Why 2027 will be Crypto's Best Year w/ Arthur0x

There are Bitcoin whales that bought into the thesis and they have been swapping their Bitcoin for Zcash. That is, I think, the most legit explanation on why it had such a crazy outperformance in the midst of a bear market. And yeah, don't forget that all this happened in a bear market.

Yeah. We might be still extremely underpositioned here just because by the virtue of how many people have just left because they just feel it's too scary to keep the money here. Not just, you know, because the price is dropping, but it's also because you don't really feel that safe to keep your money in crypto anymore. Like I know for a fact that quite a fair amount of crypto OGs, they actually offramp their Bitcoin to ETFs.

It is really crazy. I think 2022 is still the worst year of my life so far. I don't think it can be beaten. I hope it's not. Yeah, it's just a whirlwind of bad news, right? I think that it's kind of similar. I mean, obviously I got hit quite hard, but I think a lot of people in the industry kind of went through similar stuff as well.

I think from a pure market-related drawdown, it's probably like close to 60%. I think 50 to 60, and then add in the whole 3AC stuff is like another 40%. So it's like around 90%, I think.

Yeah, I'm doing good. Thanks for having me here.

Yeah, I think the bear market has ended. Yeah, I think we are starting a new cycle.

Yeah, it looks like a bull market. Oh yeah, yeah, yeah. No, I think the bear market has most likely ended in August this year.

I think first of all, this rally is kind of unexpected. I think that obviously there's a few people who caught the bottom who think that the market bottomed around June, July. But I think if you look at the industry fundamentals, like the macro, there was a lot of things to be concerned about on the macro front, because the equity market just experienced a huge correction in July, August was recovering, and then the bond yield was always steadily climbing up, and then crypto just suddenly ripped due to that remarks from the US Treasury Secretary together with gold. But even after that, gold did not continue the strength. And then crypto just completely exploded from there. I think a lot of people are not very prepared, and in a way that rally is also kind of a smart money consensus. So it kind of feels like almost like half of the CT smart money were kind of right.

And I think that it's also quite good to see a lot of the kind of so-called good projects by our definition get rewarded, like Zcash, Hyperliquid, NEAR, and a couple others. Like kind of very mid-IQ coins kind of got rewarded. It's kind of different.

Yes. Yes.

It's actually 2020. Yeah. I entered the crypto space full-time in 2018 and done a couple of different things, but what I found the most success has always been investing because this is my lifelong passion and hobby. And really early into the whole DeFi sector, you know, been playing around with all the early stage protocols like Synthetix, Uniswap. So during DeFi summer, was really well positioned to capture all the opportunities and returns that came along with it. And because there were just so little people who had the experience of, you know, doing DeFi and still survived through the 2018-2019 bear market. So, you know, at 2020 when I was like using DeFi, launching a DeFi-focused fund, I think that just, you know, there was just not that many other fund managers you can invest in. And then DeFi was very soul-hype, you know, very exciting back then. So yeah, I rode on the back of the success of the DeFi summer. I launched DeFiance Capital in 2020.

Yeah. So I think every cycle is a little bit different. But kind of interestingly, like every cycle you have a kind of Synthetix equivalent as well. I think that is really... but my context is I believe that the industry back then, even though there was a lot of scams and failures like every cycle, it still held a lot of promise. Like I think that DeFi is generally one of the biggest zero-to-one innovations we are seeing in finance because we are building a completely parallel platform, technology and network as opposed to even like fintech, they were just building on the existing financial rails. So I think that we really do genuinely have a 100x or 1000x growth ahead of us back then, even though things are looking so grim. So I think that first-principles-based belief really led me to, you know, stay on and look at what projects make sense even in the bear market. And I think that obviously, you know, the founder turned out to really persist through the bear market and then, you know, when the market returned, the project got rewarded massively.

I think it was less than 50 mil for sure, but it kept going way down. I know that I think at the worst point it was down 50% compared to my average cost of entry. So I think it went down to below 20 million market cap at one point.

