CZ Talks Investment: 70% Crypto, 20% AI, 10% Biotech – Has Invested in "Artificial Wombs" and "Knee Regeneration"

Original link: CZ on the Future of Crypto

Translation by: CryptoLeo (@LeoAndCrypto)

Editor’s Note: It’s been a long time since we saw crypto groups actually talking about crypto (all the chat is on Micron and SpaceX). Odaily revisits CZ’s interview with Galaxy to recharge your conviction. The interview, titled “CZ on the Future of Crypto,” covers the current market cycle, the convergence of traditional finance and crypto, prediction markets, AI development, investment philosophy, and more. It may offer some inspiration for those still holding hope during the bear market. Below is a full transcript and translation of the interview.

Q: Regarding the four-year crypto cycle, I’ve done some calculations, and it seems remarkably accurate, almost to the day. What’s your take on this?

CZ: I think the concept of a four-year crypto cycle is quite accurate. It’s a normal cycle. Currently, prices have pulled back about 50%. In previous cycles, we’ve seen pullbacks of 80%. For example, in 2022 after the Luna crash and the FTX collapse, crypto hit a low with Bitcoin around $16,000. Now prices are 4 or 5 times that level, and each cycle peaks higher.

Compared to before, we now have countries supporting Bitcoin, many nations embracing crypto, and crypto regulation and discussions becoming internationalized. We have institutional adoption (BlackRock), including BNB ETF listings, and so on. We’re genuinely seeing more real development activity, more developers returning to the US, and many countries issuing more stablecoins. There’s also RWA, like being able to buy SPCX/pre-IPO tokens on Binance or other exchanges.

Even though we talk about cycles, a cycle doesn’t end in the same place. The starting point of each cycle is significantly higher than the last. It’s a cyclical pattern with rising bottoms.

It’s hard for me to say where the bottom of this cycle is or how long it will last; I don’t like making predictions. But generally, previous highs become future support levels. For instance, $60,000 was an all-time high 4 or 5 years ago, and in technical analysis, a previous high often acts as support for the next low. There are various theories behind this, and I don’t know if they’re correct. I’m not a great technical analyst, but that’s how it seems to play out.

Q: In each crypto cycle, there’s usually a major blow-up that sends prices from a peak to a trough. In this cycle, is there anything approaching a similar blow-up?

CZ: That’s a very interesting question, and I’m curious about it too. I was probably wondering about it maybe six months ago. But in the last six months, no institution has disclosed being close to bankruptcy. The entire industry has done a better job controlling leverage. Perhaps there have been some internal shocks within the industry, but no one has gone bankrupt.

From what I know, I don’t see many highly leveraged products. While there are some stablecoins offering high yields, similar to circular lending, overall, the scale of these products is relatively small compared to the current size of the industry, which is a good thing.

Q: Traditional finance is building its own chains, crypto is introducing tokenized securities and RWA. Regarding the integration of traditional finance and crypto, where do you see the line between centralization and decentralization? Will TradFi make crypto more centralized, or will crypto make TradFi more decentralized?

CZ: I think both will happen because we’re already seeing this convergence. Theoretically, crypto isn’t a standalone industry; it’s a new technology, a new tool that enables financial transactions to be faster, cheaper, and more transparent. It’s like how there are no pure internet companies anymore, but there are internet infrastructure companies like Cisco.

Traditional financial companies can use blockchain technology, which is open to anyone. They can develop their own chains with various technologies, most of which are open source. Conversely, crypto companies can offer services very similar to traditional finance: lending, savings, stock trading. Transfer, payment — crypto companies can do all of this, and it’s not limited to crypto. Besides stablecoins, they have fiat on-ramps and handle fiat-like business.

Crypto and traditional finance shouldn’t be separated. This is essentially a fintech industry, so convergence is inevitable. Regarding centralization vs. decentralization, I believe that, inherently, any platform or company in the industry is part of a centralized structure. Even any team or project with multiple participants involves some centralization.

Humans have network effects; we like working in teams. Very few people can work alone using AI. But technology is constantly evolving, becoming more decentralized. So, I believe both decentralized and centralized aspects will exist. The binary opposition between centralization and decentralization can be reframed: in a decentralized world, anyone can work together. A decentralized world should be able to accommodate centralized participants.

If centralized participants can provide truly good, secure services at low cost, they will attract more users. That’s the network effect.

