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Where to Get Started if You Want to Invest in Crypto? | Cédric Waldburger

August 14, 2019


Hey.
So, today I want to talk about a few things
that I mentioned in a talk last week at an
event called “Women Shape Tech.”
It was called “Women Invest,” that is
an event dedicated to different ideas on investments.
I went there and had the opportunity to talk
a few minutes about the basics of investing
in cryptocurrencies.
This is, by no means, any financial advice,
investment advice or personal advice, or just
my personal view on what kind of steps you
could go through when you’re assessing a
cryptocurrency investment.
And with that welcome to Inside DFINITY Episode
Number Zero Zero Two!
So, I’m sure if you’re listening to this,
you’ve probably thought about investing into
cryptocurrencies, into tokens and coins, or
if not, you have such an incredible curiosity
for the space that, at least, that’s something
that has crossed your mind or at some point
surfaced in your newsfeed.
Last year was an incredible year for anyone
who invested in crypto-currencies.
Just Ethereum alone, I think, did about hundred
X from start of the year till the end of the
year interests in various ICOs that have seen
huge gains.
Of course, it can always continue like that.
And the market this year is a lot flatter
without checking the actual price of today
at about 50 percent of last year’s high which
was in December.
I think that’s a great development because
things cannot just always keep moving upwards
and, kind of like, almost approach a vertical
increase.
So I think it’s great that things have cooled
down a bit without actually crashing to like
a tenth or a hundredth of the value of the
last year.
It has just gone back to something that is
a bit more normal and stable compared to what
was going on last year.
Okay, so let’s say you heard of this and you
wanted to invest in this new space, you believe
that all these new internet computers coming
out and all these different technologies will
largely appreciate in value over the next
few years and you would like to get an idea
of how can you actually invest in those coins
and if so, on a very high level of what are
some websites and information to look at.
So the first website is called CoinMarketCap.com.
CoinMarketCap pretty much does what the name
says.
It lists the whole market capitalization in
this market.
So, it shows you a number of cryptocurrencies,
coins and tokens; and it gives you their current
price amongst many-many different exchanges,
it shows you a recent development over the
past 24 hours or longer, and a few more info.
Now this is how CoinMarketCap looks like,
if you were to go there right now.
And what you see is at the beginning it shows
you the top 100 crypto-currencies by market
cap, i.e. meaning by size.
So if you take all coins times their current
value, you end up with the market capitalization
for a certain coin or token.
Now let’s look at a few numbers in the areas
on this site that you’ll see.
So, at the very top you see a few numbers:
you see cryptocurrencies, fifteen hundred
and ninety-six.
What that means is there is a total of 1500
or almost 1600 different projects that are
currently listed on CoinMarketCap.com that
are indexed on this site.
One of the most frequent questions that I’m
asked is “Why do we need so many different
coins?”
I think the simple answer is “We don’t.
We’ll probably need some variety of tokens
and coins to do different things with them.
But it’s also very easy to launch a coin and
to copy current technology, and just launch
your own network and give it a new name”.
So there’s definitely a lot of them that are
in the long tail meaning that vast majority
of the market capitalization of the total
value of the space is comprised of very-very
few crypto-currencies and tokens.
Number Two.
The second number that you’ll see there is
markets: 11302.
So, even more than different coins, there
are different markets.
What that means it’s places where you can
go and exchange one coin for another, or even
fiat for a token or a coin.
We’ll briefly touch on the subject later
on.
But again here, I think, there are some very-very
large players that occupy far more than 80%
of the market, and then there are kind of
smaller exchanges that occupy remaining 20%
of the market.
Okay.
Next number is Market Cap.
On this screenshot, it was 246 billion dollars.
What that means is if you take those 1,500
coins and you multiply each and every coin
in those different networks by the current
price, you end up with 250 billion dollars.
Now does that mean if everyone were to sell
their tokens a total of $250 will change hands?
Probably not.
With supply and demand if suddenly there was
so much supply of all these tokens, markets
will become completely illiquid and prices
will crash.
The Forth Number: 24 hour volume.
So on this day here: there’s roughly 10 billion
in 24-hour value, meaning about 10 billion
dollars, worth of coins and tokens on that
day actually changed hands, i.e. were exchanged
at one of these exchanges.
And last numbers that are super interesting
to look at – Bitcoin dominance: forty two
point five percent.
What that means is that out of the two hundred
and forty six billion dollars that a total
market is worth, more than forty percent is
dedicated to Bitcoin.
So, Bitcoin is still even though it’s old
