Welcome to my free cryptocurrency educational series. Each part builds on the previous ones, so I suggest starting at the beginning and moving through part by part:
Cryptocurrency 101 series (core principles, social justice, blockchain tech, Bitcoin):
- Part 0 Overview of my series, who this is for, why you might consider listening to me, and how easy it is to think you understand crypto when you actually don’t.
- Part 1 Why should I care? What’s in it for me? Why is crypto important (it’s about a lot more than just making money!)?
- Part 2 How crypto actually works, why Bitcoin is valuable (even if it’s just “made up!”), and what you should know about blockchains (the tech behind them and how they could influence the future of our world)
- Part 3 How the blockchain keeps running, where new Bitcoins come from (i.e., how mining works), and concerns about Bitcoin’s environmental impact
- Part 4 How crypto offers autonomy, why it can’t be stopped, and the value of decentralization
- Part 5 How to store and use cryptocurrency, some basic cryptography, how wallets work, identity management, and the future of democracy
- Part 6 Overview of the different types of wallets, which one is best for you, what to be careful of, and why a hardware wallet might be worth the investment
Cryptocurrency 201 series (intermediate principles, Ethereum, NFT’s, DAO’s):
- Part 7 Ethereum (the #2 most popular cryptocurrency, and the one I’m most excited about), smart contracts, dapps, gas (and the high gas fee problem), Proof of Stake (PoS), and Ethereum 2.0
- Part 8 Coins vs. tokens, and some real Ethereum use cases—oracles and DEX’s
- Part 9 Intro to NFT’s (collectibles, research funding & historical significance, and music)
- Part 10 More categories of NFT’s (art, video games, virtual reality)
- Part 11 Wrapping up NFT’s (what you can actually do with them, upsides, downsides, risks)
- Part 12 DAO’s (organizations managed by algorithms, governance tokens, collective ownership, and the “network state”)
Cryptocurrency 301 series (advanced principles, DeFi, reinventing the finance world):
- Part 13 DeFi & CeFi, reinventing banking with peer-to-peer finance, stablecoins, and borrowing & lending
- Part 14 More DeFi (how Uniswap works, plus insurance, payments, derivatives, blockchains, exchanges, liquidity staking, and impermanent loss)
- Part 15 Wrapping up DeFi (why liquidity is important, LP tokens, yield farming, calculating return, yield aggregators, and major risks)
Cryptocurrency 401 series (investing, making money in crypto):
- Part 16 Intro to investing (what could go wrong, where you might fit in, and what kind of investing could be right for you)
- Part 17 Preparing to invest (how much money to put in, how to split it up to mitigate risk, setting up your wallets, buying the coins & tokens you want, and dealing with different blockchains)
- Part 18 More preparing to invest (security, understanding what price targets are realistic, and using “expected return” to choose between opportunities)
- Part 19 Specific investing options (buying and holding, index tokens, leveraged tokens, my list of coins and tokens, mining & staking, and lending)
- Part 20 Higher-risk, higher-reward opportunities (liquidity staking & yield farming, NFT’s, OlympusDAO, and Tomb Finance)
- Part 21 The single investment that’s made me the most money: StrongBlock
- Part 22 Wrapping up my seven categories of investment (including an update on StrongBlock)
- Part 23 How to invest depending on how much money you have (plus, the market dip, where my money is, and how to fit crypto into a larger investing strategy)
- Part 24 Holding coins & tokens vs. yield farming, where I’m putting my money now, big news on StrongBlock, and the future potential of crypto
- Part 25 Staying safe, preparing your taxes, avoiding scams, upgrading your security, and judging new projects
- Part 26 How to decide who to trust in the crypto world, technical analysis & market cycles, and an update on my longish-term portfolio
This is part 24 in my cryptocurrency educational series.
Part 24 Reading Time: 35 minutes
Want to listen to this post instead?
