Author: Kyle
Compiled by: Luffy, Foresight News
The argument for liquid tokens is quite simple: I believe there is a huge opportunity (alpha) in the liquid token investment space, while the VC token investment space is already oversaturated.
Many great companies are building in the cryptocurrency space, and they all have their own tokens, but the pricing is not reasonable.
The main driver of valuations in 2021 was painting dreams. I believe that after 2024, valuations will come from realizing these dreams.
Monthly chart of SOL
Solana is a typical example of this transformation, where three years later people realize "maybe it's not all just talk".
If you are a fund company, your opportunity lies in: trying to figure out who is really building cool products. You might think "shouldn't we reprice now?" - No.
Monthly chart of AAVE
Arthur in his latest article on the DeFi revival states that DeFi is severely undervalued and will continue to grow in the coming years. The facts speak for themselves. In the cryptocurrency space, some very legitimate companies are being overlooked, even those currently valued in the billions of dollars.
But the liquid market theory applies not only to old tokens. It is widely believed that there are many opportunities in the liquid token space, with companies that are truly building presenting asymmetric returns. A clear example is Banana Gun, as mentioned in the Theia Research article.
Banana Gun ranks 6th in revenue among all chain protocols, but only 284th in market cap. This shows that some companies that are truly building are undervalued.
A more recent example is Ethena. You may disagree with this argument, but I hope to make the point clear here. If you know where to look, there are incredible opportunities in the liquid token market.
This is not just "oh, this is an AI token, long it" or "this is a new thing, so the price will go up". The core idea here is:
- Some issued tokens of companies are severely undervalued
- The market will focus more on fundamentals
I will explain the opportunities in liquid tokens through four questions.
Question 1: Aren't scams the most profitable?
Yes. After all, it's still cryptocurrency, and there's an "hype" factor. Things can get overvalued very quickly, and I have no doubt we will still see false scams being pushed to astronomical prices (TRB is an example).
But if you look ahead to 2024, you'll find that asset selection becomes more important than ever, as people have learned how the "selling dreams" game works, and no one will fall for the "putting the world on the blockchain" or "second-generation yield farming tokens" trap again.
In 2021, you could long anything and make money; in 2024, you can long the hot trends and make money. But in the coming years, you'll need to gradually reduce your preference for false scams and choose more legitimate projects.
Question 2: When will the market focus?
I don't know. I'm going to where the puck is going, not where it is now. But sometimes the puck takes a while to get there. However, we can see that the market has already started to focus, and asset selection will be crucial in 2024.
Many seem to forget that our ultimate goal is to bring in TradFi money. TradFi always needs a reason: they like Bitcoin because it's becoming a "digital gold", although you may have different views, but the fact is that fundamentals are the glue that holds things together.
Anyone with enough power to drive the market needs fundamentals and wants to see actual numbers.
But at the same time, the other side of this argument is that it requires bullish conditions (i.e., BTC price increase), which we haven't seen in the past 5 months. This is also why Memecoins have performed so well, as Memecoins are usually highly resilient to market volatility, and they are in a completely different competitive environment (on-chain).
Question 3: Why not buy Memecoins? Bro, just buy Memecoins
I agree with this view. Many people reading this article might think Memecoins are the peak of false hype. No, I think false hype is the disconnect between promises and delivery. But for Memecoins, the promises and delivery are consistent: they don't promise anything, and they don't deliver anything. What do you expect from Popcat? Or what do you expect from Doge?
From this perspective, you can build a "fundamental" framework for Memecoins: obviously it won't be based on how much money they make each year, but on other factors. Does it have a community cult? Does it have memes that bring people together? Etc.
When there are 1000 different sticker packs for the same animal, it becomes hard to distinguish good from bad. This is not much different from the 100 different L1s or 100 different GameFi projects we have.
The strongest speculation is built on the core of truth, and for Memecoins, the core of truth is "a strong community". This is completely different from the false projects that sell you dreams.
Memecoins and liquid tokens are two sides of the same coin, just at opposite ends of the spectrum. Similarly, some false projects are grossly overvalued, with no actual results, but they promise the world. At least Memecoins don't promise anything, what you see is what you get.
You may disagree with this view. I admit, I haven't bet on Memecoins. But if I had to choose between Memecoins and scams, I would unhesitatingly choose the former.
Regardless of your views on the Memecoin supercycle, it's clear that this has become a reality.
Therefore, the barbell strategy of Memecoins + liquid tokens makes sense: choose the memes with the strongest cult, and the tokens with the best products.
Question 4: What do fundamentals represent?
All the examples I've given so far have a common theme, "it's making a lot of money, but the trading price is X, it should be higher". But I don't think all fundamental arguments have to be expressed this way. The essence of fundamentals is "there are logical arguments to explain why it should be worth more", and valuation is one way to express this.
Besides valuation, there are many other ways to express this, but the core element is that the argument is rooted in reasonable logic, not just "this is a new token, bro".
Conclusion
TLDR: Some liquid tokens are playing a really cool role, but haven't been truly discovered yet. Go find them!
I've divided the past year into three stages:
- Stage 1 (January to March): Excitement. The bull market is really back! During this time, we still see false hype, but much less than in 2021; more focus on some projects that are really doing things.
- Stage 2 (April - present): Memes! Memes! Memes! No one cares about Altcoins anymore. As the old saying goes: buy when no one is paying attention, sell when everyone is talking about it.
- Stage 3 (coming soon): Alternatives to Memecoins have emerged.
I look forward to discovering more unpolished gems: companies with good fundamentals that are severely undervalued.
