Redphonecrypto’s Theses For 2022 (Our Top 10)

Crypto investor @redphonecrypto has quite a following on Twitter, and once again, he’s released his predictions/theses for the upcoming year. The theses run the gamut from highly technical, to strategic, to philosophical — and cover L1s, NFTs, DAOs, and everything in between. We discuss 10 of our favorite theses; not that we always agree, but they’re definitely worth some reflection.

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Show Highlights

Redphonecrypto’s 69 Theses For 2022: “This is the year we answer the question: will crypto be free and open for all? Or will we sacrifice more than a decade of ideals for profit, “compliance” and growth? For more on this and the other thoughts that preoccupy my mind as we start a brand new year.” (Substack); (Download)

Our Top 10

  1. Thesis Number 3. “A thought experiment before every investment: Could this possibly exist 100 years from now?”
  2. Thesis Number 4. “We’ve heard a lot of mantras over the years: “The institutions are coming.” “Retail is coming.” “ETFs are coming.” Now, there’s only one mantra left: “Grandma is coming.” (& she’ll be wheeled into the sector by her financial advisor) … This is the year advisors get fomo and relent. They’ll start recommending a tiny allocation of crypto to their clients. Perhaps, Fidelity will take the lead.”
  3. Thesis Number 7. “… NFTs will become as important to us as virtually any of the tangible things we can touch and feel.”
  4. Thesis Number 9. “Most anything that can get built in crypto, will get built. The question that matters is who’s brave enough to do it first.”
  5. Thesis Number 10. “Regulators have “protected” us from so many opportunities that we’ve forgotten what it’s like to be free… Every day, crypto reminds me of the truth… And I’ve never felt so alive.”
  6. Thesis Number 12. “Total market cap for crypto = $2.5 trillion… Total value locked in DeFi = $250 billion… My degen mind sees those numbers and thinks: the entire crypto industry could see zero growth in 2022, and DeFi could still explode.”
  7. Thesis Number 32. “The simplest person to trade against is yourself. Reptilian emotions like FOMO, loss aversion and greed tip you off to important trading moments. In general, the best response is doing the opposite of what your brain suggests.”
  8. Thesis Number 36. “Once upon a time, I thought DeFi yields would compress into the single digits within a few short years. Not sure that’s the case anymore. We’ve entered the steepest part of the adoption curve. We’re seeing products that simply wouldn’t have been possible in the past. How many more will be born over the next decade? How many of them will launch tokens? How long will that sustain yields? Much longer than I think most of us dare believe…”
  9. Thesis Number 48. “I clearly segregate my buys into two buckets: speculative plays and lifelong holds that could benefit my family and descendants for generations. Always know what type of asset you’re buying, so you know when it’s time to sell.”
  10. Thesis Number 61. “I’ve been making this prediction since 2013, so I may as well make it again… in 2022, we’ll finally see a “physical” bitcoin ETF in the U.S.”

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Cryptogic is THE show for crypto investors who are focused on long term results. Follow Scott Hawksworth and Andy Hagans as they explore the investable world of blockchain technology, NFTs, Bitcoin, Ethereum, and other cryptocurrencies.

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Transcript

– [Scott] Hello, and welcome to another episode of “Cryptogic.” I’m your host, Scott Hawksworth, joined once again by Andy Hagans, co-founder of Cryptogic, co-founder of the Alternative Investment Database. And we’ve got a great show today, where we’re going to be talking about predictions and theses, and specifically, predictions and theses from Redphonecrypto, who has quite a Twitter following and he’s a bit of a thought leader when it comes to cryptocurrency.

And he has a whole list of theses, but we chose our top 10 to discuss because they were 10 of the most relevant and really interesting theses to really explore. So, Andy, welcome to the show. Excited to talk about some predictions with you here.

– [Andy] Yeah. Thanks, Scott. You know, I think it’s important to say, a lot of his theses, I agreed with 100%, and some of them I didn’t agree with at all, but I thought they were all, like, thought-provoking. And so I think whether you agree with him or not, they’re worth digesting and thinking about. You know, there’s so much, can I just say, garbage on Twitter.

