May 7, 2023
Ever hear someone say "You're still early" when it really feels like you showed up to the party after everyone there is already passed out except for you and the weird guy on the couch who is simultaneously digging between the cushions for change while enthralled by reruns of All in the Family? Because that's kind of what it feels like when everyone's bags are pumping except yours.
In this post, we're going to go over some of the best strategies and actions you can take to find the right narratives before the hype rocket finds them and blasts off to Alpha Centauri. We are not financial advisors, this post is not financial advice, and you should always evaluate your risk tolerance and appetite, don't ever 'invest' more than you can afford to burn in a fire, and always be safe when interacting with smart contracts.
Finding narratives can be difficult, and often, most relevant narratives usually aren't acknowledged until after the projects have already exploded. This can be frustrating, especially when a lot of narratives that seem sensible are often ignored by the larger crypto community. In 2021, the rise of dog-themed meme coins stole the spotlight and brought unimaginable returns. One early adopter of the Shiba Inu coin bought approximately $8,000 dollars worth of Shiba Inu and held long enough that the value of their bag went well beyond a billion dollars.
Around the same time, many Ethereum users were frustrated by high gas fees and slow transaction times and began pivoting to other Web3 solutions for DeFi and NFTs. This pivot to faster and less-expensive Layer 1 solutions spiked a massive increase in demand for coins like $SOL, $ADA, and $AVAX. Each of these saw massive pumps to the tune of 100's to 1000's of x's. Finding these early and holding with conviction made a lot of people a lot of money in a relatively short amount of time.
In April, 2023, the spike in interest in frog-themed meme coins exploded as the crypto community rallied behind tokenized representations of some of their favorite internet memes. Again, a lot of people made an unbelievable amount of money so what do dog and frog-themed meme coins have in common with a fully-fleshed Layer 1 blockchain solution? A narrative. There are certain motivators that drive crypto users to purchase, and we're going to talk about how to find them, how to get in early, how to balance risk, and how to take profit, re-base, and pivot to new narratives.
What to Do Before You Start Looking
Pre-work: What to Do Before You Start Looking
More experienced users are going to scoff at this section (if you've been in crypto more than 6 months, you can probably skip this section unless you're a casual user, in which case we recommend at least skimming this section).
GET A NON-CUSTODIAL WALLET!
If you're expecting to find new narratives and you haven't left the confines of Coinbase, KuCoin, or the Binance app, you're not going to find them until long after the train has already left the station. If you're doing anything EVM or Web3, MetaMask or TrustWallet are reliable. If you just want to get your feet wet, the Coinbase Wallet is also an option and it integrates with your regular Coinbase account.
Be sure and check out our write-up on how to set-up a MetaMask wallet. It also shows you how to set-up RPCs for different chains if you plan to transact on other chains besides Ethereum.
GET ANOTHER NON-CUSTODIAL WALLET!
If you're planning on aping into projects early (generally before smart contracts have been audited or reviewed by Certik or rated by something like DexTools), you're assuming a high level of risk that goes beyond the initial investment risk. You could be exposing your wallet to a malicious contract, so you'll want to set up at least one "burner" wallet for your degen plays if you haven't done so already. Some contracts can drain your wallet, and better to let your burner get drained than your main.
FAMILIARIZE YOURSELF WITH DIFFERENT DECENTRALIZED EXCHANGES
Once you've got your wallet(s) set-up, it's worth familiarizing yourself with different DEXs and the mechanics of swapping or placing orders so you understand how much gas generally costs depending on the chain you're using. It's also good to play with some different DEXs to get an idea of what you like in a DEX and what you're likely to feel comfortable using.
If you're unfamiliar with DEXs, you can check out our DeFi how-to.
LEARN HOW TO USE AND READ A BLOCK EXPLORER
The best thing about decentralized public ledgers is that they're, well... public. Every EVM-compatible blockchain has a very similar block explorer. The original is Etherscan, but Binance Smart Chain has BSCScan, Polygon has polygonscan, and Avalanche has avascan. The block explorer is crucial for understanding how to find contract addresses and tracking certain wallet addresses for activity (we'll talk about this later).
If you're not sure how to use and read a block explorer, take a moment to check out our write-up on how to use a block explorer.
SETUP YOUR WALLETS WITH ENOUGH NATIVE COIN TO COVER GAS
Swapping and trading eats up gas quickly, especially during a run that causes high network congestion. It's important to have a basic understanding of gas mechanics, and to know how much of your trading margin will be eaten by gas (less of an impact when dealing with very high value transactions, but if you're new to this, you don't want to find yourself needing spend 200 dollars on gas for a 20 dollar trade). Most non-Ethereum EVM-compatible chains are not gas hogs, but a lot of new hype coins are still launched on the Ethereum Network, and this can get expensive quickly.
