About Narratives
First the dogs were presented with the food, and they salivated. The food was the unconditioned stimulus and salivation was an unconditioned (innate) response.
Then Pavlov sounded the bell (neutral stimulus) before giving the food.After a few pairings the dogs salivated when they heard the bell even when no food was given. The bell had become the conditioned stimulus and salivation had become the conditioned response.
The dogs had learnt to associate the bell with the food and the sound of the bell and salivation was triggered by the sound of the bell.
It has been more than a month since I published anything on this substack, and I feel a bit rusty. I relaxed on vacation, followed a bit the crypto news from the sidelines (yes I missed the pump), and did my best to spend close to no time on deep reflections. I think the zoomers would say I was “touching grass” for some weeks.
So, what better than a monumental and challenging theme, who is surely bigger than me and makes me feel inadequate about, to start writing again? :)
Jokes aside, I will not try to write an essay here, the topic is big and can be and has been analized in endless papers, books, and blogs. As usual, I will treat writing on this substack as an exercise for me to put certain floating thoughts in my head in a more ordered form and see if they make sense once anchored to the written form, or they are made of more fleeting and vanishing matter much like dreams and hearsay.
You are here with me for the journey, because you will feed my ego, and hopefully give me some feedback about the bullshit I write.
Memes
First, we talk about memes a bit.
I spent more than 15 years on anonymous imageboards - and have no regrets - where I witnessed first hand how memes are born, and spread, and how anonymity lets the unbridled mind get full creative control over the memetic potential of words and images. There’s a big difference between anonimity and pseudonimity: I am some silly anime character on twitter, you don’t know my real name, but you will hold me accountable for my posts: if I write bullshit, and tomorrow I see I am wrong and tweet the opposite, you can call me out on it. On the other hand, if you like my posts, you build expectations for my next ones, etc. Numbers also play a dangerous game for the mind: what insilico calls the “hollywood syndrome” is a real thing, you start getting thousands of followers, you get followed by some “celebrity” and suddenly you start feeling you should give yourself a tone, and what you write has a weight and is self-important. (Did not happen to me yet hopefully, I still write garbage as when I had 200 followers).
Real anonimity has no reputation attached, no memory, you are just valued in the instant for the contribution of your ideas. If they are garbage you are told, if they are great you get recognition for them, but tomorrow is tabula rasa. You start from zero. There’s no karma points, there’s no followers, there’s no statistics.
It is a great exercise in humilty, and forces you to rely only on the strength of your arguments, or the strength of your verbal tactics.
So, back to memes, imageboards used to be at the very center of meme creation, there was a famous picture circulating, showing how it worked:
The situation is a little more evolved now, imageboards are not (always) at the forefront of meme creations, and some platforms like tiktok introduced different medium of viral content (short videos), but the principles of getting viral are the same.
Memes don’t gain recognition through their sheer value alone, but especially through hammered repetition, and in this the creation and spread of templates pay a huge role:
When you see a meme from a new template for the first time you may think it’s funny, when you see 100 variations on the theme you now even know the format of joke and what to expect and there’s an anticipation of joke/punchline at play now, you even feel a little satisfaction for guessing how the meme will play out:
And then you start spreading them yourself, you become a host for the meme “virus”, etc.
I guess nowadays everyone is expert in memetics, so I’m stating something blatant.
Let’s move onto narratives.
Narratives
I will keep this centered on the crypto space.
Cobie wrote a great substack some time ago about narratives, he called them meta, and called chasing the right narratives - to make profit - chasing the meta-game.
What’s a narrative? And how it plays with prices of crypto currencies we trade?
Let’s define a narrative as a memetic concept, hammered and spread through the internet - twitter, reddit, youtube - that is supposed to work as a catalyst for bullish price action, that is pumping the price of a (basket of) crypto asset(s).
It is important to write memetic here, because if a single influencer, no matter how powerful, makes a tweet and that’s it, even if it gets thousands of likes, a narrative it does not make.
If Su Zhu’s “Supercycle” didn’t become a meme, both through his own repetition of the concept in his tweets, by the spread done by the followers, and even - and importantly! - by the mocking done by the disbelievers, if wouldn’t have gained “narrative” status.
Similarly, even a guy with the influence of Cobie couldn’t build the “buy Ethereum ahead of the merge” narrative alone, no matter his role of co-founder of Lido and his huge following. Narratives need to become a collective phenomenon, believed by many and spread enough to reach new ears - and new wallets! - to lure into the game.
In 2021, a narrative of “Ethereum killers” blockchains emerged. Those who spotted it early, and bet heavy on Solana Avax and Luna, made insane gains. But how the narrative was formed, and how it spread? A narrative, much like memes, need some elements for people to recognise themselves in it, and thus adopt the concepts as their own ideas. In the case of ethereum killers, many participants felt that:
Ethereum transactions (gas) were becoming expensive
Transaction times were getting long for players with low gas
Ethereum price itself was getting expensive for new players to own “1 full ethereum”
So, it was easy to push a narrative based around cheap and fast tx, and playing on naive but psychologically important factors like being able to buy “full coins”. Owning 50 Avax or 30 SOL can make you feel richer than owning 0.79 ETH, as a new and small player in the game.
Now, the narrative wasn’t entirely “organic”, there was some push by big influencers heavily invested in the presale, and some embarassing attempts at promoting dubious subnarratives (anyone remembers Solana Summer and sunglasses? LOL), but overall the success was due to the spread among all the little fishes who made it their own by marrying the thesis.
But there is also another factor to narratives: much like self-fulfilling prophecies, if they work, they get stronger. It is a recurring meme in Crypto Twitter that when prices pump, we joke that “fundamentals got better”. It is not entirely a joke.
With the words of George Soros:
Fundamental analysis seeks to establish how underlying values are reflected in stock prices, whereas the theory of reflexivity shows how stock prices can influence underlying values. One provides a static picture, the other a dynamic one.
What’s next
We are still in bear market. Summer brought a much needed relief rally to participants who have been hit hard so far - and many left already, but we are still in bear market. We do not know yet when we will be out, and past the Ethereum merge, now scheduled for September, not many narratives are still emerging past that.
One thing that occurred is that the huge Luna fiasco and consequent defaults and mess that 3AC and CeFi platforms left behind, attracted a lot of attentions from regulators. It may have happened anyway, but I feel it accelerated things.
So regulators started hammering harder on crypto, and it’s very fresh news that there is for example a very hard crackdown against Tornado Cash in progress - note: it appears that today the lead dev has been arrested in Amsterdam.
So while on one hand one could see a narrative about privacy and anonimity services in crypto emerging, I believe the opposite can also manifest:
the offer of services who have nothing to fear compliance wise and are robust in regard to KYC/AML could prove to be some future winners, from participants who value the safety of their funds from confiscation higher than their privacy and freedom.
We’ll see.