Too much shitposting today, but here's a bit of sub-70-IQ alpha. DeFi continues to look shit against BTC. But if I had to hold one DeFi token now, it'd be ZRX. For a long-term I thought SUSHI was the most undervalued DeFi asset. ZRX is about to take over that position for me.
The Coinbase re-rating trade may or may not have played out. I don't know. But if it hasn't, ZRX has this nice tail wind.
Anyways, not investment advice. You'll lose all your money on these valueless governance tokens.
It's very hard to compare P/S between something like 0x and something like Sushi because the two protocols are too different. But you could look at, for instance, trading volume vs. FD market cap. I still love SUSHI, but ZRX is also up there for me.
If you ask 10 different DeFi funds about valuation you'll get 15 different answers. So this is not an exact science. Massive margin of error.
At the end of the day, valuation metrics are just memes. The $10T digital gold as BTC's total addressable market is a meme. P/S ratios for DeFi protocols are memes. The hope is that over time the market can form consensus around one or few memes.
And then, in addition to quantitative metrics which paint a picture of the status quo, you also want to think about long-term value accrual. Are AMMs here to stay? Will RFQs work? How fast can the team ship? These are even harder questions.
I got several responses that are skeptical of my view. I think that proves exactly the point that the market hasn't at all come to consensus around what valuation metrics to use. Again, huge margin of error.
Final thing I would add. The 0x team is easily 90 percentile in this space. Best team doesn't always mean best product-market-fit. But it gives you a nice margin of safety.
Ok one more thing. I have a very long term thesis that top trading trading platforms won’t be AMMs. I know this is controversial, but shouldn’t surprise my long time followers. I think the 0x team has what it takes to get there. Great retail flow, great institutional integration.
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Between a founder who’s ideologically married to Ethereum and a founder who’s deploying on an EVM-compatible fast chain as a quick bandaid, I will back the latter 10 time out of 10. It’s a sign of pragmatism and user obsession.
Oldie but goodie:
Both Bitcoin and Ethereum and virtually every crypto project starts off as being highly centralized. But that’s not a good reason to dismiss them. The vision has always been decentralization. But sacrifices need to be made along the way.
Over the years I’ve given many harsh criticisms against Ethereum. Notably:
1) Fucked up monetary policy early on.
2) Fucked up the scaling war.
But I criticize it because I care about it. Ethereum is my first love. I don’t care enough about EKs to criticize them.
Ethereum couldn’t figure out the monetary policy in the early days and really let it ossify. If you want numba go up, you need to prioritize monpol over everything else. If you’re at “in it for the tech”, then screw monpol. (I think Lord Vitalik was genuinely in it for the tech.)
Ethereum couldn’t ship scaling solutions for years. It could’ve killed the window of opportunity for EKs to emerge many years ago. I don’t think it’s because of the lack of technical ability, but rather a problem with the governance. Teams aren’t incentivized enough.
Ethereum could very well be the front runner for years to come, but the multi-chain world is here. And it’s here to stay. Polkadot, Cosmos, Solana, Binance, etc.
Accept this into your life or HFSP.
The most obvious reason why we’ll have multiple chains is communities. Not the tech. Products that have been built on Ethereum *will* be copied elsewhere, and more importantly *localized*. Users from different cultures have different habits and preferences.
Why can’t they be localized on Ethereum, you asked? Because the developers don’t feel they belong to the Ethereum. They don’t feel they are owners of Ethereum. They need a different chain where they can create a sense of belonging and ownership for themselves.
This is not meant to be hopium, but basing entirely off of the dotcom bubble, I wouldn’t be surprised that top DeFi assets will each be worth $100B+ at the peak of the current crypto cycle.
I mean UNI is already 1/5 of the target. Even if valuation multiples don’t expand, it’s not hard to picture DeFi grow 5x from here until the end of the cycle.
And obviously valuation multiples *will* expand because of hype.