“I’ve invested in Crypto Capital for six weeks now and I’m up over 400%!
Need I say more?” Brian S.
deploy and support a fully decentralised digital currency. Cryptocurrencies and the
blockchain are revolutionising the world as we know it… and it’s only the beginning.
ABOUT THE AUTHOR
At a glance, Tama Churchouse looks like a typical
financial analyst. He has a degree in economics from a
university in London, spent a decade on the structured
derivatives desks of major investment banks, has helped
start a high-net-worth family office and co-founded
Stansberry Churchouse Research.
But over the past few years, Tama has dedicated his
waking hours to the crypto space, specifically focusing
on what makes for a good crypto investment. He has
combined his background in economics, financial market
research and structured derivatives, with a front row seat
a $500 investment in Civic, and his 3,498 percent return from Crypto Capital – both are
on the inside – as a board member of a company behind
the biggest crypto token distribution to date.
With this access to a network of crypto pioneers, he
has been able to approach investing in cryptos very
differently from other analysts. This network of trusted
experts knows who builds good tech and who doesn’t,
and who can execute and who can’t.
Most importantly, he has discovered the insider’s
secret to making 1,000% crypto gains – the J-Curve.
“I’ve followed Tama’s advice and I’m now diversified with 10 different cryptos.
I’m currently up about 236%, in less than 2 months.” John R.
THE J-CURVE
ABOUT THIS BOOK
THE J-CURVE
Bitcoin has gone from around US$300 in January 2015 to around US$20,000 in Cryptocurrencies and the blockchain, the
December 2017 to US$10,000 (after a correction) in February 2018. That’s a more technology behind them, are changing the world
than 3,000 percent increase from 2015 to today (even with the correction). as we know it – from how we buy things to how
we vote to how businesses operate.
Bitcoin’s success has demonstrated to the world is that it is possible to build,
In short, we are witnessing the birth of a new
An Insider’s Secret to asset class. As with all things new, there’s a lot of
confusion and questions about how things work.
Making 1,000% Crypto Gains Cryptos are frequently referred to as a ‘Wild West’
for investors. But that’s not entirely true… at least
In this ground-breaking book, Tama Churchouse: in those days, there was a sheriff and rudimentary
justice. You’ll find neither of those things in the
• Busts the myths about bitcoin
crypto world today (with a few exceptions).
• Explains how bitcoin and its blockchain works
That’s why everyone needs a guide when they
• Follows the cryptocurrency money trail
start investing in cryptos. And who can think of a
• Introduces the J-Curve and how to make money using it to trade cryptos better guide than Tama Churchouse.
• Explains all you need to know about crypto exchanges and wallets
• Shows you how to buy your first bitcoin and start small.
“I do believe that professional guidance in this
TA M A C H U RC H O U S E
Tama also shares some of his winning trades; like making US$2,135 in two months from
new asset class is a must for all new investors and
traders. And I can say that Crypto Capital is the
examples of how he used the J-Curve to make thousands of percent in cryptos. best guide you will get in this volatile market.
I have made approximately US$100,000 in
INVESTMENT
profit with my Crypto Capital Portfolio.”
Nathan H.
TA M A C H U RC H O U S E
THE J-CURVE:
An Insider’s Secret
to Making 1,000%
Crypto Gains

TAMA CHURCHOUSE
© Stansberry Churchouse Research 2018

The moral rights of the author have been asserted.

All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for
example, a fair dealing for the purposes of study, research, criticism or review), no
part of this book may be reproduced, stored in a retrieval system, communi­cated or
transmitted in any form or by any means without prior written permission. All inquiries
should be made to the publisher.

Design by Production Works

10 9 8 7 6 5 4 3 2 1

Disclaimer: The material in this publication is in the nature of general comment

only, and neither purports nor intends to be advice. Readers should not act on the
basis of any matter in this publication without considering (and if appropriate taking)
professional advice with due regard to their own particular circumstances. The author
and publisher expressly disclaim all and any liability to any person, whether a purchaser
of this publication or not, in respect of anything and the consequences of anything
done or omitted to be done by any such person in reliance, whether whole or partial,
upon the whole or any part of the contents of this publication.
 Contents

Introduction  1
About the Author  3
Chapter 1 Bitcoin History  5
Chapter 2 Crypto Ecosystem  43
Chapter 3 What is the J-Curve?  59
Chapter 4 Examples of J-Curve Trades  65
Chapter 5 What You Need For a Genuine J-Curve
Trade  71
Chapter 6 Recommended Exchanges/Wallets  77
Chapter 7 Buying Your First Bitcoin  85
Appendix A Setting up a Gemini Exchange Account  97
Appendix B Setting up a Bitcoin Wallet  107

iii
 Introduction

Cryptocurrencies and the blockchain, the technology behind

them, are changing the world as we know it – from how we buy
things to how we vote to how businesses operate.
In short, we are witnessing the birth of a new asset class…
But that means there’s a lot of confusion and questions about
how things work.
Cryptos are frequently referred to as a “Wild West” for inves-
tors. But that’s not entirely true… at least in those days, there
was a sheriff and rudimentary justice. You’ll find neither of
those things in the crypto world today (with a few exceptions).
That’s why everyone needs a guide when they start invest-
ing in cryptos. And I can think of no one better than Tama
Churchouse.
Tama’s not your typical investment analyst.
He has a degree in economics from a university in London…
has worked with investment banks around the world on new
forms of financial derivatives structuring… has helped start a
high-net-worth family office… and he co-founded Stansberry
Churchouse Research.
But over the past few years, he’s dived headfirst into cryptocur-
rencies – learning first-hand how they work and what makes for
a good crypto investment.
He’s also managed to gain access to a little-known and extremely
private group of cryptocurrency experts.

1
 THE J-CURVE

It contains very few members… but those who are part of this
group are the most important people in the crypto world…
including the founders of most major cryptocurrencies… the
CEOs of the world’s top cryptocurrency exchanges… partners
at cryptocurrency hedge funds and venture capital funds.
Today, he sits on the board of directors of one of the world’s top
cryptocurrency companies alongside experts who have made
tens of millions of dollars on bitcoin and been involved with it
since the very beginning.
As a result… Tama’s energy has been poured into researching
the best way to identify the most profitable crypto investments,
and has delivered subscribers to his research huge gains.
And in this book, he’s sharing how he does it…
I hope you enjoy this book.
Kim Iskyan

2
 About the Author

At a glance, I’m just a typical investment analyst who’s genuinely

fascinated by the crypto space. I have a degree in economics
from a university in London… worked with investment banks
around the world on new forms of financial derivatives struc-
turing… helped start a high-net-worth family office… and
co-founded Stansberry Churchouse Research.
But over the past few years I’ve spent most of my time learning
first-hand how cryptos work, and what makes for a good crypto
investment. I’ve been extremely fortunate to combine my back-
ground in economics, financial market research and structured
derivatives, with a seat on the inside – as a board member of a
company behind the biggest crypto token distribution to date.
So with a front row seat, and access to a network of crypto pio-
neers who I truly admire and respect, I’ve been able to approach
investing in cryptos very differently from other analysts.
I rely heavily on this network of trusted experts… these are
people who have been active in the space for a long time, and
who know what’s really happening on the inside.
These guys know who builds good tech and who doesn’t, and
who can execute and who can’t.
This network is a hugely powerful tool stacked with people
far smarter than I am when it comes to the nuts and bolts of
computer science, folks who I reach out to when assessing a
potential investment.
I hope you enjoy reading The J-Curve and make a lot of money
from this book.
Tama Churchouse

3
 Chapter 1

BITCOIN HISTORY

By now, you’ve likely heard of bitcoin.

Bitcoin is a cryptographically secure medium of exchanging
value.
At the core of bitcoin technology is a kind of super distributed
ledger called the “Bitcoin blockchain.” The Bitcoin blockchain
is public, accessible by anyone, and completely transparent. It
can’t be censored and transferring bitcoin from peer-to-peer
doesn’t necessitate an intermediary.
Bitcoin represents the original “proof of concept” cryptocur-
rency. It was the first one, released in 2009 by an individual (or
possibly a group) known as Satoshi Nakamoto.
And it’s gone from around US$300 in January 2015 to around
US$20,000 in December 2017 to US$10,000 (after a cor-
rection) in February 2018. That’s a more than 3,000 percent
increase from 2015 to today (even with the correction).
What bitcoin’s success demonstrated to the world is that it
is possible to build, deploy and support a fully decentralised
digital currency, one that doesn’t rely on any central issuing
authority as is the case in the world of national fiat currencies.

5
 THE J-CURVE

More importantly, the technology behind bitcoin’s distributed

ledger (lots of copies of the bitcoin ledger are running 24/7
all over the world) means that there’s no single point of fail-
ure. There’s no “server” that can fail and bring down bitcoin.
People have often asked me, “Well, what happens to bitcoin if
the internet goes down?”.
It always strikes me as strange that people focus on that. I wonder,
how many folks who are deciding whether or not to buy Google
think about the internet “going down” as a key consideration?
Regardless, the entire U.S. could go offline, and first of all, bit-
coin would carry on transacting regardless. There are bitcoin
“nodes” operating all over the world that support the bitcoin
network. It’s completely global. And secondly, the internet
going down wouldn’t change the blockchain – in other words,
the ledger that keeps track of all the transactions and which
bitcoin address has how much bitcoin is fully decentralised…
there are tens of thousands of copies globally, constantly updat-
ing and processing transactions. If the U.S. goes offline, it just
means that U.S. nodes go offline. And when they come back
online, they update accordingly.
So bitcoin can be transferred, used to buy goods and services
and it’s scarce by design. Only 21 million bitcoin will ever be
mined. And over 16 million have already been mined.
As an asset class, I would categorise bitcoin as exhibiting simi-
larities with U.S. dollars, sterling, yen or any other fiat currency,
but its scarcity is comparable to gold.

BUT PEOPLE STILL DON’T GET BITCOIN

Even people who are very financially literate, who have been in
investment and finance for many years, who are up to speed with

6
 Bitcoin History

what’s going on in the world, tend to have a very poor grasp on

what cryptocurrencies are. So although bitcoin is increasingly
cropping up in conversation, very few people actually own any
bitcoin, or really understand it.
There are a few reasons for that. Firstly, the quality of main­
stream media reporting on bitcoin and cryptos is dire and
focused far more on price volatility and the less savoury
elements that have cropped up in the space.
And secondly, buying bitcoin is still relatively cumbersome.
You need to open an account with an exchange, which in turn
needs to do know-your-customer (KYC) checks. Approvals can
take time and plenty of folks simply give up at the first hurdle.
Depending on where you live, funding a bitcoin account can
require a trip to the bank and an expensive bank transfer. And
you still need to familiarise yourself with a new asset class,
which takes some effort.
Plus, the “talking heads” are afraid of bitcoin.
As I said, even people who are very financially literate don’t
understand cryptos.
For example, in just the past few months, these financial lumi-
naries have declared the death of bitcoin:
• Former U.S. Federal Reserve Chair Alan Greenspan said
bitcoin will ultimately “prove worthless.”
• Nobel Prize Winner Joseph Stiglitz said bitcoin “ought to
be outlawed.”
• And billionaire investor Howard Marks said
cryptocurrencies “aren’t real”.
These talking heads all have one thing in common…

7
 THE J-CURVE

THEY’RE VICTIMS OF THE DEFAULT BIAS

Most people stick with what they know. They don’t conduct
experiments in their life… whether it’s something small like
trying a new brand of soda… or something bigger, like invest-
ing in an entirely new asset class.
Think about it… How often do you change the route you take
to work? How often do you try a new dish at a restaurant?
Or, when you buy the latest mobile phone, do you just accept
the factory default settings and not even bother changing the
ringtone?
This is default bias. Most people like to stick with what they
know and shy away from making big changes or taking on new
risks, even if the change would be a good one.
The default bias is the offspring of two other biases: status quo
bias and loss aversion. Keeping things the same is convenient,
and the pain of losing is greater than the joy that comes from
winning.
Put these together, and our brains often tell us it’s just easier to
keep things the same and avoid any potential pain that might
come from changing things. Plus bitcoin is “too complicated”,
right?
For investors, this can stop us from making changes to our port-
folio or strategy because it’s too inconvenient or it makes us feel
uncomfortable. We tend to cling to the way things are, even if
it’s not the best thing for us.

IT HAPPENED WITH THE INTERNET

In the early 1990s, the internet was just starting to go main-
stream. And many otherwise smart folks were convinced it was
just a fad.

8
 Bitcoin History

Here’s a quote from U.S. astronomer Clifford Stroll in 1995:

“Visionaries see a future of telecommuting workers,

interactive libraries and multimedia classrooms. They
speak of electronic town meetings and virtual communities.
Commerce and business will shift from offices and malls
to networks and modems. And the freedom of digital
networks will make government more democratic.
Baloney.”

Even the inventor of Ethernet, Robert Metcalfe, didn’t believe

in the internet.

“I predict the internet will soon go spectacularly supernova

and in 1996 catastrophically collapse.”

And telecommunications expert Waring Partridge had this to

say:

“Most things that succeed don’t require retraining

250 million people.”

