I have been here for many previous altcoin seasons (2013,2017 etc) and wanted to share knowedle. It's a LOOONG article.
The evaluation of altcoins (i.e not Bitcoin) is one of the most difficult and profitable exercises. Here I will outline my methodology and thinking but we have to take some things as a given. The first is that the whole market is going up or down with forces that we can't predict or control. Bitcoin is correlated with economic environments, money supply increases, safe havens such as Gold, hype and country regulations. This is an impossible mix to analyze and almost everyone fails at it. That's why you see people valuing Bitcoin from $100 to $500k frequently. Although I am bullish on the prospects of Bitcoin and decentralization and smart contract platforms, this is not the game I will be describing. I am talking about a game where you try to maximize your BTC holdings by investing in altcoins. We win this game even if we are at a loss in fiat currency value. To put it another way:

If you are not bullish in general on cryptocurrencies you have no place in investing or trading cryptocurrencies since it's always a losing proposition to trade in bubbles, a scientifically proven fact. If on the other hand you are then your goal is to grow your portfolio more than you would if holding BTC/ETH for example.

Bitcoin is the big boy

How the market works is not easily identifiable if you haven't graduated from the 2017 crypto university. When there is a bull market everything seems amazingly profitable and things keep going up outgrowing Bitcoin by orders of magnitude and you are a genius. The problem with this is that it only works while Bitcoin is going up a little bit or trades sideways. When it decides to move big then altcoins lose value both on the way up and on the way down. The second part is obvious and proven since all altcoins from 2017 are at a fraction of their BTC value (usually in the range of 80% or more down). Also, when BTC is making a big move upwards everyone exits altcoins to ride the wave. It is possible that the altcoin market behaves as an inversed leveraged ETF with leakage where in a certain period while Bitcoin starts at 10k and ends at 10k for example, altcoins have lost a lot of value because of the above things happening.

We are doing it anyway champ!

OK so we understand the risks and just wanna gambol with our money right? I get it. Why do that? Because finding the ideal scenario and period can be extremely profitable. In 2017 several altcoins went up 40x more than BTC. But again, if you don't chose wisely many of them have gone back to zero (the author has first hand experience in this!), they have been delisted and nobody remembers them. The actual mentality to have is very important and resembles poker and other speculative games:
A certain altcoin can go up in value indefinitely but can only lose it's starting investment. Think about it. You either lose 1 metric or gain many many more. Now that sounds amazing but firstly as we said we have the goal to outperform our benchmark (BTC) and secondly that going up in value a lot means that the probability is quite low. There is this notion of Expected Value (EV) that poker players apply in these kind of situations and it goes like that. If you think that a certain coin has a probability let's say 10% to go up 10X and 90% probability it goes to zero it's an even bet. If you think that probability is 11% then it's a good bet, a profitable bet and you should take it. You get the point right? It's not that it can only go 10X or 0X, there is a whole range of probability outcomes that are too mathematical to explain here and it doesn't help so much because nobody can do such analysis with altcoins. See below on how we can approximate it.

How to evaluate altcoins

A range of different things to take into account outlined below will form our decision making. Not a single one of them should dictate 100% of our strategy.

Basics

It's all about market cap. Repeat after me. The price of a coin doesn't mean anything. Say it 10 times until you believe it. I can't remember how many times I had conversations with people that were comparing coins using their coin price instead of their market cap. To make this easy to get.

If I decide because the sky is blue to make my coin supply 100 Trillion FoolCoins with a price of $0.001 and there is another WiseCoin with a supply of 100 Million and price of $1 then FoolCoins are more expensive. - Alex Fin's Cap Law

Fundamental analysis

This is done usually in the stock world and it means that each company has some fundamental value that includes it's assets, customers, growth prospects, sector prospects and leadership competence but mostly centered in financial measures such as P/E ratios etc. Valuation is a proper economic discipline by itself taught in universities. OK, now throw everything out of the window!.
This kind of analysis is impossible in vague concepts and innovations that are currently cryptocurrencies. Ethereum was frequently priced at the fictional price of gas when all financial systems on earth run on the platform after decades (a bit of exaggeration here). No project is currently profitable enough to justify a valuation multiple that is usually equal to P/E in the thousands or more. As such we need to take other things into account. What I do is included in the list below:

• Check Github. You need to make sure there is active development for the platform and it's a very bad sign if the project is either keeping the code closed source or even worse there is simply no development. No projects are "complete".
• Check Website. If the website is written in bad English the Chinese google translate type it means that they are not serious enough to produce an unbreakable decentralized project. If you can't write English you can't change the world, period. That's a deal breaker.
• Check Team's Linkedin. Numerous projects have either fake Linkedin accounts or the team is comprised mainly by unexperienced employees that are even shown to be working in other companies currently.
• Check backers. Projects that have Binance, Coinbase or Silicon Valley VC funds backing them are way more legit but way more overpriced too!

Relative valuation

One of my favorite ways to value altcoins that is based on the same principle in the stock market is to look at peers and decide what is the maximum cap it can grow to. As an example you take a second layer Ethereum solution that has an ICO and you want to decide if you will enter or not. You can take a look at other coins that are in the same business and compare their market caps. Thinking that your coin will outperform by a lot the top coins currently is overly optimistic so I usually take a lower valuation as a target price. If the initial offering is directly implying a valuation that is more than that then there is no room to grow according to my analysis and I skip it. Many times this has proven me wrong because it's a game theory problem where if many people think irrationally in a market it becomes a self-fulfilling prophecy. But since there is opportunity cost involved, in the long run, getting in initial offerings that have a lot of room to grow will pay off as a strategy.

Sector prospects

In 2017 the sexiest sector was platforms and then coins including privacy ones. Platforms are obviously still a highly rated sector because everything is being built on them, but privacy is not as hot as it used to be. In 2018 DEXes were all they hype but still people are massively using centralized exchanges. In 2020 Defi is the hottest sector and it includes platforms, oracles and Defi projects. What I am saying is that a project gets extra points if it's a Defi one in 2020 and minus points if it's a payment system that will conquer the world as it was in 2017 because that's old news. This is closely related to the next section.

Hype

Needless to say that the crypto market is a worse FOMO type of inexperienced trigger happy yolo investors , much worse than the Robinhood crowd that drove a bankrupt company's stock 1200% after they declared bankruptcy. The result is that there are numerous projects that are basically either vaporware or just so overhyped that their valuation has no connection to reality. Should we avoid those kind of projects? No and I will explain why. There are many very good technically projects that had zero hype potential due to incompetent marketing departments that made them tank. An example (without shilling because I sold out a while back) is Quantum Resistant Ledger. This project has amazing quantum resistant blockchain, the only one running now, has a platform that people can build tokens and messaging systems and other magnificent stuff. Just check how they fared up to now and you will get the point. A project *needs* to have a hype factor because you cannot judge it as normal stocks that you can do value investing like Warren Buffet does where a company will inevitable post sales and profitability numbers and investors will get dividends. Actually the last sentence is the most important: No dividends. Even projects that give you tokens or coins as dividends are not real dividends because if the coin tanks the value of the dividend tanks. This is NOT the case with company stocks where you get dollars even if the company stock tanks. All that being said, I would advice against betting on projects that have a lot of hype but little substance (but that should be obvious!).

How to construct your portfolio

My strategy and philosophy in investing is that risk should be proportional to investment capital. That means that if you are investing 100K in the crypto market your portfolio should be very different than someone investing 1K because 10% annual gains are nothing in the latter while they are very significant in the former. Starting from this principle each individual needs to construct a portfolio according to how much risk he wants to take. I will emphasize two important concepts that play well with what I said. In the first instance of a big portfolio you should concentrate on this mantra: "Diversification is the only free meal in finance". In the case of a small portfolio then this mantra is more important: "Concentrate to create wealth, diversify to maintain wealth". Usually in a big portfolio you would want to hold some big coins such as BTC and ETH to weather the ups and downs explained in previous paragraphs while generating profits and keep progressively smaller parts of your portfolio for riskier investments. Maybe 50% of this portfolio could be big caps and 10% very risky initial offerings. Adapting risk progressively to smaller portfolios makes sense but I think it would be irrational to keep more than 30% of a portfolio no matter what tied to one coin due to the very high risk of bankruptcy.

Conclusion

The altseason is supposedly coming every 3 months. Truth is that nobody can predict it but altcoins can be profitable no matter what. Forget about maximalists who are stuck in their dogmas. Altcoins deliver different value propositions and it makes sense because we are very far from a situation where some project offers everything like Amazon and we wouldn't even want that in the first place since we are talking about decentralization and not a winner takes all and becomes a monster kind of scenario! Some last minute advice:

• Stay out of paid telegram/discord pump groups. They are deadly for your wallet.
• Avoid jumping on overhyped coins that have pumped massively during the last days without any very important news.
• Don't keep coins in obscure exchanges for too long or you will get burned with certainty.
• Stop thinking that your coin will 1000x and overtake Bitcoin!

P.S If you find value in reading this and want more weekly consider subscribing to my newsletter here

