Weekly update on development process (Aug 01, 2022)

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Weekly progress

• 🧠 Wrote the first chapter of the narrative analysis guide (work-in-progress).
• 🧠 Designed a filter for market news.
• 🤝 Advised another project.

How to read the news

We’re continuing our research on narrative analysis. This time, we’re discussing how to filter the news to extract strong narratives.

First, let’s talk about the news sources that we should select. There are two categories:

• Official sources (government press releases, company accounts on social media)
• Unofficial sources (“independent” press, cartoon avatars on Twitter)

Official sources are the first to publish the good news, while the unofficial sources are the first to publish the bad news. For example:

• Rewards programs are first published on the official sources.
• Huge withdrawals from the protocol are first published on the unofficial sources.

Also, sometimes the unofficial sources spread the rumors about the good news before they are published on the official sources.

Therefore, we should follow both kinds of sources.

Second, let’s talk about the news themselves. Most news is useless because they contain expected information — for example, plane crashes or celebrity clashes. We can’t use this information because other people already have it, too — they know that planes crash & celebrities clash. What we’re actually looking for is an unexpected start of continuous change of supply. Here’s the explanation:

• The news must be unexpected — otherwise it will be priced in. It’s OK if a small group of insiders expected it, but there must be a large group of market participants who didn’t expect it.
• The news must be about the start of a continuous process — otherwise it will become a one-shot event. The market participants must expect a continuation, so that they could continue spreading the same narrative in future. They must be able to say to their followers: “You are early, this trend still has room to grow”.
• The news must be about the change of supply — otherwise it can’t influence the price, because the price is a ratio of two supplies (e.g. how many USD for 1 BTC). If the narrative is not backed by the change of supply, it will have a lower probability of spreading.

In other words, we’re looking for epic news — those that definitely influence the price & continuously spread in the population of traders. Such news are rare, but they are frequent enough to make a fortune.

Let’s analyze today’s news. We’ll use the CryptoPanic feed on 2022–08–01. We show that 90%+ of news don’t contain information about the change of supply:

