The war has just begun, and it is far from reaching its end.
Just when everyone thought the epidemic was about to end, India killed a carbine. The entire line of epidemic prevention and control was lost. In New Delhi, one person died of new coronary pneumonia every 4 minutes. Military planes and trains began to be used to transport oxygen cylinders to rescue critically ill patients. The number of new confirmed cases of covid-19s in a single day has recently hit a new high. At the current rate, by August, India will have more than 1 million deaths due to the epidemic.
This is not the most terrifying, the most terrifying is that the number of mutated viruses is constantly increasing. Looking around, all of Asia, except China, has basically fallen or is on the verge of falling. Although the research and development of vaccines is becoming more and more certain, nature’s supply-side reforms seem to be unsatisfactory, and they are still making it more difficult for humans.
India is the world’s largest generic drug factory, and this wave of pandemic may drive a series of drug shortages around the world. Of course, in addition to drugs, food has begun to show signs of inflation. The Food and Agriculture Organization of the United Nations issued a report: In March, global food prices rose for the 10th consecutive month, with sugar and vegetable oil prices rising the most.
At the current rate of food inflation, starting from the second half of this year, at least half of the countries in Africa will face food shortages and even fall into a food crisis. Brazil is even more serious. Calculated from the same period, the price increase of rice has exceeded 70%. And because the Brazilian government needs more foreign exchange reserves in order to stabilize the exchange rate, it has to exchange grain exports for foreign exchange, leading to further national grain shortages. The government even advised people to go to the neighboring country Venezuela to buy food.
In last year’s article, we talked about that the Chinese government is forward-looking. It is a very important move to give priority to ensuring food reserves in the 2020 epidemic defense war. Looking at it today, the logic of a year ago is gradually being verified today.
In the past year, the large-scale over-issuance of the U.S. dollar has made many countries have sufficient fiscal monetization, but unnecessary conditions. The result is that some governments of countries that were already rotten have turned over-issuance of currency into a race, and in the end, it has become the target of harvest by the US dollar.
Just last month, U.S. Treasury bonds have exceeded 28 trillion. Under the economic stimulus of 1.9 trillion US dollars and the support of 2.3 trillion new infrastructure in the next eight years, it is estimated that this number will continue to advance by leaps and bounds. As a result, many investment institutions have begun to be short on the US dollar. As mentioned in my last article, even if the dollar is going to fall, it will not show up in the short term.
China’s GDP growth in the first quarter reached 18.6%, which is a very exaggerated figure, which is entirely due to the economic rebound after the epidemic. Judging from the development of the epidemic in 2020, due to the time difference between China and the United States in epidemic control, China’s GDP growth will lead the United States by two quarters, which means it has become a leading indicator. The United States is the leading indicator in Europe, probably a quarter ahead.
Although the Biden administration’s tax hikes for the rich have created a certain degree of negative impact on the market in the short term, the reverse is that the wealth of the rich is already in dollar-denominated assets, and the tax hikes for the rich actually lock in the flow of assets. Sex. This means that to some extent, the dollar assets that can carry large amounts of wealth will continue to appreciate in the future.
Looking at the progress of vaccines in the United States now, the certainty is relatively high. Therefore, once a large-scale vaccination is formed, suppressed consumer demand will be released again. I estimate that economic growth in the United States will look better in the second half of the year. So now the problem is that zero interest rates cannot be the norm. Once the economy recovers, the United States will inevitably raise interest rates at a certain point in time, and this time is likely to be earlier than scheduled. The market has already expected this, so the US long-term interest rate will go higher.
The Fed faces a difficult choice: interest rates rise, U.S. stocks fall, and the virtual economy collapses with physical recovery; increasing water releases and recovering liquidity will trigger the dollar’s decline at a certain point in time. Looking at it now, Biden’s policy is clearly leaning towards the latter. This is the reason why large institutions are collectively shorting the US dollar. However, overly consistent judgments of institutions on the market often turn into contrarian indicators. The market only has more opportunities when longs and shorts are inconsistent.
When the global economy is in recession, capital is more willing to return to the United States, causing the dollar to appreciate. Looking at the next two or three quarters, the rise in the dollar seems to be a possibility with a higher probability. The rapid spread of the epidemic in India may be a signal that has delayed the recovery of the global economy and even caused a lock-in response to the wider global economy. Conversely, it will cause a phenomenon in which the US dollar continues to be over-issued, but the US dollar is rising due to the actual global economic depression.
In the past few years when the global currency over-issuance situation, the Chinese government has held the bottom line, and the currency over-issuance rate is not high. And the demand of the internal market itself is hedging the effects of the external economic recession. But most countries are not as strong as China. Under the strong background of the global Great Depression and nature’s supply-side reforms, it will be subject to multiple frustrations. From the four killings of Turkish stocks and bonds last month to the spread of the epidemic in India this month, we seem to have seen the plot of the story in the future.
