Bankless - AI Memecoins & Lessons for Narrative Investing

Episode Date: March 6, 2024

Ryan and David share another Bankless Takes episode where they discuss their AI memecoin analysis, why AI crypto tokens are a big deal, how to speculate on narratives like AI memecoins (lessons and guidance for “narrative investing”, and what are the next big narratives this cycle.  ------ 🌐 CARTESI | MODULAR EXECUTION ON LINUX  https://bit.ly/3SYkjzF  ------ 🎧 Listen On Your Favorite Podcast Player:  https://bankless.cc/Podcast  ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://k.xyz/bankless-pod-q2     ⁠  🦄UNISWAP | SWAP SMARTER https://bankless.cc/uniswap  🔗CELO | CEL2 COMING SOON https://bankless.cc/Celo     🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/toku     🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle     ⚖️ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum ------ TIMESTAMPS & RESOURCES 0:00 Intro 4:49 Why is Crypto x AI Narrative a thing?  https://media1.tenor.com/m/q0zcs7G7FogAAAAd/galassia-galassie.gif  https://twitter.com/0xMubeenn/status/1764139946062029212  https://vitalik.eth.limo/general/2024/01/30/cryptoai.html   10:40 Decentralized AI & Compute  https://x.com/TrustlessState/status/1762318512507208182  https://x.com/anna_kazlauskas/status/1764675698310926459?   https://www.coingecko.com/en/coins/filecoin  https://www.coingecko.com/en/coins/arweave  https://www.coingecko.com/en/coins/renderc  https://www.tradingview.com/chart/?symbol=MEXC%3ATAOUSDT  20:00 Road to AGI 23:00 AI Memecoins 21:12 Crypto Narrative Guidance  https://twitter.com/0xMubeenn/status/1764139946062029212/photo/4   https://cryptonarratives.substack.com/p/how-to-catch-a-few-20x-to-100x-coins  46:55 Top Signals  49:50 Predictions & Closing  https://twitter.com/mrjasonchoi/status/1758902284980027818   56:51 Disclaimers  ------ Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures⁠

Bankless Nation, we got a bankless takes episode for you because we got something top of mind. And I think it should be top of mind for you as well. David, you wanted to come talk about AI tokens. And I think that will unleash a few other topics as well that are adjacent, including narrative investing and how to make that 20 to 100x gain, whether that's even possible this bull cycle. But first, what are we going to cover today? Tell me why you're excited about AI tokens.

I think today, Ryan, I want to plant a flag and say that the next crypto cycle, the 2024-20205 bull market cycle is going to be the AI token cycle. In 2017, we had the ICO cycle in 2021. We had NFTs. In 2025, we will have AI tokens. And I'm seeing these like just two parallel technologies just converge together in spectacular fashion. So I want to talk about like some of the experiences I had at Heath Denver,

call it AI Denver. The world of decentralized compute, the road to AGII that crypto can facilitate and why crypto and AI is such a match made in heaven and why I think it's going to define the whole entire market cycle that is this incoming extremely frothy, extremely speculative bull market. I think that's a good grounding for what I want to talk about too, David, which relates to sort of AI tokens. The question of, is this a narrative trade, a narrative investment?

I think your answer to that and comparing it to ICS would be, yes, it is. Maybe there's something fundamental here, but it almost is certainly a narrative investment. So I think we want to broaden that and talk a little bit about narrative investing in crypto in general. And maybe some of the lessons or frameworks that apply because I saw a fantastic piece by a guy named Victor that I want to share with you too, David. And then maybe we could conclude with talking about what the next big narratives this cycle might be. I think you came back from Heath, Denver with a list of three that we want to get into. One very big one and then no second place and then a third and fourth place. All right, guys.

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waitlist and download the mobile app. Start swapping smarter with Uniswap. All right, David, tell me about AI tokens. Why are AI tokens a thing? How is that intersecting with with crypto right now. Both of these industries are being built in parallel, completely separately and adjacent from each other. And I think the space that these two industries occupy and overlap at is going to be the thing that really captures a lot of speculative fervor, mainly from the people that like,

hey, I want to invest and have exposure to AI, but I don't want to invest in Nvidia because it is in the larger than the entire Chinese stock market. There are these two storms that I'm seeing. slowly converge together as they learn how to relate with each other. I'm calling it like a particle collision. Like what happens when you smash the AI particle with the crypto particle? Well, you got on the screen, you're making me show the Andromeda galaxy and the Milky Way galaxy. I think that's on track to you like intersect with one another in like five billion years or so. These are galaxy size

collisions is what you're talking about. Well, yeah, we have the three, two and a half trillion dollar crypto economy colliding with the you know probably a couple trillion dollar AI economy and I think we're going to produce a few trillion dollars as a result of that collision from across the space and I think it's mostly going to be AI meme coins and why is it going to be mostly meme coins and not like AI fundamental coins well what do we do in crypto we just print tokens out of thin air and we name them things that are like related to AI and then they pump and so there's going to be a few ounces of like AI fundamentals that I think are going to be very real that's going to produce like the massive amount of leverage that it has that we have to fuel into the world of AI meme points

that's what I think is coming so you think this is a bit more of a narrative trade actually I wanted to show you this I was wondering if you if you kind of agree with this so this is a graphic that I saw in a Twitter thread about attention attention captured right and we have like the serious projects on the top and this is kind of like your graph it's a very small slide that's a little bit Sliver. 5 to 10% of the bar. Right. 5 to 10%.