I think there's many contexts and I think that, you know, there was no universal answer to, you know, when is the right call, when it's a wrong call. Like you have to make your own judgment. Like obviously there are a lot of other projects that if you do it that way, you're just going to be a bagholder forever and then your bag goes to zero. And actually it does happen to us, you know, after I launched the fund and whatever as well. So it's not every time is a success. But I think that having the team that really doesn't give up, I think that one means a lot because ultimately, you know, when it comes to like all these like sub-nine-figure market cap projects, a lot of them are very like early-stage founder companies. So as long as the founding team, you think that they're capable and they're really like determined to persist through and don't give up on it, I think that is really worth a bet. And obviously you look at the sector, does it make sense? Like do you think that they're going the right direction even though the times are bad? So I think that these two are the main factors I would say to use to evaluate. And I think, yeah, back then, you know, Kane, you know, he was still really active in the Discord there. I can still see very material progress updates as opposed to all the other ICO projects that's kind of abandoned. So I think that that gave me the confidence. I mean, I wouldn't say it's easy. But I guess that sometimes when you're so deep into the whole trenches, you kind of have no option but to continue anyway, right? But I was always going to do... I mean, yeah, you can go and find a job, but I think usually most people who spend more than a year in crypto, it's very hard for them to find a job anymore.

Yeah. So I think, yep.

I honestly, now that I think back about it, it's kind of blurry because things really happened so fast in the 2020 or 2021 cycle. Like kind of feels surreal, you know. And also we are kind of like in a mad scrambling phase. And I think this like, you know, if most people ask me, should I go and how should I launch a crypto fund, I usually tell them not to launch a crypto fund unless you want to torture yourself and go through a lot of pain. Just do prop, right? It's just way easier unless you really want to, you know, raise institutional capital, you want to have the title fund manager, which I think honestly after a while you get away anyway. I think because I was really busy on scaling the fund, like hiring people, trying to get the operations in place, you know, do like communicating with all the service providers, fundraising, just really didn't process through it, but it was just extremely fast. I think that in January 2021, I still remember we have like the craziest month in the fund history and it's still not been exceeded by now. Like we are up 180% that month in one month alone. That's for the fund, you know, not like some degen's personal account. So that's kind of crazy.

So I think we launched the fund at the tail end of the DeFi summer. Like we launched in August or September and then we immediately go through a 20-30% drawdown because DeFi was just correcting. And then Bitcoin started rallying. And then we were like, okay, should we rotate our DeFi coins to Bitcoin or other majors or like layer ones? Some layer ones has been rallying as well. And then there's also like ICOs will start coming back. I think we didn't, we just stick to the DeFi coins and we rotate around the DeFi coins. Then January everything exploded, right? I think that actually BSC chain, BNB chain also exploded in January. We completely missed it actually, but we are still up 180%.

And we kind of like do some backward calculation that if we capture the BNB chain, like PancakeSwap... just keep like FOMOing. Like okay, instead of thinking like, oh, we make 180%, we like thinking, oh, why we didn't make 300%? You saw PancakeSwap went like 10x in like two months, right? I think one month or two months. And then all the other coins, like I think Binance was just massively listing all the new coins. Some random unheard of project like just 10x upon listing. You're like, oh, why did I miss it? So yeah, the FOMO was just way too strong. It was just crazy. Kind of a little bit similar to two weeks ago, like, hey, why this coin went up 20% overnight? Like you don't really know what happened. Oh, it went up. Then you're like thinking, oh, should I buy? Should I wait for dips? And then three days later it went another 20% again. Like what the hell is going on? Kind of similar. I think it's, yeah, very similar to that kind of moment where things just keep going up for no reason. Yeah, so then I think really until like probably around March when we have some proper correction, then I have time to internalize, hey, oh, actually we hit nine-figure AUM. What should we do with like this size? Because I, you know, like eight figure, low eight figure, you're kind of like, oh, this is a boutique fund, you're just trying to, you know, get started. Suddenly you feel like you have a lot more responsibility. Then, you know, start to focus more on hiring, hiring proper operations and finance people and all this thing. And unfortunately, yeah, just, yeah, the volatility is a lot to deal with. It's definitely not easy.

