How To Build Sustainable Wealth in Crypto

Personal note: Our modern world is a very unfair place, and our modern financial system further exacerbates inequality. The situation you are born into and opportunities you are afforded early in life play a massive role in your financial situation as an adult. Nothing on this page is meant to say “it’s so easy!” and minimize the struggles that come from being born into a difficult situation, not having access to quality education, having to spend all your money supporting your loved ones or healthcare costs, or having to deal with the ever-increasing living expenses of today. Our current system is designed to keep people trapped in it, and this should not be trivialized, ignored, or left unchallenged.

There is no justice without economic justice.

We have a responsibility to help each other and our world, and this is a small offering in that aim.

This page is meant to simply provide a helpful guide, for anyone who is able to set aside funds to invest. To provide knowledge, a roadmap, and a path to an eventual way out, with the hope that anyone who is able to use this knowledge to help themselves will in turn help someone else.

Even if someone is never in a position to invest much, or financially improve their life, I hope that the information in this site can at least help lighten the psychological burdens so many people carry about money, and no longer see it as a proxy for someone’s intelligence, worth, or value to society.

*All the ideas on this page are geared towards crypto investing, but are also broadly applicable to investing in any asset class.

Getting Started

Building sustainable wealth is a mixture of psychology, knowledge, and action. The majority focus solely on the action portion, without realizing that those actions flow from your knowledge and psyche. To reframe this idea:

It’s not about what you get, it’s about who you become.

One of the reasons I’ve taken great pains in previous pages to not simply say “what to do”, but to actually explain about money, markets, manipulation and why things happen is because that is the knowledge that actually sets you free, not the money itself. While I would define the formula to “financial freedom” as “having an economic machine that pays for your living expenses”, that is not the same thing as psychological freedom, which has nothing to do with how much money you have. In fact, psychological freedom is often worse for people the more money they get if they don’t see the game for what it is. Fortunately, you can have psychological freedom from many of the stigmas and traps of money far sooner than the time it takes to build your economic machine, and can hopefully keep those same traps in perspective with your own financial success.

Once you see the game for what it is, and see that money is just an idea that society created and it has no objective reality… it seems pretty silly to justify your self worth or intelligence by how much money you have (or don’t have). That knowledge alone can be life changing for people, even if they never go on to invest at all. So many in our society were taught that if they didn’t have money, they themselves were less valuable, less intelligent, or somehow unworthy. Or if they were able to get rich, they would be loved, intelligent, safe, or worthy of being loved. This is a complete lie, a lie told and perpetuated for centuries by those who control the existing system. This whole belief system comes from us obfuscating the truth, and hiding how our social and economic systems work.

Money is just a tool. While Money will never buy happiness, safety, acceptance, or love, it can be a wonderful and useful idea that helps us interact without violence, create new value, help others, provide for our families and loved ones, and help reduce suffering in our own lives.

So, with that (again… rather long 😅) primer out of the way, let’s get started.

Fundamental Truths of Investing

By applying the lessons we learned in the previous Investing 101 sections, we can understand a few simple truths.

1) Money is just an idea, and the game is rigged by the people who control that idea. So, you have to be invested in real assets, or your money will be devalued and its worth stripped away from you year after year.

2) Market Manipulation is the norm, not the exception. You have to be able to endure this volatility and manipulation without losing your nerve, selling at a loss, and letting the predators win.

3) While markets are highly manipulated in the short and medium term, in the long run, innovation continues and reality wins.

Please make sure you’ve read the previous sections, and are deeply comfortable with why these concepts are true before continuing. If you don’t know why you’re doing something, then when it gets tough, you’ll stop. And this is crypto… the times will get tough 😄

“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.”

- Ben Graham, the Father of Value Investing

How to Build Sustainable Wealth

This part is very simple. Buy quality assets and hold. Think about what will be valuable in 5+ years and buy that before it’s obvious to everyone else. Also, get out of thinking of “wealth” as being measured in dollars, as “dollars” are an idea and are continually devalued every year. Think of your wealth as being measured in assets that can produce dollars (or other assets).

Stop thinking there is ever a time to “exit” the market and sell everything. You may choose to take some profits strategically to fund your lifestyle, but “selling everything” should never be an option in your mind. Wealthy people are always in the market, in good times and bad times, and they stay wealthy because they own the assets that the newly printed dollars are chasing, so they are actually able to benefit from inflation and currency devaluation. This is the difference between people who are “rich” today and people who are wealthy. Rich people have money, but wealthy people understand money. Rich people have a habit of spending or otherwise losing their money, and are rarely “rich” for long. Wealthy people see how the game works, teach these lessons to their children, put their money to work for them, and their families can stay wealthy for centuries.

