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Encryption Level Pyramid: The higher you climb, the higher the return.

Encryption Level Pyramid: The higher you climb, the higher the return.

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ChaincatcherChaincatcher2024/05/10 08:25
By:原标题:《The Secrets of the Crypto Pyramid!》

Who is buying and being hyped? It's you.

Original Title: "The Secrets of the Crypto Pyramid!"

Author: Duo Nine⚡YCC

Translation: Deep Tide TechFlow

 

I unexpectedly became a KOL, which was a lucky coincidence that gave me a deeper understanding of how this field operates. There are many things happening behind the scenes, and this serves as a window for you to understand it.

The operation of cryptocurrency is hierarchical, much like a classic pyramid. The higher the level you are in, the more lucrative the returns. You, or the retail investors, are at the bottom of the pyramid. Here is how it operates.

Around 2020, I started posting my technical analysis on Twitter, and to my surprise, my content quickly gained popularity. Today, four years later, I have a great community that I call home.

I started getting involved with Bitcoin in 2014, and for a long time, I felt lost. Most of the places I visited were terrible, and in most cases, it was easy to fall victim to scams, manipulation, or similar occurrences.

Now, let me introduce you to the other side of cryptocurrency, which most retail investors cannot see.

Encryption Level Pyramid: The higher you climb, the higher the return. image 0

Crypto Pyramid and Its Levels Overview

First Level: You, the Retail Investor

Naive and easily trusting, retail investors are often abused and exploited. They are attracted to participate in the game by promises of 100x returns. Few actually achieve this, and those who do quickly lose everything in the crypto gambling due to newfound greed.

This is the foundational layer of cryptocurrency. It feeds and sustains all those above it. When a venture capitalist earns a 1000x return on an investment, that money comes from retail investors. Every time a token is released through TGE (Token Generation Event), IDO (Initial Dex Offering), or other methods, it is a profit-making opportunity for all levels above you. This includes KOLs, media partners, development teams, exchanges, and venture capitalists.

Who is buying and being hyped? It's you.

The goal of those at higher levels is to make you believe this narrative. If a big KOL says it's a good investment, it must be true, right?

Wrong.

They just want your money. It's that simple.

Those at the top of the pyramid buy tokens at a significant discount before TGE/IDO, or the development team simply generates them out of thin air with a few lines of code.

Your buying is giving value to that token, or in other words, transferring value to the upper levels. This is your key function in the pyramid, being exploited to provide value for something created out of thin air.

Second Level: KOLs and Media

KOLs and media companies in the crypto space serve the upper levels. They say and do whatever they are paid to. They feed off the upper levels and then pass on any content that retail investors want to hear (e.g., new tokens that will increase by 100x).

Most KOLs cannot be trusted by retail investors due to conflicting interests, and the more influential they are, the more you should be suspicious.

Why?

They may be sponsored by any party at the top of the pyramid, promoting narratives that may not align with your interests. That new token is likely just a copy-paste project from the previous cycle with a new name. Don't be fooled; always do your own research. Most memes are like this.

Media companies may also collaborate with one or a group of KOLs to create "organic" engagement around tokens or topics, which is not a new practice. Crypto protocols and venture capitalists have marketing budgets, and they will leverage this.

You are their target, and the role of this level is to sell it to retail investors.

Whenever you see a KOL listing a series of new crypto projects in a post, most of these projects are promotional pieces mixed with genuine tokens, making unsuspecting readers believe it's a legitimate research article. In reality, they haven't discovered any good projects; they are just paid to do this.

Over time, you will be able to distinguish who is real and who isn't, but if you are new to the crypto space, assume everyone is eyeing your money, and then work backward, trusting only Bitcoin because it is the most decentralized and difficult to control.

Third Level: Crypto Protocols and Development Teams

The most honest developer is Satoshi Nakamoto. Everything after him has been distorted. That's why there are over 13,000 shitcoins in 2024. 99% of them are shameless money grabs, with no technology or innovation; most are pumped to make money from retail investors.

Every time a development team releases a new crypto protocol or blockchain along with its related tokens or coins, they are essentially conducting an unregistered securities offering.

This is mostly illegal in the US but unregulated in most parts of the world. It's the fastest and easiest way to make money. The merits of that new protocol or network don't matter. Terms like DeFi, RWA, DePIN, SocialFI, or GameFI are used to confuse you, mostly to mask the truth.

That's why when you read a document of a new project, the most prominent parts are related to their tokens or useless token functions. Note that some teams do this every cycle with a new name or brand, and from the previous cycle, they have accumulated a lot of funds to pay lower-level KOLs to work for them.

If developers can raise funds with just a promise, then they have already succeeded. Fulfilling that promise is not the focus. They exist solely to make money for themselves and the upper levels. Venture capitalists sponsoring these teams expect profits on their investments, not innovation.

