This article was originally published on November 23, 2020, on the WeChat public account "BTC Deep Dive" . Here's the original link.

These days, friends keep asking me if the Bitcoin bull market has arrived. Every time, I have to explain at length to convince them, and it’s getting a bit tiring. So today, I’m going to share my thoughts on this question in an article.

The chart above is what my friends are using as evidence to ask whether the Bitcoin bull market has arrived. They say that since March 16 this year, Bitcoin's price has risen from $5,000 and has been climbing steadily for eight months. I opened the page they sent me and showed them the following chart, telling them: Bitcoin doesn't have a bull market, only a "wave" market.

What is a "Wave Market"?

"Waves" is a term I coined to describe the unimaginable volatility of Bitcoin. The chart above shows the price fluctuations of Bitcoin over three-day intervals. The most dramatic movements occurred around 2018, starting with the peak and subsequent drop at the end of 2017. Such wild swings—what do they remind you of? Does it give you a sense of déjà vu? Perhaps it makes you think of the following image, which comes from a children's science article about earthquakes and describes seismic waves during an earthquake.

The similarity between Bitcoin’s price fluctuations and seismic waves is striking. Calling it a "wave market" seems fitting. Now that you know this, you should be able to answer for yourself: "Is now a good time to buy Bitcoin?" Clearly not, because we're in an upward trend. Since Bitcoin operates in a "wave market," there will be opportunities to buy on the downside. Why not wait until then? As Buffett advises: "Be fearful when others are greedy, and greedy when others are fearful." Right now, with so many people cheering for a bull market, you should be feeling a bit fearful.

Earthquakes, as of now, cannot be accurately predicted. But you might think, Bitcoin has been around for 11 years, with plenty of transaction data accumulated—can’t we use it to predict Bitcoin’s price trends? You're not alone; experts have thought the same.

On September 25, 2019, three scholars from Kangwon National University in South Korea—Suhwan Ji, Jongmin Kim, and Hyeonseung Im—published a paper titled "A Comparative Study of Bitcoin Price Prediction Using Deep Learning." They compared various state-of-the-art deep learning methods, including Deep Neural Networks (DNN), Long Short-Term Memory models (LSTM), Convolutional Neural Networks (CNN), Deep Residual Networks, and combinations of these methods, to predict Bitcoin prices. These methods are complex machine learning algorithms from the AI field that teach computers how to find patterns in data. You don’t need to understand all the details; just know the study’s conclusion.

This paper, published in 2019, has already been cited 15 times, indicating it’s a hot topic. Speaking of citations, the most cited work in the Bitcoin field is Satoshi Nakamoto’s Bitcoin whitepaper, "Bitcoin: A Peer-to-Peer Electronic Cash System," with over 12,500 citations. If you want to understand Bitcoin in depth, you should read it carefully—it's concise and straightforward, unlike some academic papers. Here’s the download link for the Chinese version.

The scholars’ conclusion from using AI to predict Bitcoin prices was that "it is still premature to solely use such models for algorithmic Bitcoin trading." In simpler terms, AI cannot yet predict Bitcoin prices. However, the study did find that deep learning models based on regression analysis performed better than others. If you’re interested, you can check it out.

Since Bitcoin cannot be predicted, what can we do? Bitcoin isn’t the first unpredictable phenomenon in human history, and we have many ways to deal with uncertainty. One of the most common approaches is to stop trying to be clever and start being wise.

How to Become Wise?

Stop being clever means not being blinded by immediate gains; becoming wise means striving to see further ahead, even though it’s difficult.

The Chinese idiom “one leaf blinds the eyes and obscures the mountain” illustrates the opposite of this principle. Often, it’s the immediate benefits that block our vision and prevent us from seeing the bigger picture. You might also use the phrase “short-sighted” for a more vivid description—you can criticize yourself, but I can’t say that to you.

Computer scientist and investor Wu Jun once gave a brilliant description of opportunities. He said: “Many people rush into entrepreneurship, chasing the hottest trends, afraid of missing out. I tell them, if the window of opportunity is only a few months or half a year, it’s not an opportunity at all—just a speculative play. That’s a static way of looking at timing. True long-term trends last for decades, making them hard to miss, and compounding growth over decades beats any speculative gain. That’s the reward for those who see the world dynamically.”

