Life’s too short for some damn intro.
market view
The future remains uncertain. The best we can do is to try to understand and react to the present.
It’s undeniable we’ve seen bubble-level mania in many assets across crypto markets (albeit not to 2021 levels).
We’ve now seen declining hope, volume and activity across the board on the back of 6 months of poor price action, especially for alts.
Given the above, I’ve adopted a fairly-defensive portfolio structure for the past few months, with way more cash than normal for me.
On the other side of that I have a number of high risk, high upside positions that each have a unique case for exponential outperformance should a second bull leg come to pass.
This portfolio construction offers some protection if alts continue down, perhaps on the back of a continued BTC downtrend (the echo bubble has topped view), while also offering exponential upside potential should alt markets recover (an extension of giver’s ethical long view).
I don’t know what will happen, there’s a range of outcomes. Crucial to my hypothesis is that, should alts do well once more, it will be new sectors once more outperforming the old. Having lots of cash on hand to bid those gives my cash position dual-purpose.
Everyone on CT tends to obsess over maximally hitting every move perfectly.
Of all the 9-10-11 figure investors I’ve studied, I’ve yet to see the ones who got there on the back of their 100% hit rate.
revisiting the memecoin supercycle
Attention dilution fueled by Pump Fun led to a mass dispersion of capital rather than a concentration into a few names.
What I initially characterized as “the next L1 trade” was better described as “the next ICO trade”.
The best memes did 100x+, but it was mostly memes doing it over and over, rather than the larger memes moving to 10b+ valuations as I had originally thought. As a result, the positions I initially selected as best were – incredulously – not far out enough on the risk curve. The biggest performers since Mar. 1 include Brett, Popcat, Boden, and Giga. All assets that traded around 10m MC or below (or didn’t exist) on March 1st.
There are two views to memes moving forward that feel relevant: the cabal pvp view, and what I’ve called the “world shock” view. I oscillate on where I stand regularly.
Cabal pvp
The cabal pvp view of memes argues that the true inflow into the meme market was much more muted than thought during and immediately post the march mania. Instead, small insider groups use methods like supply control and hype generation to pump these memes to storied valuations.
It’s without a doubt a ton of that has taken place in 2024. The financial incentive and perceived ability to get away with it for a lot of these people is too high for that not to occur. As the market realized this, the success of memes underwent euthanasia, with each subsequent “play” achieving lower and lower peak market capitalizations.
The million dollar question is: how do we get from cabal pvp to world shock pve?
world shock pve
The “world shock” case for memes refers to a number of hindsightedly-idiotic posts i made referring to a second leg of the memecoin cycle which far outstrips what Q2 2024 was able to achieve. the timing by which I called for such a thing was far too early for it to even have a chance.
after muddling with the idea in a twitter-distant state for a while, I came to the partially-obvious conclusion that crypto must either become cool or seem economically vital for this “world shock leg” to commence.
The “crypto is cool” part is the more obvious hypothetical. If gambling on cat coins becomes the soup du jour with the people of real influence (in 2024, not people who had influence when I was 12) then we may expect large inflows of capital to gamble on crypto coins once more.
less evident to me was the “crypto becomes economically vital” investment thesis for memes. more specifically, this economic vitality must manifest in a “new era” bull market for crypto x AI protocols.
curveball, I know.
lately i’ve been singing the praises of goodalexander’s Agentic Protocols report.
It will probably go down – alongside the similarly named Fat Protocols thesis – as one of the great hall-of-fame bullposts of the crypto era.
Core to his thesis is a world in which the “crypto x ai” vision actually bears fruit in the form of self sovereign AI agent protocols which engage in economic activity on or off chain, returning the value generated to the protocol token.
It’s easy to see a bonanza of a “new era” bull market in agentic protocols occuring in a world in which LLMs are about to John Wick the entire knowledge work economic apparatus.
What I’m proposing is that a potential corollary of an agentic protocols bull run would be a massive bullmarket in memes.
The financial nihilism displayed by cryptonatives in 2024 was a test run – for the nihilism displayed by the corporate pseuodoriche of the entire world in 2025, 2026, and onwards.
It’s true that there will be many who see their industries and careers revolutionized at best or eliminated at worst and, in turn, try to invest in the new era, bidding goodalexanders agentic bags to gajillions.
This thesis argues that in addition to that many, many others will turn away from the system entirely, accepting the nihilistic view in which humans have no economic value in the new era.
In that world, humans are not much more than a circus act, a joke.
Maybe even a meme.
