Fundamentals Won’t Make You a Better Crypto Investor - At Least Not the Way You Think
Weekly Hot Take + Market Overview + Highlights
🗓 February 4th-10th, 2023
Today’s newsletter is 1980 words. A brisk 8 minute read.
Why do so many smart people delude themselves into thinking fundamentals are what matters in crypto? It’s so much simpler than that. Read this to change the way you think about the market.
Key Points Covered:
- Stop Fooling Yourself!
- Tech is Not the End All, Be All
- Example Using Various Competitors
- What Users are Drawn To
- So Simple that an Idiot Could Understand It
- How to Think Instead
Fundamentals are a Meme When it Comes to Crypto Investing!
Stop Fooling Yourself
Are you here to be a technology enjoyer, become a community member or are you here to make money? If you want to make more money in crypto, you need to change your mentality. Tired of watching other people make money? Did you watch all the narrative rotations pass you right by even though you’re active in these markets because you’re a “serious investor”? Heavily focusing on the technical and fundamental aspects of projects in crypto is a joke. Stop fooling yourself! It doesn’t make you a better investor - except it does, but we’ll get to that. Here’s why you should pay attention to the fundamentals but start thinking about it differently. It’ll change the way you look at the market.
First of all, as a sober reminder to any and all who enter these markets - crypto in its current iteration is primarily driven by speculation. Fundamentals and technicals are just part of the sales pitch. Optimized and tailored to help sell the product. They are at the end of the day used to market your product, goods or services to a wider audience, which is important if you want to succeed.
Tech is not the end all, be all
Enter the buzzwords - the technology, engineering, decentralization, blockchain specs, data availability, modular vs monolithic, transactions per second, consensus, hashrate, nodes, smart contracts, MEV, etc etc etc - all interesting in their own regard but they aren’t what will make or break the success of a project.
Way too many people are able to delude themselves that because they are smart enough to understand how something works and the technology behind it, that it is therefore a good idea and worse, a good investment. Good tech does not always equal a good idea which does not always equal a good investment! Plus human nature often leads us to picking sides and forming an identity with that side. You must stay flexible.
Example Using Various Competitors
You have 10 competitor projects within a similar sector with similar specs to evaluate, each one with various pros and cons. Some may be more technically advanced but slower. Others may have a powerhouse team but they have a terrible user experience and interface. Another may have great technical specs but absolutely zero publicity and marketing potential - team is unlikeable. One of them has a super advanced whitepaper that only a handful of people probably understand. Another is honestly pretty average but they have killed it when it comes to marketing and branding, capturing market share and everyone recognizes their name. Who is more likely to be successful?
What Users Are Drawn To
Put yourself in the mindset of the actual people who will eventually be users. What do they like, dislike, want, need? Users are drawn to things they recognize, are simple to use, offer good perks/rewards and are overall able to appeal to a wide audience. Is it a difficult concept to understand? Can you anticipate what people want/need before they even know it themselves and offer it to them?
History is a graveyard full of good ideas and smart people that never went anywhere because they weren’t able to surpass this crucial hurdle.
So Simple That an Idiot Could Understand It
At the end of the day, the simplest ideas are often the best. This is why you shouldn’t focus and obsess with the technical and fundamental details when evaluating a crypto project - instead ask how this can be marketed and sold to an audience successfully? Is this a simple enough idea that anyone can understand it? What problems does it solve, what does it do and why is it recognizable? It should all be so simple that an idiot could understand it.
Literally the best ideas are the ones an idiot could understand.
You could have great technical design, security, high TPS, finality and all the buzzwords out there but that won’t save you from getting beat out by another similar project who was able to sell themselves better.
How to Think Instead
Now that we’ve covered the notion that fundamentals in crypto investing is a meme, we can focus on a deeper understanding of the market. While understanding the underlying technology, adoption, and market conditions is important, the true key to success in crypto investing is recognizing that your ultimate goal is to sell that story to a future investor. Rather than becoming too invested in the hype and speculation yourself, it is more important to have a clear understanding of what will appeal to a wider audience in the future.
In traditional investing, the focus is often on long-term potential and value, but in the world of crypto, that doesn’t exist yet. The lack of established metrics for evaluating crypto fundamentals can make it difficult to determine its true value, but this does not mean that fundamentals are irrelevant. On the contrary, understanding the underlying technology and market conditions can help investors make more informed and less speculative decisions.
Use your knowledge of the technology, the applications, the product market fit, the business model, the problems it solves, the team behind it, the investors involved, the partnerships it has, all of it - and ask yourself if this is something people will Actually use?
A fatal flaw too many people commit is they marry an idea that turns out to not have been that great. Perhaps your fundamental analysis told you that payments, financial services and lending markets or whatever were the most fundamentally sound choices for your investments. Then you watched as NFTs went up 1000x, GameFi and metaverse projects soared, alt layer 1s blasted off and attention never really latched onto what you thought it would. Crypto is an attention economy. You must stay fluid and versatile. Then of course markets move in cycles and rotations so eventually yours might come back around. Some hopium to get you by.
In conclusion, while understanding that fundamentals in crypto are important, it is the recognition that you want to sell that story to a future investor that makes you a better investor. Don't become too invested in the hype and speculation of the market, instead, focus on what will appeal to a wide audience in the future and increase your chances of success.
