Dear Crypto Enthusiast,
It has been a long time since we took a proper look at the mathematical connection between that pesky coronavirus and that friendly crypto trading. Since we're in the final stretch of 2020, a potentially life-altering election around the corner, and drug companies starting to dig in on vaccines that will either usher in a drop in that lovely COVID-19 spike or the under-advertised Zombie Apocalypse, it seems like the proper time to go over this topic of correlation again.
This article is, once again, about exponential growth. The first time I wrote about this, I went on for a pretty long time, but the important math is in there, and as a day trader, a crypto project consultant, and dare I say a bit of a quant (not to mention a super hero still propping up profits for Valve, I must say!), I'm here to do you a favor that will probably not sink in, unless you find yourself hitting a brick wall trying to get rich off of crypto.
So, here's the deal:
Exponential growth- in crypto trading, we want that! In coronavirus infections and deaths, we DON'T want that (unless you're a sicko, in which case foo to you). Compound interest might be one way you've heard it stated, and with disease you mostly just hear "spike" and rate of growth.
Lemme make math fun for everyone, m'kay? Good!
Let's start with the crypto version, because greed is fun, but... hmmm how can I say this and feel more righteous about it? lol... We all take a personal interest in our financial future and fiscal responsibility. There, that's better. Feeding hungry mouths, making a difference in the world, we could do big things and be responsible with large piles of imaginary magical internet money. So, people take a personal interest more in the "can math make me rich" version of things.
Exponential growth, as Gordon sees it, is about taking math that makes sense in linear growth, and applying it towards exponential growth.
Example: you have $10,000 to invest in crypto. You have an absolute perfect score in trading accuracy in this example. Check you out!
You break this overall principle into a strategy with 100 trades at $100 each (100x100=10,000 voila). The goal is to trade one $100 trade at a time and earn bank on that. With linear growth, the trader wants to earn enough to cash out the profit and pay bills. I design this sample strategy as a very small percentage of growth over fees, to show that one could do something like this, trading less on the high risk volatility, and more on the consistently available lower risk volatility.
Each trade, you get exactly 0.15% profit.
A single trade will get you $0.15 profit. Who cares, right? Well, actually I do- a great deal! Try that in your bank's savings account!
After 100 trades, you will now have $15 profit.
After 1000 trades, you will have earned $150. Honestly, playing it ridiculously safe and after a few years, it's not a terrible thing to try to do to double your money and eventually re-invest it. But remember, we're talking a day trader who's goal is to cash out profit and pay bills. In the movie JAWS, the line was "we're going to need a bigger boat". In crypto, "we're gonna need a bigger pile of cash!".
If you've got, let's say, $100,000 principle capital to fund the crypto dream, the numbers look more like this:
100 trades at $1000 each.
1 trade at 0.15% over fees = $1.50.
10 trades = $15
100 trades = $150
1000 trades = $1500
So, applying the same formula, playing the range of volatility extremely low risk, and never ever failing, which technically all of this is pretty much impossible, but we're just doing theory math, but the earnings are comparatively fantastic compared to CD's, traditional mutuals and even those providing a dividend. Tiny numbers add up. But, we still have a problem; that day trader ain't gonna make buck cashing out $1500 every 1000 trades. We either have to raise the volatility, which means we get stuck in trades and lose momentum, or we need even more cash, and frankly if you've got $1M to start with, you don't need the weekly/monthly cash out!
Now let's look at exponential growth.
$10,000 initial principle. 100 trades at $100.
Now, instead of a cash out plan, we are going to leave every ounce of that investment and profit in circulation.
First trade, still $0.15. The difference, is this time we're going to add that $0.15 to the second trade. It's no longer #2 trade $100... it's $100.15. Again, big whooptidoo. In our second trade, instead of a linear $100.30, we have $100.300225. If we looked at this in fiat, it wouldn't register any difference. In crypto, we're stacking sats even if using USDT! Still, tiny.
After 10 trades, instead of $100.5 we have $101.51016561, and now it's 1 penny more and we still barely care, but the evidence is starting show something.
After 100 trades, instead of $115, we have $116.17036743. That's now an extra $1.17 from the same 100 trades. That is noticeable, but still relatively insignificant. But, the idea of exponential growth is about building wealth to a point of increasingly higher rate of return while still sitting at very low volatility.
After 1000 trades, instead of $150, we now would have $447.66550357!!!!! That's almost 3X and again, from the same work.
Maybe we make this math more realistic. Let's say you think you can steadily get 0.5% from each position.
