39. A Discussion on Bear Markets: If you are still confused, you can read this article to get information on the three major career transitions in Crypto.

Author's Note

I need to reiterate that writing is just a hobby for me, a way to express my personal subjective views. My opinions are not always correct, and they can even be wrong. If anyone has different viewpoints they wish to discuss, I welcome that. However, if you come with a mindset of debating and must prove me wrong, then it's unnecessary. You have already made up your mind and are not looking for a discussion; you just want to criticize anyone whose views differ from yours.

Today's article is intended to be a long piece, part of a series on bear market discussions, and this is the first article. The first piece will analyze the industry from a personal perspective, breaking it down into three main categories of professions. The goal is to provide a relatively clear guide for many confused individuals to understand their roles in the industry or to choose a role for a career change.

It should be noted that the roles and career changes described in the article are not exclusive. When your abilities and energy are sufficient, you can transition into any role.

This article is actually aimed at readers such as: newcomers to the industry, those who have been in the industry for years without a stable job, and those who have been in the industry for years without a stable money-making methodology. If you are already a wealthy individual, you can read this with a light-hearted attitude.

Main Text

Several months ago, I posted a thread to briefly discuss today's topic, but after some thought, I decided to complete a full article.

In this industry (Crypto, blockchain, Web3, whatever), I categorize individual participants into three main roles: traders, investors, and builders. These roles can intertwine; you can be both a builder and a trader, or an investor. Below, I will describe the abilities required for each corresponding role and what they generally do.

Trader

The trader role is relatively straightforward, adhering to the belief that "all information is reflected in the candlestick chart" and "all information merely accelerates the trend formation." Professional traders are generally reluctant to trade small-cap coins due to poor liquidity and a high probability of being controlled by project teams. A trading target that is not primarily market-driven is not an ideal trading target, as the candlestick chart often becomes ineffective due to insider trading by project teams.

The traders I know tend to lean towards traditional trading but are very professional. One of my trader friends used to trade Hong Kong and U.S. stocks professionally, focusing on trading for many years, and later switched to full-time trading of BTC in the crypto space, mostly using BTC as the base currency. I initially thought he would have achieved financial freedom by now, but in reality, he is far from it; although he has some money, it pales in comparison to the wealthy individuals in the industry.

The reason I use him as an example is that after long discussions, I believe he fits the mold of a template trader. However, I also think he adheres too strictly to trading discipline, so while his win rate is decent, he has never made substantial profits. Based on him as a template, I will list some core abilities of traders as I understand them (though these abilities do not lead to making multiples of money).

Risk Control Ability

I place this ability first because, although I do not trade often, it is one of the few very useful abilities I learned from him.

If you are reading this and have a habit of trading, please reflect on the following questions:

What is your basis for judging price movements? Is it just a feeling?
What is the size of your position when you open a trade? Is it based on intuition?
Do you have a trading plan before opening a position, including profit-taking and stop-loss levels?

I believe many people's trading basis is just a feeling or market intuition. Because of this, many people make money through luck in trading; you can read my article from last year about luck in trading.

Traders can be divided into technical traders who analyze candlestick charts and news-based traders, both of whom can make money. However, traders who try to analyze both candlestick patterns and news often struggle to make profits. When candlestick patterns and news diverge, traders who try to balance both will quickly become confused or act recklessly.

Many people have their priorities reversed, thinking that technical analysis or news is a means to make money. In reality, whether it's technical analysis or news, the core essence is the same: to improve trading win rates.

This is very similar to playing Texas Hold'em; you cannot go all-in right after the cards are dealt. You must wait until your odds are overwhelmingly in your favor before increasing your bet or going all-in. Unfortunately, I see too many friends focused on trading who go all-in every day, leveraging 10x or 20x.

Thus, the primary condition for risk control ability is to manage your position size in uncertain win rate situations, ensuring you won't be washed off the table (go to zero).

Ability to Improve Win Rate

This is very easy to understand. If you are a technical trader, do you have a thorough understanding of various indicator patterns? Many people only have a superficial understanding of trading indicators, merely grasping the subjective analysis conclusions summarized by others. Let me give an example.

"EMA bullish alignment: 5-day EMA is greater than 10-day EMA, 10-day EMA is greater than 20-day EMA, and 20-day EMA is greater than 60-day EMA."

