The 1st house is our window to the world and other people's windows into our world, the glass between us and others that is stained by the planets in it.
Neptune gives it a milky tint, making the way we see the world and the way others see us hazy and delusional.
Neptune is deceptive and only sees what it wants to see.
In the house of identity, we may have problems grasping who we are.
If you have a very unclear sense of self, if your identity is not solidified, you attract others who will do it for you, who will project their unconscious desires onto you - good or bad.
They will use you as the scapegoat they needed or as the manic pixie dream girl - but you will rarely ever be seen for who you actually are.
Like Marilyn Monroe you will be for others whatever they want or need you to be for them and your sense of identity is victimized for others.
The plus side is that you can easily mold yourself and adapt to all kinds of people and circumstances, you might even be a good actor.
Neptune is often described as a sponge that soaks up their surroundings.
It rules the sign Pisces, the fish that is consumed in a body of water and becomes one with it.
With neptune in the house of identity, one might be whatever the circumstances demand of them - depending on the people they are with and the situation they are in, they blend into that and morph their persona. This is not an act of conscious manipulation and willing deception, more so a natural, unconscious adaption.
This flexibility will, of course, make these individuals even more unclear about their identity.
Even to others, they are very hard to define and pin down - like water, they fit in any container and flow around any obstacle.
Which also makes their identity lack definition, solidity and consistency.
Having a hazy view on the world will make one be constantly up in the clouds, daydreaming, eyes going out of focus.
Indidividuals with this placement can be very naive and, furthermore, never seen to be really present in the moment, grounded in reality.