Flipside Crypto News

The Fate of Crypto Hedge Funds

At the end of a crypto event last week, two Millennial-era entrepreneurs approached me and started chatting about their new venture.

It was multi-faceted: a blockchain-enabled services business that would have a major impact on the world — but would first be funded by the raise of a crypto hedge fund. That hedge fund would invest in Tokens and ICOs — with 20–30% set aside to invest in their as-yet undeveloped crypto services business.

First step in building their services business: raise money for their new hedge fund.

How? A bit of savings and credit card debt, an apparent trust fund and — reluctantly — a fundraise (like them old-timers do it).

At the end of a conversation, we were joined by a few other folks. One of them was a young lady whose day job is at a bank, but has a side hustle going with a new Crypto Hedge Fund based in the British Virgin Islands. This Hedge Fund was Tokenized — investments convert into a Token that will rise and fall in price based on the value of all investments in the portfolio — and was structured to raise from investors based in India. $300k had already been committed toward a $5–10M raise.

Including these two, that made no less than 8 hedge fund pitches for the night.

Not even close to the record.

According to Hedge Fund Alert, as of November 2017 there were already 130 Crypto Hedge Funds.


Many are names you might already recognize: MetaStable, BlockTower, Multicoin Capital, Polychain. But underground and unlisted, there are hundreds — maybe even thousands — of smaller hedge funds that are just developing.

  • The majority are sub-$10M vehicles. “Training Wheel” funds that will establish credibility for something bigger later. That said, toss a rock into any crypto crowd and you’ll certainly hit someone with their sights on a $20-$50M fund.
  • Some focus on ICOs. Some on Tokens. Some on equity or SAFTs. Some will ferret out Chinese blockchain companies that will be huge in the U.S.. Some tap into Telegram pump and dump schemes. And some…well, why pick any strategy at all?
  • Many are raising money from family offices. A handful still focus on VCs and angels. A bunch mention the Whales they know on Reddit who might invest. One hung out with that kooky billionaire crypto maven, Brock Larson, but was too awe-struck to ask him for an investment.
  • Leadership of these new hedge funds is remarkably inconsistent. Sure, there are experienced entrepreneurs and some with substantive financial industry skill— but most have little to no experience, save for the fact that that they have a boatload of crypto enthusiasm and can rap the blockchain lingo.
  • Frighteningly few seem well-versed in the regulatory frameworks required for investing other people’s money. I asked one high profile crypto hedge fund manager (one that had already raised funds and had been actively trading, mind you) if he was registered as an ERA or IRA. “Neither” came the response, before noting he was actively discussing regulation and compliance with peer funds.

The first hedge fund was created in 1949, by Alfred Winslow Jones, with investable assets of $100,000. Today Renaissance Technologies, one of the world’s largest hedge funds, manages north of $45b of investor capital.

The term “hedge fund” is derived from the strategy of increasing gains — and offsetting losses — by hedging investments using a variety of sophisticated methods, including leverage.

For traditional hedge funds, long-short strategies are often employed: invest in long positions (which means buying stocks) and short positions (which means selling stocks with borrowed money, then buying them back later when their price has, ideally, fallen).

I bet if we polled all crypto “hedge” funds, less than 5% even understand leveraged buying or long-short strategies.

Truly. One labeled their strategy as, “pure intuition.”

But, well, the term hedge does sound cool.

And probably helps a whole heck of a ton when raising money.

Ok, that’s not fair.

There are two obvious reasons most crypto funds label themselves as hedge funds.

  • Lockups. Unlike mutual funds, hedge funds often seek to generate returns over a specific period of time. This is called the “lockup period”. Invest in a hedge fund and you cannot get out or sell shares until the lockup is over. For those leading as investment manager, this provides ample time to stay in business while you figure everything out.
  • 20% Returns. Hedge fund managers receive a percentage of returns they earn for investors. A typical 2/20 ratio means that 2% of the fund covers management fees (salaries, operations) and 20% of the returns go to the fund managers before an investor sees a dime.

Hey, this hedge fund thing sounds pretty good after all.

So, A Few Predictions

2017 saw the rapid rise and fall of public perception of ICOs: What started as an innovative cryptocurrency launch strategy became a misused get-rich-quick investment strategy.

