In the near future: only invest in BTC and ETH

Recently, Duan Yongping shared his views on Nvidia online. One statement he made left a deep impression on me, which is roughly:

This company is great, but he doesn't understand it, mainly because he doesn't know what this company will be like in 10 years.

So he hasn't made significant investments before.

Duan Yongping evaluates a company with a long-term perspective, looking for a strong moat over a long cycle.

I strongly agree with this viewpoint and believe that the crypto ecosystem will eventually trend in this direction, and some signs are already emerging.

If we apply Duan Yongping's thinking to the crypto ecosystem, I think we can choose similar projects based on the following criteria:

1. The project team must be reliable.

2. There should be a stable business model, preferably with clear profitability.

3. The project should have survived multiple bear markets and still stand strong.

4. Competitors, no matter how they copy or imitate, cannot surpass it; or simply cannot find any competitors.

5. The project's token should ideally not be just a governance token, but should be linked to the project's revenue.

Based on these five criteria, so far, in the Ethereum ecosystem that I am familiar with, there are three:

AAVE, Maker, and Uniswap.

Among these three, Uniswap's token currently does not quite meet the requirements, but the team is indeed strong, and its advantages are clear, so I still include it.

Coincidentally, during this period, the crypto market has been repeatedly impacted, experiencing one major drop after another. So I whimsically wanted to see how these three tokens performed in terms of resilience after facing various shocks, and compare their resilience with Ethereum.

I checked the data for these tokens from their peak to their lowest point over the past three months (as this period has seen the most frequent shocks to the crypto market since Trump took office and implemented various policies), and the results are as follows:

AAVE reached its peak of about $379 at the end of December last year, then hit a low of $172 on March 4, resulting in a decline of 55% from peak to trough. AAVE's historical high was over $600 in 2021.

Maker reached its peak of about $3,800 in early April last year, then dropped to a low of $864 on February 3, resulting in a decline of 77% from peak to trough. Maker's historical high was over $6,000 in 2021.

UNI reached its peak of about $18 in December last year, then fell to a low of $6.78 yesterday, resulting in a decline of 62% from peak to trough. UNI's historical high was $43 in 2021.

Then I looked at Ethereum.

Ethereum reached its peak of $4,000 in December last year, then dropped to a low of $2,055 yesterday, resulting in a decline of 49% from peak to trough. Ethereum's historical high was $4,700 in 2021.

(Note: The peak and lowest prices mentioned above for these tokens are their stabilized prices, not the instantaneous prices during shocks.)

This result surprised me a bit.

These three DeFi tokens are outstanding in their respective tracks within the Ethereum ecosystem. AAVE and Maker can be said to have virtually no significant competitors. UNI has competitors, but they cannot shake its dominant position.

In my view, looking to the future, they all have strong moats and can be considered excellent projects.

However, even such strong projects saw their tokens decline more than Ethereum during this period of significant drops. Their distances from their historical highs are also much greater than Ethereum's.

If such projects are struggling, I estimate that other application projects will look even worse.

The reason I have these thoughts is that I have been contemplating how to optimize the criteria for selecting projects during regular investments, aiming to allocate significant funds to categories that are promising and can withstand risks.

After calculating the above data, I feel that in the near future, I can be more decisive and precise in my regular investments, limiting them to just two options:

Bitcoin and Ethereum.

Other tokens can be ignored.