0xKyle's Research: Trade Ideas

TCGs & Collector Crypt

0xkyle — Fri, 05 Sep 2025 14:03:10 GMT

First things first - some disclaimers:

I hold CARDS.
THIS ARTICLE WAS STARTED WHEN CARDS WAS ON ITS FIRST DRAWDOWN AT 0.1547. I AM POSTING THIS AT ATH LMFAOOOOO. But on a serious note, I didn’t try to time the price, my priorities is to just get this piece out. Make your own decisions, just take this piece for information
This is not financial advice. Investments in any products, services, tokens or projects involve the risk of loss. Past performance is not guarantee of future results.
This does not reflect the opinions of my employers. Views expressed are my own, and this content is provided for informational purposes only and should not be relied upon in any manner as professional advice.

And some credits:

Thanks @c0xswain and +EV Capital for the first intro to CARDS
Thanks @David from DACM for sharing notes
Thanks @notthreadguy for the amazing podcast
And of course, thanks collector crypt for launching this and thoum for building a great business

Collector Crypt Thesis

Anyone who thinks CARDS is "just a crypto RWA" is doing a great disservice to the business. While it's not wrong, it is a gross oversimplification of the business that I believe Collector Crypt (hereby abbreviated as CC) has built. In particular, I believe that CC has a variety of different strengths (moats) that can be categorized into the following:

Token Moat
Deep Distribution + Logistics Strength
Founder Alignment
Sourcing Moats
Resilient Business Model

The importance of all of these factors cannot be understated. Over the past few days we have obviously seen the explosive growth of TCGs as a narrative, and thus I expect the usual crypto outcome of "everyone moving to where the gold is" akin to a mini gold rush, as many people rush to try and replicate their success. But what people are failing to realize is that this isn't a product that can be easily duplicated.

In fact, I am of the opinion that unlike AI Agents who benefit from the typical Software-As-A-Service type of scale (and hence ease of replication), replicating a TCG RWA is 1,000x more difficult than it seems. This is because of the huge logistical and deep real-world connections one has to have in order to build a scalable business, much unlike most of crypto's "purely digital businesses" where code can be forked and features can be copied overnight.

In my opinion, the combination of a strong business model operating in a high growth vertical creates a compounding advantage that becomes increasingly difficult for competitors to replicate over time. CC represents something far more defensible than the typical crypto project, and CC has something others don't - time advantage: they spent years building the unsexy but critical infrastructure that actually makes a TCG business work: purchasing networks, authentication processes, logistics systems, and most importantly, the trust and reputation that comes from successfully handling $75M in transactions.

Market Opportunity

Before we begin, let's size out the market opportunity of TCGs today. I will have to proclaim that I'm not an expert on this - my experience in TCGs only goes so far as playing Duel Masters when I was a kid (fantastic game, btw).

But that doesn't mean that I am unable to see the scope of the market opportunity here - it is massive. For starters, I will only be focusing on Pokemon cards for now, because that is what CARDS currently offers - and also, because of the simple fact that Pokemon cards are the cornerstone of the entire TCG industry. Pokemon cards have seen the largest long-term increase in value amongst all card categories: up 3,261% over 20 years.

And on a broader scale, the arts, cars & collectibles market is larger than Gold's market cap. Of the $27T, $7.43 billion alone is attributed towards TCGs as of 2024 - and this is projected to grow even further with a CAGR of 7.86% YoY.

Of course, these are all just numbers - what I like to look at are anecdotal trends and underlying ideologies that drive these numbers, because I believe they reveal the true staying power of this market opportunity. And based on what I'm seeing, I believe that these trends are here to stay:

The Millenial & Gen-Z wealth transfer

The first and most obvious trend is generational. The kids who grew up with Pokemon cards in the late 90s and early 2000s are now in their prime earning years. These kids now have nostalgia backed by disposable income, and this shows up in the data - nearly 1 in 5 adults reported purchasing Pokémon cards for themselves.

So when a 30-year-old software engineer sees a PSA 10 Charizard, they're not just seeing a piece of cardboard; they're seeing their childhood, and they now have the financial means to own it.

To add on, a simple Google search of "why are pokemon cards so popular now" on Reddit would give you similar answers:

The Labubu-fication of society

This is an interesting one. I believe that Labubus are just a deeper manifestation of how economic inequality and mainstream gambling culture have converged to create a new collectibles paradigm. When traditional wealth building feels impossible, people gravitate towards alternative forms of both spending and wealth creation that still retain that crucial "fun factor."

You can kind of see this in everything - sports betting, gachas, blind boxes, 0DTE options, pack openings - these are all forms of "sophisticated gambling," each on a different level of the spectrum. Deep down, the mechanics are similar - they all deliver some sort of dopamine hit, on top of having that allure of making financial gains.

TCGs build on top of this by also giving you a tangible collectible every time - and there's always that luck factor where a $4 Pokemon pack could contain a $500 card. So - for a generation priced out of traditional asset accumulation, TCGs offer the psychological satisfaction of "investing" while scratching the same itch that drives sports betting apps and crypto day trading; I believe that is incredibly powerful.

Overall, the growth & size of this market is up and to the right. The final nail in the coffin for me is the simple fact that this is a trend that came back after 2021. As an outsider, it was quite obvious to me that 2021/2 was quite an amazing bubble for Pokemon cards, with celebrities like Logan Paul paying $5.2 million for a Pikachu graded PSA 10 in 2022. Obviously, NFTs were also doing extremely well - but one of these survived while the other didn't.

That to me, is a clear sign that this is an industry that shouldn't be faded. The ability for TCGs to not only survive but thereafter grow stronger after a major speculative bubble tells you everything you need to know about the latent demand for these things. NFT floor prices went to literally zero, yet Pokemon cards were able to find their footing and continue climbing!

Tokenization Product-Market-Fit For Collectibles

Now that the market opportunity has been cleared, let me talk about what problem the tokenization of RWAs solves in general. Like many things in crypto, in 2021 we believed that we had a solution searching for a problem. But little did we know, we already had a problem to solve, it would only take us 4 years to realize it.

I wrote a tweet about it here; but the gist of it is that we didn't realize the golden egg we were sitting on until TradFi came and pointed it out to us! Now, the whole world is going crazy: Robinhood is integrating perpetual futures, every bank is trying to build a stablecoin (today, Stripe announced Tempo, a payments-focused blockchain), and Larry Fink himself said that "every stock, every bond, every asset can be tokenized," and that would "revolutionize investing."

And I believe that this time is not different. We have once again become so jaded by false starts that we are missing the simple fact that the NFT thesis from 4 years ago has found product market fit. How? Here's an analogy:

You want to buy a rare collectible. Today, if you wanted to purchase it, you would have to find a seller, arrange a viewing, wait for shipping, pray that nothing gets damaged or stolen - a whole boatload of hassles. This whole process takes weeks and costs hundreds in fees.

Now, imagine that collectible as a tokenized asset. You can buy it instantly from anywhere in the world with a few clicks. Authentication is cryptographically verified and immutable. Settlement happens in seconds, not weeks. The physical item stays safely stored in a vault - until you decide to redeem it. When you're ready to sell, you can list it on a global marketplace and receive payment immediately upon transfer.

The convenience tokenization unlocks is pretty much unparalleled - it trades with the speed & efficiency of a digital asset, while maintaining the underlying traits of a physical one. You basically get all the benefits of ownership with none of the traditional friction.

And of course, this is not a new idea. This is why tokens were made in the first place. But today, we finally have (god forbid I say it): Product-Market Fit. It's taken years, but I truly believe that we are on the cusp of change - that the tokenization wave is truly upon us.

Why CARDS will win

Now that the context has been set, let me deep dive into Collector Crypt (CC), and why I believe it will be the clear winner of this trend. For those who don't know, CC is a Solana-based platform designed for trading physical and digital collectible cards through an innovative on-chain marketplace. They specifically deal with Pokemon cards (for now), and most crucially, they have a Gacha that allows consumers to open packs online - more on this later.

As for logistics, this is how it works (as displayed on their website):

First, you send your cards to their secured vaults, including PSA, PWCC and ALT, where they are stored and insured
Cards are authenticated, scanned, and linked to your profile or wallet
Lastly, you can buy, sell, and transfer cards securely at a fraction of competitors' prices

And over the past week, their token has gone absolutely parabolic:

However, I am of the opinion that CARDS still represents the best in the biz, and that the underlying business has so much room to grow. This is a strong company, with an incredible team, building in a high growth vertical… Most importantly, this is one of the rare cases where I feel like having a token makes sense. That is the first of their strengths:

1. Token Moat

$CARDS represents the token of CC, and I believe that having a token is justifiable in this case because:

It is a high growth business in a high-growth vertical that has a lot of thematic crossover with the crypto industry
It offers liquid exposure, is N of 1, in a vertical everyone is dying to get exposed to

Pokemon cards, Crypto Traders, and Sneakerheads often have more in common than they do apart. Interestingly, the Venn diagram of people who understand the value of a PSA 10 Charizard and people who buy digital tokens is basically a circle:

Crypto traders are highly speculative, and when you combine it with TCGs, it seems intuitive that a token would unlock this latent demand that liquidity otherwise could not find exposure to. Not everyone wants to buy underlying pokemon cards, but having a token that could, in some sense, represent the TCG Market? That would be incredible.

The data on tokenized TCG volumes already reflects this - they have gone exponential in 2025.

In some aspects, that's what CARDS is. It offers liquid exposure to a vertical that everyone else is dying to get into. And not just any vertical - one that is part of the "hyperfinancialization" thesis. The best products in crypto always have to do with some angle of hyperfinancialization - whether it be DeFi, Perp DEX, or Prediction Markets. Now, we have the Pokemon market - one of the hottest alternative asset classes in the world.

The other aspect is the fact that it is a high-growth business that has great fundamentals; Other tokens just don't offer the same type of upside - you may be speculating on the general theme, but without the same fundamentals, all they do is act as betas with no type of alpha capture of their own. Currently, CARDS is really the ONLY liquid bet that individuals can bet on - Courtyard doesn't have a token, and Phygitals does not do enough volume to justify betting on it even if they had one.

Thus, when you take two and two together, you get a golden egg - a token with good, growing fundamentals, building in a space with a large and growing TAM.

2. Deep Distribution + Logistics Strength

This is the part many people fail to understand. Above, I mentioned that CC would be a very hard business to replicate, and it's precisely because of their incredible distribution and logistics.

Firstly, they are literally one of eBay's largest card buyers, purchasing $500,000 worth of cards every single week. They've built the world's first end-to-end eBay scraping auction tool that monitors thousands of auctions daily, uses proprietary pricing algorithms, and places bids on hundreds to thousands of cards simultaneously. No one else in the world has this capability.

And beyond that, they've become the largest buyers at most auction houses they participate in. I'm not an auction expert, but I would assume that when a customer consistently shows up to your door offering to give you so much business, they get to build relationships and reputation that cannot be replicated.

I'm being serious when I say that I really doubt anyone could replicate this easily. They have the ability and talent to source cards, go through logistics and infrastructure to get the cards on-chain efficiently - this isn't just code. This is operational efficiency at its peak; getting inventory vaulted, authenticated, scanned and minted in the shortest amount of time possible is a moat that cannot be easily surpassed.

On the verification level, they have experts verifying it, and professionals that authenticate them. Above all, they have good support systems in place to make sure nothing falls through the cracks - on the podcast, Tuom Holmberg (CEO) mentioned that they give a 100% refund if they sold you a card and it wasn't real. I mean, in an industry full of scams, this integrity is seriously a breath of fresh air.

This expertise can't be built overnight - it really comes from within. And that takes us to our next strength:

3. Founder Alignment

The reason why CC is able to do all of this, is simply because Tuom Holmberg (CEO) has been in the game for decades. From the podcasts, my image of him is a highly principled person that is deeply passionate about TCG - having played Magic The Gathering for most of his life.

While he was previously a Biotech Executive, he decided to pivot entirely into TCGs - something that he was clearly passionate about his entire life. Take note, all of this was just taken from listening to podcasts done with Tuom, so I could be wrong - but I truly think that this is a man who loves his business, and will do everything he can to succeed at it.

This is best illustrated in how he spent all the money that he raised on buying cards - not to his pockets or inflated salaries. The man still drives a 2021 used Toyota Prius while building a business that's done $75M in revenue. His tokens are locked for 12+ months, and despite numerous under-the-table offers, he's maintaining his integrity and long-term vision.

This level of founder-market fit is incredibly rare, impossible to fake, and extremely difficult to compete against. When your competitor genuinely loves the business and reinvests every dollar into making it better, you're not just competing against a company - you're competing against his life's work.

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4. Sourcing Moats

This is another great moat for CC. They have an unparalleled ability to source grail cards unlike other platforms - most users have continually mentioned how Collector has the most “value for money” gacha rewards compared to competitors in the market - such as Phygitals and Grailed. This is especially important for gacha mechanics which rely on the Pareto Principle - 20% of the rewards drive 80% of the volume; i.e the ability for the company to source the best cards, and put them up for rewards, drives a lot of the volume to the protocol.

This scalability gets increasingly important for power users who truly play to win. Power users don’t like to use platforms who have either ungraded cards, or have bad inventories - CC has (so far) been incredible for power users to use, and this, like exchanges or perp dexes, are the “whales” that drive a lot of the volume to the platform.

5. Resilient Business Model

And of course, all of this culminates in the fact that Collector Crypt dominates marketplace market share.

Their only real competitor - Courtyard, raised $43M while they raised <$3M. Yet, they have gotten to 2/3rds of Courtyard's revenue - and ONLY with Pokemon cards.

This ALL happened in the past 8 months - where they've had average monthly net revenue growth of 69% MoM - and anyone who thinks this is "airdrop farming" clearly forgot that we have been in a bear market in the past 8 months on-chain - practically zero people were talking about this.

Growing whilst being profitable is basically the North Star of any company. $7-10M in profit on $75M in revenue while having growing volumes week on week - an actual, cash flow generating product.

And to top it off, the unit economics are beautiful. The gacha in particular, is an extremely intelligent product: For $50, you get an expected value of $53.5 - and the money they make is through buying back the cards you don't want at a discount of 15%.

This basically means that on average, customers are getting a fair deal while CC captures value through inventory recycling rather than house edge exploitation. CC has created a system where customers maintain positive expected value, but the platform still generates sustainable margins.

And once sports cards launch, this will represent another massive TAM expansion. The scalability is what really sets this apart from traditional businesses. Their infrastructure can handle exponentially more volume without proportional cost increases. They've already proven they can go from zero to $75M in revenue in under two years with a skeleton crew.

To sum it all up: This is a fantastic business.

Catalysts

The icing on the cake, after all of this, is continued horizontal expansion to other markets. The biggest catalyst I see for CC is expansion to other IPs - for example, NBA and Magic The Gathering (MTG). While this might seem “simple”, this unlocks net new demand which can double or triple their revenue.

This is because MTG is a pretty large part of the TCG market as well - making up to ~20% of TCGs (Pokemon makes up approximately ~65%) ;

This is because MTG is a pretty large part of the TCG market as well - making up to ~20% of TCGs. If CC successfully onboards MTG, it not only captures an entirely new audience of competitive players and collectors, but it also establishes itself as the default digital-physical bridge for trading card IPs. Each new IP brought in is not just incremental revenue; it compounds the network effects. For instance, MTG players discovering CC could spill over into Pokemon or NBA products, boosting liquidity across the board.

The NBA angle works differently but could be even more powerful. Sports IPs have broader mainstream penetration and a more casual collector base, which opens the door to mass adoption beyond core TCG players. If CC integrates with NBA cards, it can attract sports fans who don’t care about Pokemon or MTG but still want to engage in collectible markets digitally.

Thus, the real unlock here is diversification of audience. Relying too heavily on Pokemon (~65% market share) leaves CC exposed to shifts in a single IP’s popularity or licensing. By expanding into MTG, NBA, and other IPs, CC creates resilience in its revenue base and significantly expands its TAM. The more categories they can aggregate under one roof, the harder it becomes for competitors to dislodge them, since they’re no longer just “the Pokemon platform,” but the de facto platform for collectibles.

Now, let's talk risks.

Risks:

Inventory Risk

This is probably the largest constraint right now - cards sell out immediately on open. This is despite so much money going into buying inventory - they are literally running out of supply that can't handle the latent demand. This, in my opinion, is a good problem to have. I'd rather they face this, than face the problem of not having enough demand.

Counter: Of course, this is still a problem. I believe that Tuom Holmberg has some sort of solution to this though. This is where conviction comes in, I guess. I'm willing to underwrite this risk, that he will find a way through this.

Valuation Risks

It's too high of a valuation, with $400M being pretty "fair value" as FDV goes.

Counter: $400M isn't a crazy valuation at all if they resolve inventory and expand into more markets (e.g Sports). Also, I believe that FDV isn't the metric to look at here, considering that only ~3.5% more supply will unlock in the next year. In this case, its "real" market cap is only 8.11% of FDV.

Conclusion

There is only one ticker, and it is $CARDS.

Thank you for your attention to this matter.

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On-Chain Microcaps

0xkyle — Mon, 07 Jul 2025 12:10:39 GMT

(Full Disclaimers below. Not financial advice. All content reflects my personal views only - not those of my employer, and is for general information only; They do not constitute endorsement, advice, or guarantees, may include ads or undisclosed positions, and you should consult qualified professionals because all investments carry risk of loss.)

Alts are dead, long live alts.

Any participant in the digital asset market of the past few months has been greeted with an overwhelming amount of down-only in asset prices (namely, alts) - all while BTC hovers around ATHs.

BTC has been hovering around ATHs, while OTHERS has been making a slow grind downwards.

The alt-coin landscape in crypto is grim. Gone are the days in which crypto participants expect multiples in their gains - these days, most “pumps” are at most 50% moves; which, while respectable, in reality hide the fact that you’d have to hold through a -50% drawdown first - ending up with a -25% from when you first entered.

The cost of capital for investing in alts has thus never been higher. Many alts face systemic problems, and I have narrowed it down to 3 basic criteria that altcoins have to show in order to be considered “a worthy investment”. Sadly, probably <20 altcoins have all 3. They are:

Product Market Fit: A business that is revenue generating, shows growth, and is ideally something high growth
Alignment with token holders: Buybacks are the current way to show this - but buybacks, unless done with huge size, is ultimately “useless” - the crux here is but the message that is being sent ;
No supply overhang: Many altcoins face immense unlocks - and combined with reason (1), most altcoins with a lack of product face an issue where there is virtually no buyers for their tokens - see: ETH L2s as an example.

The reality is, many tokens don’t even hit 2/3 of this. And what you get is a sea of tokens that look like this:

Add to the fact that investing in alts is often extremely path dependent, and that path can often take you through a boat load of volatility. Imagine buying a token at what you think is a fair price, just for it to -50%, before going back to break-even again. Case in point - Hyperliquid’s HYPE:

To add salt on the wound, Hyperliquid’s considered one of the best tokens out there right now that fulfill all 3 points (hence its ability to break prior ATHs) - in many other tokens, the path dependency ends after the -40% move down, where you wait for the next 20% altcoin pump before exiting your position:

Most altcoins look like this. And if you think you can bottom tick this - well, if price capitulation doesn’t kill you, time capitulation will

It’s why everyone is saying that it’s a “traders market” right now - which is very much true. Liquid investing is some of the hardest its been since I’ve joined the space - any thesis that you pitch, can go -50% first (even if it’s a tier 1 asset) ; and the total number of coins that satisfy all 3 criterias can be counted on one hand.

Why On-Chain Microcaps

I’ll spare you guys the “Internet Capital Markets” pitch - the angle I’m going for is a little different. I believe On-Chain Microcaps (hereby being abbrieviated as OCM) is one of the few investable sectors left from a liquid investors POV.

It’s important to note that while I mention Microcaps, the range of this is usually anything sub-500m in market cap (but exceptions can be made). More often than not, I look for sub-100m tokens - but the crux is that they’re on-chain. This makes all the difference, as projects no longer need to give a significant % of their supply to CEXes - thus reducing supply overhang.

So - why OCM? Well:

Ability to generate multiples instead of percentages

This is just simple math. It’s way easier for a 10m market cap coin to 3x, than a 3bn market cap coin. I’m sure many people are scoffing at this, saying “yea, but I’m not going to ape a 10m shitter” - well, here’s SPX6900 - once a sub-300m market cap coin that has 180m in liquidity, that 3.5x’ed in the last 120 days.

While this is quite obviously selection bias, the fact is that there IS more potential for upside in this area - if you look at >500m market-cap tokens that have generate multiples in the past 6 months, only 3 of them have >100% returns ; 1 of which is a fund favourite, and, was originally on-chain before it got listed on CEXes everywhere (SYRUP).

No Token Inflation

Generally these tokens are launched through launchpads, which means they’re fully diluted upon launch. This is great, because they avoid any unnecessary supply overhang that can cause investors to retreat out of fear.

Alignment with tokenholders

The Internet Capital Markets narrative spawned a bunch of tokens that were all weirdly aligned with tokenholders. While small, many of them flaunted “buyback programmes” despite being sub 50m in market cap - a great start, compared to the large CEX alts that have not done much so far. While alignment isn’t supported by all OCM tokens, I have noticed that on-chain coins seem to have a higher propensity to engage some sort of buyback, compared to CEX alts.

However, there are many drawbacks that come with the OCM thesis as well:

Not scalable for large sizes

Ironically, the reason why it can generate multiples, is the same reason why funds can’t invest in it - they’re just too small to allocate size that would move the needle for a fund. Much of these OCM tokens have liquidity pools with <1m in liquidity - buying 6 figures would likely give you double digit slippages.

However, I argue that it’s still an extremely scalable strategy up to 9 figures. It is possible to allocate 7 figures into, say, a 50m MC coin - if that 3x’es, that’s still a nice gain.

Easily ruggable

The downside of permissionless markets is that many of these coins may end up with teams that just give up after a brief period. I will argue that this is not so different from CEX alts though - there are many large CEX alts with teams that have “checked out”. Either way, one has to have a good due diligence process in order to separate the wheat from the chaff.

No PMF

Many of these coins are small and likely new, and thus don’t show strong PMF. This is not great for the longevity of the tokens, but I’d argue that there are still gems out there waiting to be found.

Because of these reasons, I have found on-chain to be the only place in the crypto-space worth looking into. Now, this article’s getting quite long, but don’t worry - the next part is what you guys have been waiting for:

OCM Watchlist

For the brevity of this piece, I will not be diving deep into these tokens. I might do deep dives into individual ones later down the line, but for now, I’ll keep it short and sweet. These are just some of the OCMs that I’m looking at right now.

