His beloved wife Eurydice was bitten by a snake and tragically died. Heartbroken, Orpheus chose to visit the Underworld to have the opportunity to see his wife once more. As a musician of unparalleled talent, Orpheus played a heartbreaking melody with his lyre for Hades, the god of death. Hades was moved by the song, and opted to give Orpheus a chance to bring Eurydice back to life. He had one condition: Eurydice could follow Orpheus out of the Underworld when he left, but Orpheus could not turn around to look. Failing this condition would doom Eurydice to the Underworld for an eternity. Orpheus was delighted, thanking Hades and left to return back to the surface. However, Orpheus was unable to hear Eurydice’s footsteps as he ascended and his resolve began to falter. Fearing that he had been made a fool, Orpheus chose to look back only a few feet away from the exit. He turned his head to find Eurydice behind him and failed Hades’ challenge, sending Eurydice back. Stricken with grief, Orpheus chose death to reunite with his lover forever.

As I write this, Bitcoin is languishing around 85k, after hitting an all time highs just over a month ago. Altcoins have been bleeding out since last year. Argentina rugged. ByBit got hacked for $1.4B by North Korea. It’s been a brutal period for the market.

From their highs:

• HYPE is down over 40%

• SOL is down over 50%

• PEPE is down over 70%

• Virtuals is down over 75%

• Trump Coin is down over 80%

• Fartcoin is down over 85%

The Crypto Fear And Greed Index looks like this:

The trenches have not been faring too well either. Pump.fun is seeing a decrease in tokens being launched, tokens graduating from bonding, and overall volume.

https://x.com/n01man/status/1894697506300190767

Bitcoin dominance has been rising since the start of the year, reflecting the destruction of altcoin performance against Bitcoin.

Unsurprisingly, people are down bad. Any positions outside of BTC and USD are probably down 50% or more over the past couple months. There’s been a clear flight away from riskier assets, and it seems like the endless rotations have slowed to a halt. Sentiment is the gutter, and there is a fear prevalent. Is it over?

My answer to that is simple: I truly don’t think so. Like Orpheus, we should be looking forward from here.

I believe that we’ve come so far and survived so much from the bear market, that to give up here is simply foolish. FTX literally blew up for fuck’s sake. Operation Choke Point 2.0 was unable to kill crypto while it was weak.

Crypto has made incredible progress since the last cycle:

• Spot Bitcoin ETFs were approved, $37B+ of inflows

• Spot Ethereum ETFs were approved, $2.9B+ of inflows AFTER being -$687M last October

• Love him or hate him, Donald Trump is undoubtedly the most crypto friendly president ever

• Stablecoin market hits $200B+, significant growth since election

• Crypto industry spent $160M on US elections, massive success

• 16 US States are considering Bitcoin/Crypto for public funds

• Blackrock wants SEC to tokenize stocks and bonds

• Multiple nations are beginning to embrace crypto: Bhutan owns $1B+, Syria is eyeing Bitcoin legalization and digitizing their currency, Czech’s Central Bank is considering a Bitcoin allocation up to 5%

• Citadel Securities is looking to market make on crypto exchanges

• Bank of America CEO expects to eventually enter stablecoin market

• SEC is dropping investigations against Uniswap, Coinbase, Gemini

I would argue that crypto is more bullish than ever. The current US legislative environment is more crypto friendly than ever, and tradfi is continuing its expansion into crypto as a result. Large tradfi institutions are more active than ever in crypto. The numbers support this- Coinbase’s Q4 2024 report showed that retail trading accounted for 21% of exchange volume, compared to 2021’s high of 36%.

So, if the cycle isn’t over, then where are we?

Luckily, someone else has already done a fuck ton of research on that exact question. Thus, I will simply point you in their direction.

This chart probably makes absolutely no sense to you, you just need to know it’s bullish. This was pulled from Ostium’s article by @cointradernik that I strongly suggest you read. The article goes over a wide variety of metrics that have historically been a good indicator of when the crypto market is topped.

His conclusion is simple: we are mid cycle, perhaps early in the late period of a cycle. If if this is your first cycle, I have excellent news: this is where the most money is made.

That being said, I do have some takes that some may not like:

• I think the vast majority of coins today are completely un-investable garbage. I personally believe that the majority of alt coins today will not reach new all time highs. I personally only own 2 alt coins in size.

• I think a lot of meme coins are completely fucking cooked. I will name two that I think are done for: WIF and POPCAT. I will not be betting against them, but I sure as hell won’t be betting for them. Also MOODENG and PNUT reviving from here would be more impressive than Jesus reviving from the dead.

• ALT L1s and ETH L2s are overpriced as fuck. I think AVAX, ARB, ATOM, OP, NEAR will underperform.

• I could see 1 or 2 AI coins doing very well, but I think AI coins as a whole will not be a top performer moving forward. Similar to how AAVE and MKR haven’t been doing so bad, but most of defi isn’t doing too well imo.

If you’re reading this and made it this far, I appreciate you taking the time to read it. If you’re down bad, me too. If I had to guess, I think my net worth has probably gone down by roughly 30% since late last year. I do ask myself a lot if I would rather own anything else at the moment though, and for the most part I’m pretty confident in the stuff that I do own. My biggest regret for this period a mix of not having more BTC and not going more into USD at the highs. Fuck it we ball though.