– Yes.

– But I know, you know, the crypto community, they are on Twitter, so…it’s not even a platform that I love, but I do use it because it’s a great way to, you know, stay connected, just to kind of hear what different people are thinking. And I think, as an investor, it’s really important to hear opposing viewpoints. I know we don’t do that as much with social media anymore politically as a culture, but definitely, as an investor, I think you should be constantly challenging yourself with other, you know, investors’ theses, even if they don’t agree, they’re very, very helpful to just review, you know, and to get your own thoughts and your own theses organized.

So yeah, I was excited. I always enjoy reading through these. Read through them last year. And, you know, it’s kind of a nice read. So we’ll have the link in the show notes for any of our viewers or listeners who want to, you know, look through the whole thing, but we have our top 10 ready to go.

– Right. And, Andy, just to kind of put another point on what you were saying, in our last episode, we were talking about, as an investor, being willing to reevaluate your own investment thesis. And I think part of that is hearing what others might have to say and what their perspective is and, as you said, challenging it.

So really, it all ties together, so that’s why we’re covering this. Let’s dive right in. We have our top 10 here. The first one I want to talk about is thesis number three. And I’ll read this. “A thought experiment before every investment. Could this possibly exist 100 years from now?” I think that is a great thought experiment.

And when I read this, I said, “Yeah. That sounds like a fantastic idea.” Especially when we’re talking about cryptocurrency, especially when we’re talking about these new technologies and DeFi, there’s this question of, well, will this really exist? And it’s funny, as I was researching for our discussion here, Andy, I saw there was some Yale professor, there was an article that came across, Yale professor back in 2018 who said that Bitcoin won’t exist in five years or whatever it was.

I don’t know if that prediction’s going to turn out true there for him, but overall, I think this is spot on because if you evaluate this and then I apply it to crypto, is cryptocurrency going to exist in 100 years? I believe it will. When you look at the current market cap, which was, last time I checked, about 2 trillion, I have a hard time seeing all of that disappearing and all of the underlying technologies that are being developed and pushed forward suddenly ceasing to be in 100 years.

So if you’re thinking from an investor standpoint, “Well, is this something I want to be involved in? Is it going to be around that long?” I think it absolutely will be. And I think that’s a great thought experiment, and my answer was yes.

– So I’m going to disagree with you 100%.

– Okay. Let’s hear it.

– [crosstalk]. Well, actually, you know, I do think it’s a really interesting thought experiment from the perspective of utility, right? And that’s one of my crypto investment theses, is just the technology is so efficient, right? So I think there’s a lot of antiquated financial systems that can just be transacted more efficiently and better on the blockchain.

So I just believe in that inherent utility. So I think from this utility, or, like, the social utility, or a productivity perspective, absolutely. Great thought experiment. What I have a disagreement with is the 100-year time horizon. Well, first of all, I don’t think I’m going to be alive for another 100 years. So my investment horizon is going to be shorter than the next 100 years.

You know, no offense to my great, great, great-grandchildren, future great, great, great-grandchildren, hopefully, that will exist. But, you know, I’m not too worried about, you know, leaving them a legacy, right? So the thing is a lot of investment theses can be correct but way too early. So go back to railroad investors, literally railroad investors in the 19th century, or go back to airline investors in the 1960s.

So much money was lost investing in those industries, which historically, turned out to not be very profitable investments. Even though the railroad lines got built, the airlines got built, you know, all these airplanes were manufactured, these entire industries grew up.

And so the investor theses, “Well, I think, you know, railroads are going to be a thing,” “I think commercial flights are going to be a thing,” those theses were sort of correct on a macro picture, but the timeline and people’s timing may have been wrong or there were just…you know, they weren’t…most investors were not able to kind of separate the winning investments from the losing investments.

And so the infrastructure got built, but it turned out to not be that profitable for the investors. So I like the question, but I don’t know that answering it in the affirmative necessarily will make for a profitable trade.