Yeah, it is really crazy. I think 2022 is still the worst year of my life so far. I don't think it can be beaten. I hope it's not. I hope not. Yeah, it's just a whirlwind of bad news, right? I think that it's kind of similar. I mean, obviously I got hit quite hard, but I think a lot of people in the industry kind of went through similar stuff as well. Like...

There was, I think first of all, I think DeFi coins really start underperforming from the second half of 2021 onward. It was actually the layer one meta where you have Solana, AVAX, Phantom, everyone, like all the layer ones went crazy. Then DeFi just like caught no bid, you know, on a relative level. And I think in 2022, then it was like really toward the tail end, I think all these projects start raising like insane amount of money. I think that Luna was raising like a few hundred million and actually we participated in that round. We actually wrote the biggest ever check into one single project on a non-liquid level. We put like 10 million into Luna in like December 2021.

And then obviously you look at, I mean, everyone was so bullish on Luna, think, hey, you know, this has the potential to flip, you know, Circle or Tether in like six months or 12 months, right? Because the supply was just growing so fast and then you're getting 20% yield on it. And then like, you know, there was actually like a plan to convert it into a partially collateralized stablecoin with Bitcoin, which you think that, hey, it makes sense, right? You went from algorithmic-based stablecoin to a Bitcoin-backed. And the history, there's a lot of like, you know, crypto-backed stablecoins that kind of, you know, Maker is still here, right? I mean, even though they transitioned a lot away from the pure crypto-backed model. So you think that, oh, sky is the limit, you know, and you know, you are like hanging out with all the most successful founders and investors. And then it just came down so quickly. Obviously the first one is just like, you know, I got hacked on a personal level on my NFT wallet. I lost more than $1 million and then that was in March. And then in May, Luna collapsed. You know, we actually fortunately we were not as exposed to Luna because we obviously we lost like the 10 million invested, but we were just not big on farming stablecoin back then. So we didn't have that much. We didn't have any money in Anchor. But the problem is that one month later, Three Arrows collapsed and then it just kind of dragged us down into it. The relationship between us and Three Arrows, I think that I mentioned a few times, like we kind of like using them as a platform to manage our fund, you know, because back then crypto fund, even right now, is still there's not that many clean ways to, you know, manage a crypto fund, right? Especially in Asia. So we think that they have experience running a hedge fund for many years. So we just partnered with them to launch a fund, but we just didn't sign up for the best structure, you know, obviously like too young, too dumb. And I think the thing is they also were too sloppy with how they think about this. I don't think anyway, I don't go into the details, but anyway, I think that it was like just, I think just a very common thing in crypto. People like, we tend to gloss over the details and just let's do it, jump into the whole thing without thinking about the consequences, even though like when you're managing serious amount of money, all this like nitty-gritty details start to matter a lot. Yeah, so obviously they collapse and then we can't really continue to trade and invest from that fund anymore. And then yeah, we have to deal with the liquidators, like plenty of lawsuits and all the legal proceedings. And then so throughout the whole situation, yeah, like it was obviously the lows. And then what, five months later, FTX had collapsed, right? Yeah, unfortunately, you know, back then I was already dealing with the 3AC thing, so I wasn't that exposed to FTX, but it's still a scare, right? Because, you know, everyone have money in FTX, then you start to think about whether the industry recover. But even throughout that, I was already preparing to relaunch a fund. So I relaunched the DeFiance Fund II in March 2023, and that started the next phase of the fund, like managing the fund, the business chapter, the second chapter of the fund onward.

I think if you look at the net worth level, it's probably 90%. Because I'm the largest investor in my own fund by far. So a lot of my own net worth is tied inside the fund and obviously given the situation, I can't just take the money out, you know, to do whatever. So actually there was a lot of, yeah, like money locked into the fund and then I actually did not cash out that much money. I mean, obviously, you know, I buy a car, I buy some houses and all this thing, but in general it was not that much relative to what I have in the fund. Yeah, so yeah, from a pure market-related drawdown, it's probably like close to 60%, I think 50 to 60, and then add in the whole 3AC stuff is like another 40%, so it's like around 90%, I think, yeah.

