Harsh truths about crypto we need to acknowledge to make life-changing gains.
Crypto is undoubtedly a revolutionary technology that will change the nature of money forever. It is a discovery that allows people to take full control and custody of their wealth, and create a desperately needed separation between money and state.
In these pioneering early days of crypto, it is also a degen playground where the innovative ground-breaking projects are surrounded by multi-billion dollar meme coins and tokens whose only value is that someone else will currently buy them from you. It is 5% revolutionary value, and 95% a sophisticated game of hot potato … for now.
In order to make money in this medley of incredible innovation mixed with sophisticated emotional hot potato, the first step is recognizing the harsh reality. Once you understand that crypto is a gigantic player vs player game, where most lose at the expense of the few who can see and navigate the unemotional reality, you will truly set yourself up to be on the winning side of that high-stakes PvP game.
The Harsh Reality of Crypto:
The concept that crypto is Player vs Player is not a knock on crypto, and should not be viewed as a criticism. It is a harsh reality that, although not unique to crypto, is particularly pertinent in crypto. The majority of projects do not generate a real yield that expands the base wealth in the system to the benefit of all participants. Instead, they overstate the “reported” value in the system with flawed metrics like market cap (MC) and fully diluted value (FDV) that are in no way reflective of the value stored in the system or the value that could actually be extracted from the system (or project).
As the markets grow and expand in the course of a bull run, those 95 out of 100 projects with inflated values can maintain those illusions as the new capital entering the market far outpaces the capital leaving it. When the capital inflows begin to lag the capital outflows, you have reached the end of the game of sophisticated hot potato. The race for the exits is quick and brutal, as we saw at the start of the bear market in November of 2021.
Always keep in the back of your mind that we are all racing towards that cliff, and although the gains will melt faces, and we may all feel like geniuses, the game has an abrupt end we need to be prepared for.
Crypto Truths for Life-Changing Gains:
Let these truths serve as an important reminder of the bull market to come. As your portfolio grows beyond your wildest expectations, and you begin to lose perspective on the value of money. When you begin throwing 10X your weekly paycheck at the latest meme coin and buying the most recent hot JPEG for thousands of dollars. When you are ready to quit your career and go full-time crypto … remember that the game is 100% player vs player, and most players will lose in the end. The ones that recognize the shift and the harsh realities — that most of this is a big game of hot potato — will be the ones who leave the game as winners. Keep in mind these are generalizations, and are not meant to apply universally … exceptions exist.
1. Market cap and Fully diluted value are BS metrics
DogeCoin has a market cap of $11.5B, but that amount of value cannot be extracted. A mere $1.5M dollar sell would push the price down 2%, just imagine if 10% of the supply wanted to sell. MC and FDV are an illusion.
2. Games do not need tokens
There is nothing a game-specific token can do that ETH or USDC could not do better. Even the most successful Web2 game could not sustain a token: World of Warcraft had a huge demand for its gold, but the value of that gold was on a permanent downtrend. Tokens can be useful to bring in-game assets outside to the real world, but in the current iterations are nothing but money grabs.
3. Governance and Staking are not token utilities
Apart from ETH and maybe the top couple L1s, governance is a sham utility that provides next to no value. Staking is even worse, as it is predominantly paid for by inflation (which is just redistributing the protocol’s value from non-stakers to stakers)
4. Nothing is actually decentralized apart from BTC and ETH … and they don’t have to be.
Decentralization is a scale, and in the case of startup protocols generally a luxury. BTC and ETH are sufficiently distributed to be considered “decentralized”, but effectively everything else is at best “decentralization in progress”. The reality is, though, that decentralization is not a key metric when evaluating short and mid-term investments as in the case of the majority of altcoins.
5. Crypto partnerships are generally a farce
Crypto partnerships are like suggesting you are partnering with Google when you use the search bar to ask “Am I pregnant?”.
6. Influencoors are informative Nincompoops
Sure, there can be a lot of value in listening to and consuming influencer content. Always keep in mind that they are not your buddies, generally will dump tokens on you, and have front run every opportunity they present you. Granted, there are plenty of good ones that provide valuable alpha, but they should be considered research tools rather than trade indicators.
7. 97% of TA “Traders” lose money over the long run. (*1)
Technical analysis is anything but technical. Yes, it can provide some small insights into price levels of concern, but using lines on a chart to make investment decisions is a sure way to get wrecked long term. Over 97% of day traders lose money over the long term, buy your conviction plays and be patient.
8. True interoperability does not exist
Blockchains are silos by design, and they cannot natively communicate with one another. What we have are increasingly better means of automated third-party communication between chains, with reducing amounts of friction as the tech improves.
9. There can be no ETH-Killer.
If you kill ETH, the L1 doing the killing would be sealing its own fate. Apart from a few exceptions (eg Solana), alternative L1s and L2 are really just bulk buyers of ETH blockspace. More importantly, they are complementary. The success of one is good for the other.
10. Maximalism is Toxic
The laser-eyed BTC maxis decrying everything as “shitcoins”, the ETH maxis with disdain for other L1s, and the SOL maxis with the “ETH is garbage” tagline are all bad for crypto. The reality is we should all be cheering on and helping each other. The success of one is the success of all.
To be clear, despite all of these difficult truths, I could not be more bullish on the future of cryptocurrency.
Crypto will cure much of the disfunction in the world; the malinvestment and rot that comes from over-regulation and state-controlled Fiat money. For crypto to reach its full potential, and for us pioneers to benefit from our early participation, we must acknowledge those difficult truths while simultaneously being unafraid to jump into this misunderstood nascent technology head first.
This bull run will be a rollercoaster of ups and downs but will be the largest one to date by capital inflows by far. We are nearing the late stages of the parabolic adoption of crypto, and the next cycle or two are your last best chance to become independently wealthy.
“We do not err because truth is difficult to see. It is visible at a glance. We err because this (fantasy) is more comfortable.” ~ Aleksandr Solzhenitsyn
Good luck out there, and see you on the next one!
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