The rise and fall of crypto narratives
In 1935, scientists wrote an article called “The EPR Paradox” which described the strange situation of quantum superpositions, in which systems can exist in multiple states corresponding to different outcomes simultaneously. In effect, the paper argued that there wasn’t only one but in fact multiple “true” realities. Each of these realities would remain valid until they were interacted with or observed by the external world. At that time, the superposition collapses into one of the possible states.
To better visualize this idea, Austrian physicist Erwin Schrödinger proposed a thought experiment that would eventually become ingrained in our culture. Imagine a cat in a box with a flask of poison, a radioactive material, and a monitor that will smash the flask and release the poison if a single atom decays. After a while, quantum theory dictates that the cat is simultaneously dead and alive at the same time. It is only once we open the box to observe the cat to be either dead or alive that the multiple states cease to be simultaneously true. It is our actions that determine, ultimately, which reality prevails.
(The above and below section was largely borrowed from @nlw’s article titled “Schrödinger’s Securities: Regulation & The Quantum State Of Crypto”)
Nobody can know everything. The complexity of society is irreducible. We cling to mental models that satisfy our thirst for understanding a given phenomenon, and stick to groups who identify with similar narratives.
Beliefs are not only shaped by reality; narratives define it. In any social arena, there’s a never-ending battle to tell what’s happening, why is it happening, and what is happening next. Controlling narratives is particularly powerful. These narratives constitute the fabric of the world around us: government, religion, culture, and finance all exist simply because we believe in it (and provides value for those who believe in it).
Investors invest in or against narratives; builders build directionally towards narratives; commentators race to associate themselves with the dominant narratives or, alternatively, to be the contrarian positioning against the conventional wisdom.
Market narratives are marketing. The incentives to push a narrative can be financial, like an investor sharing a view of the world that would just so happen to benefit them if more people were to agree with them and invest accordingly. In this way, narratives are attempts at self-fulfilling prophecy. Incentives can also be even simpler, however, such as the desire for status and community relevance.
The fact that narratives are marketing is not a bad or malicious thing. Indeed, there is value in an emerging industry enabling a space where people can discuss narratives they see trending.
This is especially true in the crypto space, in which content from investors and builders today has an outsized influence on market sentiment relative to neutral third-party research firms or data-driven journalism. Again, this is not in and of itself a problem. It is a good thing to get live insights into how operators see things. Moreover, the independent, data-driven research/journalist side of the market is catching up quickly which is accelerating the critical analysis of these narratives. — Nathaniel Whittemore (Market Narratives Are Marketing: Introducing The Crypto Narrative Index)
Cambrian Explosion of Crypto Narratives
During the Cambrian explosion more than half a billion years ago, the variety of life on Earth burgeoned dramatically. While most species that came about eventually went extinct in a series of mass extinction events, we still have this relatively short period of profligate experimentation to thank for the variety of life we experience around us now. In other words, the truly bizarre creatures that roamed the planet then were side-effects of Nature showing off its capacity for variegated expression of lifeforms, before settling into a somewhat more sensible pattern.
In an analogous vein, the dotcom bubble was an extinction event that wiped out exuberant companies, but fundamentally sound ideas survived, a large variety of which are to be found today (ex: Amazon).
In the crypto world, we have WhopperCoins, Putincoins, Bitcoin Cash, Bitconnect, and a string of other tokens/cryptocurrencies that were created during the last bubble. In the long-run, many shall die out — much like the numerous species that kicked the bucket at the end of the Cambrian explosion. Only the fittest shall survive.
“Jostling for narratives can be seen as an evolutionary battle to compose the doctrines most likely to attract the next wave of adherents. Coin prices amplify this mess. Market cycles–especially up-cycles–appear to pick winning narratives, leading to sudden increases in evangelism and waves of new adherents. And when the market swings the other way, a new narrative gains steam and steals adherents.” — Tony Sheng
Which crypto narratives are gaining steam tomorrow? How will that change next month or year (or 10)? What are prospective catalysts that could change the dominant narratives of today? How does this differ globally?
Bitcoin and Ethereum, the two most popular cryptocurrencies, have had many narratives fade in and out of popularity over the years. In the below sections are two charts which visualize the ebb and flow of these different narratives for both cryptocurrencies.
Before you read further, I must note an important differentiation. Bitcoin’s narrative of SoV/Gold 2.0 was present from day one, has Protocol Market Fit (PMF), has held off competing narratives, has been delivered on, and remains the dominant narrative today. There is persistence of the original intent.
While the Ethereum community has endorsed radical changes/pivots, trying to find narrative fit (PMF), even so far as to recently claim a SoV narrative. The Ethereum leadership team is more willing to embrace alternations to the core objective of the protocol in their search for PMF (world computer, dapps, crowdfunding, nonfungibles, open finance, radical markets).
