Written by Matt Gilmour, Corporate Development Manager at ConsenSys
Compiled by: Yangz, Techub News
Crypto Twitter (CT) is a beast. After years of being around it, I’ve come to understand its movements, but more importantly, I’ve realized how it forces me to move with it.
Understanding the essence of things, rather than what people want them to be, is the key. In the case of CT, understanding its essence means understanding the core of the game, and only then can we truly enter the game.
What is CT
Crypto Twitter is similar to the Rorschach test (a personality test using inkblots), it will become what you want to see. For degens, it is like a casino, full of memes and various forms of shitposting; for novices, CT is full of various alphas, and there are many seemingly well-intentioned "big guys" who voluntarily share investment ideas; as for investors with slightly more experience, the situation will be subtly different. They think that CT is mostly about market investment veterans and reputable venture capitalists who seem to be thorough and systematic investment arguments.
However, please don't get me wrong, all of the above impressions are just misleading Rorschach tests. When people take off the Rorschach "mask" of CT, its true appearance is nothing more than a chaotic "cesspool". CT has (sometimes) pure market comments and (mostly) disgusting investment endorsements. The resulting series of useless and harmful noise makes it almost impossible to send investment signals from it.
Why CT is useless
No one knows everything
What evidence is there that people on CT know everything? It is true that some investors may have succeeded in previous cycles. But in a bull market, there are always a few who succeed. Like John, the high-yield trader in Fooled by Randomness, these investors succeeded by luck, but they also face the risk of financial bankruptcy.
So what about the founders who get big VC money? People always think they must know something. But think about why financing is highly valued in CT? How did they get it? In many cases, investors expect them to succeed again based on their past success and profit from it. As I said before, in most cases, their success is nothing but luck.
It should be emphasized that I am not advocating that all investment success depends on luck. I just want to say that all investment success is a combination of luck and technology, and it is almost impossible to distinguish between the two (Nassim Taleb has already explained this in "FBR", so I will not repeat it here).
No Alpha on CT
Leaving aside the question of “luck” and “skill”, is it possible to find alpha on Twitter? By definition, alpha is excess return relative to a benchmark. To achieve this, investors must know what is likely to happen in the future before others do. Therefore, by definition, something found on CT cannot be alpha. By the time the so-called alpha appears on your CT, the information has most likely spread to the streets, and you may only get a small return while taking a huge risk. Remember, all alphas that are loudly publicized become beta.
With Lemmings
Even if there is some value to be found on CT, investor sentiment can fluctuate wildly. In this situation, it is extremely difficult to maintain your investment philosophy at all times. Maybe everyone is excited one day, but everyone may be depressed the next day. Maybe you know this deep down, but you can't escape the influence of "lemming-like emotions". Eventually, you will become a "lemming" on CT.
what to do?
Investors who want to succeed and who know they are in a cesspool of alpha will leave CT without being told. Just like you don’t need to tell someone not to walk into the middle of the road. However, while this concept is easy to understand, its implications may not be as simple as people think.
From a rational point of view, it is not difficult to understand the consequences of mixing with CT. What is more difficult (and necessary) is what individuals really want and what their true desires are.
If the inevitable result of following CT is low-quality returns, then why do people who want to succeed in investment still hang out with CT? The answer is that what they are actually pursuing is not investment returns, and their real purpose is not here.
One might ask, “Why would anyone want a lower return when a higher return on investment is possible?”
Because behind the low-quality rewards, what they are really pursuing is something else. Some people pursue correctness and entertainment, some people desire community and want to be part of the consensus, and some people seek self-comfort, find an outlet for their anger, or enjoy self-pity. Although the wishes of people who hang out in CT are different, the fact is that generous rewards may not be their greatest wish.
In addition, another reason why CT is so popular is that people firmly believe that they can find Alpha on CT. They believe that although Alpha has not been found yet, it will be found in the future. This is how humans waste their lives, whether it is related to CT or in other aspects.
It is not wrong to pursue low returns, and it is not necessarily right to pursue high returns. Self-judgment is like a dead end, and there will be no response to shoulds and should nots. Simply put, when a person begins to explore their desires in depth, it is not because they should do so, but because they have realized that what they are currently pursuing will inevitably lead to failure. Moreover, no matter how many boxes they open and how much effort they put into following CT, the result can only be failure. Due to different goals, someone's arsenic can also be your honey. The so-called "arsenic" will push investors to embark on a new journey. On this journey, they will realize where the real world-class investment returns are, and the answer will definitely not be found on CT.