From the digital scarcity driven by NFTs to the phrase “55 million millionaires in the world, but only 21 million bitcoins”, people are always narrating the scarcity of cryptocurrencies.
However, in fact, “Attention” is the only scarce resource in the cryptocurrency field.
First, venture capital is clearly not a scarce resource. The profitable people who participated in the summer of encryption in 2021 are raising billions of dollars in funds, planning to use it for the development of “Metaverse” and decentralized Internet applications. In this comparison, a billion dollars is not a huge sum.
Second, encrypted assets are not really scarce. This conclusion may sound somewhat arbitrary. Bitcoin and Ethereum are scarce because of the hard-top supply setting and the token design of the deflation model; the reason why Crypto Punk is scarce is because the supply is limited and fixed. Just like Crypto Dickbutt, its total issuance may increase Has been maintained at the initial 5200. But from another perspective, the total amount of things we can speculate in cryptocurrencies is constantly increasing, and theoretically endless. More specifically, billions of dollars in venture capital is not entirely used to purchase encrypted OG projects.
In other words, US dollar capital investment will be diluted by a large number of projects on the market. This is even more pronounced in the bull market-especially in the turbulent phase, when recently self-proclaimed genius fund managers will no longer agree with the long-term value theory of cryptocurrencies.
Image source: Pexels
It is true that there are only 10,000 Crypto Punk in the world, but in addition, there are 10,000 BAYC, MAYC, MAKC, a bunch of cool ArtBlocks, CoolCats, Meebits and Hashmasks. The EIP1559 mechanism implemented by Ethereum has caused billions of dollars of ETH to be burned and destroyed. As time goes by, the scarcity of ETH will gradually increase.However, if people feel that it is too late to start ETH, there are AVAX, SOL, LUNA, ONE, NEAR, and even ADA to choose from.
After a period of time, truly valuable crypto assets will be extremely scarce. Because the number of crypto assets that can surpass Bitcoin in more than one bull-bear cycle is limited, most tokens will completely die. It can be imagined that some familiar scenes may come back in the middle of the process. This is not nonsense. When the carnival ebbs, the bare-handed people finally regain consciousness. Everyone calmed down from the enthusiasm, realized the reality, and reflected on the decisions made in this “soul out of the body” experience. Capital will reapply to value. However, for investors who are now as drunk as a dream, the “value pool” at that time may face a sharp contraction.
But recently, the $1 billion fund managed by the former Citibank “Innovation Manager” (now wagmi-punk-2383) is being spoiled by various investment opportunities in the market. LP is giving them money every day, and projects are endless. Hundreds of founders are building cross-chain DeFi projects and Metaverse chain tour projects.
Attention is the only scarce resource.
Attention is the currency on the modern web, and companies in the Web 2.0 era have discovered this early on. They realize that users essentially use their attention to pay for services, so they try to attract attention, and then sell products to users at a certain point in time. Usually, these companies do not sell their own products, but only act as “middlemen” between users and merchants. By attracting users’ attention, agents sell products.
When it comes to the token economy, the monetary nature of attention will be more straightforward. Every day, more than 50 initial Defi offerings (Initial DeFi Offering or Initial DEX Offering, IDO) are being staged. They obtain funds through competition and attract users to join their respective communities. In the past 12 months, there has been a steady stream of airdrop activities. Companies use the airdrop incentive model to reward users who use and support products.
In the Web 2.0 era, traditional companies usually throw 5-10 dollars to attract people to use the product. Take Uber as an example. Once people sign up for an account, they can enjoy an immediate discount of $10 on their first ride. In the Web 3.0 era, the battle for attention has intensified, nine-figure incentives have become the new normal, and five-figure airdrops are commonplace. On the oil pipeline, the advertising fee for each video of KOL in the encryption field reaches five to six figures. It can be seen that attention resources are quite scarce and the demand is huge.
Attention-based asset valuation
As I wrote in the last article, the crypto market in the bull market is more like a video game than an investment project. If the field of cryptocurrency is compared to a massively multiplayer online game scored in US dollars, attention is the decisive factor in many “short-term games.”
In massively multiplayer encrypted games, most players cannot fully evaluate the technical and fundamental aspects of the project. In other words, retail investors are highly dependent on market signals and social recognition when making decisions.
Assuming that the price of cryptocurrency is a time-varying equation between the supply side (ie, the seller) and the demand side (ie, the buyer), the impact of the scarcity of attention comes to the surface.
If the demand increases or the number of sellers decreases, the currency price is bound to rise, but the fluctuation cycle of potential factors that affect the relationship between supply and demand cannot keep up with the high-frequency rhythm of players participating in crypto bull market video games.
Specifically, protocol development and value creation usually take several years as the basic cycle, while the operating cycle of trading players in the crypto bull market is at most a few weeks or even shorter.
Therefore, attention is the only factor that affects supply and demand variables. It changes at the same frequency as the player because it is completely controlled by the player.
The favored choice of traders
In the turbulent phase of the bull market, good players will not choose to buy the “best” asset. Instead, they will buy assets that are expected to attract a lot of attention or realize their valuation potential.
