Tag Archives: dash

My Bitcoin and Crypto Portfolio: the 7th issue

Published / by kgao / Leave a Comment

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)

April Bitcoin News Letter: The hard fork plot thickens. Bitfinex recovers fully from its $71M hack.

Published / by kgao

The newsletter continues to evolve. I try to highlight the items you can’t miss, and provide links for you to dig deeper. If you have any questions, email me or find me on Twitter.

William Mougayar and Nick Tomaino (two analysts I regularly read) are organizing a Token Summit on May 25th in New York. If I weren’t a 16 hour flight away, I’d be there. What a lineup.

Right now to be on the newsletter you need to contact me. At some point I’ll migrate to MailChimp. Also I didn’t link to the sources below because I was too lazy.

**

What you must know in Bitcoin land

For anyone who’s closely following the hard fork debate, this Reddit discussion and its linked source are must reads [Reddit discussion, Greg’s email]. If the implications are true, then it means that the magnitude and duration of the hard fork debate are mostly motivated by Bitmain’s desire to maximize its short-term profits, and not by differing views of Bitcoin’s scaling roadmap.

Bitfinex was hacked for $71M USD worth of Bitcoin in September of last year. They socialized the loss to all Bitfinex account holders and issued a custom token to represent the loss. This token represented an IOU from Bitfinex which you could hold or trade. Several days ago Bitfinex fully redeemed 100% of those tokens [source]. Which means that in the span of 8 months, Bitfinex has fully recovered from a $71M hack and paid back everyone who lost money. What a story, and a fascinating precedent for future hacks.

Meanwhile Bitcoin continues to grow. The number of active Bitcoin users doubles every 12 months [source]. And while the blocksize is reaching its limit, but not yet turning away significant transaction volume [source]. Although fees are increasing as you can see in Woobull’s chart below:

Why do the vast majority of Bitcoin investors and pundits think a hard fork is bad? Vinny Lingham explains: #1 Reduced network effects. #2 Whales dumping coins on both chains. #3 Brand confusion. #4 User and merchant confusion [source]

If you want to educate yourself on the basics of a hard fork, and what it means for investors and users, here’s a good FAQ [source]. The current implementation of Bitcoin is referred to as simply Bitcoin or Bitcoin Core. The competing / new implementation is called Bitcoin Unlimited (BU), and here’s a solid 3-part series on how BU works [source] (with a pro-Bitcoin Core bias).

Finally, a long and excellent article on Bitcoin’s evolution [source].

In investor news…

  • Another Bitcoin ETF application was denied, but Bitcoin investors have moved onto the hard fork debate [source]
  • Roughly speaking, the market thinks Bitcoin Core (the current Bitcoin implementation) is worth 90% of
  • Bitcoin’s price, and Bitcoin Unlimited (the competing version) is worth 10% [source]
  • Pantera believes bitcoin and digital assets now overbought, see below chart [source]

**

What you must know in crypto land

Zcash (ZEC) appoints AngelList founder Naval Ravikant and Matthew Green to its Board of Directors. Outside of Bitcoin, Zcash may have the most impressive collection of cryptography and software engineering talent. [source]

ICOs and appcoins and decentralized app tokens are now worth $260M [source]. To understand the general investment thesis, read these 2 essays from USV [one, two]. As an individual investor I’ve stayed away from ICOs and I recommend you to do the same. Too many scams, too much insider trading, too little verifiable transparency.

A great round-up of concerns about the altcoin Dash, the two big ones: #1 Potentially rigged mining during its launch. #2 Big holders (Masternodes) who have a lot of influence over economics and governance [source]. I more than halved my holdings after its recent price surge but 7% of my portfolio is still in Dash (see my portfolio breakdown here).

Venture money is slowing but continues to come into Bitcoin / blockchain, especially for proven products. Ledger raises $7M for its security and storage solutions [source]. Shapeshift raises $10M for its cryptocurrency exchange service [source]. I love Shapeshift.

It is very possible that services that deal solely in crypto could end up being to financial regulation what torrent sites are to anti-piracy laws… a huge pain in the ass. Like torrent sites that don’t distribute actual copyrighted content, cryptocurrency services using LN channels won’t actually control or transmit other users’ bitcoins. Many services may find themselves back in a new and undefined legal grey area. [source]

**

That’s it. Next week comes the Portfolio Letter where I share my holdings, recent trades, and brief analysis of interesting assets. Here’s the last one.

Portfolio Performance: February (+Monero, -Dash -Litecoin)

Published / by kgao

This continues a series of regular posts where I share the details of my crypto portfolio, trades, and observations on the market. Here’s January.