Indeed, if you had 1,000 Bitcoins 10 years ago and just held onto them, how much would they be worth now? $15,000,000! That’s $15 million—a return rate that’s astronomical. But unfortunately, those 10 years are gone. So, what should we do next?

If I only give you concepts without practical methods, I’m not doing my job, and my article would just be another piece of motivational fluff. To see the bigger picture, we need to switch our "ruler." This ruler focuses on change, not values. It makes you sensitive to trends, not numbers, constantly reminding you to abandon short-term gains and focus on the long term.

A simple test: if the price goes from 1 yuan to 2 yuan and from 5 yuan to 10 yuan, should they be considered the same? Would you agree? If you’re still using your "old ruler," you’d definitely disagree and think I’m trying to confuse you. Clearly, one increased by 1 yuan, and the other by 5 yuan—how could they be the same? But I’m saying they both increased by 100%, which you probably wouldn’t argue with.

This is the logarithmic scale. With this scale, we can focus solely on change, not specific values, because on this ruler, the distance from 1 to 2 is the same as from 5 to 10. The chart below shows this model.

The concept is simple. With the "logarithmic scale" as a tool to observe the world, we can force ourselves to focus on proportions rather than numbers, giving us a chance to see the bigger picture. With two scales, the Bitcoin curves you see below look entirely different.

The curve at the top is the Bitcoin price on a logarithmic scale; the curve at the bottom is on a regular scale. How does it feel? The price curve on the logarithmic scale rises steadily. Even during Bitcoin’s "free fall" in mid-December 2017, there wasn’t much change. If you had a lot of Bitcoins back then and saw this curve, I believe you would have remained calm and wouldn’t have panicked because the bigger trend hadn’t changed. We should thank the logarithmic scale for helping us avoid the fear caused by sharp price drops and see the bigger picture of Bitcoin.

But if you think Bitcoin will keep rising because of this trend, you’re mistaken. All data is history, and all the future is speculation. History only suggests possible directions for the future; it cannot dictate it. If it could, the world would be too boring because we’d be living in a known world, a world programmed like "The Truman Show." That’s not my world, and it’s not yours either. "The Truman Show" is an old movie from 1998, worth watching.

By looking at history, we see trends. What you want to ask most is whether this trend will continue. Has Bitcoin peaked? What are its limits?

What are Bitcoin’s Growth Limits?

For over ten years, Bitcoin has grown from less than a penny to over $15,000—a classic case of "exponential" growth. A key characteristic of exponential growth is that it appears as a straight line on a logarithmic scale. Bitcoin's growth over the past decade aligns with such a curve.

Note the Y-axis on the left side of the chart above—it’s logarithmic. The distances between 2~20, 20~200, 200~2000, and 2000~20000 are equal because the proportions are the same.

Many stories about compound interest are related to "exponential growth." The most famous is the chessboard story. In 1256, the Islamic scholar Ibn Khallikan recorded this story. A king wanted to reward the inventor of the chessboard. The inventor asked for one grain of wheat on the first square of the chessboard, two grains on the second, four grains on the third, eight on the fourth, and so on, as shown in the image below.

When they reached the sixth square, the square couldn’t hold all the grains. But the amount of wheat was still within the king's means, and the quantity could be expressed with the lower half of the chessboard.

Notice that the number of wheat grains in just the first "4G" square of the lower half exceeds the total wheat on the upper half. That’s the power of exponential growth. How many grains of wheat would be on the entire chessboard? There would be 2^64−1 = 18,446,744,073,709,551,615 grains, weighing about 11.99 billion tons, which is 1,535 times the global wheat production in 2019 of 780.8 million tons. In other words, this wheat could feed the world’s population for at least 1,500 years. Is that possible?

No, it’s impossible. In 1997, Carl Sagan provided the answer in his last book, "Billions and Billions." Carl Sagan was incredible. He was not only an American astronomer, astrophysicist, and cosmologist but also a science fiction and popular science writer. In his professional field, he proposed the currently accepted hypothesis that "Mars's temperature is caused by the greenhouse effect." In the field of communication, he won nearly every major award, including the Pulitzer Prize, Hugo Award, and Grammy Award. Forgive me for writing so much off-topic here—Carl Sagan is my role model.

