This one goes out to the precoiners and newcoiners who think “it’s too expensive to buy a whole bitcoin so I’ll buy this shitcoin instead”.
This article by Stephan Livera was published citadel21.com website.
This is a very ill-thought-out strategy #
In your mind you think it’s easy to make money coming off a low base, right? It takes less as a percentage to move up, and I might get lucky! Wrong. Once you really peer deep into this, you see bitcoin as the future monetary unit of the world.
If you accept that vision, holding even a tiny piece of a bitcoin will be worth so much more than holding shitcoins. Zoom out and think about the longer term here. Shitcoins may well go up in the immediate future in terms of fiat, but they will lose value compared to bitcoin in the long run. Longtime bitcoiners value their net worth in bitcoin. They’re not as interested in fiat-denominated gains as they are in bitcoin gains. Fiat dollar values are just what we use to communicate purchasing power to normies.
Play this out #
So let’s play this out, imagine you have this idea of buying “cheap” shitcoin-A with the hope of profiting. What about all the new people who have the same idea? Well, assuming you chose well, you might be in a slight profit on shitcoin-A (even if long-term down in Bitcoin terms). But eventually shitcoin-A will be more expensive than shitcoin-B. So other newcomers with this idea might end up buying shitcoin-B instead of buying your bags. Shitcoins come and go over the years, and new shitcoins are made at a very low cost.
Hidden or unconsidered costs #
Even if you thought you could successfully trade around between shitcoins to get more bitcoin—are you sure you could do it after accounting for on-chain transaction fees, exchange fees, and taxes? Tax laws in most countries encourage simply buying and HODLing bitcoin. Trading between coins means more taxable events and accounting headaches, which will potentially lead to more tax costs.
Another, less considered point: shitcoins have worse liquidity than bitcoin. So when people are trying to sell larger volumes, they can’t sell as many at that price. So those paper gains can end up being illusory and unattainable.
Understand the dynamic #
One little industry secret is the “shitcoin waterfall”, as Meltem Demirors calls it—essentially, insiders create and pump a coin, dumping it onto less-informed retail traders. There are insider creators of the coin, “crypto” fund managers, or other “crypto advocates” who get the first bite at the apple, they receive free shitcoins or receive discounted insider prices.
They aim to get their shitcoin listed on a large exchange (aka shitcoin casino) and dump onto retail. The “crypto experts” will shill their shitcoin trading recommendations (for a fee of course, they believe in capitalism). Other shitcoiners will run interference, deflecting criticism from bitcoiners as “censorship” or “being toxic”. This was how 2016 and 2017 played out. Future cycles will not necessarily be the same, but they might well rhyme.
These short-term games function mostly as a sideshow to the real main show: Bitcoin’s continuing global adoption. While these games are going on, Bitcoin’s massive network effect grows the quantity of HODLers, developers, miners, exchanges, merchants and so on. So your shitcoins might deliver profit in fiat terms, but not in bitcoin terms, because bitcoin has not been standing still.
What if we openly accept that it’s not a long-term play? #
Now if you instead accept that your gambling on shitcoins is not a long-term sustainable play, then what’s to say other newcomers joining after you won’t also recognise this? So again, the newcomer will simply go for the more established long-term store of value with strong monetary characteristics: Bitcoin.
And while you were trying to play short-term shitcoin gambling games, the smart people among the newcoiners were accumulating bitcoins. So you just end up losing pace versus them. Making it worse, this is during what is likely a once-in-humanity (or at least, once in a lifetime) monetisation event. If money is half of every transaction, do you really want to miss out on your chance to accumulate it before the rest of the world wakes up?
Time to set aside shitcoin gambling #
Face it, many people who play shitcoin casinos are just looking for an alternative to gambling. Just like with normal gambling, gamblers will happily tell you about their big wins. But do they tell you every time they lose? Maybe they even mentally block out the times they lost. After all, losing money is a painful experience that most would rather forget. So unless you’re able to be the house (i.e. run a shitcoin casino), or perhaps be in the top 1% of insiders/shitcoin elite, you’re losing money.
But if you instead understand why Bitcoin has desirable qualities for a money, and focus on the long-term case, the short-term shitcoin gambling fades away into irrelevance.
Long-term games with long-term people #
Fundamentally, this isn’t purely an altruistic thing—it’s just looking for what is profitable long-term rather than what is profitable in the short-term. To borrow a saying from the Indian-American entrepreneur and investor Naval Ravikant: “Bitcoiners want to play “long-term games with long-term people”.
The world doesn’t have to be a zero-sum game. It can instead be a positive-sum game. We can all become more prosperous through the benefits of trade, specialisation of labour, capital accumulation, and technological advancement. This necessitates changing the monetary order from fiat money to a Bitcoin standard. If that were to happen, the price of bitcoin, even conservatively speaking, would go to $10M+ per coin. There’s still incredible upside for long-term thinkers.
Use Bitcoin in the way for which it is uniquely suited: storing value for the long-term and removing the uncertainty of the total supply of the money we use. Align your thoughts and actions in the direction of building long-term wealth. Stack sats for freedom and monetary justice.