Wu Jihan: Bitcoin may not be a safe haven under extreme market conditions, but is optimistic about the price of Bitcoin in 2020

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At the B.TOP press conference and the first live broadcast of the interview with the world's miners on March 25, Bitmain Director and CEO Jihan Wu accepted an online live interview as the first guest of Zhikuang University's new column "Miners of the World".

The following is the transcript of the live interview with Wu Jihan:

01
Halving Bull Market

Host: Mr. Han is one of the few people in the industry who is not particularly optimistic about the halving. At the 2nd Global Digital Mining Summit held in Frankfurt, Germany last October, Mr. Han said that the bull market and the bear market are getting longer, and the bull market may not start at the same time with the halving. Now it seems that Mr. Han's judgment is very accurate. What is the basis for Mr. Han's judgment?

Wu Jihan: Actually, Litecoin had already halved before Bitcoin halved. The trend of Litecoin is also a bad sign. Everyone took advantage of the halving to speculate, and the price rose very high, and then fell again. It has not broken through the previous high so far.

Second, as the market value of Bitcoin increases and the user base expands, its volatility is actually gradually decreasing. The advantage of reduced volatility is that the currency value will be more stable, but the disadvantage is that it will not rise as fast as before. You may still remember a prediction chart in the currency circle that Bitcoin will eventually reach a saturation point in the future. For example, whether the total market value rises to 5 trillion US dollars, 50 trillion US dollars, or 200 trillion US dollars, there will always be a peak. Before reaching the peak, its entire curve is becoming more and more flat. From the past 2019, the recovery of the entire market rose from the beginning of the year to the end of the year, and there were some twists and turns at the end of the year. If we look at it many years later, we will find that the currency price is actually rising slowly, but there are many twists and turns. It is a relatively slow upward trend until it reaches the peak of the next bull market.

Based on this, I feel that the arrival of this bull market may not coincide so well with the halving, or it may not be so obvious, and there may be a delay in time.

Host: Thank you, Mr. Han. Could you please predict when the bull market will come? Everyone is eager to hear Mr. Han's analysis.

Wu Jihan: In fact, when we predict the price of Bitcoin in 2020 at the end of 2019, the biggest feature we feel is uncertainty. At that time, we could see that many factors driving the price of Bitcoin were moving towards extremes, which would cause the price of Bitcoin in 2020 to rise to the sky or fall to hell. As a company, an investor or a miner, you actually have to be fully prepared for both situations. Bitmain has been preparing for both situations.

With the arrival of 2020, some of my previous judgments have indeed been confirmed. The driving factors of the entire economy are moving towards extremes. Buffett has lived for so long and has seen 5 circuit breakers. I am still so young and have seen 4 circuit breakers. This shows that some driving factors in the economy are indeed very extreme. The Federal Reserve has been under tremendous pressure to push interest rates to a negative interest rate stage. The US dollar, as the foundation of the world's monetary system, now has a trend of negative interest rates. This is unprecedented. Although the phenomenon of the new coronavirus raging around the world had not yet occurred at the end of 2019, such political pressure was already visible at the time.

On the other hand, with the support of many years of monetary easing policies, debt leverage is very high around the world. Whether it is Europe, the United States, or China, debt leverage is actually at its limit. Under this situation, trade wars and so on have arisen. These factors will hinder production collaboration and the improvement of production efficiency. All of this will brew a crisis, because under the condition of extremely high debt leverage, this trade war will actually lead to a decline in global overall production efficiency. So it can be seen that both the positive side of the economy and the side that will make the economy worse are moving towards extremes. The currency price is affected by economic factors, and these two very extreme situations may also occur.

By the beginning of 2020, when the coronavirus started to emerge, I personally thought that the price of the currency should be more optimistic in 2020. There are several factors here: First, the coronavirus can be eradicated. This has been well confirmed in China and some neighboring countries, and the measures taken by these countries or regions are not exactly the same, but no matter what measures are taken, from the time the country feels a little panic to the time it is completely eradicated, it generally takes about two months. The United States basically started to panic in early March, and was relatively careless before, and the same is true for Europe. I think it took Europe and the United States basically two months to eradicate the new crown epidemic.

