Kurt is joined again by Chris Guida, long-time Bitcoin enthusiast and co-host of The Multiversity Project. In this episode Kurt and Chris discuss the prevailing zeitgeist of capitalism and anti-capitalism, how personal development and responsibility fit into that picture, how the structure of organisations is likely to change in the future, about how companies like Google already give their employees 20% of their hours to work on whatever project they like, and how cryptocurrency enables similar experimentation with business models.
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Modern Capitalism
In many developed nations, it seems that relatively free markets have allowed entrepreneurs and companies to create all kinds of wonderful things for us – to the point where we can hold computers with processing power unknown to humankind just 30 years ago, in the palms of our hands, connecting with friends and strangers all over the world almost instantly. It’s never been cheaper to fly to different countries and experience different cultures.
Modern Anti-Capitalism
However, some people in the developed world aren’t satisfied with what the market has to offer them. They feel anger and frustration, as from their perspective it seems they’ve been taken advantage of – by their bosses, by rich politicians who don’t represent them, and outdated educational institutions which don’t serve them.
You might say these young people are entitled, or even spoiled brats. Even so, there is validity to their feelings. Surely there is a better way to offer opportunities to the disenfranchised.
Future Systems
Perhaps the answer can be found in a kind of conscious capitalism. Individuals taking responsibility for those around them, creating systems that benefit their community. Clever bosses will learn that their role is not to dominate their employees, but to serve them. Companies will give greater freedom to their workers, allowing them to express themselves and also to find creative solutions.
People can move away from the dollars of central banking systems to use decentralised cryptocurrencies. They can also start decentralised autonomous organisations by creating a blockchain, or using a token on another blockchain.
To many, Bitcoin remains an oddity. They ask “But who owns it, who controls it?” And the answer is, “well, nobody really.” At least according to Bitcoin idealists, anybody can start working on it, anybody can add value, and anybody can reap the rewards. So, in a way Bitcoin is some kind of horizontal, worker-owned co-op.
Thank You
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In this episode, Kurt tells a story about how he lost a lot of bitcoin, and how it taught him lessons about being more conscious and showing proper respect for money. Chris relates it to how security problems in cryptocurrency systems lead them to become much stronger, as knowledge becomes more common and developers create more innovative solutions.
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Kurt loses his bitcoins
Kurt explains how he lost his bitcoins on an untrustworthy exchange, Bleutrade, and he also lost a phone and the money for a laptop in a business deal. After much anguish and consideration, one night he had a vision explaining that there was somehow a greater purpose to his misfortune – that the lessons were to make good use of his material blessings, and to be conscious of them and his surroundings in order to keep safe. You can hear the full story here: Money Is Sacred – How I lost my bitcoins.
Chris explains how cryptocurrency reacts as a system
Chris compares Kurt’s story to how cryptocurrency works as an economic and technological system. Every time there is a security risk exposed by people losing money in one way or another, the wisdom starts to filter through the economy, and people develop subsystems to prevent this happening again.
Thank you
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Facebook is planning on launching its own cryptocurrency called Libra.
For a long time, people in the Bitcoin community have hoped that it could reach mass adoption, that everyone would start using it and abandon fiat currency. That hasn’t happened yet.
Is it possible that a multinational corporation like Facebook could take this technology and use their existing user base to introduce it in a way that’s user friendly, and dominate the whole market? And if they do, what’s the worst that could happen?
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Facebook & the Cryptocurrency Market
So, Facebook coin. Facebook has about 2.8 B users worldwide, FB also owns WhatsApp and Instagram. Whatsapp has 1.5 B users, Instagram 1 B users. Imagine if they could connect all of these users in a worldwide financial network, using a coin which is tied to the US dollar.
People say with such a large userbase, Facebook could immediately compete with PayPal’s 277 MM users, venmo’s 40 MM users. It’s not necessarily that simple. As we can see, FB messenger already has a payment option. I’ve never used it. I’ve never heard of anyone using it. Most Facebook users say they would not use their payment system.
However, for this network wide coin, it might be different. Whatsapp has 200 MM users in India alone. For a long time, we thought that Bitcoin and cryptocurrency’s primary market would be remittances.
The problem seems to be, in a lot of the world it’s difficult to spend crypto or convert it into cash. With all those users just in India, and Facebook’s possible political influence, they might be able to literally create a whole economy.
The proposed name for the coin is “Libra”, which I think is going to be confusing for millions of Spanish speakers around the world, because to them, “libra” means “pound”. Imagine starting a new payment service and just calling it Dollar or Euro. Would that be really brilliant, or really stupid?