Only the antifragile narratives will survive
When something is “antifragile” it gains strength as a result of volatility, stressors, or shocks (originally coined by Nassim Nicholas Taleb)
“Every criticism Bitcoin survives makes it stronger.” — Jimmy Song
Crypto-communities seek for newish narratives or adapt current ones as an exercise of collective strengthening. They also do so to combat critique by isolating some of its premises. Since there is no objectively correct monetary premium, promoting the superior attributes of a monetary good is more effective than for regular goods, whose value is ultimately anchored to cash flow or use-demand. The religious fervor of participants in the Bitcoin market can be observed in various online forums where owners actively promote the benefits of Bitcoin and the wealth that can be made by investing in it. In observing the Bitcoin market, Vijay Boyapati:
“You recognize this as a religion — a story we all tell each other and agree upon. Religion is the adoption curve we ought to be thinking about. It’s almost perfect — as soon as someone gets in, they tell everyone and go out evangelizing. Then their friends get in and they start evangelizing.
While the comparison to religion may give Bitcoin an aura of irrational faith, it is entirely rational for the individual owner to evangelize for a superior monetary good and for society as a whole to standardize on it. Money acts as the foundation for all trade and savings, so the adoption of a superior form of money has tremendous multiplicative benefits to wealth creation for all members of a society.”
Fiat currency, similarly, is faith based. Per wikipedia:
“Fiat money is a currency without intrinsic value that has been established as money, often by government regulation. Fiat money does not have use value, and has value only because a government maintains its value, or because parties engaging in exchange agree on its value.”
“Gold’s simplicity is a great feature. But Bitcoin is likewise the simplest cryptocurrency. You can explain the intuitions behind Bitcoin to any captive high schooler who has a basic grasp of probability and a moderate attention span. To the digital native of the future, Bitcoin wallets will probably seem more natural than vaults full of useless metals painstakingly drilled out of the earth.” — Haseeb Qureshi
“Stable ideologies allow communities to thrive. A simple example in religion is the Christian tenet that “there is one true god”. This belief strengthens the religion because it weakens membership in competing religions. Communities with unstable ideologies will eventually collapse. The very ideology that justifies the existence of Bitcoin Cash, also justifies the use of chain splits to settle any disagreements within the community. It’s easy to see that this ideology, that a hard forked minority chain can be a legitimate successor to the original chain, is completely unstable. It is thus reasonable to conclude that Bitcoin Cash will face a never-ending threat where its community members threaten to split off permanently from the main chain.” — Kay Kurokawa
This was prophetic. Due to fragmented ideology, Bitcoin Cash (also known as the altcoin “bcash”) ultimately split into two chains late last year and the price collapsed.
Wave Function Collapse
In quantum mechanics, “wave function collapse” occurs when the superposition of several states appears to reduce to a single state due to interaction with the external world; this is called an “observation.” Narratives can persist in the multiple states for quite some time, until the moment when it comes under critical observation.
Narrative wave function collapses only when we believe that everyone else believes the critical observation (common knowledge). That’s what changes behavior. And when that transition to common knowledge happens, behavior changes fast.
The classic example of this is the fable of The Emperor’s New Clothes. Two weavers promise an emperor a new suit of clothes that they say is invisible to those who are unfit for their positions, stupid, or incompetent — while in reality, they make no clothes at all, making everyone believe the clothes are invisible to them. When the emperor parades before his subjects in his new “clothes”, no one dares to say that they do not see any suit of clothes on him for fear that they will be seen as stupid. The only thing that changes behavior is when the little girl announces the Emperor’s nudity loudly enough so that the entire crowd believes that everyone else in the crowd heard the news. That’s when behavior changes. There’s a lot of ubiquitous private information about powerful ideas trapped in the crowd today, just waiting for a someone to release it as common knowledge. — Ben Hunt
What we are observing now in the crypto bear market is the collapse of the narrative wave function from critical observations making knowledge common, ultimately manifested as price.
Some narratives are unraveling. Narratives that conflict will reconcile (ex: utility vs SoV theory of money). Which ones will remain? Which ones will survive? As we’ve seen in previous crypto market cycles, only the most antifragile will endure.
1/ Follow me on Twitter.
2/ Sign up for my weekly newsletter which contains my distilled thoughts of the week
3/ Check out my other articles 👇
By The Numbers: The Rate Bitcoin Must Climb To Reach $100K By July
Bitcoin is a numbers game through and through. There are only 21 million BTC. The code and its consensus algorithm are both made up of complex math. The total coins are slashed in half every four years, and so on and so fourth.
Most important of all, here’s the growth rate Bitcoin price must hit steadily to reach $100K per BTC by July 2021 according to one crypto capital manager – as well as the one thing that could get in the way.
Bitcoin Price Growth Rate Should Take Crypto Valuation To $100K By July
Bitcoin’s growth from virtually worthless to more than $60,000 per » Read more
” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin came to be reads as if it was ripped from a sci-fi film: Mysterious person takes a shot at all money, and takes no credit for the monumental effort.
” href=”https://www.newsbtc.com/dictionary/satoshi/” data-wpel-link=”internal”>Satoshi’s creation is now more than a decade old and has grown far beyond most people’s expectations. Over the last year alone, the leading cryptocurrency by market cap has grown at a daily average rate of 0.65% since April, resulting in a nearly a ten times climb in value.
At the current pace, according to crypto capital manager Timothy Peterson, Bitcoin price would reach $100K by June 30th.
