Occasional musings on crypto from an early investor, entrepreneur, and two-bit idiot.
TBI's Daily Bit

Crypto "Fundamentals"

April 19, 2018
Daily Bit

Today's the Messari strategy offsite, where we've set up shop three floors away from our usual office. Because we're fancy.

We had a five star working lunch from Seamless, and went through our mission and vision for the company all morning before getting into our world domination plans in the afternoon.

If you're an engineer that wants to work with former Palantir and Bloomberg engineers to build a distributed data library for crypto, and one of the first production-ready token curated registries, you should apply to join our team

We haven't done a $100 million ICO, but we can buy you a Mediterranean lunch every three months. And you'll have no risk of jail time. I promise.



Ok, I get it, but I bring up our onsite-offsite for three reasons. 

1) Mission-driven teams are going to crush most of the much larger, better capitalized, but poorly-aligned teams in crypto. Mercenaries will float from project to project without completing much of substance or doing the hard work, and they'll generally disappear when the going gets tough. Mercenaries need not apply.

2) We're aligned on building community and product first, writing a white paper for a token that we think improves a working product, and then planning to sell said token when the system is working. We're a very backwards company, but I think that regulators and reasonable people will appreciate that, given most of the best token teams have taken this approach (Filecoin, Blockstack, and Zeppelin come to mind just to name a few).
3) I'm regularly surprised by how few teams seem to sit down early on in their company life cycle and have a full day session on the basics of who everyone is, what their values / strengths / weaknesses are, how they tick, why they joined in the first place, what they believe in re the company's mission and vision, and where their specific priorities are. It's remedial shit, but I find many teams are reactive, and skip right to the how rather than start with the why when they get going. It's a recipe for poor alignment, shitty communications, and toxic culture.



Speaking of starting with basics, here's an above-the fold Bitcoin 101 post that is well done and worth the long read. These are always difficult to write concisely and in an interesting / approachable tone. I thought Lucas nailed it. Digital Asset Research (18 minute read)

If you're a newer subscriber, you're going to find that I don't write for a beginner's audience very well, so I'll regularly try to either write or link to "explain this like I'm five" articles.

At the Messari offsite-onsite we're also talking about fundamentals, and at the end of a long day, we've decided to pivot all of our attention to technical analysis now that the Financial Times is picking up vomiting camel patterns:

You should expect Messari to push the envelope when it comes to identifying new technical analyses thanks to inspiration like this, and new office supplies such as astrology cards and magic eight balls.

In case I'm not laying it on thick enough: TA is bullshit voodoo pseudo-science and you should stop retweeting it or referencing articles that cite it as credible. Novice investors will lose money from those sort of recommendations.

That's why we opt for fundamentals-driven sites like OnChainFx and CoinMetrics instead. 


I Like Pictures

Good artists copy, great artists steal. 

So let's talk about an actually decent fundamentals-driven trading thesis without naming the analyst who came up with it. This series of charts shows we may need a big BTC rally before alt-coin markets recover.
In the past three alt-coin market bubbles, the asset class rallied only after a 200%+ move by Bitcoin. A staggering 70% of the top 5-100 altcoins rallied 200% in the month following the December 2018 bitcoin peak, suggesting that most people were feeling wealthy and diversifying gains as a result...basically into anything that was tradable. 

But the cycle can be just as vicious on the way down, and the unwinding happens as quickly as the initial spike. 

What about that wall of institutional capital that we should expect flooding into the space this year, and the end of tax-driven selling?! 

Well, a pretty compelling thesis based on previous cycles is that the wall of money will hit BTC and ETH first, then trickle down to the other alternatives several weeks later.

Before your bags of shitcoins reinflate, we probably need the BTC whales to feel wealthy again. 

"A good indicator to watch is ETH / BTC. Last cycle, ETH / BTC fell >50% as BTC rallied to highs. But on 12/11/18, five days before the BTC peak, it bottomed right before alts started to rally the most. ETH / BTC may be a good leading indicator to track the next major alt-coin super cycle."

A trading thesis that actually makes sense.

(Just kidding on the plagiarism. h/t Brendan Bernstein at Tetras. Full thread here.)

Red Pillz

The volunteer army at Messari is building a free, open-source library that anyone can use as a resource, so you can go down the crypto rabbit hole a bit more efficiently.

Today’s profile looks at some *out of this world* technology. (That legendary wit is why you read.) The interplanetary file system is one of several attempts to a create decentralized storage network. Filecoin is building a layer on IPFS using the FIL token which allows users to buy and sell storage space. It's the "Airbnb of file storage", and Filecoin's approach strives to solve the "why hold this token" conundrum by introducing a "proof-of-replication" and "proof-of-spacetime" that requires staking.

Compare Filecoin to our profiles on Bluzelle and Storj, and check out the full library here

I owe a debt of gratitude to Filecoin. I invested in the advisor round (full disclosure, although I did not touch or influence this report in any way), but that's not why I'm grateful for the relationship. No, it was the fact that their ICO got me to write a 3500 word post that formed the backbone of most of my thinking around why something like Messari was even needed. 