Don’t drink the Kool-Aid yourself!
📊 Market Update
- Crypto Market Cap: $1.01T - down vs last week’s $1.07T
- Stablecoin Exchange Reserves: $26.193B - down from last week’s $27.423B
- Stablecoin Total Market Cap: $132.5B down from last week’s $135.21B
- DeFi TVL: $47.07B - down from last week’s $49.14B
- Exchange Volume: $293.85B so far for the month of February vs $797.23B total in January
- Dex Volume: $21.2B so far for the month of February vs $59.77B total in January
- Ethereum NFT Volume: $1.24B so far for the month of February vs $796.11M total in January
📈 Charts You Need to Be Paying Attention To
- Looking at the top 5 by active developers: Ethereum, Kusama, Polkadot, Cardano, Cosmos Hub. Is that the list you thought it would be? Things have been fairly quiet on the Polkadot and Cardano front.
- Not long ago Polkadot announced that they were in fact software and not a security and Cardano recently launched their Djed stablecoin. Will these active devs eventually lead to a Polkadot or Cardano season? Most of crypto twitter seems to consider both of these projects a joke.
✅ Top Crypto Highlights of the Week
- Genesis, Gemini and DCG reach agreement in bankruptcy court
- A16z votes 15M UNI tokens against proposal to deploy Uniswap on BNB Chain via Wormhole
- Crypto firms banned from Super Bowl television ads this year
- Yuga Labs reaches settlement in Bored Ape NFTs trademark lawsuit
- Google Cloud reportedly invested $300M into AI startup firm Anthropic
- Binance Tax launched
- Visa’s crypto strategy targets stablecoin settlements
- Lightning Network reached an all-time high in terms of capacity
- Justin Sun backs FTX Debt token ‘FUD’
- The UK's central bank, the Bank of England, has unveiled the model for a digital pound
- Crypto.com partnered with Korean drama distributor Studio Dragon to issue NFTs
- Microsoft integrates ChatGPT into Bing search engine
- Dubai to prohibit privacy coins such as Zcash and Monero
- $100M Tron Artificial Intelligence Development Fund
- Su Zhu announced OPNX for trading claims related to funds stuck on failed exchanges
- Kraken agreed to settle with the SEC, will pay a $30M fine and end on-chain staking services for U.S customers
- The IRS filed a court document for information against Kraken to identify customers
- Voyager Digital submitted a plan for customers to recover their assets through Binance US
- Worldcoin is on the hunt for a lead investor for its latest round of financing
- Microsoft ends team formed to help customers use the metaverse in industrial settings
- Mysten Labs, partnering with China's largest game company Tencent's cloud service
🆕 Project Updates
- Ethereum Zhejiang testnet successfully processes first-ever ETH staking withdrawals
- Blur anticipated token launch next week
- Aave's GHO stablecoin goes live on Ethereum's Goerli testnet
- BAYC Dookey Dash plans to award gamers based on how high they scored in-game
- StarkWare plans to open-source the StarkNet Prover
- StarkWare is joining the Chainlink SCALE program
- Options AMM Lyra deploys to Arbitrum Network and integrates with GMX
- Trader Joe Integrates LayerZero: JOE evolves into an Omnichain Token
- Uniswap to deploy Uniswap v3 on Boba Network
- zkSync 2.0 testnet regenesis to prepare for Fair Onboarding Alpha
- Dopex launches on Polygon
- Radiant v2 is going live around February 16
- Aleph Zero wins Polkadot parachain auction #38 and Wormhole bridge is live on Acala
- X2Y2 halving reduces staking rewards by ⅔
- DEX aggregator CoW Swap exploited for 551 BNB
- Lido Finance V2 update
- Stargate vote successful to re-issue a new STG and airdrop it to all STG holders
- Bitcoin Punks on the Bitcoin Blockchain using Ordinals
- Dell will join Google, FIS and Abrdn on the governing council of the enterprise network Hedera
- ENS DAO voted to sell 10,000 ETH to fund the project’s activities for the next 18 to 24 months
- Acala EVM+ now live on mainnet
- WeTransfer and blockchain platform Minima introducing an NFT minting service in March
- Saudi Arabia and The Sandbox agree to collaborate on metaverse projects
- Chiliz marks fifth anniversary by announcing validation of genesis block of the new Layer-1 Chiliz Blockchain
- Algorand Foundation announces broad-reaching partnerships in India to grow Web3
- Anima plans to add OpenAI's chatbot technology to its AR-powered virtual pets called Onlybots
- Web3 payments firm MoonPay partnering with NFT marketplace LooksRare
- MakerDAO community proposed creating a liquidity market called Spark Protocol
- Flux Finance launches lending token collateralized by U.S. Treasury debt
- MakerDAO integrates Chainlink oracle to help maintain DAI stability
- Optimism OP Airdrop #2 - 11.7M OP distributed to over 300k unique addresses
- Uniswap DAO concluded the final vote to deploy Uniswap v3 on the BNB Chain
- Arbitrum-based DeFi protocol Radiant will soon release its v2
- SushiSwap acquires Cosmos-based trading platform Vortex Protocol