What is the Point of this Crypto Stuff Anyway?
Level 2 - Value Investor
Welcome Avatar! Anyone who has been around for a while knows the following “price drives narrative”. Any time you see price go up, suddenly interest goes up because the price went up. This is also the reason why very few people actually understand what the point of the entire industry is. You have people who bought BTC early to buy drugs on silkroad that got rich by simply holding some and forgetting about it. Tons of people met some “tech nerd” who told them to buy and they put in $10K only to see that balloon to $450,000 (not even knowing what it does). Everyone knows the infamous 10,000 BTC pizza transaction which will eventually be a $1B purchase for pizza.
Part 1: First a History on How to Deal With Crypto
The vast majority will never understand the point of crypto. Similar to people who use the internet or use complex AI software. Next to no one could really re-build it or truly explain how it all works. This doesn’t matter because you use it every day and it is valuable to you.
Crypto will be the same.
If you are one of the naysayers who thinks its just dangerous and will go up and down based on sentiment, you’ll be wrong. You’ll eventually use it everyday and won’t even recognize that you are using it.
What Is It?
In a sentence it is a way to get rid of all middle men.
If you understand that simple sentence you will lose interest in the vast majority of “crypto currencies” since they are just worse versions of PayPal. If the coin has a central point of failure it is *centralized* the entire point is destroyed.
Tether Example: Tether is a stable coin that represents 1:1 backing to the US dollar. That said it is not a crypto currency. It isn’t a crypto currency because you can simply freeze the address at any time. Click boom, just like a bank account frozen.
While people will refer to USDT as a crypto currency, you can see that is simply isn’t. An actual cryptocurrency cannot be stopped by a third party.
Bitcoin: Compare that to Bitcoin the oldest and most well known crypto. Bitcoin is effectively removing the third party for sending and receiving value. We’re not going to go into detail about potential L2s on Bitcoin. Just keep it simple.
If an address has 10BTC in it and someone says "make sure that he/she can’t send it”…guess what? Too bad. They can send it any time they like!
That’s the entire purpose of the product in the first place.
Where Is it Going… Today
Now onto the most important part. The future applications of all of this. Uber, Self Driving Cars, Gambling… All of this is actually going to be done with crypto. Sound crazy? Not so fast.
People went nuts learning that polymarket was a better predictor of the US election. So much so that the FBI seized the phone of the creator (source)
Canary in the Coal Mine: While everyone concluded that it was good for the election and will lose “value” now, it shows how little people think ahead. Just make one simply second derivative conclusion.
We now know that the gambling market no longer needs to be done with huge 10% spreads (VIG). If done on-chain with smart contracts you now get more accurate betting markets by a wide margin.
If you think the Chiefs are going to win tomorrow you can choose to bet on-chain and get $100 or you can go to Vegas make the same bet and get $95 if you’re right. Which one are you going to choose? One makes you more money if you’re right and is also easier to access with the click of a button.
Think we all know what that means for the long term health of the gambling industry.
No. We’re not saying Vegas goes to zero. It’ll always be a casino/gambling/adult playground (blah blah blah). The point is still the same. The consistent action will slowly move to these platforms since the product is simply better.
Where Is it Going… Tomorrow
If we can agree that people will choose to gamble in the comfort of their own home when offered better returns and lower costs… then guess what that means for all middle men services? A bank after all is just a middle man service for the movement of money.
AirBnB/Uber: As an extreme example (not any time soon), this should also be done on chain. Instead of paying Uber/Airbnb 20% to book your stay/drive you can just use crypto instead. This would be much less costly.
If you make a $10 ride with only $8 going to the driver, instead it could be a $8.50 ride with $8.00 going to the driver.
Similarly, scale this up with something like Airbnb. Create a smart contract for the home you’re renting and instead of paying $1,000 with $200 going to AirBnB you’d pay say $850 with all of it going to the owner of the house.
As you can see from the image above, the financial system is slowly being copy pasted onto the blockchain. We’re not going to bother fighting everyone about which chain is going to build out the best DeFi etc etc. The key here is understanding the concept.
Take a step back and decide for yourself, which middle layer is the most likely to get dis-intermediated? We’ve now seen success with online gambling and the next step is: all financial products, expensive application middle layers like AirBnB/Uber and more.
