Dec 28, 2018

Trade Journal post

Author – Anonymous

A common mistake in investing is trying to time micro-moves. That is a game difficult to play, and without an edge, probabilities will be against you.

The hard reality:

Rewind 100 years…

How many companies listed in the S&P500 existing 100 years ago, exist now?

How many 50 years ago?

I might be wrong, but I believe only 1, and that company is G.E. (General Electric)

If you had a single investment in every company in the S&P500 100 years ago, you’d have lost everything except for your G.E. holdings.

Yet the S&P has gone way up in that 100 years. When a company goes bankrupt it’s dropped off the list. Companies died, yet the index thrived because it had the advantage of removing the bankrupt companies. Something you did not, if you bought in 1 single event.

Betting on a company with a “buy & hold” strategy is a fool’s game. In the long run all of them will go bankrupt.

ALL of them will go BANKRUPT.

Yet the core human wants and needs the goods and services those companies provided to remain. The core commodities underlying those markets remain.

Plenty of clothing companies have come and gone, yet we still have a cotton market.

Get the lesson? If not, re-read that because even the most seasoned managers don’t.

Moving forward:

How to think about blockchain and crypto markets in the next phase…

Key questions:

What are the core problems cryptos and blockchain can solve?

To solve those problems what is going to be needed?

What are the commodities that drive the crypto markets?

Where are they now and what are the NEXT core things that are going to be needed?

One must come before another. The stage has to be set first, then act 1, 2, 3, etc.

Fast forward 15 years:

99% of all transactions will be done in some kind of crypto currency. All equities will be tokenized & traded on some kind of DEX exchange (decentralised exchange). Nearly all business and trade agreements will be handled via smart contracts. Processing, storage, and bandwidth will all be provided through crypto platforms.

Everything on the internet and the internet itself will become a market powered by crypto platforms. Banks will be gone. Loans will be crowd sourced through crypto platforms. Loan risk will be quantified accurately through blockchain spending behaviour and A.I. crypto risk assessment platforms, making it super easy for any credit worthy person or organisation to get equity in minutes, and making it very hard for deadbeats to scam the system.

Local wallets will replace all bank accounts. All equity capital will come directly from the producers (the people), with no intermediaries taking a cut.

Where are we now? What are the current constraints? What has to happen next?

If you paddle hard too soon into a wave, you end up getting drilled by the crashing wave. If you paddle too late, you miss the wave.

What is the next phase of cryptos?

We have hit scaling walls currently. Next phase will be solving that problem. Scaling has to be solved for everything else that scale will enable. Key backbone infrastructure to scaling:

Blockchain bridges:

There is no way in hell any single blockchain can solve all needs. Bitcoin maximalists are extremely naive. There are going to be hundreds of blockchains, with unique features, strengths, and user base.

There will be a dominant blockchain serving 80-90% of the market, but plenty of long-tail too. There will have to be elegant bridge solutions between them.

DEX (decentralized exchanges):

There will have to be DEX solutions that can handle the volume of Wall Street. Bridges will enable a good deal more DEX solutions.

Consensus speed:

There will have to be trusted ways to get transactional consensus in seconds or fractions of a second.

Smart contracts:

Once scale, speed, bridges, and DEX have been solved, that sets up the next wave…Smart contracts will be critical powering this wave:

Speed, processing, bandwidth can now work far better on distributed networks powered by crypto. And that sets up the next wave:

Good, services decentralised & eventually corporation & nation states replaced by decentralised collaborations coordinated by distributed consensus systems.

Catch and ride the right wave at the right time…  Get off the wave before it hits the shore.