An ELI5 on #Bitcoin.

Think of Bitcoin as a startup founded in 2008, created by a guy named Satoshi Nakamoto, initially bootstrapped with his personal capital. No VC funding; just electricity.

His product? An unobtainium.

1/7 🧵

While my time investing in crypto and previously playing poker has gotten me used to experiencing large daily personal net worth volatility, it's never a pleasant experience

Short thread (by my standards...) with some ramblings that help me get through it 👇

1/10 Imo, some DeFi projects represent 10-1000x upside opportunities

Obviously, like all of crypto, it is extremely risky and can go to 0. That said, given the magnitude of potential outcomes, it just doesn't have to succeed that often to make it a massively +EV bet

2/10 As with all early stage tech, realising these outcomes will require 4-8 year holds

Unlike early stage tech, crypto investors will have liquidity, i.e. the possibility, and thus the temptation, to sell

This is both a blessing and a curse

3/10 A look at any of the best performing public stocks will show you that you cannot have 10-1000x upside potential without volatiliy and occasional large drawdowns

Crypto, as early stage tech, is much riskier than established public companies and thus even higher vol too

4/10 Obviously, one should take advantage of this liquidity as it allows for rebalancing. Most importantly, it also makes outcomes less binary and thus less volatile than traditional VC

However, one should not let the liquidity take advantage of us

On the importance of leverage for the crypto ecosystem.
A long time ago, BNP Paribas bought a retail forex exchange, because they thought they'd get an insight into forex trading flows and positions. What they quickly discovered, is that the website was a muppet slaughterhouse.

People would get stopped out ALL THE TIME because they used too much leverage. Over 90% of them lost money in a consistent way. Those are worse than even casino odds.
That's why around 2005, you had so many forex trading websites popping up. They would offer up to 500x leverage.

The higher the leverage, the better (for the website).
This became such a huge trend that regulators stepped in, and introduced maximum leverage rules. Something like x30 for forex, if I remember correctly. All of a sudden, all the ads and Premier League sponsorships vanished.

Forex gambling is still around, but not nearly as profitable, because it takes time for people to lose their money with a pitiful x30 leverage. Currencies usually don't move by 3% in a day. It can take weeks for an amateur trader to lose it all. Plus the adrenaline rush is gone.

Enter crypto.
It's hard to explain how one-sided leveraged crypto trading is. Traders don't stand a chance. With currencies, you could expect to extract SOME money from real world flows. In crypto, there are no real world flows. It's just traders against traders against insiders.