These people fell for the default bias. They believed in what
they knew and were anxious about making big changes or taking
on new risks. Plenty of other investors fell for this bias too. And
they missed out on big gains as the Nasdaq – which is home to
many tech stocks – grew 400 percent from 1995 to 2000.
We’re seeing the exact same thing happen with bitcoin and
cryptocurrencies today…
In short, every now and then something truly different and new
comes along. And if you’re willing to go against your default
bias, you could make a fortune.
And part of going against your default bias is learning what
bitcoin is – and what it isn’t…

9
 THE J-CURVE

5 MYTHS ABOUT BITCOIN

As I said, a lot of what you read about bitcoin and cryptocur-
rencies is simply wrong. So I’m debunking bitcoin’s biggest
myths to set the record straight…

1. Bitcoin is not real money

The fundamental characteristics an asset must have to be con-
sidered money are:
• Uniformity: In other words, every “dollar” or bitcoin is
the same as the next one. When you’re talking about using
seashells or cows as currency, uniformity is hard to achieve.
• Divisibility: Dollars and bitcoin need to be divisible,
broken up into small increments to cover a wide range of
value transactions.
• Portability: Your currency must be easy to transfer and
store.
• Durability: Older, agriculturally-based forms of money had
a shelf life. Gold is the ultimate when it comes to durability.
Paper notes deteriorate. In parts of Asia and Africa that use
U.S. dollar notes, people won’t accept old, dirty notes…
they demand fresh clean ones.
• Limited supply: A currency can ultimately be worthless
if there’s no scarcity to it. In our office here in Hong
Kong we have a 500 million dollar note issued by the
Zimbabwean government – it’s a simple reminder of what
ultimately happens when governments try to endlessly print
their way to prosperity.
• Acceptability: To be considered money, the asset has to be
widely accepted. People all over the world will take U.S.
dollars. They won’t however take Turkish lira.

10
 Bitcoin History

Bitcoin holds all of these characteristics with the exception of

acceptability – although that is rapidly changing. Japan passed a
law earlier this year that made bitcoin acceptable as legal tender.
And the digital element of bitcoin? Well,  more than 90 per-
cent of all money that exists today around the world is not even
physical… it’s purely digital, existing only on computer servers.

2. Bitcoin can be hacked

In certain circles, bitcoin and cryptocurrencies in general are
synonymous with hacking – thanks to some high-profile hacks
of cryptocurrency exchanges – like Mt. Gox in 2014 or Bithumb
in 2017.
In an area so nascent, of course there are hackers looking
to exploit individuals’ inexperience, or find technological
loopholes. Hackers have always and will always be a risk to
ANYTHING where value resides on a computer network.
But bitcoin is one of the most secure assets an individual can
own – it’s just that it’s 100 percent up to the individual to secure
it themselves.
Cryptocurrency  exchanges have been hacked. They are
third-party platforms where you have no visibility as to how
customers’ digital assets are being secured. So saying that you
shouldn’t own bitcoin because exchanges have been hacked is
like saying you shouldn’t own dollars because a few banks have
been robbed.
That’s why I’ve said repeatedly that you shouldn’t keep large
amounts of bitcoin on an exchange because when it’s on an
exchange you don’t own it, they do.
And when it comes to hacking, you are far, far more at risk from
other cybersecurity vulnerabilities – just look at U.S. credit

11
 THE J-CURVE

reporting agency Equifax who announced recently that the

Social Security numbers along with other personal information
of millions of Americans may have been compromised.
That’s a catastrophic breach. And this kind of thing happens all
the time. So there’s no use worrying about bitcoin “hacking”
when you can take full personal control and accountability for
securing it yourself (rather than be at the mercy of an incompe-
tent third party).

3. Bitcoin is used by criminals

“Bitcoin’s core use remains what it’s always been: paying
for drugs or extortion fees on the internet.”

That’s a quote from a Fortune magazine article.

The suggestion that bitcoin’s core use is for buying drugs and
extortion is nothing new – and it’s part of the media’s ongoing
narrative. It’s understandable in many respects.
After all, there have been recent ransomware hack/virus attacks
that demand users pay a small ransom in bitcoin to unlock their
computers.
And who can forget the FBI’s 2013 takedown of Silk Road.
Silk Road was an online marketplace used to sell illegal drugs,
personal information for I.D. theft, and stolen credit cards.
These criminals thought that because bitcoin operated inde-
pendently of the U.S. government, their activity couldn’t be
traced.
But they were proved wrong once the government shut Silk
Road down and made an example of this illegal marketplace.
You see, it turns out bitcoin is nowhere near as anonymous and
untraceable as cash.

12
 Bitcoin History

Bitcoin is pseudonymous. That is to say, a bitcoin address can

be tied to a particular user. You may not know who that user is,
but that user has an identity. Think of it like a username on a
website. You may not know who’s behind it, but that username
is tied to a particular person – and their actions are tied to that
username.
The whole point about bitcoin is that it’s actually transparent.
Every transaction is recorded on the blockchain and visible to
everyone.
In short, just because bitcoin has been the method of pay-
ment used by some criminals, it’s definitely not the currency’s
core use. And there are companies out there who analyse the
Bitcoin blockchain on behalf of law enforcement agencies,
tracking down (successfully I might add) criminals. Ironically,
an exchange of thick bundles of dollar notes is far less traceable
and transparent than bitcoin.

4. Bitcoin is not regulated

A lot of people are worried about bitcoin because the gov-
ernment hasn’t come out with an official policy about how it
should be run.
In short, there’s no financial system, like the U.S. Federal
Reserve, managing its existence and value.
But think about it… does a government’s promise that some-
thing is “money” protect its value?
The U.S. dollar can be printed at will… and only has value
because the government says so.
Plus, more regulation on bitcoin is quickly being established.
These moves will only bring additional stability to the bitcoin
market and, with it, some new money.

13
 THE J-CURVE

Now, many people are worried about governments “banning”

bitcoin.
If a government did want to ban it, the question is “how”? That
cat’s already out of the bag. And bitcoin doesn’t answer to any
government.
There is no bitcoin head office, no CEO, no board of directors.
What’s more, there’s no incentive for any major economy to
“ban” bitcoin. (Japan, the third-largest economy in the world,
made it legal tender.) Any government that does ban it is sim-
ply saying “we don’t want innovation, technology jobs, new
companies, or enterprise in general”. It’s almost like saying “we
don’t want the internet”. You don’t? Fine, there are plenty of
other countries that do!
Now don’t get me wrong – there is and will be regulation, and
there may even be a temporary shutdown of the exchanges at
some point, who knows.
But regulation is a different story altogether. For example, don’t
think for a second that Uncle Sam is going to let you make 10x
on a cryptocurrency trade and not pay your “fair share” of tax
to the coffers.

5. Bitcoin is too volatile to invest in

Most people look at bitcoin’s daily price changes and write
bitcoin off simply because it’s more volatile than your typical
blue-chip stock.
But even with this level of volatility, bitcoin delivered better
risk-adjusted returns than stocks, bonds, gold and real estate
over the past five years.
I’m not saying bitcoin won’t be volatile. Like any asset, crypto-
currencies will continue to experience rallies and corrections.

14
 Bitcoin History

Don’t fall into the trap of thinking “this time is different” and
that bitcoin will go up forever. The cryptocurrency could abso-
lutely be in for a short-term price bubble. But over the long
term, the upside is far from over. You just need to proceed
carefully. And “invest” no more than you can absolutely afford
to lose.

DON’T BELIEVE THE MEDIA HYPE

As I said earlier, the media doesn’t really understand bitcoin.
So what you read in the mainstream media on cryptocurrencies
should be taken with a liberal dose of salts.
The truth is, bitcoin is just a cryptographically scarce and
secure medium of exchanging value. It’s not a vehicle for
criminals or not a real currency. And bitcoin, and the tech-
nology behind it – called the blockchain – is quickly changing
the world. And it’s here to stay. Being on the outside (and not
understanding it) will limit your ability to profit.

SO HOW DOES BITCOIN AND ITS BLOCKCHAIN WORK?

Blockchain and bitcoin are difficult concepts to grasp. Few peo-
ple outside of cryptographers and computer programming guys
immediately “get” the underlying technology, especially when
lots of technical jargon is thrown around.
In my experience, folks need some time to digest the broad
concepts and then come back to them. It’s not easy – if it was,
then everyone would already be invested in this space and there
wouldn’t be so many opportunities.
For starters, Bitcoin with a capital “B” refers to the network (or
blockchain), whereas bitcoin with a lowercase “b” refers to the
bitcoin cryptocurrency.

15
 THE J-CURVE

Bitcoin (the network) allows us to transfer the bitcoin currency

peer-to-peer (i.e., person to person) without any intermediary.
Whereas transferring U.S. dollars from me to you means we
either have to do it in person with me handing you cash, or
through the banking system, which involves my bank and your
bank.
Bitcoin is a currency, and it’s liquid (that means it’s easy to
convert into U.S. dollars and other fiat currencies and cryp-
tocurrencies). Over half a billion dollars in bitcoin are traded
every day. You can take out your phone and transfer US$10
million in bitcoin to me. I’ll have it in minutes, and there are no
intermediaries required.
But how does it actually work?
Think of the Bitcoin blockchain as a giant Excel spreadsheet
that shows the complete transaction history and location of
every bitcoin.
Every 10 minutes the spreadsheet gets updated as an additional
“block” of new transactions is added to the spreadsheet.
Everyone can have their own copy of the spreadsheet. It’s com-
pletely transparent.
Let’s say Jim sends 1 bitcoin to Sally. When the transaction is
processed by the blockchain, the spreadsheet is updated. Jim’s
balance is docked a bitcoin, and Sally’s is credited one.
But who updates the spreadsheet? And how do we stop people
from trying to make false updates to the spreadsheet, awarding
themselves more bitcoin, or trying to send the same bitcoin to
two different people at the same time?
That’s the job of the nodes, also known as miners. Nodes are
the computers or large computer systems that support the
Bitcoin network and keep it running smoothly. Nodes are

16
 Bitcoin History

run by individuals or groups of people who contribute money

towards buying powerful computer systems, known as mining
rigs.
There are two types of nodes, full nodes and lightweight
nodes.
Full nodes keep a complete copy of the blockchain (i.e., the giant
Excel spreadsheet). This is a record of every single transaction
that has ever occurred. This is currently around 150 gigabytes
in size. (For reference, the largest USB thumb drives usually
max out at about 128 gigabytes.)
Lightweight nodes, on the other hand, only download a fraction
of the blockchain. Lightweight nodes are used by most folks for
bitcoin transactions. A lightweight node will communicate to a
full node when it wants to transact.
So the full nodes (or miners) run the spreadsheet, but how do
they keep the spreadsheet synchronised between them all? This
is the key, considering there’s no limit to the number of people
who can run their own full node.

17
 THE J-CURVE

HOW DO NODES PROCESS TRANSACTIONS?

Let’s go back to Jim and Sally. Jim wants to send 1 bitcoin to
Sally.
Sally creates a bitcoin wallet. Anyone can create a bitcoin wallet
in a couple of minutes. When you create your wallet, there are
two pieces of information created for you:
1. Your public key: Also known as a public address, or your
bitcoin address. It’s a string of numbers and letters. Think
of it like an account user name.
2. Your private key: This is your password, and you need to
keep it safe. If you lose it, it means you lose access to your
bitcoin. (There’s no centralised entity that can recover your
password for you – it’s not like if you forget your Facebook
password and you have email instructions sent to you to
reset it.)
Sally tells Jim her public key. Jim opens his bitcoin wallet, puts
in the instruction to send 1 bitcoin to Sally’s public address,
enters in his private key (password) to authorise the transaction
and hits send.

18
 Bitcoin History

After a few minutes, Sally checks her wallet again, and sees she
now has a bitcoin in her wallet. But what’s happening behind
the scenes?
First, the network (in this case a lightweight node) makes a
quick check of the proposed transaction. It checks to see that
Jim has enough bitcoin in his account. And it checks if the
address Sally provided is a valid bitcoin address.
After the transaction passes those two tests, the transaction gets
bundled together by miners with other pending transactions
into a “block”.
The goal of the miners is to verify the block, and add it to the
blockchain (i.e., update the spreadsheet).

How does a miner get to add a block to the blockchain? This is

where brute force mining comes into play.

HASHES, AND HOW MINING WORKS

To understand this, we need to touch upon hashes.
A hash value is a series of numbers and letters strung together
that looks something like this: 1gwv7fpx97hmavc6inruz36j
5h2kfi803jnhg.
A hash value is generated by pushing data through a mathemat-
ical formula called a hash function.

19
 THE J-CURVE

Another way to think of this is like the ingredients for a

smoothie and a blender.
You take your ingredients (your data), put it through a blender
(the hash function) and you get your smoothie (the hash value).
Hashing is a one-way process. When you give me a hash value,
I can’t turn it back into its original input data, in the same way I
can’t turn my smoothie back into its original ingredients.

When miners are given a block of transactions to try and add to

the blockchain, they are using a hash function to try and solve a
cryptographic puzzle.
The miners take the new block with all the transactions in it,
combine it with a randomly generated number string (called a
nonce), put it through a hash function and then get a particular
hash value.
What a miner is trying to do is find a hash value that starts with
a specific number of 0s. They will keep trying different nonces
until they get the necessary hash value.
This trial and error computation is shown in Step 1 and Step 2
in the diagram opposite.

20
 Bitcoin History

All the miners are in a race to find the correct hash value. This is
because the miner who finds it (Step 3) will broadcast the correct
solution to the network (Step 4), who will verify it is correct.

The new block then gets added to the blockchain (Step 5), and
the winning miner gets awarded 12 bitcoin by the blockchain
for his success.

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 THE J-CURVE

Sally’s bitcoin transaction is now recorded in the blockchain.

