Which Coins Will Legacy Finance Adopt First?

Let’s just start off with a list-

Bakkt/Coinbase, NASDAQ/Gemini, Fidelity announcing crypto products coming by end of year, ErisX backed by TD Ameritrade to compete with Bakkt, Yale and Harvard Endowments moving into crypto.

By all accounts starting from Dec 12th when Bakkt launches, Q1-Q2 2019 will provide an influx of “structured products” that will allow Wall Street into crypto markets.

A source from Gemini was quoted saying ““We’ve got months’ worth of backlog that is waiting for the first approval. Some of the biggest institutions in the world have crypto products prepped and ready to hit the markets. We expect 2019 to be a year of accelerated adoption.”

The context behind this is that Binance out-earned NASDAQ in Q1 2018. Exchanges like Binance, Bitmex or Bitfinex have been raking in enormous profits over the past few years and legacy financial institutions are no longer willing to sit back and watch. ICE’s Bakkt, supported by Microsoft and Starbucks, is leading the charge and the rest are scrambling to catch up.

So given this landscape, which coins are most likely to offered in these products?

Let’s start with Bakkt.

Short answer: Bitcoin first, then likely Ethereum.

Intercontinental Exchange ICE invested in Coinbase back in 2015 and has been working on the Bakkt project for over a year and a half now, secretly developing the technology to trade physically backed bitcoin futures.

ICE CEO Sprecher “The big money managers won’t create digital currency funds unless they can first buy the tokens on a federally regulated exchange, and, second, store the tokens for their investors in accounts rendered super-secure by the safeguards provided overseen by federal regulators.”

The emphasis and repetition of federally regulated points to what will be Bakkt’s biggest draw, and will limit it severely in the kids of cryptoassets they will be able to provide. Bakkt is currently waiting for approval from the CFTC which it is expected to get as the regulatory body has already deemed Bitcoin a commodity and approved CME and CBOE BTC futures. So far the CFTC hasn’t said anything about any other cryptoassets but it should be kept in mind that its mission statement is less far ranging than the SEC’s which may make it likely for it to approve physically backed Ethereum futures as well given that the SEC has already deemed it not a security. The SEC states its job is to protect investors whereas the CFTC only aims to have a fair futures market.

One news source (abacusjournal.com) claims to have heard dubious rumours of initial plans of listing Ethereum and possibly a third asset along with bitcoin but pulled back. It claims that Bakkt would eventually like to list non-security tokens across its platforms which would most likely be Ethereum but there’s nothing to confirm this. This is the most likely scenario as those are the only two cryptoassets the SEC has given any kind of green light to.

Which assets would it be most likely to offer in the midterm?

Bakkt has a unique relationship with Coinbase. The parent company ICE invested in the company back in 2015 and last week Coinbase’s former Vice President and General Manger Adam White became Chief Operating Officer of Bakkt. Given his important role at Coinbase it’s likely he was instrumental in developing Coinbase’s Digital Asset Framework (https://pro.coinbase.com/static/digital-asset-framework-2017-11.pdf). This is the closest proxy you could get to what Bakkt might use but likely less strict. Coinbase has listed 0x, a coin that had an ICO which the SEC has deemed rather unclearly would have made the asset at security at the time of the ICO. So far available for trading on Coinbase are: BTC, ETH, LTC, BCH, ETC, ZRX, USDC

Coins they have publicly claimed to be considering: ADA, XLM, BAT, ZEC

Speculative additions (these have come up repeatedly different discussions, the merits of each deserve a separate post): REP, MKR, XMR, DASH, TRX, EOS, LISK, XRP

XRP – Ripple is a unique case in this instance. One of the elements that disqualifies it so far from Coinbase’s criteria is that the ownership retained is a majority stake, as well as debate over whether the network is public and decentralized. These issues may be less important to Bakkt that will look for assets that are more attractive to institutional clients where traditional blockchain community values are less important.

What about NASDAQ?

