TLDR: In this follow-up to my epic 2017 crypto investment guide, I look back at how the portfolio did three years later, talk about what I’ll do differently this time around, and pick my coins for the next bull run.
So it’s 2021 and you missed the crypto boat again?
Maybe you read my crypto investment guide, Mastering Shitcoins, the Poor Man’s Guide to Getting Crypto Rich - Part I, but you weren’t buying it. You thought it was too late and you’d already missed the rocket to the moon. I wrote the original article in 2017 and Bitcoin was already past its former record high of $19,843. Not long after that it started to crash hard and it was all over. Boom to bust, the classic cycle.
You weren’t crypto rich, you were crypto broke.
Then the doubt crept in. The animal panic grabbed you by the throat and you sold it all at fire sale prices.
Perhaps you missed the line where I wrote: “Are you patient enough to go through an 85% draw down and the pop of the crypto bubble? Then you too can get crypto rich.”
Incidentally, that was exactly the amount of draw down that happened. Bitcoin lost 85% of its value only 15 months later and crashed to about $3000 from a high of nearly $20,000.
Maybe you ignored the ancient trading wisdom of only putting in what you can afford to lose and you went all-in with your trip-around-the world fund or your kid’s college tuition and you got terrified when it disappeared?
Or maybe you just lost faith, like my dad did when he called me in 2019 and told me he was going to keep his Bitcoin but he was dumping his Ethereum. He’d lived through the 82% drawdown of 2018 but the 8% drawdown of 2019 was just too much.
So he caught the 82% drawdown and the 8% drawdown and he missed the 464% bull run of 2020.
It’s easy to believe in something during a bull run but not so easy to believe when there’s blood in the water.
As for my personal story, I got a bit unlucky. I went through a bad divorce and it cost me a lot in blood and treasure. I kept some of my portfolio but at one point I had to raid it pretty hard to pay for the battle so I didn’t keep as much as I wanted.
But I don’t regret it in the least.
In the end it was a small price to pay for moving on and living the life I was meant to live. I traveled the world, got lost in lands near and far and fell in love with a true partner who lifts me up and believes in me every day. Some things are worth more than money. Crypto helped buy my freedom, even if it didn’t lead me to early retirement.
I’ll take a good life and a good relationship over a $1M any day because money can’t buy balance or contentment.
That said, money ain’t half bad and I don’t want to miss the next rocket to Mars. Money can’t buy happiness but it sure can buy you a big old Cadillac to drive around looking for it!
Now what is rich exactly? That’s different for every person. Remember that in the first article I wrote: “Rich is relative.”
Look, you probably won’t be the Winklevoss twins and become a Bitcoin billionaire. There’s an old saying in investing: “To get rich, first start with a million dollars.” If you’ve got that, you don’t need this guide.
I’ve met a lot of rich folks in my life, but over years I’ve met a lot more folks who turned $5,000 in to $50, 000, or $20,000 into a $100,000, or $50,000 into $300,000. If you’ve never made more than $30,000 in your life than $100,000 is a lot of extra money. Never compare yourself to other people. It’s a path to self-destruction in trading and in life.
Find out what you really want and go after it. Investing is one path to get to the things you really want. Money is nothing but a tool. It’s how you use the tool that matters.
Now lets wind back the clock to 2017 and take a hard look at the original Mastering Shitcoins article to see how you would have done if you’d followed it.
After that let’s figure out how to do it right for the next bull run.
In the last few months, a bunch of folks asked me if I’d still pick the same coins.
Of course not.
I have the benefit of 20/20 hindsight now, so there’s no way I’d pick the same coins. But we don’t get to use 20/20 hindsight in trading. We make a bet on a future that hasn’t happened yet.
First a quick refresher on this strategy. Remember, this isn’t a trading strategy, it’s a holding strategy. This is what I call it my “micro-VC strategy.” Venture Capitalists make money by investing in a bunch of companies with the full knowledge that 80% of their companies will end up worth absolutely nothing. That’s right. Zero. Nada. Zip.
It’s the last 20% where things get really interesting though. 10% become good earners and make their money back and then some. But the last 10% knock it out of the park. That’s where VCs make all their money. It’s those home runs that pay for everything else.
