Many people had likely not heard of Anthony Scaramucci before 2017, when he infamously served as White House Communications Director under former President Donald Trump for 11 days before he was fired. However, both before and after that week and a half, he built a successful career in the hedge fund industry with his firm SkyBridge Capital. After his tenure on the Trump train derailed, he became a vocal critic of the former president and a bitcoin ‘hodler’.
I spoke with Scaramucci to learn about his personal journey into bitcoin and what convinced him not only to invest, but to create a dedicated vehicle for others to grow their wealth in crypto as well. He also shared some fascinating insight on how emerging technologies such as bitcoin, which are still rough around the edges, can gain mainstream adoption over time.
Excerpted from Forbes CryptoAsset and Blockchain Advisor. Subscribe here.
Forbes: To get things started can you give an overview of Skybridge?
Anthony Scaramucci: The idea behind Skybridge was to democratize the hedge fund industry. Hedge funds often have very high minimums, particularly the more sophisticated, better managers. What I did was create a fund of funds with a ,000 to ,000 minimum. And my tagline was that I wanted to be the hedge fund manager for every dentist in America. So if you had a million dollars of net worth, and you wanted to put 5% of it into hedge funds for seeking alternative investments, you would come to us. Over 15 years we’ve built up a nice track record, have 26,000 clients and about billion under management. From there I branched out into a couple of other products. For instance, when I got back from Washington, we built an Opportunity Zone fund to take advantage of the 2017 Tax Reform Act. And again, recently, in 2021, we started the Bitcoin Fund.
Forbes: Walk us through your bitcoin discovery journey. What were some of your first impressions and what convinced you it was a worthwhile investment?
Scaramucci: We put more than three years of research into the Bitcoin Fund; there was lots of skepticism on my part and on the part of my research team. I think there are two things that you have to overcome with Bitcoin. First, you have to know what it is exactly, because one of my rules of thumb—like Warren Buffett’s—is that if I cannot understand something, I don’t want to invest in it. Second, what confidence do I have that this investment will not trade to zero and why is this a durable long-term value exchange between human beings on planet Earth? And so after three years of evaluating, we believe it is. I’ll give you the three main reasons why. The first one is that Bitcoin as a digital asset and as a store of value scales relative to its competitors. Since its inception in 2009, it’s been attacked 6,500 times by varying competitors. And yet, if you look at bitcoin’s market capitalization relative to everything else out there, it’s dwarfing everything, closing in on trillion. Number two, Bitcoin is an effective encrypted ledger. Those codes, if you will, can be exchanged between human beings in a way that’s impregnable. And so it’s almost like a certificate, if you will, a value between human beings. And that’s really all money is if you step back and look at the 5,500 years of money.
Last point and this is the most significant one, Bitcoin is a monetary network. Looking at what has happened in the 21st century, we’ve seen the evolution of a retail network that’s known as Amazon. We’ve seen the revolution of a social network called Facebook. We have a search and advertising network known as Google. What’s happening in our society, with the introduction of these new technologies is you’re creating these networks. And the networks themselves have a tremendous amount of value. There are more than 140 million owners of bitcoin worldwide now. You look at the users, the scalability, the ease of transferability among the holders of bitcoin or the potential new entrants into the marketplace—it has the ability, in our opinion, to act like gold and be an additional store of value. In some ways, what I’ve said to people is that I think Bitcoin is better at being gold than gold.
Forbes: Once you became sufficiently convinced of bitcoin’s value proposition, how did you go about constructing the Bitcoin Fund.
Scaramucci: One of the gating factors for us was storage. I think we’ve achieved that now. Fidelity Digital Assets is storing our bitcoin. It’s not the Wild West of bitcoin where you have a USB in your pocket or a safe deposit box, and if you lose it, you’re out of luck. It’s also still hard to access for individuals, so we created a low cost product, 75 basis points versus our competitors that’s in some ways a 60% discount on something like a Grayscale. We want to give people the opportunity with a ,000 minimum to scale into bitcoin. It has a three month lock up on it, which is important because we’re trying to turn people into being long-term investors.
