Beyond the Hype: Crypto’s Next Phase | Roundup

This episode navigates the choppy waters of current crypto markets, dissecting mixed signals from macro indicators and on-chain activity, LP sentiment shifts, and the critical need for enhanced transparency and standards to unlock crypto's next phase of growth and investment.

Market Sentiment Uncertainty

• The discussion kicks off acknowledging the current ambiguous market state, deviating from typical crypto cycles where bull or bear sentiment is usually clear. Michael Vance notes the peculiarity, stating, "Usually in crypto, you know if things are good or bad... this feels like a bit of an odd spot."
• Santi counters the "bear market" notion, suggesting underlying strength despite surface choppiness, framing the current period as less about a definitive bear market and more about navigating short-term volatility while maintaining long-term conviction.
• Michael Bodley observes a divergence: a few assets potentially being cornered for a squeeze, while the majority lack buyers and bleed out. He highlights the resilience of crypto despite a significant drop in Nvidia, marking a potential decoupling.

Macro Factors and Market Outlook

• Vance sets potential market boundaries, suggesting above $90k BTC signals "game on," while below $80k might mean "game over," with the market currently range-bound. He anticipates resolution within 30-60 days, influenced by geopolitical factors like tariffs and trade deals.
• Upcoming Q1 earnings reports from the "Magnificent Seven" tech stocks are flagged as crucial. Investors will scrutinize guidance for Q2 and the rest of the year, particularly capex numbers and potential impacts from trade policies, given the heavy allocation concentration in these names.
• The speakers suggest markets often look through negative short-term data if there's a positive long-term outlook, but acknowledge the risk of a stagflationary environment impacting even private markets.

Crypto Business Strategy in Current Climate

• Santi advocates for a "business as usual" approach for crypto founders, emphasizing core principles regardless of market cycles: maintain 24+ months of runway, control costs, avoid reckless spending, and focus on product development.
• He stresses the improved long-term backdrop for crypto, citing a potentially more favorable US administration, the likelihood of a stablecoin bill ("Less than that [six months]"), and growing appreciation from non-crypto natives like BlackRock and Robinhood.
• A key theme this cycle, according to Santi, is understanding monetization: "understand your position in the stack like how are you going to actually monetize your user or your product." While early-stage focus on product is vital, the path to revenue is becoming increasingly important.

Investor Psychology and Altcoin Opportunities

• Vance advises against trying to perfectly time the market bottom, suggesting the best buying opportunities often arise when an asset is 20-40% off its lows and shows clear upward momentum. He notes, "you're never going to be able to time the bottom... the best time to be buying something is frankly when it's like 20 to 40% off of its low."
• Maintaining "dry powder" (cash reserves) is crucial for potential further dips. The current market sees many anticipating a potential "fake top."
• Vance identifies the "mid-tail" of altcoins ($500M - $1.5B market cap) as a key strike zone for investment opportunities, alongside potential in larger "mid-majors" ($10B - $20B). While Bitcoin needs to lead, these altcoins often exhibit higher beta (volatility relative to the market).

LP Perspectives and Capital Efficiency

• Michael Bodley shares insights from Limited Partner (LP) conversations, revealing a growing focus on capital efficiency. LPs are impressed by comparisons showing crypto protocols achieving similar (or even less) revenue with significantly lower headcount costs (1/20th) compared to traditional tech companies.
• This efficiency narrative is resonating, but it comes alongside expectations of less venture funding overall. Bodley warns, "Every year over the last five years, we have less money than the previous year... Don't expect that that trend doesn't stop." Funding will likely concentrate in fewer, established funds.
• The rise of crypto ETFs (Exchange Traded Funds) and other vehicles (Coinbase, MicroStrategy) provides LPs with more ways to gain crypto exposure, potentially impacting allocations to venture funds, especially growth-stage funds. This may force a reckoning for companies that raised large rounds without showing strong metrics.