Yeah, I think this is obviously a bit different from the standard crypto topics, right? I mean, because you're ultimately dealing with real-world consequences, you know, it's not just magic internet money anymore because you are like having lawsuits and legal cases. You're fighting an extremely uneven, unequal and unfair battle against, you know, all these liquidators and lawyers. They're literally using my money to fight me because my money is inside the fund and they claim that that is the estate's money. So generally, I think the bankruptcy business is one of the largest scams in the crypto space. It's like, you know, look at how much the FTX estate paid to all the lawyers and all the bankruptcy guys. Like I think it's like one plus billion. And then what, I think everyone honestly, I think SBF, he definitely committed crime, but everyone would likely end up a lot better if they did not go into a bankruptcy in such an abrupt manner.

Um, so yeah, I think just like a huge sense of belief in yourself and then, you know, we obviously know the facts and circumstances way better than anyone else. So we know that the facts is on our side, but obviously some of the legal documents was not the most well, you know, prepared and advantageous to us. So just really simply believing in the facts and, you know, what we have. I mean, we did nothing wrong in principle. So we just think that we only want to get back what's mine. We are not even trying to take the creditors' money, right? Because this is not something that should ever belong to them. So I think that kind of sense of belief, you know, really just helped me persist through it. And I think that sometimes when you're in the process, you're just going to be so focused, you actually don't really have time to think about anything else. Like you just want to focus on resolving this that you're just not thinking about anything. I think that really helps you to push through. But obviously there was a lot of like sense of regrets, you know, why did I, you know, so recklessly went into these structures without, you know, consulting a lawyer and whatever to be much more well protected against myself. But I think it's just kind of things that everyone went through, right? And another not very well-known fact that I'm actually not the only guy who got impacted by this. There's actually another CT guy, he's not as well known, but he also did the same structure as me with like Three Arrows and he got zero from the whole situation because his situation is like even weaker than mine. So yeah, he literally got zero out from the whole fund. And his LP, I think, got zero out from the whole fund as well.

Yeah, I think definitely like in the glass-half-full way to think about it is like it's obviously better that we learn this very critical lesson in life like at an early stage of your life and career rather than learning it when you're 50 or 60 years old. You don't really have that much time and energy to stage a comeback anymore. So yeah, in that sense, yeah, I think it's an extremely important life lesson for me. You know, I've gotten incredibly good, I would say, in legal strategizing, you know, how to deal with different legal situations. I know how to utilize a lawyer to my best advantage and how to defend against the kind of adverse situations because I think that in my situation, the worst case is not only that we lost the case and then we obviously the whole fund is zeroed out, but we also need to pay the legal fee for the other side. Because when you're fighting the lawsuits, like you actually need to pay for the winning party's legal fee as well if you lose the case. So it's like a double-edged sword and so I just need to prepare to pay the extremely ridiculous legal bill if you lose in the end. Yeah, so I think that kind of situation really just trained me very well and I think that, yeah, it's definitely a very good life experience. I just wish the tuition fee could be a lot cheaper.

Yeah, yeah. I think the people who have done worse than me are usually either in jail. They just like left crypto already. Yeah, yeah.

Yeah, but actually I just want to add on one point, which is I honestly think that the most recent bear market is kind of bad, as bad as the 2022 one or even worse, because I think obviously in hindsight now it looks quite short, right, one year. But I think because like 2025, it holds so much promise, right? We get a, you know, so-called crypto president, extremely crypto-friendly administration, the institutions are coming, ETF and all this thing, and yet the market can still correct so much, right? So I think that the mismatch of expectations of the most recent 24-25 cycle, I think was quite brutal as well, because I think that 2022, you can kind of feel, oh yeah, obviously, you know, I mean, back then we all know that there was a lot of scams going on, all this just ridiculous. We kind of know it's not sustainable, we just did not expect the blowback and the damage to be so big, but we kind of feel that, oh, as long as all these scammers left, you know, we will be able to bounce back, and we did, right? But I think this cycle kind of feel, oh, the institutions already here, yet we still kind of like end up being a massive disappointment. So is it still going to recover? So I think, yeah, the bear market are kind of bad in a different way, I would say, this cycle.