– Andy, I really appreciate you saying that. And to just really, again, sum it up, it sounds like you’re saying, “Hey, interesting question. My issue is the time horizon, and will crypto be around in 100 years? Maybe it will. Maybe it won’t.”

– I think it will. I think it will. I just… – Yeah. But that’s almost irrelevant when you’re talking about it from a pure investment standpoint, right?

– Exactly.

– I like it. I like it. All right. Let’s move on. The second thesis that we chose was number four. “We’ve heard a lot of mantras over the years. ‘The institutions are coming.’ ‘Retail is coming.’ ‘ETFs are coming.’ Now there’s only one mantra left. Grandma is coming, and she’ll be wheeled into the sector by her financial advisor. This is the year advisors get FOMO and relent. They’ll start recommending a tiny allocation of crypto to their clients. Perhaps Fidelity will take the lead.”

I thought this was interesting. I don’t know if this is the year that that specifically happens, but I think that the thesis itself makes a lot of sense. You know, when does grandma join the movement? I think we all remember those of us, you know, us millennials here when Facebook came out and that first time you got a friend request from your grandmother, it was like, “Ooh, okay, social media, this thing’s here.”

It’s not necessarily going away anytime soon. So I think that that is an absolute correct way of considering it when you talk about this mainstream. You know, when is it all becoming mainstream? When is it going to be something that’s like that? I think that is the correct way to think about it. Whether that happens this year, I don’t know, especially just as we were talking about in the last episode.

Early 2022, there’s, you know, been some declines. I don’t know that financial advisors are going to be kicking down the doors of their clients and saying, “Hey, you know what, you got to move into crypto here.” But maybe. I’m curious to hear your take, Andy.

– I agree with this one. You know, number one, we have the ETF. It’s not a spot ETF, but we have the first, you know, Bitcoin-derived ETF trading in the United States. But actually, let me go to my other signal that I think correlates with this. So I’m a “Barron’s” subscriber, right?

I used to read “The Wall Street Journal.” I don’t have time to read a newspaper every day. I probably will when I’m retired in the future because I love newspapers. There’s nothing like holding a physical newspaper in your hands and reading it. But I read “Barron’s,” right? And so I don’t know the exact demographic number of “Barron’s,” but I think grandma or grandpa might map pretty well to it.

And I include myself in that category. So, you know, cranky old man.

– You’re a bit of an old soul, Andy.

– Yes, cranky old men like myself read “Barron’s.” And I’ve noticed a huge uptick in the number of stories about crypto investing in the past several months at “Barron’s.” And to me that’s just sort of, I don’t know, a weather vane pointing in that direction, that…and even just from some other, you know, credited investors, or advisors, or financial professionals that I’ve talked to, there’s definitely a move in this, you know, I think you mentioned 1% allocation to crypto.

I mean, shoot, I’ve mentioned that before. It’s a great place to start. So I think things are definitely moving in this direction, and, you know, it’s like one of those things where you might be surprised on the demographics. Like, certainly, crypto is skewing younger, but it’s like when you look into the demographics of gamers and you find out there’s a whole lot of 65-year-old women that own Game Boys and Nintendo Switches, and you, like, just never thought of it that way.

So people might be surprised by this kind of adoption, not user adoption necessarily, but definitely on the investor side. I think this is spot on.

– I love it. I love it. All right. Next one. This is thesis number seven. “NFTs will become as important to us as virtually any of the tangible things we can touch and feel.” Wow.

Okay. So that’s bold. From my perspective, I don’t know if that’s 100% true, that it will be as important as anything you can touch and feel, but I think there is a lot to be said about the power of the sort of exclusivity, the status that NFTs are really kind of scratching at.

I think there’s a lot to be said when you look at…really, the biggest analog I have is when you look at online gaming and you look at the rise of microtransactions, which, for many games, microtransactions came out of a way of being able to purchase cosmetic items, virtual items in-game that conferred a level of status or helped your character be stronger or whatever it might be.

