RyanTanaka

The idea of "smart investing" comes with the assumption that the market rewards reason and punishes irrationality in the long-term. What they don't tell you, though, is that the opposite is often true in the short-term. If you want to make money, more often than not you do have to have the discipline to move contrary to what most are doing. It's been almost a decade since I started getting into this stuff but the above still seems to hold true. Crypto has been mostly flat for about 6 months now, but has stayed mostly stable. The last bull run had a similar pattern where it climbed to new highs ( BTC $4000→$16000, ETH $100→$1400) then went back down to where it was prior. (And stayed that way for a few years.) The projects that were diligently working on their product even after the dip ended up reaping the rewards of the 2020 rally and did very well for themselves. The rivalries between Bitcoin , Ethereum , Dogecoin , Tezos, Cardano , Ripple, EOS , etc. were there even back in 2018, but the arguments were mostly about technical differences and felt less “personal”. This time, a lot of arguments you see on social media have more personal, political, ideological slants - a sign of the irrationality of mainstream money having arrived, perhaps. For what it’s worth, despite the FTX scandals and the very negative media coverage of crypto in recent weeks, the price hasn't really moved all that much. Chances are good that the ones that were going to leave are already gone and we're only left with the ones who are in it for the long-haul. While the talking heads gripe about their losses in public, the builders will continue to build, pushing the industry where it needs to be for the future to come. That is the hope, anyway. -- Long-term strategies only work if you're willing to wait at least one market cycle since the system needs time to work itself out - and I haven’t seen any exceptions to this rule, thus far. But having been through 3 crypto winters already, I’m starting to wonder what’s really taking so long for us to get to where we need to be - the “big ideas” in crypto (transparency, accountability, partnership automation) can already be done with distributed ledgers, but the industry has been slow to adapt to it, to say the least. The problem is that we're not really utilizing blockchain technologies the way we should be: case in point, when you look at all the people in the media and social media talking about how much money they’re making, how do we know if what they’re saying is actually true? We have no idea - we’re just taking their word for it, and now we’re finding out that many of them we’re just trying to lie and grift their way to the top. Whatever happened to "verify, not trust"? Having gotten too used to low interest rates, the fiat markets are poised to be in big trouble over the next few years - if not more. The trends do say that when an economic system goes into disarray, crypto adoption tends to go up. But in order for that to happen, the crypto community does need to convince the world that it's safer to park their money in coins rather than fiat - which, if we're being honest - we're not quite there yet. But unlike fiat institutions that are saddled with legacy and protectionist frameworks, crypto has the tools to fix itself if it wanted to - the advantage of being a new industry that has the energy and flexibility to adapt. The current irony is that crypto is suffering from the very problems it poised to solve - but a lot of it is holdovers of bad habits from Web2 and traditional fiat. You could probably argue the SBF's actions was a product of the fiat world, not crypto - there's a reason why there are those on the “inside” trying to protect him now. But FTX is also a preview, in a way, of what's to come to the fiat worlds as we head further into the recession - what they do to SBF could be them next - which is why they feel like they need to protect him at all costs, despite the blatancy of his misdeeds. In a way, SBF did the industry a favor in getting the skeletons out of the closer earlier than later. For fiat, the tide is only just starting to pull. Crypto will either set the new standards for transparency, accountability, and decentralized governance - or it’s going to fall into old habits again and go to 0. (There is no reason for people to use crypto if it’s just going to be Web2.1 - the incumbents have that covered already.) It’s going to be an interesting ride over the next few years, either way.

