The halving of digital currency talent: What is more fatal than the halving of assets is the halving of practitioners

Source of this article: Block Ark, original title: "The Second Halving Wave for Digital Currency Practitioners"

Author: Captain Warren

The Big Crash

On March 9, 2020, after experiencing a rapid drop in the price of Bitcoin from 9,200 to 7,700 in the previous two days, digital currency investors who believed that the market had stabilized never expected that three days later, on March 12, the digital currency industry would usher in a historic crash.

This is a crash that will go down in history. Bitcoin prices fell by more than 40% in 24 hours, and other digital currencies were slashed by 50% to 80%. The total amount of liquidation on the entire network exceeded 10 billion. Instantly, the entire cryptocurrency circle was in mourning. Many WeChat groups began to spread the video of Ding Hai and his son jumping off the building after the stock market crash in the Hong Kong drama "Big Times", as if an era had ended. Investors who were still dreaming of the "halving market" a few days ago now have to face the end of "asset halving".

The ending of Big Times

However, what is more fatal than the halving of assets is the halving of practitioners. Roughly estimated, this cliff-like drop will lead to a second halving of the number of practitioners in the digital currency industry.

The first wave of talent halving

On December 17, 2017, Bitcoin hit a high of 19,890 and then began to fall rapidly. I thought it was just a "technical adjustment" at the time, so I asked a bond market tycoon what he thought about the price of Bitcoin. He said it would fall to 10,000 points, a cut in half. When I asked him why, he replied: "Cut in half is the easiest mathematical calculation for humans to do."

Subsequently, Bitcoin began its long road to decline. Throughout 2018, practitioners in the digital currency industry went from being overly excited, to full of confidence, to having ideals, and finally leaving the market in disappointment. This was the first halving for practitioners in the digital currency industry.

Before that, the price of digital currency had gone up and down, but the scale was far from enough to form an "industry". It was not until 2017 that the bull market driven by ICO completely ignited people's deep-seated fantasy of getting rich and began to pour into this industry. For a time, countless hot money and entrepreneurs began to pour in one after another, and the industrial chain around ICO blossomed everywhere, including "blockchain + Everything" projects, investment institutions, incubators, financial media, ICO platforms, digital currency exchanges... everything. Many of the companies that we can call famous now were born in the grassroots era of 2017, including ourselves - Blockchain Ark. Everyone was full of chicken blood, and this emotion reached its peak under Xu Xiaoping's call for the "blockchain" revolution. They stayed up at three o'clock every night, racing against time.

The "leaked" chat records of Xu Xiaoping, founder of Zhen Fund

When everyone was overwhelmed by this blind optimism, they did not realize that the bear market had already arrived. Those young people who shouted the slogan "one coin for one villa" when Bitcoin was $20,000 were completely unaware of the risks coming and were still excited until the prosperity faded away.

Replaying the scene in 2017, we found that most of the wealth of the entire industry comes from the obsession with "getting rich quickly". When this confidence game continues to expand, countless people only deposit money and do not withdraw it, which makes this story bigger and bigger. Most practitioners are not only the builders of the entire industry ecosystem, but also market participants and speculators. Investment institutions and incubators help project parties "make up stories" in the early stage. From white papers to platform personnel, from crowdfunding amounts to listing on exchanges, there are people who take a cut at every link, and all their funds, tracing back to the source, come from the hot money attracted by this "story". After the collapse of the secondary market in 2018, the story is gone, the confidence is gone, the primary market collapses, the funds in the market begin to withdraw, and these companies fall like dominoes.

Of course, there are many people in the market who are trying new stories and ways of playing, hoping to turn the tide. Zhang Jian's "trading is mining" Fcoin has used DPOS and super nodes to trap many large EOS, DApp, STO, etc., but without exception, they were sentenced to death before they could make any waves. As each rebound of Bitcoin fell short of the previous high, the panic of the bear market began to spread. In the end, those practitioners who fantasized about turning over with digital currency/blockchain did not make a penny, but lost most of their wealth and had to leave the market in disappointment. By the end of 2018, the price of Bitcoin had fallen from $20,000 at the beginning of the year to $3,000, and countless altcoins were almost zero. The digital currency industry ushered in its darkest moment. Project parties/exchanges/investment institutions went bankrupt one after another. The S9, a generation of flagship phones, was sold by pound. The industry fell apart. Those big guys on the poker cards, the teachers who guided us to "self-cultivate", and the entrepreneurs who were determined to change the Internet industry, most of them quietly left the industry with the collapse of prices and started looking for the next holy grail.

The second wave of talent halving

If an industry needs to flourish, it must introduce a large number of talents. Capital pursues profits, and so do talents. Let's put aside the ideal of "decentralization". Most people in the world still yearn for centralized money. Except for a very small number of "cryptopunks" who believe in "liberalism" and decentralization, the dream of "getting rich quickly" that the digital currency industry is proud of is the reason why many talents come. When this dream loses its support, most talents have to leave and look for new dreams.

