Is Bitcoin really coming back to life?

“How much is Bitcoin now?”

On May 11, Hao Ming suddenly asked a question in a WeChat group mainly composed of Internet finance professionals. Someone told him: more than 6,000 US dollars.

At this time, Hao Ming may have realized that he had made a fortune by accident. At the end of last year, a friend of Hao Ming borrowed money from him for business turnover, but when it was due, he was broke and had no cash. In the end, the other party repaid the loan with Bitcoin, with each Bitcoin worth about 17,000 yuan, totaling more than 50 Bitcoins.

"It's kept by my wife. Neither of us understands it. Can the money from selling it be directly deposited into our account?" Hao Ming asked.

Someone in the group did the math for Hao Ming: the bitcoins he bought for 17,000 yuan each have now reached a price of over 48,000 yuan, which is equivalent to a net profit of 30,000 yuan per bitcoin. More than 50 bitcoins are now worth more than 2 million yuan.

Although Hao Ming wanted to sell as soon as possible and lock in the profits, almost all of his friends advised him to hold on, because Bitcoin had once reached a peak of over $20,000 and everyone expected it to be even higher this year. Some industry insiders even predicted that if he could hold on for a year and a half to two years, he might become a multimillionaire.

In fact, after more than a year of bear market, Bitcoin has reversed this year. From February to now, Bitcoin has been rising continuously for three months. In the past 11 days, it has ushered in 11 consecutive positive days, setting the longest continuous rising cycle since 2017. On the morning of May 12, Bitcoin broke through the $7,000 mark, which is also the first time Bitcoin has re-entered the $7,000 mark since September 2018. In December 2018, the price of Bitcoin fell to $3,100. Since February this year, the price of Bitcoin has doubled.

At 9:46 am on May 12, Bitcoin was trading at $7,160.00, up 9.41%. Data source: Wall Street Journal

During the same period, other mainstream currencies such as Ethereum and Litecoin also saw varying degrees of growth. In the past 24 hours, Ethereum, Bitcoin Cash, Litecoin and EOS have all achieved double-digit growth.

The continued rise in Bitcoin prices gave Hao Ming a sudden surprise. Throughout April, Tao Nan was in a good mood, and he felt comfortable both physically and mentally after having survived the cold winter.

What makes Tao Nan feel warm is not only the temperature, but also the cryptocurrency circle. Tao Nan, born in 1993, works as a data operator in a blockchain company, but he said that the company does not have much real blockchain business, and is mainly engaged in issuing and speculating on cryptocurrencies. Privately, Tao Nan is also a firm digital currency investor. In his opinion, without the cryptocurrency circle, how can he get rich overnight? In the Magic City where housing prices have long been high, he believes that the only way to change his fate is to speculate on cryptocurrencies. Anyway, with so little money, he can only take a big risk.

Bitcoin trend chart, image source: Wall Street News

Tao Nan noticed that the volume of Bitcoin transactions has increased significantly since the end of last year, reaching about five times the previous level. For example, an exchange he often uses, the platform's average daily transaction volume was 28,000 Bitcoins before, but now it has reached at least 100,000 Bitcoins per day, and even 170,000 Bitcoins at its peak. Tao Nan estimates that from March this year to now, the entire digital currency market has inflowed about 50 billion US dollars.

However, Tao Nan, who has entered the cryptocurrency circle since 2017, has not made any money so far, because the small spring in 2019 did not heal his scars in 2018. From December 2017 to December 2018, the main theme of the cryptocurrency circle was falling again and again, until it fell to its ankles.

"A doubling of the price is nothing. Last year, some currencies lost 99% of their value. Now it can be considered a rebound. However, mainstream digital currencies have all increased, indicating that there are signs of a bull market. I just entered the market too late." Tao Nan is looking forward to the next wave of market conditions.

Tao Nan is still a value investor in the cryptocurrency circle. He never buys altcoins or MLM coins. As long as he has money, he will invest in Bitcoin and Ethereum. Although he entered the market at a high point, he bought the bottom after the crash in November 2018, so his account is close to breaking even. "If there is another wave of market, I will make money. I will rely on this for the next two years." Tao Nan said.

