Dear Diary: I Will Never Trust Another Human Being Ever Again
A short introduction to how to lose all your money
So I lost $50K in this whole UST blow up. And it has jaded me from ever trusting another human being’s capacity for critical thought ever again.
I am normally a pretty good investor. Half of it comes from my, as explained in previous posts, low susceptibility to things like social proof and credentialism which gives me a unique ability to ask questions no one else asks and find pitfalls no one else finds. The other half comes from my also-innate ability to manage risk, assess probability, and extrapolate major knowledge from minor mistakes (ie have Ni as my dominant function).
When I initially bought Bitcoin in 2013, I invested about half of my meager, twenty-two-year-old net worth. Today, at thirty-one, my targets are to hold 60% Bitcoin, 10% Ethereum, 10% Cash (5% in bank, 5% as stables earning interest), and 20% alts.
That last number is ideally more like 10%. But after alts mooned in 2021 it became almost 50% and just getting back to here engendered enough capital gains taxes to make me the IRS’s bitch for the next decade.
Eventually though I will get that down and stack sats with the proceeds because I believe that everything other than Bitcoin—and maybe Ethereum and a few others—have a decent probability of exploding and never recovering. Which is why I never invest more than 0.5% of my portfolio into any alt regardless of how much research I’ve done.1
Since I took my coaching hiatus in Jan 2021, I have had no “real” income. But my wife was covering a third of our expenses working part time, yield farming was covering the other two thirds, I had enough assets on top of that to cover all our expenses for at least a decade, and the Fed was Quantitative Easing like a bat outta hell sending Bitcoin into a big time bull run so things were looking pretty solid.
I estimated at the time that there was at least a 10% chance we break $100K BTC by EOY ‘21 and a less than 10% chance we ever see prices below $30K again after the crash. Suffice to say, I was feeling pretty confident I could afford to “take a break” for a year or two to go hard at solving the writing problem while still having time for family and leisure.
But in the last six months in particular the landscape has changed a lot.
Bitcoin topping out at $70K (and going for a double top) certainly surprised me but it was within my parameters. Two major things I’d failed to account for though were that CeFi yield rates would tank as the market grew and that new DeFi yield generation opportunities would become few and far between as the market turned bearish. In retrospect this is obviously what would happen, but I didn’t think about it at the time. Suffice to say, my yields were down 20% coming into ‘22.
Further, CPI getting this hot had a low probability in my model. And I thought that even if it did J pow wouldn’t have the balls to tighten us into a recession (he does). Fed rates up means stonks down. And since most of the 2021 entrants to the crypto markets were from risk-on Wall Street types that means crypto down too.
But this, while a bummer, was still within my worst-case scenario parameters. Despite my wife going full time SAHM as of Jan 2022 I have still remained below the 4% target rate, and my overall burn is less than 2% annualized for the last sixteen months.
So that all sounds pretty good right? Well the first problem is that I suspect I’ll be burning 5% minimum moving forward. And the second far more important factor is that Lean FIRE sucks. We live in a 700 sq ft one bedroom in somewhere we don’t like driving fifteen year old cars that barely function living college-student-levels of frugal to make it work. We aren’t miserable or anything, but we certainly do not want and do not plan to live like this forever.
My goal with this “retirement” was just to have enough financial cushion to get out of doing things I dislike for a living and into things I love. Ultimately I want to build something I am truly proud of that helps both individuals (Actualization Hub) and society (Minor Dissent). I just don’t know how long it will take before those things can actually become profitable, if they ever even can. But the only scenario I’d ever be truly satisfied with is one of accumulating capital (ie stacking more sats), building something great, and living an at-least-middle-class life style all at the same time.
So the current situation of burning capital while living like students and kind of sucking at building was suboptimal to say the least.
But I didn’t want to reopen the door of coaching if I didn’t have to. One major factor that caused me to take my hiatus (besides that I could afford it) was that in 2020 I took on a company I shouldn’t have who wasn’t aligned with my values and the relationship eventually soured in a pretty big way. As someone who prides myself and even often coaches on bridging communication gaps and resolving interpersonal conflict, this really traumatized me and had me second guessing whether maybe I am actually even any good at it. I haven’t taken on a client since.
Anyway, all this to say: for the last six months I—like all dumbasses falling prey to a scarcity mindset and avoiding their fears—moved out on the risk curve.
