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Fintech Underground by Alpaca is a podcast devoted to all topics related to stock trading and APIs. From trading with algorithms or connecting apps or building out services, we aim to bring light to the different corners of Fintech.
In episode 19 of Fintech Underground by Alpaca, we interviewed Tyler Koch, Business Development and Marketing Manager from Amun. Amun provides index products that enable investors broad exposure to particular blockchain ecosystems and DeFi sectors. Tyler shares with us his experience from how he started with crypto, mining Ethereum, buying 1080 Tis and tying them on a shoe rack in a friend’s basement, to now working for Amun, providing index products. He goes through advice on how we can make the correct decision when choosing crypto coins to buy.
Find the full transcript below. To hear more of the most interesting Fintech companies speak about their experience in the industry, check out our other episodes below.
[00:00:00] Mariangela Martinez: Alpaca is a developer-first startup focused on building open APIs for stock and crypto trading, investing, and embedding. You can learn more by visiting our website at alpaca.markets. You can also find us on Twitter at @AlpacaWeb3 or join our discord community also with the invite link @AlpacaWeb3.
[00:00:21] Hello, I'm Mariangela Martinez, Content Marketing Specialists at Alpaca. And this is Jason Hsu, Crypto Growth Manager at Alpaca.
[00:00:27] Jason Hsu: Hello everyone.
[00:00:29] Mariangela Martinez: We will be hosting today's podcast on "How To Choose The Correct Coin and Avoid Scams".
[00:00:34] Our guest today is Tyler Koch, joining us from Amun. Amun DeFi is a suite of tools for passive crypto holders and portfolio management across major DeFi platforms.
[00:00:44] Amun provides index products that enable investors broad exposure to particular blockchain ecosystems and DeFi sectors. Tyler is the Business Development and Marketing Manager from Amun.
[00:00:56] So Tyler and Jason, how did you guys meet?
[00:01:00] Jason Hsu: I was working at a crypto exchange called BitMart and we were listing their index tokens that they were working on. We can talk about those a little later. But yeah, we did an AMA session together. Tyler was on it and their media personality, James Wang was also on it.
[00:01:23] Tyler Koch: Yeah. I think we really clicked so, you know, we could do another one.
[00:01:29] Jason Hsu: Yeah. Thanks Tyler for agreeing to do this again.
[00:01:33] We actually just missed each other at Bitcoin Miami, but you can find Tyler at Permissionless next month, and you can find the both of us at Consensus in June.
[00:01:45] Tyler Koch: And then also I'll be at NFT.NYC. That's one I'm super excited about.
[00:01:49] Jason Hsu: Oh, okay. Wait, did you go to the one last year?
[00:01:52] Tyler Koch: Unfortunately. No.
[00:01:53] Jason Hsu: Okay. Okay. Well, I'll be here. It's a different crowd, but it's interesting to attend.
[00:02:00] Tyler Koch: Perfect.
[00:02:02] Mariangela Martinez: That's so cool guys.
[00:02:03] So before we go into our questions, I want to say that any topic talked about in this podcast is not financial, investment, and/or tax advice. We encourage our listeners to seek individual advice should they deem it necessary.
[00:02:19] Okay. So, Tyler, what is your story with crypto? Graduating from Mechanical Engineering, how did you jump to crypto and what was that change like?
[00:02:29] Tyler Koch: For sure. Good question.
[00:02:31] So, growing up, I was always interested in how things worked since money. So I figured engineering as best way cause the starting salaries are high and it's seeing how things work.
[00:02:44] And then I was doing an internship at a chemical company in January of 2017. And I learned about Bitcoin and Ethereum. Ethereum was like $15. Bitcoin was, it was under a thousand, maybe like $600. And they just seemed super interesting to me. I always liked the stock market and I was like this is kind of similar to the stock market, but it's like these assets that are also kind of like gold or like oil with Ethereum and being used as gas.
[00:03:16] So I started doing some stuff with crypto, just like mainly buying and just researching. And then I think that later that year that's when like CyrptoKitties and a game called 0xUniverse came out. I got really involved at those. At the time, it was awesome because Ethereum gas fees were always one GWEI.
[00:03:38] And what we did was like, if you wanted your transaction to go through, you just do 1.01 GWEI. And then people are like "Oh, I'll do 1.0001. I'll try to squeeze every penny out." And then the CyptoKitties boom happened and gas went crazy. But then I went to school after that for a couple more years. So I didn't get really involved. I graduated, started just working as an engineer at the same chemical company. And that's when kind of Binance Smart Chain came out and PancakeSwap. I was in PancakeSwap before they even launched and in their telegram and discord learning about it. You know, it's crazy. You could have Ethereum experience, but way less fees and faster. So [I] got really involved with that. And then, of course it got pretty scammy. And then I learned about Polygon, looked at the large things in Polygon, at the time was QuickSwap, which was a Uniswap fork. And Polygon's even faster and cheaper than Binance Smart Chain.
