Twenty One Capital CEO Raphael Zagury on Opportunities in Current Crypto Market

CoinDesk Public Keys which broadcast right here at the New York Stock Exchange, explores the future of financial markets by looking at the intersection of digital assets, traditional finance and macroeconomics. Host Jennifer Sanasi recently spoke with Raphael Zagury, CEO of NYSE listed 21 Capital, and he spoke about opportunities across the digital asset space.

It's important to remember that we're in a bear market of Bitcoin, right? So that brings opportunities for us, of course. So the multiples, evaluations of target companies I think are fairly attractive right now. But more important, we're looking for companies that are as I said, growing well. They need to be cash flow positive. Our model to bring these companies towards our balance sheet, it's closer to what Berkshire Hathaway looked to building companies uh around their portfolio. They're going to be independent companies. They're going to sit on their with their own balance sheets, right? with their own teams, with their own management teams. Uh with control of 21, but building towards the treasury of 21, right? So different than other treasury companies out there which what they're doing is more akin to what hedge funds will do and they will do financial engineering to buy more Bitcoin to put more Bitcoin in the balance sheet. The way we're going to enhance our Bitcoin treasury in the long run is by getting these companies to contribute to to the treasury along the way, right? And for that, of course, they need to be cash flow positive.

So I guess that's I mean, if I'm reading between the lines, how 21 is going to differentiate itself from a Bitcoin Treasury company like let's say strategy.

It it's one of the ways. Uh we will, just to be clear, we will do what strategy and other companies do, you know, all the financial engineering around that, all the capital markets activities. We plan to do those things as well, but that's one of the tools that we have in our two kits, right? We're going to look at other things as well. I think the way that strategy and other companies have looked into building their treasury and to enhancing the treasury, it's more similar to how hedge funds look at allocating capital, right? It's financial engineering, and again, nothing wrong with that. It's actually very good, can be extremely profitable, right? We have large companies like Citadel that that's all that they do, right? We are going towards that market, but also more importantly at a slightly different one which is looking at as I said, Berkshire Hathaway like companies that will be very profitable for our balance sheet.

Let's talk about the lending piece. I mean, we're talking about M&A, are you looking to acquire a Bitcoin lender or are you looking to build that in house?

Well, we can't talk about transactions that we're we're looking at, right? But uh lending, what I can say is a very attractive business for us. You know, as I've been a Bitcoiner for a while, you know, I worked in Wall Street most of my career, but I've been in Bitcoin for a while and every time that I look at Bitcoin as collateral, right? I you're underwriting the collateral at the end of the day. It doesn't matter who the borrower is or at the the other side, right? Bitcoin is the collateral that you're going to be using and it's the best collateral out there. As I said, you know, you can monitor it in a in a wallet very easily. The blockchain is fully transparent. It trades 24/7, right? So for on the landing side, that's the asset that you want, right? And I think long term what we're going to see is a compression of rates and lending and I think the lending market of Bitcoin will become much more active than it is right now.

How did you get into Bitcoin?

Yeah, long story. So, 2015, I was here. I was actually working very close here at uh Deutsche Bank at the time and for a long time, you know, I was a little bit of a gold bug. Uh I read a lot about gold at the time, you know, about of course, all the issues that we have with with central banks and it was a person that I used to read a lot, John Maden at the time. And John Maden had a very good newsletter that, you know, we would receive an email by the time and he was the first one that I saw mentioning Bitcoin, comparing to gold. He's like, oh, this is digital gold. This is what you want to have long term as a new technology that it's coming out. And I've loved technology my whole life. you know, I started coding very early in my age. So that kind of like was my two worlds colliding, you know, the Wall Street and at the same time, the technology world. Uh unfortunately, it took me a long time to really understand it as I think it does for a lot of people because Bitcoin is very multi-disciplinary, right? So you have of course the computer science part, you have the finance part, right? We have, you know, a lot of other things around that. Uh but yeah, that's how I I got into Bitcoin.

Where are we on the institutional adoption curve when it comes to Bitcoin, do you think?

uh much better than we were, I would say probably a couple of years ago. I think the ETFs really changed that. uh but it's still very, very early. I I can tell you that, you know, from my old time in Wall Street to now, um probably 10% of my colleagues have active interest in in Bitcoin. It's been growing a lot. If you ask me two years ago, it would be close to zero, right? So now it's growing, but the institutional adoption is still very, very early. I think, you know, as we go through things like the ETFs, the lending business is important because of that, right? Ultimately, I think we're going to have credit funds that are going to be raised with the specific purpose of lending against Bitcoin, right? And that's inevitable. I think that's ultimately going to happen.

What's it going to take to get the the other 90% of the colleagues that you worked on Wall Street with on board?

I think part is time. It takes time, I think for people to really grock Bitcoin and understand, you know, how different it is. Uh you know, the the characteristics that it has as a monetary asset, the best money that was ever invented, right? The best savings technology that was ever invented. It takes time to get it there. So you need time for that, right? Uh it's going to happen ultimately and it's also price. Uh you know, price is important. I think as market cap starts to go up, it starts to get more interested, uh interesting as a as an asset class, right? Now compare $1.7 trillion where it is right now with gold that's 30, you know, and then other asset classes like real estate that are all used as savings technologies are much bigger than that. I think gradually, you know, as that goes up, the importance is going to go up. Uh listen, even a few years ago it was, we wouldn't even think about talking about, yeah, we're going to have pension funds, we're going to have endowments, we're going to have, you know, institutions having Bitcoin in their balance sheet. And that's happening already. gradually. Um but it's happening, right? And then suddenly we're going to see I think adoption go up. It's you usually see with new technology, right? starts slow and then accelerates and then it becomes inevitable.