Good morning, everyone. So, today I'm going to talk about the case for active management in crypto.
Almost a year, 1 year ago, we had one of the biggest liquidation days in crypto history. More than 19 billion of positions were liquidated in 1 day. So, what has the market taught us after those 12 months? And my argument is simple: this is the strongest case in years for active management. Not as a slogan, but backed by data. And this is not because active managers like us are smarter, but because the opportunities in crypto have changed. The growth is no longer in the biggest assets and majors. I'll show you the numbers first, then walk through three case studies and close with why I think what active management means today.
So, I mentioned just now, more than 19 billion was liquidated in 1 day. The normal reaction might be, 'Okay, this is a reset, flush the leverage. We will come back higher again on the majors.' And 12 months later, Bitcoin is still down around 24% compared to 1 year ago. Ether close to 30%. Solana 36%. And actually in June this year, painful memory, Bitcoin traded below $60,000. Roughly like 50%, more than 50% max drawdown. So, if the strategy is just to, 'Okay, I buy the majors and wait for the market to rebound,' most people still are not back to break even yet. Yeah. And that is the passive benchmark of crypto, what people usually benchmark to. And now I will show you what has happened to the same market in the same period for the other asset class.
So here's the same 12 months, same market, side by side. In the blue, you have the passive, the majors. Bitcoin down 24%, yeah, and Ether and Solana more. And the three tokens I'll use as a case study today: Zcash up 483%, Hyperliquid up 145%, and NEAR up 114%. And all three of them had a market cap of above a billion dollars at the day of the washout. So these are not micro caps, or as I like to call it, that you couldn't buy. Hyperliquid was actually already a 10 billion dollar asset. And measured against Bitcoin, you look at it: Zcash has outperformed by 500%, Hyperliquid 169%, and NEAR 139%. This is a huge amount of outperformance. If you put all three of them in an equal-weight basket, they're up around 250% against roughly minus 30% for an equal-weight basket of the majors. Now I'm not showing these to say buy these three tokens. I'm using this to explain that the gap between the majors and the best opportunities in the industry has never been wider. A strategy that only owns the largest assets missed every one of these.
So this is the path, not just the end point. So everything on this chart is indexed to 100 on the day of the washout on a log scale. So, two things to notice. First, the winner did not win from day one. In fact, from the first three months of the washout, they all fell together. NEAR traded below a dollar in February. HYPE fell to about $21 in January. And Zcash, or as they like to call it, Z, the core token, gave back its entire November rally by early March. If you had looked at this chart in February this year, you would have seen Zcash roughly back at where it started, and every other line underwater. But the gap started to open from April onwards. And the drivers were very specific to each asset: privacy ETF, a derivatives platform taking market share, and a cross-chain product with real volume, plus the AI narrative. That's why I will keep coming back to the idea that you have to look at these assets one at a time.
Here's the same data in a different way. The middle column is the max drawdown of each asset. The right column is where it ended up as of two days ago. Look at how they interleave. Zcash had the deepest drawdown of all the six, minus 72%, and the best returns. The rest didn't do as well. Like Solana fell almost 70% at the worst and ended up down 36%. So, in fact, if you look at all the max drawdowns, the majors did not really do much better than the three coins I highlighted. And yet, they are still negative on a year-on-year basis. While the three tokens I have selected, they are already massively positive even after suffering a very deep drawdown. So, they all suffered a huge correction. The only question is not what you own, but are we being paid for owning these assets? Because this matters for how active management should be done. I will argue that selection is the source of return. But the sizing and risk management are what let you stay in the trade long enough for you to collect it.
Now, there will be some obvious objections. Cherry-picking, right? I picked the three best assets after the fact. And I'm not arguing that you should go and buy altcoins, okay? In fact, only nine of the top 50 altcoins have outperformed Bitcoin on a one-year basis. 41 did worse, and actually way worse. A passive basket of altcoins would not have done better than Bitcoin. And I'm not claiming these three tokens or crypto are obvious. I'm just claiming that they were analyzable. Each one had evidence you could look at in public, often before the price moved. And that's what the case study will show. With this much dispersion, market exposure doesn't pay you. Picking the right asset does.