And I’ve got a little statistic for you here. The global online microtransaction market was expected to grow from $33.4 billion in 2020 to $34.59 billion in 2021 at a compound annual growth rate of 3.6%. And then if you’re talking 2025 expectations, $51.09 billion in 2025, with a growth rate of 10%.

So we’ve seen… – Well, that growth rate’s not that strong really. I mean, [crosstalk]…

– It’s not that strong, but I think when you look at it, it’s, hey, that’s still a lot of cash flow. That is still a lot going there when we’re talking about microtransactions, which are, again, much of the time just for, “I’ve got a cool-looking helmet for my character.” Or, “I have this special skin in Fortnite.”

I think that that really ties into this idea of you have the real tangible, then you have this sort of virtual world, the metaverse. You have NFTs. I think that there is a lot of potential there when you consider that. Now, again, do I think that that’s going to replace many of the tangible things?

I don’t know. That’s a pretty bold prediction, but I guess I could see the perspective.

– Yeah. I mean, to me, maybe it’s a little over-exaggerated to make a point. The numbers you cited with microtransactions, to me, that sounds like a mature industry, not an industry that is really growing materially. It sounds to me more like a mature industry, which is substantial but mature. You know, the thing with NFTs is it seems like everyone wants to make them all or nothing.

And I’m more in the camp of, well, these are going to be part of the investible art world. Let’s take the art segment of NFTs, you know, that are digital art. They’re going to be auctioned by Sotheby and Christie’s right alongside all the other forms of contemporary art in the next, you know, several years.

That’s my firm belief. And I don’t think they’re going to overtake the rest of the contemporary art world, certainly not in 2022. So, to me, this thesis overstates the point with a lot of hyperbole. So I think I’d overall come out against it, but maybe it’s directionally just correct in that I do think that they hit an inflection point in the past year and it seems like their momentum is continuing into this year for sure.

– Right. And I think there’s that question of, at the end of the day, is an NFT of Spider-Man #1 going to have more worth and someone’s more excited about that than actually having a Spider-Man #1?

– Not to this comic book collector.

– Exactly. Exactly. All right. Let’s move on to the next one. Thesis number nine. “Most anything that can get built in crypto will get built. The question that matters is who’s brave enough to do it first?” Andy, I’ll let you start first with your take on this.

– Well, I think he had sort of a fun way of stating the point, but to me, the big picture is crypto is an exciting market because it’s global, right? It’s totally global. And this touches on maybe some of these other theses that mention regulation. If a certain jurisdiction regulates X, Y, or Z, you know, or makes it illegal in that jurisdiction, well, whatever X, Y, or Z is can simply happen somewhere else.

And, by the way, I’m not talking about…you know, there are certain things that need to be illegal in every jurisdiction, right? So I’m not an anarchist, believe me, but I do think that, you know, the countries like China, you know, and the [inaudible] Chinese Communist Party that are cracking down on this, it’s not going to stop the innovation that’s occurring, right?

It just means that it’s going to occur elsewhere. And so to me, that’s really the gist of what this thesis is getting at. And to me, that is a beautiful aspect of crypto, is that, you know, with a lot of other financial markets, they’re nationalized, right? Like with ETFs, it’s a U.S-listed ETF, or it’s a ETF that’s listed in the London Exchange, or it’s listed in Canada, they’re all nationalized in, you know, fragmented markets.

And, of course, they become a little bit more global over time, right. It’s pretty easy to go to a Vanguard and buy an index fund or an ETF that holds international securities. But nothing like with the blockchain, nothing like with crypto, where it’s been a purely global market from Day 1.

So for me, that’s…you know, there’s pros and cons to that, but I think you can’t be an entrepreneur and not smile when you consider, you know, that crypto is just this 24/7 global market and the possibilities that that creates.

– I think that’s spot on. And, yeah. I mean, “Most anything that can get built with crypto will get built.” Yeah. I’d buy that. I’d buy that. I’d buy that there is so much opportunity.

It is such a blue ocean still when you look at all of the possibilities, whether it happens stateside or elsewhere. I can see if it can happen, it will happen because where there’s opportunity, there’s incentive, right?

