All posts by Andy Gordon

Finding Evidence of Crypto Progress

Do I owe Dr. Doom an apology?

Nouriel Roubini (aka Dr. Doom) is a widely respected economist who is fond of pontificating on everything bitcoin cannot do. He recently earned a place in a column I wrote for our First Stage Investor newsletter when he said, “How could [the SEC] ever approve such ETFs given widespread price manipulation of bitcoin and other cryptocurrencies?”

Roubini is part of a “proud” tradition of people making dismissive predictions about new technology. IBM Chairman Thomas Watson issued one of the most famous ones in 1943.

“I think there is a world market for maybe five computers,” Watson said.

Respected astronomer Clifford Stoll joined the naysaying tradition in a 1995 Newsweek op-ed with this doozy of a statement about the internet.

“The truth is no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works,” Stoll wrote.

When technology hits a roadblock, the naysayers get louder. And when markets crash, like the crypto market did in 2018, investors immediately take it as an indictment of a technology’s viability. It’s more of a gut reaction than anything else, but it’s powerful.

The general public has soured on blockchain and crypto-related technology, and Roubini has given this largely emotional response a pseudo-intellectual sheen…

Which makes him an irresistible target for me. But you know what?

I think I’ve done him wrong. I’ve unintentionally put Roubini in the position to do the impossible. To understand what I mean, let’s back up a little.

Bitcoin wants to replace government-issued (and controlled) money and middlemen of all stripes (though Satoshi Nakamoto had mostly bankers in mind). Nakamoto’s whitepaper spelled out in broad terms the technology that could do all this.

It is precisely these claims that Roubini is trying to prove false.

I always thought Roubini’s problem was that he was judging the beginning of a movie instead of the whole thing. And that beginning he’s judging is just a few minutes of a film that will be decades long.

On the basis of the first five minutes of the movie, Roubini can make a guess on how it turns out. But how could he possibly know?

To insist that he’s right after watching a mere five minutes of the movie is, simply put, laughable. Just because Roubini’s assertion cannot be proven wrong doesn’t mean he is right or should be believed.

The truth is, there’s no proving bitcoin’s (and other crypto user cases) claims. It’s just as unprovable as, say, the claim that a teapot is orbiting the sun but is too small to be seen by current telescopes.

This analogy comes from Bertrand Russell, one of my favorite philosophers. He argues that the burden of proof should be on the ones making the unprovable (unfalsifiable, in his words) claim rather than on others (in our case, Roubini) to disprove those claims.

Bitcoin does have some followers with unwavering faith. Everybody refers to them as “believers.”

They don’t rely on proof. Many of them are technologists. They believe in the technology, in themselves and in their ability to unleash the vast potential of blockchain technology (which underpins bitcoin) on the world.

And every day I look for evidence (as opposed to proof!) that their faith in the technology and in themselves is intact. Because, to tell you the truth, I’m not a believer. I need to see that progress is being made and will continue to be made.

The good news is, I’m seeing that progress. I could give you dozens of examples of companies whose blockchain user cases are in beta with plans to go live in the near future.

But instead, I’ll let you in on one of the best ways to track progress: the growing number of “commits” (or revisions) to blockchain projects and developer tool downloads. They total in the hundreds of thousands. Check out the trends for 1,458 individual cryptocurrencies here.

It’s not a guarantee that this massive activity will be successful in turning crypto into a global industry used by billions. Time will tell. And we have to be patient.

But while Roubini and others like him continue to argue about bitcoin’s value, bitcoin’s popularity (or lack thereof) has nothing to do with its real value. Its real value will be determined and driven by a global community of developers working behind the scenes to make bitcoin’s impact felt on a massive scale.

Amid the disappointment of falling prices, the important work of bringing this technology to the masses is advancing.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Just the Tip of the Wall Street Iceberg

Sometimes, numbers need a little bit of context…

There are 466 crypto funds created to date… nearly 100 just this year… and more than $7 billion in crypto funds waiting to be unleashed…

These figures come from a new study by Crypto Fund Research. The growth of assets managed by crypto funds has also been impressive…

But let’s not get carried away. Compared with traditional hedge funds, this is peanuts.

The top 500 non-crypto hedge funds manage around $1 billion or more of assets…. each!

More than 700 hedge funds were launched in 2017, and there were 156 crypto fund launches in 2017, according to the Crypto Fund Research report.

Crypto fund investing is just scratching the surface.

It isn’t so much in its infancy as it is in its pre-infancy.

It’s more like an incubation period.

Crypto funds account for less than 0.1% of total hedge funds’ assets.

Crypto’s Mysterious Behavior

But there is something interesting – some would say even mysterious – going on here.

Logic would dictate a downturn in funds launched this year. Bitcoin prices have fallenafter peaking in January.

No eyebrows would have been raised.

After all, fund creation in 2017 was seen as the result of rapidly rising bitcoin prices. A slowdown this year would have been viewed as an understandable reaction to fallingprices.

Further, these are professional investors who nurture the savings of the wealthy. They pay attention to how prices are trending.

Yet, the opposite happened.

Crypto funds are on pace to beat last year’s total launches… despite sluggish prices and a continuing lack of regulatory clarity from the government.

The question is…


I’ve identified three big reasons.

