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Secondary investment strategy for the cryptocurrency market: Outlook on opportunities in 2024.

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The basic principle is to respect the market.

Original Title: "EP20: Second-Level Investment Mindset in the Cryptocurrency Market: 2024 Opportunity Outlook"

Original Source: Mint Ventures

Host: Alex Mint Ventures Research Partner.

Guest: Lao Lu. Lao Lu's blockchain notes. TG channel author, Ink ArkStream Capital investment research partner, Lawrence Mint Ventures researcher.

Program recording time: 2024.01.04

Hello everyone, welcome to WEB3 Mint To Be initiated by Mint Ventures. Here, we continue to ask questions and think deeply, clarify facts, explore reality, and seek consensus in the WEB3 world. I am Alex, a research partner at Mint Ventures. Today, we have invited three teachers to talk about the topic of 2024 opportunity outlook.

Disclaimer: The content discussed in this podcast does not represent the views of the guests' respective organizations, and the mentioned projects do not constitute any investment advice.

Alex: In this episode of the podcast, we have invited three experienced Web3 investors. Please introduce yourselves.

Laolu: Thank you for the invitation. I am Laolu, the author of the blockchain notes TG channel. From 2019 to 2020, I studied early chain games, crypto cats, and the like. In 2020 and 2021, I worked as a product manager for wallets, caught up with the Defi summer, and experienced two rounds of bull and bear markets, gaining a lot of experience. Currently, I mainly use free funds to participate in some first and second-level market opportunities, while also providing consulting services for some projects and operating my own community. That's about it.

Mo Ke: Hello everyone, I am Mo Ke, the investment research partner of ArkStream Capital. ArkStream is a primary market investment fund and one of the earliest VCs to focus on Defi. Our recent well-known investment project is Sei, which has seen a high increase in multiples recently. Recently, we have also started to layout some secondary markets. Personally, I have always been paying attention to the secondary market and have known Lao Lu for a long time. We will pay close attention to every new hot spot that emerges in the market and personally experience and feel some of the changes in the market.

Lawrence: Hello everyone, I am Lawrence, a researcher at Mint Ventures. I usually focus on Defi and some new projects on the chain.

2024 Investment Goals

Alex: Let's talk about two things today. The first one may be more abstract and methodological. We know that all three guests have a lot of experience in secondary trading and are senior investors who have experienced basically two or three rounds of bull and bear markets. I would like to hear from each of you some methodology and insights on secondary trading and investment. In addition, we have come to the year 2024, and a new year is about to begin. Everyone has a lot of expectations for the market in this year. I would like to hear from each of you about the analysis of opportunities in 2024. The first topic is investment goals. Perhaps everyone's goals or even motivations for entering the crypto market are different. Have you designed a long-term or short-term investment goal for yourself? For example, the investment goal for this year 2024 or for this bull market cycle. Let's hear from Mr. Lu first.

Lao Lu: I actually haven't set a very precise goal for myself because I think the market is always changing, and it might be better to follow the market. The goal has always been to outperform BTC, whether in a bull or bear market, but it's very difficult, and most people find it hard to achieve. But I think after one or two rounds, I now have more experience in outperforming BTC than before. The overall goal for 2023 is to recover the losses from those who didn't sell at the top in 2022 and make a profit, which was achieved in early December 2023. The completion of this goal also had some impact, causing some slack from early December to January. Sometimes, after setting a goal, there may be slack after it is achieved, and the goal is not updated in time. The goal I am now anchoring is to compare with my past positions. After multiple changes in positions or trades, I compare them with the positions on a certain day a month ago, and constantly adjust my position strategy. Of course, this is compared with myself, which is better to see whether I have done right or wrong during this period. At the same time, I also try to avoid comparing profits and losses with others because it will greatly affect my strategy and make me not believe in what I have been insisting on.

Alex: I have seen that Teacher Lu has a Notion page in addition to managing his own channel. I check it every month. He sets and simulates the strategies for the month at the beginning of each month, and then reviews them at the end of the month. I think this is a very good approach. For the second topic, let's invite Teacher Moke to discuss it.

Mo Ke: Recently, I have been feeling quite emotional about this matter. A friend of mine recently suffered a large drawdown and blew up, but I won't reveal their identity. Prior to this, another good friend of mine also blew up in the third and fourth quarters of last year. Personally, I also suffered a significant drawdown in 2019 when I was trading. To some extent, I don't like setting a target based on the amount of trading, as it can become a hindrance. Especially at the peak of a bear market, such as the recent crash, no one can confidently say whether the future will be a bear or bull market, and there will be a lot of speculation. If today marks the end of a small bull market, then this target may become a mental obstacle, leading people to take some distorted actions. Overall, I personally don't like to set a long-term investment goal because it's difficult to define. I entered this industry in 2017 and have been in it for seven years now. My experience is that the height you can reach ultimately, in terms of investment returns, is actually given to you by the market, by the market's FOMO sentiment, not something you can personally decide. My goal is actually on another axis, such as trying to catch some of the market's hotspots or resonate with the market. I hope that when some hotspots appear in the market, whether it's secondary trading hotspots like TRB or events like the Ming inscription, or some new sectors or very important events, I can relate to them or pay close attention to them. Whether I participate in them or not, I will observe them closely from the sidelines. This catch on hotspots is one of my goals. If I can catch one-third of them, I think I will pass this year. If I can catch two-thirds of them, then I think I will be very outstanding. Catching 100% of them is impossible, in my opinion. Another long-term investment goal, to put it humbly, is to survive. Because we all have this feeling that many people come and go, and many friends who were once outstanding in the same period have left this circle. I think this is the ultimate goal, as long as we survive, we can see the future. We entered this industry with hope, whether it's in terms of investment returns or the underlying logic, because we all look at some fundamental things and believe that blockchain will eventually have some connection with real life. This is my idea.

