Guest lineup:

James-DFG Founder and CEO

Du Jun - Vernal Founder

Lily - D11-Labs Cofounder

Yang Mindao - dForce Founder

Host:

Angela Tong - DFG&Jsquare CMO

Topic 1: What are the core driving factors for BTC to hit a new high? Is it sustainable?

1. This year, the market value of cryptocurrencies has exceeded 400 million US dollars, BTC has exceeded a new high of 120,000, and more than 90% of Ethereum addresses have made profits. In your opinion, what is the "trigger" of this round of rise?

James: From the overall logic, the main reason is still loosening. In the interest rate hike cycle, both cryptocurrencies and stocks usually enter a bear market or a correction. At present, we are in a rate cut cycle, the market is full of funds, and high-quality assets are naturally more likely to receive buying support. In addition, this round of market is accompanied by landmark events such as the approval of Bitcoin ETF and the large-scale purchase of Bitcoin by US stock companies such as MicroStrategy, which further promoted funds, especially institutional and retail funds, to flow directly or indirectly into the crypto industry. The combination of these two factors is an important reason why Bitcoin has risen to 120,000 US dollars and has not yet pulled back.

Mindao: In this round of market, the capital side is a very critical factor, especially the capital structure has undergone a fundamental change. Take Bitcoin ETF as an example. In the past two years, the asset management scale has grown to about $150 billion. Together with MicroStrategy's approximately $70 billion, the total of the two exceeds $200 billion. In the past few cycles, it was mainly driven by leveraged funds within the currency circle, and the market was driven by the cycle of "leverage-deleverage". In contrast, ETFs and MicroStrategy are essentially equity funds rather than leveraged funds. For example, MicroStrategy's ATM financing is pure equity, without the leverage concept of margin call; there is basically no currency price liquidation mechanism in the terms of the issued convertible bonds. Therefore, even if the currency price falls, this type of funds will not be forced to sell, and it is not easy to cause a stampede-style plunge. From Bitcoin 50,000 to 70,000, the average cost of building a position for this more than $200 billion is between $70,000 and $80,000.

At the same time, Ethereum has risen by 25%-30% in the past two weeks, but the on-site funding rate is only about 10%, far lower than the 20%-50% in the previous high leverage period, which also reflects that this round of market is dominated by low-leverage, long-term equity funds. This is one of the important reasons why Bitcoin and Ethereum can break new highs, and this trend may continue. Previously, arbitrage in the cryptocurrency circle was mainly concentrated in offshore exchanges, but now more arbitrage occurs between ETFs and CME futures, involving funds of 20-30 billion US dollars. Therefore, ETFs are not only passive investment targets, but are also becoming an important tool for arbitrage and hedging in the compliant market, and may even have option attributes in the future. With the continuous inflow of such funds, the size of the "traditional cryptocurrency stock" asset class is expected to expand, and it is also an important force to support Bitcoin to break through $120,000 or even higher.

2. Is the flow of funds from ETFs or US stocks really a "new rigid demand"? Is there any data to support it?

Lily: I feel that this round is the most blurred boundary between the cryptocurrency circle and the stock market in the market I have experienced. I have a very senior friend in the cryptocurrency circle who has recently contacted many institutions on Wall Street. He said that almost all Wall Street institutions related to cryptocurrency are now trying to do cryptocurrency stocks, traders or similar businesses.

From a macro perspective, the US GDP accounts for less than 30% of the world, but the US dollar accounts for about 60% of global foreign exchange reserves and more than half of cross-border payments. This asymmetry mainly comes from "trust" - everyone believes that the United States is the strongest sovereign country and its currency has the strongest credit endorsement. But in recent years, this trust has begun to waver. Trump has repeatedly stated that he "does not want to be the world's policeman" and is more concerned about the welfare of the United States, which has led to global doubts about the long-term value of US dollar assets and US debt. Therefore, one of the biggest consensuses behind this round of market conditions is that the credit of the US dollar is weakening. The world has begun to look for inflation-resistant assets that are worth holding for a long time, which is also one of the reasons for the surge in gold and Bitcoin.

