Many people in this market have probably encountered that feeling.
I looked at a project and saw that everything was up to standard. The interface was clean. The branding was concise. The storyteller was confident enough. The backing fund was attractive enough to take a screenshot. The timeline was arranged very skillfully. All of this created a sense of reassurance, as if this project had already been somewhat validated by the market.
But after looking for a while, I began to see the discrepancies.
What is appearing before us may not yet be quality. It may just be a set of signals making quality look like it is present.
This point is worth noting because it does not only speak about a specific project. It touches on how the market operates when information is still lacking. The market is not ignorant. Not everything that looks good is empty. The issue is that the market often has to make decisions before it can verify the true quality. When the core is not visible, it must rely on what can be observed first.
Taleb has a pretty sharp example to open the door to this. He says that if we have to choose between two surgeons who are both qualified, we should lean towards the one who looks less like the 'Hollywood version of a surgeon.' That idea does not directly prove anything for crypto. But it touches on a very familiar reflex of humans: we easily read appearances as signs of capability, then let the rest follow.
Looking at the market, the question becomes clearer. When both sides do not have the same information, one side has to send signals, and the other side has to interpret those signals to make decisions. The classic overview of signaling theory accurately describes that problem and also makes it quite clear that the focus of the theory lies in costly signals, while cheaper forms of communication, like cheap talk, are a different matter. In shorter terms, the issue does not lie in whether there are signals or not. The issue lies in how costly those signals are to imitate and how much they reveal about the true quality.
Bringing this logic to crypto, I can only speak within a narrower scope. In many nascent niches, especially when the product, real cash flow, or the durability of incentives is not yet clear, the market is not lacking in signals. What is rarer are the signals that are both hard to fake and close enough to true quality.
A beautiful interface can be useful. But it is relatively cheap to create. A narrative that follows the trend can attract attention. But it is also relatively cheap to tell. The feeling that 'this project is very institutional' can often be constructed from a combination of familiar images, language, and social proof.
Meanwhile, things that are closer to true quality often reveal themselves more slowly. Do users come back? Do incentives bite into themselves? Is the team still there when prices no longer rise? Can a system still function when speculative rewards weaken? Those things are not impossible to fake. But they are often harder to construct quickly than surface signals.
I need to pause here a bit so the article doesn't go too far.
I am not saying that surface signals are always meaningless. I am also not saying that polished projects are worse than rough projects. There are very polished projects that are still very good. There are also rough-looking projects where the core is still weak. The distinction does not lie in being beautiful or ugly. It lies in the relationship between the signal and true quality. A surface signal can still be useful. But it is only trustworthy to the extent that the cost of imitating it is high enough and its relationship with true quality is strong enough.
Seen in that way, the narrative in crypto is much less ambiguous.
In periods when true quality has not yet been verified, the market may not only react to quality. It also reacts to the ability to emit signals that make others believe that quality is present.
There is a meta-study on venture investments across 75 empirical studies showing that investors do not actually read qualitative signals in an absolutely neutral way. They have biases in how they weigh those signals. This does not prove that crypto operates exactly like venture. But it does support a broader point: when evaluating things that are still very uncertain, investors' reading of signals is always selective and biased.
In the context of crypto, that mechanism appears quite quickly. A project that looks professional can easily be assumed that the team is also more professional. A founder who tells a coherent story can easily be assumed to understand the product more deeply. A project with a strong backer list can easily be assumed to have passed through a more significant vetting process. These leaps are not always wrong. But they often happen before the real data can appear. Therefore, at early stages, they can also be paid more than the core can support.
That is why I do not like to view this phenomenon with a moral tone. Saying the market is fooled by appearances sounds very satisfying, but is somewhat superficial. In many situations, the market is forced to use proxies before it can test the core. That is a natural response of an information-deficient system.
But that reaction is not always correct.
Sometimes, surface signals are enough to initiate trust. They attract more attention, more liquidity, more people to continue the story. But when prices no longer rise consistently, the waiting time for answers becomes longer, and continuing to believe in the story becomes more costly, the market often changes its questions. It no longer just asks whether this project looks right. It begins to ask what is truly supporting it.
When the questions change, the value of the old proxy also changes accordingly.
Therefore, the question worth asking when looking at a crypto project is not just whether it has a signal or not.
What is more worth asking is what that signal represents. How close is it to the true quality? And if a low-quality team wants to imitate it, how high a price do they have to pay?
If the cost of imitation is low, then it is highly likely that what the market is paying for is still just the surface of quality.