Greetings friends -
Below you will find the next installment in our series of written interviews with various on-chain defi Chads…
It is with @NickDrakon- former professional poker player turned full-time crypto investor, member of the @blockbytescom (formerly FTM Alerts) roundtable, host of the @DefiSparks podcast, and founder of @ReveloIntel - an extremely cool new tool/service for crypto degens :)
Nick has had a fascinating life and shares all sorts of wisdom on crypto/macro/etc below!
Interview
Q. Greetings Mr Drakon! You have a fascinating background… Could you expound on it? And also share how you ended up transitioning into crypto eventually?
A. Started my first business at 16 by convincing a nightclub owner to let me run Under 18’s events mid week while the club was closed. A year later I enrolled in a combined degree (Economics & Law) at uni and my parents were pissed that I kept being involved in the club business. By 21 I was an equity partner in that club as well as several others he would open.
I was introduced to poker by playing in his game. The first time I played I lost a small fortune, and although the money hurt, the biggest pain was from getting slapped around by these old dudes wearing gold chains. I was pissed, so I started studying the game. Within a few weeks I stopped losing and within a few months I was making more in the game than my cut from the clubs.
One of the guys in the game was a bookie and he opened an offshore online poker room which I started playing in. After a year of playing online I dropped out of law school in my final year to play full time. Parents are really pissed now.
Poker blew up worldwide shortly after, and I was in the fortunate position of being one of the few people who had spent significant time really studying the game. The next 4 years were an amazing time where I traveled the world playing cards and created 2 poker related businesses at the same time.
By 2008, regulation on online gaming in the US was getting out of control. I decided to exit my equity positions in the poker businesses. With so much money to be won, poker attracted some of the sharpest young people to the game. Everyone got really good, really quickly, and instead of trying to beat these super humans, I took my bag of cash and retired. Parents are happy. “When will you finish your law degree and get a real job?”
From there I immersed myself in the world of investing. Some of my poker friends had moved on to become traders and market makers, so with some help from them I started to manage my own money in a sophisticated way. In addition to my public investing I also started to invest in the private markets backing start ups. I started an eCommerce company in 2010 and built out a portfolio of complementary businesses which I operated. In 2017 I sold that collection of business to a private equity buyer, left Sydney and moved to Spain.
A side note here is that I was first introduced to Bitcoin through poker. Moving large sums of money around the world was extremely difficult as a poker player. No bank would deal with you because you had no reportable income. People owed me money from my poker days so around 2011 or so some would send me Bitcoin to pay off their debts. I didn’t understand anything about the tech or why it would be significant but I just kept it all.
The ICO craze in 2017 prompted me to look into the crypto space seriuously for the 1st time. I read the white paper and decided that BTC seemed interesting but the ICO stuff looked terrible from an investment standpoint. I shorted everything I could that was not BTC or ETH, primarily to hedge the BTC position I had collected over the years. I covered the shorts when it crashed but kept all my bitcoin and forgot about it for a while.
Then in mid 2019 the situation global central banks were in seemed precarious and I formed the view that global currencies were eventually going to fail. I started looking for ways to play that theme and at this point Bitcoin became an obsession. In Jan 2020 this virus showed up and I positioned the portfolio for the worst. Once the governments decided to shut the economy and it became clear that they would need to print trillions, Bitcoin became an obvious play and I increased my position by a multiple of 3.
By the time DeFi Summer came around, equities were reaching ATH’s and becoming less attractive, so I shifted my focus onto DeFi where for the first time I could see real utility and businesses being built. I started learning as much as I could.
People ask me why the switch from equities to crypto at that time and the short answer is that it had to do with the realization that DeFi would become a large industry with billions flowing through it. Since it was technical in nature I felt that if I could be early and collect enough knowledge I would be in a position to see fat pitches and swing for the fence. I felt the same way when I dropped out of law school to play poker 20 years earlier.
The fact it would be so risky and unregulated was an advantage for me because I was used to navigating those waters from my poker days. I decided to break off a chunk of my net worth and go fight it out in those DeFi streets.
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Q. How have your pre-crypto experiences aided you in navigating the crazy world of defi?
A. Multiple ways but here are the 3 main ones:
In poker you spend most of your time trying to avoid traps either on the table or off it. You need to learn how to avoid situations where you can get cheated, scammed or taken advantage of. I was exposed to many sticky situations and dealt with unsavory characters all the time. As a result I developed a sense of working out who could be trusted or not, and that has helped me in business and obviously translated well into the crypto space. Poker is full of bad actors that are sophisticated, experienced, well funded and most of the time backed by dangerous people. The bad actors in crypto are for the most part, amateurs in comparison so spotting them has been a much easier exercise.
When analyzing companies for investment, whether in the public or the private markets you are always dealing with incomplete, filtered and highly curated information. You know you are not getting the full story most of the time so it is important to read between the lines and try to connect the dots. The disclosure requirements in crypto are non-existent so you are working with a lot less information and sometimes with completely anonymous people. My experience in making private market investments taught me the right questions to ask and how to interpret the answers so that I can determine whether they will be good stewards of my capital. Important things I look for is how they will handle the inevitable adversity they will face and how they treat other people when under pressure.
Risk management and bankroll management are key components to being a successful trader or poker player. My experience in these 2 areas helped me formulate a set of parameters from which I could operate in DeFi without getting hurt. With such asymmetric returns it is important to ensure that you make many small bets and always stay in the game. Once I worked out how not to lose money then the focus shifted to how to maximize returns when I was right. The investing framework I built for DeFi is different from what I use in equities but it works on the same principles.