According to sources NASDAQ plans on rolling out its own cryptocurrency platform in the next 3-6 months. And it is likely that they will offer a range of products to get an edge on Bakkt beating them to the punchbowl. Four months ago they released a statement they were looking into Stellar, Litecoin and Bitcoin as potential products.

Here’s what an insider from NASDAQ had to say.

 “The conversation around listing coins has centered on how they will be classified from a regulatory standpoint. As you can imagine, our leadership is closely connected to the rumbling at the SEC and CFTC around cryptos and what is expected over the next 3-6 months. Even with the longest of time frames assumed, some guidance will be provided and I expect we will act quickly. The framework has already been laid to create a separate silo for coin listings and a robust trading apparatus. Doing the math here, look for regulatory bodies to provide guidance in Q1 of 2019, and an announcement and a ‘coin exchange’ to either be announced or launched in Q2 of 2019.”

NASDAQ has also been working with the Winklevoss twins and Gemini for some time now and has developed a close partnership starting with Gemini using their SMARTS market surveillance on the exchange. While Coinbase and other exchanges are licensed in their individual states as money transmitters, Gemini is licensed in New York as a trust company giving them a firmer regulatory status. In addition to the three coins NASDAQ claimed interest in Gemini also offers ZEC and ETH making them likely candidates for a NASDAQ suite.

The first step by NASDAQ will be to launch crypto analytics products by the end of this year. The company has already laid out plans to launch to the product and will add tools for predicting the price movements of crypto assets to its Analytics Hub. The hub, launched last year, draws on machine learning and natural language processing (NLP) capabilities to parse through social media and other alternative data sources

“Certainly NASDAQ would consider becoming a crypto exchange over time. If we do look at it and say ‘it’s time, people are ready for a more regulated market,’ for something that provides a fair experience for investors… I believe that digital currencies will continue to persist it’s just a matter of how long it will take for that space to mature.” – Nasdaq CEO Adena Friedman

Main Impediments

The most important regulatory signal that both crypto exchanges and legacy financial institutions will be looking for is a No Action Letter from the SEC. They have been very clear in their rejection letters to ETF’s that there are 3 issues which prevent them from approval. 1) removing or mitigating the potential for fraud or manipulation in Bitcoin or Bitcoin derivatives, 2) robust custody solutions, and 3) liquidity — meaning a market of sufficient size to support public trading of this asset.

There are many reasons to believe that Bakkt could solve each of these issues. A clear indicator is the focus of Bakkt’s public statements regarding “price discovery”. The Winklevoss twins ETF’s would have used Gemini’s BTC price as standard for ETF pricing which the SEC considered open to manipulation. Bakkt’s CEO is saying that they expect so much volume that it will determine an objective global Bitcoin price and given ICE’s reputation this is not an unreasonable claim. Thus the potential for and large holding individual or group of manipulating price would become minimal, custody solutions would be cleared given they claim to back all BTC claims and liquidity would be sufficient to support public trading.

Assets other than Bitcoin or Ethereum are not likely to see major institutional backing soon but these are the requirements for their ETF approval. It is most likely that Gemini coins will be first to gain institutional backing followed by those sanctioned by Coinbase. Any coin that had an ICO will likely be considered a security and will have to follow the applicable regulations unless it can be defined  as adequately decentralized as Ethereum. The SEC will not be bending the rules anytime soon when it comes to cryptocurrencies and that while bitcoin remains a commodity, all initial coin offering (ICO) tokens — or coins offered through a fundraising process — classify as securities.