One of Tao Nan’s colleagues chose to “lie down and play dead” after experiencing a sharp drop in November last year. The amount in his account has changed from “Maserati to Jialing Motorcycle”, and recently it seems to have returned to the amount of an economy car, but it is still a long way from making back the investment. Therefore, he is not doing anything now. He sold at a loss and has no money to cover his position.

It is worth noting that Tao Nan left the Internet industry at the end of 2017 to join the blockchain company, and received a good salary at that time. The employees of blockchain companies are also mostly born in the 1990s. According to Liepin.com, the number of positions in blockchain technology development and product operations is 1.9 times that of the Internet industry. However, after entering 2019, the blockchain market was sluggish, and the overall salary reduction pressure in the industry was greater than that in the Internet industry. At the same time, the blockchain industry still has a high level of education, with 91.2% of the employees having a bachelor's degree or above, and the average age is 30.2 years old, and 70.6% of the practitioners are between 25 and 35 years old.

In fact, since the second half of last year, Tao Nan has only been able to get the base salary, and his performance bonus has been withheld by the company. In addition to leaving some living expenses for himself every month, he basically invests all his money in digital currency. In his company, there are many such people.

The digital currency market is full of stories of people getting rich overnight, but for most cryptocurrency investors, they are either losing money or on the way to losing money. Zhu Chenglin, CEO of Xiyue Technology, is a "cryptocurrency veteran" who has been immersed in the cryptocurrency circle for many years. According to his observation, those who entered early have experienced a roller coaster of wealth, and the possibility of completely withdrawing is less than 5%.

1. There is no spring for pyramid schemes and Ponzi schemes

For Wu Yingchun, time is still in the cold winter, and it may be frozen indefinitely.

In July 2018, during the hot summer, Wu Yingchun, who was engaged in the cash loan industry, was recommended by a colleague and came into contact with a digital currency called COL, which was said to have been listed on Huobi.com. According to the regulations at the time, investors could first buy mining machines at a price of 18,000 yuan per unit, and at the same time receive 20 COL coins. Each mining machine could produce 6 coins per day, and the price of one coin was more than 600 yuan at the time. Calculated in this way, the cost can be recovered in less than a month, and all the coins mined in the future are profits, which is equivalent to earning 3,600 yuan per day for one mining machine. At the same time, if investors recommend others to buy a mining machine, they can also get a reward of 20 coins, which is more than 10,000 yuan.

Several executives in Wu Yingchun's company jointly purchased 1,000 mining machines, and several of his friends in Shanghai also bought nearly 200 mining machines. Seeing them making a fortune, Wu Yingchun also began to get tempted, so he also joined the market, and the number of mining machines he had gradually increased from 3 to 18, and then to 100.

However, the happy time was short-lived. Starting from the end of August, the price of COL coins plummeted from more than 600 yuan to a few cents. Wu Yingchun was so disappointed that he didn't even want to open his account again. After a long time, he couldn't find the backend, and "he was upset when he mentioned it."

"Everyone says cash loans have huge profits, but compared with the harvesters in the cryptocurrency circle, those who do cash loans are all practical people, while those in the cryptocurrency circle really have no bottom line." Wu Yingchun still feels indignant when talking about this investment.

Due to work reasons, Wu Yingchun later came into contact with a big boss in Fujian, and then he realized that COL was just a fund run by some people - it first operated abroad for about a year, then went to Huobi.com and Ethereum, and then went to China to harvest leeks. When they came to China, they combined blockchain technology with pyramid schemes, first inviting big bosses to stand on the platform and hold promotion meetings everywhere to attract users to join, and then using high rebates to let users attract relatives and friends around them to join, and when they reached the top, they directly dumped the market and disappeared.

According to Wu Yingchun, the so-called digital currency COL in which he participated had raised funds of about 3 billion yuan at the time, and at least 80 million yuan of it came from his circle of friends, most of whom were engaged in the cash loan industry.

What made him feel aggrieved was that when he thought he had lost money investing in digital currencies, a friend bluntly said, “Is this also considered a cryptocurrency circle? This is a Ponzi scheme!”

Wu Yingchun was the leeks being cut, while Lin Fei's friend Wang Yunqiao was a sickleman. Two or three years ago, Wang Yunqiao was still a loser, but after entering the cryptocurrency circle, he quickly made hundreds of millions, but today he has run into trouble.

