The Selloff

My oldest daughter Jessica send me a message last night “what’s going on with Ethereum?”. I told her it was a selloff. I said that people who had made a ton of money in the run up over the last six months were taking profits and I thought it could go on for a while. She said she was going to buy some more. I told her that was fine, but if I was going to buy, I would buy a little bit every week and not a whole bunch right now. As I have said on this blog so many times, I am a fan of dollar cost averaging and building a position over time, sometimes a long time.

I have been buying Bitcoin since early 2013 and Ethereum since last year. I keep buying but never that much at one time. Just a little bit every week. You can build a pretty big position that way, but you have to be patient and you have to keep at it.

Doing it that way takes a lot of the ups and downs out of the equation. I don’t try to time market bottoms and market tops, even though I can sense when they are happening. I don’t try to predict where these assets are going in the near term and I just believe they will be a lot more valuable in five or ten years than they are now. That’s good enough for me.

The other thing I believe in is asset allocation. I’ve told a lot of young people, including my children, that having 10-20% of your net worth in crypto might make sense. But not 100%. The category is too volatile and you could lose a lot if you aren’t careful. Having a reasonable asset allocation across all asset categories; cash, stocks, bonds, real estate, venture capital, crypto, etc is what I recommend and what we do. It might not be as exciting but it lets you sleep at night.

So, my gut says we are headed for a selloff in the crypto sector. But of course, I could be wrong about that. I am wrong a lot. But honestly, I don’t really care. I will keep buying into this correction or rally, whatever it turns out to be. Because the more important question is where these assets will be in five or ten years. And I have a lot more conviction about that one.


Comments (Archived):

  1. Tom Labus

    “We don’t have to be smarter than the rest just be more disciplined.” Warren Buffett If some one can pull off an M&A deal via a smart contract, it will be off to the races.

    1. fredwilson

      Wow. The new SPAC

    2. Twain Twain

      My perspective on Blockchain (including Ethereum smart contracts) is the same as it is on Natural Language AI.Principally … CAN CODE ENCAPSULATE ALL THE LANGUAGE AND MEANING of multi-party agreements?Yes, for financial products such as IR-FX, equities, fixed income, wealth management asset allocation (especially alternative investments), hedges etc. where the economic and quant models are established with clearly defined timelines, blockchain has utility.However, in the realm of M&A there’s additional linguistic and timeline complexity which current smart contract structures and AI frameworks, alike, simply can’t deal with (yet).@fredwilson:disqus — At 23 I worked at a startup that syndicated M&A data into the banks. I was responsible for product and quality control of that data which we harvested direct from PR Newswire and the stock exchanges. A year later, in Strategic Investments at UBS, I had to proof-read any number of transaction bibles.Since then, I’ve yet to find any AI capable of understanding M&A language — not simply do keyword clustering of transaction terms or be able to identify the quant details of the deal (date, $original bid, enterprise value, etc.).Blockchain will simply NOT be able to do the things it needs to do, such as M&A deal via smart contract, without solving the Natural Language AI pieces.

      1. James Ferguson @kWIQly

        @twaintwain:disqus – Not sure your logic follows:Certainly if you want AI to interpret the contact you have this problem.But – If I was going to put money on it, I would open up a contractTerms API as an open protocol. The interpretation of any API parameter (a clause) and any dependcies between clauses would be determined prior to first use and committed to a blockchain to prevent asynchronous interpretation.A common evolving semantic dictionary of trade terms is the basis of contract law as driven by statutes and in many judiciary regions by case law re-inforcement or clarification.As soon as a sufficiently flexible and clean dictionary exists that supports transactions within a judiciary, use of this generates return by cutting out unwarranted boilerplate costs, network effect drive a robust situation (try for example trying to challenge the meaning of a simple promisory note ! )Under such circumstances the challenges are merely transactional and not of principle.You can transfer money automatically – most other assets merely need a universal system of record. (Eg packages of land , titles etc etc).The BIG challenge in automating M&A is to get early adopters to step up – because those that hide behind complex lawyers are cowards and often misguided,

        1. Twain Twain

          The BIG challenge in automating M&A is getting to universally-agreed definitions of … everything.Scientists at the Department of Computer and Information Science at the University of Pennsylvania conducted research on how to encode classical legal and philosophical definitions of fairness into machine learning (see 1,2,3). They found that it is extremely difficult to create systems that fully satisfy multiple definitions of fairness at once. There’s a trade-off between measures of fairness, and the relative importance of each measure must be balanced.Replace the word ‘fairness’ with ‘justice,’ ‘liberty’ or ‘non-partisanship,’ and we start to see the challenge. Technologists may be unconsciously codifying existing biases by using data-sets that demonstrate those biases, or could be creating new biases through simple ignorance of their potential existence. Technologists should consciously remove these biases and encode laws, policies, and virtues, (shortened for our purposes to ‘values’), into machine learning systems. These values can be mathematized, but there will always be tradeoffs among different values that will have real-world impacts on people and society.The same Univeristy of Pennsylvania scientists found there can be a cost to fairness in machine learning. The penalty to a machine learning training rate from encoding fairness can be mild to significant depending on the complexity of the model. The cost of encoding virtues (and the benefits) must be balanced against the potentially lower costs of systems that are optimized without regard to values or bias. For a machine learning system that delivers ads for clothing, encoding values may not be worth the cost. But for a system that determines eligibility for food stamps or advises on criminal sentences, the cost of bias is severe and likely worth the expense of encoding values.*

          1. James Ferguson @kWIQly

            Hmmm -Again you assume law must be interpreted by machine learning.This is not required – and nor therefore is the bias that you assume.Simply – A smart contract *can* be as simple as the terms defined.Any contract should be as simple as it can be and no simpler.Therefore (like a legal system) codification can be built bottom up.Any more complex and it ends up in court anyway – and who would testify – Siri ???In short we are not talking about replacing the legal profession – merely acknowledging unnecessary repetition and complexity for what it is -Redundant !