$10,000 initial principle, perfect score, not possible, theoretical, nuff said. $100 100 trades circulating.
Linear: 1 trade = $0.5 profit
100 trades = $50
1000 trades = $500
Exponential: 1 trade = $0.5 profit
100 trades = $164.66684921 ($14.66 more than linear)
1000 trades = $14657.562561
So, if you were perfect, and you're not, and you had $10,000 which maybe you do, would you rather do 1000 trades with moderate risk and get $500 for an XBox, or would you rather have an extra $4657 for doing the same work?
The real miracle of exponential growth is in the high volume of low volatile trading. It is the reason that HODL'ing is nice for a 10 year plan if you've believed in crypto that long, but in the same time applying this exponential theory will look stupid for the first 8 years, and then will fly by anything you could HODL in the last 2 years. What could be a 10X in HODL if done perfectly, ends up as hundreds of millions of dollars with a crazy amount of sweat equity.
Now for the 'rona.
Exponential growth looks pretty if it means mad gainz, boi. But, what about them spikes, lockdowns, masks and social distancing mania?
If you have a population of 1 million people, and let's pretend 1 in 10 is infected with COVID-19, that's 100,000 people at risk. Just for pretend numbers, since the CDC and WHO are never going to figure out how to actually count, let's pretend 1% of people infected die. Those numbers sound tiny, but it means 1000 people dead in a population of 1 million. That sucks. But, what if we applied that model in exponential growth, it would mean that the population of 1 million interacts with another population of 1 million, which is entirely possible in the U.S., for instance, where you have a lot of suggested, but not mandatory, lockdown and limited local business. If you can visit family in neighboring states, chill at restaurants, stop for gas, use that nasty gas station bathroom and buy chips and a Kit Kat and power drink, let's say 10% of the people doing exactly that, have the 'rona and don't know it. 200,000 potential cases at 1% are 2000 potential deaths. That is still linear. The more the population interacts with higher numbers, and the longer duration of exposure, the more likely more people are infected, and again most of them it doesn't matter. Either they feel sick and recover, or they have pre-existing conditions and get really sick. With 10% infected reaching an increasing population size that interacts, the exponential growth comes not just from the linear math, but the number of places one exposes others, and where those people go from there etc. There is a very, very, very good chance that 10% of the population becomes exposed to 10% of the greater population who had access to others infected. It actually ends up very quickly looking like 10% + 10%= 20% infected reaching potential 30-40 million in neighboring states, parks, schools, Wal Mart and the list goes on. 1% of 3-4 million new people x 2 now looks like 6-8 million infections, with as many as 8000 deaths.
This is not at all comparing exact scenarios, but it is true that the math works either for us, or against us.
Some say herd immunity is exactly what is needed, in which case we need to break through a threshold of numbers that is simply not going to happen. If herd immunity actually works, it needs to build exponential capacity to expose enough of the population that new infections simply lose power and volatility the more people affected. If we lockdown, social distance and keep kids out of school every time the numbers spike, there is zero chance to test the theory of herd immunity. But, if lockdowns, masks and social distancing are not ending a virus outbreak after 10 months, then let's face it, the numbers don't add up, and there is something very fishy going on.
The truth of the matter, is that in crypto, exponential growth requires a myriad of other factors to succeed, including a plan for dealing with inaccuracy, a plan for paying fees, a plan for how many hours it takes to reach certain goals, and a lot of things that stick it to the man... or rather to the exponential growth. With the virus, exponential growth is the most likely thing to happen, and with zero effort we can have growth that eventually takes that 10% and guarantees it reaches almost full capacity. But, our efforts to minimize seem to be hitting gaps of data that don't make sense as well. 1% of any kind of death that is avoidable is worth trying to face head on. But, when the science and the methodology do not add up, the blame game and politics doesn't solve a freakin' thing. That is what the math needs to learn from reality. With the 'rona, sure a lot of people are going to expose themselves to a new risk' vaccination. I'm not a die hard anti-vaxer, but I am a well-researched individual who does not immediately trust insiders to a multi-trillion dollar industry that cannot be sued if they cause the Zombie apocalypse. So, while this article offers absolutely no answers to resolving the virus, it does provide a solid foundation for you to trade your way to $1 Billion, so if you don't die or become a flesh-eating maniac (like some youtube videos suggest considering people's COVID behavior), you do stand to earn some big bucks if you design your own exponential growth strategy!!!
So, do that.
And for now, Gordon Freeman, Crypto super hero and exponential number calculator, out.