Launched during the AI season in Q4 2024, REI has been one of the quiet outperformers - from 5m at the absolute bottom, to ~95m right now. It’s building an AI model, and seems to be literally the only comeback story of the AI Agents arc - hence making it worth a check.

Shuffle

OG 0xkyle readers remember that I pitched Shuffle a long time ago. Well - it didn’t do spectacularly well, but recently, their launch into the US market is, imo, a huge unlock that is super under-the-radar. They’re currently top 5 casinos in the world, and this could basically put them neck to neck with Stake.

Anyways, for separate readings on Shuffle, you can check this pitch on BidClub by Mitchell.

Launchcoin

While it has been a disappointing month for Launchcoin, I do think that this is the launchpad that has a differentiating factor going for it. My take on launchpads is that it’s a race to 0 - permissionless markets just means that each time we get a mini bull season, people will start bundling coins and “crime szn” will start again - and thus, each mini cycle ends faster and faster.

Launchcoin actually changes this with barriers to entry. For reference, just think about “irl launchpads” - i.e stock market IPOs. Imagine a world where anyone could IPO - you’d probably get a lot of crime, because humans are driven by greed (in fact, if you study bubbles of the past, many of them were just “vaporware IPOs” - exactly the problem we face in crypto).

Launchcoin at least attempts to change this - and while the updates have been quite minimal, IF they succeed, it’s worth a bet.

ZEX (rebranded to Bullet) is building a perp DEX on Solana. While you might think this is the 100th Perp Dex iteration, I truly believe there is space for perps on Solana - mainly because “trenchers” are quite a legit addressable market that would be perfect to trade perps. Add to that the fact that the current product offerings for perps on Solana aren’t the best, ZEX could be quite an interesting play.

Others

Some other names I find interesting:

CLANKER
PCULE
DUPE
REKT
FLIPR
TIBBIR
GP

Well, that about sums it all up. While I’m not 100% convinced on any of them, it’s alot more interesting to me than looking at the same few tokens on my watchlist. OCM definitely presents a different opportunity set that I believe is way more interesting than traditional altcoins right now.

Also - one last thing: investing in OCM is alot different than traditional altcoin investing. I might do an article as to how I invest in OCM tokens in the future, but it’s pretty dangerous to go 100% size on any of these singular tokens, as the rug risk really is way higher than traditional CEX tokens. Sizing is key in the on-chain market.

Thanks for reading 0xKyle's Research! This post is public so feel free to share it.

Till next time,

Kyle

Disclaimer

Views expressed are my own

Views expressed are not investment advice, endorsements or recommendations

Statistics are only informative

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As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

How I'm Playing This Market

0xkyle — Sun, 01 Jun 2025 10:39:22 GMT

Gmeow, here’s a q2 update for how i’m adjusting my playing style for crypto markets. It’s been a very tough year, and the game has been getting exponentially more difficult since 2021; this article serves to help me structure down how exactly i’m playing this, and I hope in the writing of this you can get some insight too.

long disclaimer inc, rest of the post is below:

Disclaimer

This content, which contain opinions and/or information related to any products, services, tokens, or projects, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or to be regarded as an endorsement of any products, services, tokens, or projects. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. Investments in any products, services, tokens, or projects involve the risk of loss. Past performance is no guarantee of future results. You should always consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

Views expressed are my own

The commentary in any of my posts (including but not limited to those on my blog (https://0xkyle.substack.com/), and social media (https://x.com/0xkyle__)) reflect the personal opinions, viewpoints, and analyses of myself only, and should not be regarded as the views of my employer DeFiance Capital or its respective affiliates. Commentary on any projects, protocols, companies or other subject matter discussed in my posts should not be taken or interpreted as an indication that DeFiance Capital holds any interest in the subject matter discussed. Neither DeFiance Capital nor myself will be liable for any actions arising from assumptions made with respect to myself or DeFiance Capital based on my posts.

Views expressed are not investment advice, endorsements or recommendations

Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by me. I may invest in any of the projects, protocols, companies or other subject matter discussed without obligations to inform or disclose such investments to you, the reader. The views reflected in the commentary are subject to change at any time without notice.

Nothing on this website constitutes investment advice, performance data or any recommendation that any particular product, service, token, project, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any product, service, token, or project mentioned. Nor should it be construed as an offer to provide investment advisory services by myself. Any mention of a particular product, service, token, or project and related performance data is not a recommendation to buy or sell that product, service, token, or project.

Statistics are only informative

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As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

It’s the best month of May for the market since 2000s - yet, it feels exponentially more difficult

From zerohedge on X

Last month was the best month of May for markets in the past 25 years. While intuitive (crashing prices = more room for upside), capturing it seems to be a different monster entirely. In fact, if you ask me, it doesn’t FEEL like it’s the best month of May - there seems to be a massive dislocation between what sentiment, and what the market has returned since Liberation Day (April 2nd);

This is because we’ve been observing levels of uncertainty and volatility in the markets unseen since, well, the last time Trump was elected. Trump is basically uncertainty incarnate - he chooses to tweet market-moving news on Friday nights when markets are closed, he tells people that “it’s the best time to buy” (and the stocks actually move up), and everyone is just sitting on the edge of their seats waiting for the next Truth Social bomb (everyone gets a tariff!)

Words cannot really describe how shaky the markets have been. I remember on Liberation Day, most people were calling for new lows - many macro traders were firmly bearish and felt that it was Great Depression v2. Smart money everywhere was calling to be in cash - I bet that if you went back in time and told these people that S&P would V-reversal back post April, few would actually believe you.

And if you look into our very niche internet bubble, we can see that it’s difficulty squared. Why do I say this? If you look at the spaghetti chart of different tokens that have outperformed Bitcoin (I probably missed quite a few), you can actually see quite a few high profile names that have done well. On the surface, it may actually look like it was pretty easy to outperform, right?

Well, no - this chart measures the returns since April 2nd. However, many forgot that prior to April 2nd, many tokens drew down 60-80%. Take Hyperliquid, for example. From February to April, Hype basically had a 60% drawdown to $10~ before it rebounded back to ATHs.

My point is as such: Volatility is immense right now. Hyperliquid is by no means a niche, obscure name - yet despite being such a popular long, investors would likely have suffered a sizeable drawdown in longing this. The returns shown in the spaghetti chart forget to account that no one times the bottom, and that in this era of investing, path dependency is a bitch.

Case in point: Myself; I bought Hype at $18, thinking it was a pretty value buy. I had no idea of knowing that it would bottom at $10 - I was just thinking that below $18, it was a pretty fair buy and was willing to DCA downwards. Of course, it went to $15 - I was fine. It went to $12 - I was fine. And then Jelly-Jelly hit it - if you don’t know what happened then, here’s a link to a short synopsis by Coindesk. And then it went to $10, and at its lows of $9, that was a -50% drawdown I took, on a $6 billion market cap token.

Now, I know that many of you reading this are going like “yea, but it’s crypto, you gotta expect a 50% drawdown” - well, when you’re sized heavily into a coin, expectations and seeing it happen are two different things. The past month has forced me to re-visit how I’ve looked at the crypto markets thus far, and re-evaluate how I have to invest moving forward.

This article is sort of a letter to myself as well, to internalize what I’ve learnt and how I will approach the markets in a new manner.

Strategies & Lessons

Let’s start with empirical observations that I’ve observed about the markets

Path dependency is a bitch.

In the past month, we can see that tokens, stocks, etc. can all drawdown huge amounts before making new highs. I.e A stock/token could, as in the case above, do a -50%/60% drawdown before rebounding back to new highs.

This is a problem, because prudent risk management dictates that you should have a price level at which your thesis is wrong - i.e “if price hits X level, I will cut my losses”; of course, this depends on the type of trader you are - and I believe this is my Lesson #1: I made the mistake of looking at price while being a thesis based investor. This means that instead of having a price where I’m wrong, I should look purely at the thesis and have an invalidation for the thesis; e.g in the case of Hyperliquid, it might be something like “Hyperliquid fails to show growth in total Perp Dex volume over time”

This is probably highly contentious and very, very context-driven & up to the individual. What works for me will probably not work for you - but I believe that this is the right way for me to navigate such markets. What I’m saying is that I should learn to accept the volatility that will come from uncertainty - i.e accept and embrace even more volatility that will come in the future, and underwrite it based on thesis instead of having price based stops.

The otherside of consequence of this is, of course, that price always acts first, and data takes time to come in. By the time data comes in, the thesis could have collapsed. The second consequence is that this is a pretty bull-headed tech that completely ignores the perils of macroeconomics and is probably quite frankly, surface level stupid way of investing.

But then I’m reminded of the above tweet, plus in Howard Marks’s Thinking About Macro memo, he writes:

Working from first principles, I believe this approach suits me as I don’t pretend to trade around a subject I don’t know much about (macro), and I simply base my investment decisions on structural fundamentals regarding a token. This aligns with 1) sticking to what I’m good at, 2) me getting chopped up trying to align macro policy with bitcoin price, and then bitcoin price with altcoin price (btc down, alts down)

Not only do the markets not know what’s coming, but they often behave in ways that make little or no long-term sense.

And at the end of the memo, Howard Marks concludes with this:

Which leads me on to my next point:

Alt season doesn’t exist anymore, we cannot compare to the past ; staying invested matters more than anything

Simply put, my lesson here is that I have realised that being invested matters more than anything now. To be honest, many in crypto including myself are more momentum traders that rely on Bitcoin breaking ATHs and getting that wave of “altszn” upon us, where everything goes up. However, I believe that paradigm simply doesn’t exist anymore.

The alt season we saw in the month of May turns out to be a wick as many alts have retraced. However, I would like to point out to Hyperliquid who’s still up 3-4x from the bottom - while of course an outlier, the lesson here is that if you were only planning to trade in “hot markets”, you’d probably miss this entire rally - because there were no usual signs of frothiness that you’d expect seeing Bitcoin rip new highs.

This is another mistake I made - to always reference 2021 in expectations of alt seasons. It’s good to have history, but it’s bad to keep using history as a benchmark expectation of what’s to come. It’s time to start with a fresh slate - and as such, I think “the old ways” of only investing in “hot markets” (i.e alt season) are kind of a figment of the past. Instead, it’s more important than ever to stay invested in indivdual coins, to do due diligence on singular projects, instead of having broad based “narratives” or “metas” that we’re so used to having.

Of course, hot markets still exist in crypto (i.e the whole ICM meta); however, they shouldn’t be thought of as the norm - if not, you’d wait the entire year for this short ICM meta that lasted 2 weeks to make money. It’s not a very consistent nor outperforming strategy if you ask me.

What I wrote in my notes app

It’s time to be more aggressive while underwriting longer time frames now; and find singular good names

Last screenshot from the memo I promise

This idea of aggressive / defensive has served me well in helping to navigate the crypto markets. In January of 2025, I was highly defensive when I saw prices just skyrocketing - and now, I believe that it’s time to be more aggressive. After the -80% across the board in many on-chain coins and the drawdown in most alts, we’ve had a nice little rally - and while many coins seem to be pulling back now, I believe that it is time to change the way I invest.

When I say it’s time to stay invested, we cannot just invest into any old thing. This is where this lesson comes in - it’s time to underwrite longer time frames, on good coins. Underwriting longer time frames is important because there are many “potential Hyperliquids”, but none have reached the same level of revenue generation just because they simply don’t have as large of a traction yet - a good case in point is Pendle - you can read Modular Capital’s thesis on Pendle here.

I’m not going to cover it, but the idea is that there ARE good tokens out there with strong product moats that may not have huge amounts of revenue yet. Hyperliquid is an outlier because it’s based off of speculation - the most profitable thing in crypto. You can see the same outcomes in AMMs / Trading bots. However, this doesn’t mean that more boring products can’t succeed.

Stablecoins are the largest thing that is coming to TradFi, and as I wrote previously, FRAX is a pretty decent long. Pendle, as written by Modular Capital, is also a good bet on stablecoins, yet it doesn’t show any sign of price outperformance. The key here is that we need to extend our timeframes and position ourselves for the inevitable puck that will come in 6 months.

With that in mind, here are some lines I’m investing under.

In this current market, it’s more important than ever to be highly concentrated in few names. Identification of those names will be key.

Summary

Path dependency is a bitch. Become a thesis based investor, accept volatility and price declines
Market structure is different. Being active only in “alt szn” isn’t a good strategy as alt szns don’t seem to exist anymore - instead, it’s more important to stay invested.
And lastly, asset selection matters. Stay invested in tokens that have distribution or revenue moats. Underwrite longer timeframes to avoid uncertainty / volatility.

Thanks for reading 0xKyle's Research! This post is public so feel free to share it.

$FRAX - The Stablecoin Play No One Is Looking At

0xkyle — Wed, 14 May 2025 21:22:48 GMT

Gmeow it’s been a while - I am restarting liquid token pitch articles! For those who are on premium subscription, I had paused your subscription for the long hiatus I was on - so don’t worry, you weren’t charged.

Some updates from my end in the long time I was away - I joined Defiance Capital as an analyst! However, do note that 0xKyle’s Substack, and my writing in general, is considered separate from the fund and does not represent the fund’s positions. I usually try to be as transparent as possible with these things - as such, here’s the disclaimer:

Disclaimer

This content, which contains security-related or non-security related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or to be regarded as an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. You should always consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

Views expressed are my own

Views expressed are not investment advice, endorsements or recommendations

Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by myself. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security.

Statistics are only informative

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I may receive payment from various entities for advertisements on my blog or social media from time to time. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith by me. In addition, any mention of a particular security and related performance data is not a recommendation to buy or sell that security.

As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.

Again,

I own FRAX
This article reflects my personal opinions—not those of DeFiance Capital.

Without further ado, let’s begin:

FRAX - The Phoenix, Reborn Anew

TLDR:

276m MC / 304m FDV ; Frax presents a great asymmetric opportunity to bet on stablecoins + with the upcoming GENIUS bill, Frax is aiming to be one of the first U.S.-compliant payment stablecoin under GENIUS Act
- Founder Sam Kazemian is co-drafting U.S. stablecoin legislation, giving FRAX unmatched regulatory alignment
- Asymmetric setup: regulatory tailwinds + product-market-regulatory-fit + mispriced token (very hated)
FRAX is now a vertically integrated stablecoin stack: frxUSD (stablecoin), FraxNet (banking interface), Fraxtal (L2 execution layer)
- frxUSD is fully backed by T-Bills and cash
Token restructuring: FXS renamed to FRAX, now the gas, governance, burn, and staking token; legacy frax dollar has been discontinued, now frxUSD
Significant under-valuation: ~$304M FDV vs peers like Ethena ($6.1B) & best liquid token exposure to the stablecoin narrative — USDC/USDT have no tokens (private companies), Maker/Curve less direct
Real-world integrations live: custody via BlackRock/Superstate, partners include Stripe & Bridge

First, let me start with the elephant in the room. The knee-jerk reaction from people when they hear the ticker is one of hesitation - usually because of how overly complicated it’s been, trying to do “too many things”, or a bad experience trading FRAX previously.

Before reading the rest of this article, I urge you to completely shed any past biases you’ve had on FRAX, and approach it with as much of an open mind that you can. Pretend that it’s your first time seeing this - because I sincerely believe that Frax as a whole has completely changed itself to become an entirely different application, making a pivot so momentous that changes the thesis entirely. Let’s dive right in:

1. FRAX Is Well-Positioned To Capture The Upcoming Stablecoin Wave

The stablecoin narrative is one that every crypto participant well understands and agrees has a large Total Addressable Market (TAM). Despite this, I see very little talk on the timeline about the GENIUS & STABLE bills - two landmark bills that define stablecoin legislation by the US Congress. Why is this so? Well, I believe it’s because politics is an extremely arduous process with many hurdles. People have low expectations of outcomes, and think it’s a nothingburger. Most people look at these bills as being somewhat important, but also don’t have a basic understanding of its magnitude. At best, they think it’s pretty cool a stablecoin bill is being passed, but at worst, they expect many delays, and ultimately, for it to be a nothing burger.

However, I would like to assure you that these bills are actually pretty important in defining the future era of stablecoins. To start with, I’d like to provide a ChatGPT summary of the two bills for you to peruse:

There are two very important takeaways from the bills:

Firstly, they define what payment stablecoins are in legal terms. The GENIUS Act will formally allow payment stablecoin (PS) issuers to issue digital dollars that are legally compliant as bank settlement media and used for interbank payments across the US and global financial system.

Payment stablecoins are the largest structural change that levels the playing field for new innovations and opens the entire multi-trillion US banking sector for stablecoin startups. The total $200B stablecoin market cap is only 1% of the total M1 money supply. The US stablecoin bill enshrines payment stablecoins as legal M1 digital dollars for the first time in history. In other words, the great stablecoin game is about to begin.

Secondly, this bill is monumental in creating a framework for stablecoins to be regulated by federal standards, and perhaps more importantly, would most definitely set the standard for global stablecoin issuance worldwide. Today, stablecoins exist within a legal gray area – there is no real regulatory framework for stablecoins, within the United States today. This prevents traditional players from truly integrating stablecoins and makes it hard for existing players to scale to their maximum potential. This bill changes all of that, and thus, I believe will truly ring the bell to usher in the great era of stablecoins.

Now, I am proud to say that there are multiple crypto people in DC that are helping draft this momentous bill – and Frax’s Sam Kazemian is one of them. I believe the greatness of this feat has gone unnoticed – Sam is working at the highest level of Washington DC, helping to draft the bills. If you ask him, he’d point out the parts of the bill in which he personally had a hand in giving suggestions!

People in crypto like to say that crypto founders are not doing anything real, or that crypto lacks fundamentals – well, here you have a founder, in the most powerful levels of the political echelon, single-handedly helping draft the stablecoin bill. I believe that it is not an understatement to say that Sam’s achievements place him in a league of his own among crypto founders.

This is not just a DeFi protocol anymore – it’s a monetary institution that is building with regulatory clarity in mind before it even passes – Frax is now ready to scale legally, institutionally and globally.

FRAX – Onboarding The World’s M1 Money To Stablecoins

Now that the context has been set, I can go on to talk about what FRAX is building today. Frax isn’t just building a stablecoin – it’s building an entire monetary system that integrates TradFi & DeFi into one cohesive stack, with the goal of capturing the global M1 money supply. Frax is executing this through vertically integrated architecture that spans issuance, yield, and settlement – the three pillars of a modern banking system, across three components:

frxUSD – Legal Tender Digital Dollars
FraxNet – The Bank
Fraxtal – The Rails

1. frxUSD – Legel Tender Digital Dollars

frxUSD is Frax’s flagship stablecoin - a 1:1 fully backed digital dollar supported by short-term U.S. Treasuries and cash equivalents. It's extremely important to note that this is nothing like Frax’s previous stablecoin – frxUSD is designed to qualify under the GENIUS Act as a payment stablecoin (hence, Sam spending so much time in DC).

frxUSD is fully backed by cash and short-term T-bills, custodied via Blackrock and Superstate (BUIDL and UStb). frxUSD aims to be the first payment stablecoin in the U.S. with legal tender characteristics, compliant reserve structure, and institutional integrations.

2. FraxNet – The Bank

This is the most exciting part to me. If frxUSD is the dollar, FraxNet is the banking interface. FraxNet is basically a stablecoin banking app – fully KYC’ed, custodial-compliant, but natively on-chain.Imagine logging into your account, seeing your Goldman Sachs MMF holdings, minting frxUSD against it, and then streaming your yield back to your Fraxtal address – in real time.

The North Star here is simple: turn every traditional Money-Market Fund (MMF) dollar into an on-chain, interoperable dollar. Frax has partnered with Stripe and Bridge to do this – with the recent announcement of Stripe’s stablecoin integrations, this should come as no surprise.

In my opinion, this is what makes Frax exciting – a stablecoin with real world asset alignment, addressing a trillion dollar addressable market.

3. Fraxtal – The Execution Layer For Stablecoin Commerce

Lastly, we move on to Frax’s native chain, Fraxtal. Fraxtal is where frxUSD will be natively issued, transferred, and settled. It’s hardforked from Optimism Bedrock, has native bridging like Circle’s CCTP, and is optimized for frxUSD to be the unit of account.

Fraxtal also uses FRAX (previously FXS) as their gas token - This means every single app built on Fraxtal – from FraxLend to FraxSwap to Frax Name Service – will require FRAX to operate. And more than that, fees from these apps go straight to buying and burning FRAX.

I believe that what Sam is trying to do with FRAX is an ambition like no other. FRAX has shed its old skin of being a decentralized stablecoin. Instead, FRAX is building a full-stack monetary system with the following parts:

frxUSD is the legally compliant stablecoin
FraxNet is the institutional bridge and user onboarding layer
Fraxtal is the global execution layer

It’s the convergence of cashflow, utility, and growth. And what gets me the most excited about this is the amount of effort Sam is putting into this to make it regulatory compliant. There is simply no other decentralized stablecoin issuer that is putting themselves on this compliant, transparent, and legitimate path.

With all eyes on stablecoins, the next wave of adoption – real, scaled, trillion-dollar wave – is going to come from institutions and consumers who need to comply with laws. They need redemption rights. They need clarity. They need to be able to walk into a boardroom and say “yes, this is compliant under U.S. law.”

And Frax is building exactly for that world. This is what product-market-regulatory-fit looks like.

2. The Re-structuring of FRAX

Now that I’ve covered the current context, let’s move on to the more minute changes Frax has undergone recently that add more tailwinds to the protocol. This part mostly goes through the changes made in FIP-428 which you can read here if you want.

In essence:

Old Frax stablecoin has been deprecated and is now known as Legacy Frax Dollar. New stablecoin is now known as frxUSD.
FXS is being renamed to FRAX – just one, singular core asset to represent the entire protocol. Nice.
- veFXS becomes veFRAX, wFXS becomes wFRAX, etc.
- However this transition takes time as exchanges work to support it
FRAX becomes the gas of Fraxtal – replacing frxETH. Every single on-chain interaction now uses FRAX as gas – and, the plan is to eventually support validator staking using FRAX – a huge unlock for token utility
New tokenomics: Tail Emission Plan – 8% yearly emissions, dropping by 1% per year till it hits a 3% floor. Emissions are now distributed via FXTL points, a point system that rewards protocol-aligned behavior
- You can boost your conversion rates with Flox Capacitors, which requires staking FRAX. The goal here is pretty clear: reward long-term users who lock, stake, and actively participate in the ecosystem. ALIGNMENT, BABY.
This also means no more FXS Gauges – no more mercenary LP farming! No more bleeding emissions just to maintain TVL – everything is now earned
- Frax is no longer a bribe game - it’s now more akin to a L1 token that gets monetary premium, burns, revenue, and utility rather than a bribe + farm token - which gives FRAX credence to get repriced as one
sfrxUSD is now the yield bearing layer – it captures yield from underlying T-Bills backing frxUSD.