          2. Twain Twain

            Ah, James … we have Satoshi saying, “The code is the law,” and Nick Szabo making the distinction between “wet code” of human minds and “dry code” of the machines.Meanwhile, here’s the mathematician, the linguist and business person in me thinking, “The machines HAVE TO BE ABLE TO INTERPRET HUMAN LAWS & VALUES, appropriately.” https://uploads.disquscdn.c

          3. Nina Gunther Kilbride

            As a former lawyer in blockchain development, I see legal as being far more amenable to code than this, but it’s not an all-or-nothing proposition. Much of what lawyers hide behind the bills are deterministic services, and the market is pressuring lawyers to release those services that don’t strictly need them.I think “legal” is more rules-based, ascertainable and attainable in smart contracts than it appears in the above chart. Some legal services do not fit within the rules based determination, like making human decisions in the face of large uncertainty.If an M&A contract is written/coded with machine readable language and parameters in mind, it’s less prone to error in interpretation.Some of us are willing to change.

          4. JLM

            .It may work for contracts, but it will never work for the litigation which flows like Niagara Falls from those same contracts.JLMwww.themusingsofthebigredca…

          5. Nina Gunther Kilbride

            Disagree. I graduated law school around when digital signatures became legally defensible. E-contracts coded out my first litigation job, and my clients made global derivatives out of what was a wasteful litigation cesspool. The litigation almost completely disappeared. We (lawyers+developers together) are about to do it again, but in a bigger, more inclusive way. Clean up formation, storage and chain of custody, and there’s much less litigation to be had, much more money to be made for businesses.

          6. Twain Twain

            Thanks, Nina. It’s not about us being willing to change or the adaptability of our understanding of language and interpretations of the law.It’s about the machines having the data sets and structural flexibility to interpret the law according to human standards.The problem with basing it on ideas of uncertainty is that then computer scientists say, “Well, if we’re within 95% confidence intervals then that’s good enough.”Now, let’s imagine two scenarios:(1.) We need the machines to help us decide whether an M&A transaction is “socially good” for the wider community in which the two companies operate. How does 95% confidence encapsulate “socially good”?(2.) We need the machines to help us risk manage whether an M&A transaction triggers job and value losses. How does 95% confidence encapsulate all the negative knock-on effects of that transaction?In SF, data scientists and AI researchers are re-examining some of the legacy assumptions that have been made about model interpretability.

          7. Twain Twain

            On the question of complexity, here’s the conversation I had with Nick Szabo at Ethereum DevCon in Nov 2015.Twain: In your slide on “Wet and Dry Code,” you propose that mathematical logic and bits can replace the unreliable subjectivity in law and commerce. This assumes all the latent variables of value, including subjectivity, are in price so we don’t need to model subjectivity. Yet trust and reputation are subjective.Nick: The more complexity there is, the more computing power we’d need. Ethereum doesn’t have that. Data needs to be small.Twain: Processing power would be different with Quantum Computing, though.[Nick is on it like lightning.]Nick: Yes, all this (pointing to Ethereum Blockchain) would need to be rewritten from scratch.=========QC is on the horizon and it will change crypto. It’s said that QC will be able to crack 70% of today’s encryption algorithms.* http://www.globalfuturist.o…——@wmoug:disqus — As I’ve said consistently, Satoshi didn’t future proof his idea for Quantum Computing or Natural Language Understanding AI, which disappoints and annoys me endlessly.

          8. phillip

            Much of this seems functionally accurate, although it seems plenty fair to characterize law as a body of those expressions of social reality which are necessarily interpreted by “machine learning” in the most abstract sense. What gets missed throughout this whole tired and persistent prewritten eulogy for the profession by would-be “disrupters” of that most ancient institutionalized opportunism is the most obvious, least legalistic fact of it all – and what this nearly gets at. That is, shit happens. So that simplicity qua simplicity should be paramount as a principle of contract seems – it’s not so simple, right?The normative claim seems more robust as stated along these lines: that API of the institution of contract (with respect to a property registry’s namespace) ought to be a responsive, human institution. Common law practice resolves disputes this way expressly, and adjudication of civil law demystified reveals quite a lot of discretion in the theater of programmatic application of code. Consistency and robustness matter; simplicity helps with ex ante vagueness considerations and to preclude ex post opportunistic availment of dispute channels, but it’s not the biggest “should” except inasmuch as it makes the language of contract tractable on the bounded resources of the humans involved in the system.What you get at, I think, is almost responsive – but more about UI/UX than architecture. Any set of workable defaults (e.g., Delaware corporate law) remains a binding to a real phenomenon: it is only “simple” as drafted, and what is formally simple may well not be plain language. Neither hand-waving away the machinery of the legal process that resolves unexpected ambiguity, nor requiring any contract language to come with its own compiler and interpreter before declaring it ready for “wet” use, is productive. There’s no reason, say, Aragon’s “jurisdiction” model couldn’t be mapped formally to a representation of, like, DGCL – with a choice of law provision to incorporate the inevitable fact of meatspace, is there?We have lived in a world of badly resolved spaghetti code for as long as commerce has existed, but that has not precluded us from developing always-imperfect, thankfully-mutable programmatic logics for use in daily life and calling it “law.”

        2. Twain Twain

          On a superficial level, we assume that semantic structures can provide some rules-based logic for qualia (term definitions) and the quadratic voting mechanisms can provide the dynamic weightings by which the system “learns” what the crowd values in terms of quanta.However, that combination is still not adequate.It really is not about “hiding behind complex lawyers,” cowardice and misguidance.It’s about maths and language and how best to get maths to be REPRESENTATIVE of the language and meanings of multiple parties, over variable time.

