
Source: TradingView, CNBC, Bloomberg, Messari
The Largest Disconnect Between Price and Growth
I’m angry. Not because prices are down. I’ve been investing for over 25 years, and I am numb to it. Markets go up; markets go down. Sometimes markets go up/down for no reason; sometimes markets go up/down for good reason. That part doesn’t bother me. There’s likely great alpha ahead here.
What bothers me is that we’ve been doing this at Arca for over 7 years now, and somehow, the world seems to be getting even less educated on what is actually happening with the growth of blockchain. For every rational, honest, factual take, it seems there are 100 insanely dishonest, incorrect or flat-out stupid pieces of information floating around that somehow catch on faster than the truth. It’s maddening.
Take this blurb from NYDIG on Friday in their weekly note to clients:
“Bitcoin's dominance, or its share of the total cryptocurrency market cap, continues to climb, recently reaching 65.2%. This cycle has been much more bitcoin-focused with the ETFs and political standing being the driving forces. What's the reason behind this trend? This cycle has lacked fresh narratives and innovative use cases. Many alts got a significant bump in the wake of the election and not surprisingly so. The Republicans more broadly support the industry in key areas, such as regulation, enforcement, economic growth, and investment. This was all incrementally better for alts, as many of these areas were already well-defined for Bitcoin. However, that bump was short-lived – many coins have entirely roundtripped the “Trump bump,” others appear that they are about to, and some are even lower than before the election. Unless new use cases take hold across the industry, bitcoin’s rise in dominance is likely to continue.”
I’m sorry, what? First, how is a crypto-native company like NYDIG still calling every token that isn’t Bitcoin an “altcoin”? If you’re not Bitcoin, you’re an alternative? There are at least 10 distinct sectors utilizing blockchain now, and hundreds of different token types (asset-backed, quasi-equity amortizing buyback tokens, debt-like, etc) in addition to whatever we’re calling Bitcoin these days (store-of-value? Currency? Commodity?). Do we really have to keep pandering our terminology to the criminally stupid?
Second, what exactly constitutes “fresh narratives and use cases” if not some of the following?
- The U.S. President and an African nation (Central African Republic) have issued tokens in the past 4 weeks, ushering roughly 1 million new people on-chain via the creation of new wallets.
- There are at least 22 states that are either pushing for or have proposed legislation to establish a Bitcoin reserve, and dozens of other countries, including the United States, Brazil, Russia, Poland, Japan, Switzerland, Germany, Hong Kong, and others.
- SEC Commissioner Peirce just released an incredibly crypto-friendly priority list, essentially stating that everything that is currently legal and not FRAUD is ok by her.
- The banking industry is signaling readiness to embrace crypto—such as Bank of America’s interest in crypto payments pending regulatory clarity and Morgan Stanley stating that the bank will work with the U.S. Treasury and other regulators to explore deeper participation in the cryptocurrency market. Meanwhile, Blackrock’s Larry Fink said, “I want the SEC to rapidly approve the tokenization of bonds and stocks.”
- The largest prediction market is built on blockchain, and continues to grow into other areas (like sports betting) post the election.
- Stablecoins are once again reaching new all-time highs
- New AI agents are being created on-chain and interacting with each other on-chain.
- Decentralized Exchange volumes are through the roof as more and more tokens are being issued, and traded, on-chain.
Do we need a blockchain to drive a Waymo or AirForce 1 before this can be considered a “fresh narrative and use case?
Or how about this recent interaction below? Jesse Colombo seems to be, at the very least, a semi-intelligent professional investor, who spends his entire career researching investments. In one ingloriously and egregiously stupid tweet, he just called for the death of all “cryptocurrency” by lumping together a currency (BTC), several smart contract platforms (SOL, ETH), the quasi-equity / loyalty rewards token issued by a $100 billion+, profitable company (BNB), a memecoin (DOGE), the token of the largest on-chain bank (AAVE) with over $33 billion in deposits, and a collection of random tokens that have nothing to do with each other.