AMA AT DETECTIVE ID (25/06/2020)
Before welcoming any questions, I would like to briefly introduce STATERA PROJECT. Statera is a smart contract deflationary token pegged to a cryptocurrency index fund. By including STA in an index fund with Link, BTC, ETH, and SNX you can buy one token and access the price action of four of the leading cryptocurrencies. You can also invest directly in the index fund (balancer pool) and receive the benefits of fees and BAL tokens paid to you while also having an automatically balanced fund. Lastly the deflationary mechanics of STA increases the chance for positive price action while decreasing beta (volatility). This is all found in a smart contract that is fully decentralized, the founders can no longer augment the contract in any way and this has been confirmed by a third party code audit through Hacken.
Q1 : please explain in more detail about Statera, what is the background of this project? and when was it established?
The dev of this project had previously created another deflationary token BURN. When the Balancer Labs released the Balancer Protocol, he had an idea to combine the two, deflationary token and a pool of tokens, making the first deflationary index fund. It started in the end of May and on the 3rd iteration, May 29th - a trustless version was launched that we see today. As briefly explained earlier, STATERA or STA is an Index Deflationary Token built on Ethereum blockchain; Index: Contains a token suite of world class leading crypto assests BTC, ETH, LINK, SNX with STA. Deflationary: On every transaction of STA 1% of the transacted amount is sent to 0x address on ethereum, burned forever, thus reducing the circulating supply of STA Index+Deflationary: STA is mixed with BTC, ETH, LINK SNX in a portfolio, backed by liquidity on a protocol known as balancer (balancer.finance) This platform serves as a market maker for the token suit. The Index suite is of equal rate of 20%, that is 20% of BTC, ETH, SNX LINK and STA, Thus, anytime there is an increase in value of any of those coins or tokens, balancer automatically trade them for STA in order to keep the token suit ratio balanced. And anytime there is an increase in the value of STA, the same process applies. while doing this trade, it enables further burning on every transaction, thus facilitating more token scarcity. In addition to this, Statera was deployed with contract finalised, that is, the index suite can not be altered, It is completely out of Dev's control.
Q2 : What are the achievements that have been obtained by Statera in 2020? And what goals do you want to achieve in 2020?
By this we assume the questionnaire is asking for a roadmap! First, the project is barely a month old, and within just a month, our liquidity has grown from $50,000 to over $400,000 currently above $300,000. Among the things we have accomplished so far is the creation of market value for STA's Balancer liquidity pool token BPT, which is currently over $1000 per one BPT. Regarding what we set to achieve: The future is filled with many opportunities and potentials, currently, we are working on a massive campaign to introduce our product to the outside world. We have already made contact with different and reputable forums and channels regarding marketing and advertisement offers, some which we are currently negotiating, some which we are awaiting response. All we can say for now is that the Team is working hard to make this the Investment opportunity every crypto enthusiast has been waiting for. Statera has the goal of putting cryptocurrency into every portfolio. We believe we have a product that increases the returns of investing in cryptocurrencies and makes it easier to diversify in this space. We have done so much in June: articles, how to videos, completed the audit, tech upgrades like one token liquidity additions, and beginning our many social communities. We have been hard at work behind the scenes but things like sponsorships, features, and media take time, content makers need days if not weeks to develop content, especially the best of the best. We are working tirelessly, we will not disappoint. We have plans for 2020-2025 and will release those in the next month. They are big and bold, you’re going to be impressed by the scale of our vision, when we say “Cryptocurrency in every portfolio” we mean it. In 2020 more specifically we are focused on more media, videos, product offerings, and exchanges.
Q3 : What is the purpose of STA token? How can we get STA? The purpose of STA is an investment in the first deflationary index fund. The whole index's value rises from these aspects: 1. The index funds (WBTC,WETH,SNX,LINK) appreciate in value 2. When the index tokens are traded, the pool receives transaction fees - 1% 3. STA burns on transactions, so it's deflationary nature increases its value as the total supply drops 4. Balancer rewards Index holders with BAL token airdrops every week You can invest via the 'Trade' links in stateraproject.com website. Easiest way is to do it using ETH. The monetary policy of our token is set in stone and constantly deflationary. This negative supply pressure is a powerful mechanism in economics and price discovery. Through the lowering of supply we can decrease your beta (volatility) and increase your alpha (gains). Our token is currently only top 40 in liquidity on Balancer, however our volume is top 10! You want to know why? Because Statera works. Statera increases arbitrage, volume, fees, BAL rewards, and liquidity. Our liquidity miners in our Balancer pool are already making some of the highest BAL rewards on the platform, one user we spoke with made 18% in June, that’s over 150% APY! Our product is working, 100% (or you could say 150%), and when people start to see that, and realize the value, the sky's the limit.
Q4 : can we as a user do STA mining? The supply of STA doesn't increase anymore, it only decreases due to the burn feature. So there is no way to mine anymore STA. Only way to acquire the tokens is via an exchange. The monetary policy of our token is set in stone and constantly deflationary. This negative supply pressure is a powerful mechanism in economics and price discovery. Through the lowering of supply we can decrease your beta (volatility) and increase your alpha (gains). Our token is currently only top 40 in liquidity on Balancer, however our volume is top 10! You want to know why? Because Statera works. Statera increases arbitrage, volume, fees, BAL rewards, and liquidity. Our liquidity miners in our Balancer pool are already making some of the highest BAL rewards on the platform, one user we spoke with made 18% in June, that’s over 150% APY! Our product is working, 100% (or you could say 150%), and when people start to see that, and realize the value, the sky's the limit.
Q5 : The ecosystem of a public chain has a lot to do with the level of engagement and participation of third-party developers. How does Statera support the developers?
Not really. Our project is focusing on investment opportunities for the cryptocurrencies. The cryptocurrency tokens that are not used and are just sitting in a wallet can work for you by being added to an index fund and appreciate in value over time. First off, what we have created is a new asset class, I’ll repeat that, a new asset class. This asset has never existed: “Deflationary Index Fund,” what does that mean for finance? What will developers do with this? It’s hard to give a finite answer. We hope there are future economic papers on our token and what it means to be a deflationary index fund. With the addition of synthetic assets and oracles you can put any asset into the DeFi space: Gold, Nikkei 225, USD, etc. STA can be combined with any assets and bring the benefits of it’s ecosystem and deflationary mechanism to that asset. STA, the token itself, also gives you access to the price action of any asset it is paired with. Put simply STA’s balancer pool(s) give you a benefit in holding them, and STA’s price will reflect it’s inclusion in Balancer Pool(s) (and possibly future financial instruments), so STA is a bet on DeFi as a whole. When we say as whole, we mean as whole: what happens if you include STA in a crypto loan, or package it with a synthetic S&P 500 token, or use it as fee payment in a DeFi platform? Being fully decentralized it is up to our community to make this happen, social engagement and community are key. We are constantly bringing community members onto our team and rewarding those that benefit the ecosystem. in addition, Statera is a fully community project now. Paul who is the current team leader was an ordinary member of the community weeks ago, due to his interest and support for the project, he started dedicating his time to the project. Quite a number of community members are also in the same position, while Statera was developed by an individual, it is being built by the entire Statera community
Community Questions (Twitter):
Q1 From: @KazimKara35 The project tells us that the acquisition and sale of data between participants is protected by code of conduct and how safe is deployed on the blockchain, but how do you handle regulations while operating on a global scale?
Statera is decentralized token, similar to other utility crypto tokens and same regulations apply to it as others. his is actually a benefit of our decentralized nature. This isn’t legal advice, however in the past regulating bodies have ruled that the more decentralized a project is, especially from launch, the less likely they are to be deemed a security (see: Ethereum). This means they can be traded more freely and be available on more platforms. We are as decentralized as you can be. The data itself is all secured through the blockchain which has been shown to be a highly secure medium. We do not store any of your data and as long as you follow best practices in blockchain security there are no added security risks of using Statera. We don’t, and literally can’t, hold anymore personal information than is made available in any blockchain transaction. and that "personal information" is more likely than not just your ethereum wallet address, no "real world" data is included in transactions
Q2 from: @Michael_NGT353 What is Mechanism you use On your Project sir? Are you Use PoS,PoW or other Mechanism Can you explain why you use it and what is Make it Different?
Our token is an ERC-20 token and it's running on the Ethereum blockchain. The Ethereum's POW mechanism is currently supporting the Statera token We run on Ethereum, so we are currently PoW. With ETH 2.0 we will hopefully be PoS this year (hopefully). We use it because ETH has over 100 million addresses and around a million daily transactions. We are currently at about 1,900 token holders, we are just touching the edge of what is possible in this market. We chose the biggest and the best network available right now to launch our product. We think the upside is huge because of this choice. Being the biggest network it is also one of the most secure, no high risk vulnerabilities have been found in Ethereum or in our code (we've had our code audited by a third party, Hacken, and you can read their audit on our Medium page), so we also have security on our side
Q3 From : @Ryaaan_Nguyen Can you list some of Statera outstanding features for everyone here to know about? What are the products that Statera is focusing on developing?
As mentioned earlier by GC, First off, what we have created is a new asset class, I’ll repeat that, a new asset class. This asset has never existed: “Deflationary Index Fund,” what does that mean for finance? What will developers do with this? It’s hard to give a finite answer. We hope there are future economic papers on our token and what it means to be a deflationary index fund. With the addition of synthetic assets and oracles you can put any asset into the DeFi space: Gold, Nikkei 225, USD, etc. STA can be combined with any assets and bring the benefits of it’s ecosystem and deflationary mechanism to that asset. STA, the token itself, also gives you access to the price action of any asset it is paired with. Put simply STA’s balancer pool(s) give you a benefit in holding them, and STA’s price will reflect it’s inclusion in Balancer Pool(s) (and possibly future financial instruments), so STA is a bet on DeFi as a whole. When we say as whole, we mean as whole: what happens if you include STA in a crypto loan, or package it with a synthetic S&P 500 token, or use it as fee payment in a DeFi platform? We touched on this a bit in the question on what makes us special compared to other exchanges. We have created a product that synergizes with Balancer Pools creating a symbiotic relationship that improves the outcomes for users (our product can also synergize with future DeFi products). By including STA in an index fund with Link, BTC, ETH, and SNX you can buy one token and access the price action of four of the leading cryptocurrencies. You can also invest directly in the index fund (balancer pool) and receive the benefits of fees and BAL tokens paid to you while also having an automatically balanced portfolio (like an index fund with dividends). Lastly, the deflationary mechanics of STA increases the chance for positive price action while decreasing beta. We want to package Statera with assets across the whole cryptocurrency space, with an emphasis on DeFi. We also want everyday people to be able to invest quickly in crypto while also feeling reassured their investment is set up to succeed. We are focused on developing a name brand that people go to first and foremost when investing in crypto: cryptocurrency in every portfolio. This is all found in a smart contract that is fully decentralized, the founders can no longer augment the contract in any way and this has been confirmed by the third party code audit. This is a feature in and of itself, some argue that Bitcoin’s true value is in it’s network effect, first mover advantage, and immutability. Statera is modeled on all three of those and has those features in spades. The community now owns our token, the power in that, giving finance and power to the people, is why we are here.
Q4 From : @futcek What do you think about the possibility of creating new use cases in DeFi space for existing real world assets by using crypto technology? What role do you see in this creation for Statera?
I think my answer above actually answers this perfectly, Statera in and of itself is a “new use case”, a “deflationary index fund” has never existed, I’ll copy and paste the other relevant part: “With the addition of synthetic assets and oracles you can put any asset into the DeFi space: Gold, Nikkei 225, USD, etc. STA can be combined with any assets and bring the benefits of it’s ecosystem and deflationary mechanism to that asset. STA, the token itself, also gives you access to the price action of any asset it is paired with. Put simply STA’s balancer pool(s) give you a benefit in holding them, and STA’s price will reflect it’s inclusion in Balancer Pool(s) (and possibly future financial instruments), so STA is a bet on DeFi as a whole. When we say as whole, we mean as whole: what happens if you include STA in a crypto loan, or package it with a synthetic S&P 500 token, or use it as fee payment in a DeFi platform? Being fully decentralized it is up to our community to make this happen, social engagement and community are key. We are constantly bringing community members onto our team and rewarding those that benefit the ecosystem.” Statera is a way to make your investment more successful, and owning Statera let's you benefit from other people using it to make their investments more successful (a self feeding cycle).
Q5 From : @Carmenzamorag Statera's deflationary system is based in that with every transaction 1% of the amount is destroyed, would this lead to lack of supply and liquidity in the long term future? How would that be fixed?
