Looking Back, Moving Forward: Analyzing 2023's Narratives and Eyeing 2024's Trends

Cryptocurrency markets are shaped by stories that capture the attention of investors. These narratives emerge, peak, and fade, influencing the market as they go. Tracking these stories is essential for anyone managing a crypto portfolio, as they can offer insights into market sentiment and provide potential signals for portfolio rebalancing.

Important Notice: Whenever we discuss "positive" or "negative" sentiment within this analysis, it's crucial to understand that such detected attitudes often suggest a time to consider taking the opposite action. This is particularly true when there is a consensus or shared sentiment towards any narrative. Market extremes in sentiment can serve as contrarian indicators, and thus, a discerning investor may find opportunities where sentiment is overwhelmingly one-sided.

To inform our analysis, we collect a wide array of data from various social channels, including Twitter, Reddit, crypto-related Telegram channels, and 4Chan. 4Chan has been recognized as a valuable source of information, particularly for memecoins, and was formally added to our data collection sources in 2023. Once the data is collected, it's cleaned up and structured so that further processing and analyzing can be done with deeper insights. This structured approach allows us to identify trends and shifts in investor mood with greater accuracy.

Disclaimer regarding the Twitter data: Due to instability and perturbations in Twitter's API during the summer of 2023, there were some inconsistencies in our data. These issues have since been resolved, and while the social volume from Twitter is still lower than before June 2023, we are steadily increasing it. On the positive side, the quality of data has remained higher than before, as we now curate the list of Twitter accounts being processed.

As we went into the first quarter of 2023, a few narratives were especially dominant and, in hindsight, proved to be crucial:

1. Stablecoins: This topic isn't new, but in March, it spiked in social discussions due to USDC and DAI losing their pegs amidst the Silicon Valley Bank collapse. This event marked the most pessimistic sentiment of the year, yet, in hindsight, it was also the prime time to invest in BTC and ETH. The stablecoin narrative serves as a reminder of how quickly confidence can sway in the crypto world and how such moments can present unexpected opportunities.

2. Inflation and Interest Rates: It's no secret that crypto markets often move in sync with expectations around the Federal Reserve's interest rate decisions. What's notable is the timing of the peak social interest in this narrative, coinciding with the stablecoin depegging event. This overlap intensified the negative sentiment, pushing it to new depths.

As the market began trending higher, interest in other narratives grew:

1. The Rise of Layer 2 Solutions: During the growth phase in March and April, Layer 2 solutions were a focal point, with a notable "buy the dip" sentiment spike around April 14th. Ironically, the actual dip occurred later, once the fervent desire to buy had subsided. The interest in Layer 2 solutions reflects the community's anticipation for more efficient and cost-effective transactions, which could potentially steer the market towards a new wave of adoption and innovation.

2. The Emergence of Competing Layer 1 Platforms: As the year progressed, competing Layer 1 (L1) platforms captured the market's attention, with the SOL ecosystem's growth being a significant contributor to this trend. It's important to note that the spike in social data on June 5th was not solely due to market events but was also affected by problems with Twitter's API in the weeks that followed. These issues skewed social data collection, which is a critical component of market research, and served as a reminder of the volatility and unpredictability introduced by external platforms and influential figures like Elon Musk.

3. Memecoins: Another interesting narrative is about memecoins. As observed, this category experienced two obvious spikes in social attention: the first around May and the second significant increase around December 15th. While we won't delve into the specifics of which memecoins were drawing the most interest (as this was a general trend across the category, not limited to one or two tokens), we do want to highlight the potential correlation between a strong surge in interest towards memecoins and market top conditions. By "strong," we refer to a clear signal at the data level, distinguishing it from the constant social noise that is ever-present in crypto social channels.

Other interesting mentions.

1. Real World Assets (RWA): RWA may not seem like a dominating topic when compared to others, but this could indicate that its peak moment is yet to come. The dedicated "social traction" chart for RWA reveals a very healthy interest, with cycles of increasing and decreasing attention, suggesting an undercurrent of growing relevance in the market.

2. Events Surrounding Binance and CZ: The events involving Binance and its CEO, Changpeng Zhao (CZ), are undeniably important for the market, as confirmed by social data. Binance, Coinbase, and Kraken are the three most established players in the centralized exchange (CEX) world, vying for dominance. Their significant market presence also makes them targets for regulatory scrutiny, which was evident in numerous instances throughout 2023.

3. Artificial Intelligence (AI): AI generated considerable interest and attention at the start of 2023, then saw a decrease in prominence among other topics, although it continued to create a buzz on social channels. By the end of the year, the dominance of AI as a topic resurfaced, indicating its persistent influence on the market and potential for future impact.

4. Friend.Tech: Last but not least is the phenomenal success of Friend.Tech. It was probably the first obvious success in the realm of WEB 3 social networks and the monetization of user profiles (and/or their content). Even if it's not clear yet how long-lasting this success will be, it has certainly made a significant impact.

Going into 2024, we believe it's important to observe both the whole space and maintain awareness of major narratives, which we believe will revolve around:

• ETFs and the BTC halving, potentially marking a market peak or not, subject to the crowd's expectations leading up to these events.
• Anything related to stablecoins and regulations is likely to be an ongoing factor and could signify both bottom or top events, depending on whether it is cast in a negative or positive light.
• DeFi and DAOs could gain momentum at any given—or unexpected—time, given the many innovations that have occurred there.
• Layer 2 solutions, in general, and zero-knowledge (ZK) technology, in particular, are on our radars as well.
• Needless to say, NFTs and memecoins are always primed for a "sudden" surge of interest. Just look (chart below), what Bonk made for SOL:

• WEB3, especially dedicated to the new way of building social networks, is actually one of our favorites.
• macroeconomic trends and narratives
• There are obviously other narratives and topics which are important, but the most important is probably to "expect the unexpected."

The insights shared in this article were gleaned using Santiment's 'Social Trends' tool, which has been pivotal in our ability to track and analyze these shifting narratives. This tool distills the vast amount of data from Twitter, Reddit, crypto-related Telegram channels, and 4Chan into actionable intelligence. By providing real-time monitoring of the market's most talked-about topics, 'Social Trends' empowers investors to stay informed and ahead of the curve. We invite you to explore this tool and make it a part of your strategy to navigate the dynamic world of crypto.

Links to some of the narratives, using the Social Trend tool:

1) ETF

2) DAO and governance

3) L2s

4) Stablecoins

Regardless of which narrative we watch, the most important, in our experience and opinion, is not to have too much attachment. We should keep in mind that everything is changing. What comes up, goes down. What looks terrible today may become better tomorrow. By constantly observing it on the data level, we can gain some level of insight. But it's even better to go deeper and start experiencing it through the lens of impermanence yourself. It is an extremely rewarding and freeing experience.