Source: TradingView, CNBC, Bloomberg, Messari
The Best Performing Tokens are from Profitable Companies – Shocking
We’ve heard many stories and anecdotes this year about the crypto “bull market” being harder to invest in than any previous bull market in crypto history. Aside from the fact that labels such as this are arbitrary (a “bull market” is historically defined as a prolonged gain of 20% or more, which is like a single week in crypto-land), the reason this has been a hard bull market is because it’s barely even a good year for crypto, let alone a bull market.
More than 75% of
tokens in our coverage universe are negative YTD, and more than 50% of tokens are down -40% or more YTD. Worse, some of this year’s winners are complete nonsense coins and memecoins that no serious investor would even look at (looking your way, LTC and BCH). In fact, the only reason most people even refer to this as a bull market is because the handful of well-known large-cap tokens are higher YTD – BTC, ETH, SOL, BNB, and XRP are all up 20-40% YTD. This is the TradFi equivalent of the Dow Jones Industrial Average and GameStop having a good year, while the Russell 2000 small-cap index is -40%. It’s just not the kind of market that would make the average investor thrilled.
Source: Messari Screeners
On the flipside, for those of us who have been shouting from the rooftops for almost a decade about needing better investor education in this industry, this is precisely what the market needs. Dispersion. Nothing good comes from an everything rally, or an everything selloff, because no one learns anything. However, when you look around the room and immediately find someone who is drastically outperforming you, you start to ask questions like “how are you doing this?”.
And the answer, for a change, is a good answer. Unlike previous crypto bull markets, you actually have to use common sense this year to make money. The days of throwing darts and walking away with a fortune are over, to many people’s dismay. You now have to own stocks or tokens that have new sources of demand via equity investors, or you have to own projects that actually make money and buy back their own token with the profits.
So what has done well so far this year in the blockchain world (aside from a few anomalies)?
- Anything with an ETF or a DAT (BTC, ETH, SOL)
- Crypto stocks (CRCL, GLXY, COIN, BLSH, IREN, WULF, HOOD)
- Anything with their hands way up inside the U.S. Government (XRP, LINK)
- Companies that are making a ton of money, and giving money back to token holders (HYPE, PUMP, SYRUP, MPL/SKY, etc.)
Six months ago, I joked that crypto needed something catchy like the equivalent of the FAANG stocks, or the BRIC countries, to get people to pay attention to the actual companies and projects in crypto that were making the most money, and distributing that money back to tokenholders. Not surprisingly, these were mostly exchanges, DeFi protocols, or stablecoin issuers. Even less surprisingly, almost all of these tokens are on the short list of tokens that are higher YTD, or at least, are amongst the best performing tokens over the past 6 months since this tweet was published.
If we were to update that list today, maybe we’d no longer call it the “BACHELORS” and instead would call it the BARHEAPS to account for the new Pump.fun token (PUMP), which is now battling Hyperliquid (HYPE) for most profitable company in crypto history (both are annualizing over $1B in revenue per year with nearly 100% of profits being used to buyback tokens).
BNB
AERO
RAY
HYPE
ENA
AAVE
PUMP
(For those who feel like ETH and SOL need to be included, simply because they do make money, then ironically the acronym would be BEARPHASE).
So it’s a good time to explain crypto investing to your peers – they’ll be shocked to hear that companies that make the most money have the best performing tokens. Mind… Blown.
The Idiot’s Guide to Explaining Blockchain in 2 minutes
Here’s the problem with the above. While it’s obvious that good-performing companies have the best-performing tokens for those who invest in tokens, most people still don’t even know this world of token investing (outside of BTC and memecoins) even exists. But they are starting to pay attention now that ETH, SOL, HYPE, stablecoins, Figure and Polymarket are in the news every day. So if you’re looking to try one more time to explain blockchain to the masses, here’s what I’ve found to be the easiest (and quickest) explanation.
The internet lets you communicate instantaneously, boundaryless, and costlessly.
Blockchain lets you send assets instantaneously, boundaryless, and costlessly.
Source: Arca Presentations
The first asset to be sent over a blockchain was a made-up crypto asset called Bitcoin (BTC), and it was sent over the Bitcoin blockchain. Just because this was first, doesn’t mean it is the only blockchain, or the only asset, that can be sent in similar ways. Congrats to BTC for demonstrating A SINGLE use case for the technology, but it is not the only use case.
Other blockchains (smart contract platforms like Solana and Ethereum) have more flexible features than the Bitcoin blockchain, and as such, they allow for other assets to be created and transferred. In fact, think of a smart contract platform as an app store that anyone can build upon. Just like your banking, gaming, mapping, collectibles and social apps live inside of your IOS or Android operating systems, your banking (DeFi, stablecoins), gaming (Polymarket), collectibles (NFTs), mapping (Hivemapper) and social (Pump.Fun) blockchain apps live inside of your smart contract platform. Many of these apps have their own tokens, which can be a form of quasi-equity in that business (if the tokenomics are built correctly), just like many of your IOS apps are publicly traded companies with their own stocks. When those apps get used (creating revenues), your stocks (or tokens) appreciate in value. Of course, since any asset can be created out of thin air, and sent over blockchain rails, you also get some assets that are stupid (i.e. memecoins), or assets that are loosely associated with a company but don’t actually have any value drivers back to the token (i.e. XRP).
Source: Arca Presentations
Ok, now we’re getting somewhere. But aren’t most of these crypto-startups going to fail? Yes, of course they will. Just like the “
dot.com” bonanza fueled all sorts of startups that went nowhere, most crypto-native blockchains and applications will fail, too. But we are now on the cusp of leaving the "dot-crypto" phase of blockchain growth (where every investable token was issued from some crypto-native startup), and we are about to enter a new phase where regular, 100-year-old companies use blockchain, and issue tokens too. No one calls a company a "dot-com" anymore, because every company is a “
dot.com” now that every business transacts on the internet. Walmart, JP Morgan and Domino’s Pizza are now internet companies, even though all were around before the internet. They weren’t created by the internet, they simply used the internet to grow. The same will soon be true of crypto. Roughly 99% of the world’s assets (stocks, bonds and real estate) have yet to be transferred over blockchain rails. But they will likely be tokenized and sent over blockchain rails in the very near future. So you can soon envision a world where your investments and your payments are the same asset (imagine sending TSLA stock as payment for an actual Tesla, or using AMZN stock to pay for your Amazon shopping).
But it’s not just about tokenizing stocks, bonds and real estate. Every company, university, municipality, celebrity, organization, and sports team
will inevitably issue their own tokens one day, which can be a 3rd asset in their capital structure (a company will be able to issue stocks, bonds and tokens). These tokens are often the greatest capital formation and customer bootstrapping mechanism ever created, as they align all customers and stakeholders, turning them into evangelists and power users. Tokens are both the way to benefit from a company’s success via higher prices AND a medium of exchange to use for the company’s services. Uber drivers didn’t benefit from Uber’s success. Content creators don’t benefit from Twitter and Instagram’s success. Chefs and Delivery people don’t benefit from DoorDash’s success. But take Hyperliquid as an example – the users of the derivatives exchange were airdropped HYPE tokens, and you can use the HYPE token as collateral to trade on the exchange. Thus, the customers are the equity holders and benefit from the company's success, driving increased usage of the company’s products, higher revenues, and, consequently, higher token prices.
Source: Arca Presentations
Try this explanation with your friends and family and tell me how it worked!
