The traditional markets have gotten themselves into trouble, as Weiss Ratings founder Martin D. Weiss explains in this week’s Weiss Crypto Sunday Special.
The policies of the traditional markets are not sustainable — certainly not with inflation rising. But, according to Martin, the powers that be don’t care. They’ll continue printing money, buying bonds and keeping interest rates low to keep the boat afloat now ... regardless of the damage it may cause down the line.
If the traditional markets are broken, it makes sense to step sideways into a new system — the decentralized finance (DeFi) system.
If you haven’t seen our latest Sunday Special, you can watch it here or keep reading for the full transcript ...
Chris:
Hi there, guys. This is Chris Coney speaking, and welcome to this week's edition of the Weiss Crypto Sunday Special.
My guest today is Dr. Martin Weiss. And the microeconomic topic we'll be discussing today is why the traditional markets are in big trouble and how you can profit from the big opportunities in the transformation that is underway, no matter which way it goes.
So, first of all, Martin, welcome to your first Sunday Special.
Dr. Martin Weiss:
Thank you for having me here. I really like the work you've done. I really love the interviews you’ve done with Marija Matic and the rest of the team.
Chris:
Absolutely. They're just a wealth of knowledge, those guys, so I'm always delighted to talk to them. So let's begin with the first part of that statement I just made. We're in the process right now of building a DeFi program, so this is the ideal time to talk about this.
On a macro level, how have the traditional, global markets gotten themselves into trouble? And then we can go into the transformation that's underway.
Martin:
There are several dimensions to it. It's all one big phenomenon, but let's look at the key dimension first.
In order to save the traditional financial system during the Great Financial Crisis of 2008 and the great recession that followed, and the big post-pandemic and pandemic crisis of 2020, they have had to effectively eviscerate the income of not just millions but billions of savers and investors around the world. And they have had to basically exploit all the small and even big borrowers around the world.
Because in order to save the financial institutions, they had to shove down interest rates to zero or practically zero. And they had to give the opportunity to borrowers to earn a lot more, especially on things like credit cards. So, the end result in the United States is the average one-year yield that you can get on a bank CD is less than two-tenths of a percent. Last I checked, it was 0.18%.
That means if you invest $10,000, all you're going to get for that at the end of the year is a meager $18. Not even enough to cover an Uber to get you back home from the bank.
Chris:
It's a good point.
Martin:
On the flip side, if you're a credit card user and you don't pay up immediately and you actually build up a debt on your credit card, you're going to have to pay a minimum of 24%. And if you let it compound, you're going to have to pay over 30%, maybe even as much as 40% per annum.
Chris:
It's the same in the U.K., 25% to 30%.
Martin:
Exactly. So that is a disaster — not just for a few people, but for billions of people around the world. And anyone who is trying to either start a business or earn a little bit of income to cover their expenses, but their nest egg is in big trouble. If the majority of the people are in big trouble financially because of that, you better believe that the financial system as a whole is in big trouble.
Chris:
Right. Where's that money going then? If the 25% of the credit cards isn't going to savers, who's getting it? Because we know the savers aren't getting it.
Martin:
Banks are getting it, and a lot of it is being used to cover the risk of defaults on those credit cards, of nonpayments, or chargebacks or other things that happen.
But the worst of this is that after driving interest rates to zero, and after printing trillions and trillions of dollars all over the world on top of that, the financial system is no safer today.
Chris:
Well, isn't that because it's essentially the same system?
Martin:
It's the same system. And instead of fixing the problem, they're just sweeping the dirt under the rug and making it worse and worse for the long term. Now, in the near term, the markets are up, the economies are recovering, everything is fine. For politicians, that's enough; but for economists who study the long-term durability of any financial system, it's very bad news.
And now, we're starting to pay the price in the form of the inflation. When the CPI was bad two months ago, the White House came out and said it was just temporary. When the CPI was even worse in the most recent announcement — in fact, the worst it's ever been in eight years, now 13 years — they said the same thing: "Oh, it's just temporary."
But guess what? Back in [the] 1970s, when we were watching inflation snowball into double-digits in the U.S., they also said the same thing.
Chris:
Do they believe they're in denial, or they're hiding the truth? What's going on there?
Martin:
It's a combination. Some people who say it believe it. Some people who say it don't believe it, but they're just saying it because that's what they have to do in order to keep their job, or in order to maintain the —
Chris:
Keep people calm.
