ConsenSys executive: Don't foolishly stare at Crypto Twitter, what can be clearly said is probably not Alpha

Written by: Matt Gilmour, ConsenSys Enterprise Development Manager

Compiled by: Yangz, Techub News

Crypto Twitter (CT) is a beast. After years of spending time with it, I came to understand its routine, but more importantly, I realized how it “forced” me to act with it.

Understanding the essence of things, rather than what people hope it to be, is the key. As for CT, understanding its essence means understanding the core of the game. Only in this way can we truly get involved.

What is CT

Crypto Twitter is like a Rorschach test, showing you what you want to see. For degens, it’s a casino full of memes and shitposting. For Newbies, it’s filled with Alphas and a lot of long-winded, seemingly well-intentioned pros sharing investment ideas. For more seasoned traders, things get a bit more nuanced as they see CT as a long-term investment opportunity to hear from reputable venture capitalists and seasoned traders with seemingly thorough and systematic investment discourse.

However, please do not misunderstand, all of the above impressions are just the misleading brought by the Roche test. When people take off the Roche ‘mask’ of CT, its original appearance is nothing but a chaotic ‘sewer’. There are (sometimes) pure market comments on CT, as well as (most of the time) nauseating investment endorsements. The resulting series of useless and harmful noises make it almost impossible for investment signals to be emitted from it.

Why is CT useless

No one knows everything in the world

What evidence is there that people on CT know everything? Indeed, some investors may have succeeded in the previous few cycles. But in a Bull Market, there are always a few successful ones. Just like John, the high-yield trader in ‘Fooled by Randomness’, these investors succeed by luck, but also face the risk of financial bankruptcy at the same time.

So, what about the founders of projects that receive large amounts of venture capital? People always think that they must know something. However, why is funding highly valued in the CT? And how do they get funded? In many cases, investment institutions expect them to succeed again and profit from it based on their past successful experiences. As mentioned earlier, in most cases, their success is nothing more than luck.

It is important to emphasize that I am not advocating that all investment success relies on luck. I just want to say that all investment success is a combination of luck and technique, and it is almost impossible to distinguish between the two (Nassim Taleb has already elaborated on this in “FBR”, so I won’t go into it again).

There is no Alpha on CT

Apart from luck and skill, is it possible for us to find Alpha on Twitter? According to the definition, Alpha is the excess return relative to the Benchmark. To achieve this, investors must be ahead of others in understanding potential future events. Therefore, by definition, anything discovered on CT cannot be Alpha. When the so-called Alpha appears on your CT, this information is likely already widely known, and you may only get minimal returns while taking on significant risks. Remember, all Alphas that are loudly publicized will become Beta.

With ‘Traveling Mouse’

Even if there is some value to be found on CT, investors’ emotions can be extremely volatile. In this case, it is extremely difficult to always maintain one’s investment philosophy. Perhaps everyone was excited the day before, but the next day it could all collapse. Perhaps you know this deep down, but ultimately cannot escape the influence of ‘lemming-like emotions’. In the end, you will also become a ‘lemming’ on CT.

What should I do?

Investors who desire successful investments and are fully aware that they are in an ‘sewer’ with no alpha, will voluntarily leave CT without anyone telling them to. It’s like not needing to tell others not to suddenly run into the middle of the road. However, although this concept is easy to understand, its implicit meaning may not be as simple as people imagine.

From a rational perspective, it is not difficult to understand the consequences of mingling with CT. What is more difficult (and necessary) is to truly understand what individuals really want, what their true desires are.

If the inevitable result of following CT is low-quality returns, then why do people who desire investment success still mingle on CT? The answer is, they are not actually pursuing investment returns, their true purpose is not here.

Some people may ask, ‘Why would people want lower returns when there is a possibility of high investment returns?’

Because behind the low-quality returns they are actually pursuing something else. Some are pursuing correctness, entertainment, some are longing for community, longing to be part of Consensus, and some are seeking self-soothing, finding an outlet for their anger, or enjoying self-pity. Although the desires of those involved in CT are different, the fact is that generous returns may not be their biggest wish.

In addition, another reason CT is so popular is that people are so confident that they can ‘definitely find Alpha’ on CT, and they believe that ‘although Alpha has not been found yet, it will definitely be found in the future’. This is how humans waste their lives, whether it’s related to CT or in other aspects.

It’s not wrong to pursue low returns, and it’s not necessarily right to pursue high returns. Self-judgment is like a dead end, there will be no response to should or should not. In simple terms, when a person starts to delve into their desires, it’s not because they should, but because they have realized that their current pursuit is bound to fail. Moreover, no matter how many boxes they open or how much effort they put into following CT, the result can only be failure. Due to different goals, what is poison to others can be honey to you. The so-called ‘poison’ will push investors onto a new journey. In this journey, they will realize where world-class investment returns truly lie, and CT cannot provide the answer.