Trading The Narrative

As 2021 is coming to an end, it is time to look at some of the most dominant narratives of this year’s major bull market. As the well-known Crypto Influencer CobieĀ wrote, there is a constant ‘metagame’ going on within crypto cycles.

The ‘DeFi’ Narrative

The most recent bull market started with ‘DeFi Summer’ in 2020. But in 2021, DeFi blue chips like Aave, Uniswap, or Compound mostly underperformed in relative terms against other coins.

The ‘DeFi’ narrative had run out of steam, other narratives took over. So far this year there have been major crypto narratives around ‘Ethereum Killers’ with competing L1 platforms like Solana, Avalanche, and others massively over-performing most of the market.

The NFT Narrative

There were at least two periods of strong growth for NFT projects, led by ‘NFT Bluechips’ like CryptoPunks, Apes, and others. More recently ‘GameFi’ projects led by Axie Infinity and a narrative around the ‘Metaverse’ and ‘Play to Earn’ crypto games took off. Of course, there can be multiple competing narratives happening at the same time.

The Bitcoin Consistency

Throughout all of this, Bitcoin has remained uncharacteristically consistent with little volatility by crypto standards. To be a truly advanced trader, you need to understand what narratives are ongoing, which ones are running out of steam, and which ones could be picking up momentum.

If your ear is not close to the ground and someone tells you about the ‘next hot thing’ in crypto, chances are that the true insiders have already moved on.

For 2022, beware of becoming the exit liquidity for someone else’s crypto cycle narratives.