3/4 Update: Expanded the “Here’s where I’ve been beginning to focus my crypto money lately” section.
3/5 Update: Added a little more at the very end about the world-changing potential of crypto; and, added a few small updates to the StrongBlock section.
3/8 Update: Added one more bullet at the beginning of the section on where I’m putting my money lately, and added a few links at the end of that section for doing your own research.
This is my ninth post specifically about investing in crypto, so I highly recommend you start with the previous ones if you haven’t read them yet:
- Part 16 (“Intro to investing)
- Part 17 (“Preparing to invest”)
- Part 18 (“More preparing to invest”)
- Part 19 (“Specific investing options”)
- Part 20 (“Higher-risk, higher-reward opportunities”)
- Part 21 (“StrongBlock”)
- Part 22 (“Wrapping up my investment categories”)
- Part 23 (“Investing based on how much money you have”)
(Disclaimer: I’m not an investment advisor, so please don’t see this series as me telling you to invest a certain way. Instead, this is my attempt to thoroughly explain all the major options available to you in the crypto world so you can make your own choices. Many of these will not be right for every person, and I don’t know your individual situation.)
Let’s begin with an update on some of the platforms and tokens I’ve discussed in the last few posts:
I’m still holding my position here. They were the original innovators in the “DeFi 2.0” space, and the team seems to still be doing good work. The whole market is of course down now, but I’m hoping that OHM (the token behind OlympusDAO) will eventually recover well.
This one is tricky, but I decided recently to completely get out of my TOMB and TSHARE investments. A lot of people still believe in Tomb, but it feels harder lately for me to buy into their central thesis that FTM (Fantom) needs an additional token that’s pegged to it. Why not just use FTM itself? In any case, Tomb right now feels like more risk than I want to be taking on, especially in a bear market.
(To be clear though, these aren’t super strong opinions that I’m holding on either OlympusDAO or Tomb Finance. I haven’t done a huge amount of additional research on either of them lately—I’ve simply made a gut decision about each based on a few things I’ve read in the community.)
As usual, because this has been my #1 money-maker in all of crypto, my update here is going to be longer.
On February 8, the StrongBlock team finally released their long-awaited Litepaper (i.e., a shorter version of a traditional whitepaper that explains a crypto project). It lays out their vision for the future of the project.
The community overall seems quite happy with the paper. I’m still not fully convinced, but I do feel better about StrongBlock after reading it—enough so that I decided to compound all of my gains from my recent node rewards claim into additional StrongBlock Ethereum nodes.
I’d suggested in Part 22 that, at that point, it might have been better to create Polygon nodes rather than Ethereum ones (since the former accrued rewards faster and I was worried about the longevity of the project); but, I’ve largely changed my mind since then for two reasons:
- After the Litepaper, it seems less likely that StrongBlock will implode in the next few months, and in the long-term Ethereum nodes provide more rewards than Polygon ones.
- Since part of the new StrongBlock roadmap is to eventually allow nodes to be sold as NFT’s, I imagine that the Ethereum ones will be more valuable than the Polygon ones since their rewards won’t decay.
Based on the Litepaper and a lot of recent conversations in the community, I’m going to lay out both a bull perspective and a bear perspective for StrongBlock. Then, you’ll have to make your own decision about whether it’s a good investment for you at this point.
My arguments for the bull side (i.e., optimism):
- The StrongBlock team has put a lot of thought into how to address the sustainability problem (i.e., the fact that the number of nodes is increasing exponentially, so at some point there won’t be enough of the STRONG token to give out in rewards). Keeping a project with over 350,000 nodes sustainable is a very challenging task, so they’re trying their best.
- The main solution they came up with is to create a whole new blockchain—StrongChain—built on the StrongBlock nodes, as well as a new token, STRONGER. Currently, node owners are paying huge amounts of money in gas fees on the Ethereum network to create StrongBlock nodes, claim rewards, and pay maintenance fees; but on StrongChain, all those gas fees will go to the StrongBlock rewards pool for node owners instead.
