I’ve been wanting to do an episode on cryptocurrencies for a long time.
So I was pretty excited when I heard that Clay Collins had launched a new crypto startup.
Yep, you heard that right Clay Collins.
One of the original internet marketers and founder of the popular Leadpages software that many of us use.
His new startup Nomics.com is aiming to be the Yahoo! Finance for crypto, so I invited him on to geek out about a topic I find fascinating.
In today’s episode you’ll learn:
- Why Clay left Leadpages to start a crypto Startup
- What percent of his net worth he invested in Bitcoin in 2013
- If he thinks Bitcoin and the crypto market in general is in a bubble
…and a lot more. I really enjoyed this episode with Clay and hope you do, too.
Andrew: Welcome to the eCommerceFuel Podcast. The show dedicated to helping high six and seven figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.
Hey guys, it’s Andrew here and welcome to the eCommerceFuel Podcast. Thanks so much for tuning in to the show today. And on this episode, I’ve got Clay Collins who is one of the long time internet marketers, I’m sure a lot of you guys are familiar with him. He’s the founder of Leadpages and he’s come out on the show to talk about really putting together awesome landing pages, email optimization, how to grow your list as quickly as possible and some of his favorite market tactics. Actually that’s a total lie, we’re not covering any of that. We’re gonna be talking about cryptocurrency, which is kind of crazy given Clay Collins’s background. But he jumped recently and stepped away from the day to day at Leadpages to start a company called Nomics, which, in his words, is aiming to be the Yahoo Finance for cryptocurrencies. Granted this isn’t tying exactly with eCommerce, but it’s something that has been in the news a lot to guess potential to really reshape how things are done in terms of commerce and potentially has some implications for eCommerce as well.
If you’re store owner, I mean, think about how much we all pay in payments, transaction fees, every year. It’s crazy, you know. And even if not it’s just an interesting topic and I’m interested in the topic and have a podcast and so I’m gonna hijack it for the cryptocurrency topic for today. So we talk about a bunch of stuff. You’re gonna learn in today’s episode what percentage of Clay’s net worth he invested originally back in 2000 and, you know, earlier…many years ago into cryptocurrencies, give you a sense of what his favorite coins are, his investment strategy. I play devil’s advocate and try to, you know, try to touch on some of the arguments against why cryptocurrencies could be something viable in the long term, talk about if cryptocurrencies are actually in a bubble, if that’s gonna burst, some of the most compelling reasons for them. We cover a lot of ground.
I have to admit, I’m a little bit of a cryptocurrency geek. A couple disclaimers starting out. I have invested a little bit in cryptocurrency, as has Clay. Everything we say in this episode is not investing advice, it’s our own personal experiences, us geeking out about something we enjoy. If you’re thinking about investing in this don’t do it based on the basis of this episode, do a lot of research on your own. Talk to a financial advisor. And this is about as speculative as it gets. So even after doing all that, you shouldn’t invest more than what you’re absolutely prepared to lose completely. So anyway, with that disclaimer out of the way, I hope you enjoy it. I had a fun time chatting with Clay and geeking out about this kind of stuff and hope you do too.
The Man Behind Leadpages
Clay, so most people listening, I would guess, know you either from kind of what I’m gonna call being an original gangster internet marketer, and more recently being the man behind Leadpages. So, you know, making the jump to crypto I would imagine a lot of people even listening… I kinda love crypto and I kind of geek out on the space so I noticed earlier, but guessing a lot of people, this is their first time hearing this. So that’s a big leap, how did that come about?
Clay: Yeah, so as an entrepreneur, I believe my sweet spot is between zero and about 15 to 20 million in annual recurring revenue. And Leadpages’ last trip got well beyond that, and I found myself kinda outside my comfort zone. And with Leadpages being my first software company was, you know, I kind of questioned whether or not this was a stage of business issue or, you know, did it have to do with the markets or, you know, was I kind of getting ahead of my skis or not. And I think after a lot of reflection, I realized that I really enjoy growing a business up to a certain scale and decided to step down. The board and I hired a fantastic CEO for Leadpages who was formally the COO. And I started just kind of looking around at that point in my life and realized that what I was most passionate about and where I saw a great deal of opportunity was in the cryptocurrency space. I believe in the space quite a bit. I think that probably 20 years from now most of the world’s wealth will have migrated outside of traditional financial instruments and most asset classes into some, you know, some form of on blockchain wealth and store value.
So I’m very bullish on the space. And I think looking more broadly at my career, I’ve always been about economic empowerment. I think at the end of the day I’m not a marketer first, I’m not an entrepreneur first, I’m someone who believes in economic empowerment. And right now, I think the biggest thing I could do towards that end is to do what I’m doing with Nomics.
