Opinion: BTC, Alts, Crypto Risks, and Investment
A lead news editor at Investoo Group Jayson Derrick oversees the news writers and analysts for one of the world’s biggest providers of content related to cryptocurrency, stocks, forex, commodities, and other markets. With his extensive background as a trader, analyst, risk manager, and financial writer, he is the right person to talk to about crypto.
The interview covered a variety of topics, including Jayson's thoughts on current trends in cryptocurrency and the factors influencing the crypto market. He also revealed his investment portfolio. For those of you who like hockey and cooking, he also shared something really interesting.
Mike Ermolaev: Thank you so much for agreeing to an interview, Jayson. To begin with, I would like to know what made you get into crypto.
Jayson Derrick: What got me interested in crypto is its ability to disrupt the traditional banking and payment systems. Living in a Western country means I can take advantage of platforms like PayPal at a relatively small cost. But such is not the case across the world, especially in poorer countries that are rich in educated individuals.
Platforms like Neteller attempt to bridge the gap by offering digital bank accounts but it still falls short. Look at El Salvador as an example of how crypto (Bitcoin) can be accessed by anyone – especially those that have been “left behind.” Around 70% of Salvadorans are unbanked but can now take advantage of a new universe of financial services.
At its core, this means that Bitcoin is succeeding as a means of transferring value from one place in the world to another. In terms of the broader crypto universe I think this is a bit ‘boring’ as there are many interesting features to take advantage of from crypto staking, yield farming, entertainment, and much more.
But perhaps most important, the crypto community is amazing and filled with brilliant minds that have the ability to introduce real change in the world.
Mike: Risk management was once your responsibility at a major prop trading firm. Do you see any way to minimize risks associated with crypto trading given its extremely volatile nature? Are there low-risk trading strategies that you would recommend?
Jayson: Stock trading is risky, I have seen first-hand how a 10% sudden and unexpected move can result in the loss of a small fortune. But on the other hand, a similar 10% move to the downside is considered tame in the crypto universe.
Look how many people got caught in the Squid Game token fiasco and watched a 99% loss happen within seconds.
Granted, this is an extreme example but most cryptocurrencies are extremely volatile and carry a level of risk that is greater than stocks. But on the other hand, higher risks translate to higher rewards.
The gold standard of crypto, bitcoin, is down sharply from it's all time highs. I’m sure the vast majority of bitcoin hodlers aren't worried about their position and are in it for the long-term.
Meanwhile, some of the stock market’s biggest names are not terribly far removed from their all-time highs and continue to offer investors a reason to invest. Apple just reported all-time record revenue and its CEO Tim Cook reassured investors its supply chain is improving.
Microsoft just reported a strong earnings report, highlighted by a 20% year-over-year revenue growth and a revenue estimate of $48.5B-$49.3B in FQ3 versus estimates of $48.23B.
Right now, investing in AAPL and MSFT is looking a lot safer than any crypto. Cryptos are too volatile right now which could offer a tremendous opportunity or an unacceptable liability depending on your own individual risk tolerance and investment goals.
Mike: Working at the news desk replaced your trading and risk management responsibilities. Would you say that news is the most important factor that moves markets?
Jayson: A variety of different factors drives the market and crypto prices, and some cryptocurrencies are indeed heavily influenced by news, especially on Twitter.
Ultimately, news plays a major role in the value of a cryptocurrency and in the overall movement of the markets. It is difficult if not impossible to value a coin using similar metrics as we do in stocks (i.e a discounted cash flow model through 2030) so news does play a greater role in influencing the movement of a coin.
Mike: I know you invested in stocks and Ether. What made you choose these asset classes? Do you have a more diversified crypto portfolio now?
Jayson: I gave my wife the ELI5 (explain it like I am 5) version of Ethereum and she agreed there is a lot of logic to it. Bitcoin, she argued, is a “glorified version” of PayPal and a “terrible store of value” since it is down so much from its highs and prone to volatility.
Is she wrong about Bitcoin? At its core, no. Now, let’s move on to my logic on holding ETH:
I like to think about Ethereum as an infrastructure that has the potential to revolutionize both finance as well as technology. As Ethereum is currently working towards a Proof-of-Stake (PoS) model switch, this will dramatically change the rewards system and lead to an increase in speed and scalability.
As we have seen with competing projects such as Solana, which can theoretically reach peak transaction times of over 65,000 TPS, a truly scalable blockchain can contribute a lot towards further developing the way we transact online. Over the next few years, I see Ethereum catching up to the competition in terms of its speed and scalability, and due to the fact that it has the largest number of projects built on top of it, it can potentially replace or remove the need for a lot of its scaling solutions.
The true disruption of traditional financial systems is just starting, and Ethereum has the potential to be the leader that replaces just about everything else we are using.
Now, back to your question on stocks. I grew up studying stocks in the late 1990s. I have seen and taken advantage of stocks that offered explosive returns, and to be honest these were not that difficult to find.
Shopify is one example. The e-commerce company offered online businesses of all shapes and sizes the ability to better target their market. Investing in this stock in the early-to-mid-2010s seemed like a no-brainer. Early investors who recognized the potential are sitting on returns north of 5,000%!
The same is true for Tesla. I believe the stock was trading below $10 when it sold its first 10 cars ever. Sure, the concept of starting any sort of new car company was insane but think about it: buying just 200 shares at the time for $2,000 would be worth more than $160,000 today.