In between the idealistic AI driven post-scarcity of Trekonomics, and where we are today, there is a gap. I don’t know if humans ever achieve Star Trek economics. I do feel intrigued by:
the likelihood markets overreact to the upside in response to the very legitimate worldwide change brought by ai (agentic protocols thesis)
the downstream likelihood that millions upon millions of people will reject this system of investment for whatever reason (nihilism thesis)
and finally, the likelihood that those same people will just dance in the rain, shocked into speculating on whatever they – and the influencers who lead them – find most amusing in what they perceive to be their final days (the world shock thesis)
Let’s see.
mental concepts
these are the concepts, mental models, market frameworks, etc. that im keeping top of mind lately. writing about them as I believe it will help me cultivate a psychological edge. sharing my writing so that hopefully it helps you too
active share
active share (h/t @connorking_) at a high level describes the percentage of your portfolio that is outside the consensus index.
For example, it’s mostly consensus to hold BTC, ETH, and despite what people say, SOL. it is not consensus to hold a material amount of one's portfolio in, say, BSV.
in this example, SOL would be considered a low active share position, while BSV would be considered high active share.
the above example highlights an important point: active share doesn’t automatically make a position a good one. I hold a decent amount of SOL and, shockingly, no BSV.
active share is important if one’s goal is to outperform markets. if you hold all the same coins that CT holds, why expect a result different than the average CT market participant? consider all the best traders and investors of crypto’s past.
they all had very high active share relative to their peer group – all in bitcoin early on while most were in stocks, all in eth when it was just a double digit shitcoin, all in defi when all erc20s were scam, max bidding solana at the “Lisbon Lows”. The list goes on.
there are two further reasons why I believe embracing active share is important specifically in crypto markets, especially today:
when crypto is in a bear market, all positions, consensus or otherwise, typically go down a lot. so why bother with the muted upside of consensus positions, unless you have no other choice (due to mandate/size/tax/lack of conviction in alternatives constraints)
In the part of the probability distribution that assumes we are mid cycle, positions with high active share (that are correct of course) drastically outperform, at least historically. Mid last cycle, Eth + Eth Defi were consensus, yet drastic outperformance came from buying Punks, Avax/Fantom Defi, Luna, Ohm, Axie, Metaverse tokens, or Art Blocks, not to mention the famed Alt L1 trade. Expressing a thesis on ANY of these in Q1 2021 would’ve gotten you laughed out of the room, yet by the Q4 November top it would be you laughing to the bank.
As such, while I still hold some portion of my portfolio in consensus names, namely Solana, active share has become a top guiding principle for my portfolio construction.
The two biggest risks to the active share approach are:
index outperforms, and
active share positions that aren’t yours outperform
For the first, it is possible that a market regime shift towards concentration in consensus names occurs, echoing the dominance of the “Magnificent Seven” of tradfi. This would mean SOL, BTC, maybe WIF etc grind upwards, but no downstream wealth effect occurs, and no new subsectors take off. This has never really happened in crypto to date, but would require significant portfolio adjustment on my part should this look to be the case.
In the second case, it means a broad rally or even bubble occurs in non-consensus markets, but they aren’t the one(s) I’ve selected. The example heroes of the past are chosen with a huge survivorship bias. For every Spartan buying $300 Eth at Thermopylae, there are countless people who were bullish the wrong alt L1s, or the wrong Alt-Defi, or bought Hashmasks instead of Bored Apes. It’s a tough spot to be in, and arguably the most psychologically painful spot to bear. Alas, life is all risk and then you die.
asymmetric risk
It’s as Soros said - all that matters is how much is made when correct versus how much is lost when incorrect. Much is made of asymmetric return profiles, where 1-2 order of magnitude jumps in position size can be had.
Fiskantes pointed out in a tweet I couldn’t find that more attention needs to be directed towards asymmetric risks.
Holding all your cash in one stablecoin presents asymmetric risk. No matter the perceived safety, the fact is you gain nothing by not diversifying and are subject to blowout risk in the worse case. The same goes for all types of concentrated positions.
These positions are not limited to financial ones. One wallet software, one hardware wallet provider, one browser, one exchange, and more all present asymmetric risks.
Eliminating these risks, however silly it seems today, is paramount.
inversion
Charlie Munger popularized – at least from my point of view – the idea that one may start from the desired end state and work their way backwards to the actions needed today. These actions are both “What must be true if I reached my end goal”, and also “What actions likely did not get me to my end goal?”
Many in crypto violate this principle on a day to day basis. I’ve been more than guilty of it too.