This is a counterintuitive approach for 95% of the people in the planet. How could you afford to get 80% of your picks dead wrong and still make money? But that’s exactly how probability works and it’s the strategy we’re using here.
So how did my picks do? What was on my original list?
Bitcoin, Bitcoin Cash, Ethereum, Dash, Litecoin, Decred, Monero, Zcash, Zcoin, Pivx, Qtum, Neo, Maidsafe, Waves, IOTA, Tezos, EOS, Ripple, Stellar, Kik, Mobilecoin, OmiseGo, Pay, Populous, Salt, Metal.
I won’t sugar coat it. There was some serious dogshit in there. Let's look at the losers before we check out the winners.
Where do I even start? Lots of losers to go through here so let’s throw a dart and start there.
The less said about IOTA the better.
I’m actually ashamed that Bitcoin Cash is on there.
The fact that it was backed by notorious crypto huckster, Craig Wright, aka Faketoshi, should have been enough for me to steer clear of it. Anyone who tries to rob their dead friend’s family of a fortune is scum and that’s pretty much all you need to know about this man. Of course, I’m sure his courier should show up with private keys any day now and we’ll all be sorry for doubting he’s the real Satoshi.
My favorite recent quote from Wright in 2019 was “Tether is not going to pump anymore. This is dead. Bitcoin isn’t going to 20, 40, 50, a hundred.”
Avoid anything this guy touches like it’s covered in COVID-19.
SALT looked like a great bet but it died off. It’s the very definition of a flat line chart. No pulse.
It hit as high as $16 and it’s gone flat ever since, even as the rest of alts boomed. It’s currently trading at 43 cents. Ouch. It’s no surprise though. Salt looked to create peer to peer loans but it’s gotten blown away by more creative financial platforms, like Compound and Uniswap, that do it a 1000 times better.
Waves promised to be an Ethereum alternative but it never really got off the ground. It hit a high of $16.96 in 2018 and while it hasn’t flatlined like SALT, the highest it ever hit again was $13. It’s not gone but it’s not a winner unless you bought it after the crash.
PIVX imploded. I admit they were probably never a truly strong contender but my experiences in their community in 2016 are still one of the fondest memories of my crypto career. Their Slack community was incredibly vibrant and welcoming and they had a tip bot that sent real PIVX that anyone could use in the Slack. It was a vision of the future to me.
It’s also a good lesson to learn in life: The most important thing in life is follow through.
A lot of people have good ideas, but it’s the people and teams who can actually make it happen who matter in the long run. It’s one thing to have an idea and it’s another to live with and do its taxes long after the initial joy of the idea fades away. PIVX never really executed on its promise.
What else was in the bag? Ripple. Ugh.
At least I called out weaknesses in coins like Ripple even though I held a little of it. I said I hated their closed source model and passed them up for a bigger position in Stellar. Stellar didn’t do all that well but Ripple got delisted on some exchanges and attacked by the US government and that sent it into a tailspin.
Other coins never really got back to their all time highs. Litecoin is one of them. Let’s just face it. It’s a coin without any real purpose. It’s basically a clone of Bitcoin with a shorter block time and a slightly larger supply. It was supposed to be the silver of crypto and it basically performs like silver, an also-ran metal that never quite takes off in any real way. I see Litecoin dying over the long haul, replaced by more valuable and programmable ideas.
Populous was a favorite of my old friend Peter who passed away recently. It managed to hit $80 a coin during the last bull run and it’s been a nightmare ever since, trading below a buck and never going higher than $1.43. It’s one of the worst picks in the entire bunch, a true shitcoin.
I still love privacy coins like Monero and Zcash but they’ve proven weak investments and my prediction that privacy coins would lead the next bull rally has proven dead wrong. That said, privacy is shaping up to be one of the biggest wars of the next decade. I’ve written that cash will get killed off by governments and the battle for the future of money is central bank digital currencies (CBDCs) versus decentralized crypto. As cash gets slaughtered and central bank digital currencies come online it may still boost the price of privacy coins but it hasn’t happened yet so these coins proved losers unless you got them at the bottom after the 2018 crash. I still like them and they will stay in the portfolio for the next round.
