Survival guide teaches you how to “rageously” in the encrypted “crab market”

If you are good enough, even a 95% drop in valuation will not stop you from taking over the world.

The World of Coins-Survival Guide to teach you how to "rageously" in the crypto "crab market"

Did the recent market retracement hit you hard?

No one really likes numbers falling and falling. The pleasure of “only rising” disappeared, and the entire market began to become sober.

We are now in the crab market: the waves are turbulent, moving laterally, and we can only go with the flow. ????

Note: Crabs, as the name suggests, are sideways, because crabs go sideways.

But these market conditions provide opportunities. During this time, we can choose to work hard.

In this period, it is time to start construction. It’s time to really dive into what you are investing in and build your beliefs around it. This is the only way you can be successful in many years.

With this in mind, when we are in these market conditions, you need to pay attention to two things:

  1. Some things will go to zero
  2. There are lemon??? and peach???. It’s up to you to judge which is which.

Hint: You want peaches. ????

In this article, Eugene Lim from Three Body Capital shares these insights, some of his lessons as a traditional investor in emerging markets, and some key lessons on how to take advantage of the opportunities at hand.

This is the new paradigm of value and ownership. Some market figures may have changed, but the fundamentals have not changed. Pay close attention to this reward with your eyes.

Here are the ways to survive and prosper in the crab market.

As an up-and-coming investor in emerging market stocks, we have been very excited about crypto over the past few years.

We are very aware of the difference between market prices and actual conditions. The key to successful investment is to understand this difference. As historical stock investors, we have always used one sentence in our business: We invest in stocks instead of investing in companies.

In this article, we have an in-depth understanding of how to apply it to the huge opportunity of cryptocurrency. The similarities with investing in old emerging markets are obvious: potential is everywhere, and every founder can make up a wonderful story about how their particular project will completely change the world—a broader narrative of potential growth makes it. become possible.

Due to the asymmetry of information between founders, investors, and the wider community, in the best times, stocks and cryptocurrencies are the same, distinguishing the difference between potential winners and potential zeroing projects (there will be many) is a problem challenge,

But in the cryptocurrency field, this challenge is compounded by the fact that we are still in the early stages of the cryptocurrency life cycle: some future winners may not even have been invented, let alone thought of; and today’s winners It is likely to fade out of people’s sight in the next few years.

In other words, our information is an encouragement and motivation, especially when we find ourselves in a range-bound, choppy crab market: volatility is normal, but considering the early stages of cryptocurrency, basically Noodles will show up as dispersion in asset prices, where good and bad are separated. On the one hand, great progress has been made in what crypto assets can do, especially in the DeFi field. We must not let volatility and market chaos distract us from this fact.

On the other hand, there are also a large number of worthless fragments that are dug up at high tide. Using the hype cycle, these fragments are likely to return to zero as the tide recedes. Maintaining a healthy skepticism about existing views and admitting that we may be wrong allows us to re-examine our beliefs and develop with the market. If after careful scrutiny and public criticism, we still believe that our views are correct, it will be more convincing.

Just as not every “emerging market” upstart has achieved great success in the end, in the field of encryption, no amount of great potential will make these challenges disappear, which is also a fact.

No matter how powerful the grand narrative is, survival in the market is not a right—just ask the legions of .com investors who have never seen their own money again. Avoiding losses is as important as gaining gains, and even more important. The original “digital jump” bull market may not last, but the good news is that for those who put in the work, there are still many ways to return potential.

Cryptocurrency provides a generational opportunity for those who work hard to study, check, and take reasonable risks, giving them the opportunity to gain exponential wealth. It is more open and easier to obtain than any traditional equity investment. The founders directly interact with their communities and use the transparency of the indicators on the chain as the standard. No investment bank sets restrictions on information access, because these barriers do not exist in the chain world, and you, the crypto veteran, are far ahead of the average large institutional investor in cryptocurrency.

The agency will have to buy from you-keep this idea low-key for the time being.

So let’s continue to focus on rewards and start working.

The fundamentals have not changed

The birth of decentralized finance (DeFi) and its potential to improve (or in some cases replace) the traditional banking services provided around the world (whether in advanced or developing economies) are far-reaching.

