A reader commented a few days ago that they had followed me for two years and noticed a change in my attitude towards Ethereum. I said yes, my attitude has indeed changed, but not towards ETH, rather towards BTC and Sol.
The concept that has run through my investment career is how to select the right assets at the right time. It sounds simple, but it's actually very difficult because the market is always changing. There are many things that seem correct but turn out to be incorrect after a while, while the truly correct things are just a few.
Therefore, investment is about doing subtraction, not addition. The progress in investment ability lies in being able to find the 'correct' answer among the options that 'seem correct.' Of course, this answer may not necessarily be truly correct, because no one can know everything, but doing so is the closest to correctness and the most profitable.
Now we are also at a crossroads.
On a larger scale, the U.S. is transitioning from an interest rate hike cycle to a rate cut cycle. Will future capital flood into a new wave of technological innovation, or will it just be a cycle of building bubbles? On a smaller scale, after the last round of excessive technical investment in the crypto space, will it shift from value disillusionment to a gambling market, or will it return to value-led investments? Looking closely, is it BTC, ETH, or Sol? How should we allocate our money? I believe many people are confused, but this confusion is based on price; when prices rise, everything feels 'clear,' but when they fall, it becomes 'confusing.'
It shouldn't be like this. Another role of doing subtraction in investment, as mentioned earlier, is to allow for closer observation of holdings. For me, price is not the core of selection; fundamentals are. When the fundamentals collapse, low prices mean disaster, while low prices during normal fundamentals represent opportunities given to us by Mr. Market. How to define 'good' and 'bad' is what I will discuss next. Of course, everyone can share their views, and I may choose not to listen...
My biggest gains come from Ethereum, followed by Bitcoin. Initially, from 2018 to 2019, Bitcoin holdings accounted for over 95%. In March 2020, I began increasing my Ethereum holdings, and during the DeFi Summer, more and more funds shifted to ETH and Ethereum ecosystem DeFi projects like AAVE, Uni, etc. The entire Ethereum ecosystem actually had a larger position in the 2021 bull market bubble; during this period, my Bitcoin and Ethereum holdings were always no less than 70%, with 30% occupied by Dot and DeFi. As of this year, Bitcoin and Ethereum account for 60%, with the exchange rate of Ethereum to Bitcoin continuously declining over the past year, making Bitcoin my primary position, while Sol and other tokens occupy 25%, and about 15% is in USDT.
This position has changed with my understanding of these cycles and the review of mistakes, and this change is what I will discuss next.
~2019, over 90% Bitcoin, no ETH, no SOL.
Compared to many old OGs, my entry into the market was relatively late. I actually heard about BTC in March 2015, but due to limited channels for understanding, a search on Baidu yielded only pyramid schemes and scams, and I lost interest. It wasn't until I participated in the due diligence for Bitmain's financing at a venture capital firm and witnessed Sequoia Capital, IDG, and Huaxing Capital entering Bitmain that I began to pay strategic attention. I spent three months reviewing almost all information and materials about Bitcoin, immersing myself in foreign forums to see discussions on Bitcoin and blockchain technology. A few months later, I witnessed Bitcoin's first breakthrough of 20K in 2017.
The cyclical collapse of capital lies in the fact that rules will be trampled by centralized power because it brings immense profit. The ideology of capitalism is aimed at pursuing profit, so financial crises will inevitably come and go in cycles.
In the past, nothing could solve this problem until Bitcoin appeared, providing a solution through blockchain technology and achieving a state where everyone must follow the rules, a state where rules cannot be violated. We call this 'decentralization.'
This kind of ideology is advanced and will definitely produce disruption. Initially, my understanding wasn't so profound, but it was enough to support me to invest spare money in BTC. However, at that time, the price was too high, so I waited until 2018 to start investing at 6K and 7K, buying a bit during large drops without questioning the price, just buying Bitcoin.
