OKX Friends Episode 9 | Conversation with the Madman: Past, Present, and Future

Introduction

The cryptocurrency world is once again in turmoil. Do you remember the top influencer of the crypto space in 2017, "The Madman" @liujia0224?

That person who posted daily, guiding countless traders with an attitude of "responsibility, focus, and sincerity" as the "Digital Currency Trend Madman."

This public account was once a must-read for Bitcoin traders. Whenever an article was published, it would instantly explode with over 100,000 reads, earning the title of the "weather forecast" of the crypto world, accurately predicting the ups and downs of Bitcoin, Litecoin, Ethereum, and other digital currencies.

On social media, he was a top influencer, known by all. His large group had a threshold so high it was astonishing (rumored to start at 10 Bitcoins); those who could enter were either wealthy or distinguished, symbolizing a certain status.

However, after several rounds of bull and bear markets, the KOL landscape has shifted to platforms like YouTube and Twitter, and rumors of "The Madman" withdrawing from the scene have circulated multiple times. Now, as the crypto world stirs again, what is the "Madman," who once dominated the crypto space, doing?

This is part of the "Friends of OKX" interview series, aimed at providing new users with insights through the stories, industry thoughts, and lessons learned from KOLs of various backgrounds. This issue features Mercy @Mercy_okx. Welcome to follow along!

Main Text

Article Overview:

Chapter 1: The Madman Speaks ------ The Past

Chapter 2: The Madman Speaks ------ The Present and Future

Chapter 3: The Madman Speaks ------ Advice for Newcomers

Chapter 1: The Madman Speaks ------ The Past

1. What brought you into the crypto space? The first time you heard about BTC, it was only over 600 RMB?

Hello, Mercy, and hello everyone. I'm very happy to have this space with the friends of OKX. Let me briefly introduce myself. I have a master's degree in finance and have worked at several large financial institutions, including brokerage firms, trust companies, and insurance companies, giving me a deep understanding of various financial products and derivatives.

I started trading stocks in 2008, and that's when I fell in love with trading. Of course, like every trader, I experienced all the necessary accidents, such as leveraged liquidation, where I lost in a few days the profits I had painstakingly built over several years, during a year when the stock market experienced a circuit breaker.

While trading stocks, I also enjoyed exploring new trading targets. It was 2013 when I dabbled in precious metals, postal currency cards, and Bitcoin. What impressed me the most was Bitcoin. At that time, a newly established exchange was promoting itself wildly on Baidu, offering 0.1 Bitcoin for registering an account. The first time I saw Bitcoin's price, it was over 600 RMB, and during the month I participated in trading, Bitcoin rose from 600 to 8000 RMB, marking the accelerated bull market of 2013. I didn't have much money at that time, as my focus was on A-shares, but I still made 100,000 RMB. Later, as the price fell, I kept trying to buy the dips, and after all the back and forth, not much was left.

However, it planted the seed of my love for Bitcoin trading. Bitcoin trading has three advantages over A-shares: first, no trading fees; second, 24/7 trading; third, T+0 trading flexibility. For someone who loves trading, these three points are truly heaven. But then Bitcoin entered the bear market of 2014 and 2015, with too little volatility, coinciding with a bull market in A-shares, leading to less attention on Bitcoin.

By 2016, as A-shares turned bearish, I remembered Bitcoin again. I thought, since I couldn't stop thinking about it, why not try working at an exchange? So, armed with years of experience in A-shares and cryptocurrency trading, I smoothly entered the exchange as an analyst.

Thus began my journey in the world of virtual currencies, or as we say today, the crypto industry.

2. Why did you start writing a public account? How did you become the top self-media in the crypto space?

Starting the public account was a matter of chance. At that time, public accounts were particularly popular, marking the beginning of the self-media era, and I liked trying new things. I casually wrote on Huobi, focusing on financial content rather than crypto. A public account with zero followers had 2.5 million reads on its second article, making me realize the power of public accounts. I thought, if I could share my years of stock trading experience with the crypto space, wouldn't that be a significant advantage?

