This post was last updated on July 3rd, 2019 at 09:19 pm
My guest today is actually me (Clay Collins).
A few weeks ago, Rob interviewed me for his podcast and I liked the content so much that I asked Rob if I could air a modified version of that conversation here for you today. He generously said yes, so here we are.
You’re probably used to me being the one asking the questions. In this episode, we flip the script and I hope you enjoy what happens when the tables are turned.
Please enjoy this conversation between myself and Rob Paone.
Topics Discussed In This Episode
- Nomics’ origin story and what led myself and my co-founder to start Nomics.
- A high-level overview of what Nomics is involved in at the moment.
- What the future product roadmap for Nomics looks like, and the importance of our forthcoming API product.
- Why we think we have the cleanest data in the space.
- The evolution of institutional participation in crypto investing and some of the top lessons learned thus far from the Flippening Podcast.
- The difference between Alpha and Beta gains.
- The ethics of crypto asset liquidity events or ICOs.
- The evolution of ICO fundraising.
- Crypto index funds and crypto funds of funds.
- Why I’m so interested in decentralized exchanges.
- Our favorite crypto projects right now.
Links Relevant To This Episode
- Cryptoinvestor Weekly Newsletter
- Clay Collins
- Rob Paone
- The Crypto Bobby Podcast
- Kyle Samani
- Multicoin Capital
- Planet Money
- SALT Lending
- Unchained Capital
- Andreessen Horowitz
- Union Square Ventures
- Pantera Capital
- BlockTower Capital
- Ari Paul
- Bitwise Investments
- Rick Marini
- Protocol Ventures
- Polychain Capital
- Naval Ravikant
- Ledger Nano S
- Radar Relay
- NVT Score
- Netoid Functions
- Decentralized Exchanges
Clay Collins: My guest today is actually me. In this episode I’m interviewed by Rob Paone, host of the Crypto Bobby podcast. Anyway, a few weeks ago, Rob interviewed me for his show and I liked the content so much that I asked Rob if I could air a modified version of that conversation here for you today. He generously said, “Yes,” so here we are. You’re probably used to me being the one asking the questions. In this conversation we flip the script. I hope you enjoy what happens when the tables are turned.
Rob and I have a wide-ranging discussion about a number of topics. In the conversation you’re about to hear, we discuss: one, Nomics’ origin story and what led myself and my co-founder to start this company; two, what the product roadmap looks like for Nomics and the importance of our forthcoming API product; three, why we think we have the cleanest data in the space; four, the evolution of institutional participation in crypto investing and some of the top lessons learned from the Flippening podcast, that is, the podcast you’re listening to right now; five, the ethics of crypto asset liquidity events or ICOs; six, Telegram hedge funds; seven, the evolution of ICO fundraising; eight, crypto index funds and crypto funds of funds; nine, decentralized exchanges; and 10, our favorite crypto projects right now. Please enjoy this conversation between myself and Rob Paone.
Rob Paone: Today I have an awesome interview for you. Probably one of my favorite interviews, that I’ve conducted to date. It is with Clay Collins, the founder of Nomics. And this is a website. It’s pretty much brand new. It was just released within the past week or so. And they’re, in some cases right now, similar to a coinmarketcap dot com, but they’re looking to innovate and provide a lot more data for investors and for people that are looking to analyze cryptocurrencies. And the conversations that Clay has on a continuous basis with hedge funds, with institutional investors, and his background and experience in SaaS software led to a really, really interesting discussion. I think you guys are going to really enjoy this 45 minutes. Like I said, probably one of my favorite interviews that I’ve conducted, to date, at this point in time. Definitely sit back and enjoy this one. Let’s get into it. Thanks a lot for taking the time to join me, Clay. I really appreciate you coming on the channel. And, so, for everybody who doesn’t know you, how about a quick introduction on your end so the folks at home know your background, generally speaking, and when you got into crypto as well.
Clay Collins: Sure, so my background is as a SaaS entrepreneur. I’m the founder of a company called Leadpages, which got started in January of 2013. Leadpages eventually acquired a marketing automation platform called Drip. While I was there, we grew that to over 50,000 paying customers. We raised 38 million in venture capital. It was really a great time. I realized that really the area where I like to focus is between zero and 15 million in annual revenue, and past that, I’m a little bit outside of my comfort zone. For my very first SaaS company, which was Leadpages, that really was where it’s at. And the board and I hired a CEO and I’ve moved on to co-found a company called Nomics, which I’m having a lot of fun with.
