First, here are two additional tips about investing in cryptocurrencies:
Whether you are using Bitcoin, fiat currency, or another cryptocurrency as your base, it mainly depends on what you have on hand and which currency is easily accessible. The logic of having no silver bullet applies in any situation.
With ETH’s ETF halfway approved, it implies that the SEC might accept PoS, but the ETF funds cannot be used for staking (I still don’t understand why). Previously, I mentioned selecting from the top 100 on CMC, and it might need another condition: the cryptocurrency should not have been labeled as a security by the SEC. Maybe after personnel changes or new laws pass, cryptocurrencies will no longer be under the SEC’s jurisdiction. However, at least it shows that under the same standards, many cryptocurrencies have obvious problems. ETH has always been in an ambiguous state, so its current situation with the ETF is quite complicated.
There are actually only a handful of safe and reliable cryptocurrencies. For example, DOT has a low profile, and the SEC has never defined DOT, but its staking rate has reached 57% of its circulation, maintaining an annual yield of 17%. I still can’t understand what this situation implies, what the consequences of a high staking rate are, and why DOT’s yield can be so high. If all holders receive the annual yield equally, wouldn’t it be equivalent to inflation, causing the price to drop? For the network, the higher the staking rate, the safer it is. However, the fewer coins in circulation, the less useful the coin is, and it cannot even be used for transaction fees. Such incomprehensible cryptocurrencies are also not worth buying.
Now, about issuing cryptocurrencies. Recently, I inadvertently listened to a recording of Li Xiaolai that was circulating online, and it was quite enlightening.
The core point of all cryptocurrencies is just one: to distribute the coins in a valuable way. The price of the coin is determined by what the holders believe it is worth. As long as holders do not sell, the price will not fall. Including BTC, it is distributed through mining, every 10 minutes, a fixed amount regardless of how many participants, with one winner every 10 minutes, adding randomness and encouraging active participation.
ETH is also distributed through mining, with block rewards every 12 seconds given to miners, similar to BTC. ETH’s two major black marks are:
Li Xiaolai issued a coin called Caddy, collaborating with a community of millions of real users, selling it to them at one-tenth the price and encouraging them to like, share, and hype news online. Li Xiaolai himself said that to successfully plan a coin, being an influencer with traffic and influence is a crucial condition. Li Xiaolai, being an influencer, frequently publishes books, gives speeches, and is a well-known teacher at New Oriental, has a strong background.
The point about being an influencer ultimately attracts a large number of fans, who recognize the coin, and the coin reaches these fans at a certain price. Therefore, whether it’s mining, early airdrops, exchange LaunchPools, or incentive distributions, the goal is to distribute the coins to holders in a valuable way. Holders must pay a price for the coin to have value. Giving it away broadly for free makes the coin worthless, but pegging it one-to-one with the dollar makes it a stablecoin. This value must be controlled, neither too specific nor non-existent.
Additionally, tenfold or hundredfold coins have no logic. ETH’s hype is generally attributed to two main reasons: one is a national policy at the time that prevented BTC from being withdrawn from exchanges. The other is a Ponzi scheme using ETH with a daily interest rate of 1%, where many users bought ETH from exchanges and transferred it to the Ponzi scheme, driving up the price. Interestingly, during this period, ETH’s price increased by over a thousand times, and the Ponzi scheme could sustain itself for three years without collapsing.
FIL was once heavily mined in China, with its price soaring to 200. Why was the price so high? It was also due to a Ponzi scheme. Later, mining was banned in China, and now FIL has no vitality left, despite its genuinely good technology. Another example is NEO, which also rose by hundreds of times without a good technical foundation, having only a dozen centralized nodes and being written in C#, claiming to be the Chinese version of Ethereum. The main reason for its rise was also a financial scheme. The founders didn’t hold many coins, and even now, it’s evident that the coin price is periodically manipulated by the scheme.
So, technology is not the absolute priority. Technology serves as a basis for horizontal comparison. For instance, among several projects called ETA, ETB, ETC, and ETH, even a Ponzi scheme would choose a relatively reliable coin with something to hype. Then it’s up to fate.
As for gossip, many news reports state that Li Xiaolai was once the richest person in the crypto world, buying six-figure amounts of Bitcoin at a quarter of the market price, holding it for years through multiple bull and bear cycles, and finally selling it at a high price. But it’s not that simple. You can find many of Li Xiaolai’s Bitcoin lectures online, showing that he did not just buy and hold but understood Bitcoin’s complex knowledge, gave lectures, and logically believed in Bitcoin before entering the crypto world. This teaches us not to buy blindly, but to look carefully before buying, not just buying a token with a nice code on the exchange or based on promotional articles. Those who genuinely make money have a deep logical foundation and do a lot of homework.
Another version of the gossip is that Li Xiaolai organized a Bitcoin fund, raising tens of thousands of Bitcoins for private investments in mining, exchanges, and stocks, which resulted in heavy losses, with many people losing money and forming a rights group. Later, he invested in EOS and made back the money, paying off the debts at a discount. Li Xiaolai boasted about having six-figure Bitcoins, but he didn’t. The police couldn’t find them during a search, and Li Xiaolai is still restricted from leaving the country. Who knows if he really has Bitcoins? If he does, he can’t be let out. This teaches us that no one gets rich by trading cryptocurrencies. Li Xiaolai was already wealthy, and despite that, he kept engaging in various operations, investing, and running funds. Making money always involves doing things, not expecting to get rich from trading cryptocurrencies by just buying and holding. Even those who participated in Li Xiaolai’s Bitcoin fund were skeptical about Bitcoin’s future value, with many dropping out along the way. So, what about now?