The approval of ETFs played a key role. Many Wall Street institutions were previously unable to directly hold cryptocurrencies due to compliance, but they can be indirectly configured through ETFs and used as asset proof, which has officially allowed crypto assets to enter the traditional financial field of vision and blurred the boundaries between traditional and crypto. The launch of ETFs is a big challenge for centralized exchanges. After MSTR, we see more and more treasuries allocating tokens such as Ethereum, such as Wood Sister buying BMNR, which also prompted the traditional financial circle to have a deeper understanding of encryption.

However, I think Wall Street’s enthusiasm for encryption is a bit too high at present. This enthusiasm may have periodic adjustments, but it is still in the rising stage. A large number of traditional funds are actively participating. I am more familiar with the US investment banks that do Crypto. They are promoting some well-known practitioners in Asia and the United States to issue new shares. With PIPE financing, it is relatively easy to raise 500 million to 1 billion US dollars. Therefore, this wave of trends is still at a very high level in terms of capital volume, enthusiasm, Wall Street recognition and consensus.

3. Hong Kong immigration policy supports encryption ETFs as proof of assets. In addition to US stocks, are the funds of Hong Kong stocks flowing into the currency circle?

Lily: Hong Kong stocks are currently in a clear bull market stage. I am one of the people who privately bullish between 2023 and 2024. Whether it is the recent IPO volume or various trends related to the crypto industry, market sentiment is high. Take Boyaa as an example. Although it is a red chip structure and the financing channel has not been fully opened, the market is still highly sought after. The current PB has exceeded two times, even close to three times, exceeding benchmarks such as MSTR. Recently, the market has responded very positively to any large investment related to Crypto, and stock prices tend to rise rapidly. Old Hong Kong stocks such as OSL, Blueport, and Xinhuo have seen a significant rise in recent times; traditional payment companies such as Lianlian have also performed well in stock prices after transforming to Web3. Overall, Hong Kong stock targets are scarce, and the market is enthusiastic about Crypto. Many A-share analysts are also discussing whether they can launch concept targets such as stablecoins in A-shares, which has become a hot topic at present.

4. The US House of Representatives has passed three cryptocurrency bills. How will the current policy trend affect the subsequent performance of BTC?

Mindao: I think the passage of these three bills may not have such a direct impact on Bitcoin (BTC). The Genius Act mainly involves stablecoins, and the Clarity Act may have a greater impact, focusing on clarifying which regulator is responsible for supervising the market. The most important significance of these three bills is that they provide a very clear implementation framework for many compliant exchanges and asset issuers. For example, we have seen that Coinbase has allowed the opening of perpetual contract transactions in the United States, which I think will directly promote the demand for Bitcoin transactions. But overall, I think the biggest beneficiaries this time may still be Ethereum, DeFi, and stablecoins, which are new financial infrastructure projects.

Lily: In the long run, these changes are definitely positive overall. As the "system" of the entire currency circle, Bitcoin will only be accepted by more people when the entire industry becomes more and more open. But in the short term, I agree with Mr. Mindao's view that there will indeed be no particularly direct impact. The greater significance lies in bringing more regulations to the entire industry, which is something that many people have been looking forward to for a long time. If we want this industry to develop in the long term and give birth to truly great companies, then at this stage, in order to make more ordinary people accept this industry, we must rely on more legislative support.

Topic 2: Is the signal of ETH's recovery real? What does it mean for the future market?

1. ETH has been included in many listed companies. Is this a long-term positive for ETH?

James: It is not surprising that mainstream funds turned to hype Ethereum after Bitcoin rose to 120,000 and then went sideways. The previous structure has shown that Ethereum has gained a certain degree of mainstream capital recognition, and its TVL data on the DeFi chain is relatively real. When the bull turned to bear in 2021, Ethereum and Bitcoin fell by a similar amount, which is a deflation-resistant asset. In this round of bull market, mainstream funds conventionally prioritized Bitcoin, pushing it to establish a bull market pattern first. Now that Ethereum has seen a rebound, it is a natural logical deduction. From our perspective, Ethereum is still attractive in the long run. On the one hand, it is recognized by the mainstream, and on the other hand, its on-chain DeFi applications are active, with TVL accounting for more than 50%-60%. At present, TVL and FDV have not yet reached new highs. In comparison, Solana will issue more. Overall, we are still optimistic about Ethereum's medium- and long-term performance in this cycle.