        3. Tom Labus

          …and at times deceitful

          1. Twain Twain

            What the systems (blockchain and AI, alike) can currently do is basically the “square logic” view of truth (or Turing validity).What they can’t yet do is the “sphere of semantics” view of truth (pass Turing test of language understanding where multiple interpretations are at play, over variable time). Turing’s models of AI can’t even get the machines there! He basically left us a witty “poison pill” in his own syllogism which turned Aristotle’s logic axioms on their head.@fredwilson:disqus — And the current “square logic” approach is why none of the existing systems have a chance in hell of solving “fake news” and toxic comments.@kwiqly:disqus — Douglas Lenat started OpenCyc in 1984 as a semantic API and we’ve since seen MetaWeb in 2005 (acquired by Google in 2010 and is now the basis of Google Knowledge Graph); its co-founder is now SVP Search at Google.So, in principle, a contractTerms API seems to make sense.BUT WE NEED MORE THAN THIS for M&A smart contracts to work.This is why Natural Language Understanding MUST BE SOLVED FIRST.https://uploads.disquscdn.c

        4. JLM

          .The legal profession is not likely to embrace something which will erode its fees. They are in business to generate fees.I saw this upfront and personal with the advent of word processing and standardized documents.I was doing a lot of deals and every deal had legal fees of 0.5% of the price. Every. Single. One.I asked my law firm — why? Shouldn’t you be getting this stuff standardized and therefore cheaper? After all, we paid full price to invent the docs the first time around.Upon arriving at an unsatisfactory answer, I had a set of “standard docs” created with “form fill” blanks. The lawyers did not think that was funny and one accused me of the “unlawful practice of law” as I did not have a law license.I got the fees down to almost nothing.Lawyers are not going to embrace anything which compresses fees.JLMwww.themusingsofthebigredca…

          1. James Ferguson @kWIQly

            @JLM – I do more than you do with yourself (agree that is :)hence original”The BIG challenge in automating M&A is to get early adopters to step up – because those that hide behind complex lawyers are cowards and often misguided”However I see I missed an Addenda- And then there’s @JLM:disqus who if he’s being taken for ride (and he likes a ride) – does not hide behind but rather gets out in front so that on arrival – it is he that owns the car (big and red) !

          2. Rick Mason

            @JLM Keep your eye on Justin Kan’s new startup Atrium LTS. He’s taking on Big Law just like Uber targeted Big Taxi.

          3. JLM

            .This is an interesting area — process control and project management applied to the provision of legal services.The breadth and depth of the funding group says something important.It varies by industry. When I was building high rise office buildings, we had a checklist (long before Atul Guwunde wrote The Checklist Manifesto) which documented the land acquisition, design, construction, marketing, operations, property management, and financing (land acquisition, construction, permanent) for the project.It was both operational and legal. The lawyers were tied in, but it was before the days of email and digital everything.The management of any repetitive process can be made better by process control and project management approaches.Where this is going to get dicey is when someone asks, “Is this something that requires a law license?”I don’t think it should, but there will be those who think it should.JLMwww.themusingsofthebigredca…

          4. Rick Mason

            Well he’s hiring both lawyers and software developers. It’s going to be a grind but it looks like Kan has the resources to gut it out. I do think some sort of guarantee will be key to it succeeding.

          5. JLM

            .The issue will be getting licensed in every state. It does not feel like the “practice” of law, but the legal profession will not be wild about it.Tech savvy lawyers are already doing this sort of thing, but not with a specific piece of software.Legal research was revolutionized by NexisLexis, so there is a path to follow.JLMwww.themusingsofthebigredca…

          6. Twain Twain

            Exactly, JLM, LexisNexis already has a decent semantic approach to the legal sector.

          7. Adam Sher

            There are some high quality CM tools out there now that do a great job of managing communications, contracts, status updates between owners, contractors, subs, and the banks.

          8. Adam Sher

            There are several document review and discovery companies trying to automate the 1st year associate and paralegal research tasks. This isn’t a new effort and I wonder how these will succeed. Will they disrupt Big Law or become tools for SMBs like Legal Zoom, which is used to cross shop small law prices.

          9. JAC

            You may be making a mistake trusting to forms for deals of any complexity. No, I don’t say that to avoid “compressing fees”, though I am a lawyer. I do substantial work for my family company at no charge. I spend a non-trivial amount of time examining and revising each license agreement. Even though we have a form, and it stays 95% the same each time, the danger is in the details. You may have weaknesses or contradictions on your deals that you aren’t aware of. If you’re lucky they’ll never be tested. Lawyers are trained to see and solve those problems.

          10. LE

            the danger is in the details.The good news is the details only matter in a small percentage of cases. And even if the details are covered by a review of a contract there is still a cost of enforcement and litigation which often doesn’t make sense unless there are big dollars at risk.Plus as anyone knows if the opposing party has it out for you they will quickly find a way even with a contract clause to cause you grief. Sure a bad contract makes it easier but that is often not the big obstacle.I’ve told the story here at AVC about the napkin deal for real estate. A building tied up for 2 years in court as a result of an agreement (which lawyers laughed at) to sell real estate that was written on a napkin (or an envelope something like that). Happened to a family member, not something I read in a story.

