“The highest correlation to long-term success, is Github commits”

Published / by kgao / Leave a Comment

Someone said to me this week that the highest correlation to long-term success, is Github commits. A research paper done a while back showed that developer activity was the highest correlation to long-term success. Not marketing, not hype, not liquidity or whatever. Go to Coingecko and sort by “Developer” and it has got an interesting picture

Good interview with Willy Woo (@woonomic on Twitter).

“From the minting of the first coin until today, the struggle has never abated”

Published / by kgao / Leave a Comment

From Jack Weatherford’s thorough, delightful, and easy to read book History of Money:

The great struggle of history has been for the control over money. It is almost tautological to affirm that to control the production and distribution of money is to control the wealth, resources, and people of the world. Over time, competitors have aligned themselves into various factions, institutions, governments, banks, guilds, corporations, religious orders, and great families; but from the minting of the first coin until today, the struggle has never abated for more than a brief respite of a century or two.

Weatherford, by the way, is quite an accomplished writer. I became a fan while reading his book “Genghis Khan and the Making of the Modern World”.

I recently shared 19 highlights from the book on my blog.

Very good paper analyzing Bitcoin and other blockchains for things like velocity and privacy

Published / by kgao

Here’s the full paper. And some of my notes / excerpts below:

  • Use of multi-sig in a public blockchain reduces privacy not only of user, but of other users as well
  • Use of mixers is a poor privacy measure and potential attack vector, as shown with Bitcoin and Dash
  • A good chunk of Bitcoin blockchain transactions still carry no fee, and often reflect a direct relationship between miner and transaction generator
  • Bitcoin transaction fees still amount to only 20% of miner reward (but growing)
  • Bitcoin velocity is much lower than expected (this, IMO, was the most interesting part):
    • the velocity of Bitcoin works out to 1.4 per month averaged over the period January 2016–July 2017, compared to 5.4 with the naive metric. Our revised estimate is not only much lower but also much more stable over time.
  • only a small percentage of bitcoins are used for activities other than investment and speculation, although that fraction has been gradually increasing over the past year

“Crypto-currencies exhibit a size effect like stocks”

Published / by kgao / 1 Comment on “Crypto-currencies exhibit a size effect like stocks”

From the perspective of an investor into the alternative asset class of crypto-currencies, we document that returns of crypto-currencies are weakly correlated both in their cross-section as well as with established assets, and thus interesting investments for diversifying portfolios. An investment strategy based on the CRypto-currency IndeX (CRIX) bears lower risk than any single of the most liquid crypto-currencies. Furthermore, we show that crypto-currencies exhibit a size effect like stocks.

Pretty good paper on cryptocurrency investment factors and price drivers [link]. Note, though, that the researchers seem to have some sort of relationship with the CRIX.

Size effect = smaller coins tend to perform better.

I haven’t published much lately, and that’s unlikely to change. Not even sure if I’ll continue the newsletter. I find myself losing interest in writing about and analyzing the space during such a secular – and some may say overheated – bull market. What advice can I give you, other than “don’t sell” (unless it’s small amounts of profit taking) and “don’t daytrade to excess”?

The long-term prospects of cryptocurrencies, cryptoassets, and token economies are brighter than ever. $1T is squarely within sight.

My Bitcoin and Crypto Portfolio: the 7th issue

Published / by kgao

Hi everyone, sorry for the delay.

Here are the assets that represent 1% or more of my portfolio, from largest to smallest:

  • BTC
  • ETH
  • XEM
  • DASH
  • LTC
  • BTS
  • XMR
  • ETC
  • ANS
  • PEPECASH
  • XRP
  • XCP

Here is my monthly performance. June results will be in the next update. I will likely underperform BTC in June after a nice streak, due to the general altcoins market tanking while BTC held surprisingly steady:

Some thoughts:

  • I have been reducing investment in small cap altcoins (anything outside the top 10-20), and increasing portfolio weight of BTC and a few “blue chip” coins. My current favorites include LTC, XMR, and DASH
  • Crypto-experts like to hate on DASH, and I went through a period of that myself, drawing down my DASH position by over 50%. But today I think the community and network are in as good a position as they’ve ever been. One of the few which has the potential to “cross the chasm” as a digital cash and payment network
  • A small bet I’m excited by is Etheroll (big believer in gambling on blockchain, plus the token pays a dividend of earnings, the first dividend is August 1st)
  • I don’t have a strong view on the UASF / Segwit2x debate. Volatility will likely increase as we draw closer to August 1st. My position hasn’t changed: I’d prefer a hard fork and two separate implementations of Bitcoin and an end to the current drama. Similar to the ETH-ETC hard fork, I believe this will eventually maximize ecosystem value. My only advice is to store your Bitcoin in a wallet where you control the private keys, to maximize your choices in case of a hard fork(s). Two good software solutions include Electrum and Armory Wallet, which both have multi-sig as well. Regardless of the outcome, as long as you don’t panic, your BTC will do just fine
  • I’m less active on the investment front, because I don’t have a strong view of the market anymore. Previously I was convinced that cryptocurrencies would surpass $100 billion. I just thought we’d get there by 2020, not in early 2017. Now we look to the next benchmark. Will cryptocurrencies hit $1 trillion? There will be much more regulatory oversight and coercion risk from nation states. There will be more governance risk and technological risk within each cryptocurrency. If you add a zero to everything, you also add a zero to every hack, fine, and scam. A big driver to $100 billion was hope and speculation. $1 trillion will require more proven use cases and much greater scale. The use case of store of value alone could get us there, but given the speed of the market’s rise and the uncertainties on the road ahead, I am in wait-and-see mode
  • I haven’t participated in any ICOs. Several have interested me (including FunFair and Tezos) but my current take is that if the token becomes publicly traded, I will take a position then. A good investment in this space should return at least 50x. The downside of missing the ICO is forgoing 2, 3, maybe 5x short-term returns. The upsides are more time and data to vet the investment, reduced risk once it becomes “publicly” traded, and a simpler safer path to buy and hold your investment.