In February 2017, the Bitcoin price increased 24%. My portfolio increased 29%, so I outperformed slightly, due to Dash’s price rocket and Ether’s rebound. Past performance is at the bottom of this post.

Here’s what I currently own (also posted here):

  • Bitcoin: 75%
  • Ether: 13%
  • Dash: 9%
  • Monero: 3%

Observations:

  • I sold my small (~1%) position in Litecoin; it finally hit me that I had no point holding onto it even as a Bitcoin catastrophe hedge and the coin (wrt technology and community) is going nowhere
  • It’s clear post-SEC denial of the COIN ETF that cryptoassets have begun to shift from Bitcoin to altcoins and digital tokens. Perhaps for diversification reasons, perhaps because big investors are seeking the drug of ever-increasing returns. I expect Bitcoin market dominance to fall below 75% before rebounding
  • Dash has been a huge beneficiary of this move away from Bitcoin. I purchased the bulk of my position around $17 and it’s currently trading at $78. I do believe Dash can become a $1B market cap coin but am skeptical of its long-term potential for a variety of reasons (quality of team is the biggest). I sold 1/3 of my position between $45-50 and may sell more in the coming days / weeks
  • In seeking even more upside (perhaps a dumb move) I’ve started to research altcoins outside the top 10 by market cap. I’m even looking at digital tokens although I still remain VERY skeptical of their average technological and network value

Portfolio benchmarks:

  • In calendar year 2016, Bitcoin increased 137%. My portfolio returned 107%, so I underperformed significantly largely because of Ether’s performance
  • In January 2017, Bitcoin fell 5%. My portfolio lost 2%, so I outperformed slightly
  • In February 2017, Bitcoin increased 24%. My portfolio increased 29%, so I outperformed slightly, driven by Dash

I’ll publish at least one of these posts every month. If you want more frequent updates, subscribe to my investment newsletter below. Thanks, happy investing!

Bitcoin newsletter: ICOs still red-hot and top-heavy; I increased Dash holdings and took some BTC profits

Published / by kgao

Here’s the email newsletter that I send out every two weeks. For now it’s just a bcc-ed email list, though I post it here a few days later.

Since these newsletters only get longer, here are the highlights:

  • In this author’s view the altcoins most likely to outperform Bitcoin in the near term are Ethereum and Dash (although since I took a big position in Dash @ $17, it has more than doubled to $44)
  • ICOs are still, on average, opportunistic grabs by questionable projects for dumb money, but the money is getting smarter, and the projects / teams are getting better
  • Blockchain tech enthusiasm is waning – as it should – even as the ecosystem and its demonstrable value are growing
  • China’s regulatory influence on bitcoin is waning even as it doubles down on its already leading position in mining

My portfolio: Increased Dash, took small Bitcoin profits

  • I increased my Dash position to 9% of my portfolio, and a portion of that to a Masternode share program, where you earn an estimated 10% annual return on your Dash holdings for providing a level of security and governance for the Dash blockchain. I was very bullish at $17 but it’s risen to $44 in less than a month. Would still recommend, in a balanced crypto portfolio, hodling a small stake in Dash
  • After bitcoin hit $1200, I sold 5% of my stake to take some profits. Had previously told myself that when bitcoin reached its ATH I would sell 20% of my portfolio, although I ended up only selling 5%
  • Here are my current holdings:
    • Bitcoin: 80%
    • Ether: 9%
    • Dash: 9%
    • Monero: 1%
    • Litecoin: 1%

Vinny thinks a bitcoin ETF is too early and not good for the ecosystem [source]. He thinks an ETF should wait until bitcoin’s price is in the $3-5K range. An ETF would cause a price bubble and these boom/bust cycles slow bitcoin’s adoption.

ICOs are still red hot, and unevenly distributed. Asset management platform Melonport raised $3M of tokens in under 15 minutes [source] and cloud computing network DFINITY raised almost $4M in a day [source]. 80% of ICOs are held on the Ethereum blockchain, and in 2016 there were 64 total ICOs raising $103M [source]. While ICOs are improving, I’d still avoid investing unless you have an insider’s edge or significant discount on the tokens.

The first-come first-serve frenzy of Melonport’s crowdfunding has resulted in a distribution to less than 150 Ethereum addresses with an average buy-in of over $15,000 — both numbers being extremes in recent crowdsale statistics. [source]

China’s regulatory influence wanes. The PBOC is running out of regulatory moves, and with each move the price of bitcoin falls less. The volume on LocalBitcoins (the peer to peer bitcoin trading platform) saw a surge in CNY volume from 2-3M per week to almost 60M ($8M USD) [source].

