Although investment in the traditional financial market is called investment, and investment in the blockchain field is also called investment, and with the development and growth of the blockchain industry, many traditional financial institutions have slowly begun to enter the blockchain industry. There are more and more financial products in the chain industry, more and more formal, and there is a tendency to move closer to traditional finance. However, at this stage, the differences between the two are still very large, and they can even be considered to belong to two completely different "worlds".
If you don't realize the difference, and apply the investment thinking of traditional financial markets blindly, you may suffer great losses.
Because I personally have some investments in both markets, I have a deeper understanding of them, so I can more clearly feel the difference between the two. I personally think that traditional financial investment and blockchain investment have three levels of thinking. An important difference.
I. Extreme thinking
What is extreme thinking?
To invest in the blockchain industry, you must first assume that the most extreme situation in the market will occur, and be prepared for the worst thinking at any time.
In fact, it is more accurate to say that this is not a hypothesis. In the field of blockchain, extreme situations are bound to happen.
The extreme thinking here is a bit similar to the "black swan" thinking in traditional finance, but the probability of a black swan event is very low, and it will happen only after a long time. However, the frequency of "black swan" events in the digital currency field is very high. The black swan event was originally used to refer to small-probability events. If the probability of occurrence is high, then the "black swan" is not very accurate, so A more direct term is "extreme thinking."
For example, in the first two days, Bitcoin has fallen by as much as 40% within 24 hours, and the market value of the entire digital currency market has increased by at least 50%. This is unimaginable in the traditional capital market. The overall market value of Japan has evaporated by more than 50%. If this is the case, then subsequent financial services such as collateral and pledge based on stock prices will encounter great problems, and the entire financial market may collapse.
Although for the digital currency market, there are not many cases of a single-day drop of 40%, but a single-day drop of 20% and a single-day drop of 10% often occur, and it needs to be treated as a regular event. And 40% is only for Bitcoin. For a single company, a single day drop of more than 60% -70% will also happen.
If it is just barely acceptable to fall sharply, the most unacceptable is zero. Although the stock market also often plummets, it is very rare that it is zero. There are thousands of A-share listed companies, and few of them have finally delisted. The proportion is very low. The blockchain digital currency industry is different. In just a few years, there were thousands of tokens, and these tokens have not undergone rigorous review. Most of them are air coins. 90% of these tokens are finally going to return. Zero.
Because of these differences, investing in the digital currency market should take extreme thinking as the starting point of the entire investment system . You should keep thinking: what extreme situations can happen in the entire market? What should I do if an extreme situation occurs? What happens to the company I invest in? If these extremes happen, can I take them?
Before investing, you should use these possible extreme conditions for stress testing. You must first assume that the broad market is down by 50% a day. How can your investment sustain this time? Obviously, if you want to be able to hold it, then you can not add any leverage; you have to assume that the entire market will continue to slump for 3-4 years, how can you hold it? If you want to handle this situation, then your funds must be long-term, cost-free, and with a little interest, it is likely to drag you down, and you need to be supplemented by a steady flow of off-site cash flow; you have to assume that your This token will be returned to zero for various reasons. Will zeroing be a fatal blow to your investment? If you want to avoid this risk of zeroing, then you must be more careful in selecting the investment target, and at the same time spread your investment more dispersed.
Second, periodic thinking
Another difference in thinking is:
To invest in the blockchain space, you need to have a cyclical mindset.
The periodicity of the digital currency market is particularly obvious, and according to historical experience, it is a cycle every 4 years.
There is also a certain periodicity in the traditional stock market. For example, the financial crisis will break out after a period of time, but it is not absolute. Sometimes the financial crisis occurs once every 5-7 years, sometimes it occurs only once every 10 years. The duration of each time It's not the same, sometimes it ends in a few months, and sometimes it lasts for years or even ten years.
This is very interesting because you know the time of the cycle and you know the general direction of the fluctuations. What's the rarest thing about investing? Information is the most rare and certainty is the rarest. If you accept the term of 4 years cycle, then many of your investment behaviors can be planned in this way, and many investment plans can be adjusted accordingly. If this law holds, this is a very favorable condition for digital currency investment compared to stock investment.
Moreover, the company is behind the stock. Although the market is not good, some companies can grow against the trend and the stock price doubles in the financial crisis. Although the company's stock price has not doubled, its profits are not affected and the dividends continue to be distributed every year. The dividends and fundamentals of these companies were not affected by the financial crisis. At present, digital currencies do not exhibit such characteristics. As long as bitcoin falls, basically all digital currencies fall with bitcoin, it is difficult to maintain their independence, and digital currencies do not have much landing Business, with energy and no dividends, it is impossible to talk about contrarian growth.
So, for stocks, we talk more about long-term investment; but for digital currencies, is it better to invest in the long-term? Or is it better to adapt to the cycle? This is also a question that every investor needs to think about.
Third, quantitative thinking
Traditional stock investment can be quantified in many ways. There are many data in stock investment, including business data, financial data, market public opinion data, various announcements, etc. These are the basis on which stock investment can be quantified. More critically, stocks can be valued. The valuation theory of stocks is based on a discounted cash flow model. This valuation has theoretical support and is widely accepted by the market. On the basis, the entire capital market was derived, from valuation to financing, from financing to listing, and subsequent follow-up issuance and repurchase formed a complete set of logic, and also produced the most widely accepted investment theory: value investment . However, for digital currency, it has no cash flow. No cash flow means that you cannot accurately value it. Failure to value it means that many theories in traditional finance cannot be applied.
If valuation is used as the "anchor" of investment, then digital currency does not have such an "anchor". We need to find other "anchors" to replace it. Otherwise, our investment will have no foundation and will fluctuate with market fluctuations. Constantly in panic and greed.
Of course, the absence of traditional cash flow does not mean that the market value of its entire digital currency is a bubble. Sooner or later, the digital currency market will form its unique valuation system, but this system has not yet been fully established. In the future, this system will be based on other indicators, such as new account addresses and the number of active users. At that time, the digital currency market can still find its "value anchor".
So, at this point in time, how do we make a good investment in blockchain? I think we can learn from the investment methods of VC and PE. When VCs and PEs invested, they were investing in startups or early stages of the company. At that time, the company had no cash flow and could not be valued. Therefore, VCs created a "track theory": To the best athletes, I will cast the whole track again. For example, if I want to invest in the bike-sharing industry, I will vote for the first 3 companies in the top 3 bike-sharing companies; if I want to take out, I will vote for the first 3 companies Although only one company may succeed and others fail, as long as one company succeeds, it can bring me dozens of times hundreds of times of profit. My profit is sufficient to cover the cost of those losses. The yield is not low.
When investing in the digital currency field, we also need to learn from such an investment method. Even if we are very optimistic about a certain company, we cannot put all of Bao on it, because the uncertainty is too great, and the Black Swan incident is really Too much. What's more, even if this company does a good job itself, for example, a company like Ethereum, but V God is infected with coronavirus, or there are some other unexpected situations, then how will Ethereum go in the future? Not good, does anyone really say it's bad to replace V God. Therefore, no matter how optimistic a project is, we need to find ways to diversify this risk and increase the anti-fragility of investment.
The above are some of my thoughts. I believe that traditional financial market investment and digital currency investment still have more differences in terms of thinking.