Investing in Cryptocurrencies in 2013
Andrew: Very cool. So with crypto, did you…has this been something…were you one of those people who in 2009, 2010 you saw the promise or when did you start getting… When did it come on your radar in a meaningful way, and when did you start investing in it in a meaningful way?
Clay: So I started investing in early 2013. The price was between $200 and $300 per Bitcoin. And I invested in other things as well, but I remember the Bitcoin price. And my hypothesis here was that this had the potential to disrupt fiat currencies or central government issued currencies. And if it did this would be a pretty asymmetrical bet, right? So I think a lot of times when people analyze potential investments they always look at the risk. But what’s really notable I think about a lot of investment scenarios is that the cost benefit is pretty asymmetrical. In other words, if in fact, money ends up getting digitized, like so many other things in this world have become digitized, photographs, documents, I mean, I could go forever on this. But if money does end up getting digitized, and this is the way, then the ceiling on the potential value of Bitcoin is unlimited, and the floor is limited to what you invested. So if you invest a $1,000 into cryptocurrencies that could go to zero, you could lose a $1,000 and that’s probably a likely scenario, like that could happen. But that $1,000 invested in 2013 could potentially end up being worth millions of dollars. So the question I asked myself was, you know, one, do I want to invest in this? And two, what is a amount of money that I’m willing to lose? And that’s what I invested in and so far it’s gone pretty well.
Andrew: Yeah, yeah, obviously. Actually, I had a similar kind of mental exercise thinking about it. Exact same thing, your downside’s limited. Everything I put in, 100% wanted to lose and really looked at this. I kind of describe it as, I don’t buy lottery tickets, but buying a lottery ticket with the best odds I’ve ever seen of any, you know, a lottery ticket in my life, assuming you’re planning on losing everything. What percent of your net worth do you have invested in crypto?
Clay: So I prefer to not say what percentage of my current net worth is bound up in crypto. I’m willing to speak though about the amount of my historical net worth that I have invested, so in terms of what I bought in at. So I decided to invest roughly 20% of my liquid net worth into crypto, and that’s when I first started, and now it’s probably about a third of my liquid net worth. So I’m not counting Leadpages ownership and ownership in companies where that capital’s locked up or that wealth is locked up.
An Early Belief In Crypto
Andrew: Man, so 20% right at…on 2013, you had a pretty…had your premonitions, right? You believed in this strongly enough because that is… I mean, even today you hear about people radar and putting 5% in is fairly aggressive. You must have had…you must’ve really even strongly believed in it back then.
Clay: I think there’s this long history of sort of real world objects or sort of things that have existed in an analog state getting digitized and then experiencing exponential growth. So Kodak was around for a long time, they were a film company, they made cameras, and when Instagram sold to Facebook it was worth more than Kodak. You know, you’ve got Amazon which sells books and music and a variety of things online, and you’ve got Barnes and Noble going out of business. You had Netflix come along and distribute digitally and Blockbuster went out of business. You know, the iTunes music store and what’s currently happening with CDs. So I think there’s this progression of technologies, you know, going digital, hopping on Moore’s Law and jumping in an exponential direction. And the network effects that exists in the cryptocurrency space are so powerful and what I saw happening in the community building up around the space, I felt convinced that a basket of top cryptocurrencies would outperform just about anything else I could invest in at the time.
So my hypothesis was not that it would be Bitcoin, my hypothesis was that if I owned roughly an equal percentage of the market cap of the top 10 crypto assets that were attempting to be currencies not, you know, utility coins, or app coins, or whatever. But if I owned a basket of the top 10 cryptocurrencies, that that basket would outperform everything else. And it’s not that it would be Bitcoin or, you know, it could be something else. But I really didn’t care what it was, I just wanted to own a diversified portfolio of cryptoccurrencies. And so far Bitcoin is beating out just about everything else.
The Strongest Case for Digital Money
Andrew: What is it that made you…obviously you saw a lot of things moving digitally, you saw a great community around that. But at some level, digital for digital sake is not a good reason. The reason Netflix has put Blockbuster out of business is because there’s a huge convenience factor there and a selection factor there. And so for crypto, what do you think the utility…the strongest argument is, in your opinion, for cryptocurrencies? You can have a number of them. You know, the fact that the fiat money system is gonna break down, central banks aren’t trustworthy, that could be one. Some of the benefits of a traditional money in terms of easier to transfer, there’s lower fees or maybe others. You know, one of those or any other one that you think is the strongest case for convenience or utility standpoint.
