Is China's concept coin just hype?

Written by: Route 2 Fi

Compiled by: Luffy, Foresight News

Do you remember Hsaka posting something like this:

It describes the Chinese Ethereum Conflux. I’ll cover this project in detail in this article, but first, let’s talk about the Chinese concept coin story more broadly.

To give you an idea of ​​the tokens I’m talking about, here’s what @doomsdart posted on Twitter earlier this year:

“This is a list of tokens that are part of the Chinese concept coin narrative. Some are projects by Chinese teams, and some are not, but Chinese friends seem to like them very much.”

After a year of narrative rotation, "China Concept Coin" stands out.

Throughout 2023, we’ve seen a variety of narratives emerge, including but not limited to:

  • AI Tokens

  • Chinese concept currency

  • ZK Rollup

  • LSD (Liquidity Staking Derivatives)

  • Bitcoin Ecosystem

  • Memecoins

Over the years, narratives in the crypto space are often short-lived, disappearing as quickly as they appear. Narratives are built on faith and sometimes on greed, as we have seen with the recent “memecoin” hype, but the Chinese concept coin narrative stands out. Even with crypto Twitter dominated by the West, the Chinese concept coin narrative continues to gain traction.

Where does the Chinese coin narrative come from? Which tokens are getting a lot of attention? Are their fundamentals strong? Will they survive?

In February 2023, there was speculation that the next wave of retail investors would come from the Chinese market, where the central bank was injecting liquidity into the economy.

Soon after, the Hong Kong Securities and Futures Commission (SFC) proposed an exchange licensing regime to take effect in June 2023. I believe this is a major catalyst for the Chinese concept coin narrative. Here is an overview of the June 2023 regulations:

  • Applicable to anyone who "1) provides services in Hong Kong or 2) promotes to users in Hong Kong";

  • Applicable to all types of tokens;

  • Asset custody rules;

  • Prohibition of conflicts of interest;

  • Regular investors must pass knowledge tests and financial verification;

  • No futures and derivatives.

If you want to learn more about this, Adam Cochran has written about it before.

With that in mind, Hong Kong is indeed different from mainland China and they have a different view on cryptocurrency regulation, so how did this so-called China concept coin narrative come to exist?

Hong Kong follows the principle of "one country, two systems" and can have its own economic and political system, so these new regulations are allowed in stark contrast to the ban on cryptocurrencies in mainland China. Chinese officials have advocated allowing Hong Kong to open up as a cryptocurrency center. It is foreseeable that the next wave of retail investors may come from Hong Kong and extend to mainland China in the coming months or years.

Fast forward to June, when exchange regulations came into effect, we did not see any bullish signals for Chinese concept coins, but rather saw a sell-off on news events.

However, one thing is certain, despite the overall market volatility this year, the price of Chinese concept tokens has risen sharply in 2023, with CFX rising more than 10 times (and at one point 20 times) from a year ago.

Let’s take a look at the fundamentals of major Chinese concept tokens.

Conflux (CFX)

Conflux is essentially a permissionless PoW/PoS hybrid blockchain, hailed as the Chinese Ethereum, and they have raised over $50 million from Sequoia and other investors and are traded on Binance, KuCoin, MEXC, and several other large centralized exchanges.

The main features of Conflux are the tree graph consensus algorithm, PoW consensus and cross-chain asset bridge (ShuttleFlow).

The tree graph consensus algorithm is a key innovative technology adopted by Conflux. Unlike existing blockchains such as Ethereum and Bitcoin, which can only confirm one block at a time, Conflux’s tree graph structure allows multiple blocks to be confirmed simultaneously.

This sets Conflux apart from other L1s and provides certain advantages, such as the ability to process more transactions simultaneously (enabling faster and more efficient execution on the network).

The tree graph consensus algorithm reduces transaction confirmation time. It makes Conflux scalable and can alleviate congestion and various scalability challenges faced by other blockchains.

Conflux has also partnered with China’s second-largest telecom company to pilot blockchain-enabled SIM cards, and has also partnered with Xiaohongshu.

Overall, Conflux seems to have the potential to perform well in the upcoming cycle, and whether or not the Chinese token narrative continues, CFX is sure to be around for the long haul.

Let’s talk about another favorite project of Chinese people: Filecoin

Filecoin (FIL)

Filecoin has been around for several years and hit an all-time high of $237 in the last cycle. It has now retraced about 98%, but has recently attracted attention again due to the narrative of Chinese concept coins.

Essentially, Filecoin is a decentralized storage protocol that allows anyone to rent out storage space on their system/PC in exchange for FIL tokens.

Filecoin encounters one of the biggest challenges that Web3 has to face in terms of data storage: storage space. Cryptocurrency generates over 2.5 quintillion bytes of data every day, and according to IDC Global Datasphere, this number is expected to grow exponentially.

Blockchains are "databases", but they are not ideal, they can only hold small amounts of information, and storing data on any blockchain is extremely expensive. This is why encrypted data is usually hosted on centralized servers rather than directly on the blockchain.

Filecoin provides storage solutions for NFTs, assets, permanent storage, metaverse, and audio/video. Messari said that Filecoin has the largest share of used storage, which is a huge competitive advantage in itself.

Filecoin’s ultimate goal is to become a full-stack cloud service provider and an effective alternative to Web2 providers such as AWS, Google Cloud, and Azure. Considering the market data of cloud computing, Filecoin is worth paying attention to. They existed before the rise of the Chinese concept currency narrative and will continue to exist.

Finally, let’s take a look at another favorite cryptocurrency of the Twitter crypto community, PHB.

Phoenix Chain (PHB)

Phoenix Global aims to capitalize on the decentralized AI space, so it’s involved in not one, but two narratives: AI and Chinese concept coins. PHB currently has a smaller market cap of around $30 million (although it’s up more than 10x this year). Essentially, Phoenix is ​​an L1 and L2 blockchain infrastructure that powers Web3 applications while focusing on the generation of AI.

The main features of Phoenix's L2 computing layer infrastructure are AI model computing services, multi-party computing (MPC), and decentralized AI processes. The goal of these projects is to introduce AI-driven capabilities to blockchain applications and Web3 capabilities to off-chain AI applications. Phoenix plans to achieve a paradigm shift in the data and AI-driven Web3 space and has mapped out some development routes. As of now, Phoenix's announced strategic technology partners include:

  • APEX Technologies

  • Federated Learning Consortium (FLC)

  • Tensor Investment Corporation

These strategic partners are all focused on their respective fields and help Phoenix in various aspects. It is worth noting that these partners have a huge influence outside of Web3 and are also located in Hong Kong or mainland China.

Given the above, PHB could be an interesting protocol to keep an eye on, and with the team continually releasing updates, this small-cap coin has the potential to be a huge success.

What these three Chinese concept coins have in common is that their trading volumes are relatively high compared to their market capitalization. For example, PHB ranks around 600 in terms of market capitalization, but ranks in the top 100 in terms of trading volume.

That being said, I don’t know if these tokens are suitable for future purchases, but my gut tells me that CFX and PHB will have good potential in a bull market.