Lastly, I could be wrong. About literally everything. I’m just sharing my thoughts and my reasoning, and betting accordingly. Suggest you do the same.

Today I will talk about Art Gobblers, a NFT experiment designed by the engineers at Paradigm. 

The premise of Art Gobblers is that Art Gobblers are NFTs that can produce blank pages by burning Goo, a token that is emitted by these Gobblers. The amount of Goo that is emitted by a Gobbler is dependent on how much Goo they currently hold. The more Goo that a Gobbler holds, the more Goo it will produce. This makes Goo highly inflationary.

Blank pages can be drawn on by artists, and Art Gobblers can gobble these drawings, permanently locking them into an Art Gobbler’s contract. The gobbled drawings can be viewed through the Art Gobbler app, and thus each Art Gobbler will serve as an on-chain art gallery.

The issuance of new blank pages is set up using VRGDA , a novel mechanism that was designed for this project. This VRGDA mechanism essentially adjusts the cost of producing these blank pages to follow a set rate. If new pages are being issued at too fast of a pace, then the amount of Goo required to produce a new blank page will be higher. Conversely, if new pages are being issued too slowly, then it will be cheaper to produce new blank pages. For Art Gobblers, this rate has been set initially at 69 new blank pages a day, and over time will gradually slow down to 10 new pages a day. 1 in 10 of newly created pages will go to a vault to be distributed to artists in the community.

Goo can also be burned to mint a brand new Art Gobbler. Like brand new pages, Gobblers will also use a VRGDA mechanism to determine the Goo costs of minting a new Gobbler. 2,000 Gobblers were minted for free at project launch, and 8,000 more Gobblers will be emitted over the next ten years. Initial issuance of new Gobblers will start at around 200 new Gobblers a month. 1 in 10 newly minted Gobblers will go to the team, and an additional 1 out of 10 will be distributed to the community.

There also is the existence of Legendary Gobblers, which require the sacrifice of normal Gobblers. They use a standard Dutch auction mechanism, so once a Legendary Gobbler sale begins, the price becomes cheaper and cheaper until it is finally sold. The Legendary Gobbler also has the perk of emitting Goo at twice the rate of the combined Gobblers sacrificed to summon them. Legendary Gobblers auctions will begin each time an additional 10% of the total supply of Gobblers is issued (so every 581 regular Gobbler mints), and thus a total of 10 legendary Gobblers are possible. Auctions for these are scheduled to end before the next Legendary appears. 

Original Thought

The initial price of an Art Gobbler before any Goo has been generated is driven by collective demand for it. Whereas your standard defi token will go live with a liquidity pool, Art Gobblers are illiquid NFTs. There is no stableswap formula to regulate violent swings in price, and upon launch supply side pressure is naturally larger than buy side pressure. Whitelisted holders had a cost basis of 0, and the demand was high from people who did not make the WL. Some of these people were art collectors interested in the project, and were willing to pay a large sum of money to be able to participate. This kind of person set the initial market prices for Gobblers. All price action after is increasingly speculative, and people contributing care much less about the art.

Goo has little long term monetary volume. Goo will accrue at an increasingly fast rate as time goes on, and there is no ceiling for this rate nor total supply. Thus, Goo supply is designed to approach infinity, and price will approach zero in response. The only way to remain immune to Goo inflation is to either leave your Goo staked or invest in Goo assets- Gobblers and Pages. Because both Gobblers and Pages use the VRGDA mechanism, the optional decision is to buy at any price below the issue rate. Lastly, the VRGDA mechanism should not be seen as a limiter on prices. It makes Goo assets more expensive to buy, but the VRGDA mechanism does not ever make it impossible to buy a Goo asset. The only limit to how much assets can be bought is when prices surpass total Goo in existence. Thus, the VRGDA mechanism should be seen as more of a floor vs a ceiling.

Only one thing matters for Goo, and that’s how quickly a party can produce it. Because Legendary Gobblers produce Goo at twice the rate of the combined Gobblers sacrificed to summon them, a legendary Gobbler is instantly worth 2x the amount of Gobblers that were burned to mint it. There is zero downside to minting a Legendary Gobbler, and thus, I imagine Legendary Gobbler mints will be heavily botted. I predict that a MEV-savvy party will accumulate an extremely large amount of Goo and mint 10+ Gobblers at once, intentionally overpaying for these Gobblers in order to trigger the Legendary Gobbler sale to start, and then buy out the Legendary Gobbler at the top of the next block.

During the test run, the meta was to buy out Gobblers and drive up the price for everyone else. Prices surged for new Gobblers as people (correctly) realized that Goo was worth very little. It’s very easy to understand once you frame it a little differently: do you want money or a money printer? What would you even do with money anyways? That’s right, buy a money printer.

Now, I’m highly skeptical that things will play out the exact same way they did in testnet. For one, testnet users were competing for a high score. In testnet, there was nothing else to do but accumulate Gobblers to make your Goo multiplier bigger and bigger. In the now-live project, things are a little different- you can now sell your Gobblers or Goo for money. 