This is a description of EMA I found on Xueqiu. Many people’s understanding of indicators stops here, memorizing some rules summarized by predecessors. However, the market is unknown, and blindly following rules will not improve your win rate.

I believe that if you attempt to be a technical trader, you should study indicators from a mathematical logic perspective so that you can truly understand the logic behind various indicators, rather than just memorizing a certain pattern.

Learn indicators - trial and error trading (with risk control) - refine indicators - trial and error trading (with risk control) - refine indicators;

Through this iterative process of refinement, your win rate will increase, and the probability of making money will also grow. Only then can you continue trading while consistently making profits.

Position Control Ability

Amid the noise in the industry, there are always people shouting to go all-in, and many people indeed open positions with their entire capital on leverage, ultimately leading to financial ruin.

Winning or losing is all about contracts. The luck money earned through contracts, if not backed by corresponding abilities, will eventually be lost if you do not exit the market. There is a well-known case of a famous Weibo influencer who made tens of millions through contracts but subsequently lost it all.

The position control ability I want to describe is actually a part of the trading system. For example, you should plan how large a position to take before opening a trade, how many points to take profit or stop loss, etc.

Taking my earlier example of the trader friend, the reason he does not make money is that he strictly adheres to opening only $10,000 per trade. No matter how good the pattern or how strong the market sentiment, he only opens $10,000. He also keeps a trading record for each trade, including reasons for opening the position, entry points, position size, profit-taking and stop-loss points, expected returns, actual returns, etc.

I will give a detailed example, but the data is entirely fictional. He would likely create a table like the following and strictly adhere to it. Since he has set stop-loss and take-profit levels, once he opens a position, he completely ignores it. If it does not trigger or hits the stop-loss, he tags it as a failed trade and reviews it after some time to assess his trading win rate.

Due to strict control over his position size, even if he incurs many losses, he will never go to zero. As long as he maintains a sufficiently high win rate over time, he will still make money under the law of large numbers.

The three abilities mentioned above are what I consider essential for traders, but the parameters of these abilities need to be assessed by the reader based on their own capabilities. Of course, there are many big players who have indeed made significant money through intuition or trading talent, but I believe these factors are not universally applicable, so I will not consider them here.

Investor

The term investor may sound distant; people might associate it with investment firms like Sequoia, IDF, or A16Z. However, in the crypto space, the barriers to becoming an investor have been significantly lowered.

Thanks to decentralization, investing in crypto no longer requires accredited investor certification or capital verification. As long as you are in this industry, you can become an investor through various means.

Those with money and resources can invest in the primary market;
Those with money but no resources can invest in the secondary market;
Those without money or resources can invest by participating in project interactions or volunteering in communities.

From the investor's perspective, I advocate three abilities that I believe every type of investor should possess.

Value Your Money

This may not be clear to many; who doesn't value their money? In fact, most people in the industry do not value their money. A slight disturbance or so-called insider information can easily lead a crowd to FOMO into investments.

This industry is filled with complex and often unverifiable information, and many friends have lost their ability to think independently. Once a seemingly credible media outlet publishes a soft article, they believe it’s a good project and invest money. Or if a big influencer promotes a project, they will also FOMO in.

These are all concrete manifestations of not valuing one's money. I believe that if you are trying to pursue the path of an investor, you must make cautious financial decisions. Here are some reflective questions for readers who invest to consider how they approach investment decisions.

How many of the projects you invested in were recommended by others?
How many of the projects you invested in did you learn about through media soft articles?
How many of the projects you invested in were recommended by big influencers?
How many of the projects you invested in did you research by reading the project white paper, studying the technical framework, investigating the business logic, and analyzing its user demographics?

You probably have a sense of this, and this is my viewpoint: people do not value their money as much as they imagine. This is also what I mentioned in a previous article: money in crypto/blockchain/Web3 is easy to make; as long as you lack a moral compass, you can easily earn money from those who do not value their money.

So how can one learn to value their money? The next two abilities will guide you.

Continuous Learning of New Knowledge

I need to say seriously that reading media information does not count as learning new knowledge. So what kind of behavior qualifies as learning new knowledge?

Those readings that make you feel difficult, require deep thinking, and are not summarized by others are what we call knowledge.

Media information is summarized but overlooks details, directly feeding you chewed-up information. Regardless of whether media information has interpretative biases or is intentionally guiding you, their biggest problem is that they make you lose your ability to think, leading you to focus only on conclusions, such as being told that XXX is a good project.

