Dear Crypto community and Blockchain Buddies
across the globe.
Welcome to Cryptonites, the No B.S. Blockchain
channel built with the community for the community.
And tonight we have an amazing guest Glen
Goodman the shares guy.
Thank you so much for coming tonight Glen.
Yeah it's good to be here.
It's a pleasure to be with you.
So Glen let us know a little bit about yourself.
Obviously, you've done a lot in the U.K. you're
hopping from conference to conference giving
amazing keynotes to educate the community.
So please let us know your story.
Okay.
Well I've been a trader for a long time but
I actually started off as a TV reporter first
for the BBC and then for ITV News.
So I was doing that for many years but because
I was a business correspondent for some of
that time that kind of got me into trading.
I got really interested in trading.
I got into it.
I started trading I made a lot of mistakes
yada yada.
I'll tell you a bit more about that later
on about the horrific failures that I started
off with which quite frankly most people who
get into trading and particularly anybody
who's been in cryptocurrency probably knows
about that about success and failure.
But eventually I started learning how to do
it properly and I started making a lot of
money.
And so by about six or seven years ago, I
realised, well, I'm making more money trading
than I am through my job and it doesn't show
any signs of stopping.
So I decided to quit my job and trade.
And that coincided very nicely with the birth
of cryptocurrency or just after the birth.
So I started trading Bitcoin initially of
course and then got into other cryptocurrencies
started discovering some of the smaller dodgy
exchanges and traded like mad.
And then basically at the end of 2017.
And this is my claim to fame that's at the
end of 2017 I built up a big Facebook page
and I made a video showing my followers that
I felt that now was probably the end of the
good times the party was over.
And I kind of warned them to be extremely
careful from that moment on and that just
happened to coincide quite nicely with the
peak of the boom.
So following that.
I got asked by a publishing company to write
a book.
Which is coming out shortly called The Crypto
Trader, all about my experiences and giving
step by step guidance on how to get into trading
cryptocurrency and how to do it sensibly while
keeping the profits and not like losing most
of them.
Like most people.
That's very cool.
So much information so many questions I want
to ask you just based on what you said.
But one thing that's really cool about you
Glen is a lot of the people here in this space
you ask them When did you enter this space.
Oh I started investing in bitcoin in 2012
and they tend to boast a little bit.
Not a little bit actually.
They tend to boast a lot about how cool they
are and how successful they've been in trading.
But you're not afraid to show the vulnerable
side that you've learned through your mistakes
or through failures.
So if you don't mind telling us a little bit
about that failure and what kind of lesson
you've learned through that particular context.
Okay.
Well, I would say that when I made that call
in late 2017 that the party was probably over
blah blah blah.
That wasn't just sheer luck.
That was the result of 15 years of trading
experience of successes and failures.
And through those failures, I kind of learn
how to know what markets are doing what are
the signs that the good times are coming to
an end and all of that stood me in good stead
as it turned out.
But at the time when I was going through hell
in the early years at times you know obviously
you know what it's like when you're learning
a hard lesson you don't really think Oh it's
gonna be great in 15 years time when I reap
the benefits of this lesson.
It's just it's just how.
So yeah I'll tell you when I first started.
I started trading shares initially and it
was at the height of the dot com boom.
I was very young and me and a few of my friends
were really into it.
Everybody was talking about dot coms.
This is around about the year 2000 when everything
got very exciting for companies like Amazon
but millions of other or hundreds of other
companies besides we're also seeing their
valuations just soar and most of those companies
you won't hear about now.
So.
Basically, I got a call from a friend of mine
who was working for a really cool startup
that was called Game Play, and the idea was
that they were going to be pioneers in the
world of online gaming.
Well, they already were pioneers and online
gaming at the time was a brand new thing.
Now we know online gaming is massive and lots
of companies have made enormous amounts of
money out of it.
And even back then it was kind of obvious.
This is once internet speeds get faster.
There's gonna be no stopping this online gaming
thing.
So, of course, it's a no brainer.
You've got to buy the shares of this company.
Game Play that my friend worked for.
He invited me to go round and look at their
premises they had a five-story office block
in London where they had like old school arcade
machines people rolling around on roller skates.
You know it's kind of sound familiar.
