The hardest lesson we've learned from crypto markets

The hardest lesson we've learned from Crypto (June 2022)

原文作者： @0xTodd, Nothing Research 合伙人 

Have no choice but to

The spectre of inflation hangs over every major country in the world.

The Russia-Ukraine war, the pandemic, and the disruption of global supply chains... There is no denying that under the wave of globalization of the past two decades or so, no country can live happily alone. Large quantities of oil and gas from Russia, cheap and high-quality industrial products from China, grain from Ukraine as the "granary of Europe"... These necessities, once so readily available, have come to a screeching halt.

In the US, Europe and elsewhere in the developed world, alarm about rising inflation has overtaken the desire to stimulate the economy. Inflation of 8-10% is enough to drive many households into a corner. But the supply was insufficient and there was no other way.

Us inflation is at a 40-year high

The only route left for central banks is probably to raise interest rates, even though everyone knows that it brings depression. However, only when interest rates rise and all kinds of assets fall can inflation be contained.

The United States, in particular, has the best nose for this. America raised rates first, and Europe, and the rest of the world, had to follow. It is like the last round of a German tournament. The last round has raised, even if you have no cards in your hand, but you have to call.

With such a doomed rate rise, all risk assets are, in a word, "alone". Unfortunately, bitcoin and Ethereum, for now, happen to be classified as "risky assets."

Cycle theory

I'm still a long-term believer in Bitcoin, Ethereum, and Crypto, but money isn't going anywhere on anyone's terms.

Do you believe in the super cycle theory? The so-called super cycle is that crypto assets go through a bull - bear cycle every four years. The most immediate support for this theory comes from the halving of bitcoin every four years. True, it has taken effect three times since 2011.

Bitcoin super cycle

I'm not a big fan of super Cycle. Because to ascribe it to a destiny is to obliterate the efforts of countless builders throughout the crypto industry, which should not be the case.

But if YOU ask me if I'm a big fan of a graph, the one I prefer is the technology maturity curve.

Technology maturity curve

This curve, you've all seen it before, implies the evolution of things, especially technology.

There is always a tendency to preach bubbles in the beginning, because they have never been falsified. And when it grows too fast, a few thunderstorms are inevitable, and another group of people, who are not advocating bubbles, will find ways to mock them (as now!). . Then, it's time to build slowly.

It goes round and round.

It is similar to, but not identical to, the super cycle:

The 13-year bull market of Bitcoin has enlightened the public to blockchain technology, so we have Ethereum in 15 years.

The bull market of 17 years made people realize the strength of smart contract, so we had DeFi in 19 years.

21 years of bull market, let us realize DeFi, NFT can do so many great things, so we are bound to harvest new seeds in the future.

It takes more time for a new seed to sprout.

So I remain firmly bullish on the long-term future of bitcoin and Ethereum. Of course, in the short to medium term, they are not completely independent of traditional markets and the global economy. Both Bitcoin and Crypto are still more than a decade old, and two fists are no match for four. So, it could be a very difficult time.

The most expensive course

As the saying goes: take history as a mirror, you can know what happens. If the next bull market is to be built, it's important to understand what we can learn from the collapse, which is the title of this article.

I think there's only one thing you have to learn:Don't treat a moment like it's forever.

What do you mean don't treat a moment like forever?

Start with after-sleep income

We invested in a token before DeFi Summer. Then he went on to a Pancake Farm and had an APR of 300%+, which was very comfortable. Later, the pool was dug by the list of alpacas. With leverage, we don't even need to put up cash. We can take that Token and borrow it to mine, and the return on it can easily reach 10,000%+.

What concept? If I put $200,000 in, at the end of a year, I theoretically have $20 million.

At that moment, the office was abuzz. Even the CAKE alone could generate thousands of dollars a day after I sleep, not to mention the added bonus of leverage and alpaca -- it seemed like I wouldn't have to work at all.

Is this forever? Obviously not (laughs). The friends who have dug the second pool are very familiar with the plot behind.

DeFi does, NFT does

Let's talk about another illusion.

If you buy an animal as an avatar, not only do you get an avatar, but pretty soon you get a dog, then a mutant animal, then some tokens that the animals use, and even 2 pieces of land where the animals will live in the future...

Even better, each of them can be sold. Pinch a calculation, as long as it doesn't take a year, it can even earn back with interest.

Would you buy?

I remember vividly, the night before the drop, my brother and I were very hesitant, very Fomo, about whether to buy some monkeys. And wait until the actual airdrop APE period, the price of BAYC itself also rose, APE also rose, sunset clouds and lone ducks fly together. At that moment, the entire meta-universe boils.

Of course, as we both know by now, it's not forever.

Even "Stablecoin."

UST's heyday was when it surpassed DAI in market value. At that moment, the farmer all over the world was boiling for it.

At the time, MakerDAO executives thought their product was better, but only slightly soured on Twitter. This, in turn, has prompted vitriol from Luna's fanatical supporters.