Clay: So there are a lot of benefits of using and holding cryptocurrencies. You can talk about privacy, you can talk about censorship resistant transactions, you can talk about the fact that it’s not controlled by any central government. For me, the core feature was the fact that Bitcoin and most cryptocurrencies are deflationary, meaning that there is a limited supply of tokens or coins that can ever exist and a government can just decide to print money. I believe that every time the U.S. government prints more USD, they are stealing from holders of U.S. dollars by inflating that currency. And the U.S. government gets to spend that money first, right? So the greater the circulation of the money that just inflated the pool of dollars, the more the inflation takes hold. So if, let’s just say, there’s a thought experiment, there’s only a million U.S. dollars out there, if I spend another million dollars or if I print another million dollars, when I spend the next incremental dollar on top of the existing pool of a million that dollar’s worth as much as the other million. But the more I spend and the more the money that I get spend gets re-spent, the more inflation takes hold. So the government usually takes advantage of the people first. So I really liked that there could only be 21 million Bitcoin ever created. And even with cryptocurrencies like Ethereum, the number of new tokens that can be created every year is fixed. So as a percentage of overall supply the inflation goes down every single year and eventually trends to zero.
An Argument Against The Bitcoins of the World
Andrew: At least we’ve talked and you get the sense that I’m a kind of a cryptocurrency fan as well. I’ve invested in the space a little bit. But I wanna play skeptic a little bit, play devil’s advocate because I think to try to have some kind of…to try to be a little bit a fair balance here. So do you think, kind of putting on that hat, Bitcoin is the… I know in there when you started investing you invested in the basket because you didn’t know if it was gonna be Bitcoin or someone else. Today in 2017, four years after you kind of gotten to the market, do you think Bitcoin is gonna be the primary cryptocurrency of the future, at least the near term, let’s say five to ten years given that the head start they have, the network effects they have? Or do you think it could just as easily be a different coin? Because I feel like one of the most compelling arguments against, at least Bitcoin, is you look at how easy it is to fork something, you know. We’ve got the Bitcoin cash, Bitcoin gold, it’s software. So yes, it’s only 21 million coins at some point and fixed, but it’s so easy to fork these different things that if sentiment changes and so much of its value, if not all its value, is tied up in a network effect of people all being on board, if that changes, you could have such a fast exodus. So do you think Bitcoin is the best chance or is it gonna be the one in the next five years or it could just as easily be someone else?
Clay: I personally do believe it’s Bitcoin, but I still maintain my basket, so there’s a percentage of the overall supply of Bitcoin that I want to own, and I also own that same percentage of other cryptocurrencies. It’s just a lot cheaper to purchase that percentage of other cryptocurrencies than it was to purchase it, you know, in Bitcoin. But the reason why I believe it will be Bitcoin is because the network effects there are so strong. So for anyone listening that doesn’t know what a network effect is, a network effect is when a network becomes more powerful, or more entrenched, or more sticky for every additional person that uses it.
So owning a phone makes…every time someone gets a phone, it makes owning a phone more valuable to everyone else who owns a phone. And that’s an example of a network effect. So Facebook, right, has a pretty entrenched network. You could build a much better Facebook than Facebook, but you would be hard pressed to overtake Facebook because you’d have to get everyone on Facebook to move to another platform and that network essentially has no value unless your friends are there, right? And that’s why it’s really important that these tokens be distributed. So someone could come in and buy 100% of Bitcoins in existence. And that would actually make Bitcoin entirely valueless, right? It’s the network that counts. And the network isn’t just around holders of Bitcoin, it’s the development community, it’s the amount of thinking and publishing that’s happened around it, it’s payment processors, it’s exchanges, it’s points of sale, it’s hardware wallets. There’s a lot that goes into the underlying infrastructure that supports Bitcoin. And I just can’t see another currency getting that kind of momentum in catching up any time soon.
Overpriced or Overlooked
Andrew: What about looking, you know, so many people have called Bitcoin a bubble. You know, you look at people like Jamie Dimon who guy but, I mean, he also was very much the great assault that he, you know, runs one of the largest institutions that potentially could be disrupted by this. But you look at people like…institutions like The Economist, you look at Buffet, a lot of people with pretty good track records are calling it a bubble. And I think you can definitely say you can have something with a lot of utility and potential i.e. cryptocurrencies, but you can also have…even if it has those, it can definitely be overvalued and be in a bubble. So thoughts on that right now. Apart from the utility side, on the pricing side, do you think given how quickly it’s gone up, you know, almost, you know, seven, eight X just in less than a year, despite your long term bullish outlook, do you think it’s overvalued right now? Do you think it’s overpriced?
