Alt-Season: The Edge
Crypto markets have historically favored risk but that’s changing fast. Institutions are here. The market structure and vibes are different. Or are they?
There are real-world use cases. R-E-A-L W-O-R-L-D. Stablecoins have PMF, RWAs are tokenized, Wall Street suits are selling DATs, and normie products like prediction markets are hitting TikTok. There’s a ton of value being created on the tech we built… and yet CT is still waiting for alt-season while crypto VCs panic about how to make money if returns are all about institutional distribution.
Zooming out, the pendulum—anarchists on one side, institutions on the other—has swung to the extreme of the suits. Finally.
I welcome it. Blockchains were always supposed to be open, sovereign, and global networks. The fact that TradFi is here is proof that it’s working. Crypto is winning.
First they ignore you. Then they laugh at you. Then they fight you. Then you win.
But our new friends have changed things.
A New Era
The majors ($BTC $ETH $SOL) and the industry’s favorite children ($ENA $HYPE) have made impressive gains, and don’t seem to be stopping soon. The fundamentalists have arrived and there’s a new generation of investors looking for revenue growth and under-valued tokens ($PUMP $RAY $MPLX $AERO). Other tokens have had their moments: $TAO during the AI frenzy, $XRP for shits and giggles, a long list of celebrity backed memecoins, and even some bottom of the barrel VC-backed max extractors funded 2022-24. But thus far, capital hasn’t flowed down the risk curve into narrative backed alts. Yet we know we’re going to get it.
Capital moves through markets like water through a river system. It propagates from big pools and secular trends, branching out to emerging categories, and creeping its way to the edge where the frontier lives.
When technology evolves into product and revenue, a dam is formed. Capital crashes on the opportunity, water levels rise and a seemingly infinite game of value creation ensues. At the same time, capital retreats from the edges and while progress accelerates at the dam, progress at the frontier slows. Eventually alpha decays, the dam cracks or overflows and the natural state of the market returns.
In crypto, a dam has formed around “institutional distribution”, DATs, the darlings mentioned above, fundamental coins, and big papa ($BTC). I believe this dam is cracking and alt season is upon us.
However, the alt-season you want, isn’t the alt-season you’re gonna get. Lightning doesn’t strike the same spot twice. But positioning for alt-season is not an unreasonable task. Fortunately, risk-on crypto capital, seeking the frontier, has very few places to go. Anything VC-backed is hollow, AI coins never had value accrual, the infra token charade is up, stablecoins are an issuers game, and prediction markets are optimizing for an IPO > token.
So where will the water capital flow?
The Edge
I’ve always been drawn to the weird. It’s what intrigued me about crypto and why I pursued my career. At the time, it was a mix of “fringe” economic thinkers, ideological mathematicians, and religious figureheads. And for the most part they were usually right. I learned along the way that the weird also had a high correlation with The Edge.
The Edge is where the smartest people congregate, truth is the only benchmark, and radical change begins.
As an investor The Edge has served me well and when it has not it’s rewarded me on a personal and spiritual level. I cannot imagine a career where being at The Edge is not core to my work.
However, about a year ago I began to feel I had lost sense of The Edge in crypto. For months I wandered in search of what drew me here in the first place. Thankfully, I found it.
There are tiny, chaotic communities of technically brilliant individuals, dogmatically aligned around seemingly absurd visions. Many of them are preaching crypto’s original gospel of freedom, sovereignty, and decentralized money. More importantly, they’re building things that can change the world: private money, sovereign assets and currency, and perpetual machines.
The Edge is also where multi-disciplinary breeding happens across industries. Crypto’s velocity of capital is a large part of why crypto capital always finds a way into [INSERT MAJOR TECHNOLOGICAL TREND] x Crypto tokens.
The Edge is where I’m betting alt-season takes place most violently.
Where to Look
1. Industry x Crypto
This is crypto’s superpower, latching onto accelerating tech trends and extracting value from them. These are pretty easy to spot, usually a crypto builder or founder with a background in another field starting some sort of network powered by a token. They typically don’t make commercial sense but the token tends to do well.
Industries I’m watching:
- Robotics
- Energy
- Quantum
I can see AI having a comeback but I have too much trauma to give that another go and productivity gains seem to be stalling. I can also see Bio / DeSci making a run.
2. Sovereign Assets
This has always been the primary purpose of crypto. Indeed, the token is the product. There are very strong forces driving our attention to our God-given rights of freedom, liberty, and sovereignty. Civil unrest, social media covered violence, political law-fare, fake government data, rising extremist views, geopolitical tensions to name a few. This attention gets reflected in capital allocation.
$BTC has crossed the Overton window but it’s the only game in town. If demand for Sovereign Assets 100xs, is $BTC the only beneficiary?
3. Private Money
Crypto’s long lost missing feature. It’s what pushes crypto and blockchains from being 7x better to 10x better than tradfi. There are some very serious teams in this category who have been working on Private Money for a long time. In some cases too long.
My latest understanding of the technical bottlenecks is that it’s no longer a game of science and discovery and has moved onto engineering and optimization. I’m watching this category closely but don’t have any positions yet.
Disclosures: This is not financial advice. Positions at time of writing: $BTC $ETH $SOL $HYPE $MPLX $NOCK