From themetaverseiscoming by Brenner
Whether or not you think memecoins or governance tokens are stupid and worthless, if you can’t admit there’s something going on with them worth paying attention to and learning from, you should get your neuroplasticity checked out.
Relevance investing is the Boomer-washed term for memecoins. Even as a millennial, it’s helped me understand The evolution we’re seeing.
To better understand where we’re going, we have to take a look at where we’ve been.
- Asset-based valuation. In the beginning (17th-18th century), companies were valued based on their tangible assets: land, buildings, equipment, cash. We look at this now and think, wow, definitely wrong. That ignores so much!
- Earnings-based valuation was next. (P/E) Price-to-earnings ratio. The flywheel is spinning, the motion is valuable! Not just the assets that make up the flywheel. Naysayers of this valuation strategy said something stuffy like “past performance is not indicative of future results!”. Those guys stayed poor. This one makes sense to us - P/E ratio is still commonly used, and on every stock website.
- DCF (Discounted Cash Flows) is the most banker way of taking into account the projected growth of a company. Growth stocks’ valuations rely on the idea that revenue and earnings will go up over time. Higher. No longer are we buying a share of a company’s assets, or investing in an existing revenue stream - we’re investing in their potential.
- Technical Analysis. All the TA bros on Twitter drawing stick figure animals over a graph of green and red candlesticks. They have no idea what last quarter's revenue numbers were, who the CEO is, or what analysts are saying next quarter’s earnings will be. The fundamentals mean nothing here. The focus is purely on price trends, chart patterns, and momentum indicators. It’s based on a different plane of reality.
- Relevance. This is the underlying mechanism at play now. Where there is mindshare, capital will follow. Some will not be relevant for long. People will enjoy it while it lasts. Some have incredible staying power, to be relevant forever.
People talk about rational money and irrational money. “The market can stay irrational longer than you can stay solvent.”
No longer can we define a growing group of investors by something they’re perceived to not be (rational). These investors are also “rational”, but on a different axis. They’re not looking at a token’s value based on fundamentals, but based on its relevance.
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