CryptoBasic Podcast

Your source for all Cryptocurrency information, made for the novice investor. 

Throwing midgets at the bar wow, did you just throw your computer growth ages before i just had some ptsd, and thanks for tuning in to the crypt of basic podcast.

Peter:

I'm joined today by brunch philbin, and this episode is hopefully going to be very informative as we're actually going to be interviewing a riel life financial advisor.

Karim:

He's, a personal friend of mine for many years, and i would consider him my first crypto currency mentor.

Peter:

Welcome to the show, peter walsworth.

Mike:

Thanks for having us guys.

Karim:

Thanks for coming on, pete.

Peter:

Second, he is a financial adviser, but nothing he's about to say or were about to say it's.

Karim:

Financial advice is all for entertainment purposes.

Mike:

Please do your own research.

Karim:

I just want to point that out before we got to deep into the episode pete has been, or do you want to?

Mike:

You want to tell you, peter peter.

Peter:

Okay, so pete has been crushing the financial world for fifteen years in the global wealth management division of both morgan stanley and merrill lynch, which, or some, like tiny companies that you may have heard of in the past and he's, managed over one hundred fifty million dollars.

Mike:

That was prior to joining morgan stanley several years ago, and he's also now left it all behind for a promising career in crypto.

Peter:

Well, his little career is promising the new one's, not so much he's, now the managing partner and co ceo of digit cat partners lp, welcome to the show.

Mike:

Did i miss anything now?

Peter:

You summed it up pretty good.

Mike:

Like i said, i appreciate you guys having me on cool, so let's, ah, let's, start very, very basically, pete, how did you end up finding your way into the financial sector of your career?

Peter:

I wasn't expecting to do it.

Karim:

My major, actually, i went to college at florida state university, nineteen ninety eight, went to college.

Peter:

My initial major was extra biology for the first year and decided they did not want to do that and heard about this promising major called management information systems and management information systems essentially was a combination ofthe computer programming and computer networks.

Karim:

And as you know, the dot com bubble was just starting to warm up in the ninety eight, ninety nine, two thousand one hundred percent employment rate.

Peter:

That was not the case when i graduated in two thousand three from college because it went from essentially other extent, planet rate to zero.

Karim:

Fortunately for me, i did have a minor in finance started exploring that routes got an interview, and i was twenty two years old, fresh out of college essentially had no idea it was going i was going to do and got an interview with merrill lynch.

Peter:

Merrill lynch had basically put on a hiring freeze for the previous two years.

Karim:

They got hurt by the market going down and essentially got lucky and got hired on at maryland starting in two thousand three s o that particular major, you were kind of focusing on the specifically like the tech sector of the finance realm, yes, and fifteen years.

Peter:

Later, essentially, it's kind of come full circle.

Mike:

I never felt like i was a good program, but i basically got a c minus is just minimal i could do to pass the programming side of things.

Karim:

It really fascinated me.

Mike:

Computers fascinated me.

Karim:

And just the way the world connected in a way your network's connected the world that kind of always stuck with me and about my line.

Peter:

That sounds like an accidental, perfect primer for getting involved in crypto like that's.

Karim:

This you're like.

Mike:

This is kind of what i wanted to do, but this booming sector is over and the butcher it's gone exactly.

Karim:

And listen now we have this.

Peter:

Yeah.

Karim:

So in a way, it's, kind of like i was meant to come back to this, but i just didn't know it at the time along those lines.

Peter:

Now we know how you got into finance but when did you first discover crypto currency?

Karim:

I first heard about bitcoin back in two thousand twelve.

Peter:

I had ah hippy neighbor in the area that that i lived that it was kind of like a townhome place where there's eat townhomes.

Karim:

On one side, nate on the other and there's like a courtyard in between so my neighbor across the way, i just looked over his houses just to check in one day and he was on the dark web on hey was a hippie, he was happy so you could put two and two together hey was ordering some things on silk road.

Mike:

It was ordered some things he basically told me all about bitcoin and how he's mind these things and i was like, okay, well, i'm not really into that, but good for you and so bitcoin's, probably around.

Karim:

This is two thousand twelve, some thinking bytecoin may have been around thirty dollars, somewhere around there, maybe thirty, fifty dollars, it was definitely in the between ten a hundred in the two digits in a two digits in attitude did digits, but i just remember just kind of keeping the word bytecoin in my mind and once again, i just it's using because i feel like everybody has this exact same type of story where they hear it, they're like and it's, not for me, and then they're like, they start noticing it more and more, and then they start asking more and more questions out, will you, yeah, well.

Mike:

It took a couple of years it took till he get posting on his social media, and i was just always like bitcoins at one hundred twenty dollars, bitcoins a two hundred dollars coins of five hundred dollars, and then it got up to the peak, their thousand eleven hundred dollars at the er the exchange crash happened that the time i was upset that i didn't invest in this, it crashed back down below, huh?

Karim:

Two hundred dollars and leveled out, and mike, you and i and brent, i don't know if you play online poker, but i was just messing around one sunday, i won a tournament and they paid me out in bitcoin or one of the options was that get paid on the bitcoins?

Peter:

I was like, why don't i just take my entire term in winnings and bitcoin and learning about?

Mike:

And so that was twenty fifteen yeah, i think i got they even like thirty five bytecoin i want to say, we're winning the tournament like seven thousand dollars at the time and, uh yeah, so that kind of started my bytecoin journey and everybody has that moment where they now that i have thirty five bytecoin let me learn as much about it and go down the rabbit hole and so that's kind of what i did.

Karim:

That's a really great story and yeah i feel like a lot of people have that very somewhere story i know i did it started for me when bitcoin is around two hundred dollars and i and i finally about two years later when it climbed up to about twenty five hundred i said okay, fine i gotta learn about this i need to know what this is all about why is it doing that this type of multiplication?