Rob Paone: Absolutely and I have Nomics up on the screen now so we can definitely talk about that a little bit more and it’s funny, too, ’cause we were talking beforehand that I think back, maybe 2013, 2014, pretty early on with Leadpages, I was definitely one of those paying customers. Heard of you through a Pat Flynn podcast awhile ago, so I’ve definitely been a fan of yours for a while. Seeing you at least with Nomics and the founding their transition into the crypto space has been pretty cool. Tell me a little bit about Nomics.
Rob Paone: Because you have a podcast and then you also have a front-end website right now as well. A little bit of a high-level overview of what you’re doing at Nomics would be awesome now.
Clay Collins: We had this insight when we started looking at trade data in the space and the insight really was that the space and the data around trades that were occurring had not been professionalized. Most of the exchanges have pretty poor APIs and anyone who’s trying to collect trade data and backtest their hypotheses against that data or receive in real time, information about what’s going on in the market, is going to be pretty frustrated. And if they’re trying to integrate with multiple exchanges, they’re going to be extremely frustrated. The formats change frequently. There’s often lots of times when the APIs go down so you have to go and catch up on data that was lost during that period. The insight really was that there was an opportunity to create like a Zapier of exchange data so that, instead of having to integrate with a bunch of different APIs to get data, you could integrate with one professionalized API that was conformed to the recent standards that had SLAs and uptime guarantees and response-time guarantees.
And we could provide that to family offices, hedge funds, professional investors, so that they could do everything that they need to do to operate their funds and strategies. That’s the back end of Nomics. And that’s how we’ll monetize the platform. The front end is probably what’s available at Nomics.com right now, which is just the first installment of over 17 types of pages that are going to be available there. We really saw an opportunity to provide something with great design that was fast, that was intuitive, that had things that you come to expect from websites like terms of services and privacy policies and contact us pages and phone numbers that there was a real opportunity to provide, again, a level of professionalization to the data that’s there. But the front end is really to market the back end. We are going to invest a lot into it because we’ve decided we’re not going to invest in like pay-per-click, or a sales team. We’re going to put our marketing budget into the front end.
Rob Paone: That’s really interesting and I think a good way to approach it, especially when, I guess the, just environment in the crypto space in general and I like the front end so far. Front end’s relatively new, correct? It’s been out for, I guess, how long has it been out for at this point?
Clay Collins: It’s less than a week at this point.
Rob Paone: Gotcha. Right now there’s a couple different data points. Market-cap price, daily-change volume, all-time high, things like that, and there’s actually a pretty solid number of close to 400 plus cryptocurrencies or crypto assets, whatever you want to call it, that you could choose from. What type of data points are you looking at gathering in the future in addition to what might be available now? Is there anything specifically that you have your eye on that you feel like is from an investing standpoint, something that’s very needed in the space?
Clay Collins: Phase one for us, was just making sure that our data was clean. And I would sort of assert that we have the cleanest data set in the space. We’ve indexed over a billion trades right now, so there’s no gaps. But, in terms of collecting additional data points, I talk to, probably a developer at a hedge fund, every one to two days, and I’d say, the requests really come in one of two buckets. Usually they’re saying, like, “My life sucks because I spend so much time that I could spend doing really cool stuff with this data, just cleaning up the data.” That’s one kind of ask, is just, “Give us good clean data behind a professional API.” The second request has to do with better crystal balls. A lot of these funds have hypotheses around sentiment, around momentum, around GitHub analytics, so how active is the development team? How active is the Telegram group, is the Reddit group? A lot of requests we’re getting right now are around that.
We’re more interested in fundamental analysis. We’re going to be moving to more on-chain analytics and showing things like the NVT score, netoid functions, which are really interesting. It’s really about moving to more fundamental data and on-chain analysis. The social sentiment could be interesting, but there’s just so many bots. And people have realized that a lot of investors are looking at this data in the aggregate and not looking at the specifics. It’s really being gamed. Even Telegram groups, Reddit groups–
Rob Paone: Oh, yeah, it’s crazy.
Clay Collins: Slack groups. It’s really nuts. It’s the Wild West out there.
