Thread by @Travis_Kling

🚨🚨Today I'm publishing my thesis on what I think could be the defining feature of the next 12-24 months in crypto.

Settle in, this is a long one. The thesis is called:

"A Lack of Pretense That Any of This Shit Does Anything or Will Ever Do Anything"

Not financial advice.

I write a monthly update letter that goes out the 1st of every month. At the end of the Closing Remarks from last month’s letter, I said:

I’ve arrived at this thesis after watching how last year unfolded, how it looks like this year is starting to unfold, and comparing that to prior periods in the 6+ years I’ve been in crypto full time.

Unpacking this thesis will be best accomplished in list format:

1. BTC has essentially a free walk to ATHs. We just got spot BTC ETFs, which unlock safe access to BTC for trillions of dollars that haven’t previously had it. The halving is a few months away. The Fed is likely to cut rates multiple times this year. Stocks are at ATHs and look like they’re heading higher. BTC ATH is up ~55% from here. We can argue about the pace to ATHs (1H-24, 2H-24, 1H-25) and we can argue about how far beyond prior ATHs we’ll eventually go this cycle ($75k, $90k, $100k, $120k, $180k), but the path to ATH looks incredibly straightforward. Crypto will have to do very little “work” to get BTC into the high $60s. It will likely just “happen” because we have ETFs and the Fed is easing. We’ve never had a setup like that before.

2. The same setup as above is also essentially in place for ETH, just delayed by 3-12 months. For the exact same reasons that the SEC was forced to approve spot ETH ETFs (lost the Grayscale decision; court ruled that if you have BTC futures and BTC futures ETFs, you have to allow spot BTC ETFs), the SEC is forced to approve ETH ETFs. We can argue about the timing of approval – March? Prob too early. May? Certainly possible but still maybe a bit early. August? Feels about right. I think it’s quite unlikely we get to a year from now and don’t have a spot ETH ETF. Combine that with Fed rate cuts and the reflexivity inherent in the ETH burn mechanism, and I think ETH also has a free walk to ATHs, which is up about 100% from here. Again, reasonable minds can disagree about the timing and how far beyond prior ATHs ETH will go this cycle, but it looks like basically a free walk. We’ve never had a setup like that before.

3. Crypto has never had the “cover fire” of its two biggest, most Lindy, most headline assets having a free walk to ATHs. You combine that view with the view of many crypto market participants that both BTC and ETH “don’t have enough meat left on the bone”. Up 55% and up 100%? What is this, a pump for ants??? And you’re left with many participants immediately looking down market cap for stuff that can move more than just a double or two. There is a palpable component of financial nihilism here – the idea that cost of living is strangling most Americans; that upward mobility opportunity is out of reach for increasingly more people; that median home prices divided by median income is at a completely untenable level. All of that is true, so you need to really swing for the fences. Why not put $500 into a memecoin that could 50x, knowing that you could likely lose most or all of it? It’s not like the $500 is enough to make any difference anyways. Neither is $1k or $5k. That mindset, which is becoming pervasive in America, is financial nihilism. This is the zeitgeist for young Americans, you’re naïve to think otherwise. And it’s a huge driver of shitcoining.

4. If you’re looking for further proof of my point about financial nihilism, look no further than gambling trends. They are staggering.

Look at that chart. Think about anywhere else on Earth you can find that kind of CAGR on that size numbers. You’d be really hard pressed. Semiconductors? Yeah. Financial nihilism is growing like microchips. Sheesh.

5. One last point about financial nihilism and crypto. Americans don’t trust crypto. ¾ that are familiar with crypto are not confident in the safety of trading crypto. 40% of crypto investors are not confident in crypto. And yet, if you polled those same investors and asked them about higher prices, I would give you heavy odds the majority would be expecting higher prices. Don’t trust it, but prices are heading higher. A lack of pretense. Let’s go shitcoining.

theblock.co/post/225734/pe…

6. If you believe in four-year cycles in crypto, then 2023 was supposed to be like 2019. But I was around in 2019 and 2023 was nothing like 2019. 2019 was a come to Jesus year for shitcoining. BTC maximalism had a big comeback. The market realized that there were no users for Alts, much of the tech was complete vaporware and the tokens didn’t have compelling value accrual mechanisms. BTC Dominance (a flawed metric but instructive nevertheless) went from 53% to 71% in 2019. It’s true that BTC Dominance also increased in 2023, but it was coming off of essentially ATLs, and currently sits at 52%, a full 19% lower than where it was four years ago. It’s difficult for me to imagine this metric heading higher this year. Last year I made particular note of the Solana memecoin BONK, which was up 9,600% in 2023. That is an unfathomable return. How did a memecoin lead us into a new bull cycle? It’s because of the lack of pretense that any of this shit does anything or will ever do anything.

