Compared to value coins or junk coins.
I personally simply divide the projects in the cryptocurrency circle into two categories.
The first category: meme projects, which have some innovations of their own, are likely to be combinatorial innovations, and will spread virally after their birth. They are essentially Ponzi schemes based on noise propagation, with a clear ceiling, and consensus often collapses with a large negative line.
The second category: Fundamental projects. Calling them fundamentals does not mean praising how excellent the fundamentals of such projects are, but that their fundamentals are difficult to falsify. They need to be verified by the market, and the results are often not available in a short period of time.
I have talked about how to participate in short-term projects. Today, I will talk to you about how to participate in some projects in the circle whose fundamentals are difficult to disprove. Compared with meme-type projects, such projects are often the main source of people's losses. The more fascinating the narrative is, the more difficult it is to disprove the fundamentals, the stronger the consensus is, and correspondingly, the greater the loss.
This is a simple investment model I have summarized based on my own experience. Different from the new copycat/non-copycat and value coin/non-value coin models, this one may be more suitable for this market. First of all, it is a change in thinking. There is a saying that a cat is good, whether it is black or white.
The same is true for choosing investment targets. The targets that can make money are the ones that are truly suitable for you. You must know what kind of money you are making. Is it the money from the overflow of liquidity? The money from the cycle? Or the money from emotions? Only by understanding this can you lose less! Right?
Let's take a look at the fundamental projects. Recently, there is actually a very hot project, that is: ENS digital domain name. This thing has a lot of real entry holders, and they have many points to support their ideas, as follows:
ENS is the infrastructure on Ethereum, and it will not collapse as long as Ethereum does not collapse.
Digital domain name NFT is a unique track compared to other NFTs, and ENS is the leader among them.
The more than 10,000 digits of the digital domain name are truly unique, and now it is occupied. Other NFT projects come and go, but only these more than 10,000 digits can always stand firm.
Etc., etc.
The above points make sense, but whether they are correct or not needs to be verified by the market and time. This is what I call projects whose fundamentals are difficult to disprove. There are definitely groups that are not optimistic about such projects, but generally, the reasons for their pessimism also need time to be verified.
This is the characteristic of fundamental projects. It may really produce a super unicorn, which can make a lot of money after being verified by the market. But it is more likely to become a "death" level project, firmly trapping a group of its loyal believers. Here are a few fundamental projects:
ETH: Initially, it was just a 6-month project in Vitalik Buterin’s mind, but now it has become the king of public chains, with a huge amount of assets and various innovations attached to the chain.
EOS: One of the earliest Ethereum killers, its technology is still praised today by some people, who say its creative concept is very advanced, but it is also a pain for many old investors.
FIL: The official designated storage party that can carry the grand narrative of IPFS, the cornerstone of the next generation of the Internet, and a strong competitor in the cloud storage market. However, except for early investors, most of the money is made by selling mining machines.
ICP: A decentralized global supercomputer, known as Ethereum 3.0, is the killer of Ethereum killers. It is also very suitable for streaming media. Look at how much Disney's stock price rose after it announced its streaming media business. It basically trapped all investors in the secondary market, and the price of the currency fell by more than 99%.
I believe that people who invest in the latter three are more likely to think that they are making "value investments" when they buy.
The words "value investment" are really harmful. Why is Buffett able to do value investment? Let's take a look at his famous early investments, See's Candies, which is a company that can generate cash flow, and the insurance company he currently holds, which is equivalent to a negative interest loan. With a continuous cash flow, it is equivalent to unlimited margin, so naturally he can buy more as the price drops, extending the investment cycle, anyway, he won't starve to death.
If you want to do value investing, then keep doing it. If Buffett were to do it, he would have invested in the above four targets, and one Ethereum would be enough for him to make a lot of money. But in fact, value investing is not suitable for most people. We come to this market to speculate.
For these fundamental projects, how to participate is the key. My personal suggestion is to first consider how much position you plan to put in such a project. For example, if you plan to buy 5% of a project, then only buy 1% at the beginning to experience it, and then wait until it falls, and then buy it at the right time, because no matter how good the project is, there will always be a negative line waiting for you.
Well, if the target you like finally falls, don't rush to buy it at this time, but analyze the reasons for the fall. The butt determines the head. Not taking too large a position at the beginning is also to hope that the analysis can be more objective.
Take FIL for example. When it falls, you will find that a large part of its rise comes from the fact that many bosses bought mining machines and rushed in. To be a storage node of FIL, you need not only mining machines, but also FIL for staking.
At that time, the FIL network consumed a large amount of FIL every day because many people rushed in, and the price would rise. As the price rose, the payback period of early mining machines was shortened, and there was a wealth effect. New people continued to take over, buying mining machines and staking FIL, pushing up prices and attracting more people. These behaviors have a strong positive feedback effect.
When the new funds entering the market were insufficient to support the price of the coin, it began to plummet. At this time, everyone suddenly realized that this was a mining coin. After mining, coins would be unlocked every once in a while, and the price of the coin entered a death spiral. How could the price of the coin rise without new people coming in?
What? You said it has application scenarios and needs in the future. No way, you don’t really think FIL can outperform Alibaba Cloud and Amazon Cloud.
This is because the decline revealed that the logic of the previous position was wrong. Since the logic has changed, the original position can be withdrawn. Of course, some projects have fallen only because of the bad environment, not other reasons, like BTC or ETH, which is undoubtedly a great time to buy.
That's all, Dyor.
Author: Beyond, Twitter @Beyond0x009; Editor: Gemini, Twitter @Gemini0x17