The curve of supply is asymptote, meaning that it will never reach zero. The idea is that the deflationary process will slowly decrease the supply of STA, which – combined with a fixed or increaseing demand – will result in STA appreciating in value. Evidently, as the STA token increases in value, the amounts of STA being traded will slowly decrease: The typical investor might buy 10.000 STA at the current rate, but in the future (proportional to an increase in the valueation of STA) this number will tend to decrease, hence the future investor might only buy 1000 STA. This of course results in less STA being burned. Additionally, STA is divisible to the 18th decimal, why – even if the supply was to reach 1 STA – there would be a sufficient supply. Well this would be a question for a Mathematician, and luckily we’re loaded with them (as seen above)! I’ll try to illustrate with an example. 1% of 100 million is 1 million, 1% of 10 million is 100,000. As we go down in supply the burn is less by volume. What also happens at lower supply is higher prices (supply and demand economics). So those 1 million tokens burned may be worth $20,000, but by the time overall supply is at 10 million those 100,000 tokens may also be worth $20,000 or even more. This means you transact “less”, if you want to buy 1 Ether now with Statera you need 8,900 STA which would burn 89 tokens. If Statera is worth $100 you only need 2.32 statera (.023 tokens burned). Along with this proportional and relative burn decrease, tokens are 18 decimals long, so even when we get to 1 token left (which mathematically would take decades if not centuries, but that is wholly dependent on usage), you are still left with 10 to the 18th power, or one quintillion “tokens”. So it’s going to take us a while to have supply issues :)
Nuked Phase (3rd Part)
Q) What is your VISION and Mission?
Our working mission and vision: Mission: Provide every investor with simple and effective ways to invest in cryptocurrency. Decrease volatility and increase positive price pressure in cryptocurrency investments. Lower the barrier to entry for more advanced investment tools. Be a community focused and community driven cryptocurrency, fully decentralized by every meaning of the word. Vision: We aspire to put “cryptocurrency in every portfolio”. We envision a world where finance is given back to the people and wealth building strategies withheld only for affluent individuals are given to all. We also strive to create an investment environment based on sound monetary policy and all the power that comes with a sound asset.
Q) What are the benefits of STA for its investors in long term? Does STA have Afrika as an important area for its expansion?
We have ties to Africa and see Statera as a way for anyone and everyone to invest in cryptocurrency. The small marketcap of statera makes it's price low and it's upside massive. Right now if you wanted to be exposed to the price action of four cryptocurrencies (BTC, ETH, Link, SNX) Statera is a way to gain that exposure in a way that has a huge upside, compared to the other four assets, there are risks in investing in any small cap but with those risk come outsized rewards (not investment advice and all answers are solely my opinions 😊)
Q) In the long run, why should we trust and follow STATERA? How do you raise awareness and elimination of the doubts of investors / partners / customers?.
You're really asking "How do I trust myself and other crypto investors" The project is FULLY decentralized, it is now in the hands of the community. We would venture a guess that the community wants their investment to succeed and be worth more in the future, so you are betting on people. wanting to make themselves money on their own investment. This is a pretty sure bet. The community being active and engaged is key, and we have short term and long term plans to ensure this happens
Q) No one can doubt the strength of #Statera. But can you tell us some of the challenges and difficulties you're presently facing? How can you possibly overcome them?
We're swinging outside our weightclass, we don't see litecoin or SNX, or any other crypto product as our competition. Our competition is NASDAQ, Fidelity, etc. We want to provide world class financial instruments that only the wealthy have access to in the traditional world to everyone. Providing liquidity, risk parity, being paid to provide liquidity, unique value propositions, are all things we want to bring to everyone. However we are coming up in a hectic space, everyday their is fud and defamation on the web, but that is the sandbox we chose to play in and we aren't grabbing our ball and going home. We can tell you that we will not disappoint and fighting all the fud that comes along with being a small and upstart project only fuel our fire. Building legitimacy is our largest challenge and looking at our audit, financial report, and some things you will see in the coming weeks, we hope you see we are facing those challenges head on.
Q) What is the actual uniqueness of #Statera.??? Can you guys please explain tha advantages of #Statera over other projects.??
When we launched there were no other products like ours. There are now copies, and we wish them the best, but we have the best product, hands down. Over the next couple weeks this will become apparent, if it hasn't already, also a lot of the AMA answers dug deeper into our unique value proposition, especially the benefits we provide to Balancer Pools which shows the benefits we would provide for any index fund. We are a tool to improve cryptocurrency investing
Q) Fragmentation, layering and cross-chain are three future solutions for high-performance blockchains. Where is Statera currently? What are the main reasons for taking this direction?
We operate on the Ethereum chain, as it upgrades our services and usability will upgrade. We are working on UI and more user friendly systems to onboard people into our ecosystem
Q) How STATERA plan to make room and make this project known in the world of crypto, full of technology and full of new projects very good in today's market?
We think we have a truly innovative product, which - when first understood - appeals to most investors. Whether you want a high-volatility/medium-risk token like STA or whether you are more conservative and simply just plan on adding to the Statera pool BPT (which is not nearly as volatile but still offers great returns). We plan on making Statera known to the crypto world through a marketing campaign which slowly will be unravelled in the comming days and weeks. If interested, you can check out an analysis of the different investment options in the Statera ecosystem in our first financial report: https://medium.com/@stateraproject/statera-financial-reports-b47defb58a18
Q) Hello, cryptocurrencies are very volatile and follow bitcoin ... and does this apply to Statera? or is there some other logic present in some way? is statera token different from a current token? Are you working on listings on other exchanges?
Currently uniswap is somewhat uncomfortable for fees. We are also on bamboo relay, saturn network, and mesa. Statera will be volatile like all cryptocurrency, this is a small and nascent space. But with the deflationary mechanic and balancer pool, over time, as marketcap grows it will become less volatile and more positively reactive to price.
Q) Security is one of the most essential characteristics for a project to get reputation. How can #Statera Team assure to their community that users assets and investments will stay safe from unwanted agents?
We have been third party audited by the same company that worked with VeChain to audit their code. Our code has been shown to be bulletproof. Unless Ethereum comes up with a fatal security flaw there is nothing that can happen to our contract (there is no backdoor, no way for anyone to edit or adjust the smart contract).
Q) Many investors see the project from the price of the coin. Can you give us advantages why Statera is so suitable for long-term investment? and what makes Statera different from other similar projects?
Sometimes the simplest solutions are the most effective. A question you can ask is “What if this fails”? But you can also ask, “What if this succeeds”? Cryptocurrency is filled with asymmetric risks, we think if you look into the value proposition you will find that there is a huge asymmetric risk/reward in Statera, and we will make that even clearer in our soon to be released litepaper. You are on the ground floor of a simple but highly effective solution to onboarding people into defi, cryptocurrencies, and investing. Our product reduces volatility and increases gains (decreases beta and increases alpha in investor terms), which is highly attractive in any investment. The down side is there but the upside outweighs it exponentially (asymmetric risk)
Q) What your plans in place for global expansion, are Statera focusing on only market at this time? Or focus on building and developing or getting customers and users, or partnerships? Can you explain this?
We have reached out to influencers in other countries and things are in the works. We have also translated documents and are working on having them in at least 4 languages by the end of July. We were founded globally, our team is global, and we are focused on reaching all 7 billion people.
Q) Now in the cryptofield everyday there are new projects joining in the Blockchain space. They are upgraded, Well-established and coming up with innovative technology. How Statera going to compete with them? What do you think, one day Statera will become useless And will be lost into the abyss of time for not bringing any new technology?
We are the first of our kind, no one had a deflationary index fund before us. Index funds will be the future of crypto (look at the popularity of etfs and indexes in the traditional markets). We are a tool to make your index function better and pay you more. As long as people care about crypto index funds they will care about the value STA brings to that. We have an involved and long term plan to reach dominance over a 5 year span, this is not a flash in the pan, big things coming
Q1. You say that the weight and proportions of your tokens are constant. So how have you managed to prevent market price speculation from generating hypervolability in your token price? Do you consider yourselves a kind of stablecoin? Q2. How many jurisdictions allow the use of Stratera products and services? Are they available for Latin America? @joloroeowo The balancer ensures an equal ratio of 20% amongst the five tokens included in our fund. This, however, does not imply that the tokens are stable. Rather, the Balancer protocol helps mitigating price fluctuations.
Q) How can I as a Statera participant participate in liquidity mining, and receive BAL as reward? What are the use cases of $STA token, and how are users motivated to buy and hold long term?
The easiest way is to go to stateratoken.com and click trade then BPT. You can also buy all five tokens and click on portfolio then add liquidity. Balancer is working on a simpler interface to add liquidity with one token, we are waiting on them. I think we explained the use cases above
Q) What do you plan have for global expansion, is Statera currently focused solely on the market? Or is it focused on building and developing or acquiring customer and user or partnership relationships? Can you explain it?
We are currently working on promoting the project and further develope our product, making it lucrative for more new investors to join our pool and invest in the STA token.
Q1) Statera have 2 types of tokens, so can you tell me the differences between STA and STAC ? What are their uses cases? Is possible Swap between them? Q2) Currently the only possible Swap or "exchange" possible is Uniswap, so you do have plans to list the STA token into a more Exchanges?
STAC is obsolete, we only have STA and BPT (go to our website and click on trade) stateratoken.com BPT gives you more diversification and less risk, STA gives you more volatility and more chance for big gains. Q2 we are on multiple exchanges (4), bamboo relay, saturn, and mesa we do have plans for future exchanges but the big ones have processes and hoops to jump through that can't be done so quickly
Q) What business scenarios can STATERA support now? In which industries can we see the mass adoption of STATERA technology in the near future?
Statera increases the effectiveness of your cryptocurrency investments. Specifically it makes cryptocurrency index funds function better, netting you higher returns, which we have already seen in just one month of implementation. Right now, today, you can buy our BPT token and increase the functionality of holding a crypto index fund. In the future we want every single web user to see and use our product
Q) Do you plan to migrate to other platforms like Tron, BinanceChain, EOS, etc. if it is feasible??
Migrating our current contract is not. Starting new offerings on those other chains could be possible, they aren't on our radar currently but if the community requests them we are driven by our community
Q) ETH Blockchain is a Blockchain have many token based in it, i have used ETH blockchain long time and i see it have big fee and need much time to make a transcation so Why you choose to based STA in ETH blockchain not other like Bep2 or Trc20 ?
Simply: 100 million addresses, 1 million transactions a day. The more users we have the more we will benefit our community. We hope ETH 2.0 scaling will fix the problems you mention.
Q) No one achieve anything of value on its own, please can you share about Statera present and future partnerships that will drive you to success in this highly congested crypto space?
We have a unique product that no one else has (there are people who have copied us). We can't announce our current and future partnerships yet, but they will be released soon. Our future hopes of partnerships are big and will be key to our future, know we are focused on making big partnerships, some you may not even be thinking about.
Q) According to the fact that your algorithm causes 1% of each transaction to be destroyed, I would like to know, then, how you plan to finance yourself as a project in the long term?
The project is now in the hands of the community and we are a team of passionate people volunteering to help promote and develope the Statera ecosystem. But then, how do we afford running a promo campaign? We have lots of great community members donating funds that goes to promoting the project. In other words, the community helps financing the project. And so far, we have created a fantastic community consisting of passionate and well-educated people!
Q) There are many cryptocurrency startups were established by talent teams, but they got problem in raising capital via token sales due to many factors as bear market, bankrupt etc. This leaded their potential startups fail. So how will Statera break these barriers and attract more funds from outside crypto space?
We are community focused and community ran. When you look at centralized cryptocurrencies you can see the negative of them (Tron, ADA, etc.) We believe being fully decentralized is the true power position. You the owner of statera can affect our future and must affect our future. This direct ownership means people need to mobilize and organize to push us forward, and it is in their best self interest to do so. It's a bet on our community, we're excited about that bet
Q) What business scenarios can STATERA support now? In which industries can we see the mass adoption of STATERA technology in the near future?
Statera increases the effectiveness of your cryptocurrency investments. Specifically it makes cryptocurrency index funds function better, netting you higher returns, which we have already seen in just one month of implementation. Right now, today, you can buy our BPT token and increase the functionality of holding a crypto index fund. In the future we want every single web user to see and use our product
Q) Why being a hybrid of a liquidity pool and an index fund? What are the main benefits about this?
By being a liquidity pool the exchange side of the pool (balancer also functions as an exchange) gives you added liquidity for more effortless, effective, and cheaper rebalancing. You also benefit from getting paid the fee when people use the exchange AND getting paid BAL tokens that are worth $15-20 USD. These are not benefits you get with an index fund, meanwhile the liquidity pool rebalances just like an index fund would
Q) Which specific about technology and strategy of #STA that make you believe it will be successful and what does #STA plan do to attract more users in the upcoming time?
I think the idea behind Statera is truly ingenious. We have made an index fund, which investors are highly(!) incentivised to invest in, namely because the ROI, so far, has been huge. An increase in the pool liquidity (index fund) indirectly translates into an increase in the price of STA, why we think the STA token - combined with its deflationary nature - will increase in the long run. The mechanism behind this is somewhat complex, but to better get an understanding of it, I suggest you visit our medium page and read more about the project: https://medium.com/@stateraproject