Thanks for reading. Happy investing!

Kevin (@kgao)

My Bitcoin and Crypto Portfolio: the 6th issue

Published / by kgao

The full version is on Steem. I’ve been testing Steem for a few weeks now since I’m a small holder of its tokens. They make publishing pretty easy, but still no real community or audience to speak of.

As of today, June 14th, the following assets and tokens are more than 1% of my portfolio, in descending order:

  • BTC
  • ETH
  • XEM
  • BTS
  • DASH
  • XMR
  • LTC
  • ETC
  • PEPECASH
  • ZEN
  • XCP

This isn’t investment advice. IANAL. Crypto is due for a large correction. August 1st could be a trigger.

You can now easily subscribe to my twice-monthly newsletter here: https://www.getrevue.co/profile/kgao. Existing subscribes are being ported over.

You can read the full version on Steem. Thanks!

Kevin (@kgao)

A guy who knows what he’s talking about talks about Bitcoin

Published / by kgao

Written by security researcher Dan Kaminsky over 4 years ago, still very relevant and insightful today (the best kind of content, imo). Wired article. Some snippets:

Bitcoin’s a dollar bill, with a teleporter built in. We can just poke in a few coordinates and poof, off it goes, with the ease of posting to some forum somewhere.

There are a small number of choke points, which someday may be asked to honor these thefts. Will the currency translators accept the money? Will the mining pools? It’s really an open question.

Bitcoin miners could very well be doing useful work, same as the gold miners. That the work is pointless misses the point. Diamonds, for example, represent little more than millions of years of earthly labor making dull black coal into a shiny clear crystal.

Fighting over what’s “fiat” and what’s “real” is silly. It’s all fiat. Gold isn’t conscious; all value is belief. What’s fiat is who can change the supply and how. Nobody can just declare the existence of one million new bitcoin and start trading on it.

It would take a massive, society-rending effort against general purpose computing to really keep Bitcoin down.

Bitcoin is the first example of a new form of life…

Published / by kgao

…It lives and breathes on the internet. It lives because it can pay people to keep it alive. It lives because it performs a useful service that people will pay it to perform. It lives because anyone, anywhere, can run a copy of its code. It lives because all the running copies are constantly talking to each other. It lives because if any one copy is corrupted it is discarded, quickly and without any fuss or muss. It lives because it is radically transparent: anyone can see its code and see exactly what it does.

From Ralph Merkle on DAOs, Democracy, and Governance (yes, the guy who invented Merkle trees).

The quote echoes Kevin Kelly’s theme of technology-as-life-form in What Technology Wants.

My Bitcoin and Crypto Portfolio: the 5th issue

Published / by kgao

Things just get crazier, don’t they? Here’s my April performance against benchmarks:​

Currently these assets are more than 1% of my portfolio:

  • BTC: 50%
  • ETH: 19%
  • XEM: 11%
  • DASH: 3%
  • ZCL: 3%
  • PEPECASH: 2%
  • XMR: 2%
  • XRP: 1%
  • BTS: 1%

I like to review my investment theses and see what needs an update. The success of Ripple is the biggest outlier. It’s currently #2 on CMC and has gone up 10x in just the last month. Whether a pump or playing catchup, XRP’s performance makes me question two price drivers I used to deem important:

1. Token supply mechanics (percent of supply issued, predictability of the issuance rate, current and expected inflation)

2. Degree of decentralization (with respect to the team, to its sources of funding, to its transparency in everything from source code to operations). Perhaps in these times of continued Bitcoin scaling uncertainty, the market is moving to centralized assets (in addition to XRP, other examples include XEM, DASH, assets like FACTOM and STEEM)

Then again the Ripple bubble could soon burst and upend these observations.

Recommended reads:

  • My Medium essay on how Pepe the frog became a very interesting cryptocurrency and trading card community [link]
  • Token sales / ICOs and their pros and cons [link]
  • The Siacoin team explains why the cryptocurrency market cap indicator is misleading [link]. Jimmy Song shares a related perspective on Bitcoin’s dominance index [link]
  • One person’s thoughtful and balanced story of how they got into cryptocurrency investing and lessons learned [link]

Thanks for reading!

Kevin (@kgao)

3 branches of BTC “governance”:
–Full Nodes (can veto miners & devs)
–Miners (can veto devs)
–Devs (can help others bypass some vetoes)
-Jameson Lopp (@lopp)