Welcome to the decentralized future of money or an epic bubble. Or both.

Arianna Simpson is founder and managing director of Autonomous Partners, a digital-asset investment fund backed by Cohen Private Ventures and Union Square Ventures. She is one of the most influential, forward-thinking investors in the virtual-asset sector. She was an early employee at BitGo, and before that worked for Facebook.

This conversation was edited and condensed for clarity. Excerpts from the interview first appeared in Private Key, Quartz’s newsletter about the crypto world.

Quartz: What led you to focus your career on cryptocurrency?

Simpson: The real catalyst was a trip I took in summer 2013. I spent some time in a few different African countries, including Zimbabwe. It was a couple years after the worst of their hyperinflation. At its peak, the Zimbabwean dollar was losing half its value every day. Obviously, this completely disrupted the economy and seeing the aftershocks of that was pretty alarming.

Arianna Simpson.

When I got back, I was thinking a lot about monetary policy and what might be possible in a country where a government or central bank wasn’t regulating currency. Bitcoin made a lot of sense in that context.

What has it been like to witness the growth of the cryptocurrency industry?

I’ve watched the space develop from this niche, weird corner of the internet into something that commands mainstream attention. Even though we’re in a bear market, there’s positive momentum and a lot more traditional financial players are getting involved. That’s not something we saw a few years ago.

I’ve also been struck by the amount of talent that’s moving in. Obviously we had the financial mania of 2017, but cycles like that attract a lot of interest from smart people. When they move into the space, there’s a 12-36 month lag, but ultimately, that ends up producing some real value.

Tell me about the people backing Autonomous Partners.

I’ve made an effort to bring aboard investors who have experience in various realms and can add value beyond their capital. We’re dealing with fundamentally early stage technologies, so having [limited partners] with experience in different areas made a lot of sense.

Cohen Private Ventures recently invested in your fund. Who are some of your other investors?

My investor base is a mix of folks. Union Square Ventures invested as a fund. David Sacks’ new fund, Craft Ventures, invested. And a number of individual partners in other VC funds–Alex Bard from Redpoint, Ryan Gilbert from Propel, and a few others. Propel, in particular, has deep fintech experience given their relationship to BBVA.

In the midst of a crypto bear market, are you concerned about capital drying up?

It’s easy for everyone to look like a genius in a bull market, but a lot of people aren’t willing to sit through the years of a bear market that you might have to in order to see those gains. I’ve structured my fund to be able to withstand some of these shocks and continue growing regardless of what’s happening.

It’s not great for the ecosystem longterm when inexperienced investors or people without convictions in their theses are starting new funds. I think [the bear market] clears it out for those who plan to stay in the industry for a long time.

Any cautionary tales you can share?

The main cautionary tale is “don’t get emotional and sell at the bottom,” which happens frequently. It’s funny—I read Warren Buffett’s and Howard Marks’ memos pretty religiously. It’s amazing how much overlap there is between what they write about and what’s happening in crypto. Ultimately, [the crypto markets] are very sentiment-driven and people who don’t have their own theses about the space will just respond to whatever the market is doing in one direction or the other.

What do you think of Buffett and others’ arguments that cryptocurrencies are non-productive assets?

To some degree it’s true. There are significant differences between how companies work, the kinds of cash flows you’d expect to see and the way that crypto networks operate. At the same time, I don’t give much weight to their comments on bitcoin and cryptocurrencies. They’ve notoriously been very bad tech investors and they’re the first to admit it.

Shifting gears, do you think a country will ever recognize bitcoin as legal tender?

Definitely. Certain countries are already moving in that direction. The Marshall Islands made plans to issue its own cryptocurrency. I’d be shocked if we don’t see that more in the next few years. In some cases, it will be countries issuing their own currency on a blockchain and in other cases, folks starting to recognize bitcoin.

One thing that’s often overlooked is that there’s a strong incentive for non-US countries to [avoid] using the US dollar as the global reserve currency. It puts a lot of power in the hands of the US, which is something that other countries don’t necessarily love. In that sense, there’s a natural drive toward crypto. I firmly believe that a number of countries have already begun stockpiling bitcoin as a hedge against the greater geopolitical forces. I’d be very surprised if we don’t see more of that happening in the next couple of years.

Do you think bitcoin will ever function as a global reserve currency? Or, could it be displaced by one of the other cryptocurrencies?

It could certainly be displaced. It depends what time horizon you’re looking at. Obviously bitcoin has a significant lead at this point in time and has a number of advantages—for example, more liquidity, security, and history. It’s been battle-tested. Over time, it could be replaced by something else, but for now, it’s clearly the leading contender for that role.

The US stock market is in the midst of its longest bull run in history. How would you respond to people who say bitcoin hasn’t been tested by a proper bear market in stocks?