Lawrence: My goal is relatively simple. Overall, I hope to outperform the market and achieve excess returns in a bull market. To outperform the market, it mainly depends on what my main positions are. Currently, my main positions are BTC and ETH, so my goal in a bull market phase is to outperform BTC and ETH, and the lower limit is to outperform BTC plus ETH divided by two, which is relatively quantifiable. In a bear market cycle, I hope to outperform BTC plus ETH divided by two. I use these relatively simple indicators to quantify. In 2020 and 2021, when I had more positions in Ethereum, the benchmark for my goals was probably based on Ethereum. My long-term and short-term goals will probably be like this.

Off-site Asset Allocation

Alex: Let's talk about asset allocation. According to our previous observations, there are many people who are interested in the world of Web3 and investing in cryptocurrency assets, but they may not have entered yet. This includes many of our friends who may hold some cryptocurrency assets and also invest in stocks, funds, and other assets. In the opinion of several experienced investors, do you allocate assets other than cryptocurrency assets in your investment behavior, such as buying a house? What are the reasons for this?

Lawrence: If we consider the current situation, there are many opportunities within the industry, and the returns on stablecoins have stabilized at around 30%. Basically, the funds within the industry are not considering going outside. I was the same in 2022, and the funds within the industry did not go outside. However, in 2021, I reduced some of my holdings, mainly in Ethereum, and invested in some Hong Kong stocks and real estate. But the Hong Kong stocks performed poorly, and I am still waiting to break even. Looking back, if we slice the timeline according to this point in time, holding BTC and ETH may have resulted in less losses. Of course, this is my personal experience, and at this stage, I am not considering going outside the industry for asset allocation.

Alex: In the long run, what about the overall asset allocation for the entire family or in the long term? You just mentioned that in this round, many risk-free returns in the market are already high. So, do you have a rough idea of the proportion in your mind? For example, Web3 is my job, and maybe 60-70% or even 80-90% of my assets are allocated to cryptocurrencies because I believe in this thing. Would you still set aside 10-20% to buy a house or even some insurance?

Lawrence: Assuming it's the end of 2024, BTC may have risen back to $70,000 or even $100,000. If I feel the market sentiment is overheated again, I may allocate some other undervalued assets. However, I personally feel that this reduction is still short-term, and I hope to be able to buy back at a better price in the future.

Mo Ke: Personally, I don't consider it at all. From two aspects, it's about offense and defense. From the perspective of offense, I talk about investment return rate. Investment return rate is actually related to two points. The first is whether the cycle of this target is on your cycle. For example, now cryptocurrency is in an upward cycle, so we will definitely put larger positions in cryptocurrency. Another is your degree of understanding of it. I myself don't really study other information about stocks, so I think my understanding cannot enable me to obtain excess returns elsewhere. Therefore, from the perspective of offense, I will choose to participate deeply in the rising cryptocurrency industry with high cognition to gain benefits. From the perspective of defense, I will only consider buying a house or exchanging it for gold, US dollars, and other simple operations. This is completely regardless of profit, and even a part of the loss can be accepted. The advantage is that it will exist no matter what. However, now there are occasional black swan events in cryptocurrency, such as FTX or Luna being hacked by some exchanges. These black swan events are completely unpredictable for me. I believe that many people have also experienced the 312 stage. At that stage, many real cryptocurrency entrepreneurs around me had doubts about the industry. I think it is necessary to defend appropriately, which can make us live longer.

Laolu: Maybe everyone wants to hear about the experience of comprehensive asset allocation, but in fact, neither Moke nor I like to invest comprehensively. We have also recognized the fact that the returns in other fields are far lower than those in the cryptocurrency industry. So, we don't spend much time studying and allocating in the US stock market, real estate, and other areas. Many people may think that if you have a certain understanding of a single investment field, you will quickly get started in other fields. In fact, this kind of confidence will make people who have this idea step on many pits. I have also seen many people who have done well in the cryptocurrency industry but have stepped on many big pits in other investment fields. I want to learn from these lessons and will not borrow some of my experience in the cryptocurrency industry in areas where I am not familiar with, and I will not take it for granted to look at other people's industries. Therefore, I have not entered these industries. However, I have already cashed out some assets to buy a house for myself, purely for living needs, not for asset allocation. Of course, I also envy some friends who can do US stocks during the bear market and then avoid trading during the bear market. It is recommended that everyone invest in their familiar fields.

Mo Ke: Let me add something. When the US stock market was just starting to heat up, several of my friends bought US stocks or some domestic stocks, and basically all of them lost money. We were all joking that we made money in the cryptocurrency circle but lost money in the stock market. I think what Lao Lu said is very true. Including myself, I think I am just an ordinary person with a bit of luck. Knowing the limits of one's own abilities is very important, and one should not think that they are a very capable person. I know the friend that Lao Lu mentioned and I also admire him, but not everyone can do what he does. If you want to develop in that direction, I think there is actually a lot of silent effort involved, which he did not mention himself.

Alex: Understood. From the results, it seems that the answer is that most of the guests do not allocate their assets to cryptocurrencies. The common logic behind this is similar to many value investment masters, which is to not do things that they do not understand or are not good at, and only focus on what they are good at. They also avoid trying to cross high barriers that are difficult for them.

Secondary Investment Strategy

Alex: Now we are entering the section of methodology, specifically the investment strategy. If you had to summarize your secondary investment strategy in three to five brief sentences, how would you describe it?

Old Lu: Those who understand my investment style may know that I am a very left-leaning investor. I like to buy undervalued projects and am afraid of chasing high prices. In the bear market, I can pick up a lot of cheap and undervalued chips. When the bull market comes, it's time to harvest some of the chips that I previously identified and get some returns. Then continue to hold until the middle or end of the bull market, when the funds in the market are unable to provide opportunities to buy low or cheap, and valuations are already high. Like at the end of the previous cycle, the valuations of primary market projects have been consistently high and have not provided any cheap opportunities, and the valuations have not dropped significantly until now. This is also a phenomenon. Personally, I am a left-leaning player, and specific methods depend on the project. Primary targets are easier to compare because you need to compare the team, participating investors, specific progress of the project, and your personal judgment of the track to determine whether it will become a popular and major track in the future. There are also some tracks that cannot be predicted. When rollup was not popular, the rollup as a service track did not exist. Until rollup became popular, the Cancun incident occurred, and everyone determined that rollup would become popular, and then the layout of the rollup as a service series of blocks appeared. There are many differences. For secondary targets, there are mainly three steps: screening targets, analyzing chips, and building positions. If there is a fourth step, it is to plan for trading and selling. It's just one, two, three, four, and maybe one, two, three, four, five. Take it step by step, and it will be relatively simple. Keep repeating your strategy and find a comfortable one.