1. Transformational technologies. Transformational technologies don’t grow on trees. Before the blockchain came along, there was the internet. Before that? We had the car, airplane and television. And before that, we had Edison’s light bulb and Franklin’s electricity. That roughly averages out to transformational technology coming along once every other generation. There’s FOMO at play here, but that’s not the whole story. Imagine if the stock market went south. How many funds would be starting or increasing their stake in the S&P 500, DJI or Nasdaq? NONE. So why have professional investors ignored falling prices and jumped into bitcoin?

2. The proving grounds. We’re about to find out how well these technologies work and if they can scale. Over the next two years, more than 75% of the active fintech blockchain projects will go from proof of concept to live production. In the meantime, the crypto and blockchain industries are attracting many of the world’s best developers, entrepreneurs… and investors. Marc Andreessen (Andreessen Horowitz)? Check. Fred Wilson (USV)? Check. Mike Novogratz? Check. Benchmark and Sequoia? Once again, check.

And now we see other VC money pouring in, catching up to hedge funds investing in crypto. Take a look at this chart…

Existing tech/fintech VC firms are expanding their investments into blockchain startups and launching their own blockchain funds.

3. The beginning of the end of the final hurdle. Here’s why you need to pay attention to my Co-Founder, Adam. He’s seeing what professional investors are also noticing: the establishment of secure, regulated custody of crypto for institutional investors. The lack of a custody solution has kept institutional investors out of the crypto markets. But that barrier is about to go away. “It’s being built out right now,” Adam says. “The ‘institutional catalyst’ theory that I (and others) have proposed is on track. In fact, the case is stronger than ever.”

Bitcoin isn’t getting the most positive press these days. But serious and professional investors understand how little this matters.

They know bumps are part of the journey. They’ve avoided knee-jerk reactions to falling prices. Instead, they’re focused on the enormity and unusual upside of the investing opportunity.

We’ve asked ourselves, What will happen to the price of bitcoin if hedge fund investments in crypto go from 0.1% to, say, an easily attainable 10%?

The number we’ve come up with may be a little conservative, but we think it’s memorable nonetheless.

If you’re curious, I have great news for you.

My colleague Adam will be revealing it to everybody who tunes in to a special event he’s headlining a week from today.

This is one of the most important events we’ve ever hosted for our readers. If you want to know how you can reserve your limited-time spot for this special event – when Adam will specify how YOU can take advantage of the coming explosion in bitcoin and cryptocurrency prices – just click here.

Invest early and well,

Andy Gordon
Co-Founder, Early Investing

I can’t believe this “surfer dude” beat all those Wall Street legends... ​650 of the world’s biggest and brightest minds... I’m talking about legends like Mario Gabelli... David Einhorn... Joel Greenblatt... and Rick Rieder... who, combined, manage more than $5 trillion. All were forced to bow down to one “unheard of” trader from Laguna Beach. Click Here to discover the strategy he used while he had sand between his toes.

Source: Early Investing

Bitcoin’s “New Normal”

Recently, I’ve been wondering about crypto’s NEXT BIG MOMENT. What it will look and feel like when institutional money starts pouring in.

So I did a little digging…

I found out that what’s new in this country is old hat in other parts of the world.

A bitcoin exchange-traded product has been around in Europe since 2015! An ethereum one has been around since 2017.

Now, these are ETNs, or exchange-traded notes. They’re not exactly ETFs (exchange-traded funds), but they’re very similar. Unlike ETFs, they don’t allow for ownership in a pool of securities. Rather, they’re debt instruments that mature.

But, like ETFs, they follow an underlying index. These ETNs follow indexes that mirror the price of bitcoin and ethereum, with the repayment of principal depending on how the index performs.

Europe Before the U.S.

In 2015, a small Swedish company named XBT Provider listed two bitcoin ETNs on the Stockholm Nasdaq exchange – one following bitcoin prices in Swedish krona and the other following prices in euros.

It was a first for Sweden and for Europe.

Anyone could invest. Participants ranged from everyday investors buying as little as $500 to large European institutional clients investing millions. Even with access to institutional investors, these exchange-traded products grew slowly at first.

And then 2017 happened.

It was a breakthrough year. XBT introduced its two Ethereum ETNs. And they took off. Within four months, it had more than $350 million of assets under management (AUM).

XBT followed those two funds with a token fund that tracked ethereum-based ICOs.

It was also a banner year for expanding the accessibility of its bitcoin and ethereum funds. Its customer base grew sevenfold. Brokers and banks from the U.K. (Hargreaves Lansdown), Italy (UniCredit), France (Société Générale), Germany, Belgium and Spain made the funds available to their customers for the first time.

XBT finished the year with more than $1 billion AUM – a 36X improvement over 2016. And the company’s income shot up by 3.5X.

XBT’s funds were bought out by CoinShares in September of that year – another key event. CoinShares aims to offer a full lineup of crypto products. It wants to be the iShares of the crypto-investing world.

It’s now offering a CoinShares “Active” Fund. This is a multicoin, alpha-generating, active strategy fund. It has also rolled out a passive large cap basket fund. (And that’s in addition to the active bitcoin GABI hedge fund Global Advisors (CoinShares’ parent company) launched back in 2014.

Today, its bitcoin and ethereum products are accessible in 179 countries… from any electronic brokerage platform that can interact with the Nasdaq family of marketplaces.

What’s Different, What’s the Same

CoinShares has done a nice job of getting the ball rolling in Europe. And it did so without scams, frauds, hacks or complaints about volatility.

It was, heaven forbid, drama free.

