Hello there! 👋🏻
Today, I would like to discuss how to anticipate crypto narratives to avoid potential losses.
95% of people in crypto invest by following a narrative.
This is one of the worst mistakes you can make.
I've seen it happen over and over again in different bull markets:
At one point, there's excessive euphoria for a "type of cryptocurrency" or narrative.
The prices of these cryptos rise.
You join this "trend" which actually already peaked and you lose money and time.
Fortunately, if you understand how narratives are formed, you can anticipate these rises.
The narrative cycle generally has 3 phases:
Building
Catalyst(s)
Euphoria
👷🏻♂️ Building
The Building Phase is when projects, devs, and venture capital find a solution to a problem and begin to build and launch it.
🧨 Catalyst(s)
The Catalyst(s) phase is when some event (or several) happens that starts generating buzz about these projects (for example, BlackRock launching its on-chain fund and talking about RWA).
🚀 Euphoria
The last phase is where prices rise, more people invest their money, and it ends up being a "mini bubble" until everything settles down and moves on to the next narrative.
If you only follow the narratives from the Catalyst or Euphoria phase:
You follow the crowd.
You don't use independent thinking.
You don't take a real risk.
To get ahead and invest in the Building phase, you need to develop your own investment theses.
To achieve this, here are 3 practical tips:
1) Forget about the now 🔮
Make assumptions and projections about how you think the world will move.
2) What will be needed? 🧠
Once you have your assumptions and projections, ask yourself what will be essential in that world (what technology, products, and services, etc.)
3) Practical applications of new technologies 🔨
New technologies are nothing if they are not applied to solve practical problems. Two points here:
Identify current and future problems of people and companies.
Identify who is using new technologies to solve current or future problems.
This takes practice, and the more you delve into the space, the easier it is to identify these projects.
Nevertheless, with these practical tips, you can begin to predict where the next narrative might head.
I’ll leave you with these Dune Analytics charts with some of the biggest Crypto narratives so you can start applying these practical tips.
If you have any questions, I'm at your disposal.
Have a great week!
See you next time! 👋🏻