technology, even though it’s been around for
almost ten years now, it’s still the most
valuable crypto asset in this space.
Okay.
You’ve probably heard me say “coins and
tokens” a ton of times and you might be
confused why that is like the terms, at first,
sound very-very similar, it’s easy to confuse
them.
Here’s the difference: a coin means it’s its
own network, it’s its own technology, and
it’s its own separate blockchain.
So something like Bitcoin, and Ethereum, and
Stellar, and Ripple – they’re all separate
blockchains and that’s why they’re called
coins.
On the other hand, we have tokens.
Tokens are basically just fixed and are launched
on top of an existing blockchain.
So, for example, on the Ethereum blockchain
you have smart contracts that can govern ICO,
i.e. they receive ETH and, in return, they
dedicate a certain amount of their own token
to your project.
An example could be EOS: until they launch
their real network, they’ve launched something
what’s called an ERC20 token, which means
that token lives on top of Ethereum.
Now, why do I point this out?
I think it’s important to understand the difference
especially when it comes to investment.
What’s important is that a token for me is
always a multiplied risk.
It means that the underlying infrastructure
needs to succeed plus the project, on top
of it, needs to succeed.
Now with the EOS it’s different because they
only launch this until they launch their own
blockchain.
But there’s plenty of projects and protocols
and ideas that launch on Ethereum and plan
to stay on top of Ethereum for the next few
months or years.
So, it’s important to keep in mind that in
these kinds of projects tokens are usually
more risky because they live on top of another
technology.
In a way, you multiply the risk of that infrastructure
to succeed times the risk of that particular
project to succeed.
That’s one of the reasons why I am personally
not very convinced of investing into applications
on blockchain right now because I think the
fundamental infrastructures are just not there
yet or, at least, it’s not clear which player
will gain most of the market share.
Now, let’s look at the actual list with front
and center if you go to CoinMarketCap.com.
So what you’ll see is a list of tokens currently
ordered by their market capitalization.
And you’ll find a lot of the numbers that
we’ve already discussed in the header – in
each row for each crypto-currency.
So, you’ll see that Bitcoin currently is at
the top, Ethereum comes in second when it
comes to market cap, and third is Ripple.
And you’ll see the market cap, you’ll see
the last price for each of those coins, you
will see the volume.
So, interesting here as well is that we earlier
said that there’s a 10-billion, 24-volume
overall and Bitcoin that has in terms of market
cap has a dominance of 42 percent.
But if we look here now, Bitcoin only had
about 32% dominance when it comes to volume.
So other coins were more heavily traded proportional
to their market cap.
Circulating supply is an interesting number
because you’ll see that there’s a vast difference
in how many tokens a certain network has.
So looking at the token price is never a good
indicator to understand if that’s a good buy
or not.
Market capitalization is a much better indicator
of how widespread and how big a token already
is, and how much the project is worth.
Imagine like there’s Bitcoin which currently
is worth about $6,000 and there’s a total
of 17 million Bitcoins outstanding right now.
Now, imagine someone launches the exact same
technology, the exact same parameters just
like Bitcoin but makes it so that what was
previously one Bitcoin is now ten Bitcoins.
That would mean – there’s a hundred and seventy
million Bitcoins out there, outstanding and
the price would only be six hundred dollars.
But it’s the exact same technology, it’s the
exact same mechanics.
The total market cap has not changed, so always
make sure to double check these two things:
market cap and a token price before you make
a decision.
And, then, of course you’ll see that there’s
also 24-hour change and a small price graph.
Now the 24-hour change.
What’s interesting is that you’ll see how
many coins follow Bitcoin.
Or, let’s say generally, top five – they – have
a lot of influence on the rest of the market:
if Bitcoin, Ethereum and Ripple dropped then
rest of the market will also be in the reds;
whereas, if these do well, chances are all
the other tokens and coins will do well as
well.
All right, moving on.
So, now we’re clicking on one of these coins.
And in this case I clicked on Stellar.
Stellar is another smart contract platform.
I think it’s quite promising.
You’ll see here one example for a token price
that is far-far lower than Bitcoin.
It’s only about 18 cents right now, but you’ll
also see that there’s almost a thousand more
Stellar out there than there are Bitcoins:
there’s about 18 billion Stellar’s well there’s
only about 17 million Bitcoins that have currently
been mined.
And, then, on the left side here you see all
the other name that CoinMarketCap that will
give you access to – you can jump to their
website, to their announcements, a messaging
board, and a few more things.
But now we’re going to go back and choose
in the header and go to Markets.
Now this page is also super interesting, it
lists all the markets that currently trade
Stellar.