Mike:

What is the full story so and like i'm like i'm pretty sure i was that annoying friend that would literally tell you about that coin every time i saw you the one from the joint over i mean i literally told you know, just telling everybody i knew about bitcoin because and i even told my wife like we're not selling these but actually added to my position like this is our retirement we're not selling this and sure enough that november thought that we were what we found out we were pregnant at the time and i'm kind of jumping ahead here but uh we had a i had eight hundred square foot town home in downtown surf's up newly married got married february of twenty fifteen found out my wife was going to have a baby they are pregnant and we're like okay, this place is way too small we need to find a new place and so we put the uh we put the condo on the market we put it maybe about twenty percent above what we thought we could get for the house because we were going to look for a new home and we didn't want to have to move out right away and within three days we got an offer elastos way were you into the exchange the said the seller to really high and someone bit it's pretty much that happened and then we were looking for a new place we didn't didn't have a new place we found the place that he wanted and the deal was great and we just needed a short term kind of a bridge loan to get from you know, the closing on the condo to the down payment on the new house she hates that i blame her for this but my wife was like what about that big coin for the down payment like you know like okay well maybe maybe we'll sell some of it and so that's it that's what i ended up doing it kind of is a short term bridge loan for the down payment and sure enough you know bytecoin two starts moving up and so now the good news is you know, a lot of people want to say that the coin i sold was a mistake but for me in terms of ah my wife actually respecting the financial decisions i make now i could make them all you keep going back to this one failing, remember, you made me so pickle, i built up equity with the wife because i could always point to that.

Karim:

Tell her about that at one time that she cost us ex hundreds of thousands of dollars.

Mike:

Hotpoint doesn't listen to this podcast, everybody, everybody gets burned some point, and yeah, like i alluded to earlier in my story, like i was offered forty bitcoin for ten thousand dollars, and i roommate and i had a friend come over and explain it to us whether or not he was trying to sell us the coins.

Karim:

We're asking all the basic questions that everybody asks, and, you know, eventually we decided, you know what?

Peter:

We don't know enough about it, we're gonna pass, and, you know, from that day, i anytime bitcoin was mentioned, i kept my eye, and i was looking for some sort of confirmation that i did a good job or that i made a smart decision, and it kept coming back as if i didn't and yeah, the idea.

Karim:

So i thought we understand your virgin that story, but look let's, fast forward, a little bit let's kind of set the stage when do you transition to morgan stanley from merrill lynch that was actually in a two thousand ten okay, so that's well, before this story, so you're putting in your time with morgan stanley, you've got your you're building your portfolio is your, you know, in a big company or, you know, moving up the ladder, getting more assets, what was life like for you when you work for morgan stanley?

Mike:

And you were trying to get into crypto what was what were the things you had to be very careful with or the things that you're unsure about and what measures did you take to make sure that you weren't jeopardizing your career in exchange for this interesting little sector that obviously caught your attention as much, though, did ours, right?

Karim:

So so, without commenting on morgan stanley specifically, i did bring it up to our compliance manager, i said, and basically what i explained to my compliance person, wass i'm investing in this thing called bitcoin, is there any?

Mike:

Because as an advisor, you need to be careful with owning investments in firms outside of where you currently work.

Karim:

So for example, if you work at morgan stanley, well, spargo, if america and you're providing financial vice other people, you need to fully disclose what your investments are, so you can't opened up a brokerage account, a td ameritrade down the street or trump swap, so i wanted to make sure that i was protected and they had no problem with me only bytecoin they considered they're like well it's considered a currency quote unquote so therefore it's not security on with it which by the way a kucoin base all the coins that they have aren't considered securities they saw no problem with it as far as me recommending it to my clients that was a little bit of a murkier area the on ly one of my clients that i felt comfortable having a discussion with and it was unsolicited by the way i was with my parents on technically i wasn't allowed to solicit bytecoin the only investment that we had that we could buy over the counter otc trading was the bytecoin investment trust which you may have heard of the gtc is the symbol the problem with investing in that right now is that it basically trades it lord very large premium and removes under huge yeah but we got in there when gtc was around i want to say sixty for my from my parents they're roth iras gtc hit thirty five hundred and then it had a split to basically bring the price back down things like a twenty three toe one split don't quote me on that but we were able to trim some off the top and one of the trading strategies that we were able to use wass if the premium wass below thirty percent you'd want to buy it, and if the premium got above eighty percent, you'd want to sell it so you could basically leverage the price of that point.

Peter:

So while this was going on sometime around two thousand sixteen, morgan stanley put gtc on the restricted list, which meant that we could no longer purchase that position.

Karim:

Did that's not be from purchasing bitcoin or just that particular security, that particular security's.

Mike:

So basically, morgan stanley, tow these stance on dh this is across the board, it wasn't just morgan stanley, my friends and other pivx firms basically said that it's not an investment, we're gonna cover, so we're going to go ahead and restrict it from new purchases, they'll only assist you with selling it, but not buying it, so we were kind of stuff just in buying and holding, and we could really do the trading thing anymore.

Karim:

So that's super interesting to think about the effect that that could theoretically have over our king on the market, specifically on gpt see itself if, ah, financial advisor isn't allowed to tell their client you should purchase gpt see when most people make their financial decisions through financial advisors, that means there are a lot of people are very specifically not purchasing it, because they can't get that advice to do so that's that's really also it's actually kind of sad in a way because firms like i said no specific discussion towards morgan stanley but just the way the big banks and the big financial institutions are they really want to protect themselves so for example, if if an advisor said hey, you really should be buying gtc what happens if it goes down fifty percent a month?

Mike:

They wanted to avoid lawsuits, right?

Karim:

So purely speculative it's was still considers you i understand why they why they were doing it but on i've done the numbers on this and the fund i co founded has done the numbers on this but um essentially adding a five percent allocation of your two overall portfolio to bytecoin does not add risk to an overall portfolio.

Mike:

Oh that's cool i'll give you an example like super volatile it won't increase risk of ruin or anything like that but the volatility of your portfolio actually goes down going back the last three years as of the end of january the volatility of a well diversified portfolio well actually go down by adding five percent in but quinn, i'll give you an example teo maybe make it in simpler terms if you have a portfolio of one hundred percent bonds you would think that's a relatively low investment are low risk running little boy until feather right?

Karim:

So what you want to do is you have you basically draw a curve and when you when you draw the occur with the excess x axis volatility and the y axis being the return essentially what you're doing is you wanted to go up into the left i probably screwed up the x and y axis by the way but you will basically one of the curve of their the risk return to go up into the left so if you had a rather simple one hundred percent bond portfolio and you added let's say twenty percent stocks your risk return metrics would actually go up into the left even though you're adding a riskier investments with investment which would be stopped your returns will be better and your risk would actually go down and the same applies for bitcoin or other non correlated a sets okay, so be so the main reason for that would be that bitcoin is not closely correlated with your standard a mutual fund or something like that things that i've compared that point to our stocks bonds cash, real estate, oil, gold, silver all those type of asset classes bitcoin essentially has little to no correlation with every single one of those and so for me it's kind of like the holy grail of investing if you can find a non correlated asset that can provide what we call alfa or additional return based upon risk to a portfolio that's what you're looking for when you're constructing the overall portfolio only get technical on that baby and it's a krypto basic calm down so simple that was the overall like sentiment in while you were still working in the financial world.