2. Can the return of ETH prices draw attention back to the Ethereum ecosystem?

James: First of all, I don't think there is a problem of recapture. Even at the peak of Solana, its market value has never been close to Ethereum. In terms of TVL, more than 50% has always been in Ethereum. It's just that, for example, the hot spots of the industry, such as the wave of meme coins brought by Trump coin, have caused the Solana ecosystem to become a little hotter, but I think Ethereum's status has always been the status of the chain king, but it's just a question of how far it is from others.

Mindao: What I think is interesting is that now when we discuss Ethereum and Solana, we are actually discussing: Will the future of blockchain be a multipolar world or a unipolar world? Ironically, the Ethereum community often says "Bitcoin is the idea, Ethereum is the execution", which means that Bitcoin is the ideal, and Ethereum is the implementation. Although the concept of "multi-chain" was first proposed by Polkadot and Cosmos, it was Ethereum that really executed it well. It can be said that Ethereum "copied homework" but did it more successfully.

Back to this cycle, I think the future must be a multi-chain world. In the early days, BSC, Huobi, and OK all made their own EVM chains. In this round, Coinbase and Kraken also launched L2 based on Ethereum. Recently, Robinhood issued assets on Arbitrum, and plans to launch its own L2 based on Arbitrum Stack in the future. In the future, if JP Morgan or BlackRock want to build chains or issue assets, they must hope to complete them in a controllable environment, which further verifies the multi-chain trend.

One advantage of Ethereum is that it is more willing to be compatible with traditional finance. From a political perspective, there are 195 sovereign countries in the real world, which means that the pattern is destined to be multipolar. There will not be only three or four chains left in the blockchain world. In this multipolar pattern, Ethereum's multi-chain architecture may make it the core of blockchain infrastructure.

At the same time, the way Ethereum-related strategy companies play is different from Bitcoin. Bitcoin treasury companies such as MicroStrategy are more like passive reserves; while companies on Ethereum, such as Sharplink, not only bring stock market funds to the chain, but also push assets on the chain to the stock market. For example, they will actively participate in DeFi on the chain, such as Staking, LSD, etc. In the future, if Sharplink and Bitmine invest TVL in DeFi, it may lead to a round of infrastructure upgrades. What I am more looking forward to is that listed companies issue DeFi convertible bonds and put them on the chain to interact directly with DeFi protocols. Even protocols like AAVE also expect that one day they can issue convertible bonds on the stock market and use the raised funds to feed back on-chain liquidity. For example, Ethena recently announced that it plans to go public as a stablecoin protocol through a reverse acquisition by SPAC, which is also a reflection of the trend.

Dujun: First of all, why am I optimistic about Curve? Because it is essentially the "foreign exchange market" in the world on the chain. If this thing can be done, it will be a company of 10 billion US dollars, and its current market value is only about 1 billion US dollars. Basically, there is no real challenger, including Uniswap v3, which has not yet reached the stage where it can challenge it. Moreover, due to the previous loan explosion incident of the founder Michael, this project has now achieved complete decentralization. So this is why I am optimistic about Curve. Second, whether it is last year or now, I have always been optimistic about Ethereum. One point is worth emphasizing: in today's entire blockchain world, in addition to Bitcoin, the only one that truly achieves complete decentralization and has a relatively neutral identity is Ethereum. Other chains are either not decentralized enough or the technology is not mature enough.

When we discuss what problems blockchain can solve, I think we should first focus on the field of "finance", such as putting real world assets (RWA) on the chain. Which chain will these assets choose to be deployed on? Obviously not all kinds of small chains. Because large funds, institutions, and even sovereign countries at the level of 1 billion or 10 billion US dollars will only choose a chain with high decentralization and neutrality, that is Ethereum. So I think that from the current situation, Ethereum has no real challenger for the time being. Whether in terms of maturity, ecosystem, or number of developers, it is the strongest. So I am always firmly optimistic about Ethereum. If blockchain can really rise on a large scale in the future, Ethereum will definitely be a very high-quality core target.