Rob Paone: Yeah, for sure, and I think it’s really interesting how you’re approaching it too and what you’re doing at this point. I actually had a conversation yesterday and it’s maybe a little bit similar goal, but more on trade-execution side, where it was Alexander Kravets’ go to. He’s the co-founder of a company called XTRD.io. And they’re trying to kind of build, or they, I think, have a beta in process right now for an API across exchanges that will allow for a trade execution across exchanges and long-term try to provide liquidity between exchanges, get the best price, things like that. But, the level of infrastructure, whether it’s data, or trade execution right now, it’s still so nascent in the industry and the type of tools that are coming out like Nomics and like some of these other ones that are trying to fill that gap, is going to be really fascinating to watch especially as a lot of, like you said, hedge funds, family offices, institutional investors are coming into the space.
Clay Collins: That’s a really great point. Another kind of potential route we could go is around correlations, especially time-lag correlations. What we’re finding is that, in general, certain crypto assets tend to move before other crypto assets that are in that category, like Monero and Zcash are linked.
Rob Paone: Totally.
Clay Collins: One usually moves before the other. Bitcoin and Bitcoin Cash are linked. One usually moves before the other. In a lot of ways, if you know which one pops before the other, you can front-run the market a little bit. That’s an opportunity for high-frequency investors, although, anyone who’s doing custodianship right is probably taking a day to execute most of their trades. You can’t spend all day, every day trading.
Rob Paone: That’s kind of funny too because I’m trying to remember the exact conversation, but I think it was a podcast that you had with Kyle Samani from Multicoin, where he was talking about, basically, the different tools and software that they’ve built out in multi-signature, kind of multi-signature storage and everything like that where, if I remember correctly, he was basically saying that the trade execution was really the worst part of his job as a crypto hedge fund manager.
Clay Collins: They’ve got a fairly involved process for executing trades and it takes them a day to execute their trades, so it’s not realistic for them to do that very often. We’re finding that even index funds in the space are rebalancing, at most, every two weeks. Rebalancing one a month is probably a little bit more common. It’s a pretty laborious activity right now if you have other peoples’ money. If you have your own, knock yourself out. Keep it all in Bittrex or wherever.
Rob Paone: One thing that I just mentioned previously, but you, in addition to Nomics, you have a podcast that’s associated with Nomics. Talk to me a little bit about that podcast, because it’s different, I would say probably the most, one of the most professional crypto podcasts out there in terms of the guests you have on, the editing, and things like that. Talk to me a little bit about just kind of what the goal is with that and who you like to speak to and what type of information you bring across there is as well.
Clay Collins: First off, I’m always looking up at you in the rankings because you’re always a little bit above us which makes me jealous. I’d say the podcast is, in a lot of ways, similar to the thesis of the company, which is, “There’s a lot of crypto bros shilling crap coins out there.”
Rob Paone: That’s never happened on YouTube. I don’t know what you’re talking about.
Clay Collins: There’s no “crypto bros shilling crap coins” on YouTube, yeah.
Rob Paone: Crap coins ready to moon today.
Clay Collins: #lambo, #winmoon. We thought there was an opportunity to come in with something that resembled a little bit more like Planet Money. For the most part we’re talking to institutional investors. We don’t think institutional investors are necessarily more sophisticated than just kind of your average retail investor playing with their own money. But we think it sort of adds a lacking perspective to the market. There’s a lot of editing. There’s a lot of post-production. I have an editor that spends, like I pay, a sizeable chunk of money to edit every episode. And we put a lot of time into it. We script out the intro. We script out the outro. We script out transitions. Sometimes we’ll transition between a couple different guest in the same show. We’ve been told it’s probably the most professionally-produced podcast–
Rob Paone: Definitely is.
Clay Collins: in the space right now. I’m kind of on a mission to speak to general partners of institutional crypto hedge funds. Thus far we’ve spoken to a VC-style firm, Kyle Samani from Multicoin Capital. We’ve spoken to a fund of funds, which I’m an investor in. You give them your money and then they invest it in a bunch of different funds. We’ve spoken to a crypto index fund. That episode is going to go live pretty soon. It’s Ali from CoVenture which tracks the top 15 cryptocurrencies and then re-balances every two weeks. I’m also an investor in CoVenture. And there’s several additional categories of funds that I’d like to talk to. I really want to get a grasp for what institutional money is doing in the space because I it provides a lot of insight into where the market is going to go. People don’t realize this. BlackRock has something like $7 trillion under management. BlackRock has more under management than the entire cryptosphere by several multiples.
That tells us a lot about the future of the space, which is why I’m so interested in it. I’m also really interested in services that are built around the space for institutional investors. We interviewed someone who allows you to take loans against your bitcoin wealth. If you sell your Bitcoin you have to pay capital gains tax.