- StrongBlock has been one of the top 10 gas consumers on the Ethereum blockchain for a while now, so those fees are substantial.
- Current node owners and holders of STRONG will be rewarded with STRONGER once the new token is created.
- The team also claims that they’ve set up have many partnerships with development teams who are eager to develop dapps on the new StrongChain, and all the gas fees from those projects will again go to the rewards pool for node owners.
- Why would development teams want to build their projects on StrongChain? Because the StrongBlock community has already built a huge number of nodes and continues to add more every day; so, that should make the new blockchain highly resilient.
- Also, StrongBlock has quite a DeFi-savvy community since so many of us have been accruing rewards for a while now and using those rewards to experiment with a variety of DeFi platforms. So, that combination of StrongChain having a fertile development environment and a savvy community will hopefully make for a robust DeFi ecosystem.
- Finally, the Litepaper announced that the StrongBlock team themselves are going to be putting 100,000 of their own STRONG tokens into the community wallet to support StrongBlock’s sustainability leading up to StrongChain, which is a great show of faith in this new roadmap.
- (3/5 update: The team completed the first of four planned transfers of 25,000 STRONG.)
- The most bullish possibility here is that StrongChain becomes a major L1 blockchain like Fantom or Avalanche, and that it partners with the other major blockchains to become a core part of their infrastructure by supporting their validator nodes.
My arguments for the bear side (i.e., pessimism):
- As usual with the StrongBlock team, the Litepaper was big on promises and small on technical details.
- While they did lay out a nice-looking roadmap for a full year, it’s short on specifics. How will this new blockchain actually work?
- Plus, the community was expecting the Litepaper to lay out exactly how the new version of the smart contract (that’s used for the Polygon nodes) works in terms of the precise decay model. But, all we got was a vague explanation without real numbers.
- Will StrongChain actually do anything better than all the other L1 blockchains?
- Will StrongChain actually help StrongBlock fulfill its stated mission of making other blockchains more resilient by compensating non-miner node owners, or will it just end up recreating all the usual types of dapps that are common on other blockchains?
- At least the Litepaper said that StrongChain will be EVM (Ethereum Virtual Machine)-compatible , meaning it should be easy to use MetaMask and port over existing Ethereum dapps. Also, the main difference here compared to other L1 blockchains is that StrongBlock’s mission from the start is to reward all types of nodes, not just miners.
- Is the creation of the new STRONGER token really solving the sustainability problem, or is it more like admitting defeat on STRONG and just creating a brand new token to keep people interested? One of the nice things about StrongBlock was the limited supply of STRONG, which reduced the risk of inflation. And, the rewards pool is still running out quickly given the exponential expansion of nodes.
- However, this point is partially addressed by the team donating 100,000 of their own STRONG to pretty much double the number of tokens in the rewards pool. That’s the short-term solution at least, and the longer-term one is meant to be the creation of the new STRONGER token.
- The team has acknowledged that at the beginning of the project, they probably burned too much of the original supply of STRONG tokens, so the creation of STRONGER is a way of rectifying that and creating a deep enough supply of tokens to be able to fulfill StrongBlock’s mission of rewarding nodes across multiple blockchains. So, it’s less like they’re just creating new tokens out of nowhere and more like they’re fixing a mistake that was made early on.
- However, even with the extra 100,000 STRONG that the team is donating, at the current rate of node expansion, it still seems possible that the pool will run dry before StrongChain is online and STRONGER is released.
- Will the price of STRONG ever get back up above $300 again? Given the large number of nodes that many early investors have at this point, there’s a huge amount of sell pressure as they keep cashing out their rewards. Even if StrongChain turns out to be awesome, that’s many months away, and in the meantime the price of STRONG might keep dropping lower and lower.