I started exploring more degenerate DeFi and CeFi platforms that offered higher yield. Being not a complete troglodyte, I reduce my risk and max my rates by spreading assets across over a dozen platforms (they can’t all blow up, right?), but if I had a real income I would much prefer to just hold everything in cold storage. And the increased risk of all the “what ifs” while now burning principal every month was definitely raising my financial anxiety.
One of the platforms I use is Holdnaut which (at least I thought) was one of the bigger and more credible players right behind Celsius, Blockfi, and Nexo. And they were offering the highest rates on stablecoins so I had moved most of my stables there.
A few weeks ago they announced this big promotion that if you add UST you get way higher rates (13% instead of 9%) as well as a big bonus for depositing.
I hadn’t dedicated any directed research toward Terra but I understand rather well how algorithmic stablecoins work in general. I experienced the IRON finance de-peg and subsequent death spiral firsthand. I only lost a few hundred bucks in it though because I had researched it, understood the risks, and got out as soon as things took a downturn.
But the surface level understanding of UST I’d established through osmosis on Twitter made it seem much different than IRON. Yes, it was an algo stablecoin. But Do Kwon (Terra founder) was all in the news for his “brilliant and innovative” partially-collateralized model; a bunch of big names in crypto venture capital and influensoor space were hyping it up and dumping in billions; LUNA had been on a tear for the last year making everyone and their mom a millionaire; both UST and LUNA were now in the top ten by market cap; and now one of the top five most reputable interest platforms—which only offers five other assets, I might add—was listing and promoting it. The social proof for Terra was palpable to say the least.
Meanwhile the only detractors I’d seen were low IQ toxic maxi’s.
The problem with the average Bitcoin maxi of today is that they don’t actually know anything about any specific altcoin project. All they know and all they believe they need to know is “it’s not Bitcoin but it has a token? It is 100% a ponzi scheme scam run by evil corrupt liars to destroy Bitcoin and take all your money”. I have had at least a dozen Twitter arguments with maxi’s about this and every single one has demonstrated unequivocally that their opinions are based on arguments that were stale to me by 2015. And this is demonstrated by me getting an “oh shit I never thought of it like that…” after presenting an even highly cliff-noted version of my current position. So by 2022 I had pretty much fully written off the average Maxi opinion as noise, having no credibility with me on anything outside of the fiat problem and how Bitcoin solves it.
And this was made far more frustrating by the fact that the signal of actually intelligent Bitcoin Maxi’s like Lyn Alden who have written long form and compelling cases explaining the algo stable death spiral and how Terra has in fact done nothing to solve it were completely drowned out by all this noise. I literally never once saw even a reference to long form content or even a single tweet about Terra that wasn’t couched in the typical emotionally laden midwit language of the average Crypto Twitter anon.
So given that any criticism I’d seen was noncredible, the little amount of support I’d seen was positive, and the basic logic of the support suggested Terra was credible, I thought “well I am feeling stressed about money and need to increase my yields. Here is a credible platform offering me a reward for switching to the hottest new stablecoin. So I’ll switch over all my USDC to UST and take those rewards. I’ll get around to doing my own research and confirming soon, but I mean come on, they must have solved the algo stable coin death spiral. It can’t possibly be the case that this many people are this fucking stupid as not to know the classic algo stablecoin model will never work, Right?”
Narrator: People were in fact that fucking stupid.
Three days later the market has some volatility, UST depegs, and everyone who wasn’t a total chump realizes the parties over so start selling their UST and LUNA and invoking massive panic. To fight the depeg, Do Kwon starts tapping his BTC reserves but it just crashes the market and LUNA further, only making it all worse. At this point the death spiral is in full force with UST redemptions printing billions of LUNA which is tanking the price causing LUNA holders to panic sell even more. When all is said and done LUNA now has trillions of tokens in supply, the whole fiasco taking it $100 all the way to $0.0003, UST remains 80% down off peg, and the $50K I had in UST is currently worth less than $10K.
To be clear I’m not even mad about the money. My portfolio is down from its Nov ‘21 peak more than ten times what I “lost” in UST. I’m obviously not happy about either and it does increase my stress but I ultimately knew this was a possibility and so I’m mostly over it. What I’m not mostly over though is that something I didn’t plan for happened. And worse, something which could have been and should have been so easily prevented.