And then we have meme coins that comprise the bulk of this being like, you know, 85 to 90%. Is that what you're saying, is that how you are thinking about AI and crypto as we get into this? Is it like 90% meme, but like 10% substance? That's exactly right. Along with an order of operations there. First, it's the 10% substance, which creates the space, the room. the motivation for the 90% meme. I think there is actually a ton of substance

between the relationship between crypto and AI. And that is as a result of that very real intersection, we're going to attract, you know, for better or for worse, mainly for worse, like the scammers, the grifters. Like this is what it's going to be the signal of the top of the market. Is that like people realize that they can make a quick buck by like throwing crypto and AI together and like, you know, doing some like ICO, if you will or like some startup raise.

We've already seen froth in the AIVC market six to nine months ago post-chatGBT BT launch. And like what happens when you collide that particle with the ability to mint on the ERC 20 token permissionlessly? Two frothy world-changing technologies that no one understands and they're going to smash together and create like what? A super bubble? A legitimate crypto super bubble?

A super bubble. Supercycle, call it. Like I also want to leave room. I was talking to Mike I belito about this. I also want to leave room for the potential of like, the whole AI world create something like approaching like the dot-com bubble

slowly over the next like, you know, two to five years. Something stupid like this. Yeah, is going to change the world. I think everyone has like now realized that. But now the whole AI industry

has access to quick liquidity, tokenization events, meme power, like content generation power. Like I think it's going to get very, very far. Okay. Before we get there,

yeah, the context year then is that this is definitely a narrative investment is definitely a narrative trade this cycle. And also there might be some fundamentals here, but it's going to be a small sliver, a small portion of the value here. It's going to bubble and froth and get way over its skis. This is a graphic from Vitalik, a recent post that he did at the end of January where he talked about the intersection between AI and blockchain and they're kind of two separate technology, but there are some synergies.

Data ownership, transparency, monetization, cost cutting, competition, innovation, but I'm guessing we'll also create a whole bunch of like AI meme coins that really like have are nothing more than narratives right are not actually making use of blockchain fundamentals and and kind of this intersection in the Venn diagram I think we can also like talk about the blurring of the line between fundamentals and memes like Worldcoin for example like has a ton of just like very real building going behind it as a very real project has attracted very real VC dollars and it has done like a very like good job like what no matter

what you believe about the project they are doing this very hard thing about building this infrastructure to help identify humans on the internet in the age of AI. It is also Ryan trading at almost a hundred billion dollar market cap and that is a meme valuation. Real project meme valuation and so like there's going to be this

blurring of the line between like what's real and what's like hot air and right now like we have a little bit of hot air I think we're going to have a lot of hot air First, I want to talk about why there will be hot air in the first place, because if there's hot air somewhere, that implies that there is a real source of energy producing that hot air. I'm talking about fundamentals here. What are the reasons why there's a fundamental truth about the intersection between crypto and AI? First, I want to talk about decentralized AI models. Second, I want to talk about decentralized compute platforms. Third, in order to really strike our imaginations, the road to AGI using crypto as a railway to get there. And then also talk about after that the shared properties that crypto and AI have. And then lastly, we'll end up where we're ultimately going to converge no matter what, which is AI meme coins. Are you ready? Totally. Let's go. All right. First, decentralized AI models. This is what happens when you have a lot of the properties that we have

in the crypto space, open, permissionless innovation, decentralization, moving complexity innovation towards the margins with the world of AI. I was at this AGI summit day, and I was listening to Casey Caruso, who's sitting on the left there, who gave this absolutely banger take, which is that we have this desire to have as many AI models as possible.

You know, your favorite line, Ryan, which is like, we'll have as many chains as there are websites or have as many tokens as there are our websites. I think we also want as many AI models as we have, like, blogs or websites or any, like, large Cambrian explosion of stuff that we've seen on the internet. AI models can like do almost infinity things.

And the more of them that we have, the more flourishing that there can be. What do you mean by an AI model, David? Like is chat GPT? Is that sort of an AI model? And that might be different than, you know, the model behind X. What's it called?

GROC. The way Elon's developing. Yeah, GROC. Is that a model? What's a model? Yeah, that's exactly right. So like chat GPT is one model. GROC is one model.

And I will call these very generalized. models. There can be models for anything. You can put any sort of utility into a model. Think about a model that has been custom trained, Ryan, as to be your personal assistant, like your Siri or, you know, your, like, Amazon Alexa. Like, we can talk about, like, the blue chip fat tail models that are very generalizable, that are kind of one size fits all. And then we can also go down the line of just like, what about like an NPC inside of a game engine or something like, or some, some model. And model about like the weather. Any sort of AI model that can be either very broad or very narrow, but the idea is that with the proliferation of AI, we have more models and we have a lot of them,

or at least we can. That is the world that I would enjoy, especially when like you can start to associate like AI, the growth of AI models as in the growth of like human cultural proliferation, expressivity. Like how can we leverage a power of AI in more total cases? And so this is the world that I would want. This is the world that a lot of the people in the open AI community also wants. That's open source AI, not open AI the company. But here's the line from Casey Crusoe, who like brought us, drop everyone in the audience back down to reality. We want open source AI. We want a wide proliferation of models custom fit for various use cases. But the tailwinds behind the economies of scale for AI models are very strong. Data monopolies and compute monopolies

restrict open AI model development. And so basically who has all the data, you know, Facebook, like why is Reddit going public? Well, because they've got all the data for AI. There's these data silos, these Web 2 data silos that is all of the, that has all the data that all of these AI models need to run on. So whoever has all the data has economies of scale for producing very strong AI models. If you, as your regular homegrown AI tinkerer, if you don't have access to data, you're not going to be able to produce an AI model. And so that is one very strong centralizing force that AI has.

