Mining farms closed down, capital came ashore, the cryptocurrency market receded, and we crossed the bear market no man’s land

On his 42nd birthday, Liu Cong announced that the mine operation had ended in failure.

People say that people are free from doubts at the age of 40. This year, in order to find electricity for the mining farm, Liu Cong took more than 200 Bitcoin mining machines commissioned by customers to inspect the mining farms. He traveled to 25 provinces and 87 cities, covering a distance of 3,932.2 kilometers. However, at the age of 42, he failed to find the answer to how to get rich in the world of blockchain.

In early winter, the Carmel Town bar in 798 Art District was deserted. Sun Haoran sat in front of the Odaily Planet Daily, recalling the nights with flickering lights more than half a year ago. At that time, young people in the cryptocurrency circle sat around his bar, confident and flamboyant, talking about projects worth "at least 300 or 400 million, and at most 300 or 400 million." There were also silent investors who raised their hands to invest in three or four projects in one night.

Those highlights of the cryptocurrency circle in his memory have long faded, the bustle has turned into loneliness, and people from the cryptocurrency circle rarely appear in his bar anymore.

Since February this year, the cryptocurrency market has entered a "bear market" as the market continues to fall. Initially, people optimistically estimated that there would be a bull market after a bear market, and a bull market after a bear market. However, what was unexpected was that the light of the bull market has become increasingly dim, while the darkness of the bear market has become increasingly heavy. On November 20, Bitcoin fell below the $5,000 support level and once dropped to $4,100. Nine months ago, Bitcoin's highest price exceeded $19,000.

Some people joked that after experiencing the last round of bear market, this sharp drop in Bitcoin is the beginning of Bear Market 2.0.

Liu Cong has now dissolved his company, packed up his belongings, and returned to Guizhou to rest. The Carmel Town Bar, which was once very popular in the bull market, continues to be lonely in 798. Some people who bought the bottom of the market several times in the past six months are still in doubt about their lives.

Some say the bear market has not yet reached its bottom. No one can imagine what the darkest moment will be like.

Mine owners are powerless

“After January, the price of the currency has not been very good. There was another drop in February. At that time, the amount of blocks produced by mining was still good, and there was still a certain profit even if the price fell. In March, when the price of Bitcoin fell below US$5,000, people panicked.” Liu Cong said.

As one of the earliest Bitcoin miners, Liu Cong once made a fortune from mining. In 2017, all in blockchain became a trend in the industry. Liu Cong gave up his job in the traditional financial industry in Taiwan and came to the mainland alone to do mining machine hosting business, pursuing the dream of financial freedom.

However, after the Spring Festival, until today, the cryptocurrency market has been in a state of continuous decline.

On one hand, the revenue was shrinking, and on the other hand, it was raining cats and dogs. In the second half of the year, Liu Cong's mine repeatedly encountered the difficulty of unstable power supply in the rented factory. More than 200 Ant S9 mining machines in Liu Cong's hands could not be turned on and operated. Customers had no mining income, and he could not shamelessly earn money from customers' electricity bills.

One day of downtime means one day of lost money, and the cost of mining machine operation and maintenance keeps rising. In order to find electricity, Liu Cong traveled from Tianjin, Henan to Shanxi, Yunnan, Inner Mongolia, and Hebei. His 200 mining machines also moved around with him, but the cost of operation and maintenance was always higher than the income, and he was unable to save the situation in the end.

The thought of suicide once occurred to him, but the final result was that he decided to suspend the operation of the mining farm in mid-June. Liu Cong began to send some of the mining machines back to the customers, and gradually assisted the custody customers in selling the rest.

During that time, Liu Cong appeared in front of Odaily Planet Daily, with a fat body covered in wrinkled outdoor clothes, a black backpack covered with a fine layer of dust, and messy hair. Two young work partners followed him on the street, like a master and apprentice who failed in their "seeking the scriptures".

The tide of withdrawal from the circle is rising

The bear market comes slowly.

The investment frauds such as "Li Shiqin" and "Fantasy" that occurred in March swept away 140,000 ETH and ran away, making the already fragile trust connection between investment agents and retail investors even more shaky. People have seen that more and more blockchain project coins have broken their issue prices.

