What might be the big opportunities in this cycle when viewed from the perspective of 'small players', 'big players', and the credit cycle of cryptocurrency?

A recent conversation seems to reveal the issues surrounding the credit cycle in cryptocurrency, along with some thoughts and reflections that I would like to share with everyone.

I won’t name names to avoid disrupting anyone's financial path, especially since compared to a bunch of rotten peaches, it’s not bad. After all, I am more familiar with their founders, so the conversation was quite frank.

The so-called major public chains with valuations in the billions of dollars have very few real active users, relying solely on self-manipulated data to support their empty shells. The main means of maintaining team expenses is to create financial chips and turn oneself into a gambling hall in a casino. I can only speculate with the best intentions that they are not out to exploit others but merely trying to survive, or to put it nicely, waiting for an opportunity, or experiencing a slow death.

The threshold for gaining trust in the cryptocurrency circle is becoming higher. Although the on-chain mechanisms have always been credible, the construction of the crypto ecosystem has become increasingly unreliable due to the lack of capacity of the main entities to fulfill commitments.

A potential trend to solve this problem may emerge: higher-level credit entities such as companies, institutions, or even countries with high credit levels in the traditional world will lead and construct the ecosystem. The on-chain mechanism, being transparent and trustworthy, will in turn impose constraints on these credit entities to combat opacity and prevent wrongdoing.

Some may question whether this resembles a flavor of 'state control over private enterprise'? It seems that decentralization is regressing while centralization is strengthening. However, I don't think that’s the case; the two are not in a binary opposition.

The advantage of super credit entities lies in their ability to take responsibility for the ecosystem they commit to based on their centralized credit. This part cannot be decentralized unless human intervention can be bypassed. Once mechanisms and rules are established, they should simultaneously undergo a process of rule formalization on-chain to impose constraints on themselves. This process ensures that decentralization safeguards overall consensus.

Ultimately, power is conferred by a decentralized consensus mechanism, and the conferral process certainly requires a reasonable consensus process. It is somewhat akin to congressional authorization and oversight, with the government executing. However, this congress is an on-chain mechanism, more reliable than congressional members. It effectively incorporates high-credit central entities into a decentralized network.

Will ordinary individuals be squeezed under such circumstances? At this current stage, I don't think so; in fact, they might even benefit from it. At the very least, the situation will be better than now, achieving higher overall welfare in web3, with a more Pareto-optimal outcome. The current situation is that low-credit entities, under the guise of high-level authorization (an unalterable decentralized consensus mechanism on-chain), have obtained high credit rating narratives but fundamentally cannot fulfill their commitments to ecosystem development (PPT scams, and then disappear).

It has turned into a situation where weak players attack each other, leading to credit overexpansion, mutual undermining, and the over-exploitation of weak participants, which ultimately causes the collapse of the web3 credit system and the emergence of the so-called 'no one takes over'. This, in fact, constitutes an obstacle to the further global expansion of crypto credit.

So why was it possible before but not now in this upper structure? Initially, the technical threshold was relatively high, and the established technological barriers could capture enough profits and broad consensus, which in turn also constituted a strong credit level and default cost constraint. Once substantial profits were made, everyone became cautious about their lives and reputations.

However, as technology spreads, the positive aspect is that startup barriers have lowered, leading to industrial prosperity and a rapid increase in the number of participating entities, resulting in a flourishing and active market. However, from the perspective of credit entities in the financial market that can issue currency, it is not necessarily a good thing; the lowered thresholds make it harder for crypto projects to gain broad consensus and high profits, while default costs have significantly decreased, leading to a general decline in credit.

In the next phase, we may need so-called true 'big players' to use their high-level credit to reshape the currently 'broken etiquette and music' market, reassemble the fragmented consensus, and genuinely deliver ecosystems, restoring the thresholds and standards for obtaining high credit. A multi-tiered credit and pricing system should be established to reconstruct broad consensus.

This seems to be a process of spiral ascent; an inappropriate analogy might be:

During a depression, relative centralization is needed to concentrate forces on major tasks, repair the credit of social entities, somewhat Keynesian, reminiscent of Roosevelt. During periods of prosperity and technological diffusion, it will lean more towards liberalism, following the Austrian school and Reaganism, leading to credit expansion and individual prosperity, which may eventually overshoot and result in a subprime mortgage crisis and credit system collapse. This cycle repeats, spiraling upwards.

The history of the cryptocurrency circle is still short, but the economic and financial history of human nature is long. The on-chain consensus mechanism overcomes some weaknesses of human nature, yet the remaining off-chain aspects of human nature still need to be addressed. We are full of confidence in the future of cryptocurrency, but we must also face the reality of the development of the cryptocurrency cycle. Especially in a market without so-called macro-control, the cycles of overheating and depression driven by human nature operate very purely and smoothly.

Such cyclical rotations are common in traditional macroeconomics. Judging correctly and finding ways to participate can yield massive profits. For example, figures like Soros and other hedge funds are prominent examples. Especially if high-credit entities gradually take the lead in forming broad consensus, it will bring about significant wealth effects. This could again present a massive opportunity in the cyclical rotation of the early cryptocurrency industry, potentially representing a hidden big opportunity in this cycle.

Of course, the cycle rotates, while BTC moves forward. BTC cannot return to that price; Bitcoin is the trend line of the industry's cyclical upward development with significant fluctuations. In this small universe of cryptocurrency—transcending the six paths and not caught in the cycle.