Right now, the narrative is [bitcoin] is a great place to put your money because it’s completely uncorrelated to other things. I’m fairly skeptical that that would be the case in a serious macro bear market. Generally, in those instances, you see a flight to quality, and people move out of everything and into the safest [assets] they can find, which is often dollars and things like that.

As much as I would love to believe the narrative that “Oh, look, the money’s all going to flow into crypto,” I don’t actually think that’s accurate. The truth is nobody can know until it happens and we can sit here and forecast it and invent calculations, but they’re likely to be wrong.

Are you worried about crypto market manipulation?

I think the market manipulation concern is generally overstated. I have friends who spent 20-30 years trading in traditional markets and they said the Libor manipulation was way worse than anything they’ve seen in crypto. I don’t think [manipulation] should be a reason to not be involved, but of course if you’re looking at a cryptocurrency that has a much smaller market cap and circulating supply, then yes, that would be much more susceptible to manipulation.

Which portfolio companies are you most excited about?

One that I recently invested in is called Marble. They’re building a smart contract bank on Ethereum, and the play there is about the integral pieces in the decentralized exchange (DEX) landscape in the next couple of years.

Right now, the decentralized financial ecosystem is very small. Trading volumes on DEXs are less than 1% of overall trading volumes, but it’s an area that can grow very quickly. There seems to be a lot of interest in peer-to-peer trading and allowing people make their own rules on the financial side, particularly around individual coins being listed and not wanting to wait for a central entity or exchange to clear those things—people are increasingly drawn to that, particularly when you layer on the overarching concern about security. Giving your keys to a centralized exchange exposes you to the risk of losing all your coins.

Another investment of mine is in an exchange which is centralized, LXDX. They come from the traditional financial world and they’ve actually built trading platforms before, which is something that’s rarely seen in crypto. I think in many cases in crypto it’s a couple of very smart engineers who used to build software apps, who say “we’re going to build an exchange.” But if you’re looking for institutional-grade performance on a lot of these platforms, you’re just not going to find it.

Those both seem to follow the model of selling pickaxes and shovels in a gold rush. What do you think of specific token investments?

I don’t invest in a lot of things. Prices—where they were toward the end of 2017—they were speculative and based on where folks thought the price would go, rather than there being any real basis for that. You see a lot of the same forces at play in the stock market. It’s a very natural part of the progression.

One of the books I always recommend people read is, Technological Revolutions and Financial Capital by Carlota Perez. She looks at a number of different technology waves and the development of those technologies in light of how capital enters the space and what that looks like over a couple of decades, which is how long she thinks these cycles take. Crypto fits into the same framework as the railroad and the internet, and there’s always an over-investment phase where prices decouple from value.

But I think it’s necessary. That’s what attracts people, resources, and attention to the space. Without the same mania cycle, you can’t get the same result.

Do you see any promise for decentralized applications (Dapps)?

Simpson: If you look at Dapp usage right now, people are doing four things: trading, gambling, playing games, and building stuff. Overall usage numbers are incredibly low. Trading on DEXs is about 50% of the activity. I think those are some of the areas that are going to become the biggest the fastest. Until user experiences—the interfaces—improve, I think it’s going to be really challenging for non-crypto-native people to start using them.

What do you think of Ripple?

I don’t know what to say about them anymore. Obviously, I’m more of a fan of the decentralized model. There are always tradeoffs between centralization and scalability and speed, but at the end, if we just reinvent the existing systems and add a token to them, I don’t think we’ve accomplished much.

I think the decentralization aspect is very much an integral piece of how these systems were conceived of and designed. If you eliminate that, all you have is an inefficient database. What’s the point of that?

Any thoughts on Tezos?

I’m glad for them that they got themselves sorted out after their governance debacle. In general, my view is that they’re tackling some interesting problems. As they witnessed, it’s going to be very difficult to solve some of the governance challenges. Humans need to be involved in most everything. I think it’s going to be years—if not decades—before we figure out how to approach some of those problems in a way that works in the code-to-human interaction. It may end up being that this is wave 1 and it’s really wave 2 or wave 3 that’s more broadly successful. They’re building real software to tackle serious problems and I respect that.

It seems like the crypto ecosystem has increasingly come to resemble the traditional financial system. What do you make of that?

There’s a tension between the need to level-up and professionalize the space and also not end up with what we had in the traditional financial system.

I’m an advisor to Commonwealth Crypto, which allows for non-custodial trading on a centralized exchange. Users maintain control of their keys. That to me, is a great hybrid model. You have some of the benefits of centralization, but you maintain control of your assets. I hope the technology evolves to the point where we can use [non-custodial exchange] to bridge the gap. Ultimately, if you need a third-party custodian to control everything and you can’t use your keys because there’s too great a risk of theft, then it’s not really any more convenient than storing bars of gold in a vault.