Martin:
Or in order to justify continuing to do what they’re doing. If the Federal Reserve were to agree that this is really the beginning of a snowball and it's going to really skyrocket into double-digit inflation or worse, then they would not be able to justify the continuation of the money printing that's going on right now, which is huge.
It was a big explosion, starting in March, April of last year when the money markets were freezing up. That continued for several months, and now it's just a series of mini explosions that continue it on, and it's still growing at a very, very rapid pace.
And what we're talking about is the Fed's balance sheet assets. Because when it pumps money into the economy, it has to buy something up, such as Treasury securities and government agency securities ... sometimes even corporate bonds. And it has to put that paper away in its store room, which is its balance sheet. And so that store room is now just piling up sky high, and they report it every week. So we know exactly how much money is there and how much it's worth.
And that is an exact measure of how much money — paper or electronic money — they're printing into the economy. You can call it electronic, you can call it paper, but in either case, we call it funny money.
Chris:
Well, they're issuing the funny money, but they're getting the assets, which is real wealth.
Martin:
It's real wealth up to a point —
Chris:
It depends on what they're buying —
Martin:
Because if they're buying it, they're bidding up the prices artificially. So the real value of those assets is much lower, especially since they're all fixed instruments and especially when inflation begins to kick in. Those assets are valued as if the inflation were running at 2%. If the inflation is really running at 4% or 5% or 9% to double-digits, those assets are going to just plummet in value. So they're taking a big risk with those assets.
Chris:
So, we're not privy to the private thoughts, but do they not just look further down the track and see this is not sustainable?
Martin:
They do.
Chris:
They do. And they have a plan for it?
Martin:
They don't have a plan for it. Nope.
Chris:
They don't have a plan for it.
Martin:
Their plan is to just do more and more of the same hoping that they can —
Chris:
Hoping that?
Martin:
That we won't have another great financial crisis, or if we do, they'll be able to anticipate sooner. But there are so many black swans in our global economy today which go beyond economic. And that's the underlying issue.
This is not just about paper. It’s not just about moving Treasury securities from the open market into the vaults of the central banks. This is also about people. It's about us. And the other big side effect of the Federal Reserve central bank intervention is inequality.
Chris:
Yes.
Martin:
Not only inequality within a nation, but inequality between nations. So, when they pumped that money in, it popped in from the top. It does not trickle down — hardly any reaches the average person. Instead, the money flows into the banking system. From the banking system, it flows into the biggest corporations, and the biggest corporations are managed or owned by the elites. So it's a major factor in creating more and more inequality within nations.
All that marches along, and nobody notices [the] difference except the poor or the middle classes that begin to get shoved into the lower cap classes around the world until it just explodes to the surface in the form of revolutions — from the right or from the left because both the left and the right are people, and they're both impacted by the same phenomenon.
In fact, they have a lot in common in that they're both suffering from this aftermath or these unintended consequences of this Federal Reserve and central bank money printing. So that's a black swan event. You don't know when it's going to strike. You can't know and can't predict in what form it will strike. And the only responses that governments around the world have used are increasing amount of authoritarianism, increasing amounts of repression and decreasing amounts of individual freedom.
Again, it sweeps the problem under the rug temporarily. It represses the immediate expression of those issues, but it doesn't make them go away. It actually builds them up, and the pressure cooker starts building.
So now you have three pressure cookers, and they're all related. Pressure cooker number one is inflation, which is about to explode. Pressure cooker number two are these interest rates, which have been suppressed to near-zero levels, which is absolutely ridiculous. That's the pressure cooker that's about to explode, with surging interest rates.
And pressure cooker number three are revolutions and coup d'états and just instability all over the world that could explode anywhere at any time. So that's the problem, and that's why the financial world and everything that surrounds it is moving deeper, deeper into a red zone.
Chris:
So, the central bank is doing more of the same hoping this time it'll be different, sort of thing. But that must mean they do not see the systemic flaw. The flaw in the very system itself.
Martin:
They don't.
Chris:
Because if there's a systemic flaw, anything you do within that system will not solve the problem … because it's still within that same system.
I was thinking about this inequality issue recently in terms of what makes a viable business. So, if you trend this out, it gets to the point where it's almost like the Amazon problem. It gets to the point where it only makes sense to do business with wealthy people because they're the only ones with the money.