– Right. Yeah. And if people are using this technology to do truly nefarious things, then, you know, let’s have the international police go find them and get them and put them in jail. You know, really. You know, I think sometimes people in the crypto community can have a really idealistic kind of rosy view that, “We’re going to live in this crypto world, and we’re going to have total anarchy and,” you know, yada, yada.

They’re getting a little ahead of themselves, but I suspect that they’re a little bit younger, Scott, so maybe we can give them a pass on their idealism.

– Sure, sure. They’ll learn. Next one, thesis number 10. And maybe this is connected, we were talking a little bit because, “Regulators have ‘protected’ us from so many opportunities that we’ve forgotten what it’s like to be free. Every day, crypto reminds me of the truth, and I’ve never felt so alive.”

– So speaking of anarchists, right? Well, you know, in all seriousness, there is more of a libertarian, I would say more of a libertarian streak with a lot of the early adopters of crypto and blockchain. And so I think that that, to me, has always been an interesting aspect of crypto, is that at one angle you can look at it as a pure investment, but then there’s other people that are invested in it.

You know, they’re invested in it, maybe not just financially, but they’re invested in it with their identity and they believe that it’s a form of, you know, cultural change. And, to me, it’s really interesting in the past year or so, you know, talk about inflection points, you know, the young people, at least that I interact with, they do seem to be very interested in freedom, you know, especially coming off of a year where there’s been sort of lockdowns and all of these top-down regulations by fiat.

And so I think there’s just this just sort of spirit of liberty infused with crypto, and it’s hard to actually decouple it as an investment, right? Because there really is that sort of idea of social change embedded in its culture. What do you think, Scott?

– Yeah. I mean, I think that’s spot on. And I’m thinking, too, about how, you know, when it began, you know, TradFi really just looked down on crypto. There was just a lot of pushback. And its beginnings was so much of this ideal, this idea of, you know, we’re going to completely change the financial system.

We’re going to change the way things work. We’re going to take the power, the control out of the hands of big banks and governments and put it in the hands of individuals. So, I mean, that’s kind of baked in. But now, as we look here, and we’re in 2022, we’ve seen that, you know, traditional financial organizations have started to take that interest.

You’re getting, you know, VC investment, you’re getting all of these more traditional, powerful, if you would. You have governments in South America that are, you know, putting in their flag in crypto as well. Like, you have a lot of things happening. So there’s this push and pull that I always find is interesting.

And I can understand sort of both sides of the argument. I can understand those who are saying, “Well, we don’t want this. This not what this is about. This is about freedom.” But then I also kind of come from that other side where it’s like, “Well, if you have more of this traditional interest, then that actually helps solidify it, and that helps make it more mainstream and put maybe some of that power, in a way, in the hands of more people, which is what you wanted.

And I think if you’re talking about it from an investor perspective, I think if you didn’t have any support from traditional financial systems, that would make it harder. So I think that overall, it’s an ideal, and I think it will continue to be the undercurrent of cryptocurrency and so many of these technologies, but we’re going to continue to march forward and we’re going to see lots of traditional entities continue to get involved with it.

– And does that mean less freedom, Scott? Does that mean more regulation and less freedom?

– I think it can mean a little less freedom in the sense of regulation if it gets too aggressive, which as we’ve seen time and time again, especially when you have regulators that don’t necessarily understand what they’re regulating, you can kind of go overboard, but there’s that give and take.

So I always kind of cross my fingers for, do we need some regulation to, you know, like we were talking about just a bit ago, if people are, you know, using these technologies and crypto for nefarious reasons? Yeah, you maybe need a bit, but I always hope that it’s thoughtful regulation.

– Personally, I don’t even know that you need new regulation.

– Right?

– Right.

– Theft is always theft, right? Whether you’re stealing U.S. dollars or whether you’re stealing Bitcoin, whether you’re stealing someone’s physical Picasso painting or whether you’ve hacked in and you’re stealing an NFT. Theft is theft. If someone commits theft, try them for theft, arrest them and try them for theft, right? So, you know, my point is just, you know, you can still believe in, you know, traditional morals and ethics, traditional society, and that can exist alongside exciting new technology.