It’s one thing to invest in a risky shitcoin and have it drop significantly or die outright. This is never a problem because, like I said, I know the risk and so only put fractions of a percentage point into them. But a top ten project? The third largest stable coin? Hyped up by everyone and their mom? Added to Holdnaut? It seemed pretty safe to me (in my, albeit, basically non existent research). Even when it lost peg I thought “yeah this would be bad if this was some no-name algo, but this project literally has dozens of giant VC firms backing it with billions. They will inject capital and will not let it die, just like happened with the half dozen other recent blow ups in big projects.”
Boy was I wrong!
To be totally honest, the biggest loss for me is the project I’ve been working on over the last year to jack myself off about how good of an investor I am. That $50K was money I’d been diligently acoomulating by profit taking whenever the market is overbought so I could have dry powder to stack more sats in the event of this exact type of crash. If I had literally just procrsatinated switching to UST for a few more days, or spent even an hour reading the UST whitepaper rather than letting social proof make my decision, I’d be giga chad gloating all over Twitter right now about how I executed the last year perfectly and stacked two additional BTC.
But instead I’m here. Angry. Anxious. Self-attacking. Poor. And the laughingstock of all these midwit Maxi’s who can hardly even tie their own shoes!
How did this happen? And what can I learn from it to make sure this never happens again?
The true cause was that I let scarcity get to my head. I let anxiety and fear influence, if not dictate, my decisions. Rather than learn from the mistakes I made in 2020 with that client that went south and confront the insecurities it created in me about my competence and intuition as a coach, I just decided to run away. And when the fears followed me I, like all cowards, only ran faster. so they, like all fears, just kept chasing.
It is not Do Kwon’s fault that I am here. Nor all the simpletons who buy shit they don’t understand and panic sell at the first sign of danger. Nor the noisy midwit maxis nor greedy VCs nor even Holdnaut for listing and promoting it on their platform.
All these people are morons, yes. But being mad at sapiens for being tribal, over confident, irrational, and greedy is like being mad at gravity because I tripped and fell. Resentment. Externalizing blame. Avoiding responsibility. These can only poison your life and turn it into hell. And when enough people do this it turns everyone’s life into hell.
I am in charge of my life. I am in charge of my decisions. I am in charge of my failures. If I choose to let high time preference things like fear and cognitive expediency govern my decisions I am free to do that. It is entirely within my rights to take a loan out on good feelings of the future to feel good today. But what I don’t get to do is complain when that bill comes due.
“Take what you want. And then pay for it.”
This is what the Old Testament God is about. Heck, this is what all of Religion is about.
“Eat your seeds and you will be fed for a day. Plant them and you will be fed for a lifetime” is the cozy motivational quote version for the New Testament soy boy. But the brutal Old Testament version for chads is:
“If you eat your seeds instead of planting them, when winter rolls around you and everyone you love will fucking starve to death”.
“God’s wrath” is just (meta)physics. “Every action has an equal and opposite reaction”. “God” is vengeful to “sin” in the same way that gravity is vengeful to flight. Gravity takes neither joy nor means any malice when you jump from a high rise building to splat like a water balloon on the pavement. Do it, don’t do it, gravity don’t care. The rules are the rules and you can do what you will with them. “God” is the same way. Except not. Because he does everything he can to try and convince you not to jump off!
When I started writing this piece I was angry. And I planned for it to be about how I tried to extend an olive branch to the sapiens and they betrayed me. But this is just a bullshit defense mechanism cope I made up to avoid the reality that I have been a coward and I finally got what I deserved. Rather than confront and process the mistakes I made with my last client and confront the trauma of how it ended, I chose to run away from one of the things I was born to do.
So thank you Do Kwon, normies, maxi’s, and Hodlanut. With your help I’ve decided I’m done being a coward. I will be starting my practice back up. I have a baby coming in the next few weeks so can’t start right away, but expect an Actualization Hub announcement as soon as that is resolved.
Good dae.
I’ve broken this rule twice. First, in 2017 when I invested 10% into the Celsius ICO. It 30xd in 2021 and accounted for almost half my portfolio at one point. I have since sold 80% of it, 50% of which went to accumulating more Bitcoin. And the second time was in 2021 when I invested 10% into Splinterlands. It is currently down. We will see what happens when the bull run starts up again.