This episode dissects the crypto market's hangover from a massive leverage wipeout, exploring the resurgence of platforms like Hyperliquid and a critical investor shift towards tokens with tangible revenue and clear legal rights.
The Aftermath of the October 10th Liquidation Event
- Market Psychology: Jason, drawing from his own experience of getting hit on low-leverage positions, explains that such severe liquidations destroy the market's appetite to bid on assets beyond Bitcoin and Ethereum. This leads to a period of choppy, sideways consolidation as the market digests the event and traders rebuild their positions and theses.
- Historical Precedent: Yan notes that historically, significant Open Interest (OI) wipes—referring to the total number of outstanding derivative contracts that have not been settled—are often followed by strong returns over 1-6 month periods. However, he cautions that the starting price used for such analysis is critical; using the wick low of the crash could skew the results.
- Jason's Assessment: Jason believes that if the market were going to break down further, it likely would have already, especially with equities reaching new highs. He suggests that the event was a prime buying opportunity for those with capital. "If I got wrecked on like that, every you know, tons of people got got wrecked. So, it kind of like kills the appetite to bid, you know, tons of tons of assets."
Navigating a Choppy Market: Macro Tailwinds and Niche Rallies
- Niche Outperformers: Cedus points out that while many assets remain suppressed, niche sectors have performed exceptionally well. These include privacy coins like Zcash, on-chain projects in the Base ecosystem like MetaDAO and Clank, and speculative robotics plays.
- Market Analogy: Jason compares the current market's choppy, range-bound behavior to the summer of 2023, where the market oscillated for months before a significant move. He views this as consolidation near all-time highs rather than a macro top.
- The "Late '99" Consensus: The team discusses the growing consensus among macro analysts that the current environment resembles the late 1990s—a "Goldilocks" situation leading into a potential blow-off top, where risk assets are still favorable. They note, however, that unlike the dot-com bubble, the current AI boom is supported by strong earnings growth that is keeping pace with price appreciation.
Hyperliquid's Resurgence with Traditional Asset Markets
- NASDAQ Perpetuals: The team highlights Hyperliquid’s launch of NASDAQ perpetuals, which has already seen significant volume ($87 million on NASDAQ alone on the day of recording). This move taps into crypto-native traders' demand for exposure to traditional equity markets.
- Competing Models: The conversation contrasts Hyperliquid’s model with Aevo's (miscaptioned as "Astium" or "Osteium" in the transcript). Hyperliquid's high baseline funding rate (around 11%) makes it ideal for short-term leverage traders, not long-term holders. Aevo, which uses a vault-based model and reportedly bridges liquidity to TradFi venues for better execution, may be more suitable for larger sizes or longer-term positions.
- Strategic Implication: The success of these platforms indicates a strong, unmet demand for permissionless access to traditional markets. Investors should monitor which model—Hyperliquid's trader-focused approach or Aevo's liquidity-bridging model—gains dominant market share, as this will signal the preferred infrastructure for on-chain TradFi exposure.
Monad vs. "Mega ETH": A Tale of Two Architectures
- "Mega ETH" Public Sale: The team discusses the "Mega ETH" public sale, noting the invasive KYC process and massive oversubscription, which will likely result in very small allocations for most participants.
- Architectural Philosophies: Cedus, despite acknowledging "Mega ETH's" potential, expresses a stronger conviction in Monad due to his preference for its "centralized L1 model." He does, however, credit "Mega ETH" for designing a token with genuine utility, such as for sequencer rotation and priority access markets—a stark contrast to most existing L2 tokens.
- Market Impact: A key question raised is where the liquidity and user base for these new chains will come from. The assumption is that they will not bring in a net-new wave of users initially but will instead pull activity from existing ecosystems like Base, Arbitrum, and Solana.
The End of Valueless Tokens: A Market Shift to Revenue
- Altcoin Carnage: The team references a chart showing that most of the top 50 altcoins on Binance are now trading below their post-FTX crash lows. This illustrates the brutal impact of continuous token unlocks into a market with no new capital inflows.
- Cedus's Thesis: Cedus argues that the primary theme for the current market cycle is the institutionalization of crypto and the rejection of "valueless tokens." The market has wised up and is no longer willing to assign high valuations to projects with functional products but non-functional, governance-only tokens.
- Investor Takeaway: This marks a fundamental shift. Future investments should be heavily weighted towards tokens with direct ties to revenue, profit-sharing, or essential protocol functions. The era of valuing projects based on pure narrative or hypothetical future utility is over.
Zcash's Explosive Rally: Momentum Trade or Fundamental Shift?
- Key Drivers: The rally is attributed to a combination of factors: strong promotion from influential figures like Naval Ravikant and Mert Mumtaz, improving on-chain accessibility via bridges to chains like Solana, and its status as the primary pure-play asset for the privacy narrative.
- The Core Debate: Jason frames the key question for investors: Is this a sustainable, fundamental re-rating of Zcash and privacy, or is it a short-term momentum trade driven by front-running narratives like its upcoming halving? The answer determines whether it's a long-term position or a trade to exit once momentum fades.
- Technical Context: Zcash’s technology includes a "shielded pool," where users can move assets to make them private. The recent growth of this shielded pool is a key metric indicating genuine adoption of its privacy features.
A New Precedent for Crypto M&A: Pump.fun and Farcaster Acquisitions
- The Two Models:
- Pump.fun Acquires Padre: Pump acquired the equity and business of Padre, but not its token. The Padre token was effectively made worthless, with its holders receiving a "goodwill" airdrop of Pump tokens with no legal obligation.
- Farcaster Acquires Clank: In this case, the acquisition included the protocol and its token. The new parent entity immediately began using protocol revenue for token buybacks, directly benefiting Clank token holders and causing the price to surge.
- The "Token Discount": Cedus uses this comparison to illustrate the "token discount"—the idea that tokens trade at lower multiples than equivalent equities because they lack clear legal rights and protections. The Padre situation is a stark reminder that without explicit rights tied to the underlying IP or business, token holders can be left with nothing in an acquisition.
Strategic Capital Moves in Crypto Equities: Galaxy Digital and Ether Capital
- Galaxy Digital's Note: Duncan explains that Galaxy Digital's recent $1.15 billion exchangeable note issuance, which caused a short-term stock dip, is a strategically brilliant move. The capital was raised at a very low interest rate (0.5%) and can be used to refinance older, more expensive debt at a lower rate and with less potential shareholder dilution.
- Ether Capital's Buyback: The team discusses Ether Capital (miscaptioned as "Ezilla") selling $40 million of its ETH holdings to buy back its own shares. This is presented as a rational capital allocation decision, as the company's stock was trading below its Net Asset Value (NAV)—the value of its underlying ETH holdings. By selling ETH to buy back discounted shares, they effectively increase the ETH-per-share for remaining holders.
Conclusion
The market is recovering from a major leverage flush, forcing a pivot towards assets with clear value accrual and defensible token rights. Investors must now prioritize fundamentals and legal structures over pure narrative, as demonstrated by recent M&A activity and rational capital allocation trends in crypto equities.