Thus, consider the following comparison.

Art Gobblers

1. Gobbler and Goo price and liquidity comes from demand for the two

2. You burn Goo to mint Gobblers, which have their price backed by the $ amount of Goo it takes to create a Gobbler at any given moment

3. These Gobblers then produce Goo, everyone becomes Goo rich, also Goo is inflationary

4. Repeat?

Luna

1. Luna price comes from Luna/UST demand, UST was backed by Luna

2. You burn Luna to mint UST, which has its priced backed by the $ amount of Luna it takes to mint UST at any given moment

3. You deposit UST into anchor, and everyone becomes UST rich, also UST is inflationary

4. Disaster

The key difference between the two is that there isn’t a Goo backed stable paying 20% yield subsidized by fluff and air to accelerate the destruction of the system. Because the vast majority of current Art Gobblers holders that weren’t on WL don’t actually care about the art that much, for now I think Art Gobblers is currently just a giant game of musical chairs. It’s kind of like if you had to hold a NFT to enter OHM staking, same shit but just repackaged a little differently. Eventually Goo supply will outstrip demand and the bubble will pop. People will rush to sell their Gobblers and the floor will quickly drop and people undercut each other with their floor listings, as well as dump their Goo and exit through the small door that is the Goo liquidity pool.

That said, I do think Art Gobblers is a bold experiment that pushes blockchain art forward. I do think they might actually become successful in the long run in creating a bunch of decentralized art galleries. I just think prices will implode violently first. I could also be very wrong and that Art Gobblers are the future of France. What do I know really?

Links:

https://www.paradigm.xyz/2022/09/artgobblers

https://www.paradigm.xyz/2022/09/goo

Community analytics dashboard for Gobblers":

https://artgobblers.dyor.fi/

I’m going to talk about flipping in OSRS, partially because I’m bored, but also because it’s probably one of the biggest reasons I ended up in crypto today.

I first started playing Runescape at a time period later than most, around 2010. I played it on and off through the years, but in early 2021 I discovered exactly how profitable flipping was in OSRS. For a period of around 2-3 months in spring 2021, I traded for anywhere between 4-8 hours a day on the Grand Exchange. During this time period, I racked up ~200m in profit trading on OSRS, which some would argue is not a lot. But the thing is, I did it from scratch.

I started out flipping free to play items, took my profit and turned that into a bond which was redeemable for 2 weeks of membership, and then started trading member’s items after that. (This was actually the first time in my life that I was a member on Runescape, I had never once bought membership before.)

During that time period, I was frequently on the first page of the weekly/monthly PNL leaderboards for the tracker I used. And despite not touching my OSRS trading account for close to a year now, it’s still ranked in the top 500 PNL all time for GE Tracker. Personally, I think I was pretty successful and am happy with my results from that time period.

The period of time I traded the most was pre-GE tax, a 1% tax charged to sellers on all items they sell. Personally I’m a fan of a change since it’s healthier for the OSRS economy, but this does affect some of the strategies I talk about, but I’ll go into more detail later. Also anyone who trades in OSRS knows this, but for those who don’t there’s a buy limit that resets every 4 hours on the Grand Exchange. It essentially limits how much volume you can push for an item, which can be mitigated if you want to open up more accounts, but I never bothered.

Useful Tools

Flipping Utilities (Super handy RuneLite plugin to track PnL in game.)

https://runelite.net/plugin-hub/show/flipping-utilities

Price checker for all items (Tends to lag anywhere from 1-5 min behind, but still very useful, do a margin check by putting in a high bid to market buy and then instantly sell an item at 1gp to accurately see what the live spread is. There is profitable alpha in being able to find the live spread (or setting it yourself) to front run the site. Any item with a ROI below 1% means that post-tax you lose money trading it at the current spread.)

https://prices.runescape.wiki/osrs/all-items

GE Tracker (You can track prices here too, not sure how accurate they are in comparison to the above link though. What I actually used it for was to export data from the Flipping Utilities plugin into somewhere I could visualize performance over time better.)

https://www.ge-tracker.com/

Strategies/Categories

High Volume

The first strategy was focusing on high volume items that see a lot of consumption but also have decent spreads. This tends to be consumables, so for F2P that would be things like steel/mith/addy/rune ores/bars, F2P non-elemental runes, gems, etc. For P2P this list is a lot longer, but includes things like potions (sara brews, prayer pots, anti-venom+, etc.), planks, ranged ammo (chins/darts/enchanted bolts), and dragonhide.

Generally these items will have buy limits in the range of thousands. This essentially allows you to settle for small profit per item, since you’ll be trading thousands of them at once.

The GE tax did hurt this strategy however, with P2P high volume items being slightly affected, and F2P items being hit a lot harder. For example, law runes are currently buying at 125 gp and selling for 126, so they have a spread of 1gp. Pre-tax, with a 4h buy limit of 18k, this means you could buy 18k law runes and sell them for a 1gp profit each, and come out ahead by 18k. Post-tax, a 1gp profit on a 125gp law rune means you lose money, since the ROI is 0.8% and the tax is 1%. The same story tends to repeat itself for a lot of these higher volume F2P items, which is why F2P traders got hit a little harder. For P2P items I find that the spreads tend to be a little wider, and since P2P items are more expensive, a 1gp difference in spread tends to mean a lot less.

