Investing Based on Common Sense

During this period, many readers have expressed confusion and misunderstanding in the comments at the end of the articles.

I believe that much of this confusion and misunderstanding stems from a certain misinterpretation and resistance to common sense.

The viewpoints I share in these articles are reflections on my investment experiences and the crypto ecosystem over the years. These reflections mainly draw on the common sense and the essence of things summarized from mature cases in the past.

What is the common sense of investment and the essence of things?

It is the future free cash flow that a business/company/project can generate.

I believe this applies to investments in any ecosystem, whether it is traditional or crypto, whether it is venture capital or value investing.

However, for many participants in the crypto ecosystem, our experiences over the years seem to be quite different from the common sense mentioned above: it appears that many "investments" in the crypto ecosystem over the past few years do not require this common sense, do not need to discuss project profitability, and do not need to talk about the future free cash flow that projects can generate.

Just by telling stories, just by meme coins, one can "get rich quick."

In my view, this is partly because we happened to encounter its bubble period, and on the other hand, it proves that the market is increasingly going astray and taking wrong turns in the absence of positive incentives.

Duan Yongping said (in essence): You can see all this by taking a trip to the casinos in Macau.

And this bubble and this wrong path cannot exist for long, nor can they fundamentally promote the healthy development of this ecosystem.

He also said another thing (in essence): If someone wins a hundred million in the lottery, can you learn from him? Can you repeat his story?

As investors, it's fine for us to play a little for fun with the lottery, but if we take winning the lottery as a successful path to ponder and interpret, that would lead to big trouble.

In fact, similar bubbles have long occurred not only in the crypto ecosystem but also in other already mature fields like stock investment and venture capital, and similar "get rich quick" scenarios have played out long ago. It's just that our generation, most of us, have not experienced it.

However, there are some areas where our generation has experienced it. For example, over the past 20 years, there have been two unbreakable myths in the world:

One is that housing prices in China will never fall, and the other is that the stock market in the United States will never fall.

In the past, anyone who dared to puncture these two myths would take great risks and be severely criticized.

However, the first bubble has burst just like that.

There is no everlasting bubble—this is common sense; it’s just that when the market is crazy, we don’t know when the bubble will burst.

But we cannot think that just because the bubble hasn’t burst, it will always exist, or even become so immersed in it that we ignore common sense and the unchanging objective laws.

Since we know that bubbles are problematic and we also know we lack the ability to manage bubbles, we should honestly return to the essence and common sense.

There is a sentence in Duan Yongping's Q&A that left a deep impression on me when I first saw it:

The easiest person to deceive in the world is oneself.

This sentence is worth sharing with all readers.

If we don’t want to continue deceiving ourselves, we must face the facts, return to common sense, and return to the essence.

Some basic facts are:

As I reflect on the development and performance of Bitcoin over the years, I increasingly see Bitcoin as neither a "safe-haven asset" nor "digital gold."

At least, it is not that now.

Since it is not that now, and it still has value, what is it? The only thing I can think of is that it is a valuable luxury collectible.

If Bitcoin is a luxury collectible, what will sustain its future value increase?

It can only rely on the value spillover generated by the prosperity of the crypto ecosystem.

And for the crypto ecosystem to prosper, what is the ultimate manifestation?

It can only be a large number of projects that generate real value, provide real services, can sustain profitability, and produce free cash flow.

Otherwise, what is the prosperity of the crypto ecosystem?

Is it meme coins?

Or is it narratives that can only tell stories but can never land?

And when the crypto ecosystem prospers and wants to share its prosperity and benefits with investors, what exactly will it share?

Is it merely governance tokens that have no actual rights or use value?

If it is merely governance tokens with only governance functions, can their real value compare to stocks? Can it compare to equity?

If it cannot, then isn’t the current price of these governance tokens inflated?

If the prices of these tokens want to rise solidly, don’t they have to become assets with real rights value or assets with use value?

I think these are not difficult to understand or deduce, as long as we stop deceiving ourselves.

Based on common sense and returning to the essence of things:

The world we live in is a centralized world. Although it brings efficiency and speed, at the same time, in many situations, we sacrifice personal freedom and personal interests. Our data and rights are often arbitrarily abused and exploited by centralized forces, and sometimes our lives are even disposed of at will by centralized powers.

That is why generations of predecessors have fought their whole lives for decentralization. These predecessors attempted to create a decentralized world with the power of technology to counteract the oppression of centralization, to liberate the human soul, to not kneel to authority, and to not submit to power.

It is precisely because of this that we have Bitcoin, Ethereum, and today’s crypto ecosystem. Without the decentralization of these foundational platforms, we cannot have such a free world in the future.

Now, even the decentralization of these foundational platforms (L1) is being questioned. Isn’t this deviating from common sense and the essence?

Moreover, we are about to enter a world of fragmentation and self-governance. If we still believe that human connectivity cannot be interrupted and that there can be a neutral world that thrives in the future, then what kind of platform can support such a world? What kind of assets can gain the trust of all humanity?

If we still can’t figure it out, then think about what assets and platforms can be safely held and used by both our isolated neighbor to the northeast and the empire that dominates the western hemisphere?

Returning to common sense, many issues in the crypto ecosystem can be clarified.