Rob Paone: Was that SALT?
Clay Collins: It wasn’t SALT. It was Unchained Capital.
Rob Paone: Okay, gotcha, gotcha.
Clay Collins: SALT is an on-blockchain solution. They have limits on how much they’ll let you take out. Unchained is probably built a little bit more for kind of like prime brokerage situations. If you sell your Bitcoin or you sell your Ethereum, you have to take capital gains. If you borrow against it, you don’t have to sell it so you don’t lose out on the gains and you don’t have to pay taxes, which is really nice. And, if you’re borrowing for the right thing, you can actually take a tax deduction on the interest you paid on your loan, which is probably less than the amount of gain you’d get by not selling. That’s what’s going on there. It takes a lot of time. It’s a ton of work. Sometimes I’m up late at night like cursing myself, like, “Oh God, Oh God, another, I’ve got to write more scripts here.” But, it’s been a fun journey. We’ll see what happens.
Rob Paone: You’ve done fantastic work with that. I’ve listened to quite a few of the episodes and really enjoyed them. It’s been awesome to see that level of, you can just tell, as somebody who makes a podcast, but doesn’t spend anywhere near the amount of time producing it. Probably 5% of the amount of time, if that. You can definitely tell the amount of work you put into it, which is pretty awesome.
Clay Collins: Well, I think you’re the smarter person here because you seem to be ranking above us spending like 1/10 the time, so I don’t know if I’m doing the right thing yet.
Rob Paone: We’ll have to see the long game. One thing that you’ve obviously spoken, like you said, speaking to hedge funds, hybrid crypto VC firms, institutional investors, a few different times a week. What have you seen just in terms of speaking to those individuals? Are there any trends you’re noticing right now just in the marketplace or anything that’s coming up consistently outside of, maybe, the need for just much better data to drive those investing decisions as well?
Clay Collins: Most of the innovation that’s happening in the institution/semi-institutional space is happening with family offices that have a lot of discretion with what they can do. A lot of activity’s happening there. Probably the next step up are index funds. A lot of people aren’t as interested in putting their money with a coin picker. I’m not sure they even think anyone knows what’s going to happen. Especially when a lot of these companies charge 20% carry and they have 2% fees. And, in some cases, they are outperforming index funds and other cases, in most cases, they’re actually not. I’m seeing kind of this progression go from family offices to multi-family offices to index funds and then probably the next thing above that, in terms of going up the institutional ladder is, we’re seeing a lot of, I’d say, non-risk-averse VC firms like Andreessen Horowitz and Union Square put money into more VC-style crypto hedge funds that do a lot of things that VCs do like talk to teams and look over the code base. These are very expensive things to do in terms of just time and expenditure. We’re seeing VC funds put money into those types of firms. And it kind of stops there. Those are kind of the three rungs.
Rob Paone: It’s interesting. It’s also, even kind of going off that point to just seeing some of the traditional VC firms. There was an article pretty recently in regards to the Telegram ICO as far as a lot of the more crypto-specific funds, I don’t remember if it was specifically Pantera and some of the other bigger ones like, Pantera, BlockTower, some of those ones that are passing on Telegram and then some of the more traditional Silicon Valley-based VC firms that are very interested in putting money into like a Telegram ICO at a $2 billion valuation or whatever it might be.
Clay Collins: There was a lot of fear of missing out a lot of FOMO around deals that Andreessen Horowitz and Union Square had done and then now they saw this company that had a ton of traction with a very ambitious project and they thought it was time to get in. Another interesting trend that I’m seeing is the birth of these Telegram hedge funds. It’s, in many cases, like one person who’s a really good trader, that maybe has a technical co-founder, that’s going and collecting data and they’re taking money from high net worth friends and family. Maybe their fund is between one million and five million and they’re posting information about wins and losses and gains and stuff in just a Google spreadsheet, like a private Google spreadsheet. And they’re taking like 20% of the gains. But, what’s interesting about these types of Telegram hedge funds that are completely unregulated–
Rob Paone: Oh, yeah.
Clay Collins: You just have to trust the person, is that in many cases, they’re denominated in Ethereum. And they’re ICO-based. I like these funds that are denominated in Ethereum because there’s this notion of alpha and beta gains. Beta gains, like if you invested in an index fund of the S&P 500, I know you know this, but I’m just sort of explaining it for the larger audience. If you invested in the S&P 500, it goes up 20% over a year. Those are beta gains. Those are just gains the market at large is having. Alpha gains are gains that you get, I’m probably slurring this, like Ari Paul could probably rip me apart for this explanation, but alpha gains are gains that you’re getting above and beyond the general movements in the market.
