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Good morning everyone,

I'm using a dictation tool for this week's newsletter as I broke my left arm last weekend.

All I can say is be careful with legless rope climbing. And if you find a typo in today's newsletter, you can keep it.

This week I'm diving into an undercurrent in popular culture that I believe is one of the main drivers of crypto price action. I'm talking about financial nihilism.

Let's get into it.

DISCLAIMER: This newsletter is not financial advice. It does not take into account your financial situation, is general in nature, and is for educational purposes only.

Also, this newsletter contains affiliate links. This means that I may receive a commission from them. But for Crypto Down Under, I only choose products I use myself and can recommend wholeheartedly. Don’t forget to do your own research.

1. What's financial nihilism?

Financial nihilism is basically when what your parents told you about the economy doesn't work for you anymore. But instead of playing it safe financially, you double down on risk-taking.

It's when the numbers don't add up anymore for millennials (anyone born in 1980 or later) and GenZers (anyone born in 1996 or later). It's when the upward mobility these young people have dreamed of is out of reach.

Nihilism is an extremely pessimistic belief that life is meaningless. In finance, nihilism means taking bigger risks when the system is stacked against you, because what's there to lose anyway?

At the monetary level, financial nihilism can be said to occur when currencies are eroded by inflation and debasement, leading to upward price distortions in stock market indexes and the housing market, and when this results in distorted risk-taking by the next generations.

2. What are some examples of financial nihilism?

Symptoms of financial nihilism include:

• Sports betting: In Australia, online sports betting revenue is expected to show an annual growth rate of 4.80% between 2024 and 2029, resulting in a projected market volume of USD 12.34 billion. In the US, sports betting revenues have been growing at high double- to triple-digit rates in recent years.

• Meme stock investing: During the GameStop short squeeze in 2021, young retail investors flocked to internet forums like Reddit to invest in the flailing video game retailer GameStop after major Wall Street hedge funds shorted the company's stock. The short squeeze caused some of the hedge funds to lose a lot of money. Some retail investors made money, but a lot of them lost a lot of money in the end. If you need a reminder of what happened, I recently watched the movie "Dumb Money". The movie is about the GameStop short squeeze.

• Meme coin investing: Meme coins are cryptocurrencies that don't even pretend to have value. They are often inspired by internet memes, characters, or trends, are typically supported by enthusiastic online communities, and focus on fun, not value and utility. Older examples of meme coins include Dogecoin and Shiba Inu. Newer meme coins include Pepe, Bonk, and dogwifhat. The largest meme coin by market cap, Dogecoin, is currently the 8th largest cryptocurrency with a market cap of USD 18.2 billion. At its all-time high in May 2021, Dogecoin had a market cap of nearly USD 90 billion. That's the market cap of a company like Shopify.

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3. What are the reasons for financial nihilism?

In countries where home ownership is seen as essential to building wealth, the most emblematic symbol of financial nihilism among young people is being priced out of the housing market.

Look at the ratio of house prices to median household income in the US:

Congratulations if you are a baby boomer who bought your home between the late 60s and the late 90s.

But millenials and GenZers will need a multiple of your income to buy a home. And since salaries have not risen as fast as house prices have gone up, many of them are effectively priced out of the real estate market.

The same is true in Australia:

In 2000, the average house cost 9 years of average household income. Now it costs 16,5 years of average household income. For many young people, buying a home is just completely out of reach.

In addition to providing a safe and stable place to live, owning a home also offers the benefit of building equity, which will help you build wealth in the long term.

If that's out of reach, the thinking goes among young people, I might as well bet on sports or invest in meme coins on my phone.

There are many other reasons for financial nihilism. Young people may be stuck in low-paying jobs, they may be saddled with student debt, and they may be struggling with the cost of living.

There are also many other indicators of financial nihilism, such as the share of total household wealth held by young people. As baby boomers have purchased assets such as stocks and real estate, and as those assets have benefited from currency debasement and upward price distortion, their share of total household wealth has ballooned, while millennials and GenZers hold little to no household wealth. Some of them will inherit wealth, others will not.

4. How financial nihilism relates to crypto

Crypto is a youth movement, and since many of those young people are angry financial nihilists, they are driving the price action.

Bitcoin is a bit of a different story here, as it has been embraced by traditional finance. With the introduction of bitcoin ETFs, bitcoin has become part of the Wall Street landscape and has investors young, old, and institutional.

However, the rest of crypto is still pretty much a Wild West. It's driven by sentiment and trends and can change in an instant.

Remember, none of this is financial advice. You can make a lot of money investing in meme coins. But if you get it wrong, you will lose a lot of money.

However, the next time you see a meme coin going to the moon, you will know why.

Have a great weekend, everyone!

Want to store your bitcoin yourself in a cold wallet? Use the link below to purchase a Ledger Nano S Plus wallet.

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