The 2024 Crypto Paradigm: A Swarm of Gnats
The 2024 Crypto Paradigm: A Swarm of Gnats
In the future, everything will be the future for 15 minutes.
ETH IS DEAD. BTC IS OVER. ITS ALL SOLANA NOW BABY! OR BASE! OR MAYBE IT’S AVAX? OR FRIEND TECH! OR MAYBE IT’S OPTIMISM! NO NO IT’S ZKSTARK! AH SHIT IT’S ACTUALLY BTC AGAIN BECAUSE OF ORDINALS.
Each month: a new L1 chain, a new L2, a new token, an old chain, a recovered archaeological chain, an old NFT, a new NFT, a new Ordinal, a new fully centralized website with TOKEN POINTS will take hold and absorb the narrative. And then in a month you’ll forget and move on to the next thing.
The swarm is here. The new paradigm will be a swarm of gnats.
The gnats live in the “alt” portion of the cycle
We discussed the idea of rotation in our previous post.
Consider the core principle here: money flows from the market into BTC first and then ETH. From there, it goes to “alts.”
I will contend that generally “alts” mean everything that is not ETH or BTC — not strictly a particular class of tokens. What does that mean?
Historically, alts were a narrow scope… Yes Solana may be better than AVAX. Doge might be a meme. Litecoin is… something? But generally the idea of alt rotation was a means of getting more growth out of your ETH/BTC gains.
Alt seasons have historically been short lived — typically last 1-3 months. As we discussed in the previous article, it requires significant injections of capital to make ETH and BTC holders feel ready to double down on something else. But when that foundation is there, the scale of capital from ETH/BTC can drastically grow any smaller cap asset class. This cannot last forever as eventually the smaller asset class is saturated; however, those participating can make significant returns.
But let’s not forget the scale…
A little bit of capital goes a long way…
Let’s look at the numbers to put it in context… Between BTC/ETH/Stables in 2021-2022, the market added nearly +$600B in realized cap in a year.
When things are flatlining (2023), you don’t spin off your new found money into new smaller things. You take less risk. But when there’s $600B flowing in, who cares…
What’s a mere $50B to put into Solana? What’s another $10B into some L2 that won’t last a year? $6B into NFTs? Seems cheap!
And what’s better than seeing the huge green growth on those numbers when that huge capital stack hits a new “alt?”
For context… the recent ~$30B yeeted into Solana was a 300% on Solana. Surely Solana is the future!
What you will note is that in 2022, there was enough capital flow into ETH/BTC to drive into an “easy” $70B for Solana. Right now, what we are seeing is likely pre-empting the bull run too rapidly. Capital is being thrown into Solana, but is happening too rapidly compared to the overall market. It may stick, who knows, but likely is too much for now.
Now, we know we are likely in the early innings of a pre-bull… So what does this mean for the future?
2024: A million gnats
In the 2021-2022 crypto cycle, there were a number of new exciting places to rotate money into… Think about where the rotations were… We had NFTs, Solana, more shitcoins than ever, L2s (Arbi,Poly), gaming (Ronin), etc. A more “expansive” conception of alts is helpful here as each ecosystem becomes its own sub-market.
It’s not to say that these are merely trends or fads (some were), but the rush to engage in these mini markets becomes its own game and place of immense growth. Despite all of that, there was still more or less foundational aspects of ETH being developed as well as other chains. Even BTC went “back to the future” by finding ways to create a sub-market to capture ETH users (Ordinals etc).
As we head into 2024, it’s more advanced. It’s easier than ever to make things on chain. It’s extremely low effort and low cost to spin up an ETH L2 on OPStack (Base, Zora, others). Solidity is better understood. An entire new ecosystem on BTC is well established. People have figured out hype fueled “applications” of PWA. There are new wallets. There are old ponzis in new clothes. There are POINTS!
So what are the gnats? Who the fuck knows. You can’t see an individual gnat. It’s a swarm. It’s up!!!! Go go go go!!!!
The future will be rotation into all of the stupid new platforms as fast you possibly can. There are now 30 narratives to choose from and they all start at a $50M cap… AI? Cryptogaming? Art? It’s all happening all the time. Imagine what would happen if they got $1B of the fun money. And at any time, the wheel of fortune could land on YOUR gnat!
Is this good? Probably not, but it does mean to prepare for the Cambrian explosion of gnats looking to steal some delicious bites of capital. Infinite musical chairs every day. At the same time, it also means to set expectations. Take a step back, breath, see if you are telling others that something is sustainable that may not be, etc. Or you can simply ignore them and wave them away. Sometimes it’s nice to go into your hole and focus.
Epilogue
Random poorly digested thoughts on the lack of free will in crypto…
One thing that I am constantly thinking about is how discourse and thought in crypto are driven by market conditions. It’s easy to say that emotions drive trading, but it feels quite different than that.
I am starting to come to the conclusion that thought doesn’t occur in crypto. Not in a critical or “stupid” sense, in a real sense. The green candle comes before thought or discourse. By the time you are talking about a narrative, you’re already just lizard braining to the green candle. And I don’t believe this is always intentional or bagholder bias. I think it’s a reflection of the existing market dynamics.
Green candles are a direct pathway into the autonarrative nervous system.
That’s it for this one.
tl;dr There are a ton of places that money will flow and it’ll be hard to keep track of them in the upcoming bull cycle. It’ll be worth taking a step back and considering what’s long vs short term when you are faced with the Cambrian explosion of narratives.
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