Essential Knowledge of the Underlying (Cryptocurrency and Financial Market Knowledge) ---- Nan Ge (Master of Finance)

There is no theoretical framework in finance for the cryptocurrency market; here, Nan Ge will use stocks for comparison.

Making money in stocks can be divided into four types: (this will be compared with the cryptocurrency market)

1: Trading money, buying low and selling high -- Technical Analysis (Candlesticks summarize data; both stock markets and cryptocurrency markets share similarities)

2: Performance growth --- Fundamental Research (Stock Market)

In the stock market, companies are involved, and a company's performance growth, net profit growth, directly affects its stock price.

(This is very different from the cryptocurrency market!!!)

In the cryptocurrency market: it is more complex here.

(1) Technical chains like ETH correspond to technology and are more related to their on-chain activity, gas fees, etc.

(2) Platform coins like BNB are more similar to stocks; they have deflationary mechanisms (like buyback mechanisms in stocks). The price of the coin is closely related to the platform's development, but there are differences; for example, Bianca's financial reports, assets, etc., do not directly influence the price.

(3) MEME coins are purely based on consensus, somewhat similar to penny stocks in the Hong Kong stock market. (They have no fundamentals and rely purely on popularity)

(So, when conducting fundamental research on different types of coins in the cryptocurrency market, there should be particular focus)

3: Dividend money --- Company Profit Dividends

In the stock market, companies will distribute profits to their shareholders as dividends.

The evolution of the cryptocurrency market in this regard surpasses the stock market.

(Staking dividends, TVL. Staking can reduce circulating tokens, stabilize prices, POS can ensure network security, and there are also staking rewards like airdrops, etc.)

(This represents a huge market for the future, including on-chain financial management and other derivatives)

4: Valuation growth money --- (money from quantitative easing and storytelling)

Company benefits and changes in strategic planning will affect the company's valuation.

Additional Knowledge Point (A criticism of the cryptocurrency market is the lack of a valuation anchor; the valuation of tokens is not anchored to a company's revenue, financial reports, or assets. However, this also creates a highly volatile market in cryptocurrencies.)

Due to the weak anchoring effect in the cryptocurrency market, both quantitative easing and storytelling can lead to high volatility in the short term.

Mastering the underlying structure can lead to stable happiness!