Those who stayed finally made it to the recovery in 2019. After the industry was cleared, those who stayed reconstructed a new monopoly pattern. The exchanges, led by the three major exchanges, ushered in their own spring again. With IEO in the left hand and leverage in the right hand, the beautiful CMO pushed digital currency back into people's vision. Compared with 2017, when a hundred flowers bloomed, practitioners in 2019 were more concentrated in digital currency exchanges. With blockchain being listed as a national strategy on October 24, industrial blockchain has changed the original "chain circle" The miserable situation of not having enough food has become an extremely huge cake.

The dormant groups began to become active. With Canaan Creative listed on the Nasdaq and Huobi OK listed on the Hong Kong stock market through a backdoor listing, the prospects of blockchain seemed bright. On the day when Wu Jihan regained control of Bitmain, countless people excitedly posted on WeChat Moments, "We are back, we are all back", as if the bull market was just around the corner. Although the price of Bitcoin continued to fall in the second half of 2019, market confidence became more and more enthusiastic as the day of Bitcoin production halving approached.

The result of this craze is that countless people have begun to leverage. There are abundant derivative products in the market that allow people to go all in, and there are also mining machine manufacturers outside the market that allow people to pledge Bitcoin to borrow legal currency to continue buying mining machines or paying electricity bills.

It is important to note that throughout 2019, the digital currency industry, or the blockchain industry, did not have much fresh blood, except for a few people brought in by the Ponzi scheme at the beginning of the year. The popularity of exchanges and the leverage boosted the price of coins, which made people in the market regain their confidence and gradually increase their positions. Most industry practitioners also allocated a large amount of digital assets in the market, and some trading platforms began to issue platform coins as compensation, wrapping company employees in this carnival.

Unlike 2018, this time, most people in the market are industry practitioners who believe that they are rational and have faith. The rise in the first two months of 2020 just proves the correctness of their insistence on this path. But man proposes, God disposes. The global outbreak of the new coronavirus has completely ignited the market's enthusiasm. The liquidity crisis in the financial market has caused overseas institutions to start selling digital currencies regardless of cost, which has made the digital currency market, which originally had no new funds, even worse. It began to be trampled and finally collapsed on March 12.

This crash left most participants in the digital currency market with nothing. Even though a small number of short sellers made a lot of money, the sharp drop in the early morning of March 13 made these "big short sellers" sweat. "When a systemic crisis occurs, no one can escape." As Bitcoin gradually fell below the mining cost, people began to worry that the foundation of the industry would be shaken. If it continues to fall, OTC leverage will face liquidation and the industry will face a thorough cleansing.

If Bitcoin continues at its current price for a period of time, or falls rapidly again after rebounding, it is foreseeable that the number of industry practitioners will decrease again. If there is no hope, the remaining believers will be few and far between.

May I ask where the road leads?

The reduction of practitioners is definitely not a good thing for the development of the industry. Although the "Bitcoin Cult" has always looked down on other altcoins, there is no doubt that a market with a hundred flowers blooming can have more innovations, and innovation in the industry requires people to constantly try and make mistakes. When capital is willing to provide entrepreneurs with the cost of trial and error, mistakes may become cheap, but what is more worth looking forward to is the birth of new things; but if capital is unwilling to invest in this market, even the lowest-level supporters begin to withdraw, then there is no way to talk about the prosperity of the industry.

The application of digital currency returned to the transaction itself in the early 2020s. Whether it is the expansion of the monopoly of centralized exchanges or the decentralized DeFi and DEX, they are all centered around the transaction itself. Perhaps this is a long-term direction in the future. With the improvement of financial derivatives and the selling of "whales", digital currency has gradually changed from the original innovative revolution of the "next generation Internet" to a commodity for trading. Although the dream of "getting rich quickly" is no longer there, the huge fluctuations still bring considerable benefits to traders.

On another dimension, the underlying logic of Bitcoin has not changed, and it is still one of the best safe-haven assets in the world. Of course, what it avoids is not the risk of depreciation relative to legal tender, but the risk of sovereign state legal tender issuance and the risk of personal ownership of assets. Despite the frequent occurrence of black swan events and the huge fluctuations in the price of Bitcoin, its underlying logic has never changed, which is why it can continue to survive.

What about the cryptocurrency industry? As Libra further compromises, Chinese companies are beginning to develop towards a non-coin blockchain. Major public chains are breaking their IPO prices as soon as they go online, and cross-chain systems are not sure where to go. The industry seems to have reached a freezing point. Do the "cryptopunks" around the world still have the motivation to continue to create a new world? Can the digital currency born in the last round of economic crisis survive this round of economic crisis? As the "authorities" in the industry, we cannot predict and can only continue to hope so.