In his outstanding book “Antifragile,” Nassim Nichoals Taleb discusses certain technologies that not only are able to withstand long term volatility, and uncertainty, but rather become stronger because of them. I would like to suggest to you that properly executed crypto investments are antifragile in this sense. Long term crypto investments will thrive when thrust into an uncertain, highly volatile future, as long as they survive.
Our investment philosophy is based on the premise that the longer a recently launched cryptocurrency is able to survive in the market, the more likely its price is to appreciate. We should remember that fully 92% (https://bit.ly/Most-Cryptos-Fail) of all crypto projects launched will fail within the five year mark, most actually within the first 18 months.
Projects that survive past the five year culling period, are likely, on average, to have been continually developed and added users over this time span, otherwise they would not have made it. This would suggest at least a marginal increase in the price of a candidate token over this period.
Thus we should approach crypto investing not as the search for a token with the best gimmick, but rather one that is strengthened from the passage of time. The Lindy Effect basically suggests that the longer a technology has been viable, the longer it is likely to stay viable. Under the Lindy effect, each day that passes strengthens our choice of asset and makes it more likely to endure for another day; making the likelihood of long term price appreciation under our model greater, and our risk (likelihood of token failure) is smaller.
Finding instances of Lindy potential in recently launched tokens requires rewiring our brains not to look for profit, but for long lastingness. One of the key features that suggest the long lastingness of a token to an early stage investor is funding.
Antifragility may be presumed in a token that can pay for itself. It does not require predictive ability to realize that if developers and promoters can be paid, at least for the foreseeable future, our token will only strengthen from the passage of time. The longer our token survives, the stronger the Lindy Effect will become. Survivability breeds survivability and survivability breeds profit.
We could much more easily dedicate ourselves to investing in established tokens, such as Bitcoin, and be done with it; the proof is in the pudding. But we believe the potential, order of magnitude returns from investing in early stage assets outweigh the risks, even taking into account the security we may gain from investing in an established token.
Predictive thinking is not required when choosing crypto assets. We must instead look for projects that are clearly able to finance themselves over the long term. Treasury models, such as that pioneered by Dash and adopted by other crypto assets come to mind. We wish to stay as far away from “prediction” (which is inherently fragile) as possible, and focus instead on searching for strong foundations in candidate crypto assets.
To be clear, we are not at all concerned with what will happen in the future to affect our token, we are rather concerned that the future does indeed happen; and this becomes more certain with each passing day. An informed crypto investor is thus unconcerned by market movements or crisis within his investment horizon. We are not afraid of uncertainty and volatility as long as our token continues to function.
We do not require complete information or a clear view of the future to execute investments, we do not wish to time or predict anything. Rather we are concerned, at the outset, with keeping the lights on and our token in working order. The profits will take care of themselves.
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Antifragile: Cryptocurrency and the Passage of Time was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.