Not every prediction I make will be right on the money but that’s all right. I’m not in the business of certainty, I’m in the business of probability. You play probabilities in life and in trading. Anyone who claims certainty is an absolutist thinker, deluded by their own zeal, dangerous to themselves and to your bottom line. In trading we learn how to be less wrong. You’ve got to realize that no person can ever hope to have enough mental processing power to see all the variables of life and to know for certain what will happen around the corner. You place bets and that’s the best you can do.
You can spot fools by their certitude. Certitude is the death of intelligence and the death of investors.
Some of my other warnings proved better predictions. I warned that PAY looked good if they could get their deal with Mastercard and Visa to create crypto backed credit cards but it never happened. I warned that Mastercard and Visa would likely get into the crypto game themselves and that’s exactly what they’ve done, after piling up a war chest of spurious crypto patents. They have a monopoly and blocking crypto from the network in the early days was always about wanting to exploit that monopoly for their own gain, so it’s no surprise the monopoly tanked any third party attempts to storm the old fiat citadels of the plastic card kings.
That takes us through the losers. Let’s wipe this dogshit off our shoes and move onto the winners.
So what did well on my list?
BTC. ETH. XTZ. MOB. DCR. EOS.
Mobilecoin was a surprise. It didn’t end up launching until 2020 so it never really proved to be part of my hold bag. It shot up to $6 and then quickly crashed to $1.69. It’s had a steady climb ever since to $7.48. How you did there all depends on when and where you got into the game. It was a strong earner with a smooth and slow uptick over 2020 and into 2021. I never got any because by the time it launched I was onto other coins so I completely missed this winner.
If you were buying Decred in Dec of 2017, you probably got in at around $95 and today it’s over $166, having hit as high as $194. That puts it in the 20% column of good earners that didn’t turn into blockbusters. A 74% gain is a strong return that you don’t see often in many markets.
I warned that Tezos might never get through its early financial battles and troubles with the government but it made it. The team kept grinding and it managed to release what is still one of the most innovative blockchains in the space, with upgradable protocols, on-chain forks, super secure smart contracts, and more. I got in at the ICO price of well under a dollar and it’s trading at over $4.20 today. That’s a 793% gainer, the first home run.
The same goes for EOS. If you bought EOS, it really depends where you got in. The community is still going strong and it’s trading well but it punched up to over $20 a coin in 2018 and it’s currently trading at $4.24. That said, if you were in on the ICO in the early days, you got it at just over a dollar and that makes it another 700% gainer. The EOS crowdsale was one of the longest and most successful in history, running for over a year and raking in $4 billion dollars for the EOS creators.
Ethereum was a big winner because it has one of the most robust development communities and it’s spawned thousands of other coins and applications. It’s powered the NFT craze, arguably the first real use case for crypto outside of just using it as a medium of transaction and speculation.
In the first article I said I’d met with a very, very big investor who had 90% of his stack in Ethereum. Why would he do that? Because he saw it “as the best chance to become the platform, the one platform to rule them all. They have tremendous momentum, incredible devs and they rapidly incorporate new changes into the system. Ethereum is a must hold for any stack.”
That proved to be true very true and it’s still my prediction for the next round.
If you got into Ethereum in late Dec 2017, you got in for around $625. Today Ethereum is trading at $1701 and it’s hit as high as $2000. That’s a 172% gain. If you got in around the bottom, say $200, then you had 750% gain.
Of course, Bitcoin remains the big daddy of them all. If you didn’t start buying Bitcoin until late Dec 2017 then you probably got in between $14,000 and $12,000 because prices were swinging wildly. Today Bitcoin stands at $55,843, having hit as high as $60,000. Let’s imagine you got in at $14,000. That’s a 298% gain. If you waited to buy near the bottom you did a lot better and had a true home run. If you got it at $5,000 then you had a 1016% gain.
All in all, not a bad run for the Mastering Shitcoins pioneer portfolio. A few good earners and a few home runs and a lot of dogshit on your shoes.
I listed 26 coins and told you 80% would end up worthless. That stat proved right as 6 out of the 26 coins proved winners, which means 77% of them were losers. Not all losers were created equal but they still lost money. Some lost big time. Some never regained their former glory, but a loser is a loser and in the markets there are no participation trophies and there’s no room for second place, not even a set of stake knives.
