Monday, November 15, 2021

Jon Thralow On Cryptocurrencies and Crypto Investing

Conference speaker Jon Thralow
Jon Thralow is a programmer who early on exploited the power of the internet as a vehicle for eCommerce. Early successes helped him recognize opportunities and his career as a marketing and analytics consultant expanded from there. 

When I learned a couple years ago he'd taken an interest in Crypto currencies I requested an interview so I could pick his brain and share it here with others. He said he wasn't ready yet. This past week, however, he got back to me and offered to follow through on my initial inquiry.

Here are some nuggets that may help those of you who have taken an interest in this emerging investment arena. 

EN: What is Crypto currency and what causes it to increase in value?  

Jon Thralow: There are a lot of different kinds of Crypto. The most popular is Bitcoin which is a store of value. Etherium is the second largest and is a programmable platform that most other crypto companies have built their businesses on. Ether has a few competitors like Polkadot, Cardono, and Solona. There are also stable coins like Tether that help transfer wealth. They keep their price tied to the dollar.

Then we have over 1000 smaller Crypto application companies that are built on top of the platform companies. They serve many different sectors like NFTs for art and quite a few games where people can earn coins by playing. There are also stable coins that help convert coins into other forms of currency.

The price is mostly driven by supply and demand. The more people who get involved the more the value goes up. Less than 10% of the population currently holds Crypto so we are still in the early adopters stage.

EN: What are the primary ways people can invest in Crypto? 

JT: The most common way for people to invest in Crypto is through trading platforms like Robinhood, Coinbase, Kraken or Binance.  For purchasing NFTs or virtual land I use and

EN: Unlike stocks, Crypto currencies don't seem to have metrics that investors can study to determine whether they are overvalued or undervalued. How does one know how evaluate whether these esoteric investments are worth what people are paying?  

JT: There are actually a lot of metrics that can be watched and understood. For example, you can see that there are only 21,000,000 Bitcoin that will ever be minted so the inflationary pressures do not exist, unlike the dollar. When the dollar was tied to gold the inflation rate was able to remain stable with the only the amount of gold that was mined every year causing inflation (that rate averages about 2% a year so gold does have an inflationary measure).   

Photo by Bermix Studio on Unsplash
Bitcoin is also mined today. That rate is also about 2%, but it is cut in half every 4 years until the 21 Million is fully mined. Some pioneering businesses like Microstrategy have converted all of their cash assets into Crypto as a hedge against inflation. Using things like stock to flow metrics can give you a good idea of where the price of Bitcoin will be in the next few months and years.  Since everything is open and transparent, you can also see the number of coins being hodled. (
Hodl is a term derived from a misspelling of "hold" that refers to buy-and-hold strategies in the context of Bitcoin and other cryptocurrencies.) When looking at that metric you can see that a very high percentage of coins are purchased and never sold. There is only a small percentage of coins that are being purchased and sold on the average day.

EN: There is no such thing as risk-less investing. Cash, for example, diminishes in value with inflation. What are the risks involved with Crypto currencies?  

JT: The risks with Crypto right now are great! For example, my first investment in Crypto over 4 years ago dropped 90% in the first 6 months. I used that as an opportunity to purchase more. I have found the best way to reduce risk is to dollar cost average over time as long as you believe in the long term and don't get too scared and sell when it drops significantly.
EN: What about government interference and regulation as a risk?

JT: Sometimes yes, but overall regulations are a good thing. With more regulations, institutional buyers will be able to enter the market. Everyone is hoping for a spot traded ETF as that will allow average investors to get involved.

EN: Thanks, Jon. Good finally reconnecting. Thanks for your willingness to share the fruit of your research.

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Related Links

5 Minutes with Jon Thralow, Internet Entrepreneur

Jon Thralow, Revisited

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