Topic 3: Why is the performance of altcoins so differentiated? Is there still a chance for linkage?

1. Has this round of altcoin linkage ended, or has it not really started yet?

Lily: I think this round of altcoins has not really started yet, and it is far from over. Of course, differentiation is inevitable. Projects like EOS have passed their peak and are more trying new things. Just like the stock market, the 50 strongest companies a hundred years ago are completely different from today. Whether they can last for a long time depends on whether the team can continue to operate. The current direction of altcoins is mainly divided into two categories:

The first category is emotion-driven, such as the representative meme coin Pump. Although it has recently pulled back, its circulation market value is still more than one billion US dollars, and its daily income is also millions of dollars. The core of this type of project lies in "humanity" and "narrative", and many CEX contracts are also amplifying this game mentality.

The second category is application-driven. I am more firmly in support of DeFi. Because Crypto actually changes the financial system first, especially the payment system. Like the recently popular Xstock, issuing and trading stocks on the chain, achieving 7x24 hours without closing, this is difficult for traditional markets to do in the short term. For example, Nasdaq plans to achieve spot 7x24 by 2026, and the options market does not even have a timetable. The advantage of DeFi is that it can already provide these infrastructures, but it still needs more liquidity and user education. In the future, the pricing mechanism of traditional assets may also be migrated to the chain. So I believe that DeFi projects like Curve that can serve real financial scenarios will become important infrastructure for the entire industry. Of course, the combination of AI and Crypto is also worth paying attention to. AI for Crypto and Crypto for AI both have opportunities, but at present, except for data rights confirmation and some interactive scenarios, it may not have found a point that can really release huge energy. But it will definitely be one of the big tracks worth betting on in the future.

2. How do you view the subsequent development of the two sectors of AI and DeFi?

James: Bitcoin itself is a product of the financial crisis. It was precisely because of the problems in the traditional financial system that Bitcoin was born. If you want to find the most "pragmatic" direction in the blockchain industry, then DeFi is undoubtedly the most solid and practical. The current mainstream DeFi protocols, especially those at the Blue Chip level, are generally profitable from a financial data perspective, and their product systems are also mature. If we compare traditional finance and on-chain DeFi, the difference is significant. Offline financial services are more targeted at high-net-worth customers, and it is difficult for ordinary people to obtain quality services; while DeFi is fairer and more open. Traditional financial institutions can even ban accounts based on vague user agreements, while the rules on the chain are transparent and credible. In addition, DeFi is also constantly evolving in product experience, stability, and innovation. Although there were security issues during the DeFi Summer in the past, the mainstream protocols on Ethereum have now matured, can make stable profits and continue to provide high-quality services. Therefore, we will also focus on the leading projects in the DeFi track in the secondary market, such as DEX, lending, etc. In the long run, DeFi is also the track we are most optimistic about among all tracks.

As for the AI direction, I am not a technical background myself, and my understanding of it is limited. At present, most Crypto+AI projects are still telling stories, and there are not many real products. Whether this track can grow in the future depends on whether it can be applied on a large scale and whether there are real users using the products. If we just talk about concepts, the narrative heat will be difficult to sustain and the investment risk will be high. But once a hit product appears, it may usher in explosive growth. Now many CryptoAI projects are still undervalued. For example, our main holdings, such as Render and Near, are not expensive. The key to the follow-up is to see whether there are any practical things.

Dujun: At that time, we mainly focused on the infrastructure field. Because at that stage, except for stablecoins, the industry had hardly made many practical achievements. There were limited projects that could be invested, and there were not many stories to tell. Everyone generally had a logic at that time: if the infrastructure is not perfect, the application will naturally be difficult to develop. This is actually a "chicken and egg" problem. Many people think that "5G cannot be made without Douyin", but I think it is "Douyin can only exist with 5G". So about one-third of our projects at that time were infrastructure-oriented, such as account abstraction, data analysis, L2, and parallel EVM. These projects are biased towards the bottom of the technology, which was a relatively reasonable choice at the time.

