To be honest, I’m facing a difficult trade-off between whether I should donate more money now to the organizations I traditionally support (e.g. Vegan Outreach), versus investing in the crypto market before the next expected bull run in 2024-2025, after the bitcoin ETF approvals, the bitcoin halving, the next hype cycle, etc—in hopes that an investment now could yield 10x more money to give later.
I’m curious if any other EAs are thinking about this tradeoff. I know a lot of us got stung, both financially and emotionally, by the FTX disaster. But IMHO, crypto is here to stay—at least as a hyper-volatile risk asset that can be used to leverage wealth, by those with the knowledge and risk-tolerance to buy low and sell high.
Fellow crypto investor here (since 2015⁄16), I now run a crypto fund. A few points to make.
1. In the short term, way more money is made on getting in on trends before they are big than on fundamentals, at least they have historically. You wanted to get in on NFTs early. You wanted to get in on “AI tokens” early. You wanted to get in on yield farming early. You wanted to get in on ICOs early. You wanted to get in on dog tokens early. You wanted to get in on anything trending early. Etc. It didn’t matter what project fundamentals were. Trends cause things to go up. There is a large degree of pyramic scheme/ponzinomics involved. You make money by getting in before others. They pump your bags and you dump on them.
2. In the long term, fundamentals are all that matter. Vast majority of junk dies with the founders/insiders/smart traders scheming off a good amount with bags held by retail traders.
3. I want to push back on the idea that we know a bullrun is coming. We don’t. There are some bullish narratives around but also, bitcoin/eth are already up like 3x. What if the bullrun already happened and this is the “cycle’s top”? What if the Bitcoin ETFs don’t get approved? What if they do nothing? There is no law of nature that causes crypto cycles due to halvings, in fact, you should expect those to be way less prominent now that bitcoin is much larger and most of the coins that will ever exist are already out there. Pompliano’s supply squeeze or whatever based on miners is stupid. I think the last one was most likely coincidental due to ZIRP and I don’t suppose you have great macro forecasts to suggest we are going back to these territories that haven’t been priced into the market.
4. I want to caution people from thinking they have alpha. I think there are good reasons to think EAs can have alpha. Quasi-insider information from being so close to the tech scene, greater understanding of AI progress and effects, some first principles thinking, just being smarter, etc. But usually, retail traders don’t have alpha. They are the ones who think they do and pay the people that actually do. You have to be crystal clear as to where your edge comes from and not expand outside of that. Why do you expect this group to be better able to predict a large scale crypto cycle better than people who do this full time with teams of super well paid analysts and quant traders?
I’m not a big EMH proponent, but this group has had a lot of success and now I think has gotten too cocky and now thinks that even weak-EMH doesn’t apply to us.
Everybody feels that they are a super savvy investor who will get above market returns and thus “others should donate now while I seek great financial returns to donate more later”
I’ve thought about this tradeoff a lot. I feel the same way. I have a realized APR over the last 4 years of around 300%. I’ve also donated ~20% over this time. I can imagine some think that it would have been better for me to continue to invest this money but:
1) I by no means expect this rate of return to continue as I am investing larger sums
2) What if stuff didn’t go in my favour
I haven’t figured out a better answer then “yes, you should always donate for several reasons, every year”. There are also non-financial factors at play here like value drift as well to consider as well as stable ecosystems/whatever the opposite of the unilateralist curse is.
I also want to push back (as a crypto investor myself who runs a crypto fund) on the idea that we know a bull run is coming. We don’t. Crypto is now a much much larger market than 2012/2013 when EA had a lot of edge investing in crypto and I really doubt we are going to have another macro free money period again.
Bitcoin is an $800B marketcap asset and crypto as a whole is 1.7T. You should expect far greater efficiency now and that retail investors/people with other jobs won’t do nearly as well as the pros.
I haven’t, but is it still true that the EA donor base’s assets are fairly heavily in crypto? So one potential downside would be reinforcing a relative lack of diversification, which could lead to both periods of really bountiful funding for orgs and droughts. Though perhaps at the small/midsize donor level, that isn’t as much of a concern and one should go for the best expected return on a risk-neutral basis.
Jason—this is a reasonable concern. The 4-year crypto asset cycle could indeed lead to cycles of windfalls and dry spells for donations. But I guess the burden would be on EA organizations to smooth this out by saving up some of the windfall money to cover the dry spells—rather than the donors trying to avoid high-volatility assets that show such cycles?
That makes sense in many contexts. I can think of some in which it might not work as well:
It is plausible that orgs may have planned for the crypto cycle, but not planned for FTX collapse and probable clawbacks, and that the assets that would otherwise be used for smoothing had to be diverted. That goes for double if the org was affected by a non-crypto financial issue (e.g., grant reduction/non-renewal from another source). As a practical matter, an org can only prepare for so many contingencies at once . . . even the US military with all its massive spending is designed to maintain a two-front war, IIRC.
I think it probably relies on an assumption that the org was old enough / established enough to have received a windfall during the high-water point of the previous crypto boom cycle. Without a windfall, there would be no windfall income to devote to smoothing.
Hopefully any donations from individual donors who have benefitted from actually taking profits (into fiat currency) from volatile assets (such as crypto) would be less subject to corporate collapses, scandals, and clawbacks than donations from crypto companies such as FTX. But it’s well worth thinking about these kinds of financial and legal risks.
