Cryptocurrency researcher Ignas believes that the growth of the cryptocurrency market is mainly driven by three forces: technological innovation, token issuance, and market narratives. If all three are satisfied at the same time, it can be expected that the project or industry will experience rapid growth, which can help determine market trends.
Technological innovation is the key to progress and can bring unique growth momentum to new projects. Without technological innovation, the industry will stagnate and gradually disappear.
Bitcoin started it all, and then Ethereum enabled more complex transactions through smart contracts. The bull market in 2017 began with the invention of ERC-20 and ICO. The key to the last bull market was NFT and DeFi, with unique technological innovations such as AMM, lending protocols, and algorithmic stablecoins.
Therefore, it can be said that technology is usually the driving force behind the market, allowing people to imagine and create narratives.
The catalyst for this bull market also sees many potential new technological innovations, including:
– The maturity of Layer2 technology and RaaS (Rollups as a service)
– Account abstraction and intent-oriented design
– RWA
– Bitcoin ecosystem narratives and DeFi
– Rehypothecation
The advancement of these various technologies accumulates the energy of this market, helping to drive market sentiment and become a force for the growth of the cryptocurrency market.
However, not all technological innovations are equal when it comes to making money, and other factors need to be considered.
Token issuance is essentially like printing money and can attract everyone’s attention. The inventions of ERC-20 in 2016, AMM and staking contracts in 2020 were powerful token issuance tools, especially the latter’s liquidity mining, which successfully served as a catalyst for the previous bull market.
Token issuance used to be difficult and expensive, requiring a fork of the Bitcoin network and enough supporting nodes to successfully issue new tokens. Well-known examples include BCH and BSV. But as the industry matures, token issuance has become easier.
Not all technological innovations can be transformed into profitable tokens. Some technologies are particularly difficult to tokenize and monetize, such as account abstraction or soul-bound tokens, while RaaS and competitive chains are very suitable for tokenization, thereby enhancing ecosystem activity.
Narratives capture people’s imagination and beliefs, creating a strong community.
Storytelling gives life to the technology and token economic model, turning them into something that people can connect with, believe in, and become a part of. Without compelling narratives and belief in the potential of these tokens, there will be little or even no motivation for new users to join and invest in the ecosystem.
Celestia’s narrative of “Holding TIA to receive airdrops” is a powerful story that helps maintain its valuation, even though few people truly understand the meaning of data availability (DA) as a technology.
The more innovative the technology, the stronger the storytelling ability. Relying solely on narratives can boost tokens, but without true innovation, tokens will be sold off at the same speed.
Whether it is technological innovation, token issuance, or market narratives, having two or all three of them at the same time can maximize the market’s growth potential.
DeFi has three key pillars. It drives technological innovation through smart contracts and self-custody, converts innovative value into token participation in the market, and has a powerful narrative of creating a new financial system. This is why DeFi grew rapidly at that time.
However, whether a project can succeed in the long term is still determined by many other factors, including product strength, regulatory risks, brand management, business model integrity, and even unforeseen black swan events, which can affect the long-term operation of a project.
Terra’s UST is a notorious example, but it did achieve astonishing growth by leveraging algorithmic stablecoin technology “innovation,” driving the currency flywheel with a massive structure, and the narrative of 20% APY passive income. However, it eventually failed.
When evaluating whether a new project has the opportunity to attract market attention in a short period of time, this framework can be used to analyze and better grasp the current market trends.
Ignas