Two of my favorite items to do using this strategy were Saradomin Brew(4) and Prayer potion (4). Since these are heavily used consumables, players tend to just market buy and execute any price. My bids also tend to fill really fast for them as well. I’ve seen spreads as high as 2-3%, which can get as high as ~200k profit post-tax for each of these items with extremely quick turnaround (<30 min). If you can’t afford the ~20m for a full 2k buy limit in one go, just split it into smaller batches.

Some items in this category were a little bit more inconsistent, such as dragon darts or chins. Every now and then the spread would open up wide enough that I would be able to offload a full buy limit for 200-400k profit, which was fun. But more often the spread would be too small and the amount of time it would take to fill my bid meant that my money was better spent flipping something else. A F2P item that falls under this category would be gold ore, especially pre-tax. Sometimes for god knows what, the spread on gold ore just opens up a stupid amount, maybe as high as 5%. But the thing is, gold ore has a buy limit of 30k, whereas pots are capped at 2k and darts/chins at 11k. As a result, I would be able to make 250k+ flipping gold ore, which is a lot for F2P.

Dragonhide theoretically should work with this strategy, but I found getting fills for it an incredible pain in the ass, my bids were constantly getting buried by higher bids. Herbs and some pots were also a pain in the ass for the above reason, but also because the bid demand for some of these items is very high, while sell volume can be very low, which makes both filling your bids and selling what you bought very difficult.

For this strategy you need to be making sure that someone isn’t outbidding you and taking your fill, so if you’re seeing a steady stream of buys for your item and that suddenly stops, someone probably has an order above you with a higher bid. I like to throw on an extra 3gp onto whole number bids for this reason. So if the active bid for an item is 94,000, I’d bid 100,003(psychopath bid), which would front run any 100,000 (normal person), 100,001(smart person), and 100,002(smarter person) bids.

You can see how F2P got hurt more here, this is an old screenshot with 2m profit with an avg ROI of 0.63%, aka post-tax this isn’t possible anymore.

Things with Decent Volume

I don’t really know how to describe this category of items, but essentially these items likely don’t have high buy limits of 10k and they probably don’t do more than 100k items traded per day in volume, most of them probably don’t even do 5k.

I’ll just list some examples of some items I really liked trading that fall under this weird category.

Without a doubt, one of my favorite items here is the abyssal whip. It has a buy limit of 70 and typically is relatively stable in price, as you can see from this 1 day chart I pulled while writing this. Right before 0:00, between 3:00 and 6:00, and before 9:00 you can see people with active bid floors on this item. If you can find where those bid floors are, you can outbid by 1gp, get filled, and sell the spread. If you’re a little bit more patient you can just be the floor instead, and I find that filling for abby whips to be not too bad.

Just in this example alone you can see the potential profit, which multiplies buy limit and spread together, to give you a 1.6m number. After factoring in tax, you can make 400k in 4 hours in this example. If you’re more patient or don’t have the time to actively trade that much, you can see that prices tend to fall below 1,670,000 somewhat frequently, and exceed 1,700,00 relatively often. If you bid and sell at those numbers, you would have a 1.76% ROI, subtract 1% for the tax, and you’re making close to 13k/whip, and over 900k for a full buy limit of 70.

Another item(s) I really liked were the god dhide sets. I pretty frequently would set bids for these before going to bed, then wake up and flip whatever had filled for as high as 1m profit.

I also did Dagon’hai pieces, godswords, and crystal seeds; I would classify those under this category.

Low Volume

Some of the items I traded would do less than 10 items a day in volume. That doesn’t mean they aren’t profitable, it just means that they aren’t liquid. These typically tend to be cosmetic items.

To look for items like these I would sort set a price filter of 1m-100m, then sort by margin to see which had the largest spreads, and then bid those.

This method is better the more money that you have, since many of the most expensive items see little volume, which means that big spreads open up more often. Once you get to items that over 1b, a 50m margin can mean that you can walk away with 40m in profit. Buy limits for these tend to be in the single digits, usually 4 or 8, but buy limits don’t actually restrict you since there’s just so little volume for these kinds of items. These trades will be obviously be much slower, but the payoff can be huge.

I find for trades like these, it becomes less about quick execution and more of a psychology game of balancing how high should you bid to ensure that you are the one who gets the buy, while not overpaying too much, which cuts into your profit.

Conclusion

These strategies probably work best in the 0-100m range, after a certain point I think it’s more worth your time to just do low volume expensive items, high volume takes too much attention/time.

I had a lot of fun doing this for that period of time, and it helped me learn a lot about markets, supply and demand, etc. I got more into crypto as time went on and it became a chore spending so much time looking at item prices on OSRS, especially since I felt like I had learned about all I could and the OSRS gold I earned so much of wasn’t actually worth much, so I just wasn’t getting much out of it anymore. It was fun while it lasted!