At first people were speculating that Libra would be something like a Starbucks loyalty card. Now they’re saying it’s more likely that it will look like Bitcoin or Ether. The question is, what do they have to gain from making this look more like a cryptocurrency than a PayPal system, or like their current Facebook payment system. One answer is, Libra can piggyback off all the existing infrastructure of cryptocurrency. Exchanges around the world can implement support for Libra, and their project benefits while externalising the majority of the costs.
Facebook probably won’t want to give up too much control. Libra probably wouldn’t be a “true” cryptocurrency like Bitcoin. It will look more like Ripple or Stellar Lumens – systems where they can still shut down your account if they feel like it.
This presents some interesting opportunities:
They could reward users for viewing ads, similar to Brave browser and Basic Attention Token.
Incentivise merchants to accept coins by giving discounts on FB ads when they pay with Libra.
FB is talking to Visa and Mastercard about making physical Libra cards. Real world integration, again taking advantage of existing payment systems.
In some ways, this project could be really cool. Maybe it would open up the possibility of a lot of money flowing into India and other countries, without impediment, allowing those countries to create more of their own wealth.
There’s also a lot of ways this could go very wrong.
The Cambridge Analytica scandal. This was a breach of trust; a lot of user data was given to a third party, possibly allowing Trump to win US election.
It was discovered that Facebook stored its passwords in plaintext for about 7 years. That means certain employees would have been able to open the file and log into anybody’s account, especially in the years before FB implemented additional security measures.
The issue of FB censorship. Of course they shut down Infowars, Milo Yiannopoulos, Louis Farrakhan. But a lot of people out there complain of five day bans or 30 day bans for sharing off-colour memes. I was put in FB jail for a week for a comment I’d written maybe 7 years prior. In many cases, there’s no appeals process. With so many people using Facebook, with Facebook being one of the primary portals people use to discover news and other information, it’s not hard to see how this could be abused for political purposes.
FB encourages you to use SMSing and eventually financial services in their messenger app. Then you get put in FB jail. Imagine giving this organisation the power to control your money, and then getting cut off. And when your funding gets cut, does the Zuck give a duck’s left nut?
Economic Risks
Facebook wants to make sending money free. The question is, how do they make money from this? One way would be, they open an exchange so people can convert FB coins into their local currency and charge a fee for it.
But if I put on my tinfoil hat for a second, I’d look at the case of Tether.
Tether started out with the promise of backing every token 1 to 1 with USD, but recently changed their website to a much vaguer wording, saying every token is backed by assets. They’ve been very evasive about being audited, and the wording is so vague that we might even assume that that the assets that back many of the tethers, are other tethers.
With Tether having established their place as the premium stablecoin in the economy, and now removing the USD backing, they’ve become a de facto central bank within cryptocurrency. If FB were to pull a similar trick, it could make them the single most powerful entity within cryptocurrency, possibly with power even to rival the biggest central banks in the world.
I have to ask if Facebook would do this, considering the legal risk they’d face – possibly endless lawsuits relating to fraud.
On the other hand, this is like the story about a guy who borrows a million dollars to buy a tank. You ask him, how is he going to pay back the million dollars? He says, “Pay it back? I don’t have to pay it back – if they ever come to collect, I have a tank.”
Likewise, once you control the money supply, what could a few lawsuits mean to you?
The steel foil version of this theory is, Facebook wouldn’t have to deal with any lawsuits, because they have the support of powerful hidden interests to create a one world currency.
So, what do you think? Would you use Libra? Do you think other people would use it? If they do, are they at risk of putting a buttload of power in the hands of an alleged extraterrestrial reptilian alien overlord? Leave a comment, ask a question.
Thank you
Thanks for pressing like and subscribe, checking the description, being a crypto bro or crypto sister and connecting with me on all social media.
As always, have a look around and notice the freedoms and opportunities this wonderful world affords you, and stay grateful!
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The total crypto market cap has gone up from 140 B to nearly 170 B over the last month. A lot of people out there are skeptical. They say the price is going to crash, the market is still manipulated, it’s a dead cat bounce.
Other people say “look at all this doubt, people are wary, the market isn’t coming back.”
It seems like a lot of people out there still don’t understand market cycles. Disbelief is a part of the cycle, and it might be a very positive one. How can you turn their skepticism to your advantage?
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So, people are wary. Here are some comments I’ve seen on Twitter recently:
“Bitcoin was manipulated to $20,000 and heisted back down to $3500 in 18 months. Congratulations for bouncing back to $5,000. Ha ha ha. There are lesser fools everywhere.”
“WOW this thread is the example of fools who have invested and still expecting big return for a TOY money.”
