to tokenize private funds or trying to tokenize different fixed income-like instruments. That's great and all, right? Like, there's a cost savings and exciting things with that. I think if, if our theory here that stablecoin market cap is gonna grow from 160 billion to, say, a few trillion in the next few years, then again, that's dollar stablecoin, and, and a lot of that is going to be in the hands of people outside the United States, right?

[00:35:14] Pranav Kanade: Like, there's not that many reasons where, why, you know, I need to have stablecoins in my, in my wallet. Like, the fintech ecosystem- Yeah ... has served me well in the United States. But the real demand is, like, dollars outside the United States. Well, those people will have stablecoins, and those stablecoins today can either buy some money market funds, like, you know, the BlackRock Money Market Fund on chain, or can then go the other end of the risk spectrum and buy a bunch of liquid tokens and memecoins, right?

[00:35:39] Pranav Kanade: There's nothing sort of down the middle. They'll want to own assets that are not on either end of the, let's just say, the risk spectrum. We think, you know, tokenized security, so tokenized equities and, and ETFs are that product, where if you get that stablecoin growth, that actually could end up in these tokenized equity-like assets.

[00:35:57] Pete Townsend: Yeah. I'm glad you raised that because so much of the market rhetoric towards that is that, well, listen, there's more room for cost efficiency in assets outside of the equity asset class. But a wise person once told me, "If you're gonna try to get someone to do something to change their whole tech platform, don't tell me how I can save money.

[00:36:17] Pete Townsend: Tell me how I can sell more."

[00:36:19] Pranav Kanade: Yep.

[00:36:19] Pete Townsend: And I think the, the point is, with tokenized equities, you could just sell a whole lot more of those.

[00:36:23] Pranav Kanade: Yeah.

[00:36:23] Pete Townsend: You know? Yeah. Viewing through the, through, through the, through the domestic markets today- Yeah ... and through some of the international markets as well. In terms of your day-to-day activity, Pranav, that with your approach to investing in Liquid Venture, what are your favorite tools to use to stay on top of the daily juggernaut of crypto activity that we've all become accustomed to?

[00:36:43] Pranav Kanade: Yeah, so, so we're more fundamental focused than, than technical focused, and so when I say that, people automatically think, "Wait, are you looking at price to free cash flow on- Mm-hmm ... on the next 12-month basis?" And, and then my answer is no, that's not how we look at this. You almost have to look at these projects from this, a little bit like with a biotech lens, where we're either gonna sit at 20 million users on a monthly basis, or we're gonna go to hundreds of millions of users.

[00:37:06] Pranav Kanade: So there's no real, like, kind of middle ground here where, like, we kind of just muddle along for a while. And what we try to do is, is sort of say, if a billion people end up on chain one day, three, five years from now, let's just say most of them are just on chain because they're holding some stablecoins and maybe doing some other things on chain, how does that value then accrue to the projects we're investing in?

[00:37:28] Pranav Kanade: And what are the right ways of measuring whether this project is actually, is actually participating in it or not participating in it? And for that, you essentially do, kind of query the blockchain and, and query the right relevant data. So, you know, we're often using something like the Dune dashboard- Or if you're using a tool like Artemis or using a tool like Token Terminal to be able to track those KPIs that are relevant for each individual project, to again answer that question of is this thing participating in that adoption story or is it not?

[00:37:55] Pete Townsend: Yeah, no, that's a great way to look at it. We've come to the point of our chat, Pranav, where I do like to ask the last question that I ask everybody on this podcast. What is one thing that people wouldn't expect to know about you?

[00:38:09] Pranav Kanade: I have a hobby with, you know, producing music and, and also DJing, something I picked up several years ago.

[00:38:16] Pranav Kanade: Nice. And, and, and one of the things I learned through both the progress, the process of learning those things is, is less is more. So being deliberate and doing fewer things, especially when you're producing music. So, you know, you're layering, let's just say, a whole bunch of instruments and drums and, and, and just sampling things.

[00:38:34] Pranav Kanade: And, and, and when you start to learn how to produce music, your first instinct is to put a lot of things together because you're, like, excited, right? You're like, "I can do so many things. This is super exciting." And it, it turns out, like, fewer high-quality actions yield a better result than a lot of action.

[00:38:51] Pranav Kanade: And I think that sort of thought process is even, you know, kind of, you can even translate that to investing.

[00:38:57] Pete Townsend: You can. You can. And to cooking. Yeah. It makes me think of when I first started trying to do some serious cooking wh- when I was maybe about 28, 29 years old, and I would concoct these elaborate things.

[00:39:11] Pranav Kanade: Yep.

[00:39:12] Pete Townsend: Right? With, with shrimp, with chicken, with roasted peppers, with cream sauce, with everything baked inside pastry.

[00:39:21] Pranav Kanade: Yeah.

[00:39:21] Pete Townsend: And I was like, one, this is not sustainable. Two, it kinda just is unpalatable after a while. Even though it tastes good the first time.

[00:39:31] Pranav Kanade: Yeah.

[00:39:31] Pete Townsend: Now I just keep it simple.

[00:39:33] Pranav Kanade: Yeah.

[00:39:33] Pete Townsend: And pan-fried salmon.

[00:39:36] Pete Townsend: Yeah. So, so simple, and it comes out so well if you do it right. Yeah. And that, that is my go-to. So right there with you from DJing to cooking to investing, keep it simple.

[00:39:48] Pranav Kanade: Yep. No, I totally agree, and that's something we try to do. Yep.

[00:39:53] Pete Townsend: Very good. All right, Pranav. Well, listen, this has been a fantastic chat.

[00:39:56] Pete Townsend: Really appreciate you coming onto the show to do this with me, so thank you.

[00:40:00] Pranav Kanade: Thank you. This was great.

[00:40:05] Pete Townsend: That does it for this week, folks. Thanks to Pranav Kanade for opening up his mind to help us figure out why he does what he does. For show notes, resources, and how to get in touch with Pranav, check out our website, MoneyNeverSleeps.ie. If you like what you heard, please leave us a rating and a review on Apple Podcasts or Spotify as it helps others to find the show.

[00:40:22] Pete Townsend: Also thanks to Conan Brophy from Create Sound for mixing and editing this episode. Conan is an excellent media man to get in touch with when you're thinking about launching your own podcast. As for me, I'm an early stage startup investor focused on where fintech meets crypto and crypto meets Web3, and I lead the Techstars Web3 accelerator.

[00:40:36] Pete Townsend: There are plenty of links in the show notes on MoneyNeverSleeps.ie and how to get in touch, so don't hesitate to reach out. Finally, till next time, thanks for listening. See ya.

Money never sleeps, pal.