Looking back at 2018: crossing the cycle? those who left and those who stayed

Editor’s Note:

Observing history is to understand the future to the greatest extent, and this article gives a good angle of review. The author has also witnessed several cycles. All volatile markets often go to extremes, either to one extreme or the other. However, it is the potential energy brought by these extremes that provides the ability for the subsequent reversal. 

Disclaimer: The content of this article is only for information display and sharing, and does not promote or endorse any business and investment behavior. This article does not provide any investment advice.

“I don’t know about bull markets, but I know too much about bear markets”

0. Write in front

Recently, many old friends have talked to me about “Dream Back to 2018”, and many old leeks have begun to write “Bear Market Survival Guide”. More new friends who have entered this bull market are eager to know what the market will be like. Seeing the eager eyes of these new friends reminded me of myself listening to the old leek bragging in 2018, and I was full of confidence in the future market, but I didn’t know that what was waiting for me was a long bear of 3 years.

Of course, writing this article does not mean that we judge that the market is about to enter a bear market in the future, we just simply recall what the digital currency market looked like in 2018 , and think together how to live long and prosper as a participant in the digital currency market in the ups and downs of the cycle .

1. Market overview – the era of mixed fish and dragons and strange forces

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

The peak of the secondary market appeared in January 2018, and the market value of the entire digital currency market exceeded US$800 billion, about one-third of the ATH in 2021. At that time, the market was full of altcoins, and the proportion of Bitcoin reached a minimum of 33.39% on the day of the high market value. The market was still immersed in the bubble of the ICO wealth creation myth. Looking back at the top 20 coins by market value at that time, all of them were various public chain tokens and BTC imitations. Today, only 6 coins remain on the list, and there are 11 new coins.

Public chain/protocol

The first is the shuffling of the public chain/protocol market. From 2017 to 2018, the market is still in the development stage of infrastructure. The public chain and protocol layer are the focus of the market. Sharding, DAG, BFT and various Proofs of Bullshit is endless. Every public chain tries to use various methods to solve the impossible triangle of “efficiency, security and decentralization”.

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

Overview of public chains in the first half of 2018

In such a market environment, investors in the primary market basically open their mouths to the consensus standard, and close their mouths to TPS. Today, we will study how directed acyclic graphs solve asynchronous problems, and tomorrow we will think about how Byzantine generals can realize peer-to-peer communication. However, most of the public chains are in the early development stage, and there are very few projects launched on the mainnet. The first-level investment can only start from the angel stage, but no one knows whether it will be implemented. Such a market environment has spawned a large number of pseudo-technical projects. One white paper and a few consultant platforms can start financing, and the project can only look at technical solutions after due diligence, but there is no data or finished products to verify. Everyone is looking for the next-generation public chain other than BTC and ETH . In 2018 , someone told me that it was called EOS .

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

(Foresight Ventures is still very optimistic about the cosmos ecosystem and various new public chains)

In addition to general-purpose public chain solutions, many projects choose to take the lead, adopting vertical solutions for specific application scenarios, public chains for IoT, storage, and privacy use, as well as protocols for data, security, transactions, and other scenarios. . Most of the projects stay before the mainnet launch, and even in the initial development stage, only a few are actually made. Incomplete infrastructure has led to shrinking demand at the application layer, and it has little use other than transfer payment, clearing and settlement, and using ETH smart contract ICO to issue coins. As for traceability, identity credit, distributed computing and other scenarios, it is even more difficult to solve.

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

Agreement overview in the first half of 2018

Of course, in these projects, there are still many teams that have gone through the hardships of the bear market and are still developing and doing things, and finally settled down the blue-chip giants we see so far, as well as the basic components we commonly use.

chain change

After the wealth-making effect of ICO spreads across the country, a large number of companies in traditional industries want to solve industry or their own problems through blockchain technology, and the trend of “chain reform” is rapidly emerging. Among them, there are many people of insight who are full of faith and eager to join the technological revolution, and there are also ghosts and snakes who take advantage of the heat to cut a handful of leeks. The chain reform trend spans P2P, mobile phones, e-commerce, traceability, AR /VR, SaaS, games, etc., only you can’t think of it, and I can’t change it without me. It seems that the emergence of blockchain can solve all the pain points that cannot be solved online and offline, but for most projects, there is only one problem finally solved – the financial problem of the project party.