- On the other hand, if StrongChain turns out to be successful and STRONG becomes its scarce governance token, the value of STRONG will likely recover very well… assuming the project lasts that long, meaning that enough people keep making new nodes that the rewards pool remains full enough to last until the creation of StrongChain and the STRONGER token.
- Properly calculating the exact rate of rewards pool depletion is complex, and I’ve seen a range of analyses resulting in mixed opinions here. But, I feel a bit relieved at least that people I trust to do that kind of research like Stephen the Calculator Guy don’t seem too worried.
On balance, there are solid arguments on both sides, but I am feeling a fair bit better now than I was before the Litepaper was released, so I’m a little more on the bull side at this point (keeping in mind that I’d still call this a high-risk/high-reward opportunity).
At least now there’s a real plan in place so we’re clear on where the team is aiming to head over the next year instead of feeling in the dark; and, StrongChain and STRONGER do feel like pretty legitimate solutions to the sustainability problem. I’m still hoping for more concrete details though in the next AMA.
Beyond StrongBlock, here’s an update on where I’m putting my money in crypto right now:
First, despite the bear market, I’ve been keeping the majority of my crypto holdings in place (other than selling out of Tomb, as I mentioned earlier).
A lot of my riskier plays (e.g., Wonderland, KlimaDAO, Umami, Jade Protocol, Euphoria, etc.) haven’t been doing so well. Like I’ve said many times, especially when it comes to these high-risk/high-reward opportunities, things change very quickly.
In this case, I don’t think I was diligent enough in tracking where the sentiment was heading here and adapting. It seems that the energy in the community moved away from forks of OlympusDAO and Tomb Finance and toward “node” projects.
To be honest, I haven’t investigated many of those too closely since most seem quite scammy to me (for example, Ring Financial turned out to be a rug pull). If you want to get into node projects, StrongBlock seems to me like your best bet.
Overall, I’ve been losing even more of my appetite for high-risk projects. My philosophy lately has been that StrongBlock is going to represent the high-risk portion of my portfolio, and beyond that I’m going to focus almost exclusively on much lower-risk opportunities.
I’ve been doing a lot of research into opportunities focused on stablecoins (specifically, USDC, UST, and DAI) as well as other coins and tokens that feel highly likely to last for a while so that I don’t feel like I have to keep checking to make sure the project is still afloat.
So, here’s where I’ve been focusing my crypto money lately (i.e., where I’ve been putting my rewards from StrongBlock when I’m not compounding into new nodes):
(Remember that these things change quickly, so the APY’s will likely be different by the time you read this.)
- Buying, holding, and staking major coins and tokens, in this rough subjective order: ETH, BTC, LUNA, FTM, AVAX, ATOM, SOL, CRO. And remember the idea of dollar-cost averaging from Part 17: It’s impossible to time the market, so just buy a small amount of these coins and tokens on a regular fixed schedule instead of trying to get in all at once at the perfect time.