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Good traders definitely want to buy “winners” items to maximize their profits, there is no doubt about this. They also want to buy projects that are expected to be upgraded from “niche” projects to “winners”. They are even more willing to buy a project that is expected to be upgraded from a “rekt” project to a “retail trap”, even though they know that there is a huge risk because of the possibility of pushing a messed up project into popularity Minimal. By shifting the direction of product focus, advancing technological change or leadership reform, the project may also turn from “failure” to “niche”. Traders clearly know that any project that can be upgraded (that is, moving from left to right or bottom to top in the picture above) can provide them with opportunities.
For long-term investors and retail investors, “winner” projects are the best assets because they are highly recognizable.However, for players who are engaged in crypto trading every day, the market opportunities provided by “winner” projects are quite limited, because they are likely to gradually move closer to the market average, but good traders prefer to invest significantly higher than the market average Horizontal items. Ethereum is a typical representative of the “winner” project.At the same time, the “winner” project also faces downside risks. With the passage of time, the pattern of the cryptocurrency market continues to change, and these “winner” projects are likely to be slowly relegated to “niche” or even “lost” projects.
“Retail trap” projects also have problems similar to “winner” projects, and their risk index is higher than “winner” projects because their technology or team may have bottlenecks and lack potential long-term prospects. Of course, they may also be upgraded to high-quality projects, but it is unlikely that even if they succeed, it will be very time-consuming. The best-case scenario is that they continue to develop and are constantly approaching market averages. In the worst case, they are downgraded from “retail trap” to “lost” projects because the market realizes their disadvantages and eliminates them.
As the popularity and popularity of projects increase, they will be favored by traders. This “favored” period is the period in which asset valuations have changed the most.
Once a project becomes the favored choice of traders, the number of market participants who own the asset will increase to saturation. Once saturation is reached, sustained growth can only be achieved through the following two ways: (a) the growth of the entire cryptocurrency market promotes the continued growth of the asset; (b) compared to the market level, the fundamentals behind the asset are continuously optimized. This can explain why hardcore crypto players don’t want to invest in “winner” or “retail trap” projects during the bull market shock phase-the above two approaches are too slow for them. There are huge opportunities in the crypto market, but the opportunity cost is also huge.
Good crypto game players usually invest in projects whose actual valuation is much lower than the potential valuation, and then sell them when they are close to the potential valuation. They are resident guests of the “winner” project, but at the same time they are constantly looking for better deals.
Long-term investors don’t care much about this type of game. They are willing to invest and bet on “winner” projects, expecting them to grow with the market, or expect their importance to gradually escalate.
SOS, Loot, BAYC
There are many examples of attention resources pouring into the market in a flash.
The recent SOS token airdrop event is a good example. In this activity, a third party will conduct an SOS airdrop based on the previous NFT purchase history of Opensea users. This is very interesting. It allows us to see that providing a corresponding amount of free currency to each contributing crypto player can quickly increase the product’s attention among all crypto players.
It is worth noting that the SOS tokens here do not involve any products and fundamentals. It is purely a speculative market catalyzed by players’ desire for OpenSea tokens or other similar competing tokens.
When players turn their attention to SOS tokens, they mainly face 3 choices:
(1) Sell airdrop tokens in exchange for Ether or U.S. dollars;
(2) Keep the airdrop tokens and watch the changes;
(3) Turn to airdrop sellers and purchase more SOS tokens.
When attention resources are injected into this new market, crypto players will begin to think about how they can make money from this new thing-this is the ultimate meaning of video games. If enough people choose the path (2) or (3), this will make the purchase price in (3) greater than the selling price in (1), the price of SOS tokens will show an upward trend, and the curve in the price chart will show a trend. bright.
If the price curve trend is clear, there will be more people talking about SOS tokens, and more newcomers will join the market and make choices among the above three approaches. So far, market participants who have never used OpenSea or have not contributed enough to obtain high-quality airdrop rewards must choose between the following two:
(1) Purchase SOS tokens and participate in transactions;
(2) Wait for an opportunity, or ignore the market altogether.
Some people will choose (1), which will further increase the token price. When the price rises round after round, people can make money from it, so they can talk more about this fashionable new thing.
However, at this time, the influence of ownership will overtake attention resources, and the popularity and popularity of the project will soon rise from the level of a “niche” or “losing” project to the level of a “winner” or “retail trap”.
As prices rise, more people are willing to sell airdrop tokens. At the same time, due to the slowdown of the price curve and the ebb of attention resources, the number of newcomers who decide to purchase SOS tokens will also decrease. As a result, the trend of SOS tokens is no longer clear, and the concept is no longer novel. It suddenly becomes an ordinary token without a product, which is rarely discussed, and the k-factor of assets will also decline. Obviously, the initial level of attention cannot be maintained for a long time, and most of the remaining attention comes from the existing holders.
Once an asset is touched by many players, after a period of time, players are likely to give it a second consideration. At this time, if the asset does not have the blessing of products and users, it will be difficult to achieve sustained attention.
