Letter 27: Red Candles

Musings from someone who experienced the 2018 crypto crash

First of all, if you even opened this Newsletter + are taking the time to read it, give yourself a pat on the back b/c I would wager that the majority of people have already “left” the crypto / NFT space.

We’re in pretty dark times. Sentiment is low and most things are down 50-100% from all time highs, including BTC and ETH, two of the “safer” (air quotes very much needed) assets in this space. 

I have literally no idea when, where or how this all turns around. What I am moderately confident on though is the “if”. Everything falls apart if it turns out crypto and NFTs are an irrelevant technology and total scam / cult / Ponzi scheme. I doubt that this is true. The technology is a game changer and there are, to my mind, a countless number of ways in which the world will become a better place as it adopts and integrates blockchain technology. 

When I first got into crypto in 2017, it was fun and exciting and almost entirely speculative on my end. I heard about Ethereum and as I did more research into it, become more and more convinced that there was something special about it. It sounded COOL. Smart contracts and dApps. People far smarter than me were talking about all the potential use cases and I was nodding my head and going “yeah that sounds awesome”. The thing is, I never truly “got it”. I couldn’t conceptualize all the theory, and at that point in time, it still was all highly theoretical. 

I was just excited by it and loved seeing number go up and thinking I was a genius for buying into ETH (and a bunch of random alt coins), and even more of a genius for telling all my friends about it. Then the market began to crash and I had no idea what to do. Is it gonna turn around? Do I sell here? Is it all going to zero? Was it all a failed experiment? 

I ended up doing basically nothing. By that I mean I held all the way down, and more or less checked out from the whole space. I lost interest. It was no longer fun. Number wasn’t going up, and I didn’t “get it” from a technical level. Ethereum still sounded cool, but I had no idea how a smart contract was gonna make the world a better place. So I went back to my “normal life”.

I would still occasionally check prices throughout 2018 and see they were still going down and feel a bit bad but mostly feel nothing. I stopped checking in on things almost entirely in 2019 and 2020. Occasionally I would hear something about Bitcoin or Ethereum on the news and go “huh, how bout that”, shrug, and move on with my day. I was out of the game. 

Enter 2021. February, to be specific. My friend Jaime asks me if I know what a Hashmask is; if I know what an NFT is. Of course I don’t. After getting over the whole “ok that really sounds like a scam” business, I started to research and fall down the rabbit hole. Not just for NFTs, but for Bitcoin and ETH too. I watched YouTube videos, read books, created a twitter account, started following people, discovered DeFI, discovered OpenSea, discovered MetaMask, discovered “the metaverse”: cryptovoxels, the sandbox, decentraland, somnium space — and basically found all the incredible things people had been building during the bear market.

I saw the prices of ETH, saw the prices of CryptoPunks, saw the prices of Zed Run horses, saw the price of a parcel of land in a metaverse that had been developing for years, saw the prices of these cool looking HashMask things, and boy oh boy, hand to heart, did I feel awful because I was so late to the game.

I felt foolish for having not stuck around. I felt foolish for thinking Ethereum was cool in 2017 but then basically ignoring it for a few years. Why didn’t I just check in every now and then? Why didn’t I just spend an hour a week, or heck, an hour a month, staying up to date on crypto? Why didn’t I DCA (dollar cost average) in to ETH over the years?

If only I had a time machine I would do it all over and spend so much more time involved and invested, not just financially, but intellectually and emotionally, in this crypto world. 

If only.

I feel today elements of what I felt back in 2018. Moreover, I see lots of other people exiting the space the same way I did back then. They’re losing interest because number isn’t going up any more. They’re losing interest because it’s not as fun and cool and exciting as it was last year. That’s normal, that’s fine, and it’s inevitable that people are gonna leave.

I am not going anywhere this time though, and I think more people are gonna stay than last time. I understand crypto and NFTs so much more than I did last time. I have a deep conviction in it. I can see all the potential use cases. I see global companies entering the space and seeing the value in blockchain technology. I see wealthy individuals collecting art. I see funds forming raising 8 or 9 figures to deploy into ETH and NFTs. I see conferences happening every week around the world where people are gathering to share knowledge and information, to network, to connect — and god forbid kmoney reads this and makes a video — but yes, to build.

