Source: TradingView, CNBC, Bloomberg, Messari
Alt Season Ain’t a Thing – But Good Assets Going Higher Is
Most of you are aware that I hate the term “altcoin” because it describes absolutely nothing, and it is part of the constant misinformation being purposefully fed to crypto investors by the exchanges, influencers, and dealers who profit from an uninformed audience. An “altcoin” is any token other than Bitcoin, and “altcoin season” was a dumb term to describe the 2020-2021 “everything rally”.
Yes, it happened. Unfortunately, many folks are still waiting for another “alt season”, even though it is extremely unlikely to ever happen again. Instead, a select few tokens issued by good companies, with good tokenomics (i.e. buybacks), in good sectors will continue to grow at the expense of everything else. And it is likely that a handful of new tokens issued by those who understand this formula will perform better than legacy, highly inflationary tokens in crowded and unproven sectors.
We’ve written about Hyperliquid (HYPE) a lot over the past 6 months. It fits the above bill. Good company (possibly one of the best ever), good sector (decentralized exchanges are killing it), good tokenomics (~97% of revenues used for buybacks). That’s a pretty good formula for a +47% gain last week, +95% MTD, and +245% from the April 8th lows. HYPE wasn’t alone. Maple (SYRUP +33% wow), Aave (AAVE +26% wow), Jupiter (JUP +18% wow), and a handful of other revenue-producing DeFi entities that focus on buying back tokens outperformed an otherwise flat, boring market last week. Other nonsense tokens may still have their day in the sun once in a while, because crypto is still a mecca for random spurts and starts, but it’s becoming more and more clear that if you want a sustainable rally that mirrors continued strength in equities, you have to build your token the right way.
It’s nice to see fundamentals matter. Total exchange volumes were up 4% WoW to $1,489B. This was driven by slight DEX outperformance, with both DEX and DDEX volumes increasing by 6%. CEX spot volumes were the largest underperformers, down 7% WoW. In terms of individual exchanges, Pancakeswap was the largest outperformer, with volumes up 124% WoW. Hyperliquid volumes were up 8% WoW. This week, Hyperliquid hit an all-time high in futures open interest, 24-hour fees ($5.4m), and USDC TVL for their EVM Layer 1 ($3.2m).
Source: Arca Internal Calculations
Lend/Borrow platforms also grew. The sector saw deposits increase +7.18% last week and new loans grew +2.5%. Maple continues to dominate the sector with deposits +12.64% and new loans +18.6%. Venus (+13.3%) and Moonwell (+9.2%) also saw sizable loan growth this week, while Gearbox (-3.5%) and Euler (-0.1%) were the only projects to see a decline in loans. But AAVE still dominates the overall sector.
Source: DeFiLlama
Oh, Forgot to Mention, Bitcoin Hit New All-Time-Highs
Last week we wrote, “I’d be shocked if Bitcoin does not hit all-time highs this week, post the Moody’s USA credit downgrade.”
Bitcoin did, in fact, hit all-time highs last week. No one seemed to care. I guess that’s a good thing. Bitcoin marches to the beat of its own drum, only this time, with less euphoria and less shock.
But why doesn’t anyone care? A few hypotheses:
- The current bull run is driven more by institutional investors, with BlackRock, Fidelity, Bitwise, and other firms managing Bitcoin ETFs, rather than retail investors. In 2021, retail enthusiasm fueled hype, with Coinbase topping app stores. Today, institutional dominance means less retail-driven social media buzz. Further, because of this “alt season hopium”, many crypto native investors are underexposed to Bitcoin.
- Bitcoin is kind of a boring, mature, $2+ trillion asset now, with lower volatility compared to past cycles.
Gold is performing well too, and thus Bitcoin’s strength is seen as an afterthought rather than the main event.
- Bitcoin is a chameleon, and its value proposition changes a lot. However, there is currently a real fear that the U.S. government's debt situation could spiral out of control (fueled further by the Moody’s downgrade), and Treasury Secretary Bessent talks nonstop about the debt burden. Trump and his administration have stopped pretending this debt doesn’t exist, which is good for Bitcoin but bad for society. And maybe that’s just not something to be super excited about.
Whatever the reason, it appears that this is the most de-risked Bitcoin has ever been from an investment standpoint. It’s the only asset that seems to be less risky the higher the price goes.
Social Value is Real
- Financial: Free cash flow, dividends, earnings multiples
- Utility: usage, gas fees, collateral, rewards
- Social: i.e. a "cool factor"
I also spent a lot of time recently talking about the TRUMP token, simply because it is one of the best pure-play examples of a token separating the “social value” from the “utility value” (and obviously has no financial value).
However, many people still dismiss me whenever I discuss social value. I even dismiss myself sometimes, because even if we can agree that social value is real, we still can’t quantify it. As investors, we want to quantify value, and both financial and utility value can be modeled. Social value really can’t.
“I write a lot about memecoins around here, so I suppose I should mention a small house in Dolton, Illinois, that carries at least $31,000 of pope premium: The childhood Chicago-area home of Pope Leo XIV is being sold at a luxury auction following a surge of interest sparked by his election last week. The three-bedroom house in Dolton, Illinois — about 20 miles (32 kilometers) south of downtown Chicago — will open bidding at $250,000, according to Paramount Realty USA, the firm managing the sale. The home was initially listed in January for $219,000 as a typical residential property. But the listing was pulled from the market on May 8, just hours after Cardinal Robert Francis Prevost, 69, was named pope and the sellers discovered the connection.
“Before he was named pope, the house was a house,” said Misha Haghani, chief executive officer of Paramount Realty. “When the pope was elected, it became something else, it became much more than just a house.”
Presumably, if you buy that house, you get about $219,000 of value from having a place to live, and then $31,000 or more (depending on the auction-clearing price) of purely memetic value from having a place to live where the pope once lived. I assume that non-pope cardinals carry no premium.
Just one step further in our quest to define value. Financial value + Utility value + social value = price.
