Reflection on the Cryptocurrency Market: Reclaiming Common Sense and Viewing Market Anomalies with Rationality
If we consolidate for another three years from now, what will you do?Original Title: 《A Return to Common Sense》
Written by: Simiao Li
Compiled by: Deep Tide TechFlow
TLDR
In a market with extreme reflexivity, the accuracy of a certain "truth" pursued by most people is often not important, but common sense is very important. Do not focus solely on the accuracy of "fundamental analysis" while neglecting common sense.
Here are some issues in the cryptocurrency space that violate common sense rules and should be corrected through the natural processes of the market.
Rule 1: If you see reliance on pie-in-the-sky/opportunistic behavior, then things usually do not work that way.
Rule 2: If you still rely on the superficial investment advice of many KOLs, builders, and investors, this is not a valuable approach. Understand the reverse signals.
Rule 3: Are there scams and manipulations? Are asset holders gaining almost no net value? This is not a sign of an asset class that large value investors are ready to invest in.
The ability and courage to adhere to common sense are rare, as cryptocurrency and crypto Twitter allow for the most obnoxious media price manipulation. Moreover, the crypto market has primarily been on an upward trend for the past decade, training everyone's attention to only chase the rise and not the fall.
Extreme Accuracy vs. Common Sense
In the cryptocurrency space, the cost of pursuing extreme accuracy at the expense of common sense may be higher than in any other market.
You can calculate every detail of blue-chip projects but still mistake cyclical leveraged Beta for long-term growth (e.g., Lido, the entire DeFi).
Most of the time, the market does not care about precise fundamental calculations because we are talking about an emerging on-chain native economy (Ethereum) with almost no existing consumer behavior. Most projects on ETH exist to burn Gas through speculative activities and are derivatives of Ethereum's network effects, providing no real net value.
No amount of accuracy can compensate for a lack of awareness of the ongoing narrative:
Ethereum hopes to have projects that can burn Gas and improve the capital efficiency of the existing Total Value Locked (TVL) on that chain. Projects that can achieve one of these two in the most efficient way will rise. Typically, a project can only achieve this for a short time until the next project appears. The Ponzi schemes of DeFi have disappeared, and what follows are on-chain RWA treasury bonds, just to keep TVL afloat in cryptocurrency.
We can only escape this extreme player-to-player competition when new projects that truly bring in new users and capital inflows emerge.
We are in an era where PvP games have almost exhausted liquidity, and there have been almost no new consumer behaviors and real applications in the past two years.
But I see some positive signs:
Prediction Markets: Like Polymarket.
Interesting Casinos: Like Rollbit.
Early Practical Use Cases for NFTs: Digital pawn shops for luxury watches.
Some early attempts to build payment applications.
There really isn't much more. Games (including Web 2.5 GameFi and fully on-chain games) have not found PMF (Product-Market Fit) in my view, but I hope to be proven wrong on this.
Common Sense
Rule 1: If it seems that people still generally believe that pie-in-the-sky is a normal point and that scams/opportunistic behavior are rewarded, then we have not yet entered the "value zone."
L2 is the new alternative to L1. Now everyone (old L1s, projects) wants to become L2 because it will increase their valuation.
NFT blue-chip projects are squeezing the last bit of value from their most loyal users.
Projects that have not proven anything are obviously overvalued (Worldcoin backed by OpenAI's reputation, launching at a high valuation).
Most of the already dead projects inflate prices and then dump to squeeze more exit liquidity from the retail market.
Venture capital firms invest in new hot narratives (although much less than six months ago) because they believe that when the bull market comes, it will immediately reach a valuation of $100 million like other projects launched not long ago.
Rule 2: If among many so-called KOLs, builders, and investors, shouting signals is more important than analytical logic, then we are still not doing enough in the "builder market."
There are still too many participants in the conferences. One moment in Hong Kong, the next in Singapore. Keynote speakers care more about showing their presence than the actual content of the conference.
Being a founder is still a commendable thing (even those who have already liquidated their assets), even if your product has less than 100 real users, you care more about attending investor gatherings than continuing to work hard.
Working in the cryptocurrency field often means spending L1 fund money to preach and hold events.
Mediocre VCs act like kings on Twitter, talking about their certainty regarding the next big event, while the total network traffic of the applications built by projects in their portfolios mainly comes from themselves and their competitors.
In contrast, those who contribute the most to this field tend to be low-key (Brian Armstrong, Vitalik, Opensea, some new Solana projects, etc.), and the founders of new projects that are slowly building legitimate products do not schedule releases and announcements based on market risk expectations and do not engage in aggressive PR activities. You just need to build, release, and let users judge with their money and attention.
Rule 3: When manipulative behavior is tacitly accepted and liquidity is still primarily used for exits, institutions will not come to buy our assets.
Just open any low liquidity altcoin chart; they have been slowly declining for over a year, but there are regular catalysts to raise prices, and you will understand why.
Players like DWF have become the new topic, surprisingly taken for granted.
Projects without real users can still easily exit liquidity through IEOs.
Those projects that do try to accumulate value for token holders perform well but are still labeled as Ponzi schemes/scams by "professional investors" (Rollbit, Unibot).
Admittedly, this is somewhat exaggerated and simplifies the current state of the industry (in some areas, common sense has returned, and trading is attractive), but overall, it is an underestimated reality.
Courage and Belief
A decade of quantitative easing and ultra-low interest rates, along with the worship of crypto, has really dulled people's judgment of common sense. Because the halving is coming, WAGMI (We All Gonna Make It). Because Powell is saving our positions, WAGMI. Because Bitcoin is on a long-term rise, WAGMI. At such times, sticking to simple common sense will yield great rewards.
I believe people's beliefs have not been tested enough. What will you do if we go sideways for another three years from now? Will you still believe in cryptocurrency? Will you still think it is the inevitable future of finance and human coordination? I will, but I am sure that most people who are bullish now will not.
True courage and belief require completely ignoring consensus and appearances, as well as a commitment to patience. These two qualities remain the traits of a minority.