“Dead cat bounce”
People are wary. People are really wary, and that’s good. I like it when people are wary. I don’t like it when people are going nuts jumping over their grandmas to buy bitcoin… that’s a sign that the market is overheated and overbought. Remember this important adage: “Be greedy when others are fearful, and fearful when others are greedy.”
Think back, if you can remember, all the way back to 2018. For the first quarter, whenever bitcoin moved up, there was a lot of noise. People started yelling on social media “Could this be the return? Have we seen a bottom???” And they were mistaken. It would rally, and then the rally would fizzle out and droop back like a sad panda.
Eventually, a lot of those people stopped posting. Many of the crypto Facebook groups I’m in went quiet over the following months. Then near the end of the year, I started to see a few bitter people returning to comment. People who stay in crypto groups just to tell others how little they believe in crypto.
Now with this recent rally, I’m seeing a lot of people say it’s false, it’s nonsense.
Previously rallies had a little hype around them, and when the hype died down, the rallies failed. Now crypto has a rally, and there’s very little hype – in fact, there’s a lot of doubt. That tells me that these movements are likely based on something other than hype.
One phrase which experienced traders and investors have heard many times is “It’s different this time.” It’s a phrase to listen out for, because when you hear it, you know it’s likely that the market is overheated. People say it when they believe that the market will go up forever. It’s a seductive phrase, because it always has a little bit of truth – things are always different this time, just not in the way that people believe.
Likewise, on the way down, people lose faith and they think that the bear market is different this time – that market cycles aren’t going to repeat. However, most of the time, they do.
Let’s talk about some things that change, and some things that stay the same. Let’s talk about access to cryptocurrency, and about the Halvening.
Access to crypto
When I first bought bitcoin in 2011, I had to go through a lengthy process – sending Aussie dollars to Paypal, converting them to USD, depositing to Virex, buying Linden dollars, and finally buying bitcoin – paying about 20% in commission. The next time was a lot easier, using Skrill, though they still charged me just to deposit my money.
Finally I could just walk into the bank and deposit cash into my Coinjar account. And now within the last few years people have been able to buy with credit cards, and on decentralised markets such as Bisq.
Every few months, there are new ways for people to get involved with cryptocurrency. It even keeps getting easier for people in countries where crypto is illegal.
So, every time the market goes up, it’s likely that more people will get involved, either as speculators, or using crypto practically.
The Halvening
Every four years, the rewards for bitcoin miners halves. That means the amount of money needed to sustain or boost the price also halves.
For example, as of May 2019, there are 1800 bitcoins produced every day. With bitcoin at $5,700, it takes about $10 million to maintain the price of bitcoin, assuming all of the miners are selling their bitcoins every day.
When the reward halves, it will only take $5 million to maintain the price of bitcoin, and that means the price is much more likely to increase.
The first time Bitcoin went through this halving process, in 2012, people weren’t really anticipating it, and the price increased very rapidly. However, in 2016, people were more ready and the price increased 3-6 months before the Halvening.
Then it started to increase again 3-6 months after the Halvening, partly because of this reduced selling pressure. Eventually the media started to take notice, and finally when an all-time high was reached, the media went into a frenzy, and that is a key part in forming one of these bubbles.
Bitcoin is such a dominant force in the market, and so many coins are traded in bitcoins, that an increase in bitcoin affects the whole market.
It’s likely that every time one of these bubbles happens, more and more people get involved, because they want to speculate or they find some practical use for it. In fact, the more speculation that occurs, the more hype, and therefore the more practical uses people find, because of the publicity.
A crash course in bubbles
Everyone who gets involved in cryptocurrency is going to get a crash course in bubbles, in mass psychology, in market cycles. This is important to the development of the human race. I saw about three bubbles in bitcoin, buying during two of them, before it clicked with me and I realised that the cycle was likely to continue, and if I wanted to get ahead, I had to be asmart and buy during the downtimes, the times when nobody was listening. In traditional markets, there tends to be a 7 year cycle. It might have taken 14 or 21 years for me to get those realisations. Now they’re coming rapidly, wapowapowapowa!
My long-term prediction is that more people are going to know about it, people are going to understand deeply and personally what bubbles are, what they look like and how they sound. That also means that a lot of people are going to become immune to market hype, irrational exuberance… People are going to be savvy investors, and that means the incidence of bubbles will go down.
People will start to learn that “it’s different this time” is a dangerous phrase, because it doesn’t tell the whole story.
Markets will start to smooth out, more people will invest in things that are valuable long term, less people will get taken advantage of. That means less scammers and more genuine projects, and more total wealth for humanity.
Thank you
Thanks for reading, watching and listening to Cryptonomics. Please like, share, subscribe, comment and connect with me on all social media. Most importantly, stay grateful!