By 2019, Crypto Hedge Funds will follow a similar pattern. Massive saturation will hit faster than anyone imagines, the cool factor will fade and capital inflows for non-sophisticated vehicles will dry up fast.

Beyond that whopper, 3 additional predictions for the Crypto Hedge Fund Market:

  1. Crypto Fund Managers will become ultra-aware and over-burdened by one major painful oversight: operations. The process of buying and storing cryptocurrency is not for the light hearted. There’s managing exchanges and OTC partners, setting up digital wallets, ensuring a foolproof custody process and tracking activities. This requires focus, time, energy, patience and resources. Fantasies of patient, thoughtful investing will be obliterated by the grind of producing tax-tracking spreadsheets and digital wallet management. Expect a wave of 3rd party resources to service the funds that stay in business.
  2. The 2/20 ratio and lockups will fall out of favor. Investors will want the same democratization and flexibility that cryptocurrency itself promises. Someone sitting in the middle taking an outsized portion of returns, while holding money hostage, seems awfully, sarcastically oxymoronic.
  3. A lack of competitive distinction, fundraising ability — and, dammit, necessary investing acumen — will lead to massive amounts of consolidation and, of course, outright failure. On the consolidation side, funds who shortfall their raises will begin pairing up with each other. Failures will take the shape of zombie-funds, left behind by fund managers who become disinterested and move on to other projects. And, yeah, there will surely be lawsuits galore.

So, for all those new crypto hedge funds out there— how about we just nip this in the bud?

Before it grows out of hand?

Too prune?

Flipside CEO on Bloomberg Baystate Business

On this episode of Baystate Business, Bloomberg Boston Bureau Chief Tom Moroney and Radio News Anchors Peter Barnes, Pat Carroll and Anne Mostue interview Dave Batler, CEO of Flipside Crypto. Some of the topics covered:

  • Not buying during crypto winters
  • Wallet loss and explaining the difference between a real wallet and a digital wallet
  • How we do all the work
  • Discussing Flipside’s first 6 clubs (with over $5.5m invested)
  • Running an investement “service” vs a fund
  • How Dave stumbled into Flipside
  • Whether Bitcoin is going to be the “currency of the future”

Dave stats at the 33:00 mark.
Link to the recording on Bloomberg.com

Listen here:

The Gift of Cryptocurrency Volatility

Earlier this week, I chatted with a professional “Active Trader” who had spent his career taking advantage of short-term price movements on highly liquid markets like stocks, currencies, options, and derivatives.

I suppose “Active” may be a slight misnomer here. This particular individual was currently on a very extended, very unwanted garden leave.

A year and 2 months ago he’d taken a package at his firm (which eventually imploded) as they sought to thin their ranks of traders — and he’s been looking for work ever since.

He explained that there were fewer and fewer roles for Active Traders in equities. Besides the rise of Algorithmic High Frequency Trading as a more efficient solution (leaving little room for the vagaries of human errors) his gripe was obvious:

“It’s impossible to make a real living as an active trader in an equity market where there is literally no volatility anymore.”

Apparently, 2017 was the least volatile year in the equities market since 1964. Just 6.8% volatility, which is nary enough for an active trader to make any sort of living.

But then there’s the crypto market — which completely redefines the concepts of volatility:

  • Holy Smokes! XRP goes up 33% in one day— which worthy of but a single raised eyebrow because its price went up 28,000% in 2017 alone;
  • At the end of December 2017 BTC’s price downshifted by $3,000 in a single day, eventually touching $9,000 in early 2018, but then over a few more days rises again to $12,500.

Here’s the simple truth:

For equities, the Bears and Bulls are cycles of years or months. For cryptocurrencies, the Bears and Bulls are cycles of days and hours.

That shouldn’t be considered a weakness; the bear/bull rhythm of cryptocurrencies — the crushing pace of its volatility — are its strength. Massive swings are a benefit.

It speaks to those who appreciate risk; who are fearless in the face of fluctuations (FFF); who couldn’t be more bored by a stock ticker dribbling up and down pennies at a time.

This is why cryptocurrency is the gift to a whole new generation of investors: the Millennials.

The Millennials have yet to have their opportunity to make riches. They never saw 5% interest in a savings account. They’ve been squeezed and burdened by student debt. They missed the real estate boom; hell, they came of age during the housing crisis which soured them greatly to government, control — and of course, equities.