Yes, I think another, I mean, we are not here to trash Ethereum, but I think another thing is because I think kind of lucky that happened during bear market, it wasn't as well discussed, but Vitalik, or I mean just Ethereum in general, the leadership kind of now think that the layer 2 vision was wrong in a way, right? I think, do you remember, like kind of abandoned the layer 2 scaling roadmap, right? They want to rescale Ethereum again. That means like the whole few years they've been telling the whole world, yeah, Ethereum layer 2 scaling roadmap, they kind of abandoned that vision. I think that was just, okay, for all the layer 2 ecosystem teams, they were building on it, they will be like, okay, so what are we going to do, what are we going to build on going from here? So I think, yeah, a lot of the technical promise ended up just not playing out and delivering. So I think that was obviously a pretty big disappointment as well, yeah.

It peaked around like February to April. I think that even like some of the bigger protocols got affected. We were just all worried back then. Yeah.

We might be still extremely underpositioned here just because by the virtue of how many people have just left because they just feel it's too scary to keep the money here. Not just, you know, because the price is dropping, but it's also because you don't really feel that safe to keep your money in crypto anymore. Like I know for a fact that quite a fair amount of crypto OGs, they actually offramp their Bitcoin into ETFs, which is why I think, and that explains the massive success of the crypto ETFs, because they felt safer to let BlackRock custody their Bitcoin versus them themselves custodying like nine figures to even like ten figures of Bitcoin. And then even some of the DeFi farmers and all this, like people who hold a lot of stablecoins, I know that they have been offramping quite a fair amount to the traditional finance ecosystem as well because DeFi yields at the bottom was quite low and obviously you carry the hack risk and exploit risk, and treasury yields were paying you like 4%, 3.5%. So there, I think a lot of money was offramped to TradFi. I don't think this money has fully came back into the system yet. Yeah, even, I mean, for us, like we have a fair amount of redemptions from our fund as well this year, you know, because people just don't see the point of continuing to invest in crypto even though our performance is like top quartile throughout the year. Like actually even when the market was at the worst, I think Bitcoin was down 40% at the worst, like we are kind of flat on the year because we just got a lot more proactive in managing the risk. But people still redeem because people say, hey, okay, I know you didn't lose money, but I don't really see a point of investing in crypto. And I don't really see those money coming back in yet. I mean, obviously people have been asking me, hey, what do you think, are we back to the bull market? I say, yeah, I mean, you know, market is doing well now, I mean, but no, I don't really see the FOMO yet. I think it's really the people who are already in the crypto system all rotating in and out. Obviously, I think Bitcoin, you always get some TradFi inflows, but all non-Bitcoin, non-Ethereum, I think that we are still quite underpositioned, which also explains why the rally has been so continuous. There was no major dip for almost all these strong coins like Hyperliquid, Zcash, like even NEAR recently, like you don't really get like a 20% dip for you to load in, right? It's just a constant like 20% move and then you correct for 5% and then you get another 20% leg up. I think that's a hallmark of a very underpositioned rally where people are just not positioned. So you don't really have people taking profit on you, right? Because last time you always get a bid because once you get a 20% pump, everyone's just trying to take profit. But now there's nobody who has much profit to take and everyone who made money are like this kind of like a dead bag that they never plan to sell at this price level anyway, which is why that you don't get that kind of profit-taking price action. Yeah.