Martin:
There's a movement now to accelerate the antitrust legislation by the Department of Justice, by Congress and so forth. And that's a patch. The problem is not the laws. The problem is not the legal system. The problem is the capital markets. And the capital markets have become less and less accessible to individuals, to small entrepreneurs and small businesses. It's harder and harder for those to do IPOs, to borrow money, to get credit lines.
And suppose you're trying to start a little stall, a little corner in the market in Jakarta, Indonesia, to get credit. And let's say you have your produce or your merchandise you want to sell and you want to finance a little shack to sell it from — where are you going to get the money? What banker will sit down with you to open an account or give you a line of credit?
Chris:
That is the problem.
Martin:
That's a huge problem because it inhibits the millions of individuals and the small businesses that could create wealth, not only for themselves but for the benefit of the entire society, and including for the benefit of the elites.
Chris:
Sure.
Martin:
So, we have the pressure cooker of inflation, the pressure cooker of surging interest rates. And then we have this massive inequality not only in business but also on a personal level between nations and within nations.
So let's talk about the solution. What you've been talking about with our experts, with Marija Matic, with Juan Villaverde, with Alex Benfield is decentralized finance (DeFi). And decentralized finance is right now. Not some 10 years in the future, but right now, developing and even offering solutions to all of those problems.
Chris:
You said broken capital markets are the base, which create these emergent problems that are anti-trust. But that’s too high level. That's not where it's at. That's the effect, not the cause. The cause is in broken capital markets.
So if that's where the traditional system is majorly flawed, if we take this sideways move into a new system, the decentralized finance system, how does that fix the capital markets is the question.
Martin:
That is the question. And we'll get into the details in a moment. Then, you can follow up with our experts for even more detail, but the main question is, is this going to replace the traditional financial system, or is this going to enhance and improve upon the existing financial system? The choice is not mine or yours. The choice is [with] the elites and the managers and, ultimately, the owners of the financial institutions, and the regulators who are behind them. If they try to stomp it out, "Oh, look at these little pests here who are trying to invade our turf. We'll just spray them with some ..."
Chris:
Regulatory weed killer.
Martin:
Yeah, regulatory weed killer. Exactly. Or, "Hey, wait a minute. They have some very interesting ideas here. How can we modify the existing financial system, modernize it in order to address all these problems in a fundamental way and improve our own lives, improve our own stability and durability and bring in a tremendous amount of customers? We don't have to have a loan officer for every single client or for every hundred clients. We can have 10,000 clients that do everything on the blockchain, and we're a part of that ecosystem." So, which is it going to be?
Are they going to try and stop them out, or are they going to incorporate or co-opt, adapt to the new emerging markets, the new emerging financial system? Well, the answer in most of these kinds of transformations is both. Some more advanced thinkers will take one route. Others will take another route. And sooner or later, you'll have an integrated centralized and decentralized financial system down the road.
Chris:
You talked about authoritarianism earlier on, right? What I thought when you said that was that is the natural response to deal with these pressure cookers, which they're like areas of chaos, right?
Martin:
Right. It's the knee jerk political response for people who just want to win the next election or for people who are just near-sighted to begin with.
Chris:
But again, the near-sightedness, you compared the politicians to the career economists, which means we're always looking at different time horizons one year, five years, 10 years, 30 years, 50 years, a hundred years, whatever. Whereas politicians just don't have that mindset because of the way their terms work.
Martin:
Correct.
Chris:
So that's another systemic flaw. There's no incentive for them to think beyond that.
Martin:
The original answer to that was to give central banks independence so that they can think long term, even if the politicians are just focused on the next election. Again, that separation of monetary policy and fiscal policy, the church-and-the-state-type separation has begun to dwindle over the years, and that wall has begun to cave. The so-called independent central bank is becoming a relic of the past.
Chris:
The fed offices also have short terms as well though.
Martin:
Yes, but they're not the same. I haven't seen any Fed chair in my lifetime who's particularly hungry for power or particularly concerned about what the public thinks today. There are some exceptions, obviously — they all have a public presence, but left to their own without the influence or intervention from the politicians, they would more likely follow a prudent path. My dad and I went down to see Fed Reserve Chair McChesney Martin in the 1960s. And he was the longest standing chair of the Federal Reserve in history.
He went through multiple presidents, and they were different, both Democratic and Republican. And even then, he felt that there was a little bit too much harassment, I should say, from the man in the White House. He just wanted us to follow a steady course that would prevent inflation for decades to come. And he was beginning to feel very intense pressure to lower interest rates and accelerate the expansion of the money supply. And that's why we went to visit, because my dad founded the Sound Dollar Committee, and he was looking to my dad to raise public awareness and to create some public pressure against the aggressive, very old.
