For 2024 crypto I am afraid fundamentals don’t matter

But we can all still benefit from this

This year is rather different. Instead of making a prediction over which tech is going to be superior in the crypto sector this year, I declare that such predictions have become increasingly irrelevant.

That’s why this year I’d rather do no tech predictions.

It is greatly understood that the longer you are in crypto the more ‘accepting’ you become. You are seeing good projects that deserve it, but it doesn’t get any traction. Meanwhile, projects that straight-up grift and scam reach billions of market cap instead.

This belief has been even more strengthened lately with how the market works in the past couple of months. That’s why Ethereum proponents are in disbelief over Solana, or a layer 1 called Sei, which only has $10 million in TVL and has over $1,7B valuation.

This disconnect has been so persistent that it has become a standard pattern, rather than an exception like many of us believed before. It is time to accept crypto the way it is. That there’s no correlation between fundamentals and the price of assets.

Fundamental analysis in crypto is flawed, to begin with

It is built upon the TradFi concept of fundamental analysis, and treating crypto like Tradfi is a mistake.

Fundamental analysis in crypto doesn’t tell the whole story. For example, people like to focus too much on Total Value Locked (TVL) but the discrepancy between it and valuation resulted in a common saying that ‘TVL is a meme.’

Other things people like to talk about are our revenue, product-market fit, and earning-to-ratio.

Recently, a TradFi VC mocked Solana on Twitter for not having revenue or product market fit. People are quick to point out that a smart contract chain or a decentralized network, doesn’t need to behave like a startup. I don't think I emphasize this enough. Layer 1 = startup equation simply doesn’t make sense. Revenue, for example, doesn’t go to company coffers, it is distributed among stakers and even holders with mechanisms like burning.

Fundamentals don’t matter, but products still greatly are

This is why, if I have to predict what 2024 is about, when it comes to real use, lovable projects will win.

What constitutes a lovable project?

• it has exciting incentives. In line with speculation, projects with constant opportunity to make a profit will thrive. This is why Layer 1 remains the best investment going forward. It’s where people go to speculate and find new opportunities. It’s the umbrella investment that’s a wise and safer choice for many people. Going into individual projects, even more memecoins, are way riskier. It’s best to stay in the native tokens that facilitate them all.
• it’s affordable to use. Hence people will always look for cheaper alternatives. Most active people who are in crypto are regular retail who wish to turn their under 5-figure capital into 7 figures or more. These demographics make up a large percentage of users. They don’t want to lose a huge chunk of it paying gas fees and their on-chain activity being throttled by slowness on non-performant blockchains.
• it can sustain the narrative, something only a few projects can achieve. Not only that a project need community, but it also needs a very passionate one. To achieve constant relevance, the project should always be attractive, despite the ups and downs of the market. Even during the slump period, this project is on the back of everyone’s mind as something that will pump again later.

Since fundamentals don’t matter and it’s all meme, the best focus on 2024 is actually finding great products based on these lovable features instead of traditional fundamental metrics.

It will be features first and fundamental later. Even, in some cases, pumpability first. Personally, I’d even resort to whether the project sounds fun or not (A list is coming up, follow me for updates).

How can you benefit from this ‘fundamental don’t matter” paradigm?

• Accepting the speculation.

Speculation is still the main use case. As 2023 has shown us, the best use case for crypto remains in its speculative activities. The bear market has not changed anything, and the new bull sentiment only exacerbated all the speculative behaviors. The sooner you, not only accept it but also enjoy it, even as an intrigued observer, the greater your chance to understand how the crypto market works and even make a profit from it.

Speculation is not a bad thing. It stress-tests the protocols’ tech, it strengthens users (becoming better at spotting scams and frauds), and it allows the wildest of experimentations on what we can do with blockchain technology. Speculation basically is a form of rapid iteration in crypto.

• fundamentals analysis is a noise. Don’t do it more than necessary.
• the better question when assessing a project or a narrative is: will people (especially speculators) be attracted to this?
• Popular projects are popular for a reason. Your focus is to find out whether their popularity sustains well.
• Know your position among other market participants. When it comes to investing, crypto is still very much a zero-sum game. What you want to avoid is becoming exit liquidity. You have to know too, with every narrative, who’s behind it, who benefits the most? Is it organic or is it influencer/VCs driven?
• Focus and what you like and what you know. Develop your niche and edge in the market. There are some crypto sub-sectors you would never figure out (for me it’s memecoins and NFTs), and the best way to avoid getting rekt is simply to avert your focus from that.

One last note. If the recent market action persists, such as bitcoin keeps hitting another high like recently, your job becomes easier in general. You don’t have to do much because everything goes up eventually.

As long as you manage to our expectations and don’t FOMO nor be jealous of others whose assets are outperforming, you’ll likely enjoy profits. The best strategy is to manage yourself first more than anything.

Also, what we can best hope for in 2024 is volatility. For as long as the market is active and liquid with constant exciting movements in both directions, it provides multiple opportunities (entries) that we all can benefit from. However, with that, the more ‘fundamentals’ become irrelevant.