After slowly getting to know the industry, I discovered more things. I missed early Ethereum and didn't expect it to become so powerful. The investment logic of Ethereum is completely different from that of Bitcoin. Bitcoin is a store of value, while Ethereum is an application that is hard to see and understand. It wasn't until after the ICO emerged and the first and second rounds of wealth effects of Ethereum appeared that I suddenly realized I could view Ethereum as a 'country.'
Based on Ethereum, many imaginative and disruptive applications can be developed, and it can achieve a status similar to 'silver.' At that time, Ethereum was very slow, and many Ethereum killers emerged, such as EOS. Many people were very interested in EOS, but I believe sacrificing decentralization for performance is unacceptable. The logic is simple: today's society is centralized; no matter how low the fees or how fast the speed, can it be faster than banks? Is its security higher than that of banks? I believe it has abandoned its core competitiveness, which is a wrong direction for development.
From 2020 to the first half of 2021: BTC 50%, Ethereum 50%, no SOL.
At this time, the entire public chain track, Ethereum and other public chains are disconnected. My past investment experience tells me that C2C has the highest return on investment. Based on this understanding, in March 2020, during the pandemic lockdown, facing the market's black swan and the crypto crash, I maxed out several credit cards and microloans to buy Ethereum.
I can only say I bet right. At its peak, Ethereum rose over 40 times, while Bitcoin only rose over 10 times. The biggest gains came from this, which is much more than my total investment income from the past few years. In April 2021, I cashed out to buy a house and allocated some to real assets, which strengthened my faith in Ethereum.
In the second half of 2021, the bull market continued, with various new concepts in the Ethereum ecosystem like NFTs, GameFi, and the Metaverse exploding. My crypto assets reached new highs continuously, and as my holdings inflated, I became more optimistic about the market, thinking Bitcoin would surely break through 100,000. Unexpectedly, the market reversed at this time, dragged into a bear market by the failures of Terra, 3AC, and Celsius.
At this time, assets experienced their first significant depreciation. When I was writing articles during this time, I maintained a calm demeanor, mainly to encourage everyone. However, I felt uneasy internally, even though I had not broken my cost basis and was still profitable. Still, a profit of over ten million being given back makes me feel anxious and regretful during the quiet nights.
You can't always be fully invested; that's the first lesson. The second lesson is that crypto has cyclical assets. When the market is euphoric, you should reduce your positions in a timely manner, especially for coins outside of BTC and ETH. After a round of a bull market, it is highly likely that many of these will go to zero, so you must decisively liquidate and take profits.
From the first half of 2021 to the second half of 2021: BTC\ETH occupied 70%, DeFi 30%, no SOL.
Speaking of which, this brings us to the third change in position allocation. I lowered my positions in Bitcoin and Ethereum to 70% and raised DeFi and DOT to 30%.
The reasoning behind this position adjustment is that the crypto industry is in an extremely early stage, and many alpha projects will yield returns far exceeding those of Bitcoin and Ethereum. I should allocate a portion of acceptable positions to invest in them, which will increase overall returns; if I fail, it's only a 30% loss, with BTC and Ethereum as ballast, preventing me from being knocked out.
The emergence of DeFi in 2020 amazed me. If BTC has achieved decentralization within the monetary system, then DeFi has taken a major step forward in decentralization at the financial application layer, allowing everyone to earn market maker profits, thereby driving a new wealth effect.
This is a huge market. At the end of 2019, I excitedly said that DeFi would lead the next bull market. Aave, Uniswap, and SNX are absolute leaders in significant tracks like lending, exchanges, and synthetic assets. The imagination needs to break through the skies. Of course, the highest increase has also outperformed BTC, with AAVE rising 22 times from 25 to 681, and Uniswap and SNX also rising 20 times.