To be honest, I’m facing a difficult trade-off between whether I should donate more money now to the organizations I traditionally support (e.g. Vegan Outreach), versus investing in the crypto market before the next expected bull run in 2024-2025, after the bitcoin ETF approvals, the bitcoin halving, the next hype cycle, etc—in hopes that an investment now could yield 10x more money to give later.
I’m curious if any other EAs are thinking about this tradeoff. I know a lot of us got stung, both financially and emotionally, by the FTX disaster. But IMHO, crypto is here to stay—at least as a hyper-volatile risk asset that can be used to leverage wealth, by those with the knowledge and risk-tolerance to buy low and sell high.
Copying from the Facebook Group
Fellow crypto investor here (since 2015⁄16), I now run a crypto fund. A few points to make.
1. In the short term, way more money is made on getting in on trends before they are big than on fundamentals, at least they have historically. You wanted to get in on NFTs early. You wanted to get in on “AI tokens” early. You wanted to get in on yield farming early. You wanted to get in on ICOs early. You wanted to get in on dog tokens early. You wanted to get in on anything trending early. Etc. It didn’t matter what project fundamentals were. Trends cause things to go up. There is a large degree of pyramic scheme/ponzinomics involved. You make money by getting in before others. They pump your bags and you dump on them.
2. In the long term, fundamentals are all that matter. Vast majority of junk dies with the founders/insiders/smart traders scheming off a good amount with bags held by retail traders.
3. I want to push back on the idea that we know a bullrun is coming. We don’t. There are some bullish narratives around but also, bitcoin/eth are already up like 3x. What if the bullrun already happened and this is the “cycle’s top”? What if the Bitcoin ETFs don’t get approved? What if they do nothing? There is no law of nature that causes crypto cycles due to halvings, in fact, you should expect those to be way less prominent now that bitcoin is much larger and most of the coins that will ever exist are already out there. Pompliano’s supply squeeze or whatever based on miners is stupid. I think the last one was most likely coincidental due to ZIRP and I don’t suppose you have great macro forecasts to suggest we are going back to these territories that haven’t been priced into the market.
4. I want to caution people from thinking they have alpha. I think there are good reasons to think EAs can have alpha. Quasi-insider information from being so close to the tech scene, greater understanding of AI progress and effects, some first principles thinking, just being smarter, etc. But usually, retail traders don’t have alpha. They are the ones who think they do and pay the people that actually do. You have to be crystal clear as to where your edge comes from and not expand outside of that. Why do you expect this group to be better able to predict a large scale crypto cycle better than people who do this full time with teams of super well paid analysts and quant traders?
I’m not a big EMH proponent, but this group has had a lot of success and now I think has gotten too cocky and now thinks that even weak-EMH doesn’t apply to us.
Everybody feels that they are a super savvy investor who will get above market returns and thus “others should donate now while I seek great financial returns to donate more later”
I’ve thought about this tradeoff a lot. I feel the same way. I have a realized APR over the last 4 years of around 300%. I’ve also donated ~20% over this time. I can imagine some think that it would have been better for me to continue to invest this money but:
1) I by no means expect this rate of return to continue as I am investing larger sums
2) What if stuff didn’t go in my favour
I haven’t figured out a better answer then “yes, you should always donate for several reasons, every year”. There are also non-financial factors at play here like value drift as well to consider as well as stable ecosystems/whatever the opposite of the unilateralist curse is.
I also want to push back (as a crypto investor myself who runs a crypto fund) on the idea that we know a bull run is coming. We don’t. Crypto is now a much much larger market than 2012/2013 when EA had a lot of edge investing in crypto and I really doubt we are going to have another macro free money period again.
Bitcoin is an $800B marketcap asset and crypto as a whole is 1.7T. You should expect far greater efficiency now and that retail investors/people with other jobs won’t do nearly as well as the pros.
I haven’t, but is it still true that the EA donor base’s assets are fairly heavily in crypto? So one potential downside would be reinforcing a relative lack of diversification, which could lead to both periods of really bountiful funding for orgs and droughts. Though perhaps at the small/midsize donor level, that isn’t as much of a concern and one should go for the best expected return on a risk-neutral basis.
Jason—this is a reasonable concern. The 4-year crypto asset cycle could indeed lead to cycles of windfalls and dry spells for donations. But I guess the burden would be on EA organizations to smooth this out by saving up some of the windfall money to cover the dry spells—rather than the donors trying to avoid high-volatility assets that show such cycles?
That makes sense in many contexts. I can think of some in which it might not work as well:
It is plausible that orgs may have planned for the crypto cycle, but not planned for FTX collapse and probable clawbacks, and that the assets that would otherwise be used for smoothing had to be diverted. That goes for double if the org was affected by a non-crypto financial issue (e.g., grant reduction/non-renewal from another source). As a practical matter, an org can only prepare for so many contingencies at once . . . even the US military with all its massive spending is designed to maintain a two-front war, IIRC.
I think it probably relies on an assumption that the org was old enough / established enough to have received a windfall during the high-water point of the previous crypto boom cycle. Without a windfall, there would be no windfall income to devote to smoothing.
Jason—yes, fair points.
Hopefully any donations from individual donors who have benefitted from actually taking profits (into fiat currency) from volatile assets (such as crypto) would be less subject to corporate collapses, scandals, and clawbacks than donations from crypto companies such as FTX. But it’s well worth thinking about these kinds of financial and legal risks.
You might be interested to ask in this Facebook group (I would love to help and thinking similar things but know approximately nothing)
Yes, thanks! Will have a look.