Over the past ten years, global currency oversupply and low interest rates have not caused high inflation. A large part of the reason is that the entry into various types of assets, such as the stock market and the property market, has triggered local inflation and asset rises. This has led to an increase in the global gap between rich and poor, resulting in an extreme populist trend. The gap between developed countries and emerging countries as well as third world countries is further divided. The dominoes of the Great Depression seem to be beginning to collapse from two aspects. On the one hand, the economic recovery after the epidemic marked by European and American countries and the rise of asset bubbles driven by the return of the dollar are caused by Turkey and India on the other. The collapsed economic crash initiated by emerging countries. The two sides squeezed towards the middle ground, and finally formed a global economic depression at a certain point. When will this time be? I recently took a look at the Buffett indicator, which is the total market value of US stocks/US total GDP. It has far surpassed the technology stock bubble in 2000 and even surpassed the peak of the Great Depression in 1929, and it continues to rise steeply. Another well-known indicator, the Schiller price-earnings ratio index has also been higher than the Great Depression in 1929, and slightly lower than the technology stock bubble in 2000. This indicator is proposed by Robert Schiller, a Nobel laureate in economics, to use a 10-year cycle price-earnings ratio (CAPE) instead of a 12-month price-earnings ratio to evaluate US stocks.
There is also the “rule of 20” invented by the legendary investment guru Peter Lynch, which refers to the fact that when the stock market’s price-to-earnings ratio plus the inflation rate equals 20 in the last 12 months, the valuation is in a fair range. At present, it has broken the record of the past 100 years and reached the position of 33.6. But think about it carefully. Now the U.S. stock market is a market with obvious head effects. “FANNG” has already occupied the leading position, exceeding 20% of the total market value of the U.S. stocks. This has not yet counted the star stock Tesla. If these high-tech stocks are deducted, the current overall price-earnings ratio of US stocks is about 20 times, which is completely reasonable.
In addition, unlike the technology stocks in 2000, at that time, there was only one speculation target in the overall market, and that was the Internet. But the US stock market we saw at the end of last year and the beginning of this year was a radiant speculation method. The first thing that started was to hype Internet companies, and then cloud computing. After that, Tesla’s electric vehicles led to a surge in all new energy vehicles, and later it was the autonomous driving supply chain driven by electric vehicles. From autonomous driving, flight sharing rentals were derived. From flight sharing rentals, space technology began to be hyped, and then blockchain-related stocks began to skyrocket.
The differentiation of the target and the wealth-making effect of the rotation of the sector have prolonged the overall life of the U.S. stock market. Therefore, the U.S. stock market is gradually taking into account the economic recovery in the United States in the next two quarters and the recovery in Europe and developed countries in the next three quarters. This is the reason why U.S. stocks cannot make a deep correction at this stage.
As U.S. bond yields soared, funds began to flow into risky assets, such as junk bonds and stocks. Individual and institutional investors are also increasing their purchases of leveraged loans and mortgage-backed bonds (CLO). When the benchmark interest rate rises, the interest paid to investors by leveraged loans and CLOs will also rise. This shows that the risk appetite of the overall market has just begun to increase.
There is no doubt that the 10-year U.S. Treasury yield will exceed 2% before the end of the year. The question is what the Fed will do when it arrives. If inflation starts to rise, is it possible that the 10-year U.S. Treasury yield will soar even higher? This is back to the current market situation. I may be more inclined to local inflation rather than overall inflation. The Fed also chose to allow inflation to rise and gave a certain degree of tolerance. After all, it is a more reasonable choice to ensure economic recovery.
The latest survey shows that 37% of Americans who receive relief funds will invest in stocks and other markets. The market takes this part of future purchasing power into account, which is also the reason for the inability to fall. But the strong rise of Baotuan stocks is also impossible to see now. At least at this stage, the US stock market has been speculated for many rounds. Even among retail investors, more than 50% of stock assets are held by 2% of high-net-worth groups.
What should I do if the stock can’t cut the leeks? Just yesterday, Musk said that Tesla recently sold $100 million in Bitcoin, which is called the depth of testing. The currency circle of the stock market may be an important issue this year. On the other hand, the exit of NFT is also allowing more traditional investors and Internet technology companies to link their stories with the blockchain.
In the past month, we have seen various types of ETFs in the application, and we have also seen various technology companies accepting cryptocurrency payments. Similarly, we have also seen a large number of friends asking about what is an NFT. These are all It is the Crypto currency that is gradually “out of the circle” in the most popular way. And I want to attribute the biggest credit this month to Dogecoin, there should be no objection.
