In markets defined by extreme reflexivity, the quest for an accurate “truth” often pales in significance compared to the paramount role of common sense. Placing undue emphasis on the precision of “fundamental analysis” while disregarding common sense is a perilous mistake.
Within the cryptocurrency realm, several counterintuitive phenomena challenge conventional wisdom, necessitating natural market correction.
Where pie-in-the-sky thinking or opportunism prevails, outcomes rarely match expectations. Relying on the advice of numerous KOLs, builders, and investors proves inadequate. Discerning reverse signals is crucial. Presence of deception and manipulation, coupled with minimal net value for asset holders, isn’t indicative of attractive investment categories for substantial investors.
Preserving common sense and courage is a rarity, given that the cryptocurrency space and crypto Twitter facilitate abhorrent media-induced price manipulation. Moreover, a decade of upward market trends has conditioned attention towards chasing gains while overlooking losses.
Extreme Precision and Common Sense Pursuing extreme precision at the expense of common sense comes at a premium in the cryptocurrency domain, more so than in any other market.
Details of blue-chip projects can be meticulously calculated, yet cyclic leveraged Beta is often misconstrued as sustained growth (e.g., Lido, entire DeFi space).
Frequently, the market disregards precise fundamental analysis, given its focus on nascent on-chain native economies (like Ethereum), where consumer behavior remains limited. Most ETH projects exist for speculative gas consumption, deriving from Ethereum’s network effects with minimal actual net value.
No degree of accuracy can substitute for a lack of narrative awareness:
Ethereum seeks projects capable of burning gas and enhancing the Total Value Locked (TVL) capital efficiency. Projects excelling in either area are poised to rise, typically for a short duration until the next contender emerges. Post-DeFi Ponzi schemes, attention shifts to on-chain Real World Asset (RWA) treasuries, a means to retain TVL in the crypto space. Only with the advent of fresh projects attracting new users and capital can we escape extreme player-to-player competition. We’re currently in an era where liquidity for PvP games is nearly exhausted, and minimal new consumer behavior and practical applications have surfaced over the past couple of years.
Nevertheless, there are some positive signs:
Prediction markets such as Polymarket. Engaging casinos like Rollbit. Early NFT use cases, like digital pawnshops for luxury watches. Initial attempts at building payment applications. Other prospects are limited. Games (including Web 2.5 GameFi and entirely on-chain games) haven’t found a Product-Market Fit (PMF) in my view, but I hope to be proven wrong in this regard.
Common Sense Guidelines
Rule 1: If the notion of miracles and rewards for opportunistic behavior persists, we haven’t entered the “value zone.”
L2 serves as a new substitute for L1. Everyone (old L1s, projects) aims to become an L2 to enhance valuation. NFT blue-chip projects extract the last ounce of value from their most loyal users. Overvaluation of projects yet to demonstrate their worth (e.g., Worldcoin endorsed by OpenAI’s reputation) is evident. Projects once deceased inflate prices before liquidation, squeezing more liquidity out of the retail market. Venture capital firms invest in trending narratives (though less compared to six months ago), believing that when a bull market arrives, valuations will reach $100 million like their recently launched projects.
Rule 2: If among many proclaimed KOLs, builders, and investors, calls for action outweigh analytical logic, we’re falling short in the “builder’s market.”
Conference participants remain abundant, changing locations from Hong Kong to Singapore. Keynote speakers prioritize showcasing their presence rather than conference substance. Being a founder is still commendable (even if those who’ve liquidated their assets), focusing on investor meet-ups over continued hard work. In the cryptocurrency realm, work often translates to spending L1 funds on promotional activities and events. Underperforming VCs behave like kings on Twitter, discussing the certainty of upcoming significant events, with the total network traffic of projects in their portfolios attributed mainly to themselves and competitors.
Conversely, those making the greatest contributions to the field often remain low-key (Brian Armstrong, Vitalik, Opensea, some new Solana projects). Founders of new projects gradually building legitimate products don’t schedule releases and announcements based on market risk expectations, nor do they engage in aggressive PR activities. Their focus is on building, releasing, and allowing users to judge with their funds and attention.
Rule 3: When manipulative behavior is tacitly accepted, and liquidity still primarily serves exits, institutions won’t buy into our assets.
Reviewing charts of low-liquidity altcoins reveals gradual declines, interspersed with catalysts driving up prices, clarifying the situation. Players like DWF become new topics, seemingly taken for granted. Projects without genuine users can still easily exit liquidity through IEOs. Projects genuinely striving to accumulate token holder value perform well but are labeled as Ponzi schemes or scams by “professional investors” (Rollbit, Unibot).
While somewhat exaggerated and simplistic (common sense’s resurgence is evident in some places, trading is attractive), it’s an underestimated reality overall.
Courage and Conviction
A decade of quantitative easing, ultra-low interest rates, and crypto-localization has skewed people’s judgment away from common sense. The impending halving fuels WAGMI (We’re All Gonna Make It). Powell saving our positions fosters WAGMI. Bitcoin’s extended surge fuels WAGMI. During these times, adhering to straightforward common sense reaps substantial rewards.
I believe people’s convictions haven’t undergone sufficient tests. If we enter another three-year consolidation phase from now, how would you react? Would you still believe in cryptocurrencies? Would you still consider this the inevitable future of financial and human coordination? I would, but I’m confident most of the current optimists won’t.
True courage and conviction require ignoring consensus, appearances, and embracing patience. These qualities remain the domain of the few.