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Friday, August 28, 2020

What is the future of the Digital currency market - A Brief anal

What is the future of the Digital currency market - A Brief anal

This year has been different. Both bitcoin and mainstream currencies have been tepid, doubling from the bottom, but nothing special compared with the surrounding markets. But some tokens based on the defi concept hype, really hot. Link has risen tenfold and made it into the top 10, and there are many more. There are a lot of tokens I can't name, and I don't know their technical background or logic.

I got involved in the digital currency trading market in 2018, when I was invited by a friend to write a technical analysis article for a blockchain media. No previous work experience related to blockchain. Therefore, As for the digital currency market developed based on blockchain technology, I don't have much expertise to share with you. However, I do have more than 20 years of experience in securities analysis. Since the early 1990s, although I also switched to other fields, securities analysis has always been my favorite. So my friend at that time also based on this thought that I might be able to bring something different to readers in this market. By then, the digital money market had passed its frenetic phase and, with the Chinese government regulating it, many people were starting to move from their initial blindness to rationality. Therefore, my article has always been recognized by everyone, which may also be because I am relatively rational and less likely to follow the hot spots.

From 2018 to 2019, I should say that the analysis of the market is relatively objective, and the final trend of the market is also basically confirmed the original analysis.

But starting in 2020, global financial markets changed dramatically. In particular, the outbreak of the epidemic led the Federal Reserve to change its strong DOLLAR strategy, and the release of the dollar led to the flood of global funds, which had no direction and hit all major financial markets, and the digital money market was not immune. So after plunging in March, the digital money market has followed commodities like gold sharply higher. But this "bull market" is not based on changes in the market itself, so its authenticity is up for debate.

Let's not discuss whether the dollar will continue to weaken in the future, or whether investor demand for digital currency has become normal.

Today I want to talk about the need for the defI concept, which has recently been hot in the digital currency market.

Defi, which I read on the web, is roughly: distributed finance or DEFI is "the movement to use a distributed network to transform old financial products into mistrust and transparency protocols that can operate without intermediaries." In other words, it puts the average bank customer on the same level as a banker.

I understand it's a mortgage. So what's new about this concept? Not really. In 2018, when I was in media services, someone was already doing this. It's just that they didn't put this thing in the product. But DEFi is not an innovation, if at all, it is merely a digitization or migration of traditional financial products to a decentralized platform.

Before 2017, the development of the digital money market had been tepid, but in 2017, ICO was caught by the Chinese capital. A large number of hot money which retreated from the stock market failed, because there was no place to hide, started a large number of financial digital money market, resulting in the great bull market in 2017. Then, at its peak in April 2018, a large number of shanzhai COINS could be circulated without even a white paper.

This has also attracted the attention of the Chinese government, which has begun to introduce a series of policies to restrict financing and trading in the digital money market. The market, which was built on a bubble, took a beating. The total value of the digital money market has also fallen from a peak of more than $800bn to below $200bn. Later, although there were a lot of so-called innovations, no matter whether it was digging mines or STO, it was not as prosperous as ICO before. And we see that these technologies are actually the reform of the traditional financial market, which is to move the traditional financial market business to the decentralized market.

This is not a leap forward in blockchain technology. And I've written many times in the past about the future of blockchain and the future of the digital currency market. Compared with Internet technology, the digital money market is still in its infancy. And if we look at the two industries, they are fundamentally different. Although they are developed based on the application of technology, they also replace traditional industries with new technologies, thus developing at a high speed. But the blockchain technology, 70% of which probably serves the financial sector, should be said to be more like a financial innovation and reform. And the Internet is changing everyone's life, especially after the development of the concept of the Internet of Things, it is not only a competitor of the venture capital industry, but also the engine of the transformation of traditional industries. We have seen giants like amazon, Google , alibaba and Tencent, which have developed on the basis of the Internet, constantly pour money into traditional fields to help transform traditional industries and stimulate the development and wide application of new technologies. They are organically integrated with the current industry. Became the leader of the new economy.

The digital money market has been struggling for legal status for a decade. The biggest difference between them and the Internet is this. Internet did not from the government cheese, they just "change" the life of the traditional industry, so their existence is legalized. The purpose of decentralized digital currency is to "change" the destiny of the government, to replace the government, to exercise the power of currency issuance and market pricing, and to "change" the destiny of traditional financial institutions. And how could traditional financial institutions and governments, with their myriad ties, have made this easy?

If the development of the digital money market is based on replacing the traditional financial industry. This is a very dangerous game. Because the traditional financial market first serves the government, but also is the government core interest. If you use the logic of decentralization, exclude the government. Can the government agree? This may be the same as China's national revolution. The nationalist government founded by Dr . Sun Yat-sen was originally intended to overthrow the Qing Dynasty and establish a democratic state. But in the face of a variety of complex interests, the revolution was not a success, on the contrary, those prefects of the Qing Dynasty, cut the whip, put on the foreign dress, became revolutionaries, and Yuan Shikai became the President directly.

So I would argue that if this revolution ends up being exploited by traditional financial institutions, they have a vested interest. Is that still the decentralised market Mr Nakamoto has shown he wants?

In fact, similar problems have been raised before, such as the dispute between Bitland and Oben Cong. In fact, they are not products of decentralization, but a deformation of the centralization model in the decentralized market, but the decentralized market is actually very fragile. Because he doesn't fit into nature's logic of the jungle. Therefore, the development process of this concept based on utopia cannot be smooth sailing.

The point of all this is to say that IF DEFI is a hype based on a probability based on an existing market, if there is so much uncertainty in the market, the hype is nothing more than hype. Once there's a wind blowing in the market, DEFi is just another ICO , STO. So based on this logic, I think the current hype, there is still a certain risk, you can participate, but must pay attention to the risk. If you buy bitcoin at $300 for a long-term investment, that's fine; If you buy XRP after a 1000x increase, you have a problem. Although I do not know when this concept subside, but I know the greed of human nature will not disappear, so there will always be cut not over leeks.

from Trading Ideas
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