Author | Wu Blockchain Blockchain
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This episode of Wu Blockchain Unencrypted podcast features Zheng Di (didier), a cutting-edge technology investor. The discussion revolves around the recent Bitcoin decline, changes in Strategy's (formerly MicroStrategy) financial strategies, the AI-driven rise in US stocks, the integration of US stocks into crypto exchage, and the macroeconomic outlook.
Didier believes that the recent decline in Bitcoin is not primarily due to macroeconomic factors or ETF redemptions, but rather the market's readjustment of expectations that micro-strategies might continue to sell small amounts of tokens to pay preferred stock dividends under the "neutral token content per share" principle. Meanwhile, AI is reshaping the labor force, and tokens are seen as new factors of production, driving the continued rise of the US AI industry chain. The crypto industry may gradually shift from speculation on native Altcoin to the on-chaining of real assets, on-chain machine economy, and a more mature industrialization stage.
The opinions expressed by the guests do not represent Wu Blockchain views and do not constitute any investment advice. Please strictly abide by local laws and regulations. Audio transcription and translation were done by GPT and may contain errors. Please listen to the full podcast:
Small universe:
https://www.xiaoyuzhoufm.com/episode/6a337dbb43a22a695585c365
Micro-strategy Selling Experiment: The Game Between Expected Selling Pressure and Market Acceptance
Cat Brother: Bitcoin has recently experienced a significant drop, and there are many explanations in the market. Some say it's due to micro-strategy selling, others say it's ETF redemptions, and still others attribute it to macroeconomic changes or leveraged liquidations. Which factor do you think is the most crucial?
didier: I think the core issue is still the micro-strategy, but what really suppressed the market was not the one time the coins were sold, but the market's expectation that it would continue to sell coins.
MicroStrategy stated in its May earnings call that it would maintain a neutral Bitcoin content per share. With the increasing availability of preferred shares and debt instruments such as STRC, STRZ, SRD, and STRF, Bitcoin is no longer just an asset for common shareholders; it must first cover the interests of creditors and preferred shareholders. This increases the cost of maintaining BPS neutrality.
Previously, the market believed that Bitcoin primarily paid preferred stock dividends by selling shares, which didn't put much pressure on it. However, now that the threshold for raising funds through new share sales has increased, the pressure is shifting towards Bitcoin. As long as the MMV remains below the neutral threshold, it's more likely to cover its cash flow through small, continuous sales of coins. Especially if the frequency of interest payments increases further, the market will naturally expect it to sell not just occasionally, but rather at regular intervals.
Therefore, the key to this round of decline is not "how much was sold," but "whether selling will continue in the future." Under this logic, ETF selling is more like a result than a cause. Because once the market judges that micro-strategies will continue to sell, related funds will withdraw in advance.
Cat Brother: So you just said that Michael Saylor is like conducting a financial experiment. What is the purpose of this experiment?
didier: Essentially, he was testing the market's ability to absorb continuous small-scale selling of coins.
From a financial perspective, given the low MMV premium, selling small amounts of cryptocurrency results in less damage to the cryptocurrency content per share compared to selling stocks; this is the optimal first-order solution. The problem lies in the significant increase in interest and dividend payments for preferred stock and perpetual instruments since the large-scale issuance of STRC in March, making cash flow management a pressing issue. Therefore, the key question is no longer whether to manage cash flow, but rather how to manage it.
If the market can absorb the impact of these continuous, small-scale coin sales, the system can continue to exist. However, if this approach, in turn, depresses stock prices, lowers MMV, exacerbates decoupling, and further reinforces expectations of "continuous coin sales," then it may have to make a soft shift, such as relying more on selling stocks again, or using a combination of stock and coin sales. Although this would sacrifice some of the coin content per share, it could mitigate the impact on coin and stock prices, representing a second-order optimal solution.
So what we're really seeing now is a game between Michael Saylor and the market. He's watching to see where the market will find enough buying support, while the market is waiting for a lower, more certain price before making a move.
Cat Brother: Could it lead to micro-strategies and Bitcoin entering a "death spiral" together?
didier: I don't think this incident alone is enough to cause that. For it to really come to that, it would usually require the addition of new negative macroeconomic factors or a larger systemic shock.
If a soft reversal occurs later, and the rigid selling of coins ceases, buy the dips funds will likely return. The issue isn't whether there will be support, but rather at what price. It could be 62,000, or it could be lower; the market is currently waiting for that level.
Therefore, my assessment remains cautiously optimistic: this round of decline is more due to structural pressures resulting from changes in the financial structure of the micro-strategy itself, rather than simply being caused by tightening macro liquidity. Without any new major negative factors, the situation is likely to reverse and is unlikely to directly evolve into a true "death spiral."
Tokens are seen as a new form of labor.
Cat Brother: Although the crypto industry is currently sluggish, AI is booming, especially in the US stock market, where sectors like optical modules, semiconductors, and data centers have seen significant gains. What do you think is the core driver behind this?
didier: The core is actually very simple: tokens are essentially becoming a new type of labor force.