And then the other one is access to compute. Who's got all the access to the GPUs? It's going to have this massive economies of scale that the regular like long tail and consumer experiment or hobbyists won't be able to access. So I think if you like understand crypto principles, you can kind of see where I'm going with it. like we want AI models but we can't have them because of siloed centralized resources. Ready to go into decentralized compute platforms? Yeah. So, okay, so we want decentralized AI because it's just like a richer or organic, more competitive than kind of data monopolies.

But it doesn't, it doesn't follow that that's what we'll get just because we want it. You know what I mean? Like you were just saying that these are centralizing, you know, like monopoly forces. So part of me is like, okay, well, game. over. You know, we can't, we can't just like, you know, make them decentralized just because we want it. Is there some sort of market force that will propel decentralized AI and decentralized compute? Is this part of the theme here? Well, so this is getting to some of the actual, like, already existing tried into crypto platforms that can actually pull that market force down towards the

decentralized end of the spectrum. So first you're seeing like centralized AI, call that the Google, the open AI versions of the world, but we are looking for decentralized AI. And I think this decentralized AI narrative is something that's very ripe to be taken up by society when they learn about how much returns on capital on monopoly that Open AI and others will have over us,

there's going to be just an interest in decentralized AI as a narrative. Crypto actually has meaningful answers to this. Some of the biggest tokens that have pumped, and this is when we'll start to get into like the narrative the meme side of the world. Some of the biggest tokens that have pumped in the last like three months are all these decentralized compute platforms. Filecoin is up 100% in the last 30 days. R weave is up 200% in the last 30 days. Render is up 300% in the last three months. BitTensor

is up 120, 1,250% in last five months. Oh my God. These are all various like decentralized compute platforms that have caught like the AI bug, the AI narrative, like have caught. the AI bid. And so these in the Filecoin, you put data on it and it's allowing for permissionless compute. And so the idea is actually very similar to your and my protocol sync thesis. Wherever you can have the most credibly neutral repository of data, it will collect all of the data. There's this thing called a data gravity in the web two world. Whereas like if there are stockpiles of data that exist on the internet somewhere or like to end servers, apps will actually migrate towards that data. So it's like thinking of like data as like a black hole. If there's

enough of it, the data won't move. Apps will actually move towards the data. And file coin, the file coin thesis is that so much data will end up on file coin because it's the permissionless compute platform for data that just the apps will go around it. And so, you know, file coin is up 100% in the last 30 days. I'm starting to see why the contours of we introduced this as a narrative because what you just said is absolutely a narrative. It doesn't necessarily have like substance backing it, but like you could foresee a world where everything you just said becomes true, like becomes true. But that's not necessarily going to happen.

You could just sort of foresee it. So it's a narrative. Here's a tweet you had us put in this episode. Today from, from Anna, today models are primarily trained on publicly scraped internet. What if 100 million users contributed their private data from siloed platforms to create a user-owned foundation model? So this is basically the part of the narrative is how do we compete against these centralized data banks like data monopolies, well, we get 100 million users to sort of combine their force

behind a credibly neutral compute platform, maybe incentivized by a token. Is this sort of where we're going with the story? That's exactly right. I love how you brought up that tweet. Do you think that person's a crypto person? I've never seen this person, but I was assuming yes, because it's in a bankless show, but you're going to tell me no? The answer is no. This is not a crypto person. I have two overlapping followers. This is an AI person. If the tweet is talking about, what if a hundred million users coordinated their resources together to get them out of silo centralized platforms to create a user-owned foundational model? That sounds like a crypto tweet. That is a crypto ethos. And so what the AI world is missing is what crypto has. Like the pushing power and authority to the

margins, right? Pushing power to the individual, whereas there's so much power contained in centralized Wall Street, aka Silicon Valley, aka Web 2 resources, how they have all the power. Decentralized AI is about taking all of that power and like pushing it down toward the margins, but you need crypto to do it.

And so like you're talking about like, yeah, that's a narrative now. Well, markets price in the future. And so if people just think that this might be a thing and also we have just like the markets going up in price and we have an interest in going out towards the long tail, we have the Bitcoin ETF funneling hundreds of millions of dollars into Bitcoin each week, which is acting like a hydraulic pump down for the rest of the risk on market.

Like this is the storm that is coming. We have this one ounce of very real narrative and it's going to create a pound of like meme coinery. Yeah, okay. So that's what's going on. I see the narrative. It remains to be seen whether it actually becomes, you know, point of fact, a reality here. But I see the narrative around decentralized models and AI and decentralized compute. Tell me about this next piece, though, the road to AGI, which is artificial general intelligence, right?