Sure, Millennials gave equities a shot. They started by shunning in-the-flesh wealth managers for rob-advisors like Wealthfront (why not let the computer try to make $ while you go hang gliding?); for those who wanted a hands-on high, they gamified their day-trading habit with Robinhood, an app that lets you buy and sell equities commission-free as if it were monopoly money.

But it was still equities. And equities didn’t move fast enough. Equities require patience. Who has time for that?

In September 2017 — when Bitcoin was still at $4600 — Charlie Bilello, director of research at Pension Partners noted that “Bitcoin and U.S. stocks don’t move together on a daily basis. They are basically independent of each other and I don’t see any fundamental reason for bitcoin and stocks to have a negative relationship.”

On January 16, 2018, gold coin sales increased fivefold, the same time cryptocurrencies were crashing 40%. And that very well may be indicative of an inverse correlation between the two investment vehicles.

For those who trade in gold, this is an opportunity: to swim in the same pool of volatility as cryptocurrency. While gold has always had some volatility, this provides a new sense of relevance —gold was the bracelet you bought or a hedge against oil or bonds. It was lumped in with housing and savings and traditional equities. Now it’s in the spotlight along with cryptocurrency.

If I were an equities trader — maybe even one who has been out of work — I might long for the day when equities correlated, inversely or directly, with cryptocurrencies to provide them the much needed volatility boost.

The volatility of cryptocurrencies. That is the gift.

1.23% Female Speakers: Shame on you, Miami Cryptocurrency Conference

And, here we go again. Another cryptocurrency conference with an all-male speaker line up.

Wait, wait. It’s not ALL male.

Phew <wipes brow, shakes sweat off hand>

There’s 1 female speaker out of the 82 listed on the front of the site.

Right, 1.23% female.

Wait, wait, that’s not true, there’s also a past speaker section. 33 speakers and — lo and behold — another female speaker.

So that’s 2 women out of 115.

1.73% for those keeping track.

Possible reasons for the male to female ratio?

A: There just aren’t that many women in cryptocurrency. Or there are less than men, and they aren’t “speaker” caliber.

Truth: Complete and utter bullshit.

I spent last weekend attending a gathering of crypto and blockchain enthusiasts on Powder Mountain in Utah. Among the few hundred people were many many (many) amazing women.

Know what? Most of them would crush it on the center stage.

Here’s a few: Jo Jo Hubbard from Electron UK or Jess Houlgrave from Codex Protocol or Marissa Kim from ARK Advisors — or the amazing (and amazingly funny) Shira Frank from Maiden.

When I pointed out the misalignment to another male in the crypto space, he responded:

Yeah good question. The ongoing gender gap in tech I suppose. I’m not planning on going either.

I’m sure none of this will endear me to the North American Bitcoin Conference organizers. Guessing I shouldn’t wait by my digital mailbox for an invitation to attend.

But you know what, I’d trade that any day to ensure the crypto industry doesn’t fall into the gender gap trap.

C’mon Miami, it’s not too late: do the work, find the women, shake up your roster, and make this a crypto conference we can all be proud of.

How to Invest in Crypto, Without the Carry

The House that Bogle Built isn’t simply a book about the creation of Vanguard Mutual Funds; it’s about the balls and nerve of Jack Bogle.

The guy essentially reinvented the concept of mutual funds with one incredibly simple trick: he provided shareholders the greatest portion of returns.

Before Bogle: astronomical commissions were paid to sales brokers, you covered the mutual fund’s high expenses, and then they took the majority of the investment returns.

After Bogle: No broker commissions, lower expenses to run the fund, and the shareholder took the majority of returns.

This became the Vanguard way.

                              John C. Bogle of Vanguard, in his early days

You can imagine how other mutual fund companies felt as Bogle flipped the entire industry on its head.

. . .

Today, we’re proud to announce Flipside Crypto Club 3. A process for investing in cryptocurrencies where the Members control the Club and returns actually go to you: the Club Member.

Club 3 follows up where Flipside Crypto’s Clubs 1 and 2 left off. Those Clubs were for experienced wealthy investors. This one is for folks with a little less capital to deploy.

Here’s how Flipside Crypto Club 3 works.

