The building block of narrative adoption

When stocks and assets become a meme, meme-ing platforms dominate over traditional media.

Alpha today exists on Twitter, in Discords, Slacks, even Youtube. There is some form of crowd-sourced emergent knowledge that sends signals which give you cues about the market. 

If you wanted to understand Gamestop’s stock price, it would have paid to pay attention to Reddit. 

Crypto alpha often is right there in plain sight on Twitter. 

The difficulty is knowing where to look, when to fade sentiment, and that this game is not necessarily predictive for long-term weighing of “fair value” for an asset. 

Narratives and sentiment drive the volatility of the market. 

Volatility is our reactionary nature to narratives, and changing opinions.

This year China banned Bitcoin mining leading to a sell-off, and, in short order, a rally back to the previous pricing levels. 

Following sentiment here would have guided you astray. 

Narratives are best faded when they are used as an excuse for a price dip rather than a reason for it.

It is difficult to understand whether narrative drives the market, or where the market assigns a narrative to its preferences. 

Some might say that the market was looking for an “excuse” to dump BTC and China’s ban provided the material.

This would make sense given how humans rationalize the world around them individually – we shape events to fit a narrative that we can securely hold on to, even if it’s divorced from how things “actually” happened. 

Given that there is no “one reality” (aside, from pricing signals at a given point in time), we are able to create any beliefs we want about something without ever being “wrong.”

Just look at all of those people shorting Tesla for the past 5 years. They hold believes despite contrary opinions because, in their reality, they have only screwed up on timing, not in the thesis.

So what can be done about this? 

For me, it’s less about reacting to narratives, and more about understanding secular narrative trends. 

Ideas, like companies, gain user adoption. 

Memes are a faster way of creating user adoption because they spread more efficiently. 

That’s why memes are “idea-viruses,” they catch hold of a population and get spread to the next person on an exponential curve.

Sometimes, memes are paired with a specific technology. 

There is the meme of BTC, but there is also the meme of “Web3.”

Memes, when they are attached to a specific person (like Elon Musk), or a specific technology or protocol (like $OHM), are incredibly powerful because technology needs user-adoption.

Pairing a meme with a person or technology provides rocket fuel to the very thing the technology is needing to create its network effect flywheel. 

When a network needs users to improve its quality and pull in more users, memes are part of the reinforcing mechanism that provides the people. 

$OHM, or Olympus DAO is an extremely interesting example of this. OlympusDAO uses the meme (3,3) to represent the change it’s bringing to the market. “3,3” is a compression of its mission statement and protocol design. 

OlympusDAO needs user adoption for its protocol to provide more value to users, thus the Meme and the Tech are paired to assist in this adoption.

Maybe Bitcoin’s first meme was Satoshi – a meme related to a person, paired with the technology. 

When memes strengthen over time, either because of technological progress or ideological progress, this is a good sign for your thesis. 

In plain English, I want to see strength in narrative adoption and technological adoption and see them both compounding each other. 

For example...Question: What is Tesla’s market cap worth, without Elon Musk?

My answer: It is valued based on its current technological assets, adoption, and revenues – minus the “Musk Multiple.” The Musk multiple is hard to value and plays out over time, but I would argue it’s a structurally lower relative value without him.

Another question: What is Ethereum’s value, without the upcoming Merge? 

My Answer: The merge provides both technological and narrative value to Ethereum speculation, both of which add up to more than simply one or the other. The merge Multiple will outpace “fair value” until it is fully digested by the market. 

Markets will then seek the next “multiplying narrative” to pair with the technology. If it takes hold, it will be powerful. But if it misses the market, the project itself will be hindered by being valued purely as technology and not technology and meme. 

Meme-Finance is about recognizing the volatility created by narrative designs and their interpretation by markets. Memes are their own form of technology, one that, as Balajis says “programs humans” whereas software programs computers. 

To discount quality meme-creation is to discount a human technology that kicks off and perpetuates network effects. 

XX I’m David Sherry, I coach early-stage founders, invest in crypto, and write on the overlap of investing, crypto, and the creator economy.

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