Out of pure curiosity, we participated in the first DeFi conference held at Imperial College London in 2019. We realized that we stumbled upon something special. The word “crazy” is an understatement, although even at that time, it was not clear how anyone made money from DeFi.

But one thing shocked us: a large number of smart young people invested time and resources to develop a completely code-based permissionless banking system without interference from third-party intermediaries, which almost produced some talented and creative People’s statistical guarantee. result. What’s fascinating is that this mentality is a mutual cooperation, not the competition we see elsewhere.

Two years have passed, and aside from price fluctuations, the crypto community—especially projects in DeFi—has a lot to be proud of. From decentralized loans to revenue aggregators to automated market makers, the level of innovation is shocking.

The World of Coins-Survival Guide to teach you how to "rageously" in the crypto "crab market"

On the other hand, encrypted assets are highly open. This is a market without barriers to entry. The liquidity wave flowing into the system, coupled with Twitter, memes, YouTube, TikTok, and all other hype machines, has turned the market into a wild west: no guarantee, no regulation, and free for everyone.

The time is ripe for any capable person to manipulate it.

No wonder that when the number goes up, the industry really goes up; when the number goes down…ouch

As a team, we have been a long-term customer of Bankless content, which allows us to understand the perspectives of promoters and changers in the DeFi field, thereby helping us gain a valuable understanding of many developments in the DeFi field. Understanding these views and ideals helps us put the founder’s development and thinking process in the background, and make real-time decisions in an industry that is developing and maturing at lightning speed.

Therefore, after the BanklessHQ team gives the opportunity to contribute, we think we will return support and share our views: views from the “external”.

Insight #1: Some things will go to zero

First, the bad news. There will be a lot of zeroing.

As we previously wrote on our blog, decentralization is coming. In the past few years, although a few outstanding and innovative DeFi agreements have developed their business-such as AAVE, Maker, Uniswap, Curve, Year and Synthetix, etc.-but there are many other agreements that may be doomed to fail.

There is nothing wrong with this-this is exactly how it should work, this is a cruel process of creative destruction, and only the best projects can survive. This is DeFi Darwinism. A large number of experiments, some of them succeeded, most of them were unsuccessful, and none of them have the right to survive. Think about the first-generation layer 1 chain, which has always been promising (and continues to only promise, not deliver), and the tokens that are a bit too joking-we won’t name it, but we all have a beautiful idea.

The typical image of dispersion is like “separating the wheat from the chaff.” Ideally, this will be the most comfortable solution on the market, because bad projects will simply be thrown away, and good projects will remain. There will be tumultuous changes in the market, but nothing too drastic.

Unfortunately, this is not the case. Whether it is narrative function, market structure, participant composition, or any combination of the three, in this early stage of encryption, the correlation is high. The common narrative that “Bitcoin is the largest cryptocurrency, everything else is the same but different from Bitcoin” leads to the fate of the entire market depending on the sentiment surrounding Bitcoin.

This is beginning to change, but only minimally. Each bear market cycle undergoes a cleanup, and the next bull market often sees new ideas and projects gaining real appeal, thus distinguishing them from established ideas and projects.

The distinction between good and bad in encryption is more similar to extracting gold in fire. Everything will melt, but the impurities will be incinerated, leaving good things behind. Fire trials are not a pleasant process, but it is the only way to test and remove dross.

Many tokens only represent a certain idea, and so do certain stocks. No matter what the asset type is, reality will always catch up: if its value is zero, it will eventually go to zero in one way or another.

This is especially true if the only reason something is valuable is the price increase. Sound familiar? Not surprisingly, cryptocurrency has a notorious reputation as a “casino”.

We can all play a role in getting rid of this image.

As we mentioned before, for good or bad (we think it is better), most projects are publicly traded 24/7, and sometimes we may ignore the fact that the basic progress of the project and its publicly traded price. Just like stocks, but even more so with crypto assets. Since encryption largely lacks institutional involvement, the stickiness of currencies is very low-generally speaking.

