Chang Yan: Bitcoin risk aversion consensus will reach its peak at the end of the year, and it will be spring after the winter

Affected by the new crown epidemic and the oil price war, the financial market was in a state of turmoil and an economic crisis was imminent. On March 12-13, the cryptocurrency market also shrank sharply. Within two days, the price of bitcoin fell sharply, falling from a maximum of 7,980 dollars to a minimum of 3,800 dollars, a drop of more than 50%. The contract market is also full of sorrow, and more than 80,000 people have become victims of liquidation. The 24-hour network has a total of $ 2 billion in liquidation.

How should we face and make decisions in extreme environments? Become the primary proposition of the moment. On March 17th, the founder of Babbitt and Changyuan, the founder of the original chain, were guests of ChainNode AMA. After several bull and bear conversions of cryptocurrencies, in the face of cruel reality, he always cherishes his ideals and injects a booster into the community.

Talk about mentality: the biggest gain of life evolution is to improve anti-fragility

People always try to find answers from history, and those who do not know that they have made the right historical choice have faced the unknown panic and struggle like us. After several rounds of soaring and plunging Bitcoin, it first occurred in 2011. At that time, the price of Bitcoin fell from a maximum of 31 US dollars to 2 US dollars within 4 months, a drop of more than 90%. In contrast, the recent decline is still small. "That was the first winter that the newborn cubs experienced. You don't know what else will come after winter. Famine is still spring or the end of time." Chang Yan described it and spent a long time tidying his mood. But the subsequent changes in winter and summer made him more and more calm, and now he feels more calm, because there will still be warm sun after winter.

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Chang Yan gave his first suggestion to improve his anti-fragility:

"In the long evolution of life, the greatest ability to learn is to improve your anti-fragility, that is, to live before the spring, not only to live, but to become stronger because of the famine. Because fragile antonyms are not tenacity , But anti-fragile, that is, stronger in changes (volatility), entrepreneurship is so (responding to market changes, keeping cash flow healthy), investment is so (following the Kelly formula, controlling positions), and so is being a man (a gentleman does Living under a dangerous wall, taking advantage of the situation). "

Talk about decision: let the black swan in the eyes of others become the gray rhino in your heart

In times of financial market turmoil, gold and bitcoin, which are safe-haven assets, have suffered double killings. It is not surprising to Changhuan. History is similar. During the last financial crisis of 2008, gold also fell by more than 30%. When the black swan appeared, people's first reaction was often cash is king. It also takes time to hedge the risk of hedging assets. When the stock market plummets, many institutions have liquidated their positions and their liquidity is gone. They can only sell bitcoin and gold to cover losses in stocks or other assets.

Chang Yan still believes that Bitcoin is one of the few high-quality safe-haven assets in the world and will exceed gold. The reasons are familiar to everyone: there is no risk of freezing, confiscation, seizure, no risk of fraud, abuse, no centralized credit risk, global market, high liquidity, etc. With the epidemic intensifying, global central banks releasing water and rising inflation expectations, Bitcoin's risk-aversion expectations will become more and more consensus. It is expected to peak in the second half of June to October.

Chang Yan's second recommendation is to adapt to the process of historical evolution:

"The best decision is that someone looks like a black swan incident, but you look like a gray rhino. That is, an event that others think is very risky and has serious consequences, but it is a small risk and an impact for you. A big thing. People have an illusion and feel that they can change the world. In fact, the world has its own evolution process and history has its own rhythm. You just need to join this process to promote and accelerate. The most wonderful thing in life There is no way to accelerate the future with a group of people. As for the income, it is the extra return to you in the future. "

Talk about valuation: Price depends largely on demand, not cost

Buffett has stated that BTC only has transaction value and no actual value. Buying and selling BTC is a trading game. However, Chang Yan believes that the value of use cannot be viewed in terms of the number of transactions, but in terms of transaction size, because Bitcoin's transaction fee is paid by byte, not by amount.

Chang Yan said: The true meaning of decentralization is the freedom of competition, which is a competitive process, not an outcome. In this sense, Bitcoin is currently the most decentralized blockchain, which is also one of its sources of value. In fact, it is the same. It has never been successfully attacked by 51%. It has been hardforked, but it has not been successful. The original chain is still the original chain. After some chains are hard-forked, the new chains replace the original ones. Bitcoin is like the hydrogen in the periodic table, the first element, and it is also very stable. Other innovations are to fill other spaces in the periodic table, not replace them. What Bytom wants to do is oxygen.

