Crypto Asset Investing in the Age of Autonomy

Competition, the drive for efficiency, and continuous improvement ultimately push businesses toward automation and later towards autonomy. If a business can operate without human intervention, it will minimize its operational cost. If Uber can remove the expense of a driver with an autonomous vehicle, it will provide its service cheaper than a competitor who can’t. If an artificially intelligent trading company can search, find, and take advantage of some arbitrage opportunity, then it can profit where its competitors cannot. A business that can analyze and execute in real-time without needing to wait for a human to act, is a business that will be able to take advantage of brief inefficiencies from other markets or businesses.

This trend following a thesis that is based on 100 years of proven economic theory. Short-wave economic cycles, those 5- to 10-year cycles, are driven by credit but the long-wave economic cycles, those 50- to 60-year cycles, are driven by technological revolution. We’ve had 5 cycles over the past 200 years with the last wave, the Age of Information & Telecommunications.

We've seen evidence that a new cycle has begun. Technological revolutions come by way of a cluster of new innovations. About a decade ago, you started to see AI, robotics and IoT (sensors) delivering on automation. That’s been powerful, but not transformational. It does not force businesses to fundamentally change how they do business. The last piece of the puzzle was cryptocurrency because it allows us to process and transfer economic value without human intervention. Soon, there will be a global race to build autonomous operations. Businesses and organizations without autonomous operations simply will not be able to compete with those that do because … autonomy is the ultimate competitive advantage.

Crypto is the mechanism that will accrue value from being the infrastructure for the next digital financial revolution. Crypto Asset Investing lays out a case that we’ve begun a new technological revolution similar to the Internet Age of the 1990’s. Artificial intelligence, the Internet of Things, robotics and cryptocurrency are converging to deliver on a new age, what I call the Age of Autonomy. Understanding the transformation that’s taken place before anyone else can yield enormous investment opportunity. In this book, you’ll learn how and why to invest in crypto assets.

Acknowledgments vii

Author’s Note ix

Introduction – Why This Book and Why Now xi

Part I The History of Economic Cycles and Monetary Policy 1

1 The Fed and You: A Brief History 3

2 Understanding Economic Cycles 16

3 The Long-wave Economic Cycle 27

4 Safe is the New Risky 35

5 Credit and Commodity Currencies 43

6 The Fall of Credit Money and the Rise of Multicurrencies 56

Part II The Rise of Blockchain and the Age of Autonomy 79

7 A Digital Commodity: Bitcoin as Digital Gold 81

8 Blockchains 100

9 The Age of Autonomy 117

10 Clusters of Innovation in the Age of Autonomy 130

11 The Case for Investing in Crypto Assets 141

Part III Crypto Investment Strategies 155

12 A Primer on Crypto Asset Investing 157

13 Quantitative Analysis Frameworks 176

14 Understanding Crypto Asset Classes 198

15 Investment Themes 209

16 Building an Investment System 223

Notes 245

Further Reading and Resources 255

Appendix 259

Index 265

JAKE RYAN is the Chief Investment Officer at Tradecraft Capital, a crypto asset hedge fund. He holds a degree in computer science with a specialty in artificial intelligence from the University of Texas at Austin, and has his early work cited with over 700 Google Scholar citations. He went on to become a software entrepreneur and investor in traditional markets, building a multi-million-dollar software services firm and continuing as a successful angel investor before focusing on the crypto asset investment.

Bitcoin and other crypto assets for years have ebbed and flowed in news cycles but particularly of late have caught worldwide attention. While many investors continue to disregard them, those who are paying close attention—and who are not intimidated by the complexity and novelty of cryptocurrency markets—are poised to profit by getting in early and investing for the long term of what may be the greatest wealth generating event of our time. Crypto Asset Investing in the Age of Autonomy is an indispensable handbook showing new and experienced investors how established financial strategies like valuation and asset allocation apply to these new markets. Equipped with this knowledge, any investor can prosper, taking advantage of one of the biggest financial paradigm shifts of our time.

