What is the long-term value of investing in digital currency?

digital currency

I think that the current Bitcoin, Ethereum, and some of the leading projects in the DeFi ecosystem belong to this type of project worthy of long-term holding.
There is an old saying that “stones from other mountains can be used for jade”, which means that we can usually learn from other fields when we do things in this field. This kind of reference is often particularly important for a new industry and field, because these new industries and fields lack a reference history.

This is the case for investment in the digital currency field. Since this field is a brand-new investment field, both investment varieties and investment groups are still immature, and there is also a lack of reference. Therefore, there are various complicated chaos in the field. These chaotic images have caused a lot of troubles for novice investors who entered this field when they first started investing, and investment veterans who entered from other investment fields.

In his new book “Value” by Zhang Lei, he summarized his many years of experience in the field of venture capital and combined these experiences with specific cases for detailed explanations.

Zhang Lei is the founder of Hillhouse Capital, a well-known venture capital fund in my country. Hillhouse Capital has grown from a simple office with only 5 people at the beginning of its establishment to now become the largest venture capital fund in Asia with hundreds of employees and control of US$60 billion.

Hillhouse Capital has successfully invested in many high-tech companies such as Baidu, Tencent, JD.com, Airbnb, Uber, Didi, Meituan, etc., and has obtained substantial profits from them.

In the book, Zhang Lei wrote such a paragraph while comparing the differences between stock investment and venture capital, to the effect that in stock investment, for value investors, the important method in the early years was to find valuable but the price was seriously undervalued. This method is very applicable when the US stock market was still in chaos before the 1950s and 1960s. But now that a large amount of long-term capital has entered the stock market, it is basically difficult to find valuable products with severely undervalued prices.

Under this circumstance, it is difficult to find products with absolutely low prices, so the goal value investors are looking for is no longer simply low prices but also consider whether the value of an investment product will increase over time. If the value can continue to increase, even if the current price is not cheap, the investment product will increase in value much higher than the current price in the future.

As a leader in the investment industry, Buffett’s assessment of the value of stocks has also undergone the above-mentioned similar changes, from simply looking at whether stock prices are low in the early stage to looking at whether a company’s value will continue to grow over time.

This change in value judgment not only affects stock investors, but also deeply affects today’s Internet investors (including Hillhouse Capital and Zhang Lei). Because even in the early stages of investment in the Internet field, such as the angel round and the A round, the valuation of general companies is generally not low. Therefore, whether the company’s value can have great growth space in the future has become a lot of Internet venture capital funds. The key point of investigation.

Comparing the development and changes of the stock market and the status quo of Internet venture capital with the current investment in the digital currency field, we will find that the digital currency market has the characteristics of both markets.

It not only has the characteristics of the early stock market (for example, the market is mainly retail investors, and the market is in a state of extreme chaos and no supervision); at the same time, because it is a brand-new investment field, the entire ecology is still in the very early stage of development, which is very similar. With the characteristics that the Internet has shown in various segments along the way, this ecology is destined to nurture and develop great potential value in the future.

Therefore, in the field of digital currency investment, we can not only find some projects whose price is seriously lower than their value, but also find that the future value of some projects will inevitably grow over time. This characteristic is a godsend opportunity for investors in this field.

Therefore, from this perspective, long-term holding of promising value items is necessary to earn the part whose price is underestimated by the market on the one hand, and the value-added part brought by time on the other hand.

To be more specific, I think that the current Bitcoin, Ethereum, and some of the leading projects in the DeFi ecosystem belong to this type of project worthy of long-term holding. Especially at the moment, the prices of many popular projects have been significantly underestimated, and they have the value of such long-term investment and holding.


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