UST, a "Stablecoin" with a scale of tens of billions of dollars, is smooth in more than ten chains and has a liquidity of hundreds of millions of dollars in Curve and Terraswap. $10, $20 million orders, there's no slippage at all. Even better, it yields a super-stable 20% annual interest rate.

For some Korean companies, even if they work hard for a whole year, they won't make 20% of their income.

One of the phrases I hear most often is that UST is "too big to fail", despite its seeming problems.

But is it permanent?

When Luna fell from 120 to 0.00012, there were still people betting on its return to anchor, but everything, has not gone back. Countless people lost their money before it was discovered that the anchor did not exist.

As I've talked about before, Curve is a completely neutral tool. Within its core range, its AMM algorithm allows it to anchor, even if your two assets are out of step with each other.

The Curve AMM Curve

And once out of the core, just a little bit of panicky capital flight is enough to knock the AMM curve back into shape, accelerating the crash.

The same goes for vote-buying levers that can instantly yield multifold returns, magic Internet currency, 40ETH club tickets, IOU notes that can be exchanged 1:1 for cash, to name just a few.

Dominoes

If only it was a drastic cure to remove Luna's sores from Crypto, that would be enough. But Luna has brought much more to the industry than that.

Luna, once a top 5 cryptocurrency, has spread its tentacles to every corner. And its demise is bringing a series of tragedies. There are two immediate consequences of what has happened:

1. Liquidity is weakened

Several large crypto market makers, which used to be important maintainers of crypto's liquidity, have been decimated.

No matter they invested Luna, lent money to Luna, provided liquidity to UST, or THE FARMER of UST (except betting ETH to borrow UST), all of them suffered heavy damage without exception.

Just like in the game, the home crystal is almost gone, no one to guard the outer tower. You can definitely feel that Crypto as a whole is much less liquid after Luna's crash.

2.Forced to sell

Celsius, 3AC and other top providers have established a reputation and reputation over the years. They also have a lot of debt (from LP, friends and users), which is normal business expansion. Given their size, when liquidity is normal, the money will be paid back slowly, probably no problem.

I believe that the moment they got the money, both parties were very satisfied.

But the good times are not permanent either.

Cryptocurrencies are now on the downside of an interest-rate cycle. As collateral shrinks, these institutions are left with fewer options. Selling your remaining chips to cut your losses is one of the few options left. And now the weak disk, simply cannot sustain such a large sell-off.

This is also a death cycle, the more urgent the sale of debt/margin cover, the more severe the fall, and then the more urgent the repayment.

uneventful

In addition to these two immediate factors, there is another likely to happen soon.

3. New round of regulation

Faced with the complaints of Celsius retail investors and the blood and tears of Luna investors, it's hard to imagine regulation not catching up.

At this point, Crypto is unlikely to part with Luna. Because the general public out there doesn't do any segmentation at all. Luna and Celsius cases were reported just when supervision was needed, and even 3AC, a wave of strong supervision of Crypto, was completely expected.

In any case, Luna's boosters are not innocent snowflakes in the BTC avalanche. The shackles of the future are as heavy as they were loud at the time.

At Luna's peak, it was touted as "too big to fail" by many institutions. When a lie is told a thousand times, it becomes a truth. I sincerely hope that we will stop advocating any Ponzi, believing in any "too big to fail", and "treating a moment as if it were forever".

Write in the last

Before, some friends on Twitter said that they came from Zhihu with me. I was really touched. In the past, all of my articles were published on Zhihu, after all, at that time janzhong Internet still allowed me to talk about crypto.

I had a yearly strategy of updating my understanding of the big market and my portfolio every year. The recommendation of '19 is mainly to invest in BTC, and the recommendation of' 20 is to switch some positions to ETH. Haha but the article at that time is a little immature, here will not put the link, really interested can go to Zhihu.

If I had to tell you my strategy right now, it would probably be biding my time.

My main positions at the moment are BTC, USDC/USDT, and some small coins and PFP. At this point, there is not much space for panic Sell mainstream, but there is still a lot of space for ALTS to go down.

About bottom fishing.

On the bottom

I think buying stETH below $800 May be the right choice for long-term holders.

ETH/USD

$800 was one of the starting points of the last bull run, and stETH certainly deserves some extra discount. The long-termism is sure to wait for stETH to return to the day of real ETH.

I am very optimistic about the combination of PoS ETH+Rollup for ethereum's future technology route. In this way, true web3.0 applications can also run on top of ethereum at very low cost and enjoy the security of ethereum without the high fees. Ethereum's environmental problems and inflation problems will also be solved because of PoS.

In addition, BTC is my favorite, and I can also choose an opportunity to start casting. In the last six months, its liquidity is good, everyone has seen, after all, liquidity is king. Moreover, interest rate hikes will eventually come to an end, and easing is the eternal era.

Meme of Bitcoin

Finally, right now, if this is your first bear market, don't get too upset. The war will pass, the epidemic will end, inflation will subside, and releasing water will remain the eternal theme. Every moment in a bear market is a chance to build and learn, because this dark moment is also not permanent.

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