So just because, you know, we have this liberty-minded philosophy, I think, in the crypto world, I think people have to remember that the normal usual laws still do apply. And, you know, for instance, theft is theft.

– Right. And one thing I’d add to that is things like KYC regulations, which yeah, can sometimes be a bit overbearing, but does that mean that we just shouldn’t…you know, that institutions shouldn’t know, you know, who they’re facilitating transactions for or who’s moving their crypto where or have no idea, you know, and I think that’s that balance there, right?

So maybe you’re right, Andy. A lot of the existing regulations can just be applied and a lot of the existing laws, rather, can just be applied. And you can do that thoughtfully without having to say, “Well, now we’re going to pass all of this additional regulation and add all of these additional hoops.”

Which then adds friction and really kind of can go against the ethos and the problems that crypto itself has been solving.

– Yeah. I’ll hold my breath and I’ll wait for this thoughtful regulation.

– Yeah. We’ll both wait. All right. Moving on. Total market cap. This is thesis number 12. “Total market cap for crypto, $2.5 trillion. Total value locked in DeFi, $250 billion. My Degen mind sees those numbers and thinks the entire crypto industry could see zero growth in 2022 and DeFi could still explode.”

That’s an interesting thought. What’s your thought?

– Yeah. So, you know, NFTs hit an inflection point, in my opinion, and I think DeFi did as well. And, you know, it’s interesting how different crypto investors have totally different theses, right? You know, there’s that old classic group who look at Bitcoin as digital gold. And, you know, as I’ve stated previously, the fact that you can earn significant yield that might be, you know, 300% of what you would earn yield-wise, what you would earn in the bond market, to me, that’s a game-changer because that can be a totally different strategy, totally different mindset, totally different reason for investing, right?

Digital gold, well, guess what, you don’t earn a yield off of regular gold. In fact, you know, it’s negative yield in terms of if you own an ETF, there’s going to be an expense ratio because you have to store it, you have to insure it, and so on and so forth. So, to me, DeFi is where a lot of the excitement and where a lot of the action is. And I’ll be honest, I think there’s going to be some spectacular flameouts, right?

In the world of DeFi. Just like you had your pets.com, you know, type flameouts in, you know, the dot-com boom era. But definitely DeFi hit an inflection point. And I mean, speaking personally as an investor, you know, the fact that there’s so many different ways to earn yield, and some of them probably ill-advised, but nevertheless, the fact that there are so many ways to earn it and to assess that risk as an investor and that, you know, play with different platforms, I think regardless of what happens with the digital gold thesis, I think that money will continue to pour into that aspect of crypto.

So I think this one is spot on.

– Yeah. Honestly, I agree 100% with your take on it, and I think that that’s been part of the revolution of DeFi, and we’re seeing that in real time. It’s no longer just that digital gold. We’re getting yield now. And I think that that’s going to continue. So I’d buy this one as well. Thesis number 32.

I like this one. “The simplest person to trade against is yourself. Reptilian emotions like FOMO, loss aversion, and greed tip you off to important trading moments. In general, the best response is doing the opposite of what your brain suggests.” So I am someone who…I’ve gotten burned before by FOMO.

And I think what this is getting at is really, it gets at atruism, a psychological truism when you are trying to, you know, get as many returns as you can and you want to make that investment that, you know, maybe if you’re a smaller investor, all of a sudden, gives you life-changing wealth or whatever it may be.

And we saw a lot of that happening over this year, both in crypto and in things like what happened with GameStop stocks and all of that. And so I think that it’s important to…and this is really what we were talking a bit about last episode, Andy, really take a step back and say, “What’s my thesis here? What’s my take? Do I still believe in my thesis? Am I making decisions that are based on emotion?”