1. “Bitcoin and Ethereum Consolidate Gains, FIL Rallies” — no change of supply, doesn’t matter
2. “Blockchain security firm warns of new MetaMask phishing campaign” — no change of supply, doesn’t matter
3. “Aave DAO Community Responds to GHO Stablecoin Proposal” — semi-unexpected change of supply (introduction of GHO borrow mechanics), does matter. It’s “semi-unexpected” because the community members already knew about it, but it’s a minority compared to target audience of the new stablecoin. Consequence: increase in staked AAVE supply => decrease in ordered AAVE supply.
4. “Bitcoin Monthly Close — Was It Good or Bad? [Crypto Analysis]” — no change of supply, doesn’t matter
5. “Blockchain Will Coordinate Airspace so Delivery Drones Don’t Crash” — no change of supply, doesn’t matter
6. “Ethereum, BNB Chain, or Tron — What do the latest TVL figures tell us” — change of supply (because TVL is supply), matters, but not immediately (the TVL changed smoothly, not abruptly, so it’s likely already priced in)
7. “TA: Bitcoin Price Struggles Below $25K, Signs of Double Top Emerges” — no change of supply, doesn’t matter. This should be clarified: on one hand, a double top technical pattern is a valid narrative, so some people will sell, but it doesn’t have long-lasting consequences (won’t trigger a long-term downtrend) because the scale of this pattern is too small.
8. “Tiffany & Co turning CryptoPunk NFTs into $50K custom pendants” — change of supply (new asset), minor decrease of ordered USD / ETH, but no long-lasting effect.
9. “Apple iPhone maker’s founder distances himself from crypto fraudsters using his image” — no change of supply, doesn’t matter.
10. “S.Korea Busan Bank employee allegedly embezzles US$1.1 mln to invest in Bitcoin” — no change of supply, doesn’t matter.
11. “Bitcoin, Ethereum hold steady over weekend, record monthly gains” — no change of supply, doesn’t matter.
12. “Tether calls thesis behind USDT short-selling ‘flat out wrong’” — no change of supply, doesn’t matter.
13. “Argentinian Soccer Club Uses Crypto To Sign Local Player” — no change of supply, doesn’t matter. Yes, this may encourage other clubs to use crypto to sign up other players, but this is a smooth change, so can’t become a major narrative & can’t be played.
14. “Bitcoin Mining Isn’t Wasteful — It Creates Abundance” — personal opinion, doesn’t matter.
15. “Lime, Salesforce do not have partnerships with Helium: Mashable, The Verge” — no change of supply, doesn’t matter.
16. “Bitcoin [BTC]: These factors might initiate a reverse exodus for struggling miners” — prediction, doesn’t matter.
17. “#Bitcoin Still Holding Strong Even in this Pull Back — LIVE from Financial Summit DR” — no change of supply, doesn’t matter.
18. “Ether derivatives trading is surging as large hedge funds speculate on merge” — change of ordered supply of USD & Ether derivatives. It’s a new instance of “The Merge” narrative, so it matters, but the narrative is already active.
19. “Bitcoin Heads for Bullish Monthly Close” — no change of supply, doesn’t matter.
20. “Dragonfly Capital leads $3.5 million seed round for Debt DAO” — minor change of supply from one company to another, doesn’t matter.
21. Ripple Sold $409M Worth of XRP in the Second Quarter — report of steady non-zero ordered supply of XRP, increases the probability of similar supply in future. Ripple has been selling XRP for a long time.
22. “Fidelity Macro Expert Says Bitcoin (BTC) and Ethereum (ETH) Now ‘Impenetrable’ Markets — Here’s What It Means” — opinion, doesn’t matter.
23. “The worst places to keep your crypto wallet seed phrase” — security guide, doesn’t influence the prices.
24. “The Economy Is In BIG Trouble: Darius Dale” — personal opinion, doesn’t matter.
25. “Bitcoin [BTC]: Will H2 2022 finally bring some good news for investors” — prediction, doesn’t matter.
26. “Crypto Hedge Fund Veteran Mark Yusko Predicts Bitcoin ‘Spring’ Kicks Off BTC Move — Here’s His Timeline” — prediction, doesn’t matter.
27. “Pro traders may use this ‘risk averse’ Ethereum options strategy to play the Merge” — derivatives guide, most likely doesn’t influence the price, but could be interesting.
28. “Tiffany & Co. announces NFT-backed, limited edition CryptoPunk pendants” — duplicate
29. “Tiffany’s Reveals First NFTs — at $51,000 Each” — duplicate
30. “Crypto Credit Isn’t Dead” — no change of supply, doesn’t matter.
31. “Memecoin Battle: Shiba Inu’s Monthly Gains Stand at 18% While Dogecoin Sees Only 2% Profits” — no change of supply, doesn’t matter.
32. “Cardano’s Vasil Hard Fork Delayed for Several More Weeks As ADA Sees Green Week” — no change of supply, doesn’t matter.
33. “Up by 398%, here’s what’s next for Lido DAO on the charts” — a new instance of “Buy LDO” narrative, matters, need more investigation (whether it’s the first reactivation of a dormant narrative or just a confirmation of already active narrative)
