The oral tradition presents anthropologists and historians with a difficult, sometimes insurmountable, problem; given that by definition its antecedents were not written down, there is no way to tell whether a particular legend is true, is entirely made up, or is in that gray area in between.
Sometimes corroboration of the true tales can come from odd sources -- such as the story amongst the indigenous people of the Pacific Northwest of a massive earthquake and tsunami, that was later shown to be true not only by geological evidence -- but by written records from Japan. But hard evidence of this type for legends in the oral tradition is rare, and in any case, an earthquake in the Northwest isn't exactly a far-fetched claim to begin with.
It's when the stories are more out there that it becomes harder to discern whether they're entirely mythological in nature, or whether there might be some bit of real history mixed in there somewhere. Which brings us to the strange tale of the Moon-eyed People of the Appalachians.
Botanist, naturalist, and physician Benjamin Smith Barton, in his 1797 book New Views of the Origins of the Tribes and Nations of America, talks about a conversation he'd had with Colonel Leonard Marbury, who had worked as an intermediary between the Cherokee and the American government. Barton writes, "... the Cheerake [sic] tell us, that when they first arrived in the country which they inhabit, they found it possessed by certain 'Moon-eyed-People,' who could not see in the day-time. These wretches they expelled." The Cherokee chief Oconostota supposedly told Tennessee governor John Sevier about them, saying they were light-skinned, had "come from across the great water," and were the ones who'd built some of the monumental earthworks in Tennessee and neighboring states.
Those two references seem to be the earliest known sources of the story with at least moderate reliability (although note that both are second-hand). Through the nineteenth century, the legend of the Moon-eyed People -- who were light-skinned (some said albinos), small in stature, and saw better at night than during the day -- was repeated over and over, then embellished and twisted together with other legends.
One of those is the odd Welsh tale of Madoc (or Madog) ab Owain Gwynedd, who after a family conflict in around 1170 C.E. sailed away from Wales with some friends, who ultimately settled somewhere in eastern North America and intermarried with the locals. Of course, "somewhere in eastern North America" is a pretty broad target, so this opened up the gates for a variety of claims, including that there's Welsh blood (and/or Welsh linguistic influence) in the Monacans and the Doegs of Virginia, the Tuscarora of New York, and even the Zunis of New Mexico and the Mandans of North Dakota. This runs up against the problem that there's no good genetic or linguistic evidence supporting any of this -- despite claims of "Welsh-speaking Indians," there's pretty certainly no such tribe. So braiding together the Moon-eyed People (for which there's no hard evidence) with the legend of Madoc ab Owain (ditto) doesn't make the case for either one any stronger.
Side note: aficionados of science fiction and fantasy will probably recognize the Madoc ab Owain legend as the basis of Madeleine L'Engle's alternately brilliant and cringy YA novel A Swiftly Tilting Planet, which has the main character, Charles Wallace Murry, time-traveling back through Madoc's line of descent in North America. Brilliant because it weaves together all sorts of contingent histories and what-ifs with a legend that's kind of cool; the cringy part is that a major plot point revolves around a "blue-eyed Indian = good, brown-eyed Indian = bad" thing, mixed in with a heaping helping of the Noble Savage myth. I loved the story as a kid, but now it's hard to read it without wincing.
Be that as it may, as far as the Moon-eyed People goes, what we're left with is... not much. Even the Wikipedia article on the legend admits, "Sources disagree as to the accuracy of the stories, whether or not the stories are an authentic part of Cherokee oral tradition; whether the people existed or were mythical; whether they were indigenous peoples or early European explorers; and whether or not they built certain prehistoric structures found in the region."
So it's a curious story, but the dearth of evidence -- combined with the fact that what we have is filtered through the eyes of white Americans in the eighteenth and nineteenth centuries who were inclined to view Native legends as quaint at best and outright demonic at worst -- means we have to put this in the "most likely mythological" column.
On the other hand, maybe we should wait for the people over at the This Hasn't Been History For Quite Some Time Channel to get their hands on it. I'm sure they'll have an answer at the ready.
The only really significant aspect of this story is that the earliest written attestation is not by a Cherokee, but by a politician motivated to justify white domination.
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