As originally published via CoinLive
I am the Co-Founder at CoinLive. Prior to founding Coinlive.io, my area of expertise was inter-market analysis. I came across Datadash 50k BTC prediction this week, and I must take my hats off to what I believe is an excellent interpretation of the inter-connectivity of various markets.
At your own convenience, you can find a sample of Intermarket analysis I've written in the past before immersing myself into cryptos full-time.
Gold inter-market: 'Out of sync' with VIX, takes lead from USD/JPY
USD/JPY inter-market: Watch divergence US-Japan yield spread
EUUSD intermarket: US yields collapse amid supply environment
Inter-market analysis: Risk back in vogue, but for how long?
USD/JPY intermarket: Bulls need higher adj in 10-y US-JP spread
The purpose of this article is to dive deeper into the factors Datadash presents in his video and how they can help us draw certain conclusions about the potential flows of capital into crypto markets and the need that will exist for a BTC ETF.
Before I do so, as a brief explainer, let's touch on what exactly Intermarket analysis refers to:
Intermarket analysis is the global interconnectivity between equities, bonds, currencies, commodities, and any other asset class; Global markets are an ever-evolving discounting and constant valuation mechanism and by studying their interconnectivity, we are much better positioned to explain and elaborate on why certain moves occur, future directions and gain insights on potential misalignments that the market may not have picked up on yet or might be ignoring/manipulating.
While such interconnectivity has proven to be quite limiting when it comes to the value one can extract from analyzing traditional financial assets and the crypto market, Datadash has eloquently been able to build a hypothesis, which as an Intermarket analyst, I consider very valid, and that matches up my own views. Nicolas Merten constructs a scenario which leads him to believe that a Bitcoin ETF is coming. Let's explore this hypothesis.
I will attempt to summarize and provide further clarity on why the current events in traditional asset classes, as described by Datadash, will inevitably result in a Bitcoin ETF. Make no mistake, Datadash's call for Bitcoin at 50k by the end of 2018 will be well justified once a BTC ETF is approved. While the timing is the most challenging part t get right, the end result won't vary.
If one wishes to learn more about my personal views on why a BTC ETF is such a big deal, I encourage you to read my article from late March this year.
Don't Be Misled by Low Liquidity/Volume - Fundamentals Never Stronger
The first point Nicholas Merten makes is that despite depressed volume levels, the fundamentals are very sound. That, I must say, is a point I couldn't agree more. In fact, I recently wrote an article titled The Paradox: Bitcoin Keeps Selling as Intrinsic Value Set to Explode where I state "the latest developments in Bitcoin's technology makes it paradoxically an ever increasingly interesting investment proposition the cheaper it gets."
However, no article better defines where we stand in terms of fundamentals than the one I wrote back on May 15th titled Find Out Why Institutions Will Flood the Bitcoin Market, where I look at the ever-growing list of evidence that shows why a new type of investors, the institutional ones, looks set to enter the market in mass.
Nicholas believes that based on the supply of Bitcoin, the market capitalization can reach about $800b. He makes a case that with the fundamentals in bitcoin much stronger, it wouldn't be that hard to envision the market cap more than double from its most recent all-time high of more than $300b.
Interest Rates Set to Rise Further
First of all, one of the most immediate implications of higher rates is the increased difficulty to bear the costs by borrowers, which leads Nicholas to believe that banks the likes of Deutsche Bank will face a tough environment going forward. The CEO of the giant German lender has actually warned that second-quarter results would reflect a “revenue environment [that] remains challenging."
Nicholas refers to the historical chart of Eurodollar LIBOR rates as illustrated below to strengthen the case that interest rates are set to follow an upward trajectory in the years to come as Central Banks continue to normalize monetary policies after a decade since the global financial crisis. I'd say, that is a correct assumption, although one must take into account the Italian crisis to be aware that a delay in higher European rates is a real possibility now.
Let's look at the following combinations: Fed Fund Rate Contract (green), German 2-year bond yields (black) and Italy's 10-year bond yield (blue) to help us clarify what's the outlook for interest rates both in Europe and the United States in the foreseeable future. The chart suggests that while the Federal Reserve remains on track to keep increasing interest rates at a gradual pace, there has been a sudden change in the outlook for European rates in the short-end of the curve.
While the European Central Bank is no longer endorsing proactive policies as part of its long-standing QE narrative, President Mario Draghi is still not ready to communicate an exit strategy to its unconventional stimulus program due to protectionism threats in the euro-area, with Italy the latest nightmare episode.
Until such major step is taken in the form of a formal QE conclusion, interest rates in the European Union will remain depressed; the latest drastic spike in Italy's benchmark bond yield to default levels is pre-emptive of lower rates for longer, an environment that on one hand may benefit the likes of Deutsche Bank on lower borrowing costs, but on the other hand, sets in motion a bigger headache as risk aversion is set to dominate financial markets, which leads to worse financial consequences such as loss of confidence and hence in equity valuations.
Deutsche Bank - End of the Road?
Nicholas argues that as part of the re-restructuring process in Deutsche Bank, they will be facing a much more challenging environment as lending becomes more difficult on higher interest rates. At CoinLive, we still believe this to be a logical scenario to expect, even if a delay happens as the ECB tries to deal with the Italian political crisis which once again raises the question of whether or not Italy should be part of the EU. Reference to an article by Zerohedge is given, where it states:
"One day after the WSJ reported that the biggest German bank is set to "decimate" its workforce, firing 10,000 workers or one in ten, this morning Deutsche Bank confirmed plans to cut thousands of jobs as part of new CEO Christian Sewing's restructuring and cost-cutting effort. The German bank said its headcount would fall “well below” 90,000, from just over 97,000. But the biggest gut punch to employee morale is that the bank would reduce headcount in its equities sales and trading business by about 25%."
There is an undeniably ongoing phenomenon of a migration in job positions from traditional financial markets into blockchain, which as we have reported in the past, it appears to be a logical and rational step to be taken, especially in light of the new revenue streams the blockchain sector has to offer. Proof of that is the fact that Binance, a crypto exchange with around 200 employees and less than 1 year of operations has overcome Deutsche Bank, in total profits. What this communicates is that the opportunities to grow an institution’s revenue stream are formidable once they decide to integrate cryptocurrencies into their business models.
One can find an illustration of Deutsche Bank's free-fall in prices below:
Nicholas takes notes of a chart in which one can clearly notice a worrying trend for Italian debt. "Just about every other major investor type has become a net seller (to the ECB) or a non-buyer of BTPs over the last couple of years. Said differently, for well over a year, the only marginal buyer of Italian bonds has been the ECB!", the team of Economists at Citi explained. One can find the article via ZeroHedge here.
Equities & Housing to Suffer the Consequences
Nicholas notes that trillions of dollars need to exit these artificially-inflated equity markets. He even mentions a legendary investor such as George Soros, who has recently warned that the world could be on the brink of another devastating financial crisis, on lingering debt concerns in Europe and a strengthening US dollar, as a destabilizing factor for both the US's emerging- and developed-market rivals.
Ray Dalio, another legend in the investing world and Founder of Bridgewater Associates, the world’s largest hedge fund, "has ramped up its short positions in European equities in recent weeks, bringing their total value to an estimated $22 billion", MarketWatch reports.
Nicholas extracts a chart by John Del Vecchio at lmtr.com where it illustrates the ratio between stocks and commodities at the lowest in over 50 years.
As the author states:
"I like to look for extremes in the markets. Extremes often pinpoint areas where returns can be higher and risk lower than in other time periods. Take the relationship between commodities and stocks. The chart below shows that commodities haven not been cheaper than stocks in a generation. We often hear this time it is different” to justify what’s going on in the world. But, one thing that never changes is human nature. People push markets to extremes. Then they revert. "
Bitcoin ETF the Holy Grail for a Cyclical Multi-Year Bull Run
It is precisely from this last chart above that leads Nicholas to believe we are on the verge of a resurgence in commodity prices. Not only that but amid the need of all this capital to exit stocks and to a certain extent risky bonds (Italian), a new commodity-based digital currency ETF based on Bitcoin will emerge in 2018.
The author of Datadash highlights the consideration to launching a Bitcoin ETF by the SEC. At CoinLive, our reporting of the subject can be found below:
"Back in April, it was reported that the US Securities and Exchange Commission (SEC) has put back on the table two Bitcoin ETF proposals, according to public documents. The agency is under formal proceedings to approve a rule change that would allow NYSE Arca to list two exchange-traded funds (ETFs) proposed by fund provider ProShares. The introduction of an ETF would make Bitcoin available to a much wider share of market participants, with the ability to directly buy the asset at the click of a button, essentially simplifying the current complexity that involves having to deal with all the cumbersome steps currently in place."
Nicholas refers to the support the Bitcoin ETF has been receiving by the Cboe president Chris Concannon, which is a major positive development. CoinLive reported on the story back in late March, noting that "a Bitcoin ETF will without a doubt open the floodgates to an enormous tsunami of fresh capital entering the space, which based on the latest hints by Concannon, the willingness to keep pushing for it remains unabated as the evolution of digital assets keeps its course."
It has been for quite some time CoinLive's conviction, now supported by no other than Nicholas Merten from Datadash, that over the next 6 months, markets will start factoring in the event of the year, that is, the approval of a Bitcoin ETF that will serve as a alternative vehicle to accommodate the massive flows of capital leaving some of the traditional asset classes. As Nicholas suggests, the SEC will have little choice but to provide alternative investments.
Bitcoin as a Hedge to Lower Portfolios' Volatility
Last but not least, crypto assets such as Bitcoin and the likes have an almost non-existent correlation to other traditional assets such as stocks, bonds, and commodities, which makes for a very attractive and broadly-applicable diversification strategy for the professional money as it reduces one’s portfolio volatility. The moment a Bitcoin ETF is confirmed, expect the non-correlation element of Bitcoin as a major driving force to attract further capital.
Anyone Can Be Wrong Datadash, But You Won't be Wrong Alone
Having analyzed the hypothesis by Nicholas Merten, at CoinLive we believe that the conclusion reached, that is, the creation of a Bitcoin ETF that will provide shelter to a tsunami of capital motivated by the diversification and store of value appeal of Bitcoin, is the next logical step. As per the timing of it, we also anticipate, as Nicholas notes, that it will most likely be subject to the price action in traditional assets. Should equities and credit markets hold steady, it may result in a potential delay, whereas disruption in the capital market may see the need for a BTC ETF accelerate. Either scenario, we will conclude with a quote we wrote back in March.
"It appears as though an ETF on Bitcoin is moving from a state of "If" to "When."
Datadash is certainly not alone on his 50k call. BitMEX CEO Arthur Hayes appears to think along the same line.
On behalf of the CoinLive Team, we want to thank Nicholas Merten at Datadash for such enlightening insights.