Private Markets, AI, and Tokenization

• The discussion touches on the traditional private market feature/bug of illiquidity and infrequent marking-to-market, which some allocators use to "hide from volatility." However, this illiquidity becomes a major problem during downturns.
• A potential parallel is drawn with the AI sector, questioning the sustainability of high valuations for pre-product AI startups and the potential for "round-tripping" revenue between interconnected portfolio companies (e.g., Softbank -> OpenAI -> CoreWeave).
• Vance notes allocators are becoming smarter, asking tougher questions about valuations and fund structures across venture, including crypto. This scrutiny could ultimately benefit crypto, highlighting its relative liquidity and potentially higher valuations compared to some traditional venture outcomes. Tokenization is implicitly positioned as a potential solution to private market illiquidity.

Bitcoin Accumulation Trends

• Santi presents data indicating long-term Bitcoin holders are back in accumulation mode. This aligns with observations that wallets holding 1,000-10,000 BTC are increasing and actively buying.
• He emphasizes the significance of this trend: "the duration of wallets that have held Bitcoin after... over a year or multiple years are buying right now and that to me has always been the strongest signal." This cohort's activity is seen as a more reliable indicator than short-term trading.
• While acknowledging Bitcoin needs to lead, the conversation pivots back to altcoins, where the speakers see significant upside potential.

Stablecoin Ecosystem Deep Dive

• The group explores how to invest in the anticipated growth of stablecoins (digital tokens pegged to stable assets like the US dollar). Borrow/lend protocols are identified as a direct beneficiary category.
• Santi suggests multiple ways to gain exposure: stablecoin-specific chains (like Tron or potentially newer ones like Plasma), investing in platforms enabling stablecoin use (like Nubank or Robinhood), or focusing on protocols capturing stablecoin flow.
• Michael Bodley differentiates between payment stablecoins and yield-bearing ones (like Ethena's USDe, sometimes viewed as a structured product). He highlights the difficulty of displacing established issuers like Tether due to strong network effects, described as "social media squared."
• Investment opportunities are categorized: Infrastructure (e.g., Plasma), Issuers (difficult due to incumbents, but differentiated models like Ethena/Sky exist), and Enabled Businesses (e.g., fintech or insurance using stables), with the latter seen as highly promising. Bodley frames it as: "fintech plus stables equals better fintech."

The Re-Emergence of Crypto Lending

• The borrow/lend market, decimated by CeFi (Centralized Finance) collapses (Genesis, BlockFi, Celsius), is showing signs of recovery, primarily driven by DeFi (Decentralized Finance) protocols.
• Michael Bodley cites portfolio company Maple Finance (now Syrup) surpassing $1 billion in TVL (Total Value Locked - the amount of assets deposited in a protocol) as evidence of this on-chain resurgence, highlighting a recent $100M+ allocation from Sky Mavis.
• Data from Galaxy Digital confirms DeFi lending now surpasses CeFi lending volume, although the overall market remains significantly down from its peak. This signifies a shift towards more transparent, on-chain credit systems.

Stablecoin Stickiness and Chain Dynamics

• The stickiness of stablecoins to their underlying blockchains is debated. Vance suggests Tron's USDT usage is sticky due to established retail/merchant connections, but also notes a large portion is exchange reserves, which could move based on cost/speed.
• Ethereum's stablecoin stickiness is attributed to its deep capital markets, making it the primary hub for DeFi activity. This depth provides a strong moat.
• Solana's stablecoin usage is seen as more cyclical, heavily tied to memecoin activity. While data shows stablecoin supply remained elevated even after memecoin DEX (Decentralized Exchange) volume dropped post-Trump token launch, Vance expresses concern that outflows could continue if the memecoin cycle doesn't reignite.

Solana Revenue Analysis and Sustainability

• Analysis of Solana's network revenue reveals a dramatic spike coinciding with the memecoin frenzy, followed by a significant drop (though market share remains high). This raises questions about the sustainability of its fee income.
• Santi introduces the concept of fee composition quality. While high revenue is good, if it's primarily derived from speculative, potentially "toxic" activity like memecoin trading with high slippage, its long-term value is questionable. He notes, "over time what you want to see is as a percentage of the pie speculation going down... you want to have other types of activity."
• The unit economics of onboarding users solely for memecoin speculation are poor, with low retention rates. Sustainable L1s need diverse, durable sources of activity and revenue.