Clay: Yeah. So it’s an interesting question about whether or not there’s a bubble. I think bubbles are traditionally characterized relative to the underlying value of a security. So you might say there’s an Amazon.com bubble because Amazon’s trading it like, you know, well…
Andrew: 500 likes.
Clay: Yeah, like a 500 X multiple, right? The issue with cryptocurrencies is there really is no underlying asset, right? The U.S. dollar abandoned the gold standard and so the U.S. dollar is backed by nothing other than the U.S. military and sort of our dominance in the world, is backed by guns and bombs. At least Bitcoin is backed by electricity and hashing power, and the network that secures the Bitcoin blockchain. So it’s, in my view, what people refer to a bubble is really just an exodus of wealth from USD to Bitcoin but there’s really not a framework for analyzing whether or not it’s a bubble. I mean, you could say that there is a digital photography bubble when everyone stopped using film and started moving to digital cameras. Is that a bubble or is the technology just changing? Was there a CD bubble when people moved from cassette tapes to CDs? No. It’s actually the same thing, it’s just taking on a different form. So I guess like that’s one lens that I see this from. Another lens, through which I look at this, is the dot com bubble. So the dot com bubble, if you could value that bubble, if you could put a price tag on that bubble, was $6.7 trillion. Bitcoin right now is at about 120 billion. So if you compare 6.7 trillion to 120 billion it makes this bubble look pretty puny in comparison even though the potential for cryptocurrencies is much larger than the dot com bubble.
Like when entrepreneurs look for large markets, you know, they try and analyze like, is this a billion dollar opportunity? How big is the market? Is it a 10 billion dollar market? Is it a 100 billion dollar market? Well, what larger market can exist out there than all of USD in circulation? Like, I can’t think of a larger market. So in my view, you know, $120 billion of wealth held by Bitcoin right now is a small fraction of its potential. And I know I’m sounding like a maximalist right now, there’s a lot of euphoria here, but I really believe this to be true. And if it’s not Bitcoin it’s gonna be another form of decentralized electronic cash. But yeah, I’m a fan.
How to Value Digital Currency In Its Current State
Andrew: What about looking at Bitcoin…there’s kind of two ways you can look at it. You can look at it as a store of value, something like digital gold that’s not meant to be a currency as much, as more of a place you park your money and it’s protected. Secondly, you could look at it as, you know, a traditional currency where you could use it to buy and sell things. Kind of the third, which is probably a lesser one, something like Ethereum where you have some kind of built in function like a programming language, Bitcoin doesn’t really have that. Which side of those are you on? Are you on more on the store of value side, or do you think that with some of the…like the [inaudible 00:22:04] networks and the tech upgrades in the future that could get over some of the higher, you know, some of the higher transaction fees that Bitcoin currently has and processing speeds, that Bitcoin could actually be a currency and a store value? Or are you more in the camp of where Bitcoin’s gonna be a store of value and then we’ll probably have something else, some other maybe secondary currency really serve more of that digital cash role?
Will Bitcoin Be The New Debit Card?
Andrew: That makes a lot of sense. One thing that’s been interesting is…so myself, people listening, primarily have an eCommerce background. And I put…before I sold my store I had Bitcoin on my Shopify check out, you know, and I had it up for probably a year and I was, you know, I was in a market that probably had…maybe not demographically on the age side, but at least on the mentality side, a lot of, you know, more than your fair share… I was in the CB radio market… had more than your fair share of preppers, libertarians, people who didn’t trust the government, right? And even in that full year, I think only one person ended up checking out with Bitcoin partially because, you know, it’s new, it’s not super convenient or easy to do quite yet especially, if you’ve never done it before, it’s pretty easy once you do it. But more so, I think maybe, on a broader sense, you look…as a consumer looking to buy something and if I go buy something from a store, one nice thing of using a credit card is that yes, there’s a fees, I don’t have to pay for them, but I know that I can charge something back. If I don’t get my product, I have some recourse i.e. with Visa or Discover whoever it is. You don’t have that with Bitcoin because it’s a one-way irreversible transaction. Do you think that we’ll see Bitcoin actually be used broadly as a way to buy things online, given the fact that it’s irreversible?
