Why Arthur Hayes believes crypto’s technology doesn’t matter

Arthur Hayes has often been a figure of controversy and awe in the crypto industry. His views on the industry have sparked discussions, debates, and disagreements. However, one cannot deny his genius. Hayes’ recent essay, “Chief Story Officer,” is about the psychological and societal underpinnings of investment and technological adoption, providing an intriguing perspective on what truly drives the crypto market. As is our tradition, I am here to break down everything he said in the essay.

The Crypto Narrative Over Technology

Hayes begins with a reflection on the inherent speculative nature of existence, drawing parallels between everyday risk assessments and investment decisions. He shares personal anecdotes, such as the calculation of avalanche risks while skiing and the everyday choice between taking the elevator or the stairs, to illustrate how our lives are a series of bets against the odds. According to Hayes, these decisions are less about the hard facts and more about the stories we tell ourselves based on perceived probabilities and the wisdom of the crowd. This blend of anecdote and analysis serves as a springboard into his broader argument about the crypto market.

Getting into the crypto industry, Hayes boldly posits that when it comes to investment, the allure of a project’s narrative often overshadows its technological foundation. He reasons that most investors rely on the perceived expertise of others rather than their own understanding of the technology. In his words, “The story is more important than the tech.” This is a provocative stance in an industry often obsessed with technical innovation. Hayes contends that a compelling narrative can significantly influence an asset’s value, potentially more than the underlying technology itself. This perspective challenges the conventional wisdom of the crypto community, emphasizing the social and psychological dimensions of investing.

Hayes’ Investment Strategy

Hayes proudly adopts the moniker of Chief Story Officer, highlighting his role in crafting and spreading compelling narratives around crypto projects. He candidly discusses his strategy for investing in tokens not based on their technological merit but on their story’s potential for virality.

The genius reveals that when Maelstrom engages in deals, the technical evaluation is often outsourced to those more versed in the technological aspects, such as leading venture capital firms, qualified angel investors, or highly regarded technical advisors. This strategy is particularly employed when direct validation from involved parties isn’t available, with decisions sometimes being made based on the success of founders’ previous projects within the crypto industry. This success is defined not just by the innovation or utility of a technology, but by its adoption and use across various projects.

Hayes’ investment philosophy hinges on identifying projects with the highest likelihood of success based on their narrative strength. He argues that the potential for a story to spread—both its macro and micro elements—is a critical determinant of a project’s value appreciation. This perspective suggests a preference for projects at the nascent stages of their narrative development, where the perceived probability of success is minimal but the story has significant growth potential. Hayes posits that a token’s journey from a perceived impossibility to a slight chance of success can exponentially increase its value, far more than tokens whose stories have already saturated the market.

Hayes further delineates between macro and micro stories, noting that the most lucrative investments often capitalize on emerging trends before they become widely recognized. He cites the example of BitPerp, a project building a decentralized exchange for perpetual swaps, as an investment with a compelling macro story due to its under-the-radar status but high potential for widespread adoption. On a more granular level, the micro story—such as BitPerp’s association with Hayes and his pioneering work on perpetual swaps—can significantly enhance a project’s standing within its niche by associating it with proven success and expertise.

In his reflection on the importance of tangible results, such as trading volume, total value locked, and the number of unique wallets, Hayes offers a nuanced view. He suggests that the impact of these metrics on a token’s price varies depending on the stage of the hype cycle the project is in. For projects moving from obscurity to recognition, even modest achievements can be perceived as groundbreaking, while for those transitioning from potential to proven success, results must be nothing short of revolutionary to meet heightened market expectations.

Looking forward, Hayes teases the forthcoming focus of Maelstrom’s narrative-driven investment strategy. With an eye on a variety of projects—from those aiming to revolutionize derivatives trading on decentralized exchanges to innovations in cross-chain asset bridging—Hayes is gearing up to champion the stories of tokens that align with emerging market trends.