It is important to understand the logic during the investment process

At the end of the article on December 25, a reader left the following comment:

"I have been following you for a long time, …, the hype about the inscriptions has turned into a mess. The magic that was strongly supported is almost at zero, while the CRV that was cleared out has risen quite sharply."

Every point mentioned by this reader in the comment is related to the logic of the investment process.

According to my logic, this reader has misunderstandings in each of their points.

These misunderstandings can often be seen sporadically in comments from other investors as well.

However, it is rare for these misunderstandings to be systematically concentrated in a single comment, so I feel it is necessary to use this comment to systematically organize and share the logic I have previously discussed.

I cannot judge how long this reader has been following me, but starting from my articles in 2022, the issues mentioned in the comment have been shared in my past articles along with their logic.

From this comment, I can clearly see that the only standard this reader uses to judge the current value of these tokens is the current price.

Because they did not analyze the sector these projects are in, did not mention the fundamentals of these projects, nor did they talk about the teams behind these projects—these are the core elements I use to evaluate project value.

Is price important?

Of course, it is important; the price of the investment target is the ultimate standard for judging our investment returns.

However, I have made a clear classification of the perspective and method for evaluating price: it depends on the stage of the market.

In a bear market, when we look at price, what should we focus on?

We should focus on whether it is low enough and whether it is worth buying.

More specifically: in a bear market, if we hold a target that we are optimistic about in terms of fundamentals and believe in its team, our preference for price should be the lower the better—because this allows us to buy the target we are optimistic about at a lower price if we want to continue buying.

Of course, there is a special case to note: if the price of this token is absurdly high, then even in a bear market, I would consider selling or not participating.

But such situations are quite rare.

In my years of experience, there was only that one time in 2020 when CRV was overpriced right after its launch.

So I won't elaborate on this exception in this article.

Next, in a bull market, when we look at price, what should we focus on?

At that time, we should focus on whether it is too high and whether we should sell.

Thus, the perspective we take on price varies greatly depending on the stage of the market.

So are we currently in a bull market or a bear market?

I have repeatedly shared my judgment criteria: I believe that a bull market is only when both Bitcoin and Ethereum hit new highs.

By my standards, it is certainly not a bull market now. Since it is not a bull market, I categorize it as a bear market.

Since it is a bear market, for a target I am optimistic about, when its price is lower, according to my consistent logic, investors should be happier.

However, once there is a very unfavorable change in any of the three elements—sector, fundamentals, or team—according to my logic, I would not hesitate to sell regardless of whether the price is high or low.

So returning to the several tokens mentioned by the reader above, if they are optimistic about their sectors, if they believe in their fundamentals, and if they think their teams are fine, then they should not feel more frustrated as the price drops.

On the contrary, if investors feel frustrated about the above tokens, the reason can only be that there are issues with one or more of the sector, fundamentals, or team, rather than the price.

I cleared out my CRV holdings because I could not tolerate its team.

In the article where I shared my decision to clear out CRV, I clearly wrote: I estimate that when the bull market arrives and the sector rotates to DeFi, CRV is likely to rise again.

But that price increase was not the reason I considered selling CRV at that time.

Later, during an online sharing session on Twitter, a listener asked a similar question, and I answered more straightforwardly:

I hope the projects I hold are ones I don’t worry about their team having issues even while I sleep. I couldn’t stand the turmoil of the CRV team, so I chose not to participate anymore.

As for Magic, my judgment criteria are the same.

At least up to now, I still have confidence in its gaming sector, I still believe the project's fundamentals have not changed much (although there hasn’t been much progress, there haven’t been any major issues either), and I think the team’s performance cannot be considered good, but it’s not bad either; it’s not easy to persist during a bear market.

So I am still holding it.

Of course, if the bull market arrives next year and the project still does not show significant improvement in terms of sector, development, and team, leading to no highlights even in a bull market, I will also acknowledge that this investment has failed, and I will carefully look for the reasons.

But that will be a matter after the bull market arrives next year; at least right now, I am not concerned about its price at all.

If I were to care, I would only care about how the blockchain gaming sector is doing now, how the team is doing now, and whether there has been any new progress in project development.

Speaking of inscriptions, I have always believed that this is the greatest invention in the Bitcoin ecosystem during this market cycle and the technology most likely to create new miracles for Bitcoin.

For such cutting-edge technology, readers may choose not to pay attention, but as an author, from the perspective of sharing knowledge, not sharing would be a disservice to this history. Because regardless of whether this technology and ecosystem succeed in the future, it will leave a significant mark in the history of Bitcoin's development.

However, as an investor wanting to participate in this ecosystem, one must have the courage to accept a highly probable consequence—project zeroing out.

If one is not prepared for this and believes that participating in a new technology will definitely yield profits, that understanding is problematic—there have been too many brilliant technologies in history that, for various reasons, did not spread and apply in time and ultimately got lost in the course of history. They may not have left us with the fruits of victory, but they have also left valuable lessons for future generations.

Moreover, how the final state of inscriptions will be is not something I can judge now; I have long written in my articles: I will give it some time and see how its ecosystem develops when the bull market arrives next year.

So every point in this comment has a significant deviation from the logic I have shared, but I have detailed all these logics in articles not too long ago.

I write articles differently from many authors; my core focus is not on sharing investment targets, but on sharing what I consider interesting new scenarios and technologies in the ecosystem, as well as the logic and thinking behind investments.

Even when I seriously recommend investment targets, I have only recommended two: Bitcoin and Ethereum.

If one focuses only on targets without understanding the logic, even if Mr. Buffett points it out in person, there will be no gains—waves of investors on Wall Street have been imitating Mr. Buffett's holdings, but how many have made a profit?

Why?

Because they do not understand the logic behind why Mr. Buffett bought those stocks, so the final result can only be a muddled loss.

Therefore, I believe that sharing investment logic is key to recording and sharing investments. If the logic is correct, readers can gain experience; if the logic is wrong, readers can learn lessons. Both sides are valuable.

Understanding the logic I share is key to reading my articles, as well as reading any other author's articles.

Additionally, I always believe that for most ordinary people, their ultimate wealth is a blessing from heaven. And to receive such blessings requires a certain level of understanding and cultivation. Without a certain level of understanding and cultivation, wealth will not come.