Wu Says Podcast: Three young people in the cryptocurrency circle talk about their "first pot of gold and first pit"

Note: The content of this issue is purely personal experience and does not constitute any financial advice. Personal investment behavior has nothing to do with Wu Says Media’s position or work. The cryptocurrency market fluctuates greatly, so please do not participate at will and strictly abide by local laws and regulations.

The following is a summary of the content. Please listen to the full content:

Microcosm:

https://www.xiaoyuzhoufm.com/episodes/65e1e495ad514f3bc80fe468

Youtube :

https://www.youtube.com/watch?v=6jlulsXXTXY

Colin: How to join the cryptocurrency circle? How to make the first pot of gold?

Shang: I first came into contact with Bitcoin in 2018, and my background is in finance. At first, I thought it would be a very cool thing to be on Wall Street. But in my junior and senior years of college, I realized that the industry was very competitive, and it was difficult for newcomers like us who didn't have a strong background to break into the inner circle. It happened that during this time, I discovered the field of Bitcoin. I started buying Bitcoin with some of my own funds, and from 2018 to 2020 and 2021, as the market was in a bear market, I did not sell any Bitcoin, but focused on learning and kept watching.

In 2021, while I was a graduate student, I was exposed to the concept of decentralized finance (DeFi). I noticed that this field was completely different from the early narrative and gameplay of Bitcoin, involving new things such as smart contracts and liquidity pools, which were completely different from traditional currencies. In the same year, I was also lucky enough to invest in a relatively large position in Solana (SOL) when the price was low. In addition, I also contributed several articles and eventually went to Singapore to officially devote myself to the cryptocurrency industry full-time and worked for two years.

During this process, I had both good fortune and misfortune, because some of the projects I invested in eventually went to zero, such as Solana, which rose from $1 to $200 and then fell to $30, Luna, which rose from $5 to $100 to $200 and then went to zero, and Stepn and FTX, etc. Now, I will focus more on exploring airdrop opportunities.

Xiao Guo: I started to learn about Bitcoin around 2017, when I had just been working for a year or two. I was working in Fuzhou, the capital of Fujian Province, and I realized that it was difficult to buy a property there with my salary at the time, so I started to consider investing to seek additional income. Because my job is related to the Internet, I am more likely to be exposed to Bitcoin or more extensive blockchain technology information. I remember very clearly that on September 1, 2017, I made up my mind to register a Huobi account, and Huobi was still available in China at that time. However, during the registration process, KYC certification was required, including providing ID information and selfie avatars, which made me wonder why an unfamiliar platform needed such personal information, so I did not continue to complete the registration.

Three days later, on September 4, the government released a policy on cryptocurrencies. I thought at the time that it was a good thing I didn’t invest because Bitcoin seemed to be suppressed and might disappear. But in December, I happened to see news about Bitcoin and found that its price had increased nearly tenfold compared to September 4. This potential wealth growth attracted me, so I started to register on other exchanges, participated in the popular projects such as EOS at the time, and officially joined the cryptocurrency circle.

As for the so-called "first pot of gold", I don't have such a concept, because in the past few years, I have been working in different places to make money and continuously investing in the cryptocurrency circle. Whether it is investment or consumption, I have not experienced a huge increase in wealth, or for a one-time large investment, I have not yet felt the impact of this aspect.

Xiao Liu: I came into contact with cryptocurrency around March 12, 2020. At that time, due to the epidemic, I had nothing to do at home. I wanted to explore the opportunity to short gold, but found that the operation in China was relatively complicated. While browsing the web, I accidentally learned about Bitcoin. When I first entered the cryptocurrency circle, I happened to catch the market crash on March 12 of that year, which was quite shocking. For the rest of 2020, I mainly engaged in contract trading, initially operating on the Bitget platform, and experienced a short period of high returns, such as a 17-fold increase in returns in two days, but then lost them back and entered a state of chaos until the end of the year.

I joined WuShuo and started researching projects. On Christmas Day, December 25, 2020, I thought deeply about future investments. Considering the popularity of the DeFi field at the time, I decided to invest in on-chain DEX, thinking it would be a great opportunity. After careful consideration that night, I bought Uni at around 3 a.m. and invested all my funds - about 5,000 yuan. Soon after, the investment doubled, and I was very surprised to see a tenfold increase in two months. By late February 2021, my investment had grown tenfold, and I chose to sell.

Later, I invested in Filecoin (FIL), which also received a tenfold return. Through these two investments, my assets quickly grew to 500,000 yuan . However, after some setbacks, I began to try to diversify my investments, but found that the losses were even more serious. The assets retreated from 500,000 yuan to more than 300,000 yuan. In the second half of 2021, Axie Infinity triggered a blockchain game boom, and I decided to invest in a game platform, Mobox, and put all the remaining funds into it. This investment also received a tenfold return, which brought my assets to more than 3 million yuan at one time.

