🧘♂️Now or Never?
Market Meditations | August 18, 2021
Take a look at this asset, before it’s too late
☀️ $SOL has made ATHs and general market sentiment is positive. Let’s look at Solana’s fundamentals. Do they support the price action? And how is the wider market looking? Remember, you’ll never be able to take advantage of crypto if you can’t master your psychology. So we’ve got a segment for that too.
?♂️ Today’s meditations:
Hottest news: key crypto headlines you need to know today
Solana nodes how: a fundamental analysis of $SOL
The ostrich effect: how to avoid a phenomenon that has led many traders to failure
Crypto punks take two: a little bit of coverage on NFTs
✅ Let’s go.
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⏰ In A Rush?
Here’s 5 things you should know about the crypto markets today:
? Solana Nodes How
As discussed on Monday, Solana hit a new ATH and there are reports of growing institutional interest. This may not come as a surprise to some, who think this Layer 1 blockchain solves the scalability trilemma and is backed by Sam Bankman-Fried (SBF). So, are there any disadvantages? Two things to keep in mind:
Censorship resistance: the Nakamoto Coefficient is used to quantify the number of nodes required to compromise at least one essential subsystem (note: it can have different definitions). Solana Beach defines ‘halt power’ as the smallest number of validators required to control more than 33% of the total stake and potentially censor/halt the network if they colluded. The current halt power is 19, and an increase in this value would suggest improved security.
Cost of running a node: because Solana uses multi-threading to simultaneously process non-overlapping transactions, it requires a high-performance desktop computer, which can out-price a lot of individual users.
SBF published notes from a discussion with Vitalik Buterin about how to improve Solana in these respects. Here are some of the solutions they discussed:
Continue to increase the number of validators so that there is more value securing the network
Use of a main shard with lots of small shards to split validation across (but with limited transaction speed per shard)
Use of blockchain domains where validators can only produce blocks for a specific subset of the network.
So Solana hype is here but it’s always good to keep an eye on the fundamentals, especially as the network has actually broken down before! For more of an introduction to the Solana blockchain take a look at our Solana guide.
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? The Ostrich Effect: Getting Your Head out of the Sand
Most traders are not profitable. Worse yet, many of these traders deliberately avoid information that could help them improve their profitability. Why? Because of the Ostrich Effect which describes our tendency to deliberately avoid negative information, even where this information would allow us to reach a more desirable outcome1. Rather than confronting our issue, just like ostriches, we bury our heads in the sand. As research has shown this happens in several situations2:
1️⃣ Where information would require a change in previously held beliefs
2️⃣ Where information would demand an undesired action
3️⃣ If we believe progress to be poor
4️⃣ Where thinking or working on the relevant goal would lead to negative emotions
Trading can trigger all 4 scenarios, as we have to accept our current systems are not profitable which leads to a change in prior beliefs, undesired actions and dealing with the negative emotions of losing money. The big issue here is that if we refuse to consider these matters, we will not be able to improve and will stay unprofitable forever.
So, how do we avoid the Ostrich Effect?
Firstly we must improve our self-awareness. Often we do not even realise we are avoiding information that could help us track progress! When setting a goal, put in a process of how and how frequently you will monitor that goal. If you do not keep up with it, the cause may well be this cognitive effect.
Then we must remember to focus on the big picture. Whilst facing negative emotions can be difficult in the moment, remember, if we avoid this information we take away our ability to improve a situation and will only face even more negative emotions in the future.
The Ostrich Effect leads to actively avoiding information that could help us improve our abilities. Implement processes to track your goals, remember to zoom out and start lifting your head out of the sand.
?? Crypto Punks Take Two & Three
Unless you have been ‘living under a rock’ (a cool NFT rock), you are probably aware of the bewildering NFT market. Some of these NFTs have sold for millions of dollars, with more reasonably priced examples going for thousands to tens of thousands. Who could have predicted the outrageous demand for digital art? Like the fine art world, digital art is subjective and tends to sell for whatever wild price the buyer is willing to pay.
Those who are sitting on a storehouse of Ether may already have an exorbitantly priced Crypto Punk or be a member of the Bored Ape Yacht Club, but newer market participants may be more interested in minting NTfs on Polygon or Solana.
Both chains recently released their own versions of the popular Crypto Punks.
We would caution buyers to beware; unfortunately, as with all things crypto, scammers abound.
The NFT space is still evolving and will not likely be limited to JPEGs forever. Mainstream companies such as Shopify and Draftkings have recently announced their own endeavors in the crypto sector and we know the entertainment industry is very interested in using a form of NFTs for ticket sales. The Block reported that OpenSea saw its highest ever volume of Google searches just last week, with a 194% increase in trading volume from July to August. As more chains develop NFT functionality, this is an industry that is bursting at the seams.
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Not financial or tax advice. 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. See our important security disclaimers here.
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Webb T. L., Chang B., Benn Y. (2013). “The ostrich problem”: motivated avoidance or rejection of information on goal progress. Soc. Pers. Psychol. Comp. 7, 794–807. 10.1111/spc3.12071
Chang, Betty P I et al. “Why Do People Act Like the Proverbial Ostrich? Investigating the Reasons That People Provide for Not Monitoring Their Goal Progress.” Frontiers in psychology vol. 8 152. 8 Feb. 2017, doi:10.3389/fpsyg.2017.00152