23% proved winners. Half were good earners and half were big winners. The math worked out.
But after three and a half years, it’s time to pick some new coins. The market has changes significantly in that time. Crypto is rapidly evolving and holding METAL for another 5 years will not make it come back.
But before we get to my picks though, we have to update my algorithm for running this strategy, based on new ideas and wisdom I’ve picked up over the years. A trader should always look to update their algorithms and heuristics with new insights. If you’re not constantly learning as a trader, you’re doing something wrong.
The market is a great teacher.
The best way to honor her is to listen and that means dedicating yourself to life long learning.
As I’ve reflected on this story and the way I want to do it this time around, I’ve added two very important rules to the strategy.
1. Weigh your portfolio more heavily in the bigger coins and keep smaller bets in the smaller coins.
2. Buy after the crash.
The first one is important. Ethereum and Bitcoin are likely here to stay and sticking with the monsters of the asset class makes the most sense. Crypto is maturing and it’s likely those coins will continue to reap the benefits of the space in the short and medium term.
I intuitively ended up weighting most of my purchases into Bitcoin and Ethereum anyway and it makes sense to make that a hard and fast rule.
The second rule is more important. If you wait for the market to inevitably crash, you stand a much better chance of knocking it out of the park. The difference in returns there would have been massive if I’d waited and I think that will prove the case this time around too.
And don’t listen to anyone who says “what if this time is different?” It’s not. Also ignore anyone who tells you it will go up forever. They’re the fools who’s money you’ll be taking if you do this strategy right.
This time around I am looking to buy blood and tears.
I want to buy from all the people who sold at rock bottom prices. That means I’m waiting to run the 2.0 version of this strategy when there’s blood in the water and the market has totally burst. When nobody is talking about cryto anymore and it’s not in the news, that’s when you’re looking to buy. I will wait 1 year to 15 months after the market dies off and then flatlines before buying again.
Go look at every chart from 2018 to the beginning of 2020. Notice how you have a massive decline and then a huge flat period. You are looking for the flat period.
Take a look at the Ethereum chart below. The highlighted part is where you want to buy:
If I’d waited a year after the crash in April 2018 to April 2019, I would have locked up Ethereum at $164-$200.
At $164, that would have made it a 931% gain which is a massive, massive difference.
At $200, that would make it a 750% gain.
Here is a little compounding interest calculator to figure out the differences. Run some different numbers through it to see the difference between 50% gains, 200% gain, 500% gain and a 1000% gain because it is eye opening.
If you invested $2500 and bought at $200, a 750% gain would have given you $21,500.If you invested $2500 and bought at $164, a 931% gain would have given you $25,775.If you had $10,000 and bought at $164, a 931% gain would have delivered $103,100.
As you can see it doesn’t take a lot of initial investment to benefit from big gains.
Don’t worry about getting the absolute lowest price. You can’t do it without getting utterly lucky. Nobody can pick the absolute bottom consistently. Just start buying after the market totally collapses and everyone is running scared. Wait for many months. Wait until people are bored of crypto and they’ve given up. Wait until your no-coiner friends aren’t asking about it. Wait until the government is not bad mouthing it.
The key to trading is to be patient. The hardest lesson in trading is learning to do nothing. Just wait.
Whether you get in at $164 or $194 makes no real difference and you couldn’t time it that well if you tried.
Now the moment you’ve all been waiting for, the coins I’m picking for version 2.0 of this strategy.
Before we go any further I want to remind folks never to just blindly follow my list. If I have one lesson in life for people, it’s this:
Think for yourself.
Develop your mind. Stop letting other people think for you. Stop giving away your sovereignty to non-you authorities.
(ABOVE:) Alec Monopoly is laughing all the way to the bank.
Remember, this is my strategy and these are my coins. Read my list, consider it, but in the end do your own research and choose your own coins or pick the same ones after you do the research yourself to confirm my thinking.
Also, I’ll give you the standard disclaimer: This is not financial advice.
I am not your financial advisor, or your mommy, or your friendly neighborhood government regulator. I’m just a writer and a futurist, aka some guy on the Internet. Crypto is highly risky, blah, blah, blah, and you could lose everything. So put on your big boy pants and make your own decisions.
