Constant information inflow leads people to form defense mechanisms. You probably didn’t notice it, but your brain blocks parts of the screens you look at depending on what’s there.

 

Our brain knows that 99% of ads on the Internet are worthless (or even promote scams). Hence, it saves you energy to ignore that information.

When you read through thousands of tweets, hundreds of articles, and dozens of technical papers every month, you develop a specific version of banner blindness. By looking into the crypto abyss for weeks, you learn to unconsciously filter out shills, scams, and false narratives.

There’s nothing wrong with that. Most projects and influencers are after your money in the crypto space. Frequently, it is not a direct relationship, but they attract noobies who create “exit liquidity,” a fancy term for suckers who will buy their garbage, by persuasion. In other words, if you want to sell something at a premium, find buyers first.

That’s why almost every project and person in this industry pushes out tons of content every day. And the more you are in the web3 space, the more you treat this ‘information’ like banner ads.

I come out as skeptical, but the so-called “skepticism” is a result of not seeing a signal in the noise. I’m immune to this kind of persuasion, which is most likely the reason why I don’t hold ADA and didn’t get rekt by Bitconnect.

It’s the same with NFTs. While I understand the fundamental value of digital communities, and I’m a big fan of DAOs, I still refuse to drink the kool-aid of NFT influencers.

I won’t call names, but I’ve seen a person rotating and pumping various NFT collections like Mooncats, 24px PixelCats, and various sorts of penguins in my Twitter feed. Over a week, they managed to find tons of reasons why some collection was primed to pump. Then, they would change a collection and do the same next week.

Historical value, sophisticated technical implementation, or the pleasant nature of art⁠—it all doesn’t matter if there’s no strong community behind a collection. That’s why I have respect for Bored Ape Yacht Club, Crypto Punks, and even EtherRocks. When you buy them, you get a ticket to an elite club of crypto millionaires, at the very least.

This rant is to set your expectations right from the ongoing NFT mania. While new money continues to flow into the market, I think it’s better to ignore the noise and capitalize on it while there is exit liquidity. In other words, sell more aggressively if you don’t see a valuable digital community behind an NFT.

Be the wolf, not the sheep. Develop your banner blindness and try to find a signal. And if you can’t find the signal, I think the best option is to stash your cash somewhere safe.

SIMETRI Portfolio – Funding Ratio

Last week we discussed the importance of liabilities. Investing isn’t about the ‘numba’ going up all the time; it’s about ensuring that you have enough money to reach your financial goals in the future.

But how can you understand whether you have enough money today to meet your liabilities in the future? Let’s do some simple math for three key financial metrics: discount, present value, and funding ratio.

As we discussed in one of the previous issues of Digest, we think that even if the crypto market turns bearish, the yield on stablecoins will remain at least at 3%. With the emergence of fixed-income platforms like Element, getting at least a 3% return should become even easier.

Assuming we can at least a 3% return on stablecoins over the next ten years, we can calculate the discounted value of one dollar in the future. The formula is simple.

Given the formula above, we can calculate the number for our case. If the interest rate is 3%, a dollar in ten years would be worth approximately 74 cents today.

So if someone were to offer to sell you an investment that yielded $10,000 in a decade, the maximum you should be willing to pay for it is $7,400.

Now, you don’t have one big liability, rather a sequence of smaller ones. You need to know how much these future liabilities cost today, given the available interest rate.

Let’s imagine you will need $30,000 in six months, $35,000 in a year, $40,000 in one and a half years, and $45,000 in two years. The total sum of your liabilities is $150,000, but their present value is $144,222 because a dollar tomorrow is cheaper than a dollar today.

Finally, to understand whether you have enough money to meet your future liabilities, you should divide the number of assets you have by the present value of your liabilities. That’s called the funding ratio.

In our example, if your assets have a value of less than $144,222, your funding ratio is less than 1, which means that you won’t reach your financial goals. So, you either have to find ways to increase your assets or look for higher returns.

But that’s for the next week. It was a lot today, so let’s take a break and look at SIMETRI Portfolio.