Sure enough, due to my expertise, my follower count quickly surpassed the few analysts at the time, and I maintained the top spot on the rankings until five years later when the public account was shut down.

As for the community, I didn't specifically build it. Writing the public account took enough effort, and my interaction with the community was entirely through the comments section of the public account. Through writing, I received continuous positive reinforcement and persisted in daily updates for over six years, five of which were on the public account. The "Madman" style community naturally formed.

The content output process was quite bumpy. 2017 was the year of the fastest follower growth due to the significant profit-making effect, with many trading websites benefiting from a plethora of copycat effects. By the second half of 2018, the market suddenly cooled down, becoming eerily quiet. No one was reading what I wrote, and users were continuously losing money, with daily complaints filling the air, making me question my life. At that time, nearly 90% of the major KOLs in the industry had stopped, but I chose to persist because I believed Bitcoin still had a future. I believed blockchain was the technology needed for the future, and as the ancestor of blockchain, Bitcoin's future was bright.

That year, I continuously recharged everyone's faith, discussing Bitcoin's future and telling everyone that Bitcoin would eventually replace gold, likely becoming a strategic reserve for nations and a global circulating currency, ultimately being priced in Satoshis, with 1 Bitcoin equaling 100 million Satoshis. To this day, I still believe this.

By 2021, the market welcomed a new dawn. My followers celebrated, saying they were glad they held on, as they made millions and changed their lives. Many such people existed, and at that time, I felt I had truly succeeded—not only changing my life but also those who were willing to believe in me. However, looking back, it was merely riding the right wave; if these efforts had been placed in A-shares, it might have been hard to achieve such a life-changing effect. So, I say that choice is greater than effort.

Chapter 2: The Madman Speaks ------ The Present and Future

1. What impact will the U.S. treating cryptocurrencies as national asset reserves have on the crypto market in the short and long term?

First, let's discuss the short-term impact. Trump's policy is a case of good news turning into bad news. Why do I say this? Because the market's expectation for strategic reserves was that the U.S. government would buy Bitcoin with real money, but ultimately, Trump's policy was to treat Bitcoin as a strategic reserve through asset confiscation. Therefore, in the short term, it clearly fell short of expectations, and the market reacted by selling the news, reflecting this news with a waterfall-like sell-off.

In the long term, the significance of the U.S. strategic reserve is enormous. First, the U.S. dollar is the most important currency globally. Previously, sovereign nations only reserved dollars and gold. Now that Bitcoin is included in the U.S. strategic reserves, it means Bitcoin will be recognized by the world in the future. Although the U.S. isn't buying it now, if other countries want to include it in their strategic reserves, they will need to buy it to increase their holdings. The logic is similar to Grayscale's Bitcoin Trust; you can only buy, not sell, but the scale could be hundreds or thousands of times larger than Grayscale, so the long-term price expectations and boosts for Bitcoin are evident.

Currently, we should pay attention to who will be the second country to propose strategic reserves. I believe it won't be long before more countries follow suit.

Additionally, beyond value storage, from a monetary perspective, the deeper significance of Bitcoin being included in strategic reserves is Bitcoin's liquidity. Bitcoin is easier to circulate than gold, more convenient to carry, and can even be memorized as a private key to be taken anywhere in the world, unrestricted by any national currency. This is a function that no current currency or gold possesses. If such a currency becomes global, it means billions of people will hold small amounts of Bitcoin for circulation and payment, ushering in an era of global currency unification, where Bitcoin will serve as the value anchor, with all goods fluctuating around Bitcoin. However, this may be the ultimate form.

We just need to understand that before the ultimate form arrives, its price is never considered high at any time. This process will continuously push up Bitcoin's price. As for how many years it will take, I believe there is still a long way to go. My attitude towards Bitcoin is that it is in a long-term bull market; the industry is far from over, and innovation has just begun. Bitcoin needs to be left for the next generation.

2. With all the favorable policies promised by Trump now in place, what new news could further drive the market up, or do you think the market has already entered a bear phase?