          11. JLM

            .Fair play to you. These are complex forms for complex deals which will be reviewed and revised by counsel for the other side.The only legal docs we could control are those we would normally promulgate on our side. This would include partnership agreements, leases, vendor agreements.The standardization of these docs — which were periodically reviewed for changes in the case law — was easy.We also had a good chance of getting first pass at things like deeds of trust but not loan agreements if the lender was from out of town.In dealing with the same lenders (GE Capital as an example), we often had an agreed upon form which was used for years with a version number and periodic updates.The truth of the matter in these complex deals, the work was done by salty associates and reviewed by partners. If the same doc was used with an agreed upon version number, the hours themselves melted away.When you’re a developer for a long time, you get to know every paragraph of every document much better than a third year associate, but as you say — the docs mean nothing until they mean something.JLMwww.themusingsofthebigredca…

          12. PhilipSugar

            I say this: Lawyers are like nuclear weapons once you use one we are both screwed.Justin Miller,…Head of Litigation for Dupont told me this. I entrusted him to be my younger brothers big brother in our fraternity.He would make his team work in business deals to understand this.

          13. Adam Sher

            I have yet to see a set of standard docs that was accepted as such and not substantially negotiated. A better name would be “not entirely from scratch.”

        5. awaldstein

          i strongly suggest that you watch the panel from the Token Summit on the legal challenges around token offering. Really smart people and trust me the legal profession is part of this ecosystem.You are not understanding this if you think it magically removed the dynamics of all business interactions. Some yes, other no.

          1. James Ferguson @kWIQly

            Did I suggest it magically removed anything?I merely pointed out where it could start – with simple well defined contract.If a universal termsheet fits *sometimes* it is a defacto low common denominator. Thereafter development is iterative. We do not need a magic bullet (and they rarely exist). A proven use case is a start.Thread started with >> If some one can pull off an M&A deal via a smart contract, it will be off to the races.I am saying this is already possible for the simplest cases – and 0:1 is surely the challenge and the first step.

          2. Twain Twain

            Here’s another issue with block chain and tokens as it relates to your specialism of marketing, Arnold …Jeremy Epstein of Never Stop Marketing: “Customer interaction, however, may be more difficult. When you buy a token, you don’t release any information. There’s no way for the project to actually interact with you (save those that play the regulatory game in a straight up fashion, but they are in the minority). So, you don’t really have a way to ask people why they buy or gain any insights about different types of customers (people in London or men between 30-45).That could be a good thing. We’ll move to a true 1:1 marketing world based on account addresses and patterns of behavior (how often that account logs into the app, sends a token, receives a token, etc.) It’s possible that sentiment will be a function of usability, which would fit Nick’s thesis. If you use it more, you like it more. If you use it less, you like it less.”

          3. awaldstein

            depends on whether you believe him

          4. Twain Twain

            He’s speaking about it tomorrow at Sentiment Analysis Symposium:* http://2017.sentimentsympos…We have a situation where we have autistic AI on one hand and BF Skinner’s behavioralist block chain on the other.Meanwhile, in the middle are us humans who are neither autistic nor behavioralist like BF Skinner’s rat-in-the-box.

          5. awaldstein

            Interesting and thanks.I am not sure how I think about this approach. If you are attending or following do share links of the proceedings. Traveling but curious.I don’t see evidence–as yet in the few blockchain based attention communities I’ve hung around with that either behavioral interaction nor the dynamics of groups is impacted from a marketing perspective by incentivizing interactions.Not saying that it won’t.

      2. Jose Paul Martin

        Isn’t AI for M&A exactly what JPMorgan is working on with COIN (COntract INtelligence?) –

        1. Twain Twain

          Not quite. Article says it’s applied for Commercial Loan Agreements so that means … where the data is well-structured and/or quantitative.Structured data and quanta lend themselves well to Machine Learning: entity extraction, pattern recognition, predictive modeling of risk. https://uploads.disquscdn.chttps://uploads.disquscdn.c…M&A contracts have more complexity, language nuances and multiple time dimensions which AI isn’t designed to deal with (yet).

    3. JamesHRH

      Crypto will never be used for hard asset or even any large transactions. Stocks and bonds are way too valuable to not be intermediaried. Why would you go to near zero when you can add 3P interdmediary value for negligibly more cost?You heard it here first.

  2. William Mougayar

    As I said on CNBC last Friday, the fundamentals for Ethereum are solid and intact. No other cryptocurrency comes close to the size and vibrancy of its ecosystem (except Bitcoin). Plus, it has become a (heated) source of cryptocapital funding for new startups and innovation all around. Unless you’re a market pro or a computer program, you can never time bottoms or peaks accurately. But then again, in cryptoland, Bitcoin already died and recovered more than 20 times already. The roller coasters can be mind and stomach shaking. I believe this is a short term correction, not a sell-off, but I might be wrong of course.

    1. Donna Brewington White

      I hope you are right.The only crypto I sort of get a peek at from the inside is DASH but certainly not a true insider. I do see the core team proactively building sustainability. So I am not as nervous about the rise and fall effect.I was surprised at the more hands off approach toward Ethereum if I am reading correctly. But then I see developments like ConsenSys and a whole ecosystem emerging.

      1. William Mougayar

        Yup, Ethereum is decentralized, so by default, its global community is what supports it.

    2. Ronnie Rendel

      From Fred/William, the people who taught us the ABCs of cryptonetworks long before it was popular, the best and most sound response which I’m sharing with all my friends.And lets not forget that the more applications running on the blockchain, and the more real that the decentralized networks born out of them – the more value in the cryptomarkets, and long term value growth.And I’m not even talking about that unthinkable yet inevitable time in the future when the gold based standard fallacy finally dies.