“We are not going to do any violence to the traditional definition of a security that has worked for a long time. There’s no need to change the definition. A token, a digital asset, where I give you my money and you go off and make a venture, and in return for giving you my money I say ‘you can get a return’ that is a security and we can regulate that. We regulate the offering of that security and regulate the trading of that security.” –Jay Clayton, SEC

One last big name to look out for will be Circle. Remember this was the first company to be granted a Bitlicense, New York’s arduous regulatory process requiring strict AML and KYC procedures. They were heavily invested in by major investment banks including $50 million from Goldman Sachs and have been working closely with those institutions to offer financial products that are attractive to them. Circle now owns Poloniex, an SEC registered crowdfunding company named SeedInves and offer a product of 11 cryptoassets known as Circle Invest.  They have also just started announced a partnership with Coinbase known as the CENTER Consortium, to promote Circle’s stablecoin USDC. Here’s what the heads of each company in a joint statement had to say, “Coinbase and Circle share a common vision of an open global financial system built on crypto rails and blockchain infrastructure, and realizing this vision requires industry leaders to collaborate to build interoperable protocols and standards. CENTRE was formed to establish these standards and to build the technology needed for fiat to work over the open internet.” (emphasis mine)

So to sum up, which coins have the best chance to be offered as institutional products?

Bakkt will offer first BTC, then ETH (maybe).

Who is working closely with Coinbase who offers BTC, ETH, LTC, BCH, ETC, ZRX, USDC and has publicly announced is looking at ADA, XLM, BAT, ZEC.

Who is working with Circle who’s Circle Invest includes BTC, ETH, BCH, ETC, LTC, ZEC, XMR, XLM, ZRX, QTUM, EOS.

As well as NASDAQ who is working with Gemini who offers BTC, ETH, LTC, ZEC and has announced is also looking at XLM.

Also DASH it should be mentioned has evidence of moving along with its No Action Letter from the SEC and has flown to DC for meetings to further the process. And XRP of course is positioning itself as the institutional crypto with close ties to the banking world so it would be no surprise to see it in the first or second round of products offered.

How to Make Your API Keys

As of June 9th Huobi has changed their process for creating API’s. They have an explanation of how it works here –

https://github.com/huobiapi/API-FAQ/wiki/Create_User_Keys_en

But here we’ll give you a step-by-step walkthrough to doing it yourself.

First you’ll have to download a program called OpenSSL, which works as a secure command prompt to create the keys. (OpenSSL is a software library for applications that secure communications over computer networks against eavesdropping or need to identify the party at the other end. It is widely used in Internet web servers, serving a majority of all web sites – Wiki)

For Windows:    Win32OpenSSLv1.1.0h_Light

For Mac users invoke ‘Terminal’, then you can execute OpenSSL command.

Once downloaded, run the installer and choose a place to place the folder, then open the folder.

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Enter the bin folder and you’ll see openssl.exe

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Create Private Key

mac/linux: openssl ecparam -name secp256k1 -genkey -noout -out privatekey.pem

windows: ecparam -name secp256k1 -genkey -noout -out privatekey.pem

 

Create Public Key

mac/linux: openssl ec -in privatekey.pem -pubout -out publickey.pem

windows:ec -in privatekey.pem -pubout -out publickey.pem

 

Enter the public and private key and hit enter. Two files should show up in the bin folder named privatekey.pem and publickey.pem. Open these with notepad.

Remember to keep your private key private and keep it stored safely. The public key your going to enter into the Huobi website to generate the API’s.

Sign into the website and under your account choose API Management

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Enter the Public Key from the notepad file and fill in “Notes” for the notes field. It doesn’t matter what you put there.

Hit Create and it will give you two API keys, an Access Key and a Secret Key. Those will be used to access your account remotely to make trades through a third party app. Remember that these Keys don’t give access to deposit or withdraw any coins, only to trade between them.

And your done!

