Justin’s note: Today, I’m sharing the second part of my interview with Casey Research’s crypto expert, Marco Wutzer. Marco is the editor of our Disruptive Profits newsletter and is a pioneer of the crypto market.
Last Thursday, he told us why he thinks cryptos will rally from here and how to profit. In today’s conversation, he breaks down his proprietary system that helps him pinpoint the world’s best blockchain projects…
Justin: Marco, the last time we spoke, you told me why you think the crypto market is gearing up for another bull market. But you also stressed the importance of investing in quality projects ahead of this coming rally.
So tell me… What sort of projects do you focus on?
Marco: There are several layers to the blockchain ecosystem.
There is an application and asset layer, a protocol layer for connecting blockchains and additional services, the main blockchain layer, a core layer that provides storage and networking services, and a hardware layer for mining rigs, point-of-sale-terminals, and other hardware.
There are many ways to invest in the blockchain ecosystem—but not all of them lead to big returns. The projects with the most potential for disruptive profits can be found at the blockchain and at the protocol layer.
The blockchains themselves are the backbone of the whole blockchain ecosystem. Most of the other layers are built on top of the blockchain layer.
And there is still not enough capacity by a long shot to support billions of users and thousands or even hundreds of thousands of applications. This is simply not possible with the current generation of blockchain technology. That’s why we’re still seeing a lot of new blockchains that are competing with the likes of Bitcoin, Ethereum, and Litecoin.
Sooner or later, this is where we’re going to see a breakthrough. A new project will emerge with the right mix of new technology, the capacity for high-speed transactions, and the right team.
A project with these attributes has the potential to become a serious competitor to something like Ethereum, and really take off.
Projects in this space should be your hunting ground if you’re looking for big gains.
Justin: Have you found any projects that check all of those boxes?
Marco: Yes. We’ve identified three projects that have the potential to challenge Ethereum. But it’s not a winner-take-all scenario. More than one of these blockchain projects has the chance to become really big.
Justin: Got it. I understand that you also see huge opportunity in projects at the protocol layer.
Can you explain what that layer is… and why there’s so much potential there?
Marco: There are protocols that will deliver new services—such as decentralized exchange of different cryptocurrencies, decentralized marketplaces, lending, and a lot of other things that enable a lot of the functionality that is the promise of the blockchain ecosystem.
Justin: Interesting. But as you know, there are thousands of cryptos out there. How exactly do you identify the best projects?
Marco: I have a watchlist of anywhere between 50 and 80 cryptos that I think are interesting projects. And I regularly monitor the progress of those projects.
Of course, there’s always new stuff coming out. Many new projects come out every day, in fact. But many of them are garbage. Lots of them have unqualified teams, bad technology, weak business models, or terrible marketing.
But I’m able to keep tabs on the most interesting ones through my contacts and the filters that I’ve set up. If you have a network like I do, you usually hear about the interesting projects very quickly.
Of course, that’s just step one. I still need to look at every project in detail.
Justin: What do you do once you’ve identified interesting projects? How do you evaluate them once they’ve made it through your initial screen?
Marco: I’ve developed the “T4 Method” to help separate the winners from the losers.
Before I ever make a recommendation, a project needs to score highly on all four Ts: Technology, Team, Tokenomics, and Traction.
The first thing we review is the technology. Does this project really have potential? Is the technological implementation of the idea sound?
Basically, I try to get a sense of what a project is trying to accomplish. I also evaluate whether the technology has merit and will survive long-term.
To give you an example, we have a decentralized crypto exchange in the portfolio. It decentralizes every single aspect of a trade. It not only decentralizes the trade itself, but also the order broadcasting, order matching, and every other element that goes into this process.
This project’s technology is very strong, but there are a lot of “decentralized” exchanges out there. One month ago, Newdex—a supposedly completely decentralized exchange—got hacked and it turned out that most of its technology wasn’t really decentralized.
Justin: After technology, you look at the people behind the project, correct?
When investing in a project, you need to make sure that you’re aligning yourself with people that can implement this technology. You look for teams that understand marketing and business development. In short, I look for teams that have A+ players in all aspects of the business. This is because it’s a business in the end and not just a software project.
