June 24, 2024 | Read Online

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"I realized I could gain some level of control as a person. I could actually enjoy the act of playing pinball machines, [instead] of just being this insipid person who was just overwhelmed by it all."

— Roger Sharpe

The pinball wizards of crypto finance

Pinball was illegal in New York City until 1976 when Roger Sharpe convinced the City Council that pinball was a game of skill, not chance.

Mayor Fiorello LaGuardia had banned pinball from the city in 1948 on the premise that it was a game of chance, and therefore could only be of interest to people as a means of gambling (it didn't help that most pinball machines were said to be owned and operated by the mafia).

Sharpe disproved this in 1976 by repeatedly calling his shots on a pinball machine set up at a City Council meeting called to reconsider the ban.

The otherwise skeptical councilors were so impressed with his play that they voted to overturn the ban.

(I'm guessing they must have been equally impressed by his tremendous mustache.)

Importantly, Sharpe had also explained to the Council that pinball, invented in the 1930s, was popular because it gave people a sense of agency — something the masses of unemployed Americans had been robbed of during the Great Depression.

In his recent book, Languishing: How to Feel Alive Again in a World that Wears Us Down, sociologist Corey Keyes explains that this sense of agency is common to all great games.

More than just fun, pinball 1) provides players with a sense of accomplishment, 2) requires players to develop a skill and 3) makes players feel like what they do matters.

Pinball, with its plunger, flippers, targets and flashing lights, makes you feel like "a source of cause and effect in the world," according to Keyes.

Could games of skill fulfill an evolutionary need to be the protagonist of one's own story?

If so, this might explain why crypto investing remains surprisingly popular.

Making us work for it

One thing that's surprised me about crypto investors is how many of them seem to invest only in crypto.

An ex-colleague of mine, for example, once told me it felt irresponsible to have all his savings in self-custody crypto wallets; to hedge his bets, he opened a Vanguard account and bought a stock: Coinbase.

(On Wall Street trading desks, this would be known as a "Texas hedge.")

I've also been surprised how many long-suffering crypto investors have stuck with it.

It's been a bumpy ride for crypto investors over the last few years, while it's been an unusually smooth ride for non-crypto investors.

But the large opportunity cost of not owning the S&P 500 doesn't seem to be dissuading anyone from being all-in on crypto.

Many would tell you that's because they think crypto has more upside than equities and/or that TradFi is rigged and/or that young people have been priced out of stocks and real estate.

I think they should reconsider — TradFi isn't rigged and every generation feels like they've missed out on the easy money (and yet, the money keeps getting easier).

But I can see why they think that way.

Many are in crypto because they object to TradFi in some way, and it might be intellectually inconsistent for those types to invest in the system they object to.

But there are fewer ideologues in crypto these days. Bitcoin maxis aside, people don't seem to think too hard about censorship-resistant investing; like any investor, they're in crypto because they want to make money.

But I think that the reason they stay is how they want to make money.

Crypto investing is more satisfying than most types of investing because crypto is participatory.

Investing in equities, by contrast, is passive: You buy a stock, receive some dividends and if the company (with no help from you) does well, sell at a profit.

Or you just buy an index fund.

With crypto, by contrast, you're probably a user and maybe even a contributor to the protocols you've invested in.

So if they do well, it'll be with your help.

To receive dividends, for example, you'll have to earn them by securing the network (staking).

To get in early on a new token, you might contribute by stress-testing a recently launched protocol (airdrop farming).

You might also supply infrastructure to a protocol's users, as with DePIN projects, or supply liquidity to a protocol's traders, as with DEXs.

And even if you've sold all your tokens, you're probably contributing to the crypto ecosystem by lending your stablecoins to traders or risking them in an insurance vault or market-making pool.

To do these things, you have to navigate a tangle of wallets, bridges, gas fees and transaction pop-ups — all of which take time, patience and skill.

It's the skill that makes crypto investing satisfying, like pinball.

This is not exclusively a crypto phenomenon.

Professional poker players, for example, don't play poker because it's an unusually profitable or easy way to make money.

It's not.

They play poker because it's a satisfying way to make money.

Making money in poker is harder than earning money in most jobs, and it's a lot harder than investing money in the stock market.

But money won is better than money earned — especially if it's won in a game of skill.

Crypto investing feels less like investing and more like a game of skill.

All of those wallets, bridges and transaction popups are like the plungers, flippers and flashing lights of pinball.

This makes crypto investing much harder than stock market investing, but that's a feature, not a flaw.

Do-it-yourself crypto offers something the stock market does not — it seems to fulfill an evolutionary need to control your own destiny.

If so, that might make crypto investors the eat-what-you-kill hunter-gatherers of modern finance.

Or its pinball wizards, at least.

— Byron Gilliam

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Ryan @ryQuant

$MSTR Volatility is Vitality.

Michael Saylor⚡️ @saylor

Volatility is Vitality.

Jun 24, 2024

70 Likes 4 Retweets 3 Replies

Jurrien Timmer @TimmerFidelity

Earnings drive stock prices, and relative earnings drive relative performance. That's a good thing to remember as we continue to assess the mean-reversion opportunity between the US and ex-US.

The chart below shows the earnings squiggles for the MSCI USA index. Up and to the… x.com/i/web/status/1…

Jun 24, 2024

38 Likes 6 Retweets 5 Replies

Noelle Acheson @NoelleInMadrid

this is typical of the months following a halving, happened last cycle as well - and it explains why June's performance was so meh despite macro tailwinds

I'm skeptical of the "14-year low", however, since not all miner addresses are labelled as such - addresses as many as 3… x.com/i/web/status/1…

Carl ₿ MENGER ⚡️🇸🇻 @CarlBMenger

BREAKING: #Bitcoin miners sold over 30,000 $BTC (~$2 billion) in June, the highest amount this year, dropping reserves to a 14-year low.

The recent #Bitcoin halving cut profits, causing especially smaller miners to sell off #Bitcoin to cover operation costs.

Jun 24, 2024

3 Likes 1 Retweet 1 Reply