- Earning on Anchor Protocol on Terra for an APY of 19.5% (especially now that native UST is available to buy directly on Kraken; but, one important thing to remember here is that this is an APY, not an APR, meaning that the 19.5% represents how much you’ll make after a full year of your earnings being compounded every day, so you’re not going to get close to that 19.5% unless you keep your money in there for the full year)
- Staking in SpookySwap pools on the Beefy yield aggregator on Fantom (SpookySwap is the top DEX on Fantom; and, you could provide liquidity to these pools directly on SpookySwap for less risk, but doing it through Beefy means your gains are auto-compounded so you don’t have to keep claiming them and reinvesting them):
- USDC-FTM LP pool for an APY of 71% (FTM is the coin of the Fantom blockchain)
- BOO-FTM LP pool for an APY of 111% (BOO is the token of SpookySwap)
- Staking in Beethoven X pools on the Beefy yield aggregator on Fantom (Beethoven X is a popular fork of the Balancer platform):
- The Spooky-Tempered Clavier pool (containing BOO, USDC, and WFTM [wrapped Fantom]) for an APY of 248%
- The Fidelio Duetto pool (containing BEETS and WFTM, with BEETS being the token of Beethoven X) for an APY of 387%
- Phantom Dai Opera pool (containing WFTM, DAI) for an APY of 97%
- Fantom of the Opera pool (containing WFTM, USDC) for an APY of 95%
- Late Quartet pool (containing USDC, WFTM, BTC, ETH) for an APY of 60%
- Staking in a TraderJoe pool on the Beefy yield aggregator on Avalanche (TraderJoe is the leading DEX on Avalanche):
- UST-AVAX LP pool for an APY of 44% (AVAX is the coin of the Avalanche blockchain)
- Staking in Osmosis on Cosmos (this is the most complicated of the opportunities in this list to get into):
- ATOM-OSMO pool for an APR of 54% (with ATOM being the coin of Cosmos and OSMO being the token of Osmosis)
- CRO-OSMO pool for an APR of 52% (with CRO being the token of Crypto.com)
- Staking BOO (single-sided) on Reaper on Fantom for an APY of 158%
- Earning in CeFi:
- There have been some big developments in this space recently involving the SEC beginning to regulate stablecoins in the United States. So, while that work is going on, both BlockFi and Nexo have suspended their Earn platforms. However, so far at least, three great alternatives are still available: Crypto.com (offering 10% APY on USDC), Celsius (offering 8.5% on USDC), and Gemini (offering 8% on USDC). Like I’ve said before, those are amazing returns for what I would consider pretty safe opportunities.
A few reminders about all this:
- In most cases, the higher the APY, the higher the risk; so, as usual, I suggest a mix of lower-risk and higher-risk plays.
- For example, the risk of a pool that includes BOO will basically always be higher than one with just FTM since BOO is the token of a specific dapp (SpookySwap) whereas FTM is a coin for an entire blockchain (Fantom).
- I like diversifying my assets and blockchains too. So, for example, I’d rather be in one pool with AVAX and one with FTM, or one with USDC and one with DAI, rather than, say, all FTM or all DAI.
- Liquidity staking is inherently not low-risk (unless you’re on a highly-trusted platform and both tokens in the pair are stablecoins, which none of the above are). But, in the list above, I’ve also been very careful to only pick pools containing coins and tokens I believe in and would hold by themselves.
- Remember that the listed APY’s assume that the current price of the underlying tokens remains stable—e.g., FTM in many of these cases. But if the cost of, say, FTM drops a lot, so too will the APY.
- My weightings here are not at all equal. Especially in a bear market like this, I believe you should have well over 50% of your crypto portfolio simply in ETH, BTC, stablecoins, and maybe a few other “blue chip” coins like SOL, LUNA, AVAX, and FTM. And, among these liquidity staking opportunities, I put less money into the higher APY ones.
- Finally, here are four great websites to begin doing your own research to find the best opportunities for you:
Now, taking a step back from all that, here’s the question I’ve been regularly asking myself for the past six months:
Is it best to just buy-and-hold ETH & BTC, buy-and-hold other coins and tokens, or yield farm?
When people ask me for crypto investing advice, the biggest question I wrestle with is:
How much should I tell them to just buy-and-hold “large cap, blue chip” cryptocurrencies like ETH, BTC, SOL, etc., how much should they put into other coins & tokens, and how much should they put into APY-generating opportunities like yield farming?
I certainly don’t have a perfect answer here, but let’s break this down.
First, should we be buying big names like ETH & BTC or other coins and tokens?
I believe that some diversification is always valuable just in case one of the smaller names shoots way up. However, ETH and BTC are still probably much better bets for the majority of your money. Here’s a very deep dive into this subject by Fais Khan. The following quote summarizes what he found in his research: “Most coins underperformed [ETH/BTC], returns got worse over time, and VC-backed [venture capital-backed] coins did worst of all.”
