1/ Highlights on the State of Cryptocurrency Investing from the #ConsensusInvest conference.
2/ All errors and omissions are mine, not speakers.
3/ Tl;DR - There is a lot of institutional money on the sidelines. Two main things holding them back are:
4/ Infrastructure - primarily a lack of exchanges, derivatives, ETFs, and custodianship solutions
5/ Reputational Risk - need some people with gravitas to come out pro-Bitcoin so fund managers can buy it without putting reputation at risk.
6/ Will start with @cburniske - Ringing the Bell on a New Asset Class
7/ Bitcoin is often compared to gold, but their supply schedules show that Bitcoin will be even more deflationary than gold. 
8/ There were 3 eras of Bitcoin transactions. 1 - Nerds/miners figuring out how it works (2009-13). 2 - Illicit uses/drugs (2013-15). 3 - More legitimate uses beginning in 2016
9/ The ratio of trading to transacting is actually higher in traditional currency markets than Bitcoin (probably driven by FX markets). As CME futures and other derivatives come online, there will be a lot more trading/speculating on Bitcoin
10/ Bitcoin is highly uncorrelated with current asset classes. This is largely a function of how young and new it is.
11/ Chris thinks that Bitcoin will be similar to gold. Early evidence Bitcoin popped around Trump and Brexit when equity futures crashed.
12/ Bitcoin’s absolute returns are decreasing but so is volatility. Sharpe ratio in 2016 was roughly same as 2011 (less appreciation but also less volatility)
13/ We are only 5% of the way to the same market cap as the web when it popped in 2000. Just entering the Frenzy stage in @CarlotaPrzPerez model.
15/ Think of the different cryptos as different metals. They are like copper and platinum and as their use cases expand or contract then their value increases or decreases
16/ Mike thinks there will be one winner per use case/ecosystem. E.g. there will be one dominant file sharing, one remittance, etc.
17/ Bitcoin is going to win the store of value use case but won’t be a day-to-day currency b/c it will be too easy to squeeze and too restricted in terms of money supply.
18/ Global Macro guys seem to be the traditional finance guys in the space. Perhaps b/c it’s more intuitive for them than someone in equities who is looking at discounted cash flows every day?
19/ Bitcoin Bull and Bear Panel
20/ First, notes from Murray Stahl - got into Bitcoin because he thinks central banks are going to debase currency.
21/ Hayek wrote a paper called Denationalization of Money (mises.org/library/denati…) in the 70s that just wasn’t technologically possible then, but Bitcoin could be that technology.
22/ Institutional money is not going to buy Bitcoin soon b/c of reputational risk. If you buy one satoshi and it goes to zero then it will hurt your reputation. You need people with major gravitas in the traditional finance industry to say that it is legit first.
23/ Next on the panel was @fundstrat - Bullish b/c this might be the largest technology wave of the next 20 years.
24/ There is a big generational divide similar to the internet where the institutional ecosystem was wary but young people really understood it.
25/ Market structure will be a duopoly. That’s a typical industry structure. Looks like BTC and ETH right now.
26/ 94% of price movements are described by unique addresses squared and transaction volume per user - amp.businessinsider.com/bitcoin-price-…
27/ Herfindahl index is one way of measuring concentration that the DOJ uses for monopoly. 2500 is considered concentrated. BCash is 2600. Bitcoin is 2100 which has doubled since the beginning of 2017
28/ @RobinWigg - bearish because it’s pure intellectual masturbation where smart people think it’s cool and the price goes up and then dumb people pile on.
29/ @RaoulGMI - bearish because premise has changed since he started investing (at around $200/BTC). 3 main premises that changed:
30/ First, forks are a form of dilution that ruin the sacrosanct 21 million cap (My note: if anyone has more on this thesis, would love to read about it)
31/ Second, Not effective as a payment system anymore.
32/ Third, the financial system doesn’t need thousands of nodes, you just need a few dozen. If the problem is Lehman, then a private blockchain with a few dozen companies involved will solve that problem.
34/ LPs for crypto hedge funds were initially VCs, then moved to high networth individuals, now moved into family offices, endowments are 3-6 months away
35/ Funds are restricted in what they can invest in b/c of lack of liquidity. Probably less than 100 tokens that have sufficient liquidity.
36/ We are at a stage where it’s a poker game. In each ecosystem/coin/market there are a few players who move markets. E.g. Coinbase moves markets w/ whatever decision they make.
37/ What are the three most compelling existential bear cases for the space?
38/ First - Regulation - Bitcoin and crypto are flat out banned (though that could also increase adoption).
39/ Second - Technical issue - some sort of vulnerability is discovered or miners collude.
40/ Third - ICOs walking away with the money and not building the tech which brings in regulation and causes people to pull out $$$
41/ The blockchain is a hugely inefficient database b/c you have to send it to all these nodes. There are only a few use cases where that is important. Two primary ones are:
42/ Censorship resistant
43/ Judge resistant - Companies like Amazon and Google have assets in every legal jurisdiction so they spread their legal risk around. Bitcoin will provide this but better and eat a lot of offshore banking industry.
44/ It's possible investors are investing at $50 million caps in ICOs what they would normally be doing as a $3-5 million seed rounds and the whole space is just too expensive right now.
45/ Putting 1% of an endowment into crypto reduces risk b/c it’s uncorrelated to the rest of the portfolio and it’s so small that risk gets diversified away.
46/ Part of the drive intro crypto is the lack of alpha anywhere else. Public equities are at all time highs.
47/ Recommended News Sources for Crypto: Twitter, tokeneconomy.co from @stefanobernardi, weekinethereum.com form @Evan_Van_Ness, @jimmysong
48/ New Tools and Products Panel - @alexsunnarborg, Hu Liang, @ Sonnenshein, Daniel Matuszewski, and @WhiteAdamL
49/ Most GDAX accounts are still retail, but starting in late 2016, the majority of volume was being done by more institutional type players.
50/ GDax’s average daily trading volume has increased 10x this year.
51/ Matuszewski (Circle) - Buy-side has exploded. A couple years ago you might get $1 million order/month. Now that is the average ticket size.
52/ Main types of institutional investors on buy side now: Crypto hedge funds, Family offices, Small funds. Bigger players are in talks but not actually putting $$$ in.
53/ Fund math is that you put 100 basis points into crypto and it’s like a call option. If it goes to zero then it doesn’t majorly affect fund performance, but if it goes up 10x then that will make a big difference on returns.
54/ Major issues keeping bigger players out: Market size still small, Custodial risk - how do you store these assets?, and a global order book
55/ Two of the reasons SEC cited for rejecting ETF was lack of a derivatives market (b/c you need that to hedge) and how concentrated trading was in China.
57/ @BitMEXdotcom - CME futures is going to end badly. It doesn’t work well with cryptocurrency markets. It is closed on the weekends, only allows so much volatility and is susceptible to DDOS attacks.
58/ This creates gap risk where you can only trade during certain hours then people can set you up to screw you.
59/ Current exchanges are custodianship and exchanges. One of the value proposition for dex is that they never hold the keys so they don't become honeypots.
60/ 2018 predictions - An Investment bank adds liquidity, Regulators in the US do something
61/ My Thoughts: There is still a pretty wide gap between finance and tech segments of cryptocurrency. Lots of talking past each other.
62/ There’s a gap between generational interest and understanding - first conference I've been to where average age of speakers was lower than the average age of attendees.
63/ Increasingly evident that cryptocurrency will incentivize nation states to compete because of regulatory arbitrage.
64/ The End
