This episode argues that applying traditional financial metrics to crypto protocols is a fundamental error, making a powerful case for valuing them as exponential technologies poised to reshape global finance, not as linear businesses judged by quarterly profits.
The New Psychology of the Crypto Market
- Haseeb Qureshi opens by observing a significant shift in market sentiment. He notes that new, promising blockchains like Monad and Mega ETH are now met with widespread hate and cynicism, a stark contrast to the enthusiasm or indifference that greeted new chains in previous cycles.
- This phenomenon signals a change in the market's core psychology, moving away from optimism toward a default state of disbelief and criticism.
- Haseeb frames this as a new challenge, questioning why the community's reaction has become so hostile before new technologies have even launched on mainnet.
- Quote: "Before 2023, almost every chain I've ever seen that launched was mostly met with enthusiasm or indifference. But now, new chains are born into a course of hate."
From Financial Nihilism to Financial Cynicism
- Haseeb diagnoses the current market zeitgeist as "financial cynicism," a successor to the "financial nihilism" of 2024. While nihilism suggested all crypto assets were worthless memes, cynicism accepts they have some value but insists they are grossly overvalued.
- This cynical view is rooted in the belief that current valuations are a bluff that will eventually be called by Wall Street, leading to a massive correction.
- Analysts are now trying to justify valuations using traditional metrics like PE ratios (Price-to-Earnings ratios), a classic stock market tool that compares a company's share price to its earnings per share. Haseeb argues this is a flawed approach.
- Strategic Implication: Investors should recognize that the dominant market narrative has shifted from "is it real?" to "is it overpriced?" This change influences capital flows and requires a different framework for defending investment theses.
The Flaw of the "Revenue Meta"
- The conversation critiques the market's recent obsession with revenue-generating protocols, exemplified by the praise for Solana's "REV" metric and DEXs like Hyperliquid that feature buybacks and clear profit multiples.
- Haseeb argues that this focus on revenue, what he calls the "revenue meta," misses the entire point of investing in foundational L1s like Ethereum and Solana.
- He points out that investors seeking exchange-like profits could have always bought Coinbase stock or BNB. The investment thesis for L1s was never about immediate, high-margin cash flow.
- The failure of Solana's REV metric to sustain its narrative highlights the inadequacy of applying traditional financial models to protocols in their high-growth, infrastructure-building phase.
- Actionable Insight: Over-reliance on short-term revenue metrics for L1s can lead to misinterpreting their long-term value. Researchers should focus on adoption, network effects, and developer activity as more relevant leading indicators of exponential potential.
Valuing Potential: The Biotech Analogy
- Haseeb dismisses the idea of writing a post to justify a specific valuation for any single new chain. Instead, he provides a powerful mental model for how markets should price high-risk, high-reward assets: the biotech industry.
- He explains that a biotech company with a drug that has a small (e.g., 10%) chance of curing a major disease is still valued at billions of dollars. The valuation is a probability-weighted assessment of a binary outcome.
- Similarly, a new L1 with a 1-5% chance of becoming the next Ethereum or Solana should be priced based on that potential outcome, not its current revenue or user base.
- Quote: "Binary outcomes are priced on probabilities, not on run rates or moral turpitude. It's the shut up and calculate school of valuation."
- Strategic Implication: Investors should adopt a probabilistic framework for valuing emerging L1s, similar to venture capital or biotech investing, rather than a traditional earnings-based approach.
The Core Crisis: A Loss of Faith in the Exponential
- Haseeb argues the root of the market's cynicism isn't a belief that new chains can't win market share—Solana's recent resurgence proves they can. The real issue is a loss of faith that there is a prize worth winning at all.
- The prevailing sentiment, especially among "smart money," is that even dominant chains like Ethereum are just memes with unsustainable valuations that will eventually collapse.
- This creates a self-defeating cycle: if the ultimate prize (becoming the next Ethereum) is worthless, then there is no incentive to build or invest in challengers.
- Haseeb positions his essay as a "smart person's manifesto" to defend the fundamental value of general-purpose chains like Ethereum and Solana, asserting that their value is real and durable.
The Amazon Analogy: Enduring 22 Years of Doubt
- To illustrate the folly of judging an exponential technology by linear metrics, Haseeb presents the history of Amazon. He uses a chart of Amazon's profit and loss from 1995 to 2019 to make a compelling point.
- For 22 years, Amazon generated virtually no profit, leading critics and short-sellers to label it a "VC subsidized charity" or a Ponzi scheme.
- Arguments about Amazon's PE ratio during this period were "devastatingly wrong" because the company was operating in an exponential growth regime, not a linear one. Its goal was market capture, not immediate profitability.
- Quote: "If you were arguing about Amazon's P ratio, you were in the wrong regime. That's the regime of linear growth. But e-commerce was not a linear trend."
- Actionable Insight: Ethereum is only 10 years old. Investors should view L1s through a multi-decade lens, recognizing that like Amazon, they are prioritizing scale and network dominance over short-term profit extraction.
Crypto's Inevitable Exponential: Open Always Wins
- Haseeb concludes his core argument by stating that crypto's growth, while "burstier" and more volatile than e-commerce due to macro and regulatory pressures, is no less inevitable.
- The fundamental driver of this exponential trend is that crypto turns financial assets into open, interconnected file formats, making finance global, 24/7, and programmable.
- He draws a direct parallel to the internet's disruption of other industries, arguing that "open always wins" and that blockchains will eventually "gobble up all of finance and money."
- Strategic Implication: For researchers and investors, the long-term thesis should be grounded in the unstoppable technological shift toward open, permissionless financial infrastructure, a trend that historically overcomes incumbent and government resistance.
This essay is a call to reject short-term, linear valuation models and reclaim a belief in crypto's exponential future. Investors and researchers should adopt a long-term, technology-adoption framework, recognizing that the most significant value creation lies in capturing a piece of a system poised for world-changing scale.