By the way, I'm not sure that we want to go down that road, but you included it here. You know, where does this fit into the story arc? This is where I think this is a little bit of a less assured take, but I think it would be very, very fun if we actually got there. When I went to, got into Eith, Denver and went to the AGI summit, which is where actually Vitalik was talking, Casey Crusoe from that. tweet that we were just showing was talking. Sri Ram from Eginlayer was also talking. He was the first person I saw giving a talk at this AGI summit. And his talk I thought was actually the most interesting. He was talking about this road road to AGI and the three different ingredients that we need to get there. And I felt it was super compelling. I am getting on board on this narrative.

one is open source AI models is one ingredient two is permissionless innovation to innovate on these AI models and three value accrual mechanisms to these AI models so like open source AI models which is like the opposite of what chat QBT is the opposite of what open AI ironically is the opposite of what Google BART is open source models so we can all as humanity coordinate and tinker around these open AI models that's the first ingredient second permissionless innovation on these AI AI models. So something that eigenlayer is working on is this derivative license so that if you are making an AI model and then other people find it useful, but they also make a

derivative of it, there is a value chain of payments for developers who are making these AI models. And then this last ingredient is basically the marketplace where can we link the value that these models are creating for users to actually the developer who is birthing them into the marketplace. And so once you have like derivations or derivatives of these AI models, you get like replication on reproduction and you add in the market incentive forces. You get a survival of the fittest. And so this is just one slice of one possible narrative that's coming out of this AI crypto space of just like we have these ingredients. We can make like expressivity happen. We can make a Cambrian explosion of innovation happen. Maybe Ryan, we can even make AGI happen. But it's using a

crypto foundation for coordination and resource management to produce a proliferation of AI, proliferation of human culture and creativity. That's kind of like, that's kind of the part that I see. It also strikes me that those three things are the same thing, like an effective accelerationist like Beth Jesus would say. And that's the thing that's going to prevent us from regulatory capture by like authoritarian regimes and monopolies who will like, you know, use AI against the people basically. So it has that shared, I guess, narrative, let's say, with crypto as well. Okay, so the projects you mentioned, Filecoin, RWeave, you know, like render, I don't know as much in BitTensor, but Rweave and Filecoin, for sure, these are real projects that people are actually using

today. But you were also talking about AI meme coins, right? So are you talking about these projects? Like there's some obviously memetic narrative element to even legitimate projects that are doing something real. Or are you talking about like a new kind of like a shit coin waterfall, like downmarket types of meme coins that are just taking this narrative and not producing much of substance and just running with it? Like what what's that piece of the equation? I'm talking about both. And like all things in every single crypto cycle, we will start with very real fundamentals and we will end with shit cornery mania froth that ends in tears and ruins. And so we are somewhere towards the beginning of that cycle, and I'm claiming that we are heading towards the, the memery, froth,

end of the spectrum. And there's, like, just a lot of properties that the crypto industry has that the AI industry does not have and will probably want. The AI industry is, like, rapidly innovating. It's moving at breakneck speeds. It's comprised of futurist frontier technologists who, like, don't want to, like, be under the ire of nation state regulation because it will slow them down. what does crypto offer them?

They offer them permissionless liquidity events with the ERC 20 token. They offer them like a way to actually have open access to data, all the fundamentals I was talking about. And we actually are also an industry that moves at break net speed. I think there's like this cultural cut from the same cloth between the AI industry and the crypto community that's going to make a match made in heaven. I don't want to like, because there's going to be a lot of like bullshit out there that is going to be very bad and it's going to like sour.

the crypto industry, but at least we're like 18 months away from that. It's a match made in heaven the sense that like there's a lot of there there. There's a lot of like clay for both industries to work with, especially just like if an AI company that is going to start up as some like rapper around a chat GBT, they're never going to IPO, but they could launch a token. And I think just the permissionless access to innovation that we both want and both have is going to, one is going to fuel the other. And especially the fact that we have ERC 20 tokens that these AI companies, can just like print or AI founders or like, you know, shit coin startup founders,

they can just start printing the tokens. We've seen this, we've seen this movie before. This happens every single cycle. Oh, cool. So you're telling me every data model is going to get a token here, David. That's where we're going to go. World of many data models and each model has a token, maybe.

The rule of if it can be a token, it will be a token has played out very, very well in crypto. Yes. All right. Well, that's a great overview. And I think there's so much more content to explore on bankless around this AI plus crypto theme, some of which will be more fundamentals driven. But David, when we come back, I want to talk about this in the context of a fantastic

narrative investing article that I read this week and throw out some guidance for bankless listeners who are trying to getting off of the fund mentals train a little bit. And they're looking over their shoulder at some of these attractive crypto narratives out there because I think there's some useful insights we have for them. So we'll be back with that. But before we do, we want to thank the sponsors that made this episode possible, including our friends over at Mantle, the yield chain. Go check them out.

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Experience Web3 development the way it was always meant to be. secure, fast, cheap, and friction-free. Visit arbitram.io and get your journey started in one of the largest Ethereum communities. All right, David, you ready to talk about investing in crypto narratives? I hate using, like, I don't know if I should even use the word investing. It's more like speculating. It's definitely speculating or something else. Well, I think that's probably one of the warnings you're about to give us.

People think they're investing when they should be very aware that they are speculating. Yeah, and that can be very difficult to sort of confuse. I guess our model for this and our framework for this is there are three ways to make money in crypto. One of the ways is you become a trader. So you're looking at prices, you're looking at charts, TA. You're very obsessed. Your time horizon is daily or weekly or sometimes like hourly, right? Things can change a lot to make a trade real. That's the first type. Second, you can be a narrative trader, narrative investor, narrative speculator, let's call it. And this is the recognition that crypto, at least in the short run. So we're talking about a time horizon of not days, but maybe weeks and months,

is very much an attention economy. Fundamentals don't really matter for narrative investors. That's a second legitimate way to do well and make money in crypto. And the third is more where bankless skews, the fundamentals investor. It's where you sort of forget the noise. You denominate in crypto money assets like Bitcoin, like Ether. You buy the assets with fundamentals. You try every single cycle, like four year cycles, to increase the amount of Bitcoin and Eath that you hold, and you measure this in terms of years and even decades. By the way, that third category, basically everyone I know who has been maximally successful in crypto has at least been in part a fundamentals investor.