  • A limited number of individuals can invest $15,000, $30,000 or $45,000, and become members of Crypto Club 3.
  • The Club gets access to Flipside Crypto’s Github Crypto Index, Volatility Index, and Nodes Firehose Data to identify a basket of 14–16 cryptocurrencies (specifically ones which have a high likelihood of return over time).
  • The cryptocurrencies are acquired (balancing the ownership level to an allocation across an investment pyramid) and stored in digital wallets, and placed into a cold storage, encrypted solution.
  • Members pay a flat fee of $2,000 for us to run our software and club service for the first year (regardless of investment amount). If members would like Flipside Crypto to provide its software and services to the Club beyond the 1st year, it’s $500 for every 6 months.
  • Members can liquidate their holdings and transfer your cryptocurrency back to USD at any time —we use a 2-sig process so members actually custody the crypto themselves. And, there is no penalty or expense for liquidating.
  • The fun part is, club members get to vote on any suggested rebalancing. Votes happen in our Slack channel, where club members also share information and ideas an articles.
  • Note that we don’t believe in active trading. We mainly believe people should buy and hold (HODL). But if Club algorithms indicate a change should be made, it’s up to Club members to validate what the Club should do.
  • Members of Club 3 get access to Flipside Crypto’s Portfolio Dashboard, to check on the value of holdings at any time.
Flipside Crypto’s Portfolio Dashboard

. . .

The question we’re asked the most about our Clubs is why the flat fee instead of a carry?

A traditional fund model works like this. You pay 2/20 to be involved: 2% of your money goes to cover the company’s salary and expenses, and then 20% of the profit goes to those very same fund managers.

To me this feels like mutual funds before Bogle arrived. Yes, we could make a LOT more money if we charged 2/20. But to make 2/20 work, you need to raise a certain amount of capital (2% only covers so many expenses) and often you start to wind your axle around deal structures that optimize the 20%. This creates misalignment between the Investment Manager and Shareholder.

I’m not saying there aren’t good, moral, effective managers who charge 2/20, and of course many funds will deliver substantive returns. I’m just saying we decided to take a different route.

Why? This is your Club, we’re just helping set it up.

. . .

Your algorithms are really strong. Your process is really crisp. You make it really easy to get broad exposure into a the cryptocurrency market.

But you’re making much less than you could. Why? Why? Why?

I guess you should thank John Bogle for that.

. . .

The above references an opinion that is for information purposes only; is not intended to be an offer for sale and it is not intended to be investment advice. Seek a duly licensed professional for investment advice.

In the meantime, if you want to find more about Club 3, find us here. And clap below either way, so you can help your fellow traveler do some crypto investing.

One Time, At a Cryptocurrency Conference

With every cryptocurrency conference, conflagration or clambake, a new “State of the Industry” is harkened for the crypto world — and Consensus: Invest (held last week in NYC) delivered exactly that.

This was no small-time get together. Rooms were packed. People listened. Excitement was in the air. Here’s what went down.

The Price of Bitcoin

As the conference wound into post-event drinks mode, Bitcoin freight-trained past $10,000. Yes, people were discussing Bitcoin’s price, and yes people oft-discussed if Bitcoin was “The One”.

But Bitcoin and it’s price — as a testament to the depth of this industry — was really only a tiny fraction of the discourse. There’s, of course, chatter about Ethereum; about seemingly unlimited number of other altcoins and ICOs; about technology limitations and opportunities; about regulation; global market movements; Institutions; data solutions; security and crypto safekeeping.

Enter into any single conversation, and it feels like you’re trying to jam 100 lbs of cryptocurrency shit into a 2 lb nylon, logo-covered conference bag. To solve this, most people spray-splatter their crypto POVs as fast as possible, regulating you to trying to make sense of dialogue at 1.4x the speed.

Ya, it feels schizophrenic, but that’s not what‘s important.

Here’s what is: the industry thrives not because Bitcoin’s price keeps going up; it thrives because there’s an unlimited amount of shit to talk about.

The Suits Are Coming, the Suits Are Coming!

Consensus:Invest was held in New York City. In the middle of Times Square.

The energy was electric, but also…punch-you-in-the-face aggressive.

Zero-apology shoulder bumps and well-practiced oblivious line cutting was rampant.

Compared to the last event I went to in laid-back San Francisco: Less jovial smiles, more serious stares.