However, due to my subsequent investment thinking, it led to a significant retracement. In 2022, I lost hundreds of thousands of yuan after investing in various Stepn imitations and failed. During the entire bear market, I failed to change my strategy of heavy investment, which led to greater losses. It was not until the end of 2022 that I began to adjust my investment strategy. Entering 2023, I kept a low profile, but the continued decline in the market led to further retracements. In the second half of 2023, I refocused on the Ordinals project and thought it might represent a new starting point for the Bitcoin ecosystem. I started investing in Ordinals in June and July, and have received more than ten times the return so far, recovering some losses, although it is still some distance from the previous peak.

Colin: Xiao Guo, it is rumored that you have made a lot of money on this inscription recently.

Xiao Guo: I think it’s okay. Actually, when people look at the story of Inscription, the story of 100x and 1,000x, it seems very exaggerated. But when we go deeper into this community, we will find that its funding capacity is actually very small. It is impossible for it to have a lot of funds to do these things. It is actually the same as the recent Stark airdrop. Many people see that others have 1,000 or 10,000 accounts. You may not know how much cost he has paid behind these 1,000 or 10,000 accounts. He just tells you how much money he has earned at the moment. I think from my point of view, the investment cost of Inscription and its funding capacity are actually very small on the chain.

How to achieve a 10-fold increase before selling?

Xiao Liu: I am always very cautious when making investment decisions. I will not make a move easily unless I have done a lot of research and am sure that a certain currency is a good investment range. In my opinion, I will only consider investing when a project has about ten times the growth space, such as my views on Uni and fil. The same is true for my current channel investment. I will never invest heavily easily. I always make a decision to invest heavily after long-term observation and in-depth research.

Xiao Guo: There is an old saying in the investment community, "Those who know how to buy are apprentices, and those who know how to sell are masters." Selling is often more difficult than buying. As Quan Kai mentioned, he evaluates investments based on market capitalization, but the problem I encounter is that we often focus on market capitalization (Marketcap) and ignore the full flow market value (FDV). There is a saying that in a bull market, we should only focus on the circulating market value. Many projects, such as the early Solana, have a small circulating market value but a large FDV. This difference has caused me to miss many opportunities. For example, Link, I shorted it when it rose to more than ten dollars because I saw that its full flow market value (FDV) was large, and I suffered heavy losses.

Shang: Starting from the first principles, what we need to consider is, who is buying this coin? The cryptocurrency market is basically a confrontation between players (PVP), to see whether there are more buyers or sellers, and whether they are willing to buy and sell. A good way is to observe the attitudes of the people around you and the market enthusiasts you follow. If you think a project is good, but many people don’t know or understand it, then in the current crypto market environment, this project is likely to be hyped in the future. Even FTT, although it eventually returned to zero, was hyped during the decline, and so was Luna. So, I will observe how many people are bragging about a certain project. As for me, I particularly like cars. In the bull market, every time I browse the Porsche website or consider ordering a car, I realize that it may be time to sell.

What’s the biggest pitfall you’ve encountered?

Shang: The two experiences I want to share are actually related to trust. The biggest challenge I encountered was the Terra Luna incident. It was not just a loss of money for me - in fact, I still made money overall - but it was a huge blow to my spirit. For those who don’t know much about the Terra and Luna project, let me explain briefly that it is a stablecoin project with obvious Ponzi structure characteristics. They created a stablecoin, which was minted through another coin. In a bull market, if everyone uses this stablecoin, the number of the parent coin will naturally decrease and the demand will increase.

Because of its strong execution, this project has indeed attracted many cases that can be connected to the real world, such as Anchor's 20% fixed interest rate. But in the end, it was discovered that this was just a Ponzi scheme. Including me, many institutions, such as 3ac and Delphi Digital, were attracted to this story. I think the reason we believe it is because we trust the narrative of decentralized stablecoins. We believe that even if de-anchoring occurs in the short term, because everyone trusts this project, they will not easily short it. But in the end, when the project collapsed, we realized that it was just a crowd pushing the wall. For me, this is believing in a project that has the potential to change the world's financial system, but due to problems on the project side and market factors, it eventually returned to zero.

Another case is FTX. I also believed in SBF's endorsement and his influence. But in the end, I found that the whole organization was a farce. I put a large part of my bottom-fishing funds on FTX, which disrupted my investment plan. Both cases are related to the fundamental principles of the crypto circle and have taught me profound lessons.