There’s a few more points, but these are the most important in my opinion. FIP-428 is a beautiful proposal that essentially ties the entire ecosystem to one token, and one token only: FRAX. Every part of the Frax system now loops back into the token; Fees from Fraxtal? Burn FRAX. FXTL Emissions? Only goes to users holding and staking FRAX. Validators staking in the future? Requires FRAX. Governance? veFRAX. And above all, FRAX is now a L1 token as it’s the chain’s native gas token.

Frax has essentially created a monetary loop with internal demand, utility, and sinks. And that’s why I think people are sleeping on this – In my opinion, the takeaway here is understanding that this isn’t just a simple rebrand. Frax is becoming the most regulatory-aligned, yield-generating, vertically integrated dollar stack in crypto.

3. Amongst Liquid Tokens, FRAX Presents The Best Case

Lastly, let’s talk upside. Everyone knows stablecoins are the darling product of crypto, servicing the largest total addressable market - i.e the world. The stablecoin narrative is extremely well understood - however, the list of available tokens to position into to capture this, is extremely small.

Frax is, in my opinion, the best liquid token to long for the stablecoin narrative with incredible upside. On top of the North Star upgrade and building the entire banking stack, Frax sits in the best position within the stablecoin value chain.

The reason is simple - issuers capture the largest share of the economic pie compared to other players - not DEXes, nor lending markets, or payment apps. Controlling issuance is a monumental value-driver that captures the deepest margins - as they say, whoever owns distribution, wins.

It’s why USDC / USDT are the most sought after products on the market today from an investments perspective - too bad they don’t have a token! Below I’ve made a comparison table with other liquid tokens as well, to showcase why Frax is the best token in liquid markets to represent the stablecoin thesis today:

FRAX on the other hand, is almost fully diluted and sits at ( as of 10 May ) $276mm MC / $304mm FDV. This is a token with partnerships with Bridge & Stripe, sitting at sub $500m. Let me remind you that $ai16z right now ( as of 14 May ) sits at $384m MC – basically 2x of FRAX.

Secondly, the under positioning is real. As I said at the start, everyone I’ve pitched this to has expressed some sort of disdain towards the protocol. I’m pretty sure everyone is offsides – and with a chart like that, I’m not surprised. All the more reason to buy – it’s an asymmetric play with incredible upside at current price points; If Sam executes (and he has so far, making partnerships with all these giants) – the growth is there to be captured.

4. Risks Of Trade

Now that I’ve covered the upside, let’s talk risks. The risks here are pretty straightforward, actually:

The stablecoin bill gets delayed, doesn’t pass, or changes in a way that affects FRAX.

This is actually happening right now – just a few days ago, the bill failed to clear the U.S. Senate – I will say that I know very little about the process that goes on in DC. However, let me direct you to Sam, who has been working with these guys for the past few months; I quote:

“Not as big of a deal as people are making it out to be. We never expected this to pass until late July before Congress' August recess. Part of the political process, it wasn't like this was going to pass 3 months ahead of expectations. I'm an optimist but not THAT optimistic. It's all still realistic and on pace for July which was always my expectation.”

July will be one to watch – now, if it doesn’t pass in July, I’d start getting worried. But till then, I’m chill.

Why have I talked about the GENIUS Act so much and not the STABLE Act? What if the STABLE Act passes instead?

Again, according to Sam, that’s not how it works - they will likely both pass their chamber votes and there will be reconciliation period where there'll be a compromise final draft that gets sent to the president's desk. It will likely look more like the GENIUS Act than the Stable Act, which is what’s important.

What’s the worst case?

Neither of the bills passing – such a case will probably only happen if a catastrophe strikes – e.g global financial implosion, in which efforts are totally derailed.

In any case, I also believe that the thesis doesn’t solely hinge on the bills – Frax has shown to be doing monumental work in improving the protocol, which I feel is good reason to bet on them.

Failure to deliver on the promise

I see this to be highly unlikely given that he’s spent all this time in DC going full founder mode.

Conclusion

To wrap this up — FRAX is no longer the half-backed algo-stable you might remember from 2022. It’s evolved into a full-stack monetary system, built around regulatory clarity, institutional alignment, and vertical integration. The founder is in DC helping policymakers. The stablecoin is backed by T-Bills and custodied by institutions. The token is getting real utility — gas, governance, burn mechanics, etc.

In my opinion, it represents the purest stablecoin bet that exists in crypto right now – and you don’t get setups like this often. A token trading below $ai16z, tied directly to the largest TAM in crypto — the dollar itself! I am excited to see what the future holds for FRAX!

also pls share

Raydium: A Deep-Dive Research Report

0xkyle — Thu, 07 Nov 2024 15:52:18 GMT

Author’s Note: This article was originally created for Artemis Research and is intended for informational purposes only, not as a trade recommendation. I apologise for not cross-posting earlier - it has already been posted on my Twitter as an Article. Again, this is a research report only, and should be taken as such.

This piece thus only serves to inform, not to advice. I hope you enjoyed the time & effort I put into this. I hold positions in the assets mentioned in this article.

Original Piece: https://www.artemis.xyz/research/raydium-king-of-solana-de-fi

~ 0xKyle

DISCLAIMER: This document is provided for informational purposes only and does not constitute financial, investment, or legal advice. The content is based on sources believed to be reliable; however, no guarantee is made regarding its accuracy, completeness, or timeliness. Any reliance on this information is at your own risk.

The author(s) may hold positions in, and may buy or sell, assets or securities mentioned at any time without notice. This document may contain forward-looking statements that involve risks and uncertainties; actual results may differ materially. Past performance is not indicative of future results.

It is essential to consult with a qualified financial advisor to assess the risks and suitability of any investment decisions. The author(s) disclaim any liability for direct, indirect, or consequential loss or damage arising from the use of this document. By accessing this document, you agree to these terms.

Overview

The 2024 cycle has seen the dominance of Solana thus far, with the major narrative of this cycle - Memecoins, all spawning on Solana. Solana is also the best-performing Layer 1 blockchain in terms of price appreciation, with it being up ~+680% YTD. While memecoins and Solana are deeply intertwined, Solana has generally seen renewed interest as an ecosystem since its resurgence in 2023, with its ecosystem booming - protocols like Drift (Perp-DEX), Jito (Liquid Staking), Jupiter (DEX-Aggregator) all having tokens with billion dollar valuations, Solana active addresses and number of daily transactions eclipsing all other chains.

At the heart of this thriving ecosystem is Raydium, Solana's premier DEX. The old adage “In a gold rush, sell shovels” perfectly captures Raydium’s position: while memecoins draw the spotlight, Raydium quietly powers the liquidity and trading that fuel this activity. Benefiting from the constant flow of memecoin trading and broader DeFi activity, Raydium has solidified itself as a piece of crucial infrastructure within Solana’s ecosystem.

Here at Artemis, we believe in an increasingly fundamentally driven world - as such, the purpose of this paper is to build a fundamental paper that highlights Raydium’s place in Solana’s ecosystem. Using a data-driven approach, we aim to break down Raydium’s place in the Solana ecosystem with a first-principles approach. Let’s dive right in:

A Brief Introduction To Raydium

Launched in 2021, Raydium is an automated market maker (AMM) built on Solana, enabling permissionless pool creation, lightning-fast trades, and ways to earn yield. The key differentiating factor about Raydium lies in its structure - Raydium was the first AMM on Solana, and launched the first orderbook-compatible hybrid AMM in DeFi.

When Raydium launched, they utilized a hybrid AMM model that allowed idle pool liquidity to be shared with central limit order books, while at that time usual DEXs could only access liquidity within their own pools. This meant that liquidity on Raydium also created a market on OpenBook that was tradable on any OpenBook DEX GUI,

While this was the major differentiator in the early days, the feature has since been turned off due to an influx of predominantly long-tail markets. Raydium currently offers three different type of pools, namely:

Standard AMM Pools (AMM v4), formally known as the Hybrid AMM
Constant Product Swap Pools (CPMM), with Token 2022 support
Concentrated Liquidity Pools (CLMM)

For every swap that occurs on Raydium, a small fee is charged depending on the specific pool type and pool fee tier. This fee is split and goes to incentivizing liquidity providers, RAY buybacks, and the treasury.

Below we’ve documented the trading fees, pool creation fees and protocol fees of the different pools on Raydium. Here’s a quick breakdown of what each of the terms mean, and their respective fee levels:

Trading fees are the fees charged to traders on a swap
Buyback fees are a percentage of trading fees taken to buy back the Raydium token
Treasury fees are a percentage of trading fees allocated to the treasury
Pool creation fees are fees levied upon creation of pools, meant to deter pool spamming. Pool creation fees are controlled by the protocol multisig and reserved for protocol infrastructure costs.

The DEX Landscape On Solana

Fig 2. Solana Total Value Locked (TVL) amongst DEXes

Now that we’ve managed to break down how Raydium works, we’ll be moving on to assessing Raydium’s position in the Solana DEX landscape. It goes without saying that Solana has managed to climb the ranks amongst L1s in the 2024 cycle - putting Ethereum aside, Solana is the chain with the 3rd most TVL, directly behind Tron (2nd) and Ethereum (1st).

Fig 3. Daily Active Addresses, Daily Transactions, TVL and DEX Trading Volumes across chains

Solana continues dominating in metrics relating to user activity, such as Daily Active Addresses, Daily Transactions, and DEX trading volumes. This rise in activity and monetary liquidity on Solana can be attributed to a couple of different factors, with the one of the more famous ones being the “memecoin frenzy” on Solana. Solana’s high speed and low cost in settlement, combined with its slick user experience for D-Apps has led to the growth and flourishing of on-chain trading. With tokens like $BONK and $WIF that have reached multi-billion dollar market-caps and the emergence of Pump.fun, a memecoin launchpad, Solana has become the de-facto home of memecoin trading.

Solana has been, by far, the most used Layer 1 this cycle, and continues to dominate amongst the other L1 in terms of trading activity. As direct beneficiaries of increased activity, this means that DEXes on Solana have been doing extremely well - more traders means more fees, which means more revenue to the protocol. However, even amongst the DEXes, Raydium has managed to capture considerable market-share, as shown in the data below:

Fig 4. Market Share Of Solana DEX Volumes Across DEXes

Today, Raydium ranks 1st amongst the other Solana DEXes, doing the most volume out of every one of them. Raydium dominates 60.7% of total Solana DEX volume - and this is because Raydium allows all sorts of activity to be done on them - from memecoins, to stablecoins.

One way Raydium does this is by offering pool creators and liquidity providers several choices when creating a new market. Users can opt for constant product pools for price discovery on initial launch or choose to LP in tighter ranges on concentrated liquidity pools -- allowing initial price discovery to happen on Raydium for long-tail assets and while still remaining competitive on SOL-USDC, Stablecoin, LST and other markets.

Fig 5. Solana DEX Liquidity Across DEXes

On top of that, Raydium continues to be the most liquid DEX to trade on. It’s important to note that DEXes are often an economies of scale problem, as traders flock to the exchange with the most liquidity to avoid slippage on their trades. Liquidity begets liquidity - and it becomes a positive flywheel as the largest DEX gets the most traders, which attracts liquidity providers for them to make money off of fees, which attracts more traders who yearn to avoid slippage - the cycle continues.

Liquidity is often an underlooked factor when comparing DEXes, but it’s crucial in evaluating the best-performer - especially considering that traders on Solana are trading memecoins which - on top of being extremely illiquid, require a schelling point to converge around - fragmentation of liquidity across DEXes would result in poor user experience and general dissatisfaction to buy different memecoins across DEXes every time.

Examining The Relationship Between Memecoins & Raydium

Raydium’s popularity can also be attributed to the resurgence of memecoins on Solana, especially by PumpFun, a memecoin launchpad that has made over $100mm in fees since inception earlier this year.

PumpFun memecoins have a direct line to Raydium - when a token launched on Pump.fun reaches a market cap of $69,000, Pump.fun automatically deposits $12,000 worth of liquidity into Raydium. Continuing on the earlier point regarding liquidity, this means that Raydium is, de-facto, the most liquid platform to trade memecoins on. Like a virtuous cycle, pump.fun bonds to Raydium > memecoins launch there > people trade there > it gets liquidity > more memecoins launch there > it gets more liquidity, and the cycle repeats.

Fig 6. PumpFun Generated Tokens Volumes On DEXes

Thus, Power Law has been attributed to Raydium, where virtually >90% of PumpFun generated memecoins do their business on Raydium. Like a mall in a city, Raydium is the largest “mall” on Solana, meaning that most people go to Raydium to do their “shopping”, and most “businesses” (tokens) want to set up shop there.

Fig 7. Volume for Pairs Across DEXes on Solana, 30D vs. Volume for Pairs on Raydium, 30D (Red = Memecoins, Blue = Non-Memecoins)

Fig 8. Raydium Volume By Token Type

However, it’s important to note that while PumpFun relies on Raydium, the opposite isn’t true - Raydium doesn’t actively rely only on memecoins for their volume. In fact, according to Figure 8, the top 3 largest volume traded pairs in the last 30 days are SOL-USDT/USDC, contributing to more than 50% of all volume. (Note: The two SOL-USDC pairs are two different pools with different fee structures).

Figure 7 and Figure 9 also serve to substantiate this, with Figure 7 showing that SOL-USDC far outclasses all other DEX pairs in terms of volume. Figure 7 represents volumes across all all DEXes, it still goes to show that volumes across the ecosystem aren’t necessarily only driven by memecoins. Figure 9 goes one step further to show Raydium volume by token type, and we can see that “native” takes up the largest market share, at over 70%. As such, while memecoins are substantial parts of Raydium, they don’t necessarily make up the whole picture.

Fig 9. PumpFun revenue

Fig 10. Raydium Revenue

That being said, memecoins are highly volatile, and volatile pools usually have larger fees - as such, while memecoins may not contribute as much as the Solana pools volume wise, they are a large contributor to revenue and fees for Raydium. This is evidenced in looking at the month of September - because memecoins are such cyclical assets, during “bad markets”, they tend to underperform greatly as risk appetite diminishes. Revenues for PumpFun subsequently dropped 67% from an average of $800k a day in July / August, to around $350k a day in September; We saw the same drop in fees for Raydium during that time period;

Fig 11. TVL Raydium Over Time

But like everything else in crypto, this industry is highly cyclical, and it’s normal to see a drop in metrics during bear markets as risk washes out. Instead, we can focus at TVL as a measure of the true anti-fragility of the protocol - while revenues are highly cyclical and come and go with the arrival / departure of speculators, TVL is a metric that stands to signify the sustainability of a DEX, and how it stands the test of time. TVL is similar to the “occupancy” of a mall - while fads come and go, and the mall usage may vary according to seasonality just like in reality, as long as the mall has an above average occupancy, we can gauge its success.

And similar to a well-packed mall, Raydium has consistent TVL over-time, signifying that while its revenues may fluctuate with market prices and sentiment, it has demonstrated its ability to be a main-stay product of the Solana ecosystem, and to be the best and most liquid DEX on Solana. Thus, while memecoins do contribute in-part to its revenues, volume is not always done on memecoins, and liquidity still flocks to Raydium no matter the season.

Raydium vs Aggregators

Fig 12. Solana DEX Trade Source

While Jupiter and Raydium don’t directly compete, Jupiter acts as the key aggregator in the Solana ecosystem, routing trades through the most efficient paths across multiple decentralized exchanges (DEXes), including Raydium. Essentially, Jupiter functions as a meta-level platform that ensures users receive the best prices by sourcing liquidity from various DEXes such as Orca, Phoenix, Raydium, and others. Raydium, on the other hand, serves as a liquidity provider, powering many of the trades Jupiter routes by offering deep liquidity pools for Solana-based tokens.

Fig 13. 24H Jupiter Volume By AMM

While the two protocols work hand-in-hand, it’s worth noting that the share of organic volume from Raydium directly is slowly increasing, and the share from Jupiter is slowly decreasing over time. At the same time, Raydium accounts for nearly 50% of all of Jupiter’s maker volume.

This indicates that Raydium has been successful in building a more robust, self-sustaining platform that attracts users directly, rather than relying on third-party aggregators like Jupiter.

The increase in direct volume suggests that traders are finding value in interacting with Raydium’s native interface and liquidity pools, as users seek out the most efficient and comprehensive DeFi experience without needing to go through aggregators. Ultimately, this trend highlights Raydium’s ability to stand on its own as a dominant liquidity provider in the Solana ecosystem.

Raydium vs The World

Lastly, below is a Comp Table we’ve built using the Artemis plugin for Raydium versus the other DEXes on Solana, including aggregators

Fig 14. Raydium VS Solana DEXes.

Fig 15. Raydium VS Popular DEXes

In Figure 13, we compared Raydium against the most popular DEXes on SOL, namely Orca, Meteora, and Lifinity - together, the 4 of them make up 90% of Solana total DEX volume. We also included Jupiter as an aggregator. Meteora doesn’t have a token, but we still included it for the sake of comparison.

We can see that Raydium trades at the lowest MC/Fees and FDV/Fees amongst all the DEXes. Raydium also has the most number of daily active users, and all the other DEXes have more than 80% less TVL than Raydium - except for Jupiter, who we consider an aggregator and not a DEX.

And in Figure 14, we compare Raydium to other more traditional DEXes on other chains - as we can see, Raydium does more than twice of Aerodrome’s annualized DEX volume, yet trades at a lower MC/Earnings ratio.

Raydium’s Token

The tokenomics for Raydium are broken down below:

Note: Team and seed (25.9% of total) were fully locked for the first 12 months after TGE and unlocked linearly each day over months 13 - 36. Vesting concluded on February 21, 2024.

The Raydium token has multiple use-cases: owners of $RAY can stake their Raydium tokens to obtain additional $RAY. On top of that, it’s a mining reward used to attract liquidity providers to Raydium, allowing for thicker liquidity pools. Although the Raydium token is not a governance token, a governance method is in development.

While emission tokens fell out of favor with the market post-DeFi Summer, it’s worth noting that Raydium’s annual inflation rate is incredibly low, and its annualized buybacks is one of the best in DeFi. Annualized emissions are currently ~1.9mm RAY, with RAY staking accounting for 1.65m of total emissions, which is little compared to what other popular DEXes were emitting at their peak. At current prices, RAY emits around $5.1mm USD worth of RAY annually. This is very little, compared to Uniswap who, before fully unlocking, was emitting at $1.45mm USD a day, or $529.25mm USD a year.

As we recall, a small trading fee is taken for every swap in a pool on Raydium. As stated in the docs, “Depending on the specific fee of a given pool, this fee is split and goes to incentivizing liquidity providers, RAY buybacks, and to the treasury. In summary, 12% of all trading fees go to buying back RAY regardless of a given pool's fee tier.” This fact, coupled with the amount of volume Raydium does, has sparked some pretty incredible outcomes.

Fig 16. Raydium Cumulative Volume

Fig 17. Raydium Buyback Data

The results speak for themselves. Cumulative, with over $300Bn worth of volume done, Raydium has managed to buy back approximately 38mm RAY tokens, equivalent to $52mm USD worth. Raydium’s buyback programme is the strongest throughout all of De-Fi, and it has helped propel Raydium to the top amongst all DEXes on Solana.

The Case For Raydium

In conclusion, Raydium is fundamentally heads and shoulders above all DEXes on Solana, and is in one of the best positions to succeed with continued Solana growth. Raydium’s growth story is incredible from the past year, and it doesn’t look like it’s stopping anytime soon as memecoins continue to take dominant mindshare in crypto, with the latest memecoin craze being centered around AI (e.g $GOAT).

Raydium’s unique position as the primary liquidity provider and AMM on Solana gives it a strategic advantage in capturing market share from emerging trends. On top of that, Raydium’s commitment to innovation and ecosystem growth is reflected in its frequent upgrades, robust incentives for liquidity providers, and proactive engagement with the community. These factors suggest that Raydium is not only prepared to adapt to the evolving DeFi landscape but also to lead it.

Ultimately, Raydium acts as a piece of crucial infrastructure in one of the fastest-growing blockchain ecosystems, and if it continues on its current trajectory, it’s safe to say that the protocol seems well-positioned for growth in the future.

Resources

Shuffle - Product Market Fit No One Talks About

0xkyle — Sun, 06 Oct 2024 14:43:50 GMT

Before I begin, I want to apologise to all subscribers - both paid and unpaid! I’ve been working at Artemis for half a year now, and so I’ve taken a respite from the weekly substack because it’s pretty tiring to write + work. I feel I should have communicated this expectation earlier - sorry about that! Anyways, I’ll be back soon~

In the meantime, you can join the Artemis Telegram channel where I post daily market commentary!

TLDR:

Shuffle trades at 52.9M MC / 314.3M FDMC (as of 1 Oct); Does 14bn volume and 100mm in revenue annualized; it’s trading at 0.5x earnings MC wise, and 3x earnings FDMC wise.
It’s building a world-class product and onboarding at a massive pace (1 year since launch and has reached audiences worldwide) ; has an amazing growth story
At the time of writing (0.38~) cents, it’s extremely undervalued with favourable tokenomics despite the massive FDV overhang; and has incredible PMF similar to the likes of Polymarket / Hyperliquid / Pumpdotfun as a product (Casino, Gambling)

Heralded as products with the most product market fit thus far, Polymarket, Hyperliquid and Pumpdotfun have taken the crypto world by storm as VCs and thought leaders relentlessly talk about how the trio are “the best products this cycle”. You don’t have to look far under the hood to see that they’re all united by one desire: Speculation.

It’s funny, because people will dunk on crypto having “no use case aside from speculation”, but celebrate when said speculation is packaged into a product for people to use that engages thousands, if not millions worldwide. Memecoin = bad. Launchpad that enables you to launch gazillions of memecoins? AMAZING.

Let’s be clear: I’m not dunking on any of these products. Quite the opposite, in fact. I simply believe that speculation IS the product, and there’s nothing wrong with admitting that. The idea that speculation isn’t a use-case is ridiculous, considering that half the financial system is built on the idea of “outperforming the markets”, which implies price going higher. From trading to business acquisitions, many things are based upon the simple “sell to a higher bidder”. It’s no surprise that crypto, the most speculative asset class, found its most-used product to be a perp DEX, prediction market, and a memecoin launchpad!

But I digress. I believe that a new addition to the trinity is in order - a Casino. Done well, casinos are venues that do incredible amounts of volume while making absurd amounts of profit through house edge. “The house always wins”, as the saying goes. Despite people knowing that gambling is -EV in the long-run, millions still flock to casinos just to click a shiny green/red button, and the house wins because over the long run, more players lose than they win. (sounds familiar? the memecoin “casino” is similar, with arguably much worse edge)

And now, enter Shuffle: A world class casino that is showing insane growth, making incredible margins, and looks to be an extremely undervalued product.