It's kind of like the Crypto Boom, the first
version of the Crypto boom, basically.
So.
So yeah I got totally sucked in.
I didn't have much in the way of savings because
I was very young but I had a few thousand
pounds and I put it into Game Play.
Bought those shares and they were soaring.
They were I think they doubled pretty quickly
and I felt like I must be a genius.
I'm just making money.
I can't stop making money.
It's just too easy.
And then basically the dot com crash began
but we didn't know it was the dot com crash.
I thought it was just a blip, just a blip.
Fine.
Okay.
So suddenly I've got less money than I started
with.
That's weird because I had double a minute
ago.
So I phoned up my friend and he's like "Yeah
I know that prices absolutely plummeted which
is amazing".
So we used to talk on the phone a lot in those
days.
"It's amazing because it means that we can
buy more shares in Game Play even cheaper".
And I was like Yeah you're right.
This is just an opportunity.
So you know I had a bit more savings left
over that I haven't invested yet.
So I put them into Game Play as well and I
kept basically just repeated it solves a couple
of weeks later the shares halved again.
He's phoning me up saying "we got to put all
the rest of our money, every last scrap of
our money".
So I put everything I had into the Game Play
shares which had gone so low because they
were an absolute bargain now obviously because
they've fallen so far.
So that's the way I saw it.
And of course, all this will sound very familiar
to most novice investors because they all
think like that they all think it was a bargain
it's fallen so it's even more of a bargain
it's fallen again
So it's even more of a bargain so you just
keep buying more and more.
What happened eventually was the shares that
had been I think at their peak more than £10
per share.
Ended up.
At £0.01 per share but even then I thought
oh well it's all right because they'll come
again.
They'll come back again.
But they don't come back again.
What happens when a company gets that cheap
is somebody buys them for like £1.00, you
know somebody buys the entire company for
whatever it was a few thousand pounds and
your shares are compulsorily purchased from
you at £0.01 each.
So I basically, of my thousands and thousands
of pounds I had ten pounds I got back on.
Wow but that's amazing because you know a
lot of people when they capitulate and I know
people from the dot com era that once they
lost their money you just completely stopped
investing.
Yes.
They're afraid, right?
Like all my friends, they all stopped.
Like they're shocked, traumatized.
I had the bug you know I just there was something
about it.
I think it was the defeat. I'm one of those
people where I play a lot of video games I
always have and if I'm defeated I just I have
to beat that game.
You know I still have to have another go and
try harder next time.
So I started learning and reading a lot of
books a lot of really old trading books from
the 1950s and earlier like the classics.
I started really trying to understand everything
that was about this trading game and you know
the first thing I read in virtually all these
books was you know "Ha ha, you're an idiot
for that thing you just did with Game Play"
was kind of number one lesson.
So that's kind of number one lesson in my
book which is being published shortly as well
because.
You never ever.
That's lesson number one of trading never
ever hold onto a losing investment.
Just don't do it.
There's no reason to do it.
It always feels like the thing to do is either
to hold on or HODL, as we now of course say.
Or even to buy even more.
But the problem is you never know.
Whether that decline is ever going to end.
You just don't. Just don't know. Even, dare
I say it, with something like Bitcoin, while
it's falling you just don't know if that fall
is going to lead to a complete disaster or
whether Bitcoin will recover.
And this interview could start looking very
old in a couple years time because I'm saying
maybe it will cease to exist and of course
maybe Bitcoin will become more massive than
ever as well.
And so there are trading techniques that I
teach in my book that can help you to basically
get around those risks so that you can make
money kind of either way and you don't have
to just worry about is it going to go to zero
and not be able to sleep the whole time because
you've got all your money tied up in something
that's just falling and falling and falling.
You know that's a great lesson I want to definitely
ask you more questions related to lessons
that you can help especially you know the
rookies or new people who want enter the space
in and they're a bit afraid of losing their
money and stuff like that so I'll ask you
some more questions related to that.
But one question I want to ask you is obviously
after every bubble burst there tends to be
emerging companies or in this sense, for example,
the FAANG stocks at the dot com bubble.
Did you happen to enter either Facebook Amazon
Netflix or Google at the time where the dot
com bubble was recuperating or recovering
at that stage?