Clay: I absolutely do. So I think right now, given that there really aren’t any widely adopted layers on top of Bitcoin, most people just are not willing to spend an asset that’s likely to appreciate in value instead of something that’s likely to depreciate in value, i.e. U.S. dollars or whatever your Visa denominated in. I think about that whenever I go to spend Bitcoin it’s like, you know, Bitcoin has gone up 600% in the last year, why do I wanna spend that? So that’s one way to look at it. But I absolutely think there’s gonna be some kind of equivalent to the protections that Visa gives you on the Lighting Network or drivechains, or whatever ends up emerging. The Lighting Network uses time-locked smart contracts. It’s very reasonable that, you know, whatever smart contract type is used in the future, that it would allow for you to lock that money in escrow during some kind of review period and pull it back if you don’t approve of the way the business delivered, you know, delivered the product, or the product doesn’t work, or what have you. So smart contracts would absolutely allow for that. And coming up pretty soon here Rootstock will be releasing their one-to-one pegged smart contract system on top of the Bitcoin blockchain which would allow for, you know, solidity contracts and Ethereum-type functionality on Bitcoin. Maybe it’ll work, maybe it won’t, but something like that is coming and coming soon. So I think all of this stuff can be modeled, it’s just not gonna all be what we know today as being Bitcoin.
The Invisible Risk
Andrew: One thing I’d love to get your take on the drastic differences and approaches and the kind of ways people look at cryptocurrency based on their age. And I’m really, you know, really generalizing here. You can have, you know, 60-year-old people that are incredibly sophisticated and, you know, are incredible programmers, and you can have 20-year-old people who live in the woods and hate technology. But I have noticed at some level…a comfort level that’s much higher with people that say, that are, you know, just 20s and 30s versus 50s and 60s with cryptocurrency. And even something where…I saw a report where I think something like 30% of millennials would prefer to have Bitcoin than stocks, which I thought was pretty telling. How much do you think of that plays into maybe, one, how much you have the sort of those traditional people I mentioned earlier, Dimon, [inaudible 00:28:22] places like The Economist, really having a more of a pessimistic view? And conversely too, how much do you think the fact that you’ve got people, you know, in their 20s and 30s who maybe if they remember the stock market crash of 2000, they certainly didn’t have much money in there. Maybe they had a tiny bit in 2008, but still most of us probably didn’t have a ton of money then when it crashed 10 years ago. How much you think that also makes us maybe under appreciate the risk that could be there that we’re not seeing?
Clay: Yeah. You know, I think millennials and the generation that has come…that sort of native to the internet…that, you know, they’ve never known life without the internet, is very comfortable spending money for Candy Crush coins or World of Warcraft items… People are very comfortable spending money for digital assets, so in a lot of ways this really is no different. You’re converting fiat currencies into some kind of digital instantiation of that wealth that can be spent in a way that you value. I think that plays a role. I also think that part of the story behind Bitcoin really is the financial crash of 2008, 2009 which was when the Satoshi Nakamoto white paper was published and the Bitcoin blockchain got started. I mean, we’re approaching 10 years if it hasn’t… no, it hasn’t been… I don’t believe it’s been 10 years just yet, but that financial crash was part of the genesis for all of this. And the aftermath of the financial crash had the U.S. government printing insane amounts of cash to rescue banks, bankers got huge bonuses. And so I think that it is important to realize that there really was a need for a censorship-resistant form of money that governments couldn’t screw with, that would allow people to a different option. And when you see the financial crisis that exists in Argentina with, you know, insane amounts of fiat currency being printed there, what’s happening in Greece, in Cyprus, and Venezuela.
Every time these types of collapses happen, you see more and more wealth shifting to Bitcoin because in a lot of ways, it’s a much more stable store of wealth and it’s actually less risky than having your income stored in several fiat currencies that are in the world right now. So I think it’s somewhat analogous to the kind of risk taking that entrepreneurs take. So I’ve heard people ask entrepreneurs before like why do you do this? Isn’t this a fairly risky thing for you to do? And a lot of entrepreneurs will respond with, having a job is a risky thing to do. I could get fired at any moment, my division could get shut down, markets could change, and I have literally no control over those scenarios. But when I’m an entrepreneur, the destiny’s in my own hands. And there’s a similar thing that happens with Bitcoin where someone who is willing to do due diligence can say, hey, I don’t know what people are gonna do or what the government’s gonna do with my currency. I don’t understand this complex, interconnected, multifaceted financial system that exists, but I can read every single line of code that is part of Bitcoin right now, and I understand that. And this is a lot more easily digestible than this overly complex financial system that exists in the world today at scale. So I trust this thing because I actually understand it and because it’s not in the hands of the rich or the 1% or the government elite or politicians. It’s in control, you know, it’s being controlled by the people.
On Manipulating the Market
Andrew: What are your thoughts on people coming into the market and really manipulating it? I mean, if I was… Say, for example, you look at the average market volume of Bitcoin per day, it looks like roughly…market caps go 120, 130 billion. Average market volume per day is about two billion-ish, I think. And so if you’re a hedge fund…like the largest hedge fund, I think in the U.S. Bridgewater Capital, they have about 150 billion, I believe, under management. So to be able to trade a couple of billion per day, I mean, it’s pretty feasible they could do that and that’s something where you can really move the markets. There’s no SCC, there’s no oversight. So what are your thoughts on how much… I mean, if I was a hedge fund this is like the perfect place to try to, you know, manipulate the markets and take a profit. So how much do you think that’s happening and how much do you think that’s driving what’s happening in the market there?