Catch the full episode: https://www.consensusnetwork.io/podcastepisodes/2019/10/5/ep36-buy-borrow-and-die-bitcoin-style-1
Buck: Welcome back to the show everyone. Today my guest on Wealth Formula Podcast is Zack Prince. He's Founder and CEO of BlockFi. BlockFi bridges the gap between blockchain and the basic financial products that you're used to including interest-bearing accounts and loans. Zack, welcome to Wealth Formula Podcast. I think you we might have had you on before as a Consensus Network replay but first time on Wealth Formula Podcast specifically, so welcome.
Zac: Yeah, excited to be here, Buck. Thanks for having me. And it's good to chat with you again
Buck: Yeah so remind me how you got into this you know Bitcoin stuff in the first place, I mean you were as I understand you were a traditional finance guy right so where did the blockchain part come in?
Zac: Sure so I was I was working at a company in the FinTech world that provided data and technology solutions to institutional investors that wanted to participate in some of the new online lending platforms, whether they were real estate platforms or consumer lending platforms, and I kind of became the FinTech guy amongst my friend group and people would ask me you know should I invest in these real estate deals on fund rise or buy loans from Lending Club and I started writing a blog to share the information more efficiently with my friends basically and I started expanding a little bit writing about Robo advisory and some other things that were going on in the FinTech space and that's what led me to Bitcoin, and this is back in early 2015. I didn't start BlockFi until 2017 because I started following the market in the background, still working in traditional financial services in FinTech and then in early 2017 it started to feel like mainstream adoption was starting to happen in the crypto ecosystem. I'm started going to some meetups in New York City because at a certain point my wife said Zac, you're talking about crypto all the time and you're talking to me about it and I don't want to talk about it so you should find some other people to talk about this with. And the meetup composition started to change and in 2016 when I started going to these meetups it was the early crypto adopters you know libertarians, computer scientists and then in early 2017 I started to see some venture capitalists, some guys who had just left their job at Wall Street still wearing a suit, some more entrepreneurs and it was a really exciting time in the ecosystem, things like the Enterprise Ethereum Alliance were getting announced which had participation microsoft and a lot of other you know fortune 500 companies and I had started to believe in it. I was drinking the kool-aid a little bit so I decided to find a way to get involved in the space full-time and that's what led me to start BlockFi.
Buck: So I have to imagine that the response you got from the traditional finance people around that time when you started talking about the blockchain space and when you started being more and more involved with that was probably not a very positive response initially or did you did you experience some of that sort of you know rejection initially to what you were doing?
Zac: Yeah absolutely. But you know throughout my career this is now kind of the third emerging technology industry that I've worked in. I was originally an advertising technology starting like you know 15 years ago and I was in FinTech specifically the online lending side of FinTech which in its early days was called peer-to-peer lending and now in crypto. So having to do a lot of education explain it you know why something isn't crazy and it might work and here's why and here's the value proposition and here's what it is, I've gotten very used to that and comfortable with it. But yeah there were a lot of people who are like you know I've heard Bitcoin is only used by drug dealers and money launderers. I've heard that I'm supposed to care about blockchain and not Bitcoin. And you know at BlockFi we’re providing financial products into the market so it's a heavily regulated business so we also had to communicate with regulators. We had to explain to state regulators, federal regulators why what we were doing with Bitcoin and other cryptos than when you're doing these same types of things with assets that they're more familiar with.
Buck: So when you were talking to people back in, I don't know I guess 2016/17 and it's not a long time ago, it's only two years ago, but I have to imagine that the response or the you know the approach that people take to you when you speak to investors is very different. Has it become more mainstream in that regard for you know for big money investors?
Zac: It's absolutely become more mainstream you know the end of 2017 Q3/Q4. Point was going on that parabolic run it started to get covered everywhere, I mean it was on CNBC every day it was in Bloomberg New York Times Wall Street Journal. If you were paying attention to the financial industry and markets you heard about Bitcoin at that time if you hadn't heard about it before. So from a baseline of awareness perspective it got a lot better and then in 2018 you had a number of positive developments for the sector including one that I think is probably the most noteworthy which is that Bitcoin futures were listed on the CME the institutional investor perspective that's massive. You now have a well regulated well known super trustworthy venue where you can get exposure to this asset class, you also had companies like Grayscale bringing products to the market which are accessible to certain types of investors and their low bridge accounts and you started to see some adoption from companies like FinTech companies like Robin Hood and Square making Bitcoin available on their platforms. So the conversation has absolutely changed a lot and it's become less about whether or not this is something that's going to continue to exist whether or not it's something that was just a bubble and is going to die and now it's more about ok how is it going to get used how big could it get what are the interesting applications of it and what could have potentially disrupt in the traditional financial ecosystem.
Buck: So you know we had obviously following this you know pop in 2017, you know I actually like you kind of really got into this early 2017 so timing was pretty good I guess now regards. Good or bad depending how you look at it but I was there before before the parabolic move. And then we have you know then we followed this up with a crypto winter and and you know who knows if we're done with it, I guess we certainly are much better off than we were. You know a unit buddy it's funny Zac I don’t know if you remember this but I was about to, we'll talk about BlockFi specifically in a minute but, I was about to use BlockFi for borrowing because I like this idea of borrowing you know collateralized debt and collateralized debt on assets and buying something else. So I was about to do it and then Bitcoin lost a clip and I was like literally and I remember I was just emailing with somebody somebody over there and I was like sorry dude I guess I just sold it, I just sold all that Bitcoin I had and you sent one email back to me and it said “capitulation” but it you know and so now we're looking back at these we go down from 3,000 back up you know been sort of flirting around this 10,000 and it seems like we're kind of maybe that we're stuck there, maybe we're kind of out of winter, maybe we're in a holding pattern but it seems like to me that since that two years not only is the awareness increase but the development of the ecosystem itself is so much further advanced than it was in 2017. Is this an unusual case where the technology and maybe even the infrastructure is actually outpacing the price?
Zac: You know it's really hard to say. I would argue that in some ways it's typical. In other industries that showed a lot of promise where investors could you know participate maybe a little bit ahead of the adoption curve you saw crazy price run ups with the tech bubble and you know ‘99-2000 being the one that's kind of top of mind in recent memory and then on the other side of things, are we behind where the price should be now? It's really hard to say because this is kind of like a commodity type asset built on a payment network and valuing that is challenging and there's not a perfect model for for doing it today. It's not as easy as something that's cashflow producing but I'm incredibly bullish. I'm on record as saying at the beginning of this year that Bitcoin has only had one year in its 10-year existence where it had a lower low than the year before and parted this year around the low price for 2018 and I predicted that we would in the year had a higher price than where we started the year pretty soon and now we're up and you know around 300 percent from where we started the year. As that happens in investing is people frequently look at things on a year-to-year performance basis and when people are looking at Bitcoin even if all we do is stay around 10 K from here when they're looking at how Bitcoin performed rather than other relative to other assets at the end of 2019 it's probably going to look fantastic. And you also have an event coming up and in the summer of next year called The Halvening where basically the supply that's produced by miners is going to get cut in half and so if you believe in the stock the flow type models of valuation for Bitcoin that is usually a very big driver of price appreciation.
Buck: I believe May of 2020, right?
Zac: That's right.
Buck: In May of 2020. Can you just talked a little bit about that just so people know because people hear about it, I've been talking about it but I don't think that it really explained it.
Zac: Yeah and you know I'm not I'm not a computer scientist so I can explain it in a you know in a very simple…
Buck: No one else here is either.
Zac: So basically the way that new Bitcoin is created is through this process called mining. And it's analogous to mining gold except instead of finding a place in the earth where gold exists and then getting your trucks and mining equipment and digging it out of the ground, the way bitcoin is mined is using this computer program and there is now specialized computer hardware that's built specifically and optimized for mining Bitcoin. And you have this network of machines around the world where the input is energy into the mining hardware and the output is new Bitcoin and those miners are what provides the power for the payment network a Bitcoin to run and when we say that there is this event called The Halvening, what that basically means is that the output that's built into the Bitcoin program that the miners are receiving as their payment for contributing energy to the network, is going to get cut in half. So the miners are going to have the same you know relative input but the amount that they're receiving is going to get cut in half for that input. This should, if the demand side for Bitcoin remains equal, it should drive up the price and historically Bitcoin has had three of these Halvening events in its lifetime so far I believe and around each Halvening you have seen you know six months before or six months after a pretty material run up in price.
Buck: Yeah so it also goes along with that sort of that the entire idea that Bitcoin unlike you know other assets including gold is it's a deflationary asset ultimately and and that's one of the things that makes that happening really significant. Apart from and I have one more question before we get to block five which is apart from the Halvening, you know thing that's happening, what is maybe the biggest development or upcoming thing that's coming up that makes you the most bullish on the future of Bitcoin or blockchain in general?
Zac: Sure so I think I wouldn't actually point to any one specific thing, I would point to two broad trends. So one is institutional adoption and participation in the asset class and the other is better ramps for retail participation into the asset class and just focusing here you know on the US market because it really is an international story but just in the US market. In September we should have Bakkt launching their futures platform. Bakkt is owned by ICE, the Intercontinental Exchange, and there's a big core difference between their futures and the current futures that are available on the CME in that futures on Bakkt platform are going to be physically settled so that means that actual Bitcoin is going to be needed to facilitate the trading on Bakkt’s platform which does not happen on CMEs exchange so that's that should be a very positive catalyst in terms of demand for physical Bitcoin that could have an impact on the price. Also on the institutional side this year I believe earlier this year, the first pension fund made an investment into an asset management vehicle that was focused on investing in Bitcoin and private equity opportunities in the Bitcoin and blockchain sector. So that will be a trend.
Buck: Which pension fund was it?
Zac: It was in North Carolina so I think it was like the North Carolina Firefighters and the group that raised the money from them was Morgan Creek Digital it’s actually invested in BlockFi by Anthony Pompliano Twitter and Mark Yusko so that's on the institutional side. And then on the retail side you've seen FinTech companies like Square and Robin Hood offer Bitcoin trading to their users. But soon you will also have companies like TD Ameritrade E-Trade and others offer Bitcoin to their users sometimes be a partnership sometimes because they've built it directly. You also at some point might see progress made in terms of an ETF getting approved that would give retail investors in the US market exposure to Bitcoin in a really easy and familiar way. All of those things are tremendously positive catalysts and the caliber of people working on them only continues to increase. Talent was attracted into the sector very, very rapidly these days.
Buck: You know one question that leads me to is that all of this is happening with Bitcoin for the most part. Are alt coins in your opinion is that market coming back or is that something that we're gonna see probably select you know group of tokens projects emerge and then the rest will kind of just get left in the dust, what do you think?