Those sub have dabbled with narrative investing. There are very few traders, I think, that actually make money. So that's the framework, I think, coming into this thing. I will say traders definitely can make money, but they take their profits and they become an investor. So like the tiers you are in the pyramid can also kind of represent your portfolio. So like, you know, 10% trade. You know, don't mess too much with that. You know, 20 to 30% narrative speculate over a longer term cycle. And then the rest, you just set and forget and don't touch. And that's your Bitcoin, your Eath, your monies. I know that's very much been your

strategy, right? And has previously been my strategy in previous cycles. I think this cycle, I'm being a little less active on the narrative investing side. I'm just kind of letting it rise because like I'm tired dude I'm like tired but you're you're going down the pyramid towards the fundamentals because that's good because I'm going up the pyramid towards the narratives well basically right but like I know your strategy is is pretty much what you you've said which is your fundamentals investing with like the bulk of your your stack let's call it I don't know if that's 80% for you or something like that but you know the other you know 20 15 to 20% you're you're you're not afraid to put on some narrative trades and indeed you play the game it's fine not why not ride the cycles out

So I guess I will say before we get in, for many narrative investing is going to be an optional side quest, right? So like I don't do very much of it. David does a little bit more. It's kind of like you don't have to do it to go on your bankless journey to do well in crypto, but you can. And I do want to caveat this by saying it's also kind of dangerous because, as we said, narrative investing is a type of speculation.

You're speculating on what's going to receive the most attention in crypto. And like I will say many of you listening to this probably shouldn't be doing it. Okay? Because probably the limiting factor for you is you don't have time. You don't have time to keep up with all of these narratives. You have to be on the game. You need to listen to every single bankless podcast. Okay.

Like you need to like consume Twitter. Like you need to be like more niche corners of the internet than bank. Yes. Yeah. Bankless is like we can't cover the long tail of narratives. Like that's not what we do. 100%. And the other caution I would give is some of you who.

go down the narrative path will be tempted to overallocate. You'll be addicted to it because this is shorter term time horizons. And I'm talking about like big risk, but also big return. The truth is narrative investing is the way you do a 20 to 100 X in a cycle. You're not going to do a 20 to 100 X on your Bitcoin and ETH stack. You're just not. Okay. You might be able to do a five to 10 X in five to 10 years. Okay. But like when we're talking about massive returns, that's why people are so attracted to this. but they can become addicted. So those are the caveats that I would say as we get into this. But now let's get into it.

And I think the first rule to understand about narrative investing is you basically take all the fundamentals you learned and you just kind of set them aside. Because for narrative investing, fundamentals really have no place. So, David, when you were talking about file coin, R weave, and render, and what else did you mention? BitTensor? Yeah, but there's like 10 others I could have mentioned. It doesn't even matter if they're actually used by AI at this point in time. Because it's not about that.

It's about attention. It's about the story. Can you get eyeballs on it? Can you get people thinking that this is part of an asset that captures some part of this? So you have to think completely different. Again, with this segment of your portfolio, you can't think from a fundamentals perspective. And I ran across this fantastic article by a guy by the name of Victor who actually puts out a substack called CryptoNatives. And he titled the post How to Catch a Few 20 to 100 X coins during the next Bull Run.

And what I love about this post, David, because I think you'll resonate with a lot of the lessons that he mentions is this is lessons from 2021. because every single cycle plays out in a similar way from a narrative investing perspective, right? Like the 2021 Bull Run had a set of narratives that were incredibly lucrative, incredibly attractive, like 20 to 100 Xers, and this cycle will as well. And so like history doesn't repeat, but it rhymes. So I think one useful exercise for us to do is to go look at 2021 and see what actually worked there and like go down memory lane and then see what we can drive. draw out some of the lessons we might be able to draw out for 2024. So you ready to do that?

Yeah, let's do it. It is worth noting that every cycle rhymes, but does not repeat. And so we are making just pattern identification of 2024 and 2025. 100%. So this will be different in ways that we just can't anticipate at this point of time. AI themed. It'll be AI themed. Yeah. Well, that will probably be a narrative. And maybe we'll end with like that narrative and some other narratives that you predict. But okay, here's what happened last time. The first thing that that happened in the 2021 narrative investing market is that shiny new coins outperformed old coins. Okay. Shiny new coins outperform old coins underperformed.

Example, uh, ripple, stellar, Bitcoin cash, Neo, uh, Iota, EOS, dash, you remember these coins. They never, even Tron never reached their previous all-time highs in dollars. They never have reached it. And they've been down only versus something like Bitcoin or an ether since 28. 18. Take a look at this. You know what this is, David? This is a very, this is my childhood in crypto. This is what the coin market cap looked like back when I was getting into crypto. Wow, when dash was number eight, no one knows what dashes anymore. This is the coin market cap from

2017. Yeah, so you mentioned it from from your first cycle. Look at these coins. What else pops out at you? Eos stellar Neo, Neo, the Ethereum of China. Qtum. It is a Deuterion. smart contracting layer over a Bitcoin UTXO model. Makes no sense. I did not even know that. There's no sense whatsoever. Right under that is BitConnect. Do you remember BitConnect?

Yeah, BitConnect. The actual Ponzi scheme that lasted way too long. Now, you talk about a narrative. Number 11, Bitcoin Gold. Do you remember all these weird Bitcoin forks that would pop up? There's a lot of Bitcoin forks. Yep. It's number 11 in the crypto market cap.