And I do feel some bear market PTSD, but I would say we have been taking the right amount of risk. Exciting that we have been rewarded quite well with it. Obviously we are very selective with the risk-taking and I tend to believe that's the case just because the positioning is just extremely... like obviously, you know, give it another six months, will we become extremely overallocated to those few coins and when everyone wants to take profit or the same thing will happen again? I think that will happen, but I think I don't see it right now because I think that the exit from crypto is really massive. And the thing is that I think the mental inertia is real, whether it's like, you know, individuals or even like funds. I think honestly sometimes when you think about it...

People managing a billion dollars — if he's thinking from a retail perspective, he will act like a retail investor. I mean, the only way you don't act like that is if you set up your whole... let's say you have a billion dollars, you set up a family office, you manage it in a very institutional manner, then you might not have this issue. But let's say we have seen a lot of billion-dollar guys who actually still think like retail — like, oh, he moved the money out from crypto, he doesn't want to just move it back in, right? It also proved that he was wrong by moving so much money out from crypto anyway, right? So the initial off-ramping of crypto, even when you're managing a huge amount of money, when you have the right setup, like you have no issue with the banks, is still quite real. So I don't think this money is coming back yet. They might come back if the market continues to go up, but at least right now I don't see that.

Yeah. So I think at least for the next few months, I still think that yeah, we are continuing the current regime where good coins get rewarded and there's just not much profit-taking happening. Yeah, at least. Yeah.

Yeah. So I think that the fact is, I mean, this is my — what, getting close to my eighth, ninth year in crypto, and nobody can get the timing right every single time, right?

But I think what really makes us continue to stay at, you know, the top 20% of performance, you know, from a crypto fund perspective, is you really — I think asset selection still matters in crypto. I think if you really pick the right asset to long, you can be a bit bad with the timing. Obviously, you don't want to top-blast every single time, but if you look at Hyperliquid, people are kind of rewarded for top-blasting every single time as long as they held on to it long enough, right? And I think they're kind of seeing a few other coins that have similar characteristics as well.

Obviously not the majors. Majors, you get kind of punished for top-blasting because they're just too big, right? I mean, for the mid-cap coins that we are talking about, if you pick the right coins, I think if you can afford to hold on to it for an extended period, you kind of get rewarded to some extent. Even PUMP has staged a massive comeback, right? And you know, like even like — and what else, like Lighter, that also massively punished and then did like a four to 5x from a bottom as well.

Yeah, I think that this is a regime where asset selection matters more than absolute precision in market timing. Obviously, you don't top-blast as well, but yeah, I think that having good asset selection skill will help you to continue to stay on a slightly outperforming side. Yeah.

I think it's certainly true, right? I think that, you know, I've been spending a lot of time to think about why Zcash did such a crazy rally. Like, do you measure — I think if on a year-on-year basis from last year October, it did 20x. Is it 20x? Well, it went from like, I think was it $50 or $100?

Use October as like a measure. I think it was like 50.

Yeah. Yeah. Yeah, it's kind of crazy, right? It happened throughout the bear market. So yeah.

I think what you say is definitely true. I think for some coins, you still have all the crypto-native money that still matters a lot, right? I mean, Bitcoin has like a two, three trillion market cap, and you just need to have 5 to 10% of this money move, and there's like a few hundred billion dollars of capital like rotating around the crypto ecosystem, creating price action, etc. Yeah. Yeah. I mean, obviously, I'm very bullish Zcash. And I think one of the theses is, you know, Bitcoiners hedging, or you know, they think of Zcash as insurance to their coin. I think Bitcoin, you know, has issues around quantum, you know, lack of having some vision around scalability or a security budget, privacy, etc. Like, what is your view on Bitcoin and like also what is your view on Zcash?

