On April 23, after the article "Returning to Common Sense in Investment" was published, a friend sent me some of his thoughts. Many of these thoughts contain very brilliant points. Today, I would like to share some of these insightful perspectives from my friend.

"To some extent, I feel that the rise in the previous rounds of bull markets in this industry was purely driven by continuous hype of narratives + a small pool, where any influx of funds would cause a surge, directly overwhelming most people."

This summary is very accurate.

I would like to add a little: during the rise of the previous bull markets, the crypto ecosystem did produce some remarkable innovations. ICOs, DeFi, and NFTs, in my opinion, all count, and I do not deny these.

However, relying solely on these innovations cannot possibly recreate the scenes of madness we once witnessed. Because some classic projects born from these innovations still struggle to compare in cash flow with traditional good companies, and when we try to value their governance tokens, which have very limited value, using cash flow, we find that the prices of those governance tokens are inflated.

But is this kind of exaggerated surge unique to the crypto ecosystem?

Not at all.

The A-shares, which everyone looks down upon, have experienced this as well.

During the first bull market of A-shares from 1991 to 1993, the Shanghai Composite Index rose from a low of 127 points to a high of 1558 points in just two years, an increase of 12 times.

This increase is no less than the rise of Bitcoin in the recent two rounds (2019 ~ 2021, 2022 ~ 2024).

It is important to note that this is the increase of an index.

I did not look up the rise of those speculative stocks back then, but we can imagine how exaggerated the increases would have been for individual stocks in that environment.

I believe that back then, they must have told stories that were no less compelling than Bitcoin's, with equally great "imagination space."

It seems that there is nothing new under the sun.

However, there is a more obvious difference between the crypto ecosystem and A-shares.

When A-shares emerged, they were only facing the still reforming mainland Chinese market. The scale and size of that market were still very small. Yet even so, it could inflate such a large bubble.

In contrast, when the crypto ecosystem emerged, it was directly facing a global market, one that had no barriers to entry and required no licenses. The scale and size of this market far exceed that of the former A-shares, so it is not surprising that the crypto ecosystem could inflate such a large bubble.

History does not repeat itself, but it always rhymes.

"Regardless of whether it is blockchain or not, this story must have had a huge wealth effect in its early stages, whether it can generate real value or not, it will continue until the game can no longer be played. Or rather, this characteristic is not unique to the blockchain industry. Instead, blockchain just happens to fit this more fundamental characteristic of financial markets."

I think this sentence comprehensively summarizes the characteristics of all financial markets in their early stages. The early days of A-shares could play out such stories, let alone the crypto ecosystem.

Therefore, the bubbles we see in the crypto ecosystem are neither special nor exceptional.

Since they are neither special nor exceptional, the bubble will eventually burst, and things will return to their original state one day.

"There will definitely be many gamblers coming in early, 100%, because the pool is small. But once the pool gets larger, this way of playing is 100% unsustainable. From this perspective, pump is a miniature version of the blockchain industry; its rise and gradual decline completely reflect the development history of blockchain up to now."

This statement expresses a very important point:

That is, relying on gambling-like strategies is 100% impossible to sustain the advancement of this ecosystem.

Its brilliance lies in vividly depicting the entire process of this game development using pump.fun, an application that has risen in this round of market.

As I write this, I want to express that:

I have always been very optimistic about the future development of the crypto ecosystem. However, while being optimistic, we cannot overlook the serious problems it currently faces, nor can we "fool ourselves" into thinking that these problems are "normal," that they are special, or that they can be exceptions.

Recognizing these problems, returning to common sense, and returning to the basics will allow us to better navigate the road ahead, assessing and participating in projects within the ecosystem in a healthier way.

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