Chainfeeds Briefing:
The best investment returns often come from several key points: first, early identification of narrative buds; second, planning capital rotation paths before others have laid out their strategies; third, timely exit at the peak of market expectations; and finally, securing profits.
Article Source:
https://www.ignasdefi.com/p/scoring-crypto-narratives-my-formula
Article Author:
Ignas | DeFi Research
Perspective:
Ignas | DeFi Research: The Bitcoin Ordinals project is a typical case. The chart clearly shows four speculative wave rhythms: In December 2022, the theory was first proposed with limited on-chain activity; in March 2023, the emergence of the BRC-20 standard triggered the first wave, followed by a decline in activity for half a year; from late 2023 to early 2024, continuous product iterations ignited the second and third waves; in April 2024, the launch of Runes briefly sparked the market but quickly dissipated. Ordinals provided multiple opportunities for entry and exit, while Runes offered only an extremely short window. The current market has been silent for a year. Will Ordinals (including Runes), Non-Fungible Tokens, or other new narratives make a comeback? Perhaps, but this will depend on the "narrative scoring formula" I have constructed. I am trying to use a formula to identify potential new narratives and determine if they have a second, more sustainable speculative opportunity. This formula is still iterating, but the V1 version is as follows: Narrative Score = [(1.5 × Innovation × Simplicity) + (1.5 × Community × Simplicity) + (Liquidity × Token Economics) + Incentive Mechanism] × Market Environment Coefficient. Although this formula is not elegant, it already reflects the importance and weight of various variables. For example, innovation and community are given 1.5 times weighting because they are crucial to igniting a narrative. Simplicity determines the spread speed, liquidity determines the smoothness of exit channels, token economic models determine selling pressure, and incentive mechanisms are key to initial liquidity ignition. Of course, all this is multiplied by the current market environment, with bull market narratives potentially flying higher, while new narratives launched in bear markets often struggle to gain momentum. Innovation is the primary driver of the entire narrative scoring. What truly ignites the market is zero-to-one innovation, which can appear in entirely new fields (such as DeFi, Non-Fungible Tokens, RWA), innovative token economic models (like veToken), or even new token issuance methods (like Pump.fun's fair distribution). These unique changes often trigger new tracks in the crypto field. Although early identification of such innovations is not easy, as people are often influenced by inherent biases - for example, Ordinals were initially viewed as noise - maintaining an open mind and trying every emerging and potentially controversial trend is key to early entry. In the current cycle, the emergence of AI has brought many external innovations, such as Kaito's InfoFi and AI Agent applications. Whether these innovations can trigger the next narrative wave depends on their originality and industry-changing potential.
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