[00:04:44] And I ended up talking to the founder of QuickSwap and a couple of people there and ended up working there and that's kind of where it started. I started moving up and then about November, Amun reached out to me and they were like "Hey, we're building these kind of index tokens". And I thought it was super interesting because back in the 80s, it was just people traded stocks. There wasn't really ETFs, you know, it was just like stocks back and forth. And then the 90s, these ETFs came out and these retirement funds, and then they like grew like crazy in popularity. And I think that crypto is going to also have this because looking around now, just talking to people, they're like, "What coin should I buy?" People can say you any random coin, doge coin. And people be like, "oh, sell doge coin now." And it goes crazy. But imagine if there was something you could put money into and it would just passively rebalance based on criteria, very similar to ETFs. So, I think that's something that is going to be very large in the future.
[00:05:55] So I'm at Amun now.
[00:05:59] Mariangela Martinez: Cool. So going back to like your college days, did you keep track of crypto or took any financial classes or anything like that?
[00:06:11] Tyler Koch: I definitely kept track of it, but I mean, going into school I didn't have any money. I also didn't have a job. So it was mainly, I used all my money for school. Of course I would look at news. But that was really the extent of it.
[00:06:29] At one time, my friends and I actually built an Ethereum miner. We bought some 1080 Tis, which is a graphics card that Nvidia made. And we tied them with zip ties on a shoe rack and put it in my friend's basement in the winter. And it like basically heated their whole house.
[00:06:49] And I think we ended up making like a Bitcoin, but, you know, I sold that for school and Bitcoin is [was] like $3,000 or something. So kind of unfortunate, but yeah, I've always been very interested in it.
[00:07:05] Jason Hsu: Don't worry. I got out at an even worst point. I got in a little bit in college in 2014 and I got out in like 2016 that's um, yeah...
[00:07:16] But our goal for this podcast is also kind of educating our TradFi folks on what blockchain is and why they should get into it.
[00:07:26] So you mentioned GWEI, that's a denominator of Ethereum. I believe it's like 1 Eth is like 1 billion. And so when Tyler said [that] it was just one GWEI back then that was incredibly cheap on gas, and gas that's, you can think of it as transaction fees. And that's not the case anymore, at least for Ethereum.
[00:07:52] so that's why you see, there's like a bunch of different blockchains being developed. And to speak to Tyler's credibility, Amun has an amazing team behind it. Maybe you can talk about it later. But I went to their office and they're like guys from Ark Invest, so they came from TradFi and they really know what they're doing.
[00:08:20] Tyler Koch: Yeah. And a little bit background of how Amun was created. I think this is around 2018. Our founders, Hany and Ophelia, created this company, Amun, and it actually wasn't DeFi at all. It was crypto ETPs, which are exchange traded products, and those are traded on a couple European exchanges. Essentially what it allowed investors to do is, these institutions or family offices or whoever, could buy Bitcoin or Ethereum on the stock market, these European stock markets, I'm not sure which ones, and the fee structure works the same as ETFs where you pay like 1% per year in fee.
[00:09:11] And the reason why it grew so much it's actually, I think at 2.3 billion assets under management right now, because it allowed these companies to put money in crypto in a very tax friendly way. These companies can't really go on Uniswap or yearn finance and buy a bunch of crypto and hold it there.
[00:09:34] So Amun had all the regulations to do that. And then about last year they thought, "What if we made these basket tokens or index tokens?" So they ended up creating a sister company called 21Shares, and that's where the regulated ETP side sits today. And then Amun was rebranded to this DeFi. So now we have these DeFi tokens. We have three ecosystem tokens right now, Ethereum, which is DFI attracts the eight largest Ethereum projects. And then we have PECO, which is the Polygon ecosystem and then SOLI, which is Solana ecosystem. So those rebalance every month, and the weights change, and the tokens change based on our methodology. There's a lot to read into, website is amun.com, if you're interested in reading more.
[00:10:39] Jason Hsu: Yeah, join their telegram community too. Do you guys have discord, by the way?
[00:10:44] Tyler Koch: Yeah, we got discord. It's just discord.gg/amun. Got one of the fancy links.
[00:10:50] Jason Hsu: Nice, nice. We actually hired an analyst that puts out daily reports of just like market trend news. If you guys want to hook it up to your server. It's under-utilized right now. For our viewers, if you want to do that, also reach out to us.
[00:11:11] Tyler Koch: Are those posted on your discord?
[00:11:15] Jason Hsu: Yeah, yeah. And it's in one of those like announcement type channels. So you don't need to like pull all your members to our server. You can just subscribe to the content of that channel in your server, so it's cross-server and then you get our daily reports that way. Yeah. So instead of like subscribing to cointelegraph, CoinDesk, all of those, we have a guy that cleans all that for you, and then you just plug it into your server.
[00:11:45] Tyler Koch: Nice. I definitely will look into that.
[00:11:47] Jason Hsu: Yeah. You also talked about these rebalancing apps. Well not apps, but just like the act of holding certain asset and then just have it auto rebalance. How does Amun compare, you got these index tokens versus these wallet rebalancing apps?
[00:12:13] Tyler Koch: Oh, like the KuCoin, how they have their own.