Since July, the Carmel Town Bar, located in 798 and a gathering place for cryptocurrency circles during the bull market, has rarely been open for dinner parties every Friday.

On August 22, the Chaoyang District government issued a document to stop all virtual currency promotion activities in shopping malls, hotels, guesthouses, office buildings, etc., and the roadshows that had been held almost every day were also terminated. This was the eve of the first anniversary of the "September 4th" incident.

On July 9, the People's Bank of China held a mobilization meeting for the next phase of the special rectification of Internet financial risks. Pan Gongsheng, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange, said that the initial token issuance and various disguised fundraising activities involving illegal fundraising and illegal issuance of securities should be "struck as soon as they are exposed." Project parties are trying to keep a low profile as much as possible, and the frequency of meetups and conferences has decreased at a noticeable speed. Some people said that the project parties can only be seen in churches.

Even more difficult are the miners.

On July 21, relevant departments in Xinjiang forced the closure of "mining" enterprises that used electricity illegally, and required them to complete the closure before August 30, 2018. Supervision is being upgraded. With the decline of Bitcoin prices and the increase of algorithm difficulty, the once huge group of miners is becoming lost.

The media is also having a hard time.

On the evening of August 21, self-media public accounts involving blockchain, digital currency and other fields such as "Golden Finance Network", "Coin World Express Service", "Deep Chain Finance", "Cannon Rating", "Huobi Information", "Daily Coin Reading", "TokenClub", and "Wu Jie Blockchain" were officially blocked by WeChat.

One month before the storm hit, the official account “Shenzhen Innovation Chain” sent out its last push.

Regulation is not the straw that breaks the camel's back; the lack of hope in a bear market is.

Anxiety germinates in social occasions in the cryptocurrency circle. In the circle, holding meetings and gatherings are the most common ways to socialize, but participants and organizers have their own calculations. Because of his work in the media, Kunkun, the executive editor of "Shenzhen Chain", knows a lot of people in the circle, and occasionally goes to conferences and gathers some dinners.

But at this time, Kunkun feels that every blockchain community is dead.

In the bear market, I gave up the feeling of being trapped in Shenzhen Innovation Chain, "It feels too difficult to survive."

This is the current situation of blockchain media and also the current situation of various project parties.

Among the "army" of blockchain projects that emerged in the bear market, most of them found it difficult to sustain themselves without a source of financing. Although those that have received investors still have food and grass, they are also worried about the future.

Short-lived fireworks under "hunger"

It's not always quiet.

In July, fomo 3d became extremely popular. This seemingly perpetual money game brought new speculative tricks to the long bear market. The last time a DApp attracted so much user attention was CryptoKitties.

How hungry are retail investors? Within 24 hours, the number of fomo3d users increased by more than 150%, and the transaction volume increased by 1500%, ranking first in the Ethereum DApp active list. Among the total visible investment volume, more than 80,000 ETH transaction orders have been generated. In terms of conversion, hundreds of millions of US dollars of cash flow transactions have been generated on this small platform, not to mention that this number is still growing.

Before it became popular, Wang Hao had noticed fomo 3d. Because he thought it was fun, he and his company's technical staff planned to make a Chinese version of fomo 3d. Before preparations were completed, media reports about fomo 3d were "overwhelming overnight". Wang Hao felt that time was urgent and the opportunity was huge, so he discussed with the technical staff to cut off some functions of the original fomo 3d, change the 24-hour mechanism to 12 hours, and rushed to make it overnight. On the third day after fomo 3d became popular, the simplified version was launched online.

Retail investors who did not seize the opportunity to enter the market early have been hungry for too long, trying to become the next lucky one in one fomo-like 3D game after another. Wang Hao's company relied on this copycat version of fomo and obtained hundreds of Ethereums simply by relying on dividends from developers in the game. As the initiator, Wang Hao got half of it.

Under the influence of fomo 3d, more and more gambling Dapps appear in the market, but the later you enter the market, the harder it is to make a profit. The perpetual motion machine lacks power, and the big prizes in the fund pool are often coveted by hackers, and eventually become geeks' program games. In the unbearable bear market, blockchain games can't escape the fate of being lost.

