It didn’t take me long in the crypto world to realize that it’s an ecosystem being fueled by the “House Money Effect”.

Having spent countless hours in the world of high stakes poker I recognized it instantly and now can’t stop seeing it everywhere I look. A short 🧵👇
For those of you unfamiliar with the House Money Effect, it’s a theory used to explain the tendency of investors to take on a much greater risk profile when reinvesting profit earned through investing than they would from money earned in other ways (i.e. - wages).
In the early days of online poker (2003-2006), anyone with a semblance of talent was able to turn hundreds of dollars into hundreds of thousands of dollars playing online. The player pool was deep and 95%+ of the players were really bad. Picking up their money was easy.
There were a few hundred players who started with small deposits and quickly amassed high six figure/low seven figure bankrolls. Did they set up nest eggs and save for a rainy day? Did they plan for retirement? Hell no!

Guess what two things happened?
First, they had to find ways to chase the dragon. Playing at nosebleed stakes was common because the lower stakes couldn’t quickly move the needle on their bankrolls. And playing at stratospheric levels differentiated them from the general poker community which was an ego rush.
Many high stakes players found ways to gamble on everything in life because it became part of their identity. This effect was magnified in an echo chamber because they spent every waking moment together playing poker, studying poker, or partying with their poker fortunes.
Second, they became numb to the value of money. A $10,000 watch was “1 buy-in at a $50/$100 table”. A $1000 steak or a $2000 pair of shoes was mere rounding error. They were living lives disassociated from reality unless you started with the belief that money was infinite.
After spending a few weeks in cryptoland I feel like I’m back in 2005 trying to talk an 18-year old millionaire into opening an IRA.

The House Money Effect is at play but magnified to a never-before-seen level in the history of humanity due to the magnitude of the winnings.
The estimates I’ve seen imply that there are over 100,000 crypto millionaires. Of this, almost 10,000 are worth at least $10MM. The impact of the House Money Effect on the ecosystem with this much House Money at work is mind boggling but it explains a lot.
What I worry about is seeing a repeat of the psychological damage that “riches to rags” can cause. When I was part of the poker scene, I had heartbreaking conversations with poker players who lost everything in their quest to stay on top. It’s damage that some never recover from.
So while there are a lot of interesting innovations taking place in crypto, I can’t help but hope that we never experience a crypto winter or NFT wipeout that creates tens of thousands of “broken” people. I’ve seen it happen to a few people in my life and it isn’t fun to watch.

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with fintechjunkie.eth

fintechjunkie.eth Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @fintechjunkie

29 Nov
After years of sitting on the sidelines, I finally decided to take the red pill.

“Week 2” put me on the steepest part of any learning curve I’ve experienced in decades.

Here are a few of my simplified observations, early conclusions and emerging frameworks:
2/44: Observation 1 (W2): Taking the “red pill” meant different things to different people

It was amazing how polarizing these words are to the community-at-large. The sheer fact that I declared that I was taking the red pill created three types of very distinctive reactions.
3/44: Reaction 1: Excitement for me

Many people with a working knowledge of crypto/web3/DeFi who know me well were excited that I’m finally taking the leap into their world. It’s a party they were waiting for me to join because they thought I’d be additive to the community.
Read 44 tweets
22 Nov
Last week I took the red pill.

Here are a few of my “week 1 observations” from my early steps into the land of crypto/web3. 🧵👇
2/28: Observation 1: The community is real

I can’t even begin to tell you how welcoming the community has been. My DMs were full of “messages of encouragement” after my “red pill” tweet. And everyone who I reached out to has been extremely happy to answer my remedial questions.
3/28: Observation 2: Getting set up sucks

I asked a number of people about what they’d suggest as a “minimum viable setup” and while there were many commonalities in the answers, there was enough of a divergence to require research.
Read 28 tweets
11 Nov
Guess who launched another innovative #fintech product targeted at better serving the #startup community? @GetCapchase!

Guess who didn’t? Traditional Banks.

A few thoughts on their new product launch and why Banks continue to lag the #fintech innovators:
2/19: Let’s start with the new product that Capchase just launched.

Capchase Earn is a deposit account that helps startups reduce their cost of borrowing while earning up to 3% on idle cash. It sounds simple. It’s a great product. But Banks don’t have anything like it. Why?
3/19: Banks play a very important function in how startups operate. Products that store money (deposits), move money (payments), lend money (lending) or invest money (investments) typically require some participation of a Bank due to regulatory requirements.
Read 19 tweets
3 Nov
As a Founder, one of the most important things you do every day is allocate people and capital because they don’t allocate themselves.🤯

Becoming a world class allocator can kink the curve on outcomes so building this skill matters…..a lot!

A few thoughts: 🧵👇
2/12: The two main resources that CEOs have at their disposal are people and capital.

The CEO’s job is to transform these resources into the three major drivers of enterprise value:

Learnings, Capabilities and Growth.
3/12: Learnings

A startup is a sub-scale company born from a Founder’s dream to solve a problem in a unique way. The Founder’s initial solution has at its core a set of assumptions that have yet to be proven and over time these assumptions are battle tested IRL.
Read 12 tweets
28 Oct
Are you responsible for leading a stressed-out and overworked team?

Do you want to become a better Leader and create some breathing room? 🧵👇
2/20: In these crazy times, everyone seems overwhelmed and way too busy. The pandemic has blurred the lines between work and home. Being “at-home” or “off-the-grid” has become a foreign concept. It’s a challenge to create boundaries and almost impossible to follow them.
3/20: But even when your team members have a lot on their plates, there are ways to reduce their stress. Results matter, but you also need a team that’s not at constant risk of making mistakes or burning out.

Being long-term focused = Operating at a sustainable cadence.
Read 20 tweets
23 Oct
Six questions you should ask yourself about yourself if you want to accomplish great things in life. 🧵👇
2/25: Question 1: Can you make a promise to yourself and keep it?

Doing difficult things takes time and rarely is the path to success smooth and easy. A truism in life is that quitting is a learned skill so you should ask yourself how sacrosanct a promise is once you make it.
3/25: Much of this comes down to what people call “grit”. Most dictionary definitions of “grit” fall flat (i.e. – Courage, Conscientiousness, Perseverance, Resilience, and Passion) so I’ll pose a much cleaner definition.
Read 25 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!


0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy


3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us on Twitter!