Sally’s bitcoin wallet is now credited a bitcoin, and Jim’s is deb-
ited one.
The mining process then starts over again, with a whole new
bunch of transactions bundled into a new block, and the miners
all compete again to find the correct hash value.
The Mining Process (Summary)

22
 Bitcoin History

KEEPING IT DIFFICULT FOR MINERS

As the example shows, if a miner can try different nonces
faster, then he stands a better chance of winning the next block.
Therefore, miners constantly add bigger and better computers
to crunch numbers faster than the next guy. Additionally, new
miners can come online and start to compete for the bitcoin
block prize.
But doesn’t that mean that blocks will get mined faster and
faster, causing bitcoin rewards to be awarded faster, thereby
flooding the system with lots of bitcoin? The Bitcoin algorithm
takes care of that.
Every two weeks, the algorithm increases the required number
of 0s a hash value must begin with.
This is to ensure that the total network mining capacity (known
as hashing power) can only generate one block roughly every 10
minutes. At the moment, given the increase in transaction vol-
umes on the Bitcoin network, transactions are queued and can
take anywhere from one to three hours to be confirmed. New
measures to scale the network are being introduced, although
it’s not necessary to go into the finer details now.

BITCOIN IS THE “PROOF OF CONCEPT”

In the media, bitcoin tends to hog the headlines when it comes
to cryptocurrencies. But remember Bitcoin itself is just the
proof of concept for blockchain. Bitcoin’s success has shown
the world it is possible for independent and fragmented entities
(miners) to enable strangers to exchange value with no need for
an intermediary. And it can be done in a completely transpar-
ent, verifiable and open way.

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 THE J-CURVE

As email is one use case for the internet, so too is Bitcoin a

single use case for blockchain.
And right now, there are two other critical innovations that are
built on top of blockchain…

1. Smart contracts
The term “smart contract” was originally coined back in 1994
by a legal scholar and cryptographer by the name of Nick
Szabo. He realised that a decentralised ledger (like blockchain)
could be used for digital or self-executing contracts. Instead
of Bitcoin blocks containing transactions, these blocks could
contain computer code that executed under certain conditions.
Here’s an example: Let’s say Jim is buying an iPhone from Sally,
which she advertised online for 1 bitcoin. Jim doesn’t know
Sally. So he only wants to pay for it when he takes delivery
because he doesn’t necessarily trust her. Sally, on the other
hand, doesn’t want to wait until Jim has the iPhone, in case he
doesn’t pay.
That’s where a simple smart contract comes in.
A simple smart contract allows for Jim to pay the bitcoin to
Sally into an escrow-style account built on a smart contract
blockchain. Sally can see the bitcoin has been paid so Jim is a
real customer. The smart contract states that when delivery is
complete, the payment will be released to her. And Jim knows
that if the UPS parcel never shows up, he can get his bitcoin
released back to him.
How is this different from traditional escrow?
Firstly, there’s no centralised middle-man (i.e., the escrow com-
pany). Secondly, fees are either non-existent or minimal (with
real estate transactions, escrow services can cost US$1,000 or

24
 Bitcoin History

more). Thirdly, current escrow systems work well for larger

transaction sizes, but not smaller ones. A smart contract escrow
is scalable to support both large and small transactions.
This kind of escrow is an extremely simple use case, so let’s
expand it further to a business.

Example: Music royalties

A music industry artist (or their record label) is entitled to
receive royalties every time their content is used for commer-
cial purposes, i.e., sold through Apple’s iTunes or streamed on
music-on-demand service Spotify.
When you pay to download music from iTunes, Apple takes a
30 percent cut before paying the remainder to the record label
that pays their artist accordingly. But the Berklee College of
Music estimates that anywhere from 20 to 50 percent of royal-
ties never make it to the musicians themselves.
Now imagine if you will, a blockchain-based version of iTunes
where artists upload and sell their own copyright-protected
music.
Your smart contract can define any kind of revenue split you
want. If there’s no record label and the band is independent,
then the smart contract can apportion an equal third share
between the singer, drummer and guitar player.
When a customer buys an album, the money is automatically
and immediately sent into the three separate bitcoin wallets
specified in the smart contract.

25
 THE J-CURVE

If there’s a record label, the smart contract can define that

30 percent goes to the label and the rest goes to the singer,
drummer and guitar player.

2. Decentralised Autonomous Organisations

What is a Decentralised Autonomous Organisation, also known
as a DAO?
It’s an entity that uses the power of the blockchain, coupled
with smart contracts, to operate a completely transparent
business enterprise that typically aligns its stakeholders with its
users/customers.
So how does a DAO come into existence? Let’s look at a lottery
example:

26
 Bitcoin History

One entrepreneur thinks there’s a market for a global block-

chain-based bitcoin lottery so he decides to create a DAO
called BlockLottery as a fair and efficient means of letting
people all over the world take part in a weekly lottery draw.
His customers will enjoy complete transparency. They can par-
ticipate anonymously online. If so inclined, they might “forget”
to mention any big wins to their tax authorities (of course not
recommended). And there are no oversized novelty cheques
involved.
In order for this BlockLottery DAO to be successful it needs to
accomplish three things:
1. It must be completely transparent and crypto­
graphically secure: Anyone who participates in the lottery
needs to be able to see that the number drawing and the
money collection/payout process is coded robustly. If that
can’t be verified then nobody will trust the lottery.
2. It needs to be decentralised: Would you participate in
a global online lottery if it was being run by a company
that has the power to simply shut down its servers and
its websites and disappear with the ticket proceeds? No.
Decentralisation means there’s no single point of failure.
Bitcoin has nodes (miners) all over the world, so if one
or a few go down, the network carries on regardless.
The BlockLottery blockchain needs to be similarly
decentralised.
3. It needs distribution, initial capital and vested
interests: It will require some initial capital to get off
the ground, build the infrastructure, build awareness and
advertise. Additionally, you want to create alignment of
interests. You want the miners who support the network,

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 THE J-CURVE

as well as the customers and the stakeholders (explained

shortly) all to be unified.
BlockLottery builds its blockchain platform and creates a cus-
tom cryptocurrency called LotteryCoin. (Please note the terms
cryptocurrency, coin, or token are used interchangeably.)
Think of these cryptocurrencies as being similar to shares. (We
will set aside regulatory concerns for the time being.) Let’s say
that as an owner of either of these coins, you are entitled to a
share of the lottery ticket revenue.
In order to distribute LotteryCoins, the entrepreneur holds
an Initial Coin Offering (ICO). He outlines his business case
along with technical details in a document called a whitepaper,
which he publishes online.
The entrepreneur plans to auction off 1 million LotteryCoins
to the general public.
His ICO ends up raising US$10 million in bitcoin (ICOs
usually raise funds using bitcoin). Investors give bitcoin and get
newly minted LotteryCoin in return. These LotteryCoin are
like shares, they provide economic value.
The US$10 million goes towards building the blockchain, mar-
keting and advertising, and building a critical mass of users.
But who runs the blockchain?
There need to be embedded economic incentives in any sus-
tainable DAO.
In the case of Bitcoin, miners (or nodes) support the Bitcoin
network by performing cryptographic proofs and keeping cop-
ies of the blockchain in return for a chance of winning some
bitcoin.

28
 Bitcoin History

In our BlockLottery example, the entrepreneur would need

people to run nodes (i.e., be miners) for his blockchain networks.
He needs enough of them to ensure that the network is
decentralised and that there is no single point of failure.
In order to incentivise them to commit computational resources
for doing this, he needs to give them some economic return.
The blockchain can code in a certain percentage of profits or
revenue to be distributed amongst the nodes in return for run-
ning the network.
Let’s say that 5 percent of all ticket sales go into a pot that is
distributed amongst the miners along with the LotteryCoin
holders.
Now once the blockchain is launched, nobody can unilaterally
alter it. Nobody can “rig” the lottery, for example.
But where DAOs are truly beginning to shine, is where they
can take the vested interests of token owners, miners and cus-
tomers and use them to evolve.
Let me explain…
Let’s say the BlockLottery blockchain has been launched and
is up and running. Every week, US$10 million worth of global
BlockLottery tickets are sold.
Every weekend, the winning results are drawn, and prizes are
automatically credited to the winning ticket holders. The min-
ers and token holders get their cut as well.
But the blockchain also reserves 1 percent of revenues for
“Special Projects”.
Let’s say I’m a holder of BlockLottery coins and I want to help
increase their value. I’ve got an idea to include a monthly mega
PowerBall draw in addition to the weekly regular lottery. So I

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 THE J-CURVE

put together a proposal, get a coder to put together the neces-

sary programming and then I submit it to the community for
Special Project approval.
I tell the community that for US$10,000 I can put this all
together and help implement it in the BlockLottery blockchain.
The token holders vote on the proposal, and if I’m successful
a smart contract is created. The smart contract lays out what I
have to provide (i.e., the monthly mega PowerBall draw code
along with technical specifications), and the terms associated
with it (i.e., deadline and cost).
When I complete my task and it gets approved by the commu-
nity, my fee is paid to me and the new lottery product is released,
thereby increasing the value of the BlockLottery tokens.
If this sounds far-fetched then rest assured, DAOs are already
here, and they are already governing and improving themselves
by using these kinds of community contracts.
And why not? When you step back and think about it, the
vested interests are all aligned:
• The contractor: I want to increase the value of the
network and I have an idea how to do it, with a newly
added PowerBall monthly draw. I want to implement it and
get paid for doing so. I want to build a solid reputation so I
make sure I deliver what I say I will, which means next time
I might be able to put forward an even more lucrative idea.
My payment is also a smart contract, which means if I don’t
do what I say I will, I don’t get paid.
• The community: The community wants contractors
to put forward good ideas to help build the value of
tokens and increase ticket revenue. Ideas can be anything
from technical to marketing. The community wants to

30
 Bitcoin History

encourage stakeholders to keep coming forward with good

ideas, by rewarding people for executing well, and ditching
folks who don’t deliver.
Although DAOs are built on code, they still require people.
The robotics revolution replaced a hundred assembly line
workers with a few machines, but we still need someone to
keep an eye on the machines. In this case, we have a vested
community keeping an eye on our lottery blockchain.
• The customer: He’s already getting the best payout ratio
of any large lottery in the world, and now he’s getting more
games added. If he owns tokens as well, then he’s also far
more likely to recommend BlockLottery to his friends.
When you add all this up, how can a traditional lottery possibly
compete with this business model? It can’t.
In short, cryptocurrencies and the blockchain are revolutionis-
ing the world as we know it… just look at the effect it’s had on
Asia…

THIS IS WHY THE REAL CRYPTOCURRENCY MONEY

IS IN ASIA
One thing everyone should know about the cryptocurrency
boom is that Asia is truly the epicentre of it.

HERE’S SOME PROOF…

The chart overleaf ranks the global cryptocurrency exchanges’
total U.S. dollar-equivalent trading volume across all crypto­-
currencies.

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 THE J-CURVE

As you can see, four of the top six are based in Asia. In fact,
around 50 percent more volume has been done through Asia
than the U.S. over a recent 24-hour period.
Now, I’m not saying that Asia is churning out more block-
chain-related startups than the rest of the world, because it’s
not. But it’s absolutely clear from the above chart that Asian
money is a massive force in cryptocurrency prices.

WHY?
Around the corner from our office here in Hong Kong is a
street market, with fruit and vegetable stalls lining narrow
alleyways. There’s one stall owner who, when she’s not selling
you vegetables from the side of the road, is visibly day trading
stocks on her smartphone.
Do I think she has any particular insight into the markets? I
hesitate to judge, but it would appear unlikely. At the risk of

32
 Bitcoin History

generalisation, folks in Asia, especially the Chinese, love to roll

the dice. Gambling is a regional pastime.
Take a look at the gambling hub of Macau. In 2007, gross gam-
ing revenue was US$10.5 billion. It then rose four-fold to over
US$45 billion in 2013 before, after a prolonged anti-corruption
drive by Chinese authorities, settling to around US$28 billion
in 2016. By comparison, Las Vegas brought in US$6.3 billion
in 2016.
You’ll also notice two South Korean exchanges on the chart
above (the first and the tenth largest). South Korea is another
wealthy country partial to a bit of speculation. And whilst there
are casinos in Korea, most are off-limits to locals. I can’t think
of a better way to speculate, if you are that way inclined, than
cryptocurrencies.
In Korea, demand for bitcoin was so high in May 2017 that the
Korean won (local currency) price reached US$4,500 versus
the US$2,700 price traded elsewhere as Koreans rushed to buy
bitcoin on local exchanges.
That gives you an idea of the kind of speculative fervour we can
see in this part of the world.
People in Korea were so eager to get their hands on bitcoin
that they were willing to pay nearly double what people were
paying elsewhere.
The second reason is that Asian governments have been
much more proactively constructive in their attitudes towards
cryptocurrencies.
For example, Japan’s government put laws into effect on
April 1, 2017 recognising bitcoin as a legal method of payment,
bringing exchanges under anti-money laundering rules, along
with capital requirements and operational security regulations.

33
 THE J-CURVE

And in July 2017, an Indian governmental committee assem-

bled by the Ministry of Finance submitted its findings – the
general view from the cryptocurrency industry participants is
that legalisation (and regulation) are likely.
China’s central bank, the People’s Bank of China (PBOC) seems
set on regulating cryptocurrency exchanges. It has outlined a
list of rules that exchanges must follow, like restricting leverage
or margin trading, violating anti-money laundering laws or tax
evasion.
Every day that passes where we don’t see an outright ban on
cryptocurrencies by Chinese authorities is a step closer to regu-
lation, and mainstream acceptance.

