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Dear Bankless Nation,
Wealth gets a bad wrap. People equate wealth with greed. But wealth isn’t greed…wealth is just a tool to make you free.
We hope you get wealthy. And we hope you use your wealth to make others wealthy. But you’re not going to make it if you pursue the wrong type of wealth.
In crypto, there are two types of people.
Those who pursue overnight wealth
Those who pursue decade wealth
Overnight wealth is the typical path people take to crypto. Chasing 100x flips. Buying on leverage. Rotating in and out of narratives.
You’ll be tempted to do this at every turn.
Here’s the truth: overnight wealth doesn’t work.
Decade Wealth
Take a moment to appreciate that you’re living in the greatest wealth transfer event in human history.
We’ve had wealth transfer events before, but with the rise of the Internet and the accelerated pace of innovation of the digital age, the speed of this transfer event is unprecedented.
Ray Dalio frames the coming wealth transfers in this graphic:
The wealth transfer from type 3 to type 1 is where old institutions die, and brand new ones replace them. Investing in these institutions is the alpha.
If you believe we’ve entered a modern-age renaissance, then the last time an opportunity of this magnitude was available was the 1400s—and that was diluted over hundreds of years! This Renaissance will be compressed into the span of decades.
We’re investing in the next new institutions that will last for centuries.
You have a chance to get wealthy right now by buying and holding high conviction crypto assets. That’s literally all it takes.
But so many people will screw this up.
They'll choose overnight wealth over decade wealth. 👇
Three Ways to screw up the greatest wealth transfer event in history
In the age of 7-second TikTok videos and instant gratification, decade wealth just isn’t fast enough for most people.
Most people in crypto make one of these three mistakes:
1. Buying low conviction small caps
A recent highly upvoted post on the r/cryptocurrency subreddit was titled “How I accumulated my wealth by looking at pages 10 and beyond on Coingecko” and made the case for how the best returns are made shotgunning $$$ into micro-cap tokens.
Yes, things that have low market caps have the highest possible upside… hypothetically. If you “find the next Ethereum” at a $100m you’d have a 17,500x ahead of you.
But what about risk?
Go look at the exterior pages of CoinGecko and ask yourself: is this token going to be around in 10 years? Even if you’re planning to buy tokens on a narrative hunch to flip for a blue-chip later then you’re committing to some extra risks:
Timing the sell
The token not working out
BTC or ETH going up while you’re in small-caps
It’s never as simple as “buy this illiquid small-cap, and sell it for a blue-chip later”.
Remember, the winners are loud and proud; the losers hide their losses. It’s a classic case of seen and the unseen. For every shitcoin millionaire out there, 1,000 people lost it all.
2. Leveraging up cause “I’m late”
Is this your first crypto cycle? I bet you’ve thought something like this:
“Wow, this crypto thing is so fascinating! But I’m so far behind. I’m so late. I don’t have any ETH or BTC compared to everyone else. My portfolio is tiny! How can I get more crypto?”
No one feels FOMO over dollars, but there’s something about the provable scarcity of assets like BTC and ETH that triggers FOMO centers in the human brain.
“If only I bought ETH at $100 two years ago when I had the chance”
So how do people catch up? They take leverage. The only answer to “how do I get my hands on more crypto” after you have allocated all of your cash is leverage.
But most people forget that leverage is a commitment to sell. You are borrowing to buy more crypto, but if price drops below a certain level you’ll have to sell your crypto to pay back your loan.
You never want to be a forced seller.
If you want to stay around for the multi-decade time horizons, don’t take leverage.
3. Outsourcing their conviction
“You can copy someone’s trade, but you can’t copy someone’s conviction”
Newcomers often look to the veterans in order to inform their decisions in this space. At face value, it seems like a good move! If you have incomplete information, just follow someone more informed than you!
This can fall apart for a number of reasons.
Some ‘experts’ take advantage of this fact, and milk newcomers out of their cash using tricks, scams, or pump-n-dumps.
Even honest experts make mistakes. No one is that smart.