If you're not familiar with the EVM, check out our write-up on the Ethereum Virtual Machine.
DO NOT BECOME EMOTIONALLY ATTACHED TO YOUR TRADES
Whenever you buy something, you always hope that it rockets to infinity so you can retire at the ripe old age of 23. This is not a realistic expectation, and most of coins in the narratives you chase will let you down. Have a sensible entry strategy, a sensible exit strategy, take at least your initial 'investment' out when you're in profit, and don't keep throwing money at it if it's a bust. You will have a lot of losers, but you will also find some winners. One 20x can potentially offset your last ten bad trades. You can't lose 20x unless you're leverage trading, and we don't recommend doing that ever.
If you have the stomach for it, and you're prepared to get #rekt, we've got the keys to the rabbit hole.
How To Find Crypto Narratives
There are a few different places to start chasing narratives. Crypto Twitter is where people start grumbling about the next thing before it starts boiling. Find a few accounts that have a history of making successful early calls, and follow them with notifications on. This will help you to see what interests are gaining traction, and subsequently help you to form the basis of your decisions about which fire pit to throw your money into.
To be clear, if an influencer is screaming at you to "buy this now." You probably shouldn't buy it now. There is also a lot of noise on crypto twitter, and opinions about certain narratives can be contentious. However, some narratives have a lot of staying power, and understanding the interest and the potential future impact can set you up for success if you know when to take action.
"There is no such thing as bad publicity" – P.T. Barnum
Here are a couple examples. One is good insight on a good narrative to follow:
The other is "noise" riding on the back of a narrative. In this example, the narrative is frog-themed meme coins that went parabolic in late April and early May of 2023. This is what's commonly referred to as a shill.
Differentiating between a narrative and noise will help you to understand and gauge how people (most importantly the greater crypto community) feel about projects within a certain narrative. There is a lot of psychology and sociology behind crypto narratives, and understanding this will contribute to your success.
If you're a decent programmer or good at prompting with ChatGPT, you can consider using the Twitter API to build a simple app that sends push notification and alerts for tweets that meet the criteria of whatever narratives you want to follow to give you an additional edge.
For After You've Found a Promising Narrative
There are some things you should do once you've got a handle on your narratives. The first and most obvious is to follow some more successful projects within those narratives. Follow them on Twitter, join their Discord or Telegram groups and see what everyone there is talking about. A lot of these channels can be very noisy with a lot of hype and moderators who call any reasonable question "fud" before banning you from the group. However, you might find that other people there are interested in other projects as well, and may have insight you don't. Plus, these people are likely also following similar narratives.
The idea behind this is to exponentiate your information consumption with less effort. You will not find every successful project by yourself. There's not enough computing power in the world or enough hours in a day to do that level of due diligence with any level of success. If somebody shares information, that's half the battle. You Also need to follow-up and determine if it's for you or not. Again, you will want to explore these projects in greater detail. Check out the website, read the whitepaper, join the Telegram or Discord group, check out the coin or token on poocoin or dextools to see how it's been trading and take a look at market cap, trading volume, liquidity, and the token scores.
Much like scouring Crypto Twitter, there is a lot of noise in Telegram and Discord groups, and you'll need to know how to filter out all the scams, hype, and noise to be able to source information effectively. However, you can also use these resources to start networking with like-minded people following similar narratives to share resources and alpha, but be cautious and careful.
Finding New Plays That Match Your Narrative
The landscape for DeFi has changed considerably over the last couple years. Tools have gotten a lot more robust making information easier to source with live analytics for on-chain events. Decentralized trading feels a lot more like stock trading on reputable platforms than it did at its inception.
The first step in checking out a play (if a contract is very recently deployed and you're finding something very early) is to check out the Live New Pairs section of dextools. This will show you all the recently deployed pairs making finding plays that meet your narrative criteria a little easier. At the time of writing, the market is awash with meme coins following the surge of $PEPE and others, so the screenshot below shows a lot of $PEPE derivatives and other memecoins (consistent with the narrative).
The arrow in the image points to the block explorer, where you can review transactions and interactions with that smart contract. At this point, you should be relatively familiar with how to read and use a block explorer (see pre-work above). Most contracts that are deployed are "safe" in terms of not containing malicious code. Whether the token is a rugpull or a honeypot is a different story. The first priority is checking the contract to make sure it is not malicious. If you're relatively new to early narrative trading, you don't want to get nuked early. Once you've got your bearings and you've set-up multiple wallets to make multiple high-risk plays, your perspective on interacting with malicious contracts might change, but for now, we'll try and remain as risk-averse as possible.