    3. prankeapple

      Fundamentals solid and intact? Lol, sir. Lol.A Practical Byzantine Fault Tolerant Proof of Stake consensus protocol has never been tried out before on a large scale blockchain network. Neither has sharding. Vitalik is a genius and the Ethereum foundation has some solid devs working for it, but let’s not get ahead of ourselves – Ethereum is still a grand experiment which could stagnate or fail. Or endure contentious hard fork after contentious hard fork as edge case protocol bugs are exploited by malevolent actors.On the upside – Ethereum is the only game in town when it comes to smart contracts. Tezos is a scam (Don’t believe me? Look at their Github repos. Or lack thereof). Rootstock ain’t goin nowhere. The developer network effect has been achieved, and now there’s only one issue which will make or break Ethereum: scalability.All that being said, I’ve made millions in crypto and cashed out a lot before this crash (the Bancor ICO made my stomach churn and I sold a ton), but I’ll buy back in if it dips significantly lower.

      1. William Mougayar

        Let’s not confuse fundamentals with technical challenges.I’ll admit that scaling Ethereum has its challenges, and they are being worked on, whether it’s charding or private parallel chains…or whatever it turns out to be. The Internet had scaling hurdles in its early days, and they were solved gradually each time they appeared around the corner.

        1. prankeapple

          I imagine blockchain scaling challenges as akin to the early NASA program – a long series of launch pad explosions, fatalities and morbid front page news stories, eventually potentially followed by a successful trip to the moon.

          1. jason wright

            Where there was nothing.

    4. Sebastian Wain

      On the bullish side not only is the ecosystem vibrant but there is a unique situation where many of its developers are now rich and can spend their time contributing to the project without looking for another job. Ethers are the appcoins.

  3. Russell

    Anyone have recommendations for software or broker that enables dollar cost averaging for public equities with minimal transaction costs?

    1. pointsnfigures

      Your finger and : ) Seriously, just put a bunch of orders in that are good till cancelled (GTC). If the market breaks, you get filled. Since it sounds like you are going to be active, just buy a little every week if the stock you want to hold doesn’t break. Reinvest the dividends and you get more exposure. There are platforms out there where you can build your own algorithm but I have no experience with them.

    2. kidmercury

      i think betterment does this, though not 100% sure.

  4. pointsnfigures

    When I first started trading hogs, I wondered how people built a position. The damn thing just traded in one and two lot increments. I was used to the Eurodollars where orders were thousand lots or more. I’ll be damned if in the first few days I suddenly found myself holding a few hundred spreads.Ones and twos add up.People new to trading will find it’s easy to put em on. When you want to get out it’s like rats hopping off a sinking ship. Or, picture yourself in a giant hotel ball room. When the bell rings, everyone charges for the same door but you can only get out one at a time.

  5. jason wright

    27th May 2017 ETH was briefly sub $140.ERC20 is an exploitable bug :)Summer madness.EOS anyone?

  6. Kent Karlsen

    I had almost the same discussion with my wife yesterday. Do we need the money? No, not really, I said. Ok, then keep at least some of it (ETH) for a long time, I am sure it will go up from what you told me about that technology. If you can sleep good, then have fun with this investment. She knows me too good 🙂

  7. Donna Brewington White

    Watching the numbers dropping is a bit scary but I like your idea of not having all your eggs in the crypto basket. And only investing what you can afford to lose. It does feel a bit like gambling.

    1. awaldstein

      It is and it isn’t , Or may be a new definition of it.I approach it that I’m prepared to lose then I’m fine.

  8. Donna Brewington White

    “You could lose a lot if you aren’t careful.”Careful = ?

  9. kidmercury

    after a parabolic, bubble-esque move, an ~80% pullback is common. that puts us at $104 on ETH/USD.…i wonder if ETH is going to be a big long-term winner here, or if monetary systems will ultimately start on their own chain rather than being built on top of ETH. i lean towards the latter, but we’ll see…..

    1. Girish Mehta

      Yes, this is not yet a selloff. It is a barely 30% retracement on ETH/USD as of now from a peak that was a 4X jump in less than a month.

  10. Girish Mehta

    Liquidity is a funny and counter-intuitive concept. Consider that you hold a listed public market asset for 5 years. Or 10 years.Every business day for 10 years you see the price and the volume action on that asset. But the liquidity of that asset matters to you on one day only – when you want to sell it.If the asset is illiquid on the day you want to sell it, it does not matter to you that it was liquid for the previous 10 years.In times of optimism, “saleability” and “liquidity” get confused as one. The correct definition of liquidity is – The degree to which an asset can be easily bought or sold in the market without affecting the asset’s last price. The last few words are critical – “Without affecting the asset’s last price”. Investopedia –…Applies to both buying and selling…but the serious consequences of mis-understanding liquidity usually arise when you want to sell (i.e. Liquidate).Often hear the term liquid applied to tokens, and to BTC and ETH. This is usually in reference to the fact there is a daily market and a price for cryptocurrencies (which makes them “saleable”), and in contrasting them to private market investments.I think its quite probable that a new generation of investors/traders/speculators is going to learn the difference between “saleability” and “liquidity” in the context of cryptocurrencies sometime in the next 3 years.

  11. Vasu Prathipati

    I use Coinbase’s scheduler to buy $5/week a week of each currency. I don’t even think about it or check the charts.

    1. rogerthat33

      do you realize you’re paying a 20% fee to do so?

      1. Vasu Prathipati

        20%? (i thought 15c)

        1. rogerthat33

          not sure if there is a minimum applied, but i typed in $5 weekly recurring transaction and it noted a 99 cent fee

  12. kirklove


    1. William Mougayar

      The epitome of fake news. I don’t know how they get away with it.

      1. OurielOhayon

        agreed. unfortunately here. had a pretty big effect on reddit to say the least

      2. jason wright

        Nation states make a living off it.They invent fake Intel and then go to war, all in the name of ‘freedom’.. Crypto is not much different at the moment, except it’s ‘greedom’.

  13. William Mougayar

    Let’s put it this way. A retraction is good because it solidifies the base further, ahead of longer term growth. The segment’s psychology is still quite optimistic and positive, despite running on high expectations. It will take a lot more bad ideas, bad projects and bad people before a more fundamental correction takes place.

