How to find the code of wealth in AI narrative?

Author: terry

Compiled by: TechFlow

First, a disclaimer:

I’m not the best trader, but here are some key insights I gained from exploring the AI meta with some of the best in the industry over the past two months.

The goal of this article is not only to distill the concepts I’ve learned, but also to help you better understand and navigate this market through practical examples and advice.

Attention and fundamentals

There are usually two main reasons why the price of a currency rises:

• Attention (hype)
• Fundamentals (real value, technology, applications)

Attention-based coins:

The price of these tokens soared mainly because everyone was talking about them (such as the popular emoji coins on X/tiktok). In this case, the price of the coin can rise quickly, but it can also fall quickly because there is no "real intrinsic value" behind it, just hype.

Coins based on fundamentals:

These coins have substantial value support, such as interesting technology, strong development teams, partnerships or useful products. Even if the price drops in the short term, it is usually just "noise" because its long-term potential is still great.

For example, a meme coin may increase in price due to a large number of tweets and tiktok mentions, but once the attention disappears, the price will quickly fall. In contrast, a mature project that is developing AI tools and working with well-known projects or companies may see a steady increase in price as more people see the actual effects of its products, even if the price fluctuates slowly in the early stages.

When trading in hype, pay close attention to price action and exit when momentum wanes. In fundamental investing, short-term price fluctuations may not matter if you believe in the long-term potential of the project (this is my personal investing style). If you find that the fundamentals of the project weaken or change, be sure to stop losses decisively. Never be too obsessed with a particular investment project.

Finding room for expansion

A smarter strategy is to focus on projects that have the potential to grow many times in value, rather than just chasing small gains.

Rather than focusing on a small opportunity that could grow from $1 million to $5 million in market value, look for projects that you think could grow from $5 million to $100 million or even $1 billion. Such deals, if executed well, could result in “life-changing” gains, not just quick pocket change.

You should always look for opportunities with significant upside potential. This often means focusing on early-stage projects with strong fundamentals or unique innovations, rather than well-known coins that have already been "hyped."

Seize the early opportunity

Profitable trading often comes from participating in trends before they become mainstream. If you can spot a promising project or trend (like AI infrastructure or swarm/multi-agent architectures) before others do, you can reap the biggest rewards.

In simple terms, if you start researching AI-related technologies or projects before AI becomes a buzzword, you may find a great coin when the market value is low. As the AI craze grows, more people get involved, pushing up the price. Early participation means you can capture most of the gains.

Take the time to learn about emerging trends in AI (such as multimodality, decentralized reasoning, swarms, traffic engineering, agentfi, etc.) and get involved before they make headlines. This may require you to follow developer announcements, read white papers, and check social media discussions in advance.

Develop transaction process

Having an edge, like using custom scripts, analytics dashboards, or any efficient research method, can allow you to find good opportunities faster than most.

You can use crypto price alert bots, or platforms like dexscreener to track new token releases. When a new project appears and suddenly gains trading volume, you should investigate immediately. Check the project's official website, team information, X account, Telegram group, Discord, etc. If it looks promising, you can decide whether to invest immediately.

Speed is of the essence. You can even leverage simple tools like an X-list of well-known “AI quants”, Telegram groups, etc. to stay on top of new opportunities. Over time, you can acquire more advanced tools, but start with the free and simple ones. The point is - you must have a strategy, a process, to help you win in the market.

Avoid the “Middle Curve” Trap

It is usually easier to buy proven leaders or find brand new low-cap projects. Mid-cap projects without a clear positioning are more risky because new competitors can easily surpass them.

Suppose you have the following options:

• Project A, market value of $1 billion, well-known and constantly launching new features
• Project B, valued at $1 million, has a novel idea but is still unknown
• Project C, with a market cap of $50 million, has no innovation and is always overshadowed by other projects

A beginner might think of C as “safer than B, but cheaper than A.” However, if C is stagnant and lacks growth or innovation, it is less likely to deliver big returns than finding a new, promising B or sticking with a reliable A.

The point is, if you choose mid-sized projects, make sure they have a plan to stand out. Otherwise, they may just be a waste of your time and capital - in the end, it's all about opportunity cost.

Focus on industry growth (this is why I only focus on AI)

AI is a long-term trend. We are seeing its impact not just in crypto but across all industries.

When an entire industry, such as AI, demonstrates significant long-term potential, the entire market could expand substantially beyond its current valuation. Early leaders in the industry could appreciate substantially over time.

If the entire AI agent space is currently worth about $10 billion, but you believe it will become one of the most dominant industries in a few years and could grow to $100 billion or more, then the leaders in the space (mature projects with strong communities and products) could potentially grow 10x or more as the industry grows.

Identifying leaders in growth stories and investing in them now can be a safer and more profitable option as the overall industry matures.

Adaptation and continuous improvement

AI is evolving rapidly, and crypto is evolving even faster. You need to constantly update your strategy, reflect on what works and what doesn’t, and learn from your mistakes.

A good practice is to write down your top 5 successful and failed trades after each month of trading. Ask yourself: Why did I buy this coin? When did I sell it and why? Could I have spotted the trend earlier? By reflecting on these questions regularly, you can identify patterns in your decision-making and improve over time.

Treat trading as a skill that needs to be honed. Log trades, gauge market sentiment, and discuss strategies with other cryptocurrency traders to help you become smarter, faster.

Managing liquidity and maintaining flexibility

Keep some cash aside so you can quickly invest in new opportunities as they arise. Don't lock yourself into investments that you can't exit quickly.

Let's say you have $1,000 to invest. Instead of investing all of your money in a project and waiting for months, you can invest $600 in a promising project and keep $400 in reserve. When you find a promising new project, you can invest quickly.

Liquidity means flexibility. When a great opportunity presents itself, it is often more important to act quickly than to always be “fully invested.”

Become a cryptocurrency learner

Think of crypto as a long-term career, where you can continue to learn and grow. Don't think of it as just a lottery ticket. You are here to build knowledge, skills, and capital over the years, not just for a one-time big gain. If crypto is truly the future of finance (and I believe it is), we are only at the beginning of this journey.

An amateur might say, "I want to get rich quickly in a month." Someone with a long-term perspective would say, "I want to gradually improve my understanding and become good at spotting trends, so that in a year or two, I will be better able to profit from market changes" - this can be achieved through trading, investing, or even creating your own projects.

Over time, good habits like focused research, active reflection, patience, and discipline will add up, and eventually you will have the skills to profit effectively from major bull markets.

Be patient and consistent. Over multiple market cycles, those who treat crypto as a career and continually improve themselves will outperform those who rely solely on luck and hype.

Summary

The key is - don't just chase the hot projects. Build a system. Learn to identify trends early, do in-depth research, focus on fundamentals, and treat crypto as a skill to be mastered over the long term. Keep some funds in reserve to seize new opportunities, review past decisions regularly, and keep learning. Over time, this mindset will help you find big winners, identify key opportunities, and avoid becoming someone else's "exit liquidity."

terry

[Co-created by gpt o1]