The current blockchain and digital currency are somewhat reminiscent of the Internet in 1997; there may be bubbles, but the prospects are immeasurable.
In this field, future BATs will definitely emerge. What you really need to do is to integrate into the tide of the times and never fall behind. The most cost-effective thing for a person is to live in the future. Make choices now according to future standards.
The digital currency field is still in a primitive state, and one's level of understanding will determine their role in this field. You might write unimaginable wealth legends or get 'cut' by others due to insufficient understanding. Rapidly improving your level of understanding is something you must strive for every second.
The crypto market offers much higher returns than the stock market, but it also comes with greater risks. The chips in the crypto market are more concentrated, with stronger control by major players, trading 24 hours a day, with no limits or circuit breakers. You can wake up one day to find your account has gained hundreds of thousands, and another day find that you have lost hundreds of thousands. It’s not unusual for coins you just bought to lose half their value in two to three days, so entering this field requires a rational view of the risks and acting within your means.
There's no need to constantly stare at the market; making quick trades is very difficult for earning big money and may affect your judgment of long-term value. As long as the fundamental value you identified when building your position remains intact and the environmental conditions haven't changed significantly, try to minimize your actions.
Choosing to invest in cryptocurrencies with a strong belief from the community is relatively safe. During overall downturns, such currencies often see smaller declines, as more people hold firmly, providing a sense of security.
There are too many stories of getting rich quickly in the crypto space, but it’s best to just listen; the first thing to do is ensure your survival.
Even in a super bull market, there are still many people losing money. Chasing highs and cutting losses is a shortcut to losing money and should be avoided as much as possible. Especially if adhering to the philosophy of long-term value investing, one must avoid chasing highs. A simple way to make money is to hold onto currencies with long-term value; once your position is established, do what you need to do and let time validate your judgment. Do not constantly stare at the market; when you have time, observe the industry's landscape and changes. Holding onto your investments can lead to easy profits, and doing so steadily may even yield big bucks! This is the shortcut to making money and enjoying the crypto experience.
The chips in the crypto market are highly concentrated, with the potential for manipulation far exceeding that of the stock market. Those coins controlled by major players can see dramatic price increases at any moment; as long as your coins are valuable, don’t panic under any circumstances. Hold onto them; they are your chips. When the market rebounds, it will be difficult to get back in.
You must manage your position reasonably; being fully invested or completely out is a label for novice investors. Betting everything at once should be taken lightly. Those who constantly go all in typically suffer significant losses. The short-term fluctuations in the crypto market are unpredictable; guessing correctly is merely luck. The crypto market changes too quickly; don't fantasize about catching the bottom. Continuously balancing your costs with your position to seek stable appreciation is the correct method.
Bubbles contain risks but also opportunities; learn to surf in bubbles, and you will reap great rewards. One should respect bubbles but also cherish and enjoy them.
1 Only invest in assets you can understand.
In the blockchain world, the vast majority of people are immature investors who need education on risk and behavioral norms.
Understanding does not mean you must grasp the principles and algorithms of the programs; rather, it is about examining the cryptocurrency you are going to invest in from several other dimensions:
How significant is its commercial value?
Taking Bitcoin, which everyone is familiar with, as an example, it has effectively addressed the security of currency transfer, becoming an asset that is increasingly recognized. At the same time, it has also become a universal currency and value benchmark in the digital currency field. Another example is Ethereum, which has added smart contracts and achieved a complete ecosystem, with many subsequent tokens and applications built on the Ethereum blockchain.
When we assess a new cryptocurrency, we must first consider its commercial value at what level. Applications with unfeasible or insufficient commercial value should be approached with caution.
What is its development stage and risk situation?
Whether a project is worth investing in must also seriously consider its development stage and associated risks.
For example, BTC is already very mature and can be considered a relatively reliable and stable investment target in the blockchain world. Ethereum has also formed a relatively stable ecosystem, with many applications built on it, so the risk of investing in Ethereum is much lower. Therefore, their current valuations are also quite high.
Take EOS, which many people are optimistic about; the risks are significantly higher. If EOS successfully develops, its high concurrency processing capability could far surpass ETH and potentially yield exceptional returns. However, the problem is that EOS has yet to deliver on its promises. If the project fails due to various reasons, such as technical complexities, internal team conflicts, or issues with BM himself, the price will undoubtedly plummet.
High risk, high reward; this principle holds in traditional finance as well as in the crypto space. New coins carry high risks, but once successful, the returns can be astonishing. Different developmental scenarios correspond to different risk levels, which is a factor we must consider when investing in digital currencies.
Look at the resumes and status of the team members?
