The primary way of valuing crypto assets is attention.

     We create frameworks to understand how to price things fairly. We use cash flow for stocks, revenue for ETH, and CAPM for investments. In crypto, there is little consensus on what fundamentals matter - ETH maxis are bullish on Ethereum's High revenue and Deflationary nature (as a result of extremely high fees); SOL maxis are bullish on Solana’s low fees and high TPS (resulting in a price/revenue ratio of 690x). Whether these metrics have any inherent value is irrelevant - Human psychology tells us we always need a rational/social reason to make a decision - frameworks provide us with that.

     Narratives are constantly changing. No one who bought Arbitrum for its revenues will sell it after EIP4844 when ARB lowers fees, they will simply adjust their narrative. Similarly, the Narrative for Bitcoin changed constantly throughout the years. As alternative technologies emerged as faster and cheaper modes of payment the narrative shifted towards digital gold.

     A project is its narrative: Trading markets are trading how humans price things. People price things based on the information they have - and since we require our counterparties to buy our coin to make the price go up - what is irrelevant to our counterparty is irrelevant to us. Alpha hidden deep in a 35-page whitepaper will largely be ignored by the market, the majority of market participants trade simply on narratives, which becomes the only information relevant to us as well.

     Therefore, the best narratives are often the simplest, are easy to understand, and are agreed on by everyone since they are the easiest to understand and therefore get the most attention i.e. ETH killer narrative, Bonk is the Doge of Solana. The narrative doesn't even have to be true (i.e., Cardano will bank the unbanked in Africa).

     Investors choose the L1 they think will make them the most money. Centralization and TPS are afterthoughts, and transaction costs of $100 on ETH vs pennies on Solana don’t matter when aping into coins which will 10x. Narratives, Incentives, and Protocols building on the L1 ultimately determine which chains are used and get attention. One step further we realize that on-chain activity and growth (Often thought of as fundamentals) follow price, not vice versa. Developers are just as opportunistic as investors and choose the chain with the most economic incentives. Price is the only fundamental.

     We invest in Ideas/Beliefs not tokens. For example, we buy $CRV because we think that institutions using DEFI will trade on Curve. However - for the price to go up this belief doesn’t need to be actualized, we just need more people to believe it.

1. A Left curver believes $CRV will be used by institutions and buys the token,

2. A Mid curver knows institutions will never use Curve and doesn’t buy

3. A Right curver knows institutions will never use Curve, but knows people will speculate and believe the narrative that $CRV will be used by institutions - so he buys the token

     Memecoins are essentially valued the same way as Normal coins - Narratives and attention. The “fundamental” investor buys MKR because of its buyback and burns program and the price goes up 100%. The “meme coin” investor who bought Doge after Elon Musk tweeted and it pumped 100%. Both investors are in profit for the same reason the buyback of MKR and the tweet from Elon brought attention and gave the tokens a narrative - beyond that nothing matters.

     The lines of what is real and what is not will become increasingly blurred. Investors/Projects realize narratives drive price, and create attractive narratives with nothing to show I.e AI projects which will revolutionize healthcare. Prices will go up because a) Uninformed investors believe the narrative and b) Informed investors understand that other people will believe the narrative. Whether the project can deliver or not doesn't matter, let us all believe the lie and we will all make money. The fake AI project is as real as the MKR burn; they both drive up prices and ultimately the market is always right. The question becomes - Is anything real? Everything is backed by human belief, even the United States Dollar is backed by the faith and credit of the US government.

Narratives are the only thing that matters - true or false. Believe in your convictions and allocate capital - but never believe in them with your heart. Your coins are only backed by human belief.