The correlation between the Fed’s rate cut and the bull market | FAQ

Some random thoughts about leaving messages and asking questions:

I have been answering fewer and fewer questions about specific tokens or projects in my current Q&A sessions.

One of the main reasons is that most of these tokens and projects have been asked by readers before and I have answered them before, and there are no new highlights and progress in the subsequent development of these projects, so if readers flip through my previous articles, they can see the previous answers. My views on them at that time have not changed to this day.

In addition, I especially noticed that some readers began to have their own thoughts, and began to jump out of specific projects and tokens, and began to have their own ideas and observations on investment logic and investment ideas. If this change is caused by reading my articles, it is simply a great encouragement and motivation for me.

Because this is the ultimate purpose of my writing articles.

There are many articles on the Internet discussing the rise and fall of currency prices today, which project can be rushed tomorrow, and what currency XX is going to list the day after tomorrow.

Admittedly, these are topics that most investors pay close attention to and are interested in.

But I rarely write about these in my articles. One important reason is that I am not used to this kind of following the trend and guerrilla warfare.

The way I prefer is to find a reliable investment framework, which can not only earn safe and reliable profits from the "ballast stone" firmly, but also quickly find a suitable field for myself and make great efforts in it when a new blue ocean appears.

When such a blue ocean does not appear, let yourself relax completely, read and study with peace of mind, especially read classic books and learn from the experience of predecessors.

And when this blue ocean gradually turns into a red ocean, I will also reduce my attention and gradually lose interest in new projects that appear in the red ocean------because most of these so-called new projects do not seem to be innovative in my opinion.

The following continues to answer questions.

1. I am still curious about the valuation issue. The profits of encryption and company stocks are different. How to define and estimate overvaluation and undervaluation?

This question is also something I have been exploring for a long time.

Recently, AAVE, which I think has the most innovative ability in the DeFi ecosystem, has launched a series of reform measures, the most important of which, in my opinion, is to link token empowerment with project profitability.

I took this opportunity to calculate the financial status of AAVE after the reform according to the profit estimation method of the traditional stock market (such as P/E, ROE and other indicators).

But the result of the calculation can be said to be terrible. If such a "company" is measured in the stock market, it is simply a junk stock. Now AAVE's "stock price" is a bubble in a bubble.

Therefore, at least for now, it may not work to measure crypto projects in the traditional stock market way. But I firmly believe that, at least for projects with a clear profit model, it is a general trend to move towards the evaluation standards of the traditional stock market. However, the specific standards used to measure the profitability of crypto projects may be quite different from those of the traditional stock market.

But this direction has become more and more obvious. We can't say that tokens have no profit empowerment and can always maintain the current coin price only by relying on governance functions?

In addition, the situation described in Fisher's book that I read recently is also very similar to the problems we face in the crypto ecosystem today.

For example, if we simply use the profit model we are familiar with today to measure the stocks of some emerging industries that he invested in in the 1950s, it would be difficult to stand the test.

But why did he dare to invest in those stocks? What is his way of thinking and strategy? These are all worth learning and reference for us today. I will find an opportunity to share in the article after I finish reading his book in detail.

2. I am afraid that even if the Federal Reserve cuts interest rates in the future, there may not be a bull market in the cryptocurrency circle.

I don’t think we need to worry too much about these. What’s important is whether we have corresponding strategies to deal with these situations.

What if there is no bull market in this round? I have written about this several times in my articles before--------My approach is to continue holding on and wait for the next bull market.

In addition, I always believe that the real bull market in the cryptocurrency circle still needs to come from application innovation within the ecosystem, rather than simply external water release.

The bull market in the US stock market in recent years has come out of the situation of the Federal Reserve raising interest rates.

Why is this possible?

The fundamental reason is that the innovation of artificial intelligence has brought a series of huge dividends. This strong internal driving force has greatly offset the pressure of the external financial environment.

So in my opinion, the importance of internal factors is far greater than external factors.

We will have an online exchange with you at 8 pm on September 7 (Saturday).

Exchange link: https://x.com/i/spaces/1LyxBgYwLaMKN