Alex: Let me ask you a more specific question. When it comes to sorting the secondary screening targets, what are the factors you consider in determining whether a target should be added to your screening list, in order of importance? Can you rank them from most important to least important?

Laolu: The first thing to look at is whether it's on a centralized exchange, which is quite important. I'll divide these assets into two categories: those on centralized exchanges and those on decentralized exchanges. Those on decentralized exchanges and those without coins will be grouped together, and liquidity may be relatively poor. This is a point that will affect your trading decisions. You can slowly build positions on decentralized exchanges because your positions are transparent and easy to find, and you can also find traces of other people's positions. Liquidity will be better on centralized exchanges, and elasticity will be better, so they should be treated differently. The second important thing is trading volume, market capitalization, and circulation rate. These are the three main points. Another important thing is that if you identify a track, try to allocate it proportionally and don't make choices. Most people have probably done a three-to-two or two-to-one choice question, and they always end up choosing a weaker one. In fact, if you allocate half and half or proportionally, you can avoid this problem. Of course, the absolute rate of return will be lower, but the average rate of return will be better than doing a choice question.

Alex: In your standards, is it better to have projects with low circulation ratio or those that are already close to full circulation?

Laolu: Approaching more than 60% is already very good, and it is almost difficult to have selling pressure. For most projects, if they circulate to around 60-70%, only the team and some funds have not unlocked, and most investors should have unlocked and turned over. When it circulates to 60-70%, he may have done one or two rounds of OTC, so everyone's average cost may be higher, and the chips are relatively clean.

Alex: Just now you mentioned trading volume. For your underlying asset, especially for long positions on the left, do you prefer a relatively thin trading volume with little attention, or do you think it would be more in line with your standards to be in a clearly amplified state in the short term?

Laolu: I hope it is relatively low, but the depth is relatively good, which indicates that there is active market-making in this market. Then, the trading volume divided by its circulating market value is also a parameter worth observing.

Alex: How should we interpret the indicator of dividing trading volume by circulating market value?

Laolu: The lower the price, the more people tend to not trade. If you hold on during this stage, it can be difficult because most of the time the price is low. Only when the trading volume divided by the circulating market value ratio is relatively high, can it be determined that there is a large turnover. At this time, liquidity is the best, and you can consider selling or reducing positions. To expand on the selling strategy, it is also whether the contract position exceeds the total circulating market value of the centralized exchange. For example, the circulating market value of a certain token is 80 million, and FDV is 100 million. In the centralized exchange, it may only have 30 million. If its trading volume exceeds 30 million, it can be considered a stage. If its trading volume exceeds 80 million, exceeding the circulating market value, it is another stage. If the trading volume exceeds FDV, it is another stage. If the contract position of the target exceeds 30 million, exceeding the circulating market value of the centralized exchange, it also indicates that there are no coins left in the contract to sell, and it becomes a contract that guides the spot price. This may also be a signal, and many decisions need to be made at many critical nodes like this. Of course, there are also many side reactions. For example, everyone is talking about this matter, or many people outside the industry are also talking about this matter, which may also be a signal. Continuously look for selling signals and then operate. But the best operation is not to sell everything at once at the highest point, which is actually difficult. I recommend a relatively good strategy, which is to sell 10% every day for a period of time, maybe 10 days, of course, for a relatively long-term target, such as BTC, Ethereum, sell for 10 days. If it is shorter, like yesterday's people, which can increase five times in a day, at this time, maybe sell 10% every ten minutes, do a Twap, and the selling strategy will be better.