Also, don’t discount Bitcoin. Like many people, I got my start in crypto through Bitcoin; but as I learned more about Ethereum, it began to seem “obvious” to me that Ethereum was the superior cryptocurrency. After all, why would you want simple “digital gold” when you could have an entire multipurpose ecosystem of dapps?
Although I still do own more ETH than BTC, my thinking has evolved here. There’s a reason seasoned investors still hold gold and commodities in addition to stocks. More importantly, Bitcoin is in a class by itself. Yes, Ethereum can “do more” than Bitcoin, but a lot of brilliant people I follow still believe that Bitcoin has a very bright future.
Perhaps counterintuitively, a big reason for that is its simplicity. The original whitepaper is less than 10 pages long, and I’ve heard a lot of computer scientists remark on its elegance. It’s not trying to do too much, and that makes it excellent at what it is trying to do—which is to offer an incredibly-secure digital store of value, with a fixed supply that can never be increased.
Plus, as crypto expert Balaji Srinivasan said, Bitcoin also has the advantage of having a “disappeared founder” (since the original creator of Bitcoin is anonymous and no longer controlling it). One effect of that is BTC can just exist as it is, easily understandable, without any controlling forces changing it.
When Balaji was asked in late 2021 what he would invest in if he could only choose one cryptocurrency, he said Bitcoin.
Next, what about holding ETH/BTC versus yield farming?
I’ve often wondered if it makes more sense to just buy-and-hold major coins or to put my money into a pretty safe farming opportunity like USDC-FTM on SpookySwap that earns an APY of over 70%.
In some ways, this is similar to asking if you should invest in growth stocks or dividend-earning stocks. There are all sorts of opinions out there on that question—some people would say you should own a mix of both.
Like I said, this isn’t an easy answer (other than to say that a mix of both probably makes the most sense here too). But I’ll explain why I don’t think it makes sense to only favor yield farming opportunities and ignore buying-and-holding “blue chip” coins (i.e., the biggest, most stable ones):
- The yield farming investments tend to be much more narrowly focused. The Auto CAKE pool on PancakeSwap, for example, is simply producing CAKE token, which is only relevant for that one platform. The price of CAKE could suddenly drop (as it has over the past few months).
- In contrast, ETH or FTM (or one of the other blockchain coins) is not just supporting one dapp but many. The CAKE token is only used for one thing, whereas ETH or FTM is used for many, many things.
- They’re less proven. Ethereum has been around for over six years now, and it’s taken a lot of work to get it to this place where it feels secure, trusted, and supported by a wide range of partners and development teams.
- In contrast, OlympusDAO, for example, might look promising, and trust in its new model has been growing quickly. But still, it’s much newer, and it represents a brand new way of managing liquidity. So, this experiment might end up succeeding or completely failing.
- It requires more work to keep up with the yield farming world. I feel dramatically more comfortable with buying ETH and letting it sit in my wallet uncared for than I do entering a yield farming opportunity and leaving it alone without regularly checking on it.
- As I explained in Part 20, there have been many cases where one of those investments required regular attention—for example, when OlympusDAO required users to migrate from sOHM (version 1) to gOHM (version 2) or when ZeroTwOhm rebranded as Umami.
- Coins like ETH and FTM are much easier to understand than tokens like OHM (OlympusDAO), TOMB (Tomb Finance), or OSMO (Osmosis).
- Sure, it’s not necessary to 100% understand the complex details of everything you invest in. But, even though I have a fair amount of money in OlympusDAO, there’s still a voice in my head that regularly whispers to me that I don’t truly understand it and thus I’ll miss the signs when it’s about to collapse. There’s a lot more psychological safety in having my money in ETH or FTM instead.