A new long-wave economic cycle, the Age of Autonomy, is here—we've seen evidence that this new cycle has already begun. Technological revolutions come by way of a cluster of new innovations. About a decade ago, you started to see artificial intelligence, robotics, and the Internet of Things (sensors) delivering on automation. That's been powerful, but not transformational. It does not force businesses to fundamentally change how they do business. The last piece of the puzzle was cryptocurrency because it allows us to process and transfer economic value without human intervention. Soon, there will be a global race to build autonomous operations. Businesses and organizations without autonomous operations simply will not be able to compete with those that do because . . . autonomy is the ultimate competitive advantage.

This book is an excellent place to start for any investor who hopes to explore crypto investing. In order to succeed, crypto asset investors must understand how to manage risk, implement systems, and wisely choose assets that are truly the underpinning of this revolution. This book explains the why behind bitcoin and other crypto asset investing, showing that crypto assets are foundational to investment portfolios given today's economic outlook.

A new decentralized digital economy is being built where sound money is required but not sufficient. New forms of capital and capital systems are being built for a new future. In three concise parts, author Jake Ryan—Chief Investment Officer at Tradecraft Capital—lays out what investors need to know about the technological innovation of today and why it is opening up a new long-term economic cycle. When investors understand these concepts, the crypto investment proposition becomes a no-brainer. Crypto Asset Investing in the Age of Autonomy concludes with the concrete investment strategies that will boost portfolios of any size. New and experienced crypto investors alike will benefit from this clear-cut approach to generating exceptional returns in this new asset class.

Praise for CRYPTO ASSET INVESTING IN THE AGE OF AUTONOMY

"It was inevitable that as technology gradually overtook all other aspects of how we lived the past 100 years, money would be next on the menu.??Jake Ryan artfully weaves the narrative that the convergence of new technology and economic cycles has put us at the dawn of a new Age of Autonomy, where individuals leverage technology to become more powerful than institutions—even more powerful than central banks and the state. Decentralized trust—pioneered by bitcoin, expanded by an explosion of blockchain applications—is at the heart of what he sees as a new golden age of individual power and wealth, for those who are brave enough to embrace the future that is already at least partially upon us.??This is a solid read that's completely accessible to the complete novice, yet one that rings true to those who have been in the trenches of this evolution for many years." —Michael Terpin, Founder, Transform Group; Co-founder, BitAngels; Recognized as one of the "top 100 people in blockchain" by CoinTelegraph

"Jake's work encapsulates how our entire world is shifting from centralized companies and gatekeepers to an autonomous world that moves at the speed of software underpinned by crypto. In this new world, anyone can create a decentralized project with code and incentivize a global community of stakeholders to optimize and enhance the project at speeds traditional companies can only dream of. Jake dives into this new realm and demonstrates why this space can be an attractive investment opportunity." —Tom Shaughnessy, Co-founder, Delphi Digital; Partner, Delphi Ventures

"Autonomous AI is a brave and forward-looking concept. While we can build autonomous systems already, there are still issues such as trust, fairness, and safety that are not easy to solve. But if we can solve them, perhaps by starting small and expanding, autonomous systems will be essential in the future. In some domains, it will soon be even irresponsible to have a human in the loop. Therefore, it is important to explore conditions and ingredients of autonomy as Jake Ryan is doing in this book. It will help prepare for the future that will provide tremendous advantages if we can do it right." —Dr. Risto Miikkulainen, Professor of Computer Science, The University of Texas at Austin; AVP of Evolutionary AI, Cognizant Technology Solutions

"Will autonomous technologies like bitcoin actually create more autonomous individuals? This is the book we've been waiting for—a must-read that demystifies digital assets and crypto investments. This how-to guide provides us with the edge necessary to understand and succeed in this fast-paced and dynamic space—and in the spirit of blockchain, brings us one step closer to a more inclusive economic playing field with more opportunities and resources for individuals worldwide." —Dr. Lene Martin, Blockchain Professor and Founder/Director, Blockchain at Pepperdine, Pepperdine University

"Our society sits at an important confluence of exciting breakthroughs like Artificial Intelligence, Robotics, and the Internet of Things. By coming together, these technologies will create new ecosystems of business ventures that can function without the need of human intervention or outside assistance. Jake Ryan's work captures how digital assets like cryptocurrencies will serve as the catalyst for interoperability between these new phenomena and spur a wave of economic growth—his book outlines a clear roadmap for investing in this impending future." —Baxter Hines, Author, Digital Finance: Security Tokens and Unlocking the Real Potential of Blockchain