In an era where narrative is king, how can we use scoring models to find the next 100x narrative?

This is not just a formula, but a thinking model that leads the next wave of cryptocurrency.

Written by: Ignas

Translated by: Luffy, Foresight News

You might have spent countless hours trying to capture the next hot narrative in the crypto space. Judging correctly could make you a fortune, while entering too late would make you the bag holder.

In the crypto market, the highest investment returns come from:

1. Identifying narratives early
2. Mapping out capital rotation routes before others
3. Exiting when the expected bubble reaches its peak
4. Locking in profits

Then consider: Will the next wave of narratives arrive? Narratives will cycle, and speculative waves will resurge under the following conditions:

• There is genuine technological innovation behind the narrative, allowing it to rebound after the first wave of hype subsides
• New catalysts emerge
• A dedicated community continues to build after the hype fades

I elaborate on my thoughts in the article below:

https://x.com/DefiIgnas/status/1757029397075230846

Taking Ordinals on Bitcoin as an example, we can clearly see 4 waves of speculation from the following diagram.

1. December 2022: Ordinals theory released, with minimal on-chain activity.
2. March 2023: BRC-20 standard triggered the first wave of activity; cooling down for six months.
3. Late 2023 - Early 2024: Continuous development sparked the second and third waves.
4. April 2024: Runes launched, prices soared, then subsided weeks later.

Ordinals provided months of positioning time and multiple exit opportunities, while Runes offered only a brief single exit window. The field is now completely silent.

Will Ordinals (including Runes), Non-Fungible Tokens, or other new forms make a comeback? Perhaps. It depends on my narrative scoring.

Analysis Framework

This is a framework for identifying hot new narratives and determining whether subsequent speculative waves will be sustained. This is a version still being refined, here is my 1.0 formula:

Narrative Score = [(1.5× Innovation × Simplicity) + (1.5× Community × Simplicity) + (Liquidity × Tokenomics) + Incentive Mechanism] × Market Environment

This formula is not perfect, but it shows which factors are important and their weights. Let's break it down!

Runes Memecoin struggles to compete with Solana or Layer2 Memecoin due to lack of passive liquidity pools. In fact, Runes is more like an NFT traded on Magic Eden: while having decent buy-side liquidity, it lacks sufficient sell-side liquidity for large exits. Low trading volume fails to incentivize first-tier CEX listings.

Non-Fungible Tokens also face liquidity issues. This is why I had high hopes for the ERC404 Non-Fungible Token fragmentation model, which could have provided passive sell-side liquidity and annual yields through trading volume. Unfortunately, it failed.

I believe liquidity is the primary reason why DeFi options have struggled to rise for years.

https://x.com/kristinlow/status/1929851536965873977

During recent market volatility, I wanted to hedge my portfolio with options, but on-chain liquidity was terrible. I had high expectations for the crypto options platform Derive, but its future is now uncertain.

Liquidity is not just about deep order books, continuous new funds, CEX listings, or high total value locked (TVL) in liquidity pools, though these are important. The liquidity formula also includes protocols that achieve exponential growth with increasing liquidity, or projects with built-in liquidity guidance models, such as:

• Hyperliquid: More liquidity means a better trading experience, attracting more users, which in turn brings more liquidity
• Velodrome's ve3.3 DEX: Building liquidity through bribery mechanisms
• Olympus OHM: Protocol-owned liquidity
• Virtuals DEX: Pairing new AI agent releases with VIRTUAL tokens

Tokenomics

Tokenomics is equally important as liquidity. Poor tokenomics can lead to selling. Even with deep liquidity, continuous selling pressure from unlocks poses a huge risk.

Excellent cases: High circulation, no large VC/team allocations, clear unlock plans, burn mechanisms (like HYPE, well-designed fair launch).

Poor cases: Malignant inflation, massive cliff-like unlocks, no revenue (like some Layer2 projects).

A narrative with 10/10 innovation but 2/10 tokenomics is a ticking time bomb.

Incentive Mechanisms

Incentive mechanisms can make or break a protocol, or even an entire narrative.

The reStaking narrative depends on Eigenlayer's performance, but token issuance failure (possibly due to complex narrative or weak community) has stalled its progress.

