John Maynard Keyes, the father of Macroeconomics, was a terrible Stock market investor.
His fortunes changed once he started studying beauty contests.
You can use what he learned to improve your Crypto trading.
Here’s the 2-minute story:
His fortunes changed once he started studying beauty contests.
You can use what he learned to improve your Crypto trading.
Here’s the 2-minute story:
The Beauty Contest
There was a newspaper game in the early 1900s.
Readers selected who they believed were the 6 prettiest faces.
The reader whose choices most closely matched the 6 most selected women would win a prize.
So which strategy did people use?
There was a newspaper game in the early 1900s.
Readers selected who they believed were the 6 prettiest faces.
The reader whose choices most closely matched the 6 most selected women would win a prize.
So which strategy did people use?
Level 1 - The Naive Strategy
You choose the 6 faces that YOU think are the prettiest.
The problem? You're assuming that your preferences are universal.
What if you think big noses are hot, but most people don't?
You'd lose the game because your choices aren't popular.
You choose the 6 faces that YOU think are the prettiest.
The problem? You're assuming that your preferences are universal.
What if you think big noses are hot, but most people don't?
You'd lose the game because your choices aren't popular.
Level 2 - a More Sophisticated Strategy
You realize it's a popularity contest, and evolve your strategy.
"I'm going to pick the faces I think everyone else will pick!"
Smart. This can work if everyone else is using a naive strategy.
But...
You realize it's a popularity contest, and evolve your strategy.
"I'm going to pick the faces I think everyone else will pick!"
Smart. This can work if everyone else is using a naive strategy.
But...
Level 3 - an Infinite Loop
But what if other people are thinking the same thing, and applying the same strategy too?
"We have reached the third degree where we devote our intelligence to anticipating what average opinion expects the average opinion to be" - Keynes
But what if other people are thinking the same thing, and applying the same strategy too?
"We have reached the third degree where we devote our intelligence to anticipating what average opinion expects the average opinion to be" - Keynes
The Markets
He couldn't figure out why prices would rapidly rise and crash, despite the fundamentals not changing.
He realized that emotions drive the markets and that stocks can become popularity contests.
"Successful investing is anticipating the anticipations of others."
He couldn't figure out why prices would rapidly rise and crash, despite the fundamentals not changing.
He realized that emotions drive the markets and that stocks can become popularity contests.
"Successful investing is anticipating the anticipations of others."
Crypto & Beauty Contests
My friend consistently loses money in Crypto.
I've heard him complain multiple times:
"Why isn't the price going up? The fundamentals are so good. But people want to spend their money on stupid meme coins and metaverse tokens."
My friend consistently loses money in Crypto.
I've heard him complain multiple times:
"Why isn't the price going up? The fundamentals are so good. But people want to spend their money on stupid meme coins and metaverse tokens."
It's a Popularity Contest
He may think his protocol's beautiful, but what if no one else does?
Prices only go up when others buy.
This is a blindspot in some investors who are 100% fundamentals/revenue driven.
They forget that PEOPLE ARE NOT RATIONAL!!!
He may think his protocol's beautiful, but what if no one else does?
Prices only go up when others buy.
This is a blindspot in some investors who are 100% fundamentals/revenue driven.
They forget that PEOPLE ARE NOT RATIONAL!!!
Emotions Drive the Market
Retail doesn't care about flywheels in a bull market.
What fundamentals did Dogecoin or Metaverse tokens have before they skyrocketed in the last bull run?
“Markets can stay irrational longer than you can stay solvent."
Retail doesn't care about flywheels in a bull market.
What fundamentals did Dogecoin or Metaverse tokens have before they skyrocketed in the last bull run?
“Markets can stay irrational longer than you can stay solvent."
PVP
Some say that markets like these are PVP (Player vs Player).
You have to buy before others buy, and sell before others sell.
This brings us back to the beauty contest.
We try to guess what other people will think is popular, and get ahead of them.
Some say that markets like these are PVP (Player vs Player).
You have to buy before others buy, and sell before others sell.
This brings us back to the beauty contest.
We try to guess what other people will think is popular, and get ahead of them.