I’m writing this piece to paint a better picture as to exactly what happened to the economy during the Covid crash, and what the Fed did to support the economy. It’s a bit long, quite complicated, and also I’m an idiot with zero formal economic background so take everything you read here with a grain of salt. Some bits of this are stolen from Stanley Druckenmiller’s talk with USC. Other parts are stolen from random websites that I stumbled upon during my Google searches. I am a thief.

Things were pretty ugly during Covid. But how bad really?

Covid ended the longest economic expansion in US record, running from 2009-2020.

Cumulative fiscal deficit from start of the recession was larger than all other recessions from 1980-2007 combined.

US Q1 GDP was -5.1%. US Q2 GDP was -31.2%.

9.4 million Americans filed for unemployment during the first two weeks of Covid, and unemployment peaked at 14.8% in April. Pre-pandemic Feb 2020 had a 3.5% unemployment rate.

I could go find more official stats for a lot of things illustrating the negative impact of the pandemic on the economy but I don’t want to do that because I’m lazy so here’s a rapid fire bullet point list.

• Global supply chains came to a massive halt

• Lots of people lost their jobs

• Increased food insecurity

• Lots of households behind on rent

• Increase in consumer debt to deal with above issues

• Massive initial drop in consumer spending

• Lots of businesses went bankrupt (small businesses especially)

• Some industries (tourism, transportation) were hit extremely hard

So how did the US Government respond to this?

Pretend you are the US federal government. Your citizens are currently stuck inside their homes due to a deadly pandemic. Your economy is currently in the dumpster. If you’ve ever played a 4X strategy game in your life, you know that an unproductive economy is a death sentence. What do?

Here’s what the Fed did.

The CARES Act was passed on March 27th, which provided $2 trillion in relief.

• $290 billion in direct payments to eligible taxpayers (stimmy checks)

• $260 billion in expanded unemployment insurance

• $150 billion for state and local governments

• $510 billion in expanded lending for businesses and local governments

• $377 billion in new loans and grants for small businesses (PPP scammers had a field day)

• $127 billion for hospitals for ventilators and other equipment

A lot of measures to improve liquidity.

• Federal funds rate, the rate which banks pay to borrow from each other overnight, was cut to 0% in March 2020. These rates have a sort of trickle down effect on other interest rates, and the move helped support spending by lowering the cost of borrowing for businesses.

• Lowered capital requirements for banks. Typically banks are required to hold some amount of free capital on hand as an emergency measure. The Feds said the liquidity must flow and told them to lower that amount temporarily.

• Lending to 24 large financial firms. These firms put up various securities up as collateral, and the government lent money to these institutions so that the credit market could safely continue. Liquidity crisis averted.

• Expansions in repo operations. The repo (repurchase agreement) market is essentially the big boy financial borrow/lending market. Firms can put up collateral and borrow cash. Pre-Covid firms could borrow up to $100b overnight and $20b for two weeks, if I’m reading this correctly it got cranked up to $500b overnight.

• Foreign and International Monetary Authorities (FIMA) Repo Facility. This is a lot of words to say that the Feds set up a new repo facility with foreign banks so foreigners could sell their US Treasuries to their respective foreign central banks and not disrupt money markets. There’s a tradfi equivalent of MEV that involves arbing the shit out of markets, and this pretty much stops that for US Treasuries.

• International Swap Lines. The Feds made US dollars available to foreign central banks to improve liquidity. The Fed received foreign currencies and charged interest on the swaps. Banks that already had direct access (Canada, England, the Eurozone, Japan, and Switzerland) had interest rates lowered and swap maturities extended.

• Backstopping money market mutual funds. Essentially, a lot of investors were holding private securities, aka corporate debt. Investors panicked when the pandemic hit, and everyone tried to withdraw their money, leading to a spiral downwards in these private securities. The Fed bought these to stop the spiral down.

• Lending to large corporate businesses. The Fed bought newly issued corporate bonds from eligible issuers, allowing companies to lever up and go 10x long. Just kidding, they were restricted to paying employees and suppliers. They also bought existing ones too.

• In June 2020, the Fed set its rate of purchases to at least $80 billion a month in Treasuries and $40 billion in residential and commercial mortgage-backed securities until further notice. In Nov. 2021, the Fed judged that the economy has recovered enough and that purchases would be tapered at a rate of $10 billion in Treasures and $5 billion in MBS. In Dec. 2021, the rate of the taper was doubled, so a reduction of $20b and $10b per month from then on out.

Essentially, the Fed handed out a fuck ton of money to a lot of different parties to make sure nothing blew up. Typically economies have to work to create something of value. Goods need to be produced, investments need to be made, new technology needs to be discovered, etc. During the pandemic, this was reversed. A lot of money was pumped into the economy, and the Fed told the world to go make something of value with it.

Did it work?

Yes, and a little too well if anything.

The wide range of aggressive measures the Fed took were very successful in making numbers go up. The US economy rebounded in record breaking fashion.

Unemployment spiked up close to 15%, and recovered 70% within 6 months. Previous recessions took an average of 25 months to recover.

Stock markets recovered strongly. Maybe a little too strongly, since the initial crash was reversed by September. Can you guess where the rate hikes started?