Clay: Hedge funds right now are largely barred from buying Bitcoin for a number of reasons. One, there’s a custodianship issue. Many types of hedge funds aren’t allowed to actually hold assets that are classified as commodities, those commodities held by a trusted third party. That’s problematic for a number of reasons. So there’s this custodianship issue that prevents them from buying Bitcoin. There’s also sometimes these contractual exclusions that bar them from purchasing certain types of asset classes. So a lot of hedge funds will spell out the types of securities and assets that they can purchase as part of those funds. Wall Street really has not invested in this asset class yet, institutional money hasn’t got in. And that’s a good thing, in my view. Most sophisticated financial instruments are usually only available to the wealthy first. There’s a lot of things that hedge funds and the ultra rich can do with their money that most people don’t have access to, and Bitcoin is kind of the opposite. It started out with an investment from the bottom and it’s slowly going up market, well, I get…it’s probably quickly going up market to institutional investors. And that’s part of what’s driving the increase in price here, is people wanting to get in before like Bridgewater executes a, you know, $10 billion block trade and jacks up the price overnight.
So I think it’s likely, I think it’s gonna happen, it opens the possibility for a lot of manipulation. But I also don’t think Bridgewater is going to buy, you know, $10 billion of Bitcoin overnight. You know, probably… What’s much more likely to happen is a bunch of these hedge funds saying, hey, we’re gonna have 1/2% allocation or a 1% allocation to get exposure and we’re not going to do that buy all at once. We’re gonna do it in small increments over a large period of time, so that we don’t drive the price up.
Capping Your Crypto Buys
Andrew: Yeah, it makes sense. I’m gonna transition a little bit into thinking about investing, buying and storing Bitcoin and just kind of…you mentioned this at the top already, but just as a reminder, this is not any…this is not investment advice at all if you’re listening. If you’re thinking about doing this, you need to chat with somebody professionally. This is just Clay’s opinion and my opinion and what we’re doing, so please don’t take this as investment advice in any way. Are you still currently buying into at the levels today, especially [inaudible 00:36:37] Bitcoins as one? Are you still buying into the market or have you kind of…do you think that a lot of the easy gains are gone and you’re just kind of holding with what you’ve got right now?
Clay: Yeah, so great question. At the end of last year I put a cap on how much crypto I would buy and it was based on my ideas about portfolio risk and how much risk I wanted to take on. So I set that cap and…
Andrew: No more than 90% of my liquid net worth in crypto. I think that is as far as I’m gonna go.
Clay: It’s much less than that. So I set that cap and at some point I had bought all that I was going to buy. Now, I’ve still invested in crypto hedge funds that have returned crypto back to me and I’ve made investments in lesser currencies that have gone up in some cases a 1,000%, and that’s allowed me to buy more Bitcoin. But I haven’t put more fiat currency or more U.S. dollars towards cryptocurrencies recently because it’s like I wanna stay responsible. I’ve got a family, I’ve got two children, the insanity has to be capped at some place.
Clay’s Top 3 Currencies
Andrew: If you… I know you hold a basket, you know, the top 10, given the fact that you’re not sure…you think Bitcoin’s gonna be the winner, but you’re not sure [inaudible 00:38:07]. Let’s say someone came in and, you know, put a gun to your head and…terrible analogy, but we’ll roll with it, and said you gotta divest off all of your crypt except for three currencies. You can hold three currencies, that’s it. Move it all into there. Which three would you hold right now?
Clay: Yeah, that’s a great question. It would probably be Bitcoin, Ethereum, either Litecoin or Monero. That’s got a store of value coin which is Bitcoin, that’s got smart contract coin which is Ethereum, and then a privacy coin.
Build Your Own Software Wallet
Andrew: But how do you get to store the coins that you do own? And this kind two different types for people, three ways, I guess. You can have a software wallet so that’s really just a program on your computer that stores the coins, and by coins really, it stores your private key and allows you to transfer those. That’s one option. A second option is a hardware wallet, so something like a TREZOR which is actually like a little…almost looks like a USB key that you can store things on, that gives a little more protection, that it keeps your private key off of your operating system, so much safer from hackers or people who might be able to access your computer. And then the third way is actually just, you know, cold storage or paper storage where you’re printing or writing that private key off somewhere and storing that physically. What are your thoughts on all three of those? How do you store your coins, what’s your approach for all that?