Of course, this can lead to small-scale centralization or even monopolies, which has both pros and cons. Companies that abuse their monopoly power typically lose their market dominance over time, creating opportunities for new market entrants. So, to some extent, centralization and decentralization will coexist forever. But I am a strong supporter of decentralization. Technology will continue to drive decentralization, and more and more tools will become increasingly decentralized.

Q: Banks and credit card giants are also building their own chains or crypto businesses. For example, Mastercard announced its test platform MTN. Why aren’t they building on BNB Chain, Ethereum, or Solana?

CZ: That’s the spirit of decentralization. You can build your own blockchain if you want; you don’t have to rely on ETH or BNB. The more diversity among blockchains, the better, and this is beneficial for users up to a point. The more choices we have, the better. Over time, users will figure out which blockchains offer real utility. It’s still unclear if most people only care about centralization or decentralization.

I think most people care about basic aspects like low cost, security, and ease of use. If large traditional financial players want to develop their own proprietary blockchains and manage to get people to use them, then more power to them. But I believe more and more people will demand greater freedom. A truly decentralized crypto world offers higher freedom and lower costs, and which chain to use is a consumer choice.

Also, many countries aren’t fully comfortable with a purely open blockchain; they want their own national blockchain. I’ve discussed this with leaders from various countries. They all want their own national blockchain but need time to convince themselves: “We are giving up control over our currency, or we are giving up control over our national financial sector.”

This might be a transitional phase. Over time, for a large country like the US, if all the Wall Street giants use one or two private blockchains, with trillions of dollars flowing on those networks, retail might be excluded. It’s like the enterprise internet — there’s enough activity on the enterprise internet that is meaningful, and that’s fine.

Decentralization doesn’t mean everyone has to use the same single open-source blockchain. If we force everyone to use Bitcoin, that’s not true decentralization.

Q: Binance offers perpetual contracts. BitMEX was one of the first exchanges to offer them, a very important, efficient, and excellent financial tool. It seems that as crypto becomes more legitimate, we’ll see more platforms like CME offering crypto trading. What impact will this have on crypto exchanges? And conversely, what impact will crypto offering stock trading have on traditional exchanges?

CZ: First, perpetual contracts weren’t invented in crypto; they existed in traditional finance. The first perpetual futures in crypto appeared in 2014, launched by BitMEX. Binance was a bit later, starting in 2019. In the intervening five years, some other exchanges offered different futures products, but not perpetuals — they were delivery futures, requiring settlement and rollover every Friday.

Binance offers these products because we have the largest user base, providing the best liquidity, volume, and price execution with minimal slippage. Now, traditional futures giants like CME are also launching futures products. I think this is great because they serve a market Binance never has. Binance has never served those institutional clients in the US.

If CME or other US institutions can drive all institutions to trade crypto futures, that will bring more liquidity. It will fill the liquidity gap, increasing overall liquidity in crypto trading. I think that’s really good.

I don’t care much about who becomes more powerful. The more people who can access and trade crypto, the better the liquidity. And better liquidity is actually the best protection for consumers. When liquidity is good, you see fewer crashes and similar events.

I predict that in the future, forex trading will also move onto the blockchain.

But that said, Binance’s user base is very diverse. For example, it’s not easy for people in many foreign countries to buy US stocks. But doesn’t every country want its stocks to be purchasable by everyone in the world? If you list SpaceX, why wouldn’t you want everyone in the world to be able to buy its stock? Which company, which stock exchange, which country wouldn’t want everyone globally to buy its government bonds? Why would you prevent others from buying your government bonds?

Digging deeper, if one country buys a lot of another country’s government bonds, conflicts between them are less likely. They must negotiate on trade rather than attack each other. So, the world is getting smaller. Despite geopolitical tensions and other problems, crypto exchanges providing a way for people outside a country to buy its stocks doesn’t harm that country’s existing stock exchange; it actually helps improve liquidity, demand, etc. That’s my view.

Q: Hyperliquid is a large and growing platform. I think it’s more decentralized than Binance but less decentralized than Uniswap, sitting somewhere in between. Have you met Jeff? What are your thoughts on Hyperliquid?

CZ: We find Hyperliquid very interesting, especially regarding Jeff. I’ve never met him in person, but he was actually involved in one of the earliest Yzi Labs incubations. So I guess he’s a very smart young guy and quite capable.