Mo Ke: Let me first talk about a basic strategy mindset, which is to respect the market. Sometimes you may feel that you can predict the market, or that you are smarter than the market. But sometimes the market runs completely beyond your cognition, such as the case of Mingwen. We looked at it in May and thought that Mingwen was actually a step backwards in technology, using remarks to issue assets, which is a more complicated approach than using smart contracts. So we did not approve of this thing, but the market eventually ran out. When the market runs out, it may be a short-term distortion of the market, and you should respect the power of this distortion, because this distortion can make you profitable. In addition, it may have another possibility, that is, you are wrong, and you need to reflect on it. The second point is to respect the fundamentals of the project. When you look at a project, you should clearly know whether this project is short-term or really has long-term value that can be held for a long time. For example, like Blur, because it has always been a leader in NFT exchanges. The third point is to have a retail investor mentality, especially in a bull market, this is very important, you need to adjust your mentality to resonate with the entire market, because the biggest source of profit in this market is FOMO, which is a bubble. So if you can't adjust your mentality to that of a retail investor, then you are likely to miss out on this huge profit. The fourth point is the leader, the leader, the leader. Important things are said three times. In most cases, your returns cannot exceed the leader of the sector. You can make some detailed layouts, but the leader must be configured. Using a specific case, such as Ordinal, I will talk about how I used this mindset to invest in Ordinal. Just now, Lao Lu has already talked about the specific operational process, so I won't repeat it. I will talk about how I built a position in Ordinal from the mindset. We understood Mingwen in April, and Mingwen was also very popular at that time. We had a perception of Mingwen, thinking that it did not have long-term sustainability. At that time, we also talked about many projects, including Unisat. Unisat is an exchange of Ordinal. After we finished talking, we were very approving of the team. We thought that the Unisat team was very agile, had strong development capabilities, and knew exactly what they wanted. But because they did not plan to issue coins at that time, there would be some lack of liquidity for us, so unfortunately we did not invest. So when we were reviewing this matter internally at that time, we said that if this matter of Mingwen has sustainability, then actually buying Ordinal may not lose to investing in Unisat in terms of the return rate in the secondary market. At that time, we left a seed there. How did we look at the matter of Ordinal at that time? We thought that we still could not understand it technically. We thought it was still a step backwards, but we could understand it from another perspective. It was the first meme on Bitcoin. Speaking of memes, it actually doesn't require your smart contract to be very good, you just need to be able to issue coins on it. Bitcoin happens to have something that no other project has, that is, orthodoxy. No matter how well others do, they cannot deprive Bitcoin of its orthodoxy, which is the concept of a blockchain that is the genesis of Bitcoin. So from this perspective, it actually has a very strong value support as a meme, so we defined it at that time. This is the first, respecting the hotspots of the market. The second is to respect its fundamentals, which is a meme leader. Later, the concept of Mingwen did not become popular, and the price kept falling. We were right at that time, because we thought that Mingwen was not sustainable. Because of its meme attributes, we put it in our reserve and observed it. Then there was a very iconic event in October, which was when Bitcoin broke through 32,000. Breaking through 32,000 is a very critical point and window. At that time, our team believed that the bull market had arrived and was always looking for some high-explosive varieties. The price of Ordinal happened to break through a key point, about 5.7. We started to build a position at that key breakthrough point. After building a position, an unexpected thing happened, which was that Ordinal was listed on Binance. We faced the first choice, whether to sell after listing on Binance. Because under normal circumstances, most of the coins listed on a large exchange should be sold, but after it was listed on Binance, we were actually thinking about something, that is, why Binance wanted to list it, and how these retail investors would look at it. For Binance, listing a coin like Ordinal actually has its value. Of course, the degree of control may be one aspect, this is our guess, and we have no direct evidence to prove that Binance actually controls a lot of chips. Many of our senior market makers who do secondary trading have told us that their judgment is that Binance has high control over chips, which is one aspect. On the other hand, for Binance, projects like Ordinal are also a new user group, and it is willing to list such coins. At that time, when it was around 12-13 dollars, when everyone was considering whether to sell, there was actually a very important piece of information. Many people misjudged that Ordinal had already turned over sufficiently before it was listed on Binance. As a new asset, many retail investors actually support it. At that time, many Chinese people went to play Mingwen, and all the retail investors, those people you think are leeks, have been playing Mingwen, so at that time I must plan to resonate with them with a retail investor mentality. So during that period, from 12 to 13, we continued to hold it and held it until it actually rose. In the second half, because after Ordinal rose, you will find that all the Mingwen are playing, such as ETHS and so on. At this time, we are considering a question, whether we should lay out the second dragon, a dragon with higher explosive power, so we actually spent a lot of time looking at all the Mingwen on all other chains, including some new chains. In fact, the effect of our review in the past month is not good. Of course, it may also be because our knowledge and experience are not enough to catch it, or it may be because we have laid out too late. In fact, for most people, you will find that from when Ordinal started at around 20 to now, the increase in this period, if you choose some so-called second and third dragons, their targets are really not as good as Ordinal. So we have a very important conclusion, that even if you think you can achieve the second and third dragons, you must still hold a certain proportion of the first dragon position. From the perspective of the secondary investment process of the project, they are actually the same, that is, the quality of the project, the establishment of a position, and the sale of key nodes. In addition, I personally prefer to look at turnover and OI. There are two OIs worth watching. The first is OI divided by market cap. If this ratio is high, it may be a high degree of control of the plate, and the other is its turnover rate is relatively high, or its OI has risen very sharply in the short term, such as yesterday, my secondary trading is participating in people, it is really pure buying lottery tickets, and I didn't buy much. At that time, it was because I saw that its OI to market cap ratio rose very sharply. I saw that it was about 23, and I told my colleagues that I bought some at around 25. After that, the coin rose seven times, and the economic benefits were quite considerable. I think this also represents a signal. Of course, you have many other indicators to look at, but the core point is whether there is money paying attention to these plates, because if there is no money paying attention to these plates, these plates actually have no value. Like the current DeFi of Wannian Goubuli, everyone knows that it still has value, but if money does not pay attention to it, it will be quite uncomfortable. Then I will add a little bit about selling. I think you can adopt a method of selling at a critical time point. Many people actually can't read K-line charts. We are not very strong in looking at K-line charts. Then you can choose, for example, when it is listed on Binance, there is a time window for breaking through, or its market continues to FOMO to a certain extent. How to call FOMO? You can refer to an indicator, such as its trading volume, whether it is a contract or a spot, to the top three before Binance, which basically represents a certain market FOMO heat. If at this time you hear that everyone is discussing this coin, it may be a short-term peak. A more illustrative example is Ordinal on December 5th. Its trading volume at that time exceeded Ethereum, which was a short-term high point. At that time, it was close to 70, and it was washed for about a month later. But there were many changes in the middle, because later Binance listed Rats and Sats, which raised the fundamentals of this Mingwen again. The second case is Solana. It is not that Solana will not rise later, but you will find that Solana has a relatively large callback, or there is a stagnation of a rise. The coins in the Solana ecosystem have a large callback, and Solana itself is in a state of offensive stagnation, which happened on the day when its trading volume exceeded Bitcoin, which was about 126, 25th. I personally have a habit of looking at the trading volume rankings of Binance. At the same time, I can give a suggestion on how to maintain sensitivity to the market. It is best to pull out the rise and fall boards on market cap every day and see what the targets are, and what concepts are suddenly rising, which means that you need to pay attention to this sector and see if you need to switch funds. You also had a question just now about the difference between secondary trading in a bull market and a bear market. There is actually no difference in mindset, the main difference is the multiple of the pattern, because the entire capital cannot drive it to go to higher places, so you must lower your profit expectations a bit, and in a bull market, you can raise your expectations a bit.

Lawrence: My main position will trade in assets with value and consensus, and then do left-side trading. The small position will trade in bubbles and non-consensus assets, which will do right-side trading, and then try to force myself to do some IQ50 operations and try to buy the most incomprehensible things. Personally, I feel that the difference between the bull market cycle and the bear market cycle may be more profound in the bull market stage to pay more attention to trading attention and less attention to fundamentals.

