🧙♂️【Merlin Space】 Last night, in Merlin Space hosted by my brother @lilyanna_btc, Boss Jeff (@BitmapTech) shared his views on the current bull market, how to observe the start-up signs of the bull market and suggestions for developers.
1. Why is this bull market cycle so difficult?
I think the reason why the last cycle makes people feel unfinished when they recall it now is because it was very crazy. I think if you break it down, there is a lot of new money pouring into this industry, and there are also a lot of new users entering this industry.
First of all, we have to talk about the issue of money. When money comes in, the price goes up, so of course users will come in. Today, as long as any market surges, new users will be spread and enter. So why did so much money come in in the last cycle?
The first one is definitely because the interest rate was reduced to 0 in the last cycle. Since everyone no longer has to pay interest on borrowing money, they are willing to make some higher-risk investments. This is an objective factor. The second is a subjective factor of the entire crypto track, which is that crypto tells everyone a very beautiful story. Of course, this story is broken today, but what is this story? In that cycle, everyone, all institutions, and all big money believed in the story that my crypto could onboard more than 1 billion users in that cycle, that is, let more than 1 billion users join the revolution of this cryptocurrency. At that time, as multiple narratives such as DeFi, NFT, and GameFi came to life, there were a lot of people who bought in when they shouted this narrative at that time. So at that time, there was a lot of hot money, whether it was liquidity funds, VCs, or various mainstream money. In fact, because there was no place to pursue higher returns, people were attracted by this story and entered this industry.
If you look at it from the other side today, we find that there are actually not 1 billion people entering the cryptocurrency industry, maybe not even 100 million people, maybe only a few tens of millions of people are still active in the crypto industry today, so this story is shattered.
Today, everyone realizes that there is no way to tell a sexier story than this. What other story can you tell in this cycle that is sexier than this? You have already painted a pie for the other party, and then the pie is shattered. Then it is much more difficult to paint another pie for it.
The second reason is that the regulation at that time was imperfect, so many people miss it now, such as Three Arrows Capital, SBF, Do Kwon, etc. It is because these people, without regulation, gave a lot of leverage to the industry. They used their own money, the project's money, and even embezzled the user's money to boost the industry. So in that situation, everyone felt that it was a great time. The reason behind it was that there were some people who used money unscrupulously to blow bubbles in this market. And then after the bubble finally burst, these people also entered.
Now compared with this cycle, first, the interest rate cut just happened, and the current interest rate is still very high. Second, you can't tell a sexier story than the previous cycle. Third, your supervision is getting stricter, so everyone says that as long as I don't make mistakes, you can see that the exchanges in this cycle actually have this mentality, that is, I would rather not make mistakes, and I won't do anything that may get me arrested, right? Everyone is like me, I would rather make less money and live legally than go in.
So in this case, you will find that the money entering this industry is getting less and less. Do you have any innovation in your products and gameplay? So naturally, the number of users entering this industry and the number of incremental users are getting smaller and smaller. So I think this is the problem I personally see in this cycle now.
2. Observation factors for the launch of the next bull market
If a bull market comes, where will it start? I would like to provide some different perspectives. I think it is better to find the pattern of this happening rather than looking for the track.
For example, I think the bull market that everyone talks about must mean that the price has risen to a level that it shouldn't be. This is how I understand the bull market in the cryptocurrency circle. If something is only worth one dollar and it suddenly rises to ten dollars, I think everyone thinks that the bull market is coming. If it rises from one dollar to two dollars, everyone thinks it's too bearish. This is my first judgment. When will the price rise to a level that it shouldn't be? There are usually two situations. In the situation that I have observed, whether it is Web2 or Web3.
The first situation is that after it comes out, people have no way to define it, so they add infinite possibilities to it, and think that this thing may change the world, so they will give it a price that is not worth it. For example, when the sharing economy came out, everyone would feel FOMO if you added a word "sharing" to the end of anything. In the cryptocurrency circle, for example, when Sandbox sold land, the term "metaverse" had only been around for half a year, and people didn't even understand the term. All kinds of land, including virtual land, were sold at a very high price. It was common to sell a piece of land for hundreds of thousands of dollars, and even millions of dollars. When STEPN came out, it thought it was the concept that everyone can exercise, etc. When many things came out, people had no way to explain and understand them, so they gave it an infinitely high expectation. In this case, this kind of product will make people think that this is the track that the bull market has come out first.
The second type is that it has never been understood by the market, or the market thinks it understands it very well, and then suddenly one day everyone finds out that its price is mismatched. For example, this thing should be worth 50 cents, but everyone always thinks that it is only worth 10 cents. But after a period of change, everyone suddenly finds out that it is much more than 10 cents, so everyone may give it a value mismatch, which is crazy FOMO, right? Let it become 5 yuan or 10 yuan. So this is another type, which is the so-called FOMO emotion after the market value is discovered. For example, in Web3, for example, Pinduoduo is actually such a case. Everyone thinks that e-commerce has no chance. If you make such counterfeit and shoddy products and use such low-income or low-value groups as your core users, your product is worthless. Suddenly one day everyone found out that this thing seems to be different from what I thought.
Including Web3, in fact, my personal feeling in the last cycle was that BNB also had such a situation at that time. That is, after BNB started doing IEO in 2019, everyone thought it was nothing, just an exchange started doing IEO, and the price of BNB itself has always been like that. Then suddenly everyone also found that one day they found that BNB itself as a token, the increase in the value of holding it plus the new tokens you bought, at that time many tokens on BNB rose a lot, that is, the new tokens rose many times. Everyone found that not only can you make money by holding it, but the new assets you bought can also rise many times. Then suddenly, maybe in that month, BNB rose, right? Many times, far beyond the market's perception of an exchange, a chain, and this coin at that time.