[00:12:18] Jason Hsu: Yeah. Like I think the ones that I'm kind following like Snowball, Linen, I don't know if you've heard them. I used to like be pitching around these guys, these guys won Pitch Day at San Francisco Blockchain Week or something. And they brought a good amount of fundraising from Product Hunt, things like that. And I think they're in their beta phase. Yeah, if you could highlight why one would kind of go for you guys instead, or like what's the scenario?
[00:12:57] Tyler Koch: Yeah, definitely. Yeah. I don't know too much about those, but there are of course a few different projects trying to do the same thing. I think one benefit that we have is there's actually no fees until 2023. I think DFI has a 1.95% fee. We waived it until 2023 and also I think we were the first index token to launch on a launchpad. So something we did with our Solana token SOLI that launched in February. We used a launchpad to actually launch it.
[00:13:39] And it's kind of confusing at first because usually launchpads, you set a price and then it sells out and then the price does whatever after that. But our tokens have underlying value. Like you can, I mean, it's like an ETF, it's all the stocks based on different weights multiplied together. Like that's kind of where the price is. So we actually gave a 10% discount to users that went on the pre-sale and just vested the tokens over 180 days, which I think is really interesting. So we actually gave everyone a 10% discount and I think we raised, I think it was $350,000. So, it ended up being like $35,000 to the community.
[00:14:27] And then also our methodology is I think, more clear than others. A few of these projects, it's not a secret of like how they do the methodology, but it feels like they can just change it on a whim. Whereas ours is very standard and if it does change at all, it requires a governance vote. And how the governance works is, like let's say there's 1000 PECO tokens out there, there'd be a vote to change the methodology. Or, you know, include a token, something like that. And you could vote with your PECO tokens, like yes or no. And then we'd respect, well the protocol would respect the outcome of the vote and instead of just like one guy or a couple people deciding the outcome.
[00:15:18] Mariangela Martinez: Oh, wow. Okay. That's interesting. That's good to know. Is there anywhere that we can read it in the website?
[00:15:27] Tyler Koch: Yeah. So on amun.com at the bottom of our website amun.com, there's a github link which explains how the whole process work, like how the smart contracts work, our methodology. So that would explain how tokens get included and their weight percent.
[00:15:48] So, you know, every month you can kind of look [for] yourself and not know what's going to be included, what's not gonna be included, kind of what the weights are going to be, because the math is all out there and it's all public. I think some other projects, essentially it's like one person just kind of picks the weights based on some backtesting. So we just want to be as transparent as possible.
[00:16:14] Mariangela Martinez: Yeah, that's good. And now at these times that everyone is not as transparent, so that's really good to know.
[00:16:22] So with the NFT boom, web3 started to get all this attention and all these startups started to pop up, and I saw that Amun raised 4 million in seed money. How did you guys manage to stand out and get that money?
[00:16:38] Tyler Koch: Yeah, so that was with the, I guess at the time it was Amun, but that's like more of the 21Shares product, our sister company. So, I think this was actually before my time, but I think it's very attractive, how we are essentially a bridge between traditional finance and crypto. It's like, you can buy these crypto assets on a regulated market and there's people that are super into like Bitcoin, Bitcoin maxis, that think this isn't a good idea, but I think it's a necessary step if like the world's going to move towards full crypto adoption. So I think the investors of the rounds really saw that and they saw the fee structure and they wanted to be a part of crypto, a crypto company instead of just holding like Bitcoin or Ethereum.
[00:17:39] Jason Hsu: Yeah, there were a lot of Bitcoin maxis at the Bitcoin conference.
[00:17:43] Tyler Koch: Yeah, I thought it would actually be worse. I'm surprised there were some DeFi booths and DeFi people
[00:17:52] Jason Hsu: mean, I went to the Solana satellite event nearby. I wouldn't call it a satellite. I feel like it's a pretty big main event on the side. Lasted a whole week. Kind of like hacker house in NYC here.
[00:18:08] Yeah, I just want to highlight like one other major differences, like with Amun here, they have a couple of tokens that they've developed. But you would really just be holding one token as opposed to a bunch of different assets if you're using a rebalancing app and the PECO token, that's P-E-C-O on Polygon that Tyler was talking about. I'm just poking around their discord and they have specific channels for all the different tokens that they have. So if you want to read up on just like specific, like what people are discussing for each token. Yeah. Please go check out their discord.
[00:18:47] Mariangela Martinez: Awesome. Okay. So, Tyler going into the topic of how to choose the correct coin and avoid scams. There are many webpages and sources containing information about investing in certain coins. How do you know which source is reliable or if it's just noise?
[00:19:06] Tyler Koch: Yeah, it's hard. Everyone always says like, do your own research and then there's the memes or especially in the NFT space sometimes you have to sign transactions to their wallet and people always say like "oh, make sure you know what you're signing." But if you look at like the details of the signature, it's just like, essentially to a normal person, it's just like random letters and numbers. And you know, you can't know you're signing unless you are like super, super deep in Ethereum ecosystem, which a very small percentage of people are these developers. So it's like, how can you do your own research when you need a PhD in Computer Engineering to read some of this stuff and maybe not even that, but maybe it would take like hours of research to know exactly what you're doing, you know? Cause you'd have to essentially audit these protocols yourself, which these audits sometimes take $40,000 and a team of people to determine if it's safe or not.
