Source: TradingView, CNBC, Bloomberg, Messari
A Call For Help to Value Investors
Mondays have been rough for markets this year, and last Monday, the U.S. equity market
lost $1.7 trillion of value. For reference, the entire liquid crypto market is only $2.7 trillion. It’s a good reminder that even when crypto markets are going down, no one really cares when stocks are also going down because so much more is at stake in equities, fixed income, and real estate. Crypto is just a sliver of the investing universe that goes up / down mainly in a quiet, ignored vacuum.
But it doesn’t have to be this way. In my opinion, crypto remains largely irrelevant to most investors because the industry is marketing crypto to the most irrelevant investors.
Meaning the majority of investors buy corporate stocks, corporate bonds, and real estate. It is estimated that over $600 trillion is invested in these 3 asset classes. Only a TINY minority buy commodities and currencies. So why are the major companies in crypto so focused on catering to the tiny sliver of CTAs, macro funds, and fast-money momentum traders that care about this tiny, irrelevant part of the capital markets?
It’s illogical, to say the least.
Source: Google estimates for the size of the global investable market
Maybe it made sense 10+ years ago when Bitcoin was the only game in town, and there was no choice but to focus on the gold/currency market and use relative value to try to attract some investors into Bitcoin. But blockchain has evolved so much in the last 7 years. There are many cash-flow-producing protocols (and let’s face it, they are really more like companies than decentralized protocols) that any normal investor would understand much better than Bitcoin or smart contract protocols. More education is needed on these revenue companies with tokens because most investors invest in companies.
And that's where investor education should focus.
As
we discussed a few weeks ago, many DeFi tokens trade at 2x P/E ratios while also executing buybacks that return value to token holders in the form of a supply sink of 1-5% of supply per year while also growing at over 1000% year-over-year. These would literally be the hottest investments on the planet if anyone knew they existed. These companies’ tokens are much cheaper than the stocks of many centralized competitors (like COIN and HOOD). Take a look at some of these charts on DeFi growth. All investors can easily understand these, regardless of whether they understand blockchain and crypto. Would DeFi be down -50-70% in the face of this growth if any real fundamental investors were paying attention?
Source: TheBlock
Source: DeFiLlama
Source: Artemis
Source: Arca Internal Calculations and Artemis
Any stock, bond or real estate investor who saw these DeFi businesses would be tempted to invest in coins like Hyperliquid (HYPE), Jupiter (JUP), Aerodrome (AERO), Raydium (RAY), and many more. But most investors don't even know that these tokens exist because so much damn attention is on Bitcoin, smart contract protocols, and memecoins. If we start educating and nurturing real value investors on growing, liquid investments based on VALUE, rather than TAM, we have a much better chance of making this industry more relevant.
DeFi is not the only sector in crypto where there is unmistakable value. But it is the most obvious area right now, and the easiest for traditional investors to digest. If we want crypto to grow, we have to stop explaining complex things to fast money traders and start explaining simple value to the majority of buy-and-hold investors.
Arca is not alone in this fight. For example, Defiance Capital has been trying to educate on DeFi tokens for years. Their
latest blog post is very well articulated and so insanely obvious. Almost every (non-venture) fund looks at investing in this way, with a focus on real businesses with cash flows (or the potential to generate future cash flows). But I highly doubt most non-crypto-focused investors have read this because we continue to be floored that some of the fastest-growing areas of crypto are being completely ignored.
In 2025, DeFi is down just as much YTD as memecoins. Meanwhile, amidst the equity market carnage, there is of course, much more healthy dispersion and differentiation. Not only are European and Asian equities outperforming U.S. equities, but even within U.S. equities, rotations are happening. Since July 10th last year, the tech sector is -11.7% with the Mag 7 -6.6%. The S&P 500 is pretty much flat (-0.3%) but financials (+14.3%), utilities (+11.9%) and consumer staples (+8.5%) are higher.
I’m still holding out hope that one day, digital assets will differentiate, too. But it won’t happen as long as Bitcoin and memecoins remain on the forefront and VCs and quants dominate the investing landscape.
A Cool Story on Solana and Its Voter Turnout
Solana (SOL) had a milestone last week. The SIMD-228 vote to reduce SOL inflation by upwards of 80% was shot down last week. The SIMD-228
vote reached quorum but narrowly failed (61.4% versus a 66.7% threshold) in one of Solana’s most contentious proposals ever. Regardless of the result, the vote did bring a few interesting topics to light.
For starters, the Solana community has been actively discussing SIMD-228 publicly for the better part of two months. As Coinbase stated in their weekly market report, “Solana’s governance process is evolving in a unique direction from that of Bitcoin or Ethereum, neither of which have leaned into token voting as a form of governance.”
According to
Multicoin Capital, SIMD-228 was the biggest crypto governance vote ever - by both the number of participants and participating market cap of any ecosystem, chain, or network. Moreover, according to Solana, SIMD-228 voter turnout was higher than in every U.S. presidential election in the last 100 years. That’s incredible! If you really want to understand why every company, municipality, university, and entity will issue tokens in the future, this is as good of a reason as any. Blockchains are coordination mechanisms with the most passionate, engaged customer base on the planet. Crypto aligns stakeholders and gives them a voice. Why aren’t more companies embracing this? You can turn your customers into quasi-shareholders who care about your growth and are passionate enough to show up at the polls.
Hats off to the Solana ecosystem and to the future of crypto governance.