L1 Valuation and Fundamental Analysis

• The discussion questions the valuation methodologies for Layer 1 (L1) blockchains like Solana and Ethereum. While traditional metrics like revenue and net income resonate with LPs, applying them consistently across crypto is challenging.
• Vance points out the difficulty in justifying multi-billion dollar valuations based purely on current fundamentals and highlights the ongoing debate around factors like issuance costs, inflation/deflation, and the "monetary premium" (value derived from the token being used as a core trading or reserve asset within its ecosystem).
• Santi observes that despite predictions, the composition of the top 10-20 crypto assets hasn't changed dramatically, with assets like XRP and Cardano maintaining positions due to strong community building and branding, sometimes irrespective of traditional metrics. He credits Ripple's strategic acquisition as a way to "grow into the valuation."

The Crypto Data Transparency Problem

• A major hurdle identified is the lack of standardized, reliable data, ironic for an open-source space. Issues include discrepancies between stated and actual circulating supply, opaque token allocations, and difficulty verifying team/foundation holdings on-chain.
• Vance shares an anecdote of finding a $50M/year revenue understatement bug in a public dashboard, highlighting the pervasive data quality issues. Michael notes, "There's no GAAP accounting in crypto."
• This lack of transparency hinders fundamental analysis and makes it difficult for investors (especially institutional ones) to confidently allocate capital.

Call for Industry Standards and Disclosure

• There's a strong call for industry-led standards, akin to GAAP (Generally Accepted Accounting Principles) in traditional finance, to define metrics like revenue, costs, and token issuance consistently.
• The need extends beyond financials to basic operational disclosures: the relationship between development labs and foundations, market maker agreements, and clear identification of team wallets.
• Implementing standardized reporting (e.g., quarterly updates) and potentially self-regulatory organizations (SROs) like FINRA in TradFi is proposed. This could improve investor confidence and provide a better negotiating position with regulators.
• Adopting practices like 10b5-1 plans (pre-scheduled, automated selling plans for insiders) is recommended to manage insider selling concerns transparently. Santi explains these plans insulate executives from accusations of trading on non-public information.

Exchange Listing Practices and Incentives

• The conversation criticizes opaque and potentially "egregious" token listing practices by some centralized exchanges (CEXs), including demanding large token allocations.
• NDAs and misaligned incentives prevent teams and investors from speaking out, creating an "industrial supply chain" where transparency is discouraged. Vance suggests, "If the big centralized guys keep taking 10% slugs out of the token supply, then that's only going to accelerate [the move to DEXs]."
• Greater transparency around listing requirements and fees, similar to IPO underwriting disclosures, is advocated. Decentralized exchanges (DEXs) are seen as potential beneficiaries due to easier, permissionless listing.

Improving Protocol Disclosures

• The speakers reveal that some newer portfolio companies plan to implement robust disclosure practices from launch, including quarterly financials, growth metrics, and clear team wallet identification.
• Michael Bodley argues that increased transparency directly benefits protocols: "The liquid buyers of assets will buy your token the more information you disclose." It builds trust and attracts serious investors.
• While acknowledging the challenge for older protocols established under different norms, the expectation is that market forces (capital flowing to more transparent projects) will eventually compel incumbents to improve their disclosure standards.

Standardizing Reporting and Comms

• Protocols are encouraged to hire dedicated Investor Relations (IR) personnel to manage communications, disclosures, and relationships with token holders and investors, mirroring standard practice in public companies.
• Effective communication and narrative-building, citing Jeff Bezos at Amazon as an example, are crucial for managing market expectations and justifying long-term strategies, especially during periods of heavy reinvestment or low profitability. Santi advises, "have an investor relations person on your team."

Amid market uncertainty, this discussion underscores crypto's maturing infrastructure (stablecoins, DeFi lending) but critically highlights transparency and data standardization gaps. Investors and researchers must prioritize protocols demonstrating clear data practices, robust disclosures, and sustainable, verifiable revenue models for long-term viability and attracting institutional capital.