Binance recently announced that they will not be going forward with FTX's bailout - so the future of the company and its holders still hangs in the balance. (The FTT token has been removed from this site since, but last I checked it was down 95%+.) Is this the "end of crypto"? Well, not quite - MATIC, ATOM, DOGE, ETH, LINK are still in up in the last 6 months, despite the recent drop, highlighting the fact that the fact that the appetite for taking bets on the crypto market is still there. Given that the recession woes are still there, many are likely still on the sidelines waiting for the market to bottom out before deciding to get back in. The downturn was expected, but it's also possible to make the argument that the industry is still doing better than expected. Here's the tricky part: the FTX scandal is triggering for a lot of people in finance because FTX had their hand in basically everything: crypto, fiat, regulators, celebrities, political parties (SBF and his families have strong ties to the Democratic Party, as records show), the media, and the banking system - both old and new. Unlike previous scams/scandals (e.g. Mt. Gox), FTX had the buy-in of mainstream money and institutions (including regulators) which also calls into question the effectiveness of the institutional safeguards as well. Who's fault is it? There's likely going to be a lot of finger-pointing in the upcoming months as the mess gets sorted out, but the question for investors right now is whether or not the market is going to see this scandal as a failure of the industry, or a failure of the regulatory framework that currently exists. So far, the results are still unclear. The irony of the FTX scandal is that these were the sorts of problems that crypto set out to fix - had they used crypto for its intended purpose (on-chain governance, transparency in their financial records and dealings), it's very likely that these issues would have been caught way earlier before it became too late. Some will leave, some will stay, but the ideal outcome to come out of this scandal would be for the people themselves to demand higher standards in accounting and fiduciary duties.

I'm sure you've probably already heard the news about FTX so I won't cover everything - but there's a few things we might expect, longer-term, from the scandal this week. - More Regulations: This incident embarrassed a lot of powerful people as well, so the likelihood of more substantial regulations coming down the pipe is now much higher. - Increased Liquidity: Lots of people are pulling money outside of crypto right now, which explains why the prices have dropped so much this week, as a whole. (Especially Solana , which took an outsized hit compared to the rest.) But the money is still there - some will leave, but some will come back...hopefully with better research. It may present an opportunity for smaller alts to grow after the dust settles. The crypto ecosystem has gone through a few exchange collapses already (ex. Mt. Gox) so crypto itself will still continue to press on. But I fully expect for more stories like these to unfold as we head further into the recession - the money printer has run out of ink, after all.

DOGE Reacts to Twitter Acquisition News - Is It Sustainable? Dogecoin had a very good week this week, probably in reaction to the news of the Twitter acquisition that happened as of today. It's still too early to tell, but some reasons to exercise caution regarding the company, especially given its new owner's past history. As we head into a recession, what worked previously may not work now. Also forgot to mention that Jack Dorsey started a new social media company Bluesky, which may directly compete with the idea of social media Web3. Can the Web2 moguls from an earlier era migrate successfully to Web3? Time will tell.

The End of the Deflationary Asset Era Deflationary assets - aka artificial scarcity - is a product of the mediocre mind. Exponential growth and real social progress comes from the idea of "growing the pie". It's weird how people don't use that phrase anymore since it has become such a foreign concept at this point. Bitcoin  (and now Ethereum ), NFTs, real-estate (both IRL and the metaverse), healthcare, education, and the economy as a whole has succumbed to the "scarcity mindset" and is in danger of collapsing on itself since it doesn't know how to grow its ecosystem from its base. Those mythical 100000x returns doesn't come from flipping or nickle-and-diming individuals but from growing the ecosystem as a whole. To keep the good times going, the response should be to increase capacity, not try to ration out your existing stock. Ethereum was particularly disappointing to watch this year because they had the capability to be so much more but chose the mediocre path when they started burning their own supply. Like Bitcoin , they put an expiration date on themselves and can now only expect modest returns from here on out. To be fair, "growing the pie" is very difficult and requires a higher degree of creativity and ability to spot new win-win scenarios from seemingly thin air. But that's why we have geniuses and entrepreneurs to fill that role that typical biz-dev types are unable to do. As the scarcity economies continues to do what it does - shrink - it's unfortunately going to take innocent bystanders with them. We're going to find that most of our tax dollars have been working to keep the illusion of sustainability rather than of real growth. But the silver lining is that as the status quo continues to implode on itself, the opportunity to grow the pie once again becomes possible. It's a cycle that has happened before and will happen again. With that, it's at least possible to navigate through the chaos. Good luck, folks. 🤞