For those reasons, we think this is a rare opportunity for retail investors to get ahead of the institutional community and be a part of the digital assets future. I can’t guess where bitcoin’s going, but I’ll just do simple math with you; if the gold market is seven to ten trillion and bitcoin is 700 million to 1 trillion, you could see a 10 to 1 move on bitcoin. It won’t happen overnight and will come with a tremendous amount of volatility. But given everything that’s going on in the global banking community, the 23.2% production of more dollars in the U.S. economy, all the things that are happening with fiat currencies, I think it’s a very good bet for people to have a small sliver of money in a position like this.
Forbes: In a recent commentary you mentioned how buying bitcoin now is analogous to investing in Amazon shortly after the dotcom bubble burst. Can you expand on that?
Scaramucci: I was using that as an example because Amazon is a great retail network, and if you look at Amazon in the year 2000 you’re thinking okay, I missed that meteoric stock performance. But if you step back and look at Amazon over its 26-year life, you would say, wow, this thing dropped in value 50% six times since its initial public offering. Yet, if you were brave enough to hold that stock, Amazon is probably the greatest performing stock in U.S. stock market history. I would overlay the bitcoin chart on Amazon because they are very similar. As users go up, and customers go up, Amazon’s price goes up, and that seems to be what’s happening with bitcoin.
And again, what I would say to you is that for the last 12 years in Amazon, you’ve had 64x return. But if you were sitting there 12 years into Amazon’s birth in 2006, and you’re looking at the stock chart, you’re thinking this has run up a lot, it’s expensive, I’m going to pass on it, which obviously would have been a mistake. I’m making the same point about bitcoin. This is one of the last frontiers in digital networking. It is effectively the Google or Amazon now of digital assets or digital store value.
Forbes: That leads me to my next question. The Bitcoin Fund is only going to be used to purchase bitcoin. Do you have any plans to offer funds geared towards other tokens in the future?
Scaramucci: The short answer to the question is no. The longer-term answer is maybe. So far there’s been a gradual and incremental process of acceptability for bitcoin or digital assets. I want to focus on this one asset; what I would say is the best in class as a store of value. If you and I are having this interview, three, five or eight years from now, could we be wading into other digital coins or possibly have a fund of funds that does that for people? Yes, I want to be open minded to that. But as an entrepreneur, I have found that my greatest success has come from incrementalism and focus. So I would say for the next three years, we’ve got blinders on and maximalist eyes on the target of our Bitcoin Fund.
Forbes: You also said recently that you feel more comfortable purchasing bitcoin now than a few years ago when it was 0. To some people that might seem counterintuitive. Could you please explain your reasons why?
Scaramucci: Obviously, if you bought in at 0, you made a fortune. But, if you bought it in 2014, it was the Wild West and it also wasn’t clear who the winner was going to be. My good friend Michael Dell once said to me, for Dell to beat out its competitors he had to make 100 really great decisions, and had to go 100 for 100 on those decisions. In the case of Bitcoin because it’s decentralized, no one’s making that decision, but it had to be almost a perfect or near perfect operating system and operating structure. And so in 2014, because of the onslaught of the competition, the low price and the difficulty of storage, it wasn’t clear that it was going to be the winner. But in 2020 or 2021, now at 27,000, 34,000 a coin, it is the winner. And as a result, it is the industry standard. Now you also have this ease of storability, and it’s very liquid.
Forbes: Your fund is structured in a way to reduce the risks that come from safeguarding your crypto, but there are still several macro risks facing bitcoin and crypto in 2021. Which are top of mind for you?
Scaramucci: There are three big risks. From a regulatory perspective, getting banned in China didn’t stop its rise in value, but if it gets banned in the United States that could put a pinch on things. However, the chances of that are remote. Secondarily, you could see the advent of a new asset, although I see that as remote as well. It would be like competing right now against Google. Even if you have minor or major improvements in search technology it would be very hard to compete with Google’s scale. Some of these technologies like ethereum are considered to be better technologies than bitcoin, but they don’t have the scale. Third is the issue of zero ability. What is that thing really worth anyway? It’s just a series of numbers and digits and code that I’m purchasing on the internet. And so why would somebody accept it as a chain of value or as an operating ledger for the transfer of value or money? You either see it or you don’t.
Forbes: Finally, many people are looking forward to the approval of a bitcoin ETF from the SEC. How do you think that will impact your fund?
Scaramucci: We think an exchange-traded fund is still 12-18 months away, and without knowing what it looks like, we can’t comment on the impact to our fund.
Forbes: Thank you for your time.