Hi, last month I stumbled on many cryptos crashing, a conversation with a greedy millionaire and continued working on my personal FIRE-handbook:
June 2022 Crypto Crash
June 2022 has seen a second crypto crash in the trading year to date. Back in May, the collapse of Terra / Luna wiped 500’000 millions from the crypto market. So far in June 2022 nearly 400’000 millions has left crypto as the total crypto market capitalisation fell below $1 trillion.
In the case of Luna, the purpose of the coin was to ensure the “stability” of the coin Terra who aimed to be a stablecoin linked to USD.
On paper the system is very easy. You create 2 coins: A aims to be stable, B is used to stabilise A:
If the price of the stablecoin is below its goal = 1 USD, you create demand by buying the stablecoin A either with money you have (= not infinite supply) or by issuing new coins B to trade for the stablecoin A (=infinite supply).
If the price of the stablecoin is above its goal = 1 USD, you create supply by issuing new stablecoins A and sell them until there is no demand above 1 USD, which stabilises the price at 1 USD.
The last piece is to generate a basic demand by a service or product where you somehow impose one of the coins and you are good to go. Famous examples are token-lending “staking”, a credit card, loans, etc.
If you achieved this, you are basically sitting on a money printer. In the case of Terra/Luna they weren’t somehow able to keep up the sync of the demand and supply properly. Lunas price fell from 117$ in April 2022 to its all-time low of $0.00001675 on the 13. May and led to panic sells (and buys) across the crypto market.
I am very sceptical if a business needs its own currency to operate. In the most cases i dug within the crypto world, it seemed that the businesses couldn’t be kept alive (with the actual product/service) for long without the possibility of issuing new coins. Most of them follow the greater fool theory: That means that the business survives as long as there are new (greather) fools who believe in the story. But if at some point no fools are left, you don’t have basic demand and the value of your coin drops to 0 which leads to a collapse of your money printer and most likely to the business as well.
The greedy millionaire
Ramit Sethi went on the Tim Ferris podcast in a special episode along with other guests and shared an interview with a very interesting couple:
He is a tech executive earning more than 80’000 USD per month but behaving like he would earn 800 USD per month and had to pay back debts.
His wife on the other side was so frustrated about his lifestyle that she was thinking about leaving him and simply couldn’t understand why he was limiting the family to a very basic lifestyle.
For me this conversation reflects a very interesting thing within the FIRE community: People learn how to make money by being frugal, successful and disciplined but fail dramatically at using their wealth to leverage their life.
I highly recommend you to listen to it, starting at 01:15:00. The podcast covers furthermore the longevity expert Dr. Peter Attia and the meditation expert Sam Harris from which I’ve learned a lot. So if the you have 3 hours left, go for it – you won’t be disappointed.
I continued to work on the Level 1: Install a system to manage your money. Unfortunately its still work in progress and will be shared in the next newsletter. If you haven’t checked out Level: 0 you can do it here and create the basis for your FIRE journey: level 0: knowing where you are (my personal FIRE template is included there).
Unbelievable you read through all of this… thanks for boosting my ego.
Feel free to comment with feedback, questions or topics you would be interested to be covered here. I read every comment personally.
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