On one hand, pay attention to the team's historical performance; on the other, focus on the current status of the team, such as information disclosure and development progress reports. If their external information disclosure is minimal, you need to be cautious.
Understanding the 'cycle'.
In simple terms, don't be superficially misled by 'trends'. The cycle we refer to consists of an upward and a downward movement; generally speaking, one cycle does not provide enough information for any judgment; at least two cycles are needed to see the true trend.
For example, based on Bitcoin's past data, two years is one cycle; every two years, Bitcoin's price forms a significant cycle of ups and downs. Most other cryptocurrencies also follow the rise and fall of the Bitcoin cycle.
In other words, if you want to invest in Bitcoin and really benefit from it, you must be prepared to hold for at least two years, four years would be better, and ten years is best... Most people can't even hold for two years. Some people I know had no Bitcoin left by early 2017, completely exiting the circle and missing out on this major market.
3 Understand the basic ecological logic of digital currencies.
If we were to predict the development of blockchain, we could use the development path of the Internet as a reference.
First, a relatively mature operating system must emerge, followed by a plethora of applications. Applications and operating systems have a symbiotic relationship.
Platforms like Ethereum, EOS, NEO, QTUM, etc., can be likened to operating systems in the blockchain field. Who will ultimately win is still unknown, and we are still in a 'layer' struggle. Creating a bottom-layer application requires immense resources and high demands on the team. The metrics to measure the project itself are the quantity and performance of applications. So if a platform claims that the number of applications on it has increased, that is a significant positive signal. If the platform's performance has notably improved, that is also a considerable positive signal.
For applications, the most important factor is the number of users. Although many applications currently have no users, that's okay; just having potential users is great. If many user-centric applications can be developed now, they could potentially soar in value. Currently, the main application scenarios for blockchain are in finance and the Internet of Things (at least for now, and these are the main, not the only). In detail, good application scenarios exist in payment, credit reporting, insurance, equity crowdfunding, accounting systems, trading systems, etc. in the financial sector. Therefore, applications in these areas are very worthy of attention.
Having a general understanding of the basic ecological logic of blockchain will help us choose investment projects and conduct value assessments.
Firmly investing in value.
Short-term investing in the blockchain world is very dangerous.
First, short-term volatility is severe; there aren't many rules in new fields, with no limits on price increase or decrease, and transaction fees are much higher than in the stock market. Trading is 24/7 without a break; if you choose to operate short-term, you may end up either suffering from nervous exhaustion or losing a lot of money.
Second, investors here are more naive than those outside; chasing highs and lows is common, leading to greater market volatility.
Third, the chips in the crypto market are very concentrated, and the control by major players is much stronger, making their actions harder to predict.
Fourth, it goes against the principle of exchanging time for space, and speculative behavior is unlikely to enjoy the dividends of growth in the blockchain industry.
Over the past few years, those who have genuinely made money in this market are almost all long-term holders who adhered to value investment. Only through long-term holding can one capitalize on wave after wave of market movements.
At this time, understanding the underlying technology itself becomes particularly crucial. Only by truly understanding which blockchain projects have the potential to take off in the future can you have the courage and determination to hold long-term. This is the opportunity to achieve hundredfold or thousandfold returns and attain financial freedom.
What is understanding based on? Learning madly. On one hand, learn the underlying logic and knowledge of blockchain. On the other hand, study the design, application prospects, and team advancement of various blockchain projects themselves.
Blockchain is a field where money is made based on one's understanding; the essence lies in enhancing one's understanding of the blockchain domain.
Good at surfing in bubbles.
When it comes to asset bubbles, many people might think of housing prices. It is undeniable that whether or not to participate in real estate speculation may have determined the social class of many individuals. Look at those who have seen their assets grow by several tens of times due to real estate speculation; what did they do right? It was their understanding + courage that allowed them to join this bubble and benefit from it.
In 2013, when Bitcoin was priced at over $100, I suggested that a few friends invest a little spare money in Bitcoin, telling them to treat it as if it didn't exist and check back years later. Some felt they couldn't understand and ignored it. One person cashed out after a surge at the end of 2013, feeling great about it. Another friend invested a lot and still holds most of it today, achieving financial freedom and moving her whole family to the US. Last year, when I visited Los Angeles, she treated me to dinner and thanked me for my advice back then. What did she do right? It was her 'understanding' + 'courage' that led her to make the right choice.
And today, blockchain may be a bigger bubble, or maybe not. But crypto market enthusiasts believe this is an unprecedented speculative frenzy and an unparalleled opportunity.
Therefore, we should not overly fear bubbles; we need to adjust our mindset, view the risks and opportunities rationally, and learn to surf in bubbles with wisdom and the right attitude!
Within the range you can bear, taking a risk in a bubble might bring unexpected surprises.
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