I was suddenly trading in and out of tech
stocks during that period once they'd started
recovering.
Yeah.
So I mean I'd love to say.
I put all my money into Amazon in 2003 and
I've just left it there ever since.
I mean you know that's the ridiculous thing
isn't it is that.
If you could go back in a time machine I wouldn't
bother with trading techniques and analysis
and all of that.
I just buy a bunch of Amazon and just hold
it.
Go to sleep and wake up 10 years later.
But you could say that about Coca-Cola you
know, I bought that in the nineteen thirties
that share and just never done anything else.
Absolutely.
But the problem is of course hindsight is
20 20.
And whilst it's obvious now that Amazon was
going to conquer the world if you go back
through news archives and read articles about
Amazon in 2003 2004 there were enormous question
marks over it.
Absolutely.
I mean it had never made a profit until pretty
recently.
But at the time that was kind of unthinkable
the whole dot com crash was caused by everybody
suddenly realising that these companies weren't
making any profits and probably never would.
And so everybody suddenly lost faith and everything
crashed and of course, Amazon was no exception
to that.
Amazon wasn't making profits either it was
just growing and growing but not actually
getting anything back for its shareholders.
And that as I say was just not the done thing
at the time.
Times have changed since then.
You know 10 15 years on now we kind of thing
is perfectly normal for a company not to make
any profits.
And who cares.
Because if you own Amazon shares your shares
have risen massively in value and that's all
that matters.
But it didn't feel that way back then.
So you know again there are lessons therefore
crypto traders and crypto investors.
You've got to realise that what seems like
a normal situation now 15 years down the line
you'll look back and you've go "God that,
that wasn't normal at all" Or you know that
coin that everybody said was definitely not
going to succeed.
The one coin that everyone said was definitely
going to fail.
Happens to be the one that's conquered the
world.
You know that's what will happen I guarantee
you in 10 15 years because it's just what
we always happens.
That's super interesting.
There's another question I want to ask.
I'm going to throw out the order of my questions
and we're going to freestyle this because
you have so many interesting topics that are
surfacing and I'd love to ask you questions.
You were talking about how some people invest
in companies that are not even profitable.
That tends to be a bit of a trend these days,
these growth stocks and companies like you
said Netflix back in that time or Tesla.
What is your take in terms of generations?
Is this a generational thing.
Or have you noticed any differences correlations
when you compare maybe let's say Baby Boomers
Generation X or reaching the millennials,
Are they different and their way of investing
based on your experience or observation?
Yeah I think there is a real generation gaps
going on.
Well for a start the millennials did something
that previous generations would have been
absolutely unthinkable.
What they did was they started investing in
ICOs where you're not a shareholder and you
don't actually have any rights over the future
direction of the company.
You're never going to get dividends because
dividends usually don't exist in any form
and when you invest in ICO you're basically
just handing over your money and praying.
And whilst that may well reap dividends for
many people in many investments, SwissBorg
obviously, and each investor there is gonna
be rich beyond their wildest dreams, maybe.
But that's the interesting thing is that previous
generations any previous generations would
just go "you can't do that".
Why is this.
Yeah well you're crazy to have a legal right
over the shares of the company.
You want to be able to phone up the chief
executive and complain and say I'm a shareholder
and this is just I don't like the way of moving
this company forward you know.
But basically, the Millennials were willing
to give up all of those rights in the hope
of getting capital growth for their tokens.
And I think that that's a perfectly valid
way of doing things.
Even though I've been around the block a few
times and I should be stuck in the old ways
I'm not.
I appreciate the new ways of doing things
which is why I got into crypto you know pretty
much as soon as I discovered it and I've loved
it ever since.
So yeah I mean that's one massive difference
between the generations.
Also investing goes in different trends right.
So.
The baby boomers were into things like buying
funds in America they called the mutual funds
or in England.
You've got investment trusts things like that.
And it was all about funds.
And then the next generation on from the baby
boomers they got into dot com shares.
They were buying and selling individual shares
and then about 10 years after that suddenly
everybody became obsessed with FX, trading
FX.
Yeah, FX was nuts in Japan as well.
Retail on a retail level as well.
People would just go nuts margin leverage
trading and all that.
Exactly.
Well because the technology kind of caught
up with that and allowed it.