34. “Top 5 cryptocurrencies to watch this week: BTC, BNB, UNI, FIL, THETA” — may contain new information about upcoming events, but “this week” is too close, most likely those events are already priced in.
35. “Cardano Outpacing Crypto Majors As ADA Reigns As The Most Developed Cryptocurrency” — opinion, doesn’t matter.
36. “Raoul Pal: Hedge Funds, Family Offices, Institutions, Retail All ‘Underweight’ Crypto” — opinion, doesn’t matter.
37. “Most Institutional Investment in Crypto Is Still Late in 2022 (Opinion)” — opinion, doesn’t matter.
38. “UFC Heavyweight Champ Francis Ngannou Reportedly Making a Killing on NFTs” — no change of supply, doesn’t matter.
39. “How Will Bitcoin Be Impacted by a Recession? | Lyn Alden | Alessio Rastani” — opinion, doesn’t matter.
40. “Axie Infinity CEO Denies Rumors of Moving Millions of Dollars in AXS During Massive $600,000,000 Ronin Attack” — may contain new information, may matter.
41. “Shiba Inu Breaks Downtrend Line — Is A Trend Reversal Imminent?” — technical narrative, doesn’t matter much (too local).
42. “Major Brands Such as Budweiser Are Increasingly Turning to NFT Technology” — no change of supply, doesn’t matter.
43. “#1067 AJ Agrawal On Building & Selling An 8 Figure CBD Business” — personal story, doesn’t matter.
44. “Here’s How Ethereum (ETH) Economics Will Be Affected by Merge: Report” — no change of supply, just an opinion. Also, the post-merge economics have already been extensively discussed, so it doesn’t matter.
45. “Meta’s Reality Labs Takes a Hit, But Investors Still Bullish” — new information, matters, needs more research (what exactly is a “hit”).
46. “This Week on Crypto Twitter: Wikipedia Accused of Playing Politics, Coinbase-Bored Ape Collab Widely Jeered” — no change of supply, doesn’t matter.
47. “Dogecoin (DOGE) Will Lose All Its Value, Finder’s Survey Shows” — opinion, doesn’t matter.
48. “Robert Greene on Power, Seduction, War, and Human Nature” — opinion, doesn’t matter.
49. “Ethereum Mining Firm Launches ETC Mining Software; Weekly ETC Price Surges 54%” — market review, doesn’t matter (but the overall “buy ETC because it keeps POW” narrative is still active)
50. “Binance CEO Changpeng Zhao Highlights Need for Market Reset, Says Crypto Should Only Attract Believers” — opinion, doesn’t matter.
51. “Shiba Inu Burn Rate Spikes 130%” — major change of supply, matters.
52. “SushiSwap and what ‘over $130M added in July’ means for SUSHI” — new information, may matter.
53. “Blockchain Games Least Affected by Market Turmoil: DappRadar Report” — new information, may matter.
54. “6 Questions for Kim Hamilton Duffy of Centre” — interview, doesn’t matter.
55. “XRP & Cardano (ADA) Need This To Hold On to Conquered Places in Market Cap Top” — opinion, doesn’t matter.
56. “Vitalik Buterin Says Facebook’s Metaverse Attempt Will Misfire” — opinion, doesn’t matter.
57. “Zilliqa (ZIL) Founder Explains Why Ethereum (ETH) Is Better Than Other L1s” — opinion, doesn’t matter.
58. “How Bitcoin Reprograms the Mind with Dan Weintraub” — opinion, doesn’t matter.
59. “Ethereum Passes Important Resistance Level: What’s Next?” — market review, doesn’t matter.
60. “Crypto Market Forecast: Week of August 1st 2022” — prediction, doesn’t matter.
61. “Crypto Analyst Predicts Strong Surge for Ethereum, Axie Infinity and One More Low-Cap Altcoin” — prediction, doesn’t matter.
62. “Shiba Inu Burn Rate Spikes 130%” — duplicate (but matters)
63. “Bitcoin due ‘one of greatest bull markets’ as July gains circle 20%” — opinion, doesn’t matter.
64. “Yuga Labs Introduces 5% Royalty on Meebits Sales, Hints at New Future” — new information, matters.
65. “Terra’s Collapse Is a Hard Lesson for Sloppy Crypto VCs and Gullible Retail Investors” — opinion, doesn’t matter.
66. “An expert explains what is — and isn’t — the metaverse” — opinion, doesn’t matter.
67. “Vibed Streaming App: Earn Crypto For Streaming Music” — new information, matters.
68. “Aave DAO votes to approve creation of GHO stablecoin” — duplicate
69. “#1066 Lyn Aden Gives A Masterclass On Current Financial Environment” — duplicate
70. “The Right Side of Crypto Regulation: Institutions Need to Avoid Thucydides’ Trap” — opinion, doesn’t matter.

Results: only 9 of 70 news stories talk about a change of supply. Out of those only 1 is about an unexpected start of continuous change of supply:

1. “Aave DAO Community Responds to GHO Stablecoin Proposal”

The GHO stablecoin proposal contains a discount rate for borrowers who have staked AAVE. Therefore, some people will increase their staked AAVE supply => decrease ordered AAVE supply. This is a continuous change without a specific end date. However, people will only stake AAVE if this way of acquiring GHO will be cheaper than a similar way of acquiring DAI. So, this narrative requires more calculations.

We will continue publishing more information about the narrative analysis & providing examples of specific narratives that move the market.

Next week’s focus

1. 🤝 Advise current projects.
2. 🤝 Publish about narrative analysis.

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