Narrative-based Crypto Investing using Banter Bubbles

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16 Mar 2024

Narrative Pumps & Dumps identified on Banter Bubbles

Abstract

Identifying high return and low risks crypto investment strategies is difficult, and just like trading strategies on the stock markets, always changing. After 5 years spent in the industry, I believe there is a rotation of capital on a weekly basis, and in some cases daily basis across different narratives and ecosystems. I never attempted to design a strategy to take advantage of this assumption because I didn’t have the right tools to make my analysis easily. However, Banter Bubbles recently added categories for narratives and ecosystems which vastly simplify my analysis. Over the next several weeks to months, I will attempt to design a winning strategy to increase my returns as compared to simply buying crypto assets and holding.
These strategies are highly risky and could lead to a complete loss of capital. As well, I will readjust my strategy along the way to adapt to market conditions and I will describe such time-sensitive changes on x.com/Crypto_Rookies.

Introduction

The crypto markets are heavily manipulated by large players such as market makers. One strategy often used is to rotate their capital between various ecosystems and narratives so that less organized crypto traders end up chasing the pumps and getting taken advantage of. Identifying the next narrative of the ecosystem that will experience a weekly pump is nearly impossible to achieve as they may be selected at random. However, here I will describe a potential strategy that I am considering to attempt to financially benefit from these short term rotations.
Note that this is an experimental unproven strategy really meant to think outside the box, and back testing could prove that it is simply impossible to achieve decent returns compared to baseline. Therefore, this article is meant as an educational eye opening piece not as financial advice.
You may also refer to my other strategy that I implemented on January 1st, 2024 to also turn $25,000 into $1,000,000 with an aggressive diversified crypto-portfolio which is less likely to be liquidated.

Strategy

If there is indeed a rotation of capital by large capital holders such as market makers, then can we take advantage of it and front-run the capital rotation? I would argue it would be ill-advised to chase the pumps, and instead we should buy crypto assets that are behaving in strength while their base narrative is significantly undervalued. For example, as you can see on the graph above, this weekend there was a massive pump on Yield Farming of 191% in comparison to Bitcoin (I have set my baseline currency as Bitcoin instead of USD). However, when you look more deeply into this narrative you can see that only a specific crypto asset grew massively TOR. Given that this is a very low market cap crypto currency, I would exclude it from my analysis.
TOR was responsible for most of the 191% ROI of the Yield Farming narrative
The point here is that I believe we can identify tokens that are the strongest when a given narrative is pumping, however we would not attempt to buy it when the narrative benefitted from a pump, we would simply keep track of these strong assets over time, and assess whether or not they crash less than other assets when the narrative is in decline. I believe at that point, it may be the right time to buy these assets when the narrative has significantly decreased preemptively to the next time the narrative will experience extreme growth, at which point it is possible the assets that are in strength within that narrative will outperform the rest. Typically speaking, if a given crypto asset benefits from strong news, it tends to increase the value of other similar assets in that category. For example, we know the gaming & metaverse narratives have been significantly down in the last few weeks/months, however Apple Pro Vision (an anticipated VR headset) is expected to launch on February 2, 2024, which could lead to the gaming and metaverse narrative to experience significant growth, and the specific crypto assets that are in strength within these categories are likely to give the best returns until they become overvalued again, and the narrative get suppressed again.
Regardless of the cause and effect for narrative pump, I believe most narrative will experience cyclical growth period, and if we buy into them while they are undervalued and suppressed, than we can cash in some great gains, and instead of chasing the pumps, we can chase the undervalued narrative that will eventually come back.
Out of the dozen or so narratives, we are likely to miss some narrative pump, but if we remain patient, I believe their time will come.

Conclusion

At this point in time, I’m only starting my analysis and back testing of narrative based investing, I don’t know yet if the returns will be better or not than my other investment strategies. I would be happy to hear from anyone who has attempted to take advantage of such a strategy and what the results were. Too often, I see crypto traders attempting to chase the pump and getting in too late, and it is my opinion that buying underperforming assets is not always the right solution either, as most crypto currencies are doomed to fail in the long run.

About

Crypto Rookies is a crypto investor, serial entrepreneur in Artificial Intelligence and Web3/crypto with expertise in tokenomics and market making. Currently CEO of Smooth, which is a Market Making as a Service infrastructure designed to prevent economic collapse of crypto-currencies.
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Also check out some of the early stage crypto assets that I’m actively using: