Surf Report: Rewardless Risk

Issue 32: 05.02.2021 (Free Version)

May 02, 2021

Hi everyone—I’m so glad to have you here. What a week.

Let’s talk about Nexon.

Nexon is a massive Japan-based company that makes video games and just disclosed on Tuesday that they purchased $100 million in bitcoin, representing about 2% of their cash on hand. They also bought Bitstamp and Korbit, two major exchanges in Europe and South Korea, in the past three years, paving the way for more institutional bitcoin adoption in Asia.

It’s a big deal.

Nexon has a $30 billion market cap and is a top 30 holding in the Nikkei 225 Index. For context, MicroStrategy is only a $6 billion market cap here in the US and has had a massive influence on corporate treasury strategies everywhere after adding billions worth of bitcoin to the company balance sheet last summer.

Nexon’s announcement did not mince words:

Usually ‘cash in the bank’ that waits for such uses can generate a few percentage points of interest at very low risk, typically by lending it to others. But in the current historically-low interest rate environment, these holdings generate almost no return, especially when compared with inflation. Even junk bonds — which carry higher risk and were formerly known as ‘high yield’— have become a source of ‘rewardless risk.’”

That expression “rewardless risk” has been used to describe certain bonds over the years, and is notable because bonds are supposed to be one of the least risky things to own in a portfolio. 🤔

Now, even seasoned high-yield bond traders like Greg Foss are adding Bitcoin to their portfolios, not just to replace gold… but to replace cash and bonds. Why? Because that’s what makes sense when you actually do the math.

So what’s going on?

Inflation and currency debasement, that’s what.

More from Nexon’s announcement:

Since January 2020, the US has printed 40% more US dollars than previously existed. We are not privy to conversations at central banks or departments of treasury, but we foresee no end to this in the near term.

We are not making a prediction on the future of interest rates. We are, however, fiduciaries of our shareholder’s capital, and as such we need to think seriously about the future buying power of our cash in a world of potential currency debasement.”

People who get gaming get the game being played here, and are best positioned to be comfortable accepting the idea of a fully decentralized, digital asset as the solution.

In-game marketplaces and economies are nothing new, and virtual currencies have existed for years, but now things are spilling over into meatspace and catching a lot of people unawares.

Make no mistake, we’re still early. Very early.

But Nexon has been down this road before, so I will leave their CEO with the last word:

“25 years ago, the idea of an entertainment world centered around online, connected, Virtual Worlds seemed crazy… Today, the idea is mainstream and almost every major entertainment company in the world is either in the online games business or trying to be.

Today the idea of a non-physical store of value (like gold, but virtual) that is also un-controlled by a central authority is considered fringe. Reasonable people ask whether it is safe. We think there’s a strong chance this too will become a mainstream idea in the not-too-distant future, and that many more people and companies will ask whether they can rely solely on legacy currency systems and instead should embrace the new.”

Until next time 🤙,


“There is no right and wrong choice of money. There are, however, consequences to choices.” —Saifedean Ammous

Breaking 🌊

🤑 Biden unveils $1,800,000,000,000 social spending plan. [Blockworks]

🎮 Microsoft CEO Satya Nadella announced that gaming revenue surpassed $3.5 billion, a 50% year-over-year increase. He also revealed that the number of Minecraft monthly active users is up 30% year-over-year to 140 million. (The game is a decade old.) [Source]

📽 YouTube has become a media juggernaut and could soon equal Netflix in revenue. [CNBC]

₿💱 Germany gives green light to institutional funds—with 1.8 trillion under management—to buy bitcoin [Decrypt]; U.S. Bank, part of the fifth largest banking institution in the United States, will now custody their clients bitcoin [CoinDesk]; JPMorgan is preparing to offer an actively managed bitcoin fund to private wealth clients. [CoinDesk]; Jack Dorsey and Elon Musk agree on bitcoin's green credentials [BBC]; Tesla’s $101M Q1 profit comes from bitcoin [Observer]; Japanese gaming giant Nexon puts $100M worth of Bitcoin on its balance sheet [MSN]