Mike:

Then you're talking those people.

Karim:

How did they think about krypto?

Mike:

I know they said that you couldn't sell that, but that was kind of ah decision made based on lawsuits and that kind of thing, so we can understand that, but how did everyone feel about it?

Karim:

Overall, i think about i would say ten percent of the advisors were open, too are excited about it and forward thinkers, i'd say the other ninety percent of advisers were race from neutral too strongly against and you look at the demographics, the younger guys, the guys that were in her forties or younger, they were open to the idea of crypto currencies as part of a diversified portfolios, unfortunately, financial advisors essentially, you know, there's a lot of sixty seven, you know, i think it was an eighty year old adviser still working, coming to work every day, so when you've got sixty, seventy, eighty year old advisors, i don't think they're necessarily open to the idea of and digital asset or a digital currency the best your knowledge, how would you describe how well the different demographics actually understood what they were forming opinions on?

Peter:

Could you rephrase that question?

Karim:

Basically so it's easy to say that you know, younger generations tend to be more open minded to this because you know, we've we've grown up and actually witnessed a digital revolution, but how well did these supporters truly understand what was going on and how much to the naysayers actually understand?

Mike:

Fundamentally, the naysayers knew absolutely nothing about it.

Karim:

They're excuse was always it's, not tangible it's not something you khun touch it's just tool of bubbles or pets dot com that's kind of the common one you see on a lot of the tv shows the younger advisor, younger people, they were open to it, and i think that bit coin and crypto currencies and general basically a multigenerational story, because the stock market, if you go back to nineteen eighty to the average foot baby boomer was in their late twenties, early thirties started to make some light.

Mike:

I'm making two from nineteen, eighty two to two thousand was one of the greatest, if not the greatest stock market return percentage wise and history, and that was largely logic driven in my opinion by baby boomers sixty eight million baby boomers in the us alone now fast forward a couple years right?

Karim:

Millennials?

Peter:

They're steem ninety something million millennials in the world what's their average age right now twenty eight years old, so i think that there's a large distrust amongst millennials with financial institutions, they don't like financial advice.

Karim:

They like the idea of taking control of their own money.

Mike:

Ah lot of people are, but i'm not a millennial, but i'm a couple years away from it, but i can understand, you know, these millennials grew up with video games or live streaming train tokens?

Karim:

No, i don't necessarily understand all of it, but the idea of a digital asset makes perfect sense of them, me being that kind of a ford thinker and understanding the technology.

Mike:

I think that this is a tremendous investment opportunity, the likes of which we've never seen as millennials start to make more money, i think that you'll see just a huge wave of money and by the way, that the big money's not coming from the males but institutions and when the institutions come along and they start putting cryptocurrencies mutual funds and everybody need now needs and one percent allocation to this that's, billions of those dollars are going to come into space to kind of backtrack to the beginning of my career.

Peter:

I remember when international investing was taboo.

Karim:

You were lucky if you know one.

Mike:

Percent average international investment and overall portfolio now it's fifteen to thirty percent of paying up, depending on how tactical do you want to be?

Karim:

So the idea of international investing came around?

Mike:

I think a similar thing is going to have a Komodo currencies were maybe we're ten years away from it being a larger percentage of general portfolio, but it doesn't necessarily take much to move the needle, so speak food.

Karim:

One quick response i have to what you just said, and i agree with almost everything that you just shared there, i thought it was very interesting.

Mike:

Look on it, i guess deep down in my own heart, if you had asked me three years ago, do i trust wall street types?

Karim:

And my answer would be no, and the reason is, and i guess this may come from my poker background, but the way i thought of it was, these guys make insane money, like, like lamborghini level money, and the only way they could do that is through rake through whatever it's like yes, they there's a chance that they can make you money, but and they will overall, but they're clearly just taking money out of it for themselves to me, it just didn't seem like it didn't seem very realistic that i could give somebody money, and they could make so much more for me than i could do for myself, and i don't know how well that thought process actually is overall.

Mike:

But i kind of feel like if you had to ask me what the reason for that is, i feel like that's, probably the reason.

Karim:

Oh, i agree with the distrust of financial institutions.

Mike:

When i was it, ah, merrill lynch, i remember a client of mine.

Karim:

His credit was maybe seven, ten.

Mike:

I thought that was ok, right?

Peter:

This is probably two thousand for two thousand five, and morris merrill lynch at the time they rejected the law.

Karim:

It was a commercial loan, and they rejected it because they wanted the credit score of seven forty and above.

Mike:

Meanwhile, on the institutional side, they're buying all these junk mortgages.

Karim:

Workers back, securities.

Mike:

And repackaging them and leveraging them up.

Karim:

I think some financial institutions went up to, like forty times leverage, i think, and they're getting a cut there, getting their fees on all of that.

Mike:

So i'm on the same side.

Karim:

The funny thing is, is that i, as an advisor, i got a lot of the brunt for it.

Peter:

You people, you people, this, you people, that i wasn't the one driving a lamborghini around, so but i got i got a lot of the brunt of that.

Karim:

You know, i was hurt as well, financially, justus along just as much as other people were in the two thousand eight crash.

Mike:

So while we're talking about the crazy money that that some financial advisors may make with lamborghinis there driving around, yeah, and i don't know if you could share anything like this, but do you have any, like, insane wolf of wall street throwing midgets at starboard?

Karim:

Yeah, you know, i don't have any wolf of wall street stories i heard.

Mike:

Yeah, i heard some things about the nineties, but in the mid to thousands things that kind of calmed down.

Karim:

But one story, i will tell you.

Peter:

I don't know if this is a wolf of wall street story for your ameriquest was the second largest provider of some crime or just back in the mid two thousand.

Karim:

Today, i know they've sponsored like the all star game and several big endorsements and that type of thing, but they share the building with where i worked and the way the building work is.

