People who get involved in the crypto market when it is in a bullish and exciting phase are playing it more like a video game than a form of investment. Most competitive video games have an evolving meta-game. A meta-game can be described as a subset of the game’s basic strategy and rules that are then extended, which is a necessary element for high-level gaming.
- Metagame In League of Legends, the metagame evolves with characters, props, and abilities. I haven’t played Marvel, but the internet tells me that the metagame is dominated by powerful and popular cards, banned and restricted cards, and cards with the loudest volume.
- Ethernet Killers Throughout 2021, one very prominent “Ethernet Killer” metagame, the “SolLunAvax” metagame, has been gaining strength for almost the entire year. Their popularity has led to metagame trends flowing into obscure alternative Layer 1s as well, and you could even say something like, “What other Layer 1s aren’t involved in metagames yet?” The meta-game is persistent despite the fact that Ether’s transaction fees are exclusive and unfavorable to trading. And the crypto market is arguably a video game that participants want to play too – they don’t want to leave their assets idle in a bull market, so take action to seize the opportunity.
- Crazy Caterpillars & Dizzy Ducks There are some meta-games that turn on a dime. NFT minting was a very popular meta-game in 2021, and the popularity of Crypto Punks successfully inspired projects like Hashmasks and Bored Apes. But what followed was wave after wave of imitation plates, with people constantly looking for the ‘next NFT collector series’. The result is that these minted coins have been oversubscribed, leading to speculation in the secondary market. Those who missed out on the early purchases of rare minted coins were fueled by the excess profits of the early participants, so later participants saw these items as ‘risk-free’. None of these projects will be the next BAYC, they are at best uninspired trend followers, and at worst they will turn into cash-grabbing scammers with virtually zero demand in the true secondary market. Since it is profitable to be an NFT PFP founder and minting is seen as a risk-free transaction, trademark dilution (trademark dilution) is on the rise and its the best use of capital. Of course, if the best use of capital is to become a buyer of minted coins, the buyer will shift his heart there, and there will be much less money in the secondary market. It is also evident in the market that in 99% of the cases, the people buying on the secondary market are the losers, followed by a massive reduction in secondary market buyers, which makes the people minting coins the ultimate losers, and this structure eats away at itself, with the biggest winners being those who understand the meta game and the people behind advancing it.
- Progress in the meta-game If you look back over the past few years, you’ll see that the meta-game has actually made a lot of progress. In the summer of 2020, DeFi emerged, categorized based on massive liquidity mining and eventually food-based tokens. Until the end of 2020, Bitcoin emerged as the dominant player, which then evolved into the resurgence of ‘blue chip’ DeFi, with Aave leading the way, followed by the NFT boom and the very lucrative sales of NiftyGateway. Next came the bad bad coin period, the Layer 1 period and another NFT period (but this time led by OpenSea). And at some point there was the Art Blocks period and the trend of pushing ‘old NFT at its best’. The Layer 1 period evolved into the Layer 1 ecosystem as BSC, Avax and Luna currencies had their own thriving ecosystems to varying degrees. You may notice that meta-gaming is likely to win the crypto video game market. In 2021, you don’t need to use DaniCoin early on to have good investment results. But in order to maximize wins, you will have to use the cycle between assets multiple times. Perhaps most importantly, the biggest loser is that players will mistakenly see the current meta-game as something else – those who think the meta-game is actually a long-term investment mechanism in early 2021 end up holding ROK from February 2021 all the way to close to -80% or so. Or rather, they over-invested in the illiquid and irrelevant NFT PFP trend. In general, the meta-game will start as a long-term investment issue, then go to fads, and finally end under a false boom.
- Is it enough to understand the meta-game? I think that for some participants in the market, simply following the ever-changing meta-game is enough, especially for those who can exercise self-control and are natural skeptics. Because I have seen many people who can jump in quickly after spotting a trend and then jump out and move on after making a substantial profit. So for most people, it’s probably more important to understand the mechanics behind the meta-game. If you are playing League of Legends, then you should know that there is a champion character named Nocturne who is currently the most powerful character in the metagame, and you can simply play it until it is no longer in the metagame and get some advantageous conditions from the powerful character. But if you understand why Nocturne is powerful in the metagame and the increased strength of the character as a result of the changes that have occurred in the game, you can avoid the pitfalls and use those advantages to win the game. You will also be the first to know when this advantage no longer applies (through changes in the game) because you know why the metagame exists. In cryptocurrency, understanding why or how the meta-game works is much more important than in understanding the main body of the League of Legends game.
- Sol DeFi vs Avax DeFi A good example to understand the importance of metagame structure can be used is a simple comparison between AMAX Defi and SOL Defi. From a high level they look the same, but let’s start by assuming that this investment topic is actually the same. – Avalanche is an alternative smart contract platform, an ethereum killer, that has been performing well this year, while the native AVAX DeFi has an earlier chance of using the new ecological DeFi system, and if Avalanche is the eventual Layer 1 winner, AVAX DeFi would also be a good choice. – Solana is an alternative smart contract platform, an ethereum killer that has been performing well this year, and the native Sol DeFi has an early opportunity to use the new eco-DeFi system. If Solana is the ultimate Layer 1 winner, SOL DeFi would be a good choice as well. So why is it that Avalanche coin is making so many CT traders rich, while Solana coin is just stealing your SOL? The ‘early’ in the meta game doesn’t mean buying cryptocurrency on day one, it means buying it at a price below its potential value. The Solana ecosystem has its own ‘very high FDV’ sub-meta-game in which the really early arrivals are those who fund the seed round. The Solana ecosystem’s monetary economy benefits founders and financiers, but it means that the valuations of these projects seem to have succeeded, and it is valuations like these that are needed for many projects to grow. The widely popular Avalanche, on the other hand, is geared more towards the masses and starts with a reasonable valuation, which means that as the Avalanche user base grows, it is able to benefit from this growth drive. This is a simple example, but it shows how understanding the mechanics behind meta-gaming can also allow people frustrated on soldefi to feel more confident on avaxdefi.