Dogecoin, a completely useless Crypto currency, through Musk’s celebrity effect, and then magnified by the visible wealth-making effect, which then caused discussion and controversy. This has to meet several requirements: 1. In the past few years, no one has paid attention to it for a long time, the total amount is large, and the price is extremely low; 2. The founding team leaves, but the super high control board; 3. There is a community cultural foundation, but it is really certain It is a completely useless Crypto currency. Dogecoin exactly matches the above three points.
Dogecoin’s skyrocketing itself will bring about a self-reinforcing effect, which is simply a typical silly game. In the past two months, I will use Dogecoin as a typical indicator to judge the increment of new investors and the time point of market adjustment. How to judge? The time sequence of the path for people outside of the circle to start consulting is often from Bitcoin, to NFT, and then directly to Dogecoin. Yes, DeFi is skipped. This is very interesting, but the content of the consultation is also very important. From the middle of this month, a number of friends who are separated from the high-tech industry have gone from asking whether they can hold Dogecoin to already holding Dogecoin. , When should it be out. This time happens to be the time when Bitcoin began to fall. This shows that in the short term, investors who have just entered the market will not be able to touch the north, and being baptized by the market is the right path.
In the past month or so, there is another project. I will use it as a reverse indicator to judge the trend of the Crypto currency internal market. This project is Filecoin. IPFS is a very mature protocol, and decentralized storage certainly has value. The only problem is that almost 100% of the users who participated in the early mining machine are from China, which means that this project has become a “single coin”.
So when Bitcoin and Ethereum started to fall some time ago, we will find that almost all of the top 50 cryptocurrencies in the world have followed the decline, and only Fil is rising alone. Because it is an independent market, it is not linked with global users. Of course, the hard disk mining project that later took over Fil was called Chia. There is a very interesting point here, that is, the main clean bitcoin. So here comes the question. A dirty, unacceptable 100-dollar dollar note fell on the ground. Will you pick it up?
The decline of Bitcoin did cause a panic, but when you think about it, the money that Coinbase sets out from the stock market is always to buy some discounted coins. As mentioned in my previous article, the changes in this round of bull market are transitioning from Bitcoin to Ethereum. After all, everyone in the traditional circle already knows Bitcoin, but for the vast majority of ordinary people, application scenarios such as value storage and large asset transfer are too far away.
What’s the next step for blockchain? Politics is the superstructure of the economy. If Ethereum is regarded as a country, then it is clear that we have seen credit assets begin to be built on Ethereum. The introduction of credit is one of the most shocking things in Ethereum. In the past world, the U.S. dollar was also the credit currency that anchored the issuance of oil. Today’s Ethereum uses itself as an anchor, triggering MakerDao and becoming the central bank of this country, mortgage Ethereum to exchange for stablecoin DAI.
This is the initial stage of DeFi. So most people go beyond DeFi to understand NFT directly because financial assets are inherently complicated in the traditional world. But it was DeFi that began to build the original appearance of the blockchain parallel universe. The prototype we saw today formed the moat of Ethereum, and then began to evolve drastically.
We have seen many public chains want to compete with Ethereum in the past, but we have not seen a breakthrough point for the time being. An extremely important factor here is that developers are the most important barrier to an underlying public chain. After the early development of the port matures, technical personnel are not willing to migrate to other platforms because the time cost of learning is high.
This is exactly why BSC moved its own chain to the Ethereum network, and the ecology began to undergo rapid changes. Before the emergence of a new paradigm, the latest top-level projects will eventually return to Ethereum regardless of which one is used in the basic chain. The bottom-level consensus winner takes all. So now other public chains are slowly becoming Ethereum’s parachains to some extent, and their ecology has become Ethereum user education in disguise. When Ethereum undergoes tremendous changes, users will return to it.
The current Ethereum adopts the Tencent model, which is to explore two different paths at the same time, and each path has two or three teams competing at the same time. This makes Ethereum’s evolutionary speed an unprecedented breakthrough. The evolution of the underlying technology will accelerate the explosion of its decentralized credit currency system.
I think in the decentralized financial world, there are two core issues: how to introduce credit assets and create credit expansion methods. For example, lending agreements such as AAVE, which are very similar to the existence of blockchain banks, are typical examples of credit expansion after the introduction of credit assets.
We have seen that in some financial basic fields, DeFi has already emerged head projects, such as decentralized transactions and decentralized lending platforms. But this is far from enough. The scenarios for the further deepening of DeFi that may appear in 2021 are in two aspects: one is with the increase in the underlying decentralized asset agreement, how to increase leverage in a decentralized way to strengthen the blockchain world Asset utilization efficiency; the other is that with the large-scale innovation of decentralized financial products, species such as decentralized investment banks, decentralized insurance, and decentralized asset management platforms will be born that are benchmarked against traditional world financial institutions.
