Living in the fat-tailed jungle
Crypto’s probability curve looks like a python that swallowed two beach balls: a fat lump on the left where careers, treasuries and reputations go to zero and an equally obese bulge on the right where an airdrop you clicked through half asleep suddenly outranks your salary history.
Many people see only one of the lumps and either worry or optimise for it.
Smart traders focussing the left tail; dreamers and moonboys chasing the right.
The trick, if there is one – is to touch both sides on purpose, with guard-rails.
A few months ago, I listened to @choffstein article with @dfauchier, 'Paranoid Crypto Cowboys'. A few quotes stood out that I think of regularly.
\> “The distribution of events in crypto over the past eight years is_ extraordinarily wide crazy things happen, and if you’re not ready for them you’re finished.”
\> “March 2020 was crypto’s stress test: five-to-ten-times the volatility of equities, no central-bank backstop, yet the system cleared. If you weren’t modeling that kind of scenario you learned your lesson - expensively.”
\> “We look for teams that wake up in the middle of the night if P/L is off 1 %. Two phones, two carriers, two different chips - redundancy everywhere.”
Now this was mostly from the perspective of risk, understandably. If you're hiring managers to manage capital that's what I imagine you think a lot about. As an everyday crypto user, depending on the extent to which your life relies on it, you should probably be thinking similarly. I also argue that apart from risk, you should also be aware of, and potentially shooting for - the right side too.
When you're looking for examples from either side you don't have have look far, and I'm going to ignore those that border insanity (stupidity?) like turning an $1000 memecoin holding to 7-figs and back again.
On one side: exchange insolvencies, token launches that have been massively manipulated, founders whose size ended up being 30 sq ft. On the other: airdrops that can retire you, JPEGs that accrue eight years of equity upside in eight weeks, and restaking loops that hand out double-digit yield for keeping the same coin you already owned.
Why the right-hand cliff refuses to vanish
-Token bootstrapping. A token can be used as a marketing budget you can mint out of thin air. When CAC is denominated in script instead of dollars, you can pay users retroactively for things they already did. This then becomes 'free money'. Look at Uniswap, Hyperliquid and Jupiter, and you can probably name 100 more, though most not as profitable.
- Snapshot culture. Everything on-chain is queryable. A protocol can decide in blocktime to reward addresses that touched it months ago. The cost is near-zero, the headline writes itself, and a thousand wallets can claim 6 figs (can we go back to actual airdrops?).
That loop of retroactive pay, headline, liquidity, price - compounds outside business hours. Negative tails have mirror mechanics: a single admin key, an un-thought-through oracle, a coordinated regulatory push. Same reflexivity, opposite sign.
The lure and the tax of curiosity
Because these upsides exist, curiosity and involvement is a rational strategy. However, theres no return without risk. Just as you can be six figures richer overnight, it can easily go the other way too. Look at UST holders, Luna holders people with significant portions of their life savings on FTX. Even aside from that, how many stories of people having their wallets drained due to clicking a sponsored ad, or what could seem a reasonably trivial event.
Exploration, then, looks less like a hobby and more like the purchase of an exotic option. The premium is the time, money, and the cognitive bandwidth you put in; the payoff is explicitly open-ended. That framing is valuable because it replaces having a punt with a cleaner question: Is this ticket mispriced relative to its strike? If yes, continue. If no, you don’t.
Survive and succeed
So then I guess it asks the question how can you work this out, which I think is hard to say especially when you don't really know when you'll get a reward like some did with Hyperliquid. Some people may say they knew Hyperliquid would be what it is now, but did they really? There may be a whole graveyard of projects they also bet on, that didn't work out so well.
What am I losing out on?
How much extra time will it cost me?
How likely is it that I will be rewarded at all?
There's many more questions that may help you, but this is just what came to my mind.
I'm spending time diversifying my trading amongst different DEX's, including Hyperliquid, Lighter, Variational, Extended - and a couple more on the list to add, mainly because I don't really lose anything by doing so. Those trades will already be placed, and probably with greater costs/risks than splitting them between different venues.
Another way I frame looking at something when deciding whether it should be a point of focus, is can I find a way to add more marginal benefit to my account/portfolio than I would by avoiding it. So, for example if I can put together something that makes me money on prediction markets - it's likely less correlated and greater +ev than finding another trading signal, or marginally improving some kind of infra.