I think Bitcoin has remained kind of unchanged, right? It's definitely part of the macro asset. I mean, every single macro manager, institutional manager, has heard of Bitcoin by now. For those who are more curious and open-minded, they have definitely done their research on Bitcoin and decided their allocation, both on a personal level and institutional level. And I think for those who decided on an institutional level, the only way is up. I mean, they probably start from zero and then like 1, 2%. And then when you look at everything that's happening around the world, it doesn't inspire confidence, right? Like bond yields around the world have been climbing up to the levels unseen in 20 years. I mean, I think for people of our generation, we kind of have never seen that level of bond yield before, because when they were that high, we were kind of like kids, right? We have not seen it before, so it's kind of in a way unprecedented, and it doesn't inspire confidence. Like almost no country has like a very credible way of tackling this issue, like the whole debasement thesis. And I think that that definitely will prompt people to increase the allocation to any alternative that is not denominated or controlled by the government. Gold is one asset, and obviously crypto and Bitcoin especially will continue to grow. I think that as an aggregate global percentage of the asset allocation, it's probably at like one, two percent. I think it will slowly get to like 5% eventually. Yeah. Some people will be more aggressive and put it at 10. Some people will be less aggressive and put it into like, what, one or two. And actually, one thing that I'm always a bit surprised — because I think I guess we have been in crypto for too long, we kind of feel, I wouldn't say jaded, but we feel like, oh, we don't need to talk about crypto every time, right? Like yeah.

So sometimes, you know, when I meet some average HNWIs, they know that I'm a crypto fund manager, they'll be all very excited to talk to me about crypto. Then sometimes you feel like they're like a bigger bull on Bitcoin than you, you know, because they're talking about a whole crazy debasement thesis, trash-talking the US government, saying that, oh, you know, the US is finished, the dollar will blah blah, all this like crazy thesis that even crypto bros like us don't really talk about it as much anymore. But there's a lot of high-net-worth individuals that really believe in these theses, especially for those like outside of the US. Like I talked to some Middle East people, obviously due to the recent war situation, I think their confidence and their faith in the US government have definitely decreased, right? But the US is supposed to protect them, and then what happened? Where is our Patriot missile? Really, we didn't get them — not enough of them. So a lot of this like the hedging and things are going on from Bitcoin.

And Zcash, yeah, I think that crypto people like us have always cared about the privacy thesis. I think that we also invested in privacy coins before, but we just got completely burnt because the market, for some reason, just don't give enough credit to these privacy coins, and they're also very prone to delisting by exchanges. I think that was the biggest risk, right? Because once any coins are like delisted by all the major exchanges, they have no liquidity, and no liquidity is where all the coins go to like a gradual death. But yeah, Zcash somehow remains listed by many exchanges, and I think that the kind of hybrid approach where you have the shielded pool and unshielded pool somehow have turned out to be the right approach. It allowed all the exchanges to continue to list them, saying that, oh yeah, you know, most of the coin you can trace, but — and I think the exchanges, they do not accept the transactions from a shielded pool, right? So they kind of have a plausible deniability. So while the privacy advocates can use the shielded pool, so the middle ground just kind of became the approach that took off. And for some reason, like Zcash also has the more techno-optimist affiliation, versus Monero seems to be a bit more like, oh, you're the dark money user, whatever. Zcash is to be like the true privacy believers are the ones using it. So it's also like the impression and image that I think makes Zcash a lot more, you know, investable compared to like Monero and other privacy coins. So I think yeah, it's definitely bullish, but just like the price action is extremely extended. I think that profit-taking is bound to happen, is probably already happening to some extent. So it's just really, I think, they're waiting to see is this like the consolidation before we rally further, or like profit-taking are happening and we should correct down to a more reasonable level before we build the momentum for the next leg up. Yeah.

Yeah, we do own Zcash.

Yeah. I think first of all, it's a very consensus play. Hyperliquid is still definitely one of the highest conviction bags. I think the question about Hyperliquid is always about the valuation right now. Yeah. It's really not about whether this is a good project, good team, good coin, because they have kind of proven, you know, themselves that, you know, they are a really good project backed by a very good community, you know, like have a huge team and then continue to execute and also like they continuously innovate and also take away market share away from like centralized exchanges, I think, which all of like the DeFi guys like us are quite happy to see, right? Yeah, but it's a question about valuation. Can they continue to break the ceiling of the valuation? Because it's definitely not very cheap by traditional metrics anymore.