San Fran’s Fed Weighs in on Bitcoin Valuation

For a look into what government institutions are saying about Bitcoin, the Federal Reserve Bank of San Francisco released a paper called “Making Sense of Bitcoin Price Levels” about a month ago.
The author starts with attempting to categorize Bitcoin into traditional asset classes to use as a frame for valuing the digital asset. As a currency it doesn’t fit well as monetary determinants of exchange rates don’t apply as there are no interest rates or output levels due to the lack of monetary policy from a central bank. Further it’s purchasing power over a basket of domestic goods also doesn’t apply as there is no native Bitcoin economy. As far as confidence in the currency, the author points to exchange hacks and government regulation.
Lastly he points to a concerning statistic which is the historic low for daily trading volume we’ve been in since January down from 11.7% total volume avg for 2016 to 2.3%.
So is it better labeled a security? Clearly not. While ICO’s might fall more easily in there, with no interest payments, dividends, earnings or capital gains no security valuation can be applied to Bitcoin.
Bitcoin is best defined as a commodity, and it’s mentioned how it already has been labeled a commodity by the CTFC. An important point the Federal Reserve is well aware of. It’s argued that bitcoin is more like gold in that it functions as a hybrid commodity, however without the intrinsic value of gold.
So they value the price using a hypothetical production cost of $1,800 (based of Chinese energy prices). He bumps that up for a lower bound of $2,500 taking in overhead, costs and 25% profit margin.
The price then is most easily explained by Minsky’s 5 stage credit-cycle bubble. Starts with displacement, then we had the boom last fall, then came euphoria and increasing leverage, then profit taking and panic. The paper was released last April and mentions 11,000 as the last high where it placed the market still firmly in the profit taking before “reality” sets in and the real panic begins.
We’ve seen that play out more or less, however there’s a few points on the narrative of the article.
First this isn’t described as one of a number of bubbles that have come before, and each one rising the price to a new higher watermark. This was the bubble and everything in the 8-9 years before was just displacement leading up to it where it’ll now fall to a Chinese production cost.
Secondly because Bitcoin doesn’t fall easily into previous valuation models, it’s assumed that it doesn’t have value. For instance it spends the first half of the article describing how Bitcoin doesn’t have interest rates or dividends, but it never mentions the immutable blockchain on which it’s built. For confidence of the future the examples are hacks and increasing regulation, not the possibility of instant, low fee global remittances with no need for third parties. And it doesn’t mention the $2,500 mark that it was at this time last year.
So what should you take from this? Federal Reserve banks aren’t known for giving biased or opinionated reports on economic events. However on this topic it has a clear narrative, and wants you to see Bitcoin as a passing fad that got exciting until taxi drivers started talking about it and now it’s dying.

Matrix AI (MAN) quick facts

One of the really exciting projects coming out of China over the past few months has been Matrix AI. Here’s a quick summary of the project and some of the reasons why it will be something to look out for in the coming months.

-open source blockchain platform that supports smart contracts and machine learning services.
-two main draws, uses AI technology and uses its mining power to serve AI based applications
-using machine learning components it allows every user to design smart contracts with limited programming skills.
-very impressive team. One of the best coming out of China right now. Alot of impressive academics with backgrounds in high tech Chinese projects, National spaces exploration, Microsoft etc,
-backed by Cybernaut, and FengHe (director is John wu, famous investor from Alibaba group)
-they’ve signed a strategic cooperation agreement with the state owned Belt and Road Development Center, the only blockchain partner of the center. (The One Belt One Road is a 9 billion dollar project)
-will create a system which can provide smart contracts based on natural English language, which will then be turned into code. This means non-programmers will be able to make their own smart contracts.
-before a smart contract is deployed on the network. They are tested for vulnerabilities by AI generated hacker programs again and again.
-uses a unique POS/POW consensus mechanism,
-mining in the MATRIX system involves participating in calculations that are meaningful to useful projects, such as the sequencing of the human genome.
They have some major partnerships to collaborate with this type of useful mining, MATRIX has started in-depth cooperation with Beijing Cancer Hospital and 302 other domestic, Grade III Level A hospitals, to develop a cancer-assisted diagnosis and treatment system, starting with thyroid cancer and liver cancer. Also with China Securities Credit Investment and China Youth Credit to fully spread out the application of blockchain to corporate credit information and personal credit information.