Okay, with that out of the way, let’s get cracking and take a look at what’s going in my bag after the sharks eat the market and leave the water red with ruin.
To get you going, it’s not a bad idea to start with the top coins at Coin Market Cap and go through them one by one. Just don’t assume that you’re going to like everything you see there. Take a good, long look at the project. Ask yourself questions:
This time around I’m looking to get 10% better. If I can go from 80% wrong to 70%, that’s two more successful trades, one or both a potential home run, which would make a huge difference in return on investment. As Annie Duke writes in Thinking in Bets, nobody can play anything perfectly. But if you can make yourself just 10% better you have a big advantage over other decision makers and the rest of the non-player characters in the market.
Now back to the Coin Market Cap list. I like a lot of the coins in the top twenty but not all of them.
Let’s start with Binance. I like Binance and everything they’re doing but I don’t see a lot of value in single purpose utility DEX coins in the long run so it’s a real toss up for this list. I see it getting replaced by more universal utility coins as time goes on. If they're lucky, they become a universal utility coin but I doubt it. That said, a universal rewards coin will take time, maybe a decade or more. So I won’t be surprised if BNB makes other folks lists with ease, because it is the definition of a home run so far. It’s gone from 30 cents at its launch in 2017 to $294.
That an utterly insane 97,900% gain. You read that right.
An investment of $2500 would have turned into 2.5 Million dollars in 2020.
The question is whether it remains a home run after the crash and after regulators come knocking on the Binance door much harder. This one is a big, big question for me. I’m rooting for it but I’d look to get into it when it was absolutely destroyed by a crash. I’m talking somewhere in the $35-$45 range an 85% plus crash.
FYI, Binance Academy is wonderful shortcut to research these days. I love the site and it’s the first place I start. It was much harder in 2017 to get a reliable background on any project or coin but now it’s easy to get a baseline before moving on to do my own research by reading whitepapers and articles.
Now let’s move on to the big two: Bitcoin and Ethereum.
What even needs to be said about them at this point? They go on the list and that should surprise absolutely no one. These two powerhouses must remain the most heavily weighted part of any portfolio.
The next coin on the list is Cardano. It has the advantage of still being cheap and it’s easier for a coin to go from $1 to $10 than it is for it to go from $10 to $100.
Cardano has a team that prefers a slow moving, careful and conservative approach. They try to implement peer reviewed only ideas. This year they gained some spotlight as a potential alternative to Ethereum in the NFT game. That’s a bit hard, considering they haven’t actually launched smart contracts so they can’t legitimately make a claim to that crown until they actually get the basics in order. That’s just hype.
Cardano is a long shot but they have some momentum behind them and and they lasted through the last crash so maybe they come out swinging in the next few years. Taking a share of the digital collectibles market, which is valued at over $370 billion annually would make them a force to be reckoned with in the future.
Speaking of NFTs, the most promising future prospects belong to FLOW, an innovative blockchain, with upgradeable smart contracts, from the makers of Crypto Kitties. It runs a unique consensus mechanism, called HotStuff, pioneered by VMWare, that offers lighting fast settlement and environmentally friendly settlements. They’re already running some big name clients on the blockchain, with NBA Top Shots calling it home, along with Samsung, Ubisoft and Warner Music Group. These are companies that understand digital collectibles as they’ve been in that business since I was collecting baseball cards as a kid in the 1980s.
EOS remains on my list despite it not quite taking off as much as I hoped it would. It still has the power to rival Ethereum if it plays its cards right but it’s got to gain some much wider adoption to take some of that share.
Tezos (XTZ) remains on the list too. To my eyes it’s still one of the most advanced and well thought out platforms in the entire space, with on-chain forking, a protocol that’s upgradeable at nearly every level and a unique smart contract platform that’s hard to hack and looks to be provably secure.
I may be a glutton for punishment but I have to keep the privacy coins on the list because privacy will turn into one of the biggest battles in the future as governments phase out cash and introduce their own central bank digital currencies. That puts Zcash and Monero on the list. I don’t see any others with the momentum to overtake them currently though I’m always on the lookout for innovative privacy technology and I’d love to see every major coin implement privacy as a core feature or an optional feature that you can use in different circumstances.