I have no idea when, where, or how this bear market is going to end. There are macro economic conditions far beyond my control and far beyond my understanding to a large extent. Nobody knows wtf is gonna happen (and anyone that pretends to, is not someone worth listening to). All we can do is make educated guesses and use the power of probabilistic thinking to position ourselves as best we can for a variety of different outcomes. For more on probabilistic thinking, read this fantastic article by my favourite writer in the space, Cobie.

What does this mean for <<insert NFT project here>>. No idea. Most projects are probably going to zero. Some will survive, and some will thrive. We’ll probably see a whole host of new NFT projects pop up and many of those will also go to zero, but some will survive, and some will thrive. 

On the balance, I think there are tremendous opportunities to make tremendous wealth in the crypto + NFT space. There is also tremendous risk, and tremendous capacity for people to lose everything and more. The smartest thing you can do, in my humble opinion, is to take a balanced approach. 

“Balance in all things” - Ember Spirit

Have a strategy and stick to it. Whatever your strategy is, make sure you account for black swan events / doomsday scenarios. This generally means having a reasonable stockpile of cash / stable coins (also not all stable coins are created equal, I feel ‘safest’ with USDC personally). What a ‘reasonable’ stockpile is will depend on your life situation and risk tolerance. A 22 year old with a secure job, living at home, with zero dependents can be infinitely more risky than someone in their 40s who is “full time crypto” with a mortgage and family to support. 

Speaking of “full time crypto”, there were a lot of people last year asking me if they should quit their jobs and go full time web3. There was even at least one influencer basically berating people who weren’t quitting their jobs to be a full time NFT trader. I won’t say their name but if I recall correctly, it rhymes with meanie. Suffice to say, I think that’s generally terrible advice.

Whenever someone asks me that question, I tend to defer to the parable by Mozart in my response: 

Young Composer: "Herr Mozart, I am thinking of writing a symphony. How should I get started?"

Mozart: "A symphony is a very complex musical form and you are still young. Perhaps you should start with something simpler, like a concerto."

Young Composer: "But Herr Mozart, you were writing symphonies when you were 8 years old."

Mozart: "Yes, but I never asked anyone how."

If you have to ask, the answer is probably no, you shouldn’t quit your job. 

For a more helpful answer — I generally think that in an environment so insanely risky as “web3” / crypto / NFTs, you want to ensure you have thoroughly thought things through and planned for all the possible outcomes. Something I tend to advocate for is having more than one revenue stream. If you’re trying to be a full time NFT trader, you best be EXCELLENT at it with a really healthy bankroll + many months (years even) of living expenses squirreled away so that you’re not trading on emotions and rent money. 

The safest additional revenue stream to pair with crypto trading is, of course, a “real job” that is utterly uncorrelated with the crypto markets. The first job that came to mind while writing this is “plumber”. The irony and pun possibilities are just a happy accident — but if all shit hits the fan with crypto, people are still gonna need plumbers and your job is probably pretty secure. If your “real job” is being a community manager for an NFT project, well then you’re in jeopardy of being out of a job when when markets on top of dealing with your portfolio crashing. If your “real job” is connected to traditional equity markets then you’re probably still gonna be moderately correlated with the crypto markets and when everything tanks like it is now, you might find yourself in a bad position. At the end of the day you need to figure out what works for your life situation + risk appetite etc etc etc. Just make sure you do think about these things.

It’s “okay” being full time web3 with multiple web3 revenue streams as long as you understand these things and are confident in your ability to pay your bills and not have to liquidate everything at massive losses just to put food on the table. That’s basically the worst situation you can find yourself in. If you’re there now — my advice is to breathe, take a step back, then take a step away, and know that it’s gonna be okay. Think about what you can learn from your experiences and start over. A LOT of people who have made enormous fortunes in crypto (and in life) have at many points in their life gone to zero, or worse — ended up with enormous debt and seemingly no way to pay for it. There is always a path forward. It might be hard to see right here and now, but trust me on this. Life goes on and life can be better in the future than you can possible fathom it being right now. I’m a living example of this, and there are countless others who have, through hard work, determination, and luck, found themselves living a life they never could have dreamed.

