Reviewing the January Hot Token Market from the Perspective of Narrative Economics

Author: Ximi Sammi

At the beginning of 2023, we experienced the explosive rise of meme coin Bonk, the tenfold surge of AI coins like AGIX and FET, as well as the main narrative of LSD, making it a spectacular start. Here, I will reflect on several projects in January from the perspective of narrative economics.

1. The Marketing Narrative of Memes

Bonk is a project that emerged after more than a month of silence on the Solana blockchain, influenced by the FTX collapse. On Christmas, most members of the Solana community received airdrops of Bonk tokens, which then became a hot topic of conversation and Twitter trends among community members. The community even created a BONK meme game, where a Shiba Inu hits SBF on the head with a baseball bat, and players can start the game by spending BONK tokens. Perhaps this emotional release resonated with the community to some extent. The token surged dozens of times, reaching a peak market cap of over $300 million.

What can we summarize about the path to finding the next meme alpha from Bonk's success?

From a marketing perspective, it can be categorized as follows:

• Leveraging Marketing. By capitalizing on the hot topic of "mocking Alameda economics and beating Sam," it brought inherent topic and traffic attributes, allowing it to serve as a vehicle for Bonk, radiating throughout the crypto space at an appropriate speed. Similar cases include the ten-thousandfold rise of Dogeking in 2022, which leveraged Shen Teng's skit during the Spring Festival Gala, quickly spreading throughout the crypto community and beyond under strong media exposure.
• Targeted Marketing. Airdropping to large holders, precisely targeting potential customers, and completing the project's cold start. A similar example is Cult, which surged 300 times in two months in 2022 under such circumstances.
• Resource Integration. Banding together for support. Bonk's launch received backing from numerous projects within the Solana ecosystem.

Successful Meme = Leveraging Hot Events Marketing + Community Cold Start + Support from Resource Background (KOL/Celebrities/Project Partners)

Finding undervalued assets through asset pricing models is the most common investment logic in traditional markets. While memes, narratives, and speculation may seem to lack intrinsic value, they are actually influenced by emotions, feelings, and hype, which cannot be measured by existing financial models. I believe that over time, meme economics and narrative economics will develop a specialized set of value measurement standards.

Soros once said that the history of the world economy is a continuous drama based on illusions and lies. To gain wealth, the approach is to recognize the illusion, invest in it, and then exit the game before the illusion is recognized by the public.

2. AI is the Long-term Narrative for Humanity

Artificial intelligence, as the largest long-term narrative since the metaverse and Web3, reached a climax with the emergence of phenomenon-level products like ChatGPT. Since October last year, countless Web 2 investors have bent the knee, and with the support of giants like Sequoia Capital and Microsoft, 2023 has become "the big year for AI." On January 10, Microsoft invested $10 billion in OpenAI at a valuation of $29 billion.

As a leading indicator of the U.S. stock market, the crypto space inevitably becomes a reservoir for capital FOMO emotions.

According to the time machine investment principle, when Roblox went public in 2021 with a market cap exceeding $45 billion, and Facebook announced its rebranding to Meta, it drove a tenfold surge in metaverse concept coins like $SAND and $MANA, which leads us to think that coins like $FET, also a Binance Launchpad project, might replicate the upward trajectory of $SAND.

In January, the market cap of metaverse concept stock Roblox was $20 billion, while AI leader OpenAI was valued at $29 billion. In contrast, the market cap of metaverse leader $SAND was $800 million, and AI concept coin FET had a market cap of $9 million in January.

As of February 8, the leading AI coin $AGIX reached a peak market cap of $792 million, rising from a low of $0.04 on January 6 to a maximum increase of 13 times to $0.66. FET rose from $0.09 to a peak of $0.60, with a maximum increase of nearly 6 times, and a market cap of about $500 million.

Although my thoughts on the AI sector were validated in just one month, I did not fully capture the entire round of gains and deeply felt how difficult it is to achieve unity of knowledge and action while combating human weaknesses. Therefore, in investing, it's not just about identifying the right opportunities; what's most important is how much you can earn after identifying them.

In an aggressively open market, when the wind blows, the correct approach is to lie flat on the track and enjoy the "value misalignment" brought by the positive externalities of the market. Excessive "rationality" can strip investment of its beauty; you cannot use current scores to measure future achievements.

3. Mainstream Narrative LSD and Sub-narrative zk

The biggest and most certain mainstream narrative in the crypto space for the first quarter is the ETH Shanghai upgrade in March. The LSD protocol has grown alongside the ETH 2.0 upgrade as a DeFi derivative sector. Without considering the price of ETH, LSD will become a sector aimed at a trillion-dollar business scale, with a high ceiling for narrative and ample imaginative space. Such a high-certainty and somewhat realistic narrative has led to an average increase of about three times for LSD-related coins like $LDO and $SSV in this round of rebound.

The crypto industry is never short of narratives, and the Ethereum scaling issue will always have a place on this narrative list. Currently, the biggest pain point in the industry is the lack of sufficient infrastructure to support hundreds of millions of users.

Therefore, ETH 2.0 and Layer 2 scaling will be the main narrative thread for the coming years, and zk rollup technology is likely to be the ultimate solution for future L2.

We believe that the successive implementation of Layer 2 and Ethereum 2.0 will have the opportunity to become a secondary growth curve for Ethereum, evolving into an economic bandwidth capable of supporting trillions of dollars. The L2 Bridge will play an important role as one of the blockchain infrastructures in this process.

4. The Best Stories Kill the Most People

Narrative is one of the greatest driving forces behind financial development. The measure of the size of a narrative is essentially how many people it influences and how deeply it affects them. The time effectiveness of narrative dissemination depends on the probability of repetition.

A good narrative carries attributes such as a time frame, ease of dissemination, repeatability, and scarcity. From these dimensions, Bitcoin is undoubtedly the greatest narrative of the past decade. Early on, the term "digital gold" not only encapsulated Bitcoin's anti-inflation narrative, making it easy to understand and spread, but also anchored the grand narrative logic with the ultimate goal of gold's trillions in market cap, explaining the reasonableness of Bitcoin's narrative reaching the skies.

The design of Bitcoin, with its halving cycle every four years and deflationary mechanism, is like fueling a Mercedes-Benz, providing the best footnote for the continuous operation of this great narrative.

Just like you, who are reading this article, have you ever lost confidence in the industry due to events like the FTX collapse, the bankruptcy of 3AC, or the Luna crash, feeling despair for the future? At this moment, veterans in the crypto space will tell you to hold on a little longer; wait until 2024, when Bitcoin halves, and the bull market will return…

In contrast to other fields, such as artificial intelligence, there have been at least four narratives about AI since World War II, from "automation" to "artificial intelligence," and then from "machine learning" to the current "AIGC." Each peak of popularity has been driven by the emergence of disruptive products, rather than a repetitive narrative fueling station like Bitcoin's halving every four years.

Many things in the world are like chemical reactions rather than mathematical calculations. In the process of solving, it is not necessary to confirm that a = b to arrive at the correct answer. In the face of a grand narrative, none of us knows which direction it will take; we can only choose to let go of our biases and pursue a vague correctness.

The beginning of the narrative is to let go of ego and embrace the bubble.

The climax of the narrative occurs when the "non-consensus yet correct" game you pursue gradually becomes a market consensus, and you turn to exit.

The end of the narrative is that the best stories kill the most people.

All phenomena are illusions; if you see that phenomena are not phenomena, you will see the Tathagata.