Mike:

We had one half of the building and america's had the other half a building, and we shared a common bathroom in the middle.

Karim:

Some go to the bathroom one day and, uh, as i walk out at least thirty, the swat team starts literally charging in the building, and i'm coming out of the bathroom and i just see the swat team just running in.

Mike:

I'm like, oh, you got me what i do, e putting.

Karim:

My hands up, they go right past me and they raid the ameriquest office so they're just taking everybody out escorting a body out of season peters and documents and everything and apparently what they were doing was misstating income or they would just tell people to say what their income wants to get approved on a mortgage so it's somebody without a job they would just put in there you know, this person makes hundred twenty thousand year and they would get the overages proved that would've been a really you know that one of the trade on insider information that would have been my wall smooth wall street opportunity teo short the hell out of america west and this is about a year before the real estate market shirts started showing cracks, but i could have made so much money shorting that i did not act on that information, nor did i tell anybody about that e i wouldn't tell anybody about the time the fbi stormed meat go to the bathroom either.

Peter:

Yeah, i was like, i know i took a number too, but it wasn't really that bad, i promise it was this it was this an anti money laundering department or this is a different department the people that stormed in?

Karim:

Yeah, what what section of the guard?

Mike:

I have no idea just kind of you didn't remember what you badges whoever the sec or not even though it was not a message since e i think that that yeah i don't know fair i have no idea yeah i've just heard so many stories about the anti money laundering being the biggest a place where they'll just bursting with assault rifles and don't really care about what you're doing at the times had nothing to do with money laundering it just had to do with mortgage fraud judge it whatever the division that enforces mortgage fraud but i guess that's uh they sent somebody in for it so overall three posts of this podcast we do not particularly view technical analysis is very positive and while i agree with some of things brents said you know such as we don't really understand it as much we're open minded too learning mohr but it seems intuitively it's still there still seems to pieces missing so i guess this is kind of a multi part question would your thoughts on technical analysis in your previous career versus the current crypto markets i think that the current crypto market has gotten really ta heavy uh i am not a huge tv guy okay?

Karim:

I feel like i like to look at long term transfer, technical, technical analysis short term, you know, one hour for our trends and trading on that to me makes absolutely no sense if you're going to trade t a you should only do it on coins that you have done the fundamental analysis on first, that you, like a lot of people, just trade ta on a quote unquote should points you know you're just trading, pumping none groups or whatever the case may be.

Mike:

I just feel like with the market size being so small of crypto currencies, a lot of the technical analysis this flawed and manipulated if we feel that the crypto currency market is going to be several trillion dollars in the next couple of years, which i believe, why wouldn't you just focus on buying good projects and not get caught up in the day training?

Karim:

Because the tv people, they're trading so much on short term basis and they don't even realize the fees of their pain.

Peter:

I had a friend text me the other day and, like you know him, but i'm not going to put his name out of a of a what do you have a name?

Mike:

Okay, people were going to say, is that we're not fearsome.

Karim:

He showed me his coin days.

Peter:

Ji dax trading for the month of december.

Karim:

And apparently, he did about twenty six million dollars worth of volume and market traits.

Peter:

And i did the math on that.

Karim:

And he paid sixty five thousand dollars in fees by day trading on g next.

Mike:

And he didn't realize it till well this month.

Karim:

So he probably january february and probably paid another fifty five thousand dollars a month and trading season.

Peter:

So it eats up a lot of your profits.

Karim:

When your day trader, you know your pain, you know.

Peter:

And it was ten basis points in twenty five basis points portrayed it's really hard to perform that i'd say.

Karim:

Unless you're some sort of genius, less than five percent of people are going to make more money trading on technical analysis than just buying and holding good projects that you like.

Mike:

Long term.

Karim:

I don't hate ta, but it's, not the first thing that i look at.

Peter:

One of the arguments that i can kind of put forward to show that kind of works is that it's almost a self fulfilling prophecy sometimes if a lot of the market believes that because of this picture on the screen the coins going to go a certain way and they all start to make a move because the coin they all think the coins about to go up so they all start to buy kind of makes the price go up so i'm sure there's some combination of some self fulfilling prophecy some merritt toe looking back at a long term chart and being able to find the patterns like we just did a cognitive biases episode where we said that thie the idea that if you flip a coin ten times and it's heads all ten times doesn't mean that the eleventh one is going to be taels more likely it's still fifty fifty but when you go back and analyze the entire data set you will see there was a place for a reversion to the mean so right so ta must have some merits because if it didn't there wouldn't be so many people in so many smart people doing it but it's so tough to find the correct spot so that's that's why we feel that way and i'm glad that you kind of you know agree with that on a micro scale and see some of the sea some of the good on a macro scale.

Karim:

In a agree with you for me, i like to look at longer term friends for tea, eh?

Mike:

Not necessarily.

Karim:

If if i'm going in for a simple but discovered coin that i like and the ta agrees with me, that it's a good entry point, by all means, that's, what i'm going to do if if that thing ta looks negative, maybe i'll wait for a better at your spotter.

Peter:

Maybe i'll set my orders lower.

Karim:

I don't go into it on ta do the fundamental, announces the coins i like, and then i'll have no expert on ta, but i've taking some courses in that type of thing, so i will try to look for good entry points in certain positions.

Mike:

But that's, not my first thing that i focus on, but i think the next fall question could be fairly obvious.

Karim:

Is there any particular types of tea?

Mike:

A.

Karim:

Even if you're looking at, like the one day lines where you're seeing very large, you know, long term charts, is there anything that you, i prefer toe notice as a positive or negative indicators, say civics i know is one of your personal favorites, so let's say, you know you're looking at, you're looking at on your defense position.

Peter:

You already know everything about fundamental analysis.

Karim:

You're readyto ad, you've got the bitcoin lined up.

Mike:

Is this when you decide to pull the chart?

Karim:

And i guess, like, my point is, what trends, if any, are goingto way maurin your decision than others.

