In an effort to better understand cryptocurrency investing, I had the chance for a conversation with serial entrepreneur and very active crypto investor Clay Collins. Clay is extremely active in the blockchain and crypto community as an investor, host of the excellent podcast The Flippening, and co-founder of startup Nomics.
How did you first discover cryptocurrency and become fascinated enough by it to devote your career to it?
I first got into cryptocurrency in 2013. At the time I was CEO of a marketing startup called Leadpages. I found the crypto world to be the intersection of a number of my passions - game theory, computers, money and economics. I immediately put a large amount of my personal net worth into the space as I was a firm believer in the technology changing the world. I certainly foresee the world becoming tokenized. I was fortunate enough to get involved with Ethereum right after its initial crowd sale.
Do you invest solely in crypto tokens today?
I have a barbell shaped investment approach. One one hand I have a large percentage of assets in relatively safe investments such as cash, precious metals and real estate. The remainder of my assets are on the extremely high risk end of the spectrum invested in direct crypto currencies crypto hedge funds, and crypto index funds.
Buy, Sell, or Hold Bitcoin/Ethereum?
Buy Bitcoin. Buy Ethereum.
Do you think fiat money be replaced by cryptocurrencies in the next 10-30 years?
It could happen but that would be the last aspect of money that would be disrupted. Store of value is the first use case of cryptocurrency that is real today (i.e. gold substitute). Another use case you see emerging is court judgement resistance. Remittances aren’t there yet but will be coming when the infrastructure is in place.
I foresee various use cases gradually eating away at and supplementing fiat currencies. For example, there is an uptick in Bitcoin every time a local government currency collapses such as you saw with Venezuela and Zimbabwe. Ironically, it will most likely be the poor and middle class in developed countries like the US that will be the last adapters and therefore benefit the least from crypto. It’s easy for people in Venezuela to understand the use case behind something like Bitcoin.
What are some under the radar coins you think people should be watching?
I’m a big believer in Monero as it develops network effects over time. Monero doesn’t allow anyone to opt out of the anonymity unlike any other anonymous crypto. A great use case you see is in some countries purchasing certain books over the internet is a high risk activity. Also the Monero team is very strong technically and they don’t promote marketing. I see it as presently undervalued.
Others include 0x (pronounced Zero X) which is a protocol for a decentralized exchange. There is a growing network effect around it that could be very powerful.
Also the Dharma protocol which is a protocol for debt instruments as crypto tokens.
What are your thoughts on investing in ICOs?
I’m not comfortable doing as it requires a very different skillset. You need to be incredibly networked in the space and be able to buy in during the SAFT phase (Simple Agreement for Future Tokens). Networking and access to deal flow requires you to spend full time doing this and travelling to meet the teams. Crypto hedge funds do this better.
What are your thoughts around Bitcoin and its scaling challenges?
I am still a big believer in bitcoin. There is so much capital and capital allocation around the bitcoin network that scaling is bound to happen one way or another. For the next 1-2 years it will be slightly behind the curve but will catch up.
Another way to think about Bitcoin is the fact that it hasn’t been hacked is a huge value indicator. Every single month that goes by without Bitcoin being hacked increases its proof as a store of value despite daily hack attempts.
Can you speak about how you invest your own crypto portfolio?
I am highly diversified across the whole of the asset class via direct investments, index holdings and crypto hedge funds.
Best resources to stay up to date on what’s happening in Crypto?
Eric Meltzer over at INBlockchain has a good newsletter called Proof of Work
Token Economy newsletter
My Crypto List that is public on my Twitter account @ClayCollins. Twitter is probably the best place to really monitor the space in real time
Predictions for 2018-2019 crypto?
Obviously this is not investing advice and for entertainment purposes only but I think crypto will rally toward the end of 2018 and we will see Bitcoin back around $20k a coin in the next couple of years.
Anything else you think crypto investors, new and experienced, should know?
I am a big believer in index funds such as the Bitwise Hold 10 and Coventures index fund.
Also just a 50-50 split between bitcoin and ethereum isn’t a bad way to invest.
In general when considering a crypto token the most important indicator is quote currency dominance. For example you see Ethereum inching up there with 2nd order network effects being built on the token.