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Q. We are in the midst of quite the economic storm right now… what are your thoughts on how the next 12 months play out in macro?
A. The Fed has to keep raising rates quickly to try and get a handle on inflation. This has been my view since May and now that Powell has finally admitted that he has to break the economy to fix inflation I think we get to 4.5 - 5% fairly quickly.
Let’s remember that the inflation prints have been flat MOM even though oil is down almost 30% from its highs. Prices in everything ex energy are still rising. My base case is that we see $60 oil in the coming months, but what if I am wrong and it goes up from here? When does CPI start to drop in that scenario?
The 2nd and 3rd order effects of raising rates so quickly with the fragile state of the global economy are not well understood, however there is no doubt in my mind that something breaks in the first half of 2023. The debt service levels on the consumer side alone are going to cause chaos and that is only one area of concern amongst many. The news around Credit Suisse is concerning as well from a market sentiment standpoint.
Depending on how high unemployment gets and what specifically breaks, the government will then step in to stabilize things toward the end of next year and into 2024.
From a trading standpoint, the market is forward looking to the tune of 9-12 months. I expect the equities market to find a bottom leading into the end of this year and potentially even sooner. As it relates to crypto I think it is somewhat of a zombie market for a while longer as the global macro chaos plays out.
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Q. What do you think will be the next big defi “narratives”, or what thoughts do you have on defi for the future?
A. DeFi to this point has been an experiment as far as I am concerned. The main useful innovation so far has been stablecoins and pending upcoming regulation it will be interesting to see how that develops.
The second innovation that I think is useful, although it has been misused thus far, is the concept of creating a security token that can be used for any number of things (fundraise, pay dividends, governance etc.).
I am not too firm on what the next narratives are going to be, and as a result I am focusing my energy on infrastructure that is going to power what comes next.
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Q. What are some teams and protocols you are bullish on or have a lot of respect. for, and why?
A.
Liquid Driver - Dr Liquid is the kind of leader I like to back. He is ultra competitive, super sharp and obsessively focussed on generating returns. His no nonsense way of conducting himself is a profile I have seen succeed over and over again.
Defi Llama - In a competitive landscape, offering a product that is better and cheaper than the competition is a winning strategy. These guys ship ridiculously fast and their entire offering is free. I would hate to compete against them.
ThorChain - Responding to adversity is something I look for. I have been following them since 2019 and they have had lots of ups and downs yet they are still moving the project forward and getting traction. Staying in the fight is half the battle and these guys have proven they are up for it.
Chainlink - Most devs I speak to tell me that there is no substitute for the services Chain Link provides at this stage. Superior product. Mass adoption. Aggressive competitive tactics. In a world where DeFi thrives it is difficult to imagine how Chain Link does not win a huge chunk of that market share. Sergey Nazarov is an impressive individual and hyper focused on building out the infrastructure that will power web3.
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Q. What advice do you have for people in defi/crypto trying to “make it”?
A. The crypto industry is going to grow into a 10+ trillion dollar market over the next decade. Most people in crypto right now are trying to ‘make it’ by trading/investing, seeking out quick and ‘easy’ gains. The problem is that most humans are not built to play that game. It is a difficult and lonely internal battle that most people are just not suited for.
The path of least resistance and the one which I think has the highest probability of success is to participate in the growth of the industry by learning valuable skills that companies will need and pay a princely sum for.
How many stories do we hear about marketing managers, product managers or data analysts who quit their jobs to trade stocks in the last 20 years who are now worth 7-8 figures?
How many stories do we hear about such people who worked for Facebook, Google, Microsoft, AirBNB, Uber etc. that cashed out their options for 7-8 figures?
It is really hard to trade for a living. It is less hard to be in the right place at the right time with a valuable skill set and ride the wave that is about to come.
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Q. Can you tell us about @ReveloIntel and what you’re developing with it?
A. Information in crypto is highly fragmented and spread out across multiple mediums. That information can sometimes be time consuming to keep up with, and in formats which contain a lot of fluff (podcasts, interviews, AMA's etc.).
I personally pay folks to follow specific projects, consume all their content and then make notes for me. So instead of me spending an hour listening to a podcast or AMA I can spend 5 mins reading the notes which gets me everything I need.
Revelo Intel’s first product is going to be this notes concept but at scale. We will cover close to 100 projects at launch and all this information will be in the one place with tools to help users get what they need faster and more efficiently. A key point here is that these notes will not be opinions or contain any analysis. They will be a distillation of what was said with some context provided where applicable.
Users can follow projects, chains, people & organizations. We will add additional products that will complement the notes and have lots of cool ideas on how to build the platform out into a must have utility in the space. It will also be affordable at under $30/month.
Right now we have a free newsletter where we release 1 summary per day while we build out the platform and the processes so we can scale the effort. Planning to launch a full platform in a couple of months.
Plz sign up for free newsletter - https://www.revelointel.com/
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Q. What else are you working on currently? Any parting thoughts/shout-outs/recommendations?
A. I am working with the Blockbytes team as they try to build out a media business covering the entire crypto landscape. Austin, Clay & Justin are 3 of the most genuine & helpful people I have met in crypto. They care deeply about the mission of advancing the defi industry and onboarding the next few million users. I am grateful to be a part of the “Across the Chains” show and will help them succeed in any way I can.
https://twitter.com/blockbytescom
Stay in motion.
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Conclusion
Huge thanks to Nick for all the thoughts and wisdom!
Make sure to follow both him and @ReveloIntel (below)!
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Note: Thanks to our official sponsor for this month @DexGuru - make sure to check them out for your charting/analytics/on-chain swap needs!