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There’s a lot to know when it comes to Bitcoin and cryptocurrency, but a lot of people just want to know the basics – how can I buy it and what am I even meant to do with it?
In this episode, Kurt explains how to buy Bitcoin and other cryptocurrencies, by purchasing from a regular exchange in your country, arranging a purchase on localbitcoins.com, buying from a decentralised exchange such as Bisq, or buying in person. He also explains the opportunities after you buy your coins – store them and hope the price goes up, trade them for other tokens to speculate or use, or use them for purchases such as Amazon gift cards – or illicit goods on the dark net.
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In most countries, cryptocurrencies are legal, and so they can be purchased through a regular, centralised exchange – which tends to be the easiest way to buy. The first thing to do is to go to your favourite search engine and type in “bitcoin exchange in” and the name of your country. For newbies, some exchanges are easier to use than others, such as CoinJar in Australia and Coinbase in the USA. However, generally the simpler exchanges will charge more for crypto.
Note: I stated in the episode that Bitcoin is illegal in Venezuela – that’s incorrect. In January 2018, the government’s cryptocurrency superintended announced that virtual currency is now “perfectly legal” in Venezuela.
When someone is in a country where crypto is illegal, the process becomes a little more complicated. There won’t be formal, centralised exchanges, however, purchasing is still possible. Many people use Localbitcoins.com to find buyers and sellers in these countries, and now more people are using the decentralised exchange Bisq. They might also go to crypto meet-ups and find someone who is looking to sell.
So, once you get your dirty digits on some dirty digital cash, what do you do with it? You can save it for a rainy day, trade it for other coins, or spend it.
Storing your coins
For small amounts of crypto, it makes sense to just store it on an exchange, as most exchanges have withdrawal fees. Once you get to a decent amount, it’s best to withdraw it, as cryptocurrency is still a new industry and exchanges have a habit of getting hacked or running exit scams – for example, Mt. Gox and Cryptsy, among many others.
One crypto wallet that holds a lot of different coins is Exodus. You can use it on your computer to keep your coins safe.
Trading for other coins
There are more than 1000 crypto projects, all with their own strengths, weaknesses and attributes – something like pokemon. Some offer the opportunity for passive income, such as Dash and NEO. Some have utility or grant privileges – for example, Steem allows you greater voting power on Steemit, DTube, DSound and related platforms.
You can have a look at all the coins that are traded on sites like coinmarketcap, coincap.io, and cryptocompare. These sites will give you some basic info about the coin, tell you the price, the official website, and which markets they’re trading on.
Some coins aren’t yet available on exchanges, but are being sold in initial coin offerings. By now, April 2019, ICO mania has died down, but that isn’t likely to last forever. To find coins and tokens being sold for the first time, check out ICOwatchlist.com.
Spending your crypto
You can use cryptocurrency to buy household goods on sites like overstock.com, to buy plane tickets on abitsky.com, and to buy almost anything with gift cards through egifter.com and gyft.com.
It’s also possible to download Tor and explore dark net markets and purchase items such as illicit drugs, stolen credit card information, counterfeit fiat currency, and gold-plated AK-47s.
Thank you
Thank you for watching this episode of Cryptonomics. Remember to connect with me on all social media, and most importantly, stay grateful!
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Dash has outperformed the cryptocurrency market over the last month, rising from $79 to $120. For people not familiar with Dash, rises in price always seem unusual, but for those who follow it closely they know that good news is always coming out.
The Dash Core Group is working on making it immune to 51% attacks, and they’re on their way to releasing a revolutionary user experience for crypto. Exchanges are also listing new Dash trading pairs.
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After there was a 51% attack on ETC, there was a lot of uncertainty in many smaller crypto projects. Bitcoin and Ethereum are big enough to make such attacks impractical, but for the rest of the market, they may be exposed to this exploit. Dash is working on a solution in the form of Chainlocks, using the Dash masternodes to prevent doublespends, making the system more secure and give faster confirmations.
The Dash Core Group has publically released the code for Evolution, the wallet which Dash supporters hope will make crypto more user friendly, looking more like PayPal or Venmo than Bitcoin, allowing merchants to integrate into the wallet and offer discounts, increasing their conversions.
However, it seems the main reason that Dash has increased in price over the last month is something more related to short-term trading. Binance added two pairs – Dash/BNB and Dash/USDT. That means traders on Binance are now using those pairs to try to gain an advantage and make more money.
Read more about these developments in Dash on Dash Force News.
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A lot of people have been saying for years that the US dollar is going to collapse, and that will cause another global financial crisis. That’s why you should hold onto your crypto for dear life. Is that really the case?