Monday's profiled token team also played a role in the early ideation. Fans of HBO’s Silicon Valley should stay tuned for that report. I think you'll enjoy it.


TBI's Compression Algorithm

Kraken’s Defiance. A day after New York Attorney General Eric Schneiderman launched inquiries into 13 cryptocurrency exchanges, Kraken’s CEO Jesse Powell came out with a strongly-worded letter. Complying with the inquiry would be a “placative kowtowing toward this [...] abuse”, said Powell, emphasizing that Kraken left New York in the first place due to the BitLicense. He said the A.G.’s inquiry was hostile towards crypto, and to business in general. In yesterday’s newsletter, we covered the news the Kraken would withdraw from Japan following regulatory pressure for tighter standards at Japan's cryptocurrency exchanges. Jesse doesn't mince words, but is Kraken’s issue with New York regulators, or regulation in general? CoinDesk

Venezuelans Increasingly Turn to Crypto Among Economic Ruins. The Venezuelan bolivar to bitcoin market reached $1.006 million in trading value on Tuesday. As of today, the exchange rate of the currency is near 60,000 bolivars per U.S. dollar, but fetches up to 845,000 bolivars per dollar on the black market. The hyperinflation of bolivars and the worthless new “Petro” cryptocurrency, combined with limited access to official exchange markets, means Venezuelans are increasingly turning to Bitcoin for a more stable and safe alternative. Amidst the fighting in the crypto-community, it is sobering to remember that citizens in the near-bankrupt Venezuela are the reason why fostering the growth of crypto is worth a damn. Bloomberg

Parity bailout/unfreezing? Last November, a user accidentally deleted $264 million in ether from Parity Technology’s multi-sig wallet by exploiting a function that, in no elegant terms, forced the wallets to suicide. Since then, Parity has been looking for ways to recover its funds. This week, the team put out an EIP that proposed a way to restore the lost wallet library with a version of the code that does not contain a self-destruct function, which would also allow users to regain the 500k ETH lost in the attack. The proposal has so far faced intense debate in the community, mostly around the tone that this reversal will set as a precedent and the worry over future corruption and bribery this may open up. For now, no other compromise for recovery is in sight. CoinDesk

Quick Bits (Don’t read that, I read it for you)

Choke Points (Exchange news)
+ XP Investimentos, Brazil’s largest investment firm, is eyeing the OTC Bitcoin exchange market. The firm currently manages $35 billion for over 500,000 clients. 

Startup Signals (ICOs, Cryptos, and Startups)
+ Coinlist has teamed up with law firms such as Cooley, White & Case, Wilson Sonsini, and Ross & Shulga PLLC to provide free legal "office hours" for companies considering a token sale. Access to relevant securities lawyers. Free of charge. Really.
+ The founder of German-based startup Savedroid had apparently fled the country after the company raised $50 million in an  ICO. The website now shows nothing but a fullscreen South Park meme, with the caption “AAAAAnd it’s gone…”. At best, it’s a PR stunt (in which case, someone needs to tell Savedroid that they are way late to April Fool’s), but this may very likely be a multi-million dollar exit scam.
+ Basis (formerly Basecoin) has raised $133M in a private placement from investors that include Bain Capital Ventures, Andreessen Horowitzl, Zhenfund, and INBlockchain. Basis is building the ‘central bank’ of crypto, with goal of solving this problem of currency instability. Some food for thought regarding this project from the ever contrarian Preston Bryne: in short, “ they got confused between the Fed and the Treasury”.  

The Powers That Be (Legal/Reg/Policy)
+ In Iceland, a man accused of stealing 600 cryptocurrency mining computers (valued at almost $2 million) has escaped from prison and is believed to be in Sweden. Police believes he had an accomplice. Adding more to the drama: he was believed to have escaped on the same flight to Sweden that Iceland's prime minister was also on. Is this a movie or real life?  
+ Police in China’s Xi’an city arrests 4 suspects for an alleged $13 million crypto pyramid scheme. Among other things, the four created fake backgrounds for team members, and even hired a “foreign national” to pose as an executive.  

BigCo Noise (Enterprise initiatives)
+ As part of the Campaign Reconciliation Project, IBM and Salon Media are piloting a proof-of-concept blockchain product that aims to achieve transparency in the digital advertising supply chain and to cut out the intermediaries between advertisers, publishers and consumers.  
+ Dow Jones media is working with the Brave browser to test a new content delivery system.

Did I miss something big?

Send me the link, your twitter handle and your best imitation compression algorithm write up. If I really whiffed, I’ll include your bit tomorrow (with attribution).


Shameless Plugs

Hit me up when I'm in your city!

Upcoming Travel:
+ Boston (4/25-4/27 - Pillar VC's Unchained) 
+ SF (5/1-5/3 - private event)
+ NYC (5/10-5/17 - Fluidity, Ethereal, Consensus, Token Summit)
+ Asia (Japan, Korea, Hong Kong early through mid-June)

My company, Messari, is hiring:
+ Front-end developer, Full-stack engineer, Data engineers, Blockchain engineers (TCR!) 
+ Volunteer analysts and summer interns
+ Content curation lead (compression algo tinkerer)

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