Geopolitical risks intensify, currency prices plummet, Bitcoin computing power reaches a new high, how to save yourself

Since September, the DeFi market has gradually cooled down, and some popular DeFi projects in the early stage have gradually entered a downward mode. Although the impact of Uni's large airdrop has delayed it a bit, the impact of the external market has still been transmitted, making life difficult for many people during this period. This also marks the gradual arrival of a phased adjustment.

1. Geopolitical risks are rapidly increasing, and risk aversion is heating up

For the investment market, no matter which type, bonds, stocks, foreign exchange, gold, crude oil, etc., they are actually affected by the macro environment in certain aspects. This macro environment has many manifestations, and it is often difficult for many people to predict. However, when it comes, if you do not take the impact of this macro environment into consideration, you may lose badly.

The first major environmental impact this year was the COVID-19 pandemic. There is no doubt that the 3.12 crash was directly caused by the COVID-19 pandemic. When the nest is overturned, the eggs will be broken as well. Panic has arisen in investment markets around the world. At this time, cryptocurrencies were not immune, and that is why the "gold pit" was created. I believe that veterans in the investment community with a keen sense of smell can basically avoid that crash.

The direct lesson that 312 brings to us is that various markets are closely connected. While investing in cryptocurrencies, we should also pay more attention to news outside the currency circle in order to fully understand the essence of things.

If we talk about the biggest events in the second half of the year after 312, it is nothing more than the conflict between China and the United States and the US election. This is definitely something that the whole world should pay attention to. Of course, the conflict between China and the United States is actually a part of the US election. According to past historical judgments, every time before the US election, American leaders like to play the China card the most, and they are very unfriendly. Therefore, in this US election, both parties in the United States have shown a tough attitude on the China issue, which is expected by the market.

At the same time, because the Taiwan issue has been hyped up by the media in recent days, all parties are on high alert. This high-pressure political situation is bound to be reflected in the financial sector, so global stock markets have fallen by more than 3%, and cryptocurrencies have basically fallen by more than 10%. Under such high pressure, even safe-haven gold faces the risk of falling, so this is unavoidable in the short term.

Well, at present, the US election is the top priority here. Therefore, it can be predicted that at least after the dust settles in November, and if the new crown vaccine can be successfully mass-produced, then the adjustment will basically be over. In other words, the direction can only be truly judged after the US election. Before this period of time, unless there is a local military conflict, there will basically be no major market trends, and all parties will still maintain some restraint.

2. The massive release of US dollars and the over-issuance of USDT cannot sustain the bull market for a long time

One of the factors behind the DeFi bull market is the flooding of US dollars and the over-issuance of USDT. Some people describe Tether as injecting an average of US$100 million into the market every day during this period. Even so, we have seen that the price of the currency has plummeted in the past few days. In other words, the method of flooding the market with money cannot sustain a long bull market.

In fact, during the DeFi bull market, more funds are basically involved in low- risk projects, such as Aave and Compound's coin savings and financial management, while some high-risk DeFi projects, such as liquidity mining, do not actually occupy a lot of funds.

Due to the characteristics of high risk and high return, in fact, when this wave of DeFi bull market is about to end, basically the liquid US dollar, that is, USDT, etc. begins to flood the market, causing the corresponding exchange rate to decrease. If we observe carefully, in fact, if we see the USDT exchange rate decrease in early September, then we can basically guess that the funds should be ready to come out, or the funds have not found projects to participate in, resulting in too much USDT, resulting in a generally low OTC exchange rate, and that is also the best time to withdraw.

Through the factor of USDT exchange rate, we can actually think deeply in many cases. For example, if the USDT exchange rate rises during a sharp drop, we can buy at the bottom. If the exchange rate remains unchanged or continues to fall, we should consider waiting. This may be a good auxiliary tool.

3. Bitcoin computing power hits a new high, miners’ income drops sharply

While everyone is focusing on liquidity mining, the computing power of Bitcoin mining, as a traditional cryptocurrency mining, is relatively stable. Most people do not want Bitcoin to surge or plummet during this period, because a sharp drop is likely to bring bad market conditions, while a sharp rise will cause a blood-sucking market. Therefore, stabilizing the price of the currency is a more ideal way.

Of course, there are also media reports that since the second half of the year, various mining machine manufacturers have faced shortages, resulting in the computing power of the mining machine market not actually increasing much.

Currently, TSMC is unable to accept orders from Huawei, which may cause some production capacity gaps. This will actually be good news for the chip industry, which is in short supply. TSMC's production capacity has been full for a long time, which is actually an opportunity for the recovery of mining machine production capacity in the second half of the year.

Under this expectation, the mining computing power may increase further in the future. At the same time, according to media reports, the internal fighting of Bitmain may come to an end, which means that mining machines may be steadily sold in the future. As for the surge in computing power, we can assume that it is most likely that Bitmain’s previous mining machines are sent to customers or that it has reshaped the supply chain.

Similarly, the increase in computing power is not a good thing for old miners. Take the Shemma M20S as an example. After mining for nearly a year, by the second half of this year, the net profit is basically around 1 yuan per day. This will extend the payback time. In the absence of a significant increase in the price of the currency, there is actually a possibility of some mining accidents.

During this period, we have also seen many whales who hoard Bitcoin gradually transfer their funds across chains to the Ethereum chain, generate WBTC, participate in DeFi mining, and thus obtain certain profits. This makes up for some of the losses in Bitcoin mining, and therefore reduces the media focus.

But no matter what, the increase in difficulty is not a good thing for miners. Coupled with the decline in coin prices in the past few days, it is actually gradually approaching the limit. So this situation may become particularly prominent at some point in the future.

4. DEFI+hedging reduces risk losses

Many miners use hedging when mining Bitcoin to lock in profits in advance. The price of Ethereum soared some time ago, and the income from graphics card mining also increased rapidly, even recovering the investment in just a few months. In fact, this is abnormal in the short term. As the author’s previous article introduced, if hedging is done at a stage high, then the income now is also very considerable.

In defi mining, there are actually some risk losses, such as what we call impermanent loss. When the price of the currency fell in the middle of the night, Shenyu, the owner of the fish pool, joked to others that the system was automatically bottom-fishing, which is actually the market-making loss in defi mining. At this time, hedging is very important. Similar to traditional mining, for example, if I want to do eth-usdt liquidity mining, then I can short-sell eth at this time. In this way, in the process of mining, no matter whether the price of the currency rises or falls, in theory, this risk fluctuation will be reduced. Also, because eth is a mainstream currency, the corresponding fluctuation is not particularly large. Therefore, in this case, it is actually possible to participate in defi mining relatively well.

Of course, it should be noted that the current transaction fees on Ethereum are relatively high. Therefore, if you have a small amount of capital, you can participate in the mining of eos-usdt, and then hedge eos. In this way, the impermanent loss will be much smaller and the operation will be more flexible.

In addition, with the involvement of large funds in digital currency mining, the mining dividends of Bitcoin may gradually decrease in the next few years. At this time, mining Bitcoin may not be the best choice. Therefore, we need to pay attention to the fact that the mining of some mainstream currencies will usher in a small peak period, such as Ethereum this time. There are not many computing power mining projects for Ethereum in the market. Therefore, in the future, the mining methods of ordinary users need to shift their focus, which is also necessary.