    1. Andy Kim

      Thanks always for your insights. Most stupid question ever but i will give it a try – How long will this correction last?

      1. William Mougayar

        When Chinese buyers start to dip again. Could be this evening EST which is their morning.

        1. Andy Kim

          thanks william – looking forward to your insights and wish you well

          1. William Mougayar

            please take my comment with a lot of grains of salt. It is not investment advice, by any stretch.

    2. Frederico Mesquita

      Not only psicologic but with an average of 1 ICO/day (and these are ICOs planned ahead of last month frenzy. How many are under construction since then/because of?) and almost all using eth there is a real demand ahead. Nop?

  14. Diego Gonzalez

    For the moment Ethereum and Bitcoin are finding good support at their moving average. So it is still to early to talk about a selloff.

  15. JLM

    .It is difficult to use the word “investment” when discussing something which was priced at $50.43 on 4-1-2017 and hit a high of $395.04 on 6-13-2017 and has been trimmed to $270.22 as of this morning.The short term should catch everyone’s eye. The ride up was quick. The slide down was quicker.That is not the price profile of a stable asset. It is the price profile of a speculation. There is nothing wrong with speculation, but it is not the same thing as an investment. Again, fair play to a speculation.The language being deployed today in this discussion is that of investments.This is neither a “correction” nor a “selloff.” It is the mirror image of the speculative ride up, perhaps, hastened downward by the false report of the death of Vitalik Buterin.Nobody should be surprised when an asset which has gone up by a factor 8 on the basis of “who knows what” trips and goes down, even substantially.Just don’t try to apply investment logic or theory to something this speculative.My bones tell me there is a lot of upside in ETH but not because of sound investment reasoning.JLMwww.themusingsofthebigredca…

    1. LE

      I will add to your excellent comment ‘don’t invest in what you don’t fully understand’.The problem with speculative investments is there is a great deal of money coming from people who don’t understand that is driving up the price. As a result it’s hard for someone to apply what I will call sound business logic because the market isn’t thinking that way.

      1. Girish Mehta

        Re -“there is a great deal of money coming from people who don’t understand that is driving up the price”.Buying in a bubble is rational for somebody with a very short time-horizon.During the dot-com bubble, buying at 100 PE was rational for a short-term trader riding momentum who planned to get out the next day. It was not rational for the person investing for retirement with a 30 year time horizon. Morgan Housel had a excellent piece on this a couple of days back – viz. bubbles will form when the market becomes predominantly comprised of very short-term players. http://www.collaborativefun…Net: Investors should not take their cue from speculators. And when the market becomes predominantly composed of speculators, investors need to take their cash and step aside.The worst thing to do is to be a investor in a speculator-driven market.

        1. LE

          The worst thing to do is to be a investor in a speculator-driven market.This is exactly why I don’t agree with Fred’s statement:I believe in is asset allocation. I’ve told a lot of young people, including my children, that having 10-20% of your net worth in crypto might make sense.I also think that it is possible for someone to get hooked on the gambling aspect of this such that if they win now and then continue to follow the same behavior in the future. When they can’t afford to lose the money that they have at risk at that time.

          1. Girish Mehta

            Everybody’s risk preference/tolerance and investment goals are different. As such, I don’t understand what it means to have “told a lot of young people” what their asset allocation to an asset class should be. Net – I didn’t understand Fred’s statement.It is usually not possible to separate out your own commitment bias when you are talking about something you have already been investing in for the past few years.

    2. Matt A. Myers

      Yup, I think we’re on the same team here JLM.The use of investment language is a trick, just like using the word currency in cryptocurrency and the use of the $ sign. And it’s seriously dangerous for society – all of the parties including the finance people have aligned themselves and its engine is now plowing into culture at full-force. They’ve laid the foundation, busy building the casinos, and now the oxygen is starting to get pumped into it – the oxygen being education (of only the positives) as a disguised mechanism of marketing; the problem with casinos though is in the end the house always wins; I love how well the casino and gambling language fits.As William mentioned, Bitcoin already died and recovered more than 20 times – which has only been possible because it’s Ponzi-like nature is that it is global, decentralized/distributed, and no one’s mad at the issuer (the blockchain of choice itself) for not giving them a promised “20%” return – because everyone’s a speculator and gambler – and the growing global community are the marketing team all wanting the value to continue to go up. The fact that this isn’t discussed here isn’t surprising – William once even scoffed at me mentioning that it is gambling and claimed to have no idea what I was talking about – that there is no gambling happening; turning a blind eye to the negatives is on the verge of evil.Notice how sneaky/sly and careful people are being with buying or selling slowly – because they know it will affect the value drastically – down to that $0.10 the other day as one example; I’m sure now the platforms will build in some sort of safeguards to try to prevent that kind of almost embarrassing signal – a slap in the face, WAKE UP PEOPLE.If I had the funds to lead a project to do calculations to show just how much wealth would essentially be stolen/transferred from society – while writing an e-book to go along with it – and perhaps do an Anti-Token Summit et al. There are many people who really dislike blockchain ‘currencies’ as they are, however no money supporting that anti movement – compared to so much money going into marketing the positives (including the individual speculators); has anyone been keeping track of all of this information? It’s a full-time job, someone like William who’s positioning himself as a spokesperson, who seems to have a huge and growing vested interest in the whole ecosystem. I don’t have the time to be that person, though I could organize the resources if they were there; otherwise I am working on developing my 10-year “top secret” master plan that I’ll publish once it is ready.There needs to be a body who makes sure governments and regulators are educated about this side as well – I don’t know if it exists, I would love to know if it does; I don’t necessarily trust that eventually people who are elected aren’t bribed either, or that the blockchain ecosystem doesn’t use their resources to get people elected who have vested interest in the crypto-assets to become currencies. The $100 of Bitcoin in 2010 now being worth $75mm gives that person a lot of resources to use for potentially nefarious purposes, and imagine if Bitcoin et al become worth 100x or 1000x its current value – the amount of resources shifted is what I believe is unfair and unreasonable; I haven’t seen calculations of this either, however I am sure Coinbase and other platforms have done these projections – I’d love to see them become transparent and show everyone what their incentive is for making this work.I would love to create a new blockchain. I know how to make it become successful and gain traction without the Ponzi-like scheme structure – that focuses perhaps primarily on the value of having a public ledger. Not sure who’s investing in that though or how to get their attention – time and resources would help with that. Perhaps doing an ICO to collect Bitcoin and Ethereum’s Ether, use their resources to create a better blockchain – however I doubt people will put much value into something that is good for society but not for their pocket.Here’s a great writeup by a developer who’s become jaded with blockchain, noting that developers et al have become greedy – some fun video clips and gifs embedded in it too:

