IF YOU BOUGHT BTC AT $200 WHAT WOULD YOU DO?

There are so many things to talk about here, this newsletter would be 10pages if I jumped into it all. So let’s cover some of the highlights.

We’ve got to remember that while you might be new to the crypto world, there are people who’ve been in it for years. Some almost a decade. While we’re getting comfortable with $30-$60k price points…these people got in the market when BTC was below $1000. Some when it was below $100 or even $50. 

What would you do if you saw BTC hit $58,000?

You’d likely take some profits, and would be smart to do so.

And if you had a lot of Bitcoin (which I know we all wish we did), you might sell a few hundred of them to make the x-million that would change your life.

 

But there are two things to consider about all of this:

1. The crypto-markets (BTC is just $1-trillion) are still really really smallcompared to things like Gold (estimated $8-10-trillion) and the NYSE (estimated $25-trillion). So a selloff of $50-100-million can spook or move the market. Just look at what happened when Tesla bought $1.5bn of Bitcoin. The price jumped 10% in an hour, and continued upwards for more than a 20% gain in a single day! The same thing happens the other way.

2. The crypto-markets have gotten more complex with things like margin trading, futures, etc. ← which means people can now play with leverage. People can borrow more than they have. This means they can lose money quickly, which floods the market with additional crypto, further plummeting the price.

The two points listed above can, in many cases, cause a domino effect of selloffs if certain thresholds are hit.

Thus, if an old BTC holder sells off, let’s say 1,000 BTC for a x-millions, that might spook others to sell and might cause a dip on a couple of exchanges. This dip could trigger stop-losses (points at which people set an automatic “sell” so they can ‘stop any more loss’ in their position). This naturally means their cryptocurrency is sold, further pushing the price down and triggering both 1) more fear, and 2) more stop losses.

This is likely what we saw on Monday morning.

And when it happens, it happens very quickly. It took less than an hour for things to tank. Here’s what it looked like:

• Make sure you’re not exposing yourself to too much risk at one point in time. The crypto world is like the Wild West and it can move very very quickly.
  
  
• Really understand market signals. If you don’t, you’re basically gambling (which is fine if you want that rush), but it means you’re much more likely to lose since you don’t truly understand what’s happening or likely to happen.
  
  
• Always take some profits.
  
  
• Leverage is not used as a way to get rich quickly (or so they say. I’m still grappling with this one). Instead think of it as a way to solidify your conviction in a market move up or down – which helps add weight to your choice.
  
  
• Anything over 3x leverage is extremely risky. You’re far more likely to get rekt (lose everything) in the crypto world. Remember 30% drops are not uncommon. At 3x leverage that would be 90% of your position.
  
  
• The market doesn’t care either way about you. The market has infinite money. The market has an infinite number of bulls and bears. The market doesn’t care how much you had before, or how much you have after. The market doesn’t care if you’re a good person or not. If you’re smart or not. Adjust your mindset accordingly. You must take emotion out of it.
  
  
• Systems over psychology. It is really hard not to fall prey to hype in either direction, be it good hype or FUD (fear uncertainty and doubt). You need a system. Build one that works for you and follow it.
  
  
• The market is about probabilities. Use this to your advantage. You aregoing to lose. But if you have a system and you’ve got the probabilities in your favor, you’ll win more than you lose.
  
  
• Stay humble, stay hungry, stay ‘foolish’, and move slowly to start – you’ll want to think with a beginners mind as much as possible. You’ll want to learn as much as possible. No one is going to know it all in the market. So start slow and build over time. There are lots of opportunities to make money.

If you’re not a techie or a dude (yes, many of the people in the NFT space are dudes) then you might not get the hype around collectables. 

So let’s think about it in another way.

Sports cards. Rare watches. A Banksy art piece or the Mona Lisa. A beautiful vintage Channel jacket.

Humans it seems, have a propensity to value what is rare. I believe this likely comes from ancient times, where a rare item might actually give you a survival advantage. 

This instinct has not left us. We still value what is rare. Only now we’ve got 1000s of niche areas that groups of people around the world can congregate around. And in each of these niche’s there are things that that group would consider “rare items”. These would naturally hold significant value to that group.

 

Enter collectables.

It could be anything. Unboxed GI joes or Barbies. Sports cards. Comics. Rare watches. Pens. Notebooks from famous people. The list goes on and on. 

Some niche groups are larger than others (think sports cards) and so typically the rare items in this group will command a much higher price than items from smaller niche groups. It’s really a supply and demand function. 

 

Now however, we’re in a digital world, where copying and duplication are as easy as the click of a button.

 

And, you’ll notice, that because of the ease of duplication on the web, the things that we once found valuable in a non-digital world (pictures, music, books, news, etc.) are now in such abundance that they’ve basically approached a $0 price point. 

 

That is until NFTs. 

 

This digital pice below, sold for 420 ETH (yes that’s about $650,000). Source Coindesk.

 

NFTs (Non-Fungible Tokens) are unique, one-of-a-kind (or one-of-a-code) tokens, that represent digital collectables. Because the code base for that token or item is unique, a collector could easily identify if it’s a ‘real’ version of the item or a ‘fake’ copy. 

*Pause*

For those who are nerding it out and want to know what fungible means – it essentially means the ability of that good or asset to be exchanged for other goods or assets. Thus money is fungible – you can exchange it easily for other money, goods or services. Your desk is non-fungible, because you cannot exchange it for other goods or services very easily, and it’s not a recognized means of doing so.

NFTs then (Non-Fungible Tokens) are tokens (or cryptocurrencies) that represent digital collectables. Like a limited edition one-of-a-kind Silver Dollar from the US Mint, they are unique pieces of code that cannot be duplicated or copied. Because they’re unique, cannot really be traded like other cryptocurrencies. Hence the term Non-Fungible Tokens or NFTs.

*Un-pause*

 

People buy them with cash or other fungible-tokens (Bitcoin, Ethereum, etc.) instead. 

 

And this market is taking off like a rocket. 

 

If you’re the type of person who really understands and knows how to value collectibles in different markets, then this space is a very exciting opportunity.

 

While we do seem to be in a bit of a hype-cycle for this, I’ve interviewed the CEO/Co-Founder of the largest platform for trading/buying selling collectables (OpenSea) a couple of years ago and found the idea of digital collectables fascinating. 

 

I feel like we’re bound to see more fractional ownership in digital or real art (whereby you could buy a 1” square of the Mona Lisa for $1m type of thing). It’s a great space to keep an eye on if you’re into that type of thing.

 

This LeBron video highlight sold for over $71,000 on Top Shot an NBA NFT marketplace. Another similar to this was purchased for over $200,000.