Investment Daily Work

Alex: As practitioners in the encryption industry, what are some valuable tasks related to investment that you repeat on a daily, weekly, or monthly basis in your daily work?

Laolu: Let's start with what I do every day. Most of it is related to market trends, so during a bear market, I may only do it every three to four days, but during a bull market, I basically have to do it every day, otherwise I may fall behind the market. Our industry is progressing quite fast, so it's easy to be left behind. What I have to do every day is to browse through the news and at least go through the mainstream media's news once, which is quite important. Of course, it's not necessary to read every article, just skim through the news and extract useful information. Then there are some emails and channels that I subscribe to, where I can extract useful information. This includes many WeChat groups and some TG groups. Of course, I also have a simple summary of these things that I post on my own TG channel, but I haven't updated it in the past half month because I found that information overload can affect your digestion of previous information. You become a machine that only acquires information, rather than digesting and refining the information you previously acquired into useful trading decisions. This is a problem I am reflecting on. Sometimes, information overload or knowing too much can also affect your trading strategy. Information is of course the first thing to do. The second is to follow up on what you are interested in or what you focus on, whether it's a project that hasn't been launched yet, a project you already have a position in, or updates on popular projects, such as Twitter and podcasts. This is time-sensitive. The earlier you discover it, the faster you analyze it, and the more accurate your judgment, the better your trading decisions will be. Then, at the pure trading level, you need to look at the changes in the aggregated trading OI across the entire network, see which positions have changed significantly today, and what anomalies there are, and then reverse-engineer the cause of the anomaly. If there is no change in the fundamentals, then it can only be judged as a behavior of the main force controlling the market. The third point is to constantly learn from other people's views and ideas, assist in judging your own position, and then make your own trading plan and hot spot analysis. The fourth point is to learn from other people's views and ideas. There are actually many bloggers on Twitter who are willing to share their ideas. We can also think and judge together. After doing these trading plans and hot spot judgments, you will have more confidence in your position and your trading role.

Alex: Just now, I did a series of work as you mentioned. In daily investment work, on the most ordinary days, how many hours of your time might it take up?

Laolu: In a bear market or when the market is not doing well, because information is relatively scarce, checking information every two to three days is just as effective as checking it every day. During a bear market, when the market is not doing well, that information cannot drive the market, and the information may be invalid. You only need to spend one to two hours a day. In a bull market, when the market is doing well, it may take more than six to eight hours, and you may enter a state where you feel that eating and sleeping are unnecessary. For example, after checking Twitter, you may need to analyze a certain token, check the abnormal trading volume on Blur, and check the floor situation of an upcoming NFT. Your daily schedule will be quite full. For example, today there is a new coin opening on Binance, a certain token is coming out, and there are airdrop details. You need to do a lot of these things. In a bull market when you want to participate in the market's hotspots, most of them are already scheduled by the project parties, and it's not necessary to be busy during those times. Your schedule may conflict.

Mo Ke: The first thing I do every day is to check Twitter and group chats. This is the fastest way to obtain information because we are still an immature market and there is no particularly organized channel for information. Especially if you want to get first-hand information, it must be through your social groups and Twitter. This takes about one to two hours every day. In the process, we come across many valuable articles, which we take time to read every day. I think this is a learning process because many people are open and willing to share their thoughts and opinions. So, we spend about an hour every day reading some in-depth articles and analysis. The third thing is that since we are doing primary investments, we look at some projects and also pay attention to the secondary market. We look at some fairly distributed projects and check out their gameplay, token economics, or whitepaper concepts, which takes a lot of time. There is also a part where we have to look at some marketization, such as recent IPOs or some gameplay, which have higher profits. We have to spend time looking at their participation mechanisms or the best ways to benefit from them. This actually takes the most time, about half of the day. Then we talk about deals, some primary deals require time to negotiate. There is also some time to meet friends, which may average about an hour and a little more. Our company always has weekly meetings and morning meetings every day, but besides that, I think we are more likely to realize the importance of something at a certain point in time and make some changes in a certain direction. For example, we recently discussed that we need to go through some projects that were previously passed on again because currently, the valuation of secondary projects is very high, but the valuation of primary projects is not correspondingly high. There is a valuation gap, and many new projects have not yet started. Therefore, at this time, some old and well-performing projects, if they issue coins during this time window, will have very good returns. During the bear market, we may have thought that it was not suitable for us to invest, or we were afraid that it would not survive until the bull market. But at this time point, it is necessary to pick them up. So, we will spontaneously discuss this matter at a certain point in time, and after the discussion, we will switch our team's work and that's how we work every day. Daily work, weekly meetings, occasional changes in direction, and then we decide what to do. We don't usually make monthly plans.

Alex: Same question as before, how many hours in a day do all these daily tasks add up to?

Mo Ke: Basically, bull markets are crowded. I also saw someone asking if it's possible to balance work and life. This is not possible. During a bull market, most of your time should be allocated to some work in the currency circle, and all unnecessary social activities, including other time, should be excluded as much as possible. Because the cyclical nature of the market is particularly obvious, the bull market may only last for a year, and the high outbreak may only last for a year. In fact, the return of five or six years in a bear market can be obtained during this year, so you must be fully focused and invested during this time.

Alex: You just mentioned that you will communicate with your friends, but you also emphasized the importance of efficient communication and avoiding ineffective socializing. How do you balance this? Because we know that there are people coming to us every day in the industry, asking to chat about this and that, and many visitors who come to us on their own initiative. How do you weigh this?

Mo Ke: I think there is no way to deal with it. Personally, I dislike being too utilitarian, so it is sometimes difficult for me to balance. I have encountered some people who come to talk to me, and after the conversation, I feel that it is not helpful for both parties, but this person is a bit persistent. I find it difficult to cut off the relationship, and it is hard to say that we should not meet again in the future. Usually, I will try to have a topic for communication first, so that everyone knows what to talk about. If the other party does not provide a topic, you need to suggest one. Also, when I communicate with others, if the communication is not helpful, I will try to reduce the frequency of meeting with them after two or more times.