      1. JLM

        .So you agree more with me than you do with yourself?Busted link at the end of your post.JLMwww.themusingsofthebigredca…

        1. Matt A. Myers

          Hm, in JLM speak – sure, I agree with you more than I agree with myself.. :PRe-pasted that link on a new line, it worked for me.

  16. Alan Warms

    Fred – I’ve been spending a ton of time on crypto myself lately and of course follow your blog religiously – but 10% of asset allocation? I heard someone say 1% and I thought that was rich. I’ve done a bit of investing to learn – but my issue right now is the market for these tokens has a ways to go to get to a real liquid market. Even using Coinbase, trading is a frustrating and uncertain activity – unclear when things can be sold or bought – unclear on accuracy of price etc. And I think a very large percentage of the traders here as some have pointed out are pure speculators – and not real long term investors. Finally, I have also heard that folks can easily get 10-30x leverage to trade this stuff – I have not verified but if that is true that is also fueling some insane volatility. I completely agree and concur in the underlying transformational effect of these technologies – and the sound investments as an example USV has made. But I think there’s plenty of time for this to shake out and people to still get in “early,” despite the emotional feeling that it’s getting late already. I suppose if folks are truly long term holders I could see buying and sitting on it – but I would view it as a illiquid investment for the most part and wait wait wait. To your point to time the market. On your recommendation just read the book about Thorpe – I don’t think 10% would fit his world view (what’s the edge here? what’s the hedge here?)

  17. Frank W. Miller

    I luv it. Dollar cost averaging with an asset bubble (at least for now). The ninth wonder of the world (compound interest is the eighth) combined with exponential returns. Life is good…

  18. Salt Shaker

    Is dollar cost avg really a strat w/ so much volatility? It’s not really a hedge or covering one’s downside w/ such wide swings in pricing, unless buying daily.

    1. LE

      Dollar cost averaging was ‘invented’ to keep people in stocks and not selling but buying. [1] It’s one of those things that gets bandied about and dropped into the head of new participants that is rarely questioned. [2]Here is NASDAQ [3] on dollar cost averaging:…[1] Not something I read but that I have observed over time.[2] Like “leasing is better than buying a car because…”.[3] Point being what do you think they are going to say about it?

  19. Tim Beiko

    Great post. How would you recommend “young people” allocate assets to categories that are typically reserved for accredited investors, such as VC?

  20. Jim Ritchie

    I’m all in blockchain, Ethereum specifically, long term. Naval Ravikant from AngelList laid out how this technology will likely change the future in this tweetstorm

    1. Michael Elling

      Markets have always been networks and vice versa. Everything new is old. History repeats in different ways.

  21. Chris Whinfrey

    “Having a reasonable asset allocation across all asset categories; cash, stocks, bonds, real estate, venture capital, crypto, etc is what I recommend” @fredwilson:disqus What’s the best way for an average joe to get exposure to venture capital?

  22. creative group

    CONTRIBUTORS:We can understand a contributor providing a brief background of why they have a position but the consistent infomercial on how great they are and what everyone should know what they have accomplished is past boring and self-serving. If you continue to find a need to let everyone know who you are and we still don’t give it up.Gheez!RANT OF THE DAY!Apologize in advance.

  23. creative group

    CONTRIBUTORS:FRED’S post hors d’oeuvre!—————“The category is too volatile and you could lose a lot if you aren’t careful. Having a reasonable asset allocation across all asset categories; cash, stocks, bonds, real estate, venture capital, crypto, etc is what I recommend and what we do.””10-20% of your net worth in crypto?””So, my gut says we are headed for a selloff in the crypto sector””Gut” “Feeling” “Hunch”————–REALLY!Looking at your investments rationally is the only intelligent way to manage your wealth.This is the reason we realize the King Makers are in the room making decisions and having positions the average Joe will be looking in verses looking out. Invest at your own risk with evangelistic promotion. Fundamentals are thrown out the door.Statements really attack the rational approach in investing.A million dollars can disrupt this sector and that is not rational.