The Bridge Between Today and Tomorrow
Now we’re sure this is going to be the next topic. What is the next item? Our current assumption is real world assets.
Right now the smart way to build is actually similar to Tether. Blasphemy until you really think about it.
If we already have US dollars that are traded around on crypto rails the next item is going to be: 1) bonds, 2) stocks, 3) real estate loans etc.
This makes a lot more sense because the governments and companies will feel like they are in control. They can brick USDT they can brick an illegal real estate deal etc.
Then The Scale Begins: Once all of this is scaled up, that means the underlying decentralized rails (maybe BTC/ maybe ETH/maybe SOL - just to avoid angering anyone for all three), will become immensely valuable. The prices are more likely than not to rise exponentially since the number of transactions continue to rise.
Eventually the system is large enough to handle millions of *real* transactions (not launching trillions of random meme coins that will be down 99.99% in the next downturn).
Once Scale Is On The Way? You’ll see it on chain. USDT is already proof that people will always be trading their crypto back to cash. Similarly, we already know that people will always trade stocks, bonds and real estate notes/debt. The latest flavor of the month meme isn’t the future of finance (outside a few that end up being folklore level cults).
Eventually you will be able to do all of this from a smartphone or laptop without the need for the market to be open or closed.
Summary
The entire point of crypto is to get rid of middle men. Not just banks. All of them. Casinos, Moneygram, AirBnB, Uber etc. The exact time it takes to eat through each use case is anyone’s guess.
If the coin is centralized it is not a crypto currency. It is just a financial product like a bank and should be treated as such (temporary move in and out).
Part 2: Ways to Get Involved
If you’re interested in getting involved in crypto you really need to decide how much you want to dedicate to this. You’ll see a huge range of opinions largely based on knowledge level and interest.
Layer 1 (10% min): People with nothing simply need to get off zero. As a quick calculation, you should at least have 10% of wealth in this stuff in our opinion. Seems pretty low since $100K on $1M is not going to be life changing if you’re wrong.
Layer 2 (Retain 10%+): If you already do this and simply understand the basics then you should be buying small amounts pretty much through every cycle. If you learned about it and didn’t go crazy thinking through the implications, it means you’re just not that interested in it. It means you’re not a true believer and should probably just stick with buying small amounts (10%) and then if you have a big run making sure to sell half and free roll.
Our guess is that the vast majority land here. We’ve seen a lot of smart people learn about it and do something crazy irresponsible like buy 5 BTC at $1K each despite having millions of dollars. This group is largely people with money who “don’t get it”. The vast majority will not get it. If someone doesn’t get the concept of crypto then their best option is keeping Crypto at 10%+ of their net-worth forever and just buy the decentralized L1s.
Layer 3 (Up to 50%+): Majority of people who have been here for a long time time are in this camp. In this group you’re dedicating practically all your free time to it. You’re on top of new airdrops, farms and products being built on crypto. You’re not worried about 20% swings and are actually *selling* when its all over CNBC (not buying). Vice versa when CNBC has its markets in turmoil sirens.
Fade the Masses Anon
Layer 4: Ignore this for the rest of your life and Have Fun Staying Poor (HFSP).
Jokes aside, you’ll be forced to use it in the future even if you refuse to learn about it today.
Part 3: Decide What You Want Out Of Life
If you like it or not, crypto is going to grow and will be here for a long time. Majority will not understand it until crypto is worth more than the value of gold (Crypto is at $3.4T Gold is at $18.0 Trillion - another 5.3x from here).
We posted this implied hint on Twitter but people always forget. Crypto is still 1/5 the size of Gold.
If your plan is to get rich, you’ll either have to make concentrated investments (what we’ve done over the past 10 years or so). Or. You’ll need to be okay with keeping pace with purchasing power with a diversified portfolio (stocks, bonds, RE, crypto etc.).
If you’re already rich off your WiFi biz then the majority should land at around Layer 2. Or. Become a deranged cartoon bull on the internet and land around layer 3.
As usual. Stay Toon’d and never forget the actual use case of crypto. It isn’t threatening to kill your dog if the CA doesn’t go to $10M market cap anon.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by an anonymous group of Ex-Wall Street Tech Bankers and software engineers who moved into affiliate marketing and e-commerce.
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