The Case for Nano: As a hedge.

Ӿ The least important case, but a logical one Ӿ

Quickly, what is Nano?

Nano (XNO) is a fixed supply digital currency that transacts instantly with zero fees. These are luxuries that the world has never had in a currency before. The user experience is unmatched in the cryptocurrency space. Feel free to try it for yourself.

Instant and feeless money. The use cases for a currency that carry those two characteristics could set off a chain reaction for potential prosperity around the globe. That is where the real utility is. However, this Substack is about a use case for Nano that doesn’t relate to the core value Nano creates as a currency, but an opportunistic hedge that seems too tempting to pass up.

Gamblers

Do you know people that gamble? Most do, and most don’t know too many that do it profitably. Unless you happen to be friends with a bookie. Hedging a bet is something good gamblers do when given the right opportunity. It may limit your upside, but can limit to eliminate your downside on any given bet.

For a thought exercise, the NFL season is coming to an end and your best friend made a season long bet for the Eagles to win the Super Bowl. If he wins, he will get $1,000 in profit, if they lose he gets nothing. However, their opponent in the Super Bowl is an underdog. How much so you ask? They have +250 odd to win the game. Now those are bad odds, but your friend can eliminate the odds of not winning the $1,000 by making another $400 bet on the opposite team. This limits his upside if the Eagles win to $600, but now positions him to also profit $1,000 if the opposing team wins. The action of making the hedge eliminates the possibility of your friend losing money on his original bet. The action of making the hedge also allows for the potential of euphoria from winning $1,000 that allows you to cope with the fact that your favorite team lost the Super Bowl.

Now, the rest of this Substack will not be about the fundamentals of Nano or how it stacks up against Bitcoin in anything other than price. Keep in mind that these currencies are different in what they offer and how they work. None of the below is financial advise, but represents a question to ask yourself.

Is assigning values to probabilistic outcomes for each scenario to limit your downside a logical next step for you to take if you are only invested in one of the top Cryptocurrencies?

One who tells you they know the future price performance of an asset for certain is either purposely lying to you or blindly lying to themselves. The overwhelming majority do not do enough due diligence in what they invest in to be able to differ their actions from gambling. If this is you, ask yourself if you rely on grifting from others to determine where you put your money.

Do you need to adjust your strategy or maybe adopt different strategies to hedge your bets?

Market Caps & What drives Them

You’ll need a better understanding of what a market cap is to comprehend from here if you do not already have one. The market cap of a cryptocurrency project is the price multiplied by the supply.

For example, there is a supply of 133,248,297 Nano and one Nano currently trades at $0.78 which means the market cap of the Nano is 106 Million. The price of Nano or any digital currency is driven by liquidity. Liquidity into an asset can be driven by speculation and severe manipulation depending on the size of the market cap of a currency. Long-term liquidity of a currency is usually derived from the utility of such currency. Simply put, the more people that use the currency the more liquidity will be available to drive the price of the currency up. Predicting future liquidity towards any digital currency is speculation at best. Everyone is still learning and discovering how the space is evolving everyday. Meaning past performance does not determine future performance. You should be prepared for multiple outcomes or willing to place small bets to take advantage of possible upsides even its not the outcome you think will happen.

Most have heard of Bitcoin (BTC). Bitcoin is the #1 Cryptocurrency by market cap currently trading at over 440 Billion dollars. There is a theoretical max supply of 21M Bitcoin. Current supply sits at 19.2M and the price of one is hovering at 23k. We talked before about liquidity driving price, so what drives Bitcoins liquidity? To this point, Bitcoin has had a first mover advantage in the space driving the largest network effects around the currency and the protocols that secure that network. Lets not forget about current utility for the cryptocurrency and speculation of future utility helping drive liquidity. Again this Substack is not to debate over which protocols will eventually deliver the promise of a decentralized currency for the world, this article is to ask yourself a logical question of where you should allocate your resources if you chose to invest in digital currencies.

Nano and Bitcoin are pretty much opposites in their features, functionalities and even price performance to this point. However, they both are both fighting for market share as one of the worlds decentralized digital currency. Whether either can deliver on the promise of being the worlds decentralized currency is up for serious debate.

Freedom to Speculate

Lets Speculate. If Nano had the same market cap as Bitcoin, it would be a 4,000x investment from where its prices are today Jan 2023. If you invested $100 into Nano at these prices, and it eventually reached Bitcoins Market cap, you’d then have $400,000.

What are the probabilities of this occurring? Highly unlikely, to be quite Frank.

Thought Exercise

You have $10,000 worth of Bitcoin. Bitcoin is your favorite asset or the only cryptocurrency you really know about. You discover Nano. A currency that is aiming for the same target as bitcoin, just with a different strategy. Lets say you assign a .5% probability that nano could possibly capture the Market Cap Bitcoin has on Jan 23. Which bitcoin maximalists would say is only a fraction of where Bitcoin should be priced. To be fair though, others think Bitcoin is going to zero. Regardless, what probable outcomes could happen if you were willing to invest .5% of your Bitcoin investment into Nano to hedge your bet on Bitcoin?

Does a $50 insurance policy entice you into any of the potential outcomes above? If Nano can capture 1/100th the value of Bitcoins current market cap, you hedge up to 21% of your Bitcoin Equity. Doesn’t seem to shabby for a .5% hedge of your portfolio.

Now these are just numbers and hypothetical outcomes. There is no guarantee that Nano ever reaches a price of Ӿ 32.96. It’s a gamble. However, so is your original bet on Bitcoin to become the decentralized currency for all of society.

Good gamblers hedge in opportunistic scenarios. The risk vs reward provided in the above thought exercise is unique. A small insurance policy could heavily return massive rewards even if Nano captures only a fraction of what Bitcoins value is today.

This is not a recommendation to make this bet. This is a layout of the opportunity for the hedge based on the disparity in current market caps for two currencies . If you are only invested in Bitcoin, my recommendation is as follows. Be willing to admit that it is not a guarantee that Bitcoin fulfills the prophecy that Satoshi Nakamoto set forth. There are other potential solutions to develop a decentralized digital currency that is meant for the masses. Its a hard problem to solve, there should be.

If you are intrigued about Nano and want to learn how it stacks up against Bitcoin. Please, listen and learn.

You may find that this a hedge worth making.