Bitcoin's annual revenue has increased nearly 10 times! A rare flower blooms amid asset shortage

Source: China Securities Network

2016 is the year when blockchain moves from virtual to real, and also the year when Bitcoin makes a comeback.

When the market as a whole is facing the problem of asset shortage, Bitcoin, which suffered a heavy blow three years ago, has returned to the public's attention. Although the central bank and five other ministries and commissions only define it as a virtual commodity, at the moment when the concept of blockchain is hot, some investors have achieved nearly 10 times the income growth in just one year. The business logic behind it is gradually favored by investors.

Reconstructing the Bitcoin Arena

Recently, as a representative of virtual digital currency, Bitcoin has seen an astonishing rise, attracting market attention. On November 17, the price of Bitcoin hit a three-year high, and the trading volume has also increased recently. The current weekly trading volume has increased by at least 10 times compared to three years ago.

Since 8 p.m. on November 16, the price of Bitcoin began to rise sharply, rising from 4,966 yuan per unit to a peak of 5,250 yuan in just one hour. Since then, the market has continued to soar and quickly broke through the 5,400 yuan mark, setting a three-year high. As of press time, the price of Bitcoin has fallen, but it still remains above 5,200 yuan.

Among the numerous Bitcoin players in China, Xiaoyu and Dashu are representative. Xiaoyu is a diligent entrepreneurial college student with a great record in the Bitcoin investment circle. He once made a profit of one million yuan in two months with a principal of 30,000 yuan. Dashu is a veteran expert in Chinese Bitcoin investment, a gentle and refined entrepreneurial pioneer who successfully created a well-known platform in the blockchain field.

This round of increase also made Xiaoyu and Uncle Da feel the hot market this year.

In October 2013, Xiaoyu, who was interning at a national Internet finance laboratory, first came into contact with Bitcoin. As Bitcoin was booming at the time, Xiaoyu took out 30,000 yuan of her savings to buy Bitcoin.

At that time, Bitcoin had just entered the players' field of vision, and there were continuous good news, especially the United States also announced the recognition of Bitcoin transactions, which directly stimulated the strong performance of Bitcoin.

"At that time, I used leverage and went all in. The price of Bitcoin surged from 1,200 yuan to 8,000 yuan in just one month. Such an amazing increase made the 30,000 yuan increase in value to 300,000 yuan in just one month." Xiaoyu told reporters.

After that, Xiaoyu rushed into the "junk coin" (virtual digital currency varieties other than Bitcoin) market and made a big splash. Within the next month, he made a profit of one million yuan.

On December 5, 2013, the central bank and five other ministries and commissions issued the "Notice on Preventing Bitcoin Risks", which clarified the nature of Bitcoin, stating that Bitcoin is not issued by monetary authorities, does not have monetary attributes such as legal tender and compulsion, and is not a real currency. In terms of nature, Bitcoin is a specific virtual commodity. Affected by this, Bitcoin fell by 40% in a single day, and the price per unit fell from nearly 7,000 yuan to 2,000 yuan in the following two weeks.

"Since then, although Bitcoin has experienced some ups and downs, it has basically never recovered." Xiaoyu said. However, in the past year, Xiaoyu feels that the Bitcoin investment circle is rapidly expanding.

"From the perspective of transaction volume, this year's market has expanded several times compared to last year, and the participants have moved away from the IT circle." When interviewed by reporters, Xiaoyu had obvious dark circles under his eyes, but his eyes were full of excitement and joy.

Data from Huobi.com also confirmed Xiaoyu's judgment. The data showed that since the fourth quarter of 2015, the number of Bitcoin investors has increased 10 times, the trading volume has also increased 3 times, and the price of Bitcoin has increased from 1,200 yuan to around 5,000 yuan.

It was with the help of this round of market conditions that Uncle Da's blockchain startup project was able to successfully raise funds, and the size of its employees also increased several times, becoming a well-known company in the blockchain field.

Xiaoyu, who became famous in 2013, later switched to the futures and stock markets, starting a "snowball" journey. A friend of Xiaoyu revealed to reporters that Xiaoyu's assets have exceeded 10 million yuan in just a few years.

"Now there are market trends in all markets. I usually go to bed at 11 o'clock in the evening and get up at 8 o'clock in the morning. Then I go to the office I rent, turn on several computers and pay attention to the market trends of Bitcoin, futures, stocks and other industries at the same time." Xiaoyu told reporters.

Since Bitcoin is traded 24 hours a day and futures are also available on the external market, Xiaoyu has to watch the market for more than 14 hours every day. "It is mainly because of the recent market trend that we need to watch the market so hard. In addition, we also need to issue program warnings at night," Xiaoyu added.

Xiaoyu believes that the sudden activity of Bitcoin this year is related to two factors. First, the production of Bitcoin has been halved, which means that the reward for the same mining (providing computing power or computing services) will be halved after July this year. Influenced by this expectation, Bitcoin has seen a large wave of market in the first half of the year. "From the end of 2015 to the first half of 2016, the price rose from 1,300 yuan to around 2,800 yuan," Xiaoyu explained.

Another factor is the expectation of exchange rate depreciation. Xiaoyu believes that the expectation of depreciation in the second half of the year has increased risk aversion. This is also a major attraction of Bitcoin. This also helped push the price of Bitcoin to 5,000 yuan.

According to the reporter, the reason why Bitcoin is so active is also related to its trading mechanism. "Bitcoin trading does not charge handling fees, and it has the function of margin trading, with the maximum leverage being more than ten times. With the frequent good news, the increase is bound to be magnified." said a person from an exchange platform.