Peter:

If i want a position badly enough and i like the price, i'm going to buy it so i'll preface it by saying that but you know right now is a very good time a lot of you know, some of the things they look at our fifth match here retracement so if i really like a coin and i'm waiting for a fifty percent you know there's a couple of key levels thirty eight point six fifty percent and sixty one point eight or kind of ones that they look at on the retracement level so if i really like a coin i may only wait for a fifty percent retracement instead of waiting for the sixty one point eight that a lot of people try to set them there by orders that so i'll adjust it based on that but like i said, if i liked kucoin and the chart looks okay, i'm probably going to start adding to a position then and you know, at the end of the day you know for example icon right and that dropped oh, what one sixty yesterday yeah, i mean anything below two was just this absolute steal, so yeah, yeah the technical analysis didn't look very good but i could tell you something like that or depicts it drop it drop below two i think briefly i'm going to load up if i may make sense and the other thing is just any little bit of news can make the market move, and so, you know, the letter came out yesterday and the g twenty, and immediately, you know, the old spike up twenty, thirty percent in many cases, we don't know when that these that news is going to come out, i think you shouldn't get held up on the a and trying to find a entry point ten percent below what the current market prices if you really like something and really like a project in price, you know, don't miss out on the price that you feel comfortable with, so i'm not a hundred percent sure what you're even allowed to say with this question that i'm going to ask, so don't say anything that you aren't a hundred percent sure that you're allowed to say, but what is your broad general approach towards crypto currency investing like, ah hua, what things do you look at when you're evaluating a project in the space to decide whether you like it or not?

Karim:

And it might be worthy of your investment?

Peter:

Well, in a general sense, in a thirty thousand foot view, sense went evaluating the cryptocurrency landscape, i am, in short looking for the drillbit makers, so the people that are the coins that are building out the infrastructure for crypto currency, i truly believe, as i believe you guys do as well that this is just a game breaking technology, that this is going to be our future.

Karim:

So the safest way to play it is in terms of investing in the infrastructure.

Mike:

So the first thing i ask myself when i'm looking at a coin is, is there a need for it to be a coin?

Karim:

Okay, so a lot of people just come up with there's a lot of these points to come out, and they really have no purpose other than just saying where crypto currency so i really looked for a purpose isn't going to help build out the infrastructure er of the space, and then i'll separate it out between ah large cap and, you know, a small cap and also across sector so weather's platforms, whether it's ah smart contract linking, whether it's inventory management or exchanges, i've kind of tried to create my own sectors within the spacers.

Mike:

There's no actual official way of classifying these cryptic curses.

Karim:

We cannot do it on your own.

Mike:

Yeah, that's really?

Karim:

The focus is i'm just trying to focus on the build out of the technology.

Mike:

So with that in mind, a couple of things i want to touch on you seemed very, very careful in your response to this answer to be political, and i just want to remind you that we should on projects all the time if if we feel it's necessary.

Karim:

So i mean, you i believe you were one of the first people that i knew even before brent that was shitting on tron kind of having hesitation about ripple early on things of that nature and those air, certainly lessons that i learned from you and i don't mind, you know, sharing that, i guess a little more specifically, i know that you like things that are going to be working products before others, so i know that we've talked a lot about the different exchange coins because those are working products i know we've talked about, you're really big on mass adoption, so whatever is leaning towards use cases, things they're going to help cryptocurrency b usable is something you're very interested in, and, you know, those are all things that air they they make sense to me logically, like, you know, we have cardano is going to have a tremendous value at some point, but it is so far away from being a working thing that i don't blame anybody that puts it on the back burner for now, you know, here's, the way i look at it, just going back to i started my career in two thousand three, so i heard a lot of the stories about dot com o okay, and so people talk.

Mike:

I mentioned this earlier talk about, you know, bytecoin or cryptocurrencies being the next pet stop calm and to me out of that came cos like priceline, like amazon.

Karim:

And so what i think you want to do is a lot of these projects are going to fail, and so it is kind of humorous to me, a lot of the twitter experts or read it, experts, they post their their portfolios, they post their portfolios and they have five positions and they're like, should have owned this.

Peter:

Or should i hold this?

Karim:

And i'm more of a believer of if you could go back to the dot com bow and let's say there are a hundred projects out there, and we know that ninety of them are going to fail, and ten of them are going to be spectacular successes.

Mike:

How would you go about diversifying your portfolio up?

Karim:

Well, if you do research.

Mike:

On the team's behind the coins and you know what their focus is and what their legitimacy is in terms up building out the infrastructure you could probably near this hundred coins down to let's say thirty coins that you have a reasonable amount of confidence and so now you're down to thirty coins, which is probably around the size of let's say a roulette table and you have money at the roulette table.

Karim:

How are you going to spread your money and there's let's just say thirty six points right or thirty six to thirty eight, thirty six number and cable so much to say thirty six so if you knew that there was a one in three chance given the scenario explained one in three chance of hitting a coin that's going to go off a hundred times and then the rest of them are going to be worth zero how would you spread your money so you spread it evenly across the board because you're expected value of making an even across the board bet is that when you have a success you're one hundred times return on average will say or you could even say twenty five times but at the end of the day threading it evenly across those coins that you narrowed it down to makes a lot of sense given that same scenario you're just gambling if you just decide to pick five coins out of those thirty six coins in this narrow i gave you your just gambling and you may actually get unlucky and, you know, talk about flipping a coin, right?

Mike:

You may get out fifty five times and all of a sudden you lost all your money so there's going to be a lot of coins that are not going to be able to deliver on the promises that they made?

Karim:

I am a big believer of having a lot of warner to five percent allocations and projects you believe in but not necessarily going all in or super high percentage of your overall cryptocurrency portfolio in the coin i think that's the way to be successful in this space if you believe the space is going to like i said, uh grow ten times twenty times fifty times i think that's the way we play and you have to do a lot of research there some beliefs among people including some major us figures that the financial indicators are pointing to an expected crash for the us economy.

Peter:

Obviously we can't predict the future we're not going to expect you to doing that.

Karim:

Do you just have like any?

Peter:

It doesn't have to be exhumed in on crypto do you just have any general like financial advice over the next decade or two?

Karim:

No, no, no i know this's and a specific entertainment could they haven't so if i came you and you didn't know how the market had done at the stock market had gone and the bond market have done if i came to you and said, hey, my caper, the stock markets at the highest point that's ever been highest valuation it's ever been and the bond markets also at the highest valuations ever been, but i still have a lot of opportunities to invest for it.

Mike:

You probably look at me like i was a little bit crazy, and i kind of feel like that's where we're at right now or in a rising interest rate environment, which generally is bad for bond prices.

Karim:

Stock market's trading around twenty percent above what the historical pt racial is of you.