So I personally find from this model that if the bull market really comes, and everyone finds that the bull market has come, the projects that are most likely to go viral, or grow beyond your cognition at the beginning, I personally think that either they can’t explain it to you, and no one knows what it is. Or everyone thinks they understand it, and then suddenly finds that its value is underestimated, and then a crazy emotion arises. This is my personal opinion. Yes, but I think now, I don’t know, I am still relatively pessimistic.
3. Views on issues and innovations in the industry
I think innovation, in fact, I think we should look at it from the perspective of this abstract structure, and then look at actual cases.
For example, you will find that the financial industry is actually an optimization of efficiency on both the supply side and the consumption side. For example, on the supply side, because the supervision was not so stressful in the last cycle, various exchanges could let go and continue to list various assets. And because of DeFi, the issuance of assets on the chain was also very popular. But in this cycle, you will find that if you buy coins on the exchange, you are likely to lose money during this period, no matter what coin you buy, but the supply side of the chain has been upgraded.
For example, if you look at Pump, it makes the efficiency of issuing assets faster and the game easier.
tech, it refers to KOL in the past, because in fact, there are so-called social coins of KOL in the previous cycle. But it makes the process of KOL issuing assets more obscure and more subtle. You come in, and the person you follow buys his pass, and you feel like you are becoming his fan. But in fact, as long as you join his fans, you become a kind of buying behavior, and you are invisibly involved in buying low and selling high. And including the previous KOLs who issued their own, I remember there was a product name that I forgot, and it was also very popular at the time. In 2021, you let KOLs issue their own coins, and the psychological threshold is very high. But it uses such a method to make people on the supply side feel free of pressure, that is, my Twitter account, I go to register my own account, if you want to chat with me, come? Buy my pass and chat with me, you can also choose not to buy it.
There is another example, for example, this is not really an advertisement, but it is true that our thinking at the time was that this was the birth of the BRC-420 protocol. Because at that time, we felt that when people were playing with various 20 protocols, to be honest, for example, what is the name, people might really just look at the name. But if you look at the EVM ecosystem, for example, like NEIRO, right? People still distinguish between uppercase and lowercase. I think the name is a very low-level thing. Especially when people can still have the same name, why? Because you make all the people who issue assets on the supply side become very competitive.
What is vicious? It means that if you issue assets and others want to speculate on them, you must do it, right? So-called I am shorting a lot of short positions, and then let the coin rise high later, so that people will pay attention to my token contract and speculate on this coin. But the product design logic of 420 is that your asset itself has a visual presentation and an interactive presentation. At that time, there were all kinds of 3D, pictures, music and other things. So when you have the presentation of content, everyone's choice will have a certain so-called aesthetic, or this kind of attraction to this asset. At that time, I remember that there were many people on Twitter, who might really have 100 or 200 fans, who were not KOLs at all. He posted an interesting little thing, a small package, and then it was instantly hit. On the contrary, those who raised a lot of money, or the team advertised, bought various KOLs and posted this and that, and then they could never hit it. I think the old users present today should have this kind of memory. So it has changed the game of naming that everyone used to compete in, into a way of issuing assets on the supply side with more options. In fact, BRC20 was also very innovative at the time. Today, after playing with it, you will find out why I said it has changed a lot? Because at that time, you could only choose four characters in BRC20 and they were not duplicated, so the name you chose was very important, right? If you want to be in the EVM ecosystem, your name can be duplicated, then everyone is actually not competing at all, it’s really just about who can get the plate. So this is the example I just gave, in fact, it’s all about supply-side optimization, not to mention the optimization of the traffic side. Now, whether you are doing peripheral users on TG, or you are thinking of some ways to find the so-called massive adoption, so that the threshold for users in the country is lower, etc., in fact, this wave of LRT also helps users lower the threshold of finance, so that they can participate in the project, which is different from this and Layer2. So in fact, who can make innovations in these two aspects is who can make innovations in supply and consumption,
The third is the innovation of its economic model, which is how to ensure that your product is stable and stable for all participants, and that it can grow rapidly in a short period of time. Then, either the parties to the agreement can earn more income to gain more users, or each participating user has a large enough incentive to promote this thing in the early stage. How to change the design of this economic model.
If you look back at these three points, you will find that in fact, compared with the previous cycle, you have indeed seen less innovation in this cycle, or that everyone is not paying attention to these fundamental things. People may look at the news and chase some of the concepts in the news. But if you really pay attention to these fundamental things, you can actually get some short-term positive feedback by making some small innovations anywhere. In fact, if you look at BRC420, there is really nothing, that is, there is not so much innovation. But at that time, there were indeed various entrepreneurs who came here to participate in this matter.
4. Advice for developers
I think if you can spend ten minutes every day imagining yourself as a user, you will find that there are problems with what you do. As a user, you will be very confused, very depressed, and you will not understand why this product, this project, and this protocol do this. If you can really look at this from a user's perspective, you will definitely find many problems. For example, as a user, I will doubt, for example, what is the value of Merlin's token $MERL, right? If it cannot bring value to everyone, then the users in your community will eventually be the ones whose interests are damaged. For example, if I imagine myself as such a user, then I will think about how to solve such problems, and so on.
So I think that if developers can face themselves honestly, and treat themselves as your users and your retail investors, you may be able to break out of your self-deceptive state of mind and start to solve some really important problems.
The above are personal notes for sharing only and do not constitute investment advice. If there are any errors, please correct them.
