What do we believe?

The Four-Year Curse

A while ago I published Matt’s philosophical take on cryptotwitter (CT). It baffled me that it actually triggered a reaction. I am unsure whether the main point went above the heads of the critics or they just have too vested interest as The Big CT. Perhaps they derive validation from keeping the degen mind enslaved and, therefore are unable and unwilling to see a clear parallel between commentaries on CNBC and CT.

The Big CT is prone to get fooled by randomness.

That is not to say one cannot stumble upon information that turns out to be useful investment advice. That happens on CNBC too. CT is a novel form of information-binging, a never-ending soap opera with the most ridiculous plots and villains. It’s mostly entertainment. And there’s nothing wrong with that. 

This episode made me ponder on the state of crypto. At some point it hit me - crypto is mainstream. It might not be mainstream adoption but it is mainstream entertainment. How many people around you have not heard of crypto? Today it’s actually a topic of the US presidential election. How can it not be mainstream?

People like to be early and they like to fool themselves into thinking that being early is good enough to make money. Participation is a guarantee of success. And CT is a false prophet perpetuating this. Alpha this and alpha that…CT is a reality show selling tokens as entertainment and I don’t care how big your discretionary capital pool is.

CT is neither bad nor good for the industry, it is just a manifestation of a larger trend to which crypto pivoted. From the humble anarcho-capitalist to peak aspiration culture, crypto today is undergoing tiktokization and packaged to consumers in a way Satoshi could’ve not imagined.

This is how we’ve wedged ourselves into the mainstream. 

Just one last grift…I promise

A CT classic once wrote on twitter (something like this): “Signs of froth are indistinguishable from mainstream adoption.” The problem with being mainstream is that you can’t rely on being early. Participation does not guarantee generational wealth.

Crypto has adopted its own version of manifest destiny culture. Whether you’re a bitcoin, ETH, or SOL maxi you might believe the legend of the four-year cycle. Almost all hesitantly believe that we are preordained to grow, every four years a big bull appears out of nowhere and leads us to the land of plenty.

But as the industry grew bigger and branched into a fractal-like network, imitation and exploitation have become more rewarding than innovation. The industry now relies on the mantra of a four-year cycle perpetuating an idea of being early as a skill. This could be changing, and participating might not be enough. The consequences of complacency will catch up with us eventually.

Explaining the anatomy of the cycle.

Necessity is a mother of invention but unfortunately, there has been an abundance of capital that optimizes for short-term games (of marking up) and a healthy supply of savvy founders who know how to play the VC Keynesian beauty contest. There has been no necessity and no real innovation trigger in the past two years.

That is why currently crypto only looks at macro interference as a saving grace, either rate cuts or the new presidential administration. This suggests we are expecting to benefit from a top-down inflow of capital (e.g. ETFs) rather than bottom-up innovation. The question is if the game breaks sooner or later.

VCs in general are struggling to raise new funds and the industry of VC is scrutinized over the lack of distributions. Crypto is the same but with the caveat of existing crypto LPs having been pampered with distributions around 2021. It’s not going to happen this time around as funds touting paper gains soon met the ruthlessness of the paper hand.

The only savior is the divine intervention of the golden bull. Betting on financial perversion as the only way out and hoping for greater fools to bail us out show how far we have fallen. The thing is most don’t even hide it. I have never stood on the edge of the bullmarket in which everyone could not wait to sell.

The idea of crypto "cycles" needs to be destroyed altogether for crypto to truly cross the chasm into something entirely new. As long as the idea of the "four-year cycle" exists, the default incentives will be to 

1. prioritize short-term behavior (both as builders and investors) and 

2. perpetuate the greater fool theory because there will always be the belief that the current cycle will eventually collapse.

Crypto is turning into a zero-sum game as low-hanging fruit ideas have been picked. Founders and “communities” celebrate big fundraises without any product as a win. Xs of Ys (Aave/Uniswap/pump.fun but on this chain) get funded left and right masking the fact that there is no true technological innovation like we had in the past cycle (DeFi). There are no things on their own here.

What do we still believe other than a fool’s hope of our bags being redeemed? Do we believe The Big CT, which is but a sentiment amplifier? Do we believe in alpha or do we believe in fooling ourselves into narratives?

See, this is what we’re left with…narratives. We are brute-forcing stories we don’t believe in, only hoping someone else will. - But you can’t have bull markets and adoption without narratives! - No you can’t, but the narratives work best when you don’t think of them as narratives.

Real narratives are not manufactured on Twitter. They are forged by the innovation which then inspires enthusiasm turning into extrapolated hubris. This is how manias work. There must be a substance on which they are founded. We don’t have that substance. We only have a desire to propagate processes - exploit memes and tweet empty narratives into existence.

I’ve been guilty of this myself. Obfuscating a lack of product by yelling CULTURE! is not good enough anymore. The only culture we have been fostering is the culture of exploiting vapid narratives and brute-forced communities that are only as strong as the price action.

But maybe, after all, we should not underestimate the predictability of stupidity. Hasn’t this always saved us from impending doom before? Or maybe tucked away in a corner a big innovation is brewing? 

I don’t have the answers. I suspect that without markets reaching new highs we’ll enter an unforeseen territory, which might be painful in short to mid-term but good for innovation in crypto.

Thanks to Matt, Rap and Cam for feedback.