Mike:

You can actually track the s and p five hundred p e ratio of the s and p five hundred stepping around the average mean has been around fortune in the half fifteen i believe her last i checked, you can quote me on this, but we're at seventeen or eighteen so that's about twenty percent overvalue going into twenty eighteen my top two picks for investable assets were india on and commodities, so those were the top two ideas going?

Karim:

I do think that there's some merit to go gold, silver in the minors, and they've kind of already moved a little bit, but when those air your two best ideas and you're trying to construct a good portfolio of stocks and bonds, i think that the returns over the next three to five years in the stock and bond market are going to be very needed.

Peter:

I think he was probably cee lo lo, single digit average average returns in the stock market certainly could be wrong, but i feel pretty confident in that prediction that it's going to be a tough couple of years in the stock and bond market, a lot of sense, like even though we said before, just because something the highest it's ever been doesn't mean it can't go higher if there's a lot of past evidence that something is overvalued, that may be one of many indicators that you don't want to continue to go a word with that thing, it's never another, none that, you know, if if you're way up on your stock portfolio, maybe you turned back a little bit, you know, z people always get it stuck onto any to be all in or all out and that's, not what i'm advocating trends tend to overshoot in both directions.

Karim:

So that's, where you can really find opportunities, i think stock market right now, it's, it's definitely being propped up by monetary policy.

Peter:

And so this is kind of, you know, one of the reasons.

Karim:

Another reason i want to get into for the currencies is that i have witnessed some very poor monetary policies.

Mike:

I don't know if you knew this, but actually lived in venezuela for three years.

Karim:

Who?

Mike:

And so i've kind of seen the first hand, what a hack, dictatorship of meditation, but basically, they're socialist regime i can do, and so i know, you know, my grand grandfather actually basically lost his business because he was taxed out of business, and they just privatized a lot of ah, natural resources.

Karim:

For example, they just private the they made it, basically government owned, that they were there like, this is mine.

Mike:

This is mine.

Karim:

This is mine should cast.

Mike:

They basically just started to castro started ticking, so i left i lived there for three years and i was young, but i still have family and south america and columbia, so that definitely stuck with me and i was always following what was going on in venezuela and the politics there, and so it's not a surprise to me that what is going on now is taking place and it's it's very sad to see, but i'm seeing a lot of other countries, you're basically doing it, it's not that that extent, but similar things.

Peter:

They're devaluing their currency and taking a massive amounts of that.

Mike:

The global death, i think, is over two hundred trillion dollars now us alone is a twenty one trillion we just twenty one trillion a couple of days ago, and i don't know how we're going to solve that with some of the medicare issues going on and social security issues, you know, all those kind of things not being funded, we've got a big problem on our hands, so i'm not saying we're gonna fall, you know the drill, go the direction of venezuela, but teo, i think that governments are going to be a good steward of our money and treated responsibly.

Karim:

You even see it on a local level where local municipalities go over budget on projects and things like that.

Peter:

I think crypto currency can liberate a lot of people from that and give people an opportunity to take angel of their own financial lives and freedom.

Mike:

So to me, putting a two percent five percent, ten percent allocation of that, even if it goes, potentially goes to zero, you're not broke if that happens.

Peter:

But the flip side, the alternative is that you could see things like that as well, a popping up across the world and that type of scenario.

Mike:

I think crypto currencies will become very successful.

Peter:

So we're not hoping for negative things to happen to the world, that at the end of the day, it is a hedge against those type of things.

Mike:

Kind of playing off that all those thoughts that you had about theoretical possible crash, that kind of thing and and the way things were heading, did you have a specific like, ah, ha moment where you're like, fuck this, i'm leaving, i'm leaving this financial world behind, and i'm going to go ahead and start this fund that i'm starting to be a part of this fund that starting up, i mean, you were in there for fifteen years and you walked away from an established company, established space with an established income just said, fuck it and went forward, i mean, was there like a moment or in a way, i i just have a passion for it that i've never experienced in my career before, even with stock market, i feel like i meant to being a part of this, and and somebody once said, i think he believes crypto currency is kickstarter for social change, and that actually kind of run true with me and that he was tim draper said that recently, but if you think about it, crypto currencies or little, they have their own government governance in a way, and so people are going to vote with choosing crypto.

Peter:

Currencies that offer the best service that have it for the lowest fees that are first certain causes air for certain industries.

Mike:

I just kind of had enough with the status quo taking, you know, in a way, i'm taking control of my financial future by doing this, but i believe in it that much that is the right thing to do.

Karim:

Yeah, i just truly believe that this is going to change a lot of people lives, probably not an aha moment, but i have been believe me, i've been thinking about this for years making the move and the opportunity presented itself and it's just an opportunity i couldn't pass up.

Mike:

All right, that was some great stuff, peter really appreciate.

Karim:

You know your honesty.

Peter:

And we want to give us a little insight into your world.

Mike:

We did have a couple listener questions we wanted to get to get into before he signed off.

Karim:

I'm gonna start with degenerate brahmin who posted our discord asking the following question when analyzing projects in the real world markets.

Peter:

What are the types of parameters?

Karim:

They look four.

Peter:

And how similar are these two?

Karim:

The cryptocurrency mark it's actually, a great question.

Mike:

And that is it is something that people have been trying to figure.

Karim:

Out how can we put value in crypto currencies when they don't have a balance sheet or pete ratios?

Mike:

Are growth rates that we can look at?

Karim:

So i would actually flip that question on its head and say, how can we measure it if they're polar opposites in terms ofthe measuring the value?

Peter:

And so in a way, you kind of have to reverse engineer evaluations for crypto currencies.

Karim:

In my opinion, a dollar saved is a dollar earned.

Peter:

And so what you're going to see is a lot of these crypto currencies are going tto add value to already existing industries or cos i'll just throw on example out there, wire fraud is a big problem right now in the us, i believe wire fraud is a thirty two fifty billion dollars a year cost on financial institutions if we could create just making something if you could create a cryptocurrency that reduces wire fraud by let's, say, fifty percent, what value does that half?