transaction mining

After the market sentiment fell slightly, most investors began to consider investing in projects that can generate cash flow, and exchanges became the first choice. The “transaction mining” exchange led by Fcoin was born. In order to realize the cold start of the exchange, Fcoin issues FT according to the user’s transaction volume for transaction incentives. In fact, the rate of return at that time was only 30-40% annualized, but users who had not experienced Yield Farming flocked to it. With the soaring popularity of FT tokens, the FT token rose hundreds of times in a few weeks, and it was also due to the defects in the design of the mining mechanism. crash. However, this innovative model has been used, and a large number of exchanges have begun to use “transaction mining” as a selling point to raise funds for platform coins . Like Internet companies, exchanges focus on long-term product and operational capabilities, as well as the discovery and capture of high-quality assets. Most of the exchanges that followed suit were short-lived, and only a few survived.

death spiral

After the secondary market reached a high point, the primary market “thriving” through various hot spots for half a year, and the time came to August 2018, when the most exciting part of the bear market came – the ETH death spiral. Since a large number of projects in the last bull market used ETH for financing, a large amount of ETH in the hands of the project party and first-tier investment institutions has not been realized. When ETH fell, investors began to sell, and the project side also reduced their holdings. As the anchor of the altcoin market, the decline of ETH led to the decline of the entire market. Project parties, investors, and traders began to reduce their holdings of various altcoins. The death spiral began. ETH fell from $400 to $200, and it fell to $89 after two months of sideways. The primary market was also completely Declared dead. The original accumulation of most investors in the last bull market has seen a retracement of more than 50-80%, and the glory of ICO has long disappeared.

STO , EOS/Tron dApp and others

During the two-month period of the broader market sideways, the primary market also tried to adjust some small tasks: the first is the compliance-oriented ST (Security Token) and STO (Security Token Offering), which is simply a form of asset tokenization . The process from Asset backed security to Asset backed token. Owning assets or cash flow as value support, but it is essentially another form of ICO that is closer to regulation. In view of the downturn in the market at that time, the demand for issuance in the primary market has begun to shrink, so the concept of STO has not finally become a reality.

The second is the explosion of EOS dApps, with a large number of games and spinach projects appearing on the EOS chain. The EOS dAPP represented by BetDice created a turnover of 8.2 billion yuan in two months and attracted hundreds of thousands of users. Decentralized exchanges, wallets , mining robots and other related services built on EOS have developed rapidly, and their popularity has even led to the hype of EOS RAM. For the first time, the whole public chain ecology is realized by the application side. However, the projects on EOS are mainly based on the spinach attribute. The transaction volume of the spinach dApp accounts for 90% of the total transaction volume. The life cycle of its users is basically kept within 1 month. The game of stock funds has led to the EOS application ecology. Crash quickly. Later, Tron also copied the model of EOS, trying to continue the glory of EOS, but within a few weeks, its user data and activity also experienced a cliff-like decline.

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

As Bitcoin maintained a sideways trading near $6,000 for three months, it quickly fell to $3,000 in November. The primary market has since entered a stage of no speculation, and the most desperate moment is coming.

2. Market Participants – Stay or Leave


Exchanges are one of the participants with the best cash flow in the digital currency industry and the longest surviving party in the bear market. As a channel for the issuance and circulation of assets, exchanges occupy the upstream of the entire industry chain. However, under the background of the bear market, there is no wealth-making effect of assets, the spot trading volume has shrunk seriously, and users’ trading habits have also changed from buying coins to trading contracts, which has spawned many contract exchanges.

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

Exchange Trading Rankings in April 2018

The picture above is the ranking of exchanges by trading volume in April 2018. It can be seen that BitMEX , which focuses on contract trading, occupies the top spot, followed by the three major domestic exchanges and overseas regional exchanges. BitMEX and OKEX were the places where the contract trading function was launched earlier, and they were also the choices of most people for contract trading at that time. In the second half of 2018, most exchanges began to develop the contract trading business. Huobi opened Huobi DM in the contract trading area at the end of 2018, and Binance launched the USDT perpetual contract business after acquiring JEX in September 2019 . In terms of spot, Binance pioneered the concept of Launchpad in the first half of 2019, and then major exchanges began to launch their own IEO imitation products, and a wave of IEO market independent of the market appeared.

