Fundamental Characteristics of Cryptocurrency

  • Fixed Total Supply: The total supply of mainstream cryptocurrencies like Bitcoin is predetermined and unchangeable. For instance, the maximum supply of Bitcoin is capped at 21 million coins, with about 94% mined by 2024, meaning that the future circulation will gradually decrease, potentially affecting its scarcity and value.

  • Unlimited Variety: Anyone can create new cryptocurrencies based on different blockchain technologies or protocols. Currently, there are thousands of cryptocurrencies worldwide, ranging from mainstream coins like Bitcoin and Ethereum to various functional tokens (such as DeFi and NFT projects).

Current Trading Status of Cryptocurrency in China

  • Policy Regulation: China prohibits cryptocurrencies as payment methods or financial instruments but does not completely ban personal buying and selling. The state is cracking down on illegal activities such as money laundering using cryptocurrencies, rather than ordinary investment behaviors. For example, leading exchanges like Binance and OKX still allow users to trade.

  • User Behavior: Some users view cryptocurrencies as part of their investment portfolio, buying and selling through regulated exchanges. However, it should be noted that China has strict regulations on cryptocurrency trading, including monitoring of fund flows and anti-money laundering reviews.

Holding and Risks of Cryptocurrency

  • Holding Situation: Among early investors, some have gained significant returns through long-term holding (such as holding 1,500 Bitcoins), but there are also risks. For example, cases exist where assets were permanently lost due to lost keys or unexpected events (like accidents).

  • Market Volatility: Cryptocurrency prices are highly volatile, influenced by market sentiment, policy changes, and other factors. Reference content mentions that Bitcoin's price experienced single-day fluctuations exceeding 10% on 87 occasions in 2023, and leveraged trading carries extremely high risks (a 10x leverage means a 10% reverse price fluctuation can lead to liquidation).

Controversies and Future of Cryptocurrency

  • Supporting View: Some opinions believe that cryptocurrencies have long-term value. For example, there are about 100-150 million Bitcoin holders, with tens of millions of indirect holders through trust funds, totaling about 200 million people. Its anti-inflation property makes it a 'good currency' and could serve as a benchmark opposite to fiat currency.

  • Opposing View: Critics point out that cryptocurrencies are essentially Ponzi schemes and have technical flaws. For example, some analyses suggest that the cryptocurrency market has a 'negative-sum game,' with contract traders having an average lifespan of only 47 days, and frequent trading leading to losses.

  • Future Predictions: Some experts predict that Bitcoin will no longer be priced in USD but will be anchored to a basket of currencies known as the 'Bitcoin Index,' growing in sync with global M2. However, there are also views that Ethereum (ETH) may go to zero, and the future fair value of Bitcoin may drop to $20,000.

Reasons for Young People's Participation in Cryptocurrency

  • The Temptation of High Returns: Young people pursue easy high returns and are more inclined to cryptocurrency investments compared to traditional jobs (such as a monthly salary of 5,000 yuan). Some believe in 'enjoying comfort first' and are unwilling to accept the traditional notion of 'suffering first, enjoying later.'

  • Cognitive Bias: Some participants have insufficient risk awareness of cryptocurrencies, viewing them as 'high-cognition' investments, while in reality, they carry high risks. For example, there are cases where users lost money by following trends in 'Meme coins.'

Technical Background of Cryptocurrency

  • Technical Origins: Bitcoin was born out of the cryptographic geek community, with early developers mostly being programmers (like Ethereum founder Vitalik Buterin). Participation from the tech circle was once high, but the proportion of financial investors is larger.

  • Technical Risks: The blockchain technology itself has vulnerabilities, as seen in the 2022 LUNA crash event, where technical analysis failed under extreme market conditions, leading to significant investor losses.

Global Impact of Cryptocurrency

  • Geopolitics: Cryptocurrencies may impact the international trade payment system. For example, if China had not banned cryptocurrencies in 2017, it might have used them to bypass USD hegemony and promote the internationalization of the yuan.

  • Regulatory Challenges: There are significant differences in regulatory policies among countries, with Hong Kong planning to become a cryptocurrency hub while China imposes strict restrictions. Regulatory agencies need to balance innovation with risk prevention.

Summary

As an emerging asset class, cryptocurrency combines innovation with high risk. Its fixed total supply design aims to simulate the scarcity of gold, but market volatility, technical vulnerabilities, and regulatory uncertainties necessitate cautious investment. In the future, it may differentiate into 'good currency' (like Bitcoin) and 'bad currency' (like highly volatile altcoins), requiring investors to rationally assess risks and avoid blindly following trends.

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