For example, most people say, “I want to make a gajillion dollars investing in crypto, buy 5000 acres of land in Italy, and reinvigorate the Roman Empire” or whatever.
But then, when you talk to people on any given day, their behavior exhibits a near-manic obsession over what seems to be the random trivialities of the day.
The price movement that already happened yesterday. The bit of breaking news that doesn’t change anything in almost every case. Pump fun, is it just or unnjust? Nomenclature of tech that neither they nor none of their investments are affected by.
The list goes on.
But if I asked these people, say you made a bajillion dollars. How would it have happened?
The story likely doesn’t begin with, “So I was trading the 15 minute chart in a Telegram group chat…”
Again, I’ve lost focus like this time and time again, you can just look at my twitter during various periods for proof of that. I'm just redialing my focus on the goals I have in sight, and trying to make sure my actions today are in line with those goals.
That’s partly why I’ve written this post - clarity and concision are gained through writing.
position evaluation framework + highlight
the basic framework for position building tries to align a high outlook for the fundamentals, technicals, and the market tone + reflexive potential surrounding the investment. When these are in line, the odds are skewed moreso in my favor.
Solana in Q1 2023 was the perfect example of this :
Fundamentals: Solana was market-leading tech back then, with a clear route to 10-100xing performance, with a resilient community on top.
Technical analysis: A depressed chart that could theoretically go lower, but was unlikely to face greater sell pressure than Caroline/FTX dumping their stack to support FTT, with price bottoming out since that event.
Market tone / Reflexivity: Solana’s main competitor was trading at some 40x it’s valuation, with precedent for the alt L1 trade and plenty of hatred to fuel a hated rally. People would increasingly target ETH’s valuation and metrics as comparisons for Solana, justifying high prices.
Note: We may also utilize Soros’ basic market cycle framework (from The Alchemy of Finance”) to evaluate where in a potentially reflexive process any given asset lies. The steps are summarized as follows:
The emergence of a largely unrecognized trend
The beginning of a self reinforcing process
The period of testing. If the trend fails the test, no boom occurs. If it does, then
there is growing conviction, which yields a growing divergence in the perception of an asset and its reality
A climax, where reality reaches its limit relative to the expectations of investors.
A flaw in perceptions, where people continue to play the game even though belief in the game decreases (commonly referred to as “complacency”)
A tipping point, leading to a self reinforcing process in the opposite direction – the crash.
The existence of “double bubbles” and failed starts makes it hard to use this framework to precisely assess where in a market cycle we are. Soros himself called it crude. That said, while crude, it remains useful.
(note: the above example using Solana is a highly summarized version of the research and conversations it took to realize the view. fundamental analysis can get deep: here’s a few of my solana pieces I wrote to gain conviction: solana ecosystem overview (free), compression, firedancer, and reframing the narrative)
The Next Big Stablecoin - DYAD
at a high level: Dyad is a novel stablecoin protocol which tokenizes excess collateral in the system into a token, called Kerosene. This gives Kerosene a theoretically deterministic value which increases as protocol TVL increases.
Importantly, the Kerosene token itself is not counted as protocol TVL, avoiding the problems of endogenous collateral seen in protocols like Luna. (The protocol is not without risks, as we will discuss below.) Blocmates has done a great deep dive on the protocol’s technical design which can be found here.
Fundamental analysis: Tokenizing excess collateral has a potentially drastic effect on the capital efficiency of the system. If other CDP protocols like Liquity or Maker functioned with a similar mechanism as Dyad, the freed up capital would be in the hundreds of millions to billions of dollars. In turn, the deterministic value of Kerosene would increase significantly if TVL grows to match or exceed some of these competing protocols.
Joey (Dyad’s founder) recently appeared on the Flywheel podcast, discussing his long-term vision for the protocol. It includes details on the different levers Dyad may pull to try and earn that growth.
Beyond the CDP product, Joey discussed single sided staking for DYAD (which could power consumer facing high yield saving applications), and a novel lending market (which could open up even more forms of margin collateral to back Kerosene). On top of this, the team has been aggressive in pursuing new, varied collateral types, including sUSDe, tBTC, eETH, and wstETH.
Technical Analysis: Kerosene looks to have completed a miniature cycle over the last few weeks:
Volume spike on Aug. 15/16th pumps price from $0.02 to $0.07
Pullbacks are all bought, token surges to $0.30, up 15x in a matter of weeks
Now potentially consolidating between $0.078 bottom and $0.13
Ultimately, no magic lines will indicate where price goes next, but at the very least we may argue that the Kerosene market is nowhere near euphoria at this current stage down -67% from local highs.
