The Marks of a Healthy Crypto Community Part I
Real Crypto Users vs. Tourists
“How do I know if a coin is any good?” my friend Tyler asked as he sipped a coffee at Starbucks.
“The same way you know your cell phone is useful,” I said. “It connects you to other people.”
One of the most important fundamentals in crypto investing is community evaluation.
Crypto is a network-based technology. 1 Its value does not originate from revenue, cash flow, or balance sheets in the traditional sense, but from the strength of its network effect. When the network effect strengthens, the asset tends to gain value. When the network effect weakens or breaks, the asset often loses value rapidly.
The easiest way to think about this is to compare other network effect technologies to crypto. How much value would Facebook have if only Mark Zuckerberg used it? Not much. Now compare that to the millions of people who use it every day. That shared usage is what makes it a multi-billion-dollar company.
One of the reasons Bitcoin has the largest market cap 2 is that it has the largest network effect. There are millions of people who accept it as payment, millions who spend it, and millions who save with it. You want to see the same potential in any crypto project you invest in.
The Problem of Tourists
I joined Quora in 2014 and started writing there. It had a vibrant community, and when I posted an answer, I would regularly receive comments, DMs, and answer requests from people engaging with my posts. Quora felt this way until around 2023, when it suddenly became a “ghost town.”
It is true that Quora still receives roughly 414 million visitors per month 3 and is ranked as the 76th 4 most visited site in the world. But from an experienced user’s perspective, people are largely coming to read content and then leaving. The social side of Quora is dead, and tourists are what keep the site alive.
Crypto projects can have a similar problem. Just as Quora has many tourists who come to visit and then leave once they’ve read the content, crypto attracts tourists who show up hoping for a “quick buck” and disappear once the price dips or they’ve made their money.
The tourists are the people who flood Telegram chats asking “wen moon” (the misspelling is intentional). The tourists are the airdrop hunters who collect tokens and immediately sell. The tourists abandon every project they’re involved in as soon as the bear market rolls in.
The tourists are one big distraction.
Build During the Bear
Crypto projects are well known for saying that you should “build during the bear market.” That’s because building during the bear market is easier. Projects aren’t distracted by tourists. Instead, they are surrounded by people who are genuinely interested in the project, willing to help, buy a bag, and hold for longer than a few days.
But once the crypto market heats up, the tourists come back and create a mess. This is where projects get distracted and start trying to please tourists by promising updates and features they request. Of course, most of these people won’t be around next year, but founders often have a hard time telling the difference between a solid community member and someone who just wants a quick buck.
In crypto summer, everyone is in the sun drinking mai tais.
The Impact
It’s hard to know whether a community is successful or not.
Social media following is up.
Comments are flowing.
Discord and Telegram are active.
Trade volume is through the roof.
But will the project survive its first bull and bear cycle? That’s impossible to know. All the metrics you hear about for judging a community get thrown out the window when the cold weather comes.
The Solution: Filter out the Tourists
The solution is simple: you need to filter out the tourists. Once you know who will still be around when the next market cycle ends, you can begin to see the true network effect. But this is hard to do.
One approach is to assume that a project will fail unless it has survived multiple bear markets. This is why projects like Ethereum, Litecoin, BNB, and Cardano continue to thrive. People expect them to be around because they have communities of true believers who stay even when the market turns down.
The problem with this strategy is that it limits you to already established projects. You won’t find a 100x or 1000x opportunity using this technique.
The second solution is the one I recommend. You join several projects during bear markets and observe what they are like once the tourists are gone. From there, you try to evaluate who the tourists were and who the real users are.
A solid project will shrink during a bear market, but it should still be larger than it was before the previous bull market began. Even then, this is difficult to judge, and there are no guarantees.
What you are looking for in a bear market is not how many people still “hold the bag.” There are plenty of tourists who get stranded on crypto island. What you are looking for instead is:
Users who still interact in Discord and Telegram
Users who continue to market the coin during the bear market
Users who volunteer to improve the code or look for bugs
Users who write articles that help new users adopt the product
One of these users is worth 1,000 tourists.
Conclusion
When you investigate a new project, or even evaluate your own, there is one important question to ask: who are the tourists, and who are the users? If you know the answer to that question, you know whether the project is built to last.
Final Word
Do you know who the tourists are?
“Twoflower was a tourist, the first ever seen on the discworld. Tourist, Rincewind had decided, meant 'idiot'.”
― Terry Pratchett,
New to Crypto?
Most people enter crypto like tourists. They wander around, take bad advice, lose money, and leave confused.
You don’t have to.
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Disclaimer:
The information in this publication is for educational purposes only and does not constitute financial, investment, or legal advice. Always do your own research before making any financial decisions. Cryptocurrency investments carry risk, and past performance is not indicative of future results. I actively invest and trade in the crypto markets, and my personal portfolio and holdings change frequently. Nothing I share should be interpreted as a guarantee of performance or a recommendation to buy or sell any asset.
https://www.ledger.com/academy/glossary/network-effects
https://coinmarketcap.com/
https://business.quora.com/resources/reach-over-400-million-monthly-unique-visitors-on-quora?
https://www.semrush.com/website/quora.com/overview/