Thesis

1. Shuffle is building an amazing product

Crypto casinos often get dunked on because of two reasons:

They tend to rely heavily on crypto-specific liquidity, which is typically short-term and lacks stickiness
They try to build decentralized casinos, which are historically hard to build due to their technicalities. Instead, casinos but with a token would be much better suited to crypto (think Binance with BNB, or Hyperliquid with their token)

In my view, crypto casinos should prioritize the core casino experience first and crypto integration second. - this means avoiding the complex task of decentralizing gambling - just like how some perp-DEXes don’t try to solve the problem of a decentralized orderbook. Instead, they focus on building a normal casino, with a crypto twist.

That’s exactly what Shuffle does. While Shuffle has a token (and is very focused on bringing utility to said token), it started out purely as an online casino in the bear market of February 2023, and since then they’ve managed to achieve over $2 billion in monthly wager volume.

This bear-to-bull market anti-fragility is, in my opinion, a key factor in their proof of being a great product. If you build in a bear market and still manage to attract users, I believe that you’re making something great and have some sort of product-market fit ; It suggests that people are drawn to your platform, regardless of market conditions.

It also helps that Shuffle pivoted from their original idea of attracting crypto-whales to their platform - as Noah (Founder Of Shuffle) mentioned in a podcast, they halted that idea once they realised it wouldn’t work in the long term.

“Most users of Shuffle are not crypto users, but users who just happen to use crypto to gamble” - Noah (Paraphrased from podcast)

This shift was crucial in attracting users who are genuinely interested in the product itself, rather than those who are simply farming rewards. Crypto liquidity is often mercenary, and appealing to these users typically results in a volatile "M"-shaped chart, as they ride the speculative wave but rarely stick around.

Case in point: NFT volumes. Typical M pattern that mark peak of speculation, with no real lasting liquidity

And so the combination of 1) launching during the bear and 2) not choosing to cater to crypto whales means that most of the people that come to Shuffle, genuinely like the platform and will stick - i.e a durable moat. The result is a gradual MoM ramp-up of volume, signalling actual growth.

And if you want to argue that the sharp jump in volume was “because of the airdrop” - post Airdrop 1 (AD1) we still saw continued growth; They didn’t have the usual post-airdrop dump in volumes, which is yet another bullish indicator that they’ve truly built a product that people use.

2. Shuffle makes a ton of money, and has excellent value accrual

“SHFL will be tightly integrated with the core platform, reward the most active users, build the community, and take the player experience to new heights. The token is designed to grow alongside the platform, with SHFL being the best token to wager with on Shuffle.” - Shuffle Docs

If building a great product wasn’t hard enough, building a fantastic token is even harder - most products fail at one, and succeed at the other. Take UNI, dYdX or Lido for example - these are all great businesses, with terrible tokenomics / value-accrual to the token.

Shuffle, on the other-hand, has made it clear that their token is instrumental in its capabilities as a casino, and that as they aim to be the best casino in the world, the token should grow along with them.

So far, Shuffle has two main ways of accruing value to the token:

Wagering in SHFL

Users can use SHFL to wager - this Shuffle is sent to the treasury and removed from the circulating supply. Users can swap their assets to SHFL in-app, and wagering with SHFL gets you bonuses and benefits. Basically, it’s pretty similar to what Binance does with BNB - by offering benefits of doing X with SHFL instead of usual fiat, users are persuaded to sell their fiat / collateral, buy SHFL, and wager in it instead.

Buy-back and burns (BB&B)

Creds to Lai Yuen!

BB&B’s are probably the most commonly-used way to drive value to the token - and Shuffle does it too. So far, they’ve burnt 3.58% of total Shuffle - my criticism here is that buy-back and burns typically don’t impact the markets until much, much later - however, Shuffle’s buy-back and burns are useful in gauging how much they make.

15% of non-SHFL net gaming revenue (NGR) and 30% of SHFL NGR are used to BB&B SHFL tokens on a weekly basis. Here’s a useful illustration of how it works:

illustration of how Shuffle gets their revenues

While some might think that using SHFL to buy-back and burn SHFL is shady, my pushback is that the fact remains that the casino still makes money on the swap. Money in a system cannot be created or destroyed, only transmuted. When someone sells USDC for Shuffle, that amount is still being used to “buy” SHFL, and all the casino has to do is to burn a 30% stake.

Now let’s breakdown the BB&B data. It’s really simple, actually - the data shows that Average Weekly NGR = 1.917mm ; Annualized NGR is thus = 100mm~; When comped against the top revenue generating protocols on Token Terminal, Shuffle trades at the lowest MC/Rev ratio amongst all of them.

Team

Shuffle’s team is fully doxxed:

Cofounder: Noah Dummett, ex-Alameda (pre-collapse in 2019-2021), ex-BitMex
Head Partnerships: Calum, prev. Co-Founder of Cardigan: livestreamer management w 1bn monthly views;
Incubated by Fisher8 - @hedgedhog on CT, great reputation and incredibly high integrity

It’s worth mentioning that my high levels of conviction directly correlate to how well I know the Fisher8 team - they are a stellar group of individuals, and have known to be one of the most upstanding people in the industry. A big portion of why I believe Shuffle to be the most promising crypto project is precisely because of them - the best talent in crypto incubating a product is something I can very much get behind.

While I don’t know Noah personally, Noah has also shown to be a very outspoken individual on Twitter. This is purely anecdotal and has no data evidence at all, but I generally have better vibes from founders who tweet directly from their personal accounts instead of their company accounts - see Sam Altman’s OpenAI updates, or Elon Musk’s SpaceX updates. Noah does just that, and it signals a sense of transparency that most crypto projects lack.

I think this aspect cannot be discredited, because a big part of the Rollbit saga was their shady / not-doxxed team which led to general disbelief about whether they were legit. The Shuffle team show that they’re doing the opposite, building genuine connections with their community.

Another small point to raise is that their token has given them access to a separate community - because gambling communities have such high churn, it’s tricky to build a strong and steadfast one. However, users can now rally behind their token, giving them access to a much larger user-base than a traditional casino-only product.

Tokenomics

Total Supply / Max Supply: 1,000,000,000
Initial Circulating Supply: 71,126,984.56
Token Breakdown:
- 31.2% treasury (312,000,000)
  - fund partnerships / sponsorships, host giveaways
  - can be used to backstop bets if necessary ;
  - Ultimate goal of distributing unallocated tokens to users through additional incentive programs and bonusing.
- 28.0% Airdrops (280,000,000)
  - All ADs under go a 3m linear vest
- 25.0% Team (250,000,000)
  - 6m cliff, 36m linear vesting
- 8.8% Early Contributors (88,000,000)
  - 6m cliff, 36m linear vesting
- 5.0% LBP (50,000,000)
  - LBP used to create initial liquidity, w the USDC raised from LBP used to seed initial liquidity for SHFL-USDC pool
  - 46,849,322.43 to the SHFL LP, with 3,150,677.57 returned
- 2.0% Liquidity Mining (20,000,000)
  - liquidity to the SHFL-USDC pool
  - Over a period of 3 years, with 128,205.13 SHFL a week

Lots of words, I know. I’ll try to simplify it to the key points:

If you check above, the “true circulating supply” on the Shuffle dashboard shows 5.77%, whereas my calculations show an estimated 12.32% that should be unlocked right now; This differential is probably because of the amount burnt (3.58%), and a large percentage of AD1 that has been wagered in SHFL ; Also, I could possibly be wrong in how I calculate it
The important takeaway here is the inflation rate - the team, by my estimates, get an unlock of about 1.0% of total supply each month, until Airdrop 2 (AD2) in December - which is around 3% each month for 3 months
However, the pushback on this is that:
- Early investors / team gives off the impression that they’re not willing to dump so early & have high conviction in their product - i.e low chance of “team dumping”
- As Shuffle continues to grow, it is quite possible that their buybacks offset the increase in token supply every month
TLDR: Low circulating + Team not really dumping tokens + not a liq farming token = token has low inflation, great utility

Catalysts:

The catalysts for Shuffle are simple - Lottery, and Airdrop 2.

Shuffle Lottery: Shuffle is launching a lottery system that aims to distribute revenue to users, with each Shuffle token representing a ticket in the lottery. This aims to attract more users to buy $SHFL - very bullish
Airdrop 2 - Airdrop 2 aims to airdrop the next 9% of tokens over 3 months somewhere in December to the most loyal users of their platform. While initially bearish (because it’s a large chunk of token supply), I’m of the opinion that it’ll have little to no market impact, because AD2 is weighted to go to users who have used their platform the most. For example, if you withdrew SHFL after AD1, your AD will be less than someone who kept SHFL. Additionally, wagering with old accounts that you’ve been using since AD1 deters sybilling, and also ensures that only the most loyal of users get AD2

While the catalysts aren’t anywhere near “CEX listing” kind of extraordinary, I believe Shuffle is more of a long-term play than a short-term catalyst trade.

Technicals

Alot of people like to tell me that “GambleFi isn’t sexy right now”. My answer to that is: I want to SELL when people think it’s sexy, not buy. Look at Banana, for example. Everyone thought TG bots were dead, and then Banana came back from the dead to prove them all wrong.

The Shuffle chart just looks like a bottomed chart, with not much going on. Perfect for accumulation!

Risks

I know, I know. This article has been very long - and we’re almost at the finish line! Before I end, I’d like to go through the risks of the trade - something very real that we all have to keep in mind.

Risk 1: Why not Rollbit?

Why Shuffle over Rollbit? Rollbit theoretically trades at a cheaper FDV, with “larger BB&B revenues” if you were to believe their numbers. Well, my reasoning against Rollbit is precisely that - it’s hard to trust their numbers. Again, a large part of my conviction in this thesis really lies in the Shuffle team - they have demonstrated to be a strong and trasparent team.

Reputation risk is very real when it comes to businesses like casinos - just like how you wouldn’t trade on shady centralised exchanges, users won’t trust their money with casinos that don’t look entirely clean.

It’s also worth noting that Shuffle leads Rollbit in terms of net deposits and currently stands 3rd, behind Stake and Roobet respectively. I also believe that Shuffle is far ahead of their peers in terms of where they would be at the same point in their lifecycles.

Risk 2: Regulatory Risk

I’m not sure what the legal rules are around a casino having a token; As one can expect, this will also probably not get listed on CEXes. There’s very real regulatory risk around Shuffle, and it’s pretty clear that they might face some tough headwinds from government bodies if they continue to grow.

Regulatory risk is something that can’t be avoided with many crypto products, though. But with casinos, the risk is larger than most - especially if they become one of the biggest casinos in the world. This is why trust in the team is important - having a strong team to navigate uncertain waters is crucial in building a great product.

Risk 3: No immediate catalysts

The catalysts for Shuffle don’t strike me as “huge catalysts” - but that’s ok. To me, Shuffle ticks the boxes of being a long-term investment, not a short-term one. I believe in Shuffle’s continued growth, and eventually, enough people will look at it - similar to what happened to Banana, basically.

Risk 4: Fake Revs

This is a little hard to disprove, but I’m sure it can be easily done by looking at who’s selling SHFL. If you don’t remember, Rollbit was under controversy because people thought the team was selling RLB to fund their buyback and burn - as such, I’m sure it’s possible to check sells on SHFL. While I looked into it, I haven’t done any comprehensive analysis on it.

Concluding Thoughts

We like the purple coin. Shuffle has shown incredible growth thus far, and I’m excited to see where they go next. Building a casino is extremely difficult, but done well, they’re a multi-billion dollar business yearly.

With the clear increasing financialization of the world (prediction markets suddenly exploding in popularity in 2024), it’s clear that online-gambling is on an uptrend. I’m even seeing gambling reels on Instagram, and gambling influencers are going viral for hitting “huge wins”. I believe Shuffle is well-positioned to capture the rise in gambling, and is poised to see increased growth in the coming months.

As GCR likes to say:

Thanks for reading! <3, Kyle

Thanks for reading 0xKyle's Research! This post is public so feel free to share it.

DISCLAIMER: The information provided in this document is for general informational purposes only and does not constitute financial, investment, or legal advice. The content is based on sources believed to be reliable, but its accuracy, completeness, and timeliness cannot be guaranteed. Any reliance you place on the information in this document is at your own risk. The document may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those expressed or implied in such statements. The author(s) of this document may or may not own positions in the assets or securities mentioned herein. They reserve the right to buy or sell any asset or security discussed at any time without notice. It is essential to consult with a qualified financial advisor or other professional to understand the risks and suitability of any investment decisions you may make. You are solely responsible for conducting your research and due diligence before making any investment choices. Past performance is not indicative of future results. The author(s) disclaim any liability for any direct, indirect, or consequential loss or damage arising from the use of this document or its content. By accessing this document, you agree to the terms of this disclaimer.

$PEOPLE - A Bet On The Politi-Fi Season

0xkyle — Wed, 12 Jun 2024 06:04:10 GMT

Dear Diary,

Today was the day before FOMC. It’s a bloodbath out there. Alts getting slaughtered, and my timeline is so bearish that it’s making me go crazy. There’s this guy on substack now telling me to buy this coin called $PEOPLE because of the upcoming elections? I’m gonna go touch grass.

As we wait for CPI and FOMC to come out tomorrow, I bring to you an extremely simple trade idea that I’ve been looking at for a while now. As we all know, the crypto market runs on narratives, and as election season draws nearer, we’re about to head into a narrative that I believe will dominate news cycle as the year draws to a close.

Without further ado, let’s dive in.

Thesis

With the recent announcement of an ETH ETF, we’re clearly seeing changes to the USA’s stance towards crypto regulation. I wrote about this in my latest trade idea - the ETH ETF trade:

The idea is that crypto has become a bi-partisan issue that politicians are taking seriously - and given that this is election year, a certain Republican President is making his stance on this clear:

As such, crypto now has become a political issue - and as we’re well familiar with, in crypto, attention is the name of the game. It seems clear to me that we’re bound to see certain coins trend with the ever-increasing narrative of what is now being called Politi-Fi (Political-Fi) - now, your job is to just figure out what to long.

Read the rest of this article for free if you refer 0xKyle’s Research to 3 people!

Looking At Existing Politi-Fi Tokens

As with all memes, there are some simple rules of engagement:

Memes are an attention game. Fragmented attention = bad. You want to only invest in the top ones (e.g PEPE, WIF, etc.) Derivatives of the “main meme” is almost always bad on a longer term - short term outperformer, long term underperformer
Liquidity is king. The best memes are the most liquid ones - memes that are on more exchanges / etc. benefit from having more liquidity, more eyes on them, and thus more green candles

In my head, there’s really only two real competitors:

TRUMP - 600m mcap
BODEN - 132m mcap

PEOPLE currently sits between the two, at 580m mcap. However, I believe that PEOPLE will surpass both of them to be the “De-Facto Memecoin”.

Don’t get me wrong - I think both of these tokens will still pump into H2 2024 - however, there are a few structural reasons why I believe their upside is capped, and thus why I believe PEOPLE still remains the best way to express your opinion on the PolitiFi narrative.

TRUMP and BODEN are a bit too consensus

This is a big reason for me - the fact that they are painfully obvious trades to take for the average narrative trader. “Oh, a token named after Donald Trump in an election year? Isn’t this a long?” - Yes, we’ve seen this trade play out successfully throughout the year.

However, I believe that these coins will start facing diminishing returns at some point. Because what was once a “buy the news” event has become a “front-run the frontrunners” into a “everyone has already bought, who is left to buy?” kind of situation. Let me break it down:

Trump says something → $TRUMP pumps → People extrapolate this by thinking: It’s election season, Trump will continue churning out news → Buy before hand so that I don’t have to react → Everyone starts piling in on the trade → There is no one left to buy → Instead, it starts selling hard on the news

We actually saw this in recent TRUMP price action:

$PEOPLE is bi-partisan

The core idea behind this trade is the fact that these tokens are supposed to reflect “attention on the elections” - however TRUMP and BODEN are more similar to social tokens that reflect the popularity of the said individual.

This essentially splits capital inflow - however, PEOPLE is bi-partisan and doesn’t represent any bet on a party, but rather a bet on the political scene in general. It’s a more non-biased way to express your position in the general election scene without taking a side.

Exchange listings might be a no-go

This is probably another big reason that I favour PEOPLE more than political tokens - the fact that listing TRUMP and BODEN on Binance / Bybit might be extremely difficult. Obviously, I know nothing about exchange listing requirements - I might be very wrong right now, and tomorrow a tier 1 exchange lists TRUMP.

However, I believe that this is a factor worth considering - listing a political coin that obviously expresses a certain person seems like it would flaunt some sort of regulation in some way - as such, I prefer $PEOPLE, which is already on Tier 1 exchanges.

Again - I do think TRUMP / BODEN might go up (TRUMP more likely than BODEN) - but to me, their upside is capped: The trade of buy and hold trump just lacks the upside when its such a consensus trade.

Power To The $PEOPLE

Thesis:

This is a coin you just keep accumulating when attention goes away - I believe that attention will go up once the election season starts
The only political coin on Binance & Bybit
Soon, the news cycle will be dominated by politics - just like how you accumulated AI in 2024 knowing that every ChatGPT upgrade would pump prices, the same might be done for PolitiFi

Risks & Invalidation:

If it doesn’t go up despite politics being hot
TRUMP and BODEN running but PEOPLE doesn’t run after giving it some time to run (e.g 10 days after MAGA goes vertical, PEOPLE doesn’t do anything)
Generally, a 600m mcap coin is pretty hard to pump - don’t expect a 10x
It’s the ONLY political coin with perps and not many spot dumpers - but the biggest risk is whether it can find that narrative - people need to believe it’s a political coin

Anyways, that’s it for today! It’s 2AM now, so I’m heading to bed. cya.

The ETH ETF Trade Idea

0xkyle — Mon, 27 May 2024 05:38:52 GMT

PS. I started writing this article on 24th May, when ETH was $3632.22, and ONDO was $1.08. It took me a couple of days to write it, and certain assets have been repriced. The trade thus has a less favourable r/r, but the upside is still there to be captured, IMO.

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Congratulations, my fellow Cryptonians. In a move that surprised everyone, the SEC has approved of a rule change to allow creation of ether ETFs - despite Gary Gensler having a notoriously hard stance against ETH in the public light.

I will not go into why this happened - I will leave that to the political pundits on Twitter. Our main concern is that it HAS happened, and that it signals a significant shift in the US government’s stance towards crypto.

This is also further enabled by the approval of FIT21 (“FIT21 provides the regulatory clarity and robust consumer protections necessary for the digital asset ecosystem to thrive in the United States”) - a new era of regulatory compliance is on the horizon for businesses.

The US government new dovish stance towards crypto is extremely bullish, and you can see how the market has digested this information - RWA and Ethereum sectors are the prominent outperformers MTD.

I believe that with the ETH ETF and the recent dovish stance towards crypto, these two sectors in particular are poised to continue outperforming in the coming weeks & months.

Sector Performance MTD, from Artemis.xyz

Introduction

Overview

This thesis can be broken down into two - first, the outperformance of Ethereum as an asset class and its relevant alts, and then the outperformance of the RWA sector as a beta to the overall “bullish crypto government stance”.

These two sectors are tightly connected because:

With the SEC approving the ETH ETF, it signifies a more dovish stance towards crypto, thus meaning that RWA assets driven by institutions will also see more flows (as we’ve already seen in ONDO’s relations with Blackrock)
The “ETH thesis” from institutions has always been tokenization, stablecoins, real-world settlement - that major institutions will go around talking about RWA assets on Ethereum; that has always been the major narrative for ETH, after all.

And so, the TLDR is:

Long ETH and its best beta
Long RWAs - with ONDO being my favourite

It is also possible to consider other RWAs to long, but the reason why I’m not is because ONDO itself is an altcoin to ETH, and going down the risk-curve simply means you’re more exposed to market beta in the event of a downside move. I prefer to keep things simple.

Cross-Examination Of The ETH ETF

Now to breakdown the ETH ETF trade. I think this is extremely interesting because unlike the BTC ETF in which we had a lot of time to “prepare” for - the ETH ETF caught many market participants offside. It’s why we saw a 25% candle in a day when the odds of an ETH ETF approval were vastly changed overnight.

The thing is, the market rarely allows you the same trade twice - the thesis of this trade hinges on the idea that “the ETH ETF hasn’t been priced in”. To measure this, we’ll first have to look at how the BTC ETF performed:

Key Dates for BTC ETF

June 15, 2023: Pivotal week for BTC, when Blackrock showed their hand and filed a spot Bitcoin ETF
October 23, 2023: Perhaps what truly cemented the probability of a BTC ETF was SEC not appealing the court ruling for Grayscale, meaning that they were considering it seriously → market thus has confirmation
Jan 10, 2023: Official launch of the Bitcoin ETF

Here’s some things to note

The Blackrock ETF announcement essentially kickstarted the closing of the discount
Only when the ETF launched did the discount fully close (obvious statement to make, but thinking about it, it’s like “free money” and now that we’ve had “proof” that an ETF can / will be launched, the discount might close even BEFORE the ETF launches)
OI spiked up after June 15, shot down somewhere in August, but started an uptrend in October that peaked in February
I look at CME OI because it’s the best vehicle to see institutional positioning

Now, let’s look at ETH in comparison.

Key Dates for ETH ETF

20 May, 2024: Bloomberg analysts up odds of ETH ETF approval from 25% → 75%
23 May, 2024: SEC approves exchange applications to list spot ether ETFs

So here’s the stuff that’s interesting to note:

The ETHE discount is has closed from -24% to -1.28% in the span of 2 days, compared to the few months GBTC took to close
You can see that CME OI growth hasn’t been as strong as the BTC ETF growth
Lastly, most of the ETH move was priced in upon the revision of probability, but not on the event itself - i.e the market has front run the announcement of the ETF, which is ironic considering how for BTC, every announcement saw a sharp spike in price ; like I said, the same trade won’t work twice

And so with the context in mind, let’s break this down:

Thesis & Risks

I’m going to start with the risks of the trade, just because I think that it’s much more important to weigh the downsides of a trade than the upsides - manage your downside, and let the upside take care of itself

Risks:

Main Risk: The market has topped / close to top for ETH / Time-based capitulation

The argument for this would be how quickly the discount has closed and how the price of ETH behaved into the announcement itself. You can make the argument that these people know how the trade goes - that it’s basically a free upOnly trade, yet CME OI and total OI has basically stagnated.

If anything, the fact that ETH OI is just 4bn shy of the BTC OI on January 10th could signal that “all longers have already longed, who is left to buy?”

To be honest, I find this argument to be pretty strong. I believe that the market is heavily front-running this trade - the expansion of Open Interest past ATHs despite the ETF just launching is unlike the BTC trade, wheree we really only saw such high OIs in the market upon the launch of the ETF itself.

