When crypto winter comes, pack up or dig deeper?

Note: The original author is David Hoffman, co-founder of bankless.

When financial markets and paradigm-changing technologies collide… things get weird.

Time is distorted. Markets always try to price the future, and when disruptive technologies emerge that promise to change everything we know about the world, humans inadvertently price them in.

When BTC rose from $1,000 to $20,000 and ETH rose from $10 to $1,440 in 2017, people were pricing in the future. Investors who paid these new prices believed that 3-5 years of ecological progress were being priced in… immediately.

But financial markets are not that simple. The market is a second-order chaotic market, which is different from first-order systems (such as the weather or the trajectory of planets and stars) that change their trajectory based on people's predictions about them.

That is, the market reacts to the forecasts people give it.

This makes the market both a self-fulfilling prophecy…

1. If everyone thinks the price of an asset will go up, it will go up because everyone will buy it.

...At the same time, it is also destined that these people's answers are wrong.

1. If everyone sees that everyone else is buying, it becomes a game of chicken, who will hit the sell button first?

It's all about psychology

Markets are emergent, born from the collective minds of individual participants. Prices rise or fall based on the stories and narratives we share with each other.

When it comes to the intersection of financial markets and breakthrough technologies, the pricing of assets is determined by the shared stories and narratives we tell ourselves.

Ultimately, this means that these markets are largely driven by narrative, and the stories we tell ourselves ultimately determine how these markets unfold.

I think this is one of the reasons why there are these massive boom and bust cycles in the crypto industry. Eventually, the time for optimism and prosperity came, and after 3 years of a brutal bear market, and after the COMP token sparked a yield farming revolution, people collectively decided that it was time to be bullish again.

There is no other reason except that the sentiment is bullish ¯\_(ツ)_/¯

Of course, fundamental catalysts also drive these things. On the one hand, after the crazy printing of dollars in 2020, 29% of the public paid attention to Bitcoin. Of course, the only reason they paid attention to Bitcoin was the claim that its limited supply could prevent inflation.

Optimism and exuberance have driven the price of Bitcoin into the stratosphere. Start with some basic, solid fundamentals, add a really good narrative, and also be in an industry that is known for exponential growth, and all of a sudden you get a massive amount of interested capital that far exceeds the fundamentals we started with.

It also goes both ways. It starts with fundamental negatives for the industry (Bitcoin wastes energy), some concerns about inflation, and a garbage billionaire with a huge Twitter following, and then all the optimism and excitement about the future turns to fears about regulation and skepticism about actual adoption rates.

It’s time to explore deeper

In the past 3 months, there has been a lot of garbage in the crypto market, such as Doggie coin, a liquidity mining token claiming a 10,000% annualized return, ADA with CX everywhere, and Dogecoin shouting "to the moon", right, guys?

These are crypto tourists who are here just because the numbers are going up, they don’t know why but they don’t care.

They come here for excitement and to get rich.

It seems like a lot of crypto tourists have left. New stablecoin supply is flat, gas fees are at all-year lows, and high-yield yield farming is disappearing.

The tourists are leaving, and those who are still here are staying because they know it’s not over. Unlike 2017/18, there are a lot of positive drivers behind the industry that we haven’t had before, while ordinary people are getting closer to using crypto assets as part of their daily finances.

So now’s the time to ask yourself: Are you packing up, or are you digging deep?

Wealth is built in quiet times

If you got into this industry because of the bull market, you may feel that you are late. You feel behind because there is so much to learn, there are so many things you don’t know, everyone else knows, but you know nothing.

The quiet times in the crypto market are when things are built, which is where value is created. This is your chance to build your knowledge, accumulate long-term positions in quality crypto assets with real fundamentals, and network with like-minded people in the industry.

If you entered the industry with the dream of becoming a crypto millionaire, that dream will become a reality if you stick around during the quiet periods.

You won’t become a millionaire overnight, there is no such thing. But if you stick with it, do your homework, and pay attention and accumulate quality crypto assets, then when the crypto tourists come back, you will be the crypto expert everyone needs in their lives.

Notice

If you decide to set up camp in the crypto industry, you will be able to witness firsthand:

1. The integration of EIP 1559 and the origin of the fee burn market;

2. The merger of Ethereum and the Beacon Chain, the launch of the first highly secure, high-value Proof of Stake (PoS) economy;

3. The growth of a competitive layer 2 environment and fierce competition between DeFi applications on these L2s;

While we can do our best to speculate what these things will be like, there is no substitute for seeing them in person. In order to excel in this industry and become the crypto millionaire you want to be, you have to experience these things for yourself.

You have to be there when things happen and see yourself when these things happen.

A lot of wealth was created in the DeFi Summer of 2020, most of which belonged to people who were already in the industry, paid attention to the reasons why the DeFi Summer happened, and knew how to deal with it. They are the ones who did the best in the industry, and those who were able to seize favorable opportunities before unknown future events. If you leave and come back to the industry, you are behind and you will miss a lot of opportunities.

So get out your shovel and axe, set up your camp, and dive in. Now is the time to position yourself for long-term success, not short-term pleasure.

Wealth is expressed in times of irrational exuberance.

And now that the exuberance has left the market, this is the time to build wealth.