Xiao Guo: The turning point of my investment was not the biggest pitfall I encountered, but it was a major change in my understanding of the entire industry, which was the Luna incident. I was not an early investor in Luna, nor was I one of those who invested in Luna early and waited for it to rise, nor was I a UST pledger. I participated in Luna after it plummeted. I remember that it fell from more than 100 US dollars to about 5 US dollars due to additional issuance. I rushed in to buy the bottom at that time, thinking that such a super public chain project with a market value of 10 billion yuan would definitely rebound after falling 90% in one day.

But this incident made me realize that the price in the secondary market is actually illusory. Luna issued a large number of new shares, and the market value did not drop that much, but the price dropped dramatically. I didn’t know much about the entire mechanism of Luna at the time, and I was not familiar with the things on the chain, so I bought Luna from the perspective of the exchange. As a result, because I was doing contracts instead of spot, my position was quickly gone, which brought me a huge shock.

After this incident, I realized that I needed to learn more about on-chain data and the essence of the project. Since then, I have started to learn in-depth knowledge about the chain, conduct data analysis and project interpretation. At the same time, my view on the secondary market price has also changed, and I realized that it is very deceptive. Take Bitcoin and Ethereum as an example. Although their gains in the last bull market seem similar, Ethereum's market value has actually increased more than Bitcoin because Ethereum has a higher inflation rate. Ethereum may even be deflated now, but the total circulation of Bitcoin is still increasing every year.

Therefore, if the market value of Bitcoin and Ethereum can reach a similar level in the next bull market, the secondary market price of Ethereum will definitely exceed that of Bitcoin. As ordinary investors, it is difficult for us to access the channels of currency issuance, so we should pay more attention to how we should hold the coins we hold in the secondary market. Take Doge as an example. Although it is a popular Meme Coin, its annual issuance is very large, and a lot of the gains are actually diluted by miners. In general, the Luna incident is a huge turning point in my feeling about investment and my understanding of the entire industry.

Xiao Liu: During the bear market in 2022, I summarized some lessons learned. First, I suffered heavy losses when investing in Stepn's imitation project in the first half of 2022. Then I turned to the NFT market in the second half of the year and tried to invest in some second- and third-tier platform coins, but I also suffered heavy losses. This series of experiences made me reflect on my investment style, and I found that I tend to adopt a more aggressive investment strategy, that is, buy and hold until the target is reached and then sell.

However, there is a big problem with this strategy, which is that the market cycle must be correctly judged. In the bull market of 21 years, this method allowed me to achieve my goals smoothly. But in a bear market, the purchased assets may continue to fall, resulting in significant losses. In addition to cycle judgment, I also realized that the choice of investment track target is also very critical. I have invested in Stepn imitations and some platform coins in the second and third-tier NFT markets, and did not choose the leading assets in those tracks. Leading assets may fall even in a bear market, but their risk resistance is significantly stronger than other assets.

Therefore, I have developed a habit now, that is, when investing in the secondary market, I will try my best to choose the leading tokens in the track. This strategy helps me to have a stronger ability to resist risks when facing market fluctuations.

What is your judgment on the current market situation and the strategy you adopt?

Xiao Liu: I have invested about 50% to 60% of my positions. I think we are definitely in the early stages of a bull market, which may have started at the end of last year. In June and July last year, I have been investing in Ordinals (Ordi) and plan to hold it for a long time until a bigger bull market comes. In addition, I have invested in some other leading assets, such as the recently popular LRT and its previous LST. I think Pendle is the leading asset in this track and I plan to hold it for a long time. My core positions have been configured, and I may pay attention to some potential airdrop opportunities in the future. In general, I believe that this is the early stage of a bull market.

Xiao Guo: Let me talk about Blur first. Actually, I am not a qualified NFT player. My investment in NFT has basically failed. I bought a lot of small pictures, and now there is almost no liquidity. However, I actually invested in a token of an NFT trading platform, which is Blur. To be honest, I have never used Blur for NFT trading. I still use Opensea. So why did I invest in Blur? It is entirely because I start from the perspective of on-chain data analysis. I often observe the Gas consumption of the entire Ethereum network to see which contracts are used every day and which contracts are used more frequently. There are roughly three categories here. The largest Gas consumer on Ethereum is Uniswap, which belongs to the liquidity DEX. Then there are the data broadcasts of each company's L2 sequencer. The second is others. Among these other contracts, I found the target Blur. I started to study and found that the market value of this token is still relatively low. When I invested, FDV was only about 1 billion, but its trading volume and user market share in the NFT trading platform can be said to be comparable to Opensea. Some indicators are lagging behind, while others are ahead. So I think this kind of 1 billion valuation and such a strong user base makes this token more promising from a community perspective.

