The post-Christmas, pre-New Year’s period is always one of my favorites. Every year, I take a couple of days to unplug from the internet, reflect on the past year, and look forward to the year ahead. What I’m excited about, what I’m fearful of, what I need to do to evolve, who I need to get back in touch with, how can I relentlessly prune bullshit, which of my core beliefs have changed, and which high-conviction contrarian beliefs do I still hold.
The process helps me declutter my mind, refine my plans for world domination, and get excited about how amazing, happy, and successful future me is going to be. (Even if New Year’s Day me wakes up hungover and feeling like a beached whale.)
I wanted to share some of my thoughts from this year’s exercise, since so many of them had to do with crypto. Some of these might be helpful to you, others might offend you, still others might seem stupid, simple, or obvious. But I offer them up because writing for such a great, long-term audience sharpens my mind, and weeds out half-baked thoughts.
95 Theses for 2018
On Crypto Prices and “Investing”
1) 2017–2019 will be THE big crypto bubble. Things could get nuttier from here…far nuttier than in the dotcom era. The retail investor base is 10x larger, with 24/7 access to the FOMO and get rich quickism. And we’ve got CNBC to help with the pump!
1a) Unbelievably, the institutions will be the last money in this time, with the futures market and custody solutions just coming online, and the mythical ETFs perhaps not too far behind. This has been properly hyped, I think. I could see a Q1-Q2 stampede.
2) OTOH, there are only like five people talking about “fundamentals” right now. Most seem to be triangulating on the same general view. I call it the cryptoasset barbell: cryptocurrencies (sky’s the limit), utility tokens (heading to zero), and “smart securities” (coming soon).
3) BTC, ETH, ZEC, and XMR are the main cryptocurrencies. These could still have a LOT of room to run. Money is a reflexive asset where the more people buy it and use it and believe in it, the more valuable it gets. Cryptocurrencies are the ultimate momentum play.
4) Utility token valuations should theoretically be capped at the future maximum utility value of the network divided by velocity. Low velocity comes from a need to hold: you hold money (reserve savings) and securities (income producing) and very few staking tokens.
5) Most utility tokens, then, will go to zero, regardless of team quality and execution. You simply don’t need to hold them but for momentum & greater fool investing. When the market lacks “higher order” investors for speculators to flip to, assets will unwind. Viciously.
6) Desperate utility token teams will later try to concoct velocity “sinks” to ward off unravelings. The most common sinks we’ve seen have been to create incentives to “stake” coins: most commonly protocol governance rights and network fee dividends.
6a) Kyle Samani from Multi-coin wrote a great piece about some of these attempts. Most will fail, but some might have limited success.
7) Crypto-securities aren’t really a thing yet, but they will be massive, and they will actually have measurable fundamental value due to their cash flows or the residual claims they give their holders. Most surviving utility tokens will at least try to convert to crypto-securities.
8) Bidding up assets you don’t believe in is tulip bubble speculation / greater fool investing / pump and dump BS. That or investors are just impossibly optimistic about how valuable a fledgling network’s future cash flows could be. Nah, just kidding. It’s scammy. Don’t @ me.
8a) Related reading: 1) Burniske, 2) Winton, 3) Pfeffer.
9) I didn’t understand XRP at $1bn. I really don’t understand XRP at $100bn. It’s not required to use Ripple’s software, so unless banks are adopting the currency as a new global reserve, it doesn’t make sense. But the top employees are now billionaires, so that’s cool.
10) BCH is tough to root for, but you have to be long as a hedge. If BCH loses badly, I doubt we’ll ever see on-chain BTC scaling, and Core’s stranglehold on the dev roadmap will be cemented. But if BCH wins, it could take down the whole asset class. Rock. Hard place.
11) Cardano, NEM, and IOTA at $10bn market caps make me want to commit seppuku. Seriously, what the f*ck is wrong with people.
12) BTC = reserve currency for people that hate the fed; ETH = reserve currency for people that hate the SEC; XMR = reserve currency for people that hate big brother; Dogecoin = reserve currency for people who don’t care about money.