From The Tweetbox 🐦

“Now, Central Bank governor admits to Finance Committee that inflation will be well above 2% target for the next two months—after saying for months that would not happen.” [Tweet]

“Powell says has no opinion on fiscal policy, but won't tighten as long as there is slack in the labor force... which is a direct consequence of trillions in fiscal stimulus” [Tweet]

“Remember when it was suggested that US rates couldn’t go negative? One month bills are now negative.” [Tweet]

“+1.9 million Bitcoin has been bought above the $1 trillion market cap.” [Tweet]

The bitcoin stock-to-flow model makes it to Forbes [Tweet]

“Many founders aren’t hiring from Harvard. They’re hiring from Twitter.” [Thread]

“Value investing was supplanted by growth investing because buyers aren't looking at fundamentals, they're looking for speculative money substitutes. Cheap credit and monetary inflation opens the flood gates for asset inflation.” [Tweet]

For The Pros 😎

Worth A Read 📃

Uncovering the Hidden Costs of the Petrodollar. (There’s an audio version too that’s 👌:

When the global reserve currency is literally reliant on the sale of oil, the world has a massive carbon emissions problem. Not to mention the fact that, as discussed, the petrodollar is defended by the U.S. military’s global presence, which has a carbon output the size of a mid-sized nation, is exaggerated in size by America’s need to protect the dollar, and is boosted by the oil price-spiking wars it fights on various continents. It is truly impossible for the petrodollar system to be green when it is based on black gold.

99 Additional Bits of Unsolicited Advice, from one of the all-time tech greats Kevin Kelly. Some of my favs:

  • That thing that made you weird as a kid could make you great as an adult — if you don’t lose it.

  • The greatest rewards come from working on something that nobody has a name for. If you possibly can, work where there are no words for what you do.

  • Don’t create things to make money; make money so you can create things. The reward for good work is more work.

  • You are only as young as the last time you changed your mind.

  • You can reduce the annoyance of someone’s stupid belief by increasing your understanding of why they believe it.

PNGs 🖼

The Consumer Price Index, which the government uses to show there’s no inflation, isn’t indexing the consumer goods and services that are inflating. [Source]

Not every idea needs an app.

Groms 🐣

Pragma is building what it calls a “backend as a service,” providing ready-made infrastructure to developers of online, live service games.

It just raised $12M in Series A funding

Pods & Schools 🐬🐠

🔊 Danielle DiMartino Booth on When the Fed Crossed the Rubicon. She brings her deep historical knowledge of the Fed (having actually worked there!) to a wide-ranging discussion of the economy. They cover the evolving role of the Federal Reserve, how the Fed "missed its chance" to normalize markets, the worsening relationship between the US and China, and her opinions on inflation vs deflation.

🔊 The First Quant In The City Of London Now Turns His Sights To Bitcoin. I loved this episode so. much.

Bruce tells some amazing stories involving finance/trading luminaries from back in the day. Chatting with Fisher Black and Myron Scholes (of Black-Scholes fame), dodging the Long Term Capital Management bullet, successfully avoiding Black Thursday...

Probability, asymmetric risk, commodities vs stocks vs bonds, diversification vs concentration, time horizon… it's all here. He also gives practical advice on borrowing against your bitcoin for wealth preservation reasons—the kind of thing usually reserved for conversations in more wealthy circles.

🎬 Bitcoin is the Mycelium of Money. An impressive documentary-style summary of one of my all-time favorite Bitcoin essays involving nature’s own organic internet. Highly recommend!

Tools of the Trade ⚒

Products I use to make money

Swan. I recently became an official Swan partner because I love them so much. So if you're like me and just want an easy, automated way to buy bitcoin on the regular with the lowest fees in the game, head to You even get $10 for free ✨

StockCharts. I easily make back the small monthly subscription fee with the superpowers it gives me.

Carrd. I use card for all my landing page needs. Use this link or referral code 892PYX69 to start your own web empire.


Nothing in this email is intended to serve as financial advice. Do your own research.