In the short term, all favorable policies have indeed been realized, and there are no new policies to look forward to. The only hope we have for this year is that the Federal Reserve might reintroduce quantitative easing in the second half of the year. From Trump's series of actions since taking office, it seems he is creating an artificial economic crisis to force the Fed to loosen monetary policy. Therefore, we are currently in this man-made crisis, and feeling uncomfortable is perfectly normal. However, we need to understand the term "crisis" more deeply; there is opportunity only where there is danger. Every crisis washes away a large number of unsteady bulls, but ultimately, the market will always rebound. Those who dare to add positions in the pit will eventually reap great rewards. Since we know Trump is creating a crisis, this pit will eventually be filled; we just need to think about how deep it will be.

Regarding bull and bear markets, I believe Bitcoin is still in a bull market. Currently, based on on-chain data and funding conditions, it does not align with the logic of a bear market. It is more likely in a bull market correction cycle, and historically, bull market corrections often range from 30-40%. So, if we trace back from 110,000, the correction low is likely around 66,000-77,000. The market has already touched this range, but whether it has bottomed out can be assessed by looking at the U.S. stock market. The U.S. stock market has seen three consecutive weeks of large bearish candles, with declines exceeding 10%. Such a level of correction often does not end quickly. In past crises, a 10% drop in the U.S. stock market is just an appetizer, a 20% drop might be a successful buy, and a 30% drop is generally a sure win. Therefore, I personally believe that 77,000 is likely not the bottom of this correction. In the short term, 77,000 is a good support level, so as the U.S. stock market rebounds from its oversold condition, touching above 90,000 is highly probable. For medium to short-term traders, reducing positions above 90,000 and buying back after a drop might be a good choice.

Overall, Bitcoin does not meet the standards of a bear market, but the correction is likely not over, falling into a high sell-low buy market.

In the long term, I believe there are several messages that will drive Bitcoin to new heights:

First, the Federal Reserve reintroducing liquidity, as mentioned earlier.

Second, the globalization of Bitcoin as a strategic reserve, with countries following suit will bring significant incremental demand for Bitcoin.

Third, and most importantly, if cryptocurrencies are legalized in mainland China, it will be a massive boon. In terms of purchasing power, no other country can compare to the Chinese. The average citizen has money in their pockets but lacks good investment targets. The stock market has been stagnant at 3,000 for over a decade, with constant expansions but no growth in indices, leading to significant losses. Now, the real estate market is also not doing well, and with the end of the demographic dividend, real estate has been in a bear market for over ten years.

So, if this truly opens up, trillions of funds could flood in within minutes, making it easy to double Bitcoin's price. However, if China opens up, it will definitely not be to allow current cryptocurrency exchanges but rather to create a Chinese version of an ETF, allowing transactions within the wall but not permitting withdrawals, with prices pegged to global Bitcoin. In essence, it would create a pool to hedge against the outside, as the foreign exchange wall cannot collapse; it is the foundation of the economy.

3. Which sectors should we pay attention to in the future, and what types of projects might yield new alpha returns?

Alright, here are a few sectors I believe have opportunities for your reference:

1. RWA: Tokenization of real-world assets. This concept is vast and encompasses many areas. Firstly, it can combine DeFi with traditional finance. DeFi is already mature in the crypto space, and if blockchain technology can be applied to traditional markets, the possibilities are limitless. For example, tokenized bonds can be used for collateralized lending, and tokenized equity can greatly increase liquidity in financial markets. Additionally, splitting property ownership into tokens to gain future income and growth, and tokenizing art pieces are examples of virtualizing real-world assets. In summary, there are clear opportunities for landing here, but the step of asset tokenization requires backing from traditional large institutions.

2. AI: AI is a hot topic right now and will continue to be a sector capable of innovation in the future. The integration of AI and blockchain mainly reflects in AI algorithms. AI requires vast amounts of data for machine learning, and blockchain protects data privacy while turning data into a form of value transfer. This allows centralized AI to evolve into a more secure decentralized form. Currently, aside from some simple AI agents, most are still in the conceptual stage and are far less practical than centralized AI, but bubbles will always exist, as the market seeks dreams, leading to speculative hype.