13) Most mature cryptos trade in pairs or as a group. BTC/BCH, ETH/ETC, XMR/DASH/ZEC. If you’re going to trade, you should think about how these things trade vs. their baskets. LTC doesn’t trade higher than 0.02 BTC. ETC follows ETH up and down. Et cetera.
14) The time to make money in ICOs was in 2015 and 2016 when they were contrarian. Almost everything else more recently was either a) restricted to insiders, or b) underperformed vs. BTC/ETH. (If you can’t spot the sucker at the table, you’re the sucker.)
15) Good token sale teams are starting to demand that their pre-sale investors submit to lock-ups and vesting schedules. That’s admirable, but when you destroy your own liquidity premium, you will probably need to slash your valuation expectations.
16) Tezos was a cool project that embedded governance at the protocol layer. But it will probably be remembered as the project that made people start to think twice about “clever” overseas legal structures and hand-wavy “these are actually donations” mistruths.
17) Forks with airdrops will become the preferred alternative to ICOs. You give away free money in order to get people excited about the new and improved project. The only thing they pay is attention. The people who truly buy in become your collaborators.
18) Stablecoins will work until they don’t. Sure, the Basecoin and MakerDAO teams seem strong, but these things will always break under (not so) black swan market conditions. And like the fiat currencies they aim to replace, once they break, they’ll be broken for good.
19) Token sales for decentralized derivatives protocols. Tokens to short tokens! What could go wrong?
20) There is no rhyme or reason to prices in crypto, and there will not be in 2018. Best to embrace that this will be a sentiment-driven market until the crash. Stay safe and embrace the opportunity to sit on the sidelines and do research! There will be gems to swoop up in the coming 99% off sale.
People and Personalities
21) I respect Vitalik more every day. He says all of the right things and strikes me as a once-in-a-generation type of visionary leader for the ethereum community. That said, whether he ends up like Steve Jobs or Elizabeth Holmes depends on some pretty ambitious technical breakthroughs. Crypto is so polarizing that I don’t know what to believe re their potential.
22) There is only one Andreas, and we’re lucky to have him. There’s no more deserving person in crypto to earn a windfall gain than Andreas Antonopoulos. He’s been patient zero for many in the industry, and his positivity and authenticity are an example for all. The $1.5 million (and counting) in donations he received made for the feel-good story of the year.
23) Yes, Craig Wright could be (part of) Satoshi. Satoshi was a jerk in emails. CSW is a jerk in real life. Satoshi had a fat early stash. CSW seems to have been early to BTC (no matter your opinions of him). CSW convinced Gavin and some other smart and early bitcoiners he was the same person. Finally — and this is the clincher for me — if you were Satoshi, you’d probably be paranoid to the point of believing that no matter the extremes you went to remain hidden, at a large enough $ value of bitcoin holdings, powerful people would eventually dox you. What better way to hide in plain sight than to get an army of smart bitcoiners discrediting you and mocking you as a con artist. That’s how a genius would have played things.
24) Read everything Chris Burniske writes. He’s taking “intellectual compounding” to a whole new level. Started with some basic foundational theories and build on top of them. He’s become the go-to analyst, and CryptoAssets is a must read / must gift to newbs.
25) So many good crypto podcasts right now. I’m thinking of doing one because it’s probably easier than writing. (But that’s why I ultimately won’t do one.) Laura Shin’s Unchained is the most professional, Marty Bent offers a bro-y alternative by working with the Barstool Sports guys, Brian Crain’s Epicenter podcast is great. And I like Arthur Falls’ The Third Web, mostly because of his Aussie accent.
26) The best crypto twitter follows right now are: Tuur Demeester and Ari Paul (trading insights), Jameson Lopp (bitcoin basics and maximalism), Andreas (nails the why), and Neeraj (policy & memes). FortuneLedger actually put together a great list that I mostly agree with.
Source/More: 95 Crypto Theses for 2018 – TwoBitIdiot – Medium