Which experts do you follow? Picking the right one isn’t simple. Instead of researching “which expert to follow” why not research the fundamentals of crypto and become an expert yourself instead?
And if you copy the expert traders… are you really copying them? Do you know when and why they make their trades? Are they really being transparent about their buys and sells?
If you want to make it in crypto for decades, you’re going to need to make your own choices. Might as well start now.
Conviction can’t be given, it must be earned.
The Cheat Code
The key to avoiding the mistakes above is self-control. Investing isn’t as much a skill as it is a temperament. Don’t let the dopamine hits control you.
And there’s one last tip that’s helped me more than anything else…
Just do a tiny bit of degen trading. Eating healthy for 3 meals a day, 7 days a week is a prison sentence… but when you introduce a cheat meal it’s suddenly manageable.
One cheat meal a week.
TikTok only after work.
Alcohol only on the weekends.
Giving yourself permission to be a small degen will help you control the part of your portfolio that is focused on the long-term. Satisfy your inner degen by compartmentalizing your portfolio!
Take <10% of your portfolio, and be a degen with that.
Then take your winnings, and rotate them into your long-term piggy bank.
You’re here. You already won. Just don’t eff it up.
Pursue decade wealth.
- David
P.S. Help learn & build the future of web3 at Graph Day + Hack. June 2nd-5th in San Francisco. Bankless listeners get an exclusive $50 discount with the code GRAPHBANKLESS!
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MARKET MONDAY:
Scan this section and dig into anything interesting
Market numbers 📊
BED dips slightly again -2% to $106 from $108 last Monday
GMI falls -11% to $53 from $59 last Monday
DEX volume drops -6% to $16B from $17B last Monday
DeFi TVL drops again -2% to $75.5B from $77.1B last Monday
L2 TVL dips slightly again -4% to $6.47B from $6.74B last Monday
BTC funding rate plummets to 0.37% from 0.89% (Bitmex) last Monday
ETH funding rate rises to 6.71% from 5.8% (Bitmex) last Monday
Market Opportunities 💰
Yield Opportunities 🌾
What’s Hot 🔥
Sri Lanka defaults on all foreign debt to save money for essentials
Class action lawsuit against Uniswap Labs for allowing “fraudulent activity”
Meta to take a nearly 50% cut on virtual asset sales in its metaverse
Uniswap Labs launches venture unit to invest in web3 projects
Lido Finance announces update on roadmap towards permissionless validation
Web2 authentication service Auth0 announces Ethereum wallet signing
Introducing Loop Crypto, an autopay recurring crypto payment solution
Arbitrum releases major update, halving fees and increasing tx speed
Uniswap Labs launches Swap Widget, allowing users to trade tokens anywhere
Launch of Tribe Turbo Fuse pool, targeting unproductive DAO treasury assets
Launch of Panoptic, a perpetual options dapp leveraging Uniswap V3
Money reads 📚
Bitcoin 2022 Reveals the Inevitable Draw of DeFi and NFTs - Owen Frenau
The Anatomy of a Web3-Native Fund - Patrick Fitzgerald
Post-mortem of Beanstalk DAO governance exploit - Jon Greenwood
Atoms, Institutions, Blockchains - Josh Stark
An investigation of potential collusion between NFT projects - Rug Pull Finder
On the use-cases of $FPI, an inflation-adjusted stablecoin by Frax - 0xHamZ
Top 10 must-reads on token economics - 0xSong
Introducing veRev, a new twist on veModel - UXD Protocol
Trending Project: Floor DAO 📈
What We’re Buying 👀
Governance Alpha 🚨
Meme of the Week 😂
Never miss a day of level-ups, no matter what.
Job opportunities 🧑💼
Opportunity: Co-founder for an Omnichain DeFi Primitive on Layer Zero and Stargate
Bankless is hiring a Newsletter Editor (come join us!)
Browse more roles (or add your own) at the Bankless Jobs Board
Action Steps
Execute any good market opportunities that you saw
Listen to In Defense of Bitcoin Maximilism with Vitalik Buterin
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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.
Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.