So there's some durable things like Bitcoin, Ethereum. But number three is Bitcoin Cash. Where's Bitcoin Cash now? Where is XRP now? If it's on the top 100, yeah. Where is still around? XRP is still around. It's still in the top top 20.

But again, back to you, it hasn't actually outperformed ether's never gone back to kind of all-time high since 2018. Other than Bitcoin and Ether, the only exception to this rule has been Dogecoin, which is also one of the big narratives of the cycle, which is meme coins. Yes, yes. Okay, so old coins will underperform shiny new coins are probably the ones to look at from from a narrative investing perspective. You don't want to go with the old dogs.

The second lesson from Victor's Post is also great. Most coins underperformed Bitcoin before the bull run really starts. That's where we are now. This is still a Bitcoin-owned bull run, okay? As expected. This is how it plays out. That tells you that the actual bull run for this narrative investing shenanigans that's about to happen has not started yet.

It hasn't really started. Yeah. The whole flows of money of capital of dollars into the Bitcoin ETF to me is just like the rocket being loaded up with fuel. It is the hydraulic pump that is just getting primed to as soon as Bitcoin calms down, as soon as flows equilibrate, all of the BTC holders who are just extremely wealthy and ETH is following right along Bitcoin. And honestly, so is Solana too. A lot of the blue chips, the top five assets are up bigly. as soon as this main big move, this start of the bull market,

takes a breather, that hydraulic pump is going to just ram market cap down the stack. And so people are going down to like the 200 chart, the 300 level charts on the coin gecko and looking at like, what are some of the most Dgen plays I can make right now? If Bitcoin grows 10%,

some tiny little shit coin is going to go 1,000x. And this is just, and we have no, never seen Bitcoin being primed this hard ever before because of the Bitcoin ETF. It's absolutely an insane alignment of SARS. Yeah. And people will point out over the last, hey, but over the last six months, there have been pockets of narrative investments that have outperformed Bitcoin. And yes, absolutely, that is true. It has already started in small ways, but I just, we, we ain't seen nothing yet. Right. Right now, this is still Bitcoin's ride. We haven't seen the true kind of like

narrative investing degeneracy that we're about to see. So that's the second point. The third point, and this is incredibly important, is how fast it happens. Time, we're in the bull market now, guys. Time is about to speed up. It already has sped up, and it's going to go warp speed. Most of the gains for these types of narrative investments are concentrated in a period of a few months' time, okay?

During the last bull market, for example, January to May, August to November 2021, these were the periods of time where it just felt like easy mode, up only, nothing could go down. There's this famous GCR tweet that Victor mentioned in his blog post that says this, you should be sacrificing, this was the peak, you know, 2021, October 2nd, 2021.

You should be sacrificing your weekends to give everything you have, harvesting all possible yield out of this market. Oh, you're 22 and you want to have fun with your friends? You will never have such easy opportunities for generational wealth, even if you live another 80 years. at that point in time it was kind of trueish that like okay look at this bnb 8x in 20 days

February 2021 that in 20 days it ate x that's the binance coin it had a narrative season sushi 6x in one month ave 6x in one month this kind of tells you that like it can be absolutely explosive and you want to get in on the front end of these types of narrative trades and not the back end because it can shoot up in a hurry and get away from you. I think this also just shows that these things are not investable. They are speculatable. Like you do not find like you don't go sifting for like this AI gem and then plan on being a long term holder of that AI gem.

That is going to be a two, maybe nine month long thing and even nine months long. It's just you are waiting for hopefully to strike gold, hopefully for that thing to pump. but as soon as it does, you are not going to, you do not believe more in that thing. You cash out, right? Like, it doesn't, it's not a long-term process. And that's true, by the way, that's true. By the way, even if the thing that you're investing has fundamentals, buying fundamentals, like file coin has fundamentals, okay?

But it doesn't have a hundred billion dollars worth of fundamentals. Right. It's not worth that much, probably. And so, like, that's even true with things that have some sliver of fundamentals underneath them. The last point here is don't let the bear market PTSD rob you of the insane gains. What Victor is commenting on here is you have to change your orientation. Some of you might still be, if you're doing this, narrative investing, some of you still might be holding on to the PTSD of the bear market where like every pomp, you just got like, oh, I don't believe that. That's not real.

You know, it's going to go back down. And in the bear market, that's the behavior you're rewarded for, right? You're rewarded for pessimism. in the bull market momentum has shift shifted completely you got to get out of that mindset like things are just going to go up and they're going to get go up in a hurry so don't let that PTSD from the bear market like stop you if if this is what you're you're trying to do so those are the the four lessons that we learned i think from 2021 that are probably still valid going into 24 i think it's also worth noting that it becomes increasingly hard to remind yourselves that you need to be sober when froth is happening like left and right when we go if you go right now the day of recording march

fourth if you go look at the top movers in the last seven days it's bonk doge pepe dog with hat um like like all of the meme coins right uh this the bull market i remember one of the biggest mistakes i made last bull market was thinking that the bull market was going to last longer than it did it did get cut short like the whole interest rate phenomenon thing happened but i kind of considered the bull market starting in 2021, not when it actually started, which was like May in 2020 when Defi summer was a thing. The biggest thing to remember is as the total crypto market cap goes up, it is right now at $2.5 billion, maybe it tops out around $10 billion a little bit more. Everyone is sitting on a mountain of paper gains. And this is when the game of chicken continues,