[00:20:05] But you know, one thing I've kind of been around a while, if you go on Twitter, there's usually also people that have been around a while that you can maybe trust, they don't promote these scams. They do a lot of research themselves. You could look at audits, so that's where a team looks at the code, they look at the team, they do know your customer on the team, so they know who's behind it. Basically trying to prevent any red flags. I mean, if you see a project. That the team is, the head guys, just like a picture of a frog, no one knows his name and they haven't built anything before and they promise a 100x, that's a lot of red flags and maybe their code is not audited. They're just like "Hey, put money in us." I mean, that's kind of like do your own research, but I think that's also why we created these basket tokens is, there's a lot of people that don't have time or don't know how to do the research. So we set it up in a way where it'll automatic rebalance based on the tokens where the methodology says it's safe.
[00:21:16] So some of the requirements are like the team has to be public, the code has to be audited, the project has to be out for I think either three or six months. So there's at least some time to make sure it's okay. And then if a project starts doing really bad or the team leaves or something, of course that'll mean the price will usually go down and then it'll end up not being included in our index because it won't meet the requirements for total value locked or liquidity.
[00:21:49] And then on the other hand, if there's a new project that just comes out and it's this super awesome team and it's growing really fast, like then our indexes will automatically include that and it doesn't require any research or intervention from the holders of the token. And I think that it's going to be very powerful as crypto grows.
[00:22:09] Jason Hsu: Yeah. On the signature part, I completely agree. I'm going to send this podcast and future request to call you out, Anthony at MetaMask, I think you guys have something you guys can build.
[00:22:23] Yeah, it just make it more newb friendly.
[00:22:27] I mean I don't want to check every single signature I'm signing and I have like four discord accounts just to be on all the different servers I've got, and I get hundreds of DMs a day joining this NFT server or these NFT scams that basically pretend they're the owner of the server. They use like the same icons, names, and they'd be like "Hey, premint has already happened, go to this site to mint NFT." But it's not the real site. If you ended up signing something that, you could end up losing all your assets, all your NFTs in your wallet. And on do your own research, well, I was part of the audit process at the crypto exchange, where I kind of say like, "Hey, maybe we shouldn't list this token, there's like underlying risk that they could rug." If you want to dive a little deeper, do more than just reading their white paper, you could look on blockchain explorers, see when they made this token, how many current holders they have. So if you don't know the team personally, and you don't want to jump in before everyone else has, just kind of wait it out, see that number, get to a healthy stage where you're comfortable with, then you can jump in. It's a lot of work. The smart contract audits, there are certain more reputable firms like Certik that you can look for. See if you know, these projects have their reports published on their website, see if their lists are on reputable exchanges. But really if you don't want to do all that research leave it to Tyler and their tokens.
[00:24:38] Tyler Koch: Yeah.
[00:24:39] Mariangela Martinez: Yeah, definitely a lot of research. I mean, it's like you're putting in your real money and, you know, just to be scared to lose it, I mean, it's better to be safe than sorry.
[00:24:50] Tyler Koch: Yeah, it can be very stressful sometimes.
[00:24:52] Mariangela Martinez: You know, going back into this, everyone right now, it's apparently knowledgeable about crypto now-a-days. It's like fashion influencers giving advice on nutrition. You know, they don't even have much professional background on it and people trust them and followed their advice. So the same applies to FinTech influencers, fin-influencers, right? There's a difference between doing research and knowing about the topic than getting lucky and making money. So, how do you choose which finfluencers are reliable for crypto insights and advice and why do you follow them?
[00:25:27] Tyler Koch: Yeah, I mean, honestly, I don't trust any influencers. It's impossible to know if they're actually like the coin. If they did the research or, I would say of high majority of them, they're just trying to basically pump their own bags or the founders of the token paid them, to say it. Of course there are some that are honest and legit, but it's hard to tell which ones. So I just try not to follow it and try to make my own conclusions based on what non-influencers are saying. It's hard too, because there's all of the rumors. In Hollywood, for example, these actors or actresses, they lose like 40 pounds in two months and gain all this muscle. And like, "how'd you do it?" And they're like, "oh, I just eat rice and broccoli." But then there's these rumors online, it's like, no, this person is taking like performance enhancing drugs. So it's like, you know they're not going to come out and say that obviously.
[00:26:32] But I think that's kind of similar to how influencers are doing it. It's like, "oh, buy Shiba." It's like, they could have a billion dollars of Shiba, they're just trying to pump their own bags to sell on these people.
[00:26:44] Mariangela Martinez: Yeah. Wow. Definitely scary with everyone advising on the internet and every social media platform. I mean, everywhere you go, you know, there's advice and stuff from anyone, really.
[00:27:00] Tyler Koch: Yeah. And I get DMs saying like, "oh, we'll promote your projects, just give us like a hundred dollars and we'll post like good things on all our channels." So it's hard to tell who's honest [and] who's not, who gets paid.