The Market Has Spoken - "Liquid Staking" is the Future Following this week's inflation report and the much-anticipated "The Merge" on Ethereum's ecosystem, the crypto markets took a massive dip - in particular, ETH itself. This is the classic "buy the rumor, sell the news" pattern as the hype towards the merge date neared, then the massive-selloff right after. But not all coins were in the red - COSMOS (ATOM) did very well this week, and showed a very strong decoupling pattern from the rest of the pack. Why? Because they currently offer the best staking rewards (15%+!) out there, beating both the banks and its competitors by a very large margin. If you wanted to sell ETH but stay in crypto, it was the most obvious option to go with, at least on paper. ETH2 has the problem of being illiquid (there is no set date for when you can withdraw your funds), as well as expensive - which will likely lead to the coin struggling over the long-term as coins that offer low-fee liquid staking (ADA, XTZ, DOT, MATIC, AVAX, etc.) has had a much longer time. ETH2 "final form" isn't likely to happen any time soon (some say as long as 6 years) so they are currently behind the curve of industry standards, not ahead. Whether they can catch up to the rest is yet to be seen. Now that ETH has de-coupled itself from proof-of-work, we're going to start to see public attention towards different aspects of Web3 and DeFi - and staking rewards is likely to be the talk of the town, especially as we go further into the recession.

Ethereum Completes its "Merge". What's Next for ETH2? The much anticipated "merge" has happened on the Ethereum network as of last night - so far there doesn't seem to be any major shifts, although if you're an ETH holder you may have noticed a sharp drop-off in price as of this morning. (The market is down as a whole, but ETH took a bigger hit than most, as of today.) This pattern can be seen pretty often in the industry, where a technical upgrade or public hype often triggers a short-term rally as it gets close to the date, then a massive sell-off right after. ( Dogecoin in particular tends to be very susceptible to this especially on Twitter , I've noticed.) While some attribute this behavior as "whale activity", it's usually a sign that ETH still has downward pressure in terms of price - experienced investors often try to time their liquidations by riding short-term hype cycles of clearly-defined dates, as seen here. While the merge was a momentous occasion for the chain for sure, now that it's over it's going to shift the attention of the project to a number of challenges that will likely determine the viability of ETH2 in the long-term. A few of them are: - Yesterday probably marks the beginning of the proof-of-stake era for the crypto industry, especially as we head further into the recession and staking rewards (interest rates) start looking more appealing as a place for people to park their money, longer-term. ETH has made that transition, but there are also already many competitors out there (Tezos, Cardano , Cosmos, TRON, etc.) that outperforms ETH2's staking rewards by a very large margin right now. (Though to be fair, ETH2 is still beating the banks, which still is trying to stay at near-0, despite the Fed's rate hikes.) - "The merge" is only 1 out of 5 steps (Merge, Surge, Verge, Purge, Splurge) until ETH2 is "fully done", which is estimated to take 6 years or longer. Gas fees won't be affected until their "sharding" upgrade is complete, which doesn't have a deadline as of yet. (Until then, most ETH apps will largely sit idle/abandoned since practical usage is just not possible right now.) 6 years is a very long time to sit idle, really. - ETH2 is currently not liquid (you're not allowed to withdraw from ETH2 accounts until they're "ready"), which makes it much more inflexible and risky than traditional CDs and bonds that have fixed end dates. This is likely to make it very unappealing for most investors out there who will need more clarity and stability in their returns, especially during bear markets. - Though in theory they are supposed to be independent, we don't actually know what sorts of after-effects ETH2 will have on Layer 2s and ERC tokens built on top of the original chain. Time will tell, but if the price continues to drop (which is likely at this point), we may start to see unintended effects start to pop up. (A lot of crypto projects "balance" their economy with the idea of the price always going up - but that strategy has already backfired in a number of projects already.) - ETH doesn't support on-chain governance systems (like Tezos - Vitalik was on record being against the idea for a very long time) so there is no way for people to know whether or not the outcomes of DAO or multi-chain votes were done with due-diligence or not. Many businesses and organizations will not participate in these activities until this is fixed. Until then, ETH holders will have to just get used to big decisions behind done behind closed doors. - What happens with the migration of miners in the ecosystem (ETH was the go-to in terms of mining profitability until now) will be interesting to see since this will be major shift in hash-power allocation in the industry as a whole. Bitcoin mining - due to its fixed supply - has a extremely high difficulty curve and very difficult to turn a profit on so most miners are unlikely to go there, either. It may be an opportunity for a lesser known proof-of-work chains to make its move. (Especially "useful" PoW projects like Gridcoin and Golem.) -- All in all, the merge came and went, as with like most technical upgrades in the past, the market didn't seem too concerned -- at least, not yet. Ethereum has the bigger challenge now of addressing use-cases and business concerns in order to re-attract the talent and resources that had fled the scene since its gas-fee problem started becoming all too apparent. Can it stay competitive among the proof-of-stake league that have had more time to refine their process? Time will tell.