Next, we analyze the third T, the “tokenomics.” What is the financial matrix behind the project? How many tokens are out there? What is the purpose of the token? What’s the market capitalization of the project?
What also happens a lot is that you’ll find a project that has good technology, but it wants to raise $100 million. Those are often money grabs.
Even if it’s not a money grab, is the team still hungry and motivated to build a successful project with so much money in the bank? Probably not.
The initial valuation is also very high for a start-up. In order to get a 5x return, the project would have to go to a $500 million valuation. That would put it in the top 20 or so. There’s not a very good chance of that happening.
If you compare that to a high-quality project with a really good team that just raised $10 million, for them to get to a 5x return, they just have to get to a valuation of $50 million. That’s much more doable. If they get to $100 million, it’s a 10x return. The high-quality projects that raise less money have a much better chance for a good return.
Justin: Got it. And how do you get a sense of how much a crypto could return?
You obviously can’t value them like you would a stock. You can’t run a discounted cash flow analysis. And there’s nothing like a price-to-earnings or price-to-sales ratio for cryptos that I’m aware of.
So how do you get a sense of a token’s upside?
Marco: There are fewer financial metrics than you have with stocks or real estate. But here are two very important ones that I consider.
One is the number of outstanding tokens and the inflation going forward. Together, with the price of the token, you have an idea of the overall valuation of the project.
The other important factor is the percentage of tokens that a team makes available to the public when it raises money versus how much the team keeps. Of course, the core team members need to have skin in the game but they shouldn’t award themselves more than 15% of the tokens.
The majority of the tokens need to be distributed to as many people as possible for the project ownership to be decentralized and to grow a solid community around the project.
So let’s say that a project raises $10 million but the team keeps 80% of the tokens for themselves. Then the float is only 20%. That’s not a good thing. You want to see projects that offer at least 50% to 65% of tokens to the public.
These are two key metrics that I use. The rest is more about the technology and the skills of the team.
Justin: Thanks, Marco.
Marco: You’re welcome.
Justin’s note: Marco uses his proprietary “T4” system to uncover the world’s best blockchain projects… ones that have the potential to become 300-baggers. You can learn more about his system—and access the names of the nine projects in his portfolio—with a subscription to Disruptive Profits. These are projects that no one is talking about right now, so you’ll want to get in before they move higher. Click here to sign up today.
Last week, Doug didn’t hold back in our Conversations With Casey on Columbus Day. Below, readers flood the mailbag with mixed responses…
Good morning, I’m a conservative and celebrate Columbus the explorer. Columbus had little to do with how things played out in the Western Hemisphere. Many European governments and individuals seeking fortune, fame, and freedom flooded in afterwards to shape things into what they have become today. In fact, the most significant event that shaped not only the West but the entire world was the American Revolution; a revolt against the strongest empire at the time. Any historian would tell you that if the events of 1492 played out 100 times, there would be 100 very different outcomes.
My bottom line on your “conversation” with Justin is that it was carefully contrived to bring out all the “red” meat of sins that socialists accuse Columbus of bringing to the West. I know of conservatives who spout the narrative that you bring out in the conversation; but I have heard it stated in educational institutions from professors “quoting” conservatives on that narrative to their gullible students.
I, too, want a huge voter registration campaign, so I wish you success in that, but I also will do my part to convince voters that the truth would serve them better than fiction.
Completely agree with Mr. Doug Casey. The pre-Columbian New World was nothing of a paradise, notwithstanding the alike climate. The legacy of that world is mainly pyramids built for the conveyor-type human sacrifices. That world lost nothing good following the discovery by Columbus, and there was nothing in that world worth much lamenting. Indigenous Peoples’ Day may be good only as an “indigenous” literature festival celebrating writings dedicated to the indigenous peoples—”Indians” as Columbus first named them. As Columbus never intended to discover any New World, and this world just happened to be on his way to India and China, where he planned to get to sailing westward for the sake of conveying eastern species (a very lucrative business at that time), as the eastward root was impassable for the Westerners. Therefore, the discovery of America was one of the greatest events and one of the greatest mistakes in human history at the same time. As for the present-day Americans, they should be rather grateful to Columbus for his fateful mistake. Otherwise, where would the USA be nowadays?