[00:27:17] Mariangela Martinez: Yeah. I follow this website on Instagram and they post pictures and in this pictures, there's all these comments like, "oh, follow this person, they just made me 14k." And it's like, no!
[00:27:31] Jason Hsu: Yeah, those are all scams, yeah, yeah. I get a lot of these in my comments on my Instagram too. I'm trying to redirect my followers, but I don't show any coin in particular. I just do it for the education, like everyone should know about these projects. And please don't call me an influencer. I don't want to influence you to buy anything, do anything. It's just information sharing.
[00:28:03] But I've overheard this project that someone was working on at the Bitcoin conference. They're trying to aggregate like market sentiment on just like different Twitter personalities, what they say they're buying and kind of match that against, maybe a period of maybe like three months, six months, how accurate that is, and then maybe develop some sort of trading bot. Or kind of sell that data, but the challenging part is kind of, I guess, quantify like which influencer or Twitter personality is more accurate or should be given more weight. But really it's just, I think individually you just gotta be, I mean, we all have our own different risk appetites. So you just have to be able to discern, what are factual and what's believable. It's our job to kind of educate the public and our clients, what the basics are.
[00:29:20] Just to be in line with our topic, why should investors care about these technical upgrades like London hard fork? Should they even follow this when they're deciding to buy a token or not?
[00:29:41] Tyler Koch: I think, so of course there's short-term price action on these new upgrades. I think typically like the price runs up. And then right when the upgrade happens, like the price to go down, just cause people buy the rumor, sell the news.
[00:29:56] It's funny. That's kind of also what happened with the Bitcoin conference. I think people are excited like, "oh, all these people are going to know about Bitcoin now." And the price went down like 5% on day one of the conference. So, you know, who's knows what'll happen with the upcoming Ethereum upgrade the merge. I think it's definitely could be long-term beneficial because Ethereum is going to move from the proof of work to proof of stake.
[00:30:24] One of the large cons of the crypto industry is the energy consumption. So, when Ethereum moves from proof of work to proof of stake, I think it's literally 99.99% energy reduction because it's just going to be people running these very low watt nodes instead of thousands of graphics cards and warehouses that take up like an entire hydroelectric dam of power or like a whole natural gas power plant.
[00:30:58] And then of course, it promises speed improvements and higher throughput of transactions. So, of course that's beneficial for the industry because, I know we mentioned the NFTs earlier, you know, NFTs do you want to buy or sell on NFTs right now? I think average you're paying like $40 just for buying or selling, like just in gas fees, so that's just like wasted money. And you know, a lot of people don't have whatever it is now, $400,000 for a bored ape, like they want these $20 NFTs. It doesn't make sense to buy a $20 NFT when you have to pay $40 in gas fee. So if gas can be like a penny or less, maybe even 10 cents, I don't know what it'll do, but that's going to be definitely beneficial for the industry.
[00:31:49] Jason Hsu: Yeah. I was just poking around your Twitter. You got a bored ape recently?
[00:31:55] Tyler Koch: Yeah. I actually got one yesterday and I got one in November.
[00:32:02] Jason Hsu: You got two! Do you plan on lending them? I mean not for me, but like for money, like on a protocol.
[00:32:12] Tyler Koch: I might, I don't trust any right now.
[00:32:16] Jason Hsu: Yeah, yeah. That is sketch. But I did read someone borrowed five just before the Ape coin drop and then gave it back right back afterwards. That was smart. Yeah.
[00:32:27] Tyler Koch: Yeah. That was a lot of money. But yeah, I think it'd be cool to like put it up as collateral and to take loan against it, but I don't know. That's hard, cause you'd have to trust the protocol a lot. You'd have to send the apes somewhere.
[00:32:44] Jason Hsu: Okay. Okay. Have you heard of Vera? It's like, I guess I'm a little biased, cause like I met this guy and they throw like the craziest parties, several times now in New York and LA and in Miami. They are an NFT renting/collateralizing protocol and you can fractionalize that ape and have multiple people borrow against it and like rent it. I think it's pretty, pretty crazy stuff.
[00:33:15] Tyler Koch: Yeah. I haven't heard of that exact one. Will definitely to look into it, but I've of course heard of projects like doing that or planning to do that. Yeah, I think it be really cool. I think there was one, it was called like ape Dao. They might have had a hundred bored apes at one time. But ended up not many people used it, so they like liquidated it. They had a big auction. Okay. Bought the apes.
[00:33:41] Jason Hsu: Yeah. Yeah.
[00:33:42] Tyler Koch: Because definitely we had to do it right. Just one's figured it out yet.
[00:33:49] Jason Hsu: Yeah. It is a little crazy though with the ape holders. I met last year, I at NFT NYC they threw a couple of actual yacht parties. I met some of them outside of the party for dinner and like three of them would hold like 70+. So it was like $14 million and we're just eating hot pot.
[00:34:15] Tyler Koch: The cheap stuff on the menu. They're crazy.
