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Stagflation Generation: Why They’re Chasing Crypto Moonshots

December 23, 2022 - 8 min read

A Generation of Risk-Seeking Degens?

A moonshot is an ambitious project or opportunity which has an incredible amount of unrealized potential. It is often left unspoken, but moonshots are understood to also contain extra risks inherent to the nature of lesser known investment opportunities. After all, if investing in moonshot tokens were such a good idea, we would all do it all the time, and then we could all be filthy rich, right? Obviously this isn’t so.

In crypto, the term moonshot is often used to refer to small cap altcoins which are relatively unknown, thus giving them the potential to ‘go to the moon’ in terms of their token’s price. To be fair, Bitcoin is also a moonshot in the grand scheme of things, no matter how it seems from within the crypto bubble and Web3 Twittersphere. All of us reading this are likely chasing moonshots, so this article should include echoes of truth throughout its contents.

Moonshots are not a new phenomenon, but rather the vernacular itself is relatively novel. However, what is arguably a new phenomenon is the common mindset that we now share which precedes our gravitation towards these so-called moonshots. That is, why do people seem to be seeking out riskier investments these days, and why do they seem to be proud of it?

Have we developed such an appetite for making quick profits that we have effectively rid ourselves of the fear of financial ruin? Perhaps there are specific economic conditions which create favorable conditions for this sort of YOLO investing. Aversion to risk involves having something to lose in the first place. That is, if youngsters don’t own much, the fear of risk has receded so as to barely exist. Let’s explore this concept further.

Young Folks and the Quest for Moonshot Tokens

Many of you reading this will still remember the travesty which occurred as a result of the 2008 financial crisis in which government bailouts for banks and hedge funds were followed by roughly two decades of asset price inflation. Outside of a few cases, like Iceland, for example, the largest risk-takers suffered no consequences for investing so recklessly.

After all, their losses were subsidized and shared across the world by regular folks who held their money in savings accounts and government bonds. It taught us all that no matter how much risk you took and how irresponsible you were with your finances, if you cried out in pain enough, bailouts would arrive in due time, leaving the uninvested behind.

Since 2008, the millennial and subsequent generations have experienced stagnant wages, artificially-low interest rates, and exploding house prices. Inflation is a popular term to discuss now as it’s become so obviously rampant, but for too many it has become entrenched as a normal part of life. For instance, students were told to just borrow more since they couldn’t afford college tuition, and then borrow even more to buy a home to live in.

Those encouraging all the borrowing have justified it with lower and lower interest rates. “Don’t worry,” they say. “You can always refinance at lower rates in the future to lower your payments. Well, having a ton of monthly payments is fine so long as you are always employed and the cost of daily living doesn’t rise too quickly. Enter 2020, and central banks around the world dropped their base lending rates to zero (or negative in some cases- looking at you Europe).

The US government, and many other central banks, coordinated to prop up their economies with fiat credit expansion amidst lockdowns and trade restrictions. Just in terms of the US, the money supply grew by $6 trillion, an increase of nearly 40% in just over two years. Predictably, the historic level of unfunded credit expansion of fiat currencies paired with self-imposed production limitations has resulted in totally absurd levels of consumer price inflation which hasn’t been seen since at least the 1970’s. Sharp price increases were to be expected, considering that all this new money would chase the same amount of goods and services (actually fewer considering the restrictions which were imposed on commerce and travel). Young people feel like the financial system is rigged against them, and that simply earning a salary and saving their money in “safe” assets is either a losing or neutral strategy. Now, inflation is cutting into budgets to such a degree that the thought of achieving financial well-being seems off the table; unless one is ready to take risks that our parents never had to take. Remembering the bailouts of 2008, investors didn’t hesitate to go bananas when markets tanked following the Covid-19. We had been conditioned to ignore the potential for a true crisis and just ‘buy the dip.’ After all, young folks didn’t want to miss out on the massive rush of liquidity which would come to bail markets out once again; and they were not disappointed. Unlimited credit expansion made anything priced in fiat currencies absolutely explode in value, and made the rising costs of living into a growing concern for many. Crypto: We Love You to the Moon and Back Again In recent months, crypto markets have been hit hard, causing many to question their dreams of finding the next crypto moonshot. For some perspective, the price of Bitcoin fell from its ATH of roughly$69,000 to under \$17,000 over the course of just one year, beginning its descent from its meteoric rise during Q4 of 2021. Nevertheless, the booms and busts of central banking economic cycles has hardened many into the disposition that all they must do is hunker down and survive the coming crypto winter.