Rob Paone: Yup.
Clay Collins: Some of these hedge funds are charging 20%, and in some cases, 30% performance fees when they more-than-double your money in a given year. Bitcoin did 14X last year. I don’t want to pay 20% on what you would have gotten if you just invested in Bitcoin. When you’re dominated in like, when the fund is denominated in Ethereum or Bitcoin, then you’re really only paying for the alpha gains which I’m totally okay paying 20% when–
Rob Paone: Above and beyond,
Clay Collins: someone outperforms Bitcoin. Yeah, so that’s kind of interesting. In a lot of cases those can be the better route to go if you’re–
Rob Paone: Okay with that.
Clay Collins: okay with taking on the risk.
Rob Paone: Yeah, it’s funny ’cause I’m kind of in a similar situation where I’ve just through New York city, through mutual connections, things like that, I’ve had a chance to meet a number of different people and there’s a lot of situations like that, where it’s like, “Hey, there’s this opportunity. Throw us a few Ethe. Here we go. We’re going to get into this. I’ll hold the tokens for you short-term.” Or, most sophisticated case, I have a friend that built a smart contract that will automatically disperse any type of …Send an Ethe, automatically disperse the tokens or anything like that. That’s been a really interesting way to try to outperform the market in some cases. But, like you said, seems like there’s a lot of hedge funds and I think a lot of people have been joking about some of the hedge funds, at least in crypto Twitter the past couple days about how people are still enjoying that two and 20% fee for losing 60% of the valuation in the past–
Clay Collins: My gosh.
Rob Paone: couple of weeks but who knows?
Clay Collins: Yeah, absolutely. Especially, I think it’s the last day of every year that most of these funds are taking their gains according to CoinMarketCap, which is a really interesting choice. I started investing in 2013 and it was really simple back then. I got in on the Ethereum presale and I bought Bitcoin. And, if you bought those two things, you were going to be okay. But now, so many things are happening that I think it does behoove most people to consider and taking a portion of what they have and investing it in …
There’s Bitwise Investments has something called The HOLD 10. I think it’s a minimum of 25K to get in. CoVenture has an interesting index fund. There’s going to be some on-chain index funds as well. But I think it behooves people to put some money there because these movements aren’t rational in many cases. You’ve got people coming in with this value investing mindset and saying, “Well I’m going to look at the code and evaluate the team.” And it’s like, none of that matters–
Rob Paone: Take ones you actually tweet and then
Clay Collins: You know, you’ve got time?
Rob Paone: I completely agree. That’s the funny part about it is like there are so many, I feel like there’s so many just incredibly intelligent people with all these valuation methods and trying to go through a process of, “This is why this coin is valued at X. This is why this coin is valued at Y.” And then, as much as I love Dogecoin, you’ve got Dogecoin at $2 billion, or at least you did like a month ago, and there’s no logical reason why a cryptocurrency that, I don’t think has had a GitHub commit in a year and a half or something like that–
Clay Collins: Oh my gosh!
Rob Paone: is valued at $2 billion, but that’s the crypto market and I guess you can’t really fight that trend until it goes the other way.
Clay Collins: That’s why I do enjoy the diversification of an index fund. There’s a methodology and they just execute against that methodology. Another interesting trend that we’re going to see more of are these funds of funds. On the podcast I interviewed a guy named Rick Marini that runs Protocol Ventures. I think minimum investment with him is half a million dollars. And, what’s interesting about the way he operates is he has special deals with these funds. One objection to a fund of funds, sometimes, is that it’s fees on top of fees. If you’ve got a hedge fund that’s taking two and 20, you know, 2% management fee, 20% carry, and then you’ve got to pay Rick at Protocol Ventures, it’s just costing you a lot of money. What’s cool, though, is that Rick has special deals with many of these funds so that his fee is just sort of lumped into what you’d pay the individual funds because he does get a discount.
I, personally, wasn’t willing to invest enough to get into Polychain Capital, or Ari Paul’s BlockTower, I think it was a minimum of $5 million investment to invest in BlockTower. I didn’t have that much to put in, but I did want to get in on this fund of funds which gives me exposure to Polychain, to BlockTower, to all these other things. It’s just helped me diversify. I was really afraid that I’d just pick the wrong one. But, I know all the funds he’s in and I like all of them. They’re all really good funds, so I think, through the index fund and through the fund of funds, I feel like I’ve just spread out the risk enough that I’m probably going to be okay.