Mike:

And so i could actually make the case that, given that scenario where fifty billion wire trot fraud gets reduced to twenty five million dollar life fraud, i could make the case that the value of that crypto currency his twenty five billion dollars a year and so i'm using a very simple example, but in a scenario like that now you can apply a p e ratio if you this is just one way to look at it, but you could apply a p ratio to that twenty five billion dollars a year that that particular crypto currency group of crypto currencies and in value of value stock may have a p ratio of twelve girls stock may have a pt racial twenty five, so even if we conservatively the p e ratio is ten, you multiply ten hands, twenty five billion dollars, twenty five billion dollars that's a i mean, the numbers are staggering two hundred fifty million dollars valuation if you just thought of it as a traditional company.

Karim:

So right before we go on, one of the things we like to don't cut the basic is, anytime we aren't sure at the listeners know what you're talking about, we're just try to stop.

Mike:

And can you just refresh us?

Karim:

What p e means ah, price turning.

Mike:

So basically, all you do is ah, if you have a publicly traded stock, whatever the price of the stock is divided by the earnings, if krypton curses can add value to certain industries that i could make the case that the valuation should be similar.

Peter:

To stop gardener it.

Karim:

Actually, i read a piece by gardner.

Mike:

There were publicly traded consultant for fortune five hundred companies, and they said that by the year twenty thirty, that the crypto currency value added to the fortune five hundred companies would be over three trillion dollars.

Karim:

So the space right now have a three hundred fifty billion.

Mike:

I guess if i told you that crypto currencies in next ten years, we're adding three trillion dollars of value to fortune five hundred companies.

Karim:

Don't you think the crypto currencies are very cheap right now?

Peter:

And i don't know that there's a lot of growing pains to be had, but something that adds that kind of value, the market as a whole, the evaluations should be much higher than what they are today.

Karim:

Yeah, that makes a ton of sense we we talk about all the time, the growing pains and how every time we have to deal with some annoying wallet or some annoying process to get something in crypto done in the end, we're just like note this is this is a good thing we're the only ones who are willing to go through and do this annoying stuff where as everybody else just want to go on coin base and go back and forth, so we're still early adopters, even though it might not feel like it.

Mike:

There is so much room to grow in the space you're talking about one company, which, by the way, the headquarters for around the corner for me, my uncle was a ceo of a company called lux research, which is a competitive to them.

Karim:

He was super skeptical of crypto currencies, but that was years ago when he's stopping he's stopping theo a couple years ago, i believe all these fortune five hundred companies most if not all of them are going to use watching technology in some way shape of form, and a lot of them are going to be used in ways that we haven't even thought about yet, you know, i could imagine ok when the internet came out and when i started using a well three point oh back in like ninety three ninety three i could envision.

Peter:

Okay, i could see how there could be an online bookstore amazon, right, but i couldn't envision that what it is today, that is basically what we do, everything for over half of retail purchases or done on amazon.

Karim:

I mean, i just could never imagine that.

Mike:

So i think that, you know, we couldn't imagine what facebook, google those type of companies would do.

Peter:

Sure enough.

Mike:

Well, here we are.

Karim:

I made a joke recently that we should fork the united states into the united states of amazon instead of the face of america on i might be happier with how they run things.

Peter:

Yeah, i mean, i mean, what the whole foods the other day and the prices are a lot cheaper than there used to be a nice at least at least at the buffet.

Karim:

You know, you used to spend fifteen dollars.

Peter:

They're getting a salad with a piece of chicken on it, but it's in dollars.

Karim:

All right, so the last question will ask you is from ah, user called his his his name was, and he said, e d i e d i hope i pronounced that right.

Mike:

I'm actually gonna summarize it just quick.

Karim:

What he's asking here is what benchmark if you're allowed to even say this, what benchmark would you try to measure a fund against?

Mike:

Would you try to measure against, you know, ex crypto assets like the top five, like the coin base one?

Karim:

Or would you try to measure against bitcoin alone or measure against the stock market?

Mike:

Like, how would you measure your success?

Karim:

I think the way that we're measuring is i think the ultimate goal is to acquire more bytecoin and so i would say the main index, basically that we're going against would be bytecoin i think we add a lot of value in terms ofthe the selection and diversification with a lot of the of the alternative cryptocurrencies, but the main benchmarks wanted the bitcoin and there's other some people like tio just measuring us dollars, which i hate and then there's another one called the crypto ten index.

Mike:

Which basically the top ten kryptos in terms of market cap, we're trying to find some hidden gems as well.

Karim:

Someone's that air definitely overlooked in i know mike's talk about the dv project, which is when i really like that order, if they can deliver on what they're saying, i think it's going, it could theoretically get up to, like a dash type of level it being a master no master, no dogecoin and that's everything so that's kind of the upside, right?

Peter:

I mean, whether they deliver on the promise or not remains to be seen.

Karim:

But i like to get into certain projects for small portions of the portfolio that, you know, maybe three or six months, a wave having their own black chain or launching their product and kind of accumulating alone away.

Peter:

A lot of the criminal world is really focused on what kind of returns i could get in a week or two weeks.

Karim:

I think the focus of the fun is more on a longer term basis without getting into too much detail on exactly what we do on a day to day basis.

Mike:

There's a lot of value, i think that could be added by investing in something like that one.

Karim:

Of the cool things that you taught me right away when we were looking at crypto currencies and you kind of you approach this from a mass perspective because you know i'm a math guy you know i like the numbers you know thes airways that are going to sell it to me and he said to me you're like mike like you know we can go up top we can we can play it safe or we can do the math and remember distinctly you telling me if you if you find a project that's really far down and it's and it's worth market cap is like three million dollars isn't it a lot easier to go from three million to thirty million that it is from thirty million to three hundred million and i was like that was the moment where i was i really put it into perspective and it said to me like yes there is a lot of risk in the lower market caps but do you don't need that much to go right for it to be a very worthwhile investment so again and in no way do i want to suggest anybody just go buy a bunch of shit coins kareem is like squirming in his grave right now you have to do the research when you're dealing with the micro cap coins there's a lot of risk involved in that so you want to look at the teams you want to look at, you know what industry there in, i'll give you an example of when i talked about it hasn't really kind of permission, so this might be here a good opportunity, but haif project h b n one of that's, one of the holdings that i do have for a small amount, okay, but you look at something like hi project, what they are doing is they're invoice trading company, and so a lot of small and medium sized businesses essentially need liquidity.

Mike:

And so when they have a ninety day outstanding invoice, they're willing to give up some return in order to get liquidity right away.

Karim:

So essentially, assuming they have been credit, they can put the invoice that they're trying to collect on the block chain.

