Whether you are getting ready for guests to join you for the holidays, or thinking of how to position your portfolio for the coming year, now is a time of preparation
Excellent. I especially appreciated your fair treatment of crypto. Just a few hours ago I Tweeted something to the effect of, "Yes I understand how horrible things are in crypto land right now, but the technology has not actually failed." Bitcoin and Ethereum remain unchanged, still producing blocks.
As I was reading your article another thought occurred to me. We all make jokes about retail investors buying the highs and being so bad at timing markets. We laugh as they (I am part of the "they") buy the rips that the so called sophisticated investors are selling. Yet when prices are attractive, as they are in crypto now, there is so much pressure on Twitter and in the media to get the hell out! Never touch this awful stuff! You would be insane to buy crypto!
Market commentators make it difficult to buy at/near the lows. Does that make sense? I'm just hashing out ideas here, maybe my thinking is not coherent.
Buy low, sell high, yet when prices are low it can feel like the entire world will call you a fool for buying that most hated of things.
Behaviorally, it is extremely difficult for investors - both institutional and retail - to not get caught up in the emotional actions at the top and bottom. Institutions are subject to these same biases for sure. The biggest difference for professionals tends to be risk mgmt, the use of stop losses and/or hedges etc. Finance is not difficult - it is cash flows and discount rates. This is no different for crypto than for anything else. The question is 'what are the cash flows'? They don't have to be current but they have to happen at some point otherwise it is just a greater fool theory. Ethereum has cash flow now from staking. Once people get comfortable there is no fraud, they can assess the value based on the cash flow from staking. For now, you can do that but you have to use a very high discount rate to reflect the risk involved. Of course the risk comes from CeFI and not DeFI but this is how many are interacting with the space. The broader crypto space evolves and survives. This is no different than the dot-com implosion. However, it takes years because this time, there was meaningful money lost.
It is quite difficult, and what we're seeing right now is the surprising degree to which the so-called sophisticated investors/institutions did get caught! And were so eager to invest in crypto that they chucked DD out the window. I have to imagine that the LPs in funds such as Sequoia are asking some pointed questions, like if you missed FTX, what else have you failed to see?
I also like your point about Ethereum having cash flows. I especially appreciate that it's not just fixed flows either. The more people use the network, the more money flows to the stakers. I think that's an excellent feature.
I feel a bit ill putting capital into crypto right now, which has traditionally been the sign of a good trade. If it takes a few years to pan out, so be it.
I have yet to find the killer app but it will come. I would agree with you it is most likely on the Ethereum chain. Much like the dot-com blow-up, there were oppty amongst the last high-fliers (AMZN) but there were still those that would go away (Lucent) and those that never really recovered (CSCO). The biggest oppty was in those that had not yet even started (GOOG, META).
Could well be the great innovation is yet to come, but yes. For now I like Ethereum. I think the killer app is going to be a proper stablecoin. Highly regulated, 100% clear on regulations and transparent reserves. Maybe it ends up being USDC or something else. And it's going to link to DeFi but more importantly, you'll be able to pay your credit card/cell phone bill/Amazon purchase with it.
I think it will be here within a few years. Could be private, or government backed. I wrote an article arguing the US government might nationalize Ethereum. That's extreme, but the lite version would be a nationalization of USDC.
Excellent. I especially appreciated your fair treatment of crypto. Just a few hours ago I Tweeted something to the effect of, "Yes I understand how horrible things are in crypto land right now, but the technology has not actually failed." Bitcoin and Ethereum remain unchanged, still producing blocks.
As I was reading your article another thought occurred to me. We all make jokes about retail investors buying the highs and being so bad at timing markets. We laugh as they (I am part of the "they") buy the rips that the so called sophisticated investors are selling. Yet when prices are attractive, as they are in crypto now, there is so much pressure on Twitter and in the media to get the hell out! Never touch this awful stuff! You would be insane to buy crypto!
Market commentators make it difficult to buy at/near the lows. Does that make sense? I'm just hashing out ideas here, maybe my thinking is not coherent.
Buy low, sell high, yet when prices are low it can feel like the entire world will call you a fool for buying that most hated of things.
Behaviorally, it is extremely difficult for investors - both institutional and retail - to not get caught up in the emotional actions at the top and bottom. Institutions are subject to these same biases for sure. The biggest difference for professionals tends to be risk mgmt, the use of stop losses and/or hedges etc. Finance is not difficult - it is cash flows and discount rates. This is no different for crypto than for anything else. The question is 'what are the cash flows'? They don't have to be current but they have to happen at some point otherwise it is just a greater fool theory. Ethereum has cash flow now from staking. Once people get comfortable there is no fraud, they can assess the value based on the cash flow from staking. For now, you can do that but you have to use a very high discount rate to reflect the risk involved. Of course the risk comes from CeFI and not DeFI but this is how many are interacting with the space. The broader crypto space evolves and survives. This is no different than the dot-com implosion. However, it takes years because this time, there was meaningful money lost.
It is quite difficult, and what we're seeing right now is the surprising degree to which the so-called sophisticated investors/institutions did get caught! And were so eager to invest in crypto that they chucked DD out the window. I have to imagine that the LPs in funds such as Sequoia are asking some pointed questions, like if you missed FTX, what else have you failed to see?
I also like your point about Ethereum having cash flows. I especially appreciate that it's not just fixed flows either. The more people use the network, the more money flows to the stakers. I think that's an excellent feature.
I feel a bit ill putting capital into crypto right now, which has traditionally been the sign of a good trade. If it takes a few years to pan out, so be it.
I have yet to find the killer app but it will come. I would agree with you it is most likely on the Ethereum chain. Much like the dot-com blow-up, there were oppty amongst the last high-fliers (AMZN) but there were still those that would go away (Lucent) and those that never really recovered (CSCO). The biggest oppty was in those that had not yet even started (GOOG, META).
Could well be the great innovation is yet to come, but yes. For now I like Ethereum. I think the killer app is going to be a proper stablecoin. Highly regulated, 100% clear on regulations and transparent reserves. Maybe it ends up being USDC or something else. And it's going to link to DeFi but more importantly, you'll be able to pay your credit card/cell phone bill/Amazon purchase with it.
I think it will be here within a few years. Could be private, or government backed. I wrote an article arguing the US government might nationalize Ethereum. That's extreme, but the lite version would be a nationalization of USDC.
We shall see.