But why is it a good project? Is it the editor's subjective interpretation or a paid soft article? You have no idea. Therefore, please make sure to read the most original information; ideally, you should read the code directly.

However, many friends may not have the ability to read source code or conduct code audits, so at this point, you need to read technical articles. Try to understand a subject from a technical perspective or logical framework.

For example, recently I have been continuously reading about zero-knowledge proofs. I have not read the carefully edited articles from the media. My chosen learning path is to read on Wikipedia, starting from the basic definitions to understand the general meaning. Then I read the references at the bottom of the page.

Certainly, there are many English documents and algorithmic literature that I am unable to read due to my limited ability, but at least I am closer to substantial content than media articles. This is why many readers say my articles have sufficient depth; it is not that my depth is sufficient, but rather that I am much closer to the essence than the typical media articles, which are merely summaries. More importantly, it reflects my thoughts during this learning process.

Researching Niche Fields

This is also a common mistake among many friends; everyone tends to chase trends, knowing concepts like NFT, metaverse, GameFi, Layer 2, etc., but few delve into the niche fields within these areas.

Taking the NFT field as an example, NFTs are not just the commonly seen PFPs. There are many niche areas within NFTs, such as NFT PASS, NFT fragmentation solutions, NFT lending solutions, NFT cross-chain solutions, and so on.

Another example from the metaverse perspective: many people only focus on the topic of the metaverse but not its details. For instance, many projects promoting the metaverse currently only have promotional materials like websites/videos and lack actual project progress. Everyone knows Sandbox is working on the metaverse, but few understand the business logic built around UGC; the focus is merely on selling land and price fluctuations. In terms of products, there has been almost no attention to the major version improvements of the Sandbox UGC editor.

I have also written a more detailed article on the metaverse. Interested readers can take a look.

Once your research delves into niche fields and you can accurately understand their application value, you will be ahead of many others, even leading investment institutions in starting to position themselves.

What drives industry development is not market capitalization or coin prices. It is builders and the widespread application of projects.

Builder

First of all, builders are not just programmers; builders encompass a broad range of industry creators. From a personal perspective, whether you are a programmer, operator, business developer, marketer, or even a KOL, you are a builder of the entire industry.

As long as you work in any company or project within this industry, you are a builder driving industry development. Whether you are a trader or an investor, if your identity does not include being a builder, you are merely extracting value from this industry.

I use Web3 to describe this industry, in contrast to Web2. Compared to Web2, Web3 emphasizes the power of individuals and feeds back into the individuals, which is where Web3 has the wealth-creating effect.

In the Web3 space, you can create what you want based on your abilities without having to write multiple proposals for your boss, and the purpose of writing proposals is to satisfy your boss rather than to achieve anything. In fact, your existence in Web2 is often to make your leaders or bosses happy rather than to create value.

To illustrate, suppose you are a programmer with some ideas for DeFi; you can immediately start coding and testing. But if you are in the Web2 world, you first need to write several proposals based on your ideas, submit them, wait for approval from your leaders, and then begin technical evaluations and selections. If you have not felt this pain, let me describe the fear that comes from Web2 more specifically.

What is the underlying logic of this proposal? Where is the top-level design?

What is the final delivered value? Where are the key points in the process?

How do you ensure the results are closed-loop? What are the highlights of your proposal compared to others?

What are your advantages? I do not see your accumulation and thought process.

Do you have your own methodology? What would be different if someone else presented it?

Web2 has already formed a fixed mindset. You need to first prove that a certain idea is correct and profitable. The focus is on proving and overly valuing the results of that proof. Because of this, in many product discussions in Web2, you will hear "other products do it this way" or "other products have this many monthly active users." These are all used to prove an idea, leading to the solidification of Web2's approach, where the existence of successful cases in other companies justifies their methods. This is also the essence of the homogeneity problem that Web2 products have faced for years.

In contrast, in Web3, due to the industry's long-term development phase and lack of fixed methods, many innovative ideas and approaches can emerge. The reason traditional methods are called traditional is that they are difficult to shake.

Rapid trial and error and quick corrections are the long-term principles of Web3.

Alright, the first article in the bear market discussion series is complete. If you are confused about what you should do or which direction to strive for, I hope this article can help you. My experience cannot cover such a vast area, so many parts are not thoroughly written. If you have deep insights into a particular field, feel free to share and include your advice for others during the bear market.

Author: Liu Ye Jing Hong

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