Building Wealth is Simple, in Theory

Let me tell you how to build wealth fast

During the 2016 bull market, Bitcoin’s value skyrocketed 743%. During the 2021 bull market, it soared 777%. This means that a relatively small $3,000 investment at the beginning of those bull markets would've returned you a $18,000 profit.

Making money during a bull market is conceptually, quite simple.

Sure there will surely be highs, lows, corrections, and all sorts of fluctuations, but I’d take the bet that if you make 5 to 10 high conviction plays that expose you to multiple different narratives and then just forget about them entirely, you will (probably) be up in 6-12 months.

Issues arise, as we’ll see in a moment when you try to take shortcuts.

It’s hard to believe, but when I first became interested in crypto in March 2020, Ethereum was trading at $116. By the time I write this, its value has increased 25x, and had even 40x when reaching its All Time High in November 2021.

$5,000 invested back then would be worth $138,000 today.

If I had approached investing rationally, I should have invested a portion of my capital into Ethereum, knowing it would be a slow and steady game that would pay out over time when more people realized the power of this technology.

But this is not what I did.

Instead, I decided to gamble, take shortcuts, and form tricks and strategies to get more returns, more quickly. I traded in and out. I followed the latest narratives. Bided on the latest memecoins.

Some of these bets were profitable. Most weren’t. In fact, many of them led to significant losses. Four years later, I’m far from having 25x my initial investment.

So why do all these crazy things even when I know better?

I wish I could tell you it was greed. That it was for the thrill of the game. Or a tendency towards self-destruction, but the real answer stands in 4 words:

Fear Of Missing Out (FOMO)

Show me a picture of your wallet with some number in the green and my immediate response was that I needed to sell all my crypto to ape into these new coins. And not just ape a bit, but ape a lot, right now.

Forget the fact that the person probably just had an early token allocation and was now shilling his bag trying to use his followers as exit liquidity.

I. NEEDED. TO. INVEST.

And so often, I did. Not all of the time, but a fair amount of the time. I spent probably a few thousand dollars investing in the latest memecoin, chasing the daily riser as if it were the last slice of pizza at a party and I was on a diet for the past month.

And you would think that, after a few losses, I would learn my lessons.

But if you’ve been reading this newsletter for a while now, you’re probably starting to understand how my brain works, and therefore won’t be surprised that my reaction was rather:

“I must’ve done something wrong this time, let me try one more time..”

And so I returned, as always, to that dopamine machine known as crypto Twitter, newsfeeding me into another vision of a perfect coin I could project all of my hopes and wishes onto.

I honestly did this for months, until finally realized this wasn’t the way.

FOMO is completely irrational. When you see a token pumping, what you get is not only an individualistic incentive to ape into something hoping to make a 100x (that would be too easy and life isn’t supposed to be easy). No, you also get the peer pressure of everyone else doing it.

Your timeline is on fire, all your friends are already shilling their gains, and you feel left behind.

When you witness a friend making life-changing money by staking tokens into a new protocol and receiving a massive airdrop, or see a tweet about a trader flipping 1 SOL into $200,000 in 2 months, FOMO triggers that part of your brain that thinks:

"Shit, that could be me"

And at first, that feels like a good emotion – it feels like you’re learning through observation and following a data-driven path to success. It feels like you’ve spotted the small traders that seem to make the most money and believe you have a hedge that you should capitalize on.

You’ll usually go through a rabbit hole trying to figure out exactly what the person did, follow more closely their next calls, and then start investing your own money.

But what’s occurring is you are outsourcing your emotions and rational judgment to guys pumping their bags when the good opportunities already happened.

See, in almost any area of our life, being proactive and putting in time and effort is a competitive advantage. If you want to get a job, you’ll have to send hundreds of resumes. If you want a new partner, you’re in for many long and tedious date nights.

Investing is a rare exception where doing nothing is your competitive advantage.

And it’s hard. No one likes to invest, then simply let their money sleep. We all feel like we need to do something, optimize for more, and refine our strategy over time. We’re seeking instant gratification and constant positive feedback.

But there is a reason passive has overtaken active investing in equities — it’s because it works.

Want to know a sad truth?

Constant portfolio re-optimization is what destroys people in the Bull.

I've seen it time and time again. Friends feeling FOMO and constantly shifting their portfolio around by chasing the daily risers, ending up simply catching every retrace (buying too late) and then panic sell for a loss instead (selling too soon).

Because in crypto, a market driven by FOMO where all it takes is a viral tweet, an ETH address, and a few hours for hundreds of millions of dollars of capital to flow into a completely new asset, doing nothing is a competitive advantage.

Your best option to make it during this bull market?

Forget about potential 100x. Make high-conviction bets and then just forget about them entirely. When a new shiny coin pops up on your radar that you are not already exposed to and you feel the FOMO, invest into it over time instead with new funds instead of constantly re-balancing.

- Eliot

PS: What did you think of this article? If you enjoyed today's edition, let me know here - It'll help me understand what you want me to write about (and it only takes you 10 seconds).