In the U.S., I believe we’re going to see many firms within a relatively short period be approved for an ETF. Will it be as drama-free as it was in Europe? Probably not. But Europe’s experience shows us that bitcoin’s next big moment can take off in a smooth and professional way.

CoinShares used the crypto boom in 2017 to spur the growth of its existing funds and launch additional crypto products. It’s going to play out a little differently in the U.S…

Here, we’ve accumulated a great deal of pent-up demand among institutional investors waiting for ETFs to be greenlighted.

That money is coming. It doesn’t need a boom to pave the way.

It would take nothing short of a crypto crash to dent the impending rush of institutional money into the crypto space.

That’s not in the cards at this point. If anything, we see bitcoin rallying. And bitcoin ETFs would only add to it.

An increasingly user-friendly infrastructure… SEC approved ETFs… the participation of both retail and institutional brokers…

They all add up to a key inflection point in crypto’s continuing journey toward looking like and feeling like mainstream investing – crypto’s “new normal.”

Invest early and well,

Andy Gordon

Co-Founder, Early Investing

I can’t believe this “surfer dude” beat all those Wall Street legends... ​650 of the world’s biggest and brightest minds... I’m talking about legends like Mario Gabelli... David Einhorn... Joel Greenblatt... and Rick Rieder... who, combined, manage more than $5 trillion. All were forced to bow down to one “unheard of” trader from Laguna Beach. Click Here to discover the strategy he used while he had sand between his toes.

Source: Early Investing

How Order in Crypto Land Can Pave the Way to a New Bull Market

As a rule, I hate rules.

They’re too often used to defend outmoded practices and vested interests that impede progress.

Of course, we need some rules. But I wish we chose more carefully when and where they should apply.

Crypto vs. Rules

Cryptocurrencies take an interesting approach to rules.

Rules are embedded in the software that gives these coins life.

For example, only 21 million bitcoins can ever be created. That’s the software speaking, not an outside party.

I have no doubt that the anonymous creator of bitcoin, who goes by the name of Satoshi Nakamoto, hated the idea of rules being foisted on bitcoin (and other cryptos) from the outside.

The Crypto Creed Is Evolving

True believers in crypto don’t like rules. They like rules foisted on them by an “overreaching” government even less.

Government rules – and the administration of those rules – have slowed down the machinery of the global economy.

This has made noncooperation with government agencies a point of pride for crypto players – and a sticking point for government bodies like the Securities and Exchange Commission (SEC).

In this context, the government crackdown that has depressed crypto prices this year was practically inevitable.

If you haven’t been keeping up with the news, let me give you a brief rundown.

SEC, CFTC and DOJ Have Crypto in Their Crosshairs

It began back in January. That’s when the Commodities Future Trading Commission (CFTC) gifted Bitfinex and Tether with subpoenas.

The SEC joined the fray in March. It issued dozens of subpoenas to major crypto players, including exchanges, funds and companies that had initial coin offerings (ICOs) or were in the process of launching coins.

Late May saw another probe launched – this one courtesy of the Department of Justice (with an assist from the CFTC). They’re looking into the manipulation of prices through spoofing (creating the illusion of rising demand by submitting orders to buy bitcoin and then canceling). They’re also targeting wash trading (buying and selling to yourself, which creates the impression of trading activity).

Most recently, The Wall Street Journal reported last Friday that the CFTC is demanding more trading data from Bitstamp, Coinbase, itBit and Kraken. CME Group, which offers bitcoin futures trading, gets its prices from them.

CME was granted access to a few hours of daily trading data – after asking for a full day’s worth. The CFTC is reportedly “upset” with this arrangement.

These investigations and subpoenas make it abundantly clear that the government has crypto players in its crosshairs.

But here’s the thing.

It’s not exactly accurate to conclude that crypto is under attack by the government.

The SEC does NOT hate crypto players, ICOs or bitcoin.

What it does not tolerate is price manipulation… bad actors… or scams. It rightly thinks there’s been too much of all three in the crypto world.

And many crypto players are finally distancing themselves from their previous “if you’re not with us, you’re against us” stance.

I say, it’s about time.

Something needs to be done about the $3 billion in fake daily volume, according to investor Sylvain Ribes…

Something needs to be done about rampant price manipulation…

Something needs to be done about the illicit activity that relies on cryptocurrencies. A recent Cointelegraph report says that “approximately one-quarter of all users… and close to one-half of bitcoin transactions… are associated with illegal activity.”

And something needs to be done about all the hacks of exchanges. South Korean exchange Coinrail is the latest platform to be hacked. Last week, it lost cryptocurrencies totaling $30 million to $40 million.

Whenever a hack of this size happens, prices tend to fall. It certainly contributed to bitcoin’s recent price woes.

A Bad News Cycle

Even the truest of true believers, like Mike Novogratz, agree with me.

“Weeding out the bad actors is a good thing,” says the billionaire investor, who’s setting up the crypto merchant bank Galaxy Digital.

But it’s also a messy thing… and a reminder that crypto has not yet escaped its “Wild West” environment.

These investigations are in the early stages and ongoing. Who will be punished and who will be forgiven is still unclear.

The government isn’t blameless in all this. No single agency has taken charge of cryptocurrencies. The SEC, CFTC and IRS have designated most crypto coins, in order, a security, commodity and property.

Who gets the “prize” of regulating crypto is still up in the air, along with everything else.

You’ve heard of the “calm before the storm,” right? Well, this is the storm before the calm… the lawless “Wild West” before the sheriff imposes order.