…while Chinese miners double down. Bitmain – the world’s leading producer of bitcoin mining rigs and currently its largest mining pool – built and sold what will become the largest bitcoin mine in the world, to be based in Xinjiang or possibly Szechuan. [source 1, 2] Would increase network hashrate by 25-33%. Bitmain’s CEO Jihan Wu is an outspoken supporter of Bitcoin Unlimited (BU) although Bitmain has explicitly stated it “has no say in what pool the users of that farm may choose to mine on.” [source] Business projects of this scale can’t go forward without the explicit approval of the Party organ at multiple levels

If you’re not reading Bitmex CEO Arthur Hayes’ notes, highly recommended. Here’s his analysis of the COIN ETF.

Blockchain is more hype than substance [source]. The author’s highest value use cases: #1 decentralized digital currencies, #2 micro payments, #3 proof of existence on blockchain. Quotes:

  • Lots of hype. Not many tangible solutions. But a foundation for opportunity exists. Add it to your innovation priority list.
  • I for one am for the government having the right level of visibility to keep us safe, however Blockchains present a very creepy possible future that I don’t like the feeling of. At all.

So, when IS a blockchain useful?
“Blockchains make sense for databases that are shared by multiple writers who don’t entirely trust each other, and who modify that database directly. But that’s still not enough. Blockchains truly shine where there is some interaction between the transactions created by these writers.” – Gideon Greenspan [source]

A simple breakdown of Segwit and Bitcoin Unlimited, the two competing poles of Bitcoin’s future [source]. In this author’s view, BU has a weaker technical team but more alignment with the broader Bitcoin community, while the team behind Segwit is second to none technically but has #1 conflicts of interest vis a vis Blockstream and #2 an operating style that resembles “my way or the highway”

I think a hard fork is likely. While a hard fork comes with significant risk, I do think the Ethereum / Ethereum Classic hard fork was not a disaster as some people made it out to be:

I do want to make the point that hard forks can be beneficial (both logically and empirically) when users have irreconcilable political differences that they are willing to leave the community over.  Existing holders have nothing to fear from a split: their value will continue to exist on both sides of the chains, and remains protected regardless of outcome. – Philip Daian [source]

If you invest in crypto, read Woobull! One of the smartest blogs specifically on crypto investing. Examples:

  • Even applying a $10m market cap filter which should bring us beyond scam-coins, to coin platforms that should promise higher returns from their new and untouched markets, these guys (well below 10 coins introduced per year) continue to be outperformed by bitcoin. [source]
  • For a currency with a tiny market cap of $10b, compared to say the Euro’s M1 money supply of $7.5t, bitcoin’s price stability is ridiculously good. [source]

Analysis: Bitcoin price most correlated with Litecoin [source 1 and 2]. Dash and Monero come next, then Ethereum. But these three pale in comparison to Litecoin.

More analysis: Gold now shows a strong negative correlation with Bitcoin price [source]. Prior research had shown a positive – albeit weak – correlation.

Crypto funds are growing and attracting Wall Street money [source]. An article I wrote that divides professional bitcoin funds into 3 categories: #1 public buy and hold funds (eg, GBTC); #2 private buy and hold funds (eg, Pantera); #3 hedge funds (eg, Metastable, Polychain).

Emin Gun Sirer’s State of the Bitcoin network [source]. Takeaways:

  • “…the provisioned bandwidth of a typical full node is now 1.7X of what it was in 2016. The network overall is 70% faster compared to last year.”
  • There are 5700 nodes on the Bitcoin network, with a 2.6% stale rate which the authors think is “unexpectedly high”

Enterprise Ethereum announced on February 28th. Ether’s price has risen ~75% in the 3 weeks surrounding the announcement [source]

  • Ethereum has a larger community of volunteer developers, and more computers on its network than Bitcoin. And the members of the new alliance — which include Banco Santander, BBVA, Credit Suisse, ING, Intel, Thomson Reuters and UBS — say the real-world testing of Ethereum makes it stronger than the alternatives.
  • “Ethereum has this massive advantage of having the public network that has been tested for two years,” Mr. Gray, of Microsoft, said.