IN ASIA, CASH CAN BE FRAGILE

Another reason is that in Asia, we are continually reminded that
local currency is hardly an enduring asset.
Let’s say you lived in India, and on November 1, 2016, you
decided to put your life savings in carefully bundled 1,000 and
500-rupee banknotes (notes bearing the head of Mahatma
Gandhi no less) under a mattress and head off into the
mountains to meditate with monks for a couple of months,
unconnected to the outside world.
Unfortunately, you would have returned home on New Year’s
Day to find that your life savings were now completely worth-
less. (Hopefully, after two months of meditation you would
possess enough inner peace to deal with your new-found
poverty.)
This is because on November 8, 2016 Indian Prime Minister
Narendra Modi made a surprise televised announcement that
all 1,000 and 500-rupee banknotes would be invalid as of mid-

34
 Bitcoin History

night, and only changeable to new notes until midnight on the

31st of December.
So when you take the fragility of Asian fiat currencies into
account, alongside a population that is increasingly inter-
net-connected, then cryptocurrencies which can be instantly
bought, sold and speculated on, appear pretty attractive.
If we see the Chinese and Indian governments in particular,
along with South Korea, adopt the kind of permissive legisla-
tion that Japan has, then we could see a whole lot more money
flow into the cryptocurrency space.
But what about the U.S? How are cryptos viewed be the gov-
ernments there?

WHAT THE SEC SAYS ABOUT CRYPTOS…

When it comes to regulation, what exactly is a cryptocurrency?
The U.S. Securities and Exchange Commission (SEC) has
weighed in on whether it views cryptos as currencies… soft-
ware… or more like equities…
How regulators like the SEC define and treat cryptocurrencies
is important because it affects both the value of cryptocurren-
cies, and how likely it is that blockchain technology will thrive
in a particular jurisdiction.
For example, if a country’s regulatory body decides that cryp-
tocurrencies should be banned, then this will drag down prices
(depending on the size of the country) and blockchain tech-
nology companies will avoid setting up shop or investing there
– they won’t feel welcome.

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 THE J-CURVE

Investigating the DAO

In July 2017, the SEC issued the results of an investigative
report into the details surrounding a cryptocurrency initial coin
offering (ICO) called the “DAO” in the first half of 2016.
An ICO is when a new cryptocurrency token is offered for sale
to the public, similar to an initial public offering (IPO) in the
stock market.
The DAO intended to be a fully decentralised cryptocurrency
venture capital fund. It would raise money (in the form of a
cryptocurrency called ether), issuing DAO tokens in return. It
would then allocate those raised ether funds to various business
ventures by way of voting amongst the DAO token holders.
The DAO raised US$150 million worth of ether from some
11,000 investors. But then disaster struck. Despite assertions
that the DAO’s code had been analysed by “one of the world’s
leading security audit companies” and that “no stone was left
unturned during those five whole days of security analysis”,
DAO was hacked. US$50 million of ether was stolen.
The SEC’s investigative report wasn’t about trying to identify
the culprit behind the attack. Instead, it was focused on whether
or not DAO tokens constituted a security (that is, a stock) and
should therefore be regulated under existing securities laws.

Are cryptocurrencies securities?

The straightforward answer is maybe. The fact is, every crypto-
currency token has its own attributes.
As the SEC report put it:

“U.S. federal securities law may apply to various activities,

including distributed ledger technology, depending on the
particular facts and circumstances, without regard to the

36
 Bitcoin History

form of the organization or technology used to effectuate a

particular [cryptocurrency] offer or sale.”

In other words, it just depends. But on what?

To answer that, we turn to the “Howey Test”, which was cre-
ated by the Supreme Court as a means of determining whether
certain transactions qualify as “investment contracts”.
[The test refers to a precedent from a case the SEC levied
against Florida companies W. J. Howey Co. and Howey-in-
the-Hills Service, Inc. that sought to determine whether or
not a particular land-related deal constituted an “investment
contract” under the Securities Act of 1933.]
If certain transactions meet the criteria, then they are deemed
“securities” and subject to a raft of regulatory requirements.
Without going through all the checks, I’ll just include some of
the pertinent ones that the SEC included in its report.
1. DAO investors invested money… “Money” doesn’t
necessarily mean cash. Whilst investors used ether to buy
DAO tokens, the ether itself constitutes an “exchange of
value”.
2. …with a reasonable expectation of profit… The
DAO was a for-profit entity that sought to fund projects,
targeting a return on its investment. These positive returns
constitute “profit” in that it would have increased the value
of the DAO tokens.
3. …derived from the managerial efforts of others. Given
the marketing and active engagement with the community
from the DAO founders, investors in the DAO had a
reasonable expectation that these individuals would provide
management and oversight of the entity.

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 THE J-CURVE

So, investing money (cryptocurrencies included) in a token with

an expectation of profit (a dividend or simple value increase)
derived from the managerial efforts of other people points to
a cryptocurrency being a security, and that it’s required to be
regulated as such.

In early 2018, the SEC weighed in on cryptos again…

In January 2018, Chairman of the SEC, Jay Clayton, delivered
some very blunt statements regarding the crypto industry.
Interestingly, he pointedly called out listed public companies
that have been trying to cash in on the crypto craze to spike
their own stock prices, with acts as simple as adding the word
“blockchain” to their company name.
As Clayton said:

“I doubt anyone in this audience thinks it would be

acceptable for a public company with no meaningful track
record in pursuing the commercialization of distributed
ledger or blockchain technology to (1) start to dabble in
blockchain activities, (2) change its name to something like
“Blockchain-R-Us,” and (3) immediately offer securities,
without providing adequate disclosure to Main Street
investors about those changes and the risks involved.
The SEC is looking closely at the disclosures of public
companies that shift their business models to capitalize on
the perceived promise of distributed ledger technology.”

I suspect that this should rein in companies like U.S.-listed

Long Island Ice Tea Corp, a company that makes non-alco-
holic ice-teas and lemonade, that saw its shares soar five-fold in
December after changing its name to “Long Blockchain.”

38
 Bitcoin History

(Incidentally, at the time of the name change the company was

simply in the “preliminary stages of evaluating specific oppor-
tunities” in the blockchain space with no agreements with any
blockchain entities at all.)
It’s hard not to be deeply cynical and sceptical about this kind
of behaviour.
Clayton also had criticisms for lawyers involved in the block-
chain space for advice given to their ICO clients – specifically,
instead of telling their clients that their ICO is likely a security
they say “it depends,” and as a result people on potentially
uncertain and risky legal grounds proceed with an ICO.
And in February 2018, Clayton and the Chairman of the
Commodities and Futures Trading Commission (CFTC),
Christopher Giancarlo, addressed the U.S. Senate Committee
on Banking, Housing and Urban Affairs regarding the over-
sight roles for their regulatory bodies over the crypto markets.
Their testimony was surprisingly benign.
The general message to the committee was that they have
things under control and that they will work to preserve inno-
vation while continuing to use the Howey test as a measure of
whether a crypto asset falls under their purview (plenty will).
And Giancarlo said we owe it to this new generation to respect
their enthusiasm for virtual currencies with a thoughtful and
balanced response, not a dismissive one.
In short, regulation is going to happen, especially with the sums
of money that are involved. The SEC is tasked with protecting
mom and pop investors. And when you’ve got huge amounts of
capital and a lot of these crypto projects sailing very, very close
to the wind, shall we put it, this is only to be expected.

39
 THE J-CURVE

So you shouldn’t invest in cryptocurrencies on the assumption

that they aren’t (or won’t ever) be deemed securities. And when
you evaluate different blockchain companies that issue their
own cryptocurrencies, check the characteristics against those
“Howey Test” criteria.
Now, so far in this chapter, I’ve shown you what the blockchain
is… how cryptos are changing the world… and how govern-
ments around the world are viewing cryptos. But I haven’t
touched upon one of the most common questions I get asked
about bitcoin – how it compares to gold…

BITCOIN WON’T REPLACE GOLD… HERE’S WHY YOU

SHOULD STILL OWN IT
Bitcoin is frequently compared to gold. But it’s not an either/or
proposition… and I’ll tell you why.
Indeed, gold and bitcoin are the only two widely distributed,
decentralised methods of exchanging value as currency. There
is no central authority issuance like there is with U.S. dollars or
any other fiat currency.
Likewise, neither bitcoin nor gold can just be “printed” at the
push of a button by an anxious central banker. You have to
either earn your gold by mining it – which is also what you do
to get bitcoin, but with computers instead of picks and shov-
els – or you can pay cash for it. But there’s one big difference
between the two…

GOLD IS THE VERY OPPOSITE OF NEW TECHNOLOGY

Gold is a physical, tangible and real asset.

40
 Bitcoin History

You can pick it up and feel its satisfying weight in your hand.
It can’t be altered. Gold is gold. Once I own it, that’s it. I don’t
need to rely on a functioning internet. I don’t need a computer.
It’s pure, tangible value.
And gold has unquestionably been money for thousands of
years. A gold coin can still sit in my pocket, even while I might
be fending off mobs, zombies, nuclear winter or hordes of
cockroaches.
On the other hand, bitcoin is nothing more than a code that
exists somewhere on the internet. You can’t pick it up and put
it in your pocket. If you lose that code… you lose your bitcoin.
Bitcoin isn’t easy to explain to the average guy on the street.
The fundamentals of blockchain, and the distributed ledger
systems upon which bitcoin is built, are not straightforward.
It usually takes time and effort for people to really understand
just how much of an innovation bitcoin really is when it is a
trustless mechanism for exchanging value. Most people simply
can’t comprehend bitcoin and the blockchain.
As a guy (who runs a multi-billion-dollar family office) on an
email thread I was on succinctly put it:

“I prefer a currency that has survived 5,000+ years of wars,

empires, the rise and fall of countries, cold spells, hot spells,
and has been universally accepted in every country of the
world.”

I can’t argue with that.

No matter how big bitcoin gets, it will never be gold.
If you were to ask me which I think is more likely to be around
a hundred years from now, it’s gold… every time. Nothing
has usurped it for millennia as a globally accepted medium of

41
 THE J-CURVE

exchange or store of value, and I don’t think bitcoin will do so

either.

BUT… YOU SHOULD STILL OWN BITCOIN

Bitcoin is the ultimate in freedom of asset ownership. The gov-
ernment can’t confiscate it from you, as it did from owners of
gold in 1933 in the U.S. under Executive Order 6102.
You can cross national borders with bitcoin in your possession
on a USB-stick device, a piece of paper… or if you can memo-
rise your private key, with no physical object in your possession
of any kind.
Whether your bitcoin is worth US$100 or US$100 million,
it makes no difference to how you move and store it (which
is clearly not the same with gold). You don’t need a trusted
middleman to send it, and you can move it around the world,
securely, in a matter of minutes.
And if you’re looking for gains… bitcoin is a lot more likely
than gold to be up 1,000 percent three years from now. Even
though its price has soared over the past few years, it’s still
nowhere near mainstream yet.
So gold and bitcoin both deserve a place in your portfolio.
Gold has stood the test of time and is a medium of storing value.
Bitcoin’s time, on the other hand, is just beginning. Blockchain
is the future, and when you have an opportunity to buy the
future and tuck it away, you should take it.

42
 Chapter 2

CRYPTO ECOSYSTEM

At the time of writing, the total value of all cryptocurren-

cies in circulation is around US$441 billion, according to
Coinmarketcap.com. But we’re just getting started.
Bitcoin is the largest and most widely known cryptocurrency,
accounting for around 50 percent of the total crypto market
value. But bitcoin is just one of some 1,000-plus cryptos
currently trading in the market. And more are being added
every day.

CRYPTO ASSETS
The cryptocurrencies out there all offer the holder very dif-
ferent characteristics, from digital currencies to digital
businesses to digital platforms.
You see, the term “cryptocurrency” gets thrown around, sup-
posedly to describe all the various digital assets out there. But it
is wildly misleading.
The majority of these “cryptocurrencies” aren’t currencies
at all in the way we associate the word in traditional finance.

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 THE J-CURVE

The yen, dollar, pound, euro… these are currencies. They are
simple mediums of exchange. Bitcoin is a digital currency, and
there are a handful of other competing digital currencies.
But the technology behind bitcoin has led to businesses that are
built on blockchain technology being distributed to investors as
a cryptocurrency. These cryptocurrencies give investors expo-
sure to that particular business.
These kinds of cryptocurrencies are a lot more like securities.
They’re like digital equity instruments.
I’ll make up an example here. Let’s call it “Bettingcoin”. Let’s
say the team behind Bettingcoin decided to build a global sports
betting platform on blockchain. They decide to create a million
Bettingcoins, and sell them to the public in return for some
bitcoin. They do this in an ICO. And these Bettingcoins give
the holders an economic interest in the Bettingcoin business.
For example, the Bettingcoin platform takes a small commis-
sion on all the sports bets, and then every month distributes
that out like a dividend to their Bettingcoin token holders.
As you can see in this simple example, a Bettingcoin isn’t really
a digital “currency”, it’s really a stake in an underlying business.
There are hundreds of these kinds of “tokens” in existence,
covering all sorts of different business ideas and models. We’ll
call these digital businesses.
The final category of cryptocurrencies is one of the most excit-
ing, the platform plays.
You see, if you have an idea for a blockchain-based business
that you want to issue tokens for, you have two choices. You can
either build your own blockchain from the ground up, or you
can use a platform. Let’s put it another way.