It’s why prices are scuffling.

And also why we see light at the end of the tunnel.

For cryptocurrency to gain broader acceptance among retail investors and a toehold among institutional investors, a rules-based space needs to be realized.

Rules are coming. And the best news is, unless the government really overdoes it, they will be welcomed by the vast majority of crypto players.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

The Five Waves of Crypto Investing Hide Some Very Good News

I met Jim in Florida while taking a break from work about a month ago. My friend Mike said I had to meet this guy.

“He loves crypto. You’re a bit of a skeptic of all things, Andy, but this guy is a true believer.”

And according to Mike, Jim has made a ton of money off crypto.

From the looks of it, Jim is in his late 20s. He founded a local brewery two years ago and probably makes the best sour beer in Florida (he gave me a six-pack). But he wasn’t really interested in talking about his brewery.

He wanted to talk bitcoin.

Jim wasn’t part of the original “true believer” club of developers, coders, libertarians, world-changers and cypherpunks. He’s been mining and investing in crypto for about 18 months – before crypto took off in early 2017 but way after the majority of original true believers got in around 2014.

“I talk to these true believers all the time,” Jim said. “They’re young entrepreneurs like me… they’re into craft beer and surfing – my two things – and they enjoy talking about their jobs. They’re very honest. They’ll talk about problems and progress, including pending announcements.”

“Meaning,” I said, “you see jumps in price before they happen. That’s convenient.”

Jim pushed back: “It helps, but believe me, I check on a lot of things before committing to investing in or mining their coins.”

I had fun talking to Jim, and he shared with me some of the message boards and crypto chat channels he uses to keep up with this incredibly dynamic investment space.

I’ve begun to use some of these myself (like And even though I don’t belong to the original tightknit club of young believers, I had no trouble getting people to respond to my questions and comments.

Can’t ask for more than that.

It got me thinking about the different waves of investors who have been discovering, following and buying crypto through the years.

Here’s how I see the evolution of different cohorts of bitcoin/crypto buyers…

  1. 2009 to 2010 – The creator and his following: Satoshi Nakomoto created bitcoin in 2009. In mid-2010, this tiny, obscure and mysterious digital coin was worth less than a penny.The very few who invested got lucky. Please don’t tell me they knew their pennies would turn into thousands of dollars. Maybe they hoped. Maybe they had an inkling. But there’s no way they could have known.
  2. 2011 to 2014 – The trailblazers: Bitcoin was still well under a dollar. These were the true believers.My colleague Adam belongs to this cohort. He began following bitcoin closely in 2012. And he began investing in 2013.Was it about the money?

    Well, it wasn’t NOT about the money. But it was much more than that.

    It was also about the trailblazers’ deep distrust of big banks and government and their symbiotic relationship that pushes public debt to higher and higher levels. Bitcoin was created to blow up that relationship. This cohort was young, idealistic, striving, frustrated and distrusting. They believed in change at its most disruptive. They thought of themselves as revolutionaries. And bitcoin was their weapon of choice.

  3. 2015 to mid-2017 – The early professional investors: Venture capital firms, family offices (like LDJ Capital) and angel investors began recognizing the disruptive power of crypto and the tech talent that was driving it.This was the leading edge of institutional money that continues to build as it waits for regulatory clearance to begin investing in earnest. Peter Thiel’s Founders Fund exemplifies this cohort. It bought $15 million to $20 million worth of bitcoin now worth hundreds of millions of dollars.
  4. Mid-2017 to early 2018 – The momentum/speculative investors: Attracted to the market by a combination of fast-rising prices and rapidly advancing technology, they’ve become the “weak sisters” of crypto buyers.When the market’s momentum slows or reverses, these are the investors who bow out the quickest.
  5. Early 2018 to the near future – The sweet spot investors: What’s not to like? Prices have come down to attractive levels. Scaling solutions are being addressed. User cases are multiplying. And the investing infrastructure is slowly but surely being built out.It’s similar to the stage where startups raise their Series A or Series B funding. A lot is known, including price, market fit and growth strategy. But it’s still early, and scaling usually awaits.All this echoes crypto’s current stage. There’s still risk, of course – every investment has some level of risk. But there’s much less of it now, and profit potential is still incredibly high.

I can’t say this enough…

It may not feel early, but it really and truly is.

Data from Coinbase shows that 95% of cryptocurrency wealth is held by 4% of the owners. That’s not surprising. It’s exactly what a nascent market should look like.

As the crypto market continues to grow year after year after year, those percentages will draw closer together.

You’ll see a relatively modest number of big winners grow and become a much bigger number.

If you’re thinking of investing in crypto, you’re right on time.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

An Analyst’s Bullish $10 Trillion Case for Crypto

Dear Early Investor,

A broker from a big bank just did something I’d never do…

He put a number on the potential value of the blockchain market.

If you think, as I do, that blockchain technology will expand from dozens of uses to hundreds and then thousands, how can you calculate a precise market value for that?

It’s like Thomas Edison trying to predict in the late 1800s how much the electricity market would be worth a few decades into the 20th century.

Did he realize at the time that almost everything we now make and use, not just lights, would be electrified?

Probably not. How could he?

(And the one thing he thought would be electrified – vehicles – didn’t catch on until more than 100 years later!)

I believe at some point in the future (10 years? 20 years?), most of the services we’ll be using on a daily basis will be enabled by the blockchain.

