This episode dissects the harsh realities of launching a new Layer 1, exploring why Monad's mainnet debut met muted expectations and what this signals for L1 valuations and investor strategies.
Monad Mainnet Launch: A Muted Debut
- Initial Observations: The hosts observed very low initial activity. An actively managed vault on Monad's official page, curated by Steakhouse, showed a TVL of only $20,800, which Bokky found "ridiculously low" for a featured application.
- Day One Challenges: The speakers emphasize the immense logistical difficulty of a coordinated launch. A chain might work with hundreds of applications during its testnet phases, but only a fraction manage to go live on day one. Bokky highlights the struggle: "I can't imagine anybody being particularly happy day one of their launch. Like what chain had a good day one launch? Probably nothing."
- Market Context: The launch was also impacted by poor market timing. Monad's Coinbase ICO was priced at a $2.5 billion valuation, a level that pre-market perpetuals on exchanges like Binance had already traded down to, erasing the expected "launch pop" for early investors.
L1 Valuations and The Performance Trap
- Is Faster Better?: Bokky questions if Monad's purported 10,000 TPS is a significant enough leap when compared to specialized chains like Hyperliquid's appchain (200,000 TPS) or the ambitious goals of projects aiming for 1 million TPS.
- The Value Accrual Problem: Danny argues that the critical factor is no longer just performance but economic activity and value accrual back to the native token. He expresses disappointment that both Monad and Mega ETH have not adopted a more "centralizing" strategy by building and owning their own native applications.
- An Actionable Insight: Investors should scrutinize an L1's strategy for capturing value beyond simple transaction fees. Chains that vertically integrate by building their own decentralized exchanges, lending platforms, or stablecoins (like Hyperliquid) may offer a more direct path to revenue and token value than those that remain purely neutral infrastructure providers. Solana's high transaction volume from memecoins, for instance, generated significant priority fees but failed to capture value from the underlying spot exchange flows.
Berachain's Controversial Investor Deal
- The "Risk-Free" Investment: The report revealed that Berachain gave its lead investor the option to get a full refund on their investment if the token's performance was unsatisfactory post-TGE (Token Generation Event), the moment a token becomes publicly tradable. This effectively created a risk-free bet for the fund.
- Strategic Implications: The deal raises questions about governance and fairness to other investors. The hosts discuss MFNs (Most Favored Nations), a standard venture capital clause that ensures all investors receive the best terms offered to any single investor. It remains unclear if other Berachain investors were granted this same protection.
- A Marketing Expense?: The speakers debate whether such a concession was a necessary "marketing spend" to secure a prestigious lead investor. They conclude that at a $25 million check size, the team likely could have raised the capital from the community without offering such preferential, risk-eliminating terms.
Investment Strategy: Fundamentals vs. Narrative
- Trading on "Vibes": James states he doesn't use fundamental or technical analysis for most of his crypto trading. Instead, he focuses on what he calls "vibes"—identifying idiosyncratic opportunities driven by market structure, capital flows, and narrative. He argues that valuing Ethereum based on fundamentals over the past six months would have been a losing strategy.
- The Problem with L1 Valuations: He argues that established L1s like Ethereum and Solana have achieved a "Lindy" status where they are no longer valued on fundamentals. For new L1s, he believes the path to achieving this status is nearly impossible, making them poor long-term holds.
- Structural Flaws: James points out a critical flaw in the current market: "Every single one of these projects is going to continually just raise at a massive valuation and there is not going to be any natural buyer... until we start launching projects at way lower valuations and publicly float all the tokens way earlier, it's just going to keep happening."
The Power of Pre-Market Price Discovery
- A Real-World Example: James reveals he considered participating in the Monad ICO but decided against it after observing the pre-market perpetual contract trading down to the ICO price of $2.5 billion. This signal indicated there was no immediate upside, saving him from an unprofitable trade.
- Actionable Insight for Investors: Pre-market perpetuals and other pre-launch trading venues are no longer just speculative instruments. They serve as a vital tool for real-time price discovery, allowing investors to gauge market sentiment and avoid participating in token sales that are priced at or above their likely public market valuation.
Conclusion
The episode underscores a critical market shift: technical specifications alone no longer justify multi-billion dollar L1 valuations. Investors must now prioritize projects with clear value accrual models and use pre-market data to avoid over-hyped launches, as the market structure continues to favor private investors over public participants.