What exactly is a smart contract?
Smart contracts were first defined in the early 1990s as “a computerized protocol that executes the terms of a contract” (Szabo, 1994). [source]

Quotes of the week

By contrast, the Chinese government hasn’t taken much action against bitcoin. They have put in a “kill switch” but they are not using it, because their main concern is to maintain China’s foreign exchange reserves, and moving money from bitcoin doesn’t negatively hit their reserves. The Chinese government has put in the ability to shut down bitcoin transfers if they want do, but right now they don’t want to. – Bitquant [source]

…WHEW THAT’S IT. THANKS FOR READING!

Hit ‘reply’, find me on Twitter @kgao, forward it along. Happy to add other emails to the distro list too.

Cheers and happy investing,

Kevin

Portfolio Performance: January and February (increased Dash, exited Zcash)

Published / by kgao

This is the first in a series of regular posts where I plan to share the details of my portfolio, the trades I’ve made (if any), and observations on market performance.

Here’s what I currently own in the world of cryptoassets (a semi-regular update is also posted here):

  • Bitcoin: 87%
  • Ether: 7%
  • Dash: 4%
  • Monero: 1%
  • Litecoin: 1%

Here are the trades I made in January and February:

  • I sold my entire Zcash position – about 1% of my portfolio; it’s still a promising technology and team, but given coin inflation and past performance Zcash price is not likely to beat Bitcoin
  • I increased my Dash position from 1% to almost 4%; I also contributed some of my shares to a Dash Masternode share program and may even setup my own Dash Masternode at some point
  • When Bitcoin neared its all-time high at $1200 I sold less than 5% of my Bitcoin holdings. I did this because I had promised myself, during the long extended bear market, that if Bitcoin ever reached its ATH I would take some profits. Even then, I didn’t take as much off the table as past-me had promised myself. Funny how psychology works
  • I slightly increased my position in Monero although I am starting to suspect it won’t outperform Bitcoin in the next 12 months

Portfolio benchmarks:

  • In calendar year 2016, Bitcoin increased 137%. My portfolio returned 107%, so I underperformed significantly
  • In January 2017, Bitcoin fell 5%. My portfolio lost 2%, so I outperformed slightly

I’ll eventually draw up a table to compare my portfolio’s performance versus Bitcoin and other benchmarks, eg, the S&P 500 and a Gold ETF.

What I’ve learned:

I’m of the increasing suspicion that currencies favored for transactions (eg, Ethereum as gas, Monero, Zcash) will underperform currencies that exhibit store-of-value / buy-and-hold properties (eg, Bitcoin, Dash with its Masternode structure). It may be hard to predict ex-ante coin behavior. I will look at transaction metrics (volume and dollars moved) and measures of a currency’s velocity to see if there is some correlation

I’ll publish at least one of these posts every month. If you want more frequent updates, subscribe to my investment newsletter below. Thanks, happy investing!

Dash passed Monero in market cap. It’ll eventually be #3 behind Bitcoin and Ethereum

Published / by kgao

Cryptocurrencies are all about incentives and network effects and right now Dash has a better mix of them than any of the other altcoins.

Bitcoin will remain the 800-pound decentralized currency gorilla given its brand familiarity, time in market, and deep investor base.

Ethereum’s potential is still enormous as the one blockchain that rules them all: ICOs, dapps, hybrid and consortium blockchains, Vitalik’s genius.

But in the mix with Dash are Monero, Ethereum Classic, Litecoin, and Ripple.

Ethereum Classic won’t grow no matter how much Barry Silbert pumps it up. Sorry die-hards.

Litecoin is silver to Bitcoin’s gold. Silver is ~$14B USD and Gold is ~$7T USD. If the same ratio holds than Litecoin should be 500x smaller than Bitcoin. Bitcoin is currently ~$20B USD (for ease of calculation) which puts Litecoin at $40M USD. Litecoin is currently almost $200M. So overindexed 5x. And not much community nor innovation that I’m seeing beyond (possible) Segwit implementation.

Ripple? Um, no. A test money for a small network of banks.

Monero is for drugs and dark markets. Definite upside. But may just act as a transactional in-and-out currency while people prefer to hold bitcoin. And there’s plenty of competition besides. Not sure yet.

Dash, meanwhile, is fascinating if only because the positive feedback loop is so strongly self-reinforcing. A higher price means the development team is paid more (10% of block rewards) and thus encouraged to build and promote. A higher price means Masternodes earn more and thus are incentivized to buy and hold more Dash (45% of block rewards) and involve themselves in decision making. The community is more active than any besides Bitcoin and Ethereum. The self-governance model has room for improvement but shows promise as a way to truly decentralize and thus accelerate consensus building and decision making.

I took a big Dash position at $17 and may add more later. Currently it’s 4% of my portfolio.