Merge to the Splurge - Inflation and Inflated Expectations Lots of things happening in finance today. US inflation is at 8.3% (higher than expected with no end in sight), which tanked both crypto and the stock market at the same time. Goes to show that there's still a lot of overlap between the two right now. Also coming up is the much anticipated "merge" on Ethereum (going to happen some time this week, according to Vitalik), which will finally migrate their chain from proof-of-work over to proof-of-stake. As interest rates start to get hiked further, crypto coins will likely need some sort of staking mechanism to survive - or at least offer some kind of utility beyond marketing hype. Some things to keep in mind: - The "merge" is not likely to affect ETH's gas prices, since that comes later during the "sharding" phase. Until then, most dApps created on the ETH ecosystem will still largely sit idle/abandoned. - During recessions, cash is king - and the coins that resemble that the most (projects that are used as currency, rather than speculation) is likely to perform better overall. That means coins that leaned into the "store-of-value" idea (and have oversaturated mind-share) may be in big trouble - which includes Bitcoin , as well. - Many Web3 "fintech" startups (including some very big ones) operated under the assumption that BTC /ETH was going to go up forever - some already made headlines this year as they imploded on itself after the downturn, but we're likely to see more of them pop up as we get further into the winter as a whole. - Coins that offer substantial staking rewards (Tezos, Algorand, Cosmos, Solana , TRON, etc.) are outperforming the banks right now by a very large margin, and may be a good position to grow as the banks continue to drag their feet. Holders of coins that were reliant on the "perpetual growth" model in order to offer staking rewards will likely see their rates shrink over time. (If they're desperate enough, it may even go negative. 😨) - ETH2 coins are, by default, "locked up" for an indeterminate length of time - lots of people signed up to be validators during the December launch in 21' but the legality of it will likely be in question. As the market dips further, many will want to liquidate and there will be more pressure put on the ETH team to do so. (If not, a few class-action suits may be in the pipeline.) - What happens to the miners after the "merge"? Up until now, ETH was by far, the most reliable and profitable coin to mine, but that will go away, overnight. Some competitors are trying to use the opportunity to fracture the ETH community by offering their own places to mine, but longer-term, PoW's real value lies in their ability to allocate their processing power to "useful" mining. (e.g. Gridcoin, Golem, etc.) We may start to see a shift in favor of those types of projects after miners start to do more research on their own. Long story short, the projects that were reliant on perpetual fundraising are likely to be out - replaced by projects that have revenue/profits and greater sustainability. The crypto winter may be brutal for some, but the silver lining is that we may finally get to see a crypto ecosystem that prizes utility and sustainability over short-term hype. It's going to be a crazy time either way - good luck, folks.