After DeFi, there is also cross-chain DOT, which is very important. The isolation of blockchains must be broken, and cross-chain is particularly important. However, cross-chain cannot rely on protocol projects, as they have more money but lower security. It can only be done as a public chain, so DOT was chosen, which also rose over 20 times.
Looking back at the last bull peak, this allocation seems correct. The mistake lies in being overly optimistic about the future and greatly underestimating the cyclical nature of the crypto space, resulting in not profiting and exiting in time. The price fell back to where it was purchased, and some small coins even incurred high-position losses.
What I missed were Terra and Solana, which I didn't pay attention to in advance. Because in the past, many Ethereum killers emerged, but they all emphasized performance. This led to the biggest problem: do you believe blockchain technology will improve? I do. So will these public chains that pursue performance through technology be replaced by the next public chain? Probably.
Thus, every cycle will bring forth new technological public chains, such as EOS, Sol, and now Apt and Sui, all of which are not decentralized enough and may be replaced. As for the so-called super performance, high TPS doesn't seem that impressive. For example, this year's hype about inscriptions has revealed many flaws. In retrospect, missing out then doesn't feel like a mistake; even if I had bought in, I wouldn't have successfully timed the top.
At this stage, I think there will be no dispute over ETH and Sol. It's generally accepted that ETH will go further than Sol, right?
From 2022 to 2024: BTC\ETH occupies 65%, Sol\small coins occupy 20%, and cash reserves 15%.
The shift happened in 2022. The biggest political correctness in the industry starting in 2022 is 'anti-VC'. As you can see, none of the star projects have not experienced a drop in value after listing. This period marks the mean reversion of the VC bubble.
From 2021 to 2023, VC funding accumulated to 80 billion. A large number of VCs were driven by high-return FOMO, and there are only so many good teams, narratives, and projects with large funding capacities, leading to outrageous premiums. Based on current prices, there is still 155 billion in selling pressure in the future, which leaves no room for the secondary market. This anti-VC trend has even affected Ethereum and all crypto applications.
Thus, after 2022, regardless of what new concepts emerge, I haven't seriously discussed them with everyone, nor have I bought much. Depin, RWA, modularization, and even Layer2 have not been mentioned much after the airdrop craze. These tracks and projects within them have value, but their prices are too high.
Speaking of price, we shouldn't overestimate ourselves. The real significant influence on price comes from old money breaking into the circle. From 2021 to 2023, traditional VC giants have faltered in the crypto industry, causing more capital to retreat. Before a new 'big pie' is drawn out, I fear that the money capable of driving prices up will remain in a state of 'fear of the well rope.'
You see that the net inflow of ETH ETFs is negative 497.92 million. The reluctance of big money to invest in Ethereum stems from caution towards web3 and the crypto application layer.
Bitcoin, which remains unaffected by the winds, benefits the most. Especially after BlackRock opened up this risk exposure with BTC ETF, Bitcoin ETF's total net asset value is 72.055 billion, with total inflows of 23.023 billion. In the U.S. stock market, even a small company like MicroStrategy can rank among the top ten in trading volume.
Polarization is becoming more and more obvious. The trust of large funds in Bitcoin is increasing, and the time for BTC to reach 1 million dollars is getting shorter, with consensus growing stronger and certainty increasing. The entire market has transformed into Bitcoin taking the lead, with other projects playing their own roles.
At this moment, if I were to take out 1 million to make a choice, I would want to hold a large position after Bitcoin's crash. This is the most certain way to bet big.
But if I want to take a small risk like I did when entering on March 12, I have to make choices between ETH and Sol, and the only questions to consider are two:
1. Will ETH, which hasn't increased this year, rise in the future, and will its increase exceed BTC?
2. Will Sol, which is rising this year, continue to rise? Will its increase exceed BTC?
Regarding Ethereum, an old OG made an evaluation stating that Ethereum's past development benefited from timing, location, and people, thanks to regulatory restrictions on Bitcoin that created a demand for ETH as a financial token; the ICO period exacerbated this demand; followed by the DeFi boom and the large collateralization of ETH in POS, which propelled ETH's rise.