However, there is never a shortage of speculators in the market. For example, the previously popular star public chain EOS experienced a short period of arbitrage speculation in July due to defects in the parameter settings of the Bancor algorithm and arbitrage space for the core resource RAM.

CoinPool Queen, a serial entrepreneur who graduated from Tsinghua University, is a beneficiary of RAM. Her technical friend saw the EOS instruction document in the community early on, and after realizing the arbitrage opportunity, he seized the opportunity in time and told his friends in the circle that it would not be too difficult to increase the profit tenfold if they did not exit too early.

But the enthusiasm of this carnival gradually died down after EOS founder BM published a blog post on the three-step solution to the RAM price problem. RAM fell accordingly, and memory allocation also dropped from 80% to 76%.

These are like fireworks in the long night, brilliant but very short-lived. Only those standing on high ground have the opportunity to see the best view. When the last spark is extinguished in the darkness, people fall into silence again.

Capital hibernates, funds turn into "pimps"

The initiators of the blockchain bubble, in addition to crazy speculators, were also the capital that continuously poured into the market. After the popularity of digital currency, various investment funds grew wildly in the market. According to the Crypto Fund Research report, 130 new digital currency funds were established in the market in 2017, far exceeding the total of 2014 to 2016. Some media predicted that 147 new funds will be established in 2018.

This is indeed the case. The investment fund industry has indeed been prosperous. In addition to the crazy growth of small funds, the three major exchanges such as Huobi, Binance, and OK have also established their own investment funds based on the endorsement of their exchange business, and real money has been pouring into the blockchain trend.

Around the Spring Festival, Hu Hui left a first-tier dollar fund and came to an early-stage investment fund in the blockchain circle as an investment manager.

When talking about the mixed bag of investment funds in the blockchain circle, Hu Hui, who comes from the regular army, is quite disdainful.

“In terms of investment professionalism, investment funds are much less professional than traditional VCs. In a bull market, you don’t even need to consider the value of the project, as long as you can coax these new investors within a year. In fact, many people in the market are just speculators who have a lot of coins and nothing to do, so they start to invest in projects.”

Hu Hui realized that, unlike the traditional VC market, the blockchain market seems to have always been a place to make quick money: "For projects in the traditional venture capital circle, it takes at least three and a half years or even ten years from Series A to IPO, which is a very long process. But it is different in the cryptocurrency circle. From listing on an exchange to unlocking a coin, it can be almost completely sold within a year. The money comes too quickly."

Yang Lin, who works in the investment research department of a well-known capital, has the same feeling on this point: "Everyone is eager to cash out. If you don't sell, someone else will. So this market has become a market for those who run fast. Whoever runs fast will get a better return."

A post on WeChat Moments by Yi Lihua, founder of Lede Capital, directly pointed out the dilemma facing investment funds: "In 2018, the rate of return of Token Funds, based on the legal currency standard, -80% is normal, -60% is qualified, -40% is excellent, -20% is top-level, and -0% is not invested in."

The bear market is here, and the cryptocurrencies raised by the project owners have begun to depreciate, so they have to seek a new round of financing to survive. Unlike the capital carnival in the bull market, capital has entered a hibernation period first.

Capital is of course unwilling to do a business that only loses money and does not make any profit. "Lying still" and "not investing" have become self-protection measures that capital unanimously agrees on. Hu Hui clearly felt that the investment funds on hand were being tightened: "At first I thought it was just for the next two days, but later I found that the market has been bad, so I just didn't invest.

The wind blew and the capitalists flocked ashore.

"Some funds around me have started to change their business. Some small funds used to have a 1:1 ratio between investment and research, but now almost all investment and research have stopped." Being in the industry, Yang Lin has also felt the impact of the bear market on the capital market. He said that going out to build relationships, do BD, and "pimp" have become the way for small funds to survive in the bear market.

Even though the company that Yang Lin works for is strong in terms of both funding and background, Yang Lin can still feel the impact of the bear market on his company's investment strategy. Incubation is a new model derived from coping with the bear market.

Yang Lin introduced that the main work of incubation is to help project parties establish economic models, revise white papers, provide overseas roadshow opportunities, etc., and the capital will extract corresponding commissions from them. Compared with the return on investment, the income from incubation is far less than that from investment.