When you talk about FOMO, are you tired? Are you stressed out? You know, are you hungover? Or whatever it might be. Are you making your choices in the best frame of mind and with all of your data in front of you and everything there? I think that it’s really important to keep in mind, especially when we talk about a market that’s so volatile like crypto.

– Yeah. You know, this, I would barely even call it a thesis, but I like it and I agree with it. I mean, this is simply taking what we already know about any of the traditional investment markets and applying it to crypto because really, though, in crypto, because of the higher volatility, all of these psychological tendencies of the human psyche will be magnified, like, 10X, right?

– Yes.

– The rollercoaster is that much steeper on the way up. It’s that much steeper on the way down. My only tip here, my practical tip, is every investor should have a written plan, right? In times of market turmoil and, frankly, so when things don’t go as expected…frankly, when they go better than you expect, you’re not going to care about your plan, right? You’re not going to worry about anything, you’re just going to be patting yourself on the back and feeling like a genius even if it was pure luck.

When things go poorly, though, when you’re in that bear market, it’s time to refer back to your plan. Like, for instance, if you’re tempted to sell, right? If equities are in a bear market and you’re tempted to sell because they’ve taken a, you know, 30% dive, go back to your investment plan, right? And check it against that.

Because the reality is, you know, as human beings, we have that fight or flight, you know, nature hardwired into our brains.

– Adrenaline gets going.

– Yeah. Exactly. But step back a minute and, you know, ask yourself, “What’s my time horizon? What about the next decade, two decades, three decades?” You know, depending on how old you are, what your time horizon is, are you going to be a net saver, or are you in that stage where you’re just drawing down your portfolio? Because I got news for you. If you’re going to be a net saver for the next decade or longer, the best case for you is that everything nosedives.

All assets nosedive. You know, real estate, if you’re going to buy real estate, that hopefully, that will nosedive. Crypto, if you’re going to buy crypto, hopefully, that will nosedive. Equities, hopefully, those will net…you know, if you’re going to be a net equities buyer, it’s just so counterintuitive for people. But I think if you have a written plan, and you can even write things like that out, you know, it doesn’t have to be long, it can be a paragraph or two.

“My investment plan, I want to be a net saver.” You know, “I want to save 10% of my income and have it in a balanced portfolio.” You know, just simple statements like that. If you’re willing to refer to it when you have that itchy finger, you know, that wants to trade, that wants to actively trade when it’s not time to, you know, that can be a help. So, yeah, I think this is sound wisdom, Scott, and I think it applies to any market, but 10X to something as volatile as crypto.

– Take the emotion out of it. Don’t let that reptilian brain take you off your plan there. Next thesis here, 36. “Once upon a time, I thought DeFi yields would compress into the single digits within a few short years. Not sure that’s the case anymore. We’ve entered the steepest part of the adoption curve. We’re seeing products that simply wouldn’t have been possible in the past. How many more will be born over the next decade? How many of them will launch tokens? How long will that sustain yields? Much longer than I think most of us dare believe.”

– Yeah. And, you know, I think a lot of us have shell shock from the bond market and it’s actually like this…it’s this crazy idea, Scott. This is crazy. But there used to be this thing called a market where buyers and sellers of bonds could agree on appropriate yield, right?

On a yield at which they would transact. So where the buyer of the bond would determine what would be an acceptable yield for the amount of risk they’re taking on by lending in the form of, you know, buying that bond. Well, now we have the Federal Reserve really for now over a decade, and longer than that, you know, who manipulates interest rates and the bond market to such an extreme extent that the typical investor, heck, even the super-smart investor, if you ask, “Well, what should yields be?”

it’s like they can’t even, like, understand the question.

– Right. Like, “What is that?”

– What are you talking…? Yields are steeply negative. Like, what’s going on, you know? So I think it’s like we’ve all had this shell shock to even see, like, any yield above 4%. It’s just like, “Well, that’s crazy. How could anything yield as high as the inflation rate? That’s crazy.” Crypto is a totally different world, right? I’m not saying it’s delinked from the Federal Reserve, from yields in the bond market, because in some ways, you know, the major tokens are becoming more traditional risk assets.

