Bitcoin Players’ Real Story: Speculators Are Foolish, Rational People Hold Long and Avoid ICOs

"I started to get involved in it in March and April this year, and now the money has probably increased several times." Li Ding (pseudonym), a virtual asset investor in a fourth-tier city in a southeastern coastal province, recently told a reporter from 21st Century Business Herald.

Li Ding is undoubtedly a beneficiary of this round of virtual asset craze represented by Bitcoin. Since the beginning of this year, the price of Bitcoin has risen from more than 6,000 yuan per unit to more than 30,000 yuan per unit recently.

Before he started investing in virtual assets, he had participated in a Ponzi scheme with obvious pyramid scheme attributes; before participating in the Ponzi scheme, his specialty was repairing trucks and he owned a small repair shop.

Ponzi scheme operators turn to virtual assets

The so-called Ponzi scheme refers to a financial pyramid scheme that has no hematopoietic function, robs Peter to pay Paul, and uses the money of later members to pay the first members. Due to its attractive high returns, it has emerged in endlessly in the past few years. The so-called Ponzi scheme project by Li Ding refers to the "MMM Financial Mutual Aid Community" founded by Sergey Mavrodi. It used "financial mutual aid" as a banner to attract retail investors' funds. It was once a very popular Ponzi scheme project in China. It declined after the central bank, the China Banking Regulatory Commission and other four ministries and commissions named it and warned it in early 2016.

Li Ding's friend Pang Pian (pseudonym) had an experience very similar to Li Ding's.

"I have been operating Ponzi schemes for the past five or six years, but I didn't make much money. This year, I made two or three times as much money from Bitcoin and Litecoin." Pang Pian said that he has now shifted his focus to investing in virtual assets. "Many people who used to play Ponzi schemes are now investing in digital assets to some extent."

Li Ding and Pang Pian believe that virtual assets are not much different from Ponzi schemes in essence. "The key is the timing of entry. The earlier you enter, the more you will earn. The people who come after you pay the bill."

"At present, many ICO projects only have a PPT, and the risk of the financing party absconding with the funds is huge." Regarding the risks of ICO projects, a Beijing lawyer told reporters that the large number of retail investors currently participating in them do not care. "Many times they are unable to care about the prospects of the project, and just hope that the price will skyrocket and let latecomers take over."

Lawyers bypass ICO

Unlike speculators like Li Ding and Pang Pian, Ding Ren (pseudonym), a partner at a Beijing law firm, has his own understanding of virtual assets such as Bitcoin and Ethereum.

"I have a client who does cross-border Bitcoin arbitrage, for example, buying at a lower price in the United States, and then selling at a higher price in markets such as South Korea, Japan, and China." Ding Ren told the 21st Century Business Herald reporter that he came into contact with Bitcoin through a client about three years ago. "We explored its compliance and even discussed it from the perspective of anti-money laundering and cross-border capital supervision."

"Then I spent a week reading all the overseas information related to Bitcoin," the lawyer told reporters. "After doing some self-analysis and judgment, I felt that holding these assets was not a bad thing."

Initially, his main purpose was to understand how funds were transferred between China and abroad. “I registered Bitcoin accounts in the United States and China and invested some money in each, about 4,000 US dollars in the United States and about 1,000 RMB in China.” Later, he found that “domestic technology was more advanced and faster, so he increased the domestic investment amount to hundreds of thousands of RMB, and the average cost per coin was about 17,000-18,000 yuan.”

"Before, I sold on highs and bought on lows. I have made several transactions and it was also a learning process. But now I have switched modes and plan to hold it for a long time." Ding Ren said that due to the scarcity of Bitcoin itself, the long-term value-added potential of holding Bitcoin is more considerable than trading it.

He also made some investments in Ethereum and Litecoin, but his main funds are still concentrated in Bitcoin.

"I may hold more, but my starting point will be different. For example, when there is a shock in the exchange rates between China's foreign exchange and the United States, I may do some risk hedging in the middle. Global asset allocation is also possible," said Ding Ren.

Ding Ren also said that he "will not touch" the currently very popular ICO projects in China because "it is too crazy, very similar to the Shenzhen Stock Exchange in the 1990s, when people used cash to buy stocks at the stock exchange, and everyone was thinking of getting rich overnight."

“ICO projects will be regulated sooner or later, and regulators will formulate certain rules for investors in terms of information disclosure, investor protection, etc.” Ding Ren said that out of caution as a lawyer, he will avoid ICO projects before regulatory measures are implemented.