7. Relative valuation appears to be one of two dominant trends for buying Alts. ETH is a buy because it’s cheap to BTC. SOL is a buy because it’s cheap to ETH. APT and INJ are buys because they’re cheap to SOL. SUI, SEI and TIA are buys because they’re cheap to APT and INJ. The absolute valuation levels are ignored. Fundamentals are ignored. Buy the thing because it’s cheap to the other thing.

8. The other dominant trend for buying Alts is “which one is going to airdrop me the most free money?” Airdrops were huge in 2023, one of the biggest narratives of the year in Alts. ARB, JTO, BLUR, . In 2023, savvy on-chain market participants received stimmy checks from crypto that would make the US government blush. The smallest airdrop sent out by JTO was worth $8,500… Let that sink in. It appears the senior leadership at various crypto projects took notice of the hype that airdrops generated in 2023, and they want in on some of that action. The mechanism by which these airdrops are divvied out is “points”, a relatively new concept for perpetuating ponzis in crypto. Points are not a difficult concept to understand – they are the “quantitative representation of a user’s contribution to the network”. Market participants are now racing around staking, depositing, trading, etc to earn points, with the expectation that in the near future, these points will correlate to an airdrop that has real value, potentially a LOT of value. Because of this “points to airdrops that are worth a lot” setup, the market is really not asking tough questions about what any of these things do, or what the valuation of these things are. It’s a full embrace of the ponzi. Who cares what the valuation is when you get it for free? Never had a setup like that before.friend.tech

9. Another noteworthy trend that supports my thesis is how much infrastructure plays are leading us so far this cycle. L2’s. Modular vs monolithic. Data availability layer. Parallelized EVMs. Restaking. This stuff is so far down in the weeds there aren’t a thousand people on planet Earth that can really explain to you what it all actually means. Lord knows I’m not one of them. But no one cares! The market simply isn’t asking the question, “ok but what about the end use cases that will actually drive the blockchain activity?” People don’t care, but that certainly doesn’t mean people aren’t expecting higher prices. People def are, it’s just not with the pretense that any of this shit does anything or will ever do anything. The biggest pushback against my assessment of the silliness of leading with infrastructure with such a dearth of end user use cases that will drive adoption is the adage from Field of Dreams “if you build it, they will come”. So maybe that’s what’s going on here. Maybe we just need to get “parallelized EVMs hooked up to a data availability layer enabled by restaking” and the use cases are just going to magically appear like Shoeless Joe Jackson in a corn field in Iowa. I wouldn’t bet on it though. Not this cycle.

10. The SEC is highly likely to lose against Coinbase. We can argue about timing, but I’d give you 3:1 odds they’ll either effectively or literally lose. Bring on the shitcoining.

Pushbacks, Caveats

So the thesis is the market is going to shitcoin hard, shitcoin prices will rip, and that setup doesn’t have the perquisite of actual use cases or actual growth in end user demand. Where could I be wrong in that thesis?

You might say – how dare you! Actual use cases are coming! End user demand growth is coming! Look at AI! Look at DePIN! Look at DeSoc! Look at NFTs! Look at crypto gaming! And I would respond to you that all of those pockets are worth paying attention to (some more than others).

AI is a clear opportunity for crypto, but I am wary about crypto’s ability to execute on that opportunity this cycle. I unpacked this view at the beginning of my June letter, so I won’t rehash it here. I realize that I’m somewhat crossways with Fred Wilson and Vitalik on this one and I don’t take that lightly. I’ll just say that crypto has historically been quite poor at execution, and most anything in AI is inherently very difficult to execute on. So crypto saying it’s going to execute on AI is like asking to borrow $50, getting turned down, and then asking to borrow $50,000. That’s not to say the tokens won’t pump. They already have and they probably will continue to. It would be my base case that a basket of AI names will outperform crypto broadly this year. But I don’t think it will be sustainable. You’ll just blow another big bubble and pop said bubble without ever garnering meaningful adoption that even comes close to justifying the valuations. Just like we’ve seen time and time again.

