In the cryptocurrency space, for 99% of coins, the only thing that matters is the attention in the market. Personally, I came to Web3 from traditional finance, and I had to change my mindset from focusing on profitability and fundamentals to thinking that "99% of tokens have no intrinsic value, but can be arbitrarily valued". Let's look at a very interesting example, INJ.
Judging by the impressive ecosystem on the left side of the chart below, one would think that this ecosystem is thriving, and the INJ token has grown 32x year-to-date, which will help solidify this idea in your mind. But this year, its TVL is basically flat, and the core developer has been declining. So why did the token go up 32 times? Did the INJ team find a cure for cancer? No. The price has gone up, which has attracted more attention, and as more attention (funds) flow to INJ, the price of the token has been rising, forming a positive cycle.
You can even look back and see that smart people like Viktor came to the same conclusion (and after this post, the token grew 3x): the fundamentals are not there, but the price of the token continues to rise.
Another example is Celestia (TIA). The project underwent a massive airdrop that caused a lot of attention in the market. But since the airdrop, the number of transactions and active accounts at TIA have mostly declined.
The same is true for development activity, which is on a downward trend.
But again, it doesn't matter. After all, in the currency circle, a strong price is about equal to a good project.
There's a cliché in the crypto world: there's no better way to market than when your token's price goes up, and these are just two examples. The only advantage of these two projects is that they have the attention of cryptocurrency traders. These are not the coins I personally like to trade, but I saw them on my Twitter/X being discussed for 2-3 months.
For those who only trade on DEX, we know which projects are getting the most attention, such as popular tokens on Dexscreener (and associated filters). Taking it a step further, you should build your own mental framework around "how do I trade X coin followers" qualitatively and quantitatively.
If a coin has been in the top 5 on the Dexscreener hot list for 3-4 days in a row, and then seems to "disappear", what do you think will happen to the token price? For example, GFY (which is a hot trend for at least 3 days in a row) quickly drops by 85% once the attention (and associated trading volume) starts to slip. Obviously, the attention of the market appears to be more important on memes, as they almost only have attention as the sole justification for their value.
Now let's compare MUBI, which lost traction, trading volume, and upward trend in 3-4 days due to the widespread discussion of "BRC20 is dead" in the market last week due to comments from Bitcoin Core developer Luke. However, it should be noted that MUBI has now rebounded from the support level and then almost tripled as attention and volume picked up.
You may have agreed with this investment logic by now, but for me personally, it's always been something I have to keep improving, whether it's opening new positions, stopping losses, or doubling down on bets.
You can also build a mindful market model in other ways. Whether I'm buying a brand new token with little to no information or buying a token with a mature ecosystem, I ask myself a few questions:
- Has this token reached its peak of attention? If so, I probably shouldn't touch it.
- Will this token or narrative continue to see an uptick in attention?
- From a qualitative point of view, where do I think this token is in its "attention cycle".
- For example, DOGE's attention peaked on the day DOGE was mentioned on SNL and then dropped by 90% in 2 years. But at present, a new cycle is gradually opening, and the attention is gradually rising. (Editor's note: SNL is a well-known American comedy and variety television show.) ）
Once you start investing in crypto in this way, when an AI shell project (or near-shell project) spikes from $2 million to $100 million in days/weeks/months, while your favored DeFi project token doesn't go up, you'll understand that it's because of the attention. I wrote about this in Chameleon Investor, but after going through the process of building chainEDGE and understanding what types of tokens the traders and traders with the highest profits and losses were born from, it was easier to recognize that in the crypto world, attention trumps everything. Going back to AI, one of the reasons I'm personally bullish on it is that there aren't a ton of public stocks available for you to hype about AI. Cryptocurrencies, on the other hand, are perfect for this. Coupled with some artificial intelligence technology, the project can easily reach tens or even hundreds of millions of market capitalization in days/weeks/months because of hype.
But how do I put it into practice? First of all, if you don't have a Xi of watching Dexscreener's popular tokens, then start paying attention now. You don't have to buy them, but you need to keep an eye on the movement of funds on the chain. Just in the last few weeks, it's hovering between AI, BRC 20, AVAX, memecoin on every chain, and now it's back to BRC20. But for any token you currently hold, you should have a clear idea of: (1) whether the market popularity of my token is peaking, (2) my token is in a narrative that is getting attention, but my token is not rising, and (3) my token is not currently gaining any heat in the market, but I think it will go up for some reason.
In other words, you have to pay attention to the trend of the heat in the currency circle.
Investors can use chainEDGE to track the popularity of the cryptocurrency circle. I spent 18 months building this tool, and a common misconception is that you have to be a 24-hour on-chain maniac or use a bot to take advantage of it. But you can also use our holding data and filtering features to find projects that are "undervalued relative to potential attention". For example, I've been using our holdings data to see which tokens have more than 10,000 holders. Then I look for tokens where this number is growing, or something I haven't seen before, while also looking at smart money holdings as a percentage of market capitalization. Using these simple screenings is very friendly for those crypto fanatics who are online 24 hours a day or those who have busy lives, have kids, etc.
Taking it a step further, you can use our tool to find early-stage tokens that you think will later become tokens with a lot of market popularity. You can also filter by when the token was listed to try to find early tokens (we found projects like JOE, WEBAI, MBX, AEGIS, PALM, HYPR, and BSSB early on).
In the future, we will optimize the functions of the platform and launch a more practical upgraded version of chainEDGE.
Finally, I think that in the cryptocurrency circle, the market heat is the most important. Rather than delving into the roadmap and ecology of a project, it is better to think about "why anyone cares about this project" from a higher-level perspective.
Here's another example to underscore another very crucial point: there is no such thing as overestimating or underestimating in the cryptocurrency space. LBR, the most successful LSDfi project, has created a circulating supply of more than $165 million of its own stablecoin, but has a market cap of only $26 million.
At the same time, some of the more market-focused token cases:
- TO
- OLAS $3.6 billion
- AGRS $248 million
- PAAL $169 million
- ATOR $80 million
- GROK $80 million
- AIX $26 million
- ENQAI 2700万美元
- MND $26 million
- BRC20
- MUBI $157 million
- BSSB $40 million
- TURT $20 million
Finally, it is crucial to capitalize on the heat in the market to succeed in cryptocurrency investing. I think the importance of popularity goes beyond fundamental analysis, and paying attention to factors such as community market sentiment plays a significant role in determining the value of a token.