Just note that privacy coins often come under attack from governments who hate privacy. That may get them delisted on centralized exchanges and force you to decentralized exchanges or atomic swaps in the future to reap the rewards of the coins. That makes these coins high risk.
Decred stays on the list too because they’ve managed to stay in the game this long and make me money so let’s see how they do this time around. I consider them innovative but still a long shot. I love their community driven focus and voting.
After that we have the DeFi coin roundup. That’s short for Decentralized Finance. I’ve read a lot of long and boring diatribes on DeFi that are confusing at best and totally wrong at worst. After all that reading, I see DeFi as pretty simple. It’s any technology that cuts out the middle man of banks and intermediaries to do basic finance like loans and credit lines. Simple as that. If you can think of a service a bank does for you now, like escrow, there will likely be an algorithm for it that does it automatically and programmatically.
I had the right idea with coins like SALT in my last set of picks, but it was too early and too narrowly focused. Today’s DeFi platforms may be too early too, so watch out, but they have more momentum now and more advanced protocols that are more universal. Universal is key. I don’t want anything in my bag that does just does escrow. I want a platform that has to potential to do it all.
Uniswap is at the top of my DeFi list. It’s one of the most powerful and most well maintained decentralized platforms in the mix right now and I expect it to keep growing. It’s automated the process of market making and that’s a big deal. Algorithmic liquidity to a market is hard to pull off but they’ve done it. I expect more innovations to come out of this team.
The second major player in the DeFi space is Compound. Binance Academy describes it best so I won’t rewrite what they so succinctly have to say on it: “Compound Finance is a DeFi lending protocol. In more technical terms, it’s an algorithmic money market protocol. You could think of it as an open marketplace for money. It lets users deposit cryptocurrencies and earn interest, or borrow other cryptoassets against them. It uses smart contracts that automate the storage and management of the capital being added to the platform.”
Beyond the big two in DeFi, we get to smaller contenders for the crown. Avalanche is a new and promising take on DeFi and it looks to make itself the “internet of finance.” That’s a bold claim and it’s a long shot, but we’re looking for long shots here.
Solana is another one in the DeFi space with a new kind of consensus that’s been attracting interest from small and institutional traders, if the interviews are to be believed. I take all commentary in this space with a grain of salt now but a review of the tech shows promise. It can crank over 50K transactions per second and it has some big developers working on it so it makes the bag. The developers behind the project invite you to “break Solana” and that’s the right approach to security.
AAVE is another up and coming player in the DeFi space and it soaked up a lot of liquidity during the 2020 DeFi craze. It focuses on letting folks lend, borrow and earn interest on crypto assets.
In fact, if you really wanted to go hog wild you could go with a mix of the following smaller coins that my best friend Peter was looking at before he passed. He had a knack for finding small coins that could go big and almost everything on here is a dark horse DeFi coin doing something interesting and unique:
With all these DeFi coins you’d think I’d be bullish on DeFi in its current state but I remain skeptical of its current iteration. There is little doubt decentralized finance is one of the key use cases of the future of programmable money. The real question is whether any of the coins here are the Amazon of DeFi, a small unassuming idea now that takes off later and dominates the world. I’m not sure that blockchain tech has developed far enough to make these early contenders the one DeFi coin to rule them all but we’re going with what’s available now and hoping one of these platforms ushers in the tidal wave of DeFi dominance in 2024 or 2025 or 2030.
I’d also like to see DeFi platforms find a way to break out of the overcollateralized approach. That means if you want to borrow $100 worth of Ethereum, you have to put up more than that amount in another coin. That approach is safe but it will only take us so far and I don’t see it as the breakthrough method to replace traditional loans.
Whether you like credit or not, credit was the foundation of the modern world. Before credit and distributed risk, life remained pretty much the same. Read about the history of money and you'll realize that if you were a middle class person in the ancient world and you wanted to start a bakery you wouldn’t get a loan because the only folks who had the money were the nobles. Nobody believed the future would be any different than the past because life stayed relatively uniform over most people’s entire life. Loans were exorbitant and that baker would have to give more than half their business to the noble and pay back the loan in a few years at 50% to 100% interest or lose the entire business. As you might imagine entrepreneurship was not much of a thing back then because who the hell could afford that kind of usury?