Assessing liquidity in the early stages of a narrative is challenging, but innovative incentive mechanisms can help build liquidity.

I'm particularly interested in new token issuance models. If you've read my previous articles, you'll understand what I mean: when tokens are issued innovatively, the market often undergoes a transformation.

• BTC hard fork → Bitcoin Cash, Bitcoin Gold
• ETH → Ethereum Classic
• Initial Token Offering (ICO)
• Liquidity mining, fair launch, low circulation high fully diluted valuation (FDV, suitable for airdrops but unfavorable for secondary markets)
• Points narrative
• Pump.fun
• Private - public sale on Echo/Legion

Token issuance and incentive mechanisms evolve with market changes. When an incentive model is overused and its patterns are widely known by the market, it means the market has entered a saturation and hype peak.

The latest trend is crypto treasuries. Public companies buying cryptocurrencies (BTC, ETH, SOL) have stock valuations exceeding the value of their crypto holdings.

What's the incentive mechanism here? Understanding this is crucial to avoid being the bag holder.

Market Environment

The best narratives launched during brutal bear markets or macro risk events (like early tariff wars) can be drowned out. Conversely, in a liquidity-loose bull market, even ordinary narratives can soar.

Market environment determines the following multipliers:

• 0.1 = Brutal bear market
• 0.5 = Volatile market
• 1.0 = Bull market
• 2.0+ = Parabolic frenzy

Case: Runes (April 2024) had innovation, community, initial liquidity, and some incentive mechanisms, but its launch coincided with a significant market pullback after Bitcoin halving hype subsided (market environment multiplier ~0.3). Result: Mediocre performance. If launched 3 months earlier, it might have performed better.

How to Use the Formula

Score each factor from 1-10:

• Innovation: Is it a breakthrough from 0 to 1? (Ordinals: 9, Memecoin: 1-3)
• Community: True believers or speculators? (Hyperliquid: 8, VC-dominated projects: 3)
• Liquidity: Market depth? (Quick first-tier CEX listing: 9, Runes trading like NFTs: 2)
• Incentive Mechanisms: Attractive and sustainable? (Hyperliquid airdrop: 8, No incentives: 1)
• Simplicity: Can it become a meme? ($WIF: 10, zkEVM: 3)
• Tokenomics: Sustainable? (BTC: 10, 90% pre-mine: 2)
• Market Environment: Bull market (2.0), Bear market (0.1), Neutral (0.5-1)

Scoring is subjective. I gave Runes an innovation score of 9, but you might give 5. This formula is just a suggestion of factors to consider.

Using Runes as an example:

Innovation = 9, Community = 7, Liquidity = 3, Incentive Mechanisms = 3, Simplicity = 5, Tokenomics = 5, Current Market Environment = 0.5

Plugging into the formula:

• 1.5× Innovation × Simplicity = 1.5×9×5 = 67.5
• 1.5× Community × Simplicity = 1.5×7×5 = 52.5
• Liquidity × Tokenomics = 3×5 = 15
• Incentive Mechanisms = 3

Subtotal = 67.5 + 52.5 + 15 + 3 = 138

Multiplied by market environment (0.5):

Runes Narrative Score = 138×0.5 = 69

In comparison, Memecoin scores higher in my subjective assessment (116 points):

• Innovation = 3 (due to Pump.fun's innovative issuance model, not completely zero)
• Community = 9
• Liquidity = 9 (integrated into AMM, high trading volume = high LP rewards, CEX listing)
• Incentive Mechanisms = 7
• Simplicity = 10
• Tokenomics = 5 (100% circulation upon issuance, no VC, but small group risks/sniping, no revenue sharing)
• Market Environment = 0.5

Summary

• Scan narratives early: Use tools like Kaito, Dexuai, focus on innovation and catalysts
• Score strictly: Assess honestly. Poor tokenomics? In a bear market? Lack of incentives? Market environment changes, native innovations in new areas might revive narratives (like Runes' AMM DEX)
• Exit before incentive mechanisms decay: Sell at token release peak or airdrop landing
• Respect trends: Don't fight macro trends. Hoard cash in bear markets, deploy funds in bull markets
• Keep an open mind: Try protocols, buy hot tokens, participate in community discussions... Learn through practice

This is just my 1.0 formula, which I will continue to refine.