Chris:
Well, so that's where you say the separation between the church and state thing starts to collapse a bit, when the White House starts pressuring the now independent central bank, threatening its independence by trying to lean on them a little bit. Doesn't make any sense.
Martin:
There are multiple ways of doing that. But it's not a lost cause because after the next cycle, suddenly people look back and they say, "You know what? We made a mistake. We really goofed. Now let's do something substantive, such as DeFi, such as more independence for the central banks to fix it for the next time."
Chris:
Got you. So in terms of DeFi's potentials, the right side of the world economy, what do you think about automating the central bank? The “what is Bitcoin (BTC, Tech/Adoption Grade “A-”)?” question is answered a number of different ways. What Bitcoin is to you depends on how you use it, but describing it as an automated central bank is something I've spoken about more often, recently. So that is more akin to the very steady sets and costs that you were talking about. I suppose, if it were the Federal Reserve chair that was looking for a slow and steady stable policy, that might bring into question the validity of that post. It's like, "What do we need you for?" And the answer is, to hold onto the rudder to make sure it doesn't go awry.
Martin:
Exactly. So, a good metaphor is in our ratings business — as you know, we issue ratings on over 52,000 different investments and companies, including cryptocurrencies. And we do two things. The first is we have an automated process, which is driven by the code and by the data independent of any human intervention, except for the creation of that code. And that code punches the data on these 52,000 different entities. There's no way that you could do that with all the fresh new data pouring in on a daily basis with even a staff of 10,000 people. There's no way. There's just too much data, too much analysis.
But the computer and the data have certain limitations. And until we get some super-duper AI in our models, it still requires a thinking person who has an awareness of everything going on in society beyond just the numbers, beyond just the quantitative data, and can make a reasonable judgment. So after you get all that data crunched and you have the results, the second step is to have a thinking analyst to look at it and do a reality check — make sure there's no random event or something happening in the markets that might prevent him from recommending that particular investment.
The same should be true for central banking. The blockchain and the rules built into the code can drive 90% or 99% of the workload of monitoring the economy and then making minor adjustments automatically in real time. But still, you'll need some living organic person or group that looks at all that in the context of what's happening in the real economy, in the real world, including things that are happening that you cannot measure quantitatively.
As soon as we develop those tools in the future, fine, add it to the model. But until then, you got to look at it and you have to look at it in the context of the politics, in the context of the society, in the context of things like public health.
Chris:
Sure. Do you know what oracles are?
Martin:
Like Chainlink (LINK).
Chris:
Like Chainlink, for example.
It's how to get real-world data that isn't generated by the network itself into the network.
So that would be like a prediction market. You can have all the code and so on, but someone has to say who won the ultimate fighting championship because the autonomous system doesn't know that. It's outside of the cyberspace. So that is an area of innovation in DeFi that eventually would lend itself to all manner of quantitative data going into those systems. But there's a lot of work to be done there.
Martin:
There are two other problems. There's a lot of data that's not economic and financial that, as cultural anthropologists, we’d have to gather in order to understand the culture, in order to understand what's driving mass psychology, in order to understand what the threat of civil unrest might be and what the consequences are. All those things we have to try and quantify as best we can in order to feed that data into. It's not just financial data.
And the second problem is there's a lot of data as I said earlier that is simply not quantifiable. It's very valuable information that's just not quantifiable in a model. For example, an individual head of state or individual CEO that might be on the verge of resigning or doing something very unusual can have a major impact on the financial markets and on market psychology.
Chris:
Got you. So that could be a human heuristic where you go, "Ooh, Martin Weiss has not been happy these days. I think he's going to resign."
Martin:
Imagine a meeting in a CEO boardroom and there's an emergency, or we're in the Situation Room at the White House and there's been a major terrorist attack. There's neither the time, metrics or the tools to quantify that situation. It's just people getting together and trying to make the best decision they can.
Or, you're on the verge of a nuclear war with the Soviet Union because Khrushchev has just ordered missiles on the island of Cuba pointing to the United States. Now, what? How do you get that into your quantitative model?
Chris:
Well, there's so many possible variables from that. So much —
Martin:
So, beyond the computer and the blockchain, there's still going to be an important place for someone, central bank, central bankers, CEOs and thinkers who can look at a situation and make special emergency judgments. But the day-to-day regulation should not only be automated, but it should be implemented in real time.
