Returning to ‘Common Sense’ Rationally Examining the ‘Truth’ of Crypto

Revisiting Crypto with Rational Examination of the Truth

TLDR

In a market with extreme reflexivity, the accuracy of the “truth” that most people pursue is often not important, but common sense is very important. Do not focus only on the accuracy of “fundamental analysis” and ignore common sense.

Here are some questions in the cryptocurrency field that violate common sense rules and should be corrected through the natural process of the market.

• Rule 1: If you see behavior that relies on pie-in-the-sky/opportunistic actions, things usually don’t work that way.

  • LianGuai Daily | Former product leader of OpenSea sentenced to 3 months imprisonment for insider trading; Binance Labs invests in Pendle Finance.
  • Detailed explanation of the evolution of the MEV market from zero-sum game to separation of powers, the dark forest is being illuminated.
  • Looking back at the decentralized storage track that has been ‘neglected’ by the market from EthStorage

• Rule 2: If you still rely on investment advice from many KOLs, builders, and investors on the surface, this is not a valuable way. Understand reverse signals.

• Rule 3: Are there scams and manipulative behaviors? Do asset holders hardly gain net value? These are not signs of asset categories that large value investors are ready to invest in.

The ability and courage to stick to common sense are rare, as cryptocurrencies and cryptocurrency Twitter allow the most annoying media price manipulation. And, in the past 10 years, the cryptocurrency market has mostly been bullish, and everyone’s attention has been trained to only chase the rise and not the fall.

Extreme Accuracy and Common Sense

In the cryptocurrency field, the cost of pursuing extreme accuracy at the expense of common sense may be higher than any other market.

You can calculate every detail of blue-chip projects, but still mistake periodic leverage Beta for long-term growth (e.g. Lido, the entire DeFi).

Most of the time, the market doesn’t care about precise fundamental calculations because we are talking about an emerging on-chain native economy (Ethereum) with almost no existing consumer behavior. The purpose of most projects on ETH is to burn Gas through speculative activities and they are derivatives of Ethereum’s network effect without any real net value.

No amount of accuracy can make up for the lack of awareness of the ongoing narrative:

• Ethereum hopes to have projects that can burn Gas and improve the capital efficiency of the existing total locked value (TVL) on the chain. Projects that can achieve one of these two things most efficiently will rise. In most cases, a project can only achieve this for a short period of time until the next project emerges. The Ponzi schemes of DeFi have disappeared, and next up are on-chain RWA treasury bonds just to keep TVL in cryptocurrency.

• Only when new projects that truly introduce new users and capital inflows emerge, can we break free from this extreme player-to-player competition.

We are in such an era where PvP games have almost exhausted liquidity, and in the past two years or so, there have been almost no new consumer behaviors and actual applications.

But I see some positive signs:

• Prediction markets: Polymarket, etc.

• Interesting casinos: Rollbit.

• Early practical use cases for NFTs: digital pawnshops for luxury watches.

• Some early attempts to build payment applications.

There’s not much else really. Games (including Web 2.5 GameFi and fully on-chain games) haven’t found product-market fit (PMF) in my opinion, but I hope to be proven wrong in this regard.

Common Sense

Rule 1: If it still seems normal for people to believe that pie falls from the sky and scams/opportunistic behaviors are rewarded, then we haven’t entered the “value zone” yet.

• L2 is the new replacement for L1. Now everyone (old L1, projects) wants to become L2 because it increases their valuation.

• NFT blue-chip projects squeeze out the last bit of value from their most loyal users.

• Projects that haven’t proven anything yet are clearly overvalued (Worldcoin with the endorsement of OpenAI, high valuation).

• Most dead projects raise prices and dump to squeeze out more exit liquidity from the retail market.

• Venture capital firms invest in new hot narratives (although much less than 6 months ago) because they believe it will immediately reach a valuation of $100 million when the bull market arrives, just like other recently launched projects.

Rule 2: If in the “builder market,” shilling is more important than analytical logic among many so-called KOLs, builders, and investors, then we still have work to do.

• There are still too many participants in conferences. One moment in Hong Kong, another moment in Singapore. Keynote speakers are more concerned with showcasing their presence than the actual content of the conference.

• Becoming a founder is still something to be admired (even for founders who have liquidated their own assets), even if your product has less than 100 real users. You’re more concerned with attending investor gatherings than continuing to work hard.

• Working in the cryptocurrency field often means spending L1 funds to preach and host events.

• Underperforming VCs act like kings on Twitter, talking about their certainty regarding the next big event to come, while the total network traffic of the applications built by projects in their portfolio is mainly attributed to themselves and their competitors.

• Conversely, those who make the biggest contributions to this field tend to be low-key (Brian Armstrong, Vitalik, Opensea, some new Solana projects, etc.). Founders of new projects that are slowly building legitimate products don’t schedule releases and announcements based on market risk expectations, and they don’t engage in aggressive PR campaigns. You just need to build, release, and let users judge with their money and attention.

Rule 3: When manipulative behavior is default accepted and liquidity remains primarily for exits, institutions will not come to buy our assets.

• Just open any low-liquidity shitcoin chart that has been slowly declining for over a year, but regularly has catalysts to pump the price, and you will understand why.

• Players like DWF have become the new norm and are considered normal.

• Projects without real users can still easily exit liquidity through IEOs.

• Projects that do try to accumulate value for token holders perform well but are still labeled as Ponzi schemes/scams by “professional investors” (Rollbit, Unibot).

Courage and Belief

Admittedly, this is somewhat exaggerated and oversimplifies the industry’s current state (some common sense has returned, trading is attractive in some places), but overall, this is an underestimated reality.

10 years of quantitative easing, ultra-low interest rates, and the worship of crypto localization have truly clouded people’s judgment. Because the halving is approaching, WAGMI (We Are Gonna Make It). Because Powell is saving our positions, WAGMI. Because Bitcoin is going up long-term, WAGMI. It is during times like these that sticking to simple common sense will yield significant returns.

I believe people’s beliefs have not been tested enough. If we consolidate for another three years from now, what would you do? Would you still believe in cryptocurrencies? Would you still think this is the inevitable future of finance and humanity? I would, but I’m certain that the majority of people who are currently bullish won’t.

True courage and belief require completely ignoring consensus and appearances, as well as perseverance in patience. These qualities are still possessed by a few.

Original Article Link:

https://www.maverickcrypto.xyz/post/a-return-to-common-sense

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