But you look at some of these DeFi products, how they’re designed, I mean, they’re just operating in a different orbit, right? And as I said, I think some of these platforms, some of these projects are going to flame out in a spectacular fashion and maybe that’ll throw a bucket of cold water on the whole space, but I have to agree. I think that, you know, the market’s going to figure out because we don’t have…this is a real market, right?

It’s not a pretend market like the bond market, right? Where you have a federal reserve that is manipulating everything to such an extent that you don’t even know what the market thinks.

– You don’t know which way is up.

– Exactly. No. This is a real market. And I think that this does have staying power. And, again, there’ll be flameouts, but I think this thesis is spot on. I wouldn’t bet against it. And frankly, I’m having too much fun playing with a lot of these yielding products.

I’m just having too much fun participating to want to believe that it’ll blow up, so.

– I love it. I love it. We’re running low on time, so I want to get through these. We’ve got only two more here. Thesis number 48. “I clearly segregate my buys into two buckets, speculative plays and lifelong holds that could benefit my family and descendants for generations. Always know what type of asset you’re buying so you know when it’s time to sell.”

Andy, I think there’s a lot of wisdom in here that kind of goes back to what you were saying earlier, talking about having a plan. Your take here.

– I mean, bingo. This is spot on. I mean, I’ve mentioned before with my crypto, you know, money. I have my play crypto and then my real crypto, right? You know, the real crypto tends to be more, you know, long term HODLing and really, you know, I try and be thoughtful about risk-reward analysis in terms of what kind of yield that I can earn on different platforms, you know, what tokens that I want to hold long term because the truth is there’s transaction costs, you know, with those long term holdings.

It’s better if you can park them and earn yield over time and never sell, you know, that’s going to create the most tax efficiency. So that’s one mindset, right? And then there’s DeFi and there’s my play crypto which for me is more about learning, and experimenting, and having fun, and, you know, playing with different projects, and playing with different apps.

But it is good to have that, you know, clear wall between those two worlds. You know, and for me, frankly, it’s different amounts of money, right?

– Yeah. Of course.

– I’ve never really liked gambling. I’ve never really liked poker. So when I play with something that I don’t understand and I suspect I’m going to lose my shirt, I usually play with a pretty small limited amount of money. But that’s okay. You know, you don’t need that much money to learn and to play.

– I agree. I agree. And, you know, if you get that hit, take those wins but then be prepared to take the losses too because those kind of both come hand in hand often. And so, again, going back to having a plan having an idea of what your thesis is, and really separating those two I think is key because when you meld them together, that’s where you could run into some trouble.

Last one here, thesis number 61. “I’ve been making this prediction since 2013 so I may as well make it again. In 2022, we will finally see a physical Bitcoin ETF in the U.S.” Andy, what do you think?

– Well, it’s just absurd that we don’t have one already. And I mean, I think that’s actually my entire point, is just, you know, how they approved the futures ETF and not spot ETF to me was…it’s almost like, you know, they’re toying with the crypto market and, you know, they’re kind of thumbing their nose at it.

But as that futures ETF in the United States, you know, took off, it was immediately successful. I think it’s just a matter of time. I’m not really sure what their calculus is on, you know, which fund they’ll eventually accept, you know, which sponsor, which issuer, I guess, will win the race and be the first.

So I don’t have any predictions there, but I would be actually surprised if we ended this year without a spot ETF for Bitcoin. That’ll be a shame.

– Yeah. I agree. And I like that prediction, too, but let’s hope it comes to pass, huh?

– That’s right.

– All right. Andy, thank you so much for joining me again and offering your perspective. And for our listeners, we are going to have our show notes at cryptogic.com, with all of these predictions and these theses from Redphonecrypto. And stay tuned because, you know, it’s going to be an exciting year and there’s a lot more to cover.

– Thanks, Scott.

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Andy Hagans

Andy Hagans is the co-founder of Cryptogic and a recurring guest on its weekly show. He believes that early blockchain investments provide an asymmetric investment opportunity for enterprising investors.