At only a daily growth rate of 0.64% the top crypto should hit $100K by July | Source: BTCUSD on TradingView.com
The One Factor That Could Cause BTC To Fall Short Of Target
Bitcoin price must maintain comparable momentum over the last year to keep climbing at a similar rate and reach more than $100K per » Read more
” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>coin. The number is now closer to the current price action than $10K is, and thus potentially more achievable.
Price predictions for the next cycle top reach as much as $400K, with estimates more steeped in reality ranging from $125,000 to $325,000 per BTC.
The rally could really be over if the historically accurate signal is right again | Source: BTCUSD on TradingView.com
There’s a chance, however, the cycle top is in, according to the Pi Cycle Top Indicator. If the historically accurate tool is right yet again, the leading cryptocurrency’s daily growth rate will begin to decline from here on out until another bull market breaks out.
Bitcoin price wouldn’t make it to $100K by July, and a return to prices much lower would follow. If that’s the case, crypto investors would have to wait a while longer for the number one cryptocurrency by market cap to reach that ultimate target.
Featured image from Deposit Photos, Charts from TradingView.com
Bitcoin’s time has come: TIME magazine to hold BTC on balance sheet
Institutional fund manager Grayscale has partnered with acclaimed New York-based magazine TIME to produce an educational video series on the subject of crypto assets.
The partnership was announced on April by Grayscale’s CEO, Michael Sonnenshein, with Sonnenshein revealing that TIME and its president, Keith Grossman, will receive payment in Bitcoin.
Further, TIME does not intend to convert the Bitcoin it receives through the deal into fiat, and will hold the crypto asset on its balance sheet. No further details of the partnership have been revealed so far.
— Michael Sonnenshein (@Sonnenshein) April 12, 2021
TIME was first published on March 3, 1923, with the magazine and online publication having been active in the crypto space of late. In March, TIME cashed in on the NFT mania by dropping a set of tokenized magazine covers on NFT marketplace SuperRare, with the “TIME Space Exploration – January 19th, 1959” NFT fetching 135 ETH worth almost $250,000 on March 30.
“The media industry is undergoing a rapid evolution. TIME is seeking a Chief Financial Officer who can help guide its transformation,” the listing said.
According to Bitcointreasuries.com, TIME will become the 33rd publicly traded company to hold Bitcoin on its balance sheet. TIME joins the ranks of top U.S. companies Microstrategy — who have invested billions into BTC from August 2020, Square — who added 4,709 BTC to their treasury in October, and Tesla — which purchased $1.5 billion worth of BTC in January. Multinational investment corporation Blackrock also began dabbling in crypto during February, profiting more than $360,000 from a small long using Bitcoin futures.
This deal marks a significant partnership between giants of the mainstream and crypto worlds. Grayscale was founded in 2013 and has $46 billion worth of crypto assets under management, including roughly 3% of Bitcoin’s total circulating supply.
Moonstake integrates with Sylo to bring their staking protocol to the Sylo Smart Wallet
Moonstake, a staking pool protocol and service provider, has announced a new partnership with Sylo, a decentralized software development firm and the creators of the Sylo Network and Sylo Smart Wallet.
Through this collaboration, Moonstake will connect Sylo with their robust API/SDK solution, thereby enabling staking functionalities in the Sylo Smart Wallet and allowing Sylo users to earn passive income from their idle crypto assets.
Founded in 2010, Sylo is committed to decentralization and has created an ecosystem consisting of digital consumer wallet software, applications, infrastructure, and developer tools in order to usher in a decentralized future worth looking forward to.
A unique wallet app that combines digital asset management with decentralized communication, the Sylo Smart Wallet is a savvy decentralized e-wallet that enables users to purchase, store, track, send, and receive crypto assets, explore the world of Ethereum dApps by means of a Web3 Browser, pay with cryptocurrency in the real world, and provides secure communications by chat or audio/video call.
“We’re pleased to offer our community of global users yet another way to access the benefits of crypto. As always, our user flow has been designed with simplicity in mind, and staking via Moonstake in the Sylo Smart Wallet will make earning from digital assets simple enough for people everywhere.”
– Dorian Johannink, Co-Founder and Business Director of Sylo
Born over a year ago with the aim to create the largest staking network in Asia, since its inception Moonstake has developed highly user-friendly wallets for both Web and Mobile (iOS/Android) that are compatible with over 2000 cryptocurrencies.
After a full-scale operational launch in August 2020, Moonstake’s total staking assets have grown rapidly to reach USD 800 million in staked assets over just six months. Within a year of its founding, Moonstake became ranked in the top 10 of the world’s premier staking service providers and it continues to strongly expand its business.
“The Sylo Smart Wallet is an interesting e-wallet that combines the functionality of a flexible digital asset management tool and a secure instant messaging app. We are happy to help proper crypto projects like Sylo enable staking in their wallet so that users can have more ways to earn with crypto. With a wide selection of PoS coins and attractive yield rates from our high-quality staking pools, we are confident that users will be pleased with their staking experience on Sylo powered by Moonstake.”
– Mitsuru Tezuka, Founder of Moonstake