USD is still the official currency of other countries such as Ecuador, East Timor, El Salvador and Zimbabwe. It’s used for $100Bs of oil trade every year. Hundreds of millions of people pay their taxes in dollars, and despite the Federal Reserve and US Treasury printing trillions, it’s still valuable. The IMF has plans to create a system of e-dollars, and as early as 2008, political figures were discussing a new currency system known as Bretton Woods 2 – so there’s always a way out.
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Dollar Collapse – its coming. When? Don’t know, but all signs point to the edge of hyper inflation. When the dollar starts going, you won’t have much time to buy [cryptocurrency]… and there might not be much to buy.
The Dollar Collapse
In case you’re not familiar with the case for the dollar collapse, it goes like this:
The Federal Reserve and the US Treasury have been printing a lot of money for a long time. After the 2008 global financial crisis, they saw an opportunity and started a program of “quantitative easing”. That’s a fancy term for “printing a buttload of money”. From 2008 to 2015, the base money supply more than quadrupled, going from 900 billion to over 4 trillion.
After all that money printing, people who were watching thought that it would mean the dollar would lose a lot of its value, perhaps going into hyperinflation like the Zimbabwe dollar or the Venezuelan bolívar. But here we are in 2019, and despite the dollar losing some value, it is still the reserve currency of the world, and many countries still look to it in times of trouble.
Many intelligent people have predicted a dollar collapse – but maybe they’re being too critical and overlooking what the dollar has in its favour. So what does it have going for it?
In The Dollar’s Favour
The perception of value
The dollar is accepted in many countries around the world, and in many countries outside the US, such as Ecuador, East Timor, El Salvador and Zimbabwe, the dollar is the currency, officially or unofficially. In Cambodia, dollars are seen so much as a symbol of wealth that Chinese Cambodians will burn false dollars on Qingming, ancestor day, to send to their fallen loved ones in the underworld. Countries don’t do that with Australian dollars or Canadian dollars. A few countries do use euros outside the EU, but mainly countries turn to the dollar.
Dollar bears say those dollars are one day all going to come back to the USA, and suddenly they would be so concentrated that people would realise how worthless they were.
One day, perhaps. But when they do, we may be looking at a very different world. For now, it seems the idea of the dollar as a safe haven is very fixed, and that’s a key part of what sustains its value. It would take a huge shift or a lot of time for that to change. Of course, if that changes, then people who have some precious metals or crypto are likely to be in a very good position.
Base money
When it comes to the supply of base currency US dollars, it has actually reduced in the last couple of years. The supply peaked at 4 trillion, and is now down around 3.3 trillion.
Bears’ track record
Look back at these predictions from the bears. People have been predicting a dollar collapse, or something like it, for maybe 30 years. But hasn’t happened, not like they said.
In 1980, author and investor Doug Casey appeared on Donahue, predicting a crash and gold going to $3400 an ounce. He was pretty certain, enough to name figures, but it just didn’t happen the way he said it would.
Don’t think I’m saying you shouldn’t listen to guys like Doug Casey, Jeff Berwick, Jim Rogers, Jim Rickards… These are all smart people, contrarians who look for ways to take advantage. So listen to them, take their knowledge on board, but be wary of doomsday scenarios. There will literally always be someone to tell you that the sky is falling.
Innovation props up failing currency
There’s a lot of regulation in the USA. You need a licence just to cut or braid someone’s hair. Even so, the economy continues to advance in one way or another. People keep finding ways to innovate within the cracks, finding more efficient ways to do things.
For example, Uber, Lyft, AirBNB, all of these have brought down costs. Every time one of these innovations pops up, dollars end up being worth more in certain scenarios. That kind of innovation is likely to continue. With things like AI, self-driving cars and general automation crossing the horizon, that’s going to keep pushing it up.
The Petrodollar
After Nixon took the dollar off the gold standard, the US negotiated with Saudi Arabia, informally agreeing to price and trade oil in dollars.
Many members of OPEC trade oil in dollars, and If they don’t have dollars, they need to buy them in order to get oil, pumping up the demand. Some members of OPEC are now trading in Chinese renminbi rather than dollars. Even so, every year hundreds of millions of dollars are traded for oil between OPEC nations every year.
Pay your taxes
The tax dollar is also strong. 100s of millions of people in the USA pay taxes in one form or another, and many of them even claim to be proud to pay taxes, an unusual claim to say the least. As long as people are willing to pay taxes, that upholds the almighty dollar.
Keep the good times rolling
The IMF released an article in February 2019 talking about negative interest rates. The thesis is to create a two currency standard – regular dollars and electronic dollars. Regular dollars would be worth 3% less every year compared to e-dollars. The dollar didn’t collapse when they changed to Bretton Woods in 1944… then an informal petrodollar in 1971… so is it likely to collapse when they introduce this new standard?