Did I get off topic again? haha. My portfolio structure seems to be changing by the month. My wife and I are expecting our second child in July so we are shifting away from crypto into boring blue-chip stocks that will be converted to cash for a downpayment to buy a larger home.
Mike: Do you think Bitcoin and other top altcoins will remain relevant in the future?
Jayson: For some reason whenever anyone asks me if I think Bitcoin will remain relevant I think of Myspace. For those young millennials reading, Myspace was the pre-Facebook social media platform of choice. It was awesome, it was great, everyone was on it. Then along came Facebook and Myspace drifted into a thing of the past.
Can the same happen to Bitcoin? I find it hard to believe, although it is possible. After all, it is the first cryptocurrency token to truly make it big, and it has remained at the #1 spot as one of the most influential and most valuable tokens in terms of market capitalization.
While its developments have been slower than competing projects, it is still setting benchmarks, and even if, in 10 years from now it gets outdated from a technological viewpoint, it will always be relevant due to the fact that it pioneered cryptocurrencies to be as we know them today.
Mike: What about newly released coins? Would they ever be able to compete with Ether and Bitcoin? Are there any signs that can help retail investors recognize a worthwhile project from the beginning?
Jayson: Newly released coins need to do a lot to prove themselves. This is mainly due to the fact that there is seemingly a plethora of new coins coming out on a regular basis. The idea behind these tokens should be to solve real-world issues, as that will give them the groundwork upon which they can build.
If a token is a "meme" or built doing the exact same thing that current tokens do, then it has a much lower chance of success, but if it truly introduces something new and technologically evolves what we can do with the blockchain, then it is primed for some level of success.
What I love doing is looking at a coin’s webpage and seeing if they have a jobs opening section. This is a clear signal that a coin is ready to not only scale, but has the resources to do so.
When Ethereum came to the scene, many people thought that no other project could catch up to it, but we saw projects such as Cardano and Solana catching up and introducing several technological advancements, which led to developers starting to build decentralized applications (dApps) for those blockchain networks instead. There is genuine potential for newer altcoins to eventually bypass any of the current tokens, but they would need to introduce something truly spectacular to simply disrupt this current system.
Last, if a project solves an issue that has been plaguing either the crypto industry or traditional financial systems, it will not get ignored. Investing in a project that has a solid team backing it, a whitepaper that makes logical sense to eventually be executed to its fullest potential, and that solves a real issue, will see some level of success.
Mike: You do a fantastic job with your technical analysis. Can you share your favorite analysis tools? Can you say that the bull's party is over from the technical analysis perspective?
Jayson Derrick: Tough question. I hate charts with too many indicators that could even start conflicting with each other!
I keep it simple by relying mainly on demand and supply zones and confirm my views using volume activity and RSI. Moreover, identifying institutional order flow while analysing is one of the most important points as they are the main market movers.
Clearly, it is not looking good for bulls right now. While on the topic of technical analysis, the RSI is hovering near its lowest levels since virtually every asset class was hard hit in March 2020. This could represent a potential entry point, but as the saying goes “the trend is your friend”, and the trend right now is very negative.
Mike: Let's switch gears and talk about your favorite hockey team. The Pittsburgh Penguins have five players in the IR, all under the Covid Protocols. If any more games are postponed in the second half of the season, will they be able to jump ahead of teams in the Metropolitan Division? There are probably the Pens’ fans among our crypto audience who are curious about that.
Jayson: Well, current stats place a 92.5% likelihood of the Penguins reaching the playoffs. Where they finish in the standings is really relevant. There are some tough teams to get past to push for another Cup.
Another showdown with the Capitals seems inevitable and something that hockey fans deserve to watch. Crosby is still averaging a point per game and Ovechkin is looking no different today than he did 10 years ago.
In terms of COVID, Crosby and Letang tested positive last year, so now is the time to really hope that natural immunity is a real thing and we don’t have to worry about a star catching COVID during the playoffs!
My prediction: Penguins cruise past the first round, barely get by the second round, and lose in the third round.
Mike: I know you’re a culinary whizz. Could you share some of your cooking secrets with us? How do you make the perfect BBQ? Is there anything you cook most often for your family? Do you have a favourite traditional Canadian dish that you make?
Jayson: The perfect BBQ is quite easy but something a lot of people fail to get right. Heat up the BBQ properly and cook to the right temperature. Invest in a semi-decent meat thermometer so you don’t overcook your meat. An overcooked steak is a shame and a waste of good money.
Not sure if this is ‘traditional’ but a family favorite is duck breast with blueberries and maple syrup. My 5 year old daughter loves it more than pizza!
Mike: That sounds delicious! Your insights are terrific, Jayson, thanks for sharing.
I plan to interview a variety of experts in cryptocurrency. Who would you like to see as an interviewee and what questions would you like me to ask them?
Jayson: Accidental crypto millionaires! I would love to hear from someone who had no idea what they were doing and bought an inside amount of SHIB or DOGE in the early days and made a million dollars or more.
Question I would love to ask: What did you know then, what do you know now. I wonder if an accidental crypto millionaire would answer ‘nothing’ to both!
Mike Ermolaev, the Head of Public Relations at ChangeNOW.io, conducts an expert interview series with different notable people in crypto to provide both crypto beginners and veterans with an inside perspective on the crypto market. This interview was originally published on Benzinga.