Is it really that hard to spend 30 minutes figuring out that none of these tokens have any similarities other than the type of technology that created their token? We’re 8 years past the Ethereum-led ICO boom, and it is still too difficult to differentiate the different use cases of blockchain technology that has spawned from the rise of smart contract protocols.
Wood is used to build multi-million dollar mansions and buildings. It is also used to build whatever the hell these things are. Does this mean from now on, we have to turn our brains off and lump everything made of wood together as a single output? I just cannot, for my life, understand why this is such a hard concept to grasp.
So… let’s get back to markets. Bitcoin continues to separate from the rest of the market, as the majority of tokens have now given back most, if not all, of November and December’s gains, with a few exceptions. As of Sunday, all tokens in the Coindesk 80 index (tokens #21-100 by market cap) are negative YTD. The bottom ten are down more than 50%. The CoinDesk 20 (tokens #1-20 by market cap) has only 4 constituents in the green for the year (XRP, SOL, BTC, LTC), and for very different reasons (SOL because of TRUMP coin launching on Solana, Bitcoin because of adoption by countries and states, LTC because of optimism over an ETF launch, and XRP because, well, Ripple?).
Source: Coindesk
Meanwhile, a lot of the tokens that are down the most have never seen more success or interest in their projects. From other blockchains to DeFi, to AI infrastructure projects…. this is one of the biggest disconnects we’ve ever seen in terms of news / usage / fundamentals relative to price / sentiment. So let’s talk about crypto sentiment and price action and how fickle it can be.
On May 28, 2024, I wrote that the past week was "
the most bullish and important week in digital assets capital markets history". Some thought I was exaggerating, but upon reflection and after enough time had passed, I was mostly proven right. It was the most bullish and important week in the history of digital assets capital markets. The 180-degree pivot regarding crypto’s future that week was insane and most certainly snowballed into the Presidential election and, ultimately the incredibly positive announcements coming out of Washington over the past 6 weeks.
Naturally, the market must have shot higher right? Nope. From May 28, 2024 until the lows on Sept 6, 2024, the total crypto market fell 28%. BTC was much more resilient, which means excluding BTC and stablecoins, the rest of the market fell even more.
Source: CoinGecko
Of course, many were shouting from the rooftops that crypto was dead. If the market couldn’t rally on this news, it would never rally again, and there would never be any real use cases of blockchain.
And we know what happened next.
From the lows of Sept 6th, through the November election, up until the FOMC meeting on Dec 17th, crypto more than doubled, with many tokens gaining +300%+.
Source: CoinGecko
So why is sentiment so bad? Well, actually it isn’t. The exhausted full-time crypto investors and builders who work 20 hours per day and have seen more volatility in a few years than they would wish on their worst enemy are certainly depressed and angry, but sentiment has never been higher amongst traditional investors and innovators that we speak to. The TradFi world only sees the positive news, and Bitcoin is near all-time highs. They move slower than your average crypto-native on-chain degenerate gambler, but they are moving. They are building, and they are gearing up for investment.
The TradFi world holds 100x more wealth than the entire size of the crypto market. A senior person at Morgan Stanley once told me, "We're not late. We could buy all of crypto if we wanted to". And they aren't wrong. This industry is still tiny compared to the Wall Street giants, and still largely irrelevant.

Price often lags news. And only in crypto is the PTSD so bad that investors let price convince themselves that news, adoption and fundamentals don’t matter. When you combine that with misinformation and lack of education, crypto can become a pretty lonely place for investors. Yes, it’s baffling to me that value and growth investors who buy tech stocks have yet to figure out that the tokens of revenue-producing decentralized exchanges (i.e. HYPE, UNI, RAY, JUP, AERO, etc) are incredibly cheap on both a current, and forward-looking multiple, and produce in many cases more revenues than anything in the Nasdaq outside of the Mag 7. Just look at the chart below of volume growth, and the P/S ratios of DEX’s like Raydium, Jupiter and Hyperliquid. This is an investor’s dream, yet the price charts of these tokens look the same as FartCoin, because it's all lumped together. It’s maddening. But it is also just a reality. The industry has failed to educate.
Source: Arca Internal Calculations
We have a very simple investment thesis for the next five years. Blockchain technology has proven to work incredibly well for asset movement and transfer, but the majority of the world’s most popular assets (stocks, bonds, real-estate) are not available yet on blockchain rails (due largely to regulatory and workflow issues). As these barriers between crypto-native assets and TradFi assets break down, which is clearly and unequivocally happening for the first time ever, more tokenized assets will be issued and traded and sent on-chain. The beneficiaries will be certain Layer-1 blockchains that support this growth and these transactions, the DeFi applications built upon these chains, the stablecoins and stablecoin providers, and applications in a few sub-sectors like gaming and AI that will help you navigate on-chain. We haven’t even begun to see what blockchains are capable of yet because the majority of the world’s assets are not available on blockchain rails. So while crypto traders get caught up in the short-term and often chase flashy returns with no substance (i.e. memecoins), the longer-term investment thesis is centered around boring, global permissionless finance that makes investing and banking more efficient and transparent.
And while I could have said the above statement at any point over the past 7 years (and I have), it has never been closer to reality, and more certain of an outcome.
Now, that does not mean that I love all the coins and tokens that exist. Of course not. I’m probably more bullish on crypto than anyone right now, but I hate most of the coins that exist, too. Many will go to zero. And many will somehow sustain billion-dollar-plus market caps for reasons that I may never understand. I’m also infuriated by the fact that my 7-year thesis that companies, municipalities, celebrities, universities and other organizations will issue tokens is finally playing out, and the issuers are blowing it with thoughtless memecoin launches instead of something much more tangible and useful. My
first blog on the subject came before Arca even had a website in early 2018! If only there was a crypto-native investor and former investment banker who could help structure some of these tokens correctly!

Regardless, eventually, the real investment dollars from institutions will have to actually look at this space seriously and differentiate the wheat from the chaff. It will not be hard to differentiate between them if you just spend a few minutes talking to a rational person in this industry. We put together a
taxonomy almost 5 years ago. While some of this may be a bit stale, it’s definitely not a brand-new concept. It’s just a matter of when the majority of investors will take the time to learn, objectively, instead of simply having a binary emotional response to the industry (crypto is good; crypto is bad).
Objectively, blockchain’s future has never been more certain. And if we can simply educate the masses beyond the craziness, I honestly think it would be impossible for most investors and companies to refute this.
We (society) often fail to question the status quo. Or fail to act even when we know it's ridiculous (i.e. Ticketmaster). But society is also filled with tipping points. And blockchain has hit that tipping point. It’s objectively better than many of our traditional systems. It works. There are so many unique use cases, and more are on the way. When every company, university, municipality, celebrity, organization, and sports team inevitably issues tokens (which is happening sooner than you think), and utilizes DeFi, AI agents, and blockchain games, the growth of this asset class will be mind-blowing, and so obvious in retrospect.