In the two years from 2018 to 2019, the top exchanges basically maintained their original status, and Binance gradually rose to the top of the list through innovative operation methods and management models. For small exchanges, some can continue to obtain income by maintaining existing customers, while others gradually stop business in the market of reduction.

project party

Before discussing the situation of the project party, let’s first look at the financing of bull market projects. The figure below shows the public offering data of the top ten projects in 2017. It can be seen that the valuation and financing amount of the projects were large at that time, and the financing amount of large-scale projects was basically between tens of millions to hundreds of millions of dollars. By the first half of 2018, the project valuation in the early white paper phase of 100 million US dollars has become the standard. Therefore, for the project parties of bull market financing, most projects do not have funding problems.

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

Top 10 Digital Asset Crowdfunding Projects by Financing Amount in 2017

Here we classify the project parties into projects that have raised funds and issued coins, projects that have raised funds but have not issued coins, and projects that have not raised funds.

For projects that have raised funds, the project party that issued tokens in the first half of 2018 basically does not need to consider the management and maintenance of market value, and a large amount of funds are still entering the market. There are not a few high-point cash-out projects represented by EOS. Blockone is a master of cash management. At the high point of the market, the funds raised are sold and exchanged for cash and US treasury bonds, successfully avoiding the bear market. Some project parties did not sell, and after experiencing the death spiral of ETH in August, the funds in their hands also shrunk significantly. Some teams chose to give up currency price maintenance and concentrate on work and development. Project parties that did not successfully issue coins in the first half of the year began to delay issuing coins, or did not issue coins, which is commonly known as running away. For the project parties that have not yet raised funds, most of them have changed the direction of the project. Some choose to leave the blockchain industry and return to the traditional market, while others transform the industrial blockchain and do some To G services.

corporate investor

The primary market in 2017 was basically dominated by individual participants, and a large number of Token Funds and traditional VCs began to appear in early 2018. The quality of these institutions varies, some are professional investors from the traditional financial and Internet fields, and the other are early digital currency players and big players with original accumulation. The picture below lists the well-known domestic investment institutions in the market at that time. There are also A16Z, Pantera, Hashed, Kenetic and so on overseas. If you compare it with the current list of investment institutions, you can find that most domestic institutions have withdrawn from the stage of history, and the reshuffle of primary market participants is also quite thorough.

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

The iteration of institutions was not very obvious in the first half of 2018. Everyone basically made a lot of money in the last wave. As long as you get the quota, you can make money. Fundraising, exit, and cash out are not a problem. . However, when the market went down, most projects broke, returned to zero or even did not issue coins. A large number of institutions without investment capabilities were unable to withdraw from the previous Haitou projects, so the wave of rights protection in the primary market began to rise. A large number of Saft protocols have been resold second-hand, among which there are many star projects such as Filecoin , Algorand , Difinity, etc. that have risen thousands of times. For institutions that still believe in the market and have the ability to invest, some funds have begun to find ways to create cash flow in addition to asking the project side for money, so secondary asset management and quantitative trading have become popular choices.

Looking back on 2018: Crossing the cycle?  those who left and those who stayed

SAFT resold at the end of 2018

Media, community and other services

For service agencies, the downturn in the primary market is devastating. Market hotspots have cooled, financing has shrunk, and project parties have disappeared. The demand for media promotion and public relations has dropped rapidly, and service agencies have lost major customers and sources of income. As the wealth level of all market participants is declining, the personal networks and resource relationships that have been accumulated in the past gradually become ineffective. The original proxy investment community began to run away and disband, and the investment exchange community was gradually transformed into a contract leader group. Service agencies with no cash flow and no revenue began to retire from the stage of history.

3. Investment logic – the transformation from the path of doing business to the path of research

I started studying the digital currency market in early 2018. Before entering this industry, I was engaged in securities research. I believed in fundamental analysis and sneered at technical analysis. When I started to invest in the primary market, I started with the principle of the project, and examined the technical solution, consensus mechanism, token model, release rules and team quality of the project. Although I am not from a technical background, I have read a lot of papers, white papers and technical articles, and have conducted in-depth study of the commonly used solutions on the market, and I am full of longing for the blockchain world.