So a whole new generation of traders grow
up on FX which is a completely different game
altogether because of course shares they tend
to go up over the long term like as a group.
And likewise, I would like to think cryptocurrencies
as a group will go up over the long term.
They have been doing so far.
It might not feel like it right now but over
the period that they've all existed it's been
a kind of a long long upward trend and hopefully,
that will continue.
But with FX which as I say the previous generation
got into it it's like it can go up it can
go down there's no up or down you turn the
graph upside down and down is up and up is
down.
I mean.
It's a completely different way of doing things
altogether.
So the people who've grown up with FX trading
tend to think very differently in terms of
how they trade and how their whole attitude
to investment.
So I find that absolutely fascinating and
very exciting that the millennials and even
younger than the millennials have got into
crypto in the way that they did a lot of them
will be nursing losses right now but just
like my Game Play losses, hopefully, a lot
of them won't be put off trading and we'll
learn some lessons read some useful stuff
like book like mine.
Well, mine, actually not a book like mine
they read my book and no other. Ans they will
learn how to become excellent traders.
And you know it's a baptism of fire.
It always is.
That is a really cool analysis.
I love how you broke that down from funds
and in moving into shares and moving into
actual FX like you said because in Japan a
lot of people say that the reason why crypto
took off so extremely fast is because of that
conversion of FX traders that suddenly got
interested in crypto assets because it's kind
of like the penny stocks it feels like something
that if I find the right penny stock it's
going to blow up I'm going to make massive
gains.
Kind of like the leverage trading within the
FX platforms.
So do you see that as a connection?
So you saw people move from to the other?
Yeah.
Like so many of the FX traders were telling
me in Japan that they were losing lots of
retail investors because they saw this kind
of as a new game of gambling or betting on
something that could.
Have exponential growth.
Do you see that transition?
That's interesting that's a very different
perspective that you saw that side of things
because virtually everybody I've dealt with
as my Facebook page that I set up a few years
ago as it grew massively during the boom and
became well for a period it became the biggest
trading page in the world.
It still might be but I can't say definitely
because I haven't checked all the others to
see how many followers they got but it became
a pretty big deal for a while and I was having
deluged with messages and people wanting to
talk to me about trading and I'd say at least
9 out of 10 of had never traded at all.
Apart from some of them have tried to cryptocurrency
but certainly, there were very few who came
from FX.
But I guess because of where you worked at
the time the business you were in and you
saw that kind of thing.
It's really interesting because you know Japanese
culture is very risk averse so you would you'd
wonder why are there so many FX traders in
Japan in a risk-averse culture.
So I'd always ask my friends I lived there
for the past decade and they would always
say they say listen I don't want to put money
in a stock that may bring me an average you
know 5 to 8 percent a year while I can do
something crazy have fun with FX and maybe
get crazy capital gains you know at the end
of the day.
So they see it as a game I guess in some ways.
I mean what was fascinating now is I don't
know if you've noticed Facebook ads for trading
platforms now by law they have to put the
percentage of their clients who lose money
and reliably across all the different platforms
that are regulated in my territory.
They have about an 80 percent loss on average.
Not that the average person loses 80 percent
of their money but that 80 percent of the
accounts that are open are losing money not
making money.
And bear in mind most of those are doing FX
and that kind of thing.
They're not just normal investors in shares
of retail investors and shares they're doing
FX they're doing Treasuries they're doing
all kinds of kind of complex thought the stuff
that frankly.
Largely should be left to the professionals.
And I can say that because 80 percent of these
people might say it's kind of.
It stands to reason that it's a difficult
difficult game whereas buying shares rather
like buying cryptocurrencies because there's
a natural direction of flow which is up then
it's somewhat.
I would say is easier exactly but there's
a kind of.
There's more hope to it that way whereas FX
people try and they try again and then try
again.
And you know I tutored a couple of guys who
asked me to help them.
They'd been trading FX for 10 years just ordinary
guys but they were doing it in their spare
time and they had lost money all the time
every year for a decade.
But there was still they still wanted to go.
If I can just make a few changes I know I
can make money at this.
I don't know but the statistics show and there
have been big studies done on this.
Sadly the statistics show that traders who
lose money and don't make massive changes
to their strategy generally carry on losing
money forever, right.