Again, how can you put a price on such a ubiquitous technology?

Is it in the tens of billions? Hundreds of billions? More?

A Report From Deep Inside Wall Street

Here’s the best thing about the report this broker put together…

It doesn’t come from crypto investors talking their own book… initial coin offering companies hyping their future growth… or blockchain evangelists espousing best-case scenarios as a given.

Mitch Steves, the author of this report, is a traditional Wall Street equity analyst. He works for the RBC Capital Markets subsidiary.

His only connection to blockchain and crypto?

Among the companies in his bailiwick is NVIDIA because it makes graphics processing units for mining cryptocurrency.

By the way, he says the $4 billion-plus market for mining cryptocurrency is here to stay.

Steves says that blockchain technology is misunderstood – that store of value and payment use cases are the most commonly cited but “the least interesting.”

The single most “positive technology” breakthrough is the one staring us in the face: The blockchain, the underlying technology, HAS NEVER BEEN HACKED.

(And, in my opinion, it WILL NEVER be hacked.)

This is no small thing. Steves compares Box, a content management platform, with Filecoin, a decentralized blockchain equivalent, to highlight the differences…

With Box, your data is owned and controlled by a third party that has access to your information (a photo loaded can be retrieved by anyone with access to Box servers – employees). With Filecoin, your storage is distributed and decentralized, making the holders unable to retrieve your photo (they would need to hack every computer on the decentralized network – blockchain). Your information is now secure, and without your private keys, it cannot be accessed.

This is an early case of how a globally decentralized network of computers can work using the blockchain. Steves calls this network of computers the “World Computer.”

He says that same concept can be applied to a “wide variety of decentralized applications (aka ‘dapps’).”

I completely agree.

Rose-Colored Glasses?

What Steves is saying is reasonable and, frankly speaking, not entirely novel. People who aren’t paying close attention may be confusing hacks of exchanges and individual wallets (which has happened) with hacks of the blockchain itself (which has never happened).

But insiders have well understood the security benefits of putting data, transactions, assets, documents and sensitive information on the blockchain… and how the blockchain makes it fasteasy and secure to track these things.

But it’s nice hearing this confirmed by a big bank with no vested interest in the crypto or blockchain markets.

And because Steves hails from outside the crypto community, he openly acknowledges the “many risks to crypto.” No rose-colored glasses on him.

Among the risks, he lists the possibility of an attack if a single entity were to garner more than 50% of the computing power (which, I should add, would be near impossible).

Other risks mentioned? Coordinated attacks to manipulate prices… and the potential for smartphone wallet hacking.

The Worth of the Market?

How he arrives at this big round number turns out to be the most disappointing part of his 38-page report.

He basically took a third of the roughly $30 trillion in assets held in offshore funds and gold. Just a rough stab, in other words.

But perhaps that’s as it should be. At this early stage, trying to do anything more would be a reach.

We simply don’t know how big this number will be. Anybody who says differently is lying to themselves or everybody else.

However, I believe it will be a big number. Blockchain technology is driving a surge of innovation in the development of new protocols and blockchains.

There’s a long way to go. And nothing is a given at this point. But decentralized computer technology has the potential to reinvent huge swaths of the global economy.

With that kind of upside, even a modest investment could yield quite a large return.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

The Blockchain Can Advance a More Efficient and Honest World

I have good reason NOT to trust the government.

It stole something from me.

It did it in such a brazen manner that even now – 20 years later – I get mad whenever I think of it.

It involved a public bid. A big tank cleaning job. My company, based in Jakarta, had been eyeing it for a while.

We won the bid – a good feeling. The story should have ended there.

In most countries, it would have.

But Indonesia isn’t most countries.

Its economy is run according to a set of unwritten rules that can be summed up this way…

If you’re not taking a bribe, you should be giving one.

It’s rated 96 out of 180 countries in Transparency International’s Corruption Perceptions Index.

Fifteen years ago it was much worse. I’m sure it rated well above 100.

So let me tell you what happened.

Gone, Contract, Gone

After winning this project, we received a signed, sealed and stamped letter from the government agency whose project it was.

And that happened to be Pertamina, Indonesia’s big, bloated and corrupt state agency involved in the country’s oil production and trading.

The vice president who ran our Jakarta office – James T. – was summoned to a meeting by a Pertamina official. This is how he described it to me…

I entered this enormous boardroom at Pertamina headquarters. At the far end of a long table sat an official whom I had met once or twice but did not know very well. He greeted me like we were old friends.

He then told me there was a small problem. He had found a small error in the approval letter sent to us. He asked for the letter, explaining he’ll fix it and return it in five minutes. He returned 20 minutes later and said he found a couple more errors. He said he needed to keep the letter and I could pick it up the next day. As I left the room, he said he’d call me in the morning.

James never saw or heard from him again.

Nor did he ever see the letter again.

Two weeks later, Pertamina issued a new letter to another company. We learned that the copy James had made carried no legal standing because it was not the original.

We were, in a word, screwed.

Later on, we found out that the Pertamina official James had met was given a generous bribe by the new winner of the project. Surprise, surprise.

Of course, I’m not the only one this stuff happens to. You and I know… IT HAPPENS ALL THE TIME.

Just recently, for example, countries from Peru to Mexico were rocked by a big scandalinvolving the Brazilian construction company Construtora Norberto Odebrecht. It had paid bribes to a number of government oil officials (of course).