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 Crypto Ecosystem

Let’s say you wanted to build a software program (it could be

anything).
Now, would you want to focus your energy on building an
entirely new computer operating system first (i.e. your own
version of Microsoft Windows or Apple’s OS platform), and
then build your iTunes software on top?
Or would you just want to use an existing operating system, and
then build your software application on top of that?
Of course, you’d want to build your application on top of an
existing platform, right?
Well, it’s the same for blockchain businesses. Building your
own blockchain platform from scratch just to build an appli-
cation on top of it is a hugely inefficient process. So if you can
use an existing platform that’s already out there to build on, a
blockchain version of Microsoft Windows, for example, then of
course it makes sense to use that.
We are calling this final category of cryptocurrencies digital
platforms.
Please understand that not every cryptocurrency token out
there will fit neatly into one of these three categories. Some of
them will potentially overlap. But these categories will help you
understand the ecosystem a little better.
Now, before we move on, there’s one important thing to under-
stand about the crypto space…

NOT EVERY CRYPTO IS LEGITIMATE

As I said, bitcoin is the original “proof of concept” cryptocurrency.
What bitcoin’s success demonstrated was that it is possible to
build, deploy and support a fully decentralised and secure digital

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 THE J-CURVE

asset that doesn’t rely on any centralised issuing authority.

Bitcoin showed that for the first time, a scarce digital asset (one
that couldn’t be copied) could be stored and transferred over
the internet.
If the internet of the 1990s was about the transfer of informa-
tion, blockchain and cryptos are about the secure transfer of
value. The implications are mind-boggling, and it’s only once
you start to immerse yourself in this brave new world that the
lightbulbs start to light up, one by one.
The birth of bitcoin was a truly ground-breaking and landmark
event, a combination of computer science, cryptography and
economics, that has paved the way for hundreds of other cryp-
tos to flourish.
But as with all early-stage industries, most of these early cryp-
tos will fade away into obscurity.
And cryptocurrencies are very different to equity markets…
Equity markets are regulated. Not only is the buying and sell-
ing of securities highly controlled, but companies themselves
are required by law to share information with investors and
potential investors.
Auditors examine the books. Stock market regulators require
strict criteria be adhered to in order to access public markets…
like annual reports, quarterly earnings reports and other
updates.
Companies have shareholder meetings, boards, meeting min-
utes and a relatively high degree of transparency.
There are tens of thousands of high-paid equity analysts and
institutional investors covering stocks and quizzing company
management. The media constantly probes and asks questions.

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 Crypto Ecosystem

PRACTICALLY NONE OF THIS EXISTS IN THE

CRYPTOCURRENCY SPACE
Not only is the general mainstream media coverage of cryptos
very poor (I’ve seen articles from The Wall Street Journal, for
example, with basic factual inaccuracies), but the crypto media
space is also generally not great.
People who write about cryptos often have their own agendas.
They may own tokens in a competitor they are writing an arti-
cle about, and hence be extremely negative. Or, more likely,
vice versa.
There are a huge number of trolls, spammers, pumpers and
dumpers, liars and cheats. That’s why it’s so important to have a
solid strategy to make money in this space.

A FIRE IS RAGING RIGHT NOW

Recently, the entire crypto market has seen a significant correc-
tion – a forest fire if you will.
But this isn’t a bad thing…
Forest fires, whilst potentially lethal and devastating to people
and property in their path, are a crucial part of the natural cycle
of forest ecosystems.
Fires remove dead vegetation and alien plants that compete
with native species, stimulate new growth, trigger certain
plants to release seeds, and actually improve wildlife habitats.
They also remove diseased, decaying trees, making room for
new younger ones.

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 THE J-CURVE

THE SPARK
The spark was a long-overdue regulatory hammer blow start-
ing to reverberate, from both Korea and China.
China is intensifying its crackdown on crypto trading, specif-
ically on exchange-like service providers. Chinese exchanges
themselves have long been closed, since the previous regulatory
onslaught in August/September of 2017.
A Chinese central banker was also quoted as saying that busi-
nesses providing any kind of market-making (like OTC brokers)
or crypto trade settlement services should also be shut down.
Chinese central bank regulator Vice Governor Pan Gongsheng
also said that mobile apps and websites offering trading services
should be blocked, and that there should be an “orderly exit”
for the crypto mining industry.
Korea, on the other hand, is focused on more regulation and
oversight – an end to anonymous crypto exchange accounts
for example, and proper taxation – rather than on shutting the
market down.
I warned about this correction…
In December 2017, I wrote:

“The moves we’ve seen in the alt market recently have

been extraordinary. There’s a degree of frenzy, and of blind
speculative mania, that has taken hold. I’ve seen projects
that I know with certainty have no long-term future
whatsoever see their market values double, triple, or more,
moving into the billion-dollar plus category.

These are projects that I’m certain will fail.

… The big shakeout is going to come. Don’t be even
vaguely mistaken about that.”

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 Crypto Ecosystem

Of course, losing money isn’t good. But through the smoke and
flames, it’s worthwhile remembering that these fires do serve a
greater purpose.

WHY FOREST FIRES – A CRYPTO CORRECTION – IS… GOOD

Firstly, they force people to start truly assessing what it is they
own… or they think they own. In a raging bull market when
everything’s going up, it’s easy to throw some darts at the crypto
wall with no research at all, bag some returns, and think you’re
a genius. As the cliché goes, a rising tide lifts all boats.
Corrections force discipline on an otherwise broadly unsophis-
ticated market. And that’s only a good thing in the long run.
The second benefit is that these fires clear out the deadwood…
that is the garbage of the crypto world.
For example, let’s look at a crypto called BitConnect.
Back in November 2017, one of my Crypto Capital subscrib-
ers wrote to me asking about it. He noticed it had been doing
extremely well and upon further digging came across an article
online claiming that BitConnect was some kind of “sustainable
2.0 Ponzi scheme”.
I wrote at the time:

“Another crypto I’ve highlighted, a pretty large market cap

coin, it goes by the name BitConnect, is genuinely a Ponzi-
like scam coin.
…I think BitConnect’s days are probably going to be
numbered.
If I look back on coin market cap here, you can see, this is a
US$2.5 billion Ponzi-like scheme. I don’t know how much
longer it’s going to be around.

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 THE J-CURVE

I have warned people about it. People go, “Well, the price
keeps going up.” Well, that’s kind of what happens in a
Ponzi scheme until it doesn’t and the rug comes out from
under your feet.
It’s interesting to see the regulators coming down and
actually sending cease and desist to a specific crypto. We
warned about this crypto in the past, so I hope you don’t
own any.”

Well, in early January, the inevitable finally happened –

BitConnect collapsed by over 90 percent.

The sad part of this is that there are probably thousands, if not
tens of thousands, of individuals who were wiped out. There
was certainly no smart money in BitConnect tokens. This was
the preserve of the unsophisticated – who I suspect could least
afford its demise.
US$2 billion of “wealth” vanished in a near-instant.
Its very existence, however, was a black mark on the whole
crypto sector in general.

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 Crypto Ecosystem

The company behind it received multiple cease and desist

orders. No one knows who is actually behind the platform.
Its Github repository, where all open source blockchain code
resides, is noticeable only for its inactivity. And if you’re look-
ing for a whitepaper to learn at least something about the inner
workings of this coin, good luck finding one.
Oh, and according to its website, BitConnect is “an interest-
bearing asset with 120% return”.
When all’s said and done, these corrections will help this
still-nascent asset class.
There’s still a lot of deadwood to clear out. It’s a painful process.
But the market will be the better for it.
The lesson to learn from all of this? Never invest more than
you can afford to lose.

SO HOW MUCH SHOULD YOU INVEST IN CRYPTOS?

It’s another of the most common questions I’m asked about
cryptocurrencies.
And I get it.  A lot of people think cryptos are in a big
bubble. They’re some of the most volatile assets markets have
ever seen. And with so many different types of cryptos out
there, it can be hard to know how much of your portfolio you
should allocate to any one of them.
So I’m clearing up the confusion…

Start small
The first thing to keep in mind when you’re investing in
cryptos is to start small. And when I say small, I mean with a

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 THE J-CURVE

few hundred bucks. (Remember that you can buy a fraction of a

bitcoin… the minimum lot size is not 1 bitcoin.)
Using a small sum, get used to the process of transferring, trad-
ing and safely storing cryptos. Once you’re comfortable, then
you can start to level up to bigger sizes.
You see, the process of buying, moving and storing cryptos is
not like traditional online banking or investing. In the world
of crypto, if you make a mistake you can lose your money in
an instant. If you send bitcoin to the wrong address, it’s gone.
That’s it. There’s no recourse. And there are very few, if any, “I
forgot my password” options in the crypto world. So it’s critical
to familiarise yourself with the mechanics of buying crypto and
moving it around first in relatively small sums, before moving
on to larger dollar amounts.

Never invest more than you can afford to lose

By that I mean, if you woke up tomorrow and your entire crypto
portfolio was worthless, you’d be fine financially. It would sting
of course, but it wouldn’t be ruinous or anywhere close. So be
conservative.
The table below is a very general portfolio allocation guide…

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 Crypto Ecosystem

Now, before I get a slew of angry emails, let me point out that
the left-hand column denotes the maximum percentage of a
portfolio that should be invested in cryptos depending on your
experience AND your market bullishness.
Even the most enthusiastic beginner who’s in the process of
learning the ropes should not allocate a position that exceeds
one percent of their total investment portfolio to begin
with…  at an absolute maximum. If your portfolio grows to
exceed your maximum allocation, that’s fine – but I’m talking
about the hard dollars you initially commit to crypto. AND
remember, never invest more than you can afford to lose.
So how much do you allocate amongst different cryptos?

THERE’S BITCOIN, AND THEN THERE’S EVERYTHING ELSE

In my opinion, bitcoin should be the largest single position of
any crypto portfolio.
You see, bitcoin is still the “reserve” currency of all cryptocur-
rencies. So it makes sense to understand bitcoin first.
Let me share an example.
You might have heard about Ethereum. It’s a virtual currency
network that’s been in the press recently as a wave of top blue-
chip I.T. and financial companies (including J.P. Morgan and
Microsoft) have announced the formation of an alliance that
will use Ethereum for blockchain-related opportunities.
Ethereum soared over 3,500 percent in the six months leading
up to June 2017.
But if you want to buy Ethereum you typically have to buy bit-
coin first.
That’s why you should take the time to figure out bitcoin.

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 THE J-CURVE

It’s the global crypto reserve currency. And it’s the first crypto
asset that tens of millions of people who enter the space after
you will be buying.
So you should buy it before them.
If you are looking to become an active crypto investor, I think
you should hold anywhere from 30 to 70 percent of your crypto
portfolio in bitcoin, with other crypto assets taking up the rest.
And note: The newer you are to the space, the higher the per-
centage of bitcoin you should own.
Total beginners will start by allocating 100 percent into bitcoin
as that’s the first crypto they buy. Then they’ll get more com-
fortable and start to buy other cryptos.
So the proportion of bitcoin will fall below 100 percent as you
begin to diversify. Over time, your portfolio will change in
size and bitcoin as a proportion of your portfolio may further
decline: but don’t forget that bitcoin is the “bedrock” of any
crypto portfolio. So anyone just starting out should be predom-
inantly long bitcoin.
And please remember: Do not allocate more personal capital to
this sector than you can afford to lose. This is as speculative and
risky as it gets… that’s the price we pay for the kind of returns
on offer.
Take a look at your crypto portfolio and ask yourself if you
could stomach a 50 percent (at a minimum) decline tomor-
row without spinning into a panic. If the answer is no, then you
need to do something about it.

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 Crypto Ecosystem

THIS CORRECTION WON’T GO ON FOREVER

As I said earlier, this crypto correction is clearing out the dead
wood. It’s a painful process. But the market will be the better
for it.
And there’s every reason to believe cryptos are headed higher in
the long term…
You see, the smart money is finally headed for cryptos.

WHY THE SMART MONEY HAS MOSTLY STAYED AWAY

FROM CRYPTOS – SO FAR
In the world of investing, “smart money” refers to profes-
sional investors who have more and better information than
the general investing public. This includes hedge funds, large
institutional investors and wealthy private investors. They have
teams of analysts who do nothing but look for the best stocks
and markets to buy.
Smart money tends to be the first to invest in “the next hot
thing”… and the first to flee markets in anticipation of adverse
conditions.
But with cryptocurrencies, the smart money has come late to
the game.
You see, while there’s obviously been a lot of interest in cryp-
tocurrencies as a new financial asset class from big institutions
(it’s hard to ignore the massive gains we’ve seen in bitcoin and
other cryptos), there are a lot of hurdles they must overcome to
put some money into cryptocurrencies.
A sovereign wealth fund or endowment manager that wants
to buy cryptocurrencies needs to jump through a lot of hoops.
There’s all sorts of compliance required, legal opinions, not

55
 THE J-CURVE

to mention expanding the scope of your investment mandate

(which defines what assets you can invest in) – which is no easy
task.
And there haven’t been many “bridges” between traditional
asset managers and this new, less well-understood arena of
cryptocurrencies.
Let’s say you’re the manager of a sovereign wealth fund, and
you’re interested in making a small allocation to cryptocurren-
cies, how do you go about it? Do you build an internal team
and do it yourself? Unlikely.
Instead, you’d be looking for people with strong backgrounds
in asset management, who have transitioned over to crypto, and
who know how to responsibly invest other people’s money (i.e.,
institutional level security, compliance and reporting, etc.).
There are a few cryptocurrency funds out there. Notables
include MetaStable Capital, a San Francisco-based hedge fund
and Polychain Capital, run by 27-year-old Olaf Carlson-Wee
with US$200 million in assets under management. But these
funds are usually backed mainly by big Silicon Valley venture
capital names like Sequoia Capital and Andreessen Horowitz,
not traditional institutional asset managers like pension funds,
for example.
So the institutional level of participation in cryptocurrencies
has been very, very small by any measure… but it’s increasing.