- OlympusDAO, Tomb Finance, Osmosis, and other flashy opportunities might look awesome, and a lot of people I respect have invested in them. But, I’ve read probably a dozen articles explaining how they work and I still couldn’t confidently explain it in detail. This is very, very complex stuff. If you buy stock in AAPL (Apple) or TSLA (Tesla), you know what you’re getting. If you buy ETH or BTC, you know what you’re getting. If you buy OSMO (Osmosis) or TSHARE (Tomb Finance), maybe not so much.
- Good investing always comes down to proper asset allocation, diversification, and risk mitigation. If you’re investing in the stock market, probably any financial planner in the world would agree that you’re much better off putting 25% of your money into TSLA (Tesla) and 75% into the S&P 500 rather than 100% into TSLA.
- So yes, I think that these high-risk-high-return strategies can have a place in our portfolios—just not the biggest place.
- Historically, the “blue chip” cryptocurrencies have done amazingly well.
- ETH returned over 400% in 2021 and nearly 500% in 2020. It might feel more exciting to be putting in all the effort to learn about complex DeFi strategies, but simply buying-and-holding would have worked out very well for you over the past couple of years.
Plus, if you believe in the vision for crypto as a foundational part of the future Internet, the “blue chip” cryptos should keep rising, right?
Well, let’s look at three different perspectives it might be reasonable to have on the future of the crypto world:
To be clear, what I’m about to lay out are purely hypotheticals. Just to play devil’s advocate, I’ll argue for each of the three perspectives, even though I personally am somewhere between #2 and #3.
- Skeptical perspective: “Crypto is only a good investment in the short term, or it might have already peaked. The price will likely steadily decline from here once the bubble pops (and, in fact, it might have already popped).”
- Sure, it’s been possible to make a lot of money in crypto over the last few years, but we’re in a bubble, and this can’t last forever. NFT’s are a fad (and often a scam); DeFi will just be subsumed or outcompeted by traditional banks; and other use cases will just be recreated in a less decentralized way by existing powerful institutions like Google or Facebook.
- Blockchain tech is indeed useful, but powerful financial institutions and governments won’t let it last. It’s too dangerous to the status quo and existing power structures. They’ll sabotage it and over-regulate it however they can. Sure, crypto might continue existing, especially in other countries, but it will be made painful enough for US residents that it will largely die out here.
- It will conclusively come to light that USDT (Tether) was artificially propped up and not fully backed at all. Since USDT was used to buy a lot of ETH and BTC, it will mean that their prices were artificially inflated. This will cause faith to be lost in crypto.
- Mixed feelings perspective: “Crypto is promising but risky. Maybe ETH will hit 4,000 or 5,000 this year (it’s currently hovering around 3,000), but who knows.”
- Crypto is promising in theory, but it’s all so complicated that most people don’t really understand it. These investments are too volatile for most people, which will keep leading to panic-sells. Even if there are promising opportunities here, the user interfaces and complicated steps involved are too much for all but the most dedicated people to access. But, a lot of brilliant people are working on this problem, and dapps have made a huge amount of progress over the past two years in terms of usability and visual appeal. They’ll continue to make more.
- Yes, it might turn out that USDT was up to some shady business, and the market will suffer for a couple of years, but it will eventually rebound. This will lead to much heavier regulation of stablecoins, which will ultimately be healthy for the crypto ecosystem.
- There’s bound to be a major hack or exploit discovered at some point. It might just come from independent hackers looking to make money, or it might be an attack from a government like China or Russia. However, there have already been a lot of those over the past year and the community quickly moved on.
- Ultimately, there will definitely be bumps in the road, but so much energy and money has already been invested in crypto platforms and startups, and venture capital firms have become increasingly involved. Even if there are challenges along the way, there’s so much momentum here that it will be incredibly hard to stop this train.
- Visionary perspective: “Crypto will be foundational to future societies driven by blockchain tech, decentralized finance, and DAO’s (decentralized autonomous organizations). NFT’s will be used to represent digital ownership of a wide variety of goods and services. ETH will eventually hit 15,000 or even higher.”