Why is Vernel still incubating infrastructure today? Because today's infrastructure logic has changed. In the past, it was public chains and data, but now it is more related to security. The biggest challenge at present is: how to make it more convenient, safer and more trustworthy for users to enter the on-chain world. Although some projects in the past (such as account abstraction and gas-free) have solved some of the "ease of use" problems, security issues are still serious, such as frequent thefts, scams and the proliferation of junk tokens. Now tens of thousands of coins can be issued on the chain every day, but there may be only dozens or even single-digit people behind them who are repeatedly operating. How can wallets identify these malicious behaviors? How to prevent being deceived? Including in the future when stablecoins are widely used, how will wallets face compliance, anti-money laundering and other issues? For example, KYT, how to identify funds from sanctioned addresses or illegal accounts? These all belong to the category of "new generation infrastructure". Therefore, we will still incubate some technical projects, but the direction is more inclined to security and compliance. Overall, in each of our projects, about one-third to one-quarter will still focus on this direction.

Mindao: In this round of cycle, our definition of "copycat season" has also changed. Looking back at the cycles of 2013, 2017, and 2021, everyone defines the alt season as "most currencies other than BTC and ETH hit new highs." But I think that in this cycle, the "alt season market" that we used to understand may not really come. Why? Mainly because the capital structure has changed a lot as I just said. For example, why did Ethereum obviously underperform Bitcoin in the past round? It is because there are more than 200 billion US dollars of institutional funds behind Bitcoin, including ETFs, MicroStrategy, etc. This type of funds is completely different from the highly leveraged funds in the traditional currency circle. Looking back at the previous cycles, in fact, the market pricing benchmark has also undergone changes: from 2013 to 2015, it was mainly BTC; after 2017, Ethereum gradually became the unit of account; later, stablecoins began to become popular, and now most tokens are priced based on USDT. Once priced with stablecoins, the "resonance" effect of the market is not as obvious as in the previous cycles. Because stablecoins are no longer directly linked to the prices of BTC and ETH, the logic of "leading" is weakened.

Ethereum and Bitcoin hit new highs, and the biggest beneficiaries are still those basic protocols that take on TVL spillover. Recently, the TVL of the overall DeFi has approached its historical high, but this is not due to the innovation of the protocol itself. Most DeFi protocol structures were basically formed as early as 2019, such as AMM, lending, asset management, etc., lacking substantial breakthroughs. The growth of TVL and handling fees is more the result of natural promotion with the rise in currency prices, rather than the reflection of the project's own efforts. This also highlights the key difference between DeFi and other altcoins (such as Meme, AI, GameFi) - the former can naturally take on the liquidity after the main chain rises, while the latter is more difficult to do. However, from an investment perspective, I do not agree with the statement that "DeFi is triple leverage of ETH". This is not because DeFi cannot capture value, but because of the current capital structure. The main market players prefer to directly allocate BTC or ETH as asset reserves or ETF underlying assets, rather than further sinking into DeFi projects.

Topic 4: How are institutions and the stock market changing the Web3 market?

1. From the perspective of capital flow, is Wall Street "entering the market" or "leaving after cutting"?

Lily: Not all Wall Street funds are long-term funds, and everyone needs to have a basic understanding of this. I have participated in the operations of many Crypto companies in the US stock market and have a very good understanding of the situation of several projects. Many hedge funds in the market are very active in PIPE (Private Placement). After they get the chips at a discount, they use hedging strategies to sell large amounts the day after the PIPE is issued, resulting in huge transactions. This type of capital operation does not necessarily mean that they are optimistic about the long-term value of the industry, but their entry is indeed good for the industry. Because the LPs of these funds are various retail investors, family offices or institutional investors, in a sense, this is also a form of "breaking the circle".