For years there have been rumours for years of a North American Union, combining Canada, the US and Mexico. In that case, a new currency, the Amero, would replace the loonie, the dollar and the peso.
Similarly, on 26 September 2008, French President Nicolas Sarkozy said, “we must rethink the financial system from scratch, as at Bretton Woods.” In fact, Bretton Woods Part 2 has been suggested by economists as early as 2003.
From the perspective of the moneymakers, it doesn’t need to be a perfect, sustainable system. It just has to be good enough to last for 30-40 years, to keep the good times rolling.
They’re not out of tricks – they still have aces up their sleeves. Maybe those aces are a little dirty and sweaty, but they’re there.
The upshot – win or win
I made the video saying HODL is for chumps… I wasn’t saying that you should sell all your crypto, just that when the crypto goes up or down, you shouldn’t hold it religiously, and to think about asset allocation, especially in good times.
If you were 100% certain that there would be a dollar collapse, you might put all of your money into crypto and precious metals, or find some other way to bet against the dollar. I was certain about it in 2011, and I put most of my wealth into gold at an all time high, buying at around $1800 an ounce. It wasn’t the right move.
The idea is to form a strategy assuming one does not know everything that is going to happen, or make a strategy that works even if one is mistake wrong.
The case is that a dollar collapse is unknown – it might happen, it might not. At the very least, even when its managers inflate it so hard it looks like they want it to die, it hasn’t died.
If you’ve ever played chess seriously, you know the idea of a fork. You get your opponent in a spot where you are going to benefit no matter what he does. Maybe he’ll lose his queen, maybe he’ll lose a rook, but you’re going to capture a piece either way. Life is similar. If you plan and act carefully, you can improve your situation even if things don’t go exactly as you wanted. You win a little, or you win a lot.
That’s the challenge. How can you structure your life so that you and others around you can end up better off, regardless of events out of your control?
Thank you
Thanks for listening, watching and reading Cryptonomics. Remember, have a look around you. There’s a lot of people on this very day who won’t have a chance to see a blue sky or breathe fresh air, so take advantage, and stay grateful!
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In the world of cryptocurrency, a lot of investors know this word: HODL. It started as a typo in a hastily typed post on bitcointalk, in which a fellow was telling everyone NOT to sell their bitcoin but hold on. Later it turned into a backronym, “hold on for dear life”.
Now, whenever the market goes down, people bring on the old memes telling people not to panic, not to sell and above all, HODL. I’m here to tell you why that’s really stupid.
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HODL is for chumps
RIght now, March 2019, it looks like we’re nearing the end of a bear market in crypto. So not many people are thinking about what they’re going to do when it blows up again, how they’re going to protect their gains. That’s why I want to tell you to plan ahead now. Remember the 6 Ps of success: “Proper preparation prevents piss-poor performance.”
It’s great to be prepared for this now, to get your mind primed so you already have a plan for when the market takes off.
“Bitcoin to the Moon” Scenario
It’s around the end of 2020 or 2021. Crypto has been going up, accelerating steadily for the last 6 months. Then suddenly, the market makes a big 20% jump in a single day. More people than ever are scrambling to put in their cash, and a week later the market drops 40%.
People start pulling out their doge memes and their HODL memes, saying you’re a sucker to sell now when it’s far down from the peak. You look at how much you have in dollar terms, and think about how much you had a week ago, and you feel ugly inside.
That feeling is important. Emotions are information, and in a market like this, they give you a clue about what everyone else is feeling. In this case, they can be a trigger to look at how much you’ve lost and consider how much more you might lose.
A lot of people will be saying “It’s already dropped 40%, surely it can’t go down much more” when they say that, look back to the charts of 2014 & 2018 and think yes, it can go down another 90%. Now you’ve had a dose of reality – don’t resist it.
If you were blinded by hype, don’t double down and again be blinded by hope.
Ideally, you’d already be out, with 90% of your holdings safely in other markets, with a lot of dry powder ready to launch back in when crypto settles down. In the likely case that you didn’t get out as much as you wanted, it’s time for damage control. Protect your downside, cover your backside, HODL is for chumps.
Peak tilt
When you’ve already lost a lot, the temptation is that the numbers don’t matter any more. Thousands, 10,000s and even millions blend into one another.
So many gamblers have lost $200 at the table, and because they’ve peaked out their tilt or negative emotions, they don’t feel any worse when they drop another thousand. Make no mistake, that $1000 will sting bad on the long walk home.