[00:34:19] Jason Hsu: Yeah. And then, but like one guy was also wearing like Uniswap socks. Which peaked at like what, 400k? But I'm like, okay, that's that got excessive? Cause I, I couldn't tell if their those are real or not. And they're worth what, like quarter mil at the time, I don't know. Pretty insane stuff. Yeah.
[00:34:39] Tyler Koch: Yeah. They're worth a lot. Yeah. This year's NFT ape fest is going to be like crazy. Cause I mean, apes have gone, I don't know, 3 or 4x since last year's.
[00:34:52] Mariangela Martinez: Yeah, it's going to be crazy, probably.
[00:34:55] Tyler Koch: Yeah.
[00:34:55] Jason Hsu: Yeah, I also just met another, I think he does community at OpenSea and, yeah, he bought a bunch of apes, at like .2.
[00:35:06] Tyler Koch: Oh wow.
[00:35:07] Jason Hsu: He's doing well these days.
[00:35:12] Tyler Koch: For sure, yeah.
[00:35:13] Mariangela Martinez: So with all the scams and hacking there's going on, how can we trust the system? For example, for me, every time I come across news about another hacking of millions of dollars, which is, you know, often and people losing their money, it makes me more skeptical.
[00:35:32] Or, you know, employees at crypto companies are keeping low profiles and not have their image spoofed for these scams. So what would you say to someone like me?
[00:35:45] Tyler Koch: Yeah, I think I would say just stick to the large projects. If, you know, someone walked around and tells you something, or you see some random billboard that tells you to buy this token, that's usually a red flag, but if you look at, you know, something like Ethereum or Bitcoin, these super large ones, you know, even stuff built on Ethereum, like Maker or Curve or Compound like those, those have been around for years with no major security incidents. So, I guess those are kind of regarded as safe. Usually the exploits are kind of stuff that's newer, like hyped. Luckily a lot of them do get paid back, but there's also some exchanges that get hacked that haven't paid back users. So I guess, you know, my thing that I follow is like, I don't keep money on exchanges and I usually don't have bridge assets.
[00:36:49] So that's, I know like a month ago, Wormhole had that exploit where wrapped assets on Solano were stolen. They got paid back, so it's all good, but you know, I just keep like Bitcoin on Bitcoin chain and Ethereum on Eth chain.
[00:37:07] Mariangela Martinez: Yeah. But is it common that they give the money back when, when they get hacked, like for you, that you got your money back?
[00:37:16] Tyler Koch: I've actually been lucky. I've haven't been a part of anything that's got hacked, but like Wormhole did pay everyone back. Well, FTX paid everyone back, but FTX like kind of owns Solana. And if they would've just let it go, then Ethereum and some other tokens would have lost the peg in their markets and it would have been chaos like Solano might've had to restart the whole thing.
[00:37:44] So yeah, that's why they kind of just ate the cost.
[00:37:49] Mariangela Martinez: Yeah. Oh, wow. So, you said that you don't leave the money in your exchanges, right?
[00:38:00] So, but people do and, I don't know if you watched the Netflix documentary "Trust no One" about QuadrigaCX. I don't know if you're familiar with it.
[00:38:11] Tyler Koch: That's the Canadian exchange?
[00:38:13] Mariangela Martinez: Yeah. That one.
[00:38:15] Tyler Koch: Yeah.
[00:38:16] Mariangela Martinez: Yeah, that it was completely faked, you know, like you put your money in and you can't get it out. You know, like what if I put it in somewhere and then they just don't give your money back? You know, people lost lots of money or everything, so..
[00:38:31] Tyler Koch: Yeah. Yeah. I don't know. It's just, it's hard because I'm sure they had like some kind of marketing campaigns where they incentivize people to use the exchange, like put money in the exchange. Cause a lot of things do, so people put money on there and they do a bunch of trades and they get, you know, $20 of Bitcoin or whatever.
[00:38:53] And then they don't realize that they can't take it out. I think it's a big education thing in crypto still. It's hard to know what to trust and what not to. I would say like as far as exchanges, I would only, I only use very large ones, things like Coinbase, Crypto.com, FTX, stuff that's been around a while that's very regulated. I feel like those are safer than these kind of smaller.
[00:39:23] Mariangela Martinez: But it's just like, I don't know, like they're big because people trusted them and then they started to get big. So what about the small companies? You know, how are they going to get to that point if people don't trust them? It's just this circle of going back to trusting, right?
[00:39:40] Tyler Koch: Yeah. Yeah. That's very true. I think it's probably kind of like the same in the, even traditional markets, you go to the store and you see Pepsi for $2 and then right next to it you see like Dr. Cola for $1.75, like people don't trust Dr. Cola 'cause they don't know what it is, so they just get the Pepsi, even though it's more expensive, it's hard to like market penetration.
[00:40:06] Mariangela Martinez: Yeah. What's your standard process for assessing new coins and how your research affects your investment strategies? And how would you evaluate a cryptocurrency and its potential?
