What’s Happening In Crypto?
About The Undercurrents
So you left in 2022. Or maybe you did not leave but you gravitated to the surface-level narrative chasing generational wealth flipping memecoins. Or perhaps you were sidelined skimming an article here and there. Now you want to figure out what is actually happening underneath. What do I think you have missed?
Two phenomena seem to reign supreme over the world in this day and age.
Elon’s Razor of the most entertaining outcome is the most probable
What used to be entertainment is serious and what was serious is entertainment
Number 1 is pretty easy to document. Just the fact that Elon Musk runs a US department called DOGE is unfathomable by the 2016 standards. That was only 8 years ago.
Number 2 is a manifestation of number 1. The US election was a true season finale to a reality show called “The America”. Politics becomes entertainment. War casualties being streamed. The jokes being canceled. Movie plots used to convey an agenda. Social media posts getting prosecuted.
One niche symptom of “what was serious turning into entertainment” is money. Memecoin to be precise. Magic internet money as they call it. Funnymoney. The 24/7 online lottery of memes.
While apparently, the sovereigns will acquire BTC reserves en masse (following a bunch of innovators like El Salvador and Bhutan) only to give a big middle finger to Germany who rushed to sell in August. In retrospect, it’s obvious that one should not expect an economically rational decision from a country that decided to continue shutting down its nuclear energy power plants while on a proxy war path with its former biggest energy supplier.
Meanwhile, Michael Saylor is working on the mother of all bubbles, allowing Wall Street to beat sovereigns to the race.
But this is all Financial Times-type news that the reader does not really care about. What’s happening below? What has been brewing underneath for a while and can move the wheels of the apparent bull market?
If you don’t know who the user is - YOU are the user
For the insiders, crypto has become a lifestyle. Terrible thing to admit but it’s true. It is a lifestyle that is an aggregate of consuming premium goods from various crypto brands. It's a lifestyle based on moving money, losing money and hoping to retire with no effort. Mable put it much less cynically:
“It’s a lifestyle where only the “current” and “now” matter because the influence of anyone or anything is reflected almost in real-time in what we’re experiencing. The concept of an end result is nearly obsolete, as the world has truly become an infinite game.”
Crypto has gotten faster with “seasons” turning into weeks. Altcoin season is now a week of price performance for a specific niche of altcoins. Narrative rotation is faster than ever. So many distractions to choose from.
Crypto has truly arrived in Kevin Kelly’s protopia; “the problems of today were caused by yesterday’s technological successes, and the technological solutions to today’s problem will cause the problem of tomorrow.”
Crypto is in the never-ending state of becoming. Incremental improvements are not visible for a long time and all it takes is a little nudge, little liquidity and an expectation of a political tailwind, to make the aggregate of the incremental transform into a financial frenzy.
Everything in crypto is charged by money. It is money. It is the hyperfinancialization of attention.
Everyone is a user even if they do not know it. The thing about living in protopia, in the state of becoming, is that you don’t even realize you live it because you’re forced to upgrade everyday.
Everyday you’re a newbie even if you don’t think of yourself as such:
“The momentum of technologies pushes us to chase the newest, which are always disappearing beneath the advent of the next newer thing, so satisfaction continues from our grasp”
In 2017 onchain trading via orderbooks (shoutout to Ethredelta) was an inferior experience and AMMs were deemed inefficient. In 2018 the problem was that no one wanted tokens. In 2020 the market realized that they can make money swapping tokens permissionlessly on Uniswap and provision liquidity while getting paid.
Ok, but gib ticker
What I know is that every time it’s different but it also is not. The difference lies in the nuance of every frenzy surpassing the imagination and expectations of most. There is no way to predict which way it will take us, especially with so many ecosystems and applications brewing in all directions.
My best guess is that rotation gets faster, certain waves return a couple of times, and path independence will be the most precious resource to navigate such an environment. The ecosystem (L1/2s) becomes less important as trends become app/use-case dominant.
The “agent” and “DeSci” themes are the most interesting to me because they play into existing industries of DeFi and memecoins. The synergic momentum could lead to a Cambrian explosion of new use cases - some more flashy and hopefully others making a real difference.
If the value can freely flow between DeFi, DeSci and agents, we could actually productize “investment in progress” and wrap it in memes. It then becomes self-reinforcing and expands crypto markets into unforeseen places.
We need crypto to promote positive sum games by creating new markets. This might be why big players in the industry explore these themes that can have real-world impact real fast. Memecoins becoming RWAs were no one's bingo card.
As in every mania, the demand for genius ideas will produce a steady supply of imposters, gimmicks and scams.
What calls itself a cult is not a cult
Innovation triggers might be visible only in retrospect as in protopia aggregation of incremental progress becomes visible in short bursts. What follows is validation turning people blind and hunger leads to entitlement. Entitlement grows into megalomania.
Bitcoin used to be the gateway drug to crypto. Not anymore. Not for retail at least. Memecoins are a monetized attention market and are becoming the access point for new users. But what they are is a momentum trade. They cannot be forward-looking.
It’s a shock value replaced by a new shock value. No insight can predict that. These are as fast as any social media posts. They are the new media. Memcoins redefine what a social media post can be.
Just recently people realized one can attach memecoins to a vision and give it an actual persona. GOAT’s loose affiliation with The Terminal Of Truth was the first instance of memecoin tied to the persona of an AI agent. LUNA followed. Albeit rather generic in their expression it indicates there is a design space to experiment in.
Couple days ago I was surprised by a memecoin tied to an agent that takes control of robots globally, driving and streaming (Disclaimer: Frodobots is our portfolio company and we bought SAM). If people continue iterating at this rate, the game remains entertaining. This only confirms that this is the peak cryptotainment era. (Meme)coins are media that people consume.
At the moment, the agentic element is mostly a generic surface-level dressing up. It is also an automation of shilling. But it offers novelty and expands imagination. It forces some level of innovation other than promises of “cult”.
Some use phrases like “religious following” and “cult” very lightly. There is but one cult in crypto and that’s the belief in up only. Oddly it is a religion of maximizing rational economic choice while making irrational financial decisions. But real cults never call themselves cults.
So what you might have missed, whether you were here or not, is that crypto is actually becoming a consumer product. It created a new medium to be consumed in a short-attention-span dopamine farming era with its value somewhat ephemeral. All this while riding economic and political tailwinds.
The most entertaining outcomes will go both ways. Fortunes will be lost in seconds. The biggest opportunities always lie in the asymmetric outcomes. The most promising things today did not look like opportunities yesterday. The biggest threats are readily ignored.
Opportunism is the strongest cult in crypto.
Gread read as always!
Every cycle we find new reasons to print tokens. The printing this cycle is even crazier than during defi summer days.
Great