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Image: PixTeller
Maximum Bitcoin
A few weeks back, I said for most retail crypto investors, dollar cost averaging (DCA) Bitcoin is probably the best bet. And yet, over the last few weeks, a number of alt-coins have done quite well against Bitcoin.
As my regular readers will know, I have a very dim outlook on the macro environment. As an over-educated smarty-pants type, I believe the world is about to get a tough lesson on basic economics.
I don’t care how anyone wants to twist it around, a 400% increase in the money supply over two years is going to cause problems. In fact it is causing problems right now.
There is no “soft-landing” for that kind of stupidity. The same people that didn’t see the last financial crisis coming are currently doing everything they possibly can to cause the next one.
What I can say with a high degree of certainty is this: the next crash is going to be spectacular. It is going to go far deeper and far longer than most can imagine.
When it does, you might consider stocking up on some Bitcoin. I can’t really say the same for whatever alt you might be pining over.
Image: ImgFlip
Richard Heart, Hexicans, and the U.S. Space Force
Probably one of the most important attributes you can have as a crypto investor is an open-mind. The inverse of an open mind can be summed by a simple equation:
Confirmation bias + overconfidence = rekt
Having an open mind means you take in information without judgment. More importantly, it means taking in information you don’t like hearing without judgment.
I don’t remember where this idea came from, but it is a guiding principle in my life:
If someone tells you something you’ve never heard before, ask them to repeat it. Take the time to listen and really understand what they’re saying. Chances are good it’s important.
Case in point: Bitcoin. Up until recently, I had heard all of the common arguments for why Bitcoin is special. And it was all crap.
Perfect money, store of value, inflation hedge, you name it. It doesn’t take too long, or too much effort to poke massive holes in all of those ideas.
Then I heard something about Bitcoin I had never heard before. I took the time to listen, and when I understood, I realised it was important.
Jason P. Lowery is an MIT grad and member of the US Space Force. And he is the only person I am aware of that has a cogent argument for why Bitcoin might be important one day.
After I heard what he had to say, I changed my mind about Bitcoin. I didn’t hang on to my bias. I didn’t cling to my ideas.
I simply changed my mind.
Image: ImgFlip
Likewise, I have generally dismissed the Hex crypto project. But then I saw an interview with Richard Heart on CryptoBanter and I think I’ve changed my mind about Hex.
For his part, Mr. Heart dismisses Bitcoin for many of the same reasons I used to. But the big takeaway for me was, Hex is no different than Solana or Cardano or any other “name” blockchain project.
As I have pointed out before, we don’t use crypto for anything. While I think that’s about to change, the fact remains that the two things keeping the money flowing in crypto projects are:
Community; and
Narrative
As Mr. Heart points out, Hex has both — in spades. I don’t think Hex (or the upcoming Pulsechain) are going to have any real utility. But I think the same is true for Solana.
And, as Mr. Heart also points out, Hex has generally held up quite well. At the very least, it’s just as competitive from a market perspective as any other “name” brand token.
Here’s Hex (blue) versus BTC (orange), prices in USD:
Image: TradingView
Are there other crypto projects I invest in that I think have better long term potential? Of course. Do I also think Hex could generate some serious network effects and pump like crazy.
Yep.
Well, at least enough that I’m taking a little bet on it. Why not? Sure, it might zero out. But so can Solana.
And, if you don’t think it’s possible for Solana to zero out, I’d direct you to the “open mind” section up above. Not saying it will, just saying it’s wise to keep in mind most alts never regain previous all-time-highs.
That’s also important to remember for the next section as well.
$BTC v. Alts: Rise of the Alts
So why go into all this about changing minds and Hex and all that? Because historically speaking, stacking Bitcoin with DCA will outperform speculating on alts.
Most retail investors get rekt on alts. They are a literal ATM machine for venture capitalists (VC). The majority of the “name brand” crypto projects have early seed rounds.
Early Polkadot investors bought in at $0.29 (equivalent). Early Solana investors got to buy at $0.04. Early Matic buyers got in at $0.00079.
Chances are really good you did not.
Here’s the game in a nutshell: tokens list after tons of (paid) hype, early retail pumps the price. VCs dump on late retail’s head. Project slowly dies. Rinse and repeat.
That said, yes, Bitcoin’s heyday may have passed. It’s possible. And yes, alts like Solana might be about to make Bitcoin a thing of the past.
But on balance, I think there is a solid risk-to-reward ratio in the idea that Bitcoin truly is a strategic, defensible asset that will transform kinetic force into electrical power.
I know that’s a mouthful.
But it’s the entire reason I’m bullish on Bitcoin. It’s also the reason I think it’s super important to price things in relation to Bitcoin if you’re going to speculate on alts.
