When Nicholas Merten saw a video explaining Bitcoin in November 2011, he brushed it off, later lamenting that “I unfortunately did not do the right thing.” It’s hard to blame him, after all, he was only 13.
Now 23, he runs DataDash, a YouTube channel with over 470,000 subscribers, making it among the largest focused on the cryptocurrency industry. There, he shares tips about trading and makes thoughtful, balanced, and interesting commentary on various relevant topics along with occasional speculation. What is notable about his channel is that it is almost entirely absent of hype, preferring calculated and tempered analysis.
Merten is also the CEO of Digifox, a DeFi startup that aims to act as a one-stop shop for new cryptocurrency investors, soon allowing them to automatically deposit portions of their paychecks into crypto by way of dollar-cost averaging.
Merten got started with investing at 13, though “even before that I was doing research,” he adds, leaving one to wonder whether his first words were stock tickers. He was quickly bitten by the entrepreneurial bug, and by 17 he was experimenting with a clothing company of his own making, and separately “tried to make relaxation beverages” by formulating recipes with a partner company.
“It was a nice head start to understand a lot of the emotional nature of markets and market cycles.”
It was due to this “intimate interest” in entrepreneurship that Merten, who grew up in Virginia, chose to study business administration and finance at Virginia Commonwealth University. He quickly dropped out, however, opting instead for alternative education through Praxis, which matches accepted students with six-month internships for on-the-job learning after a three-month training period. Often, these internships convert into full-time positions, and Merten “was really hungry to get my first job.”
That first job as a sales data management intern came at age 18, located “six blocks down from where Steve Jobs used to live” in San Francisco, Merten recalls. This was followed by six months as a content manager at ClickUp, a project management software company that is “like a billion dollar unicorn now,” he says, emphasizing the learning opportunities that come with working at such a high-growth firm.
While working at ClickUp, Merten created his YouTube channel called DataDash, which he originally envisioned as dealing with data science and data analytics. Soon, DataDash became a cryptocurrency channel after Merten made a few videos on the subject. “I got a couple hundred views, and I was like ‘you know what, I’ll keep going’,” he recalled.
With the 2017 bull market in full swing, Merten decided to leave his job at ClickUp in order to devote his full-time efforts towards his crypto craft.
Don’t trade, DCA
In 2019, he expanded by founding Digifox, “which I originally started building back in 2013.” The startup consists of a smartphone wallet app that allows users to trade and earn interest on their cryptocurrency deposits via a plug-in to Celsius.
In the weeks ahead, Digifox will come out with a “get paid in crypto” feature, which will help people to receive a portion of their salary in cryptocurrency, received right in the app. Initially available in the USA and later the EU and UK, workers earning a salary will be able to simply request their human resources departments to direct a portion of their paychecks to a bank account owned by Digifox. ”Your employer doesn’t even have to know your earning crypto,” Merten clarifies, adding that the app charges a 1% flat fee.
“Buying crypto but in the US, I know that a lot of banks, they’ll freeze transactions on debit cards or bank accounts — we think of this as the ultimate crypto on-ramp.”
This method of regularly buying into a cryptocurrency is called dollar-cost averaging, or DCA, and is a common concept from the old world of traditional investing. Merten says that many new investors ask him “if it is a good time to buy, price-wise,” to which he recommends DCA as a way to spread out risk.
This is because the average buyer may have no way of knowing whether they are buying into a temporary peak. If we were to imagine a continuously rising asset, an investor who does not previously have a large amount of investment capital for immediate allocation would be better off to invest $1,000 per month for 12 months, rather than to save up for a year in order to invest $12,000 at the end. That’s why I get paid in Ethereum — an arrangement that has treated me well.
“It’s a great strategy. In this case, for someone to passively invest and not have to stress about the market,” Merten confirms. Another useful factor in the dollar-cost-averaging method is that its systematic nature tends to mitigate against the oft-dreaded “panic selling” which many new investors succumb to after seeing their investment drop in value.
Unlike many other channels, Merten’s DataDash does not encourage its followers to over-trade or enter leveraged positions despite the potential rewards. “The first principle I say is ‘do not day trade’,” he emphasizes, saying that passive investors are 95% more likely to end up in profit. But there’s something potentially even more dangerous than day trading — doing it on leverage.