Zac: I mean I'll tell you exactly what I'm doing with my portfolio and then I'll provide a bit more color. So my asset allocation in the crypto side of my investing is I'm like 90% Bitcoin 5% Ethereum and 5% B&B; which is the Binance right. So I'm super bullish on Bitcoin. I think that you know there's a chance that Ether makes a comeback specifically I think that a lot of the stable coins that have been launched have been built on Ethereum if you're not familiar with stable coins it's basically the concept of a dollar but on a blockchain which could be really really powerful because it creates the opportunity for the delivery of US dollar denominated financial services at a global scale not using the traditional banking rails. And then B&B; I mean Binance is the biggest and most successful exchange they have a history of innovating, creating new products, going fast and so I'm taking a bit of a flyer with them but I'm 90% Bitcoin. I don't think that I'm not bullish on any of the other all coins frankly I struggle to see you know the big upside I have heard whispers in the community that there's kind of like a new wave of altcoins 3.0 might emerge, you know could see some some good returns similar to what some of the ICOs did in 2017 but it's not an area of focus for me. So that's my view.
Buck: Yeah let's talk about BlockFi. Remind us exactly what BlockFi is.
Zac: Sure so we're a wealth management platform for crypto investors. Today we have two products that we offer. One product is analogous to a savings account from a traditional bank where you're able to earn interest on your holdings except on BlockFi, the assets instead of being dollars are bitcoin and Ether and we don't have FDIC insurance so it's not exactly the same risk profile as a savings account at a bank, but conceptually you're able to hold Bitcoin and an account with BlockFi and earn interest on it paid in Bitcoin every month. That's one product that we have. The second product that we have which you are alluding to earlier offers our clients the ability to borrow dollars secured by the value of their cryptocurrency and it's analogous to a securities backed loan or a liquidity access line in the traditional world except instead of securities we're taking Bitcoin or other digital assets as collateral and lending it rates as low as four point five lending USD that rates as low as four point five percent a year.
Buck: I wanna pick these apart a little bit if you don't mind. In terms of this savings account first of all is it just bitcoin or is it bitcoin, Ethereum?
Zac: We actually support three assets in the interest account currently Bitcoin, Ether and GUSD which is the stable coin from Gemini.
Buck: Got it. And talk about the interest because it's not one flat interest rate right it's different depending on how much cryptocurrency actually is held?
Zac: Correct so there's a tiered interest rate structure. Currently on Bitcoin for balances up to ten Bitcoin, we offer a six point two percent annual yield and for balances above ten Bitcoin it's a 2.2 percent annual yield. On Ether, for balances up to two hundred Ether it's a 3.3 percent annual yield and balances above two hundred Ether is 0.5% annual yield and for GUSD the stable coin it's an eight point six percent interest rate with no tier so yeah those are the different rates.
Buck: Why did, I mean was it just a matter of like an issue with people dumping like a thousand Bitcoin and trying to get six you know 6% of that, was it just too hard to you know make that a long-term part of the business model or why did the higher levels end up changing to a lower rate?
Zac: Sure so I wanted to function of market conditions and to it's a function of supply and demand. So we launched the interest account in March of this year. We were just starting to come out of the bear market and one of the things that happened as we switched from being in a bear market to being in a bull market is the futures switched from being in backwardation to contango which basically means that our institutional borrowers the groups that we lend to that enable us to pay the rate to depositors had less of a need they had less demand to borrow and they were willing to pay lower rates to borrow crypto than they were when we were building and planning to launch this product. The second thing that happened is we were surprised to the upside in terms of the level of interest that we received from depositors and especially depositors with very large sums of cryptocurrency. So to give you an example you know within a day or two of making the product available publicly, we had a number of groups that were depositing 5, 10, 15, 20 million dollars worth of Bitcoin and so the supply-demand that we have to manage is, the amount that we have on deposit relative to the size of this market that will borrow Bitcoin size of the market that will borrow Bitcoin is partially a function of market sentiments partially a function of number of trading venues and the liquidity profile and it's partially a function of you know BlockFi’s efforts in terms of sales and client development relationship management. So the supply side got a little bit ahead of the demand side on deposit and how much there was available to borrow so we made a few tweaks. We want to keep the 6%, 6.2% rate on Bitcoin available to as many people as possible for as long as possible so that's why we went with the tiered structure where we made it available on balances up to 10 and reduced it for balances above that.
Buck: Got it and the interest on that, when you say 6.2 percent that six point like it's all denominated in Bitcoin, you're not paying cash out right?
Zac: Correct so to use round numbers to provide an easy example you start on January first with a hundred Bitcoin in an account, by the subsequent January first you will have 106 point 2 Bitcoin in your account.
Buck: Yeah and that that's kind of neat too because then you're you know you're also getting potentially the upside of that you know I mean they made 6% but if you if you're really bullish on the market you could be potentially looking at a lot more than 6% on your money. How about in terms of the, is there like a you know do you do it sort of a month-to-month or six month or month you know year-long contracts for these things?
Zac: It's month-to-month. So the rates are subject to change on a monthly basis. We provide notifications at least a week in advance before the end of one month on what the rates will be for the subsequent month and people are able to you know withdraw any time without penalty. We reserve up to 7 days to process withdrawals but we've never taken more than one business day to process a withdrawal so they're pretty quick but not instant for security reasons and yeah it's pretty flexible.
Buck: How about the lump in the lending side how does how does that work? So now I've got like 10 Bitcoin and so I would deposit that I guess and you guys I understand that maybe that that goes into like a Gemini account or something, is that still how it works?
Zac: Correct so we have a partnership with Gemini for custody. So when you log into a BlockFi account you'll have a deposit address. When you send Bitcoin to that deposit address it actually goes directly into storage with Gemini. Gemini was the first custodian in the crypto sector to receive insurance against cyber hacks on their platform. They were also the first custodian to get to complete a SOC 2 compliance audit and they have a really long track record of custody billions of dollars worth of crypto without ever having any issues. So it goes directly to Gemini and then you're able to interact with block-wise platform to take any actions that you might deem necessary. So you can view your interest payments you can withdraw you can deposit more you can also take out a loan. So in terms of taking out a loan, if you have ten Bitcoin that's worth roughly a hundred thousand US dollars at this point in time, you can borrow up to fifty percent of that value in a US dollar loan which can be funded be a wire or stable coin and then the structure of those loans is that you make interest-only payments on the amount that you borrowed throughout the duration and you can prepay at any time without penalty.
Buck: And what's the typical you said it was four point six.
Zac: We have interest rates as low as four point five. The interest rates on borrowing USD vary according to your initial loan to value ratio. So if you have a hundred thousand dollars worth of Bitcoin we actually have three loan-to-value ratio options. You can borrow at a 50 percent initial loan-to-value ratio which would mean you're borrowing 50k, the interest rate on that will be eleven point two five, if you borrow thirty five percent of the value so 35k the interest rate is seven point nine, and if you borrow twenty five percent of the value of the interest rate is four point five percent per year.
Buck: Got it. In terms of you know the technical, so you basically pay that on a month-to-month basis and then in terms of contracts, are those also month-to-month loans or how does that work?
Zac: Those are one-year term loans well now it's the ability to renew without repaying the principal at the end of the term at current rates and our rates for those loans have always come down so far. So it's a one-year term loan BlockFi committed for a year at that rate your payments stay the same but you can prepay at any time without penalty.
Buck: Right. When do you do when would you do an actual sort of I guess a cap will call like what loan-to-value because you can go up to say you're borrowing at you know you're borrowing at the lowest rate you know you're at 4.5% you're borrowing see you know just for round numbers 100 Bitcoin you borrowed or you said 10 Bitcoin hundred thousand dollars but you only borrowed twenty-five thousand dollars at four point five percent, what if Bitcoin you know loses 50 percent of its value then what happens?
Zac: Well you wouldn't have a margin call based on on that example. If your loan to value ratio hits 70 percent that's when we have a margin call and the way the margin call works is our clients have the option to either post more collateral, pay down the loan using USD or some of the collateral that's posted for the loan or take no action. If they take no action there's a 72-hour window where we'll wait to see if the price recovers, if it does then no action is required, if the price keeps going down further then we will initiate a partial collateral sale to rebalance that LTV to a healthy level at the end of that window.
Buck: So in terms of the clients that you see doing this kind of stuff, I mean who are you seeing borrowing because you don't have a cap I mean you can on the borrow side, I mean and the rates don't really change like if you're depositing a hundred Bitcoin you're getting the same rate differences as somebody who's depositing ten for borrowing right?
Zac: That's right.
Buck: So who are the people who are putting I mean what are these businesses that are putting are using these loans who are the typical clients?
Zac: Sure so it's a mix of retail and corporate. On the retail side we actually did a survey recently on use cases and the number one use case about a third of our borrowers expressed is that they were using the funds that they borrowed to start a business, which we were really excited about. So the other popular use cases were investing in real estate, investing in other types of traditional assets like stocks and bonds, home improvement, larger purchases, vacations were all used cases, paying down higher cost debt was another use case, and then on the corporate side the loans are used for operating capital. So we have some mining companies that borrow from BlockFi. Other types of companies who you know maybe have crypto denominated inventory like exchanges or crypto ATM businesses our frequent borrowers from BlockFi and our loan sizes rearranged from you know as low as five thousand dollars all the way up to seven figures. So it's a pretty diverse group of borrowers.
Buck: So recently it sounds like you guys partnered with another company called Casa. What is Casa and I guess how does that benefit both companies?
Zac: Sure. So Casa is a leader in fighting self sovereign storage solutions for cryptocurrency owners so if you're alone that owns Bitcoin and to use a gold analogy. If you want to own gold but you keep it in your vault or in your backyard you want to have physical possession of it yourself if you want to do that same type of custody with Bitcoin. Casa has a solution that makes that really easy. Our partnership with Casa provides mutual benefits to clients on either side. So Casa clients are able to receive some discounts in terms of accessing BlockFi products and vice-versa BlockFi clients are able to receive discounts in terms of accessing kasam products and over time we'll build some things in to the user experience specifically on Casa’s platform that will make it you know a bit more seamless to interact with BlockFi products while you're on their platform. In general that partnership strategy is something that you'll see more of we think there are in the ecosystem that are specializing in areas that BlockFi's not focused on and doing things where we can provide benefits to clients on both sides is a win-win for us then and our clients.
Buck: Last thing I want to ask you about, last time I spoke to you, you had talked about the idea of potentially Bitcoin backed credit cards meaning like you know getting Bitcoin back instead of miles or dollars back. You guys any closer to that, because I definitely want one of those cards.
Zac: I'm so glad you brought it up. We're definitely closer, but we're not you're not going to have the card until like Q3 of next year probably. It's getting worked on, these things you know for better or worse they take a long time launching a credit program is no small feat you know we're working on it. We've identified some of the key partners that we'll be working with to bring that product to market it is going to happen and I share your sentiment like I wish I had it now.
Buck: Yeah seriously that'd be great. Well listen it was great talking you. So it's BlockFi.com and it's spelled like block and then fi and tell us you know tell us the process of doing is pretty simple okay how long does it take to apply for these things…
Zac: Yeah I mean nothing takes any time really. So you could come in and start earning interest and get a loan from us all in under five minutes. And we also have a client service team that's super responsive in in terms of communication however you want to communicate with them, over email, over the phone, over text message so you know don't don't hesitate to reach out to us. We're also on twitter. My twitter handle is BlockFiZac and our company twitter handle is @therealBlockFi so we're very active on those platforms and happy to chat with you there as well.
Buck: Zac Prince, thank you very much for being on Wealth Formula Podcast today.
Zac: Thanks for having me, Buck, I appreciate it.
Buck: We’ll be right back.