Mike:

Somebody will pay them maybe ninety two cents on the dollar, and they could get that instant liquidity and the person in exchange for that, they get to collect that entire invoice when it's due within a couple of months, so they get a good return.

Karim:

The company, if it's, you know, we'll get immediate liquidity and that invoice could be traded on the wanchain so hive is, i believe, it's, a, uh twenty five million dollar market cap it's only competitor in the space right now is a populous and populace is a five hundred fifty seven million dollars company hive is actually further along that populace is, but populace is is in a much better job of marketing themselves and getting a lot of viral support.

Peter:

So that's one of the opportunities, like, do you want to buy populace and five hundred fifty seven million, or you want to take a chance on a more under the radar project, like hive at twenty five million valuation?

Karim:

Where if they can even know either populace is super over overvalued or hive is super under dragon, even if they meet in the middle somewhere, you could make a ten x type return on a project like that so we could look for, and this isn't the majority of the portfolio, but aside, you know, maybe do ten or fifteen of these one percent type opportunities where the management team looks pretty good, and they have a working beta, a working product in place.

Mike:

I don't need that many of them to succeed in order to make a really good return for me to govern my money on populace.

Karim:

I mean, it needs to be over a billion dollars, whereas aiken spread the money out across some other smaller projects, and it would be a lot easier for me to make that return at the end of the day, i do think.

Mike:

That crypto currencies will be moving more towards value good projects so the quote unquote should coins ninety percent of i think ninety percent of the coins out there maybe ninety five percent of coins right out there right now are terrible investments and so if you could just find a couple of gems is that our undervalue i know mike we talked about neblio all right so we got internet neblio right after the ceo under a dollar went with six pretty much right away after we bought it and then spent two or three months going from six straight down about two dollars and fifty cents and so we saw what happened there when it got listed on finance things that nut's there and you could could've sold neblio at fifty dollars at one point so that's a pretty good return to get when you're looking at some of these undervalued super small cap ah portfolios a couple points i want to make here number one populous one thing i noticed about them is there that the fault coin when you log on to either delta i don't know if they paid for that or they just got lucky but that has to have some value like people long on there like what is this ppt thing and then they go look it up yeah, i have no idea why that is i this space could be pretty good there's only two maybe three coins that are focusing on this space that we're pretty close.

Karim:

But populace is online and it's just a thing.

Peter:

So hive is only on a hit ptc and either delta, maybe another wrapping exchange of c why coin and idex?

Karim:

So you have to be willing to swim with sharks a little bit, you know, and and you want to make sure you have the technical knowledge to kind of swim in those waters.

Peter:

When it comes to eat a delta or some of these exchanges, i would never keep my money there's only a couple of exchanges that trust and it's you get, you get the money on there by the coin, you send it to your harbor wallet or whatever the case may be, you kind of have to that's part of the risk you take with going with some of the smaller points, because the reason they're so small in many cases because they either don't have the training volume, so have to be patient with it, or they're just not a very good exchange that's, kind of the one downside of hunting for i'll go and elaborate on that just slightly in case anybody's interested in digging lower in the mark, we cops do not do so unless it is something you're okay holding for a little while on a couple of things that have that have popped up for me.

Karim:

If you're quoting only being traded on one particular exchange, they may just decide to put that that exchanges wallet into maintenance for, like, weeks a time, so you may not even have a real place to be able to sell it.

Peter:

The other thing that i wanted to say earlier was that it's clear to see where mike got some of his picks for his portfolio because we just talked about neblio we just talked about depicts and that's forty percent of his staff for bully a lady pig.

Karim:

So, yeah, mike and i have talked a lot about that certain coins, but, uh, yeah, once again, pete, thanks a lot for coming on.

Peter:

Listen, what is your how do we get in contact with you?

Karim:

How do we check out your your hedge fund?

Peter:

How do we get a job?

Mike:

I'm pretty much unemployed other in this podcast, so yeah, probably the best way is tio email me directly info i n f o at the jerk cap dot com digibyte i see ap dot com the fund is ah, focused on accredited investors only, but if you have any questions general questions, i'm happy to help.

Peter:

We do have a pretty simple website up and running and hope to get more information on there.

Karim:

But for now, the website is dj capt.

Mike:

Dot com awesome.

Karim:

Are you hiring?

Peter:

No.

Karim:

Well, right now we have a team of two with a part time employee.

Mike:

We're starting our pretty lean and maybe in a couple of months we're going to see where this goes and we at some point we'll look to add some talent to the team, but for now, we're like i said, we're starting pretty lean.

Karim:

S o unfortunately, not as of now, all right, and i was totally at actually it's okay, you're free, you can help out for free if you want that's better than what i've been doing in crypto lately, so all right, so so if we want to get at you on social media, where you want to get at you on twitter, you have anything like that out there or you like us and, you know, you kind of sucked it up and didn't do the greatest social media marketing in the beginning, we've got no adventure camp would you have a twitter we have nine followers so let's uh let's get that number i only tweet it twice and it's a cap and it's a camp partners dot com i probably need teo go on there and uh oh upgrade as some tweets but that's okay listen we got banned from twitter like three times before we were even able able to send a tweet so you do better in us oh really?

Peter:

I'm kind of afraid teo to put my personal twitter out there because you're looking back my history is probably some tweets on that huobi sweets on that something listen you're preaching to the choir about people's pass on ah social media have deleted most of my facebook stuff so seriously again peter walsworth thank you for coming on the show digit cap partners investments you khun followed peter at the twitter you mentioned before it's going to be the show notes i actually forgot what it was but check him out check out there website which i think it's just the landing page but hey you can check it out they'll appreciate it and if you ever want to have us ask peter a question we're good friends so this is not a one of thing we can always ask pete so thanks again for another episode of crypto conv owes this has been brandt filming and michael laki thanks for listening thanks like us the members of the crypto basic podcast are not financial advisors.

Karim:

They are idiots.

Mike:

Please don't take any of their advice as investment advice.

Karim:

Do your own research.

Mike:

All investments have inherent risk.

Karim:

Do not risk anything more than you can afford to lose theo

The members of the CryptoBasic podcast are not financial advisors, and this information is provided for entertainment purposes. Please do your own research, and don't listen to these idiots.

The CryptoBasic Podcast is owned and operated by Cipher Consulting Group LLC.