CRYPTOCURRENCIES ARE FINALLY GOING INSTITUTIONAL

In recent months, we’ve seen several developments that will
open up cryptos to the smart money…

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 Crypto Ecosystem

For example, in December 2017, bitcoin futures contracts

started trading on some of the largest U.S. exchanges (the
Chicago Mercantile Exchange and Chicago Board Options
Exchange).
This gives a lot of institutional credibility to bitcoin as an asset
class. And that really gives the green light to some of these
bigger institutions that have been on the sidelines looking for
some kind of validation of bitcoin.
So that is a big sign that we’re going to see a lot of institutional
money coming into this space.
Also, Coinbase, one of the largest crypto fiat exchanges, recently
launched Coinbase Custody, which is a custodian service for
institutional investors. Now, Gemini already has this. Coinbase
is adding it. And clearly, this is targeted at institutions. Custody
is, of course, one of the major issues that an institution needs
to overcome in order to be able to buy bitcoin and enter the
space. So having more custodian options for these institutions
is a big plus.

WHAT DOES THIS MEAN?

This means there’s every likelihood that over the next year or
so, we will see much greater sums of money flow into crypto-
currencies, and bitcoin is likely to be the biggest beneficiary.
Remember, bitcoin is the global crypto reserve currency. It’s
the first crypto asset that tens of millions of people who enter
the space after you will be buying.

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 Chapter 3

WHAT IS THE J-CURVE?

The “J-Curve” is a graph that represents any value that initially
falls before recovering and ultimately rising higher than the
starting point – reminiscent of the letter J.
The J-Curve is applicable across a range of disciplines, from
economics and private equity to political science, as a means of
correlating the level of a country’s stability and openness. I first
came across the concept through my economic background
as much of my financial market research is centred around
macroeconomics.

THE J-CURVE IN ECONOMICS

An example of the J-Curve in economics is when a country’s
trade balance initially worsens following a devaluation or
depreciation of its currency. A devalued currency means imports
are most expensive and exports are less valuable – leading to a
bigger deficit or smaller surplus.
But, in time, due to competitive, relatively low-price exports,
the country’s volume of exports may rise. So the trade balance
eventually improves to levels better than before the devaluation.

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 THE J-CURVE

In cases where a country’s currency appreciates, a reverse

J-Curve may occur. This is based on the country’s associated
exports becoming more expensive for importing countries. If
other countries are able to offer the goods at cheaper rates, the
country with a higher currency value may see demand drop.

THE J-CURVE IN PRIVATE EQUITY

In private equity, the J-Curve shows the historical tendency of
private equity funds to deliver negative returns in early years
and investment gains in the outlying years.
You see, in the early years of the fund, management fees,
investment costs and under-performing investments that
are identified early and written down can all lead to negative
returns. But over time, the fund will experience unrealised gains
followed by realised gains (i.e., IPOs, mergers and acquisitions).

THE J-CURVE IN POLITICAL SCIENCE

In political science, the J-Curve theory is used for political
revolutions, to explain the rise of revolutionary movements
in terms of rising individual expectations and falling levels of
perceived well-being.
In short, the J-Curve says revolutions are most likely to occur
after a period of prolonged improvements in economic and
social development are suddenly reversed. This sharp reversal
of development creates an intolerable gap between what people
want and what they get.
This model is often known as the Davies’ J-Curve (After sociol-
ogist James Chowning Davies presented it in 1962) because
economic development followed by a depression would be
modelled as an upside down and slightly skewed J.

60
 What is the J-Curve?

THE J-CURVE COUNTRY STATUS MODEL

Another use for the J-curve is to show the correlation between
stability and openness. In this model, the x-axis measures the
openness of an economy and the y-axis measures the stability of
the same country. It suggests that states that are closed/undem-
ocratic/unfree are very stable, however as you move right along
the x-axis, stability decreases, creating a dip in the graph, until
you reach the openness side of the x-axis and stability increases
again. This forms a J-shaped curve.
States can travel both right and left along the J-Curve, so sta-
bility and openness are never secure. And the J is steeper on
the left-hand side because it’s easier for a failed state to create
stability by closing the country than to build a civil society and
establish accountable institutions. The curve is higher on the
right than the left because states that prevail in opening their
societies ultimately become more stable than authoritarian
regimes.

THE J-CURVE IN MEDICINE

In medicine, the J-Curve refers to a graph where the x-axis
measures either of two treatable symptoms (blood pressure or
blood cholesterol level) while the y-axis measures the chance
that a patient will develop cardiovascular disease.

THE J-CURVE IN CRYPTOCURRENCIES

The J-Curve can also be applied to the crypto asset investment
process as a means of identifying potentially undervalued cryp-
tos that have the potential to deliver huge gains. Chris Burniske
from Placeholder Venture Capital, an extremely perceptive
crypto market analyst, was the first person I know of who used

61
 THE J-CURVE

it in a crypto asset perspective. If you are interested in the

crypto asset market in any way, I highly recommend following
his writings.
Let me walk you through my simplified version using the chart
below, which is broken down into three stages:

Stage 1: The ICO

Cryptos come to market typically with the goal of raising
money quickly, and usually with as much fanfare as possible.
It’s analogous to an initial public offering (IPO) in the stock
market, although not a perfect one.
There’s a lot of hype at this stage of the process. Maybe some
celebrities get involved. Short-term speculators pile in to buy
tokens on launch looking for a quick flip.

62
 What is the J-Curve?

But the tokens at this stage don’t have any utility. Or they don’t
have much circulation or real use application if they are a cur-
rency token rather than a utility one.
The underlying value proposition or product that the company
is raising money for hasn’t been built yet.
So we often see a short-term spike in speculative activity, fol-
lowed by a correction.

Stage 2: The doldrums

The doldrums is a colloquial maritime expression, describing
parts of the Atlantic and Pacific Oceans affected by low pres-
sure around the equator.
Whilst these areas can host squalls and thunderstorms, there
are often long calm periods where there is no wind whatsoever
for weeks on end.
That’s often what happens in Stage 2.
The initial ICO and post-ICO hype and media coverage have
subsided. The speculators have come and gone. The developers
are hard at work (we hope). And the project has several months,
or even a year, before it goes live.
The price reflects the lack of interest from speculators. There’s
not much “buzz” yet. That will come later if and when a viable
product is launched. But for now all is quiet.
As an investor, this is the ideal time to strike. It’s the
“sweet spot”.

Stage 3: The launch

With time, the project will get closer to hitting key milestones
and the launch of their crypto, be it a currency, a protocol or an
enterprise.

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 THE J-CURVE

As we start to approach that territory, we see interest in the

project build again, and the price reflects that.
There’s a world of difference between buying a token for a
project that goes live in a week versus six months.
I hope it’s clear where we want to be buying: Stage 2, when a
project is under the radar. It’s “unloved” by the speculators. It’s
not appearing on the news and blogs because there’s not much
to report other than that the team is building.
This is when as an analyst, I stay very close to the project. I’m
looking for regular development updates. I’m making sure that
the team is hitting its milestones. Are they ahead or behind
schedule? Are they building the team or are developers leaving?
These J-Curve trades provide us with the best possibility for
finding huge returns.

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 Chapter 4

EXAMPLES OF J-CURVE TRADES

You’ve likely never heard of it…

Civic is a small crypto that runs an identity-verification plat-
form that could revolutionise the digital identity world…
This crypto is still tiny – roughly 0.1 percent the size of Bitcoin.
And it was only created in June 2017.
But in October 2017, it caught my attention…
At a glance, the crypto appeared to be going nowhere.

65
 THE J-CURVE

The average investor would have grown impatient… and sold

to chase some other high-flying crypto.
But I knew the team was working to make several deployments
and that the Civic app would soon expand functionality to pro-
vide more services in the digital identity market place.
And watch what happened next…

Civic shot up 327 percent in just 66 days. That’s enough to turn

a US$500 investment into US$2,135 in just two months.
Or consider Bitcoin Cash…
It’s a bitcoin offshoot created after a group of programmers split
from bitcoin on August 1, 2017, creating a totally new currency.
At the time, there was debate in the bitcoin community on
whether Bitcoin Cash was the “real” bitcoin or not.
A lot of people piled into this new currency.
But I waited until the mania had died down by November 2017.
Take a look…

66
 Examples of J-Curve Trades

Sure enough, Bitcoin Cash soared 473 percent in the next 40

days. Enough to make you five times your money… in just over
a month.
Finally, let’s look at EOS.
It launched in June 2017 to great fanfare. Many folks predicted
it would be the “next Ethereum.”
Thousands of new crypto investors piled into this new crypto,
hoping to capture thousands of percent gains.
And EOS took off…

67
 THE J-CURVE

…only to soon take a dramatic fall.

A lot of people were surprised. But not me.

The initial batch of tokens sold for around US$1 before the
price quickly spiked to over US$6. As the initial furore died
down, the price fell.
By October 2017, there wasn’t much to write about from a
media perspective and there was still a way to go until launch,
so nobody in the market was paying any attention. But I knew
the team behind EOS has dozens of developers working on the
platform and it was only a matter of time before the tokens
took off again.
That was the ideal time to invest. I recommended it to my
Crypto Capital subscribers when it was trading for just 52
cents. In the weeks that followed, EOS soared 3,498 percent,
enough to make 35 times your money.

68
 Examples of J-Curve Trades

These are all examples of how I’ve used the J-Curve to make
thousands of percent in cryptos. And how you can use it too…

69
 Chapter 5

WHAT YOU NEED FOR A

GENUINE J-CURVE TRADE

As I said earlier, it can be hard to find legitimate crypto assets.

There’s practically no regulation in the space.
Not only is the general mainstream media coverage of cryptos
very poor, but the crypto media space is also generally not great.
People who write about cryptos often have their own agendas.
They may own tokens in a competitor they are writing an arti-
cle about, and hence be extremely negative. Or, more likely,
vice versa.
There are a huge number of trolls, spammers, pumpers and
dumpers, liars and cheats.
Trust and integrity are hard to come by. That’s not to say there
aren’t excellent thought leaders in crypto.
But you have to work hard to find out who they are.
So how can you make sure you’re investing in an authentic
opportunity?

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 THE J-CURVE

When you’re looking for crypto assets to invest in, here are six
key attributes to look for:

1. PROBLEM SOLVING
Does this technology leverage blockchain technology to solve a
problem (preferably a difficult one) that cannot be solved with-
out blockchain?
I’m very sceptical of companies that are simply looking to take
an existing business and put it on the blockchain, just to tap
into the hype surrounding cryptos.

2. THE ADDRESSABLE MARKET SHOULD BE GLOBAL

At this early stage in the development of the blockchain eco-
system, you want maximum bang for your buck. You want to
be buying tokens that can be multibillion dollar currencies,
platforms or enterprises.
To achieve that, you want the potential for everyone on earth to
benefit from whatever crypto asset is being built.

3. LAUNCH HORIZON PROXIMITY

The way a lot of ICOs work is: the company produces a white-
paper that outlines the technology it plans to build, and then
funds it by issuing some tokens in return for capital (in the form
of bitcoin and/or other cryptos).
The key phrase here is “plans to build”. There’s an ocean of
difference between putting an idea down on a whitepaper and
building and executing a successful launch. This is one of the
main reasons why you should be very careful about participat-
ing in ICOs.

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 What You Need For a Genuine J-Curve Trade

4. THE TEAM
You want to see a team comprising developers who have a
track record of building and deploying (preferably) blockchain
technology.
Note here, they don’t necessarily need to have been successful
in prior ventures. Bill Gates’ first company disintegrated before
he built Microsoft. Steve Jobs was kicked out of his own com-
pany. Milton Hershey founded three failed candy companies
before what is now the US$23 billion Hershey Co.
Again, because the world of crypto is so new, there’s a lot of
subjectivity here. A CEO doesn’t need to be a computer scien-
tist, but he or she needs to have a very strong understanding of
how blockchain will address points one and two above.

5. THE COMMUNITY
This is a highly subjective measure, but it’s hugely important.
Does this project have a large community of followers and early
adopters who will actually use whatever is being built?
Building and deploying a digital platform, for example, is use-
less if there isn’t a community of developers who are going to
build applications on it. And there’s no point building a block-
chain casino app if nobody’s going to come and lay some wagers
on it.

6. THE TOKEN ECONOMICS

Crypto tokens have varying characteristics, but scarcity is an
important one. Would you buy into a token that had a billion
tokens currently “issued” if you knew that in three months
another two billion would be issued? Probably not.

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All cryptos have completely different token economics under-

pinning them. Bitcoin, for example, has around 16.5 million
bitcoin in circulation at the moment. New bitcoin are mined
every day, but there will only ever be 21 million bitcoin created.
That’s it.
Other tokens create all their tokens in a single launch, and then
the supply is fixed thereafter.
Then there are others that specify an annual “inflation” of,
say, 3 percent of the initial tokens, to be distributed every
year according to a predefined mechanism. There are infinite
permutations of token supply and we need to analyse these
accordingly.