goes on. If everyone has paper gains and no one has sold, whoever sells first gets to make out like a bandit and they get to leave everyone else with the bag. And if buying turns into selling, all of those paper gains down to just like normal app parody like one to one like no gains for everyone. And you want to have to have sold before that happens. And you can't trust yourself to call the top and you can't trust yourself to know in the moment whether like to sell or not. You can't trust your instincts in psychology. So if you do this, my recommendation to you is have a cell plan going in. Right. What do you do if at five X's? What do you do? What do you do? do if at 10xes? What do you do if it, you know, 50xes? Have a plan at all of those various

points. You want to know what the common denominator is between Sam Bankman-Fried, three-eurost Capital, and Alex Mishinsky at Celsius? Oh, wow. That's a cast of characters. What? The common denominator is as as the bull market went on, they took on more leverage, not less. They took on more exposure, not less. Both Sam Bankman-Fried and Three-Ros Capital started with a risk-adjusted basis trade, which is basically the least risky thing you could do. They started the bull market with that. And then they both ended with massive amounts of leverage. I'm pretty sure this is the same for Alex Wichinsky as well. As we all are going to get drunk in the next six months, some of us already are. You are going to want to have more exposure because

you're going to FOMO left and right. Actually, it's the time to get less exposure as the bull market goes on. Yeah, I want to get, and like maybe end this section with some of the top signals, David. But like one quick recap, do you know what? Some of the main themes for the 2021 cycle. Some of these were more real. than others, right? The first one was DFI. Remember DFI? DFi summer, DFI, that was some reality being priced back in,

and then it went absolutely crazy. But look at this, AVE and Synthetics. From bottom to top, the gains in Avey and Synthetics were 500X and 1,000 X. Absolutely incredible. And then we had this Alt-Layer 1 season, which was another narrative trade last cycle. So that's where you saw, like,

Saloon, what was it? Saloon Avax. Yeah. And Phantom and BNB again, all of these things. And then you had a Alt Layer 1 ecosystem playbook. So B&B is pumping. So cake, which is an app on top of B&B should pump to a ABA. Exactly. And then we had briefly a Metaverse pump. Do you remember this? So Facebook's rebranding to the Metaverse. And so Sand and Manna and Gala went absolutely crazy. And then in the background you had AXI Infinity going nuts. And then of course the Like, you know, the true narrative trade throughout all of this was the meme coins.

Shib and the doggy coins, you know, Elon, all of these things. We had NFTs as well. These were some of the main narratives from last cycle. It might be helpful as we try to, like, predict the narratives for this cycle. But a few of the top signals that I felt like were right on that he points out, too, as you'll resonate with this, main character and the worship of some crypto figures. Oh, deifying wealth, whoever makes a lot of wealth. Yes.

So let's name some of them. Sam Bankman Freed. Right. CZ, Suzu, Elon Musk, Doe Kwan, Richard Hart, Andre Kronier, Danny Sesta. He got deified by a bunch of DGens.

We get animal spirits left and right. Yep. Some of these are great guys. Some of them are not so great guys. and that's one thing to look out for. If you're looking for top signals, look for the deification of some of these main character architects. Can we paint out who we got in a fight with last cycle?

Svf, Suzu, Doe Kwan, Richard Hart, and Danny Sesta. Yes, we did. We didn't get into a fight with Elon Musk. I'll point out, which is somebody else on the list. I don't know if Elon Musk deserves to be there, but whatever. So that's one top signal, right, is the deification of main characters. Another top signal is closely related is this cult. you'll feel like this cult type vibe

of some kind of like a cult Ponzi which you know you can't say anything disparaging about their bags you can't like rationally argue with them do you remember the peak for this was when we had a debate the podcast was entitled is Luna a ticking time bomb is Tara Luna ticking

time bomb and of course this was six weeks before it absolutely blew up and we had a bull for Luna and we had a bear and that post that episode got absolutely attacked on all social media that we've seen. You should see the YouTube comments are so gross.

Yeah. And the lunatics. Basically, we got lunatics swarmed, lunatic attacked. And then I remember you and I looking at this. Whenever the Terra Luna bear would speak, the comments would just get wild about him. This guy's making no sense. He's so unconfident. And they were really bolstering up the bull because he was pumping their bags.

And they were just taking down the bear. If you see a cults with a Ponzi with a group of followers hit that cell button, Because it means bad things are ahead You might be able to ride it for a little bit But eventually bad things are ahead Without fail, every community that has had this type of vibe Has completely collapsed The louder that the Colt gets

The stronger the cell signal Danny Sessa's ecosystem was exactly this way Richard Hart with Hex, right? Even Olympus Dow had like vibes of this The other thing to maybe look for Like the last top signal is Oh, when we start to get this kind of shit, David. FTX Arena

Remember the FTX Arena? buying arenas, yeah. Yeah, so Vegas Sveer, I know you've mentioned this before, if the Vegas Svear starts to have a crypto project on it or token, like sell, top signal. Maybe wait like two days and then. Okay, so that's narrative investing. We've just scratched the surface of it.