Today we see that the market value of Uniswap has exceeded 130 billion U.S. dollars, the market value of AAVE is close to 35 billion U.S. dollars, and the MKR is about 27 billion U.S. dollars. Coinbase has a market capitalization of more than 100 billion U.S. dollars, and it seems that Uniswap’s market value is too high. But in the world of blockchain, you will find that the bottom-level consensus winner takes all, so the market will give a premium that is higher than that of traditional capital. As a result, the accumulation of early advantages will become extremely critical.
Now Uniswap is preparing to upgrade V3, and we have also seen that some decentralized trading protocols have created the V3 version in advance, but once the upgrade of the first advantageous project is completed, liquidity will quickly flow back to the underlying consensus project. Therefore, we should not benchmark Uniswap against a certain centralized exchange, but should regard it as the sum of all centralized exchanges. In the long run, it is very likely that Uni’s market value will exceed one trillion US dollars.
Everyone, don’t think that the world of DeFi is over here. What about borrowing? What about asset synthesis? What about derivatives? What about insurance? What about revenue aggregation? What about investment banks? What about asset management? There is a lot of innovation here that hasn’t started or just emerged. Even in the current Crypto currency secondary market, there are still projects that may double 100 times in the next year, and even have seen a thousand times in the long run. And I think such projects will continue to be born in the coming year. The meaning here is the return on investment of pure secondary market investment without considering the primary market at all.
The ecology of the blockchain has far exceeded everyone’s understanding in 2017, and many people still have path dependence, including the old understanding that has not been updated and iterated. Don’t think that for some projects, someone else might get the currency at a very low cost in the primary market, and you are here to take the order. Those who invest in the primary market may not be able to see the long-term development of this project. Most of the people I know who have participated in the Ethereum private placement have sold all of the Ethereum early in the morning, and today there is no Ethereum in their hands. If your knowledge is in place, you will find that many of today’s DeFi projects can find companies or projects that can be targeted in the real world, and then convert them into a blockchain thinking to see and understand, you will see that others don’t To the future. After thinking for so long, I found that there is one and only one type of people who have survived in the blockchain world for a long time, that is, the aborigines of crypto.
Only when you think about the parallel universe of blockchain based on currency, you will find that the trading pairs of all Crypto currency exchanges are reversed, not BTC/USD, but USD/BTC. When the USD skyrocketed, it represented the false prosperity brought about by the flooding of the traditional world. When the USD plummeted, it was the real economic situation of the traditional world, and the citizens of various countries in the real world were fleeing the traditional economy on a large scale. Enter the blockchain Crypto world and become a new citizen.
The blockchain we see today is linking traditional groups and blockchain cognition through various types of mining machines. I believe this part will exist for a long time. Is POW really just an expression of a consensus mechanism? Looking at the longer-term future, the essence of POW mining machine is the Internet of Things IOT, the means of production are on the chain, and the final workload proves the transfer of asset data and various types of application data in the future. Therefore, POW will exist for a long time with the large-scale iteration of hardware infrastructure and continue to evolve.
When these people in the traditional world begin to gradually enter the Crypto world, DeFi will become the next paradigm to help them understand the blockchain. I know that the listing of coinbase in the past month has caused a lot of emotions. Everyone feels that we have lost the right to speak in the blockchain world.
In fact, think about it carefully. In the past, the disappearance or inefficiency of China’s blockchain projects was not a policy factor in itself, but because the underlying consensus was the winner takes all. It was precisely because other projects could not build the ecology for a long time, and finally had to leave lonely. market. Today, the number of people participating in Crypto currency investment has surpassed 100 million, and the number of people participating in DeFi is only a mere 1 million in the world. The group participating in NFT has just exceeded 100,000 people worldwide.
Why do I say that in the future there will be 100 times the opportunity a year, and there are more than one, but there are many. Today’s DeFi has just arrived on the global Bitcoin and Ethereum Crypto currency market in mid-2016. Where is this going? Not to mention NFT, which is close to the global Bitcoin market in 2011.
The war has just begun, and it is far from over. There are still plenty of potential opportunities to explode in the DeFi field. Both AC and SBF want to build their own decentralized financial gangs. This market is already large enough. The huge difference between blockchain and the Internet is that Crypto currency itself is an asset, and Defi is creating a new paradigm of direct profitability.
Blockchain is an infinite war. It is not necessary to compete in the dimension of value storage or operating system. On the contrary, it is the dimension of decentralized financial conglomerate, which will become extremely important in the future. This will be a high dimension. war. If you have time to pity yourself alone, it is better to take up the weapon in your hand and fight. In the coming year, DeFi is entirely possible to give birth to a super platform with diversified financial service capabilities similar to the Morgan Stanley Group. Is it possible that this super platform was made by the Chinese team? If you are a developer, you should participate in this war to create the future.
Blockchain is a huge trend that lasts for decades, and 2021 is just the starting point.