As his university major was technical English, he was more exposed to cutting-edge technology. As early as 2009, he began to get in touch with Bitcoin. He witnessed the rise and fall of MT.GOX, the world's first Bitcoin exchange, the rise and fall of Chinese exchanges such as BTCC, and the overnight rise of blockchain 2.0 projects such as Ripple, BitShares, and Ethereum. When it comes to the development history of virtual currency and blockchain technology, Uncle Da knows everything.

Da said that before, there was no concept of blockchain, only the prototype of Bitcoin's underlying technology. After blockchain technology was gradually brought to the stage in 2015, Bitcoin's underlying technology was once again recognized, and Da's "status in the world" was gradually improved.

"The recent surge in Bitcoin prices should not be over-interpreted. Judging from the documents issued by five ministries, Bitcoin is currently defined as a virtual commodity, and its value in the blockchain is gradually becoming more prominent," said Uncle Da.

The confusing ICO

Of course, the fact that there are so many voices in the market paying attention to Bitcoin shows that many people have noticed the exchange value of the Bitcoin blockchain. At the same time, a new business model has also stimulated the market demand for Bitcoin.

There are many ways to raise funds in the stock market, among which the initial public offering is called "IPO". In the virtual digital currency circle, a fundraising method called "ICO" has gradually become mainstream after the success of Ethereum. The so-called ICO (Initial Coin Offerings) refers to some blockchain projects that can raise bitcoins to maintain further operations and development. In return, the project party will issue tokens representing the project's income rights or shares as consideration.

"This innovative fundraising method has led to an increase in market demand for Bitcoin," Xiaoyu believes.

It is precisely because of the popularity of ICO that virtual digital currencies are now not limited to Bitcoin and Ethereum, but there are hundreds of virtual currencies for players to choose from.

"The ICO method usually starts with the release of a white paper on technology and feasibility, announcing the specific plan and features of the project to the industry, and then raising bitcoins. There is usually a fundraising cap, and once successful, the project startup costs will be covered," said Gong Ming, founder of Blockchain Pencil.

At present, there are many platforms focusing on ICO at home and abroad. From the reporter's observation, many blockchain projects have successfully raised funds on some platforms and completed ICO.

On the other hand, Xiaoyu was also dazzled by the various new virtual digital currencies that emerged after the success of ICO. According to statistics, there are currently about 300 types of digital currencies with a market value of about 30 billion US dollars.

"Except for Bitcoin and Ethereum, which are relatively well-known projects, it is difficult to assess the value of others." Xiaoyu feels that she does not have time to carefully read the recommended white papers of these projects.

Da Shu is one of the first entrepreneurs to try ICO. He believes that this kind of entrepreneurial project aims to promote the project and reach a consensus with IT professionals to jointly realize the project blueprint. The virtual digital currency that goes with it represents its rights, so it is important to pay attention to the success of its business project.

"In order to avoid misleading investors, our project refused to issue virtual digital currency from the beginning, and instead adopted a form of blockchain equity called antshares. Antshares means sharing, and it focuses on the value of shares," said Uncle Da.

In addition, how to set prices also tests investors.

"Compared with stocks, it is difficult to have a quantitative valuation model for these virtual digital currencies. Most of the time, VC or PE valuation is required for the project. If you don't understand the business logic, you definitely don't dare to participate." Xiaoyu told reporters that in his opinion, the advantage in recent years is that he has chosen the right field that he is familiar with. He insists on this point even more for alternative investments.

Virtual currency investment is still a high-risk area

Of course, huge profits are accompanied by high risks.

"From the current perspective, Bitcoin and Ethereum are relatively successful virtual digital currencies, while the others are still 'on the way'. Sometimes, even Bitcoin is full of risks," said Gong Ming.

"The sharp rise in Bitcoin in the second half of this year is due to expectations of RMB depreciation. Some people take advantage of this expectation and claim that buying Bitcoin can hedge risks. Little do they know that Bitcoin is a high-risk product with great volatility and is not an ideal short-term product. Bitcoin investment must be thought about calmly, and long-term trends and short-term fluctuations must be distinguished," Gong Ming believes.

"The application progress of blockchain technology and the policy trends of various countries are core factors that affect blockchain. If you don't have a good understanding of the relationship between blockchain and currencies such as Bitcoin, it's best not to invest in this field." As a veteran, Xiaoyu is now confident.

The virtual digital currency generated by ICO projects is even riskier. "ICO is essentially exchanging high-risk virtual assets such as Bitcoin for the project's own virtual digital currency, and its risk factor is greatly increased, not reduced." Uncle Da emphasized to reporters that you must see clearly before getting involved.

Many well-known people in the industry also told reporters that since the ICO system originated from the blockchain, the project has its own particularity. At the same time, its unique attribute of crowdfunding Bitcoin is still blank in supervision, and there are still hidden dangers in the future.

"Since the ICO project issuer sets up the mechanism primarily for project launch, it focuses more on the project than fundraising. If someone exploits the rules just for the purpose of raising funds, the consequences will be very serious and may even ruin this technological innovation system," said Sun Ming, a legal expert in the blockchain field.

Wu Sijin, CEO of FuZhuMei, often travels between Beijing, Shanghai, Guangzhou and Shenzhen to promote the company's exchange blockchain technology and model. "We originally wanted to raise funds through ICO, but later gave up. This is because the legal and institutional bottom line of this model is unclear, and once there is a policy change, it is not conducive to communicating with investors.