Comedian and former sports gambler Norm MacDonald tells a story where he lost most of his bankroll, and then went on to throw $60k in cash into the ocean. You might think Norm was kidding, but themes he describes are very real. Once you lose a little, you may even want to lose it all, just so you don’t have to worry about losing more.
So be present, empathise with your future self. Protect your downside, cover your backside, HODL is for chumps.
Asset Allocation
When the market has gone down, you don’t necessarily know how much farther it’s going to drop. Nobody has a crystal ball, and nobody’s timing is perfect. That’s why you’ll hear so many guys who are really experienced in the market sound so uncertain – so humble.
We have three ways to become better speculators. Pick better projects, pick better timing, and choose better asset allocation. The first two are really complex, but with just basic asset allocation we have a lot more control over our financial situation.
If you have 5% or even 20% of your portfolio in crypto, you don’t stand to lose a lot. If you have 90% in crypto you do. You have 10%-20%, you can still easily double your entire portfolio within a couple of years, the kind of gains many traditional investors couldn’t have dreamed of 20 years ago. Think about your number, how much do you really want to expose to an extremely volatile market like crypto? How much is going to give you a high chance of excellent gains, and a low chance of losing your shirt?
A Grand Opportunity
Again, my hope is that the gains don’t just go to hedge fund managers and bankers, but to regular people like you. For that to happen you need to be prepared. It’s really possible for you to outmanoeuvre the market, but you have to be a little smarter than the average. This is a market where being 5% smarter means you can gain 5x as much as the average guy loses.
When regular people understand more about hype and market cycles, when they’re a bit more emotionally intelligent and better at recognising scams, and when they stop HODLing, the market won’t be anywhere near as volatile.
Until then, protect your downside, cover your backside, HODL is for chumps.
Thank you
Thanks so much for listening, watching and reading Cryptonomics. Please be a crypto-bro, like, subscribe, have a look in the description and connect on all social media. Most importantly, have a look at the beautiful things around you, and stay grateful.
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You might know that Bitcoin is money for the Internet, a system where no one person has the power to change the ledger. What you might not know is, why should you care? How is it going to help people escape poverty, find prosperity, to hold governments accountable, to push banks to reform or be forgotten? Let’s talk about the potential that cryptocurrency has to change the future for regular people like you.
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This episode of Cryptonomics is brought to you by good questions. I’ve told you karma is real. As a human being, questions are your karma. Many people have improved their quality of life because they had the courage and the persistence to ask the right questions – starting with “what do I have to be grateful for right now?”
Personally, I am grateful for my listeners, and everyone who enjoys my content enough to share it.
When I first started to put the puzzle pieces together about Bitcoin, I realised it was similar to Napster or Bittorrent, these file sharing services which people used to share music and movies, giving more power to the people who consume them, putting pressure on the industries to better serve their them. I saw that Bitcoin could put pressure on commercial banks, central banks and governments. It wasn’t clear to me what the effects would be, but with time they’re becoming clearer.
Let’s talk about the big one. How could crypto end war?
Crypto ends war
Ron Paul said, it’s no coincidence that the 20th century was dominated both by central banking and war. Without central banks, wars are normally short. The government has to collect extra taxes to pay for the war, and eventually they either run out of money, or the people get tired of a constant low standard of living.
With modern central banking, states just keep borrowing and printing money, and it’s hard for people to even know that war has something to do with their money being worth less or the economy failing.
Unlike dollars, Bitcoins are limited by software and consensus of the network. That means a state can’t just keep printing more of them to sustain the war on terror. They would have to ask for the money. They would have to find ways to serve the people, justify their existence, and any war that they wanted to wage.
Now we have a very real choice. If we want to withdraw our support from the dollar and other fiat currencies based on violence, we don’t have to convince people to accept silver coins; we can ask them to accept electronic cash. That is, as soon as crypto gets a decent user experience.
Crypto ends poverty
We have these central banks borrowing money, state treasuries printing money. That’s one key reason our dollars, pounds and bolivares don’t buy as much as they did last year. Just like if you flood the market with bananas and the price of a banana goes down, when the Fed floods the market with dollars, the price of a dollar goes down.
This means that saving money is for suckers. There’s no reason to save when you know your money is going to be worth less the following year. Instead, it encourages people to spend money on things they don’t need, or even invest in things they haven’t fully researched.
When you have sound money, money with a limited supply, money chosen by the people rather than imposed by a state, it will become worth more over time. The purchasing power will reflect advances in efficiency.
Saving money will be meaningful, and it will even be cool to save money. If people can save even 0.5% of their paycheque, that will make a huge difference in the long run. First they leave poverty, then they become prosperous.