As usual, I agree with Doug Casey! It’s refreshing to read common sense rather than the left-wing claptrap that comes out of most of the media, including the BBC! Officially known as the British Broadcasting Corporation it should more accurately be known as the Biased Broadcasting Corporation! Yes, it’s much the same on this side of the pond!
I am an indigenous from North America and totally disagree with your thoughts on Columbus. As Natives we have sophisticated language, ceremony, and artwork. The language and ceremonies tie directly into our natural surroundings.
Whoever is more technologically advanced should also be spiritually advanced. The way that murderous Columbus butchered and massacred native people for his king and queen is inhumane. What does it say about Spain?
I am glad they changed from Columbus Day to Indigenous Peoples’ Day.
Exactly correct. That is part of the plan for any communist takeover, erase the history, erase or lock up the old people who remember and can tell others about history. As we have done in this country over the last 50 years, just don’t teach history. Thank you for understanding and properly explaining the Civil War. I wish more people new the truth.
I enjoyed Doug’s thoughts about Columbus Day. I work for a Native American tribe in Oklahoma. We never got Columbus Day off. I used to joke and call it “European Boat-Trash Day”. We had Columbus Day off for the first time in my 22 years here because we called it “Indigenous Peoples’ Day” instead. Now, I get to joke and call it “Siberian Immigrants Day” or “We-Were-Here-First Day.” Having said all that, Doug is right about civilization: Civilization is way more important than genetics or ethnicity.
Wow, what a reading. Doug never stops surprising me with a very original angle of looking at things which goes against the brainwashing I have suffered in school. Thank you.
This is stupid. We should celebrate Columbus Day because if not for him, America would not have been discovered… if they want to celebrate the native American Indians that were here, fine, but make a day for them.
Mr. Casey, I admire your intellect and integrity, follow your work closely, and I’ve benefited on several levels from your wisdom. I’m probably of a similar political mind as yours, and I’m anything but “PC.” However, I respectfully share with you, as a student of indigenous North American cultures and someone who has spent much time in modern “Indian Country” that your assertion that no philosophical concepts emerged here is very ignorant. I study Blackfeet language because through it, I gain insight into a very old philosophical tradition that I find infinitely more valuable and sophisticated than perhaps any other I have encountered. The Crow people are another example of an extremely advanced culture. They developed a culture of true freedom and liberty that in many ways exceed even our own Founding Fathers’.
Regarding slavery, yes, it’s true that, for example, on the Northern Plains, taking captives was common, but the captives were typically free to integrate into their new tribe or in time, return to the tribe of their blood relatives… not slaves at all and in time enjoying the same rights as anyone else. I’m not aware of any widespread nor even isolated cannibalism being practiced in North America. Mayans, Aztecs, and Incas are often cited as examples of “advanced” civilizations in the Western hemisphere, but from my perspective that is a product of judging a culture based on material artifacts that compare with those of Eurasia. If we judge them in terms of the expression of liberty, equality, and philosophical insight, I find very little remarkable in those three cultures.
I would like to comment on Doug’s interview and to say the same thing is happening up here in Canada.
In the past year, our politically correct leaders deemed it was necessary to change our national anthem because when it was written back in 1880 and the English version was revised in 1904, the composer committed the mortal sin of using “True patriot love in all of thy sons command” so now it has to be the gender neutral “True patriot love in all of us command.”
While Americans debate that statue of what civil war general should be left standing, Canadians have gone one step further and started to remove statues of one of our founding fathers and first Prime Minister, Sir John A. Macdonald because 127 years after his death it seems that Sir John had racist views toward our indigenous people, sorry First Nations people, and thus is not worthy to have a place of honor in our nation. On November 11, Canadians somberly participate in Remembrance Day, a day set aside to remember the cease-fire that ended the First World War and to honor those who paid the supreme sacrifice in wartime or on Canada’s various peacekeeping missions there are those who claim this special day glorifies war and that the cenotaphs erected in Canadian towns and cities that mark these tragic events in our history should be torn down.
Group think and morality changes with each passing generation, but one can only learn from history if we keep it intact and look at it objectively and without bias. I, for one, do not want to live in a time where 2 + 2 = 5 because the politically correct group think demands it to be so.
And as always, if you have any questions or suggestions for the Dispatch, send them to us right here.
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