Flipping Podcast with Ari Nazir – just the essentials

Last week on the crypto podcast Flippening host Clay Collins, CEO of Nomics, had Ari Nazir on to talk everything about investing in the world of crypto. Ari is a founder and managing partner at Neural Capital, an advisor at Protocol Ventures, and Chief Investment Officer at Apex Token Fund. His twitter is @AriMNazir, you can listen to or read the full podcast here https://blog.nomics.com/flippening/sentiment-momentum-investing-ari-nazir-neural-capital/.
Ari is a top name in crypto investing and has a lot of insights into the market. Here’s a quick summary of their conversation.

-what we’re seeing more and more these days is a flight to quality, and specifically quality of talent. What’s really becoming more and more important are the minds and abilities of the teams that are behind projects now that we have enough data and experience to see what has lasted and succeeded and what hasn’t. Ari stresses this a few times.

-overall strategy is split into two parts. Half the portfolio is based on fundamental research. Figure out how much liquidity you have that can be tied up longer term and find a few assets that you have good reason to believe will outperform over the next few years. Then about half goes into a sentiment driven model that will appreciate over the next 2 weeks, month, 6 months. Most of the latter is based of balancing and rebalancing, diversifying and hedging.

-he think that crypto investing should be wealth generating and not wealth managing. However, it’s important to recognize and keep your eye of the really big risks, technological, regulatory, and avoid diving into a project no matter how good the fundamentals without hedging and preset entry and exit plans.

-he’s not a fan of ICO’s or the utility token model and sees it as a direct mechanism for creating bubbles.

-when they move into big positions they become very active in the companies they invest in. They visit the companies and help facilitate growth for anything from the technical side of creating a usable wallet or hiring staff and marketing.

-building off of this he doesn’t want to be associated with any of the P&D that’s happening in the crypto space. This was about exactly one week before the whole Bitcoin Bravado mess came out so I think we can guess his opinions on that. He’s pro regulation just for the sake of cleaning up some of the bad actors.

-the indicators he talks about at Ichimoku clouds, simple and exponential moving averages and RSI strategies. What’s important is to differentiate the signal from the noise and using a number of these indicators together can help you do that, especially over the long term.

-he uses CNBC as a reverse indicator. Basically once it shows up on Fast Money it’s time to short it.

-Jed McCaleb is crypto Bezos.

-and once again, always always follow the talent.

Alt Season

Here we are again. Sports fans know the feeling the well. You’ve been sitting around all summer watching something boring like baseball or golf waiting for the real sports to start and here it is – first game of the season and your favorite team is playing. But is alt season really back? Or is it just a preseason exhibition match?

Bitcoin’s cycles can be hard to define and it’s not clear when you’re in one until you’re looking back. For alts, it’s a bit easier to see clearly how we’ve just finished up a major cycle. Here’s one example from @BMBernstein who gives an excellent description of the alt cycle.

alts graph

Here you can see the increase in speed and volatility of altcoins throughout the last 3 market cycles. So what’s driving all these coins up past 200%? It’s bitcoin bull markets. Bitcoin shot up from 6000 in mid November and peaked at 19,500 on December 18th. For alts, it took an average of 22 days after bitcoin’s peak before they hit their peaks. (https://docs.google.com/spreadsheets/d/1baOUMA-01-ykbERvoQitfQQRjnP56SiGI9G_PISHgoo/edit#gid=0)

Basically bitcoin hit its peak and then alts took off. By the time bitcoin’s price basically retraced the entire cycle and came down to 6,000 all alts had essentially done the same and were for the most part sitting where they had been in early November.

So what are we seeing? At the start of the cycle bitcoin dominates with impressive gains. It is by far the most liquid and available asset to buy if you’re moving into crypto from fiat. Most alts are measured against bitcoin so before they have their rally, bitcoin needs a surge in price. Money flows in from people trying to catch the wave. Then with the influx of fiat, as well as the dollar gains from the rise in price this extra volume flows into alts who, with their smaller market caps have a better chance of doubling and tripling. Everyone tries to get in to catch the wave, it overflows, and then corrects itself.