However experienced they get if you're making
basic errors which most traders do.
And they're kind of stuck in your head.
These basic errors and you just keep repeating
them in a kind of Groundhog Day.
You will just always lose money year after
year after year and that's what sadly happens
to a lot of people.
So history keeps on repeating itself repeating
itself and instead of.
Changing and being flexible and creating a
new strategy new goals and your approach to
trading.
That's why I wrote the book obviously
Exactly.
To get people out of bad cycles and get them
into positive ways of behaving.
So that is a perfect transition for the next
question.
So if I'm a newbie I'm a beginner in this
space.
What are a few pieces of advice that you could
give to that person on how to be ready for
trading in terms of strategy goal setting.
What are some important lessons you've learned
through your failures that can help new people
in this space?
All right.
I mean the number one thing and I have it
kind of front and center in my book.
And repeated quite a lot is old Wall Street
maxim frankly which is cut your losses run
your profits and it's very easy to say it
actually doesn't appeal to most novice investors
because they think that they want to do the
other way round when they've got some profits
they want to take those profits quickly and
when they've got losses they want to hold
on because they will probably go back up again.
But actually.
Nearly all successful traders do it the other
way round when they have a loss they're out
of there quickly and when they're making a
profit within reason they try and let it run
for as long as possible until they feel like
Okay we really have come to the end of a trend
here.
So those are the kind of two most basic rules
for most traders and some people say to me
well not all traders trade successfully like
that look at Warren Buffet.
He holds onto things that are losing money
and he's the richest trader in the world.
I think he's still the richest trader certainly
one of the few.
The fact is that he also follows the trends
but he follows them over the very very long
term.
So he just takes a longer-term view than your
average trend follower but ultimately he's
still doing the same thing which is just buying
something which he believes is on a long term
upward trajectory and inevitably will go to
the sky eventually and he so he kind of.
He HODLs but he's not HODLing in vain hope.
Like.
A lot of crypto HODLers have done.
He is invested in things that you know are
either sure things or as close to being sure
things as humanly possible.
And unfortunately in the crypto space that
just isn't the reality is not a sensible way
to behave because we just don't know which
cryptos will be the biggies.
You know again another lesson I really should
point out at this point it is a very important
one that I stress in my book is that you just
don't know which ones are going to be successful.
And it's always been that way.
Take the dot com boom once again back in 1995
Netscape.
If you remember Netscape?
Of course yeah.
Completely disappeared right.
Yeah Netscape was the browser around 99.
I think it was 99 percent of people were using
Netscape to browse the web right.
And that was in 1995, seven or eight years
later only 2 percent of people were using
Netscape and then of course it it pretty much
to all intents and purposes ceased to exist
shortly after.
Absolutely.
Back in 1995 if you wanted to invest in internet
things I mean Netscape was like.
You'd think Netscape is the deal right?
Yeah, it's like, Netscape is so bright. It's
like a household name.
Everybody's heard of it.
It's captured the market completely it has
a total monopoly over the market.
It's like what could possibly go wrong.
And yet look what happened to it.
And there are any number of other examples
of course we could give like AOL.
MySpace.
MySpace, in America we had Friendster.
Friendster yeah.
And here in the UK we had Friends Reunited
which was just a big UK thing for a while
everybody was on Friends Reunited.
This is of course before Facebook everyone
was meeting their old school buddies through
Friends Reunited.
And that company was sold to a news provider
that I happened to be working for at the time
for hundreds of millions of pounds.
And then that investment turned out to be
virtually worthless.
So you know.
You could carry on going back through history
with just countless examples of the same kind
of thing.
And I'm sorry to all the young people who've
got Bitcoin in their head or Ripple in their
head or Ethereum and they're just like yes
this is definitely going to succeed.
There is no definitely.
And you have to basically, trade in a sensible
fashion where you might end up like me and
Game Play.
It's not a nice place to be.
Absolutely absolutely.
So that is a bit scary right for some people
because they're thinking "oh what if my bitcoin
or Etherum or the main crypto assets will
eventually die and a new crypto asset will
surface and take over most of the market share".
Do you have any personal preferences with
regards to crypto assets any coins or tokens
that you still feel will not be a Netscape
or will not be a MySpace at this point or
is it too difficult to tell?