The market is taking the “approval of ETF” to equal “the launch of ETH ETF”, which are two vastly different things. This take makes sense when you look at how price reacted on the announcement of the approval itself, and how the discount was closed so quickly.

ETH OI Spike

BTC OI Spike

I actually agree with this take, and that’s why I started the article with, I quote: “these two sectors in particular are poised to continue outperforming in the coming weeks & months.”

I believe that we will start seeing some time-based capitulation when people realise that these effects aren’t instant, and that is when you start bidding. I myself have set bids at certain price levels - filling my bids slowly and surely. Here’s a quote to illustrate how I’m trading this:

Thanks Long for the pic! <3

Idiosyncratic Regulatory Risk

I’m in less of a position to comment on this just because I have no idea how reg risks work. But, from what I’ve read on TWITTER (DOT) COM, people are saying how only 19b-4s have been approved, and not the S-1s.

This, in essence, means that it “can be challenged in the next 10 days” (?) ← I don’t know if this is true! BUT if it is, it definitely presents a huge risk to the trade if the entire thing was a sham of some sort, LOL.

Or maybe, there’s some other “hidden in between the lines” kind of risk that comes with this approval - idk. But, definitely something to keep in mind.

OK I LIKE THE TRADE. WAT LONG????

I know it’s been a long article so far, but we’re getting to the good part. The story so far is: ETH gud, but maybe market front run too hard. But still, ultimately bullish long term catalyst. So, what do you buy?

When choosing a beta to ETH, many participants will suffer from analysis paralysis - after all, you have Liquid Staking Derivatives (LSDs), L2s, ZK-Rollups, and De-Fi protocols, memes, and many more to choose from.

As such, when plotting the performance of all these coins, we can see that the outperformers are (in order of most outperformance to least outperformance):

PEPE, LDO, UNI, PENDLE, METIS, AAVE

This is on a lookback period of 1 week (i.e 18 May - 26 May). This is a crude method of gauging outperformance - a more scientific method would be actually calculating the beta of all these coins on a more “proper” lookback period - but it works for me.

I personally am choosing to long PEPE and PENDLE out of all the coins, just because they have been favourites of the market all year round. These coins don’t just outperform idiosyncratically - they have been some of the best performers YTD.

Best performers of the top 100 coins, YTD

Thus, I believe PEPE + PENDLE offers the most upside. They have the added effect of being high attention coins that the market loves ; I would not fade the strength of the PEPENDLE combo.

Time For The RWA Side Of The Trade

I’ve spent too long talking about the ETH ETF trade and now I’m running out of brainjuice to write about the RWA side of the trade. The thesis is simple: RWAs has been something that the institutions have been pushing since their entrance into crypto, and ETH has been the main chain for that - with ONDO having collaborations with Blackrock being built on ETH.

As such, it’s a beta play to the general ETH narrative. For asset selection, my main picks are ONDO, with some people I know also shilling CANTO / DUSK. Personally, I’m going simple with this one - 1 ONDO = 1 CONDO.

Others

As a side note, I think a good pair trade to put on will be the ETH/SOL pair. Generally I get the feeling that SOL has topped out for the time-being, and long ETH / short SOL beta will be extremely attractive.

Concluding Thoughts

Whew! If you made it to the end, you deserve a cookie! I hope you enjoyed this trade idea. I’m starting to get back into the swing of things, so I’m hoping that I’ll be able to keep on pushing new trade ideas! Other than that, for the Americans, please have a very happy Memorial Day. I’m in NYC, so if you ever want to have a cup of coffee, feel free to reach out.

Also, here’s a good screenshot that I wanted to include, just to show how people might over-estimate this whole “spot ETF approval” thing and position themselves too early.

Manical Memecoin Meta

0xkyle — Tue, 19 Mar 2024 05:27:36 GMT

Out of all the speculative assets in crypto, memecoins are THE most speculative. If I had to draw it out on a chart, it’d look something like this:

This is crazy to me because even the left side of crypto - BTC / ETH / your L1s / alts, is already considered highly speculative relative to traditional investing.

Tell any tradfi you’re buying Bitcoin - they’ll think you’re some Gen-Z Zoomer who knows nothing. Even after the Bitcoin ETF, I’ve had friends going to digital assets conferences hosted by big traditional banks, telling me that the attendees were convinced this would “all get shut down soon”.

Yet, this week we’ve seen the following:

BOME presale, where you could put in 10k and turn it into 1 million at the top
This caused presale mania, where someone even sent a few million in SOL into the burner address, causing presales to go insane about losing money (the token then mooned, which of course it did)
And before that, you had general memecoin mania - with WIF / PEPE / MOG / memes on SOL/memes on Base

Memecoins are traditionally a sign of “top signals” in previous market cycles because they indicate an extremely high-risk appetite - something that tends to come only after price has gone up to a point where people feel “invincible”, and that “there is no more bera market”.

Combined with the FOMO of people who missed the entire move up and seeking profits, this creates a cesspool of coins that instantly gratify you - you either make a lot, lose a lot, and you move on.

So - why are memecoins so prevalent in this cycle, even in the early stages? What does it mean - and more importantly, what is the thesis behind it?

The Memecoin Thesis

Memecoins are in a league of their own. They do something better than every other crypto asset - and that is, they can go up an astronomical amount.

L1s go up 10x? They go up 100x. They are designed to be the most reflexive asset on the planet. That reflexiveness works on the downside too, of course - but we shall not talk about that

From Rewkang’s Tweet

Philosophically, I believe that memecoins work because they don’t promise anything. With any other crypto project, things must be promised for the price to pump. Roadmaps must be made, deals struck, raises done - and memecoins are the antithesis of all that. They simply exist.

That in itself is a double-edged sword - if a memecoin somehow gains traction in this attention casino, it can find itself gaining size with the snowball effect - but this also means that when the inevitable correction happens, and attention dies off - it can make or break a memecoin.

Many memecoins then go to zero after that initial run-up - see JOE / SPX / any memecoin from last cycle. The worst part is, they’re so easy to make - and there’s so many of em, that it’s hard to bet on the winning horse. Memecoin traders often find themselves spraying and praying.

So - with this, I hope I’ve painted a clear picture of the true volatility of memecoins. A class of tokens that are easily reproducible, hard to bet on winners, and when the winner does emerge, may find itself losing steam as quickly as it gained it - the market is fickle, after all.

And now, you’re probably thinking: Kyle, this does not sound like something I should even touch with a 10-foot pole. And you’re probably right - but I want to put this in context of the 2024 Cycle.

Memecoins in 2024

We’ve seen something quite amazing in this cycle - the emergence of memecoins so early on in the cycle as a prevailing narrative. Recall what I said above - memecoins were traditionally a “top signal” and a sign of frothiness in the markets.

This time, we got them in the very beginning, and anyone who took it as a top signal would find themselves sidelined for most of the rally. Why this happened is anyone’s guess - late stage hyper-capitalism / financial nihilism that prompted a more hyper-gamble attitude; who knows?

What matters is what this means. Crypto is by an attention market, and you always want to buy what has the market’s attention. In this cycle, we’re seeing that memecoins stick. Not all of em - but the ones that have staying power look poised to become the DOGE/SHIB of this cycle.

It should be emphasized that not all memes are created equal. Again, in this hyper-attention-optimized game of memecoins, you cannot expect long-term outcomes for short-term coins. It is prudent & necessary only to have long-term views for long-term memecoins - as stupid as that sounds.

I genuinely believe that PEPE and WIF are great in this regard. There is a chasm that every memecoin has to cross - the chasm that I mentioned above, where they gain in astronomical value, before crashing to 0.

PEPE and WIF have shown to have crossed that particular chasm, so betting on winners here seems like a clear trade idea that I’d like to take.

This thesis is extremely fundamental driven, and can be simply boiled down to:

These two memecoins have shown to drive the most attention, and attention on memecoins are a positive flywheel that goes upOnly
There is still a 5x to catch up to SHIB

Risk of trade wise - wait, are you seriously asking me the risk of a trade of a memecoin? Memecoins are extremely hard to put a technical stop-loss to, just because of the insane volatility. You’d find yourself shaken out multiple times before you could build a substantial position size.

The best I can do is approach this like any other fundamental trade, and think of the SL in terms of the thesis - in this case, a bearish scenario would be if attention fades from WIF / PEPE and people no longer care about the meme. Unfortunately, this practically means “I am wrong wen coin is zero” because attention correlates with price.

As you can see, betting on memecoins is generally hard when you try to approach it with a legitimate process with defined boundaries, because the volatility of the said asset would smash those boundaries into a million broken pieces.

Ultimately, you kind of unironically have to turn off your brain - “left curve” it, as commonly said in crypto-speak. So once again, for the people in the back, the thesis is -

Memecoins rising early in the 2024 cycle shows that it might be mainstay and no longer frothiness - but a genuine narrative
This gives it better r/r, and longing the memecoins that crossed that chasm for long-term catch up play to DOGE / SHIB boosts those odds
No leverage, spot accumulation over the cycle - don’t get shaken out, nor try not to think too much about it. Just continuous buying of the dip

Lastly, Rewkang has some genuinely good tweets about memecoins you can read here:

Round 2: Fight!

0xkyle — Wed, 14 Feb 2024 14:23:00 GMT

GM. Can you feel it in your bones? Rushing through your blood. Circulating throughout your body. It rings in your ears. The euphoria. The madness. The rush.

Send it. Send it all.

If you’ve been here since the bear market and are enjoying BTC at 50 keks, then congratulations. It’s been 3 years since we hit 69k, and GOD it felt a lot longer than that. 3AC was almost 2 years ago, and FTX was more than a year ago.

I’ll keep this brief. As I’ve said time and again, I don’t know why you’d be bearish here. I’m like a broken record (and have been, for a while) - On HTFs until rate cuts, nothing is stopping us.

The ETF was a short-term bearish and long-term bullish event. With enough time passed (GBTC redemptions, Celsius selling, etc.) we’re at the part where the ETF is now an unstoppable monster. We’re seeing daily inflows of 700 MILLION dollars coming in to buy BTC, and this isn’t slowing down.

Higher.

I believe in Trad-Fi. I believe that these guys know what they’re doing, and obviously the earlier you buy, the better of an entry you get, the more profits you get. It’s really George Soros’ reflexivity - just now angled upwards.

They’ll keep buying because they’re “still early” - until price comes to a point where it doesn’t seem as attractive anymore - then we pullback (I assume ATHs), then it starts going up again, then the late longers realise that this can go infinitely up, and then all pile in (we sell here).

For an IRL example of this, look at NVDA. At every point, people have shouted “this is overvalued!”. But look! It just keeps going up, until it forces your hand. The tipping point will of course, be when everyone is on the goddamn train. But until then, long your longs, and hold on for dear life.

Trade Ideas

Let’s get straight into it.

APT / SEI / SUI: The L1 trades of February 2023, and Jan 2024. These are pushed solely on narratives because if you look at their TVLs, you’d be aghast. Attention is what dominates this space, and nothing grabs attention better than price going up.

TVL numbers

Speaking of price going up, you’ve had MAVIA show us the true potential of gaming coins. With the MAVIA run up, BEAM basically 2x’ed in a couple of hours. For gaming, I really just like BEAM and PRIME - I think that the betas (SHRAP, MAGIC, AXS, etc.) underperform with not that much risk-adjusted returns. This isn’t statistical, but just going off purely from intuition. Again, new shiny coins > old doomer coins
In the AI sector, there’s too many to count, but here are the names I like
- On CEX, we really only have RNDR. I like AKT, but it’s too inaccessible right now. Oh - we also have $AI, which could do well - but it’s not something I enjoy buying. RNDR just has too much going for it - now that the Kenetic seller is out, we’d hopefully see some positive price action
- Next up, everyone’s favourite TAO. This is a thousand dollar coin, I can feel it in my bones. I don’t really know what to say here - other than the fact that this thing just keeps going up. If you’re on-chain, look into buying wTAO for exposure because TAO isn’t currently on any T1 CEXs for spot (it is on Bybit perps though)
ETH
- ETH ETF is more than likely gonna happen, which is why you’re seeing insane candles on ETH right now. People are front-running the ETF trade, and that leads me to ETH BETA
  - L2: BLUR (Blast + NFT market confluence) / ARB / OP
  - LSD: PENDLE / LDO / FXS / RPL / SSV
- From memory, LSDs are a more direct play to ETH than L2s, which didn’t see that big of a pump the last time we had an ETH god-candle. I like Pendle the most, out of all LSDs.
New, shiny tokens
- DYM - Dymension is one of those low-float, high FDV tokens. The issue is finding out the % of supply staked - but other than that, the metrics look good - spot buying, OI going relatively flat-ish but price going up;
- ZETA - I have no clue what this coin does but by god does it go up. It reminds me of those DWF coins we used to see - and I like this coin alot
- ONDO - Blackrock RWA coin. I have no thoughts about this.
- PYTH - Solana coin that re-emerged from the depths. Also, no thoughts.
- ALT - might be good ETH beta, but otherwise, idk. No idea.
BTC Beta
- STX legit just going god-mode and 2x’ing in a day. Very happy for the STX lovers out there (I was sadly not one of them)

On-Chain

Now we get to the good part. God, I love On-chain tokens.

AI:
- On-chain you have a couple to choose from:
  - OLAS - this has made a major recovery since the whole “team selling” debacle
  - Arbius - this new AI coin that launched a couple of hours ago went up 3x just because it was followed by Marc Andreessen - being a16z incubated, it might be worth a look
  - comAI - TAO beta that has done exceedingly well. I love this one.
  - TAOPAD - launchpad for TAO
- And of course, you have the unlaunched ones: Ritual, Gensyn, IO.NET, HyperspaceAI
ERC-404s: This died down pretty quickly, but MAYBE we see a resurgence as an ETH beta
- I’d probably only ape PANDORA if it came to that - betas just aren’t great
MOG: This is a meme coin that revisited ATHs - something basically never done befoer in the history of a memecoin. It has an insane cult & community, and honestly 100M mcap doesn’t seem too far of a dream for it

That’s all for now, but if the market continues giving us so many opportunities like this, I’m gonna have to ramp up the speed at which I produce these articles.

Leave a like if you enjoyed reading this or I’ve added value to your trades! And good luck out there.

<3, Kyle

Node Monkes - A Deep Dive Into The CryptoPunks Of Bitcoin

0xkyle — Thu, 11 Jan 2024 13:14:21 GMT

PS: I’ll be extremely busy in these few weeks finding a place to stay in NYC, so there probably won’t be any market colour updates. Instead, I hope you enjoy this Node Monke thesis that I’ve been working on for a while.

Lastly, If you’re in NYC and wanna grab a cup of coffee, pls lmk! <3

Send nodes.

If you follow me on Twitter / are a paid sub, you’ll know that one of my most recent high-conviction bets is the Node Monkes – a 10k PFP collection on Bitcoin that has garnered attention from top artists like Jack Butcher and Beeple (God forbid, he was the top signal).

While I admit I did oversize on this bet a lil, I have good reason to believe that Node Monkes will be one of the best-performing NFTs in this cycle. If you can’t already tell, I’m extremely bullish on the monkes.

You may be skeptical about this trade because it’s an illiquid NFT rather than a liquid shitcoin, but my counter is that as a profit maximalist, I will take any asymmetric bets that I see.

But before I shill you , we must, as first principles maximalists, dive deep into what makes a good JPEG in the first place.

On NFTs:

I don’t proclaim to be a great NFT trader, but I do have my roots in the NFT game – with my first transaction on ETH being a Loot derivative that I paid 0.4 ETH for. Much of my early experience in crypto was in NFTs, so it’s not like I know absolutely nothing about it.

NFTs are more illiquid shitcoins, nothing more, and nothing less. With that analogy in mind, it is possible to build a framework around “what makes a good NFT”. And so, in no particular order, here’s what I believe to be the most important factors in making a good JPEG:

Does the collection have a strong narrative in the first place?

Yes, narratives exist even for NFTs. If you were here last cycle, you would remember that we had multiple narratives – for example, pixel art was the main narrative at one point (Kaijus, Cyberkong, etc..) then you had gaming NFTs (Wolf game), PFPs (Azuki, CloneX, BAYC) and many others.

Even recently we just had a SOL NFT run as the overarching narrative for SOL NFTs. As such, for NFTs to even catch a bid, there must be some sort of collective belief in the ecosystem. You don’t see AVAX or Tezos NFTs doing well precisely because there is no narrative.

Who are the buyers and sellers?

This is where “Community” comes in. For an NFT project to succeed, you can’t have people looking to flip. Just like how for a good token project to succeed, you can’t have buyers who are looking to sell on a 1.5x. No – these people must be in for the long haul. Simply put: more buyers than sellers.

But with this, you can go one level deeper – how do you tell if an NFT project has a good community? While there are no quantitative numbers I can pull, there are a myriad of factors that go into this:

Art. Is the art good?

No matter the NFT, the art must be decent, and cannot be a copycat of other existing art styles. Just like how betas of shitcoins always underperform, NFTs that copy a big projects art style (e.g Ordinal Punks, BTC Degods, etc.) are extremely undesirable.

This is even more true for PFP projects, where the PFP is “social proof of wealth”. Flexing a copy of a big project is like getting caught red-handed renting that Lamborghini for Instagram Pics instead of owning it.

Are there whales buying? Are people buying to hold rather than buying to sell?

People love to follow smart money – and nothing is more indicative of smart money in a NFT project than absurd sales. Golden BAYC selling for 500k? Alien crypto punk for a million? These sales collectively bring a sort of “prestige” to holders of the collection, knowing that rich people think that their JPEGs are valuable.

These high value sales aren’t limited to grails though. Above floor sales for normal PFPs are one of the best indicators in gauging the sentiment of buyers. When a PFP project consistently has people buying above the floor, it shows that buyers are willing to pay a premium for a NFT that they actually enjoy owning.

Mindshare? Are people loving the project on social media?

NFTs are an attention game – and for PFP projects, there’s nothing better than seeing many people rocking your collection. Remember how everyone at one point had an Azuki, or Cryptopunk, or Bored Ape? PFPs thrive heavily on attention, and you always want to see a good amount of people rocking your PFP for it to garner any significant long-term traction

Can the NFT project survive capitulation?

Just like coins, all NFT projects will eventually face some sort of dip. The initial post-hype dip is the breaking point for legitimate NFT projects in determining whether they live or die. Many NFTs don’t survive the drop in attention as people scramble to exit, but if you have a strong holder base with people who genuinely enjoy collecting the JPEG, you will see continued bullish price action.

Other factors

You then have other smaller factors like:

Team: Are they anon? Do they have a shady past?

While no rule states anon devs are better than doxxed devs, I have observed that sometimes not knowing who made a collection has made it perform better. I believe this to be a more “tail risk” sort of factor – there’s more downside in knowing who the artist is – because if he turns out to be a serial rugger, you can bet the NFT is doomed to fail. But not knowing it doesn’t mean it won’t succeed – and unless the artist is famous, more often than not knowing some rando is behind the project just doesn’t have that much upside.

Operating under a pseudonym seems to be better, in this regard.

Catalysts

This is a double-edged sword. Depending on the project, it might be better to not have anything at all – for example, if people are collecting a PFP project based on “potential catalysts” instead of more “holder-ish” reasons like liking the art, you can bet that these will be additional sellers once the catalyst passes.

There are probably many other factors, but these are the ones that I believe to be more important. Now that we know what makes a good NFT project, let’s look at the bullish thesis for Node Monkes.

Send Nodes:

1. Overarching Narrative:

Like ETH Eco in 2021, the Cambrian explosion of BTC Eco in 2024 will be a no-brainer.

The first reaction I always get when I tell people this is: “Why not SOL? Why BTC?”. I believe that the chain itself has a sort of “vibe” to it. The best advertisement of a chain is simply: numba go up.

In 2021, we had so many on-chain coins and NFTs on ETH that went upOnly. Yet in the past few months, Solana didn’t have the same wealth effect – while you had certain collections that outperformed, you didn’t have the same insanity that we regularly see on ETH.

Hold on, I’m not saying SOL dies, or that you didn’t have some insane trades (you did, e.g Madlads, tensorians, WIF, etc..) But Solana shitcoins regularly topped out before hitting 1M mcap on Solana, NFT collections would get undercut every 1 SOL increase, etc.

You see this same thing on Arbitrum as well – low-gas chains seem to all suffer from the same problem. Sure, on-chain season will continue to exist on SOL, and there’s always money to be made.

But it doesn’t have the same asymmetry when compared to BTC. BTC just blows this argument out of the water - It has provenance. It’s the mother of all cryptocurrencies. It’s the OG coin. And Bitcoin holders have had nothing to do on the chain for the past decade – while ETH had their De-Fi boom just 3 years after being created.

I believe that the BTC narrative is much stronger in this regard. There’s just so much money on Bitcoin that I find it unfathomable that the BTC Eco won’t get bid. Go to the BTC Degods NFT collection, and you see people paying 1 BTC for a copycat JPEG. That’s crazy.

Additionally, the fact that it’s a pain in the ass to bridge, store, and figure out how BTC chain works is a great sign that many people will fade the trade until its too late. It reminds me of Canto back in 2023, where people just found it too difficult to bridge to – Canto NFTs went up 100x afterward.

I just think BTC Eco is an evergreen narrative with a much greater upside, and that the reigning collection on BTC will undoubtedly be worth hundreds of millions.

2. Amongst all the NFTs, Node Monkes stand out

First mover advantage & the proper timing

Node monkes are the first original PFP project on Bitcoin. It had insane hype on week 1, and despite the FUD, it created a strong community of holders who believed in it. Sub-communities have also formed around them which is another good sign of long-term holders and mindshare spreading

Launching in the bear would have been suicide for many NFT projects, as there was just not enough liquidity sloshing in NFTs. Launching too early on BTC wouldn’t be the best - but Node Monkes seemed to have the right timing in launching when there was enough infra, but not too late that it was over-saturated.

3. It has a low inscription count

Inscription numbers are important to Bitcoiners, with many people willing to pay a premium on the first hundred inscriptions. Node Monkes greatly benefits from this, being the first 10k PFP inscribed on BTC.

As you can see - many copycats

4. The art is great

On top of that, amongst all existing collections, Node Monkes are original. Of the top 10 collections by volume, many are derivatives – BTC Degods, Ordinal Punks, Dogepunks, etc.

Node Monkes have put incredible thought into their art, with traits like Asic Miners as a hat, Hoodies and Aliens as a tribute to crypto punks, Gold as a tribute to BAYC, Peer to represent a “peer node”, etc. The art is incredible, and this can be seen in the price action – it has seen regular above-the-floor trades

5. Whales love it

I cannot remember the last time I saw someone pay over 80k for a JPEG. Yet so far, we’ve had multiple sales above 1 BTC.

