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.
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President Maduro: Venezuela Seeks Opportunities To Use Cryptocurrency For Global Trade
- Venezuela’s cryptocurrency story continues as the country’s President Nicolas Maduro has presented new use cases.
- A recent report informed that the South American nation is studying the possibility of using digital assets in trades alongside the national Petro.
- President Maduro has presented new anti-sanctions law in the Constituent National Assembly. In a recent speech, he asserted:
“The anti-sanctions law is the first response to give new strength to the use of petro and other cryptocurrencies, national and global, in domestic and foreign trade, so that all cryptocurrencies of the world, state and private, could be used. This is an important project that is under development.”
- The news comes after Maduro suggested last year that his country could adopt cryptocurrency payments.
- Additionally, Venezuela signed a new tax agreement this summer that enabled the nation to start collecting taxes and fees in the Petro.
- A study reported by CryptoPotato revealed that digital assets already play an essential role in the country’s struggling economy. Venezuela’s intensifying financial crisis has catalyzed significant interest in cryptocurrencies as people seek opportunities to escape the devaluating national currency.
- The Bitcoin peer-to-peer volume exemplifies the growing interest in the primary cryptocurrency within the country. As per data from coin.dance, the BTC P2P volume on LocalBitcoins has been continuously surging in the past several months.
Leader That Allowed Scams: TRON’s Justin Sun Responds to Claims by Ex-Employees
Yesterday The Verge published an elaborate article portraying a picture of Justin Sun’s leadership at BitTorrent post the peer-to-peer file-sharing site’s acquisition by the TRON foundation.
Sun later responded to the ‘false-claims’ made by TRON/BitTorrent’s ex-employees in the article with ‘An Open Letter to Anyone Who Cares to Read’ on Medium.
Claim: Megalomaniac Leader; Response: True Libertarian
In the supposedly expose piece, author
Refuting the above portrayal of his leadership, Sun, in his response, stated that he has devoted his entire life ‘to being a responsible, global citizen’. Adding to this, Justin said that is a true champion of libertarian principles for a significant portion of his life.
I have devoted myself to being a responsible, global citizen throughout my entire life, spending significant portions of my personal and professional life to activities promoting universal values of respect, liberty, equality, and kindness.
The TRON and BitTorrent chief impressed further on his ‘global’ approach to things. He explained that the TRON Foundation harbors a ‘global team of talented contributors and developers’. And that he takes ‘pride in working’ with this global community to make TRON ‘one of the greatest decentralized blockchain protocols’.
Claim: Freedom Suppressor; Response: Upholder Of Human Rights, Individual Values
Dunaway reportedly engaged in conversations with folks who are/were associated with the TRON brand and the work culture. From what he gathered, Justin enforced a draconian company culture, with employees officially following the ‘9-9-6’ norm.
According to the article, TRON’s HR had Slack replaced with its Chinese counterpart DingTalk. The communication platform had an in-built surveillance mechanism that would use ‘Apple Health to count people’s steps’. Also, DingTalk used to ping employees literally all the time.
To this, Sun responded by saying that he has left no stone turned in, establishing a work culture that respects.
diversity and individuality through a culture that cherishes fundamental human values freedom of speech, user privacy, intellectual property protection, kindness, a diversified working environment, and compliance with legal standards.
Justin went on to comment that TRON and BitTorrent operate with a ‘globally collaborative team’. One that upholds and respects the ethos of cross-culture teams. Sun claimed that the folks at TRON folks have ‘worked hard’ to create a collaborative work culture. One that values freedom of speech and individual privacy.
Claim: Suppressed Criticism, Allowed Scams; Response: No Control Over Protocol Functioning
The Verge piece mentioned that ‘decentralization’ was just a facade for what was happening behind the curtains. Justin Sun and his core officials exercised strict control over content moving about and within the TRON network.
This involved allegedly paying a Redditor to ‘erase negative posts’. Which later drew the ire of the community.
Free speech is part of the ideology of decentralization, where ideas flow without gatekeepers. Tron started deleting any post it wanted.
The article also claimed that TRON’s administration team was silent and allowed the perpetration of scams on the network. While this happened, scammers and the scammed continue to grow in numbers while the management did nothing to interfere.
Justin, in his Medium post, said that he and the entire TRON administration team function sans control. Even though the team at TRON works to upgrade the platform, they do not exercise any censorship/regulation.
…we have no control or discretion over what applications use the protocol, what data is transmitted, or how its community members use it.
Sun went to add that he and his team are proud of TRON and BitTorrent’s achievement over the years. He went to quote that both have collectively ‘served 2 billion users around the world. These include ‘numerous enterprises, universities, and governments’.
Lastly, the TRON and BitTorrent boss struck down all claims made by ex-employees Lucasz Juraszek, Richard Hall, and Cong Li. Justin declared that the TRON foundation’s legal counsel has submitted all the requisite proofs and evidence pieces to the court. “We believe the decision will speak for itself”, he said.
BTT and TRX’s price didn’t seem to undergo any correction following the release of the bitterly scathing Verge piece. On the contrary, BTT is actually up 2.3% in the last 24 hours.
Featured image courtesy of QZ.com
Ethereum Price Analysis: Will ETH Surpass 2019 Highs Towards $400?
ETH/USD – Bulls Struggling To Pass 2019 Highs
Key Support Levels: $350, $336, $325.
Key Resistance Levels: $364, $378, $390.
Ethereum pushed higher last week to reach the 2019 highs at around $364 over the weekend. Unfortunately, it has not been able to overcome this resistance in the past four days of trading as bearish divergence popped up on the short term charts – highlighted in our last analysis.
For now, Ethereum is finding strong support between $350 and $355; however, it is looking increasingly likely to break this support soon as the short-term bearish divergence continues to play out.
ETH-USD Short Term Price Prediction
If ETH does penetrate back beneath $350, the first level of strong support lies at $336 (100-days EMA). Beneath this, additional support lies at $324 (.618 Fib), $320, $310, and $300.
On the other side, the first level of resistance lies at $364 (2019 highs). Above this, resistance is expected at $378 (bearish .382 Fib), $390, and $400.
The Daily RSI did dip beneath the mid-line to suggest that the sellers are battling to gain control of the market momentum.
ETH/BTC – Bears Continue To Face Resistance at Falling Trend Line
Key Support Levels: 0.033BTC, 0.032 BTC, 0.0315 BTC.
Key Resistance Levels: 0.0337 BTC, 0.0347 BTC, 0.0352 BTC.
Against Bitcoin, Ethereum continues to face the resistance at a falling trend line that has dictated price action during September. Each time ETH attempted to break above this falling trend line, the coin was rejected and headed lower.
On Monday, ETH attempted to push beyond the March 2019 support at 0.0337 BTC but could not pass it. As a result, ETH moved sideways this week and has returned to the falling trend line. Here, it can be expected that ETH should be heading lower – especially with the daily RSI flattening out in the bearish territory.
ETH-BTC Short Term Price Prediction
Looking ahead, if the trend line rejects the sellers, the first two levels of support lie at 0.033 BTC and 0.032 BTC. Beneath this, support lies at 0.0315 BTC (100-days EMA & downside 1.414 Fib Extension), 0.0311 BTC (.618 Fib Retracement), and 0.0305 BTC.
On the other side, if the bulls can penetrate the falling trend line, the first level of resistance lies at 0.0337 BTC (March 2019 Support). Above this, resistance lies at 0.0347 BTC, 0.0352 BTC, and 0.0361 BTC (March 2019 High).
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Cryptocurrency charts by TradingView.
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