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Checkmate's Corner

Hedging Crypto Part 4

Alt-platform Buckets

There are three buckets of smart contract platforms that I use in my mental model of this market:

Bucket 1: Professor Coins – These are science projects by over-qualified academics that pitch ALL THE BEST FEATURES and have the most incredible technology that makes it better than Bitcoin!… and have absolutely no viable path to success. Professor coins are characterized by ambitious ‘best ever’ hype with not a great deal of marketing. They are very much academic science experiments by smart teams without a product market fit.

Classic examples are Cardano (ADA), Hedera Hashrgraph (HBAR) and Algorand (ALGO). HBAR and ALGO have simply the most ridiculous token distribution models where some need KYC to acquire them, they only release like 5% of the tokens up front and basically encoded infinite sell pressure from here until the end of time.

I mean, there is something special to be said when the only Google images I could find of Cardano was for the Foundation and Algorand has a Trademark symbol…much decentralised…

Cardano is probably the most viable of the three and even that has been on the research workbench for years and years with very little to show for it. They have an active and qualified team with lots of developer activity…but does it really matter? Who uses it?

I hear murmurings that the next major release of Shelley is coming this year…considering it was supposed to be delivered in 2018, I don’t recommend holding your breath. Based on the published roadmap, Cardano should be 100% complete by now but we are still awaiting the Shelley release to be completed.

My current verdict for Professor coins == Trade the hype and the news, don’t marry the narrative. Stay very objective and take those profits if you have a position. I do not believe the world will use a Professor Coin in the future.

Bucket 2: Venture Vulture Capitalist Chains – These chains are heavily funded by Vulture Capitalists who provide massive up-front liquidity to build both a product and most importantly, a hype machine. These chains most likely have one single purpose, to make the VCs who backed them rich. They are characterized by long delayed build phases after mammoth token sales and capital raises. They usually have a very centralised ‘Foundation’ with a massive treasury, huge token supply holdings and are there to guide the protocol to a decentralised future….ok…

Examples include ‘Ethereum Killers’ like EOS, Dfinity and Polkadot. Now I do believe that VC Chains have a greater chance of being useful that Professor coins as the VCs who back them know that all that matters is hype and network effects. They will market these products relentlessly and this includes approaches like social media bot-nets, hyped up memetic warfare and UNVBELIEVABLE statistics on chain performance and adoption.

EOS for example has consistently been critiqued for being incapable of handling more than a handful of transactions per second despite pitching itself as a 1M TPS chain. It continues to run into cartel behaviour in the 21 block producers which are all largely based in China or represent the major exchanges.

VC chains will look exactly like the real deal and the temptation to invest in the story and narrative will be very strong. These, like Professor Coins, will present great trading opportunities. They have excellent PUMPAMENTALS by design and that is an opportunity. Is it moral? Probably not, but the VCs will dump on everyone who gets bought into the narrative nonetheless.

VC Chains are the new IPO now that WeWork showed that bubble has popped. They will moon at some stage, just long enough to get everyone on the Kool-Aid and then the selling will commence. The foundations and VCs have huge token supplies (minted for free) and will sell right through the hype cycle as they realise gains from their initial seed investment.

Trade em, don’t hold em.

Bucket #3 – Semi-Legit, Use-case Specific Chains – These projects have many of the characteristics of Professor and VC chains but are differentiated by having at least some path to success defined. I would put Tezos, NEO, Cosmos and Radix in this bucket.

Now to be very fair, I have not spent anywhere near the length of time studying any of these coins as I have for ETH, BTC, DCR or XMR. The simple reason that there is just too much information. And that is actually why I don’t think there is much reason to look beyond Pumpamentals and Adoption. I just do not believe the vast majority of people buying these coins will do much due diligence beyond that. Who really cares about the fancy Ethereum killer features when it is just as likely to pump harder because it has a cool logo and boasts a similar feature set.

Tezos has had spectacular price appreciation of late, and yet the On-chain analyst for the Our Network newsletter consistently points out that the only thing growing on the network is exhcnag balances. The foundation is well capitalized and owns everything from BTC, gold, stocks and bonds. Talk about a centralised entity. Tezos foundation alone bought 10% of the supply during the last pump…and only told everyone about it after the price had moved up 40%. Then it listed on Coinbase. Adoption is horrendous, but it has good Pumpamentals!