6. Mindshare

Many influencers can be seen rocking a node, and notable artists like Beeple and Jack Butcher have shown support for the nodes.

They made honoraries for famous NFT influencers (Claire, etc.)
- Betty: 92k followers, CEO dead fellaz https://x.com/betty_nft/status/1741990272349720855?s=20
- Grant River Yun, 53k followers, nft guy https://x.com/GrantYun2/status/1741976499715019158?s=20
- Lucrece, artist that sold at Sothesby and Christie, 60k followers https://x.com/DesLucrece/status/1742041467097387412?s=20
- Claire, 90k follower, big NFT https://x.com/ClaireSilver12/status/1742018676054802891?s=20

As I mentioned above - the attention game is something the NFT market heavily thrives on. Projects live and breathe attention - I’ve never seen a valuable PFP project not have some sort of crazy community on CT.

7. NFTs are an easier bet than tokens

Currently, I don’t believe that an “index” of the ecosystem exists for BTC – yet. With AI, you have TAO; Gamefi, you have PRIME. But BTC has a bunch of “nonsense” – ORDI, TRAC, MUBI, SATS, etc. While people talk about ORDI being the “king”, I think that it’s much easier to bet on NFTs.

NFTs are easy to understand, and a great way for Bitcoiners to flex their wealth.

Risk Of Trade

Node Monkes get outshone by a newer, or existing collection.

Here’s some competitor analysis:

BTC punks: non-native, derivative
Onchainmonkeys: Sitting at a quarter million inscriptions
Bitcoin Frogs: Almost half a million inscriptions
OMB: Probably the one with the best chances because it has a decent community - but ultimately, it is a punk derivative, fragmented across 14 million inscriptions
Taproot wizards: Also another one of the better bets because of the founder - and I think this is a collection with asymmetric r/r as well; but have no idea how to get one
Dogepunks: derivative fusion

Node Monkes don’t survive the capitulation

When Beeple posted his Node Monke art, that was the top signal because, at that point, there were no new buyers. Anyone who didn’t know what node monkes were now known - and with that, prices started stalling.

We’re now down 30+% since ATHs, sitting at around 0.17 BTC. While I think the worst of capitulation is behind us (we saw incredible celebratory tweets and attacks on founders which are classic signs of a bottom), I don’t know what the catalyst for it to go up soon will be.

We may remain in this range for the next few days/weeks, but I would argue that this builds anti-fragility; dumpers are out: everyone who wanted to dump already has.

Instead, what we’re left with are the strong-hands and believers in the ecosystem. If Node Monkes sees another move up, I believe that to be the confirmation signal that this is a collection that will stay.

Concluding Thoughts

Overall, I believe this trade is two-fold:

1) BTC Eco is an assymetric bet
2) The way to bet on it are through NFTs, and the best NFT are the Node Monkes.

I probably could have played it better by selling the Beeple top and buying on the confirmation signal instead of holding it like an idiot, but I’m not that good. All I can say is that these are my honest thoughts on Node Monkes, and if this article has piqued your interest, you may want to keep a close eye on the floor.

As I said, while I believe the worst is over, this lull period can last from days to weeks and will be an incredible testing period for the holders of the monkes.

That’s it for now – I hope you enjoyed this thesis!

PS: If you’re interested in the rarity rankings, the grails are: Hoodies / Aliens / Gold
Some nice skins: Ducks / Deathbots / Robots / Crown

OVERWORLD - The GameFi Project Of 2023

0xkyle — Sun, 24 Dec 2023 06:48:06 GMT

With over 4000 ETH in volume done despite launching a week ago, Overworld has definitely been the most hyped mint of H2 2023.

Introduction

If you’ve been reading my tweets or are a paid subscriber with access to my weekly portfolio breakdowns, you’ll know I’ve been bullish on Overworld for quite some time.

While the macro thesis was built around the idea of GameFi coming back, Overworld has cemented itself as the most popular mint of H2 2023, with over 100,000 followers on Twitter, 75,000 whitelist applicants, and 53,000 daily quest participants. The Overworld NFTs are currently resting at a floor price of 2.63ETH, a 17.5x from mint.

As we head into 2024, I believe GameFi continues to see a “hated rally”, and that Overworld will be one of the stronger games emerging from the pack. With their $MNCT token slated to come in Q1 2024, I believe that a bullish thesis can be structured around the game.

Without further ado, let’s dive in.

What Is Overworld?

A sandbox RPG set in a fantasy universe that features a brand-new combat system never seen before.
- Jeremy Horn, COO of Overworld, Co-Founder of Xterio

Overworld is a cross-platform online RPG set in a fantasy world. The game boasts visually captivating anime-inspired graphics, adding an extra layer of appeal to its design.

Players engage in rewarding battles while exploring and conquering diverse landscapes, collecting valuable items for crafting and trading. It is free-to-play, with PvP and PvE game modes.

Overworld is developed and published by Xterio Games (Jeremy’s company), and currently has 2 NFTs available for purchase: the Genesis Incarna PFPs, and the Supporter Key.

Breakdown Of Overworld NFTs

From their gitbook

Currently, the best way to gain exposure to the Overworld ecosystem is through their NFTs. There are two main collections:

Supporter Keys: Only given out to members of the community who have shown incredible support for the team, limited to 100 keys. Current Floor Price: 26 ETH
Genesis Incarna PFPs: The original mint that went out on 15 December, with a supply of 6000. Current Floor Price: 2.63 ETH

The Overworld team has constantly hinted at a token ($MNCT) that will be airdropped to NFT holders at a later date. Below is a breakdown of differences in benefits between the two NFT collections:

The PFPs will get airdropped MNCT at a later date, while the keys seem to act as a “booster” of sorts for the PFPs. It’s also worth noting that the Keys are currently the only known way to gain access to the $XTER presale - the native token of Xterio, Overworld’s parent company.

Manacite - $MNCT

The native token of the Overworld ecosystem, Manacite, is to be launched somewhere in Q1 2024, and listed on a “Tier 1 CEX”. Having been backed by Binance Labs, the natural assumption to make is that MNCT will be listed on Binance.

Tokenomics:

Total Supply: 20,000,000,000 tokens

Allocation:

Player Rewards: 65% - In-game Activities
Ecosystem/Treasury: 20% - Held in reserve, ensuring liquidity and supporting various actions for the game's economy, project development, and operational needs.
Community/Marketing: 15% - Designated for marketing and community initiatives, including a 3% airdrop to Incarna holders at listing.

Ways To Get $MNCT

Holding an Incarna NFT: You'll receive an airdrop of $MNCT at token listing, equivalent to 3% divided by the total supply of Incarna.
Staking Your Incarna NFTs: This method will earn you additional $MNCT over time at a rate of 2% per year for three years, divided by the number of days Incarnas NFT are staked.
Complete in-game quests and dungeons to earn $MNCT
Trade in-game items or services: Exchange them with fellow players in return for $MNCT tokens.
Get $MNCT on exchanges: obtain more $MNCT on the Xterio marketplace (via CEX partners) via $XTER tokens.
$MNCT Tokens aren't tradable within the game or through their marketplace.

$MNCT Usecases

Obtain in-game assets, such as supply-limited land, before and after the game launch.
Used to craft, refine, and upgrade items in combination with a forge NFT.
In trading with other players for items and services

Token Model:

In the model above, I used BIGTIME as the benchmark just because it’s the most recently launched GameFi token - as such, it would be natural to assume that MNCT will perform similarly.

Team & Partners

The above image shows the backers of Xterio, Overworld’s parent company. With names like Binance Labs, Animoca Ventures, Hashkey and more - it’s safe to say that this is a pretty strong list of investors.

The Overworld core team is made up of 3 people:

Michael Tong (CEO): Co-founder of Xterio, Ex-COO of Netlease, CSO of FunPlus. With over 20+ years of leadership, Michael has incredible experience in managing a company.
Jeremy Horn (COO): Co-founder of Xterio, Ex-VP at Jam City, GM at TinyCo and GameLoft. Over 15 years in Gaming, and known to be the “product guy” in the Overworld team - on Twitter Spaces, he regularly talks about building an incredible product first - and everything else will follow.
Yitao Guan (CTO): Co-founder and CTO of FunPlus, a multi-billion dollar gaming company, having produced hit games that drew in over 10 billion dollars in revenue.

These are individuals that have many years of experience in gaming, and incredible connections across the gaming scene.

Roadmap

Token: Q1 2024

Playtest Alpha: June

Overall Thesis

The Overworld team is led by individuals with deep expertise and know-how in the gaming sector. With their close relationship with FunPlus, it provides legitimacy to the game - that it’s not just some run-of-the-mill GameFi product.

The list of investors is also incredibly impressive - with Binance Labs on the cap table, it would mean a strong possibility for MNCT to be listed on Binance.

A new token, with the Game-Fi narrative, launching on Binance? I couldn’t name three better ingredients for incredible pumpanomics even if I tried.

You also have the added confluence of:

The NFT market bottoming
The GameFi hated rally and resurgence in 2024
ETH Outperformance sometime in 2024

In conclusion, Overworld is an extremely promising project and one of the better bets in the GameFi ecosystem so far.

Why I'm Bullish Decentralized AI

0xkyle — Fri, 24 Nov 2023 08:27:42 GMT

Happy Thanksgiving everybody! I hope ya’ll are as excited as me for the best time of the year. Have a good one! <3, Kyle.

I want to preface this note by saying that I’m not knowledgeable about AI at all. Sure, I’m familiar with the high-level overview of how it works, but ask me anything technical and I’m at a loss for words.

This note is, instead, an attempt to convey how I think about trends and narratives in crypto and has nothing to do with the tech itself.

Naturally, your reaction will be something along the lines of: “Wtf? If you know nothing, why are you writing an article on this?”. Well, because I believe that the cryptocurrency industry is built on the bedrock of dreams and speculation, rather than fundamental truths.

In fact, this Truth itself is why we have valueless governance tokens at billions of dollars in market-cap. It’s why we have so many new AMMs, Layer 2s, Monolithic Blockchains, Decentralized-As-A-Service, etc. - all these new fugazi schemes, every month of every year.

It’s Truth with a capital T. In uttering this foundational statement that forms the cornerstone of our industry, I’m saying the quiet part out loud. I want you to remember this Truth - for this statement forms the fundamental axiom of belief for many of us in crypto.

And so - how does this relate to decAI? Well…

Narratives

“Do you want to be right, or do you want to make money?”

This statement is often asked in Telegram group chats or Discord group and is normally preceded by someone posting a shady Dexscreener link to a copy-cat product that has been done 200 times.

The crypto participant in his natural habitat cares not for originality or growth - he only cares for the “potential” of the product. AMM model that has been done 20 times launching a token? Add an “incredibly well-known founder” behind it and it becomes an irresistible dessert for the crypto participant.

The figure above best describes the crypto market - an amalgamation of “narratives”. And what is a narrative but a figment of the collective unconscious, all wishing together for something to be true?

If tomorrow, everyone says “USDC is going to depeg” - it becomes a self-fulfilling prophecy. And this cycle has played out in crypto time and time again - from stablecoin depegs, to narratives that are willed into existence. All aboard the SOLUNAVAX train, anybody?

I’m not saying anything new. All I’m saying is that crypto is THE ULTIMATE speculative asset class, and prices are very much driven by narratives and attention. I’ve done my best to hammer this point home - why? Because you really have to understand this in order to understand WHY decAI will succeed.

What Makes DecAI A Good Narrative

In choosing an asset that you think will outperform BTC/ETH, you have to look at a couple of factors - most notably, whether something has “sustainable mindshare”. I’m not talking about projects that reach stardom and die quickly after (e.g Telegram bots, Canto, etc.)

No; In choosing an outperformer, you have to choose a token of a group that you know will constantly see headlines. A few top contenders I’ve seen so far are Solana and LSTs - but… I’m sure you know where this is going.

DecAI will be the one narrative to rule them all.

Why? Just because it’s new? Yes - that’s part of it. In being new, there can be no bagholders from previous cycles - no forced sellers.

But not just that - it’s much bigger than that. DecAI is hope, renewed. In past cycles we’ve always had some sort of core technology to rally around - in 2017/18, it was ICOs. After that, it was NFTs and the “Decentralization Of Everything”.

The world is now aware of our tricks. They’ve come to understand that anything with the word “token”, or “decentralized” is a sham. It’s hard to overstate how bad our reputation is to the average retailer because it just is that bad.

This all changes with decAI. I believe that decAI will be the core technology that people rally around in 2024/5. “But Kyle, doesn’t decAI have the word ‘decentralized’ in it? That totally destroys its relevance, no?”

Ah, my observant one. Yes, it does - and perhaps I wouldn’t be as bullish on decAI if not for what happened in the past two weeks. You see, I believe the shakeup at OpenAI has brought so many more eyes to the importance of decentralization, that it’s slowly becoming a word that’s less associated with crypto, and more with - well, what it originally meant to be.

Decentralization is now being seen as a “movement”, separate from the identity of “cryptocurrencies”. For the most part, “decentralized XXX” is still viewed with massive scepticism. But when you put AI in front of it, you suddenly have “product-market fit”.

DecAI is starting to grow its own identity, separate from its roots in crypto. This is a necessary growth step for any narrative to reach terminal velocity - it must take on a life of its own. It must be the rocket ship of hopes and dreams, and it cannot carry any phantoms of the past with it.

DecAI Will Form The Core Of 24/25

To sum it up, there are two things that make the decAI narrative worth pursuing.

First is the incredible bullishness of AI as an industry. This was always going to be the overarching narrative of the world going into the next decade, from a purely objective standpoint.

Second, is the legitimacy of decentralization in the context of AI. All of a sudden, crypto may find a use-case that people can rally around.

Now, you may think this whole article to be fugazi. To base your investment thesis of off “attention”, “narratives”, and “what people are thinking”? Nonsense!

All I have to offer, are these two pictures:

Who would have known - that something “valueless” can turn into something “of value”, just by capturing “mindshare” over the past 15 years? Ah…

"Imagination is more important than knowledge. For knowledge is limited, whereas imagination embraces the entire world, stimulating progress, giving birth to evolution. It is, strictly speaking, a real factor in scientific research." - Albert Einstein

$LMR- The Bitcoin Hashpower Marketplace

0xkyle — Tue, 14 Nov 2023 14:55:34 GMT

Henlo. Today I bring to you a project I’ve been looking into. Hope you enjoy this report with a cup of coffee or something~

Disclaimer is at the bottom, but I do hold tokens in this project.

Introduction

Overview

Lumerin is one of the more interesting projects that spun out of the bear market. Launching in March 2022, they’ve grown to be a $50M marketcap project with not much advertising. Their product is simple - they view hashpower as a commodity and are building a decentralized marketplace to buy and sell hashpower.

Hashpower currently lacks an effective and transparent means of trading - the Titan network introduces a new protocol for provable hashpower. The result is a platform that can trade hashpower.

Lumerin assures that the hashpower participants are trading is real by using hashrate oracles, and they aim to eventually decentralize the entire process in which this is done.

Like all protocols, I want to focus on the problem it solves so that we can evaluate whether we’re dealing with a good product. Let’s dive in.

Problem It Solves

Lumerin seems more like a B2B solution than a B2C solution - individuals themselves wouldn’t be too interested in buying hashpower, I feel. So here are the arguments as to why miners would use this product:

Buyers:

Risk Mitigation

It allows miners to hedge against market volatility and the fluctuating value of cryptocurrencies. Miners can use hashpower futures to hedge against the risk of future price fluctuations in their koins. By locking in a price for their future hashpower, they can mitigate the risk of declining prices.

Cost Efficiency

Selling hashpower can help cover operational costs, such as electricity and maintenance, making their mining operations more sustainable.

Miners located in regions with particularly high prices may never be able to run a sustainable operation. In that context, it may be more convenient for them to buy hashpower from another miner in a cheaper location than mining at high costs themselves.

Keeping Up With Difficulty

Large miners can take advantage of instant, remote, and on-chain hashrate acquisition to keep up with higher mining difficulty in real time, maintaining their competitive advantage until they can expand their physical operations and install new hardware.

This enables them to remain competitive without having to wait for manufacturing and shipping of new machines.

Sellers:

An Additional Revenue Stream

Selling excess hashpower provides additional income, especially during periods when mining profitability is low. This will provide miners with more predictable revenue streams, reducing their exposure to both crypto market volatility and fluctuations in mining difficulty.

Hedging Against Bitcoin Volatility

Keeping the treasury solely in Bitcoin is a double-edged sword, and it can have catastrophic consequences during a strong market correction. In that regard, miners can split their revenue into two different BTC and LMR streams to mitigate Bitcoin volatility risks, meanwhile building a tokenized hashrate reserve to boost their Bitcoin mining capacity when needed.

Tokenomics

Total Supply: 1 billion | Market Cap: 49.5 million | Circulating Supply: Unsure
Price: $0.04751
Supply Breakdown:

Team: 47.6% (25 + 22.6)
VCs / Insiders: 23.1% (8 + 15 + 0.1)
Public: 4.3%
Miners: 25%

Pretty subpar tokenomics. Generally, tokens being vested each month create a source of supply that will constantly be dumped on the market.

Thesis & Risks

Thesis - Why Can Lumerin Succeed?

ICO Won’t Dump On You

It’s lower than the ICO price of 0.45 USD per LMR currently (https://icodrops.com/lumerin/). This is a double-edged sword, as it could also mean that this coin is cursed to permanently not pump beyond a certain price due to bagholders offloading at every pump. That would suck.

Team Is Pretty Stacked

Ryan Condron - Co-Founder:
- Started Bitcoin mining in his garage since 2012.
- Created the 1st profit-switching mining pools
- CEO of Titan (for-profit mining company)
Jeff Garzik - Partner:
- Core dev for Bitcoin that supposedly received code from Satoshi.
- Created one of first $BTC mining pools

I’m not sure whether the venture firms involved are notorious dumping bandits, but I’d say that some names like Titan and Coinbase Ventures are generally in it for the long term. Also, I’ll highlight this point in the risks section, but having a good team is makes or breaks this product, imo.

From what I’ve seen in my research, Hive and Bitdeer are also #9 and #7 respectively on the list of Bitcoin miners by market capitalization. This is bullish.

Bitcoin Beta On Chain

Like I mentioned earlier, miners generally outperform Bitcoin. This cycle so far has been focused on “Bitcoin”, due to the BTC ETFs being filed. While I doubt that people use LMR as meaningful exposure to Bitcoin, I think that it can be viewed as an underlying speculative bet on Bitcoin.

Asymmetric Risk On Long Term

I feel that Lumerin has the potential to give asymmetric r/r if it does deliver. The potential of creating the first market that trades one of the most important commodities of the future (hashpower) could have divine implications that would warrant a mass re-pricing.

Obviously, this is a huge IF - but with Titan, Bitdeer and Hive, I like to lean on the side of positives. Their catalyst roadmap looks promising, with Q1 2024 looking good.

Risks - What Does Lumerin Need To Succeed?

What it needs to succeed conversely also becomes points of failure when it doesn’t come through. While Lumerin isn’t the first of its kind for these sort of products, I’d say that it’s one that has

Caught the attention of CT
Has quite an incredible team
Has been building through the bear market

Any investor knows that it’s not so much about the product - very rare do you get to invest in “firsts”. Rather, it’s about the people leading it - and so far, Lumerin has shown their hand in this. Generally, I favor any product that has been building in the bera - it shows long-term commitment, which is the foundation for success.

Moving on, I think that these are some factors that you should consider when evaluating whether this product can succeed:

It Needs Strong Partnerships

As an exchange, the product really only finds PMF once it gets validated by users using it. Just imagine this headline: “Biggest Bitcoin miner sells Hashpower on Lumerin”. You just know that immediately validates the product as a whole.

This is probably the biggest risk in this trade - any failure to gain traction will spell doom for the product. On the other hand, you also know that Titan, the CEO’s Bitcoin mining company, will probably be onboarded. So that’s a boon for the thesis.

It Needs Revenue To Show Growth

Another driver of numba go up is your trusty “revenue driver” - a key schelling point for any crypto product this cycle - especially when it comes to “real-world products”. This product doesn’t sound very short-termish, so I’d expect initial numbers to be quite lackluster, which is a headwind for speculation I’m sure.

Tokenomics…

You can’t change this, but it’s important to have good vesting dates with not too much “vc dumperinos”. Traditionally, low float and high FDV coins tend to do well - and going into the bull market, you’d want as small as a market cap as possible for the pamp.

I’d say that the tokenomics aren’t necessarily facilitating of a pump, and in fact lie more on the predatory side, but since its a product that warrants long term thinking, I can only pray that the people involved are in it for the long haul.

However, if you want to err on the side of caution, you’d best be assuming that everyone involved can and will be dumping immediately.

It’s important to understand that I’m arguing from the PoV of what makes “coin go up” - and that, most of the time, deviates from the actual fundamentals of the product. An announcement like in (1) will be extremely bullish, even if the actual use-case still needs half a year for the company to be onboarded.

Technicals

There’s not much to discuss here, LOL. The chart is uponly, and clearly is a relatively fresh chart (Aug 2023). It may have 5x’ed from the bottom, but remember - if you’re always worried for people who got in at a better price, you’ll never buy anything in crypto.

Verdict

My honest opinion: It’s not a bad product, and I think it really has potential. I wouldn’t go balls to the wall on it, but I’d think that it’s one of the better products you can bet on with such a strong team and background.

The issue here is this: Very simply, this product is an exchange. Like Binance, like FTX - and all exchanges need users. Ultimately, if it can get users - great! If not, it’s doomed to fail. While you can make this same argument for every d-App in the crypto space, Lumerin is tackling a particularly niche space. Bitcoin hashpower isn’t exactly the greatest narrative - unlike AI, it’s really not consumer friendly.

Possible Outcomes

Is there a world where this doesn’t succeed at all?

That would likely mean either:

Product fails (Team abandons, etc.)
Interest in Bitcoin wanes and we get a bear market
People just aren’t interested in on-chain Bitcoin

This is purely just numbers off of the top of my head, but I’d say the probability of each respectively is <10%, <5%, <15%. I don’t think the team will abandon ship, neither do I think interest in Bitcoin will wane with BTC ETFs. I think that there is a chance no one bids Lumerin despite the good product, but it’s not a huge number.

>50M mcap?

When in doubt, consult projects that are > 50m mcap. A vibe heuristic, as I call it. I don’t really know what all of these tokens do, so I’m leaning on the side of - yes, this project can probably go higher from here.

Execution

Well,,, the trendline does look good. I think spot DCAing isn’t that bad of a plan, and get in an amount you’re comfortable with. Like I said, we’re still near ICO price, which isn’t that bad of a time to get in.