According to the self-media Coin Circle Shanhaijing, Wang Yunqiao made a blockchain game called BTMC in 2018. The game was crudely made, but the mechanism was quite complex. Users can enjoy both dynamic and static benefits after participating. Users can also get commissions by recommending friends to participate, and the level of participation in commissions has reached 10. Wang Yunqiao recommended almost all his relatives and friends to invest in this project, including many bosses who do usury.

Image source: Coin Circle Shanhaijing

After a large number of users entered, Wang Yunqiao began to change the rules of the game and restricted withdrawals. He also announced that he would launch mining machines and stop withdrawals. Since then, BTMC has started a downward trend, with a daily drop of 30%-40%. Many investors look at the unilateral decline chart every day and feel helpless. Now the price of the currency has dropped from the initial 6 yuan to a few cents.

Lin Fei estimated that Wang Yunqiao raised 300 million yuan from this project. Although many people reported the case, it has not been filed yet, so Wang Yunqiao is still free and even planned to give 50 million yuan to his wife for gambling. Because he offended too many people, Wang Yunqiao returned the money to some close people and started to act low-key. He no longer considered other investors who lost money.

2. Has the spring of the cryptocurrency world arrived?

Why has the price of Bitcoin skyrocketed in the past month? Has the cryptocurrency market recovered?

Zhang Feng, a lawyer at Beijing Jincheng Tongda (Shanghai) Law Firm who specializes in blockchain legal affairs, believes that it is difficult to say whether the cryptocurrency market will recover, because there are multiple factors that affect the price increase of Bitcoin. Some recent favorable factors in applications may have an impact. For example, Facebook and Ant Financial have recently proposed stablecoin plans.

On May 5, Facebook completed the acquisition of the trademark of the cryptocurrency project code-named "Libra". Facebook's stablecoin project is code-named Project Libra. Facebook hopes to accelerate the promotion of its cryptocurrency daily transaction applications through its huge user base, and is preparing to bring in Visa and MasterCard, the world's two largest credit card payment companies.

On May 7, Zhang Hui, head of the blockchain department of Ant Financial, mentioned in a speech at the third "Blockchain Business Summit" that Ant Financial is exploring how to issue digital assets on the blockchain in "some form of a token." These assets will be linked to certain values ​​in the physical world, such as legal currency or other types of assets.

Some industry insiders also said that the impact of these two pieces of information on the cryptocurrency circle is not that direct. For example, Facebook's stablecoin is not connected to Bitcoin, but is only connected to the legal currencies of various countries. Moreover, this information did not come out recently.

Zhu Chenglin believes that the cryptocurrency market is clearly recovering, because the trading volume of exchanges in various countries has increased compared to before, and after the bear market last year, major institutions are trying to save themselves, including capital, media, project parties, exchanges, etc. The recent emergence of IEO (Initial Exchange Offerings, which refers to the issuance of tokens with exchanges as the core; tokens skip the ICO step and go directly to exchanges) has also led to a wave of increases, but since the popularity of IEO has ended and a new baton has not appeared, he believes that this recovery will be short-lived and is expected to end this month.

However, in Zhu Chenglin's view, the real spring or bull market in the cryptocurrency circle has not yet arrived, and this round of increases is mainly in mainstream digital currencies. A small number of altcoins have slightly rebounded due to the market, but most of the altcoins have not rebounded.

Zhang Feng mentioned that from the perspective of Chinese supervision, digital currency will still be based on the 94 Announcement of Seven Ministries and Commissions as the basic framework in the short term. The recent regulatory risks may come from changes in the overall financial regulatory environment. In addition, the "Industrial Structure Adjustment Catalogue" issued by the National Development and Reform Commission on April 9 this year included virtual currency "mining activities" in the elimination catalogue. It has not yet been officially passed, but once it is passed, its specific impact needs further observation; and before the regulation of digital currency matures, it will be difficult to have a spring for blockchain and digital currency as a whole.

After a long wait, Tao Nan, Wu Yingchun and others are still looking forward to the arrival of spring in the cryptocurrency circle, but no one knows how long it will take.

(At the request of the interviewees, Hao Ming, Tao Nan, Wu Yingchun and Lin Fei are pseudonyms)