In the past, the core production factor for enterprises was people; whether it was physical or mental labor, it was all done by people. But now, many execution tasks that were originally performed by people are being replaced by AI and tokens. In the future, what will truly be scarce may only be a few people who can complete the closed loop: those who can set goals, design solutions, drive execution, and ultimately solve problems. Such people, along with a large number of tokens, constitute a new labor force system.
This will directly change corporate organizational structures. In the past, companies had many layers because information had to be passed down through people; but in the AI era, many middle management, assistant, IT, and executive positions will be reduced. What truly matters will no longer be mere execution ability, but rather influence, decision-making power, and imagination.
So essentially, in the past, companies paid their employees; in the future, they will pay more to tokens, models, and computing power. Model companies will then invest in upstream resources, purchasing chips, energy, optical modules, and data centers. Since upstream capacity expansion is limited and supply cannot keep up with demand, these upstream sectors will become the most continuously benefiting links in the AI industry chain, which is the core reason for the continuous rise of related US stocks.
The service industry will be the first to be impacted because knowledge-based services such as accounting, law, consulting, and data analysis are inherently the most easily replaced by AI. In the future, businesses will become increasingly automated internally, and a machine economy may form between companies. At that time, many transactions, collaborations, and even payments will be completed by machines.
Cat Brother: You mean this round of price increases isn't just short-term speculation, but has medium- to long-term sustainability, and we might still be in the very early stages?
didier: Yes, I think the era of the machine economy has only just begun.
Many people also have a misunderstanding of the "one-person company." It's not about one person working alone, but rather one person leading a dozen or more intelligent agents. These agents combined might be equivalent to the efficiency of hundreds of people in the past. Therefore, the premise of a so-called one-person company is actually that there are a large number of intelligent agents providing labor behind the scenes.
This is why I've consistently emphasized that tokens represent a new form of labor. In the past, companies spent money hiring people; now, they're increasingly shifting their budgets towards tokens. As long as tokens can continuously amplify revenue, corporate profit margins will significantly improve, which is the core logic behind the market's bullish outlook on the AI industry chain.
Therefore, the expectation reflected in the US stock market now is that more and more companies will become AI-native companies, using tokens to replace labor and improve automation levels, thereby significantly increasing profit margins. This is the most fundamental and reasonable driving force behind this round of growth.
Exchanges have switched to US stocks, so users don't need to rewrite their trading logic.
Cat Brother: With the continued rise in US stocks, many crypto exchage have also opened US stock trading channels. What's your take on this? Is it because the crypto industry itself lacks hot topics, forcing exchanges to actively create demand, or are there deeper reasons? Furthermore, will this further lead to capital outflow from the crypto industry?
didier: I've actually said this before: there are only two paths for offshore CEXs in the end.
The first option is to create a prediction market, but this path is extremely difficult. The leading players have already largely established themselves, and most existing centralized exchanges (CEXs) will find it very difficult to truly transform into the next generation of "exchanges for everything."
The second point is to shift to distribution channels for real-world assets, and the most important real-world assets at present are US stocks and US bonds, with gold also being an important direction.
The more fundamental reason is that, over the years, truly valuable native crypto assets have been few and far between. Bitcoin is one, and a few DeFi infrastructures and public chains are another, but apart from that, most native assets lack sustained intrinsic value and cash flow support. Therefore, the trading infrastructure built around these assets will inevitably seek new, valuable targets.
Therefore, it's quite natural for CEXs to shift their focus to US stocks. I don't really see this as a squeeze on crypto assets; it's more like the industry returning to reality: there aren't many truly valuable assets to begin with, and exchanges are simply turning to things that can better support liquidity.
However, in the long run, this may not be a bad thing. The core value of blockchain is not just about issuing native assets, but about providing decentralized options and more efficient and lower-cost settlement and transaction methods. Putting real-world assets on the blockchain is a meaningful direction in itself.
Moreover, in the longer term, blockchain is actually more like a technology designed for machines. The more likely scenario in the next five to ten years is that humans interact with agents, and agents complete payments, transactions, and collaborations on-chain. In this way, the on-chain infrastructure built today can be directly used by machines.
Therefore, in the long run, I actually think this is good for Bitcoin. Because eventually, more people and more machines will come into contact with on-chain assets.
Cat Brother: For ordinary users, who previously mainly traded Altcoin, Bitcoin, or public blockchain assets in the crypto market, the logic behind switching to US stocks is quite different. There are significant differences in financial reporting cycles, valuation systems, and regulatory rules. If you were to give one crucial piece of advice to these long-term crypto users or traders, what would it be?
didier: Actually, I don't think they need to change too much deliberately.
Because US stocks and on-chain assets are essentially very similar. US stocks include value stocks, growth stocks, and many assets with meme attributes. The core reason why this round of on-chain meme market has weakened is that the most influential meme assets have actually shifted to US stocks.
The story these assets tell is essentially about "changing the world." This narrative used to be associated with blockchain, but now a stronger version is appearing in the US stock market, such as quantum computing, nuclear fusion, and SMR. These things are often difficult to explain solely through financial reports, cash flow, or DCF; they also inherently possess strong meme-like qualities.