The more important consideration is sizing - how much should you size in this? Personally, I like to size a number that fits in my conviction. In this case, since I’m not highly conviced unlike Rollbit or Solana, it’ll definitely be less than 20%. I’d say 5-10% is a reasonable amount - at 50m, a 6x to 300m at 5% will be equivalent to 30% of your portfolio. Decent returns, percentage wise.

Well, that’s it! I hope you enjoyed this report, and if you have any thoughts on Lumerin, you’re always free to DM me on Twitter ; I’ll see you guys next time!

Thank you for reading 0xKyle's Research. This post is public so feel free to share it.

Solana... As The Next Ethereum?

0xkyle — Sat, 23 Sep 2023 05:51:06 GMT

0xKyle: Good morning, everybody. Today is a long-term look at $SOL and its position for next cycle. The crypto market is dry, catalysts can’t play out – everything that has high FDV / inflation rate is following traditional laws of supply / demand right now. Hope you enjoy!

Introduction

Overview:

Solana is a Layer 1 blockchain built for mass adoption. It utilizes the Proof of Stake consensus mechanism and improves on it with the Proof-of-History mechanism. The Solana network is slated to be able to support up to 3,000 transactions per second, but realistically it can perform around 273 swaps / second on an AMM – whilst BNB can only manage 194.6 TPS, and Avalanche a maximum of 175.68 TPS, and ETH at 25 TPS

Tokenomics

Price: $19.37 | Circ Supply: 412.61M | Total Supply: 558.10M
Market Cap: 7.99B | FDV: 10.81B

Solana’s circulating supply consists of SOL that is currently circulating across exchanges, DEXes, user wallets, and also includes both staked SOL (delegated) and unstaked SOL.
Non-circulating supply normally consists of either:
- SOL that is locked in a stake account – meaning, the account is frozen until a specific date
- SOL that is owned by Solana Labs or Solana foundation

Inflation by rewards
- SOL’s annual inflation rate is currently 6.017%, and will decrease by 15% every 180 epochs, with each epoch varying from ~2.5 – 3.5 calendar days. This inflation rate is delegated to stakers who ensure network security by validating the network
Venture Unlocks
- As seen in the chart above, the initial seed allocations have been fully vested and distributed to market participants.
Validator Supply Unlocks
- Solana utilizes a proof-of-stake unlocking system – as such, at any time validators that hold a large stake of SOL can choose to unstake and sell off. The unstaking process takes up to three days – or more accurately, when the current epoch ends – with each epoch lasting around 2.5 days
- Currently, total SOL staked is 86.4% of the total supply – i.e 476,650,635.7 SOL is staked.

Catalysts:

The idea behind this trade lies more on the fundamentals of $SOL being undervalued compared to its price. It is thus not a “catalyst” trade in the conventional sense – rather, an investment that relies on the belief that $SOL is undervalued compared to its actual value. Of course, calculating actual value of internet tokens is not easy – especially not for Layer 1 tokens. While attempts have been made to try to value Layer 1s – such as using total gas paid as profit / earnings, or basic TVL/Mcap comparisons, I did not include them in this report because I feel like they do not place a huge weightage as to how people value $SOL; this is unlike Rollbit which is heavily dependent on their revenue dashboard.

Fundamentals:

Overall, the long-term thesis of $SOL is that it’s facing similar headwinds as $ETH did in 2019 – no one believed in it, and everyone was extremely bearish on whatever was built on it. Instead, when taking an objective look at it, we can see that Solana as an ecosystem actually has more than decent developer activity, strong community members, and undeniable interest from other participants to build on it. These are all important factors to not only keep the chain alive, but to help it flourish and move forward.

$SOL has decent fundamentals on both the tokenomics, product and technical side that it justifies being a good long-term bet for the future. Similar to how ETH was in 2019, $SOL will discover a similar trajectory as a “Lindy” L1 chain.
The fall of FTX alongside with the crash in token price ‘washed out’ all the bad actors
$SOL was particularly chosen over its competitors because out of all the “ETH Killers”, it is the one with the most mind-share, likeability and brand presence.
$SOL also faces similar circumstances as $ETH did back in 2019 – similar headwinds and negative press. I believe it pays to be bullish at bottoms.

Some recent $SOL News that have shown increasing development despite falling prices:

Hyperledger’s Solang opens Solana EVM, allowing ETH Devs to port over easily
Solana Pay being integrated with Shopify as a payment method
Visa introducing settlement of USDC on Solana
Visa report publishing Solana’s transaction finality

Visa Report

Product

The developer base of $SOL remained extremely strong during the FTX blowup, which indicates signs of strength and conviction in arguably what plays the largest role in growing Layer 1s. In essence, more dev activity = more products = more user which ultimately leads to long-term growth.
- As seen in the figure below, Solana is the L1 with the 3^rd largest development activity on the chain – while it’s far behind Cosmos and Ethereum, it’s leaps and bounds above Avalanche and Aptos.

More importantly, Solana Foundation have raised over $600 million in seed funding over the past two years – and with this money, they have launched some of the best hacker houses in the scene – such as Grizzlython, and Solana Hackerhouse 2023. These hacker houses does well in spreading the brand name of Solana, and onboarding future developers for the chain.

Technicals

The Solana Fractal

A story in two parts :

Top: $SOL. Bottom: $ETH

I kid. While a fractal may just be basic pattern recognition that doesn’t hold much value, I believe that the first principle that underpins a fractal lies in the idea of the product itself – that something is running parallel to what we’ve seen before. Like how you can draw a fractal of the Dot Com bubble versus the 2021 Crypto bubble – the underlying psychology and logic is the fact that the circumstances are alike.

On-Chain Analysis

Projects that move to $SOL are bullish indicators of how the chain, is in fact, not “dead”:
- Render Token has just announced a migration to Solana in the RNP-002 proposal;
Projects building on $SOL:
- Drift Protocol – On chain perps platform
- Chicago Board Options Exchange – It joined the Pyth Network, which is built on Solana
- Parcl – Real estate derivatives platform on Solana
On average, Solana ranges between 5-20% of daily NFT volume, and is the leading contender next to Ethereum for being a chain for NFTs. I believe that this is an undervalued point – NFT traders are well-known to bring in huge amount of retail interest, and I believe that we may see SOL become a secondary NFT chain, thus raising mindshare of the token. There have already been a number of notable collections that have come from Solana, namely: MadLads, Solana Monkeys, ABC, and many more. It’s worth noting that even though y00ts and DeGods moved to Ethereum, they did launch on SOL, and were able to gain significant traction before moving – thus showing that there is potential for NFT trading activity on Solana.

Social Media / Community:

The Solana community is extremely active on Twitter, with their community being second to the “ETH Maxis”.
Multiple key opinion leaders have emerged to say that they believe SOL will be huge because of various reasons, such as:
- Ansem: Biggest SOL Shiller
- Heartereum: “Don’t fight cults”
- Picklecrypto: ETH 2019 vibes
- AviFelman on 100x: Solana is currently controlled by people who deeply believe in it, there is zero fast money -> Any hint of new activity could probably skyrocket SOL

Thesis

I think that Solana does have the potential to do great things. If I had to pick out of all the Layer 1s, I would choose Solana. But to me, its greatest strength could also end up being its greatest weakness. The way I see it, 2024 is the cycle of the institutions. Solana is well positioned with partnerships with big traditional names like Visa, etc. This makes it a good contender for being the Layer 1 with the highest beta to any ETH ETF.

Bull Case:

Solana has the largest mindshare next to Ethereum – it will benefit from any form of ETH ETF
Traditional institutions may look into alternative Layer 1s to invest in – and see that Solana has huge potential to outperform
Solana continues partnering with big brand names, and continues to be the Layer 1 with the most legitimacy
Lindy Effect compounds on this – being such a large, battle tested chain, it forms a virtuous cycle where people just can’t stop finding good things to say about it, making it a self fulfilling prophecy

Bear Case:

If Solana becomes known as the chain with “high settlement speeds” for stablecoin / general purpose payment transactions, it inadvertently will attract the ire of any news that deals with stablecoins / payment allegations.
And seeing as to how stablecoins are quite literally in the snipers scope of the SEC, if this plays out, it’ll be very bad.
Depending on how ETF plays out – perhaps tradfi institutions will only be allowed to invest in ETH ETFs, meaning no trickle down effects to any non-ETF Layer 1s.

Risks

Alameda Risk

On 13 September, FTX was ruled to be allowed to sell their digital assets, with Solana making up to $1.062 billion of that.
- However, the Solana foundation released a post showing that the SOL tokens held by FTX would be linearly unlocked till 2027.
- According to the terms of the crypto conversion to fiat by FTX, there will be a cap of $50 million for the first week and $100 million in subsequent weeks, which limits the selling pressure.
- Assuming that the creditors can sell all the SOL tokens, they’d need around 10 to 12 weeks to unload their total holdings, which will distribute the selling pressure over time.
- The 30-day average daily volume on spot exchanges is $338 million, per CoinGecko data. On a weekly scale, it is around $2.5 billion, giving FTX’s selling pressure a small percentage of 4%.

Many of the VC firms that first invested in SOL have been impacted in the fall out of FTX, and are hence forced sellers of $SOL.
- These include, but are not limited to: Alameda, Jump, Multicoin – while Jump might not be directly impacted, their recent controversy with Luna and their actions to pull back from trading digital assets, I will not be surprised if they start selling their tokens as well.
- This is a huge risk – Alameda owns over 8.26% of total SOL, and Multicoin and Jump having a combined stake of over 21.8 million SOL tokens, which represents another 4% of total SOL.

Generally, it seems that this news always immediately forces a knee-jerk short reaction in the markets, but on closer examination may not be true.

Execution

Solana seems prone to insane FUD – buying those events could be good entry points
Also just observing CT, trying to position when the market stops talking about it entirely / everyone’s attentions are focused on something else
Manage risk wisely – make sure you size properly
Stop losses can be placed on invalidation of thesis

Invalidation

Any changes to the FTX / Solana saga may require re-examination of short-term downsides – but long term upside remains the same
If Solana stops building / fails to reach meaningful traction in the coming months with traditional companies – i.e they just stop making progress at all – that’s super bearish
Because of how “fundamental focused” this thesis is, any changes to the fundamentals listed above will

Resources

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Is Friend.Tech The Next Big Thing?

0xkyle — Fri, 01 Sep 2023 10:19:46 GMT

Friend.Tech Is Extremely Profitable

Friend.tech is a on-chain Social-Fi app built on Base, Coinbase’s Layer 2. The model is simple: Users sign up, and can purchase “keys” (i.e shares) of other users. The shares can be bought or sold, and like any speculative asset, the more that people buy your shares, the higher price goes.

Users gain a fee of all trading volume of their own shares, and the platform takes a cut as well.

Cryptokoryo’s Dune Dashboard

Considering the fact that it’s less than one month old yet has made the equivalent of OpenSea in fees in the past 30 days, friend.tech has seen tremendous growth. $84.6 million of inflows in under a month with over 125,000 unique accounts makes friend.tech one of crypto’s most successful projects in this bear market so far.

Friend.tech has also onboarded notable influencers, such as 100 Thieves Nadeshot, Faze Rain, and other OnlyFans’ influencers. While growth and transactions seemed to have slowed down, onboarding a famous influencer will probably re-ignite the ecosystem again.

Friend.Tech’s Offerings For Users

Rev Share

Looking at Friend.tech’s top earners makes it clear how it attracts influencers. With just 423 trades, Cobie has earned $167.3k USD from the platform - the revenue share back to influencers is pretty hefty.

Speculative Greed

It’s a virtuous cycle - the more that influencers see the potential of making money, the more come onboard ; and this begets more speculation in the system - users come in with the aim of making money from “flipping” these influencers.

And So.. Will Social-Fi Take Off?

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The Market Has The Say

Friend.tech is not the first time we’ve had Social-Fi. Chiliz, a project launched in 2018 that recently launched their own blockchain, is currently building a fan-token exchange, where users can bet on world-famous football players and clubs. DeSo, a 2019 project, launched a Layer-1 blockchain built to decentralize social media.

Social-Fi has existed before, yet hasn’t actually taken off. Why? Whether something can take off depends heavily on timing. NFTs existed in 2015 - 2017, yet really only took off in 2020 - 2021.

And so, the market is a signal - it rewards those who are right, and punishes those who are wrong. Too early? No one cares. Too late? Everyone’s fixated on something else. Just nice? Everyone loves you. The success of friend.tech could very much be an blaring green light for what is to come.

That being said, I don’t think friend.tech is the product that will rule over Social-Fi. It’s more of a litmus test of future narratives that could influence the crypto markets.

But Remember - Bubbles Pop

Yes, friend.tech is an amazing product that has driven incredible amounts of revenue. But so did Opensea when it was valued at $13bn in 2021 - yet look at where it is two years later, after a vampire attack by Blur and the collapse of the NFT market.

lol…

We must remember that crypto markets are first and foremost driven by speculation. For asset classes that are less embedded into the financial ecosystem like NFTs and social tokens, we must remember that they only exist as long as there is some inkling that people can make money from them.

Don’t get lulled into a false sense of complacency that “we are in a new paradigm”. Bubbles pop. Even altcoins in a bear market can barely get over a million in volume in a day - what makes you think your higher beta assets can do better?

Well, but I should leave this talk for the middle of the bull market, not a bear market.

Concluding Thoughts

Social-Fi makes a good ponzi idea for next cycle, and I hope it takes off. I’ve long since proclaimed that we need a “new ponzi” for next cycle - 2021 had Defi 2.0 (OHM, etc.), NFTs (shitcoins for retail) and GameFi. 2024 and onwards will need something new - and Social-Fi could be it.

GCR also pointed out that all “new asset classes” always needs two cycles - NFTs were first in 2017, then really took off in 2021. Social Fi seems to follow the same pattern - they debuted in 2019, and perhaps may take off in 2024.

The best strategy here is to ride the wave, but don’t get caught up in it. If everyone believes that trading social tokens is profitable, you'd be an idiot to ignore it - the crypto market is all about attention, after all. But conversely, you’ll be an idiot to hold it to “the next paradigm” - because once people lose attention, it’s game over.

good luck, soldier.

$RLB - CT's Most Controversial Casino

0xkyle — Fri, 25 Aug 2023 06:57:57 GMT

Introduction

Overview

Rollbit is a casino that offers casino games, sports bets, a NFT marketplace (including NFT loans), and most importantly, a crypto futures exchange where you can leverage up to a 1000x in predicting whether the price will go “up” or “down”. It also has a spot crypto portfolio option, allowing users to buy select spot tokens. Their newest feature, Degen EXchange, features on-chain coins such as OX (Su’s New Exchange), HarryPotterObamaSonic10Inu and Unibot.

Launched in 2020, Rollbit has a native token $RLB. It had no ICO – the entire supply was distributed via an airdrop to users, and people who bought their NFTs (Rollbots).

Rollbit.com

Tokenomics

Price: $0.147184
Max Supply: 5,000,000,000
Total Supply: 3,296,951,622
Circulating Supply: 3,296,951,622

Market Cap: $485,237,627 (#66 on Coingecko)
FDV: $735,888,304

Rollbit’s Relative Performance:

Catalysts:

Buy & Burn

Rollbit’s largest catalyst is it’s buy and burn mechanism – it uses a portion of its daily revenue to buy and burn $RLB. More specifically, it uses profits from 3 different revenue streams to purchase $RLB, namely:

30% from the 1000x Crypto Futures Vertical
20% from the Sportsbook Vertical
10% from the Casino Vertical

Above is a picture of the breakdown of Rollbit’s annualized burn. In 1 year, they buy back 13% of the market cap – and in all honesty, that’s a negligible amount. If you’re an investor, you’re assuming market cap goes up – in which case, the annualized burn goes down. For all intents and purposes, the “buy back and burn” is an effective ponzinomic catalyst, but in actuality has negligible implications in the shorter term, especially less so if you believe price will go up.

Narratives

Rollbit has enjoyed quite a bit of narrative this year – partnerships with key influencers such as Hsaka, Gainzy, Alex Wice, etc. have meant that it has enjoyed its fair share of riding the CT on-chain narrative wave as one of the strongest “gambling coins”. In fact, the “on-chain index” consisting of “$OX, $UNIBOT, $BITCOIN, $RLB” has been touted as one that has outperformed majors – which, depending when you bought, obviously has.

I do think Rollbit will continue to experience a dominant mind-share in the hearts and minds of the crypto people, so long as it continues to remain the dominant player in its field (in crypto). There is none quite like Rollbit (in crypto) for the time being – an amalgamation of perps, casino games and sports betting is quite unique.

The reason why I’m putting (in crypto) is because Stake is quite obviously Rollbit’s biggest Web2 competitor – I do think that Rollbit still dominates in the crypto scene because:

Its perps exchange is unique and has garnered the love of CT
It has partnered with many crypto-natives, which is a major reason why it is so prominent in CT
It also has a token, versus Stake who doesn’t have a token. It is the only way crypto people can express their bullishness on the future of gambling (right now)

Metrics

Rollbit is #66 on Coingecko, which essentially makes it a higher marketcap than GMX and dYdX – aptly done, seeing as its Fees/Mcap are much higher than GMX and dYdX
The next course of action I can imagine is comparing Rollbit to an exchange, and using that exchanges’ token as proxy to measure it. Assuming correct data (which, honestly is hard to get, so it’s a pretty stretched assumption. I’ve posted the links to the data in resources down below), Rollbit has better Fees/TVL than Binance and OKX. This means that for every dollar deposited, Rollbit is making more off fees.
- This isn’t surprising, seeing as how Rollbit is a casino facilitating the separation of money from the gambler and the house, whereas Binance features more of an “exchange” for traders.
Of course, the one thing I should compare Rollbit to are other casinos, but the data for casinos are extremely opaque and hard to find.

Technicals

Rollbit has a great chart, with clear signs of a longer term uptrend. Previous ATHs at around ~0.13 remain technical areas of support for the coin.

On-Chain Analysis

Jeeters

Thiccythot’s post here

There have been on-chain analytics that show $RLB whales consistently selling their tokens. The last I checked, they were still selling it – constant sell pressure often is a bearish case, but also may create bottoms for people to buy into.

Growth

Rollbit’s cumulative net volume is on an uptrend, with more deposits than withdrawals. Also, deposit volume over time is slowly increasing, signifying more users depositing assets. New users are also on an uptrend, with an average of 171 new users daily. Overall, RLB’s on-chain metrics seem to show a platform that’s steadily growing users

Team / Community

From an outsider’s look, there is nothing notable about the community to comment on – unlike memecoins who generally have a strong social media presence, with tweet reply-guys in certain communities such as $MOG always posting memes and such.
On July 31^st 2023, FatManTerra announced a call with a US government agency about Rollbit. This prompted key figures of the Rollbit community to attack him – and a counterargument thread exposing FatMan was posted by the co-founder
Partnerships: Rollbit’s propulsion to fame can be said to have been heavily influenced by the onboarding of key influencers such as Gainzy, Hsaka, Alex Wice, and many others. Gainzy, in particular, is a prominent crypto-gambling personality with a large Twitter following that brought the attention of Rollbit to the masses.

Thesis

I like Rollbit as a project, I really do. But as an investment, here’s the simplified breakdown of what I see to be the biggest headwinds (and tailwinds)

Bear Case

It’s hard to make the case that Rollbit hasn’t topped (locally). At 21 cents, we had a Hsaka partnership, an Alex Wice partnership, and virtually everyone on CT talking about it. On August 9, the day the Buy & Burn catalyst was announced, $RLB dropped 10% - following that, it increased by 38%, topping out at 21 cents. However, sentiment during that time was at peak bullishness.
Current market conditions aren’t facilitative for another on-chain bull-run for a while. With Bitcoin at 26k, crypto is facing an extremely low volatility and risk-off regime.
From a business perspective, limiting itself to just crypto natives seems to be shooting itself in the foot when it could be aiming for the stars instead.

Bull Case

The fact of the matter is that Rollbit has incredible growth, and incredible value as a casino. It’s metrics blow dYdX out of the park, and if you compare Fees / TVL Ratio (see above), RLB has better metrics than even Binance – for every dollar in TVL, Rollbit makes slightly more in fees – making it a more “profitable” endeavour.
Growth still seems to be on an up-trend, and people are playing Rollbit – by no means is it a dead app.
If anything, now might be a great time to buy – if you forecast future growth and profitablility.
Quite frankly, the bear case I’ve built just attacks from the angle of “why Rollbit won’t go up in the short term”, but doesn’t give substance for Rollbit to go to zero; the issue here is that for Rollbit to hit all-time highs again, you might have to wait a while (which is fine for an investment, not a trade)

Overall, I believe possible key areas that signal a strong buy on RLB would be anywhere below $0.10 (severely undervalued), and possibly the area between $0.13 - $0.14 (a 30% correction from ATHs).

In the short term, I don’t think we print new godly candles breaking through ATHs, but in the long term I think a market cap of 1 billion may not be that far-fetched (a 2x from here). I know many people who are holding $RLB for a “next cycle coin”, which, if projecting current growth and taking into account future possibility of expansion, is a decent idea.

Risks

In order of what I imagine to be the greatest risks:

Growth Risk

Rollbit is crypto-focused, but with majority of CT already knowing about it, it begets the question: Who is left to buy? Rollbit should consider pivoting and attracting retail customers as well – and that has to start by allowing people to deposit with fiat, not just crypto. Especially because its main competitors in the casino space were retail focused before pivoting to crypto – crypto can be seen as the smaller subset of the bigger picture.

Regulatory Risk

While Rollbit is fully licensed and authorised by the Government of Curacao, there has been past instances where their regulatory legitimacy was called into question. On the FatManTerra saga, there was also a tweet where Fatman supposedly was in talks with a “US government agency” on Rollbit’s operations.

I’m sadly not knowledgeable enough about legal rules to understand the worst-case scenario – I’m not sure as to how much jurisdiction a US government agency can have on a Curacao license, but it’s definitely something to keep in mind and to keep a look out for.

Tweet can be found here

Transparency Risk

There are concerns that Rollbit’s volumes have not been accurate, and that they are faking volumes. While this may be possible with wash trading, their buy back and burn accounts are public – we can corroborate their daily revenue with how much they’ve burnt on-chain, which should lay rest to any concerns for the time being.