The “Suits” gave it away: wealth managers and equity traders have caught on that this is the future of finance. Whether for self-preservation or curiosity or just plain greed, those who spent their corporate lives inside the bowels of traditional finance institutions have realized this is a break-free moment. One where they can utilize their years of day-trading equities, shorting, hedging, and iron-condoring to great advantage.

The Iron Condor

The finance folks realize the potential in front of them: to apply their craft in a new, tangential industry that is booming with possibility.

They’re sprinting toward the crypto light as fast as they can.

Custody, It’s a Thing.

Every hallway conversation ultimately ended up stuck in the dead end corner of custody.

There’s no debating the fact that the Institutions — Fidelity, JP Morgan, Goldman, pick your poison — have billions of dollars to invest into Cryptocurrencies. While some may be investing off balance sheet, not a single Institution is going to invest client assets into cryptocurrencies until there’s a reputable custody solution.

Smaller funds can get away with homebaked solutions that offer encrypted, air-gapped, single-IP-access databases or 2-sig wallet solutions; but the Institutions need something more robust, something capable of passing the sniff test of hundreds of compliance officers and the eye-of-Saron level gaze of the SEC.

One potential is Xapo, who has a sophisticated custody solution with one major problem: it isn’t “Qualified”. Meaning, the regulators just aren’t committed to their process and so the Institutions…well, they ain’t got no time for dat.

           The Institutions Awaiting Crypto Custody Solutions

[Editor’s Note: Mike Novogratz stage-praised Xapo CEO Wences Casares as “Patient Zero” for spreading the crypto gospel. Kudos to that alone.]

But the crowd was electric about potential solutions on the horizon. There were whispers that Fidelity was about to release something. And that Goldman was getting close? And Circle? They may be on the verge of eating the world, and custody is a huge part of that.

While custody isn’t solved just yet, it seems imminent. And with that one thing is for certain: Once the Institutions get comfortable, the floodgates of investors will truly open.

The Data, No, It Never Lies

Chris Burniske (cburniske) from Placeholder VC never, ever disappoints.

He led a presentation that satisfied those investment manager’s seeking alignment to the traditional equity environment.

“Crypto assets are as innovative as equities were 400 years ago “ — cburniske

If you look at 2016, Twitter and oil have same level of volatility as Bitcoin — cburniske

Of course, Burniske — practically pulsating with meme fodder at every turn — didn’t just offer quotes befitting of a quarterly earnings call. He spoke to those gathered for a football tailgate bash — with rabid fans rallying around the figurative keg of crypto knowledge, as analytical anthems pumped out of a window-tinted, mud-splattered nearby Ford F-150.

“If you want to buy a kilo of cocaine, you’re better off using cash than Bitcoin” — cburniske

Bitcoin isn’t the Eggman. It’s the Platypus.

Burniske’s praise-be quotes may only have been outshined by some seriously righteous analysis by Blockchain Capital’s Spencer Bogart.

First: no BS, this guy is one of the best presenters I’ve ever seen. If there’s one reason the crypto space is ballooning it’s because of the crispness of delivery by the thought leaders. The brightest minds in this space can present their facts and philosophies with an off-the-cuff confidence that will hypnotize even the most strong-minded.

Spencer noted we were still in the first inning; his Harris Poll data proved that millennials were leading the charge of interest and ownership in crypto assets, while your grampappy’s investment advisor was pretty much frozen in a state of traditional bond-buying yesteryear.

But this data merely served as foreplay to the homerun analogy of the year. Bitcoin: the Platypus of the cryptocurrency world.

Bitcoin: the Platypus

According to Bogart, the reason Bitcoin (and crypto) is so damn fascinating is that — like the Platypus — it is a somewhat unidentifiable mishmash of many tremendous, unique things that shouldn’t fit together — but somehow do. The Playtpus, it has webbed feet with claws; a venemous spur; a beaver tail; they’re milk producing; duck-billed; otter-furred.

For those seeking to define what Bitcoin: yes, it’s a store of value; yes it’s a payment network; yes it’s a 3rd party disintermediary; yes it’s decentralized; yes it’s a cryptographic wonder.

And yet — much more importantly — it’s all of those, together.

Bitcoin is an incongruous force of nature.

The takeaway? Bitcoin’s beauty is that you can’t peg it to just one thing — and while each characteristic on its own is special, together, well, that’s a platypussian miracle.

