Happy Friday,
Welcome to another installment of StakeSchool.com’s newsletter, by Angel City Stakes. For those that don’t know me, I recently founded Angel City Stakes and Stake School. I am a former trader, an investor for over 20 years, and a current liquidity miner. At the end of 2021 I put in my two-weeks’ notice from my tech job to focus on cryptocurrency (mostly) full time. My goal for this newsletter is to instruct, educate, and help others in their crypto journeys. Crypto tech is a powerful tool that can serve us and help make our lives better, but with most things in life, success at it requires work.
I will show you how I’m using liquidity mining and crypto staking to generate a daily stream of passive income equivalent to $1,000’s every month. Read on.
An Infinite Game
I recently watched Simon Sinek’s Game Theory talk and immediately saw the connection to crypto as an infinite, rather than finite game, despite the fact his analogies were business and war. It’s a short talk, and I recommend you watch it after reading this. Here I’ll briefly explain:
In game theory, there are finite games and infinite games
Finite games are well-defined with agreed upon rules, timeframes, and have clear winners and losers
Infinite games are open-ended, subject to change, and the objective is to keep the game going in perpetuity
Cryptocurrency is an infinite game and those playing it as a finite game are likely to be frustrated
You “win” in crypto by staying in the game long enough to capitalize on bull markets and price increases
Time in the market > timing the market
Survival (not getting “rekt”) > Binary outcome (E.g. “Lotto ticket”)
The Infinite aspect of crypto is due to
Decentralization (hard/impossible to stop now)
Inflation (new tokens and players constantly entering markets)
Returns on crypto holdings and compound interest
The unstopping march of technology
Play crypto as an infinite player, and you increase your odds of success
Play crypto as a finite player, and you may get rekt
To provide a comparison to the early days of the internet, watch this awesome infographic that shows players entering and leaving (losing). Clearly those that persisted the longest are the ones still reaping the rewards:
Inflation and Crypto
Many Americans recently became aware of the negative effects of inflation, after not really thinking about it or experiencing it for decades. However, in other parts of the world, double-digit inflation is the norm. We even see some extreme cases of triple-digit annualized inflation in economically unstable countries. Even with the current ~10% of so annual inflation Americans are experiencing, it’s hard to imagine prices rising even faster and constantly, non-stop, as your government prints paper, devaluing any savings you have and effectively giving you a pay cut, month after month.
If the above table doesn’t scare you and make it obvious why Bitcoin has value, I don’t know what will. Bitcoin is so viable today, especially with the advancements of the lightning network that allows for near-instant and cheap transactions (pennies).
The Lightning Network is built out by nodes, with each node having the ability to process up to 250 transactions per second (TPS), but no limit as to the number of nodes. It is estimated that Bitcoin Lightning can ultimately achieve from 1 to 40 million TPS. Compared to ETH 1.0 (12-15 TPS) and Visa/Mastercard (somewhere between 1K-10,000 TPS), this is revolutionary.
Bitcoin is hard money because Bitcoin is supply-limited, and pre-programmed. It is decentralized, so no one can shut it down. In a world of increasing authoritarian tendencies, Bitcoin is the life raft on a sinking ship. If Bitcoin succeeds, and price rises, it will lift most other crypto along with it.
Getting Used to Inflation
It seems with the way things are going, we should be prepared to live with inflation for the foreseeable future. Inflation begets more inflation, as more and more paper money is needed to fund the debts of prior cycles. The only other option to get rid of inflation is austerity, in which the business cycle breaks down and shrinks, inflicting significant economic pain and shortages. Given the two options, inflation seems like the lesser evil, although the options affect people differently and unequally.
I recently read a great piece about something called “Sneakflation” - which is basically the pre-cursor to inflation, indirect inflation, or inflation in all but name. This is like your packages of cereal getting smaller, or BMW recently announcing that they will charge you a subscription to access the heated seats of your car. The car you already. Own. Why? Because they’re feeling pinched by higher prices, profits are down because costs are up, and they want creative ways to make up the shortfall. See why austerity is so painful?
Inflation is a wave that rolls in slow and big. No one cares when they can barely see it in the distance. Not many care when the shrinkflation wave rolls in. It’s annoying but doesn’t provoke action. Sneakflation is also a long slow wave. Only after time do people add things up.
To make matters worse, when inflation takes hold, the people assume it will continue and plan accordingly, thereby creating a self-fulfilling prophecy. As I wrote previously, half of the Fed’s mandate is to fight inflation. The Central Banks of the world typically follow the Fed, looking to the US as the leader. This is already happening, and if and until a severe economic or other mega-scale disaster occurs, is not likely to stop any time soon, and since inflation is our “drug” of choice as a society, it could be especially painful.
Making Sense of Cents
What does this mean for the average cryptocurrency investor?
Crypto is great because it gives the same tools that governments use to create money supply and puts them in the hands of the people. Instead of the government benefiting from inflation, cryptocurrency holders can directly benefit by the same mechanism (printing more paper/issuing more coins).
This is not automatic. You have to stake or provide liquidity in order to receive newly issued crypto, which is represented in the form of APR. Of course you have to be careful of what you stake or invest in, and practice sound risk management.
Tying it All Together
So you’ve got the following confluence of forces:
Inflation ravaging fiat (paper) currencies around the world
Governments stuck in a loop of needing to inflate, but trying to fight inflation causing economic harm
Bitcoin as a store-of-value or way to opt out of locally inflated currency
When recognized, the value of Bitcoin will lift other cryptos
Crypto staking and liquidity mining is a way to turn the tables on government money printers
The unstoppable march of technology and the crypto genie is out of the bottle by this point, its impossible to go back to pre-crypto world.
With all this, there are clear indications that not only are we playing an infinite game, but that the confluence of forces is advantageous for crypto all else being equal. Although there is likely further pain ahead as the global economy digests inflationary pressures and attempts to fight them, there will always be pockets of opportunity; investments are not created equal.
Remember, in an infinite game, winners are those who continue the good fight and guard against fatal mistakes and avoid getting rekt. If you are able to save money from your paycheck, you have the option to Dollar Cost Average. If you have fiat savings, you have the option to opt into Bitcoin. If you are taking advantage of staking and mining, you have the option to compound your daily rewards, planning for one day when they will be bigger than the current sum of their parts. All of these are important tools in your fight for crypto survival, use them abundantly at your discretion.
Stay nimble,
Mike Broudy, ACS and StakeSchool.com founder