So, the main argument is: crypto is not one trade anymore. For most of this industry's history, you can count it as one. Bitcoin went up, everything went up more. Bitcoin went down, everything went down more. That has been the case for the past 7-8 years. And that led a lot of people to think that, 'Hey, owning the majors was a reasonable approximation of owning crypto, the asset class.' I will argue that that's no longer true. The industry right now has distinct businesses: privacy, on-chain financial markets, cross-chain infrastructure, and AI. And I would like to use the word AI again: AI, AI, AI. So, they grow for different reasons, at different times. The largest assets don't capture all the growth anymore. And sometimes they don't even capture any of it. So, investors like us, we need to judge the crypto opportunities one by one. The same way an equity investor looks at individual companies and not just buys the index.
So, how do we judge the opportunities one by one? You start by asking the right question for each asset. Then you go and find the evidence. Three case studies. One, Zcash: what made investors reassess the value of private digital money? Second asset, HYPE: what is the right valuation multiple for the most successful decentralized trading platform in crypto? Third, NEAR: can crypto actually capture economic value from AI adoption? Or is it just a story?
So, let's start with Zcash, up 483%. Market cap went from about $3.7 billion to $22 billion. The question is what made the market reassess what private digital money is worth. So the first thing is some of the evidence was public before the big move. On the left you can see that the total share of Zcash supply held in the shielded pools, which means the private pools, was around 8% in early 2024. It went to around 11% by January 2025, and 18% by around October 2025. So people were actually already choosing to use the privacy before the price told them to. And today it's around 29%. On the right you can see that in the first week of October, Zashi, the main Zcash wallet, shipped private swaps to NEAR Intents. You can go from Bitcoin, Solana, or USDC straight into shielded Zcash without a centralized exchange. Naval Ravikant, a very famous angel investor, had posted, 'Bitcoin is insurance against fiat, and Zcash is insurance against Bitcoin.' And boy, that narrative really took off. Winklevoss Capital led a $59 million raise for a treasury company that turned out to be a Zcash treasury. And Grayscale had a Zcash trust dating back to 2017, which made it a ready route to an ETF. And to be fair, Zcash had already rallied like 4x even in October 2025. So the signals were already there and not secrets.
But underwriting this thesis is not easy. If you look at it, it went through a lot of volatility and drawdowns throughout the period. So there was a lot of details there. I'm not going to go through all of it one by one, but the most notable one is, and you look at point three, there was a dispute and clash in governance between the core dev team. So that actually led the price to correct significantly in around January. Obviously in February, the majors also dropped significantly, so that dragged the market down as well. But the Zcash price slowly recovered, and at point four, a major crypto fund, Multicoin, disclosed a position in Zcash. That led the coin to rally, but in just one month, one of the scariest events for Zcash had happened. A counterfeiting bug was found in the Orchard shielded pool. And the bug had been live since 2022. It was fixed very quickly, but nobody could prove that it had not been exploited. And Zcash fell about 50% in two days.
But we had a recovery afterwards. There was an Ironwood upgrade in July and the exploit was fixed. There was no evidence that the shielded pool was ever exploited and the market recovered. And in August, the first US spot Zcash ETF started trading. And that ETF attracted 200-plus million of inflows in the first few weeks. So there was a lot of events and they did not come all together. The usage came first, and then came access, and then came the institutional ownership. And it happened despite two crashes. One was a real flaw in the systems.
So, what's the takeaway from Zcash? First, the usage: 29% of all Zcash right now sits in a shielded pool, which is what makes Zcash different from all the other cryptocurrencies out there. And ownership: you have a Nasdaq-listed company that owns about 1.8% of the supply. And institutional assets: the ETF, which took in a lot of inflow in the first few weeks. Those are real changes in how private money gets used and who owns it. And what does it cost to hold? A 72% drawdown at the worst. A 50% in 2 days. And next year, we have some regulatory change that might affect the liquidity of the asset: the EU AML rules. So, the lesson is the thesis was right, but you still have to survive the drawdown to get paid. So, this is active management. It's not about trading every single move, but it's about having a thesis and sizes so you can still hold it through while being wrong for a while. Obviously, that's for active managers like us. Sometimes we like to think we are too smart. We try to trade it more, but actually sometimes we end up making less.