Clay: Unfortunately, I have a pretty complex scheme here and I don’t talk about it publicly, but I can provide some recommendations here. So I have diversified my custodial risk so there’s a bunch of different ways that I store my crypto assets, and the vast majority of my funds are like time locked. So you could come in, put a gun to my head and I couldn’t give you what I have even if I wanted to because of how I have it set up. I think most people would do well to use a combination of Coinbase which insures your funds and a hardware wallet like TREZOR or Ledger Nano S. So I would use both of those, I’d have your stuff in a Coinbase vault and I would use a hardware wallet.
How To Invest
Andrew: Are there… If somebody, you know, if someone wants to buy crypto, a lot of times the… In the U.S. the most obvious way is Coinbase like you mentioned [inaudible 00:40:36] or Bittrex or Kraken, some of these other exchanges. But if somebody wants to either invest in…wanna go through any of those routes or maybe they wanna invest in like an IRA, [inaudible 00:40:45] investment advice that wouldn’t recommend putting a lot of your IRA retirement money in this. If they did and independently decided they want to do that, are there any good traditional methods for getting Bitcoin exposure or crypto exposure in a traditional brokerage account? The one or two that I’ve seen so far don’t look appealing because you end up paying it seems like a huge premium for the underlying cryptos. Are there any that you see that are appealing?
Clay: There really isn’t right now. And I think it’s really best to have control of the underlying asset versus a derivative which is cash-settled and approximates the Bitcoin price. I’d say if you’re gonna own Bitcoin, own Bitcoin, hold it, control it, make sure that you have your own private keys that, you know… It’s not your Bitcoin unless you have the private keys. I saw a joke on Twitter, someone was saying…someone claiming to be Satoshi Nakamoto lost their keys because the dog ate the keys and someone responded that, well, that would mean that Satoshi Nakamoto’s dog is actually Satoshi because he had control of the private keys. So make sure you own your private keys, make sure you own the underlying asset. There will probably be an ETF at some point where you can get exposure to the gains without actually holding crypto, but I think long term that’s a much riskier proposition than just investing the time necessary to purchase the asset yourself.
Clay’s New Startup Nomics
Andrew: I wanna talk about Nomics before we wrap up. So Nomics, of course, is the startup that you’ve recently begun. What…and you kind of described it as, you know, the Yahoo Finance for crypto. Can you give us a little more sense of what it is? What are you trying to do with Nomics?
Clay: Yeah, so Nomics has two parts, there’s the front end and the back end. The front end is essentially attempting to be the Yahoo Finance or the Google Finance for the cryptocurrency space. There are a lot of competitors there right now, none of them are well-funded, none of them appear to be taking this seriously. Many of them are running ads for scams on their home pages and they’re just not being built by real software development teams. So that’s the front end. The attempt there is to create a consumer grade…and I mean consumer grade in the best possible way, but to create a consumer grade front end to make this stuff accessible and understandable to everyone. Now, that front end consumes the back end API that we’re building. So we’re indexing the entire cryptosphere. So not just every trade and transaction that happens, but even every single order that gets placed on exchanges, even if those orders aren’t filled. And right now, it’s doable to do that, but difficult. Ten years from now, it’s gonna be pretty much impossible to do that unless you started kind of where we are right now and built up that muscle over time. So I kind of think about Google and what’s impressive about what they do in the search space. And what’s most impressive about what Google does is not necessarily their algorithm, there’s a lot of data scientists that could probably do as good a job as Google does creating their algorithm. What’s most impressive about Google is the fact that they index the Web multiple times a day, no matter how much the Web grows they’re indexing it and we’re doing that as well. So the front end play is probably what most people are going to see, the back end is probably what’s most impressive. And we’re selling our data to hedge funds, family offices, institutional investors through paid API. And that’s how we’re gonna make most of our money, almost all of our money. And the front end is gonna stay free, probably forever.
Andrew: Are you bootstrapping this or are you guys taking money raising money for it?
Clay: We are self-funding. So we might raise money at some point in the future, but we’re in no rush to do it. We don’t need to do it. We’d probably do it to get certain types of expertise involved with the business and having a stake in the business, I doubt we’ll do it ever because we need the capital.
Andrew: And you’ve got a great newsletter over there that comes out once a week with kind of a really nice round up of what’s going on in the crypto space. I’ve been enjoying getting that. And if you wanna check out more, Nomics, N as in Nancy, O, M as in Mary, I-C-S.com, nomics.com. And we’ll link up to that in the show notes. I highly recommend if you’re interested all in this get a newsletter, it’s worth reading.