🥳 We’re hosting a webinar and LIVE Q&A with @Nicholas_Merten on Dollar Cost Averaging next week!
According to Merten, leveraged trading is the biggest danger faced by crypto investors today. It is enticing, with a single correct call “easily” netting huge returns in a short timeframe — but at great risk. Despite his warnings, leverage is seen as an intrinsic part of crypto-investing by many, with a large number of influencers referring to leveraged trades as “positions” to differentiate them from mere “spot” holdings which are 1:1.
“It’s really bad that a lot of people are getting into leverage trading — you know they’re getting into trading on derivatives platforms, and it’s generally a losing game for most people.
Time to DeFi
With margin trading off the table, Merten encourages users to put their cryptocurrency to work using decentralized finance, or DeFi solutions. Merten believes that the app’s DeFi-like functionality is important, because high gas costs on Ethereum make on-chain transactions expensive for retail investors even if they know exactly what they are doing. “A small investor, like a $1,000 investor, they’re going to have a difficult time because there’s an immediate 5-10 percent fee on their trade,” he says, his example very likely an understatement.
ETH gas fees are highest from 4 pm to 12 am EST, especially on Tuesday & Thursday.
Gas fees rack up quickly when trading tokens or adding liquidity pairs to decentralized exchanges like Uniswap or SushiSwap. “As great as it is for someone who might be trading thousands, hundreds of hundreds of thousands of dollars, it doesn’t make sense for our everyday users,” Merten claims. Recently, NFT minting has been blamed as a cause for spikes in gas prices.
Once the crypto hits the Digifox wallet, users can choose to deposit it into a yield account, where it “can earn up to 5%” in interest denominated in the same currency. This is done through a direct plug-in to the external Celsius platform. Similar to traditional banking, earnings of depositors ultimately come from other users who elect to borrow from Celsius using cryptocurrency as collateral. “We try to say it’s like a kind of savings account,” Merten explains.
“I think that this is one of the few major opportunities we have in our lives in the 21st century — where you can invest in something and really make a sizable return”
Though, “Celsius doesn’t have a major insurance policy” for the user’s cryptocurrency they hold in custody while paying interest, Merten says he chose the platform after researching the security protocols of its competitors including BlockFi and NEXO. In the future, he expects that the company will allow users to earn a lower amount of interest, also known as yield, in an insured pool where “some of the yields that they’re giving up goes into an insurance fund” to compensate for potential losses.
He admits that it “provides some peace of mind” that Celsius has $20 billion under management, which makes Digifox a very minor player at around $10 million.
Merten believes that we are now halfway through the cryptocurrency market cycle — not in a period of fear or doubt, but neither yet at peak optimism, which he sets at Bitcoin approaching $200,000 and Ethereum trading between $15,000 and $20,000. He says this would bring the crypto market to a total value of $10 trillion, a far cry from the current $2 trillion market valuation.
“Different from most people, I don’t think the cycle is going to end this year, and I don’t think it’s going to end in early 2022 — I think it will be late 2022 or early 2023,” he says, referring to the many industry pundits who are calling for a peak around the upcoming new year.
Instead of relying on times of the year, Merten believes in “expanding cycles,” where the market cycles expand by “11 to 13 months from previous cycles.” He explains that in his view, the first Bitcoin market cycle was 11 months, followed by the second which lasted 24. As the cycle ending in 2018 took 35 months, he anticipates the 2022 bull market to last about 47 months.
“If history repeats, it would be December 2018 for the start and November 2022 for the cycle end,” he says referring to Bitcoin, adding that altcoins are likely to top “soon after.”
Despite his tendency to make predictions, he admits that he was entirely blindsided by this year’s NFT boom “I thought CryptoKitties was kind of the end of it in 2017, and I did not see it coming back with such a vengeance,” he recounts with a sense of bewilderment, referring to the cat-breeding NFT project which clogged up the Ethereum network in 2017. Merten says he is keeping an open mind despite fraud and “over-hype” in the sector.
With 10 years of investing experience, Merten considers a long-term outlook as a key virtue for those looking to make long-term profits.
“I like to make a few simple coordinated investments for trades — over a one to two year timeframe. I like to get into the maximum point of fear and doubt in the market when prices are at historic discounts, and I like to ride the wave.”
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