In the blockchain space, narratives have always been a powerful driver of investment. The ever-changing landscape has seen the rise and fall of themes ranging from ICOs to DeFi and NFTs, while also leaving important lessons for investors, founders, and enthusiasts.
The evolution of the narrative here can be seen from the initial coin offering (ICO). The ICO boom in 2017 heralded a revolution in venture capital, but many projects failed to maintain this momentum. As the industry matured, investors' attention turned to more sophisticated investment mechanisms, and individual exchanges led the launch trend. These narrative shifts also demonstrate the dynamic nature of the Web3 space, where trends quickly emerge, peak, and fade.
Narratives sometimes sweep through the cryptocurrency space like a tidal wave, propelling once obscure concepts to the forefront of attention.
First, we had the Bitcoin DeFi moment. Bitcoin is not usually associated with experimentation, but it introduced ordinals to represent Bitcoins through unique identifiers, opening the door to complex DeFi applications. Built on Ordinals, BRC-20 tokens are designed to mimic the fungibility of ERC-20 tokens, with unique characteristics that may pave the way for Bitcoin DeFi with fractional ownership, smart contracts, decentralized exchanges, lending platforms, and insurance platforms. But as we always say, the attention span didn’t even last two months. Only the first users/builders can really make money from it.
Then we had the LSD craze. LSD dominated DeFi thanks to Ethereum’s shift to proof-of-stake. It offers users staking rewards without locking up assets, and protocols like Lybra and Pendle built on this concept, expanding the ecosystem with benefits like increased liquidity and reduced risk. The APR has always been high. But guess what? After the initial decline, the APR dropped dramatically, and with it, the hype.
We saw the same thing during the meme craze. Tokens like PEPE and BEN surged in price, driven by social media, NFT popularity, and the desire for quick profits, even though people knew these tokens were risky and highly volatile, but they just wanted to generate 100x returns in the shortest possible time. The hype there was the relative ease of buying, coupled with the potential to make huge profits in a stagnant market. Like all meme tokens we know, the hype ended abruptly with a host of scandals, carpetbaggers, hacks, and shills.
We can’t forget the recent hype about AI coins from the popular AI Chatgpt. What’s driving the hype? Transformative potential? Speculative rebranding? Or can we forget the so-called VR revolution? Rumors about Apple VR headsets and Meta’s rebranding have sparked interest and speculation in the virtual universe. Tokens like MANA, SAND, AXS, and RNDR have risen many times due to these rumors. Old investors benefit, while new investors suffer.
Narratives have their limitations. They can push a theme to the forefront, but they don’t guarantee long-term success. As a result, founders often find themselves caught in a dilemma: the challenge of timing their startup correctly amidst unstable narrative cycles.
For founders navigating the Web3 space, several survival strategies have emerged:
1. Understand the narrative: It is critical to distinguish between investor-driven narratives and themes with deep-rooted potential. Founders should determine whether they are entering a narrative early or riding the wave of an existing narrative.
2. Act early: First-mover advantage usually translates into months of investor education and persuasion. This double-edged sword is both a blessing and a challenge for founders seeking support and investment.
3. Flexible survival: Survival is a remarkable achievement in itself when many of your peers may fail. Prudent financial management aimed at weathering difficult times may be the key to long-term success.
As the Web3 investment landscape continues to evolve, the challenge is to strike a delicate balance between risk and reward. Timing investments within narrative cycles, understanding the intrinsic value of a project beyond speculative hype, and fostering user engagement are the cornerstones of success. Investors, founders, and enthusiasts must navigate this intricate landscape with an eye toward long-term potential, guided by the lessons of the past and the promise of a more sustainable future.
The Web3 investment landscape is a complex weave of narrative, attention, capital, and survival. In this context, trends rise and fall, hype can either propel a project or kill it, and success depends on a combination of foresight and adaptability. As the industry matures, the focus shifts from short-term price increases to long-term value creation. Finally, I would like to leave you with a sentence that I have been repeating this week. If you work hard on the right path, you will achieve everything. If you walk on the wrong path, you will end up going in the wrong direction.