Spencer Bogart’s Platypus/Bitcoin Analogy

When you Pop the Froth of a Bubble, Will you Find the Filth of a Fraud?

Finally, let’s shatter any notions that this crew of people are as head-in-the-sand naysayers of reality on the level of…say….Trump supporters.

They’re not. These folks recognize reality when they see it.

Every. Single. Person. Knows. This. Is. A. Bubble.

Yes, much of it harkens back to the go-go salad days of the Internet in 1994 or 1996 or 1999 (no one seems to be sure which era we are actually in).

Mike Novogratz shined this up pointedly: “This is the largest bubble of our lifetime.”

The Cryptocurrency Bubble, it Will Pop.

Ok, so bubble are not, is Bitcoin and it’s cryptocurrency brethren somehow fraudulent?

Is it a fake? Have we all been Madoff’d on a global scale? This thesis is easily dismissed, pointing to mathematical facts and checks and balances from peer-to-peer global footprints.

On the bubble front: everyone respects that the bubble WILL burst.

And that dark days will indeed follow.

But if you have the nerve, the tenacity, the wherewithal to hold on and survive through the dark, nuclear-winter days post cryptocurrency bubble-burst, you’ll most certainly arise into the heavens, where you’ll be guaranteed entrance into the halcyon days of the golden hereafter.

See you at the next clambake.

All Hail The GitHub Crypto Index

<PA crackles. Taps microphone twice. Is this thing on? Clears throat.>

In thanks for your patronage, listeners to today’s show will receive free access to the Crypto Github Index. The index tracks hundreds of cryptos and runs complete with multi-coin compare charts, 7 day trailing indicators, and a personal dashboard.

Yes, Dear Listener, a link to this free Crypto Github Index can be found at the bottom of this post.

It won’t be available in stores.

It comes in grey and blue, but not purple.

It has been pre-filled with premium unleaded gas.

It’s an exit seat, but doesn’t recline.

<slight feedback, 422hz, a few seconds of dead air>

The Github Crypto Index provides hours of relaxation

To run Flipside Crypto’s Cryptocurrency Clubs, we utilize two algorithms: a Volatility Index, which evaluates exchange data to understand price movements, and a Github Indexwhich reflects developer activity over time. Both of these are produced, tuned, adjusted, refined, and backtested in house.

The Flipside Crypto Index tracks data from pushes, pulls, watches, stars and fork activity, and generates an index vs. all other Tokens with developer activity.

Club members receive access to these tools to help determine which cryptos to potentially acquire, and how long they should be held for.

Flipside Crypto’s Club One basket of 16 cryptocurrencies is up 28%, just a few short months since inception. It’s not a perfect basket — a few have yet to perform.

Want to guess which ones from the chart below?

Flipside Crypto Github Index

For Club One, we chose almost all Tokens which indexed at about 900, which seemed reasonable given 500 is an average score. But results from our other algorithms, as well as market/team/technology evaluations — caused us to overrule the data presented by NumeraireIexec and OmiseGo.

Turns out…2 of those are the Club’s worst performers so far — and the third is just barely above water.

With fascinating precision, the Github Crypto Index identified which Tokens were unlikely to perform vs. those that would rise.

This is not investment advice.

The Github Crypto Index is not perfect.

It’s not the only tool you should use.

But without it, you’re operating in the dark.

Why the Blockchain creates lunatics.

If you’re like me, you’ve come across more than a few folks who are completely, utterly, batshit-crazy obsessed with Blockchain and Cryptocurrency.

At the mention of any trigger word — try ‘ crypto,’ ‘bitcoin,’ ‘private key,’ ‘ledger,’ ‘coinbase’, ‘hash,’ (the non-smokeable type) — they’ll all stop in their tracks and stare deeply into your soul, their eyes doing cartwheels.

Engaging them directly should be handled with care; even a seemingly innocuous question like, “so how does the blockchain work?” could result in a 30 minute antennae-rubbing mindmeld, or an impromptu whiteboard session on your car window.

Whatever you do, never (ever) say something like, “is this Bitcoin thing for real?” or you risk a Zombie-bite to the neck in a bloodthirsty effort to deliver you the dreaded crypto virus.

Hey, Have you Heard About Bitcoin?

During the days I ran BzzAgent, I became known as an expert in Word of Mouth Marketing. For a short time, one might argue, I was the expert.