Most of the people chasing overnight riches in crypto today (or overnight riches in anything…) are going to end up getting wiped out, and losing both the money they gambled originally and even their new “winnings” when the bull market ends. That’s what always happens to most speculators when the music stops. The people who have prepared for the hard times, focused on the fundamentals of what is being built, and built an economic machine for themselves made of valuable, quality assets, are the ones who will end up with the real wealth at the end of the day.

“The market is a device to transfer money from the impatient to the patient.”

- Warren Buffett

What are Quality Assets?

We’ve talked a lot about “buying quality assets”, so what are they? I would define quality assets as finite resources that have real objective economic value or use. They have an objectively justifiable reason why they are valuable (not just the “greater fool theory”, like with beanie babies or tulips for instance). For example:

Why is real estate valuable? Because we are physical creatures and land is finite. A house is valuable because someone can live there, and humans need places to live. For as long as people need places to live, work, or otherwise use real estate to better their lives, real estate will be valuable.

Why are businesses valuable? Because they provide products or services to people. If the product or service is valuable, then the business (and consequently, Stock or shares in the business) will be valuable.

Why are physical resources (i.e. commodities) valuable? Because you can consume them to support human life or build things with them (i.e. lumber, iron, water, food, grain, etc). As long as humans need to eat, drink, and build things, these assets will be valuable.

There are different kinds of assets of course, but this is an easy way to think about it. Your friend thinking beanie babies, tulips, or some nonsense memecoin in crypto with no real use case are valuable because prices are going up or other people want them right now is a pretty weak investment thesis. You might make money on them in the short term (plenty of people made money on beanie babies right up until they didn’t), but these should never be viewed as investments. It’s completely fine if you want to gamble, but please… be aware you are gambling and don’t tell yourself you’re investing!

How do I apply this to crypto?

The people who made the most money in the gold rush were the people selling picks and shovels.

You want to first look at the platforms that people will build and innovate on. You could look at the 2017 crypto bubble and say “oh, well 99% of those cryptos failed, how can you invest in that kind of a market?”… Or, you could have just asked “what platform was everyone building everything on?”

That was Ethereum, and it has always had a sensible value prop as an investment: you need the coins to pay fees to do anything on the network. Ethereum is still one of the largest cryptos in the world today, and is far more valuable than it was even at the peak of the 2017 bubble… because people keep building things on it! That would have made you a colossal amount of money, even if you had the worst timing in the world and bought at the top of the last bubble.

So, just like that you could have easily picked the 1% of projects that were quality investments in 2017 and highly likely to be successful long term, by just focusing on the idea of platforms.

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Before continuing, a caveat: Bitcoin is not really a platform. It gets a pass as a valid investment however, as it’s the established reserve currency of the digital world, which is a highly coveted position that really only gets one winner. Bitcoin doesn’t need to do anything else other than exist for it to be valuable to people. Its value comes from it being a globally accepted money that has a truly fixed supply, its expansive network, and its growing importance vs the legacy financial system. As long as people continue to use and accept Bitcoin, it will be valuable, and its value will increase with more adoption and degradation of the existing financial system (i.e. It’s “digital gold” and has the same basic value prop as physical gold as inflation protection).

In short, Bitcoin is the only “unproductive asset” in crypto that should get a pass.

Every other crypto you invest in should have real, objective, and justifiable economic value.

Now, with that caveat out of the way, let’s get into something with a more objectively justifiable value proposition.

What are the clearest investments in crypto?

The clearest investments to me currently (outside of Bitcoin) are Layer 1 Smart-Contract Platforms that leverage Proof of Stake consensus.

This means independent blockchain platforms that you can build things on top of (Dapps, DeFi, NFTs, Identity, Voting, etc). Most of the top platforms here will be detailed further later in our course, under Section 3.

The value proposition here is crystal clear for people who own the coins of the network. The coins can be staked to help secure the network, and in return receive both 1) a portion of the new block rewards the network generates, and 2) a portion of fees paid on the network. In addition, you also need the coins to pay fees to use the network, and some platforms will allow you voting rights for holding coins as well.

In short, if the platform is valuable, the coins are by definition also valuable.

Bitcoin is Proof of Work (i.e. has Miners), so while it is a Layer 1 blockchain, the base platform will never cashflow for investors. In contrast, Ethereum is transitioning to Proof of Stake, and Cardano, Polkadot, Solana (and many more) are already using Proof of Stake, so these investments will have a claim to block rewards and fees on the network, which provide cash flow to their investors.

There are many other interesting investment options as well, but the value prop is often a bit fuzzier. While these other parts of the ecosystem are still developing, I would recommend heavily skewing towards Layer 1 Proof of Stake blockchains, which already have a clear value prop, and which will benefit from everything that is built on top of them (DeFi, NFTs, Dapps, etc).