🧘♂️Our Next Move
Market Meditations | March 30, 2021
Dear Meditators
Understanding ‘Skin in the Game‘ can determine your success as a trader and investor.
? And yet, so few people do.
Today, we make sure that all Market Meditators are comfortable with this concept and able to start applying it ✅
? We also analyse the hottest crypto market developments and share our fantastic DeFi podcast ?
Have you been enjoying Market Meditations? Let us know how we can be better for you ? here.
MARKET BRIEFING
Crypto. Bitcoin continues to rally off the back of bullish news from Visa and PayPal as both are getting into cryptocurrency payments. More on this later ? No sign of the NFT craze dying anytime soon, with Dapper Labs, startup behind NFT platform NBA Top Shot, grabbing $305 million in funding.
Legacy. Stocks declined for a second day and Treasury yields touched a 14-month high as traders weighed the consequences of more stimulus from the Biden administration.
We are extremely grateful for our partner ? Phemex. This collaboration makes our free content production possible ? As well as receiving free bitcoin and discounts for signing up, Phemex have launched Crypto Asset Management ? Their savings accounts allow you to earn crypto passive income and as Warren Buffet famously said, ‘you want to find ways to make money while you sleep’.
MARKET MEDITATION
Skin in The Game
Today, we talk about Nassim Taleb’s Skin in The Game. Our mission is to bring you summaries of all the best work in the field of trading and investing. This way, you can use the wisdom of the greatest minds when you place your next bet.
1️⃣What Skin in The Game Means
‘Skin in the Game’ is a phrase that is thrown around a lot. In its purest form, it’s about symmetry: If you are able to enjoy the benefits of a positive outcome, so too should you share the downside if something goes wrong. Perhaps this is clearer in an example. The year is 2007. Consider two individuals: Banker Bob ? and Pilot Peter ✈️. Who has skin in the game?
Upside ✅ Banker Bob’s upside is that his risky trades pay off. He enjoys a nice commission. Pilot Peter’s upside is a safe flight. He gets a decent share of the passenger fees.
Downside ❌ Well, if Banker Bob is selling Mortgage Backed Securities and a series of derivatives contracts that go on to cause a Global Financial Crisis in 2008, he doesn’t experience much downside. What would (and did) happen, is that the banks bail him out. At the same time, millions of people suffer unemployment and poverty. On the other hand, if Pilot Peter’s plane crashes, he literally goes down with the rest of the passengers.
Only Pilot Peter has skin in the game: he shares the upside and the downside. Banker Bob does not have skin in the game: he stands to benefit from the upside and avoids the downside.
2️⃣How Skin in The Game Can Help You
? Making You A Better Trader.
Taleb often tells the story of how hopeless it was for him to learn about probability and statistics in college. It was only when he got his first job in trading that everything started to make sense. The best way to learn is to put Skin in The Game: to start trading and investing with your money. Only then will all your reading and researching begin to come together. Not to mention, when you have money on the line, everything becomes much more exciting. It’s much more interesting to read financial statements if you own a share of a company.
? Passive Investing.
Skin in The Game is really important when it comes to taking financial advice. You don’t need people to tell you what they think, you need them to tell you what’s in their portfolio. It’s all well and good if someone is telling you to buy $LINK but are they long themselves? Surely, if it is such a good investment, they would take their own advice. This can also be considered when investing in actively managed funds or investing partnerships. Make sure the money manager has Skin in The Game; that they also have something to lose if they turn out to be wrong.
? Active Investing.
If you are actively selecting projects or companies to invest in, take a look at the leadership and make sure they too have Skin in The Game. Leadership who do not have Skin in The Game could have incentives to make decisions favouring the short term over the long term. One of the good things about angel investing is that the founders tend to be all in; with complete Skin in The Game.
? For more crypto analysis and trading education consider joining our Market Meditations community?
INSTITUTIONAL NEWS & ANALYSIS
Paypal Launches Crypto Checkout
? Paypal announced earlier this morning that U.S. customers can use crypto holdings to purchase goods and services from its 29 million merchants globally. PayPal President and CEO Dan Schulman summarizes the gravitas of such a move in his statement, “this is the first time you can seamlessly use cryptocurrencies in the same way as a credit card or a debit card inside your PayPal wallet.”
With PayPal’s crypto checkout, users will have the opportunity to “checkout with crypto” when purchasing a good or service. PayPal will then convert it into fiat with no transaction fees. PayPal hopes that by settling transactions in fiat, adoption among merchants who previously avoided crypto due to its volatility will increase ⬆️
✅ This could very well help normalize the brand of crypto and encourage a whole new wave of people to research the asset class. With more eyes on the industry, it’s logical to believe that demand will increase. ? If more people do begin looking into crypto, it’s likely demand will follow the same cycle of money flow it always has. Money will likely pour into Bitcoin and trickle down to large caps, mid-caps, and small-caps sequentially. Check out our ? FREE Crypto Cycle Guide ?to better understand how to maximize your profit by rotating your capital at the right time from coins that have already pumped to coins that may pump next ?
PUZZLE
Today’s Puzzle is on probability and contains elements of randomness and chance, all things you need to understand to be a profitable trader. If you are interested in finding out more about these principles we have a full Risk Management Course.
This puzzle will push you a little outside of your comfort zone, but the best traders can think on their feet. Lets see how you go!
Koroush AK has two identical dice and on the faces of each are the numbers −3, −2, −1, 0, 1, 2.
If he throws his dice and multiplies the results, what is the probability that their product is negative?
Scroll down for the answer ?
CRYPTO REGULATION
Tether Assurance Report
✅ On a report dated 28 February, Moore Cayman, an independent audit and consulting firm, has confirmed that Tether’s stablecoins ($USDT) are indeed fully backed. Put simply, Tether actually has enough reserve USD to cover the $USDT issued.
The report confirms specifically that Tether’s total assets amount to $35.3 billion whilst its total liabilities amount to $35.1 billion. ? Seasoned crypto veterans will remember that Tether has been under fire as the proof of its reserves had never previously been made public. This led to much uncertainty about its legitimacy. Concerns were only assuaged after Tether agreed to provide quarterly reports on its reserves to the NYAG’s Office as of last month.
? Whilst you may spend a lot of time trading, did you know you can make upwards of 20% passive income on your stablecoins? ? With concerns about Tether’s reserves subsiding, it paves the way for more centralised and decentralised platforms to provide opportunities for you to lend, stake, and provide liquidity to earn a yield on your crypto including stablecoin $USDT. Confused? Make sure to check out our ?FREE Passive Income Guide ?for a complete step-by-step explanation on how to make your current crypto holdings work for you!
PODCAST
Ethereum, DeFi and NFTs with Camila Russo
Camila Russo is the founder of The Defiant, a DeFi news platform. She is also author of The Infinite Machine which details the story of Ethereum.
ANSWER
⅓ (Well done if you got this)
Here’s why. In order for you to have a negative product you would have to multiply a positive number by a negative number. So you would have to multiply -3, -2, -1 with 1 or 2. There are 12 possible ways of doing this with 2 dice, and there are 36 total combinations from both dice. So our probability of getting a negative number is 12/36 which simplifies to ⅓.
To illustrate this clearly below is a sample space diagram showing all the possible outcomes of the dice, with the negative numbers highlighted in orange.
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Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision.