Catch the full episode: https://www.wealthformula.com/podcast/179-buy-borrow-and-die-bitcoin-style/
Buck: Welcome back to the show everyone. Today my guest on Wealth Formula Podcast is Zack Prince. He's Founder and CEO of BlockFi. BlockFi bridges the gap between blockchain and the basic financial products that you're used to including interest-bearing accounts and loans. Zack, welcome to Wealth Formula Podcast. I think you we might have had you on before as a Consensus Network replay but first time on Wealth Formula Podcast specifically, so welcome.
Zac: Yeah, excited to be here, Buck. Thanks for having me. And it's good to chat with you again
Buck: Yeah so remind me how you got into this you know Bitcoin stuff in the first place, I mean you were as I understand you were a traditional finance guy right so where did the blockchain part come in?
Zac: Sure so I was I was working at a company in the FinTech world that provided data and technology solutions to institutional investors that wanted to participate in some of the new online lending platforms, whether they were real estate platforms or consumer lending platforms, and I kind of became the FinTech guy amongst my friend group and people would ask me you know should I invest in these real estate deals on fund rise or buy loans from Lending Club and I started writing a blog to share the information more efficiently with my friends basically and I started expanding a little bit writing about Robo advisory and some other things that were going on in the FinTech space and that's what led me to Bitcoin, and this is back in early 2015. I didn't start BlockFi until 2017 because I started following the market in the background, still working in traditional financial services in FinTech and then in early 2017 it started to feel like mainstream adoption was starting to happen in the crypto ecosystem. I'm started going to some meetups in New York City because at a certain point my wife said Zac, you're talking about crypto all the time and you're talking to me about it and I don't want to talk about it so you should find some other people to talk about this with. And the meetup composition started to change and in 2016 when I started going to these meetups it was the early crypto adopters you know libertarians, computer scientists and then in early 2017 I started to see some venture capitalists, some guys who had just left their job at Wall Street still wearing a suit, some more entrepreneurs and it was a really exciting time in the ecosystem, things like the Enterprise Ethereum Alliance were getting announced which had participation microsoft and a lot of other you know fortune 500 companies and I had started to believe in it. I was drinking the kool-aid a little bit so I decided to find a way to get involved in the space full-time and that's what led me to start BlockFi.
Buck: So I have to imagine that the response you got from the traditional finance people around that time when you started talking about the blockchain space and when you started being more and more involved with that was probably not a very positive response initially or did you did you experience some of that sort of you know rejection initially to what you were doing?
Zac: Yeah absolutely. But you know throughout my career this is now kind of the third emerging technology industry that I've worked in. I was originally an advertising technology starting like you know 15 years ago and I was in FinTech specifically the online lending side of FinTech which in its early days was called peer-to-peer lending and now in crypto. So having to do a lot of education explain it you know why something isn't crazy and it might work and here's why and here's the value proposition and here's what it is, I've gotten very used to that and comfortable with it. But yeah there were a lot of people who are like you know I've heard Bitcoin is only used by drug dealers and money launderers. I've heard that I'm supposed to care about blockchain and not Bitcoin. And you know at BlockFi we’re providing financial products into the market so it's a heavily regulated business so we also had to communicate with regulators. We had to explain to state regulators, federal regulators why what we were doing with Bitcoin and other cryptos than when you're doing these same types of things with assets that they're more familiar with.
Buck: So when you were talking to people back in, I don't know I guess 2016/17 and it's not a long time ago, it's only two years ago, but I have to imagine that the response or the you know the approach that people take to you when you speak to investors is very different. Has it become more mainstream in that regard for you know for big money investors?
Zac: It's absolutely become more mainstream you know the end of 2017 Q3/Q4. Point was going on that parabolic run it started to get covered everywhere, I mean it was on CNBC every day it was in Bloomberg New York Times Wall Street Journal. If you were paying attention to the financial industry and markets you heard about Bitcoin at that time if you hadn't heard about it before. So from a baseline of awareness perspective it got a lot better and then in 2018 you had a number of positive developments for the sector including one that I think is probably the most noteworthy which is that Bitcoin futures were listed on the CME the institutional investor perspective that's massive. You now have a well regulated well known super trustworthy venue where you can get exposure to this asset class, you also had companies like Grayscale bringing products to the market which are accessible to certain types of investors and their low bridge accounts and you started to see some adoption from companies like FinTech companies like Robin Hood and Square making Bitcoin available on their platforms. So the conversation has absolutely changed a lot and it's become less about whether or not this is something that's going to continue to exist whether or not it's something that was just a bubble and is going to die and now it's more about ok how is it going to get used how big could it get what are the interesting applications of it and what could have potentially disrupt in the traditional financial ecosystem.
Buck: So you know we had obviously following this you know pop in 2017, you know I actually like you kind of really got into this early 2017 so timing was pretty good I guess now regards. Good or bad depending how you look at it but I was there before before the parabolic move. And then we have you know then we followed this up with a crypto winter and and you know who knows if we're done with it, I guess we certainly are much better off than we were. You know a unit buddy it's funny Zac I don’t know if you remember this but I was about to, we'll talk about BlockFi specifically in a minute but, I was about to use BlockFi for borrowing because I like this idea of borrowing you know collateralized debt and collateralized debt on assets and buying something else. So I was about to do it and then Bitcoin lost a clip and I was like literally and I remember I was just emailing with somebody somebody over there and I was like sorry dude I guess I just sold it, I just sold all that Bitcoin I had and you sent one email back to me and it said “capitulation” but it you know and so now we're looking back at these we go down from 3,000 back up you know been sort of flirting around this 10,000 and it seems like we're kind of maybe that we're stuck there, maybe we're kind of out of winter, maybe we're in a holding pattern but it seems like to me that since that two years not only is the awareness increase but the development of the ecosystem itself is so much further advanced than it was in 2017. Is this an unusual case where the technology and maybe even the infrastructure is actually outpacing the price?
Zac: You know it's really hard to say. I would argue that in some ways it's typical. In other industries that showed a lot of promise where investors could you know participate maybe a little bit ahead of the adoption curve you saw crazy price run ups with the tech bubble and you know ‘99-2000 being the one that's kind of top of mind in recent memory and then on the other side of things, are we behind where the price should be now? It's really hard to say because this is kind of like a commodity type asset built on a payment network and valuing that is challenging and there's not a perfect model for for doing it today. It's not as easy as something that's cashflow producing but I'm incredibly bullish. I'm on record as saying at the beginning of this year that Bitcoin has only had one year in its 10-year existence where it had a lower low than the year before and parted this year around the low price for 2018 and I predicted that we would in the year had a higher price than where we started the year pretty soon and now we're up and you know around 300 percent from where we started the year. As that happens in investing is people frequently look at things on a year-to-year performance basis and when people are looking at Bitcoin even if all we do is stay around 10 K from here when they're looking at how Bitcoin performed rather than other relative to other assets at the end of 2019 it's probably going to look fantastic. And you also have an event coming up and in the summer of next year called The Halvening where basically the supply that's produced by miners is going to get cut in half and so if you believe in the stock the flow type models of valuation for Bitcoin that is usually a very big driver of price appreciation.
Buck: I believe May of 2020, right?
Zac: That's right.
Buck: In May of 2020. Can you just talked a little bit about that just so people know because people hear about it, I've been talking about it but I don't think that it really explained it.
Zac: Yeah and you know I'm not I'm not a computer scientist so I can explain it in a you know in a very simple…
Buck: No one else here is either.
Zac: So basically the way that new Bitcoin is created is through this process called mining. And it's analogous to mining gold except instead of finding a place in the earth where gold exists and then getting your trucks and mining equipment and digging it out of the ground, the way bitcoin is mined is using this computer program and there is now specialized computer hardware that's built specifically and optimized for mining Bitcoin. And you have this network of machines around the world where the input is energy into the mining hardware and the output is new Bitcoin and those miners are what provides the power for the payment network a Bitcoin to run and when we say that there is this event called The Halvening, what that basically means is that the output that's built into the Bitcoin program that the miners are receiving as their payment for contributing energy to the network, is going to get cut in half. So the miners are going to have the same you know relative input but the amount that they're receiving is going to get cut in half for that input. This should, if the demand side for Bitcoin remains equal, it should drive up the price and historically Bitcoin has had three of these Halvening events in its lifetime so far I believe and around each Halvening you have seen you know six months before or six months after a pretty material run up in price.
Buck: Yeah so it also goes along with that sort of that the entire idea that Bitcoin unlike you know other assets including gold is it's a deflationary asset ultimately and and that's one of the things that makes that happening really significant. Apart from and I have one more question before we get to block five which is apart from the Halvening, you know thing that's happening, what is maybe the biggest development or upcoming thing that's coming up that makes you the most bullish on the future of Bitcoin or blockchain in general?
Zac: Sure so I think I wouldn't actually point to any one specific thing, I would point to two broad trends. So one is institutional adoption and participation in the asset class and the other is better ramps for retail participation into the asset class and just focusing here you know on the US market because it really is an international story but just in the US market. In September we should have Bakkt launching their futures platform. Bakkt is owned by ICE, the Intercontinental Exchange, and there's a big core difference between their futures and the current futures that are available on the CME in that futures on Bakkt platform are going to be physically settled so that means that actual Bitcoin is going to be needed to facilitate the trading on Bakkt’s platform which does not happen on CMEs exchange so that's that should be a very positive catalyst in terms of demand for physical Bitcoin that could have an impact on the price. Also on the institutional side this year I believe earlier this year, the first pension fund made an investment into an asset management vehicle that was focused on investing in Bitcoin and private equity opportunities in the Bitcoin and blockchain sector. So that will be a trend.
Buck: Which pension fund was it?
Zac: It was in North Carolina so I think it was like the North Carolina Firefighters and the group that raised the money from them was Morgan Creek Digital it’s actually invested in BlockFi by Anthony Pompliano Twitter and Mark Yusko so that's on the institutional side. And then on the retail side you've seen FinTech companies like Square and Robin Hood offer Bitcoin trading to their users. But soon you will also have companies like TD Ameritrade E-Trade and others offer Bitcoin to their users sometimes be a partnership sometimes because they've built it directly. You also at some point might see progress made in terms of an ETF getting approved that would give retail investors in the US market exposure to Bitcoin in a really easy and familiar way. All of those things are tremendously positive catalysts and the caliber of people working on them only continues to increase. Talent was attracted into the sector very, very rapidly these days.
Buck: You know one question that leads me to is that all of this is happening with Bitcoin for the most part. Are alt coins in your opinion is that market coming back or is that something that we're gonna see probably select you know group of tokens projects emerge and then the rest will kind of just get left in the dust, what do you think?