His question is that Binance's IEO has made BNB take away Ethereum's financial token share; now Sol has taken away Ethereum's casino share. Will new narratives continue to emerge in the future? Will Vitalik become a black swan for Ethereum? Uncertain.
I actually have a different opinion. The meaning of the crypto industry is decentralization. Without the ideology of decentralization, it has no footing. Because it cannot compete with centralized finance, whether in terms of industry maturity, resources, talent, law, or practical functionality.
Once crypto loses its decentralization, no matter how large the bubble is, it will only be a poor concept, ultimately worthless and returning to zero. And we are not the organizers; we cannot judge when the bubble will burst, nor can we speculate.
Crypto cannot have just one BTC; BTC is merely a store of value. It needs applications and must produce progress in production and life to disrupt web2 industries.
Ethereum represents the application layer of crypto because, from now on, there is still no project that can match the size of Ethereum while maintaining the highest degree of decentralization and security (excluding BTC).
Can Sol achieve this? No, because it has a centralized structure. The reason Sol has outpaced Ethereum's response speed from the previous round of DeFi and NFTs to this round of MEME is that it can rely on centralization to 'concentrate power to do big things,' plan the economy, and coordinate uniformly. If it were sufficiently decentralized, its response speed would not be so fast.
However, like the Soviet Union, why did it ultimately lose? Because it couldn't innovate technologically and could only copy quickly. I once asked everyone a question: Can you name any ecosystem projects that emerged from Ethereum, such as AAVE, CRV, DYDX, Layer2, or even NFTs like BAYC? What about the ecosystem projects of Solana? Pump.fun? What else?
This is the biggest problem. The future of crypto lies in the application layer, not in casinos. Many people say the losers will inherit the earth, but Sol is not about inheriting losers; it's about exploiting them.
Returning to those two questions, many people criticize Vitalik and the Ethereum Foundation for selling coins, but has Ethereum's fundamental situation deteriorated? From its inception to now, Ethereum has become much richer than before, maintaining the highest degree of decentralization and security in the entire industry. Its fundamentals have not deteriorated. So if ETH doesn't rise, it is an opportunity.
But can the application layer be completed in this cycle? I don't know. Maybe in the next round. Holding ETH requires cross-cycle thinking and long-termism. After breaking the 300 billion market cap, the future imagination is vast.
Can Sol still rise in the future? Uncertain. Can a central plan capture the NFT and MEME hotspots? Can it capture the next hotspot? I don't know, and it's not decentralized. Under the premise of not having much value, rising so much is itself problematic. It's not a few large players pulling the market; what if retail investors stop doing that? Will new technologies with better public chains and more powerful project teams emerge? I believe so.
Thus, the systemic risk of Sol is much greater than that of ETH, and it is not a target that can be held long-term. It is merely the most certain one among cyclical assets. I will definitely reduce my Sol position significantly in this round of cycles.
As stated at the beginning of the article, my attitude towards Ethereum has not actually changed; I simply have an almost 100% certainty in Bitcoin. As for Ethereum, I cannot be sure after ten years; within ten years, it still ranks just below BTC. As for Sol, it is merely a cyclical asset.
My money will continue to increase, so in the future, I will increasingly consider systemic risks, and my BTC position will keep rising. Other positions will decrease.
But friends with small capital originally want to take some risks, just as I did with my choice on March 12. But at that time, even if I took risks, it took a year to reach a sufficient multiple, while I waited three years for Bitcoin to reach 70K.
Short-term prices are not our standard for judging projects. What we need to do is determine whether there is a possibility of a fundamental collapse when prices are low. Of course, this is said to investors; friends who wish to get rich overnight probably won't listen.
That's all for now.
The crypto world is like the sea, and you and I are like boats. Knowledge will be our lighthouse through the storms.