I think Constellation and FRAX are two of the most important projects for the future of crypto, at least in terms of how crypto will get used. But I think Bitcoin is going to be the strategic backbone for global adoption.
So I price in Bitcoin. And that’s why I think you should too. At the very least, you should see how whatever alt you’re thinking about buying is doing against BTC. Because if it’s tanking against BTC, why not just buy BTC?
Here are some random ones from the top-50 by market cap:
AAVE (De-Fi)
Image: TradingView
This chart actually looks pretty good. AAVE is an open-source, decentralised liquidity market. Price in BTC is quite good and has definitely performed well in the bear market in BTC terms.
It’s currently trading at a steep discount from USD all-time-highs (ATH). Easily one of the stronger alts out there, with a definable and verifiable on-chain revenue stream.
Axie Infinity (Gaming)
Image: TradingView
Uh, yeah, no. Launched and has been bleeding against BTC ever since. Deeply under the 36, 72, 144, and 216 exponential moving averages (EMAs). Definite pass for me, but if you’ve done your research and know something I don’t, might be a good bet.
Dogecoin (Meme)
Image: TradingView
You can crap on Doge all you like, but charts don’t lie. Of course, the crypto bros will tease you relentlessly for “investing” in a meme. But Doge has got a hell of a community, not to mention a rocket-man shill in Elon.
It’s also ridiculously volatile. There is a non-zero chance Doge wins crypto. It’s super easy to buy, most just hop in “as a joke” and then they hodl like crazy. I guess you could say Doge is kind of like a lottery ticket for crypto.
Can’t win if you don’t play.
EOS (Blockchain)
Image: TradingView
Open source blockchain project that has been absolute dump city in BTC terms. Looks like it’s catching a little pump lately. Launched as part of the Initial Coin Offering (ICO) craze back in 2018.
I’d want to see a retest on the lows and some serious continuation before I’d put a penny into this one. But like all things crypto, one good story and this thing could be off to the races.
ICP (Blockchain / Network)
Image: TradingView
Clearly not a great chart. A good part of the reason for such poor performance are the absolutely bizarre tokenomics. 90% of the tokens went to the foundation, with the rest going to investors.
Not sure what the reasoning or logic is behind that decision. But it looks to me like the result is dump city. Maybe they’ve got some super-smart giga-brain idea that will get retail involved.
If they do, I lack the imagination to see what it might be, or how it might work. Hard pass for me.
MANA (Meta)
Image: TradingView
Decentraland’s MANA token seems to be performing pretty well in BTC terms. I’m not a huge metaverse guy, but between this and the next one, I think I might have to start exploring a little more.
Knowing me though, I’ll get hooked and end up lost in the metaverse, never to see the light of day again. Might not be so bad, sit around, get fat and build a virtual strip club or something silly.
Oh, wait, I can already do that now in the tactile 3D verse. Second Life redux anyone?
SAND (Meta / Gaming / NFT)
Image: TradingView
Grab some phat stax with this one. Solid performer so far in BTC terms. Tiny funding rounds, at least in crypto terms. Total capital raise was around $7 million on 560 million tokens.
Meaning, it doesn’t seem like there’s a truck-ton of VC tokens out there waiting to dump on your head. Gaming space is fickle and stuff like this can come and go pretty quick.
Then again, World of Warcraft has been going strong for 20 years. If you’ve done your homework and you see the potential, SAND seems like a solid bet.
Conclusion
As you can see, some alts are actually doing pretty well in BTC price terms. How well they hold up over a decade will be the real test though.
The broad point here is, before you ape into something, it’s always a good idea to see how well it’s performing against Bitcoin.
And if you’re already in a project and super hooked on the Kool-Aid, it becomes even more important to see how it stacks against Big Daddy BTC.
With any crypto project, you have keep an open mind. Don’t marry your bags and be ready to change direction with new information.
Community and narrative are super important to the founders and the VCs. Until crypto has wide adoption, those are the only things keeping their project (and their wallets) afloat.
Being part of a community can be fun. But emotional attachment to that community is a dangerous game. Just ask the Lunatics and the Celsians and all the other devoted crypto fanbois that have gotten rekt through the ages.
But if you’re savvy, detached, and open minded, you can position yourself much better to capitalise on the communities and the narratives. At the end of the day, investing in this space is a crap-shoot.
Stacking BTC is likely going to be your best bet, if history is any indicator (it isn’t). But part of the fun in investing in crypto is zigging when others are zagging, especially if you zig right when something pumps.
Speaking of which, I think I’m going to go zig into some HEX 😉
These are just my opinions. I’m not a financial advisor, this isn’t financial advice, and always DYOR. Following any of these ideas might cause you to lose all of your money. I am 100% serious about that. I like tinkering with this stuff, but I’m on record acting like a total baboon. Invest accordingly.
Until next time, be safe, be smart and be sure to tie the camel.