Zac: I mean I'll tell you exactly what I'm doing with my portfolio and then I'll provide a bit more color. So my asset allocation in the crypto side of my investing is I'm like 90% Bitcoin 5% Ethereum and 5% B&B; which is the Binance right. So I'm super bullish on Bitcoin. I think that you know there's a chance that Ether makes a comeback specifically I think that a lot of the stable coins that have been launched have been built on Ethereum if you're not familiar with stable coins it's basically the concept of a dollar but on a blockchain which could be really really powerful because it creates the opportunity for the delivery of US dollar denominated financial services at a global scale not using the traditional banking rails. And then B&B; I mean Binance is the biggest and most successful exchange they have a history of innovating, creating new products, going fast and so I'm taking a bit of a flyer with them but I'm 90% Bitcoin. I don't think that I'm not bullish on any of the other all coins frankly I struggle to see you know the big upside I have heard whispers in the community that there's kind of like a new wave of altcoins 3.0 might emerge, you know could see some some good returns similar to what some of the ICOs did in 2017 but it's not an area of focus for me. So that's my view.
Buck: Yeah let's talk about BlockFi. Remind us exactly what BlockFi is.
Zac: Sure so we're a wealth management platform for crypto investors. Today we have two products that we offer. One product is analogous to a savings account from a traditional bank where you're able to earn interest on your holdings except on BlockFi, the assets instead of being dollars are bitcoin and Ether and we don't have FDIC insurance so it's not exactly the same risk profile as a savings account at a bank, but conceptually you're able to hold Bitcoin and an account with BlockFi and earn interest on it paid in Bitcoin every month. That's one product that we have. The second product that we have which you are alluding to earlier offers our clients the ability to borrow dollars secured by the value of their cryptocurrency and it's analogous to a securities backed loan or a liquidity access line in the traditional world except instead of securities we're taking Bitcoin or other digital assets as collateral and lending it rates as low as four point five lending USD that rates as low as four point five percent a year.
Buck: I wanna pick these apart a little bit if you don't mind. In terms of this savings account first of all is it just bitcoin or is it bitcoin, Ethereum?
Zac: We actually support three assets in the interest account currently Bitcoin, Ether and GUSD which is the stable coin from Gemini.
Buck: Got it. And talk about the interest because it's not one flat interest rate right it's different depending on how much cryptocurrency actually is held?
Zac: Correct so there's a tiered interest rate structure. Currently on Bitcoin for balances up to ten Bitcoin, we offer a six point two percent annual yield and for balances above ten Bitcoin it's a 2.2 percent annual yield. On Ether, for balances up to two hundred Ether it's a 3.3 percent annual yield and balances above two hundred Ether is 0.5% annual yield and for GUSD the stable coin it's an eight point six percent interest rate with no tier so yeah those are the different rates.
Buck: Why did, I mean was it just a matter of like an issue with people dumping like a thousand Bitcoin and trying to get six you know 6% of that, was it just too hard to you know make that a long-term part of the business model or why did the higher levels end up changing to a lower rate?
Zac: Sure so I wanted to function of market conditions and to it's a function of supply and demand. So we launched the interest account in March of this year. We were just starting to come out of the bear market and one of the things that happened as we switched from being in a bear market to being in a bull market is the futures switched from being in backwardation to contango which basically means that our institutional borrowers the groups that we lend to that enable us to pay the rate to depositors had less of a need they had less demand to borrow and they were willing to pay lower rates to borrow crypto than they were when we were building and planning to launch this product. The second thing that happened is we were surprised to the upside in terms of the level of interest that we received from depositors and especially depositors with very large sums of cryptocurrency. So to give you an example you know within a day or two of making the product available publicly, we had a number of groups that were depositing 5, 10, 15, 20 million dollars worth of Bitcoin and so the supply-demand that we have to manage is, the amount that we have on deposit relative to the size of this market that will borrow Bitcoin size of the market that will borrow Bitcoin is partially a function of market sentiments partially a function of number of trading venues and the liquidity profile and it's partially a function of you know BlockFi’s efforts in terms of sales and client development relationship management. So the supply side got a little bit ahead of the demand side on deposit and how much there was available to borrow so we made a few tweaks. We want to keep the 6%, 6.2% rate on Bitcoin available to as many people as possible for as long as possible so that's why we went with the tiered structure where we made it available on balances up to 10 and reduced it for balances above that.
Buck: Got it and the interest on that, when you say 6.2 percent that six point like it's all denominated in Bitcoin, you're not paying cash out right?
Zac: Correct so to use round numbers to provide an easy example you start on January first with a hundred Bitcoin in an account, by the subsequent January first you will have 106 point 2 Bitcoin in your account.
Buck: Yeah and that that's kind of neat too because then you're you know you're also getting potentially the upside of that you know I mean they made 6% but if you if you're really bullish on the market you could be potentially looking at a lot more than 6% on your money. How about in terms of the, is there like a you know do you do it sort of a month-to-month or six month or month you know year-long contracts for these things?
Zac: It's month-to-month. So the rates are subject to change on a monthly basis. We provide notifications at least a week in advance before the end of one month on what the rates will be for the subsequent month and people are able to you know withdraw any time without penalty. We reserve up to 7 days to process withdrawals but we've never taken more than one business day to process a withdrawal so they're pretty quick but not instant for security reasons and yeah it's pretty flexible.
Buck: How about the lump in the lending side how does how does that work? So now I've got like 10 Bitcoin and so I would deposit that I guess and you guys I understand that maybe that that goes into like a Gemini account or something, is that still how it works?
Zac: Correct so we have a partnership with Gemini for custody. So when you log into a BlockFi account you'll have a deposit address. When you send Bitcoin to that deposit address it actually goes directly into storage with Gemini. Gemini was the first custodian in the crypto sector to receive insurance against cyber hacks on their platform. They were also the first custodian to get to complete a SOC 2 compliance audit and they have a really long track record of custody billions of dollars worth of crypto without ever having any issues. So it goes directly to Gemini and then you're able to interact with block-wise platform to take any actions that you might deem necessary. So you can view your interest payments you can withdraw you can deposit more you can also take out a loan. So in terms of taking out a loan, if you have ten Bitcoin that's worth roughly a hundred thousand US dollars at this point in time, you can borrow up to fifty percent of that value in a US dollar loan which can be funded be a wire or stable coin and then the structure of those loans is that you make interest-only payments on the amount that you borrowed throughout the duration and you can prepay at any time without penalty.
Buck: And what's the typical you said it was four point six.
Zac: We have interest rates as low as four point five. The interest rates on borrowing USD vary according to your initial loan to value ratio. So if you have a hundred thousand dollars worth of Bitcoin we actually have three loan-to-value ratio options. You can borrow at a 50 percent initial loan-to-value ratio which would mean you're borrowing 50k, the interest rate on that will be eleven point two five, if you borrow thirty five percent of the value so 35k the interest rate is seven point nine, and if you borrow twenty five percent of the value of the interest rate is four point five percent per year.
Buck: Got it. In terms of you know the technical, so you basically pay that on a month-to-month basis and then in terms of contracts, are those also month-to-month loans or how does that work?
Zac: Those are one-year term loans well now it's the ability to renew without repaying the principal at the end of the term at current rates and our rates for those loans have always come down so far. So it's a one-year term loan BlockFi committed for a year at that rate your payments stay the same but you can prepay at any time without penalty.
Buck: Right. When do you do when would you do an actual sort of I guess a cap will call like what loan-to-value because you can go up to say you're borrowing at you know you're borrowing at the lowest rate you know you're at 4.5% you're borrowing see you know just for round numbers 100 Bitcoin you borrowed or you said 10 Bitcoin hundred thousand dollars but you only borrowed twenty-five thousand dollars at four point five percent, what if Bitcoin you know loses 50 percent of its value then what happens?
Zac: Well you wouldn't have a margin call based on on that example. If your loan to value ratio hits 70 percent that's when we have a margin call and the way the margin call works is our clients have the option to either post more collateral, pay down the loan using USD or some of the collateral that's posted for the loan or take no action. If they take no action there's a 72-hour window where we'll wait to see if the price recovers, if it does then no action is required, if the price keeps going down further then we will initiate a partial collateral sale to rebalance that LTV to a healthy level at the end of that window.
Buck: So in terms of the clients that you see doing this kind of stuff, I mean who are you seeing borrowing because you don't have a cap I mean you can on the borrow side, I mean and the rates don't really change like if you're depositing a hundred Bitcoin you're getting the same rate differences as somebody who's depositing ten for borrowing right?
Zac: That's right.
Buck: So who are the people who are putting I mean what are these businesses that are putting are using these loans who are the typical clients?
Zac: Sure so it's a mix of retail and corporate. On the retail side we actually did a survey recently on use cases and the number one use case about a third of our borrowers expressed is that they were using the funds that they borrowed to start a business, which we were really excited about. So the other popular use cases were investing in real estate, investing in other types of traditional assets like stocks and bonds, home improvement, larger purchases, vacations were all used cases, paying down higher cost debt was another use case, and then on the corporate side the loans are used for operating capital. So we have some mining companies that borrow from BlockFi. Other types of companies who you know maybe have crypto denominated inventory like exchanges or crypto ATM businesses our frequent borrowers from BlockFi and our loan sizes rearranged from you know as low as five thousand dollars all the way up to seven figures. So it's a pretty diverse group of borrowers.
Buck: So recently it sounds like you guys partnered with another company called Casa. What is Casa and I guess how does that benefit both companies?
Zac: Sure. So Casa is a leader in fighting self sovereign storage solutions for cryptocurrency owners so if you're alone that owns Bitcoin and to use a gold analogy. If you want to own gold but you keep it in your vault or in your backyard you want to have physical possession of it yourself if you want to do that same type of custody with Bitcoin. Casa has a solution that makes that really easy. Our partnership with Casa provides mutual benefits to clients on either side. So Casa clients are able to receive some discounts in terms of accessing BlockFi products and vice-versa BlockFi clients are able to receive discounts in terms of accessing kasam products and over time we'll build some things in to the user experience specifically on Casa’s platform that will make it you know a bit more seamless to interact with BlockFi products while you're on their platform. In general that partnership strategy is something that you'll see more of we think there are in the ecosystem that are specializing in areas that BlockFi's not focused on and doing things where we can provide benefits to clients on both sides is a win-win for us then and our clients.
Buck: Last thing I want to ask you about, last time I spoke to you, you had talked about the idea of potentially Bitcoin backed credit cards meaning like you know getting Bitcoin back instead of miles or dollars back. You guys any closer to that, because I definitely want one of those cards.
Zac: I'm so glad you brought it up. We're definitely closer, but we're not you're not going to have the card until like Q3 of next year probably. It's getting worked on, these things you know for better or worse they take a long time launching a credit program is no small feat you know we're working on it. We've identified some of the key partners that we'll be working with to bring that product to market it is going to happen and I share your sentiment like I wish I had it now.
Buck: Yeah seriously that'd be great. Well listen it was great talking you. So it's BlockFi.com and it's spelled like block and then fi and tell us you know tell us the process of doing is pretty simple okay how long does it take to apply for these things…
Zac: Yeah I mean nothing takes any time really. So you could come in and start earning interest and get a loan from us all in under five minutes. And we also have a client service team that's super responsive in in terms of communication however you want to communicate with them, over email, over the phone, over text message so you know don't don't hesitate to reach out to us. We're also on twitter. My twitter handle is BlockFiZac and our company twitter handle is @therealBlockFi so we're very active on those platforms and happy to chat with you there as well.
Buck: Zac Prince, thank you very much for being on Wealth Formula Podcast today.
Zac: Thanks for having me, Buck, I appreciate it.
Buck: We’ll be right back.