  24. creative group

    CONTRIBUTORS:Coinbase website outage update:Identified – is still experiencing issues with heavy traffic and may be unavailable for some customers in the meantime. We’re working to restore full service as quickly as possible. Jun 26, 12:19 PDTUpdate – is now serving traffic to all customers. Ethereum buys and sells have been restored and we’re continuing to monitor for any ongoing issues. Jun 26, 11:13 PDT —–Ethereum buys and sells are now turned back online. We are continuing to work towards a resolution for delayed Ethereum sends. Thank you for your patience!Posted about 20 hours ago. Jun 25, 2017 – 16:29 PDT

  25. creative group

    CONTRIBUTORS:OFF TOPIC ALERT!How a VC’s conduct can destroy an entire company. Justin Caldbeck formerly of Binary Capital apologized for sexually harassing female founders. This appears to have destroyed Binary Capital instantaneously. The sole partner remaining Jonathan Teo had to be aware based upon the evidence. (Tiffany Zhong 20 worked at Binary Capital-Names of the sexually harassed not provided)…—-Jonathan Teo if you or Orin Snyder and Michele Maryott of Gibson Dunn are reading this whisper you need to hire a female Partner immediately before the investigation is complete. There is no less than ten qualified Female Partner VC’s listening. And we are not billing you.Women to call immediately and ask for a Female VC candidate (If they would even accept your call)1. Ann Lamont Managing Partner, Oak HC/FT2. Jenny Lee GGV Capital3. Theresia Gouw Aspect Ventures4. Rebecca Lynn Morgenthaler Ventures——Forbes Quote of the Day”If you make a mistake, own it and move quickly to fix it. ”Tooey Courtemanche, Founder of Procore Technologies——Personality can open doors, but only character can keep them open.”Elmer G. Letterman

  26. Alex Brennan

    Fred – I came across a doc (… explaining a crypto called XRP. I see the company behind being VC backed. Are you involved there as well? And what are your thoughts? Thanks, Alex

  27. Matt A. Myers

    @fredwilson:disqus There are a number of UX problems with Disqus, including spammers – is this actively being worked on? isn’t as useful as a platform as it could be either. Is there someone I can share my ideas with?

  28. creative group

    CONTRIBUTORS:Silence!Is all well?

  29. creative group

    CONTRIBUTORS:OFF TOPIC ALERT!The character of a person is reflected by their works/deeds. Our Quote…..”Pool Where Biden Worked as Lifeguard Named After Him” — NBC10/Philly:Delaware Gov. John Carney (D) joined former Vice President Biden and community members in Wilmington yesterday “when the aquatic center at the Brown-Burton Winchester Park was renamed the Joseph R. Biden Sr. Aquatic Center … Biden … worked at the inner-city pool as a teen. … Biden was the only white lifeguard working there, according to his 2008 autobiography.”Biden told the audience during the dedication: “I was a kid from suburbia. … I wanted to get more involved. And I realized I lived in a neighborhood where I’d turn on the television and I’d see and listen to Dr. [Martin Luther] King and others. But I didn’t know any black people. No, I really didn’t. And you didn’t know any white people, either. That’s the truth.”So I wanted to work here. … I owe you all. I owe this neighborhood. I learned so, so much. You’ve always had my back. … I’ve always had your back, and I’ll always have [it] as long as I’m around.”——As Independents we are happily able to Congratulate Joseph R. Biden, Sr. for serving those that didn’t look like him or have the same opportunities of being afforded first base and not in denial about it.https://uploads.disquscdn.c

  30. creative group

    CONTRIBUTORS:OFF TOPIC ALERT:GOOGLE hit with record EU fine for allegedly/¿ abused its power by promoting its own shopping comparison service at the top of search results.(What is Bing, Duckduck, amazon, etc doing?) Promoting their business they created?A phone directory is one of the first searches offline. What do they do promote their brand and sell ads.…Why does the EU/US and other companies use Amazon, Google and Facebook for starters as a Piggy Bank when the company becomes the best option within its space? It appears it doesn’t take that much to issue a fine by the EU.We are pro business and acknowledge checks and balances are required when humans are involved. Absolute power corrupts. But Governments using fines to raid the coffers of successful companies isn’t right. The best options are to pay the fine without admitting guilt because the company makes so much revenue in multiple countries.

  31. creative group

    CONTRIBUTORS:OFF TOPIC ALERT!Forture Magazine has an award to Companies who have made a social impact in 2017. We asked Alan Murray is there a category for VC’s because love him or hate him there is no doubt who that award should be awarded if they had a VC category. Hands down.And we definitely don’t agree with everything Fred posts or promotes. If you review our critiques and questioning posts (which we expect to go unanswered) we suspect he would view us less than supoorting at times) We just equally speak to power no matter what corner it lands.But Alan said this list wouldn’t apply to Fred (VC’s).

  32. creative group

    CONTRIBUTORS:OFF TOPIC ALERT:COINBASE IRS UPDATEToday the IRS filed a motion in federal court to compel Coinbase to produce customer personal records pursuant to the government’s “John Doe” summons. This filing, which we have anticipated for several weeks, is part of the ordinary process by which the government enforces a John Doe summons against a recipient. As we stated to our customers in November, Coinbase remains concerned with the indiscriminate and over broad scope of the government’s summons and we have produced no records under the summons.Our legal team is in the process of reviewing the IRS’s motion. We will continue to work with the IRS to assess the government’s willingness to fundamentally reconsider the focus and scope of the summons. If it does not, we anticipate filing opposition papers in court in coming months. We will continue to keep our customers updated as to status.…So much for autonomy………

  33. creative group


  34. Erlich_Bachman

    I am still trying to get my head around which of the *specific* functions of money, folks believe bitcoin/cryptocurrencies are going to disrupt (vs our current fiat FRNs): 1. Medium of exchange 2. Store of wealth 3. Unit of accountSo far there has been a speculative run-up (i.e. tulip bulbs), and a story about the distributed ledger, but I am not seeing the specific path to displacing FRNs for the purposes of 1, 2, or 3. Bitcoin is too volatile to be a reliable store of wealth, and it also fails durability (granted FRNs also suck at this thanks to inflation, though intentionally by design!). As for medium of exchange and unit of account, those have “killer apps” (like income tax payments and much of the global petroleum trade) forcing their usage at the point of a gun. How do cryptos displace those?