In a bull market, how do you choose which tokens to invest in? How do you conduct your research? Is it just about scouting potential picks on Twitter?
With so many tokens and narratives in the crypto space, evaluating which ones have the potential to outperform BTC requires a structured approach.
From my perspective, the success of any crypto ecosystem hinges on three critical elements:
- Technological innovation
- Token minting opportunities
- Compelling narratives
These pillars help assess a project’s potential to attract and sustain an engaged community. Below, I’ll expand on methods I’ve shared in previous blogs and tweets, using examples to illustrate key points.
1. Technological Innovation: The Engine of Progress
Technological innovation drives new projects or upgrades in crypto. The more groundbreaking the tech, the stronger the narrative potential.
- Bitcoin pioneered decentralized ledger technology.
- Ethereum introduced smart contracts, enabling complex transactions.
- The 2017 bull run was partly fueled by the ERC-20 standard, which tokenized assets beyond mere currencies.
"The impact of Ethereum and ERC-20 wasn’t just technical—it was societal. It expanded crypto’s use cases as prices rose."
The 2020 bull market was defined by DeFi innovations:
- Automated Market Makers (AMMs)
- Lending protocols
- Algorithmic stablecoins
Recent advancements include:
- Rollups (Optimistic and ZK) for scalability
- Data availability layers
- Account abstraction for better UX
- Soulbound tokens (SBTs) for identity
- Real-World Assets (RWAs) tokenization
- Inscriptions and Bitcoin DeFi
- Restaking
However, not all innovations yield equal wealth opportunities. For instance:
- Account abstraction is hard to monetize.
- SBTs (non-tradable) lack speculative appeal.
- RWAs may offer stability but limited upside.
2. Token Minting: The Wealth Flywheel
Token minting ("money printing") mirrors central banks injecting currency into economies. In crypto, it’s about issuing new tokens within ecosystems.
Historical Examples:
- 2017–18: ERC-20 tokens crashed due to weak fundamentals and no sustainable flywheel (e.g., staking, revenue).
- 2020: AMMs + liquidity mining created a Ponzi-like but profitable model.
- 2021: NFTs thrived until oversupply diluted value.
Current Opportunities:
Bitcoin DeFi (Ordinals/BRC-20)
- Free-fair mints lack smart contract functionality but may evolve (e.g., Bitmap’s BMP airdrops).
- Stacks could bridge this gap.
L1 Ecosystems
- Injective/Kujira: Focused staking rewards and airdrops.
- Solana: Rebuilding with new token launches.
- Avalanche: Targeting RWAs/Forex.
- Polygon: Transitioning to "chain of chains."
- Celestia/SEI: Data availability and low-cap competition.
Restaking + Liquid Restaking Tokens (LRTs)
- Eigenlayer’s mainnet launch could reignite this narrative.
L1 vs. L2: L1s often have stronger tokenomics (native staking + ecosystem airdrops). L2s need fee burns/staking to compete.
3. Narrative: The Community Catalyst
Narratives transform technical jargon into relatable stories that capture imagination and belief.
Why Narratives Matter:
- Sustain demand for new tokens.
- Without innovation/tokenomics, tokens pump and dump (e.g., Terra UST combined all three pillars but collapsed).
Top Narratives for 2024:
- Restaking/LRTs: "Secured by Ethereum" story.
- Bitcoin DeFi: Revival of BTC utility.
- Modular vs. Monolithic L1s: Solana vs. Ethereum’s modular vision.
- AI: Strong buzz but limited crypto-native innovation so far.
Sustainable vs. "Boom-Bust" Ecosystems
Axie Infinity exemplifies a "boom" ecosystem: Play-to-Earn worked until inflation outpaced demand. DeFi 1.0 matured into sustainable models post-hype.
Today’s emerging narratives (e.g., restaking, Bitcoin DeFi) are pre-boom. The challenge is identifying ecosystems that balance:
- Continuous innovation
- Controlled token inflation
- Narrative resilience
FAQ
Q1: How do I spot the next big crypto narrative?
Look for converging tech innovation, token utility, and community excitement (e.g., Bitcoin DeFi in 2023).
Q2: Are L1s better investments than L2s?
Often yes—L1s offer staking rewards and ecosystem airdrops. L2s need fee-based burns to compete.
Q3: Can AI crypto projects sustain prices?
Only if they solve real problems (e.g., decentralized AI training/data). Most current AI tokens lack substance.
Q4: What’s the biggest risk in token minting?
Oversupply without demand (e.g., NFT collections diluting holder value).
👉 Explore top crypto narratives in 2024
👉 Mastering tokenomics in bull markets
Adapted from Three Pillars of Booming Crypto Ecosystems.