You’ll notice that I barely touched on the price of anything in this letter. That’s because I have basically no idea what’s gonna happen price wise for anything. My strategy is to hold basically everything, because I have no “need” to sell anything at this point, and I have conviction in the market and the asset classes of crypto / ETH / NFTs as a whole (and specifically in the projects I am heavily allocated in). I will set some buy orders to start DCA’ing into ETH. I’ll probably set them for something like:

$1250

$1050

$850

$650

$450

$350

$250

$200

$150

Do I think that ETH is gonna go down to $150? Probably not. Do I think it’ll go down to $450? Probably not, but it wouldn’t completely shock me if it did. Do I think it’ll go down to $1050? I have no idea, maybe? Seems not all that unlikely. It’s all largely guesswork, hence the strategy of DCA-ing in. All of this is predicated on the belief, and the conviction, that ETH will be worth more in the future than it’s worth today. Importantly, also, that it will outperform most other assets. The same thinking goes for any NFTs I might be DCA-ing into. I have less of a firm strategy there as I already have a pretty hefty allocation into NFTs, but I would find it hard not to buy certain things at certain price points.

My highest conviction plays outside of ETH/BTC are Generative Art NFTs (ie Art Blocks, FxHash), 1/1 Art, Membership/Utility NFTs (ie PROOF/PREMINT), Certain PFP projects (ie Yuga, Doodles, Moonbirds), and then generally any project that is being “run like a business” with a doxxed team that has a solid runway to be able to “survive the bear” (Meta Angels, Martian Premier League, Curious Addys Trading Club, etc).

Importantly, a huge part of my strategy involves “building” (there’s kmoney again popping into my head — imagine owning a word, what a boss). By this I mean, growing ZenAcademy and The 333 Club. Creating content and growing my Newsletter, YouTube channel, and my podcasts. Speaking at conferences. Expanding my advising/consulting services. Just generally doing things that add value to the space and that will, either tangibly or not, provide alternative revenue streams for me either now or into the future. 

In 2018 I left. In 2021 I returned and had massive regret at leaving. In 2022, I will not leave. I will be here in 2023, and in 2024, and in 2025. What you decide to do is up to you, but I would highly encourage that you at least keep one eye on this wild and wacky world that is web3 so that you don’t come back in a few years and wish you never left.

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Additional Content

If you’re here to stay, and enjoy my content, here are some other places you can find it.

I’d recommend checking out the most recent episode of my podcast where I talk to Alex from HeadSpaces, an NFT project focusing on mental health.

Podcast version: https://zenchatswithzeneca.buzzsprout.com/1968021/10718320-30-addressing-mental-health-with-alex-from-head-spaces-nft

For anyone considering launching an NFT project, or who wants to understand better the process involved with such a thing — I created a 7 day masterclass on the topic. You can sign up to it here: https://nasacademy.com/zeneca.

25% of my proceeds will be donated to support Ukraine.

75% of my proceeds will go into a scholarship fund to support upcoming artists in the NFT space.

You can also get access to the course for free if you own a ZenAcademy NFT, which at the moment is actually priced cheaper than the course (0.26 ETH or $395.99). This is the type of utility I plan to bring into ZA, with much more planned :)

I have two more courses coming out soon, one on building/growing/managing a community, and the other on mental health & staying sane in web3. Both will also be free for ZenAcademy NFT holders. We’ve also partnered with an incredible analyst and thinker in this space, Daniel Tenner (swombat) who has a course coming out soon that will be free for all ZA holders.

For something more fun and lighthearted — I would recommend checking out the podcast I co-host with my friend of 15 years. It’s called Two Bored Apes but he just sold his ape soooo tune in to see who’s gonna get the last laugh on that front (still TBD): https://www.twoboredapes.com/ (can also find it on your favourite podcasting apps).

If you enjoy reading Newsletters about NFTs, I encourage you to check out the ZenCaps Newsletter, a weekly publication put out by Rogue Raven to help you cut through the noise in this insane space.

If you enjoy this Newsletter, please consider subscribing to receive email updates :)

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Disclaimer: The content covered in this newsletter is not to be considered as investment advice. I’m not a financial adviser. These are only my own opinions and ideas. You should always consult with a professional/licensed financial adviser before trading or investing in any cryptocurrency related product.

Additional Disclaimer: I own a lot of the projects mentioned in this post and my incentives are aligned with the projects doing well. I am not endorsing or recommending anyone to buy into these projects at their current prices, or at any prices. Please do your own research before making any financial decisions.