Kickbacks at Brazil’s Petrobras and Mexico’s Pemex were unearthed. Ecuador’s vice president was put behind bars.

According to Reuters, the company has paid $3.5 billion in settlements in the U.S., Brazil and Switzerland.

Here, There, Everywhere

For every company that’s caught (like Odebrecht), I bet there are 100 running around handing out gifts to their favorite officials.

Based on my global business experience, I’d say that in a good 50 countries, it’s impossible to do a sustainable level of business without handing out bribes.

The U.S. isn’t one of those countries. Here it’s a little subtler…

A network built on mutual back-scratching at the highest levels of government, business and entertainment exerts a nefarious influence on how deals get done.

If you’re on the outside looking in, it stinks.

Dumping the Toll Takers

Just a couple of years ago, I would have said to those outsiders, “Deal with it.”

It’s the way of the world. Nothing you can do.

With the advent of trustless blockchain technology, I’ve changed my tune.

The blockchain itself confirms a transaction. No middleman (like a bank) is needed.

And you can put all kinds of things on the blockchain, not just payments.

For example, you can put government projects and public bids on the blockchain. Hmmm…

The blockchain applied to public contracts – what a great idea!

It’s turning into a reality, thanks to a team of university graduates from Mexico who initially developed it.

The blockchain would track bids and store records of the bidding process. It would allow audits to review every step of the bidding process.

Imagine if government officials knew this was in place.

Such a technology wouldn’t stop bribery altogether, but it could make a serious dent.

For example, I’m not sure how it could expose one subtle form of favoritism – structuring a bid to play to a particular company’s strengths.

(Confession: I’ve played this card myself back in the day. It’s very effective.)

It’s definitely a step in the right direction.

Mexico’s national digital strategy coordinator said it would eliminate the “easily corruptible” human element and introduce transparency to the public tender process.

What the Future Could Look Like

I would love to see public projects won based on sophisticated algorithms embedded in the blockchain. No human intervention.

It would empty out hundreds of buildings around the world filled with government pencil pushers.

That’s the beauty of the blockchain. It gets rid of the middlemen, the gatekeepers, the toll takers.

And it eliminates the rent – that also can take the form of bribes – for the users.

Massive adoption of blockchain technology would make the world not only more efficient but also more honest.

How great would that be?

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

Are We Underestimating the Blockchain?

Dear Early Investor,

Cryptocurrencies can offer investors dazzling returns.

That’s a nice conversation starter.

But cryptocurrencies can do so much more.

Adam and I have talked a lot about the gains that have been made (and the gains likely to come).

We’ve also talked about how nice it is to finally have a viable alternative to fiat money (aka traditional currency).

Cryptocurrency prices rose so quickly in 2017 (more than 10X) that progress made in the equally exciting blockchain technology has been drowned out.

The profits are real… and happening now. It’s definitely created a buzz.

But what about the technology itself?

Well, it’s developing about as well as can be expected. Every day, new advances are announced.

A bipartisan bill in Colorado proposes using blockchain tech to protect state data.

Developers of TrueBit, a smart contract that scales transaction computations through interactive verification, were able to move Doge coins to the Ethereum network and back again. Once the technology is fully developed, it could allow a degree of scalability currently out of Ethereum’s reach.

American Express has applied for a patent to use blockchain tech to boost transaction speed.

None of this is surprising.

There are thousands of developers around the world working on new blockchain technologies. The companies that employ them announce their breakthroughs with as much fanfare as possible, in hopes of attracting both funding and top-caliber engineers to their projects.

Yet it seems that cryptocurrency is garnering as many detractors as enthusiasts and eager investors. Here are three rules to explain why this is happening.

Rule No. 1: The more transformative a technology, the more skepticism it engenders in its early days. Breakthrough technology is hard for most people to understand and accept. What’s more, it doesn’t come fresh out of the lab fully developed. New products are greeted with disbelief or bemusement, as if they’re toys. (See my article here for more of my thoughts on this.) Past examples include Skype, mobile phones, iPads and desktop computers.

It’s why bitcoin wasn’t taken as seriously as it should have been when it first appeared on the scene. And it’s still the case today!

Rule No. 2: It takes time for external technological forces to catch up. An ecosystem needs to mature around any breakthrough technology. Thomas Edison invented the lightbulb in 1879. Two years later, he patented a system for electricity distribution. A year after that, the first few thousand houses in New York City were electrified. And efficient scaling was still years away.

Because prices and fees fall, network effects kick in and accessibility improves. Basically, technology adoption is sluggish at first, but it gains speed over time.

But that is neither a smooth nor a linear process. I’m a big believer in an adage known as Amara’s law…

We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.

Roy Amara was a co-founder of the Institute for the Future in Palo Alto. He describes a typical pattern with new technologies as “a big promise upfront, disappointment and then slowly growing confidence in results that exceed the original expectations.”

This is true, he says, of computation, genome sequencing, solar power, wind power and even home grocery delivery.

Let me add blockchain technology to his list.

Rule No. 3: Unproven technology is where the biggest investment gains (and risks) are made. I think very few people would dispute this. Yet this same rule makes early and unproven technology an easy target.

A typical comment I hear: “Lots of people invest in it, few use it.”

Of course, I can say the same thing about crowdfunded startups that have thousands of investors but little or no sales to speak of.

That doesn’t mean a thing to early investors. It comes with the territory. But we do expect the technology to work… and eventually make a profit.