Lawrence: Actually, what I just said is similar to what the two teachers said earlier. Now, maybe every day or every two days, I will first follow up on some projects that the fund has invested in, including the progress of some projects in the tracks I cover. In the previous period or bear market cycle, this work may only need to be done once a week or every half week, but recently, because the price changes are relatively large and there are also many updates to the projects, the coingecko page may need to be refreshed several times a day. The main thing is to understand why these projects are changing. In addition, I will also go to brush up on various aggregated information sources that I would pay attention to during the bear market, such as Teacher Lu's TG channel. I have also been paying attention to similar information sources. I pay attention to some news flashes, and basically go to see every one. In addition, I will spend some time studying some new projects on the chain. Recently, I may occasionally open Birdeye, and in the previous period, I opened Dexscreener to see what projects have the highest on-chain trading volume and what they are doing. This is also a behavior similar to regularly checking the coingecko gain list, which is to understand what everyone is trading and what they are paying attention to. In addition, recently, I will spend more time following up on projects that I have positions in or are paying attention to, their OI data, including their transaction volume, and take a look at their CVD data. The frequency of this action will be relatively high recently, and maybe I will refresh it two or three times a day.

2024 Opportunity for Secondary Market

Alex: The fifth question is more concrete. What do you think about the overall development of the 24th to 25th cycle? Of course, this is a broad question, and we can discuss some specific opinions. For example, based on your judgment of the cycle, will the 24th to 25th year be a bull market with a main upward trend as most people expect? And in terms of specific targets, which type of track and narrative do you think is more promising in the next six months or one year, and what are your specific views?

Moke: We believe that it is already the beginning of a bull market. If you look at many assets, they have risen sharply from the middle of last year to this year. We have gone through many projects for a while, such as all projects on Binance, and not just Binance, but also many second-tier exchanges and coins on the chain. You will find that these coins are actually not well-known, but many have risen by ten or twenty times. Of course, this may be related to liquidity. There is a hidden signal here, which is that the water has already started to come out, so it supports the rise of all projects. Looking at the entire past cycle, I personally think it is very similar to the period from the end of 2019 to 312. The market has already bottomed out, and everyone is doing speculative expectations, such as the speculation of DeFi back then, and now it is the speculation of ETF and interest rate cuts. Therefore, it is actually the concepts in the market that are starting to do some speculation, such as meme, inscription, and AI. There may be a relatively large callback later, but we believe that it is already a bull market in the entire cycle. We will lay out a larger position, whether it is primary or secondary, including primary, and we will try to shoot more bullets recently. Macroscopically, some friends' sharing will think that the interest rate will be lowered in 2024, and many people are betting on the interest rate cut in October. The interest rate cut is definitely good news for risk assets. In 2024, we will be more inclined to lay out the following five tracks. The first is games. In fact, we almost didn't invest in games in the bear market. So far, we have collected more than 800 game projects. When we talk to these projects, we will ask them a question, what do you think are the one plus one greater than two aspects of the combination of games and encryption, and what changes have been made to the essence of the game? In fact, most of the answers have not escaped the play-to-earn approach. If it is just play-to-earn, it is difficult to rise in a bear market. The first fundamental change this year is the increase in the number of users. Binance now has 170 million registered users, so we can see a very obvious increase in the number of users. I remember that in the previous cycle, this number was over 100 million. You can also see that OK has started to try some MPC wallets, and this attempt has achieved very good results on the inscription side. We can also see that OK's NFT trading volume in the NFT trading market is no less than that of the original NFT leader. The first point is the increase in the number of users, and the second is that the games now are actually more complex than the previous round of games, because they are more complex, so they can achieve two effects. The first is that the complexity of its entire economy is a bit higher, so even if it is a Ponzi scheme, the life cycle of this Ponzi scheme will be longer. The second is that because the game is more complex and more fun, it will actually capture more user time. With the increase in user time, it will actually make the possibility of this game itself more diverse, reduce the Ponzi attribute, and increase its life cycle. I think time is money. Once you capture the user's time, when his time is immersed in it, he is willing to pay, which also forms a long-term source of support for the game. Therefore, games are a track that we pay special attention to, and it is also relatively easy to associate with ordinary retail investors and easier to understand by retail investors. The second is public chains. Now everyone is looking more at concepts such as Layer2 and ZK, and it seems that we are all looking at parallel EVM. Public chains will still receive relatively good valuations in the market. The third is that we will pay more attention to BTC's Layer2 and BTCFi. Some of the current targets are quite regrettable because they are not quite pure BTC Layer2. For example, they still use their own tokens to do some gas, which is not quite pure. Including its entire cross-chain method, is it gradually becoming centralized? We are observing and seeing some new targets. The fourth is AI. Now it seems that AI is running with encryption, rather than encryption running with AI. Because AI is the main narrative in the technology circle, and AI has always been iterative and innovative, we will see many AI projects in the currency circle. We cannot judge whether it is available from some fundamentals for the time being, but as long as AI is still developing, the concept of AI+cryptocurrency will continue to develop. You can also see that Binance has recently launched two AI-related projects. The fifth is Depin. In fact, this is our most entangled track, because many of the current Depin are old wine in new bottles, and they are repackaging a new concept on some services such as GPN or some distributed cloud computing power. So we are not sure how this track will perform, because in the past, such as cloud computing power, including the most typical demonstration is Thunder Play Cloud. So we are still observing and learning, but it is still the sentence I said earlier. If the market comes out, then it must have its reason. Depin has some coins on Solana that have risen quite well, and it is worth our attention and learning. These are the five main tracks.

