In yesterday's article, I expressed the following view:
In crypto ecosystem investment, to ultimately obtain long-term, continuous, and stable returns, one must find projects that can continuously generate long-term, continuous, and stable cash flows.
Of course, if investors believe that in the crypto ecosystem, investing only in Bitcoin is sufficient, such investors naturally do not need to pay attention to this investment approach. This is similar to real-life scenarios where some investors believe that investing only in gold is enough, without needing to invest in stocks, equity, etc.
However, I will not do this. So, both now and in the future, my primary focus and energy will definitely be on projects with continuous returns. As for Bitcoin investment, it requires no thought or time, and can even be held for a lifetime without management.
In the perspectives of Munger and Duan Yongping, they often say that it is difficult to judge what is good or right, but conversely, we can relatively easily determine what is not good or wrong.
This method can also be used to evaluate crypto projects.
In the crypto ecosystem, we may find it challenging to determine what a project with long-term, continuous, and stable cash flows looks like, but we can examine what a project without such cash flows would be like.
Take Ethereum, for example. In this market cycle, without powerful new ecosystems and existing ecosystems unable to generate sufficiently strong and continuous returns, Ethereum's token price has continuously languished. Even occasional price increases are purely driven by sentiment, with short duration and weak intensity.
Take Solana, for instance. Recently, as meme coin sentiment gradually fades and no other ecosystem can generate sufficiently strong returns and attractiveness, its token price has also begun to decline.
This applies to main chains, and layer-2 expansions are not immune: Ethereum's once-popular layer-2 expansion Scroll received a total investment of $1.8 billion during the venture capital stage, but now its token's fully diluted valuation (FDV) is less than $400 million.
There are many reasons for their token prices' decline, but ultimately, in my view, it boils down to one point: lack of long-term, continuous, and stable ecosystem returns, causing project tokens to either continuously languish or experience brief glory.
I remember writing in a previous article about analyzing some well-known DeFi projects using traditional listed company analysis methods, such as Aave, whose token price is significantly overvalued.
At that time, some believed that crypto projects should have such high valuations and that traditional analysis methods do not apply to crypto projects.
In fact, I believe this is self-deception. Analysis methods are not about being traditional or not; in any field, they should be the same and should return to simple common sense: can it generate value, can it generate continuous cash flow.
If investors continue to deceive themselves, believing that emotional value can replace the continuous cash flow value brought by genuine services and products when evaluating a project token, such "investments" will eventually fall into a pit, and once the tide recedes, they will be exposed.
Look at these well-known DeFi projects - which of them have reached their historical peak prices from several years ago? This is the most authentic response from the market.
Reviewing these projects now, from their inception to the present, investing in these tokens would result in losses unless one can accurately predict emotional value fluctuations and precisely execute high selling and low buying.
Of course, if these projects find powerful profit growth points in the future, generating tangible cash flows like NVIDIA or Apple, not only could their token prices reach new highs, but creating miracles would be entirely possible.
However, some projects have begun to recognize this common-sense issue and are attempting to solve it through various methods.
MakerDAO was an early mover, while Aave has been making significant moves recently.
They are doing the same thing: attempting to expand their business into the RWA domain, striving to substantially increase income and generate more value.
We will not discuss whether their expansion into the RWA domain is appropriate or if their methods are reasonable.
But their direction of effort is definitely correct.
In Duan Yongping's words, they are "doing the right thing". As for whether they are "doing things right", that remains to be verified.
But I believe that as long as one persists in "doing the right thing", this exploration is valuable.
Project teams are returning to common sense, and investors should also return to common sense and the fundamental evaluation of project value.
