Crypto Narratives and Catalysts — The True Meaning

Crypto narratives and catalysts are just like rumours and gossip. They spread like wildfire. This is not far from the truth in crypto as these rumours have become the driving force in the space unfortunately, we don’t call them rumours rather, we call them narratives and catalysts.

A catalyst is a piece of news or event that influences traders/ investors to buy or sell an asset quickly within a space of time.

Now, let’s take for instance, payment giant Mastercard made an announcement at Consensus 2023 about the launch of their crypto credential services for cross-border transfers. This news alone increased the crypto market cap in less than 24 hours. Now imagine if they had announced the launch of a particular coin/token for these transfers, so many people would have rushed to go purchase these coins before the price would pump.

Another major instance was when CZ announced that Binance would be selling off their FTM allocation on Binance, people automatically believed that the price of FTM would dump and so many rushed to sell off their holdings.

In all these, one thing you should take note of is the timing. For instance, Although Binance had not sold off at the time of the announcement, there was already a reaction and speculation in the market, which caused a change in volatility beyond normal.

A catalyst is an event, news or announcement that drives hype. It could have a positive or negative effect on the adoption/ price of a coin/token. What then are narratives?

Narratives in Crypto

Narratives are the stories people believe as a result of a catalyst.

For instance, when CZ made the announcement, people automatically believed that this would dump the price of FTM, considering other factors like the ongoing FTX’s insolvency rumour which began when CoinDesk revealed in an article that Alameda Research’s balance sheet was stacked with FTX’s native exchange token, FTT.

Also, considering other factors like the roadmap, announcements, market sentiments, personalities involved, etc, people begin to make an assertion/create a story around that particular product in the market.

When Do Narratives Form?

Narratives can form before, during or after an event/announcement. This is because they are formed around the knowledge of an event rather than the event itself. Knowing an upcoming event helps you position yourself way ahead of others, which is also another reason why you need to join platforms/communities where you can be among the first people to get updates.

A very good example of this is the recently announced Bitcoin ETF approval by the SEC. The announcement of the SEC approval of Bitcoin ETF was not the main thing but the knowledge of the SEC approval spiked the price of BTC from $43,600 to an all-time high of $48,600 after the SEC’s approval.

This is why it is very important to look at a project’s roadmap to see if there is an upcoming event before investing in that project.

Note: Just because a project is good does not mean that it is the right time to invest. Narratives help you to know if actually, the time is right to dive into a project (Especially for traders, so that you will not be an exit liquidity for others).

How to Enter Narratives

There are two (2) main approaches to entering narratives:

1. Identifying a strong narrative and finding projects that fall under its category. Then evaluate the projects and dive in. A few narratives that have trended so far in 2024 include The Chinese Year of the Dragons, Airdrop season, Cosmos Ecosystem, etc.
2. Find a good project you wish to invest in and wait till there is a fitting narrative before you can enter.

Summary

Fundamental analysis can help you identify projects that can do well however, narratives help you to determine when the prices will appreciate.

So, If your target is to make more in 2024, it is only wise that you learn how to understand trending narratives and position yourself.

In our next post, we will be talking about how/ where to find narratives. So, stay tuned.

If you enjoyed this post, kindly give me 10 claps, comment and share for a wider reach. Also, do not hesitate to reach out for collaborations and partnerships.