You might ask, what about “HODLers”? The fact that people must be told about HODL itself means that the decision to hold is not self-evident. “Diamond hands????????” (don’t be afraid of market volatility, hold positions until the target) is the same-the fact that anyone needs to be reminded shows that, contrary to what memes represent, capital is not It is sticky.

why? Because behind their heads, there is a trivial question saying, “What if this is a zero-value Ponzi scheme?” This suspicion fades in the bull market, but once the “no-brain rise” ends, there will be revenge. The retracement, the reason it exists is because all the funds and the promise of making quick money continue-no one is really sure whether they’ve sold a scrap.

Of course, some extremists invest in their favorite projects ideologically and are determined to never sell it—sometimes it will be rewarded (such as Bitcoin or Ether), sometimes not (such as Bitconnect).

Who knows if they really have diamond hands?

The difference between the survivors is huge-remember that hardly anyone tells people that they have zero HODL tokens.

Insight #2: Lemon???? vs. Peach???? and market structure

One of our favorite economic theories is commonly known as the “lemon theory”. The title of the paper is “Lemon Market: Quality Uncertainty and Market Mechanisms” and the author is George Akerlov, the 2001 Nobel Prize winner in economics (shared with Michael Spencer and Joseph Stiglitz The award).

Little is known that his wife is Janet Yellen, the former chairman of the Federal Reserve and the current Secretary of the Treasury. What a smart couple.

The lemon theory tells a story of information asymmetry: buyers go to the used car market, where there are two types of used cars. Good used cars (peaches) and bad used cars (lemon) are available, but buyers cannot judge the nature of the car based on its appearance alone. He relied on a used car salesman to sell the cars he offered. However, when an ignorant buyer wants to find a good car (peach), a used car salesperson wants to sell a bad car (lemon) at the price of a good car.

Does this sound familiar?

Most importantly, buyers know that salespeople are motivated in this way. So, what will happen? In short, the buyer needs a car but is not sure if the salesman is selling garbage trucks. Therefore, he must assume that all cars are lemons and bid accordingly. This is bad news for Peach, but due to the selfish motives of the salesman, all cars are now lemons.

The same is true for the crypto market. There are many lemons and few peaches, but because there are too many second-hand car salespeople around, anyone who can’t overcome this asymmetry information and can’t distinguish between lemons and peaches can only take pictures before asking.

The lemon and peach became the same.

This is programmed, and this is exactly what we have now.

Whenever we look at a market, the most important thing for us is to understand the market structure.

Once you understand who your opponent is, you can build a mental model of how these different participants tend to behave in different situations. Obviously, investors in memecoin are different from investors in DeFi. Bitcoin investors today have a completely different image from Bitcoin investors a year ago, let alone earlier. In addition, different types of investors have different levels of knowledge, understanding and beliefs.

Understanding this is absolutely necessary-if you know, you know.

Traffic drives the market in the short and long term. Anyone who believes in the structural bull market of cryptocurrencies wants to invest long-term, sticky funds into projects that fundamentally guarantee funds. Over time, this will curb volatility and increase the motivation of the project to do things right.

Build useful things, instead of chasing a bull market to sell, not paying attention to Shiba Inu coins and others.

DeFi has attracted the attention of the world

The good news is that there are plenty of useful experiments going on for crypto assets. The difference from 2017-18 is that most of the fields were “evaporators” at that time, and there was no other material except white papers and smart ideas. We are now looking for not only successful deployment but also marketization of products, suitable Projects that have continued to be profitable on their own.

The World of Coins-Survival Guide to teach you how to "rageously" in the crypto "crab market"

The total value locked in DeFi. Source: Token Terminal

The rapidly rising prices have attracted everyone’s attention, from gunner traders to institutional investors. It can be said that the latter are slow to join, but they will enjoy the benefits afterwards. Nothing can distinguish good from bad better than a bear market.

Exchanges that do not require market makers, banks that do not require bankers or loan officers, and ecosystems that allow agreements to interact freely and seamlessly-these are all investment opportunities that all investors have dreamed of for decades. Trust us when we say that viewing the quarterly performance of commercial/investment banks, brokers, or exchange operators anywhere in the world is one of the least attractive things to find on the to-do list.