Clay: It’s like economics without the eco.
Resources To Get You Started
Andrew: Yes, thank you. Good way to describe it. That’s a wrap up of the crypto section here. Couple of things I’ll link up to you that I have found valuable, really interesting article from Scott Galloway chatting with one of his colleagues over at NYU about how to value cryptocurrencies or pricing versus [inaudible 00:46:11] which is an interesting discussion. And then another podcast, it’s called “Invest Like the Best.” Host over there did a really great three-part series called Hash Power, all about this. I’ve done a real deep dive, I’ll link up to that too, it’s well worth listening to. Clay, do you have any thoughts for people who are looking to dive deeper down the rabbit hole here, great resources or things you’d recommend?
Clay: Yeah. So there’s a talk that Chris Burniske gave at Token Summit on cryptoasset valuations which I think is pretty good. I can get you that link. I also think the interview that Tim Ferriss did with Nick Szabo is really good. So a lot of people think Nick Szabo is Satoshi Nakamoto. I have no idea who it is, but if I had to make a bet I’d probably bet that Nick Szabo is Satoshi Nakamoto. I think that’s good. There’s a book called “Digital Gold” which is a narrative style book that tells the story of the genesis of this movement and of Bitcoin. And it’s really well done, it’s really entertaining, it’s not this dry academic treaties, it’s a fun read, and it’s got a arc and all that stuff. So I’d recommend that book as well. I’m also coming out with a podcast the beginning of December, which I think will be enjoyable. But everything we’re doing is really for crypto investors who are not doing general “how to” stuff or talking about, you know, doing deep dives on the technology or how this all works or even getting much into the social implications. It’s mostly stuff that’s purely for investors by investors.
Andrew: And is that gonna be called The Nomics Podcast?
Clay: No, it’s gonna be…it’s tentatively titled “Flippening.” And that would be at flippening.com. There’s nothing there right now.
The Lightning Round!
Andrew: Clay, this has been really interesting. One thing I wanna do before we kind of officially wrap up here is do a lightning round with you. I do this with most of our guests here. So if you’re up for it I’ll dive in and just you can give me rapid fire answers.
Clay: Awesome. Let’s go.
Andrew: What’s the number one thing you’re trying to optimize your life for right now?
Andrew: Who’s someone you strongly disagree with?
Clay: Donald Trump.
Andrew: How much money is enough so, you know, money in the bank or you would be satisfied, that’s the number.
Clay: Oh, not much, 50 million.
Andrew: What’s the worst investment you made in the last 10 years.
Clay: Oh, arguing with people. Time spent arguing with people.
Andrew: I think I have a hunch what the answer is gonna be here. What’s the best investment, apart from your business, you’ve made in the last 10 years? I’m guessing it’s gonna be crypto so maybe to make it a little more interesting if there’s a specific coin that you’ve invested in that has been the best?
Clay: Yeah, Bitcoin.
Andrew: Bitcoin. The first CD you ever owned.
Andrew: REM, nice.
Clay: Sorry, I don’t remember what the album was, probably REM.
Andrew: A couple customized ones here for you. I gotta get a pricing prediction out of you, it’s just how these things go. What do you think the price of Bitcoin will be in 10 years, if you had to guess?
Clay: A million bucks.
Andrew: What do you think the market cap of the broader crypto ecosystem will be in 10 years? It’s, you know, call it 200 billion right now, where do you think we’ll be in 10 years for all crypto?
Clay: A third of USD, in circulation.
Andrew: Oh, yes. This has been…my guests had a lot of fun. I’m excited to see what you do with Nomics over the, you know, the coming years. Congrats on, of course, everything you’ve done in the past with Leadpages all the way through. So it’s been fun following your career. I remember in the very early days when I was getting eCommerceFuel going, stealing one of your subject lines, “Now, welcome, welcome. Please open [inaudible 00:49:48]” that little hack. And I noticed you use that too with your Nomics newsletter as well which made me smile so…
Clay: If it works, it works.
Andrew: It works. It works beautifully. Anyway, thanks for being an awesome [inaudible 00:50:00] shared so much in the space, and best of luck with Nomics. I’m excited to see how it goes.
Clay: Andrew, thanks for having me.
Andrew: Want to connect with and learn from other proven eCommerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.
What Was Mentioned / Related Resources
- Andrew Youderian: Blog | Twitter | Facebook | LinkedIn
- Clay Collins: Website | Twitter | Facebook | LinkedIn
- Hash Power
- A Primer on Cryptocurrency [Youtube]
- The Quiet Master of Cryptocurrency – Nick Szabo
- Token Summit Video
- LedgerStatus Crypto Newsletter and Podcast