What you’ll notice here is when you think
of the Forex market, you will mostly see stocks
against some currencies, some fiat currency.
Let’s say Nestle against Swiss francs, or
US dollars or Euros, or I don’t know Lufthansa
against yours.
What you will almost never see something like
Lufthansa against Nestle.
That’s quite common in the crypto world – so,
most of these tokens and the vast majority
of them, they’re not tradable on an exchange
that trades them directly against fiat but
they are tradable on cryptocurrency exchanges
that allow you to trade them against other
cryptocurrencies, coins and tokens.
And so you’ll see here.
It’s ordered by Volume, you’ll see that almost
12 million dollars of Stellar changed hands
within the last 24 hours, but they weren’t
changed against dollars: they were exchanged
against Bitcoin on an exchange called Binance.
Also very important to see here, in third
place, it’s also Binance and there is a roughly
3 million exchange of Stellar against USDT.
Now, USDT is not the US dollars that’s Tether.
Tether is a company that mirrors the real-life
fiat currency like US dollar onto the blockchain.
So in this case, their idea is that one token
is a token because it lives on Ubik, i.e.
it’s one of these projects that sit on top
some other technology.
The idea behind Tether is to provide a stable
coin because in theory there’s one U.S. dollar
in a bank account for every USD Tether that
exists.
The idea is that this coin should always have
a value of pretty much one U.S. dollar.
Historically, that’s proven to be true but
there’s also all kinds of mysteries, ideas
and myths about whether or not this bank account
with such a large US dollar supply actually
exists.
All right, moving on.
So, we’ve talked about where you can acquire
your Cryptos in case you’ve made a decision
to buy.
You can head over to exchanges.
Here are a few of the big ones: Coinbase,
Kraken, and Binance.
These all have huge volumes, they all list
ton of coins and tokens, these all allow you
to exchange fiats vs. crypto, and vice versa.
But, of course, there’s also a more peer-to-peer
way to do this.
For example, you could buy and sell bitcoins
or any other crypto currency over a page called
Local Bitcoins, or Local Ethereum, or they
have many derivatives depending on which currency
they’re selling.
Where if you own some Ethereum, you can go
on there and say “Hey, I’m offering this
and that” and then someone else can say
“I’m buying some bitcoins, and I want to
pay off to this or that price”.
It’s kind of like an eBay with a fixed price
like, i.e. it’s a marketplace to bring two
people together: one selling, one buying.
You can also buy crypto from your friends
out of two reasons: one – if someone of
your friends has invested a lot of money in
crypto over the past few years and gotten
rich, he might be buying stuff that he really
doesn’t need, like this oversized melon.
And then, two, there’s a crypto currency called
Melon emitted by a company called MelonPort
which is actually a Swiss company.
Right now, I think they’ve shrunken back to
the size of a golf ball roughly but sometime
last year they’ve grown to this oversized
melon.
A few more thoughts in case you want to dive
in further and see how much selling is going
on where and what prices.
Here’s a good website you can go to cryptowat.ch.
So, cryptowat.
This page offers in-depth prices and books
for a lot of currencies and a lot of exchanges
– the ones that offer them in an interface
that you might know if you’ve traded stocks
before, and you’ll find a lot of this similar
indicators and tools built into this website.
Last but not least, I think your first investment
into crypto, you should always see it as an
investment into knowledge.
If the price goes up and goes through the
roof and makes you a lot of money – great,
but be prepared that this is a very volatile
market: anything can crash in a moment.
There’s some very good questions about how
much value that actually is behind each and
every one of those tokens and coins.
There are definitely also some projects that
do not deserve that market cap they currently
have.
So, what I would always suggest is if you
want to invest in crypto, seed as money that
you pay towards learning.
And one great way that I found in the past
is to dive into a certain coin is download
this application called Blockfolio.
It lets you track crypto-currency holdings
on your phone, you can set alarms and certain
triggers.
And that way you can monitor your crypto current
holdings on the go, and I found that a great
opportunity for myself to be constantly in
mind to check up on a project, to learn more,
to dive in.
Blockfolio is now connected to any of the
exchanges.
So you can also just set up a virtual portfolio
and see how well you would do in case you
were to buy X, or Y, or C coin this weekend.
And that’s it.
This was Inside DFINITY Episode Two: my thoughts
on how to assess cryptocurrency investments.
As always, if you have comments, questions
or anything else that you would like to know,
please let me know in the comments.
If you share this video with anyone that you
think could get value out of it.
And with that, I’ll see you soon.

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1 Comment

  • Reply Arthur Falls July 10, 2018 at 7:34 pm

    Melon! Delicious!

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