Rob Paone: Absolutely, and that’s interesting and there’s a certain level of investable assets for, I think, most people. And even I have a couple friends that have done well and they’ve gotten to a certain point where they’re looking at their portfolio and they’re having a small hedge fund kind of reach out and they’ll say, “Hey, I want to put maybe, even if I don’t want to go all in, I’ll put 25, 30% of my capital in this hedge fund, just to diversify some of the risk and hopefully, if things go down, they’re able to play that and I’ll keep the rest on my own, not pay those fees, whatever it might be.”h at’s been kind of an interesting approach to see a lot of people develop in the fund of fund approaches is pretty cool. And I think even you can break that down. I don’t know how often you’ve been seeing these ICO syndicates and things like that, like that’s a lot–
Clay Collins: Yup.
Rob Paone: I’ve been seeing that all the time now and there’s even people that, I have a few friends that are looking to start like a syndicate of syndicates where–
Clay Collins: Oh my gosh.
Rob Paone: It’s just like all over the place, spreading out allocations to presale ICOs and things like that because, especially with the SEC yesterday, I think the days of main sale ICO investing is completely over at this point in time. Either you’re in a credit investor or you have a foreign passport or you are participating in some syndicate where you’re basically just sending somebody Ethe and they’re kind of taking on that counterparty risk for you.
Clay Collins: Yeah, I have mixed feelings about those Telegram ICO syndicates. I think we’re finding that–
Rob Paone: It’s scary in some cases.
Clay Collins: They’re scary in some cases and I used to fault venture capitalists for buying into a company early, putting a ton of money into it at a loss to pump it up prior to an ICO, into an IPO, sorry. And then when the IPO happened, pensions and grandmothers and people would buy this thing and, in many cases, it would tank, but they just kind of sold off their gains to the public markets. What I’m seeing with a lot of these ICOs is a lot of them are scared to do a public ICO anymore. What they’re doing is they’re going to these kind of, sometimes shady, sometimes not, pools of liquidity in some of these syndicates and, maybe, selling $10 million to $20 million of their token at a huge discount. Sometimes 50%, sometimes 80%, and these people are buying up the tokens and reselling them on day one on these exchanges–
Rob Paone: Massive profits.
Clay Collins: not holding, it’s just massive profits and the only value that they’re really providing is–
Rob Paone: Is liquidity on day one.
Clay Collins: Saving this company. Yeah, it’s just liquidity on day one. I think sometimes that’s good, sometimes that’s bad. I was reading, I can’t, I don’t want to name names here, but, I’m not going to name names here but there was a top-tier investor which, there’s three initials associated with their firm. There was a top-tier investor that was essentially buying tokens at a huge discount, allowing the project to do a bunch of press around the fact that this company had invested. And was simply flipping those tokens when they hit the public exchange. And that’s all they were doing, was slapping their name on it, buying the tokens at a discount and flipping them. That’s not a value-added service.
Rob Paone: No, no. And it’s something too, for anybody that’s watching now as a retail investor, as somebody that might be participating in an ICO, or looking afterwards at some of these ICOs, I think that’s one thing that you definitely need to be aware of is, not to call anything out, but behind the scenes there is a lot of that going on where there are some of these bigger hedge funds or people that are prominent in the space that are getting massive, massive discounts on some of these ICOs and some of these tokens and day one when it hits a prominent exchange, you’re buying their token at a hundred percent profit to them and they’ll continue to sell that and you might see some depreciation in that price due to that so it’s been an interesting trend to watch. And then also how some of the companies that maybe are a little bit more respectful of that whether they’re implementing lock-ups on the, they’re implementing lock-ups and things like that, but on the other end of the spectrum, what do you think about lock-ups?
Who knows where the crypto market’s going to be in three years? How many investors are really that confident? You might be incredibly confident in a project, but the crypto market could be $5 trillion in three years, it could be at a $100 billion in three years. I don’t think anybody knows, and participating in a lock-up like that, I think is a pretty big risk for at least some of these folks.
Clay Collins: What people give up in security, they gain in liquidity.
Rob Paone: Yup.
Clay Collins: And having very little liquidity and high risk, it’s just woo, it’s hard for me to stomach as an investor.
