Information Wants to Be Free but Secrets Are Worth Paying For: HotNewCrypto's Story

HotNewCrypto dropped from several thousand users to fewer than 100 when the website started charging for its service, but its operators say the cash flow was well worth the lost popularity.  

The site, run by a pseudonymous team, scours Twitter at machine speed to find buzzy young cryptocurrency projects for potential investment (hence the name). On April 19, HotNewCrypto shut down the free Telegram bot that surfaced its discoveries and removed a public leaderboard ranking them by the engagement they elicited. To get this intel, users would now have to pay $2,500 a month for a gated service called Secret Party.

The move brought howls of derision. Here are some samples of comments in its Telegram group:

And:

But also:

That last comment speaks to the problem HotNewCrypto faced. 

"We're in the business of secrets basically and the problem with secrets is, the more they propagate the less value they have,” said E.S., the only North America-based member of the three-person founding team.

That is why the group decided to throw most of what they had built behind the paywall. The goal was to learn if they could find 20 customers willing to pay the admittedly intimidating fee, roughly equal to the rent on a two-bedroom apartment in Brooklyn, N.Y. A month into the experiment they succeeded. According to E.S., HotNewCrypto now has between 50 and 100 customers, but closer to the high end of that range. 

These people, he said, were more than happy to pay such a high fee for access to new projects before others do. The service had already been worth much more than that to them, and supporting the team to find additional signals would be even more helpful.

As they researched the space, E.S. said, the team realized that others were providing similar services but they called it “research.” Research is different, he said, because it provides enriched information. Secret Party doesn't offer enriched information, but it offers actionable information fast.

The team also learned that investors already trade information informally to some degree. They call it "alpha trading." (“Alpha” is an old Wall Street term for above-market returns, and is used loosely in crypto circles to mean competitive advantage.)

The Telegram group that started it all has reached more than 4,000 members. Not only did spreading these leads so widely undermine their value to those willing to pay $2,500 for access, it could also pose a problem for very young projects. Founders could end up being flooded with inbound messages looking for airdrops or cheap tokens, long before they were ready to entertain such requests. 

On the other hand, there are some inbounds that new projects don't want to miss. "Those projects, when they are really new, are very interested in people who can help," E.S. said.

HotNewCrypto has no investors, but the new customer cash flow has allowed it to expand its operations, E.S. said. It now casts a wider net than Twitter, finding projects sometimes before they even have a social media presence, when one of the founders is just kicking around ideas on GitHub, for example.

The payments are accepted in five different cryptocurrencies (bitcoin, ether, USDC, litecoin and dai) and processed by Coinbase Commerce, according to a checkout page generated when CoinDesk staff checked out the order flow There is no option listed for paying fiat. (Unlike rival processor BitPay, Coinbase Commerce does not convert crypto to fiat for its merchant clients; those who want to do so must withdraw their coins to an exchange such as its namesake sister company.)

HotNewCrypto refers to its approaches for automating discovery of embryonic projects as "strategies." (That's the same term DeFi darling Yearn Finance uses for the particular magic its so-called vaults use to maximize yield.) The subscription income has helped the team build more alpha-hunting strategies that isolate even stronger signals from the noise online, E.S. said. 

The team has also gotten a lot better at sorting projects to surface. In an ideal world, E.S. said, they would be able to automate finding the most promising new projects. That can be quite hard, he said, because the signals there are tricky (maybe impossible) to spot. 

Culling junk from the list, though, can be a lot simpler, and that's also helpful for folks looking to trade on good information early. "There's a lot of interesting things that can be done with comparison," he said. 

He gave one example of how culling junk can be automated. The worst projects, he said, just copy a large portion of the code base they use, whether it's the software running their smart contracts or the one that runs their site on the old-fashioned web. There's also telling metadata that machines can read. 

"To me it feels like crypto is a thousand times more than tech in terms of noise," E.S. said. 

HotNewCrypto has always been blockchain neutral. It looks for projects wherever they might pop up, be it on Ethereum, Solana, Binance Smart Chain or elsewhere.

Fans of the old site have reason to rejoice: the free leaderboard went back up, though it is a bit more limited now. It shows the most trending new projects over the past quarter. For up-to-the-minute leaders, users will have to pay that $2,500. 

E.S. said the team plans to roll out additional tiers that would help less deep-pocketed people get in early on airdrops and other opportunities the retail market likes to chase for a more reasonable price.

To that end, HotNewCrypto has also created another free Telegram channel, Rekt Party, that highlights dubious opportunities. Its sardonic tagline: "Be the first to know about the latest s**tcoins and future rugpulls. There might even be a gem or two in there ... Don't get rekt."