We have legitimate “proof of concept” claims from blockchain technology companies, but we’re so early in the life of this technology that we don’t know for sure if it will be put to work on a massive scale… or even if it will work at all.

It goes to show just how nascent the technology in this current period is.

We’re basically in the experimental, pre-commercial phase of blockchain technology. Lots of things are being tried and tested in controlled trials, but very little is being trotted out for actual use. Mass consumption is still years away.

Late, Early or Just Right?

Most of you probably wonder if you’re too late. Ha! You should be concerned whether you’re too early.

The good news: You’re neither. I’m very bullish on the long-term outlook for blockchain and cryptocurrency investments. We’re at the very beginning of a multidecade phenomenon.

I’m convinced that dozens of industries will be reinvented by distributed ledger technologies and decentralized digital-asset-backed protocols. The change will be massive and global… and will develop into a multitrillion-dollar space. In terms of scale and impact, it will be similar to the internet, which transformed EVERYTHING.

The extraordinary returns come very early in the cycle. Your timing couldn’t be better.

Of course, it all has to play out. And maybe it will never amount to anything (though I doubt that very much).

My advice? Invest a small percentage of your savings – enough to make a difference in your life if the cryptocurrency/blockchain space overcomes current skepticism and gains broad acceptance, as we expect it to.

Remember, needle-moving technologies have always experienced tremendous challenges early on.

Good investing,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing 

This Math Is Magic


Dear Early Investor,

Last week, I told you about how adding a technical analysis layer to my stock vetting made me a much better investor.

This week, I’m going to share with you how I do it.

Of course, I can’t tell you everything in one short article. My partner Adam has already discussed a neat technical analysis tool called the relative strength index. Read his piece here if you haven’t already. It’s definitely worth a few minutes of your time.

Today, I’ll be discussing another neat tool: Fibonacci retracements.

It’s not the only tool I use. In fact, Fibonacci is most effective when used with other technical indicators. But it’s definitely one I like a lot.

For one, it’s versatile. It can help predict the extent of both pullbacks and rallies.

So what exactly are Fibonacci retracements?

They’re ratios that indicate when price reversals may be drawing near.

What this means is when a price line hits these levels, it signals a possible turnaround. When other technical indicators also point to a turnaround at the same time, the signal is amplified.

The most common Fibonacci ratios are 23.6%, 38.2% and 61.8%. (You’ll also see a 50% level with most Fibonacci charts – though technically, it’s not a part of the Fibonacci sequence.)

Curious as to where these ratios come from?

Well, we have to go back nearly a thousand years to identify their origins.

Leonardo Pisano Bigollo (aka Fibonacci) was a mathematician from Pisa who introduced the Fibonacci sequence to the West in the 12th century. It is as follows: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610… and so on to infinity.

Fibonacci demonstrated how a number divided by the previous number in his sequence approximates 1.618. And, lo and behold, a number divided by the next highest number approximates 0.6180.

It’s known as the “golden ratio,” and it is the ratio I consider the most important. (By the way, the inverse of 1.618 is approximately 0.618!)

What I find fascinating is that these ratios are also found throughout nature, architecture, art and biology. They can be seen in everything from sunflowers to the spirals in galaxies.

The next most significant number? It’s 0.3820.

It’s the number you get when you take one of Fibonacci’s sequence numbers and divide it by another one two places higher. For example: 13/34 = .382. (Also note that 1 – .618 = .382.)

Years ago, I used these ratios for stock price analysis. Now I’m back at it, using them to help predict crypto price movements. It’s like meeting an old friend!

They’re called retracement levels (or ratios) because they refer to price movements that retrace in the opposite direction of a previous leg up or down.

As the bounce or correction approaches these retracement levels, technical analysts become increasingly aware of a possible price reversal, especially when other indicators are chiming in.

To illustrate just how Fibonacci works, I’m going to show you three bitcoin charts. For purposes of clarity, I’m not including other technical indicators, so keep in mind these charts have been simplified to an extent.

After a long climb, bitcoin finally peaked last December and began retracing some of the gains it previously made.

But by how much?

Remember, I said that 61.8% was the level I paid most attention to. You’ll notice in the chart that once prices broke below that important level, they immediately began a new leg up.

What can you do with this information?

When others may be thinking of selling, you’re thinking of buying on the dip. At the very least, it prevents you from selling at the wrong time.

Here’s another bitcoin chart using the Fibonacci levels from earlier, identifying a smaller leg up from last September…

As prices approach the 61.8% level, the possibility of a price reversal once again presents itself.

And another buying opportunity is indicated in advance using the Fibonacci levels.

So what about right now?

What can the Fibonacci levels tell us about current price movements?

With prices just shy of the 61.8% level, they say that a rally could be imminent.

A couple of things to remember here…

While Fibonacci puts me on the alert for a price reversal, I like to see it actually happening before issuing a buy or sell alert. And, as I’ve said, I like to see other indicators supporting what Fibonacci is telling me.

As I mentioned last week, we’re dealing in probabilities here, not certainties. So even though I now have a technical system in place (I call it the “Cadillac of technical analysis systems”) telling me how much lower prices need to go for an upswing to occur, there are no guarantees.

Nonetheless, these kinds of technical analysis tools go a long way in helping me understand price trends and manage risk.

We’now better equipped to give our members insightful buy and sell guidance so they can optimize gains, minimize losses and, at the end of the day, show greater overall crypto profits.

