Curious Ran Blog #2
Thank you guys for your insightful and supportive feedback.
In case you missed the 1st blog post, you can find it here.
On today’s menu: Cryptocurrencies, Investing, Decision making, and Superbowl.
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.” Charlie Munger
Cryptocurrencies
1/ 2018 Cryptocurrency investment overview
Macro
2018 was a turning point in the Blockchain investment landscape: An All-time high number of funds joined the cryptocurrency investment ecosystem: 220(+11.1% VS 2017)
The crypto investment landscape is comprised of VCs, Hedge Funds, Private Equity, High Net Worth Individual(HNWI), and retail investors. You guessed right, the Big Boys are holding most of the funds.
There are currently 741 active managed crypto funds, 50.2% VCs( ~370), 47.2% Hedge Funds( ~349) and the rest is PE. Here is the breakdown:
2018 was a very challenging year for cryptocurrency investing. On average funds have lost -70% of the value. Below is 2018 Bitcoin performance VS Bitwise 10(10 largest cap coins) VS Bitwise 100(100 largest cap coins).
Crypto 2018 performance:
- Bitcoin: -72.6%
- Bitwise10 -79.1%
- Bitwise100 -81.9%
- Pantera Capital -81.9%( estimation)
This is highly disappointing for investors since:
1/2017 was an exciting year for crypto investors, gaining very high returns. in 2017 Ethereum gained ~8,800% return, and investors expected “more of the same in 2018”.
2/ICO boom in 2017 along with a thesis of a “new economy” driven by blockchain and a new Decentralized organization structure.
3/High Fees: the fee structure of most actively managed funds is 2/20: 2% fees on total Assets Under Management(AUM)+ 20% of the profits.
4/Regulation: many of the actively managed fund’s portfolio companies were not listed as securities, not complying with security laws in the US.
When combining High fees, low performance, and low alpha, i suspect that crypto funds will close in 2019, along with a low addition of new funds.
Micro: Pantera Capital Deep Dive
Pantera Capital is one of the earliest most renowned funds in the crypto ecosystem, founded in 2003. In 2014, Pantera Capital changed its investment strategy into Cryptocurrencies. Pantera Capital is currently managing 3 funds with AUM of ~800M$(Estimated). Below is Pantera Capital’s portfolio companies:
Pantera Capital 2018 key points:
1/In 2018, Pantera Capital performed poorly, gaining ~80% NEGATIVE returns.
2/ During 2018, Pantera Capital stopped sharing funds’ performance with their LPs on the monthly Newsletters( not such a good sign)
3/Pantera Capital is currently raising 30M$ for funds #3, investing into nine portfolio companies such as Bakkt, a high profile exchange and a subsidiary of the NYSE( with horrific branding), Blockfolio , Staked, StarkWare(more below) and Synthetic Minds.
3/Regulation: It is estimated that 25% of Pantera Capital’s portfolio companies were not compliant with Security laws, meaning they might face regulatory charges And/Or will have to return investor’s money.
Micro: Starkware Deep Dive
Starkware is a highly anticipated company based in Israel with a very strong team including Prof. Eli Ben Sasson, a Computer Science professor from the Technion and the co-creator of Zero-Knowledge Proofs and Zcash.
More on Eli Ben Sasson on this Epicenter podcast talking about Cryptography, Cryptocurrencies, Zcash, and Blockchain.
A Zero-knowledge proof(ZKP) lets you validate the truth of something WITHOUT revealing how you know that truth or sharing the content of this truth with the other side. ZKP also faster transactions rate.
Starkware raised 36M$ in 2018, starting with a seed round in January, and an A round in late October 2018. Starkware is backed by some of the biggest investors including most renowned VCs hedge funds and Angel investors: Naval Ravikant, Vitalik Buterin, Fred Ehrasm, Polichain, Pantera Capital, Sequoia, and Intal Capital to name a few. Here is a link to their CrunchBase page.
3/Crypto Lending. In 2018, over $250 million worth of loans were routed through open lending protocols such as Compound, Dharma, dYdX, and MakerDAO.(+1200% VS 2017) Source. Below is the crypto lending market share: MakerDAO is leading with 61.3%, followed by Compound with 17.44%
I think it will be very interesting to watch crypto lending platforms evole and gain more traction in the future. MakerDAO recently shared they have “locked” more than 2 Million ETH as collaterals on their platform which represent aprox. 2% of ETH circulating supply.