- At first glance, it seems like your money is probably safer in US dollars or the S&P500 than crypto. But is it really? The US dollar is experiencing hugely growing inflation, and the United States is clearly losing its dominance as the world’s top superpower. Is the S&P500 likely to continue its growth in the way it has over the past hundred years when the US was the undisputed superpower? That seems unlikely. In contrast, crypto represents the global collective output rather than just being a US-focused index.
- Even with many of the potential setbacks described in the previous scenarios, ask yourself this: If you imagine the world continuing on along this path (more technology, faster Internet, more flexibility in working from anywhere, and so on), which of the following becomes more likely: that digital currency and distributed blockchain tech is obviously the future or that we all collectively decide that this was a nice experiment but give up on it?
- Our world right now is at a strange point where we have so much advanced technology available but so many bureaucratic processes that are still decades behind:
- Why do we have nearly-self-driving cars but our car title certificates are still pieces of paper?
- Why should it matter where you live or what you look like if you’re able to effectively do a job remotely and pseudonymously?
- Why should the work of a physical artist be more highly valued than that of a digital artist who put in just as much effort?
- Why should you have to get a loan from a bank instead of having technology that would easily connect you to others for peer-to-peer loans with distributed risk?
- Why do we allow Apple and Google monopolies on their app stores? What if we had a decentralized place to get apps with low fees and shared governance not controlled by a large profit-focused corporation?
- Why are we still using passwords and going to physical voting locations when we could be signing everything with our encrypted hardware wallets in a way that’s virtually unforgeable?
- Imagine if all that were driven by blockchain technology and NFT’s. If that’s what the future world might look like, it seems like there’s a good chance that one of the major blockchains could form the foundation for all that and thus represent an amazing investment today. Could buying ETH, SOL, LUNA, or FTM now be like buying Google stock back before it was the ubiquitous search engine that virtually everyone uses?
- What future price would make sense for ETH in this scenario? Let’s imagine that Ethereum becomes the foundation of the future Internet and thus reaches the same value (i.e., market cap) as Alphabet (the parent company of Google). In that case, if we use the market cap calculation trick from Part 18 and take the current circulating supply of ETH, the price of ETH would end up as $15,182, or over five times what it is today. So, if this vision sounds plausible to you, buying and holding ETH might be an excellent investment.
Particularly with the crypto market decline lately, I know it becomes easy to just think of all this as similar to the stock market: You put money in and your investment rises or falls.
It’s easy to lose sight of the potentially world-changing technology being deployed in the crypto space. Here’s a video of a professor explaining “zero-knowledge proofs”—a core technology behind blockchains—in an easy-to-understand way. I personally find tech like that to be beautiful and inspiring.
And here’s a February 25th tweet from Kyiv-based photographer and NFT creator Artyom Fedosov:
In other words, this isn’t just another investment opportunity—crypto is a force that has the potential to fundamentally reshape some important aspects of how our society works. It’s already begun doing that, so of course there’s push-back from traditional institutions and growing complexity around regulation. But, despite the ups and downs along the way, I continue to firmly believe in a bright future for crypto.
Bottom line: I think that there’s definitely room for yield farming and other coins/tokens in your crypto portfolio, especially yield farming involving stablecoins. But, it seems to me that the majority of your crypto money should still be in ETH, BTC, and potentially some of the other most promising blockchain coins like SOL, LUNA, FTM, and AVAX.
Next time, I’ll explain some scams I’ve been hearing about, how I’ve dramatically increased my security, tax strategies, and more.
Part 25: Staying safe, preparing your taxes, avoiding scams, upgrading your security, and judging new projects
P.S. Crypto is one of my newest passions, but my overarching focus in life is personal growth and intentional living. Do you want help with challenges like confidence, decision-making, or idea overwhelm? I’m a transformation coach who helps analytical thinkers get unstuck, find consistent motivation to take action, and design their life purpose. Read more about me here or my coaching practice here.