During Recessions, Cash is King - Where Does Crypto Fit In? During recessionary economies, the money-classes that take the biggest hits are usually assets - stocks, real-estate, speculative assets, which, yes, also includes NFTs. As they say, during tough times, "cash is king". As we get deeper into it, we're going to see a big shift in the way people use and talk about their money. For crypto investors out there (or anyone in general who wants to prepare themselves for the new era that's about to unfold) the things to keep in mind are: - Asset ownership tends to skew upwards in the income bracket, which means that there will be lots of doom-and-gloom narratives coming from the top. For most people a "market crash" will be a good thing (better than getting priced out by inflation , anyway), and the result will be that the top earners will have slightly less money in relation to the bottom, evening the "playing field" so to speak. Take everything you read with a grain of salt, either way. - Cryptocurrencies are in an interesting position where they're able to function both as assets AND cash - even legally, the definition of where the technology lies in regards to the two is still unclear. But we see that some coins tend to "lean" towards one end of the spectrum more than the other. Bitcoin is largely classified as an asset ("store-of-value"), Ethereum is the former trying to move towards the latter (the "merge", "sharding"), though the fate of the latter is still unclear. Dogecoin , on the other hand, may actually see a bump in interest due to the fact that it's currently treated more as cash than an asset. (The chain also has plans on moving towards Proof-of-Stake, though the timeline is still unclear.) If cash is king, the loveable Shiba Inu mascot may, in fact, be the one to dethrone King Bitcoin sitting at the top. - The strategy for most investors during recessionary times will switch from "beating" inflation to "keeping up" with inflation - inflation will naturally drop as interest rates rise, eventually reaching an equilibrium. This presents an opportunity for coins that offer reliable staking rewards since they're currently beating the banks by a very large margin right now. (Some banks are still stuck at 0, for the record.) The average person is likely to benefit from this transition in the long run in the form of cheaper goods. (Especially for essentials, which are obviously out of control right now.) - The 0 interest rate decade-long experiment in the US economy is about to come to an end, having peaked during the COVID era where money-printing and cheap loans became at an all-time-high . (Some would describe it as the "apocalypse economy", but that's for another discussion altogether.) Many "Web3" startups of last year were part of that cash grab, and will likely run out of runway in 2023-24. (If you're having second thoughts about the "investments" you made last year, the time to get out would probably be now, in other words.) - As interest rates rise, it will get exponentially harder to raise money, even for Web3 projects. CEOs and founders will be chosen for their ability to generate revenue and turn a profit, rather than their marketing and fundraising skills. (The current crop of "thought leaders" we see in public today are a result of the low-interest "casino economy" we had over this past decade.) We're likely going to see a dramatic shift in the way people talk about startups in general, cryptocurrency projects included. - Higher interest rates will encourage people to save rather than spend, which will also change the focus of the types of products and services that companies and startups start to offer to the general public. The economy having been in overconsumption mode for so long, this will be a big adjustment for most people out there. -- Long story short, there will still be ways to "come out ahead" even during recessions, but the benefits will be more complex than seeing the numbers in your bank account simply going up. It's more that you're losing less money relative to everything else, which, in turn, increases your purchasing power overall. (If you're making the same money but rent gets cut in half, for example, you're still "winning".) I still do believe that in the long run the recession will be a good thing for most people, and that the economy will come out stronger after the dust eventually settles. The path to getting there, though, will be a rough one no matter how you put it. Good luck folks. 🤞

The Fork of Thrones - Will the Merge Fracture the ETH Ecosystem? The much anticipated (or dreaded if you're a miner) "merge" coming in Sep 19th will officially move the Ethereum ecosystem from proof-of-work to proof-of-stake. Justin Sun seems to see the opportunity for this event to sow some chaos within his competition by supporting ETHW and ETHS coins on the Poloniex exchanges as of this week. - ETHW and ETHS is similar to ETC ( Ethereum Classic) in the sense that they are hard-forks of the original ETH chain - which means that if you had money in a wallet during the time of the fork, you would have gotten copied coins of it there, too. (Free money!) FYI, if you had your money on an exchange during that time, however, the coins go to them, not you. - ETC has had many issues in the past, including having gotten 51% attacked, which is probably the worst thing that can happen on any given chain. These new projects (with more likely to emerge as a result of miners looking for work after leaving ETH2) will also be vulnerable to similar attacks just because the smaller size makes it easier for hackers to target. - A lot of developers and artists were chased off ETH due to its high-gas fee problems last year, and it's unclear if they're going to be going back, or if the foundation has any strategy of addressing this problem in the near future. (Right now the ecosystem is dominated by talks of speculators talking to other speculators about speculation - which usually is a bad sign for a project's long-term prospects.) ETH has many issues to contend with, even if the merge is successful. (Sharding and scaling issues are planned for 2023, not in September, btw - it's unclear whether or not this upgrade will have an impact on the high fees.) - Crypto's biggest sell during a recession - staking rewards - is not available on Bitcoin , since simply doesn't have the mechanism to do so. The rivalry between the two coins right now revolves around the pros/cons of PoW vs PoS , but keep in mind that on PoW, mining power = voting power; on PoS , money = voting power. Aside from Tezos (XTZ) and a few other niche projects, most coins do not offer on-chain governance so the results of voting will always be unclear and vulnerable to manipulation/misinformation. It's going to be a crazy year for both crypto and the general economy so hope people are prepared. Good luck, folks. 🤞