If during your due diligence, you see something like this, you'll know it's a good indicator to move onto researching the next project. Once you've landed on something that meets all your personal metrics for supply, market cap, narrative, and smart-contract safety, your next step is to take your position.
Assume the Position
This part can be tough because in a lot of instances, minutes or even seconds can mean the difference between an entry on a 100x play and an entry on a 5x play (if you exit in time). If you found a play early enough (in most cases less than $1M market cap, and in better cases less than $100k market cap), you've read the whitepaper, checked out the community and the roadmap, it's time to enter on your position. Make sure you haven't skipped the previous steps. This could mean the difference between a good entry on a play worthy of high conviction and losing everything you have in your wallet. You can use something like Dextools or Poocoin to make your swap. You can also swap on pancakeswap or uniswap, but you'll need to have the valid contract address for the token you want to swap for. You should know how to find this if you've learned how to use the block explorer and are reasonably familiar with Dextools or Poocoin.
Determine how much you're comfortable with throwing into the fire, and make your swap. When making a play on a narrative trade, there are a few things to keep top of mind in order to maximize your odds of success:
Be mindful of gas, especially on Ethereum. High congestion and gwei can very quickly erode your profits on small plays if you're not paying attention.
Check your slippage. Slippage refers to the exchange tolerance of the market maker contract. For example, if you want to trade $100 for 100 coins and you set your slippage at 1% this means you are fine with accepting any range of coins between 99 and 101. Some higher risk plays have high slippage requirements because of coin tax on the smart contract or volatility. If you have to set your slippage to more than 10%, understand that your $100 will get you 90 coins or less (in this example. Ratios will vary based on the actual exchange rate for the token you are trading).
Be mindful of price action impact. Most DEXs have a warning for this, but for extremely low cap plays, a buy-in of 1000 or even 100 dollars can have an impact on price action meaning a potentially instantaneous 5-10% swing in the price.
Keep an entry, exit, and stop-loss strategy. Tell yourself before you buy what your targets for these are, and honor them.
Don't trade emotionally. It's easy to lose focus when you miss a play and have to watch it 50-100x in front of your eyes. Don't let that be the reason you end up being someone else's exit liquidity. Continue to research, find your next play, and move on.
Avoid sunk cost. If one of your plays gets rugged, fails to deliver, or fizzles out, it's time to cut your losses. Don't let volatility be the reason you exit, for a good project with a sound narrative and active development that has long-term validity, it is worth hanging onto, watching, and adopting a DCA strategy. Other high-risk plays not so much. Don't keep throwing your money into the fire if it's a wash. Exit your position, and research your next play(s).
Once you've entered your position, identified your exit and stop-loss markers, keep researching. Rinse and repeat. Once you've found one, look for the next one. Make sure to take profits (most strategies suggest DCA in and DCA out. This works great for longer term plays).
A low-cap profit taking strategy adopted by many usually involves taking out your initial investment (plus a little extra) after a sizeable return, and keeping a moonbag for if it keeps going higher, then DCAing out as the price goes parabolic (if it does). If it doesn't keep rising, you've already taken profit plus your initial investment. Make sure on your exits you're also accounting for gas costs that contribute to the overall size of your initial investment.
After a few times, you'll start to get a handle on narrative trading and understand market sentiment a little better. You'll never be able to predict the behavior of the market, but things will seem like they start to make a little more sense after a while. Crypto is a strange space with interesting people, but like with any other behavioral analysis, patterns exist. What are people going to jump on next? What's making noise? What are people excited about? These are the sorts of questions worth asking, and if you can answer them, there's money to be made.
Back Down to Earth After the Moonshot
Narrative trading can enable many to turn a relatively small bag into some serious money. If we haven't made it abundantly clear, this kind of trading is not without substantial risk, so understand your risk tolerance beforehand and only 'invest' what you'd be willing to throw in a fire. The other side of this, is that the only people who turn $100 worth of $BTC into millions of dollars established their positions in 2008 and 2009. There are opportunities out there, you just have to know how to look and it is our hope that this guide helps to give you the tools you need to do this with some level of success.
For context, a $100 initial buy-in with a 120,102x would be over $12 Million. Results not typical.
We'd like to be clear that this is not financial advice, and if you're planning on getting into high-risk low market cap narrative trading, you do so at your own risk. Make sure you fully understand the inherent risk of any crypto trade you make, and be mindful of your risk tolerance and appetite. Most importantly, don't forget to take profit and have fun. If you thought this guide was helpful, don't forget to leave a like, give us a share.