Therefore, those who used to chase Altcoin and memes can still find success in the US stock market by following the same logic and pursuing these long-term concepts. Similarly, those who focus on cash flow, fundamentals, and value propositions can also find corresponding value and growth stocks in the US market.
So what I mean is that various trading styles in the crypto actually have corresponding counterparts in the US stock market. Most people don't need to force themselves to change their trading patterns to find asset classes they are familiar with.
If I had to offer one piece of advice, it would be to avoid forcing yourself to change your methods just to switch markets. People who have survived to this day usually have a proven set of survival strategies; sticking to the parts that are effective is actually more important.
The 1011 incident severely damaged crypto liquidity, and altcoin prices are unlikely to recover.
Cat Brother: Listening to your analysis, the picture that came to mind was quite dramatic. It seems like the Altcoin hype of the past period has completely ended, because almost all those hyped-up targets can now be found in the US stock market, and some even have stronger practical significance. Is that a fair interpretation?
didier: That's one way to understand it.
The altcoin boom has essentially ended because the liquidity in the crypto was severely damaged. The 10/11 incident dealt a very heavy blow to the industry. While reports surfaced of $19 billion in liquidations, the actual figure is likely far higher. Rumors circulating suggest around $40-50 billion, which I believe is closer to the truth.
Moreover, it's important to note that this loss isn't just about book value; it's about real cash. The crypto industry's total market capitalization isn't particularly large to begin with, and a significant portion of that is locked up or inflated. The actual amount of tokens available for trading is far less than it appears. In this context, losing hundreds of billions of dollars in cash in a single day is a devastating blow to the entire industry's sentiment and liquidity.
Therefore, I believe that the 1011 incident was the final straw that broke the camel's back for the counterfeit market.
As for why "meme assets" can still be traded on the US stock market, the reason is simple: the US stock market is currently the most liquid market globally. When your own liquidity declines, you will naturally shift to a more liquid market.
From the US perspective, its support for Bitcoin and blockchain also stems from its own strategic considerations. The US logic is to transform blockchain, on-chain markets, and centralized exchanges (CEXs) into channels for US assets to attract global capital and access speculative investment. Therefore, its push to put the US financial system on-chain is essentially an effort to expand the global financing and distribution capabilities of US assets.
Of course, this is just the US government's understanding and usage. Whether the blockchain and crypto world will ultimately be completely shaped by this national will is another matter. A more realistic scenario is that the on-chain world and sovereign states will likely maintain a complex relationship of cooperation, exploitation, and competition for a long time to come.
But at least so far, this American approach is indeed gradually becoming a reality.
More cautious about the macroeconomic outlook for the second half of the year, but still optimistic about AI and Web3 in the long term.
Cat Brother: What are your macroeconomic assessments for the next six months to the end of this year? What policies might the newly appointed Federal Reserve Chairman Warsh adopt, and how will they affect the overall market?
didier: I think market uncertainty is rising going forward.
On the one hand, the market has already risen significantly; on the other hand, several more mega-companies may be going public, such as SpaceX, OpenAI, and Anthropic. The real pressure isn't just the drain on liquidity from fundraising, but rather the potential forced sale of other weighted stocks by institutions to rebalance their portfolios once these trillion-dollar companies are rapidly included in the index, given limited liquidity. This would put pressure on the market. Therefore, I will be more cautious starting in June.
Another key variable is the midterm elections. If the Democrats ultimately win both houses of Congress, it could be a negative factor for Web3 and AI, as they place more emphasis on labor rights, regulation, and oversight than on allowing cutting-edge technologies to continue their rapid expansion.
However, from a fundamental perspective, I believe the market may be underestimating the true impact of AI on the economy. AI has already permeated many aspects of life, but existing statistical methods may not fully reflect this. Therefore, in the long run, its ability to improve productivity is still very strong.
The real problem isn't just growth, but also distribution. If the distribution mechanism isn't adjusted properly, a highly polarized situation could emerge in the future: a small number of people who can master AI will reap the lion's share of the profits, while a large portion of the middle class will be squeezed out or even lose their jobs. In that case, although productivity will increase, overall societal consumption capacity will actually decline, which is why I'm more inclined to believe in long-term deflation than long-term inflation.
Therefore, the distribution mechanism will be crucial in the next few years. I think things like an AI tax will likely be implemented within three to five years, because without new tax sources, many future social arrangements will lack a financial foundation.
Looking only at the second half of this year and into next year, I don't want to draw any absolute conclusions. Short-term adjustment pressure is indeed increasing, especially around the time of SpaceX's IPO, but I think this is more like a correction than a complete market top. As long as major companies continue their capital expenditures, the overall market trend isn't over yet.
Looking at the longer term, I remain optimistic about AI and the combination of AI and blockchain. In the future, enterprises will become increasingly automated internally, and a machine economy on the blockchain may also emerge between enterprises; this general trend remains unchanged.
Therefore, I still believe that blockchain and Web3 have great potential; it's just that the methods will become more mature. The era of blindly rushing in and making money may be over. The future is more like an era of industrialization and institutionalization.
