I’ve created a five-pillar “5 Ts” system for isolating and identifying the right coins to buy. When you’re all-in, with 100% of your liquid wealth in digitals, you’ve got to have a system like this to separate juicy opportunity from a life-changing catastrophe.
All the pillars in the system are equally important, but at a time like this, when major crypto failures are happening left and right and the world seems to be flipped on its ear, I though it’d be a good time to dive deep into the “T” that’s in play right now.
I’m talking about the human element: the team. The team is something I weigh pretty heavily when I’m making a buy/pass decision on a crypto.
And I want to talk about it some more, because I think if more people had paid attention to project teams, a lot of the financial carnage and mayhem we’ve seen since May might not have happened.
Here’s What a Lot of Investors Missed This Time
TerraLuna and Celsius are two of the highest-profile failures the crypto world has experienced over the last few months. They’re both multibillion-dollar dumpster fires, and they both made investors promises that proved to be utterly worthless BS.
I could see that at the time. When these platforms’ tokens came up for consideration, I looked first at the teams backing them… And even then, I didn’t like what I saw at all.
Celsius’ Alex Mashinsky and TerraLuna’s Do Kwon came off to folks infected with FOMO Fever as charismatic, intelligent, even fearless innovators, with “no time for haters” – which explains why so many people fell for it.
But if you asked them legitimate, probing questions – you know, due diligence – about their projects, you’d get a non-answer, or an insult, or banned from the platform altogether, and frequently you’d get all three. As a kicker, you’d get a raft of abusive BS from their cultish acolytes and followers.
I actually called out Mashinsky on Clubhouse once over his promises of high returns, asking how that would even be possible, let alone profitable, and I got an arrogant non-answer… and got the boot from the platform.
Never accept that when you’re deciding where to invest your hard-won capital. Due diligence should never be treated as trolling, and if it is, run – don’t walk – as fast as you can in the other direction. A founder or team that dismisses questions or concerns out of hand is a huge red flag.
Then there’s TerraLuna’s Do Kwon. Before he was responsible for ruining tens of thousands of people and pissing away their wealth, and before he was being investigated by authorities across five continents, he’d cultivated a reputation as the “Bad Boy of Crypto.” Anyone who dared to question the validity or sustainability of his projects was publicly insulted.
“Hey, Kwon – can you map out for us how you can possibly offer investors consistent returns of 20% consistently? Maybe walk us through it step-by-step?”
“I don’t debate with poor people.”
Frances Coppola, a widely respected, widely read economist, got the “poor” treatment after she called Kwon out on TerraUSD’s “algorithmic stablecoin” model. Coppola said, and she was 10,000% right about this, that its self-correcting mechanisms fail in the face of investor panic. That’s exactly what happened. You cannot have an asset that’s supposed to be backed by cash not be backed by cash. The basic premise is totally invalid, and I wish investors had seen that.
Now Kwon’s in some Singapore bolthole, hawking new versions of the same old Ponzi scheme while law enforcement closes in, and Coppola’s changed her Twitter handle to “Frances Schadenfreude Cassandra.”
“Hey, Kwon – what’s the plan once the Is are dotted and the Ts are crossed on all the extradition requests? Wait, don’t answer that…”
Of course, there are absolutely worthwhile projects out there.
How to Spot a Great Team
It’s easy – a founder, or a team, that’s actually onto something good, that’s proud and enthusiastic about their project, will always take the time to walk you through it step-by-step. They welcome due diligence.
When I look at a project team, I want to dig into who’s building it. Who are the principals? Have they built other successful things, and if not, have they failed up? I like to use Ripple (XRP) as an example. David Schwartz is there – he’s awesome and a former National Security Agency cryptographer… but Chris Larsen and Brad Garlinghouse are there, too, and they’re quasi-crooks. One awesome player, two absolute heels – doesn’t pass the smell test. Chainlink (LINK) is another project I’ve avoided. Sergey Nazarov is an interesting, accomplished guy, but LINK devs sell coins just as fast as they get them. Does that sound like a team that really believes in its project?
And I include venture capitalists – “VCs” – in my team evaluation. You want to look at who’s investing in new projects and then scan their track records. Do they have a record of investing correctly again and again? If the answer’s “yes,” that’s a big plus for me. I like to follow VCs like Coinbase Ventures, Andreessen Horowitz, Polychain Capital. These firms have a proven track record of success, and if they’re onboard, I’m very interested. Big, conservative banks are also a good sign, because they won’t invest a nickel until all their questions are answered, and neither should you.
You should be asking questions like…
- Do I trust this team to take me along a clearly defined path to profit?
- Can I trust these folks?
- Would I let my kids hang out with the founders?
- Do I even like these people?
- Would I loan this team money?
- Have they got the business background to execute?
If the answer to any of these questions turns out to be “No,” it’s time to tap the brakes.