A healthy balance of skepticism and curiosity

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If you've been active in the space the last month, it's clear that markets are starting to pick back up.

Bitcoin crossed $70k and hit an all time high, alts are rallying, memecoins are on fire, and even NFT markets are picking back up.

However, this is just the start. If previous cycles have taught us anything, it's that crypto will get crazier than most people can even fathom.

With that being said, today's letter isn't another post on "why memecoins are cool". I'm not trying to convince anyone to buy anything or share any kind of alpha. None of this is financial advice.

Rather, what I thought would be helpful for all of you is sharing my learnings from one of the most active crypto market participants in the last decade...Cobie.

Cobie has built up a reputation of being a genuine, curious guy who tries all the projects, is open about his mistakes, and is trusted amongst the community.

Heck, I've seen people make live bets on twitter and send their amounts to Cobie's wallet to serve as an escrow without even asking 😂 .

In the last bull, he started a substack to share some of his learnings on his journey. Most people don't know this, but he's a fantastic writer and all of his posts are brilliant. Reading his thoughts have made it clear to me that there is no better learning than experience itself.

On Cobie's substack, there's about 10 posts so I skimmed through all of them the last few days. There were two that stuck out to me that I wanted to dive deeper into. The first is a piece called trading the metagame and the second is tokens in the attention economy.

In today's letter, I cover my notes and takeaways from both of those posts.

Sections below:

1. Don't be a midwit

2. The current thing

If there's one thing you take away from Cobie, it should be this banger quote:

Winning in crypto means having a healthy balance of skepticism and curiosity

Let's dive in 🚀

Participating in crypto markets during the thrill stages of a bull-run is isomorphically more similar to playing a modern video game than it is to investing.

Traditional investing means reading through earnings reports, building DCF models, etc. Over the last century, millions of investors have developed thousands of frameworks on how to analyze stocks. There is an endless amount of data available on the stock market for investors to go through and better account for inconsistencies, patterns, cycles, etc.

The total market cap of the U.S. stock market is $50 trillion while the total crypto market cap is not even at $3 trillion yet. Additionally, crypto has been around for less than 15 years.

Point being, the idea of value investing in crypto is still in its early stages. Of course, there's still whitepapers, tokenomics, etc. to invest somewhat rationally. But for the most part, there's a much larger margin for volatility in this market because it's unclear as to what the playbook is for how people will react.

New primitives are being launched every few months and the name of the game is constantly changing. It's true. Being active in crypto does feel like a video game where you're hopping around different worlds, trying to level up, collaborate with anonymous people around the world, etc.

I recently saw this tweet by OSF and I think he nailed it. Being in crypto requires you to understand the craziness of the past because there's only so many cases where markets have gotten so insanely exuberant and felt like a video game.

If there's one thing that I'm starting to realize after 4+ years in crypto is that midwits lose in these crazy bubbles.

The truth is, crypto is still so early that you shouldn't be overthinking things. Especially if you're trying to trade newer assets like NFTs and memecoins. Attempting to do a full scale assessment and analysis of every trade is realistically not a great strategy. There are too many unknowns! It's natural to feel a 100 different emotions all at once in bull markets. Heck, I've had times (many times lol) where I just want to drop everything and start trading all day everyday. But that's just giving into fomo and greed.

For the majority of you reading this, it's best to think of your trading portfolio as an opportunity to be part of fun experiments with the expectations of zero returns.

Think about it...do you know anyone who plays video games hoping that they'll finance their families? Other than the pro twitch streamers, I'm guessing no. The same applies to crypto - leave the professional trading to the day traders and market makers who have committed to this as their job.

If you are running a company, have a full time role, etc. then the expectation is to have fun with these novel tools and ideas. If you make some money, great! If you don't make any money, then also fine!

And here's the thing...I'm willing to be that the minute you start having fun with "trading" and have a curious-fist mindset, you'll probably start doing well because your brain isn't fogged up with greed and profits.

The metagame can be described as subset of the game’s basic strategy and rules which is required to play the game at a high level...All other variables equal, knowing and utilizing the metagame gives the player the maximum chance to win the game.

This quote reminds me of the current thing. Every market has a current thing of course, but the speed at which the current thing changes in crypto is unparalleled.

For those of you that were around after the Covid crash in crypto, you'll probably remember the number of phases the ecosystem had from June 2020 to November 2021.

Of course, it's worth noting that no one actually needs to follow any of these trends to make money.

The market average in the space is just holding some combo of Bitcoin and Ethereum and letting that sit. Holding eth feels like holding the S&P 500.

However, if you are looking to do something with a "trading portfolio" in order to maximize your holdings and beat the standard crypto investor returns, then it's essential to understand the metagame.

With most of these trends, 99% of the projects launched are usually spam, hacks, have malicious intent, etc. But there's a few that end up building a fan base so strong (i.e. BAYC) that it's the community that proliferates the meme non-stop which in turn leads to unprecedented price jumps.

At the end of the day, the mindset for most of us who are not day trading but want to participate in the market should be "how can I identify the current metagame and ride the wave to stack more eth?".

Right now, it's memecoins. Even within memecoins, we saw a shift from coins being launched on Solana and then on Base.

Maybe the next meta that is heating up are NFT projects on Base. I don't really know. The point I'm trying to make is that it's up to you to identify which trend is undervalued right now in terms of popularity and mind share.

How do you do that?

I don't think there's an exact formula here, but from my own personal experience the answer is that you just have to be super active online and join the communities that are high signal and fun for you.

The goal should be to enjoy the community you're in, post more than you lurk, and make genuine connections so that people feel comfortable sharing their thoughts with you.

For some people that are defi native, that might mean hanging out in the Arbitrum discord. For others who are obsessed with consumer crypto, that might mean watching closely on Farcaster and FriendTech. And for those who are pfp experts, that could mean actively communicating with folks in the Pudgy Penguins or Azuki chats.

There's no one right answer. And it's not possible to catch every meta. Rather, our job is to look closely in the ecosystem we understand the best and to make the most of any metas brewing in it.

Most importantly...and probably the mistake we all make the most!

The worst thing you can do is run head-first into a metagame that is reaching exuberance. So, if you already thought 5 or 6 times about taking a trade, weeks/months have passed, and you have finally plucked up the courage to do it: you’re probably too late. It doesn’t feel risky anymore, which means it’s probably maximally risky.

Usually when the meta is common knowledge amongst all participants, the meta is already shifting to something else.

The right time to buy into a meta is typically when you first hear about it and believe the meta is undervalued.

If you wait too long - which I know we all do because of fear and laziness - then there's probably a good chance you're buying the top of an attention cycle.

But here's the thing. It's okay if you miss a few metas...you don't have to catch every single one! It's in your best interest to not fomo into a meta at the last moment and be someone else's liquidity. Rather, go and find the next meta...there's always another one right down the road.

That's all for today's letter!

I hope everyone has a fun and relaxing weekend 💤

See you all back on Sunday evening with my weekly "what I minted" post :)

- YB