Interview, Fireside Chat
Kyle Samani: Why Bitcoin is Not a Hedge Against Inflation | 20VC #909
- Kyle Noller founded Multicoin Capital in May 2017 after recognizing Ethereum's potential for permissionless finance, launching their liquid fund on October 1, 2017, and their first venture fund in July 2018.
- The firm transitioned from a 36-month strategy attempting to combine trading, fundamental research, and venture capital to a singular focus on thesis formation with indefinite holding periods, having scrapped market trading due to the high cost of failure in that approach.
- Multicoin Capital currently manages three venture funds and operates without formal portfolio construction rules, sector diversification limits, or capital reserves, preferring to deploy capital based on market opportunity rather than pre-defined buckets.
- The firm structures its hiring process to prioritize writing ability over pedigree, requiring candidates to submit essays that are rigorously critiqued by the entire investment team to identify logical fallacies and biases.
- Investment decisions are reached through an "active disagreement" culture where investment memos undergo extensive asynchronous debate, often involving hundreds of comments, to stress-test every assumption before committee approval.
- Noller asserts that human cognitive performance is critical to investing success, relying on strict health behaviors regarding sleep, diet, exercise, and supplementation to maintain peak brain function during high-intensity information consumption.
- The firm consumes information at a rate they claim is three times higher than competitors, utilizing approximately 40 daily email newsletters and 3–4 hours of daily reading while multitasking during meals, exercise, and travel.
- Multicoin Capital believes tokens are assets that primarily function to bootstrap network effects by incentivizing early participants to take financial risks in building infrastructure, citing the Helium wireless network as a primary case study.
- The Helium model incentivizes early hotspot deployment by issuing a fixed supply of tokens over time, resulting in higher token rewards per device for the first adopters, effectively distributing risk and reward based on the timing of network participation.
- Noller argues that tokens can reduce the power of network effects over time by lowering barriers for competitors to bootstrap their own networks, as the incentive mechanisms that lock users into one system can be replicated by new entrants.
- The firm rejects capital structures where both equity and tokens claim value accrual, viewing them as conflicting interests; Multicoin Capital primarily invests in tokens and often treats equity as having little to no value.
- Multicoin Capital prioritizes market analysis over product or founder evaluation, dedicating roughly 93% of discussion time to market dynamics, including the specific shape of network effect curves (sublinear, linear, or superlinear) and returns to scale.
- The firm avoids SaaS businesses and token tools within the crypto sector because they generally lack the meaningful network effects required for their specific investment thesis.
- Noller maintains that crypto bull markets are driven by novel capital formation mechanisms rather than increased leverage, noting that while hidden leverage exists in DeFi, it does not constitute the primary catalyst for market cycles.
- Multicoin Capital claims a significantly lower loss rate than traditional venture capital due to the liquidity of tokens, allowing them to exit positions in 18–24 months if a thesis proves incorrect without the long-term illiquidity associated with private equity.
- When exiting positions, the firm engages in "t-whopping" (gradual selling over six months to a year) to minimize market impact and maintain responsible communication with founders.
- Noller limits the core investment team to 10 people, arguing that larger teams become net value-destructive due to dilution of debate quality and the inability to manage the time required for rigorous decision-making.
- The firm performs quarterly decision reviews to analyze sizing errors and forecastability, learning from both knowable errors in analysis and unknowable black swan events, which they estimate account for roughly half of their failures.
- In a recent "quick fire" segment, Noller dismissed Bitcoin as a hedge against inflation, calling it "nonsense," and asserted that Ethereum lacks a credible scaling plan compared to Solana, which he views as superior due to market-driven predictability.
- Multicoin Capital's most recent public investment highlighted is Delphi, a data dow that aggregates consumer data (e.g., from Amazon, Google, LinkedIn) to trade US equities using predictive analytics and short-dated options.
- Noller expresses a desire for regulatory clarity around capital formation in crypto, specifically advocating for a laissez-faire approach that would require an act of Congress or significant SEC rule changes.
- He identifies a common personal failure as difficulty maintaining the work ethic he advocates, specifically noting that he struggles to make himself work out every day despite believing it is essential for cognitive performance.