There’s a reason they listed usury as a sin in many religions of the time. Usury is lending money as absurdly high interest rates. Today we’d call that a loan shark but that was the entire credit market in the old world. It was widely hated and it was widely hated for good reason. It was a crushing burden on the borrower. It was gangster lending and today usury is the province of gangsters and authoritarian regimes only.
If that sounds familiar, it feels a lot like DeFi today, still an alpha version of the future. If you already have $130, why would you want to put that up to borrow $100? Why would you risk getting liquidated for all of it? The reason people do it now is because they’re speculating that the coin they borrowed will go up and frankly that’s about all it’s good for, but if DeFi really wants to take over the loans market for small businesses and entrepreneurs, it needs to evolve and that will take time, maybe even a decade or more.
Of course, if a DeFi platforms don’t have a killer front end, then it’s just the web without the browser. I can’t wait for some smart graphic design heavy programmers to start working on innovative GUIs to the DeFi space because once the big players like Visa and Mastercard get into the game it could be lights out. You can bet your ass they’ll focus on user experience. Read my lips, MetaMask is not an interface. We need a beautiful front end that even grandma could use and we need it soon.
Lastly, it’s worth noting this portfolio is overly weighted in DeFi coins. That’s because I see it as one of the most promising applications for the crypto space, as I’ve noted, but there’s a big problem with that. It also stands as the area most likely to see the biggest government crackdowns and attacks. That makes it incredibly high risk. That’s what we call correlated trades in the investing space and we’ve got some major correlation here so watch out.
Believe me when I tell you that governments the world over will lose their shit when they realize people are getting loans without a middle man and potentially bypassing their centralized KYC choke points. Expect frequent and furious attacks that will tank many projects.
With all that said, I expect DeFi is here to stay, even after it gets regulated into a shell of its former self by overzealous governments in the not too distant future. If we get lucky, maybe one of these coins is here to stay too. It’s a long shot because the space will continue to evolve and newer and better projects will come along, but there’s a chance, so let’s hope.
Enough about DeFi. Let’s break out of the DeFi loop for a bit and look at other coins that want to revolutionize old industries.
LINK is the place to start. It wants to be the link between all kinds of blockchains and third party information and it’s one of the most widely used services in the crypto space.
That’s a good idea because why should we have thousands of blockchains that are all silos. Eventually we’ll have commons standards that allow blockchains to easily swap information and liquidity. To be honest, I don’t think LINK will be that glue between blockchains but it’s the best contender for the space now. Eventually I see a number of open source glue protocols driving this interoperability but it will take time to get there.
Link is also, as Binance Academy writes, “a decentralized oracle service that can provide external data to smart contracts on Ethereum. In other words, it connects blockchains with the real world.”
What are Oracles?
(ABOVE:) The Oracle at Delphi
They’re basically a third party service that gives real world information to smart contracts. Smart contracts are kind of dumb. They’re basically just simple scripts. If this happens then do this thing. But imagine trying to embed those scripts into a real contract, like a will. You can have the smart contract script hold the money in escrow until the creator of the will passed away, but how would the script know the person passed? Oracles. An Oracle queries and verifies the external information and allows the smart contract to execute.
In the future I expect smart contracts to get embedded in real world legal contracts but the two are very different things. A legal contract is a lot of hand written logic that assumes a lot of human interaction. People know if someone passed away and they can start doing what the legal contract of a will demands. Now all of that work is done by people but in the future embedded smart contracts will start dishing out the money once an Oracle verifies it, rather than a person.
On that front, I’d invest in Mattereum if I could but they don’t have a token yet. I love the project and the people behind it. It’s about solving the problems of property ownership in the real world. I’ve already written about the project, so I won’t waste a lot of space here as you can read up on it there.
THETA is another coin trying to revolutionize an old space, in this case video streaming. It’s designed to incentivize a global decentralized video stream platform. The more users who join the more bandwidth the platform gets. It’s a kind of anti-cloud, pushing the cloud out to the edges again, distributing it. This is the great pendulum of history, centralizing everything only to decentralize it in the next revolution and then it swings back again. It’s got an impressive group of VCs behind it, as well as partners in the media and gaming industry. Someone will revolutionize the video space and maybe it’s these folks, but it’s probably too early.
