Dear Bankless Nation,
There are three types of crypto investor:
- Trend Trader - identifying patterns and trade charts (days to weeks)
- Narrative investor - front-run crypto market narratives (weeks to months)
- Fundamentals investor - long-term thesis and fundamentals (years to decades)
Which type are you? (maybe all three!)
The focus of this program is #3 but the crypto market feels like it runs on #2. Pumpamentals over fundementals.
But should we expect anything else? This is how markets have always operated.
In the short run, the market is a voting machine but in the long run it is a weighing machine. - Benjamin Graham
Crypto is a narrative voting machine in the short run. Less about what’s actually happening and more about the story people believe.
There are big narratives that drive big asset trends:
- Blockchain not Bitcoin (2015/2016) 👉corporate chain mania
- The Fat Protocol (2016/2017) 👉ico mania
- Bitcoin maximalism (2018/2019) 👉flight to bitcoin
And smaller narratives that drive smaller asset subcategories:
- Bitcoin is missing privacy 👉Privacy coins solve this (2017) 👉XMR/ZEC go up
- ETH can’t scale 👉Plasma solves this (2018) 👉LOOM go up
- The oracle problem is hard 👉ChainLink solves this (2019) 👉LINK go up
A good narrative investor front-runs the trends.
A great narrative investor creates the narratives.
Btw that second sentence is why crypto hedge funds write so much content, it’s why meme bots are everywhere, and it’s why scammy marketers copy & paste open source blockchains then pump their asset.
You may not like these truths (neither do I)—but this is how markets work. Especially new ones. Maybe you’ll find consolation in the fact that ultimately every narrative gets weighed by the market and properly re-adjusted.
But I want to talk about the ETH narrative.
Say you’re a narrative investor. You don’t care about fundamentals. You’re scanning for a narrative to front-run. You look at ETH. It’s 83% down from all-time-high, yet…
- DeFi on Ethereum going parabolic
- Assets on Ethereum mooning
- Staking on Ethereum could ship this year
Plus there’s this crazy group of zealots that thinks Eth is money—some kind of reserve asset for DeFi. They even have theories to back it up.
What if the market starts believing them?
What if the success of DeFi gets linked to ETH the asset just like it was in 2017?
Hmmm…that could be big.
Maybe you should wait until Bitcoin starts taking off first. But with DeFi pumping on its own, do you really have time to wait? ETH led BTC in 2017.
You look at prices.
ETH up 5% today. That’s double BTC!
Better get in before this thing takes off.
—
That’s how it goes.
And once a narrative hype cycle starts it quickly turns reflexive—the “ETH is money” narrative looks more true when ETH hits $800 than when ETH is $240 which causes more people to jump in at $800 which causes further price increases.
I’m not a narrative investor but I’ve been observing long enough to see the obvious. And “DeFi up = ETH up” is about the most obvious narrative front-running opportunity I’ve ever seen in crypto.
I guess we’ll see.
- RSA