FINALLY… YOU NEED TO BE A CONTRARIAN

The ideal Stage 2 “sweet spot” of the J-Curve from a buying
perspective hinges upon contrarianism. How so?
Well, the trough of a J-Curve is a pretty dismal looking place.
When people pull up the historical chart of a particular crypto
asset, and see a big initial bump followed by a persistent down-
trend, they move on. Most folks like to invest in momentum
– in other words, they like buying assets that are already trend-
ing upwards.
Remember, Stage 2 is where the media hype has faded away.
The buzz has moved on. The smash-and-grab day traders and
outright speculators have all gotten bored and gone elsewhere.
It’s only the people who are closely following a project’s tech
development, keeping an eye on milestones, and using what
they know from a well-sourced crypto network, who are likely
to be buyers at this stage.

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 What You Need For a Genuine J-Curve Trade

It’s here that the weak hands have been shaken out, and we’re
looking for that key moment when there are few other market
participants who are left to sell. And it’s not necessarily a crypto
that’s shrouded with negativity and pessimism, rather it’s simply
fallen off the radar.
But bear in mind, there are plenty of cryptos, in fact the vast
majority of them will never leave Stage 2. They will wither and
die. We are focused on the ones that won’t.

TIMING FOR THE TREND

Timing the “sweet spot” or the “trough” of the J-Curve is no
easy feat. It doesn’t matter what asset class you’re investing in,
picking the bottom is always more art than science. And it’s
only in retrospect that we are even able to look back, possibly
months or even a year or more, and see just how close we even
were.
But there’s a difference between trying to catch a falling knife
and buying on an uptrend.
Let me explain.
Patience is key when it comes to Stage 2 of the J-Curve. As an
analyst, it’s a particularly tough time because by this time you
know the project well, and you’re generally bullish – that’s why
you’ve hung around, kept researching and continued to keep
tabs on development. In other words, it’s easy to let enthusi-
asm get the better of you and it’s tempting to be early instead
of late… But this is problematic because we want to avoid the
“falling knife” scenario.
If we’re too early on in Stage 2, and our target is still trending
down, we can end up sitting on a position that falls away by
another 50 percent or more.

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That’s not the end of the world if we have conviction in our

research, but at the same time nobody likes sitting on a position
that keeps bleeding month after month.
As a result, we want to try and risk-mitigate where we can. If
we can see a solid line of price resistance or preferably, a small
uptrend, then we’re likely in a much better position. Why?
Because market participants prefer buying assets that are
trending up, not down… regardless of the asset market you’re
looking at.

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 Chapter 6

RECOMMENDED
EXCHANGES/WALLETS

Crypto exchanges are an integral part of the crypto asset eco-

system. They provide a means of converting cash into bitcoin,
and of converting bitcoin into one of the other hundreds of
cryptos out there.
These exchanges vary tremendously in terms of user-friend-
liness, security, regulatory protection, the number of cryptos
they trade and whether they support the dollar-to-crypto con-
version or not.
In my experience, the best way to understand exchanges is to
break down the exchange ecosystem into two key objectives:
• Objective 1 – Convert U.S. dollars (or fiat currency) into
bitcoin, the digital “reserve currency”
• Objective 2 – Convert bitcoin into other crypto assets

Let’s take a closer look at each…

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CRYPTO-FIAT EXCHANGE
There is no one-size-fits-all crypto-fiat exchange. Everyone has
different needs.
There are other ways to buy cryptos like bitcoin without using
an exchange. I bought my first bitcoin years ago, in cash, from a
friend! But times have changed. Personally, I have used Gemini
and Kraken, and to a lesser extent Coinbase.
Of those, I would strongly recommend Gemini and Coinbase,
as Kraken’s user interface is confusing and less than ideal for
beginners.
San Francisco-based Coinbase is one of the longest running
and well-liked exchanges, so that and Gemini are my top two
picks for converting your cash into both bitcoin and Ethereum.

Crypto exchanges do not touch any fiat currencies like dollars

or euros (unlike crypto-fiat exchanges). These exchanges are
“crypto-to-crypto” only.

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 Recommended Exchanges/Wallets

You need to open an account with a crypto exchange, and fund

it using bitcoin or another crypto.
These exchanges trade cryptos in pairs just like currency trad-
ing. Cryptos, for the most part, trade against bitcoin, our digital
“reserve currency”.
There are hundreds of crypto exchanges globally. And because
these exchanges don’t touch dollars or other currencies, they
have fewer regulatory requirements. That means they are
open to residents of pretty much every country and are quicker
to set up.
The downside is there is less government oversight, which
means we don’t like leaving much money on these exchanges at
any given time.
You should generally not use these exchanges for storing your
cryptos.

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RECOMMENDED WALLETS
If you’re going to buy and sell any cryptocurrencies, even if it’s
just bitcoin, you’ll need a cryptocurrency wallet.
You use a crypto wallet to store, send, receive and generally
keep track of your crypto assets.
Wallets exist in different forms: As software on a mobile or desk-
top device, on a dedicated hardware wallet device, a USB stick
or even a piece of paper. Some wallets are designed for bitcoin
only, and therefore only interact with the Bitcoin blockchain.
Other crypto assets have their own wallets. And then there are
wallets that can support dozens of different crypto assets.
Before I get into the different types of wallets, you need to
know whether it’s “hot” or “cold.”
A hot wallet is one that is connected to the internet, either on
your desktop computer or your mobile phone.
Hot wallets are convenient because you can just unlock your
smart phone or computer, open the wallet (usually with a pass-
word and/or pin) and send your crypto.
On the other hand, a “cold” wallet is one which is stored offline.
This can be in the form of a paper wallet, a hardware wallet
(like Trezor), or even on a USB stick.
“Cold” just means that your private keys are stored completely
offline. So if someone hacked or stole your mobile or desktop,
there’s NO WAY they could access your crypto assets.

TYPES OF WALLETS
There are a few categories of wallets to choose from:

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 Recommended Exchanges/Wallets

• Desktop wallet (hot): This is software downloaded and

installed on your Windows or Mac computer (desktop or
laptop).
Desktop wallets are usually secure, however as with all
things crypto, they are only as secure as your computer.
If your computer is filled with malware, doesn’t have
antivirus protection or anyone can access it, then your
wallet isn’t likely to be very secure!
• Mobile wallet (hot): A mobile wallet is an app you
download from the iTunes or Google Play store on your
iPhone or Android device. These are very similar to
desktop wallets, and some wallets provide both desktop and
mobile access. A mobile wallet is perhaps more convenient
than a desktop wallet.
• Hardware wallets (cold): These are small physical devices
that plug into your computer and provide an easy way of
storing your wallet information (i.e., your private keys)
offline in a secure device.
If you want to transact from a hardware wallet, you need to
plug it in to your computer and a simple internet browser
interface will be used to view and move your crypto.
These are less convenient for day-to-day transactions, but
more secure against potential hacking.
• Paper wallet (cold): A paper wallet is a document with
your public and private keys on it.
This is “cold storage” – the private key, which is the main
piece of data that a crypto wallet stores, is offline on a piece
of paper.

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But remember – this is only as safe as how you store the

paper wallet! If it’s filed away safely, with a duplicate backup
somewhere else that’s safe, then great. If it’s lying on your
desk, waiting to be thrown out in the trash by mistake or
have coffee poured on it, that’s not ideal.

If you are planning on storing a significant amount of bitcoin,

I would strongly recommend purchasing a Trezor hardware
wallet. They cost approximately US$100 and can be purchased
from the Trezor website directly or from Amazon.
Trezor provides cold (i.e., offline) storage. I personally keep my
bitcoin on a Trezor device stored in a safe.
Exodus and Jaxx are also both good wallets that are very easy
to use. These wallets provide support for a number of crypto
assets, and they both have a built-in in-wallet exchange func-
tionality, which is especially convenient.

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 Recommended Exchanges/Wallets

This means you don’t need to transfer your bitcoin to a sepa-

rate exchange, buy another crypto and then send it back to your
wallet. The exchange can be made within the wallet.
For secure Ethereum and ERC20 token storage, I recommend
MyEtherWallet, which is a web interface that allows you to
create your own wallet on the Ethereum blockchain.
It’s widely used in the Ethereum community and supports hun-
dreds of ERC20 tokens.

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 Chapter 7

BUYING YOUR FIRST BITCOIN

When it comes to bitcoin and cryptocurrencies, you need to

be meticulous about how you go about the process of buying,
moving and transferring it.
If you transfer bitcoin to the wrong address for example, that’s
it. It’s gone. There are no refunds.
If you forget your password or private key, depending on the
platform or wallet you’re using, you can easily lose everything.
It is imperative that you make backups and hard copies of
EVERYTHING. Ideally, you should have a physical notebook
or folder with usernames and passwords, along with printouts
of your public and private keys (don’t worry, we’ll get to all this
shortly!).
Now, to get started with bitcoin, you’ll need:
• A computer
• A mobile phone
• A notebook
• Microsoft Word or Excel

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• Scanned copies of your identification (Passport and/or

driving licence)
• Proof of address (a utility bill with your name and address,
issued within the previous three months)
• A printer
• Your bank details.
You may be looking at this list and thinking “this looks too
much like hard work”. But remember, this does require a little
bit of hard work on your part. It’s why you can still get in on
this opportunity early.
TOP TIP: When setting up your bitcoin exchange accounts
and bitcoin wallets, keep all the details in a document (a Word
file or an Excel spreadsheet, for example). Bitcoin addresses
or public/private keys are long garbled mixtures of words and
letters, so using a copy-paste function to keep this information
in a document is advised. When you’ve finished, print it out.
In Microsoft Word and Excel, you can password-protect
your document for additional safety by selecting Tools >
Protect Document.

HOW TO BUY BITCOIN

There are two things you need to start trading virtual currency:
1. An on-ramp
2. A wallet.
An “on-ramp” is simply a website where you can convert fiat
currency (i.e., U.S. dollars), into bitcoin.
Gemini is one I’ve used. You create an account, go through a
verification process, deposit some dollars, and buy some bitcoin.

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 Buying Your First Bitcoin

Whilst a platform like Gemini allows you to buy your bitcoin, I

don’t like storing much with an exchange.
I’d rather keep it in my bitcoin wallet. The “wallet” is where
you store your bitcoin.
Exchanges can (and do) get hacked. My personal choice of
wallet is Trezor. It’s a hardware wallet used to store bitcoin
offline. For storing bitcoin on a computer, I like Electrum.
And if you want to store your bitcoin with a web-wallet, look at
Blockchain.info wallet. There’s also good selection of wallets to
choose from here.
Once you have an on-ramp and a wallet, you can get started
trading bitcoin. Again, I recommend everyone go through the
process of buying a few hundred bucks of bitcoin, transferring
it to a wallet, and maybe transferring it to an exchange to buy
another cryptocurrency (say Ethereum) is an excellent way to
put yourself way ahead of the pack.

BEGINNERS BUYING BITCOINS SHOULD DO THESE

THREE THINGS…
Here are three simple pieces of advice for bitcoin beginners:

Start small
Speaking from personal experience, I highly recommend that
folks looking to buy some bitcoin start with an extremely small
amount… no more than a bitcoin worth, which today is the
equivalent of a couple of thousand U.S. dollars. (You can use
less money and buy a fraction of a bitcoin, if you prefer). The
process of buying, moving and storing bitcoin is not like tra-
ditional online banking or investing. If you send bitcoin to the

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wrong location, for example, you can’t just call up your bank
and cancel your transaction.
I’ve experienced that myself…
Recently, as I sat in the lounge at New York’s JFK airport wait-
ing for my (delayed) flight back to Hong Kong, I decided to
move around some bitcoin from my trading exchange account
to a new separate wallet I had just set up.
At the time, one bitcoin was worth around US$2,100. So the
total value of the transfer was a little under US$8,500.
I put in the transfer request, confirmed the transaction by
clicking on a confirmation link sent to me in an email by the
exchange, and then I waited…
And waited…
Usually, a simple bitcoin transaction takes a few minutes, maybe
more. It’s not instantaneous (one of the biggest misconceptions
about bitcoin is that transactions happen at once). But after an
hour there was no sign of the bitcoin in the new wallet I had
just documented setting up.
I re-checked my account at the exchange. Sure enough, the
four bitcoin had been removed from my balance… but in the
transaction ledger, it simply read “awaiting approval”.
I got on the flight and thought nothing of it. It wouldn’t take
long for this “approval” to go through.
But when I checked on Monday morning back in the office,
nothing had changed. The exchange was still showing “await-
ing approval”. Whose approval? It was not clear.

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 Buying Your First Bitcoin

The exchange I was using in this instance is called Poloniex.

Operated out of the U.S., it’s the largest cryptocurrency
exchange.
So, I raised a support ticket (reported the problem to the
exchange) asking what was going on. (Note: there’s no phone
number for support, no email, no instant chat box. You can only
raise a ticket with your problem and leave it with the exchange
support staff.)
Days passed. And then a week. Still nothing. Nobody responded
to my support ticket. There was absolutely nothing I could do.
The transaction simply said “awaiting approval”. In the mean-
time, the bitcoin was completely frozen.
I had a little more cryptocurrency in my account that I could
trade, but I didn’t want to try to transfer that in case the dreaded
“awaiting approval” issue cropped up again.
In the end, it took TEN DAYS for the transaction to ultimately
be cancelled, and the bitcoin returned to my exchange account.
It’s a great reminder that with cryptocurrencies, you don’t enjoy
the kind of “investor protections” you might be accustomed to
with banks and brokerages.
In this case, there was nobody to call and nobody to complain
to. Nothing. I just had to wait.
But fortunately, by the time those four bitcoin were finally
transferred out of my exchange account (successfully) into cold
storage, they were worth another US$2,800.
In short, it’s critical to familiarise yourself with the mechan-
ics of buying and moving bitcoin around first with a relatively
small sum, before moving on to larger dollar amounts.