Lawrence: The price of BTC reached 45,000 the other day. I feel that not many people around me think that there won't be a bull market in 2024 or 2025. Everyone believes that if it's not the beginning of a bull market now, it will start after a wave of correction. I think my view is quite consistent with everyone else's on this point. As for the promising tracks and narratives, it's similar to what Mo Ke mentioned. I am optimistic about L1 and L2, because L2 will soon have a Cancun upgrade. The same goes for L1 as a whole. Solana has also risen a lot recently, and the market is also widely concerned about other paths of expansion. I think this concept has been one of the biggest gainers in every cycle in the past, and I think this cycle will be the same. Then there's gaming. In addition, I am more optimistic about the entire meme track, because the meme track was only considered a track and began to be noticed by everyone in the last cycle. Later, some downstream tool tracks, such as bots, also appeared. From my perception, if we think that crypto will move towards a wider audience and attract more users, the most direct, simplest, and most straightforward thing may be memes, which may play a very important role in it, so I will pay attention to memes. I also hope to find some new tracks that are short-term and cannot be falsified, or have some ancillary properties.

Laolu: I think there may still be significant fluctuations in 2024. Personally, I am cautious and may reduce a large amount of trading above 40,000, and concentrate funds on assets with better liquidity. If 2024 is very good, because of the combination of interest rate cuts, halving, and ETFs, 2025 may not be so optimistic. This may also be a consensus among everyone. Originally, everyone thought that 2024 might be average, and 2025 would be a bull market. Now it seems that after the funds and enthusiasm are exhausted in 2024, 2025 will enter a period of rest. As for specific tracks, I listed seven or eight before, let me count them for you. The first one may still be the continuation of inscriptions, because it has created two billion-dollar leading companies, and the outflow of funds is still considerable. Whether it flows to other EVM inscriptions, or protocols like Atom or BRC420, the income related to inscriptions will gradually decrease as the funds flow slowly. Just like everyone is doing BRC20-related launchpads, the story of creating new assets cannot be justified, and everyone will not believe this. In fact, it is still affected by the cycle. As time goes by, the average return on investment will become lower and lower, and the story will eventually end. The second is SOL, TIA, and a bunch of ZK series that have not yet issued coins, as well as new opportunities and new ecosystems brought by rollups. The third is the Cancun mainnet at the end of February, which may be a relatively clear hotspot that everyone cannot avoid. Almost all tokens related to Cancun are at new highs. If there are good opportunities for callbacks before the end of February, I may pay more attention to Cancun. The fourth is the game sector, but the game sector will be special. Its hotspots will not rise as a whole like other sectors, but may be concentrated in Gamefi in the rising period or relatively new ones, and then some game public chains and game guilds. I think this is the way it will be done. If you bet on the game sector and bet on most of the game tokens, the return on investment may not be so good, only the game public chain can carry the flow of funds in the game sector. The fifth is the AI sector that everyone knows. In fact, in the past two or three months, except for WLD, the CEO of openAI who resigned and returned, other AI tokens have not been hyped, or have not reached the state of people's uproar, but they have been quietly rising. I think AI will be hyped up round by round with some updates of AI technology, even if they are not related, only one AI label, there will be such operations. Its cycle is different from that of native crypto assets. It may depend more on updates of AI technology or Apple's progress in AI. I think its outbreak point is the upgrade of AI outside the circle, not within the industry. The sixth may be restaking starting with layer, which is actually an advanced version of LSDFi and can be understood as more Defi-oriented applications. The seventh is social media, whether it is FT or lens, everyone has been waiting for the social media sector. It may be weaker than the previous six, but it is also a sector that cannot be avoided. The eighth is RWA, assets such as national debt. I think they have been weakened very severely at this stage because the on-site fund return rate far exceeds that of national debt. Therefore, the RWA track may have to be given a lower priority when the market is good.

Experience and Lessons Learned

Alex: You have been in the investment market for so long, and you must have made some mistakes and hoped to know some truths earlier. If you could go back three years and tell yourself some truths, what would you say?

Mo Ke: If I were to warn my past self not to do something, I would tell myself to play with contracts less. Of course, I still open some positions with contracts now and I still want to improve my capital utilization. Three years ago, I experienced a significant drawdown while playing with contracts, so I would advise my past self to minimize contract operations because contracts do not have cumulative effects and many people lose themselves while using them. Contracts are just a tool, and many people try to control the price points too much while playing with them, but I think most people do not have the ability to trade these points because they often fluctuate randomly or are affected by noise or controlled by others, which you cannot perceive. More time should be spent on researching projects because research on projects and understanding of the industry have cumulative effects, which will make you go further. Therefore, I think the value of contracts lies in their ability to improve your capital utilization, but you still need to manage your risk positions well.

Laolu: The first one may be similar to Moke. In the past two years, I have received messages from the future. The first one is not to play with contracts, which is something I have warned many people about. The past two years have been the same, except for when hedging is needed, tools may be used, but of course, this tool cannot be completely ignored. Do not engage in naked short selling or leverage because there are indeed too many lessons learned. This experience has been helping me avoid many things for four years since 2020. I only trade spot and do not pursue excess returns because it requires strong self-control and energy to do so, which I feel I cannot do. Therefore, I have reduced this matter. This is the first lesson that I hope everyone will pay attention to. The second is liquidity risk. I was taught a lesson during the Luna and Solana period. The entire market's liquidity is actually a whole. When a certain liquidity is destroyed more miserably, even if you do not hold assets that are highly correlated, you will also be affected. This is similar to BTC's 50% market value share, especially in this market, which needs to be focused on. Even if you do not own the assets that have problems, you should also take some hedging measures, which is quite important. The third thing to pay attention to is the periodicity of hotspots. Do not operate against the cycle and grasp the rising period, platform period, and timely withdraw before the decline period comes. This has been verified in various hotspots, whether it is Defi or NFT. Everyone can review and find some experience. The fourth point is an experience at the trading level, which may be more helpful to myself two or three years ago and can avoid some lessons in 2022. Historical positions are actually a burden. Even if you know in your mind that you need to make new decisions, historical positions will become a burden that is difficult to get rid of. Historical positions may exist in two or three situations. One is in a loss and unwilling to cut losses and sell. The second is that there is a profit, but it is lower than expected, and you are unwilling to sell. The third is that it may be around the cost and you think there will be a profit in the future, but it has not yet been shown. These positions sometimes affect your judgment in the next hotspot and will be a heavy burden. If you cut or sell these positions, it will be better than holding them. Clearing these burdens will make it easier for you to participate in subsequent opportunities more flexibly and not stay in the previous version. If there are still people holding a bunch of defi coins from 2020 and 2021, this burden is still quite heavy because once your position is there, you will think about when everyone will come back to hype defi. These defi applications have indeed performed well and everyone has been using them, but the price is not satisfactory, and you will always be trapped in obsession. You need to clear these thoughts and observe your position every once in a while. If this situation occurs, you must be decisive in clearing it so that you can enter the next hotspot more easily. I think this is quite important and something I have been adjusting recently.