The screenshot below is from Carl Sagan's book, available on the Internet Archive (https://archive.org/). You can find many valuable things there—basically anything that’s ever been online.

Carl Sagan’s answer is straightforward: "Exponentials can't go on forever because they will gobble up everything." Here, "they" refers to bacteria. But whether it’s bacteria or wheat, it’s impossible. Land is finite, arable land even more so. That means Earth can’t produce enough food in one year to last 1,500 years.

So, can Bitcoin continue to grow? It depends on which square of the chessboard we’re on. One indicator to consider is Bitcoin's potential market size. According to the boldest estimate in the article "How Many People Will Use Bitcoin in 2020?" Bitcoin currently has 100 million users. Bitcoin still has significant market potential, as the world’s population will reach 7.8 billion by 2020. Of course, this is a very rough estimate, suggesting that more people may use Bitcoin in the future.

I must emphasize again—this is just a possibility. Even if such a trend does emerge, a black swan event could suddenly change everything. The world we face is uncertain. Always remember that.

Knowing the possible trend makes us wiser. But we still can’t answer the question—how to buy, and how much? This clearly requires more than wisdom; it needs a "brilliant" strategy.

How to Operate More Brilliantly?

The future is uncertain, and black swan events can happen anytime. You can't prepare for them, nor can you be fully prepared. All you can do is make yourself strong. If you can’t get stronger, at least ensure you can survive. The concept is abstract, so let’s first get to know someone.

Li Xiaolai achieved the legendary feat of turning 3 million into 7 billion thanks to Bitcoin. His initial investment in Bitcoin is especially instructive for those of you considering entering the market.

Li Xiaolai’s 3 million was earned before 2011, before he knew about Bitcoin, from working as a teacher at New Oriental and selling books. In 2011, when Bitcoin's price exceeded $1, he bought 2,100 Bitcoins at an average price of around $6, spending a total of $13,100, or about 86,800 yuan—not even 100,000 yuan. At the time, the exchange rate was about 6.3 yuan per dollar.

On May 2, 2013, Reuters reprinted the report "Bitcoin Mania," which described why Li Xiaolai believed in Bitcoin.

In early 2011, Li Xiaolai first learned about Bitcoin through his Google Reader subscription. He then read Satoshi Nakamoto's design paper in detail, and the libertarian economic ideas behind the "decentralized" setup deeply attracted him. He believed that Bitcoin’s simple yet logically rigorous design system would make it a disruptive currency.

On May 18, 2013, CCTV aired an interview with Li Xiaolai during the early morning "News Live" segment, where he admitted to holding six-figure Bitcoins. What you need to remember is that Li Xiaolai was 41 years old then, and Bitcoin's price was around $122. Today, Bitcoin's price has increased by 100 times.

Li Xiaolai is now featured in a column on "De Dao," introduced as a "pioneer of financial freedom, a seasoned investor, serial entrepreneur, former New Oriental star teacher, and blockchain expert."

This image cleverly encapsulates Li Xiaolai’s life—English before 2011, Bitcoin afterward. Whether he has 7 billion or not, no one has verified it. The key point isn’t the latter but the way he invested in Bitcoin in 2011, which is very much worth learning from.

In 2011, Li Xiaolai had 3 million yuan, and he spent less than 100,000 on Bitcoin, just over 3% of his total, not even 5%. You might think Li Xiaolai was foolish for being so conservative, not jumping at the opportunity when he saw it. I believe this was precisely Li Xiaolai’s brilliance. Ten years later, we can play the "hindsight game" and call Li Xiaolai conservative, but at the time, his behavior was already quite bold. We should learn from Li Xiaolai’s "brilliance": When faced with opportunities, be bold but cautious, and always leave yourself enough capital to "rise from the ashes."

Conclusion

All in One is never the best strategy. Bitcoin is not our whole life. Failure is the most likely outcome when we face opportunities. Leaving yourself enough capital to start again and then boldly trying is the right approach.

Ultimately, it’s simple: we are human, not gods.