After the epidemic, people's social and economic activities gradually began to return to normal. In addition, the major central banks around the world have loosened their fiscal policies during this period. The money that has been released will never be able to be recovered, as can be seen from the financial crisis in 2007 and 2008. The Federal Reserve said it would shrink its balance sheet, and once it did, the entire market, the entire political circle, and all voters immediately rolled on the ground. With the recovery of economic activities, the money that has been released cannot be recovered, and I believe the prices of related financial assets will still be very good.

02
The latest generation of mining machines: S19

Host: Thank you Mr. Han for your answer. Winter will always pass, spring will surely come, and we are looking forward to the arrival of the bull market. Bitmain has just released the latest S19 series mining machine, among which the S19 Pro has an energy efficiency ratio of 29.5W/T and a computing power of 110T. It is currently the most advanced mining machine, far ahead of its competitors. Antminer has always done a good job in power consumption ratio. Mr. Han, how does Bitmain maintain its long-term technological leadership?

Wu Jihan: I think the reason why Bitmain has been able to maintain its leading position for a long time is mainly due to our humble learning and hard work. Of course, our own engineering team is also quite excellent. For example, when the early Antminer team started its business, Zhan Ketuan invited back his long-lost brother Su Jie, who made great contributions to the chips and played a key role.

Bitmain itself is not very good at full customization. Even the company's technical partners at the time did not know what full customization meant and did not agree with this direction, but we still unified this strategy. Later, with the help of some very good American and Russian engineers, we learned full customization technology and mastered the design principles related to series power supply. Earlier, when we designed hardware solutions such as mining machines, we also widely referred to many papers and some experience from other industries. Today, Bitmain has the most complete technical modules in the industry in terms of mining machines. We also do the best optimization within each module, and we have a very good development process and a good atmosphere for team operations. This is a very important factor for us to stay ahead.

Finally, I want to say one more thing. In fact, Bitmain has had ups and downs in R&D over the years. When we did well, we were customer-centric; when we started to lag behind in the market and did not do well, we were actually self-centered, arrogant and conceited. When we removed this arrogant and conceited human factor from the company, our products immediately became ideal again.

Host: Thank you Mr. Han for sharing the story of Bitmain's entrepreneurship with us. Bitmain has always maintained its technological leadership. We have also purchased 21 million of Bitmain's latest S19 series mining machines, so we are also concerned about how many years the S19 can mine? When will the 5nm and 3nm machines be available in the future? When these machines come out, what will be their power consumption ratio? How much computing power can they achieve?

Wu Jihan: According to the industry's experience, the economic life of a generation of mining machines is usually the time it takes for two generations of mining machines to be replaced, which means that mining machines can basically survive in alternate generations. Now the technological progress of mining machines and the forward evolution of Moore's Law have slowed down. This generation is S19. I estimate that it will take about 18 months to truly produce the next generation of mining machines. If it takes two generations to iterate continuously, it should be 36 months, which is basically about 3 years. This is the first estimation method.

The second estimation method is how long a generation of mining machines can survive after being released. This is related to the time point of the currency price in the entire market cycle when the mining machine is released. For example, if it is released at the beginning of a bull market, this generation of mining machines can usually mine for a long time; if it is released at the peak of a bull market, its lifespan will be a bit short.

I think the release time of S19 cannot be said to be the starting point of the bull market, which started at $3,000 last year, but I think this round of bull market will definitely be a slow and long bull market, which will extend its life cycle. So overall, I think S19 should be mined for about 3 to 4 years.

03
The future of BCH

Host: We know that Mr. Han is an early Bitcoin evangelist. He was also the first to translate the Chinese version of the Bitcoin white paper. Mr. Han is also a supporter of the big block faction and BCH. How does Mr. Han hope the BCH community will develop in the future?

Wu Jihan: For the BCH community, I think the next step is to do well what is in front of us. BCH now has a clear technical roadmap, and we should implement all the functions on the technical roadmap. In addition, the technical architecture should be kept simple, the community should maintain unity, and try to avoid conflicts and move forward together. The future prospects should be very good.

We have gradually seen that many necessary ecological elements have begun to gather in the BCH ecosystem. In the future, we will ignite a certain detonating point application. In fact, these ecological elements have gradually begun to gather. At this time, I think it is more important to be stable. I think it is more important for BCH to develop these technical modules of how to make an electronic cash in a down-to-earth manner. Other things that are too ambitious can be put aside for the time being.

