In the blockchain space, narratives have always been a powerful driver of attention, investment, and growth. A good story will be proportional to the price of the asset, often like a TV plot with highs and lows. The changing landscape has witnessed the rise and fall of various themes from ICOs to DeFi and NFTs, leaving important lessons for investors, founders, and enthusiasts. The narrative shift highlights the dynamic nature of the Web3 space, where trends emerge quickly, peak, and fade away quickly.
Stories are sweeping across the cryptocurrency space like a tidal wave, pushing once obscure concepts into the spotlight.
We had the Bitcoin DeFi moment. Ordi was introduced to represent Bitcoin through a unique identifier, opening the door to complex DeFi applications. BRC-20 tokens built on Ordi are designed to mimic the interchangeability of ERC-20 tokens with unique characteristics, potentially paving the way for DeFi on Bitcoin, including fractional ownership, smart contracts, decentralized exchanges, lending platforms, and insurance platforms. It didn’t even last two months. But looking back now, only the first users and builders really made money from it.
Then we had the LSD-Fi craze. LSD has taken a dominant position in DeFi due to Ethereum’s transition to proof-of-stake. It provides users with staking rewards without locking up assets, and LSDfi protocols such as Lybra Finance and Pendle Finance build on this concept, expanding the ecosystem through benefits such as increased liquidity and reduced risk. The annual interest rate has remained high. But what happened? After the initial decline, the annual interest rate dropped sharply, and with it the hype.
The same thing was seen during Memecoin mania. The token has surged, driven by the popularity of social media, NFTs, and the desire to make a quick profit. Knowing that there are tigers in the mountains, the most obvious feature of the currency circle is that the tigers are in the mountains. Everyone knows that these tokens are risky and volatile, but who doesn't just want to get 100 times the income in the shortest possible time.
The hype there was the relative ease of buying, coupled with the possibility of lucrative profits in an otherwise stagnant market. Like all meme seasons known to man, the hype ended abruptly, with a slew of scandals, lies, hacks, and shills.
Surely we can’t forget the recent hype around AI coins due to Altman’s AI popularity on Chatgpt? What’s driving this hype? Speculation due to progress? Transformative potential? Speculative rebranding?
Rumors of Apple VR headsets and Meta rebranding sparked interest and speculation in the Metaverse. Tokens such as MANA, SAND, AXS, and RNDR rose several times on these rumors. Old entrants profited and new entrants lost money.
They can push a theme to the forefront, but they can’t guarantee long-term success. As a result, founders often find themselves caught in a dilemma: timing their startup in the midst of a turbulent narrative cycle is a challenge.
Most of the projects mentioned are very good projects, but the narratives that drive their prices and popularity will ultimately hurt them in the long run.
Therefore, founders try to come to terms with the fact that they earn enough revenue, profit, to be able to manage operating costs in a market downturn. Because even a bear market can expose weaknesses in projects that get caught up in the frenzy of attention, leading to a dwindling user base and bleak market prospects.
The Web3 investment landscape is akin to being in uncharted territory, where pioneers must rely on foresight and thoughtful risk-taking.
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 potential. Founders should determine whether they are entering a narrative early or riding the wave of an existing narrative.
2. Early Action: First-mover advantage often means months of investor education and persuasion. For founders seeking support and investment, this double-edged sword is both a good thing and a challenge.
3. Survive with agility: Survival is a remarkable achievement in itself when many of your peers may have failed. Prudent financial management, designed to weather the storm, may be the key to long-term success.
4. Consumer focus before capital: Prioritizing user engagement and iterating products based on consumer feedback before seeking investor capital is a smart strategy. Meeting consumer needs promotes more sustainable organic growth.
5. Get the timing right: Timing is critical; entering a crash phase or misinterpreting short-term price increases as real consumer demand can make it challenging to obtain follow-on financing.
We must then shift our focus to tangible utility and real use cases. DeFi projects that can demonstrate concrete value propositions, solve real problems, and provide sustainable financial products are likely to find more stable footing. A balance needs to be struck between innovation and compliance. We must move from speculative trading tokens to products that provide real financial services.
Today, the Web3 ecosystem emphasizes ownership and exclusivity, in stark contrast to the early days of the Internet when free access to content prevailed. The shift to ownership comes at a cost, both in terms of financial investment and user engagement.
Emerging themes such as DeFi, NFT, Gamefi, and AI are still unfolding, each with its own unique trajectory. The shift from relying solely on investor capital to promoting consumer engagement is a critical shift that founders must embrace. It is no longer enough to chase trends; founders must build products that meet real needs and provide tangible value.
As the space struggles to create value and retain user attention, models that combine a “free” experience with ownership, such as those seen on Reddit, offer a potential path forward.
A new paradigm is emerging in the Web3 investment space - one that values sustainability, user engagement, and meaningful differentiation. Unlike the frenzied ICO era, investors are now scrutinizing projects for their long-term viability and ability to withstand market volatility - as interest rates rise and market liquidity dries up. The concept of "survival of the fittest" applies not only to the projects themselves, but also to the investors and entrepreneurs who adapt and evolve as the tides change.
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 projects beyond speculative hype, and cultivating user engagement are fundamental to success. Investors, founders, and enthusiasts must navigate this intricate landscape with an eye toward long-term potential, guided by past lessons and a more sustainable future.
The Web3 investment landscape is a complex system of narrative, attention, capital, and survival. In this landscape, trends rise and fall, hype can either propel or kill a project, and success depends on a combination of foresight and adaptability. As the industry matures, the focus should shift from short-term price action to long-term value creation. The path forward requires a strategic approach.
Therefore, builders, creators, and users alike should be aware of the changing dynamics and remain steadfast in their commitment to innovations that stand the test of time.