And that's another thing that's lacking in our traditional financial banking system. If I'm a broker and I'm at Merrill Lynch, and I call you a broker at The Goldman Sachs Group, Inc. (NYSE: GS) and I say, "Okay, I want to buy $10 billion worth of your 10-year Treasury notes, and I'll pay you X dollars for it," and you say, "Deal," it's going to take days.
That's a solid deal. That word closes a deal and there's no turning back, but it's going to take days for that transaction to settle. On the blockchain, that transaction could settle almost instantly.
Chris:
I was going to say, even the decentralized capital markets, where we talked about making one loan of $1 million or a million $1 loans, well, those kinds of things go beyond internet banking, where you can apply for a loan online and be accepted in five minutes and all that stuff. You're still going to get the money transferred to you. Whereas these decentralized capital markets, the interest rate is right there, and within two minutes, you can see the loan in your account. It's literally that fast — you click the buttons, and you can have that loan in your account, the money boom. And there's no particular term to it, right?
Martin:
Right. And there's a huge upside for the bankers as well as for their customers. If you're a banker and you're sitting in London — I know you're a little bit north of London, but let's assume that you fly down to London — and you're given a choice between 10 million customers or 1 billion customers, which would you prefer?
Chris:
Well, it depends. It depends on the —
Martin:
Well, they're all profitable.
Chris:
They're all profitable.
Martin:
They're profitable. Obviously, a billion is going to be less profitable than the few large customers you have. But collectively, they're going to be much more profitable. And by the way, if they get richer over time, then they're going to truly be more profitable for you.
Chris:
Well, I was going to say it depends on the cost of the infrastructure. It depends on the cost to serve those people, which is back to my 1 million $1 loans.
Martin:
No, no, but my question assumes that you're going to be able to serve them profitably by leveraging the power of the blockchain and DeFi.
Chris:
Right. So if a bank uses that as their backend liquidity provider, say, and then they could provide added value services on top of that.
Martin:
Right. Right. Right.
Chris:
Very true.
Martin:
And I guess it's also to the benefit of the customers to have access to the global financial markets, which they don't currently have. But overall, all of us, whether we're middle class, high class or low class, benefit when the access to the financial system goes beyond just the existing customers, the existing base to a much larger base … everybody benefits from that growth.
Chris:
Do you think that will really happen though? Because what we just laid out there is you've got the automated —
Martin:
It's already happening.
People will have choices, right? Today, you have multiple choices about how you get your information. You can read a hard copy book, you can get on the internet, you can watch it on YouTube and so forth.
The same is going to be true for financial services. You have a choice. And the more choices you have, the better it is for everyone. Already, the traditional financial system is rapidly digitizing. We live in a very nice neighborhood. There are a lot of wealthy people in this neighborhood, middle-class high, high middle-class and wealthy ... but the branch of SunTrust that services this neighborhood just closed down.
And that's happening to a lot of bank branches around the world because the banking system itself is digitizing. People don't have a need to physically walk into the branch anymore. They do everything online. So that's the first step. The next step is to move a lot of those transactions and a lot of that infrastructure over to the blockchain.
Chris:
I'm still not getting why the bank would have to sit in between it, though, because it feels to me like going to a company and saying, "Can you please send this email for me, and this is what I want to say?" It almost feels like that.
Martin:
To some degree, it is that. So there are two things that are standing in the way. One is the infrastructure, the legacy computer systems. There's a tremendous amount invested in that. And as we saw, it took a long time to go from COBOL, for example, to the code that they're using today. That was way behind. The banks were probably the last ones to do it because they had so much investment in it, right?
Chris:
Yeah.
Martin:
I think they're still in the old days. And then there's one more other factor, which I can summarize in just one word: fear. They're afraid.
Chris:
What's the fear?
Martin:
The fear is the same fear that well-established newspapers and encyclopedia publishers and so forth had of moving from the hard copy to the digital distribution of their content. They were afraid that by so doing, they would be trashing their existing business and would lose their profitability, causing everything to just disappear.
Chris:
I totally get it, but if it's going that way anyway, that's inevitable.
Martin:
It is. And some of them catch on sooner and some of them catch on later, but it takes time.
Chris:
So they might still be in denial, like it's going to be a fad or something.
Martin:
And some of them fall by the wayside.
Chris:
Not willing to make the transition.