Later, when I really threw myself into the market, I found that fundamental analysis was basically ineffective in an ineffective market. There is no data to support, only concepts and theories. How to make investment judgments in this situation? I tried to sort out the following logic from limited data and due diligence information:

  • Technical scheme: project progress, technical popularity, technical feasibility;
  • Market popularity: number of media reports, roadshows, community data, search index;
  • Economic model: token distribution plan, token function, token unlocking, financing and valuation;
  • Team situation: founding team background, consultant team background, investment team background;

However, in the actual operation of most investment funds, this set of investment systems has gradually been transformed into two types-tokens and teams. Investment has become extremely simple, and investment projects only look at two points: one is when the tokens will be listed, what is the proportion of the first release, and whether the unlocking time is reasonable; the other is who the consultant is, who will invest, and who will come to the platform. As a result, investment in the primary market has become a thorough follow-up behavior. There is a list of institutions that everyone should keep in mind. Basically, the top-ranked investment institutions invest, and other institutions will inevitably follow. After the primary market shrinks, the above logic eventually degenerates into the logic of sitting. Incubation, Zhuangzhuang, and market value management have become the last resort to harvest the stock market.

With the slow recovery of the market in two years and the emergence of various statistical tools, fundamental analysis has come in handy in the digital currency world. In the 2020 Defi Summer, research-driven investors finally made money for the first time by mining on-chain data, transaction data, business models, and project mechanisms. The digital currency market is also gradually transforming from ineffectiveness to effectiveness. The holy grail of investment is no longer bowed to the dealers, but to market participants who really work hard to research and build.

4. What do we get?

By sorting out the investment hotspots, market participants, and investment logic of the bear market, and then comparing with the current market conditions, we can easily draw the following conclusions:

1. Market volatility is huge, and both investment targets and market participants have undergone huge reshuffles. The Beta of the industry is very large, but it is difficult to keep the Beta profit after a bear market, which requires strong investment ability and forward-looking judgment on the market trend. More than 90% of the incompetent people have been eliminated in the bear market, and more than 90% of unreliable projects have also been abandoned by the market.

2. The market is getting better and more efficient. With the recognition of digital currency and blockchain technology worldwide, a large number of professional investment institutions and capable industry builders have continuously entered the digital currency industry in the past few years. There are fewer and fewer scammer projects, more and more teams are doing things, and the players and fundamentals of the industry have changed dramatically.

3. The market is rewarding long-termists and those who build hard. To have a firm belief, persistence is victory. 2018 is just the beginning of the bear market, the most painful stages are actually 2019 and 2020, and the entire market is in a state of half-dead. When market participants are no longer able to expand their business from any angle, the belief in blockchain collapses. I believe that everyone in the industry at the time asked themselves these questions repeatedly: Was Bitcoin a tulip bubble? Will the bull market still come? Most people’s hopes are lost in waiting. But during this period there are always some long-termists who are still working on projects, still investing and supporting projects. They also dare to dedicate their time or money to the things they believe in. Some of these people have become leading institutions, and some have become blue-chip projects, and the market has given them a thousandfold return.

Finally, let me tell you a little story: On April 19, 2019, my colleagues and I had a meeting with a boy whose WeChat profile picture was curly. He told me that they were going to be a futures exchange. After listening to it, I felt that it was no different from the BitMEX model. So I asked him a few related questions about BitMEX, and he didn’t have a good answer. I went to their website to look at the transaction data and found only a few transactions a day. In addition, the market is very cold, and we no longer plan to invest more in the primary market, so we quickly passed the project. Later I saw him again on the live broadcast of the U.S. hearing, and he had a name tag on his chest that said “Mr Bankman-Fried”

In the end, I hope everyone can survive in the future market cycle, sowing in the bear market and harvesting in the bull market.

Data Sources:

Huobi Research Institute “Global Blockchain Industry Panorama and Trend Report (first half of 2018)”

Chain Tower Think Tank “2018 Digital Currency Exchange Research Report”

DappReview “8 billion in 80 days, the undercurrent in the cold winter – the explosion of the EOS DApp ecosystem that you don’t know about”

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/looking-back-at-2018-crossing-the-cycle-those-who-left-and-those-who-stayed/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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