The Thermodynamics of Crypto Investing

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The Thermodynamics of Crypto Investing
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As the various structural risks of crypto investing change over time, the opportunities for returns change, too.

Once upon a time, when bitcoin came to life, there were many risks. One of the first primordial ones was “existential risk.” Back in 2014, it was not clear if bitcoin was going to make it, especially after the Mt. Gox hack. This was the baffling “funny money” era, when an unsuspecting pizza lover spent 10,000 BTC for a pair of pies.

Many risks still remain, of course, which is why investors still have the chance for outsized returns – though as each risk falls, returns become incrementally smaller. Offshore market makers are decreasing volume, which affects quantitative market-making and high-frequency arbitrage trading strategies.

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