Martin:
So, some of those big banks will fail, although they’ll be merged up into another institution. And there's going to be a battle. It could be a bloody battle — I don't mean bloody literally — or it could be more of a friendly transition, or some combination of both. But it's happening. No matter which way it goes, it's happening. And the information that you're bringing to your viewers via the Sunday Special is giving them insights on how to take advantage of it.
Right now, for example, Marija is focusing on yield opportunities. And just to give you some examples I just printed out from her Tuesday issue, you can earn a 20% or more annualized yields with nearly zero price risk to your principal with USD Coin (USDC) and Dai (DAI) with the QuickSwap (QUICK) tokens that she describes. And she gives a whole guide for that.
You can earn 20% yield staking Terra (LUNA). You can earn up to 50% yields again with near-zero price risk to your principal by staking Dai on Polycat. Now, I'm reading these words. I personally don't know how to do this. So I'm looking forward to a video by you or someone on your team to explain this to me and walk me through it step by step. And here's when it really blew my mind. If you stake your QuickSwap, in other words, your QUICK token on Polycat using ... is that Fish, right?
Chris:
Yes, that's right.
Martin:
You can go up to 200% yields.
Chris:
That's great.
Martin:
And Marija said she actually got 400%, if you annualize —
Chris:
I've been doping it myself.
Martin:
Oh, you have?
Chris:
Yeah, with her advice.
Martin:
It really works?
Chris:
It works. It's actually very straightforward.
Martin:
So, if the yields plunge in half from, let's say, 200%, and you're getting only 100% yield, that's still not a number we're going to typically associate with yield in the traditional world. The highest number we would associate with yield might be like the 20% interest that we talked about that people pay on credit cards. Or if it's a wild inflation situation, like we saw in Argentina or Venezuela, then obviously we get those huge yields. But with 2% or even 5% inflation that we have now, a 20% yield isn’t possible, let alone a 200% yield, 100% yield.
Chris:
Well, it's higher than that. Because of course, the yield does go down as more people get in. But in her original screenshot, the yield on QUICK was like 1,200%. So now it's down —
Martin:
If you annualize it.
Chris:
If you annualize it. Yes, absolutely.
Martin:
But after a year, it goes down and maybe it'll average out down to something much less than that.
Chris:
Oh yeah, it's going down right now. It's 200% right now.
Martin:
Only 200%, right?
Chris:
Yep. So I actually looked it out. I was profitable in 21 days. Put it that way.
Martin:
So, this is not going to be forever. Once the system stabilizes and more people get into it, I think obviously the yields are going to adjust down to more normal levels. But even then, it's going to be a lot higher than the 0.1% that I mentioned —
Chris:
Because it's a free market.
Martin:
... but the question I have is risk.
Chris:
Yes.
Martin:
Normally we would associate those high yields with extremely high risk. So, what is the downside when you do this last one, staking QuickSwap tokens on Polycat for those 200% yields? What could go wrong there?
Chris:
So, the first that might cook people's noodles is those yields are on the quantity of QUICK tokens themselves. That's not denominated in U.S. dollars. So if I stake 100 QUICK tokens and I get a 50% gain, I end up with 150 QuickSwap tokens. Now, the U.S. dollar —
Martin:
Wait a minute. So the previous ones I mentioned, which were about 20%, even 50%, were using stablecoins, right?
Chris:
They were U.S. dollar-leveraged stablecoins, that's correct.
Martin:
So there, the price risk was, like we said, relatively limited, or there's virtually none, right?
Chris:
Yeah.
Martin:
But on the Polycat platform, there is price risk because you're holding the QUICK tokens. Is that it?
Chris:
Exactly. There's no risk to you losing the number of QuickSwap tokens you've got — you will add those gains. But the dollar-denominated value of the QuickSwap tokens exists, whether you just buy it and hold it or whether you farm it on Polycat.
Martin:
So the 200% yields you cited though, we're not including the price appreciation in the QUICK tokens.
Chris:
No. That's to accumulate more QuickSwap.
Martin:
Right. But as long as you're holding those QUICK and you're not in stablecoins, then you are exposed to the risk of the QUICK tokens going down significantly in value while you're holding them.
Chris:
Exactly.
Martin:
Is that correct?
Chris:
Yes, absolutely. But that's the thing. Vin Kumari has already recommended the QUICK token as a play anyway. So if you're long-term bullish on that, well, you may as well double-down and press it. If you think QuickSwap is going to go up in its capital value, that's fine — you buy and hold it. But if you can get 200% on top of that, actually accumulate more of those tokens, why not?