Hyperliquid proved a new market segment that didn’t exist before, something others hadn’t achieved. They have a small team but carved out a niche that Binance couldn’t compete in. They don’t have KYC, and they claim they are decentralized (I won’t comment on another project), but based on what we see in the technology, they have significant control over Hyperliquid. They use smart contracts for deposits and withdrawals and claim that makes it decentralized. In any case, Hyperliquid has some technological innovations that are quite good.

Q: What are your thoughts on prediction markets? Many US jurisdictions are upset about them (sports betting), but they also seem to have significant utility, especially in cases where you need to trade a proxy for an event rather than the event itself. From a regulatory and product concept perspective, how do you view prediction markets now?

CZ: I also think it’s a great invention. Prediction markets have been around for a while, like event futures prediction markets. Different regions have different regulations for prediction markets. However, the CFTC chair is supportive of prediction markets in tone, and many important figures in the US government have expressed support for Polymarket. This is good; it allows people to provide pricing and liquidity.

I founded an exchange, so I like seeing any tool that aids price discovery and liquidity. I believe Polymarket and Kalshi have licenses in the US, so I’m not sure about certain states that might dislike it. I steer clear of any jurisdictional disputes. But I think it’s a good thing for consumers and the global crypto industry. Like any new technology or platform, as long as they function well, they can be excellent. Of course, there will always be ways to do it poorly. But I think, the top prediction market projects today are doing a really good job. And there will be many new prediction markets emerging in the future.

There might be as many prediction market projects as there are general crypto projects — maybe 100 to 1000. So I hope all these projects execute responsibly.

Q: What should we be paying attention to on BNB Chain right now?

CZ: Now that I’m no longer managing the exchange operations, I have more time to interact with community developers. I’m really excited about some of the new features they are building on BNB Chain. One piece of advice I give developers is: Don’t do major upgrades during a bull market; do them during the calmer bear market periods. I recommend this to every blockchain project team, not just BNB Chain developers.

Right now, they are working on the next version. It will be faster, cheaper, and offer users more privacy control options. The list of features for the next version is quite long. I don’t drive these features, but when I see the list of everything they’re building, I think they’re doing a great job.

Q: Ethereum’s hub-and-spoke model has become somewhat urgent because the L1 is highly decentralized. So they launched L2s, but currently, L2s are mostly OP stack single-sequencer rollups, which aren’t truly decentralized. I don’t think they’ve reached stage 2 decentralization. What are your thoughts on this argument? I know Vitalik seems to be saying maybe they should focus more on L1.

CZ: Yes, I’ve definitely sensed a shift in Vitalik’s attitude. I recall about four or five years ago, the Ethereum community was very focused on L2 technology. In the past few years, it seems like they’ve somewhat backtracked or stopped moving forward. I think the main reason is that L2s don’t contribute value back to L1.

We did some calculations and found that the license fee BASE pays for choosing the OP Stack is actually more than the L1 fees they pay.

Vitalik seems to have realized that L2s don’t help L1. Then Ethereum experienced a price decline, and Vitalik had to deal with the pressure from that. All these things combined made him realize he still needs to work on L1. So now he has shifted his focus slightly, which is normal.

There are still some powerful L2 solutions, but I think the future lies with L1. L1 speeds will increase, but then demand will increase too, and L1 won’t be able to scale fast enough. Then other L2-type solutions might emerge again, like a recurring cycle of L1-L2.

Q: Yzi Labs was formerly known as Binance Labs. It’s your core investment vehicle. What types of projects are you focusing on now?

CZ: I give Yzi Labs a general guiding principle for investments: roughly 70% crypto, 20% AI, 10% biotech. I believe these three areas are massive industries that will continue to grow rapidly, filled with innovations waiting to be discovered, implemented, and built. These innovations are likely to have a positive impact on our civilization.

Our philosophy is for Yzi to invest for impact, not necessarily for financial return. Let me give an example. Suppose we invest a billion dollars in a drug research company working on a common disease like cancer, and the treatment becomes very cheap. The company might not make any money, but it could cure one million, ten million, or one hundred million people. I would rather lose that billion or even billions of dollars. That would make me very happy because we achieved impact.

Many early-stage projects are a bit crazy, and we expect a very high failure rate. Of course, we also invest in some very good projects. There are many crypto companies