Rob Paone: Yeah. I don’t know if this is something you’re seeing at all, but I think one of maybe the interesting developments that’s starting to go on too, is these presale ICOs that are followed by an airdrop to whether it’s Polymath was one of the ones that recently did it and there’s been a couple other ones, but that’s been something that I’ve been seeing. I don’t know if that’s something that you’ve heard about at all, but it seems like that’s like a trend from a regulatory perspective and maybe is more favorable from a regulatory standpoint. Then the airdrop kind of adds a level of liquidity on day one.
Clay Collins: That’s kind of interesting. It was Naval Ravikant who started referring to fair coins, so coins that distribute tokens to hundreds of millions of people if possible. The wealth is spread far and wide. I haven’t tracked a lot of the airdrop activity. I just haven’t done enough there. I probably missed out on a lot of free money. I don’t know. Are you getting in on air drops?
Rob Paone: In some cases. The Polymath one I think at the time, it was like $250 of free money, just that all you needed to do was sign up for an email. That was pretty interesting. But there’s some other ones that seem to be following that because, I guess, from my mind, there’s, yeah, obviously if there’s a company out there, I feel like there’s a really interesting balance because a company like Telegram, they might raise a ton of money or they’re trying to raise a ton of money. But, if it’s an, at least in my mind, if they’re trying to have end-user adoption, does end-user adoption really get assisted when you have 10 hedge funds that buy up all the tokens? Or, is there a better way to approach that where you can actually get small individual investors in addition to maybe those hedge funds that provide the large blocks of initial funding? I feel like that’s been very interesting to watch develop at least from my point of view.
Clay Collins: Yeah, I agree. Sometimes I’m just kicking back and eating popcorn. I don’t have an opinion on a lot of this stuff. It’s fun to constantly be looking at the data. I’ve got the, I have the Nomics dashboard open a lot of times. One of the things that I’m always looking at is, whether or not, Bitcoin is outperforming the market on the whole, and, recently, Bitcoin has been outperforming the market. I think, during upswings it does. Or, when the market’s gone down and then it kicks back up again when it bounces. Hopefully this isn’t a dead-cat bounce.
Rob Paone: Yeah.
Clay Collins: Bitcoin tends to outperform the market, but I think those are people just converting Fiat back to Bitcoin again so that they can buy other coins. Other tokens are going to follow.
Rob Paone: As far as looking at the crypto ecosystem in a large scale, is there any specific project, it could be a crypto asset, a currency or just something that’s kind of ancillary in supporting the crypto ecosystem? Is there anything that you find very interesting right now?
Clay Collins: I’m really interested in decentralized exchanges. ZeroEx is something that I have a lot of conviction about. I remember when I interviewed Kyle Samani on the Flippening podcast. The interview with him actually happened, I believe, in late October even though it took us several months to actually publish it. And he was talking about how ZeroEx was his highest conviction investment. At that time, I went out and got a bunch. And it’s been good to me. A lot about these multi-level, or these second-order network effects. So everyone talks about network effects for individual tokens. But what happens when you have a protocol that has other protocols built on top of it that also have network effects? Ethereum is an example of that. It’s not just the network effect around Ethereum, it’s the network effects around the networks that are built on top of Ethereum.
And then you’ve got ZeroEx, which is maybe, it’s sort of a third-order network effect where you’ve got de-centralized exchanges which have standardized on the ZeroEx protocol, which is built on top of Ethereum. I think we’re going to see a lot more de-centralized exchanges. I, for one, although I’m all about paying taxes. This is not about tax evasion. But, I do not like that Coinbase is reporting transactions to the IRS. We’re going to see more oversight from governments across the world. And the thought of being able to trade directly from my Treasurer or from my Ledger Nano S is really appealing. De-centralized exchanges enable that. Most of them right now are ERC20 Token-based but, pretty soon, with atomic swaps, ZeroEx is going to allow you to trade, essentially anything, for anything else. And to be able to do that without going through a third party is incredibly exciting to me.
Rob Paone: I couldn’t agree more. I have a decent size holding in both ZeroEx and AirSwap as well and I like both of them. ZeroEx, especially with Radar Relay, and you’re starting to see, at least in the beginning of January, starting to see the volume pick up on Radar Relay and some of the other de-centralized exchanges kind of built on the ZeroEx protocol. That’s been pretty fascinating to watch. And I think there’s such a hatred for centralized exchanges in the crypto world and–
Clay Collins: Oh my God.