Obviously you cannot predict the future.
We don't have a crystal ball.
This is going to be on YouTube forever isn't
it? I'm going to look pretty stupid.
I mean look if you were going to, if you forced
me to say.
A name or some names of things that are most
likely to succeed then at this point.
I would have to say the biggest names because
all other things being equal the ones that
already have some household brand value.
Like Amazon back in the day by 1998 it was
already pretty well known.
And that did count for something that it was
well known, it didn't count for everything
as Netscape found out and AOL found out.
But it does count for something and the fact
that Bitcoin is already entrenched in most
people's heads throughout the world is like
the cryptocurrency.
I mean let's face it most people haven't even
heard of any other cryptocurrency that's gonna
account for a lot.
But of course, we know that there are just
so many technological limitations to Bitcoin.
And I know that you're going to be interviewing
other people who have stuff to say about that
and who are working on ways to mitigate those
various fundamental problems with Bitcoin.
Those efforts are still ongoing but those
efforts are still not at the point where you
can just get yeah they've solved the problems.
They're going to win it.
Yeah it's still hard to say at this point.
Exactly so.
So yeah I'd have to say the big names Bitcoin
because of its name, Ripple because it's supported
by so many large institutions who are able
to plow money in and plow kind of expertise
in expertise in.
Ethereum has had some of the shine come off
it obviously over the past couple of years.
I got very excited about it.
I still kind of believe that Vitalik Buterin
is a true genius.
I mean he just wows me every time he opens
his mouth.
So I still have kind of some faith that he'll
pull some rabbits out of hats and just make
this thing what it has clearly the potential
to be.
Obviously, it's not looking too great for
Etheruem at the moment but yeah if people
watch this video in a few years time hopefully
they'll go "hey look Ethereum went onto amazing
things".
Cross fingers it's an amazing project and
I love the way Ethereum try to decentralize
everything.
I remember seeing an interview with Vitalik
saying we should decentralize our parties
like every Ethereum party should have external
people in there somewhere.
So yeah, really cool mindset.
Great project.
When it comes to Bitcoin.
A lot of people say that it's not necessarily
the fastest or best that wins the competition.
If we look at McDonald's, they have more market
share than any other burger place, but maybe
a local burger joint may actually have better
burgers or fruit, for instance, Toyota is
not, they weren't the best cars.
You have Mercedes BMW more beautiful more
powerful cars.
But they had the most market share up or up
until recently when Nissan merged.
Or the classic example that people often bring
up his VHS and Betamax.
That has to be before your time, well it's
before my time as well.
But yeah there was this big war of the formats
right.
You may have heard about so, you had VHS like
tapes for video for home video and you know
you would go to the video shop and you could
get VHS tapes or you could get Betamax tapes.
There were like two options and people had
Betamax machines in their homes.
And the interesting thing is that by most
people's reckoning by most experts reckoning
Betamax tapes were far superior right.
VHS tapes were a bit grainy and a bit rubbish
as we know from having.
If you've ever watched any which I'm sure
you have.
You know they have the little lines across
the bottom and the fuzziness, ugh, horrible
horrible but VHS won. VHS just destroyed Betamax,
pushed it out of the retail market completely.
But what was interesting is that as a TV reporter
working for the BBC working for ITV News for
years and years.
Beta is the standard or was the standard.
Yeah I used Beta tapes all the time, all the
cameramen with the big cameras on their shoulders
they using Betatapes.
Absolutely.
So you know they don't anymore because they're
big.
We've now got little memory cards.
But you know for a very long time for decades
they were using beta because it was far far
better but VHS, it won even though it was
a bit rubbish so I mean you know it just goes
to show.
So maybe something.
What about analogy of my making.
I suppose I'm kind of saying that Bitcoin
maybe is a bit like VHS.
It's kind of it's already the famous one.
And so it might just pick up popular momentum
even though it has many limitations, especially
if people manage to solve some of those, semi-solve
some of those limitations. I don't know but
there are some great projects.
There are some really good projects, yeah.
That just wipe the floor with Bitcoin.
Yeah and that does make me think.
Okay.
So nobody's heard of these projects.