The participation of the entire Wall Street in Crypto is becoming more and more formalized. For example, people have been paying attention to the inflow of funds into ETFs for a long time, and will try to build a model to predict the price trend of BTC: how much net inflow of funds into ETFs every week corresponds to how much Bitcoin may rise. This model has formed a certain reference value. Similarly, we can also use a similar method to look at the capital flow of cryptocurrency companies. For example, some companies announced that they would support Ethereum, and the actual funds invested behind them may come from the money originally used for asset allocation such as real estate. This will make Ethereum more closely linked to traditional funds. In addition, except for Bitcoin, all other chains are essentially "application chains". Platform chains such as Ethereum, Solana, and BSC rely on more breakthrough applications and user scenarios. As more and more institutions enter the industry through primary market investment or direct use of products, more positive effects will be brought about.

In general, the integration of traditional finance and the crypto world is good for the entire industry to be known by more people. But we can also see the problem: a lot of funds on Wall Street are also leveraged. When the market enters a downward cycle, many cryptocurrency companies will appear below net assets, that is, market value is lower than book assets. In the past, Grayscale has experienced an inversion, and it will happen again in the future, especially for long-tail companies. There are very few companies that can truly bet on Crypto for a long time like MicroStrategy.

2. For entrepreneurial projects, have the preferences of VC, CEX, and traditional funds changed?

James: Now that the price of coins is rising in the bull market, many "coin stock" companies are naturally more willing to benchmark crypto assets, and even have a very positive attitude. But in the real bear market, when the price of coins continues to fall, the asset value of such companies may be greatly discounted, or even "inverted". I completely agree with this. So we have always been very cautious when investing. Although we have received many good investment invitations at present, various coin stock companies hope that we will participate, such as buying Ethereum, Solana or other crypto assets, but so far, we have not invested in any of them. Of course, this does not mean that we will not invest in the future, but that we will be more cautious. Especially for those companies that are not mainstream and have not reached the top, but have a high valuation premium, we think they are not of much value to long-term investors. In contrast, we prefer to invest in companies that truly have product capabilities, clear business models, and even profitability, and may be listed on the US stock market in the future, such as Circle, Ledger, and CoinLis, which are leading teams in the field and have real users and revenue. This type of company is more in line with our investment logic of focusing on "long-term value".

Mindao: The recent "coin stock" craze on Wall Street is indeed hot, but from my point of view, there are not many coin stock companies that really have long-term value. Bitcoin-related leading companies, such as MicroStrategy, are indeed valuable because they use real money to issue bonds, issue stocks, and use structured products to net buy Bitcoin in the market. In contrast, Ethereum and other public chain coin stock companies have structural differences. Many of these companies use PIPE to increase issuance, introduce large holders of coins, and then use the raised funds to repurchase tokens. In essence, it is "pouring money from the left pocket to the right pocket", not real new capital inflows. This type of operation risk cannot be ignored, especially when the coin price goes down, it is easier to expose. The current market is not sensitive enough to the "market value premium" of coin stocks (market value divided by the number of coins per share). The premium of some Ethereum-like coin stocks has reached 2-4 times. If they continue to issue more through ATM, their behavior is very similar to the Rebase model of early algorithmic stablecoins - continuously issuing more at a high premium to dilute the original shareholders and form an arbitrage cycle. Only a few companies such as MicroStrategy can use financial instruments to maintain a premium above NAV and maintain market value through repurchases in a bear market. But this is almost impossible for most coin stock companies. To achieve a long-term positive cycle, such companies must quickly become industry leaders and become core liquidity opponents that market arbitrage, hedging and other institutions cannot bypass. Otherwise, most of them still remain in the arbitrage logic of "stock speculation with coins", which is similar to the gameplay of the early DeFi Summer. Therefore, we always remain highly cautious when facing such projects, focusing on whether they have real product capabilities, financial instrument combination capabilities and long-term value.

Dujun: I think we can look at this issue from a different angle. We will not go into details about listed companies like Xinhuo, so just pay attention to the official announcement. But whether it is a coin issuance project or a listed company, it all comes down to one essential question: What value does your company create? How do you make money? How is your cash flow? From this perspective, I am actually very grateful for this wave of market conditions. Because it allows us to see more clearly that a good project is a good project, and a garbage project is garbage. So whether it is a company in the primary market or a listed company, it must eventually return to the fundamentals, to the real value creation and cash flow capabilities.

以人民币计价的BTC价格突破42万元，接近21年峰值

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