Soon, in our Crypto Asset Strategies service, we’ll focus much more on using technical analysis like this to help us vet new crypto recommendations. If this kind of approach interests you, be sure to keep a close eye on our upcoming alerts.

Good investing,

Andy Gordon
Co-Founder, Early Investing

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Source: Early Investing 

A Simple Way to Assess Startup Risk

Dear Early Investor,

Startup valuations are tricky.

This is due to the difficulty of assessing illiquid young companies with measly track records but exciting technologies and/or business models.

But you still have to pay attention to them. Why?

The valuations you begin with heavily influence the profits you end up with.

Which is why I always ask founders what their company’s valuation is… and how they arrived at it.

The wrong answer – an inflated valuation – is a deal breaker.

Enter the Berkus Method

Last Friday, I was talking to a founder who was telling me why his social engagement company was such a great investment.

Its value? “Five million dollars,” he said.

The startup was pre-revenue. And it was ramping up downloads at an impressive rate.

When I asked him how he arrived at a $5 million valuation, he said he used the “Berkus Method.”

I’ve heard of the DCF method, Risk Factor Method, Scorecard Valuation Method, Comparable Transaction Method, First Chicago Method and Venture Capital Method.

But the Berkus Method?

That was a new one.

When the founder explained it to me, it sounded pretty simple. Rather elegant, actually.

But I needed to know more. A company’s valuation is too important to depend on somebody’s two-minute explanation.

So I did some digging.

And you know what? The Berkus Method is worth knowing.

It’s a four-factor valuation formula. These same factors also give you a nice framework to assess the investment opportunity in terms of current risk and chances of future success.

This is what I found out…

Version No. 1

Dave Berkus created the first version.

Dave is a startup investor and author. He came up with his method in the mid-1990s, he said, to “help with the imprecise problem of how to value early-stage companies.”

His method gained prominence when it was published in the book Winning Angels in 2001.

It identifies four major risks that startups face: technology, execution, market and production. A startup can be credited in each of these areas with a maximum of $500,000 for reducing risk.

Plus, the startup automatically gets $500,000 for the idea itself.

If it earns a perfect score, its valuation tops out at $2.5 million.

Here’s the Berkus Method summed up in a chart…

Version No. 2

In 2005, Berkus’ method was tweaked by Alan McCann. He visualized the Berkus Method this way…

McCann replaced technology risk with investment risk and replaced production risk (making a product) with development risk (developing a product).

He also added the cohort responsible for each. “A nice touch,” Berkus said.

Its Current Use

The Berkus Method is meant for pre-revenue companies.

In the mid-1990s, when the method was created, that mostly meant seed companies.

Times have changed, though.

Nowadays, seed-stage companies usually generate revenue.

Used to determine seed valuation, the methodology yields valuations that are too low.

In a November 2016 blog post, Berkus agreed. He said that his method should create valuations that users “are willing to accept in a perfect situation.”

In our First Stage Investor portfolio, the lowest startup valuation is $2.7 million. That startup – Court Innovations – is one that Adam and I consider a huge bargain.

Most of our seed company valuations fall between $4 million and $10 million.

The Berkus Method is best suited for pre-revenue, pre-seed companies.

Take, for example, the founder I was talking to last week. He used the Berkus Method pre-seed. He was seeking his first angel investments and used the max $2.5 million valuation.

Now he’s raising again – in a seed round. And he’s upped the valuation to $5 million based on the progress his company has made in the four risk areas Berkus identified as key.

Rather than have each category be worth $500,000, he doubled them.

Sounds about right to me.

Valuations Matter

Progress and valuation: Alone, they’re impossible to decipher.

Taken together, one gives meaning to the other.

Nice progress at an exorbitant price isn’t a great investment.

A good price for mediocre progress isn’t such a great deal either.

Berkus says his valuation method only works if the startup reaches at least $20 million in revenue within five years.

Let’s say, conservatively, that this translates into a $100 million company (five times revenue).

That would place the startup in the upper third percentile of exit valuations. Two-thirds of startups do worse…

What can a $20 million-in-revenue company do for you?

If you invested in the company at a $2.5 million valuation, your profit would be 40X without dilution and roughly 20X including dilution.

Remember, only one out of three of your holdings would reach at least $100 million.

In a portfolio of nine holdings (to keep the math simple), with one out of three of your holdings reaching at least $100 million, you’d have three big winners.

If you invested $1,000 in each holding (again, keeping the math simple), you’d net a minimum of $51,000 for a portfolio of startups that cost you $9,000.

That’s nearly 7X in profits – or more.

At a $5 million valuation (which I think is more realistic), your total return would be cut in half. The profits from your three winners would go from 20X each to 10X each (counting dilution).

That’s exactly what Berkus had in mind. He said…

There is no question that startup valuations must be kept at a low enough amount to allow for the extreme risk taken by the investor and to provide some opportunity for the investment to achieve a 10-times increase in value over its life.

I agree.

Extreme risk should beget extreme rewards.

The math says when it’s used to invest at the right valuations, the Berkus Method does just that.

Invest early and well,

Andy Gordon
Co-Founder, Early Investing

Can a $10 Bill Really Fund Your Retirement? The digital currency markets are delivering profits unlike anything we’ve ever seen. ​23 recently doubled in a single week. And some like DubaiCoin have jumped as much as 8,200X in value in 18 months. It’ unprecedented... but you won’t receive any of the rewards unless you put a little money in the game. Find out how $10 could make you rich HERE. ​

Source: Early Investing