In the long run, THETA is another longshot and probably not the platform that actually gets us to micropayments paying artists for eternity but it’s the best candidate at the moment so it gets the nod.
DOT, aka Pokadot, is a super interesting project that falls into the “next gen, decentralized web” camp. It’s one of these ideas that never seems to go away in blockchain and even winds of getting satirized but even the original founders of the web, like Sir Tim Berners Lee, are working on a more decentralized approach now, so it’s not just a pipe dream. Every time I’ve investigated the Pokadot project, I find a lot of smart people behind it, but their presentations almost always seem couched in sci-fi hand waving versus real world concrete innovations. It’s another project that wants to create a universal network that links everything into a universal framework. It goes in the bag, just in case they pull it off.
Stacks (STX) is a coin from the folks a Blockstack. Its platform connects to Bitcoin, enabling people to build apps, smart contracts, and digital assets that inherit Bitcoin’s security and network. I did a little work for them in the past and I find the team to be highly intelligent and the company is backed by folks like Naval Ravikant.
Bancor had a mega ICO during the ICO craze of 2016–2017. It’s basically an algorithmic liquidity provider for trading platforms, aka an algorithmic market maker and swap protocol.
TRON is a weird, dark horse coin. It wants to be an “operating system” for decentralized applications and it has a charismatic and controversial founder. It’s fairly popular for building Dapps in the gaming industry and I expect the gaming industry to be instrumental in the rise of crypto over the long run. I’m honestly mixed about this one but I put it on the very, very long shots of this list, with a small allocation.
VeChain is a second dark horse. It’s been on a steady rise lately and it has a hardcore following. It’s designed for supply chain management, whether that’s tracking the safety of food or tracking goods as they travel over the high seas in shipping containers. I eventually see a worldwide, distributed tracking system for food and goods but I think it may take several decades to come to fruition because those industries are usually super late on the defusion of innovation adoption curve. VeChain has gone on a tear lately but it would have to survive over decades to have any chance of revolutionizing that age-old space. Still, it goes in the bag for now.
So there you have it. Grab a basket of coins, buy and hold. Wake up rich in 2–5 of years. Same approach as last time, with a few twists to make it interesting.
If you did this a few years ago you’d be retired or least have the down payment on a house. Most of the coins would have disappeared but the big ones would have delivered those 10 baggers, if you got in at the right moment.
Of course, you can’t hold forever, so when you sell is just as important as when you buy. HODL forever is just a meme. It's got nothing to do with reality. Have a plan to get out and turn these coins back into dirty fiat. In others words:
Hold, but sell.
If you don’t sell, you just have phantom gains on paper.
Remember a lot of these coins will fail too but today is even more different than three years ago. We have lots of digital money flying around the world now, trillions of dollars. There are some real applications that scale and solve real problems. Developers were busy during the crypto winter.
That said, it’s still an immature market. It’s the size of a banana republic. There are single companies with a bigger market cap than all of Bitcoin combined. It’s only been a decade and things take a lot longer to develop than people imagine. It took 25 to 30 years for the Internet to take off and another decade for it to become ubiquitous in our lives. Things move a little faster now because of the Internet and how fast information travels but not as fast as you think. It’s a long, slow slog to invent something that doesn’t exist and solve all the problems that come from it.
This is Darwinian evolution at its finest. The strong will survive and everyone else will go the way of the Dodo.
We will have another crash. Maybe this year. Maybe next. But it’s coming like a tidal wave, far out at sea, slowly gathering force as it rushes towards the shore. You can’t see it now but you won’t be able to miss it when it slams the coast and turns the waters red with ruin.
But that’s when you’ll smile. You’ll put a reminder in your calendar to check on it six months later and a year later and then you’ll start buying everyone’s salty tears.
After that you’ll put those coins in cold storage and forget about them. Don’t even look at the charts.
Then wake up in two or three years and see how you did.
With any luck you won’t be working for anyone ever again or at least you’ll have a trip around the world or have paid off all that college debt that was dragging you down.
What will you do with your new found gains?
Travel the world? Buy your dream house? Start a career as a DJ instead of a waiter?
The world is vast and infinite. There are so many paths out there that lead to a life of intrigue and adventure.
Which path will you pick?
Whatever you choose, the choice will now be yours.
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