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Write everything down

It’s ironic that whilst bitcoin is a highly modern technology,
you must make sure you keep “offline” records of all your bit-
coin information. That means a pen and paper, or at least using
a Microsoft Word document and printing it out as a back-up.
I mentioned this before and it’s worth repeating…
Storing and sending/receiving bitcoin involves setting up a dig-
ital wallet. This is where you “keep” your bitcoin.
Your wallet has a public key (which might look a bit like this:
1GwV7fPX97hmavc6iNrUZUog) which is where the bitcoin
gets sent to. This is like an account name.
Your wallet also has a private key. This will either be an
alpha-numeric sequence that looks like the public key above, or
a long sequence of random words generated by the wallet. This
is the “password” you use to access your wallet.
Either way, secure wallets do not have an “I forgot my pass-
word” option.
If you lose or forget your private key, you lose access to your
wallet. And you lose your investment. Period.
I write everything down, and I print out screen grabs (that is,
printouts of what is shown on the screen).

Don’t leave money at the exchange

In order to convert your cash into bitcoin, you need to open an
account with an exchange.
This process will typically take a few days as the exchange will
need to conduct KYC (know your customer) diligence on you.
This means they’ll do a standard identity verification so the

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exchange knows who you are, and that you’re not a wanted
criminal.
Once you’ve opened the account, you’ll be able to fund it with
a bank transfer – or by credit card in some cases – before you
buy bitcoin.
But don’t leave your bitcoin at the exchange. As I said earlier, if
your bitcoin is at an exchange then you don’t own it – they do.
And if the exchange where you bought bitcoin (and left it there)
gets hacked, then you can lose your money. This has happened
in a couple of high-profile cases.
For example, in 2014 bitcoin exchange Mt. Gox, which at the
time was handling up to 70 percent of all bitcoin volume, filed
for bankruptcy, saying that 750,000 of customer bitcoin was
missing.
That’s why I keep nearly all of my bitcoin offline, in what’s
called a “cold storage” wallet. This is a piece of hardware where
you store the bitcoin. I keep just a little “fun money” at the
exchange for trading.

DON’T TOUCH A CRYPTO UNTIL YOU READ THIS

As cryptocurrencies become more and more mainstream… so
do the stories of people losing lots of money in cryptos.
Just consider the story about a crypto novice who had
US$100,000 worth of crypto assets stolen. These assets were
stored on a hot wallet on his laptop. So what happened? He
used his laptop in a restaurant on an unsecure public Wi-Fi
network… and hackers gained access to his wallet. The next
thing he knew, his hot wallet was empty, and his cryptos were
gone – for good.

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We also recently saw a website that supposedly allowed you

to claim Bitcoin Gold (one of the forks from bitcoin). Once
people put in their Bitcoin seeds (a string of words to access
your bitcoin wallet) to check how much Bitcoin Gold they were
supposedly allowed to get, some guys went around and used the
seeds to access the Bitcoin wallets and empty them.
They took over US$3 million.
(Never – ever – give your bitcoin seed/private keys/passwords
to someone else, unless you want to give them total and com-
plete access to your wallet.)
The common theme between these two stories is security – or
lack thereof.

EVERYTHING IN THE CRYPTO SPACE REVOLVES

AROUND SECURITY
Before you start buying, storing and moving cryptos, it’s vital
that you understand one thing: It is 100 percent your respon­
sibility to store your crypto assets securely. And your crypto
assets are only as safe as your computer and general internet
security practices.
This will be a different way of thinking for most investors…
You see, we take far too much for granted now when it comes
to our digital financial wealth.
If our credit card gets hacked, we just assume that the credit
card company will foot the bill.
Our bank deposits? Well, it doesn’t matter if the bank is cred-
itworthy or not because (in the U.S.) the U.S. Federal Deposit
Insurance Corporation (FDIC) will cover US$250,000 worth

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 Buying Your First Bitcoin

of traditional bank deposits with any FDIC bank. And it’s the
same story in most other markets.
After the global economic crisis, there is a prevailing assump-
tion that the government will just bail us out if anything goes
wrong. The onus of responsibility has shifted away from us as
individuals to the government and financial institutions.
But when it comes to crypto assets, make no mistake – the
responsibility is well and truly yours. There are very few safety
nets – if any. And the safety nets that do exist are the ones that
you are responsible for setting up yourself!
That’s why you need to make sure you’re always following four
safety measures when dealing with cryptos.

Safety measure #1: Antivirus software

Having up-to-date antivirus software installed on your internet
devices is just common sense.
It’s a basic preventative measure for everything you do online.
And keep in mind, antivirus software isn’t a magic bullet. It’s
like wearing a seatbelt. If you drive like a drunken maniac, then
you’re still likely to crash. The seatbelt will help, but it can’t
do much for speeding and drunk driving. So even if you have
antivirus software, you still need to practice common sense on
the internet.

Safety measure #2: Stop using the same password everywhere!

I have well over a hundred different usernames and passwords
for all my online activities… everything from my banking
accounts to my newsletter subscription portals to brokerage
and social media accounts… it’s endless.

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But there is a temptation to use the same (or very similar) pass-
words for numerous different accounts. This is a disastrously
bad idea, regardless of how strong the password is.
Everyone knows this, but most people still do it anyway.
Getting into the crypto asset space will require new crypto
exchange accounts and wallets, and of course plenty of new
passwords to go with these accounts.
And instead of using short, obvious passwords – try longer ones.

Safety measure #3: Use Two-Factor Authentication

When you create an account with a crypto exchange, the login
details you need to get into your account are usually:
• Your email address (or a username)
• Your password.
You’ll also need to verify your identity with the exchange,
providing I.D. copies, proof of address, and maybe your bank
details as you proceed with the rest of the account set up.
Once the account is approved, you’ll fund it, and start buying
cryptocurrencies.
Great, right? Wrong.
You have a glaring point of failure. Your account and everything
in it (including your personal information, address, etc.) is just
protected by a single password. This is a recipe for disaster.
But there’s a very easy fix, and it’s called Two-Factor
Authentication (2FA).
2FA is a second layer of security above and beyond your user-
name and password.

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 Buying Your First Bitcoin

All exchanges, in their user security or user profile settings,

allow you to add 2FA. Some insist on it.
And 2FA isn’t just used for logging into your exchange account.
On an exchange by exchange basis, you can select 2FA to be
used for withdrawals from your account as well, providing an
extra layer of security.
The three most common ways to add 2FA protection to your
exchange account are through text message verification*, email
verification, or a 2FA application like Google Authenticator or
Authy.
This might seem like a hassle – but it’s absolutely critical to
protecting your assets.
(*Please note though, simple SMS text message verification
is now a vulnerability. Because of so many waves of identity
information hacks (i.e., Equifax), hackers are stealing identities,
and then hijacking mobile phone numbers by calling the
individual’s cell carrier and switching them to another service
provider (using the same mobile number) for example. Once a
hacker has your SMS’s re-routed to him, he can leverage that
for 2FA access to your accounts. You should no longer assume
that SMS 2FA is secure.)

THE PROCESS
Here are the basic steps to buying your first bitcoin broken
down into three categories below.
1. First, you need to open an exchange account and buy
bitcoin.
2. Second, you need to set up a wallet where you can store
your bitcoin.

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3. Finally, you need to move your bitcoin from the exchange

to your wallet.

We cover the steps in our following guides included as

Appendices to this book.

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 Appendix A

Setting up a Gemini Exchange Account –

A Step-by Step Guide

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 THE J-CURVE

CREATING YOUR ACCOUNT

Register with Gemini – go to https://gemini.com and register.

When you register, make a note of your email account and

password details.

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 Setting up a Gemini Exchange Account

You’ll need to activate your account when you receive the email
in your inbox.

SECURING YOUR ACCOUNT

2FA is “2 Factor Authentication.”, Typically, you use your
mobile phone number. When you login or request transfers of
money or digital assets, a confirmation code will be sent to this
mobile number for additional security.

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Select your country and input your mobile phone number.

After entering your mobile number you will receive a text mes-
sage with your one-time Gemini code.

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 Setting up a Gemini Exchange Account

You can download a separate 2FA mobile application if you

want. This is up to you. Simple text message 2FA is only as
secure as access to your mobile phone and account password!

IDENTIFYING YOUR ACCOUNT

• Personal Details
• Address
• Passport

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• Photo ID copy
• Proof of address

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 Setting up a Gemini Exchange Account

All bitcoin exchanges are currently experiencing a huge amount

of new account openings so it might take a few days to verify
your account.

You’ll be notified by email when it’s ready.

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FUNDING YOUR ACCOUNT

You will need to go through the process of sending a bank
transfer or wire instructions with your bank in order to fund
your account.
*This is the last hurdle! The rest is straightforward.

A sample of wire instructions that you will be shown:

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 Setting up a Gemini Exchange Account

BUYING BITCOIN!
Once the cash has cleared, you can buy bitcoin.

We recommend a “Limit” order. You specify the most US$ you

are willing to pay per bitcoin.

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MOVING BITCOIN!
Once you’ve bought bitcoin and it’s shown in your BTC balance
– you can move it somewhere safe…

Enter the destination wallet address. Always copy-paste this

address from the original source and double check it. If you
input the wrong address you can permanently lose your bitcoin.

The bitcoin should now be in your non-exchange wallet.

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 Appendix B

Setting up a Bitcoin Wallet –

Three Different Types

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BITCOIN WALLETS
Bitcoin wallets come in all shapes and sizes, but there are five
main categories:
• Mobile wallets
• Paper wallets
• Desktop/software wallets
• Hardware wallets
• Web wallets
This guide is not designed to be exhaustive, it is designed to
show you three specific wallets, a web wallet (where your
bitcoin are stored in an online wallet), desktop wallets (where
you download software to your computer), and hardware
wallets (physical devices that allow you to store your bitcoin
completely offline and off your computer).
Just like the wallet you carry around with you, your bitcoin
wallet has to be secure.
You should ALWAYS back up your wallet where possible, and
do it regularly.
DO NOT FORGET YOUR PASSWORD(S) – I lost a
password to a bitcoin wallet I had 12 months ago and it cost me
thousands of dollars in lost bitcoin price appreciation.
Every wallet will provide you with a public key or address – this
is the long combination of letters and numbers that you can use
to send bitcoin to.

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 Setting up a Bitcoin Wallet

CREATING A WEB WALLET

https://blockchain.info/wallet

SECURING YOUR ACCOUNT

You will be now prompted through a series of steps to secure
your account.

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SECURING YOUR ACCOUNT – EMAIL VERIFICATION

CHECK YOUR INBOX

Make a note of your wallet ID.

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 Setting up a Bitcoin Wallet

SECURING YOUR ACCOUNT – BACKUP PHRASE

After you are given the 12 key words – you will be asked to
retype them to ensure you noted them correctly.

You will be given a series of 12 English

words – this will be your Backup
Recovery Phrase – YOU MUST
WRITE THIS DOWN AND KEEP
IT SAFE.

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SECURING YOUR ACCOUNT – PASSWORD HINT

Don’t make the hint obvious

IDENTIFYING YOUR ACCOUNT – ADDING MOBILE PHONE

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 Setting up a Bitcoin Wallet

IDENTIFYING YOUR ACCOUNT – ADDING 2FA

A simple ‘use your mobile number’ is OK for 2FA

RECEIVING BITCOIN

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USING A SOFTWARE WALLET

https://electrum.org/#home. Download and then open the
application – Mac and Windows options are provided.

SETTING UP YOUR ACCOUNT

For most people, simply use Auto connect.

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Give your wallet a simple recognisable name.

• A standard wallet requires a password to use.

• 2FA uses two-factor authentication (usually a mobile
device).
• A multi-signature wallet is one that requires two or more
people to approve before transactions are sent.

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Electrum derives its private key using a “seed” consisting of a

dozen random English words. It is CRITICAL that you write
this down and keep it safe.

After you are given the seed above, you will be asked to re-enter
it, and then prompted to create a password.

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 Setting up a Bitcoin Wallet

Your (empty) wallet looks like this!

To receive bitcoin, simply click on RECEIVE to get an address.

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COLD STORAGE
Trezor is a physical hardware wallet that allows you to store
your bitcoin offline (i.e., in a safety deposit box).

If you buy it, you set it up by plugging it into a USB drive and
following the walkthrough provided online – it’s VERY easy. It
will require writing down a seed and pin code.

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SUMMARY
• A wallet is only as good as the manner in which you secure
the respective security information.
• Web wallets, whilst convenient, are not ideal (what happens
if you login and the wallet provider server is down?).
• I recommend using Electrum with a 2FA, ensuring that you
backup accordingly.
• For buy-hold investors, Trezor is a secure option but I
recommend it be stored in a vault or safety deposit box
facility.
• This guide is far from exhaustive – you must do all your
own due diligence and not rely solely on the information
provided in our guides.
• It’s always a good idea to try out new wallets with small
amounts of bitcoin first before progressing to larger sums.

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