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Link: Ezra Klein, Dan Olson and diamond hands

Dan Olson, who recently brought us the spectacular two-hour deepdive into web3, recently appeared on The Ezra Klein Show. The whole thing is worth a listen, but this dissection of the ‘diamond hands’ phenomenon – not limited to the crypto world – is absolutely spot on:

So diamond hands — the logic under there and the way that that gets weaponized is that there’s not enough liquidity in these ecosystems. There’s not enough liquidity in crypto, as a whole, for the whales to do what they need to do. But then that disparity between how much cash is actually floating around and these absolutely absurd valuations that get tossed around is vast. And as a result, it’s very, very bad if people try to cash out in waves.

So as a protective measure, as like an immune-system response, the culture has developed diamond hands as a virtue, that someone who is willing to bear incoherence, that someone who is willing to bear instability, who is willing to just look past the volatility and the warning signs and just keep holding — you are a spiritually better person if you are a diamond hands who is willing to just get a grip on your Bored Ape and never sell it. So you have this Bored Ape, and it has this fictional price, whatever it’s at right now — $60,000, $120,000, $250,000, $2 million. Whatever the theoretical price of this thing is can only be realized if you sell. But selling is quitting. And quitting is spiritually bad. It means that you have given up. It means you don’t believe in the theoretical future value of that Ape.

So it’s trying to play both sides at the same time. It’s trying to make you think that it’s like, you have this asset. You are rich now, because you have this Bored Ape, and it has this value. But you’re actually cash poor, because you don’t have the money from that Ape. You can only get that money if you sell it. But selling it would be a bad thing to do. It would make you a bad person. It would make you a coward. You would be balking in the face of the future.