It’s November, and Bitcoin is the best performing major asset of the year – again. Despite having gained +49% since January, it is still about 50% below it’s average annual rate of return. In simpler terms, on average, over the last 12 years, Bitcoin has doubled in price every year. In this post I dive into monetary history, recent price action, growing popularity of NFT’s, and other exciting projects in the crypto space.
One year ago, I noticed something. Search term popularity for the word “Bitcoin” started edging up for the first time in three years (via Google Trends). This turned out to be more insightful than even I expected, and was a MAJOR cycle low, with Bitcoin price still trading under $20,000 at the time. I continue to update this thread each quarter…
Crypto lives at the intersection of history, technology, and behavioral psychology. These are a few of my favorite things.
Crypto has gained popularity because people are tired of the government’s mismanagement of resources, and because now there is technology that can do the job that we outsource to governments and banks – trust – better. Bitcoin is better money because it is money backed by math and is apathetic to politics. To understand Bitcoin, start with defining what money is, understand what it used to be and how we got here. Answering those questions leads us to see what money will inevitably become. In the same way that water transitions from a solid state of ice, to a liquid state, to a gasseous state, to an ionized state, we are phase transitioning through forms of money.
For a long time, Gold was money. Then, when governments needed more money than they had gold, they took the gold component away and created the monetary system as we know it today.
Cash – a paper bill – was originally a claim for physical gold…until the government confiscated and banned all gold from households via executive order in 1933. Thereafter, cash became a claim on absolutely nothing, “backed by the full faith and credit of the U.S. Government”. It is perhaps then just an anecdotal observation that over the last 12-18 months, as our government created more new dollars than that which had ever been created in the history of our country, I’ve visited vendors that told me they no longer accept cash. Who gets hurt when businesses don’t accept cash? Usually lower-income groups, children, and even old people.
Aside from Bitcoin as the world’s first scarce digital asset and best form of money, and aside from Ethereum, the world’s first platform for Smart Contracts that set the stage for decentralized applications (think the “app store” of crypto), several smaller projects in the crypto space have my attention.
Let me be clear, about 80% of my net-worth is in Bitcoin, including, but not limited to, my IRA and my 401k. Yet, I can’t stay away from some of these so-called “shit coins”. Let me show you why – below is a chart that shows the 6-month percentage (%) returns of several individual crypto projects.
In ascending order shown below: SHIB (+730%), SOLANA (+445%), VERASITY (+375%), POLKADOT (+116%), BITCOIN (+77%), ETHEREUM (+71%), DOGE (-25%). I personally experienced these gains in Verasity, Solana, Polkadot, Bitcoin, and Ethereum. I never bought SHIB (congrats if you realized that gain!), and I lost like a hundred bucks in DOGE – my only losing crypto “trade” of the last 3 years… so far.
I wrote extensively about Verasity back in March 2021. The two paragraphs below are taken from that post:
Verasity, an E-Sports site and protocol taking part in the NFT-craze was awarded a patent in its drive to stop ‘fake news’. Verasity, who’s mission is to increase engagement for video creators and deliver them a boost to advertising revenues, obtained Patent #10956931 for its Proof-of-View protocol, that “ensures views recorded on video platforms are genuine – delivering accurate, secure, real, and transparent audience metrics.” Some estimates suggest that over 50% of money spent for online ads go to views that are not even seen by real people.
Up to $389 Billion per year is expected to be spent on digital advertising by 2023, and last year, 2/3 of that ad spend went to Google and Facebook. This dominance causes obvious problems. The token that governs the Verasity network, $VRA, also can be staked on the Verasity website at an annual interest rate (paid in VRA) of 36.5%. This is HUGE and reflects the disruptive nature of defi compared to traditional banking.
In that time, Verasity has quadrupled (+400%), but there’s also another token gaining institutional attention that is tackling the same problem:
Basic Attention Token (BAT) powers a new digital advertising platform designed to fairly reward users for their attention. Advertisers get a better return on ad spend due to the protocol that ensures only real views are paid for. Verasity has had much stronger price performance, but the creation out of necessity of both BAT and VRA is a clear signal that our digital capabilities are evolving once again.
I can’t go without mentioning NFT’s. The universe of crypto-based lending, saving and trading apps, known as DeFi (decentralized finance) is breaking records. The total amount of money traders have invested reached over $165 billion, largely due to an increase in high-net worth and institutional investors like J.P Morgan and Blackrock (!). Sales on the NFT marketplace, OpenSea, hit $3 billion in August 2021 alone, up more than 10x the total of the previous month.
What is an NFT? I have a couple analogies that helped me understand what an NFT is, but in short, an NFT is a unique digital token, “art”, that through its use of the blockchain enables a layer of authenticity, traceability, and transfer that has not yet existed in the art, antiques, and memorabilia space. I was lucky enough to go to Game 2 of the World Series in Atlanta, and I was disappointed to get home and find my ticket crumpled up in my pocket. What if my ticket to the game was digital, and me having proof of ownership (via blockchain) allows me private member access to events, a community, and other benefits held only by those highest bidders who own the NFT’s/memorabilia. Trolls will be sad to learn that copy/pasting the .jpeg of the ticket won’t work because each ticket is numerically unique with its own certificate of ownership.
Most artists reach fame post-humously. Is it fair that during his or her life, an artist may sell a painting for $1,000 that eventually sells to the next person for $10 million? From now on, when artists, musicians, brands, etc., release content via NFT’s, they’ll earn royalties on all secondary sales. When you sell that $1,000 painting for $10 million, the original artist will now receive 5-10%, and 5-10% of all sales therafter (or whatever royalty they tied to it).
If and when I sell my NFTs, the original artist will receive royalties (shown below). My first purhcase was from a release by world renowned aritist Brendan Murphy’s #BoonjiProject. Each Boonji Spaceman released is unique and programmatically generated from a multitude of possible traits, including the Bust, unique formulas, backgrounds, visors and more. The rarity of each trait enables other add-on value.
I am enticed by, ok – obsessed with, the way crypto, defi, and decentralization inherently puts the power back in the hands of the people. New networks and applications – Bitcoin, Ethereum, NFT’s, Proof of Viewership, etc., are extreme examples of disruption and “cutting out the middle man”. What makes this opportunity so unique is that in all other instances of such technological or financial revolution, banks held a tremendous advantage in their ability to “get in early”, before the masses and before those businsses went public. In the crypto space – new Wild Wild West, we everyday citizens have the ability to be the underwriters of projects disrupting multi-billion dollar industries. For the first time ever we can participate in the development of a global project through equity, community engagement, and voting rights. These projects didn’t need to IPO because they were “public” from Day 1, and unlike traditional investable assets, we don’t have to stand in line behind the banks to get our slice of the pie. This is a revolution.