They are here for these opportunities. When we start to see traditional investment funds write research reports on Ethereum and DeFi projects as we have done recently, you will know that things are getting more and more serious. Yes, their investment approach may be more cautious and avoid the exciting (at least during the ascent) YOLO that many of us took at some point in the crypto journey (you can only live once, you should live in Now, do it boldly) method. But they will provide stable funding for projects that show the most basic commitment.

They are doing this work, and when they come, they will only buy the best. We need to be the first to enter.

The recent sell-off is an opportunity for us to divert our attention away from ideologies such as “no-brain rising” and “earthly wood”! And correctly understand how the project creates tangible value (or does not create tangible value). Think about the projects that proved themselves to be a key part of the DeFi infrastructure in this cycle: Ethereum, Aave, Synthetix, YFI, Curve, Compound, Maker, Uniswap-the list goes on. Some were small before the DeFi summer, but they are likely to become bigger and stronger in the next round. It is almost certain that the second wave of new projects may still be budding and developing at this time.

In the broader field of encryption, the same principle applies: the projects that will ultimately survive and prosper are those with appropriate intrinsic value.

We have seen some very innovative applications of token economics and constructed this cycle: from blockchain games in the meta universe and companies such as Axie Infinity, whose indicators are rising day by day; to guiding global wireless networks The development of the project, just like Helium did, the number of hot spots and the utilization rate have steadily increased; then the NFT art auction has achieved great success in the most famous auction houses, which put a new generation of artists under the global spotlight . There will be more in the future.

Creators, musicians and other talents are just beginning to figure out how blockchain technology can grow their industries.

For us, debanking is more than just being able to replicate basic banking functions. This is about generating a complete ecosystem, absorbing tangible, real-world value, and allowing the seamless transfer of value inside and outside the ecosystem. If your bank holds the keys to fiat currency (or all other real-world assets), you can’t break up with them.

There is still a lot of work to do, and this is by no means the end. This is just the beginning.

Don’t ask what its price is doing, but what it can do for you.

Investment managers are profit maximizers-their job is to help clients be responsible for managing and protecting their assets. Deciding to put client funds at risk is a huge responsibility, so for any respected agency manager, “YOLO” is a 100% choice.

Try to explain to the risk management committee why Dogecoin is in the portfolio-the idea of ​​having to make this explanation is enough to be a reason not to own it. The fiduciary duty immediately draws 95% of the assets from the investable area. We like to think of crypto as a venture capital project with public liquidity-but just because the price of something goes up doesn’t mean it needs to be chased.

Institutions will buy suitable items-we have no doubt about this.

On the contrary, we need to understand how each exposure is fundamentally transformed into value creation and measure the risk of problems. Once the fundamentals are in place, there can be dialogue around price action and market timing—not the other way around, and of course not just looking at the latter in isolation.

This is an alpha loophole: In a world without banks, no investment bank controls the flow of information to provide privileges to their customers. Everyone can get the data on the chain. There is absolutely no reason not to do research.

So, where does this take us?

Back to the lemon theory, in cryptocurrency, we don’t need a used car salesperson. Everything is public. Each of us has access to the data, and conducting research is no longer the patent of Wall Street analysts. This time, the information asymmetry can be resolved.

This approach gives us the confidence to manage risk and scale exposure in a way that corresponds to our belief level. We have never really determined whether every position we have laid out will make us profitable, but the work has been done to understand the risks we are taking and give us enough comfort to take these risks and determine when we need to cut down the wrong decision. Objective basis.

In other words, we may not know whether a peach is sweet or not before biting, but we will definitely know that it is not a lemon. This is a good beginning.

Ultimately, a well-thought-out and well-researched decision-making process can be applied to the field of encryption. In order for this space to truly mature and develop, we all need to see through the hype, curb FOMO and control YOLO, and realize that for all fluctuations, the “brainless rise” we experience in this field and to some extent “nothing” “Brain down”, the ultimate important thing is the creation of intrinsic value.

Cycles will come and go, but as Mr. Bezos proved after 2000, if you are good enough, even a 95% drop in valuation will not stop you from taking over the world.

Posted by:CoinYuppie,Reprinted with attribution to:
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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