The Shitcoin Missile Crisis
Reclaimed Hops 6
While nuclear dystopia has long been a theme in sci-fi media, a fun hypothetical I’ve discussed when markets are slow is slightly related, but completely unsolvable: how would you trade the end of the world?
Inherently, this is a bit of a venue problem: suppose you are short the S&P 500 when a nuclear war breaks out, and all stocks go to zero. What exactly are you supposed to get paid in? Keep in mind that the idea of currency is liquidity: if there’s no ability to actually facilitate exchange, the currency is worthless, whether backed by a central government, gold, or otherwise. Practically, this is why I don’t bet against the dollar, even though I’m obviously fatalistic about it on some unknowable timeline in my lifetime, because everyone is dependent on its existence:
Can you imagine what China’s situation would be if the US stopped paying on its debt and the entire risk-free rate concept vanished? Starting with Nixon and ending with Kushner, the US has meticulously securitized every country’s interests to align with the fact that the dollar must exist and built the military to soft-stick the world into understanding this. Go look at how much of the stock market Saudi Arabia and its shadow investments own: is it any wonder they’re mad when the Middle East erupts and the US soft power is increasingly exposed?. . . There is no doubt in my mind that ZIRP broke the central banking regime by totally untethering “dollars” from “productivity”. The system is at the point where it solely works to preserve itself — the markets must be backstopped and the number must go up. But what’s the alternative? On a long enough timeline, everything goes to zero, but that timeline is likely longer than any of the people who see the writing on the wall could ever accurately estimate. People who can’t see the big picture take the big short. Ironically, all of this further entrenches the illusion of the dollar.
This leads to my general answer that after sufficient prepping (ammo, food, and water), the only thing to do with extra liquid assets is to plunge them into the market and hope that things aren’t as bad as they look. What would result is essentially hyperinflation a la Zimbabwe trillion dollar,
The Zimbabwean dollar was introduced in 1980 to directly replace the Rhodesian dollar (which had been introduced in 1970) at par (1:1), at a similar value to the US dollar. In the 20th century the dollar functioned as a normal currency, but in the early 21st century hyperinflation in Zimbabwe reduced the Zimbabwean dollar to one of the lowest valued currency units in the world. It was redenominated three times (in 2006, 2008 and 2009), with denominations up to a $100 trillion banknote issued.[4] The final redenomination produced the "fourth dollar" (ZWL), which was worth 1025 ZWD (first dollars)
as currency becomes worthless at both the tails — when everything is valued on paper too highly, it’s essentially the same as being worth nothing.
So when I saw WorldPVP this week, I kind of got delighted. Here’s the idea behind the game:
At time of writing, the first “nuke” will be launched within the day, with the US and China having fought for control of the top since the start of the project (including an incident where the president of China briefly took over the USA.)
Notably, it is totally up to the president to disclose their intentions or not, and to “ally” with other countries. Given the mechanics of the reward, though, even without communication, the natural target would be the country with the second-largest market cap. As of today, this is what the (new) US president has indicated he will do:
The trading pattern, then, should be as follows: liquidity from the presumed target either mass crowds into the #1 token follows just prior to the nuke (because of the reward) or distributes across every other token to be the beneficiary of the random distribution of the “nuke rug”. (Or, of course, an individual attempts to dethrone the current president at the last minute.) Holding each token to the nuke that isn’t #1, then, is essentially a huge game of chicken — or a rapidly expiring option, if you so choose to look at it that way. But due to the mechanics, it seems to me like this creates a volatility “frown” rather than the standard “smile”:
You can think of the #1 country as the ~100 delta strike on the x-axis above, as there is zero risk of it getting nuked. (Also, nuking begets nuking — given the reward distribution, the #1 country will only build its advantage.) Concurrently, the ~0 delta strikes show little volatility as well: Countries #50-211 have <~15k market caps, and thus become pretty hard to accumulate efficiently when selling out from the larger ones. The highest volatility, then, arrives at “at the money” countries — those with sizable reward pots (say, in the top 10), as they jockey for position (or alliances) to not end at #2 and get nuked. Assuming the game doesn’t go illiquid or get rugged outside of nukes, here’s what I expect to happen (though memes seem unpredictable):
mass scattering of liquidity from #2-#10 down all the countries in an attempt to capture the random distribution upon each nuke (I’ll have to see how the mechanic snapshots after the first nuke to know exactly how much remains as reward potential)
After each nuke, liquidity rapidly distributes to capture/liquidate the pump driven by the chaos of avoiding the nuke (essentially all the weekly options — each nuke is launched in 7 days — reissue/rollover)
As more and more countries get nuked, the current power law distribution of market cap centralizes around a few major countries (optimally, two)
A “Cold War” type scenario occurs after the later nukes where countries try and recruit others to sell out and build up their market cap so they can nuke “the enemy”
CHAD wins out
You can keep track of it all at worldpvp.co or on their twitter. “Real-money destruction” games are not a new thing by any means, if you ever want to read the magnum opus historical record of Eve Online — further proof that the crypto world is really an ultra technologically advanced video-game economy.