Apart from Blur, I think holding Bitcoin is the most politically correct choice in this industry. I remember a KOL said that no matter how your position changes, you should put 50% of your investment in Bitcoin. Because Bitcoin is the market, when the market goes up or down, most of your positions will not be affected too much, so you won't make overly hasty decisions due to market fluctuations. This doesn't mean it will bring huge returns, but at least it will give you a psychological advantage so that you won't rush to invest in projects that you don't know enough about. I think it's very important to try to invest in things you can understand. Since I started learning and analyzing on-chain data, I will prioritize on-chain data when evaluating projects or public chains, which makes my investment decisions more independent.

Colin: What do you think of the Inscription track now?

Xiao Guo: Regarding the inscription, I think many people may view it as a whole because they have not actually participated in it. But I personally think that the inscription itself or BRC20 is not the most critical point. For me, the core is that it represents the assets on Bitcoin, which is the most important. My attention to assets on Bitcoin, such as commodities, is not limited to inscriptions. Although people may call them inscriptions or BRC20 now, I think this classification is not appropriate. For me, what is more important is that they are assets on Bitcoin.

We know that in the past, most of the non-chain assets, such as dApps or tokens, were based on Ethereum's ERC20. Take the tokens on CEX for example, there may be seven or eight hundred of them that are ERC20, and they do not belong to other chains. Since the rise of ICO in 2017, ERC20 standard tokens have occupied almost 80 to 90 percent of all altcoin investment markets. Bitcoin, in addition to its transfer function, does not seem to be valued by everyone. Although some solutions were explored in the early years, such as USDT-OMNI, the right to issue coins was not delegated to ordinary project parties. Since the emergence of Ordinals and Inscriptions, everyone has begun to pay attention to assets on Bitcoin again. I think that if the assets and network activities on Bitcoin are not prosperous, it will be difficult for other networks to surpass the prosperity of Bitcoin in the long run. This is true for the entire industry.

Colin: Bitcoin’s core developers don’t seem to want to issue assets on the Bitcoin network

Xiao Guo: How do I see this? To me, Bitcoin is more like a larger commons than Ethereum and Solana. Why should we care about what the so-called Bitcoin core developers say? Bitcoin belongs to everyone, not just one person. If the Bitcoin core development team makes some not-so-good decisions one day, or the decisions they make really don't meet the needs of the market, they will definitely be abandoned by users. We come to the blockchain world, not to listen to some people's high-sounding speeches. I think that people who truly understand Bitcoin and truly believe in Bitcoin will not care too much about what the core developers say specifically. The key is to return to the users. What do users really need?

For example, it should be very obvious how many new addresses and new users the Ordinals project has brought to Bitcoin. For miners, the boom in handling fees across the entire network is also very important. Another point, in terms of investment, I forgot to mention before that in the new cycle, we can't just focus on old assets. Looking back, for example, those hot assets in 2017 may have disappeared now, with only Bitcoin and Ethereum left. By now, many new users may not know what YFI is. It may be the first project that retail investors will be excited about at the beginning of the DeFi summer. Everyone may have forgotten what YFI is and what SUSHI is.

Our industry is very receptive to new projects, but their elimination rate is also very high. New assets and new ways of playing are constantly emerging, driving the technology or concept iteration of this industry. But in the end, most of them will return to Bitcoin, I think.

Shang: Last year, I thought Crypto was really boring. It felt like a bunch of scams. Everyone was hyping up MEME, and fewer and fewer people were paying attention to Bitcoin, Ethereum, and DeFi, and their significance to the world. At that time, the people who survived were paying attention to things like Dogecoin. But then I thought, this might be the market environment. The difference is that this year, the Bitcoin ETF was approved, and we found some interesting projects, such as those related to RWA, which may attract institutions.

For me, the biggest indicator is how many new people and how much new money flows into the Crypto market. In 2021 and 2022, many people came to the Crypto world because they received relief money. Even if Crypto is not so perfect, it is still a place full of opportunities. Under the impact of AI, people can use their free time here to earn more money and participate in a whole new world.

As an investment, I think the safest way is to participate in airdrops. Now many projects need to issue coins. They have raised too much funds and there are too many similar projects, which has led to an oversupply on the supply side. There are at least 10 projects that everyone may pay attention to. Almost no project will not consider issuing airdrops. This has almost become a consensus in the industry. Especially after the first airdrop of Blur, users are still very scarce compared to the number of projects. Therefore, it is profitable to participate in airdrops or some open investment opportunities. For example, Blur, I bought nearly 100,000 Blurs through a lending platform with almost no risk. Then there are airdrops like Jupiter and JTO, which are opportunities with extremely low or even no risk. I think this situation may continue to happen in future cycles.