That doesn’t mean young investors aren’t aware of the dangers of ‘rug pulls.’ These are cases in which a token is launched and then pumped by social media influencers before its creators dump their stacks into an illiquid market, collapsing the token’s price in the process. Seasoned veterans have often either suffered from rug pulls themselves, or else witnessed the devastation wrought upon unsuspecting newbies to the crypto space. They know that this is possible, but just like a lottery ticket, the chances of winning give participants a sense of hope in the face of rising costs, debt levels, and the declining economic opportunities of preceding two decades.

So that begs the question, what is the next moonshot in crypto? Aside from a few major names like Bitcoin and Ethereum, most of the digital asset landscape must seem like ‘moonshots’ to the layperson. That is, there are over 21,000 cryptocurrencies in existence, and if any of them were to outperform their peers, it is likely that early investors would stand to make small fortunes for themselves. Having said that, the likes of Polygon, Polkadot, and Cardano have demonstrated a lot of promise, perhaps in just that order.

On the other hand, freshmen joining the crypto space could offer even more innovative solutions than more established competitors. For instance, Sui, Aptos, LayerZero, and Sei are all what’s called ‘Layer 1’ newcomers. This means that they are independent blockchains themselves, on which applications are to be built atop. They are all competing to entice more builders into their ecosystems.

Aside from these, the top moonshot contenders could also come in the form of ‘Layer 2’ networks which essentially function as faster, cheaper networks which write their final settlements onto a Layer 1 blockchain for lasting and immutable public storage. Finally, there are always individual dApps themselves, perhaps in the realm of GameFi or the much-talked about metaverse.

Accepting the Perils of Crypto Moonshots

There was a time when gambling was restricted to back alleys, smoky pubs, or designated casinos like Macau or Las Vegas. With the Internet, and now with the introduction of digital assets, a lot of gambling these days takes place online. It is not only easy to access, but the rewards are immense and the opportunities for quick profits ample.

For many, a life of easy money from placing risky bets is more attractive than sitting idly by and letting their savings earn near-zero interest or else put it into a retirement account that is sure to be pillaged by inflation by the time they reach old age. That is, if playing it safe offers little upside, why not risk it for a chance at life-changing opportunities?

Well, the more you take risks, the more you find out how bad it hurts when things go south. The stagflation generation went all-in on crypto moonshots, and they got burned pretty badly. Depositors lost their funds to Celsius, Terra/Lunna, Voyager, FTX, BlockFi, Gemini, and other platforms which offered them chances to place bets on moonshots. As it turns out, chasing moonshots most often ends up exploding on the launch pad

It’s not difficult to empathize with young investors choosing to gamble on moonshots, so long as they’re not using excessive leverage. It is a cultural shift which has been further cultivated as a result of economic conditions, growing debts, and shrinking opportunities for upward mobility. At least in North America, ever since New Jersey legalized sports betting in 2018, the trend has seemingly caught fire with over 20 states having legalized it in some form.

It is not only sports, though. In the crypto space, day traders call themselves “degenerates” or “degens” in endearing greetings or farewells. It is safe to declare that taking risks is something younger generations are quite proud of, it has defined them so much that they disregard it as a part of life. Here’s to the ambitious crypto crowd out there with dreams of the moon, cheers.

References

1. Darbyshire, M. (2022, 20 July). Generation moonshot: Why young investors are not ready to give up on risk. Financial Times.
2. Jones, C. (2022, 21 Sep.) Are there too many cryptocurrencies? Cointelegraph.
3. Robinson, E., & Vladimarsson, O. (2016, 31 Mar.). This is where bad bankers go to prison. Bloomberg.

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