Rob Paone: The idea of plugging in your ledger and trading and really right now, the best way to do that, is EtherDelta or IDEX, but I think both of them fall short in terms of the actual useability. I feel like the useability isn’t just there yet, but once the useability and the liquidity get there, it should be pretty fun to watch how those might blow up.
Clay Collins: Yeah, it’s going to be really exciting. ShapeShift, in a lot of ways, has some of that market. You don’t have to have an account there. No one has to know about those trades. But, yeah, I think that’s right. Once the liquidity is there, it’s game over. We’re going to see everything start heading in that direction. How about you? What are you interested in these days? What tokens are you, I’m not … Any tips for me?
Rob Paone: To your point too, I’m a big fan of both ZeroEx and MAST so I like both of those. I actually just scheduled an interview today with the AirSwap team for February 14th–
Clay Collins: Nice.
Rob Paone: Should be interesting to get in contact with them and hear a little bit about what they’re trying to do. They have a solid team there. Outside of that, I think privacy. Coins that have been interesting to me, I think the valuation, it’s so hard to figure out the actual true valuation, but in terms of the use case, I feel like that’s so strong. For me right now I have Zcash, although I’ve been looking. There’s the Zcash versus Monero debate. I feel like there’s a lot of discord between the two. I’ve been trying to evaluate whether or not I be better-served with something like Monero or if that just has a better use case and maybe Zcash would be a better investment vehicle. Trying to figure that out at this point in time. And then I have still been looking at opportunities within ICOs. There’s still quite an opportunity out there but it has to be really a perfect scenario and there’s something to be said about the projects that are conservative and raising that sub-$30 million hard cap.
Because there are so many terrible cryptocurrencies out there that are a hundred plus million dollars. It’s pretty easy to look at some of those pretty conservative raises in an industry that has maybe a direct competitor or an actual use case and then can pop pretty much on day one. I’ve been evaluating those. One that I participated in recently was OriginTrail that like three, four X’d a couple days after the ICO and that was a supply-chain play. Supply Chain has been another one that I’ve been kind of looking at and seeing where, some of the traditional industries, how you might be able to take blockchain and whether or not it’ll actually come to fruition or not, I think remains to be seen. But, there’s an investing thesis on that now. I feel like, in a lot of cases, that’s all it really needs at this point in time for a lot of these. Was there anything, maybe, that we didn’t cover from, in regards to what you’re doing with Nomics and your podcast or anything like that that maybe you’d like to tell the audience?
Clay Collins: The gist of what we’re doing is that we think there’s an opportunity to level up the services here. I’d love it if folks had any feedback or comments for us. There’s a contact us form on the website. Our email’s there. There’s a phone number on the website. If you have suggestions, if you have asks, we are very much into outreach. To my knowledge, none of the other companies in this space, well, for the most part, they’re anonymous, so you don’t even know who they are. There aren’t terms of service. There aren’t privacy policies. There aren’t contact us pages. We’re talking to people. We’re showing up on shows like this. We want to be part of the conversation. We want to hear from people. The main thing is that we want feedback. Do you like how it looks on your mobile device? Is there a data point that you think we should prioritize? Do you want to jump on the phone and talk about opportunities for making things better? We’re here. We’re interacting with the market. Talk to us and let us know what you think.
Rob Paone: Awesome. Well, that’s definitely fantastic news on your front. And I’m excited to see what you end up building because I know this is very early on and there’s–
Clay Collins: Super early.
Rob Paone: A lot of things in the pipeline, so I’m excited to see how that develops. And I love the idea of, and the approach you’re taking of having this front end with the website with the podcast providing all that value to, in the future, provide significant back-end services to institutional investors, family offices, hedge funds. That’s a fantastic approach and I’m excited to see how it continues to develop. And I really do appreciate you taking the time and, not only talk about Nomics, but just your general thoughts on the industry. I really appreciate it. I learned a ton. Just the level of conversations you have on a daily basis are super helpful for me to find out about, and I think everybody else out there is really going to enjoy it as well.
Clay Collins: Awesome, I listen to your show. I love that it’s very straight-forward. It’s sobering. There’s not, there’s so much dude, bro, coin, shilling, lambo, mooning-like crap, and so to hear a sober voice being rational, spelling out what risks are, but also being really open about where the opportunities are as well, that’s a fantastic thing to see. Thank you for doing what you’re doing and thanks for having me on.
Rob Paone: I really appreciate it. Thank you so much for your time, Clay. Hope you have a good one.