What can cause Pumpnomics?
A FEW patterns I've noticed:
• Cult leaders
• Good branding
• Tribalistic communities
• Partnership announcements
• Riding real-world hype like A.I.
• Pricing a share < $0.10 (unit bias)
• Influencer / shillfluencers backing it
A FEW patterns I've noticed:
• Cult leaders
• Good branding
• Tribalistic communities
• Partnership announcements
• Riding real-world hype like A.I.
• Pricing a share < $0.10 (unit bias)
• Influencer / shillfluencers backing it
The Power of Story
An underrated element is a simple story.
Humans are wired for stories. And as Crypto becomes more complex, simple stories sell.
The stories must be simple enough to understand, and compelling enough to act.
I'm going to share a few examples.
An underrated element is a simple story.
Humans are wired for stories. And as Crypto becomes more complex, simple stories sell.
The stories must be simple enough to understand, and compelling enough to act.
I'm going to share a few examples.
Stories Pump
In 2017:
• Dragoncoin pumped because people thought there was a partnership with Disney
• Justin Sun psyops people into thinking he's Jack Ma's heir
• People thought Omise Go had a partnership with Apple because of an Apple sticker on a skateboard.
In 2017:
• Dragoncoin pumped because people thought there was a partnership with Disney
• Justin Sun psyops people into thinking he's Jack Ma's heir
• People thought Omise Go had a partnership with Apple because of an Apple sticker on a skateboard.
Last Bull Cycle:
• MetisDao pumped because Vitalik's mom is on the team.
• Real Yield Narrative. I was bullish over the summer because the story made sense.
"Stop investing in unsustainable ponzis, and invest in tokens that generate revenue."
• MetisDao pumped because Vitalik's mom is on the team.
• Real Yield Narrative. I was bullish over the summer because the story made sense.
"Stop investing in unsustainable ponzis, and invest in tokens that generate revenue."
Potential Future Stories
1) Real World Assets - an actual use case + has the same energy as the "real yield" movement.
2) Crypto A.I. - Anything A.I. related now is a money grab. But it's looking to be the next "metaverse" play where we're piggybacking off of hype.
1) Real World Assets - an actual use case + has the same energy as the "real yield" movement.
2) Crypto A.I. - Anything A.I. related now is a money grab. But it's looking to be the next "metaverse" play where we're piggybacking off of hype.
Implementation
Does this mean everything's a popularity contest? No.
Without solid fundamentals, a project won't be sustainable.
My solution:
1) Portion of portfolio for long-term investments
2) Another portion for hype-based trades where I look for pumpnomics.
Does this mean everything's a popularity contest? No.
Without solid fundamentals, a project won't be sustainable.
My solution:
1) Portion of portfolio for long-term investments
2) Another portion for hype-based trades where I look for pumpnomics.
Psyops
Let's say someone has the power to move the markets. They decide to start fudding a token like ETH.
1) Are they being truthful, or is it a move to get lower ETH prices?
2) Do the crowds believe them, or will believe it's psyops and act accordingly? 🤔
That's Crypto.
Let's say someone has the power to move the markets. They decide to start fudding a token like ETH.
1) Are they being truthful, or is it a move to get lower ETH prices?
2) Do the crowds believe them, or will believe it's psyops and act accordingly? 🤔
That's Crypto.
Isaac Newton
He was the greatest Mathematician of his generation.
Despite his genius, he lost his entire fortune investing in the South Sea Company Bubble.
After losing his fortune, he remarked:
"I can calculate the motion of heavenly bodies but not the madness of people."
He was the greatest Mathematician of his generation.
Despite his genius, he lost his entire fortune investing in the South Sea Company Bubble.
After losing his fortune, he remarked:
"I can calculate the motion of heavenly bodies but not the madness of people."
That's the Keynesian Beauty Contest!
This is why I find Crypto fascinating - a combination of game theory, psychology, economics, technology, tribal warfare, and more.
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This is why I find Crypto fascinating - a combination of game theory, psychology, economics, technology, tribal warfare, and more.
Like/Retweet the 1st tweet below if you think your audience would find it helpful. I would love to share more!
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