A lot of the rapid rise in markets was because money was cheap and a lot of risk-on money was being funneled into companies that reached insane valuations off the pandemic environment. My personal favorite was Peloton. The entire period reminded me of altcoin season, except meme stocks.

Yes, a company whose main product was an exercise bike with a tablet attached was worth 46 billion dollars at the end of 2021.

Crypto markets performed extremely well. The small red candle at the bottom left is the March 2020 crash. Bitcoin hit 4k on that day. You sold at 69k though right? It’s okay if you didn’t, me neither.

Anyways long story short, the pandemic hurt, then the US Fed turned on their printer, and now it turns out they printed maybe a little bit too much so it’s time to rate hike and erase your gains from 2020-2021. Inflation is the new big bad so we must fight that too. Also I find it amusing that we thought we might have bottomed when the Ukraine crisis broke out. Turns out that we are all just puppets dancing on a string, the US Fed is the puppet master, and everything else is simply a distraction. When the rate hikes inevitably get paused, the down only will be reversed.

Markets are forward looking and things might be bad in the short term, but markets are really just bets on various parts of humanity, so you should probably long the fuck out of it (without getting liquidated). If it goes to zero we’re all dead anyways, so you might as well.

Timeless is a brand new experimental new defi protocol.

Timeless is a protocol that allows users to speculate on tokenized interest rates in either direction.

Timeless does this by offering a yield token that differs from current yield tokens (Element/Pendle/APWine) in that Timeless’ yield tokens will never expire, allowing holders to collect yield on underlying assets infinitely. These are called Perpetual Yield Tokens, or PYT for short.

In order to access these PYTs, users must deposit their interest bearing collateral to a Timeless Vault. For each 1 of the underlying asset, the user receives a PYT and something called a NYT in return. In order to get their interest bearing collateral back, the user must return their PYT and a NYT back into the Timeless vault. As a result, the price of one PYT and one NYT should theoretically always equal the underlying asset.

Now you might be wondering what a NYT is, and here’s the answer: it’s a Negative Yield Token. The name is a little bit misleading, but I’ll do my best to explain what these NYTs are.

When you deposit your interest bearing collateral and mint a PYT and a NYT, what happens is that Timeless gives the PYT all of the future yield of your collateral to the PYT, and none of it to the NYT. This essentially means that a PYT is levered 2x, since it gets the extra multiple of yield from the NYT. But because you need the one PYT and one NYT to get your collateral back later, a relationship is formed between the two asset’s prices- PYTs and NYTs have their price directly tied together. This elegant splitting mechanism makes Timeless capital efficient, as the full value of the underlying token is used to create a PYT and NYT, leaving no idle capital.

Thus, assuming yield is positive, the following is true:

1 PYT + 1 NYT = 1 Underlying Asset

PYTs can approach 1, but never reach 1, as long as the Underlying Asset has a value greater than 0, due to the need to redeem.

The inverse is true as well: NYTs can approach 0, but never reach 0, assuming yields are positive, as long as the Underlying Asset has a value greater than 0, due to the need to redeem.

Additionally, if the amount of interest the underlying asset earns increases, then naturally the price of the PYT goes up as the extra yield increases the value of the PYT. And because 1 PYT + 1 NYT = Underlying Asset, the NYT goes down in price as the PYT goes up. The inverse is true as well, if interest rates go down on the underlying asset, then the PYT is worth less, which makes the NYT worth more.

It’s worth nothing that this relationship does not necessarily make the price of PYT and NYTs so that when one goes up, the other goes down. The above example assumes that the only thing changing is the yield, and not the price of the underlying asset. If the underlying asset goes up in price, then PYTs and NYTs will both go up as well.

This is reinforced by outside arbitrage, as people can buy cheap PYTs and NYTs on the open market and redeem for the underlying asset if is profitable to do so. This buying pressure will drive the price of PYTs and NYTs up until it is no longer profitable to do so, which theoretically should be when the price of PYTs and NYTs equal the price of the underlying asset.

Similar things occur in the opposite scenario. When the price of the underlying asset drops, then it is profitable to deposit the underlying asset into the Timeless vault to redeem for overpriced PYTs and NYTs, and sell those on the open market. This sell pressure will bring PYTs and NYTs back to fair value.

How exactly should we value PYTs and NYTs? The Timeless whitepaper mentions something called exponential discounting, which essentially means that money in the future is worth less than money in the present because we can do things with our money to earn more in the present vs waiting for the future money to come into existence. This makes sense, and I’ll provide a quick example why. If I offered you the option between $100 today and $100 in a month, which would you take?

Thus, in my opinion, the market will ultimately be the one pricing PYTs and NYTs, as people collectively vote with their buys and sells how much future money in the form of a PYT is worth to them.

Timeless is also extremely flexible. One current flaw in current similar token products is that they have expiration dates, which create limitations in how they can be priced and used. Because Timeless yield tokens don’t expire, you can integrate them much more easily into other protocols. Imagine being able to deposit PYTs as collateral, continue collecting yield on PYTs, and then borrowing against deposited PYTs to buy more PYTs to repeat the process with, effectively creating a folded PYT yield farm- all without worrying about the underlying token expiring.

