Original author -Arthur Hayes

Compiled - Odaily Nan Zhi

We rely on others to judge the quality of a narrative

We are all speculators. Every moment of our existence in this universe is filled with uncertainty. The brain is constantly constructing probability maps of our environment as we attempt to navigate an unpredictable existence. Our actions are not based on facts but on probabilistic predictions of various outcomes.

A simple example is the risk of triggering an avalanche while skiing. The optimal slope for skiing is between 35° and 40°, which is also ideal for avalanches. Before starting to ski, my guide will assess the probability of a possible avalanche, based on snow conditions, weather conditions, and observations from other guides who have recently skied the same area. If the risk is too high, we don’t ski.

A more common example is taking the elevator versus taking the stairs. The former is faster than the latter. However, elevators are mechanical devices that sometimes malfunction, and malfunctions can result in serious injury or death. You can calculate expected value (probability*outcome), estimate the likelihood of injury or death, and the time and energy saved by taking the elevator 30 floors up.

You are gambling with your life every moment. Thats not a bad thing; its just the nature of humanitys inability to predict the future perfectly.What a terrifying existence it would be if we knew exactly how the future was going to play out. I prefer our imperfections.

Your self-interpretation of certain actions shapes your perception of the risks they pose. I will call it narrative. For social creatures like humans, narratives are created primarily through the “wisdom of the crowd.” For better or worse, the most powerful stories are the ones that everyone believes.

This narrative is also constructed from objective facts. Facts are, in most cases, discrete events that point to the riskiness of certain actions. It is a fact that avalanches are more common on slopes of 40°. It is also true that people have been injured or killed while riding in elevators.

Everyday conversations and objective facts combine to make up the narrative. Although the facts are important, it is very difficult for individual humans to know the exact number of fatalities out of the total number of rides on an elevator. Likewise, it is a challenge to know the number of skiers killed by avalanches on a 40° slope compared to the total number of skis performed on similar slopes.In situations where we are unable to determine exact actuarial data, we rely on others.

In the above-mentioned incident, the actual operation process is as follows:

avalanche

My guide was experienced and had extensive training on how to determine which slopes were prone to avalanches, and he believed this particular route was safe.Safety doesnt mean avalanches wont happen; safety means the likelihood of avalanches is acceptably low.So, because of my trust in his training system, which has been refined over time with the experience of thousands of mountain guides, I will follow him down this slope.

elevator

I know that taking the elevator is more dangerous than taking the stairs. But everyone else was taking the elevator.If everyone else is taking the elevator, then it must be safe. Everyone cant be wrong at the same time.Additionally, there are building regulations that were created using the experience of trained engineers, and the elevator is certified as safe. So, trusting the expertise of engineers I had never met and the wisdom of the crowd, I felt safe riding the elevator.

The way we assign probabilities does not depend on facts or technology, but on our perception of the facts and how good the technology is. These perceptions are based on what others say, and we assume they know more than we do due to training and experience, that they are telling the truth or that they are speaking of good technique.

crypto world

To relate this to cryptocurrencies, consider the following scenario. Suppose a new project claims to solve a problem using novel technology. The problem they claim to solve is well known, and the tokens of other projects trying to solve it are highly regarded. You trust the engineers on the project to be smart and talented enough to solve the problem. You believe this because other engineers who have successfully launched cryptocurrency projects are advising them. You also have confidence in the team because they graduated from reputable technology-focused universities and have experience working at successful technology companies. Because the narrative is strong (story + technology), you invest. But dig deeper into your thought process,Which is more important: story or technology?

The answer is story

Story is more important than technology. Your perceived probability of success is based on other peoples perceptions of the problem and other peoples perceptions of the teams technical capabilities. Your ability to evaluate technology from a fundamental level is a small probability event. This is why you trust others to understand the situation better than you to judge whether the technology has a good chance of solving the problem.

While your technical skills are usually not enough to properly evaluate a project, you can easily understand whether a story is good or not.A good story is one that more and more people tell each other. Of course it would be better if the story is conveyed in a positive way. For example, In this round of the market, all retail investors will move from CEX to DEX. But even if the story spreads in a negative way: It is impossible for retail investors to leave CEX and switch to DEX., the trading volume will move from centralized exchanges to The story of the migration of centralized exchanges is still spreading.

