How Can Investors Find the Next Trend That Could Ignite the Market?
This article is adapted from Ignas’s piece “Scoring Crypto Narratives: My Formula” and compiled by Foresight News.
(Background: Why is the ‘Digital Gold’ narrative underestimating Bitcoin’s true value?)
(Background Supplement: A 30-Year Strategy Analyst on Wall Street: The Logic of Debt, Currency, and Bitcoin as a Hedge)
You may have spent countless hours trying to capture the next hot narrative in the crypto space. Get it right, and you could make a fortune; get in too late, and you could become a bag holder. In the crypto market, the highest investment returns come from:
- Identifying the narrative early
- Mapping out the capital rotation before others
- Exiting when the anticipated bubble peaks
- Locking in profits
Then ask yourself: Will the next wave of narratives come? Narratives can cycle, and speculative waves may revisit under the following conditions:
- The narrative is supported by genuine technological innovation, allowing it to rebound after the initial hype fades.
- New catalysts emerge.
- After the hype dissipates, a committed community continues to build.
I elaborate on my thoughts in the article below:
Taking Bitcoin’s Ordinals as an example, we can clearly see four waves of speculation in the chart below.
December 2022: Ordinals theory released, with minimal on-chain activity.
March 2023: The BRC-20 standard triggers the first wave of hype; activity cools for six months.
Year-end 2023 to early 2024: Ongoing development sparks the second and third waves of hype.
April 2024: Runes launch, prices soar, and then fade a few weeks later.
Ordinals provided several months of layout time and multiple exit opportunities, while Runes offered only a brief single exit window. Currently, the field is silent. Will Ordinals (including Runes), NFTs, or other new forms come back? Perhaps. It depends on my narrative scoring.
Analytical Framework
This is a framework for identifying hot new narratives and determining whether subsequent speculative waves will persist. I am still refining this version, but here is my 1.0 formula:
Narrative Score = [ (1.5 × Innovation × Simplicity) + (1.5 × Community × Simplicity) + (Liquidity × Tokenomics) + Incentive Mechanism ] × Market Environment
This formula is not perfect, but it illustrates which factors are important and how they are weighted. Let’s break it down!
Innovation
Here, innovation refers to the crypto-native technological innovations I focus on. The most powerful catalysts are innovations that move from 0 to 1. They can appear in new domains (DeFi, NFTs, RWAs, etc.), new tokenomics models (such as veToken), or even new methods of token issuance (fair launches, Pump.fun).
I have previously written that 0 to 1 innovations have a unique ability to change the trajectory of the industry, and their originality can spawn new segments within crypto. Due to cognitive biases, identifying such innovations can be quite challenging. When new things emerge, they may receive little attention (like Ordinals) or even be dismissed as noise. Therefore, maintaining an open mindset and trying every new trend (especially controversial ones) is key to gaining an advantage. Without genuine technological innovation, narratives are merely fleeting speculative bubbles.
This cycle is unique because its innovation (AI) comes from outside. Thanks to AI, we have seen innovations such as Kaito InfoFi and AI agents. Some examples from this cycle include:
- Ordinals
- Restaking
- AI Agents
- InfoFi
- SocialFi
- ERC404
My goal is not to list every case but to build a mental model for identifying them. The degree of innovation can be scored from 0 to 10.
Simplicity and Meme Potential
Not all innovations have equal spreadability. Some are easy to understand, while others are not. Complex narratives (such as zero-knowledge proofs or restaking) spread slowly, while simple or meme-worthy narratives (like WIF) spread rapidly. Can you explain the concept in 5 seconds? Is it catchy?
For example:
- High Simplicity (10/10): AI, Memecoin, XRP as a blockchain bank
- Moderate Simplicity (5/10): SocialFi, DeFi, NFTs, Ordinals
- Low Simplicity (3/10): Zero-knowledge proofs, modular chains, restaking
Complex narratives require time to ferment, and price rises are slower. Additionally, simplicity can drive community growth.
Community
Bitcoin is the greatest innovation from 0 to 1, but without a community, it is just a piece of code. Bitcoin’s value comes from the story we assign to it. People still do not understand why Cardano or XRP performs well despite limited innovation; the reason lies in their loyal communities. Or, to put it more radically: Memecoins.
They lack any technological innovation, but Memecoins have now become a $66 billion sector, entirely thanks to a group of people coalescing around the token. The tricky part is calculating the size of the community: should we look at the number of fans on platform X, the trending topics on X, or the number of Reddit subscribers and post volumes?
Some communities are difficult to identify because they communicate in different languages or on different channels, such as Korean users discussing XRP in local forums. Kaito’s concept of “Mindshare” is an excellent indicator, but Loudio’s experiments show that having significant mindshare does not necessarily mean a real community has been established.
To identify a true community, especially in the early stages, the best method is to immerse yourself: buy tokens or NFTs, join Discord or Telegram groups, and observe who is discussing it on X (not paid promotions).
If you feel a genuine sense of belonging and connection, this is a strong bullish signal. In my view, Hyperliquid is the fastest-growing community. Binance and OKX’s attacks on HYPE have only strengthened its cohesion, giving the community a mission and purpose to support the team and protocol. Hyperliquid has already become a movement.
I believe innovation and community are the most important factors, so I allocate a weight of 1.5 to both. Like innovation, I have included the same simplicity variable in the community factor: the simpler the narrative, the easier it spreads.
Memecoins (like PEPE) are easy to understand, while Hyperliquid, though less straightforward, has still successfully united a community. Both Runes and Ordinals brought technological innovation (allowing the issuance of fungible tokens on Bitcoin, which was once thought impossible) and have strong communities. But why did the prices decline? Because there is a third factor to consider.
Liquidity
Innovation ignites the narrative, the community builds the story and belief, but liquidity is the fuel that allows you to ride the wave and exit safely at the peak. This is what distinguishes a “sustainable wave” from…