Lawrence: I mainly have two points in mind. The first point, as mentioned earlier, is to focus more on trading attention and less on fundamental analysis during a bull market cycle. Upon reflection, I realized that I paid too much attention to fundamentals in the previous cycle and didn't focus enough on narratives or attention. The second point, as mentioned by Mr. Lu, is that I would say, don't fall in love with a particular coin. This is a lesson learned after riding many roller coasters. Additionally, I specifically looked back three years ago, which happened to be 2021, and everyone was playing with algorithmic stablecoins. If I could say one thing to my past self, I would say to hold my nose and buy OHM, as their IDO on Discord looked too unimpressive at the time. In hindsight, this may have been the biggest missed opportunity due to my bias. Therefore, the third point is to avoid bias and try to use your small position to lower your IQ and participate in more things during a bull market period.

Investment and Life Balance

Alex: The last question is not entirely related to making money, but I feel it may be a concern for many friends around me, including myself recently. I see many groups discussing how the bull market can indeed make money, but it feels tiring. Sometimes I even want to go back to the bear market when no one made money, but it was easier. This ease is reflected in the body, mood, and having more time to focus on specific projects instead of constantly keeping up with various hot topics. Do you think balancing investment and life is a challenge at present? Apart from investing in the bull market, are there any expectations and goals in life?

Old Lu: Actually, I have also been troubled by this issue and have discussed it with other friends. In the past two years, when I was younger, my physical and emotional state was relatively simple, and it may not have had a big impact on my investment status. I lived alone in an apartment and could immerse myself in the industry's investment. As I grew older, staying up late may cause some physical discomfort, such as tinnitus, headaches, dizziness, and difficulty getting up, which may affect investment. The second is that some trivial matters in emotional and daily life may also affect investment. I asked some friends how to balance the time spent here with the time spent on life while having emotions. I feel that they have handled it relatively well in terms of mentality or the whole process. But I may not have grasped the balance point in the middle, which can indeed have a relatively large impact. What can be done now is not to choose one of the two, but to give up some opportunities that cannot be achieved in time, give up some opportunities that only come out at three or four in the morning, or give up some opportunities that are available during some holidays, and spend more time on life. Of course, this will reduce the rate of return and also reduce the acquisition of information, but balance is needed to find one's own state. Then it is also necessary to reduce the noise in trading, which is a very important issue. Information overload will affect many things. This is also a problem that I have been thinking about recently. There is also a growth curve for obtaining a large amount of information. In fact, having enough information is good. The more information there is later, the marginal utility is not only decreasing, but may also become negative. The goal may be to find a better balance point between life and investment and not make both sides unhappy.

Mo Ke: I am an experienced person now with children. I think these major events in life will definitely take up a lot of your time and energy, such as marriage, love, and having children. If you have the choice, try to postpone these key events as much as possible, because it is impossible to balance everything. For example, if my child suddenly has a serious injury, I cannot focus on trading or looking at the primary market. I must put all my energy into my child. For unavoidable situations, my advice is to postpone as much as possible. Another thing I think is to subtract, but it depends on what you subtract. I found that many people subtract their health, such as lack of sleep or physical illnesses caused by sitting for long periods of time. This cannot be subtracted. In the balance between work and the cryptocurrency industry, the balance must retain the necessary parts, such as daily exercise and adequate sleep, because only in this way can you ensure that you have sustained energy to operate. Another subtraction is to delegate or abandon unnecessary work, such as when we need to inscribe, I will not actually operate it. I may look at a project, but I will give it to another colleague to operate, reducing our workload through division of labor. When we look at primary and secondary markets, we may have some focus, such as algorithmic stablecoins, which I am more familiar with and will look at more. Another colleague may be more familiar with derivatives, so I will let him look at it more, reducing everyone's workload through division of labor. Even some external cooperation, such as some new projects, can be outsourced to other teams for a certain fee, which is also a way of subtraction. Another way is to completely abandon, such as I have been trying to deliberately reduce my trading frequency. Because you will find that the less you trade, or the fewer varieties you focus on, the better your energy or operation will be. I think this is also a very important point, which is to subtract from your life. After subtraction, if you really can't subtract anymore, then you can only work hard.

Lawrence: I also had a child during this cycle, and my experience is similar to what several teachers mentioned. Balancing work and family is indeed much harder than before. So I would like to advise my younger friends, if you are single now, it may be the best state for you. You have very little to worry about in terms of time and energy, and you can invest most of your energy in the bull market. This time must be cherished. I am not sure if I have reached a balanced state yet, but I feel quite tired. I deeply appreciate Alex's foresight in exercising during the bear market cycle. My goal for the next 24 years is to maintain my overall physical condition and hopefully improve it by spending more time exercising.

Alex: One last suggestion, because the overall work pressure of people in the cryptocurrency industry is high, and the time spent indoors is long, it is important to supplement with vitamin D. I recently went for a physical examination, including my family, and found that there was a clear lack of vitamin D, mainly due to lack of sunlight exposure, which makes it difficult for vitamin D to be naturally secreted. Vitamin D has an impact on bone density, cardiovascular health, and depression, so everyone can buy some vitamin D supplements. Currently, almost 90% of people are deficient, which can alleviate headaches, back pain, and calcium deficiency. I wish everyone a good harvest in this bull market year, and at the same time, not too much loss in terms of health and family. Thank you to all the guests for their time, and I hope we can have another opportunity to review in 2025.