Tag Archives: william mougayar

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.

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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]

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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]

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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.

Some interesting slides on Ethereum and ICOs

Published / by kgao

William Mougayar (@wmougayar) gave a funny short presentation about the state of the Ethereum ecosystem and I thought it worth sharing two interesting slides. The full presentation is here.

I’d still advise a healthy level of skepticism and caution if you’re thinking of investing in ICOs, but it’s good to pay close attention and see how this ecosystem develops alongside ether.

Bitcoin news: GBTC becomes 3rd ETF filing at 2% annual fee; avoid ICOs unless you have an angle

Published / by kgao

My recent trades: I sold my Zcash position. I took a position in Dash. I increased my position in Monero. Right now my portfolio is 90% bitcoin, 10% other. I’m watching ICOs, but haven’t invested any money yet (and don’t recommend you do, either, which I explain at the end of the email).

The Bitcoin Investment Trust becomes the 3rd bitcoin ETF filing (ticker: GBTC) [source]. The trust owns 170K bitcoins at a current market cap of $190M, a 10% premium over bitcoin’s spot price. The product is similar to the other 2 filings, the Winklevoss COIN and SolidX XBTC. This is the first filing with a publicly stated fee: 2% annually. It’s still a foot race to see which ETF is approved first, COIN being the first to file. ETNs already exist in Europe, eg, COINXBT and BitcoinETI. The difference? ETFs hold and allow redemption of bitcoin. ETNs track an asset price but are really just unsecured debt with more counterparty risk

Bitcoin in China looks safe for now: Less risk of an outright ban now. Still a good chance the PBOC will choose to formally regulate bitcoin – a process that could take years and involve multiple agencies and lots of painful news “leaks” – instead of its current usage of ad hoc fines and brief public statements. But I’d expect such formal regulation to happen only if another major local bitcoin investment scam succeeds or bitcoin‘s renminbi price skyrockets 5-10x. The government’s priorities are to #1 constrain capital outflows and #2 protect the middle class

China exchange volume plummets: Just what did the PBOC’s investigations and the exchanges’ subsequent removal of margin and no-fee trading do to global trading volumes? Have a look (the leading renminbi exchanges are BTCChina, Huobi, and OKCoin) [source]:

Bitcoin Unlimited nodes (22.2%) have surpassed SegWit nodes (21.6%), as of the last 1000 blocks (~1 week). Here are two sites where you can check node counts [source 1, source 2]. I believe we’ll see a hard fork with an outcome similar to Ethereum / Ethereum Classic.

How big can Bitcoin get? Here’s my favorite over-simplified chart to put into perspective its upside [source].

  • if Bitcoin = Paypal, a bitcoin = $5K USD
  • if Bitcoin = Visa, a bitcoin = $10K USD
  • if Bitcoin = the world gold supply, a bitcoin = $350K

People don’t use bitcoin for regular consumer transactions: Fiverr stopped accepting bitcoin for payment [source]. WordPress had also accepted then dropped support for Bitcoin. CEO Matt Mullenweg said at its peak bitcoin only accounted for 2 transactions per week [source]. More evidence that bitcoin isn’t used for normal merchant activity: existing payment solutions are good enough. Bitcoin is used, however, as a transactional and intermediary currency in the shadow economy. If you’re buying drugs online, you’ll use bitcoin. If you’re smart, you’ll use Monero, but the best way to get Monero is by buying and trading bitcoin.

China has no interest in ether. Amidst all the talk of China bitcoin trading volumes, we miss an incredible statistic: Renminbi trading volumes represent less than 1% of total Ether trading! [source, slide 28].

ICOs are promising but too early for your average crypto investor. As far as I can see, the smart ICO investors are getting big discounts and special deals that you’re not aware of and don’t have access to. Too much information asymmetry right now. Unless you have an angle or are connected, you’re better off observing and studying until the market grows and stabilizes.

Now, the ICOs are coming. And the ICO funds are also arriving. And a crash will be forthcoming. – William Mougayar [source]