And next, we move on to Hyperliquid. I'll go a little bit faster because we're running a bit short of time, but okay, this is probably one of the most consensus trades for all the smart money in crypto. I mean, the question is, I think the thesis is very well understood: Hyperliquid is the most successful decentralized trading platform in crypto. The question to ask in October last year is: what is the right valuation for HYPE? So, Hyperliquid probably had one of the best runs in the past 2 years in crypto. They keep winning. Really good executions. By all metrics, they've done very well. The market share of open interest across all perps venues, including decentralized exchanges, has climbed to around 12% as of now. Open interest is at a record high. And a lot of HYPE has been bought back over the years. But the revenue has stayed flat because we're in a crypto bear market, and naturally people trade a lot less. So, by any measure, this is one of the best businesses you can find in crypto. But that's not the question.
The question to ask is: what is the right valuation multiple for HYPE? Last year, it was trading at around 9x on market cap to revenue. And now it's trading around 32 times. And I will argue that when people really start to see that HYPE has staying power, they continue to win, you are seeing the valuation multiple keep getting re-rated. So it went from trading at a discount compared to all the other centralized crypto platforms like Coinbase or Robinhood to trading at, I would say, still on par with them. And that took around 1 year. If you look at it, Coinbase trades at around six times revenue and around 50 times profit. And Robinhood is around 21 times revenue and probably around 50 to 70 times profit. So, HYPE is still trading at, like, I would say there's still a lot of room for growth compared to the two of them. But the re-rating process was really on how the market perception of them has changed given the continuous execution, and you need to look beyond the metrics of revenue only.
The third case study, NEAR. NEAR has positioned itself as the blockchain for AI. And its co-founder Illia Polosukhin wrote the Transformer paper, which made LLMs possible. The question we ask is: can crypto actually capture economic value from AI? So, for NEAR, there's three buckets of evidence: deployed and measurable, deployed but no usage data you can measure, and the narrative. So, if you look at the measurable data, the Intents, which you can think of as a way of moving your assets cross-chain without all the technical complexity. And you can even do that for assets with no smart contract capability like Zcash, and any of the other chains that have no smart contract capabilities. A lot of the on-chain Zcash privacy demand is routed via NEAR right now, and it has grown a lot over the past 6 to 12 months. You also have NEAR AI, which provides private inference, so that nobody can see what you are talking to your favorite LLM. They also launched Iron Claw, which is a private version and their own version of the OpenClaw, like an open-source AI agent framework. These are the real products, and the narrative and what they're really working on is AI agents conducting transactions on the NEAR blockchain.
And the value capture has also started to catch up. We have all the NEAR Intents generating 23 million of NEAR buybacks for the NEAR blockchain, and actually still increasing on a double-digit percentage on a month-on-month basis. Granted, it is a little bit volatile. There's also the inflation reduction. There was a governance proposal being proposed right now, which I think is likely to pass, that reduces the token supply. So, all these narratives combined have set up NEAR for a very good catalyst rally. And in September this year, which was last month, we have private perpetuals routed to Hyperliquid on NEAR.com and the first spot NEAR ETF on the US market. So, products and assets are what re-rated NEAR this time.
So, let me put it all together. What does active management mean in crypto today? So, four things. One, we need to judge each asset on its own. Privacy, on-chain finance, and AI are all different businesses. Each needs its own questions and its own evidence. If you just own a single crypto beta, you have missed all three. Two, we should find the evidence before the price. And in every case, you have started to see some public fundamentals on the public dashboards ahead of the price actions. And none of it was secret. Three, you should know what the token holders actually capture and what you actually pay. And the fourth is you should size for the drawdowns and re-underwrite on the new facts. And I think this is really the essence of active management in crypto, because there's always new facts and circumstances that emerge, and you need to keep re-underwriting the thesis. And all three of them, the big winners, they all fell between 56 to 72% inside a year, and a lot of bad events. So, if your position size can't survive the drawdown, you can't collect the return. And when the facts or price change, your view should, too. None of this is exotic, but what is new is that crypto now rewards this active management.
So, I'll conclude with what I've said so far. I believe that right now in crypto, owning the market beta alone doesn't pay as well as it used to, but selection does. If you just own the majors, you're still down on a year-on-year basis, but if you actually own the right asset, you're up between 150% to 480%. So, we should always judge each opportunity on its own in crypto right now. And that is my case for active management in crypto. Thank you.