It can be said that Loot’s model overlaps more or less with the above blueprint. This may explain why BAYC has become the best-performing PFP project in the NFT field this year. It quickly surpassed Punks’ reserve price, while other competing tokens of the same kind issued at the same time have all withdrawn. The reason behind this is that BAYC focuses on building value-driven community construction, and community members participating in it will become permanent promoters, maintaining stability or attracting more attention resources.
Dogecoin is another interesting example of the influx of attention resources into the market in 2021.
In the long run, Dogecoin fluctuates more frequently than Bitcoin. However, from the initial issuance of Dogecoin until the end of 2020, the fluctuation range has basically remained within the same range. The chart below shows the change trend of Dogecoin from 2014 to the end of 2020. It has basically maintained a consistent zigzag fluctuation for 7 years.
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When people learn about Dogecoin, they have two options:
(1) Purchase it;
(2) Ignore it.
It is inferred from this that the proportion of decisions made over the past 7 years has remained basically unchanged. For every 100 people, 90 people choose to ignore it, and the remaining 10 people choose to buy it.
Subsequently, in 2021, a new attention catalysis mechanism was introduced. Elon Musk became the number one fan of Dogecoin, which contributed to the following two things:
(1) Many crypto natives were persuaded and chose to buy Dogecoin;
(2) New market participants were also persuaded to choose to buy Dogecoin as the entry cryptocurrency.
When Elon Musk started to drive up the price of Dogecoin, it was actually a very interesting market game. You can ask yourself: If Musk continues to attract people’s attention to Dogecoin, what range of audiences can he cover at most? To what extent will the ratio of buyers and neglecters be affected?
Thinking in this way, it becomes very easy to bet on Dogecoin. If he continues to raise the price, the attention resources he attracts will greatly change the relationship between supply and demand within a period of time, and Dogecoin holders will occupy the market advantage-5 to 10 times the upside potential is expected. If he does not raise the price, the holder may lose 33% of the investment. In this way, investment risks and returns are not balanced.
Image source: Pexels
But in the end, people all over the world who are inclined to buy Dogecoin will understand this truth. At this node, the attention resource is at best to maintain stability, because people who know Dogecoin are already saturated, and those who might be persuaded to buy it have already bought it. At present, attention resources are mainly focused on hesitating bystanders and those who have purchased the largest amount of expectations. As the rate of attention change decreases, new participants will become more reluctant to buy, and finally the holder will become the only source of attention.
When the influence of ownership and valuation begins to overtake attention resources, smart traders have already begun to sell tokens.
Finally, I will talk about an interesting example-Cardano (hereinafter referred to as ADA). Although the core logic behind ADA is the same as Avalanche, Solana, and Luna, its performance throughout 2021 is completely different from them.
In the early days of the bull market, ADA attracted widespread attention. It has become the most popular token in the YouTube encryption circle, and all well-known bloggers have listed it as one of their three major assets. The founder Charles is also an encryption circle tubing blogger, and his video views are usually no less than 50,000.
However, since the beginning of 2021, the price of ADA has fallen by 93% compared to SOL.
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Perhaps this can be explained by the logic of analyzing SOS or BAYC.
When the influence of the attention resources of a project far exceeds that of ownership, their pricing is usually re-elevated. As of the end of 2020 and the beginning of 2021, ADA has been a leader among the “Ethereum Killers”, attracting the attention of many retail investors. In addition, the bull market had just begun at that time, and many new participants began to join the market, which also made ADA attract more attention.
Throughout the year 2021, Layer 1 public chain companies such as Avalanche and Solana have built a vibrant ecosystem with high user participation-similar to BAYC. They continue to attract the attention of users, developers and speculators, and increase awareness. Brand-new projects and profit opportunities are rapidly starting on these L1s.
The members of these communities are eternal promoters. In addition, because crypto players do not like to be idle, these decentralized finance, games and other projects form a positive feedback loop that guarantees sustainable attention. Due to the scarcity of attention, all L1 tokens are simultaneously competing for the share of consciousness. The success of Solana and Avalanche in user awareness share also means the loss of other L1s.
Although ADA is popular, what users can do at present is quite limited, and it lacks an ecosystem that allows encrypted gamers using ADA to earn points through games. In a sense, ADA is more like a “retail trap” rather than a “winner” project.
Attention is the only scarce resource in the cryptocurrency field.
When evaluating encrypted assets, or playing “massively multiplayer encrypted trading electronic games”, the rate of change of attention resources and the saturation of ownership are two effective observational evaluation indicators.
The best traders are looking for relatively low-profile assets. When they successfully cross the visibility gap and change from “obscurity” to “household name”, their valuations will rise sharply. When the influence of ownership gradually surpasses attention, they will sell these assets.
In the turbulent phase of the bull market, most of the people who choose to hold the “winner” project are those who have a calm heart and a balanced life. Maybe one day I will become one of them.
Oh, by the way, don’t listen to the nonsense of the crypto circle tubing bloggers, they just want to use your attention to pay for their advertising business.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/encrypted-world-under-the-flow-economy-from-bayc-people-to-sos/
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