DePIN is poised to potentially be the brightest spot for actual adoption in crypto this cycle. Helium is objectively one of the most successful projects in crypto history. RNDR is seeing meaningful adoption and is very well positioned right smack in the middle of a strong secular trend. It would be my base case that a basket of DePIN names will outperform crypto broadly this year. But I worry about the token structures. They do not appear to sustainably accrue value over a longer time horizon and look to me to be susceptible to the exact type of bubble and collapse that Axie Infinity had. Doesn’t mean they won’t pump first though.

Decentralized Social Media (DeSOC) is another area worthy of experimentation. is unlikely to be the thing that gains mass adoption, but it was incremental innovation that will hopefully lead to additional incremental innovation that will eventually lead to a breakout product down the road. It’s just not my base case that will happen this cycle. I don’t see anything on the horizon that leads me to believe otherwise.Friend.Tech

NFTs are here to stay but their current incarnation does not strike me as being sufficient to gain mass adoption. It’s worth noting that “NFT” is such a broad umbrella with so many vastly different subsectors underneath that the catch-all term “NFT” borders on a misnomer. There are PFPs that you hope go up in value sure. But there are music NFTs. “Phygital” NFTs. Proof of Attendance NFTs. Fine art NFTs. Gaming NFTs. Event ticket NFTs. Identity NFTs. Real world asset NFTs. All sorts of NFTs. In short, I don’t see any of them ready to bring in say, 10mm incremental users over the next two years. The space overall needs to continue to iterate on innovations to find true product-market fit for NFTs. Maybe that happens next cycle. Prob not this one.

It is my base case that crypto gaming will produce some amount of hype this cycle and should at least be able to feign some real adoption via ponzi-esque incentives. But I have my doubts about the sustainability beyond just a pump and dump. I don’t think a basket approach is compelling for this sector. I think there are probably too many games that will do little/nothing this year. It would be my base case that a select few crypto games (maybe 3-10 names?) will outperform the market this year. You would need to own those names and not all the other ones. And then you would want to make sure to be long gone as the cycle top approaches, because another Axie Infinity likely awaits.

Finally, a couple caveats to the thesis:

First off, macro could derail this whole thing. If the Fed were beginning a tightening campaign instead of an easing campaign, I’d be writing a totally different thesis. The good news is, I don’t see any macro skeletons falling out of the closet this year that would spook risk assets broadly and most of all, vaporware ponzi crypto. If for some reason inflation spiked again and the 6 rate cuts currently priced in for 2024 magically evaporate to zero over the course of the year, I would have serious doubts about being long shitcoins. Good news is, I don’t think that’s going to happen.

Secondly, if the Binance situation goes quite badly, that could derail this setup of vaporware ripping. Binance is ground zero for vaporware ripping. The US government is now in charge of their compliance department for the next five years. We don’t know exactly how that’s going to play out. There’s real risk that this setup could manifest in a way that is seriously detrimental to the market caps of vaporware ponzis. I wrote about this in my December monthly. For now, it’s not my base case that the Binance situation will play out in a way that it will seriously curtail Alt price performance this year, but it’s worth paying attention to.

Third, I want to explicitly carve out stablecoin payments from the thesis. Stablecoins are the most successful product in crypto history (objectively more successful than Bitcoin, sorry maxis) and poised to continue to grow. For example, Visa’s partnership with Solana could see major traction in 2024 and that could benefit the price of Solana. That is a real world use case driving an increase in end user demand that in turn drives prices up.

Lastly, the election in November could affect my thesis, but that likely wouldn’t come to fruition until the very end of this year, and likely 2025. If Democrats win across the board, crypto is in for at least two more choppy years from US regulators. The vaporware ponzis may not like that.

So What?

This is a bullish thesis wrapped in a bearish thesis… Or a bearish thesis wrapped in a bullish thesis. I’m not sure which. The thesis is that Alts prices are going much higher in the coming 12-18 months, and that this is happening without the expectation that real world use cases will emerge over the same timeframe that will drive strong incremental adoption of the asset class and technology. High prices, low expectations. Crazy setup, but that’s how I see it.