It started in 2000, when I read everything I could get my hands on — Tipping PointAnatomy of BuzzDiffusion of Innovations — and chatted up anyone who knew anything about the space. I sponged all I could, launched the business and focused on delivering results.

Then something strange happened

A few years in, even with BzzAgent growing like a weed and all eyes on the burgeoning Word of Mouth industry, the learning — it just fizzled.

BzzAgent, NY Times Magazine Cover Story, Dec 2004

Sure, I’d occasionally pick up tiny bits of practical knowledge, or realize an incremental evolution to the model, but overall, the learning stalled. While the industry continued to move forward, it was generally from the momentum of all the learning before it. There just wasn’t that much more to learn.

With reflection, a startling revelation: in almost every industry I’ve encountered, the same pattern emerges. Education is a bounty up front, but eventually additional learning — it just plateaus.

But not so for the Blockchain industry. This space. This ridiculous space. It’s a different beast entirely.

Blockchain Industry vs. Every Other Industry (as articulated by 12 year old Stella Balter)

The Blockchain/crypto industry is probably the closest thing to a fifth dimension you’ll ever witness: everybody who is involved is just…well, they’re just vibrating.

They’re possessed.

They’ll find you on Telegram, on Slack on Reddit. They’ll point you to articles, to podcasts to Token Economy and Token Report. They’ll read a new whitepaper.

Then they’ll write one. They’ll find a Solidity developer. They’ll attend an ICO event and a Cryptocurrency Conference and create a list of all of Boston’s Blockchain Orgs. They’ll trade notes, they’ll make introductions.

They’re obsessed with learning: A new fork, a new protocol, an evolution of mining, a country-wide ban on exchanges, a country-wide adoption of Bitcoin.

There’s cryptography. There’s economics.

Blended it’s cryptoeconomics, a whole. new. thing. to. learn. entirely.

The Blockchain industry is different for one simple reason: because there is a limitless amount to learn, about an unlimited number of things. And there is no plateau in sight.

And because of this, the industry is a magnet for a certain type of individual. Someone who craves learning; someone who gets their energy from accumulating knowledge.

It attracts those who thrive in ambiguity, and those who strive to create clarity. Those who know the knowing is infinite, and knowing all is unattainable.

And once they gain knowledge, what do you think they do? They turn around and begin to teach.

And these people, given the opportunity to teach, man oh man…It’s like 40 mg of Adderall stirred into 5 shots of espresso.

The focus is so intense, it’s distracting.

Lou Kerner likens crypto learning to an Alice-in-Wonderland-like “Rabbithole.”

Down and down and down and down you go.

And if there’s a bottom to that hole, it’s nowhere in sight.

Strap in, and get your learning on, the Blockchain ride has only just begun.

Flipside Crypto: The Oxymorons of Crypto Investing

Go ahead. One more time.

Tell me about getting into the “hottest ICO” — which presold it’s presale tokens, preceding what was previously expected.

Or pitch me an opportunity to join a Bitcoin mining operation that is so perfectly foolproof, it could only be a Ponzi scheme.

(true story: this one was pitched by a shirtless guru, from his house in Acapulco. That he just bought from his returns. And everyone within his line of sight was <swings around computer to a bunch of twenty and thirty-somethings sitting around a pool, partying, slurping drinks, slouching — oh so cooly> making…$3k…$5k…$10k…per day!

But to do this, I would have to sign in through a VPN because, well <don’t worry about this>, it wasn’t entirely clear if this was legal in the US. But that doesn’t matter, because if I get my friends to join, then I would receive 5% of their returns. And once I did start to see money flow, I would want to reinvest a large portion of those back into the mining operation, so I could get more capacity. <Because that’s what everyone does.> . Sir, please label this exhibit Ponzi 101.)

illustration courtesy of Jeff Sheffer. Beware of Crypto Ponzi Schemes.

At the fringes of the largest shift in the economic landscape, it shouldn’t come as a surprise that there are people looking to make quick, easy bucks.


I guess.


I prefer to look at the Blockchain / Bitcoin hype a bit differently. Underneath all of the bluster, there is a very real shift in how the world will operate. And beyond that, yes, there’s a lot of money to be made in this new economy. But it’s not going to be made by the majority of the “get rich quick” folks (a few will get rich, but many will get hurt). Rationally, it will get made by those who figure out how to “value invest” in this space.