I've worked with a couple of them and I'm
just like blown away by some of the technology,
graph technology and you know.
Good stuff is out there.
I don't want to start shilling for various
companies I've been involved with so I won't
start going into that now but.
Yeah there is some good stuff out there and
maybe just maybe if they market themselves
right then they could be Bitcoin killers.
There's one thing that I really loved about
what you said is when you talk about valuation
models you know one of our employees actually
our co-founder at SwissBorg was interviewed
by London School of Economics and one student
asked him.
"But don't you think that crypto assets do
not fit any valuation model out there"
And he actually answered the question with
a question.
And his question was "is it that crypto assets
do not fit the valuation models or is it that
the valuation models do not fit crypto assets".
Well, I think that the efforts that have been
made so far to form the fundamental valuation
models tend to be based on network effects.
Yes. Metcalf's Law for example right.
Yes exactly.
They're looking at network effects and network
effects are you know to anybody who doesn't
know just basically the value of a network
Metcalfe's Law says that the that the value
of a network is related to how many people
are using it.
Exactly.
And then there's a multiplier.
Yeah.
And then yeah you have a multiplier effect
there are some nice pictures that are stuck
in my book sort of telephones linked together
which were used with the original Metcalfe's.
Oh cool.
But anyway the point about it is, the problem
with it for me is that network effects as
we've just seen with Bitcoin during the crash
is it's kind of a chicken and egg situation
which comes first the fall in valuation or the
reduction in the amount of people using the
network.
It's like the two kind of feed off each other.
And so you end up with virtuous circles upwards
in vicious circles downwards in the valuations.
There's nothing really solid like earnings
to hang on to you know.
A company can see its share price plummet
but it's still making really good profits.
That happens all the time.
And so then you can say well that those shares
are cheap from a fundamental point of view.
They could still get cheaper of course as
I saw with Game Play, mind you, it wasn't making profits.
That was the problem.
The point is that it gives you an anchor
doesn't it.
It says these shares are fundamentally cheap
because the company is making tons of profits
but the shares have gone down a lot because
of the stock markets crashed right.
Whereas with the cryptocurrency market.
If you're saying well the valuation of Bitcoin
is based on how many people are using it.
The problem is when the price starts crashing
less people use it.
And that causes the price to fall further
and then less people use it and then the two
tend to go down together and they go up together
which is a very different thing from the way
the fundamentals work with shares.
Absolutely.
So in terms of the fundamentals as of course
as you know we have discounted cash flow.
We have this kind of dividend model's P E
ratios which are the more traditional kind
of valuation models.
It doesn't work better.
Okay.
So that smart arse LSE student was probably
right in the sense that we just haven't worked
out what a good valuation model is.
But considering that thousands of the finest
brains in the world are involved with cryptocurrency
and nobody has yet come up with a model that
really comes anywhere close to a price earnings
ratio for shares tells me that.
Probably probably the problem is unsolvable
which is why I'm stuck with technical analysis
for the time being as my as my main tool for
at least for finding good cryptocurrencies
As the main tool, and most of the experienced investors out there or traders actually usually recommend
technical analysis probably for the same reason is they
can't really find a good fundamental analysis.
But I do have a question when it comes to
for example recently the exchange tokens they've
been exploding right since January Binance coin, Huobi token, KuCoin.
Because these companies not only they have
massive Treasury they have great profit margins
they're actually making a lot of money.
Could there be some sort of fundamental analysis
applied to the exchange tokens because the
utilities are clearly connected within their
ecosystem.
And is that one of the reasons why these tokens
or coins are blowing up recently.
But I think again you'd, I mean to some degree.
That's an interesting point and you've and
you've got a good point there.
But the problem remains similar in the sense
that you know Binance's own coin for example.
Yes it's gone up massively in value and yes
the company as far as we know is doing very
well and making lots of profits.
It certainly should be considering how many
people are using the platform to trade.
But let's say it started let's say it had
fewer users if fewer people were using the
Binance platform then
the price of the of the tokens would probably
fall because there'd just be less demand for
them and profits of the company would probably
fall
commensurately they'd probably fall as well.
At the same time.