Usage

Now, how can Timeless be used?

The simplest way to use Timeless is to obtain PYTs of interest bearing tokens you like. For example, if we could buy PYTs of the 3pool LP token, and this would earn us 2x the yield compared to the regular 3pool LP token. Alternatively, we could deposit 3pool LP tokens to Timeless, mint PYTs and NYTs, sell your received NYTs to buy more PYTs, and then collect even more yield.

NYTs offer an interesting hedge on interest rates for users. For example, defi farmers can buy the NYT of the token they’re farming as a hedge against drops in yield. Another interesting hedge is that lenders to protocols like Aave can use NYT to hedge against falling lending rates.

Personally, I believe the killer use case for Timeless is for good stablecoins and related products (ex. stablecoin LPs). Because stablecoins do not move much in price, all changes in the price of associated PYTs and NYTs can be attributed to changes in interest rates and not underlying asset price fluctuations. This is pretty important because 1 PYT +1 NYT = 1 Underlying Asset, which means if the Underlying Asset fluctuates down to 0, the PYT and NYT do too. But, if your stablecoin is good then it will never break peg and your PYT and NYT will always have value. A good stablecoin creates a solid foundation that Timeless users can speculate safely on.

This speculation is key: I believe with enough liquidity, Timeless can become the newest crypto pvp battleground.

Disclaimer: Timeless is a very experimental protocol. I would not consider this a “safe investment” by any means, and this post is purely for educational purposes and is not in any way financial advice. I am a seed round investor.

These faithful magicians were spread across the four corners of the globe, but united in their unwavering faith. This group of starry-eyed hopefuls saw the wonders of the magic they deemed smart contracts, and lauded the wonders of their scroll to any who would listen. “The future of France!”, they exclaimed. But alas, their excitement was often met with disdain from critics.

Determined to create something so valuable that the world was forced to acknowledge their greatness, the scorned magicians threw caution to the wind and began to create brand new spells. The first set of spells they created were farming spells. These brilliant incantations allowed the magicians to create an infinite amount of food. By simply placing some ink inside, magicians could collectively spawn unfathomable amounts of food. For a short time, the magicians had managed to do the impossible. They rejoiced, joyfully celebrating that no magician ever had to worry about food ever again. Surely the world had no choice but to recognize their achievements now!

Unfortunately, their jubilant excitement was unexpectedly short lived. Some of the magicians began to eat the food that they had created, redeeming their food for ink, which then placed stress on the enchantments they had created. Before long, their spells lost stability, and the conjured food disappeared. Some unfortunate magicians had gambled all their ink into these farming spells, and never recovered when their hard earned food disappeared. Bickering ensued as impoverished magicians derided those who had eaten for their gluttonous greed. Some of the angriest magicians were simply upset that they had watched others enjoy the fruits of their labor, and wondered why they had not done the same. Morale was low and some began to question the magical scroll they had dedicated so much to. Perhaps their critics had been right all along.

Soon after, some of the more creatively minded magicians began to draw on the scroll, permanently sketching colorful pictures and silly animals onto the magical scroll, inspiring a new wave of hope among the faithful. However, some cynical magicians ridiculed these artists, claiming that their frivolous drawings contributed little to the wonders of their scroll. They believed that the scroll should only be used to create spells of responsibility instead, which they loudly extolled as a vastly superior use of precious space on their infinitely long scroll. When these same magicians were pressed to explain the value of their responsibility spells, they became oddly quiet. Some things are better left unsaid they muttered. Other magicians believed in spells of cooperation. They claimed that if they all pooled all their ink together to create a gigantic puddle of ink, they would collectively obtain generational wealth. For some unfathomable reason, some magicians mysteriously decided not to cooperate. The puddle evaporated shortly after.

Before long, many magicians shamefully realized that the vast majority of spells they had created and silly animals they had drawn had no intrinsic value- much like the emperor’s clothes. Many decided to salvage what little pitiful value they could by trading in their worthless spells for magical ink they had once let freely spill. The surviving magicians clutched their ink tightly, realizing that one day someone would desire their precious ink to create spells of actual value.

And so the wait continues…

if you buy say 1% of a CDO, you are loaning out money equivalent to 1% of the mortgage principal in it. the idea is to get your 1% investment back, plus interest as all these mortgages slowly get repaid. big banks started buying up a lot of loans, grouping them into a CDO, then selling them to investors and collecting commission.

these CDOs could be split into risk tiers. the tranche (tier) of the CDO that had the most consistent/quickest mortgage repayments were the safest, while the riskiest tranches had mortgages least likely to be repaid. these tranches made things very confusing, the documentation for CDOs were very complex and made it hard for people to truly understand what mortgages were inside these CDOs. (people did not read the docs)

lastly, there were ratings agencies that would grade these CDOs. obviously, better grades on these CDOs meant lower risk, and investors would rely on these ratings to drive their decisions. several issues here. one, CDOs were so complex that the experts at these agencies didn’t really know how they worked. even better is the fact that big banks would have classes teaching people at these agencies how to grade CDOs, and the big banks were the ones selling these CDOs. obviously, it’s in the banks’ interest to have higher ratings. two, there were a lot of fraudulent loans out there, and it would’ve take some real in-depth research to uncover them. that costs time and resources, which is expensive. three, these agencies are for-profit companies. these big banks shopped around for agencies to give them good grades on their CDOs the same way drug addicts shop around for doctors to prescribe them prescription grade opiates.