So where are we now? If anything it looks as though this process is speeding up because people are getting wise to what happened last time. Say you held onto bitcoin until December 18th, then moved into alts, you would have maximized your gains. Here we saw the jump from around 6,700 to 8,000 and within 2 or 3 days alts were showing up 10-30% across the board. However we should be realistic as to what’s happening, without a major large cap rally to pump money to sow the seeds for alts there won’t be a major alt run. A prudent move now is to diversify but don’t go all in. There will be an alt retracement we’re already beginning to see if bitcoin doesn’t break 9000 soon. If it does it’ll be best to be nestled in safer large caps until the next resistance levels (check our page to find out where and those will be), and then be position to move back into alts when they follow.

Investing in the Lindy Effect

What is it?

If you’ve started delving into the world of crypto at all, it’s only a matter of time until you come across the Lindy Effect. More often than not it’s used by Bitcoin maximalists to justify why Bitcoin is king and will outlive and outperform all the competition. But there’s always the other side who argue that it doesn’t apply, leads to bad investing and is more wishful thinking than anything else. So what exactly is Lindy’s Law and how does it apply to crypto? The short answer if you want to stop reading here is that Bitcoin’s been around almost a decade so it should be around for another. But why is this true, and does it have anything to do with where you should put your money?

When we apply the Lindy Effect to something like technology we’re explaining two different statistical phenomena which are both pretty intuitive and straightforward. The first is that without any additional information about a particular lifespan, you want to shoot for the average if you’re guessing. Mandlebrot, the statistician who first developed the Lindy Effect, describes it in the parable of the receding shore. Imagine you’re out rowing on a lake and you don’t know how far the opposite shore is. You’ve gone out 5 kilometers and want to guess how long the lake is, your best guess is you’re in the middle of it and the lake is 10 km long. So you get to 9 km and you should be coming right up on the shore right? Nope, now you’re in the middle again and the shore just “moved” 9 km away to 18.

I’m sure you’ve got the point but why does this work? Say I sleep in, so I skip breakfast and rush to work. On my way I stop by the 711 across from work for a quick sandwich. I step outside and see the crosswalk sign has a little green guy on it and I’m wondering how long I have to make it to the crosswalk before he turns into a red hand. My best guess for how long I have to make the light is half the light’s lifespan. If I missed my alarm and repeated this scenario every morning for a month the average time I would wait for the light would be 30 seconds if the light stays green for a minute so that’s your estimate.

This may sound straightforward but it leads to some interesting places. For instance should you be worried about Trump starting a nuclear war with Russia and wiping out the human species? Well maybe, but the statistical chances of yours being the lifetime in which the end of the human race comes is statistically zero. (Lacking the additional information of crazy old men with nuclear fission bombs of course.)

Where the Oldest Live Longest

The second statistical property the Lindy Effect is referencing has to do with survival rates. Basically perishable things like people and toasters have bathtub survival curves. A lot of toasters end their lives in the factory in a pile right after quality control. The rest go out to live long and fruitful lives in suburban kitchens toasting bagels for 10-12 years then die out. For humans it’s basically the same thing, don’t think about it too much.

01thebathtubcurvefailureratevstimeReliabilitytestfailureanalysiscalculatelifetimeofaproduct
photo credit https://belhob.wordpress.com/2008/01/25/the-bathtub-curve-and-product-failure-behavior/

For non-perishable things like technology, ideas or companies, they have a Pareto survival distribution. Picture the graph above except it doesn’t increase at the end, it just keeps going. The failure rate just keeps on decreasing slowly, so books or coding languages that are far along the curve face a much lower mortality rate than those behind it. They have the property of antifragility – basically just a book-selling way to say resilience. During periods of heavy competition, most die off quickly and those that are able to withstand the pressure become hardened and more likely to survive future trials. These are the kinds of things that thrive off volatility, disruption, variation… each passing wave refines and strengthens its ability to survive.