“Before, you could get a 20-fold return by investing, but the risk was also very high, and you might lose everything. Although incubation has limited returns, it is safer. Regardless of whether the coins issued by the project party rise or fall, we can get financial returns in advance.” Yang Lin said.

Similarly, Hu Hui's company is also preparing for incubation-related work. But he seems to see it more clearly: "Isn't incubation just pimping? To put it bluntly, the core demand of the project party is to raise money. Incubation is actually to put something together to help the project party raise money."

Domestic routines are complicated, and going abroad is a way to survive

Going overseas is another option to avoid risks.

In addition to incubation, Yang Lin said that his capital side will basically no longer invest in any domestic projects at present, but will instead focus on overseas projects in the United States, Japan, South Korea, Southeast Asia and other countries.

"The Chinese are too good at playing with business models. After raising funds, few projects will actually follow their white papers. In comparison, foreigners are more down-to-earth."

In June 2018, Zhang Lu started hash.pro, which mainly engaged in cloud computing business. When Zhang Lu entered the market, the market was not optimistic, so at the beginning, Zhang Lu positioned his business in the overseas market. Currently, more than 90% of its users are from overseas.

"Currently, domestic users are familiar with the rules of cryptocurrency speculation, which is quick in and out and full of gambling, so more people are participating. The enthusiasm for mining is not that high," said Zhang Lu. Overseas customer groups generally do not take the benefits of digital currency very seriously. "It may be because digital currency has a high penetration rate in Japan, and our largest user group is in Japan. In addition, due to many factors such as the welfare society, in their minds, an annualized income of about 10% from mining is already good."

Today, the tide of the bear market is still surging, one wave higher than the other. Some people immersed in the cryptocurrency market are still struggling, but most are being submerged little by little.

“I don’t want to leave until I make 300 million yuan”

"There is nothing to be surprised about in a bear market. Where there is a bull market, there are bears. This is the natural law of the market. The market is constantly evolving. If most people are still speculating, it only means that the bear market has not yet squeezed out the bubbles. Things can only be accomplished after the bubbles are digested." Hu Hui said. He does not want to be a speculative upstart forever. He hopes to do something valuable and be respected after this round of bear market.

In the bear market, Hu Hui finally found his normal life and work status. In his words, during this period, he can have a romantic relationship and study the investment trends and the real situation of various projects. Why not?

Wang Hao lived a nine-to-five office life and worked as a financing intermediary in an investment institution. He also signed up for an online English class, which he attended every other day, and listened to the BBC every morning. His boss wanted him to go abroad to develop development projects, and he wanted to equip himself with knowledge first. He didn't pay much attention to blockchain games, as he felt that blindly imitating would never make a lot of money. Although his salary is not high now, he also feels that "money is easy to make and it's easy to get carried away. I'm fine, because when I was about to get carried away, the bear market came."

After the market cooled, surgeon Guo Zhixing gradually slowed down his investment in the digital currency market. Prior to this, he had achieved a 10-fold profit in the cryptocurrency circle through his investment philosophy, and also became a columnist on "Coin View".

In order to reduce the cost of living, Liu Cong moved from Tianjin to a remote town in Guizhou shortly after closing the mine. Here, Liu Cong rented a 100-square-meter house at a price of 1,680 yuan per month, and arranged his office and living in this house.

"Increase revenue and reduce expenditure," he said.

At the end of October, the temperature in Guizhou was still 12.8 degrees at 3:30 in the morning. Liu Cong sat in front of a small desk, with four screens stacked one above the other working tirelessly. One screen was used to look at K-line charts and do quantitative trading, one to capture the ever-changing currency prices, one to read various external media news and consultations, and another screen was scrolling through various social networking content...

"You know FOMO, Fear of missing out. The whole industry is huge, so information anxiety will arise. I am always prepared. I don't want to leave here unless I make 300 million yuan," said Liu Cong.

Liu Cong doesn’t know how long it will take for the blockchain industry to recover, and more and more of his friends have left the blockchain industry. But the experience he has accumulated over the past few years tells him that he can’t wait until the market picks up before returning to the industry.

“How long will it take for the blockchain industry to recover? I don’t know. More and more colleagues I know have left this circle. I hope we can meet again in the future.” Liu Cong said, looking at the dark night outside the window.