(slightly off track, but a large number of opiate addicts in the US are elderly people who were prescribed pain killers after a surgery/big accident/etc., then eventually can’t afford them because of healthcare costs, and switch to heroin instead because its cheaper.)

so what ended up happening is that mortgage lenders would then knowingly sell mortgages to people who had no chance of ever repaying them, because they could immediately sell this risk to big banks. big banks would then package the risk into a CDO, make it hard to understand what was inside them, and then sell these bad CDOs with theoretically good ratings but were actually just bundles of garbage tier mortgages and collect commission.

so logically people wanted a way to hedge against these riskier tranches, essentially insurance. this insurance came in the form of credit default swaps. you didn’t have to own these CDOs in order to buy insurance against it, so billions of dollars of credit default swap insurance was being bought on CDOs with only millions of dollars of assets inside. for example, if there was a billion dollar insurance policy with a 2% chance of paying out, insurance sellers would logically only hold 20 million dollars in order to cover that bet. This essentially meant that the entire CDO mortgage insurance market was on 50x leverage, kind of like 2017 coin margined Bitmex futures.

as a result, banks were selling billions of dollars worth of insurance because they believed that the housing market was unlikely to fail, not knowing that much of the housing market was being held up by terrible mortgages being repackaged as CDOs that were being graded incorrectly, perhaps intentionally. they also collected a lot of fees during every step of the process. smarter banks were then buying this insurance, correctly betting against these bad CDOs. the only issue is that the smarter banks were buying insurance from banks holding CDOs, and these banks were going bankrupt because their CDOs were worth about as much as ElonDogeMoon coin and thus couldn’t pay out the insurance they had sold. so essentially the smarter banks got the right answers on the group project, but because everyone else failed the group project they failed the group project too. and because the big banks are the whales of the US economy, the disaster spread outwards and collapsed the whole thing, and the Feds had to bail everyone out on taxpayer dime because it literally would’ve all went to zero.

so what is the takeaway?

beware bad money. one dollar is always worth one dollar, but not all dollars are the same. many such cases. think about where the value of your dollar is coming from. bad dollars metastasizing throughout an economy creates great systemic risk. invest in better dollars.

ps: Mirror doesn’t have email notifications built in, but I do have a Substack that you can subscribe to instead for email updates- just click the Subscribe button below to be taken there. Any Mirror articles I write will be uploaded there as well. Thanks!

The first and most obvious is one, is just the aesthetic. How does the actual NFT PFP look? Punks use some a retro pixel art style. BAYC uses a more modern comic book kind of style. Cool Cats look like they came out of a webtoon. I can’t prove it, but I believe that the aesthetics of these collections had a direct impact on the kind of communities that gathered around them. I don’t think it’s a coincidence that BAYC which uses the most mainstream Western art style out of all of them was able to garner such a large normie Western fanbase compared to the rest.

A second big factor is novelty. Is this NFT collection doing anything new? Punks are the gold standard because they are the first successful NFT PFP collection, period. BGAN Punks are a clear Punk derivative, but use some cool tech to create something totally unique. BAYC kicked off the whole trend of animal PFPs. We quickly moved to things with more “emotion” in them, for lack of a better word. Penguins were cute and easily memeable. Cool Cats have a certain swag to them.

A third factor, and arguably the most important, is the community. Who are the holders of these NFT collections? Does the creator (the very first community member) have some sort of reputation? (Seerlight is a good example here.) Punks are held primarily by crypto-natives. 0xmons are held mostly by a specific anon side of CT, Owen fans. BAYC has the most mainstream celebrity holders, so they have the most mainstream community. They also did a ton of work in building their community: merch and IRL events. I believe their active efforts in building a community is what allowed them to flip Punks. Punks are a boomer artifact with zero utility in comparison. When you change your PFP to a NFT from one of these collections, you are advertising to the world that you belong to an exclusive club.

There’s probably a lot more factors to consider here, but these are the main ones I’ve noticed, and also I’m feeling lazy now so I’m just going to end this here.

-ct_zpy

The market nuked pretty hard today, but I went outside and played some basketball right before sunset with a friend so that was fun.

Was introduced to mirror by @anon75374998, really smart dude.

I’m always pleasantly surprised by the amount of really smart people on crypto Twitter. Admittedly, crypto probably attracts a lot of left and right curve people because of the life-changing amounts of money that can be made and the intellectual stimulus of the rapidly evolving industry. Just being able to read the tweets of some of these gigabrain people make me feel kinda dumb at times though- I get intellectually humbled in under 280 characters pretty frequently. Still, better to be the idiot than be surrounded by idiots. Lots of opportunities to learn something new just by following the right people on Twitter. I’m a really big fan of learning new things.

Ok this will suffice for my first Mirror post, good bye now.