So is Bitcoin antifragile? Well the great thing about the Lindy effect is that with every passing year it becomes stronger. When you hear about possible doomsday scenarios for Bitcoin they’re becoming less and less likely. Say the SEC and CFTC finally get together and declare a full blown blackout – no trading, no exchanges, no owning. Or the Illuminati uses the International Bank of Settlements to buy every ASIC they can and wage a mining war for the hash rate. Every storm of regulation and mining centralization so far has made Bitcoin resilient to them and every year the chances of them having a fatal effect become smaller.

Consider this; the average lifespan of a fiat currency is 27 years. That means that Lindy says in 4 years Bitcoin will approximately be expected to live as long as the average currency. Now add that to the fact that the average lifespan of a reigning monetary system is around 30-40 years and we’re 55 years into ours at the moment and you can draw some interesting conclusions.

So, Throw All My Money Into Peercoin and Namecoin?

So is Bitcoin a good investment? This brings me to an article that aimed to debunk the myth of the Lindy Effect and cryptocurrencies. The author disagreed that the Lindy effect should be applied to cryptocurrencies because a coins age wasn’t found to be correlated with higher growth. But this is exactly what we would expect to find, because Lindy doesn’t explain much about early growth rates, in fact we know that coins or businesses that are small are going to grow at a much higher rate than those that are already established just by simple math. Whether Bitcoin is a better investment than other coins just depends on your risk tolerance and whether you’re a value or growth stock kind of investor.

But let’s still take a look now that we’re looking back after the bubble. Out of the top 50 market cap coins there are 27 who have price date for more than a year. We checked to see if there was any correlation between age and price growth over the past year and came up with even sadder results for the blue chip investors with a correlation of -0.27. All the data can be found here.
price chart

But that’s what we would expect when some players get to start with a price of $.01. Small market cap coins will always out-compete on basis of growth. On the other hand if the project is only six months old the best guess is it’ll last a year so it’s not the kind of coin you want to put in your ledger and forget about.

(Is this really the best guess? There’s debate about how applicable the Lindy Effect really is. Two points: 1 – since the future is unpredictable it’s a fair argument that the best predictor is past performance. 2 – simple heuristics are usually better at real world application that complex ones.)

What Lindy is really saying is this. Of the top 50 market cap coins the correlation between market cap and age is 0.55.

price chart 2

Coins that have withstood the test of time have earned the trust in their protocol through surviving hacks, forks, regulations and every other kind of fear, uncertainty and doubt which is what makes them good investments. For a good explanation of why Bitcoin has shown to be anti-fragile, check here. (Also keep in mind there’s a selection bias here by only picking successful coins and a lot of factors go into a coins value, don’t put all your money into zombie coins because they were released in 2012.)

Originally the Lindy Effect was Lindy’s Law, and it actually meant the opposite of what it means today. It referred to the standard knowledge among veteran comedians that the more time you spend on TV the shorter your career will be. That is the life expectancy of a comedian’s time on the tube was inversely proportional to the time he spent on it prior, explained by the fact that there’s a limited supply of material to work with. Albert Goldman, in his quaintly homophobic article for the New Republic pointed out that their Lindy’s Law was wrong, with the example of Johnny Winter’s act which is described as “insanely fruity”. (He also wrote books on Lenny Bruce – alleging he was homosexual, Elvis Presley – latent homosexual, and John Lennon – affair with Brian Epstein. Can you find the theme?)

The Lindy Effect however was not immune to its own principle and over time evolved and adapted on the basis of the statistical truths behind it. So if you’re sick of hearing about it, it first showed up in 1964 so you’ll probably be hearing about it for the next 54 years.

Notes

Finding a cryptoasset’s start day was quite a challenge, and took a bit of subjectivity. Mark M Liu ‘s data helped out a lot. I usually looked for a system launch, ico, or price listing, whichever came first. The last resort was to use coinmarketcap’s initial price date which works reasonably well for fairly new coins.