I'm curious as we end this episode. So we started this episode talking about the AI narrative, AI meme coins, AI tokens, there's some substance there. There's a lot of narrative, Mimetic energy. It's definitely a narrative investment or narrative trade. Besides that, what do you think? You promised us three. David's prediction for big crypto narratives on the level of like the metaverse or like NFTs this cycle. What are the other two? Yeah. So number one, obviously crypto and AI, that was like what the whole first half of this episode was, a very distant second

because I really want to emphasize how strong I think the crypto AI just meta is about to be. A very very distant second, but also extremely strong, is the Bitcoin Renaissance. This is the Bitcoin Layer 2 mania and also tokens on the Bitcoin layer 1, both inscriptions and Bitcoin's equivalent of an ERC20 token, which is not, by the way, a BRC20 token. That's something that's coming soon. We're going to talk to Casey Rotamer about that. Tokens on the Bitcoin Layer 1, NFTs on the Bitcoin Layer 1, and also Bitcoin Layer 2's. Bitcoin's getting Layer 2's.

and one of the reasons why I think this is so powerful is related a function of the moneyness of BTC, the asset. There is three times as much money as there is in Bitcoin as there is in Ethereum, and look at how much speculation and NFT activity there is on the Ethereum chain. Multiply that by three because that's how much more money there is in Bitcoin.

I mean, then take some premium away because the layer two on Bitcoin are strictly inferior to layer two is on Ethereum, just on a technical capacity. but nonetheless, if there's a lot of money in the ecosystem, there will be a lot of speculation. We've seen NFT projects, ordinal projects on Bitcoin, mint, and then immediately pump a 3x. And this is what happens when there's a lot of latent demand for speculation on any sort of chain that has a big stockpile of money, which is BTC, the asset.

The Bitcoin Renaissance, I think, is going to be perhaps the second biggest narrative of this cycle. Okay, AI tokens, Bitcoin Renaissance. What's number three? Igen layer restaking and it should come as no surprise of people who to look into who have been watching bankless

the amount of capital that I think is going to be injected into the Ethereum space over the next like six to nine months as a result of eigenlayer both from LRTs becoming tokenized and AVS is becoming tokenized and then AVS is spitting out

yield is I think going to be massive I think AVS is going to be kind of remember yield farming DeFi yield farming food farms of the DeFi summer cycle of 2020, I think that's about to be repeated at the AVS layer around eigenlayer.

It's going to be extremely frothy. People, I think fundamentally, the eigen layer structure is sound, but human greed at a higher level, a leverage level on top of that will test how sound that structure is. And so just the yield, I think, is going to also produce

like a ton of capital injection and a lot of speculation. Interesting timing as well at the time of recording. EigenLayer today has just passed a billion into the locked value or 10 billion, excuse me, which by the way was your prediction for 2024 and it happened two months in to 2024, right? So again, fast forward. Like this is like the bull market is going to be exceedingly fast. And, uh, you know, at some level, if you're, if you're hearing about the narrative and it's getting

like amplified in a big way, you might be a little late to that, to that particular narrative. right so there's probably some other restaking types of opportunities out there but um at least a good portion of that has has already uh leaked its way into into the market i would say i said this once before um but i'd really just want to emphasize this the thing that will end the bull market is the magnitude of paper gains that people have right now we're sitting on a lot of paper gains because as a crypto industry everyone inside of crypto who are crypto believers that we're sideline have bought and that put Bitcoin up from 20K up to where it was at 45K. It took ETH from like $1,000 up to $2,500.

It took Solana from $10 to like $120. That was internal capital. We have not yet seen external capital, except with Bitcoin. We have not yet seen external capital. Retail is just now coming back into the market as of the last two weeks. Coinbase is just now as an app rising in the ranks of downloads per year. week or activities users per week. Coinbase is now crashing. Retail is coming in as of this week because we are threatening all-time highs. So the first phase of the bull market is over. The first

of the phase where all of sideline capital buys, now everyone is basically exposed because we are all expecting retail to come in. And the second phase of the bull market has started, this phase of the bull market will end when we are all sitting on too many paper gains and we all want to cash out because we made life-changing money. And so it doesn't matter how strong the fundamentals are. It doesn't matter like how cool these projects are. Eventually, once there's too much paper gains, the animal spirits will invert and buying will turn into selling

and selling will beget selling and the bull market will be over. Who knows when that is? You know, who knows when it is? It's no mistake on the weekly roll up every week. We talk about the total crypto market cap, right? And so we are now at $2.6 trillion, the last all-time high in total. crypto market cap was about 2.9 and that was at the very peak. So you could see that here,

right? You see 2.9 in November of 2021. The cycle before that was 2018. That was in January, February 2018. The cycle high was not just under a trillion. It was 850 billion. Okay. So the big question, the thing to look at is how high will this go? I remember during more sober times, this was just like not less probably than two or three months ago. You and I actually predicted this. I think that you said something. Do you say $10 trillion? Something like that?

Yeah, I think I said like $10 trillion. Yeah. I think that's right. And I was like, you know, 10 to $15 trillion, somewhere in that range. Right. But is it going to be six on the very low side? Is it going to be $8? Or is it going to be $20 trillion?

We actually don't know. But the closer we get to those amounts, the more paper gains is kind of what you're saying on the books. And the more we get into $1. Be careful. This market's getting exuberant territory. Right. 100%. I remember in 2017 in my crypto chat group with all my friends,

I think the crypto market cap passed $850 billion. And I sent out the question, how long will, this was like November of 2017. How long, guys, question to you, how long after we cross $1 trillion, will it take us to cross $2 trillion? And I remember I said, I said, we're going to cross it in January, $1 trillion, and then we're going to cross 2 trillion in May. We never cross 1 trillion. That's first cycle, David.

That's first cycle, David. Okay, guys. We will end it there. Of course, these side quests around narrative investing, purely optional if you just want to block out the noise and just stack some ether, stack some Bitcoin. I totally understand. I got to end with this.

Of course, you know, crypto is risky. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the bankless journey. Thanks a lot. Thank you.