October 2, 2021

The Game of Yields

The Game of Yields
Why should the FED have all the fun printing value out of thin air?

The game of growing one's wealth via crypto is essentially straightforward.

Find an undervalued asset with the right mix of innovation, community, and tokenomics.

Buy it. Maybe even leverage your bet to get some extra alpha.

Hodl. Hodl. Hodl.

And at a time of your choosing take profits or use it as collateral for the next investment play.

As mass adoption increases by the day the dynamics between crypto and financial imagination expands by the month.

Yield generating opportunities that didn't exist last month, are available to those searching for the next alpha play.

Problem is there are external forces that interrupt the speed of growth and profit like economic volatility, fiscal policy, regulations, hope, fear, greed, inflation, scams, taxes, fees, and a whole horde of money piranhas that eat away at your capital and ROI.

Let's go reverse for a quick moment to see how the yield game typical plays out in the long term for cash equivalents...

Diminishing Value

Long long ago in land far far away there was this thing called a Certificate of Deposit that earned double digit returns.

It was a modern money miracle.

Just set it and forget it the banker told Nana & Pop Pop.

And this is how it played out...

https://www.bankrate.com/banking/cds/historical-cd-interest-rates/

Assuming they invested in 1984 Nana & Pop Pop were doing well for a short amount of time.

Over time the yield dropped to the near zero percent it is today.

Chances are Nana & Pop Pop didn't factor in inflation, making their real returns even less.

A bit of an oversimplified example of a concept that exists when it comes to yield generation...the more money chasing a specific yield (demand), the less yield there is to be had (supply).

This is true in crypto, as we've seen 354% yield opportunities drop to 20% as more liquidity is provided.

As of now all projects with staking rewards face this reality.

Just look at ETH.

In the beginning early stakers were earning 20%+.

As of today it's at 5.5% and will stabilize around 4.9%.

When compared to the "savings rate" offered by TradFi, it's nearly 5X better.

But when you factor in inflation 4.9% is barely breaking even, assuming you use CPI as an inflation barometer or whatever J.Powell and Friends claims it is.

https://launchpad.ethereum.org/en/

This leaves every crypto investor and DeGen with a few critical money questions to answer.

We've outlined the Top 11 below and how to spot money printing protocols in the wild.

As a wise crypto monk from Mt. Gox once said (we think)...

Know Plan. No Pain.
No Plan. Know Pain.