3. Public Chains: This is a well-trodden sector. Every bull market cycle sees a surge in public chains, and each cycle brings a few new chains that get hyped. However, alpha often exists in new chains rather than old ones. This is the logic of standing on the shoulders of giants. Before all chains converge, public chains will continue to iterate, constantly breaking through the "impossible triangle" of blockchain until they catch up with the current internet transmission speed and cost.

4. Payments: Cross-border payments play an important role in the global integration process, while traditional financial settlements are notoriously slow and costly. Using blockchain for these purposes has clear advantages, but these gaps have largely been filled by stablecoins like USDT and USDC. Moving forward, we should focus on the integration of payments with smart contracts. For example, IoT devices can earn data value through data transmission. Additionally, blockchain projects that replace banking systems in underdeveloped regions like South America, Africa, and Southeast Asia are emerging, as the cost of opening a bank account is prohibitively high for the poor. For instance, the Filipino maid we hired was paid in fiat currency, but her transactions through the traditional financial system were slow, complicated, and costly. Later, I taught her to use an exchange to settle in USDT and then convert it to local currency, which was much more convenient and reduced costs significantly.

5. MEME: The MEME coin craze has passed, but this phenomenon will not end. Low-cost, high-return PVP will always exist in the gambling mindset. In the future, celebrities and brands may issue their own tokens on-chain, leading to more gameplay possibilities, such as tokens being used to exchange for company products. The current hype is merely the initial form; ultimately, MEME will be empowered, whether in brand value or consensus value.

From a sector perspective, the overall logic still favors new over old. The big opportunities in the future will be in new projects, as 90% of old projects cannot escape the fate of declining value. After all, for most project teams, the easiest way to make money is to launch a new project rather than rescue those with scattered chips.

4. Traditional financial institutions are entering the crypto space. Which crypto assets do you think these massive funds will allocate to? Where will the funds flow in the future?

Looking at traditional capital, we can refer to four directions: strategic reserves, ETFs, Grayscale, and the Trump fund.

The types of tokens in the U.S. strategic reserves, such as BTC, ETH, SOL, XRP, etc., are likely to be the first allocations for traditional institutions entering the crypto space. For most traditional institutions, they do not understand the crypto space at all. They invest blindly with investors' money, simply allocating because they have to. They absolutely dare not touch projects that might go to zero. With the backing of strategic reserves, traditional funds do not have to bear that risk.

Additionally, we should pay attention to the future approval status of major ETFs in the U.S. Currently, only BTC is approved, while ETH, SOL, XRP, and LTC are in preparation.

The allocation of Grayscale Trust represents the direction and expectations of early institutional investors in the U.S. crypto space. Currently, Grayscale Trust has single asset trusts for BTC, ETH, BCH, ETC, LTC, SOL, LINK, MANA, FIL, BAT, LPT, XLM, ZEC, and ZEN.

Finally, the Trump crypto fund is also an important reference. It currently holds BTC, ETH, TRX, LINK, AAVE, ENA, MOVE, ONDO, and SEI.

Chapter 3: The Madman Speaks ------ Advice for Newcomers

1. What advice do you have for newcomers entering the cryptocurrency field? How should they start learning and accumulating experience?

For newcomers, the current threshold in the crypto space is quite high. Unlike when we entered, where buying and selling was enough to dive in, with a bit of foundation, the crypto space has developed too many play styles over the years. Especially with the vast amount of on-chain content, it can be said that everything traditional finance has has been copied over, and the crypto space is innovating in areas traditional finance lacks. This means one needs a lot of financial knowledge, strong blockchain knowledge, and an understanding of the internet.