Execution

Setting limit bids at key buying areas I’ve mentioned
Also just observing CT and Rollbit, trying to position when the market stops talking about it entirely / everyone’s attentions are focused on something else
Manage risk wisely – make sure you size properly
Stop losses can be placed on invalidation of thesis

Invalidation

If another casino that’s bigger than Rollbit launches a token (e.g Stake), this doesn’t directly invalidate Rollbit’s growth, but it’ll probably still be better to bet on the larger casino – it’s like betting between Bitcoin and Litecoin – bigger is better
Regulatory risk – if government agencies start gunning for casinos, this would signal short term bearishness that could impede Rollbits’ growth
New bearish information coming to light – e.g fake data / shady origins / etc.
Loss of partnerships from key figures – could signal either something bigger happening, but also loss of faith from key CT infleuncers would probably lead to a falling domino effect
Growth stagnates / even goes negative, as revenue drops – Rollbit stops becoming a profitable project and even loses users ; would signal something in the market changing, and the fundamentals of the project losing ground.

Thank you for reading 0xKyle's Research. Share this post with friends you think will enjoy it!

$CRVball - A Long / Short Idea

0xkyle — Tue, 01 Aug 2023 06:36:29 GMT

Thesis

Overview:
On 31 July, Curve was exploited. Due to certain smart contracts running different versions of Vyper (Versions 0.2.15, 0.2.16 and 0.3.0 are affected according to mimaklas, a member of the Curve Team), a re-entrancy exploit was conducted. In doing so, the attacker drained the following pools:

CRV/ETH
alETH/ETH
msETH/ETH
pETH/ETH

We will be focusing on the amount of $CRV drained, as it is the crux of the trade idea. According to Nansen, the exploiter made away with about 32 million CRV.

Impact:
This subsequently caused the token on-chain to crash to $0.20. The potential implications are of major focus because it plays a big part in the trade idea. Firstly, the token:

Brought focus to the $100 million CRV debt of Mich’s on Aave once again
Was halted on Korean exchange Bithumb and Upbit
TVL on Curve dropped from $3.25b to $1.84b (43.3% drop)

Thesis: Long $CRV

because it’s oversold, highly negatively emotionally skewed.
Traders are trying to hunt the liquidation threshold by shorting CRV. While Aave health factors have always been a source of contention, they’ve not actually ever been low enough to justify liquidation.

The overhanging risk here lies in the fraxlend pool, which remains the clear line in the sand due to interest rate payments.

Curve’s Relative Performance:

Price of $CRV (as of writing): $0.513
Liquidation Prices: $0.35 - $0.39 (but Frax is the volatile one)

Technicals:

On the initial huge wick down (-11.73% move), OI/MC ratio increased from 7.73 – 12.29 (59% increase)
Since then, OI/MC has increased by ~12.58 (104%) where it currently sits at ~24.8
Most traders seem to be positioned short, as OI is steadily climbing while price is moving downwards
Funding rate of CRV currently sits at -186% annualized. For reference, BTC and ETH are at +6.02% and +4.62% respectively. It is the 3^rd most negative funding rate coin on Binance at the moment
Aggregated CVD dipped heavily negative (presumably from the hacker selling the tokens / fud), but has steadily climbed +50%, to an aggregate of 4M spot, but has since gone down even further to -10M

It seems to me that the combination of these factors means that:

People are really hunting his stops
Perps will have to unwind eventually – with OI increasing and price not budging, it’s presumably bullish – short sellers aren’t able to push through the bid wall

On Korean exchanges, they have disabled the withdrawal / deposit of CRV. This has caused price to fluctuate violently. The prices of CRV on the following exchanges are:

Bithumb: $3.28 (+437.7%)
Upbit: $0.81 (+32.7%)

Assuming that withdrawals / deposits gets re-enabled, this would encourage arbitrageurs to step in, selling CRV on Korean exchanges and buying CRV on CEXes. At current prices, $0.613 CRV is ~782.59 KRW. On Bithumb’s Orderbooks, we can see that there are limit bids at the following prices:

Taking Bithumb as an example, an upper limit of ~$259,355 can be arbed. Looking at Binance, it’s quite telling when the upper 2% depth is only $187,018 – assuming a full arb, it’s possible to move $CRV’s price on Binance by 2%. Obviously it won’t play out like that, but the model shows us that even there is more upside than downside on CRV, especially when looking at +/- 2% depth on Binance.

Curve’s Previous Short Squeeze

The biggest reason to be long $CRV has to be due to the previous short squeeze. On 15 June 2023, Michael Egorov ($CRV’s Founder) was also thrown into the spotlight for borrowing $63 million in USDT against collateral of 288 million ($180 million) in CRV. Risk analytics company Gauntlet proposed Aave to freeze CRV collateral.

However, it didn’t work before – and to reach .39, it’ll have to reach FTX levels of contagion.

Risk

Worst-Case Scenario

Some possible worst case scenarios:

Curve gets hacked again, either by the same way or a different way
Somehow price of $CRV gets to Mich’s liquidation levels
Fraxlend pool doesn’t get refilled / he doesn’t repay the fraxlend pool

Execution

For the worst case scenario to come true, we need the following to happen:

Enough sell pressure to come true to push CRV to liquidation price. From previous events we’ve seen that this is extremely hard to do (at 0.39, that’s a -20% from current price)
Mich’s inability to repay his loan

For shorts to unwind, these are possible scenarios:

Mich repays Fraxlend Pool (the most dangerous pool right now due to interest rates)

In essence, this is a bet of Mich’s ability to repay his loan on Fraxlend, versus him not wanting De-Fi to collapse. As the days go by, the probabilities increase in the shorts favour.

I’d estimate that currently it’s a 60 (no collapse), 40 (collapse) trade, versus the 80-20 probability just a few days ago. But these numbers will exponentially increase the longer he doesn’t pay, as people continually lose faith.

On the other side, the moment he repays his fraxloan, I’d assume he’s out of the red – his Aave stops have shown to be only hit when a FTX level event hits, so it’s quite hard to reach. This will cause a short squeeze.

Possible LONG Execution:

Either long on the news of Frax repayment confirmation (on-chain information has no asymmetry, so you’ll be competing with bots)
Long in anticipation of repayment
Market can remain retarded longer than you can remain solvent, so it’s probably best to add on dips. This can go lower than you expect

Possible SHORT Execution:

Short in favour of him not being able to repay
Open shorts once frax liquidation has been hit, expecting a liquidation cascade

Misc. Resources

Gameplan.

0xkyle — Thu, 06 Oct 2022 12:02:25 GMT

Once again, I find myself unable to sit still and do my assignments, so I’ve decided to channel this inability to concentrate on reading my lecture slides into something more worthwhile instead. This article hopes to eloquently explain my game plan for the coming years, as a retail investor.

Preconditions To The Game:

Without a doubt, we are in a period of financial turmoil. People are being laid off, the tech sector is downsizing, liquidity in crypto markets is at a standstill, etc. While I’m not of the opinion that this is going to lead to a huge financial crash / an overthrow of world powers, I can say that things, as they stand, are bleak. I’m not here to tell you my thoughts on the macro-economy, nor on how I think things will play out. For that, there are people much better at that than myself (i.e Arthur Hayes).

The pertinent idea I want to explore is what exactly, will it take for crypto markets to come back. However, this idea of “coming back” implies that there’s something to come back to - so you obviously have to agree with the idea that crypto will see another bull run. In fact, there are a few preconditions to this - you have to agree that:

Crypto will come back
We should not be trying to make money now
We have to be patient

I think the argument for (1) is simple - crypto is an asset that’s available to be bought. And when there’s a market, there will always be speculation - look at GME / AMC / etc. Crypto markets are notoriously volatile not because volatility is built in, but because of the market cap of the assets - the total crypto market cap is less than half of $AAPLs. It’s tiny. As such, I do believe that at some point people will look to buy crypto yet again.

The argument for (2) is harder to make, but the idea is that I (as a retailer) don’t really have much of an edge. I have the empirical evidence to prove it - I made a bet with myself 5 months ago that if I didn’t make money over the next 5 months, I would stop trading / degenning of any kind. I

I lost 3 eth, so I stopped. Now if you think you’re some hot shit, then I highly encourage you to do what I did. See if you can make money in the next X months.

The third precondition is simple, but is perhaps what kills us all. Now is not the time to be risk-on and 24/7 at your screens. Now is the time to get a job, mine some fiat, and just wait. All I can say is that this is the easiest step, yet most of you will fail. All you have to do is NOTHING.

Now on to the next.

Context: What Will It Take To Come Back

To understand the context, we have to explore what exactly created the previous bull run. The Covid-2020 bull-run was an amalgamation of very interesting circumstances, and while there is no one underlying factor that we can point to with certainty, I believe that we can boil it down to:

Investors with the “gamblers” mindset - i.e the world is screwed, bet big and try to make all we can
Millions of people being forced to stay home
Stimulus packages giving people the liquidity they need
People not knowing what crypto was
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Afterwards, what followed was Soros’ general theory of reflexivity - positive feedback loops generated by an UpOnly price combined with the huge influx of people suddenly hearing about cryptocurrencies literally created waves of people that would join the space every week, interested in knowing more and bringing $ with them.

We have to also remember that normies/retailers don’t use CT - their main sources of information are actual crypto YouTubers. All of these circumstances really created a positive feedback loop where millions upon millions of people were suddenly introduced to this term - “cryptocurrencies”, and the world where so much money was being made.

So what do we have today? Well, I think the key difference between then and now is the risk appetite of investors today. People today just don’t have the bandwidth to focus on gambling when their entire livelihoods are at stake - the natural response to that would to be secure some sort of future for you and your families by working a safe job that pays well.

Today, it’s not that people don’t know what crypto is - they do. They just don’t think it’s a good asset to buy, either because “it’s not expensive enough” (see Wall Street chart below, everyone buys near the top), or they lack the propensity to do so.

With that logic in mind, we can answer the question - what will it take to come back? In my eyes, I believe that people need to feel like they can spend money without having to worry about future repercussions. In layman’s terms, easy money circumstances.

But what will that look like? Now take this part with a pinch of salt because I know nothing of the machinations of the macro-economic machine. But my best guess would be that signs of life would start to enter the market when the FED starts quantitative easing, which alludes to inflation going down / below a certain amount.

So now that we know what it takes to make it come back, we can logically deduce that we are in a period of “not back” yet right - and the price attests to this. And thus begins the set-up phase.

Phase 0: Set-up Phase

Context was all about understanding the pieces of the board. I have hopefully convinced you that a bull market will return, and have logically joined together certain pre-conditions that we’ll need to see. Just in case, I’ll re-iterate: We’ll need a liquidity injection that’s facilitated by a risk-on mindset in the markets.

So, what’s this set-up phase? The set-up phase is where we are now, and arguably one of the most important ones in the market.

Keep in mind that peaks and troughs always happen in life, and in markets. Dwelling on the now isn’t as impactful as planning ahead for future years. Look at the Wall Street Psychology Chart above again - where do you think we are in the traditional markets? If I were being honest, I’d say we’re around the “Denial” Phase, as people try to justify and do their threads on “Why the FED will Pivot in October”.

But for us retailers, we don’t care about that. We want to maximise financial opportunity - and this environment here presents maximum financial opportunity. As Howard Marks from Oaktree Capital says: “ If everyone else is focusing on something that doesn’t matter and ignoring the thing that does, investors can profitably diverge from the pack by blocking out short-term concerns and maintaining a laser focus on long-term capital deployment.”

Today, everyone is focusing on the FED, and how much they raise - and rightly so. But we’ve already accepted that we’re not concerned with this short-term price action, and we’re merely just waiting for the easy money conditions to come. Patience. The conditions now are actually pretty good for buying already - but hold on to your horses!

While I say that, I don’t think you should all-in your firepower now. I do believe that we still have lower to go - if you were to take what Jerome Powell said last FOMC seriously, we’re expecting 2023 to be a bumpy right.

As such, perhaps employing the strategy of dollar-cost averaging would be best in spreading out your financial risk. At least, that’s what I plan to do.

Phase 1: Play The Game

Set-up phase is over, and we’re back to seeing signs of life in the market. Now everything written here on out is purely conjecture, because it takes place in a hypothetical future.

I would say that the entire 2020-21 cycle has increased the general “baseline” of crypto - many, many more people now know of the game, and this has led to more degens. The first-order consequence of this is that there will be lesser “exit liquidity”, and thus an increase in the difficulty of the game as players become more knowledgeable.

Perhaps certain inefficiencies will be covered up - for example, trades that front-run the news. Such is what happens when a market matures. On the other hand, legitimate projects gain in legitimacy - more and more people will have no choice but to recognise crypto as something that’s here to stay, and that idea can bring in more money as crypto starts to become one of those assets that you want in your traditional 60/40 portfolio. Doubtful, but possible.

For me, I’m more interested in thinking how exactly I think the game will unfold this time. 2020 was characterized by DeFi, 2021 with NFTs. Will 2022 see some sort of new technology that can be traded? If you were to believe in the trend, then yes, probably. But it remains unclear to me what this will look like. Maybe it’ll be the tokenization of celebrities (that didn’t do so well the last time). Who knows!

Secondly, what kind of projects will succeed in an era where players are becoming more and more sophisticated? I think the answer is that projects that obsfucate their ponzinomics in ever more complex mechanics will do extremely well. No more “risk-free value (3,3) bank-run” scenarios, now we’re in “risk-free high APY 999% vault leveraged farm” that either don’t tell you how they make money, or are so complicated that you just trust them to do their thing.

Even complicated mechanisms like MEV - has seen a huge increase in price over the past months. I'm not questioning their ability to make revenue - I know close to nothing about the project. But I can't help but notice that it's in such a complex niche of an already complex ecosystem, that I highly doubt the people buying it even know what it is for.

As for the perennial question as to whether “old projects will be as good as they once were”, that is up for debate. I’m of the opinion that even if they regain old highs, they simply do not offer that good of a R/R - why bet on old dogs when newer and improved wolves are sure to come? Lindyness seems to be a concept that’s only applied to BTC/ETH, and when it comes to alts, hot money always flows to the coolest kid on the block.

The irony here is that trying to predict future markets is inefficient. What matters more is instead getting to a level where you’re able to confidently tell yourself that you can navigate the crypto markets without being led astray by a pastor preaching that his coin will top ETH one day. Up your savviness, your sophistication, and your cynicism. Up your knowledge, your skills, and your degen-radar.

I don’t really know how to explain this last point of mine, but the idea is that in getting good at the game you don’t actually need to be rich. Money is the by-product of playing well. Instead, what you need is that cynical mindset coupled with the emotional stability of not being led astray by fear-mongering or hopium-doping. We are retail investors - we have no KPIs to hit, no performance benchmarks to rush for. We do things at our own pace, all ensuring that our own numba go up.

Comments

Liquidity flows: this is why I accumulate BTC/ETH first
From Visualize Value
Lastly, the legendary mngr tweet - maybe not 5x a year anymore, but just wait.

Why You Should Be Long Crypto - A Thesis

0xkyle — Mon, 11 Jul 2022 14:35:04 GMT

Welcome to Exit Liquidity: A newsletter written by a crypto analyst, talking shop about finance & life insights. If you want to join this tight-knight community, subscribe below:

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Now, to the article ☕

Why You Should Be Long Crypto - A Thesis

Recent events have set our space back a couple of years. While some people might clamour that the fall of CeFi shows the legitimacy of DeFi, I'm afraid that the rest of the world does not think that way. To them, we're all lumped under "Crypto", and clearly this instability has wrecked our PR.

Worst still, crypto natives are also losing faith - after all, crypto was built to fix TradFi, yet we seem to have fallen into the same pitfalls as they have. We have become the monsters that we swore to defeat.

However, it's important to recognise that the pitfalls we currently experience are growing pains, and that there will forever be bad actors in a space so focused on making money. Learn to zoom out - on a 5-10 year time horizon, do you still see crypto going to 0? I don't think so.

When in doubt, always fall back on first principles and fundamentals - in doing so, you won't be bearish at the bottom and will be able to recognise the opportunities that currently exist. And if you don't actually know why you should be bullish crypto, then you're in luck. Below is my "long crypto" thesis - read and internalize it, and let the bull flow through you. Enjoy!

1. Self-Sovereignty and Decentralization

" Beneath this mask, there is more than flesh. Beneath this mask, there is an idea, Mr Creedy. And ideas are bulletproof. " - V in V for Vendetta

The idea of self-sovereignty is one that has gained momentum over the past decade. While it presents itself in different forms, the fundamental belief is the same - a distrust in centralized entities and a belief that one should take matters into their own hands.

In other words, the idea that the individual is in control of their identity and not at the behest of some external company or corporation. As with any idea, this shouldn't be taken to the extreme (that's anarchy); but the fine line lies somewhere with how we should have control over our digital identities and our money.

And hence, the lack of trust in the establishment has led to the increasing need and demand for what we have today - immutable money on the blockchain. Uncensorable money, no KYC financial services, etc.

I believe that this is a fundamental truth that cannot be understated - while most people might not grasp this idea at a high level, the need is clear after seeing events that have transpired across the globe - Canadian truckers being banned from certain financial services, Chinese citizens being unable to withdraw from local banks, etc.

The ability to truly own what you own, and not at the behest of an entity that may not have your best interests in mind. Be it 10 days or 10 years from now, I believe this need will remain relevant; this inherent demand for sovereign wealth is why I'm bullish on the prospect of crypto.

2. Decentralized Information (Web 2.0 -> Web 3.0)

Joel Monegro & Chris Burniske 2017 Thesis Summary

While Bitcoin is sovereign wealth, Ethereum and other blockchains present a different market opportunity altogether. The article above elaborates on the cycles of Information Technology that are characterised by three phases - expansion, consolidation and decentralization. Simply put, periods of froth and expansion are followed by periods of value creation, where the bubble pops and whoever is left and able goes on to become the most successful platforms of that age (consolidation).

What happens next is that smaller companies clamour to build low-cost, open-sourced alternatives to the incumbent platforms (decentralization). As the market decentralizes, newcomers compete with current behemoths on cost savings, hence increasing competitiveness. Entrepreneurs then go on to find a space with a more significant upside: Up the stack.

For example, as the hardware layer became saturated, value creation moved up to the software layer. Cheaper computers meant less opportunity in that area - and it also created a demand for software, which led to the success of Microsoft - the first major Operating System.

Fast forward to today: We have a consolidation amongst MANGA, but the current business model relies on monetising large data sets and putting a price tag on your data for advertisers to buy. Following the history of information technology, it seems that democratizing information (going up the stack) is the next natural step, and hence the next opportunity for innovation.

Note that how crypto-networks operate is that for nodes to collaborate in a decentralized manner, they each must share the data amongst themselves - each node can get a copy of the database. This means that no single party monopolizes the data, which is very different from what we have today.

Crypto hence presents the next level of information technology through decentralized information. Narratives such as Web 2 -> Web 3 further consolidate this idea. But most importantly, decentralized information networks set the stage for:

3. The Network State

Balaji's Book: The Network State

The Network State is the consequence of the combination of sovereign individuals and decentralized networks. What we will see is a network of individuals from every part of the globe, all working collaboratively to create new opportunities in a decentralized manner.

Crypto has provided a new and revolutionary mechanism for organizing human activity globally. By decentralizing the infrastructure, open-sourcing the data, and using tokens as incentives, value is distributed more broadly.

But perhaps the most important idea is that for the first time, the network is now an investable asset, where the price of the token is correlated with the usage of the network.

TaschaLabs did a great thread on this, comparing blockchains to countries. While I wouldn't go so far as to make that comparison, the underlying concept is there - L1 networks are akin to an investable economy; a bet on an L1 is a bet on all the systems that will grow on it, from Decentralized Finance to NFTs to GameFi.

Many people try to value layer 1 blockchain tokens like stocks.
That’s absurd.
Instead of pricing Ethereum, Solana & so on like *companies*, you should price them like *countries*.
Here’s how.
— Tascha (@TaschaLabs)
Nov 6, 2021

The Network State is hence an extremely powerful idea that goes to show the potential of crypto as a space. It is also why I believe that spot buying ETH and holding it for the next ten years is an extremely legitimate strategy with high asymmetric risk, as these L1 tokens tend to accrue value from usage (even more so with the Merge coming up).

Think of it this way - if the Internet had a coin, would you buy it? I believe in the untapped potential of crypto networks, and that there's a lot more room for growth.

4. Raw Potential

Lastly, I believe that we are in the infancy of crypto as an industry and that it's impossible to tell what will be built in the coming years. Imagine being at the start of the dot-com bubble and trying to predict that apps like Instagram and Tiktok would even exist - a probabilistically improbable task.

Likewise, it's extremely difficult to tell what will be spun out of this industry - after all, the concept of a metaverse wasn't as popular until the NFT boom of 2021/22. I swear GameFi didn't exist until the last year or so. It seems to me that there is much left to be discovered and that the upside in being long crypto is much greater than the downsides.

To me, crypto is a raw ball of potential; an amalgamation of possibilities, waiting to be uncovered and unlocked. This is probably similar to how investors felt at the start of the dot-com boom: No one really knew what was coming, some people thought it was just a fad, but the smart ones saw the possibilities and bet on it.

I'm doing the same with crypto.

5. EXTRA: Gambling

So I asked on Twitter what some peoples' thoughts on crypto in the long term were, and the one answer I got the most was: Gambling.

i genuinely want to see the answers to this
what is your long term thesis on crypto (as an industry) and why / if u don't think crypto as an industry will make it
some ppl i wna hear the opinion of are @heartereum@himgajria@poordart@fuckyourputs@milesdeutscher@anon75374998
— Kyle (@0xkyle__)
Jul 10, 2022

In poordart's words, the "idea that for working retail, nothing beats the convenience of a 24/7 market with muddy / no KYC requirements." People will always need some outlet to gamble their hopes and dreams for the sake of a better world, and crypto will forever exist to fulfill that need.

In fact, GCR just tweeted that crypto "will remain the least efficient market" in which there is the highest % chance that someone can get rich from small $ for "quite some time". And GCR also famously said to long "human degeneracy" (i.e gambling).

lot of discussion on TL if there will ever be opportunities again
still are and still will be
crypto will remain least efficient market with the highest % chance someone can get rich from small $ for quite some time
altho will be much harder than 17'/21
not hopium, just truth twitter.com/ASvanevik/stat…
— GCR, Ezekiel X (@GCRClassic)
Jul 10, 2022

You know, I don't think this is a bad take. Morally questionable, sure. But the idea of crypto's use case mainly being a casino is something that could happen. While it would be an extremely unfulfilling outcome, I do think that there will still be a subset of crypto used for gambling, as it is in human nature to do so.

Concluding Thoughts

Remember - when in doubt, consult the first principles of why you joined this space in the first place. Whether you believed that the archaic banking system needed a revamp, or the possibilities of NFTs' IRL use cases; the important aspect is remembering them, so that you don't flip biases at the bottom.

Always zoom out - on a longer-term time horizon, we'll be alright.

If you enjoyed my content, subscribe here. Also, what is YOUR long-term thesis on crypto? Feel free to reply, I'm super interested to learn all about it.