4/ Facebook recently Acqui-hired its first blockchain startup, Chainspace, a startup focused on Smart contract. This seems like another step for Facebook to integrate Blockchain technology and to adopt a native cryptocurrency for their platforms. David Marcus Facebook’s former Messanger app was promoted to head of Blockchain taskforce. In terms of market positioning, Facebook now controls 4/10 of the most used mobile apps, reaching at least 2.271B people worldwide. See chart below,the orange dots represent a Facebook company.
Facebook’s user base is the population of China, the US, Indonesia, and Brazil Combined. It only makes sense for Facebook to leverage this user base to create its native economy and currency based on Blockchain.
Combining the steps Facebook is taking: buying a blockchain startup, allocating resources, an enormous user base, and a strong business incentive, signals that Facebook is acting toward leveraging blockchain technology and potentially issuing a native token in the new Facebook Economy.
Decision making:
I have recently bought a decision journal, from the artwork of Farnam Street blog(more below) with the intention to improve my decision-making process. Here are Ray Dalio’s thoughts on how to get better at decision making. My logic goes as follows:
1/Getting better at making decisions could improve my performance drastically.
2/When I look at a decision I made in the past, my memory betrays me and I miss critical facts that had a tremendous impact on why I made the decision that way.
3/ Mental and physical state has a big impact on WHY we make the decisions we make at a particular moment.
4/I’m affected by various biases once making a decision (e.g. Similar to me effects, loving my own ideas, Zero Sum biases etc..)I would like to create the right environment in which I am able to map and address the relevant biases. Below is a Cognitive biases codex I use.
5/I didn’t try to improve my decision making process, so why not?
6/I do not have any data on a past decision I made, so I am not able to make an analysis and improve it.
I am going to focus on journaling my BIG decisions keeping track and learning from mistakes and good decisions I make. Here is a template from the making of FS blog.
Here is a cheat sheet for cognitive biases and the inspiration for the cognitive biases below:
Here is the cognitive bias codex:
SuperBowl LIII:
On February 3rd, the New England Patriots won Superbowl LIII against the Los Angeles Rams 13–3. The Patriots have won three championships in the last 5 years( with a total of 6 NFL championships). This Superbowl was special for Tom Brady ( Patriot’s Quarterback) making him the oldest player winning a title at the age of 41 while marrying to Gisele Bundchen, and getting him closer to becoming the GOAT(Greatest of all time).
TV Ads
Superbowl TV ads are the pinnacle of every marketing professional around the world. Production is extreme, the creative is high, costs are enormous, anticipation is mounting. All because Superbowl is the biggest sports event around the world with the highest view base.
TV ads costs reached an all-time high of 5.25 Million$ for a 30-second slot (+4.7% VS 2018 ) while Total viewership went down to 98.2 Million( -5% VS 2018). It is becoming increasingly more challenging to approach your target audience in 1 specific event and more costly. since 2002, TV ad slot has more than doubled!
Here is AdAge ranking of the top 55 TV ads of Superbowl LIII
Here is an archive of all the top Superbowl ads since 1969
Book:
The Prince by Niccolò Machiavelli. This book addresses strategy, governance, and how to acquire and maintain political power. This book is short(~150 pages) and Machiavelli writes in such an honest, frank manner on how to be a good ruler it is somewhat inspiring. For me, this book was the gateway to Italy’s Renaissance era and the Cities-kingdoms era ( I know I’m 500 years late)
Podcast:
The Knowledge Project by Shane Perish. This is by far, the best thing you can hear on Decision Making, Learning, Mental Models, and entrepreneurship.
Blog:
Mungerism is a blog dedicated to Charlie Munger. In case you are not familiar with this exceptional guy, stop doing whatever you’re doing right now, and read all about this guy’s way of thinking, curiosity, and sheer wisdom. His children call him “ A Book with legs” driven by his love of which I find remarkable and funny at the same time.
Charlie is the longtime business partner of Warren Buffet, acting as the vice president of Berkshire Hathaway.
Here is a window to Warren Buffet and Charlie Munger’s investment thesis written on the Motley fool.
And here is another piece of wisdom by Malcolm Gladwell, on Heinz’s Ketchup taste. “Mustard now comes in dozens of varieties. Why has ketchup stayed the same?
Disclaimer: This is not financial advice. I am not a financial advisor. I am not affiliated with any links shared above. If you enjoyed this post, share it with your FFF.