[00:40:19] Tyler Koch: I think the biggest thing is looking at the team and you know, the team's done big things before, they have a reputation in the line, so they're probably in their best interest to make something big again. And then also, I don't want to call them influencers, but if people that you trust look into it and they're like, "oh, this is cool ideas, this is good." And if there's audits, I would say that's cool. It also depends if they're just, if it's just simple copycat, like those usually aren't the best. It's very hard to value things. If it was easy, some people that have so much money, 'cause I think it would be like, "oh, it's undervalued, I'll buy it." And then it goes up and then they sell it. So yeah, it kind of comes back to do your own research.
[00:41:16] Mariangela Martinez: Right. So in crypto, the average investor may notice certain trends appearing and disappearing and make decisions based on short-term price action. In a given week, a topic will be popular like DAOs and draw lots of attention, resulting in high price action, but once the hype dies down, the coin loses the value like you were talking about it. So these projects are legit backed by founders with long-term vision. However, the returns are terrible from an investment perspective. For example, if we look at every single DeFi 1.0 project that launched in 2020, all had great fundamentals, still operational and being used but are down 80% compared to Ethereum. So what is your approach on this investments?
[00:42:05] Tyler Koch: Yeah, that's also a funny thing. There's a lot of, I guess they're called like moon boys, people that think that these prices are going to go crazy. But one thing I look at is the total market cap of the token. Total market cap is essentially like how much the project would be worth. It's basically all the tokens times the price of the token. So it's like how valuable is this project or this company, whatever it is.
[00:42:37] And a good example actually is Tesla. So Tesla sells something like 2% of the cars than Toyota. Toyota sells 50 times more cars than Tesla, but Tesla's worth more than every automaker combined. And it's like, it doesn't make sense cause their revenue's way smaller, but it's just people betting on the fact that it's going to be huge longterm.
[00:43:06] And I think these projects that were made in 2020, I mean, the fully diluted valuation of some of them was like over a trillion dollars, 'cause they have so many coins to still mint. So it's like, is this project actually worth a trillion dollars? Like worth Apple, like look how big Apple is. I mean, my answer would be no, but you know, some people like actually really thought that like back when things were mooning, but then the price equalized.
[00:43:35] So I think a big thing is market cap. A lot of people look at price, which they shouldn't really look at. Price as in like, you look at Shiba and it's $0.00001. Like, "oh, you know, it gets the doge coin price of a billion dollars," but they don't realize there's a million times more Shiba than Doge coin. So that's why it's like six decimals over or whatever it is.
[00:44:03] Mariangela Martinez: Right.
[00:44:04] Tyler Koch: Market caps is an important thing to look at, rather than just if a coin is one cent or if it's $50,000.
[00:44:11] Mariangela Martinez: Yeah. Take a look at the whole picture, not just at the price.
[00:44:14] Tyler Koch: Yeah, exactly. And also look at if there's still tokens to mint like Bitcoin, for example, there's I think 19 million tokens outstanding right now, but there's only ever going to be 21 million. So it's like, there's not much inflation left. But some tokens there's, you know, a million tokens in circulation, but eventually there's going to be a billion tokens in 10 years. So the inflation for that coins can be so high that like, usually with inflation, that price naturally goes down.
[00:44:48] Mariangela Martinez: Going to another question, prominent crypto Twitter accounts, like 3AC, or Gigantic Rebirth, or IamNomad, and others I'm sure you're aware of, publicly tweet their trades including their entry and exit positions. However users who try to "copy trade" tend to get burned when they sell to stop losses in the short term. So these funds or accounts tend to outperform, if you hold long-term. Would you have any comments on how to absorb, interpret and act on the "investment advice" from professionals?
[00:45:23] Tyler Koch: I think an important thing, there is usually the things that they invest in are, I mean, they're usually the very large tokens. So usually that means, I'm sure they have a team of people that audit them and really look into it and know the team, so it can be as safe as possible, safer than just some random tokens.
[00:45:46] In terms of copy trading, you know, usually when they buy something, the token price would go up because they bought it and everyone wants to get in, which really just helps them because they buy and then they announce it and the price goes up more. So it's not really good for the people getting in later. And that's also the same thing with selling, when they announce they sell something, it's already been sold, but then other people want to get out. So then they sell, but they sell a little lower price than like 3AC got out. So that's why like, from a percentage wise, usually the normal people will have less return than the 3AC or whoever does.
[00:46:34] But, you know, it's kind of like people copy trade Warren buffet too, the Berkshire Hathaway fund. They can just buy like Apple and Coca-Cola and whatever else is in there and get similar returns. But you can also look into the projects yourself and be like, "oh, is this something that I think would be useful in the future?" If the answer is yes, then maybe just buy it and hold it long-term even if they sell it.
[00:47:07] So, copy trading is an option, but it's also nice to look at like what these large companies are trading.
[00:47:16] Jason Hsu: Yeah. Yeah. I think even without the manipulation it's a little slightly different from just copying traditional trades from hedge funds. Yeah, is way higher volatility in crypto. And some of the coins that they may be showing or have like Tyler was saying earlier, way smaller market caps, like even across exchanges, there are opportunities. And so by the time they post these trades and your copy trading, there's large slippage. So I know this because I also helped run a crypto fund of fund that did this thing. We coined something called mirror trading. So instead of copy trading someone else's trade after they've already made that trade, you're executing the trade at the same time, but this becomes less efficient 'cause you're eating more orders on the order book, if you have larger amount of capital to work with. So sometimes, if this is some sort of quant strategy that the trader is using it actually works against them. So I think some of these market sentiment, you should just treat them as like market sentiment and they're not good for high-frequency trading.