So again you have these kind of all the things
go down and all the all the metrics go down
at the same time and all the metrics go up
at the same time which again makes it very
difficult to find any point where you go these
are cheap because if the if the tokens are
going to be cheap probably the companies making
less profits and probably less people are
using the platform.
So are they cheap.
If that's happened you know what I mean.
Yeah okay.
That's there's a possibility there could be
a divergence between between them and then
we could start thinking yeah maybe there is
a fundamental basis here if they diverge.
I've kind of yet to see a real life example
of that happening.
Yeah, it's still not very clear yet.
But it is interesting right that since they
have a product they are making money they're
profitable they are great Treasury they have
financial licenses, does it feel a bit
more secure.
Do you think for people from a traditional
world when they know these, well they don't
have access to the financial documents but
does it feel a little bit more secure do you think?
I think so.
I mean there was an interesting report out
recently wasn't there about
how a lot of exchanges are faking their traffic.
95 percent was it's something like that?
95 percent of all volume is a lie.
I mean that kind of for a start, makes you terrified but
But to be fair Binance was one of the exchanges
that was mentioned as this looks like real
volume of saying here not the faked volume
that a lot of the other exchanges were doing.
So that gives a certain amount of confidence
you're right the fact that people are seriously
analyzing that platform and going Yeah this
looks like the real deal to me.
Nonetheless though.
At this point in time and things might may
change very significantly in the next year
or two but at this point in time even with
the reassurance of certain licenses and a
degree of regulation the platforms we're talking
about and the fact that they're making profits
or not is still kind of somewhat hazy compared
to say a company like Amazon or any any American
company that's listed or any developed-world company that's listed on an exchange and they
have proper accounts and they have you know
everybody can see how much money they're making
and where cash flow is the cash flow and issue.
And you know we can see the ins and outs whereas
all of these platforms are basically to some
degree closed books apart from say Coinbase
and a couple of others.
But the the big companies like Binance the
most popular ones they change jurisdiction
that you know I don't want to say anything
bad about them because I don't I don't really
know that much about well nobody knows how
they operate internally which is half the
problem.
But you're right, they're closed books.
So it's it's hard to say right it's still
there's no clear path to that fundamental
analysis yet although it may reassure a few
psychologically maybe, to know that, OK they
only have let's say 200 to 300 employees operating
huge cash flow, great profit margins
So maybe some people might feel a little more
secure.
I don't know.
It's a psychological game anyway right.
Yeah.
But also the way that IEOs have taken
over to some degree from ICOs.
Yeah.
The IEOs are for those who don't know the
issuance of tokens but doing it through a
platform like Binance, so Binance
kind of organizes the whole thing and that
provides a degree of reassurance because we
know that Binance exists and it's a real thing
that they're actually human beings working
within it, whereas the problem with ICOs initially
was half the time you didn't know that's the
case or you didn't know which were the real
projects and which were the scam projects.
Whether they would list or not whether it'd be a tiny
exchange or not.
There's so many question marks to those type
of.
Yeah that's super interesting that this has
been an amazing experience.
There's so much key information, gems in there.
I really look forward to your book by the
way.
So do you mind telling us a little bit more
about your book when it's going to be out
there's so much more information and we definitely
need to continue this conversation one of
these days it's been a great, great journey.
So anything you'd like to share about the book.
Well, you asked me to bring a, because we don't have the physical books yet.
We've got,
because it's being published in May.
And at this point we're still in March but
I've got the cover.
Here's the cover.
Beautiful cover the corporate trader very.
How anyone could make money trading Bitcoin
and other crypto currencies.
It wasn't my idea I should say to put a picture
of my face on the front.
That was the publishers the publishing company
insisted on it.
Did they put makeup on you, or?
That is a great cover.
Is there any makeup? No there's not.
Okay guys so please have a look at the crypto
trader.
It will be out in May.
May 19.
We really look forward to it.
This has been absolutely stellar.
Thank you so much for all the wealth of information
I'm sure many people out there have learned
so much about trading and I really look forward
to seeing your book being released in May.
Really can't wait can I get a free copy.
Yeah go on then.
Right thank you so much.
Thank you so much for everything today.
Guys definitely have a look at Glen's book
the crypto trader.
It's going to be a huge success and definitely
stay tuned for the next episode of Cryptonites.
Thank you very much.
Have a great night.
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