I think if you measure on an FDV basis, similar to NASDAQ, right, in market cap, I think flip NASDAQ, right? On FDV basis. So yeah, that is a pretty ambitious goal. So I think that either that we need to find a bigger story to tell to make people believe that it deserves like even a higher multiple than NASDAQ or whatever, or you know, like yeah, like it will probably just need some time to grow into the valuation. So I think that that is a key question. It's just about valuation.

Yeah, that's a good question. I think that like my good friend like Waslawicz recently also have mentioned, right? There's probably no good way to do a second airdrop. You know, you will always piss off one group of people, right? Like the bagholders are going to be pissed. Oh, you know, suddenly there's so much new supply coming online and then it's like going to dump on us. And the people who have — if you never do it, then people who have kind of like implicitly farmed season two are like, oh, we got rugged, like, you know, yeah, we got scammed and all this thing. I think that the team just need to find — I'm pretty sure they have a view on what they want to do with it. Obviously, they might still be subjected to some changes, but if they think that the initial objective got achieved and they think that, you know, the pros outweigh the cons, then they should go ahead and do it. I don't have an answer because I don't think I'm as in the weeds as compared to a lot of people, and I'm not in the core team as well.

Yeah, I think that given the amount involved, they probably need to — it's a very tall bar to justify why should they add up so much, right? And the incremental benefit should really outweigh, you know, all the increase in supplies and all those things. So I don't know, like probably like give all the tre — institutions 3, 5% back-ish and then make them buy all this back, and then they commit to do something for Hyperliquid if they can get that done would be one good example. And then you airdrop another 5 to 10% to the community and everyone is happy. And then the institutions that got all this back, they won't be able to sell, right? Because they need to commit to stake their HYPE and whatever. Yeah, so I think that that's probably one way to do it, but it's just like random thoughts on this. Yeah.

Yeah. So I think obviously as a fund, we always evaluate and continuously update our thesis. But I think when we look at the execution of Hyperliquid like throughout the past six to 12 months, I think it has always consistently been on the top of the game. Yeah, so right now I don't see anything to be concerned as of right now.

Okay. Yeah, except the small thing about like — what is the relationship between Trade XYZ, right? Still unclarified, but honestly I don't think it's a big issue because I feel like the Trade XYZ team are extremely aligned with Hyperliquid as a project, as a token. So I don't think it's the main issue. It's just that people try to make it as an issue. Yeah.

No.

Yeah. For example, we've been through so much disappointment in DeFi, right? I mean, even some OG teams, and let's not go into the names, but I can't find any team that out-executed Hyperliquid actually throughout the past two years. I don't think I can find any.

Yeah, and I think one thing, obviously again I don't have the details, but also really surprised me how well they are doing in the US regulatory, so-called lobbying side. Like obviously nothing is happening, and I don't think it will happen. Just my own view. I don't have any privileged information. Yeah. I mean, they hired a very good lawyer, right? I think in the Hyperliquid — Shishkin for the Hyperliquid Policy Center. They were at the forefront of, you know, what's happening. I'm pretty sure there's a lot of, you know, closed-door discussion, and it's just not something I expect Jeff being able to do — or he hired the right guy to do it. It just shows that he either knows how to do it himself or he hired the right guy to help him manage all these things.

Or he's just like blessed by the gods. He has the mandate of heaven, so that he got protected, all these things. So it's just like you thought that, you know, teams like Coinbase, they're all striking to kill him, right? Or like the SEC is looking to kill him. Nope. I mean, so far nothing has happened, and that was also one of the bigger risks that people have kind of thought about, right, talked about. Yeah, nothing is happening so far, and it looks like they got all these things sorted out. Yeah, they have the mandate, it seems.

And also not to mention Hyperliquid, obviously that was a recent phenomenon, the perp — the Hyperliquid perp. I think it's the only altcoin — I mean, probably the altcoin term doesn't make sense for Hyperliquid anymore — that trades above 1x MNAV. I think it was trading at a slight premium, like 1.1. Every other altcoin MNAV is like less than one.

He's, you know, like he...

Correct. Correct. Correct.