[00:48:55] Tyler Koch: Yeah, that makes sense.
[00:48:56] Jason Hsu: Yeah.
[00:48:58] Mariangela Martinez: So several scams appearing with verified Twitter accounts, for example, Doritos Brazil, tweeting phishing links for popular NFT accounts, like bored ape, where users click the link and are hacked of their assets. What recommendations would you have to avoid such a thing.
[00:49:19] Tyler Koch: I follow the rule where I like never click on links unless I know a 100% sure it's legit. Even if, let's say bored ape yacht club tweeted something and it had a link, I'm always skeptical to be like, "okay, what if their Twitter account got hacked? And there's a fake link." So I usually wait, maybe like a couple hours till other people look at it and look into it and do it. And they're like, "oh, it's safe." So then I'll do it because with crypto, usually with these scams, there's a call to action where it's like, "oh, first five people get a hundred dollars" or like, "the price is so low, get them now before it goes up" like you got to buy now though, get in now.
[00:50:07] Mariangela Martinez: Yeah.
[00:50:08] Tyler Koch: There's usually never a rush on things that are actually legit, you know, they'll give you, let's say there's a NFT drop, like they're going to announce it way in advance, you're going to know exactly the day, exactly the website, it's not going to be like, "oh mint now go on the sketchy website and connect your wallet and sign this and just like do it and you'll get it for free." you know, like those are almost always scams. I would say always scams. I, even if there's a slight chance that it's real, I wouldn't even touch it because it's just too much risk. Or what you could do is, a lot of people do this, you know, it's very easy to have multiple wallets in your MetaMask. So people have one account where they'll hold their valuable money, their valuable tokens or NFTs. And then they'll have more of a hot account with not a large amount of money on it. And then they'll use that to like mint things or like buy these sketchy things if they want to do that.
[00:51:06] So don't use your main wallets to to do something if you even remotely think it's a scam.
[00:51:14] Jason Hsu: Yeah. I was going to say the first five people who listen to this podcast and reach out to me on Twitter, I'll send you $10, but we're not a scam. There's no link or anything.
[00:51:25] But the multiple MetaMask wallets, that's a good tip.
[00:51:29] Mariangela Martinez: So these stolen NFTs are flagged on OpenSea at "suspicious activity" and sometimes they get removed from marketplaces altogether. So do you agree with this approach as others say it goes against the decentralized philosophy of crypto?
[00:51:48] Tyler Koch: Yeah. I mean, I think it's good for maybe people to know it's stolen. I always try to think of crypto back to more of like a traditional market, like let's say there's a Picasso in a museum and it was stolen, and then someone puts it on eBay the next day. It's probably good to know that that's a stolen thing that you're going to be buying and someone wants to back.
[00:52:23] But also crypto, once it's on the blockchain, like it's finalized, your keys, your crypto, if you give up your keys, it's essentially like handing someone your wallet. So when these people get like their bored apes hacked, I mean, it's not like they meant to do this, but essentially what they did is like gave someone their real life wallet with all of their money in it.
[00:52:47] Yeah. It's I think it's a good idea. I think like blocking trading doesn't make sense, but maybe it's something good to know that it was stolen in the past. I know OpenSea does the suspicious activity link and doesn't allow trading, but then there's another project called LooksRare that has the opposite approach where it's like, someone has the asset they can sell it, if it was stolen or not, people can sell or buy it.
[00:53:15] So that's more of the crypto ethos. But could see both ways.
[00:53:20] Mariangela Martinez: Would you like to say anything else to our listeners now that we're coming to an end?
[00:53:26] Tyler Koch: Yeah. I would just encourage people to please come check out Amun.com, check out our products and give feedback. I don't even want to say, you don't have to buy our products. Right now we're just very much in the learning phase. And even if you think it sucks and it's a terrible idea, like DM me on Twitter @EthTyler and tell me what you think. Or go on our telegram to like, "oh, this is cool, but this is terrible." Like, we are very happy to get any feedback.
[00:53:58] Mariangela Martinez: That's awesome. Tyler, thank you so much for joining us in our podcast. And it was a pleasure having you here with us and thank you for sharing your insight.
[00:54:08] To all of our listeners, to check out Alpaca for more information about stock and crypto trading. And always remember to do research before investing!
[00:54:18] Tyler Koch: Awesome. Thank you guys for having me.
[00:54:20] Mariangela Martinez: Thank you, Tyler.
[00:54:21] Jason Hsu: Thanks Tyler, for doing this.
[00:54:26] Mariangela Martinez: The content and comments of this podcast should not be taken as Alpaca providing investment, legal and/or tax advice. Every situation is different and you are encouraged to seek independent legal, and investment and/or tax advice.
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