Siam Kidd, aka The Realistic Trader, is a former RAF pilot turned trader and investor, whose educational work is intended as an antidote to the many get-rich-quick schemes often found in the same space.
In this interview with the Two Blokes Trading podcast, he speaks to Tom and Owen about trading's current hot cake: Cryptocurrencies.
In the episode, Kidd is open about the reasons why he used to be against Crypto, and outlines the key reasons why he has since changed his mind and now believes that they are here to stay...
Blockchain...it's going to kill every single middle man on the planetSiam Kidd
On defining Cryptocurrencies...
When I first got into this, I was confused. Because I was like, well what the hell is a Cryptocurrency? And the easiest way to say it is, "online currency". But then that made me think, well how is it different than PayPal? With PayPal, you have a lot of intermediaries: you basically put your money onto PayPal, and then you send money to someone else's PayPal account, but along the way there will be middlemen, i.e. banks, exchanges, and you'll have commissions and what not.
So it wasn't a true Internet currency, so to speak. It was just like sending it to another bank. Whereas Cryptos is a true internet currency, and really peer-to-peer. So I can send Bitcoin or any other Cryptocurrency directly to you, from my wallet into your wallet and no one else will touch it, there will be very minimal fees. That's what a Cryptocurrency is.
Explaining Blockchain through history...
You can't really talk about Cryptos without taking a little look at Blockchain. Blockchain is something which really confused me for a while, because in essence it's an online "spreadsheet" so to speak: it's a distributor ledger. If you understand Blockchain then you sort of understand Cryptos a lot easier. So the first explanation of Blockchain is the Yapese.
There's a civilization in Micronesia called the Yapese, and for a long long time they had a money system with these things called Rai Stones. They're huge stones with holes in the middle, and that's what their money is. Basically whenever someone did a transaction with someone, all they are doing is swapping ownership of these stones, which are dotted around the island. So if Joe sold a pig to Bob, they'd both go "right, I now own part of this stone, do you agree?", "yes I agree". And then they would tell the village: "right I now own this part of the stone". And everyone would agree. They've done that for thousands of years. So that is basically the world’s first Blockchain, because everyone knew about that transaction.
Explaining Blockchain through football...
And the easier way I now think of it is having a 5-a-side football match. You're at school playing football and someone scores. It's one-nil. It's a legitimate goal, everyone is like "yep, one-nil, good goal". But let's just say the goalkeeper was a bit disappointed and was like "no, that goal didn't count, he was offside". And the thing is, everyone in that team, or 9 out of 10 people on the pitch, have agreed it's a legitimate goal, and the knowledge that its one-nil is basically a Blockchain. They all agree that the score is one-nil, even though the keeper said it wasn't.
So that's why Bitcoin and other Cryptos are pretty cool because no one can really interfere with it. If I send a Bitcoin to you, and a few other nodes agree that this transaction took place and was legitimate, and if some nefarious operator went "nope that Bitcoin is mine", all the other nodes will go "no, that guy is being a dick, ignore that person".
There are different types of Blockchain, but if you look at Bitcoin, that Blockchain is completely transparent. Every transaction on the planet, no matter who's sending it to who, is out there on the Blockchain and you can see and which address it went to. But you don't know who that is. It's legitimate because the community says it is.
On the current Crypto market...
It's exploding, it really is. It's just under a billion dollars in market cap, and it's growing almost exponentially. There's around a thousand Crypto currencies at the moment, most of them are pure bullshit. And anyone who is like "you need to buy this particular coin", it really is a mugs game. It's no different to penny stocks on the AIM market. It's a purely futile task, just picking a couple of Crypto coins out there, hoping it's going to be the next Bitcoin or Ethereum.
On Bitcoin and Ethereum...
In this whole market the two big boys are Bitcoin and Ethereum. Bitcoin is the daddy, created in 2009 in the aftermath of the sub-prime mortgage crash when there was a bit of demand for "honest money". With Bitcoin there will only ever be 21 million Bitcoin, ever. And that's why people are kind of calling Bitcoin "digital gold", as it's got in-built scarcity.
Ethereum is the new boy on the block and is all about smart contracts. They've basically built this platform where you can build all sorts of different smart contracts and other Cryptos. I think there are around 300 different Cryptos that use the Ethereum platform.
Why he still has some doubts...
Regardless of what anyone says, this is the biggest bubble in human history. It makes the Tulip mania of 1636 look absolutely insignificant. I cannot stress how big this bubble will be. 65,000% growth in 6 months? This is just tech bubble 2.0, from 2017 to 2020/21.
Then there's the risk. This is the wild wild west, it really is. The exchange risk, the third party counter risk. You can't hack Bitcoin; the NSA tried to hack Bitcoin for six months straight and then gave up, which is impressive. That really shows how strong the Bitcoin algorithm and in-built security is. However the exchanges where you go and buy Cryptos are getting hacked, left, right and centre.
And the Cental Banks and Governments don't like them one bit. And there is a phrase on the markets "Don't fight the Fed". Because you will nearly always lose. It's exactly the same here; the central banks have spent 113 years getting their squid-like tentacles around the world. They're not just going to role over and be like "well done Bitcoin, you've got us".
Why he's finally coming around to Crypto...
It's the first time a new major asset class has been introduced to the world since 1694 when the UK Government first released their Gilt (UK Government Bond). And like with anything, when you look at history for new asset classes, guess what? Money tends to flirt with it and then pile into it. We've had the pioneers and early innovators who have jumped onto this, and now we are getting the early majority. And then you have the late majority; the masses. We're still early days when it comes to Cryptos.
The Crypto market cap is exploding, yet the public haven't set foot in it. I'm being really, really conservative here, when you're looking at the stats around the number of e-wallets etc there's about 15 million accounts, which means there's only 1 in 500 people playing in the market. Now I think that stat is quite overly conservative, because I myself have four accounts. So most people have multiple accounts, so I'd say 1 in 1,000 are investing in Cryptos. Even though this is a bubble, the things that pop bubbles are the public. The public do the worst thing at the wrong time, always. You need to use the public as a contrarian indicator. And a good indicator for when the public come in, is when you see it on Fox News all day, every day, or front page of the Sun newspaper. Or every taxi driver is saying buy Ethereum etc.
Blockchain is going to consume the planet, just like the Internet did. It is like the Internet in the mid-90s, it really is. Everything will have a form of Blockchain, all businesses, everywhere you go, You'd be a fool if you don't at least research Blockchain...it's going to kill every single middle man on the planet.