Crypto brings prosperity
In a lot of developed nations, people are afraid to start businesses. Regulations drive up the cost to start a business, and then people don’t want to risk that much money. Imagine a world where you could save for 5 or 10 years and retire. You would be much more willing to save for a year, chase your dream and start an enterprise, because you know you don’t have much to lose anyway.
So we’ll see a lot more entrepreneurs. People will try out many ideas, some of them will even work, they will become rich and so will the world, for seeing their ideas come to life.
Then there’s the process of raising capital. It’s not easy to raise a million dollars. With the advent of ICOs, it’s a lot easier. Now people with crazy ideas can fund their sci-fi projects. Of course there’s a lot of scams that go with that, and with time there will be greater accountability measures – keep the sci-fi projects focused on Mars.
The other side is making money as a speculator. Before ICOs, only qualified investors or millionaires could put money into a project in the early stages. Peter Thiel bought 10% of Facebook in 2004 for $500k. At IPO, 8 years later, those shares were worth about $500 million. It was impossible for someone to buy $10 worth of Facebook in 2004. Now, it could happen with a new project, so now these kinds of 1000x gains are available to regular people.
I remember when I saw the first $10 I put into Bitcoin turn into $1000. I said to myself, I’m probably never going to see ridiculous returns like that again. But now, I say the good times are just beginning.
Thank you!
If you didn’t know why people were excited about crypto, I hope you now see that it is about real change in the world. Please leave a comment, what’s the biggest change you picture happening as a result of Bitcoin. Thanks for sharing this video with your friends so they can start to get the bigger picture.
Please note, if you’re subscribed on YouTube, starting with the next video I’ll be publishing Cryptonomics on my old channel, The Paradise Paradox. Getting those first 1000 subscribers on YouTube isn’t easy, so I’m going to go back and leverage the audience I already had there, and I hope you’ll join me.
Many people have lost money in cryptocurrency, either from oversight, malice or just not knowing how to prepare for market madness. One fellow asked me the other day about how to deal with the pain of seeing his portfolio go from millions to… not so much. While I’m yet to make and lose my first million, I do have a few ideas about emotional intelligence.
Here are Kurt’s tips for a happy loss, explained in detail in this episode:
Count your blessings
Find the lessons in the pain
Feel deeply
Embrace the journey
Let go
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If you’ve experienced losing millions of dollars, or even something more precious, you might know that it exposes deeper trauma. Things that have been hiding from your view – that’s what makes this subject so serious. Maybe you’re reading this in the future after the next crypto crash, and you’re wondering what your life is worth after losing so much. Remember you can always seek help in the form of talk therapy, using certain substances, or reaching out to me on Facebook. The important thing to remember is that pain is temporary; this too will pass.
1. Count your blessings
Even if you’ve lost all your money in the world, chances are you can still find something so be grateful for. Take a look around, breathe some fresh air, feel the sun on your face or the cold ground under your feet. Call an old friend. Ask, what is there to be grateful for today?
2. Find the lessons
When something happens that causes us a lot of suffering, it’s partly because we weren’t properly prepared for it. If you lost more money than you expected, you probably didn’t realise how much you were really risking. Maybe you had more opportunities to enjoy the money but didn’t. What lessons lie hidden in your pain? As long as it hurts, there are probably more lessons to learn.
3. Feel deeply
A lot of people go to sad movies, and cry. And how they cry! They don’t resist the feeling of sadness, nor its physical expression. They seek a kind of pain in order to find release.
When something tragic happens in your own life, does it also present this opportunity, to squeeze the sponge dry? What will be left, once you feel it completely? Find out for yourself.
4. Embrace the journey
Just like a movie, just like a journey, life is an adventure full of ups and downs, disappointments, delight, and unexpected turns. When we start a journey, we can anticipate these things will occur. When they do, they don’t have to shake us to our core. They’re just another part of the journey.
Many times when we look back at our challenging days, we see we were pushed to our limit. We were uncertain if we’d even make it – but weren’t we alive then! With years we see that the hardest times, and that was when we grew the most. Can you gain enough perspective to enjoy the hard times while you’re living them?
5. Let go
After embracing the journey, feeling the pain and learning its lessons, you can let it go. Its likely at that point it will come easy to you, like dropping off the training wheels or an old jumper that no longer fits. You can let go.
6. Be grateful for the pain
It turns out there’s a final stage to this process. I sent this video to my friend who asked me the question. It’s been a month since they first asked me, and a lot has passed. Now they are grateful that things happened the way they did. His deeper pain was revealed, and because it was made conscious, he could finally heal it.
So it’s true, the lessons are in there, and soon enough you might be grateful for the things that were taken from you, and what was left in their place.