Martin:
So, this 200% has risk to your principal, let's face it. And the only way to avoid that risk would be to take the yield out just like you would unwind an investment, right?
Chris:
Yes. You can. Actually, that's a good point. And Marija does give you that option in her guide. She says instead of compounding, so you start with a thousand QuickSwap tokens. Instead of getting more and more QUICK tokens, you can keep the thousand QUICK, and then every time you get a yield from Polycat, take it in U.S. dollar-leveraged stablecoins.
Martin:
So there you're adding some balance or some improvements to the investment. You're still risking a thousand principal you have in QUICK tokens because that can go up and down. But you're taking your yield out as you go so that that amount goes into U.S. dollar stablecoins.
Chris:
Absolutely. You can do that. That's the thing. It's flexible.
Martin:
But if you don't compound, are you still going to make the 200% yield or [does] 20% yield include the compounding?
Chris:
Good question. Polycat gives two readings. One is APY and one is APR. APR is just the natural interest rate if you didn't compound, and APY is if you did compound. So you can —
Martin:
So which one is the 200% that she cited, the APY or the APR? I don't remember.
Chris:
Well, I can look it up, actually, if you want. Let me see if I can bring up the Polycat post.
If you don't compound, it's 103%. That's the APR. And if the APY is —
Martin:
Right now?
Chris:
Right now, yeah. And then if you do compound, you're looking at under 181%.
Martin:
181?
Chris:
Yeah.
Martin:
So it's good. The number she cited of 200% is probably with the compounding because that's close to what it was.
Chris:
It looks like it. It does.
Martin:
And it has come down a little bit, but I'd be happy with the non-compounded.
Chris:
Absolutely.
Martin:
Then, my only risk is those 1,000 tokens.
Chris:
Sure. That's very true.
Martin:
And it looks like the markets have gone flat here, which implies that the next move could be up.
Chris:
That's actually why Marija is focusing on the yields, because while markets are sideways, switching strategies to these yield farming opportunities is absolutely ideal.
Martin:
Right. Exactly. So I think we've solved the world's problems now. It's just a matter for the world to figure it out.
Chris:
Now, we just need people to move from the old system to the new system because all that capital needs to flow in.
Martin:
And I'm sure there's a lot of development work still to be done in the new system. It's just in its infancy as well.
Chris:
It is. It is. And it doesn't take long for an idea to become realized, as I talk about in the DeFi course. It's permissionless innovation. Anyone who spots an idea, a new market, they can deploy it so, so quickly because all the infrastructure is there. You just write the code, deploy it, get the word out and boom.
Martin:
I'm glad you reminded me about the DeFi course. Could you tell us a few words about that because I'm really anxious for that to be completed.
Chris:
Most of what we've spoken about today and the Polycat stuff — that's one single lesson from that program called DeFi Yield Farming, but there are a dozen other strategies. There are actually several different yield farming strategies within that, like DeFi staking, lending and borrowing. There's all manner of other things, like platform investing and all kinds of things like that. And I think the concepts or principles from traditional investing do carry over. It's just you have to tweak your mindset of how they are deployed in this new decentralized financial system.
So you're not reinventing the wheel. The principles are still there. It's just “how do they apply in this new world” is what the course is going to teach.
Martin:
I get it, and it's still not as user-friendly as a traditional financial system. First of all, you can't call your banker and say, "Please do this for me." Number one. Number two, I've tried it and it's not as simple as opening an online banking account.
Chris:
But that's, of course, the opportunity there because by the time it's simple ... all those yields would be gone.
Martin:
So you got to grab it now while it's still available.
Chris:
Exactly. It's worth it putting in a bit of effort to get in there.
Martin:
Absolutely. 200%, I'll take that.
Chris:
Exactly.
Martin:
I'll take 100%, and I can work hard for that. Click a few more buttons.
Chris:
Right. And that's our job, to guide you through it.
Martin:
Well, thank you very much. I'm looking forward to that.
Chris:
Okay, great stuff. Well, thanks very much for being on this edition of the Weiss Crypto Sunday Special. I think we'll close it there.
Martin:
Thank you very much.
Chris:
That's going to do it for this edition of the Weiss Crypto Sunday Special with me, your host, Chris Coney and Dr. Martin Weiss. Until the next one, bye for now.