Note: Given that BTC must stay flat at a minimum for alts to do well, it’s mandatory to consider the health (or lack thereof) of the BTC market. Arguments for further downside are probably valid, which is why long alts isn’t a risk free investment at this stage.
Market tone: Stables are rivaled only by trading platforms in terms of product market fit in crypto today. In 10 years, Tether achieved $100 billion in asset issuance, now rivaling the biggest countries in the world for US Treasury holdings. In the crypto native scene, Maker’s DAI has billions issued, despite relatively poor capital efficiency and a fairly centralized collateral mix.
Combine the above with the persistent yield chasing environment we see on Ethereum especially, and an attractive market sentiment for Kerosene emerges. It’s not hard to imagine stETH or USDe whales depositing large sums into Dyad – after all, they deposited hundreds of millions into a number of nearly undifferentiated Eigenlayer restaking tokens – before Eigenlayer’s own token ever even went live.
Reflexivity: With protocol TVL only at $25m, I believe there’s huge room for deterministic value to increase, as mentioned in the fundamentals section. The TVL targets of other protocols provide the reflexive fuel for the protocol to grow exponentially from here. Even if the teams Joey is aiming to compete with – the likes of Maker or Circle – are unreachable, less innovative stablecoin projects still have 10x the TVL of DYAD.
Risks: The stickiness – or lack thereof – of Dyad’s TVL will determine much of the downside risk to the system. It’s possible for mercenary TVL to withdraw large amounts and rapidly selling Kerosene to boot, sending the deterministic value of Kerosene down significantly. If the market expects that dynamic to continue, there’s little reason to step in to arbitrage the DV back to parity with the underlying collateral - it’s better to see when and where selling subsides.
We saw a miniature version of this during the end of Aug-beginning of september selloff, which was largely driven by two whales exiting the protocol. In this micro example, no follow-on large TVL flight occurred, and buyers did end up stepping in. How Kerosene will fare should this example play out on a larger scale is unknown.
cash + equivalents
“This game got valleys and peaks…”
Sean Carter
I’m not really worried about not being all in a move from Sol 140 -> 200. That isn’t an asymmetric return. When there are so many avenues to earn good yield while retaining dry powder for further downside and/or new asymmetric positions, I’m happy to capitalize. This position ensures I survive even if all my other positions go bust.
long tail positions
ore
I wrote a fairly detailed research piece on ore earlier in August. It’s since gone down only. In retrospect, the optimal game theory was to pump the token as much as possible pre mining re-launch, so that the high emission days would be at artificially high prices. Once mining came online, gifted miners took full advantage, selling like mad men.
I still like this project in the long run. The idea of a Solana native hard money resonates to me, and as we approach the flattening out of Ore’s inflation curve, it will be interesting to see if the project can re-engineer positive momentum.
meta
The idea of governance via markets where people put money where their mouth is sounds revolutionary. Prophet is sharp. It wouldn’t surprise me to see futarchy implemented across 50%+ of Solana protocols a year or two from now.
It’s cool, it’s new, and hard to value. Typically a +ev setup with respect to crypto.
punks
Ethereum as an ecosystem is inching closer and closer to it’s Protestant Reformation moment, where, ironically, a subcommunity will elect to prioritize the performance of code and code alone. It’s not there yet, and as such I have minimal desire to be long ETH.
NFTs are even more bodybagged. Yuga Labs seem set on perfecting their Inverse Midas Technique, which turns all IP they touch to mud. That said, if there’s one NFT I’d own for 10 years, it would have to be a punk. I believe Cobie once commented that he tried to buy the punks IP – he won’t be the last to attempt it over time.
a yuga free Punk in a world where crypto succeeds in the long run is probably worth more than a souped up 2024 Toyota Sienna.
conclusion
Thanks for reading. I’m shooting to iterate on these every month or two, depending on how active the portfolio is. this series is focused on the public market – I will look to visit thoughts on the private market in some of my next work: first up to bat is “Blink and You’ll Miss It: $SOL’s Consumer App Supercycle.”
Cheers and good luck.
Disclosure
The information provided in the present publication, including but not limited to research, analysis, data, or other content, is offered solely for informational purposes. This article is not intended to constitute financial advice, investment advice, trading advice, or any other kind of advice. All readers are hereby warned not to rely on the information in this paper for financial investment decisions or any other financial purposes and to seek independent financial advice from an appropriate professional. The author does not give any warranty as to the accuracy of any information in the paper to any person for purposes of financial decisions.