About cryptocurrency denominations
I wanted to try to avoid topics that I’ve already discussed in the article How to Survive in Crypto, so I just wanted to share an idea that has been helpful to me and others.
Notes to Editors:
At the end of this article is the full text of "How an Ordinary Person Survives in the Crypto".
I more or less mentally measure my crypto holdings in terms of crypto.
Yes, I believe in “1 BTC = 1 BTC”, and by extension “1 ETH = 1 ETH” and “1 punk = 1 punk”.
When I told them this, they thought I was talking nonsense.
“Don’t you look at the dollar price?” The odd answer is “A lot less than you think”
Since I have been following the market, I have a general idea of the prices, but even this weekend my CT is lagging far behind.
“Okay 6529, that must be great, you have encryption and we don’t, stop bragging”, I will confirm to you, you have things in the wrong order.
The reason I still own some crypto is that I made a decision 10 years ago to not care about the dollar price.
The decision is as follows:
“I think digitally native permissionless assets are important and will become more important in the future. So I should own some, no matter the price, but in principle”
I can’t seem to imagine a future where I don’t want to own any BTC, ETH, or NFTs.
Given this, it must mean that for at least part of my portfolio, my holding period is effectively infinite.
To me this percentage is high, but I don’t think it should be zero for anyone.
If this is indeed the case, then the daily or monthly dollar price won’t matter that much.
If you own 1 BTC, you own 1/21 million of the greatest permissionless value transfer network in history.
If you owned 1 BTC on Friday, you owned 1/21 million of the network, and today you own 1/21 million of the exact same network .
If you really believe this, you can look at what happened this weekend with a calm mind.
Curiousing what Jump is doing and how the Japanese handle their own affairs is an interesting intellectual exercise in a sense, but it is clear that whether BTC is a long-term hold is not up to Jump.
This has absolutely nothing to do with the future.
Leverage can certainly be deadly, and I have deep sympathy for those whose accounts got blown up this weekend , but realistically, the vast majority of us, myself included, should not be using leverage.
Leverage is like a casino, where the house wins on average in the long run.
A bankrupt counterparty holding your crypto can also “kill someone,” which is why you need to learn secure self-custody.
Yes it takes some effort, and yes there is a learning curve, but any adult who can drive can do it (and it’s a lot easier than learning to drive)
I understand that some of you have short-term cash needs and some of you are working/gambling to improve your living situations quickly.
OK, got it, it's human, and the feed actively encourages it.
There will always be someone making 100 times the money you didn't make.
But I also want you to have another side.
“I know I own a small part of a potentially transformative future, and I know no one can take it away from me. I don’t worry as much about the price as I care about my relative position in the crypto space.”
This feels great.
It’s a much more relaxing way to live, and statistically most people will also make more money this way rather than chasing the latest economic news.
You don’t have to do this for all of your portfolio.
Take out a portion and say “this is permanent cryptocurrency” and then take out another portion “denominated in fiat currency”
This way, no matter what happens, you can make your choice about the potential future of cryptocurrency
"How an Ordinary Person Survives in the Crypto" Text:
About how to succeed in crypto like a normal person.
There is only one rule: survive!
Survival means four decisions:
a) Should you invest?
b) How much did you invest?
c) What should you invest in?
d) Do you have leverage?
All of this is deeply personal and has to do with your worldview, your financial situation, and most importantly, your psychology.
The purpose of this tweet is not to convince people who have not yet invested in cryptocurrencies to invest in cryptocurrencies.
It is also not intended to convince you to invest more in cryptocurrencies.
On average, I try to get you to invest less in cryptocurrencies so that you can survive in the long run.
Another purpose of this thread is so that I can refer to it when people ask me what they should do in crypto.
My short answer is: “Let’s talk about competition” (most people are still not ready to exercise self-restraint in crypto)
If they insist, the slightly longer answer is: "Buy some BTC and ETH every month and forget about them for ten years"
If they really insist, here's my longer answer, so I hope it serves as a reference for me, and maybe it's useful to others too.
Anyway, let's get back to the theory:
Crypto is a bet on a form of digitization, and in the future we will embody value in a digital and decentralized way.
This value can be digital gold (BTC), smart computing (ETH), cultural objects (NFTs), and many other forms of value.
Currently, approximately 0.5% (~1/200) of the global asset value is represented by decentralized digital crypto assets.
Our global assets are about $360 trillion (including real estate but excluding intangible assets). The actual total is easily over $400 trillion.
Cryptocurrency market cap is around $2 trillion
The details of market capitalization calculations are not that important.
I think it's $2T/$400T, but you can substitute whatever number you like.
I think it's hard to get your cryptocurrency percentage above 1% or below 0.1% right now.
The macro questions for me are:
“By 2030, will decentralized digital assets account for more or less than 0.5% of global asset value?”
To me the answer is: "Maybe from a technical perspective, but probably not because of regulation/centralized systems"
My first form of analysis was an "expected value" analysis. For example
Assume there is a 50% chance that cryptocurrencies as a percentage of total assets will drop to 1%, and a 50% chance that cryptocurrencies will disappear completely and drop to 0%.
In this case, we should remain neutral.
50% x 1% + 50% x 0% = 0.5% = our current level.
My point is that the probability of a cryptocurrency doubling is significantly higher than the probability of it going to zero, which means the expected value is positive.
Therefore, even today I would like to invest in cryptocurrencies.
[When I first did this analysis, cryptocurrencies only accounted for 0.005% of the global market cap]
"But 6529, that's the dumbest expected value calculation ever, you should have plotted the entire distribution of outcomes and calculated the probabilities for each level and then added them together"
Answer: No, you don't.
The point of this analysis is “Do I want to invest in crypto at these general levels?”
My stupid expected value calculation answers this question just as well as your super fancy distribution curve
The second question is “How much should I invest in cryptocurrency?” This is a very confusing question.
I think so:
[Your total off-chain net assets] / [Total off-chain assets ($400T)]
Compared
[Your total net worth in crypto] / [Total crypto assets ($2 trillion)]
If you are neutral on the chances of cryptocurrencies, these numbers should be the same
If you are positive, then the percentage of cryptocurrencies should be larger
If you are negative, then the off-chain percentage should be larger.
For example, the coinless are an extreme case of a negative stance.
For me the percentage is much bigger in crypto, however:
a) My off-chain net worth is good. Even if the crypto goes to zero, I will still have a good life
b) I spend some time on professional cryptocurrency topics, so it would be weird if I didn’t get involved
c) I can handle the volatility
The first stage, therefore, is to answer yourself whether you want any cryptocurrency risk by doing some form of expected value calculation.
If the answer is “yes”, we move on to the second question, which is “How much?
For most people, the correct answer is “If a crypto bomb goes off, your life won’t be affected much, but if it doesn’t, it will be enough to improve your portfolio performance.”
For example, you invest 2% of your net worth. If it drops to 0, you can afford the loss. If it drops to 4%, you're happy.
The longer answer has to do with my "layers" framework
https:// x.com/punk6529/statu /punk6529/status/1435229502708322313…
If you are L1, you are not included in this discussion
L2 is really tricky because you need money to pay the bills
