Those who follow me prosper, and those who oppose me perish? How should we think about cycles?

The so-called cycle, those who follow me prosper and those who oppose me perish.

The currency circle may be the group of people who pay the most attention to the cycle, and almost everyone will discuss the term "bull-bear cycle". But if you ask what a cycle is and where it comes from, few people have thought about it. Most people just rely on mechanical indicators (such as BTC price) or intuition to judge the market.

Therefore, under the slump, the remarks that the bear market cycle has come naturally became rampant.

It is also the same that institutions are buying Bitcoin on a large scale. When the market is good, everyone is discussing that institutions will bring about an "eternal bull market." Now that the market is not doing well, the topic has become "how institutions have their cards cut".

Therefore, what we should do is to think seriously - what exactly is the bull-bear cycle? Can the cycle be predicted, and how we should face it.

A cycle is an abstract reality, which is a summary and induction of what happened in the past period of time. Because the same things keep happening, economists see patterns in them. Then I found that the things discovered so far seem to fit this law, and there is the concept of "cycle".

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In 1860, the economist Jugra first proposed the concept of "Jugra cycle" in an article. After him, another economist, Schumpeter, perfected the concept. Four important components of the Jugra cycle are proposed: expansion, crisis, recession, and recovery.

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This is the capital market cycle that most people are familiar with, that is, the bull-bear cycle of the stock market.

The 20th century U.S. economy is nearly perfectly described by the Jugra cycle, with the 1970 recession, 1980 recession, 1990 recession, 2000 recession, 2008 recession.

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But interestingly, in the 21st century, the Jugra cycle has become less and less apparent.

Take China as an example. Every decade, China is fighting against the cycle in ways that the world cannot imagine. In 2008, China became an infrastructure madman and started a counter-cyclical adjustment. We have all benefited from this infrastructure construction to this day.

At that time, we said that the troika driving the economy was investment, export and consumption. We have completed a counter-cyclical adjustment that the world can't imagine, and maintained social stability. The starvation of the Great Depression in the United States has not occurred in China.

Another ten years will be the end of the superimposed Jugra cycle of the epidemic. This time, what drives the economy is the internal economic cycle, more and more new energy vehicles on the road, and more and more dense 5G base stations.

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What I want to say here is that the cycle is not static, and it is not as scary as we think. Although from a more macro perspective, the cycle is still playing its laws. In the past three decades, we have proved to the world that we are not helpless in the face of cycles.

Why is the Juglar cycle a perfect summary of the US economy in the last century, but it can't explain the growth of US stocks in the past decade?

From a more abstract point of view, it is because the logic of productivity has changed. The world economy in the last century cannot be separated from the logic of industry. If you want to expand the scale of production, you must increase investment and increase inventory. When everyone does this, commodity prices will inevitably fall and investment will decrease, completing a cycle.

However, the logic of the Internet is different. The diminishing marginal cost of the Internet is far superior to that of industry, and there is no concept of inventory. Therefore, the way Internet companies expand production is very different from the previous industrial era.

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The Internet and globalization have injected two of the most important variables into this world. The Internet makes the circulation of production factors faster, and the per capita output value of leading Internet companies far exceeds that of industrial enterprises. At the same time, globalization has made the world more and more connected, and each country no longer faces the cycle alone.

We said earlier that a cycle is an abstraction and summary of what happened in the past period of time. Therefore, when economic variables change, the cycle describing economic activities will naturally change.

Fortunately, blockchain is the new technology that will change business logic. The phrase from the Internet of Information to the Internet of Value sounds abstract, but it is meaningful. Based on this, I think the cycle description of "four-year bull and bear" is not applicable to the blockchain.

What really affects the blockchain cycle should be the "Technology Maturity Curve". This curve was proposed by a consulting company in the United States in 1995, summarizing several core stages in the development of new technologies.

The technology maturity curve divides the maturity and application of new technologies into five stages: the promotion period of the birth of technology, the peak period of excessive expectations, the trough period of bubble bursting, the bright period of steady climbing, and the plateau period of real production. Almost all new technologies must go through these stages.

Corresponding to the currency circle, the bull market in 2017 is actually the peak period of excessive expectations. The blockchain has told one huge and attractive story after another, the market sentiment is high, and everyone seems to see a new world beckoning. But in fact, the blockchain at that time could not do anything - so the bubble burst quickly.

Everyone began to wonder, what can the blockchain do? Is it something other than a financial asset? I got in at the end of a bear market when the whole industry was in self-doubt. Everyone is at a loss. They don't know what the blockchain can do, and they don't know where the future development direction should be.

Later, DeFi became popular, and NFT became popular, and the market seemed to suddenly have confidence-it turns out that the blockchain can do so many things.

The bear market has squeezed out the bubbles in this industry, and it has also squeezed out those who are not determined and speculative in the industry. This bull market is fueled by those who are serious about moving the technology forward.

So what exactly should we expect in 2021, especially after the plunge?

I think there are two things that are most worth looking forward to. One is that the narrative of the blockchain is getting smaller and smaller (and getting closer to landing), and the other is the improvement of infrastructure and products.

In the bull market of 2017, we are discussing those seemingly great "blockchain revolutions". But soon everyone will find that these stories are like a dream come true. But in 2021, we are discussing "Layer 2" and seriously thinking about the "little thing" of getting out of the circle.

I asked some friends who have experienced bulls and bears what they think of this issue. Many of them gave me the same answer, hold the target that should be held, and continue to do what should be done. Perhaps these serious people and teams do not have much voice, but it is their continuous efforts that are driving the development of the entire industry.

The second thing is that with the improvement of the infrastructure, the bottom layer of the blockchain is getting better and better, and the application threshold is getting lower and lower.

I like to talk about Nervos the most. They spent three years burying their heads and starting from the bottom layer, and finally polished the bottom layer of the public chain. Based on Nervos, low-threshold products such as "Unipass" and "Golden Legend" have finally launched.

We have also seen similar trends in other fields. For DeFi + Layer 2, we have Layer2.finance and Loopring Wallet in different directions, and NFT has Flow and NBA Topshot. The security token ST that we have been looking forward to for a long time finally has a pioneer like Republic Note.

We bragged a lot in 2017, and in 2021 we are realizing them a little bit. We are clearing up a lot of logic that we did not understand before.

These trends and signals are telling us that blockchain is getting closer to technology maturity and commercial use. The blockchain will eventually enter thousands of households through commercial use, and this day is getting closer.

In "Value", the founder of Hillhouse Capital wrote: "There is only one criterion for real investment, and that is whether it is creating real value, and whether this value is beneficial to the overall prosperity of society."

I also suffer from losing money, but I will not lose my faith because of the plunge.

Faith must be derived from logic and independent judgment. What we should really do is to find our place in the long river of time, walk with the great viewers, and create more value for the world.

We respect cycles, but there is no need to fear them.

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