I dont care if people believe the story, I just want them to tell the positive or negative variables in it. Because in this round, you can make more money by holding long-term than shorting, optimism will trump pessimism. Its just the way the human brain works.

What is my job?

Although my official title is Chief Investment Officer of Maelstrom, I should change it toChief Narrative Officer. I tell stories. The better and more concise the story, the faster it will spread. The more viral a story is, the more the tokens adjacent to that story will appreciate.

Technology doesnt matter!

Maelstroms finance professionals are graduates of the Wharton School of Business. While we understand the potential applications of Crypto and blockchain technology, we are not cryptographers, distributed network experts, or have deep technical knowledge of computer science. When we do transactions, we outsource technical due diligence to others who possess those skills.

Others may be VCs at the top of a list of early investors, or may be well-respected technical advisors to the project. Without these validators, we might as well be satisfied with the technology because the founders have already launched successful projects.

Our job is to determine which project has the best chance of success in a vertical story. Success depends on macro and micro stories that are widely communicated. You make the most money on tokens where a story goes from being thought of as never to could happen.

I would rather invest in a token with an expected probability of success of 0.01% and a story that is in the viral growth stage, and are unwilling to invest in a token with an expected probability of success of 50% and whose story has entered the common sense stage. If the probability of success rises from 0.01% to just 1% because the story quickly infects the perception of many people, then the investment will increase 100 times.

The macro story tells an observed trend and how this project will capitalize on it. Its more of a story than a trend, as were extrapolating a small movement into a more uncertain future. For example, there is a macro story “Retail derivatives trading is moving from CEX to DEX” and BitPerp is building a Perp DEX. BitPerp’s token will rise because its macro story is currently unknown but has the ability to go viral.

The micro story tells why this particular project will be one of the best in the competition within a specific macro story. Examples of micro stories are BitPerp was advised by Arthur Hayes, who helped invent Perp trading. When others hear that Arthur is involved, they will assume that the project will get some cool advice to help them beat the competition. project.

I rarely write in-depth micro stories about specific coins outside of Bitcoin and Ethereum. However, its bull market time. I’ve laid the foundation of the significant forces driving crypto adoption, it’s time to market my assets.

result

Do the results, that is, transaction volume growth, TVL, number of unique addresses, etc., really matter? Yes, they are important,But their importance to the token price depends on which stage of the hype life cycle you invest in.

When investing in a story/trend that you think will happen from never to could, the appeal of the project is less important. The market is not expecting much as the market believes that this coin is associated with a trend that is unlikely to grow in the future. therefore,Even mediocre results are touted as groundbreaking because expectations are so low.

When investing in a story/trend that you think will happen from maybe to definitely, the importance of the projects traction is high. Market expectations are high because they believe in a bright future. Results that were considered surprising at the previous stage are considered mediocre at this stage. Amazing results are not enough; at this stage, a project must be truly revolutionary to meet expectations.

Shitcoin time is up

The purpose of this article is to present to the reader the conceptual framework that guides Maelstrom. Over the next few months, most of the articles I write will beFocus on specific tokens we hold and their macro and micro stories. These tokens have already launched or are about to launch, so Im working on getting this story out more widely. I dont care if you buy or sell any of the coins I talk about. What I care about is that I present a story and supporting arguments that are so compelling that you will discuss it with others in a positive or negative way.

When I read what I wrote on social media, I know Ive succeeded.

Here’s a rough idea of ​​the macro and micro stories I plan to tell in the coming months.

• Retail investors turn to DEX: dYdX, GMX, and possibly other competitors;

• Interest rate swap demand triggered by ETH pledge: Pendle;

• Shitcoin dual currency derivatives: Krav;

• DEX chain liquidity is provided by middleware and market-making: Elixir;

• Settlement and clearing price on-chain oracle: Flare;

• Stablecoin with non-fiat currency reserves: Ethena;

• Bridgeless cross-chain: Axelar.

reward

Right now, energy and attention is focused on the staggering volume of purchases of U.S.-listed spot Bitcoin ETFs. Coupled with the global fiat currency devaluation carnival,This will push Bitcoin to unimaginable heights in terms of fiat currency value. The upcoming ETH ETF will also push up the price of ETH. I already hold BTC and ETH, I may buy a little more, but overall, my attention is turning to Shitcoin.

Can I buy a coin that performs better than BTC and ETH? This is Maelstroms lowest return. We do this by learning as much as possible about certain projects and telling amazing stories.