Yes, value investing in cryptocurrency may be one of the most outlandish oxymorons you’ve ever encountered — unless…well, unless the future is already here.

With Bitcoin and Ethereum — and their respective forks — leading the way, there are now 1,000 Altcoins and Tokens, many of which will increase in value substantially over the next decade.

Yes, there will be volatility.

Yes, there will be many times naysayers will justify that the market for crypto is officially over.

But eventually — for those who maintain their positions, don’t overtrade, and sit tight — there will be substantive, generational return to be made.

The hard part about value investing in crypto today might not be what you think. Identifying the investable alt coins or tokens requires little innovation. Analysis via algorithms and data science have already been weaponized by equity investors, brokers and hedge fund managers. With those tools in hand, actively listening to the market and understanding blockchain’s fundamentals will give you all that you need to pick effectively.

But after the identification of investable crypto, most potential buyers are pretty much hosed. Here’s why:

  • First, you’ll need to figure out a paced acquisition process, or else you risk moving the price in the market (down, unfortunately).
  • Second, you’ll need to understand how transfer your holdings betweencryptocurrencies — many require Bitcoin over cash as acquisition principal. So you may need to become versed in crypto exchanges like Kraken or Poloniex or Bittrex. And then you have to figure out how to run effective arbitrage across dual exchanges.
  • Third, you’ll need to hone your technical chops in order to set up digital wallets. The complexity of wallet activation is multifold. Do you choose a multi-wallet program like Jaxx, or utilize a hardware-based wallet like Bitcoin Trezor, which serves the dual purpose of cold storage? Neither support all coins, so even if you do choose those, you’ll also need to download, setup and activate coin-provided digital wallets.
  • Fourth, once you choose your wallets, each has an entirely unique password creation process. And, lord help you if you have even a modicum of dyslexia, because you’ll need to copy 6–30 random words during each setup process.
  • Fifth, you cannot leave your passwords or hashcodes vulnerable to cyberattack, or you could lose all of your currency. So, you need a cold storage solution — simply put, you need to disconnect your digital wallets from the internet. Do you write the codes on paper? Do you store them in a safety deposit box? Do you backup in AWS?

As a buyer, it’s infuriatingly complex. It’s like it’s the TCP/IP era of the Internet and your friend is explaining how to get online:

“You just ‘dial up’,” they offer.

“Dial up, like a phone?”

“Sort of. Did you get an AOL CD in the mail? Use that, then connect to a browser.”

“What am I browsing, like in a store?”

“No, a browser, like Netscape, do you know what that is?”

“No.” Now you’re exasperated.

“It doesn’t matter, once you open it up, you’re online.”

“Then what do I do?”

“Well, that’s the special part. You can do anything! It’s the Internet!”

How long did you wait to figure the internet out?

Today we are proud to officially introduce Flipside Crypto, which implements investment clubs for cryptocurrencies.

We are a team of 5 experienced entrepreneurs — with skills ranging from technology to data science to financial planning.

Our launch coincides with the closing of Flipside Crypto Club One. This Club was purpose built to help a handful of people acquire a “basket” of ~15 different cryptocurrencies. But more than that, it was designed as a service for effectively gaining access to the currencies: that means managing the entire process of digital wallets, encryption, safe keeping and cold storage of a client’s cryptocurrency property (the official classification by the SEC).

It’s the latter part that really hits home how early this market is. Actually gaining positions is full of complexities, but understanding what to do with those positions is downright unapproachable.

The paradox of Flipside Crypto Club One is that in a market that is accelerating faster than any before it, our aim is to help our clients slow down and become patient.

We don’t advise.

We don’t trade daily.

We aren’t their bank. (We don’t even hold the cryptocurrency positions — it’s the client’s property, and sits in their possession.

We are clear with our clients: this is a long game. We do the heavy lifting and then you have one job: sit on your cryptocurrency for many years, maybe even a decade.

One other important component: as a club, we meet regularly to discuss the evolution of the cryptocurrency markets. Sure everyone wants to make money, but learning and education may be an even higher priority for our clients thus far.

My Dad always used to say to me, “if it’s too good to be true, it probably is.”

I suppose one could argue that Flipside Crypto’s market approach is the most yawn-inducing, boring, and just-good-enough cryptocurrency organizations around.

Honestly, we’re kinda fond of that.