04
User Questions and Answers

Host: Thank you for Mr. Han's answer. One more choice means one more freedom. We hope that BCH can develop better and better on this path in the future. During the live broadcast, many friends asked questions. We asked Mr. Jiang to select some for Mr. Han to answer.

Jiang Zhuoer: Someone asked Mr. Han, in a world of extreme volatility, will Bitcoin become Noah's Ark?

Jihan Wu: Actually, I am not so enthusiastic about Bitcoin, including the concept of so-called "safe haven assets". The so-called safe haven assets, such as gold and Bitcoin, do have the function of avoiding risks. If the world really goes to extremes, then it will obviously be very useful at that time, and this currency is likely to be gold. Bitcoin is easy to transfer. When the various payment network systems built by sovereign countries collapse, as long as the Internet is still there, Bitcoin can be sent. So obviously in extreme cases, Bitcoin also has the function of avoiding risks.

However, you may have noticed a recent phenomenon: whether it is Bitcoin or gold, the price basically fluctuates in sync with the stock market. How do you explain this? The world is just experiencing a financial crisis, not that the world has collapsed. Financial crises are a normal phenomenon in human capitalist economic activities, and financial crises occur every eight or nine years or even more than ten years.

Now the coronavirus has impacted both the supply and demand of the supply chain, forcing many people to stay at home and unable to go out to work and earn money. This impact is not an extremely dangerous situation for humans, so the so-called safe-haven assets at this time are just a branch of the financial asset category. The day when safe-haven assets really play a safe-haven role must be when you feel very uncomfortable, there may be war, famine, severe natural disasters, or situations similar to the disintegration of civilization.

Now we live in a peaceful and prosperous era. If you sell a house in Beijing, Shanghai, Guangzhou or Shenzhen to buy food, the amount you buy can last for several lifetimes. But if civilization and economy fall into a state of complete chaos, what can gold or Bitcoin get in exchange? They cannot exchange for as many things as they can in a peaceful and prosperous era, but they can help you exchange some things at that time. Therefore, they may collapse, but they will have a lower limit than other assets. As long as the economy is bad, the value and purchasing power of all assets will collapse, but some collapse to a certain limit and stop, while others collapse without a limit.

So, in a volatile market, will Bitcoin be a safe haven? I think it's hard to say. One of the characteristics of Bitcoin is that it is traded 24 hours a day, and the stock market also trades. I believe there are some trading opportunities in this, and you can trade in both markets at the same time. However, Bitcoin is closely related to financial markets and economic activities. They are like the relationship between waves and surfboards. Sometimes you can go against them, but most of the time you go with them.

Jiang Zhuoer: Someone asked Mr. Han what he thinks of Ethereum and its future development?

Jihan Wu: Ethereum is the first implementer and true innovator of the concept of smart contracts. Although the technology development has fallen into a stagnant state, or is very slow, Ethereum's status in the industry is difficult to shake.

I think the innovations of many blockchain projects are very similar to the phenomenon of "better XXX" in corporate activities, that is, many blockchains can be summarized in one sentence, "better Ethereum". I think it is difficult for these "better Ethereums" to challenge the status of Ethereum. Although Ethereum currently has performance problems and its development is focused on some less important issues, such as thinking about how to eliminate PoW every day, its first-mover advantage is still relatively strong. For example, the recently emerging DeFi, a decentralized application based on smart contracts, is still the best developed on the public chain of Ethereum.

Jiang Zhuoer: Someone asked Mr. Han, please talk about the design intention and future prospects of Matrixport in light of the recent market conditions. Why did you build such a financial platform?

Wu Jihan: In the next few years, the user base of the entire cryptocurrency will expand from the current 50 million to 500 million, this is what Brian Armstrong, co-founder of Coinbase, said. I agree very much, this is definitely a major trend.

In this big trend, we need to consider what new needs and changes users will have. I think it is very important that these users will need more simple and easy-to-understand convenient services. Many services in the current cryptocurrency circle are still very professional, and many financial innovations are still relatively rare in the traditional financial market. This is actually what makes me excited and proud of the entire industry. The blockchain industry does have a lot of innovations, but those products still have their complexities. To expand the entire user population, more concise applications are still needed.

Matrixport, both in terms of the meaning of its name and the ideas behind our product development, are more down-to-earth and closer to the needs of ordinary users.

Risk warning: The content of this article only represents the personal opinions of the guest, does not represent the views of Zhikuang University, and does not constitute any investment advice or suggestions.