This is the primary purpose of most shitcoins. They are not here to help you or solve any problems. They are here to make quick money because the bull market is short-lived, and it's like a forest after rain, with new mushrooms or shitcoins everywhere. But be cautious—some are toxic!

Few protocols are really here to build something long-term. That's why I recommend focusing more on tokens that have been around for a while and truly have practical use cases. It's best if they have gone through at least two crypto cycles.

Only consider genuinely innovative new projects; the rest are hype promoted by KOLs. AI narratives in the crypto space are the latest example, where 99% is hype, and only 1% is a real use case.

Cryptocurrency is driven by greed, and part of the blame also lies with retail investors who have always dreamed of that 100x return, while the upper levels are happy to cooperate and create various crypto projects that shatter the dreams of retail investors.

Fourth Level: Venture Capitalists

These are the tycoons of the crypto space, with money and power, controlling everything. They can manipulate or suppress the market, exchanges, or even kill tokens. They also drive the development of the crypto gambling by investing in various new projects proposed by crypto developers.

Undoubtedly, venture capitalists are here to make money. While retail investors dream of 100x returns, venture capitalists actually make 1000x profits during the crypto bull market. They buy in at pennies and sell to retail investors at hundreds of dollars.

They are the ones who kickstart the bull market and sell at market highs because they profit on these 1000x investments (smart money). Once the hype fades, they stop playing the game, entering what we call a bear market.

In this game, if venture capitalists pick the wrong side, they will be crushed because it's a game of free competition. In the previous cycle, there were many such examples due to the collapse of Terra Luna and FTX.

Venture capitalists receive funds from the upper levels, but if their investments succeed, they can also enjoy a significant profit of their own. Just look at the price of Solana to see some venture capitalists making a fortune. Vitalik Buterin was surrounded by venture capitalists in the early days of developing Ethereum. They are now wealthy.

Venture capitalists use this money to sponsor the development of new crypto projects. They promote the growth of the space, which is good, but they can also cause significant damage. Venture capitalists are as greedy as retail investors, just with a few more zeros. Nevertheless, they play an important role in the crypto cycles because they are part of it.

Sometimes, development teams dislike venture capitalists, refusing to work with them or accept their bribes because they would lose their freedom. In such cases, venture capitalists call the shots, and sometimes retail investors get hurt. Some development teams care about this, while others don't.

That's also why some outstanding development teams with excellent projects have never succeeded because they are not part of the venture capitalist club. If you hang out with members of the venture capitalist club, all levels below them will support your project, including retail investors prepared to accept anything fed to them by the upper levels (i.e., dumb money).

Fifth Level: BlackRock and the Federal Reserve

BlackRock recently entered the crypto space in a public manner through their Bitcoin ETF. Privately, they have been deeply involved in this field for years through venture capitalists. They have traditional finance, and cryptocurrency is their latest expansion. The role of the Federal Reserve is quite simple; they print dollars as needed, deciding when the market thrives or collapses.

BlackRock is the world's largest asset management company, and naturally, they wouldn't overlook the latest asset causing a sensation—Bitcoin. This year, they joined the Bitcoin train in a public manner with the approval of a Bitcoin ETF. Retail investors at the bottom of the pyramid have been trying for over a decade to get a spot Bitcoin ETF approved, but it wasn't until BlackRock decided to join that it was truly approved, which we call power.

For years, BlackRock has been privately (and mostly secretly) leveraging its Bitcoin private trust fund through venture capitalists to accumulate BitcoBitcoin, their listing is inevitable. They know the direction of Bitcoin and have become a part of it.

Encryption Level Pyramid: The higher you climb, the higher the return. image 1

The role of the Federal Reserve in the crypto field is simple, they decide when to inject liquidity into the market, just like in traditional markets. Cryptocurrencies are not exempt. When the Federal Reserve prints dollars out of thin air, the crypto market thrives. When they stop, the market collapses.

They effectively control the lives of everyone at all levels, with the rest being handled by BlackRock. BlackRock or the Federal Reserve do not care about a 1000x return, they can print as much money as they need anytime, anywhere, money is not an issue for them.

Their main task is to control and master the power at the lower levels. They maintain this control through monetary policy and other tools. We are the victims of their decisions, with no right to influence or stop those decisions, they act as kings of the pyramid at will.

* Disclaimer

The above is just an example of how the crypto pyramid works and the relationships between the layers. The entities mentioned are not exhaustive, and there is much left unsaid.

There are some legitimate participants in this space striving to advance the vision set by Satoshi Nakamoto, but they are few, and most participants are players in the crypto pyramid.

Finally, anyone harming those at the top will be swiftly punished, like CZ from Binance who would go to jail for it. That's why Satoshi Nakamoto's true identity is unknown. He understood more and correctly assessed the impact of his creation on those at the top.

Related Tags
Bitcoin Cryptocurrency DeFi RWA DePIN SocialFI GameFI
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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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