The 24/7 uninterrupted trading can be exhausting for newcomers. Therefore, they can first understand the entire framework of the crypto space, such as secondary market trading, primary market analysis or macro analysis, exchange-related businesses, on-chain treasure hunting, DeFi, etc. Newcomers should focus on a specific niche, thoroughly understand a particular area, accumulate experience through practice, and engage in discussions with industry veterans. Learning from the pitfalls others have encountered is the most valuable asset for newcomers.

Finally, rapid learning is crucial; only by moving faster than others can one seize great opportunities.

2. What common misconceptions or traps should newcomers avoid in the market trading process?

In trading, I have been in the market for nearly 20 years, possibly older than many of the friends listening to this space. I’m not that old; I just started trading while in school. Over the years, I have encountered many pitfalls. I believe the most important thing is to maintain the right mindset. I often say in my tweets that trading is a marathon, not a 50-meter sprint. Don’t think about getting rich overnight; instead, focus on steady growth. As long as you can survive, opportunities will always be there. Therefore, I emphasize how to allocate assets, how to ensure stable annual growth, which assets are risky, which are cash assets, and which are value-preserving assets, and how to allocate them based on your risk tolerance.

If your current assets are not substantial, focus on working hard in this industry and think about how to make money rather than obsessing over getting rich through trading. I have seen too many people who got rich quickly only to give it all back to the market. Often, the money made was due to luck, while the losses were due to skill.

Additionally, do not take out loans or use money that affects your daily life to trade cryptocurrencies, as this will impact the most important aspect of trading: your mindset. Once your mindset is distorted, all operations will become deformed. If you notice your mindset is off, immediately stop trading, take a break, and then get back on track.

If you are using leverage, remember to set a stop-loss before opening each position. This is key to survival. If you cannot adhere to this rule, please do not engage in contract or leveraged trading.

3. How do you suggest newcomers establish their own analysis framework and models? Are there any practical tools or methods you can recommend?

In trading, I believe the most important thing is not to read books but to start first, allowing yourself to accept failure, to accept every stop-loss, and to acknowledge that you are imperfect, even weak. Learn to respect the market. Therefore, my advice is to start with very little money, experiment, and make mistakes. Identify your problems through trading and then solve them, finding a trading method that suits you.

Once you have accepted your failures, you can begin to learn some theoretical knowledge, look at indicators, and understand the patterns of candlestick charts. Here are a few books I find helpful regarding trading: "The Wyckoff Method," "Japanese Candlestick Charting Techniques," "Reminiscences of a Stock Operator," "The Turtle Trading Rules," and "Stop Loss."

Ultimately, combine various types of knowledge to increase your success rate in market judgment. Trading is not a simple path; it is a system, and it is difficult to derive correct results from a single indicator. I have been continuously improving and learning over the years. Trading is a path of hard cultivation, so if there are better ways to make money, I suggest not choosing this path. It is a road fraught with danger, and most people spend their lives in mediocrity. Those who can achieve stable returns are rare. More often than not, it feels like a test of talent, or whether your personality is suited for trading. The key is to find a way that works for you to make money.

Conclusion

Mercy is honored to invite the legendary trader, The Madman, for this sharing session. "Responsibility, focus, and sincerity" are qualities I deeply perceive from my mentor. In the dull market conditions, I hope everyone can gain insights and regain confidence from his sincere and profound sharing!

Finally, Mercy has extracted a quote from The Madman's recommended reading—"Reminiscences of a Stock Operator"—to share with everyone:

"There's nothing new on Wall Street because speculation is as old as the hills. What happens today in the stock market has happened before, and it will happen again."

Risk Warning and Disclaimer

This article is for reference only. The views expressed in this article are solely those of the author and do not represent the position of OKX. This article does not intend to provide (i) investment advice or recommendations; (ii) offers or solicitations to buy, sell, or hold digital assets; (iii) financial, accounting, legal, or tax advice. We do not guarantee the accuracy, completeness, or usefulness of such information. Holding digital assets (including stablecoins and NFTs) involves high risks and may experience significant volatility. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professionals regarding your specific circumstances. You are solely responsible for understanding and complying with applicable local laws and regulations.