- Observe Winners and Problem Solving Usually crypto meta-games are success stories, and these things work well and continue to inspire new founders and investors. Ether has been a huge success, it has inspired thousands of founders and driven an interesting ecosystem, and Ether’s success has created many multi-millionaires. But usually, the crypto meta-game is also enabled by failure. Ether has failed in scaling to allow ordinary people to use the chain, and it is very expensive to use it on Layer 1, but Layer 2 is not yet mature and has their own user experience issues. The “Alt L1” meta-game is rooted in the success of ethereum and enabled by its failure. The “winner” was a stimulus for the meta-game, people were inspired by a successful project and they all wanted to find something similar, so the founders decided they wanted to build something like it, and better, and investors wanted to launch the next version of these great ideas as soon as possible. The success of Axie Infinity started a wave of capital flowing into Gamefi. not only did AXS become one of the best performing tokens of the year, but its ecosystem began to progress, creating a full meta-game even though they didn’t have the same metrics or usage to value them. Gamefi became a fad. The emergence of problems and failures was also a stimulus – everyone could feel the pain caused by the problem and see how much better it would be if it was solved. So they are eager to solve the problem, and while the solution is not yet clear, it is to be expected because it is never clear to everyone when it is too early. Observing winners and locating problems in the crypto market can both be a way to identify potential meta-games.
- cryptocurrency>problems Sometimes meta-games are enabled solely because like-minded people advance projects to early realization, and new market participants simply refuse to buy into the OG meta-game and therefore choose to create their own value. Areas such as DOGE, SHIB, BSC, BAYC, AMAX, GME, etc. can all be seen as having this element. They saw something succeed first and simply decided “we won’t play their game because it’s our turn to get rich”. Perhaps each generation chooses to leave the Ponzi scheme created for them by the previous generation and decides to create their own new world instead.
- Non-narrative meta-games There are also meta-games in the crypto space that do not rely on crypto investments. – There was a time when the FTX market was almost always bullish for listed companies, which was the most attractive new concern in a bull market. – All this time, there have been people trading way ahead of Coinan and Coinbase, and they find out through inside information, API leaks, or whatever method they have to find out which cryptocurrency will be the main trade, and then they buy ahead and sell the assets right at the time of the IPO. – As long as you don’t follow Barry and instead follow certain VCs you have a chance to ride the coattails of some meta-game. – One-chain analysis and watch crypto whale tracking site Whale Alert also has a chance to ride on a meta-game. – There is also a meta-game in pre-sales through which even the worst projects can still be funded because of the guaranteed profits for early backers – they raise money at a very low valuation, have a large number of investors, and raise IDO at a 20x valuation. Seed buyers are almost can be guaranteed a profit, and those who invest at an early stage can say to the public “I’ve invested in this thing! as propaganda (where IMO it completely distorts the risk imbalance between them and potential investors, but I guess it’s legal). And in that case, the founders and early investors might have a win-win outcome, and the meta-game becomes disadvantageous relative to everyone else.
- Using meta-games As with video games, meta-games in the crypto space give players the best chance of winning, and participating in meta-games allows you to find the easiest as well as the most profitable opportunities at any given time. A trader named The DogKennel, who created a portfolio of every dogcoin before the early dogcoin spike, found a dogcoin meta-game and turned $15,000 into millions of dollars, which is probably the smartest dumb idea I’ve seen all year.
The traders who saw DeFi take off ecologically on Avax were able to buy and hold the most profitable Avax DEX because they understood the meta-game and the motivation behind the meta-game, and identifying the motivation behind the meta-game is probably the most important skill for any junk coin trader. If you understand the incentive strategy inside, you can figure out if a meta-game will lead to positive feedback or sustained growth volume, and even if it is a scam that runs out quickly. Of course the best way to identify the mechanics behind a metagame early on is to buy the currency and sell it, and overall the most successful alternative investors I’ve seen have used metagames to increase the value of their holdings over time, but not only that metagames are useful for a number of other reasons as well. Sometimes you can easily watch to see if you’re missing the current meta-game and rush out to keep the value in your hand.
When a meta-game moves to something new, most of the capital flows out of the original meta-game, and people will sell their last holdings for the next meta-game to rise, which is the video game ecology, where players want to play games all the time and don’t want to have idle time. Meta-games can be used to help decide which assets are suitable for leveraged trading on derivatives, or to build out relative ground around those assets. In 2021, you can get the most back on assets when you think the overall market looks good rather than just focusing on the mainstream, and the trader returns in 2021 are huge. Both SOL and LUNA, which were at their lows in June, gave traders huge returns compared to those for BTC and ETH. Many traders are stuck in the middle of using different meta-games that don’t currently match reality, and many have spent a year mapping out the blueprint for Bitcoin and modeling potential dominance mechanisms, but they are referencing meta-game models based on 2017.
And the worst thing you can do is run headlong into a meta-game space that reaches a boom, and if at the beginning you spend weeks or even months thinking about it 5 or 6 times and then finally get up the courage to do it, it’s probably too late, and when you don’t think it’s risky anymore, that means it’s the biggest risk of all. In summary, by the time the meta-game becomes a consensus among all participants, it has long since moved on to something else.