But how to measure the value of Bitcoin? Chang Yan believes that currently there is no reasonable Bitcoin valuation or price model, because the price is largely determined by demand (external factors) rather than cost (internal factors), especially considering Bitcoin as a kind of Safe-haven assets. He shared some indicator parameters for reference. They all have instructive meanings, but also have their limitations:

(1) VWAP reflects the average cost of bitcoin in the market. From a trading perspective, it reflects the cost of holding positions just like stocks. (2) MVRV , from the perspective of use, considers the amount represented by each coin in the network when it last appeared in the network, reflecting its true value. Of course, the word true must also be quoted. (3) Cambridge Bitcoin electricity consumption index CBECI , from the perspective of production costs. (4) Many people like to analyze S2F , from a scarce perspective. But there is a saying that bitcoin is scarce because it is expensive, not because it is scarce. It also means that demand determines costs and affects prices.

Talking about transactions: The contract is a bookmaker's combine, and off-chain transactions cannot be manipulated

The fierce volatility of the cryptocurrency market is attributable to both unlimited contract leverage and the skepticism of dealer manipulation. Chang Yan bluntly stated: "Another word of the contract is the bookmaker's combine. As long as Bitcoin is still trading off-chain, there will always be a problem of banker manipulation. Because you don't know if the transaction is really on-chain , Or a bunch of data in a database. "

Like a paragraph said: Bitcoin has M0, M1, and M2, M0 is the Bitcoin on the chain, M1 is the currency in the exchange, and M2 is the currency in various borrowing and leverage contracts. Therefore, its safety margin is actually in the minds of every user . As long as each user is gradually used to the decentralized transaction method and accepts the concepts of “transaction as transfer, private key as account”, market manipulation will be greatly reduced. , Because the cost of market making has doubled.

As for on-chain transactions, Lightning Network is a transition solution, but in the end we will solve the transaction capacity problem in a cross-chain manner. Just like a road is blocked, there will be many small three rounds carrying passengers, running out of numerous branch paths, these small three rounds are the relay nodes of the lightning network. But in the end, we need to build a wider highway, Layer 2, to divert traffic through a cross-chain approach.

Another solution is DeFi, but at present, most DEFIs have inherent defects. Several applications have been arbitraged by hackers using lightning goods, causing huge losses to investors. Some of them have problems with the design of the financial model, and some are limited by the performance of Ethereum and the bottlenecks on the cross-chain architecture, which makes the application impossible.

Talking about MOV: The community will know the original chain because of MOV's success in DeFi

Referring to the current pain points of DeFi, the large fluctuations in the price of a single collateral have caused many DeFi platforms to be forced to liquidate. Chang Yan said: (1) a single asset mortgage must have a high risk, and a multi-asset mortgage will be relatively better; (2) even a multi-asset mortgage, you should also estimate different liquidity risks and market risks for different assets, independent mortgages, and risk isolation, That is, the liquidation of the A asset mortgage pool does not affect the B asset; (3) There must be a scientific risk model to quantify parameters such as the mortgage rate and stable fee rate.

"Because I have been researching and developing in the past few years, the title has been advancing, and I took a sigh of relief. Now that the products and platforms are almost ready, I believe that in the future, it will attract more attention from everyone. Technology is the best marketing, and the community may "Because of MOV's success in DeFi, it is better than the original chain. " Chang Yan said.

The original MOV stable financial system will support four types of mortgage assets: BTC, ETH, USDT and BTM. The four types of digital assets have different liquidity risks and market risks, and the risk of mutual correlation will not be too high. Users can choose the type of collateral independently. The four types of assets are independently mortgaged and the risk is isolated. The discount rate (Haircut Rate) is calculated. From high to low, they are BTM, ETH, BTC, USDT. Valuation discount rate is an important tool to reduce system risk loss, and it is also a dynamic process. In the formula for calculating the discount rate, MOV follows the traditional value-at-risk model VaR (Value at risk) calculation method, and adopts a more flexible risk matrix, which can realize the real-time adjustment of the liquidation mortgage multiple and the benchmark mortgage multiple (minutes every 6 hours, every Hours, several steps every 15 minutes). Compared with DEFI products on the market based on the decision-making mechanism of voting heads and voting, MOV parameter adjustment will be more scientific and sensitive.

AMA full review: https://www.chainnode.com/ama/415020-3

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