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Conversation with DeFiance Founder: How to Find 100x Cryptocurrencies in a Bull Market

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In a bear market, investors may become pessimistic about their investments and consider selling. Conversely, during a bull market, they may see further growth potential and hold on to their investments.

Source: Taiki Maeda, Crypto Market Wizards

Translation: Deep Tide TechFlow

In this issue of "Crypto Market Wizards", Taiki Maeda interviewed Arthur0x, the founder of DeFiance Capital. As a seasoned cryptocurrency expert and investor, Arthur0x shared his in-depth insights into the cryptocurrency market, including his personal investment strategies, market analysis, and predictions for the future of cryptocurrency.

Presenter: Taiki Maeda, founder of HFA Research.

Speaker: Arthur, founder of DeFiance Capital.

Broadcast time: November 14, 2023

Arthur0x Personal Background

·Arthur said he entered the cryptocurrency industry in 2017 when he was 20 years old. Due to its global nature and active participation, he found the cryptocurrency industry very interesting. After exploring different roles in the industry, including running his own startup and working for Layer1 protocol, Arthur achieved success in the investment field.

·He added that he has become a fundamental investor and focuses on the potential use cases of cryptocurrencies beyond speculation. This prompted him to delve into DeFi in early 2019 and take advantage of the opportunities brought by DeFi Summer.

Market Status

·Arthur mentioned that since the last conversation three years ago, the cryptocurrency market has undergone significant changes. Many well-known organizations or individuals have collapsed, and the cryptocurrency field has experienced reshuffling. Especially in the mortgage loan sector, it no longer exists, and this transformation has had an impact on the market infrastructure.

·Arthur believes that although people may need time to readjust, the demand for leverage will always exist. He predicts that transparency and auditing requirements will increase before under-collateralized loans become more common again.

·Arthur believes that the current market situation is bullish. Although he doesn't think the market will reach the peak of 2021, he believes that the market has bottomed out and is currently experiencing a small bull market.

Advantages of the Mobile Cryptocurrency Market

·Arthur emphasized that the unbalanced capital inflow may lead to the distortion of the cryptocurrency market structure. He classified market participants into four categories: retail investors, cryptocurrency companies, large corporations, and VCs. Among them, the capital inflow from VCs may disrupt the natural flow of the market.

·Arthur explained that due to the influence of VCs on the market, retail investors often have a negative view of VCs. He believes that it is important for retail investors to understand how VCs operate and their role in shaping the market.

·Arthur discussed some distortions caused by imbalanced capital inflows:

·Due to excessive funding from VC, the valuations of some projects are too high.

·Improper resource allocation, prioritizing financing over product development in project considerations.

· Intensified competition for VC funds between projects has led to overvaluation.

·Arthur emphasized the need for a balanced market structure where each category of participants plays their respective roles and no group is overly dominated. He suggested that a healthy market structure will allow for fair competition and innovation.

·Arthur said that due to the frequent fluctuations of cryptocurrencies, many investors choose to invest in cryptocurrencies through venture capital transactions. They look for private transactions and hold their investments until the lock-up period ends. Large institutions usually do not directly purchase crypto assets.

·He added that a healthy capital market requires early-stage VC and public market investment. Due to the volatility of cryptocurrency prices, many investors only focus on venture capital. However, having liquidity in the public market is crucial for sending accurate market signals.

·Arthur said that in the encryption industry, there is an oversupply of capital chasing a limited number of high-quality private transactions. Institutional investors often overlook good projects with liquid tokens because they specialize in investing in venture capital. This distortion has gradually been corrected in the past 6-12 months, but before that, about 80% of crypto financing was concentrated in venture capital.

Basic fundamentals vs Narrative

·Arthur said that fundamentals are important in cryptocurrency investment, but they are defined differently from traditional stock markets. Community and narrative are considered part of the fundamentals of cryptocurrency investment. While narrative drives attention-based markets, empirical evidence shows that fundamentals still play a role.

·He added that evaluating the fundamental factors of cryptocurrencies involves not only cash flow income. Community attention and other intangible factors are part of the evaluation of fundamentals. Having good fundamentals alone may not be enough, as new information or developments may affect prices.

·Arthur said that the narrative-driven nature of the cryptocurrency market is influenced by attention-based markets. Narratives about speed, innovation, and other factors can attract attention. It is currently unclear whether fundamentals or narratives will have a greater impact on price increases in the next adoption wave.

·He added that if there is no new information that affects the price, good fundamentals alone may not be enough. Strong fundamentals combined with new marginal information can affect price trends.

"Home Run Trading" Characteristics

·Arthur said that home run trading involves identifying trends that are ultimately larger than expected, with examples including DeFi and gaming, as well as NFTs.