Act accordingly.

I truly believe that very few of these coins have much going for them in the long run. These four are at the very least trying to build something useful but do they really hedge anything better than Ethereum? Not really.

Tezos has on-chain governance but Ethereum is already flexible in its social contract.
NEO has a handle in China but Ethereum is a global network anyway.
Cosmos is a use-case specific chain for interoperability…why do I need to hold it…I don’t.
Radix is a great idea using DAG tech, but where is it? Great, you hit 1M TPS…wen launch sir?


CONCLUDING THOUGHTS

Whilst it may seem somewhat sad that I don’t have the same specific hedging strategy for ETH as I do for BTC, I promise, there is method behind the madness.

The market simply does not care.

You could spend years studying the fine comb details of all these coins and comparing their consensus and security and features set…only to see that literally every coin except your winner pumped 100% in three days. The truth in my eyes is that all these smart contract platforms are nothing more than swing/trend trade opportunities that are driven primarily by hype, marketing and well capitalized foundations than any fundamental qualities.

None of them are differentiated in any significant way, they all do the same thing and they all have the same problems. If you consider them all as solely trade opportunities and nothing more, you will most likely come out of this cycle with a big grin on your face as you watch the crowd buy your bags as you sell alongside the Vultures, Professors and Smart Money.

When you look at this market on aggregate, most chains are centralised with no path out, few have a product anyone wants and almost all of them have no reason to exist. And yet they have good Pumpamentals, and that my friends, is the only fundamental metric outside genuine adoption that matters.

Rather than worry too much about which smart contract platform beats the others, watch Ethereum’s adoption metrics, track it’s 2.0 progress and follow Bitcoin’s leading price indicators.

Most importantly – USE PRICE AS YOUR COMPASS. That is the REAL fundamental of this market and ignoring the technical mumbo-jumbo noise is likely to prove the soundest strategy.

The ReadySetCrypto "Three Token Pillars" Community Portfolio (V3)

 

Add your vote to the V3 Portfolio (Phase 3) by clicking here.

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What is the goal of this portfolio?

The “Three Token Pillars” portfolio is democratically proportioned between the Three Pillars of the Token Economy & Interchain:

CryptoCurreny – Security Tokens (STO) – Decentralized Finance (DeFi)

With this portfolio, we will identify and take advantage of the opportunities within the Three
Pillars of ReadySetCrypto. We aim to Capitalise on the collective knowledge and experience of the RSC
community & build model portfolios containing the premier companies and projects
in the industry and manage risk allocation suitable for as many people as
possible.

The Second Phase of the RSC Community Portfolio V3 was to give us a general idea of the weightings people desire in each of the three pillars and also member’s risk tolerance. The Third Phase of the RSC Community Portfolio V3 has us closing in on a finalized portfolio allocation before we consolidated onto the highest quality projects.

Our Current Allocation As Of Phase Three:

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The ReadySetCrypto "Top Ten Crypto" Community Portfolio (V4)

 

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What is the goal of this portfolio? 

The “Top Ten Crypto” portfolio is a democratically proportioned portfolio balanced based on votes from members of the RSC community as to what they believe are the top 10 projects by potential.
 
This portfolio should be much more useful given the ever-changing market dynamics. In short, you rank the projects you believe deserve a spot in the top 10. It should represent a portfolio and rank that you believe will stand the test of time. Once we have a good cross-section, we can study and make an assessment as to where we see value and perhaps where some diamonds in the rough opportunities exist. In a perfect world, we will end up with a Pareto-style distribution that describes the largest value capture in the market.
 
To give an update on the position, each one listed in low to high relative risk:
 
SoV/money == BTC, DCR
Platforms == ETH, XTZ
Private Money == XMR / ZEC / ZEN
DeFi == MKR / SNX and stablecoins
 
It is the most realistic way for us to distill the entirety of what we have learned (and that includes the RSC community opinion). We have an array of articles that have gradually picked off one by one different projects, some of which end up being many thousands of words to come to this conclusion. It is not capitulation because we all remain in the market. It is simply a consolidation of quality. We seek the cream of the crop as the milk turns sour on aggregate.

Current Top 10 Rankings:

 

 

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