🟪 Thursday Meta Cycle Mailbag

When do the normies get here?

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"When a measure becomes a target, it ceases to be a good measure"

- Goodhart’s law

Thursday Meta Cycle Mailbag

Q: When do the normies get here?

I’m not sure they’re coming — partly because we didn’t give them enough time to get interested, and partly because we didn’t really give them anything to get interested in.

It’s evident from both stablecoin AUM and the most recent Coinbase results that the current cycle has failed to attract many new investors to the crypto ecosystem (ETFs don’t count) — and David Hoffman makes a convincing case that the current cycle is already over.

Helpfully, he’s not just measuring it by prices.

He explains instead that each crypto cycle has been catalyzed by a new way to distribute tokens (the "meta," in his terminology) and lasts only as long as it’s effective.

2013: Proof-of-work/fair launch 

2017: Initial coin offerings

2020: DeFi summer/liquidity mining 

2021: NFT mints

2024: Airdrops and points 

Based on recent results, it feels like this cycle’s distribution meta of airdrop and points has already played itself out. 

David’s co-host, Ryan, notes that each meta is a new game for people to play and I think that’s part of the issue this time around: The game of farming airdrops and points just isn’t very fun.

You have to pick the right projects, you’re competing with robots, you have to open and keep track of a zillion wallets, you have to bridge money back and forth all over, you might get rugged, and, even if all that goes well, you have to be quick to sell, too.

There were some good ones, like Jupiter and Wormhole, but there were not enough of them and not for long enough to attract much new money into crypto.

(Side note: How much money has North Korea taken out of crypto via airdrops?)

David cites Goodhart's law to explain why crypto meta cycles end: Once a new means of issuing tokens is recognized by grifters and regulators, it’s over, for everyone. 

This time around it feels like the grifters and regulators were lying in wait because the meta was recognized quickly — too quickly for new money to come in.

Q: Can I blame Gensler?

Yes!

Gensler’s insistence that everything’s a security has forced institutional money seeking exposure to crypto (beyond bitcoin) to invest in the only available alternative — VC funds.

That captive audience then inflates crypto VC valuations and those, in turn, can only be justified with tokens launched at valuations that are even more inflated — and the only way to achieve those valuations is by selling a tiny percentage of the float into the limited pool of retail money willing to buy these things.

It hasn’t been ending well as of late, and I blame Gensler.

Q: Does friend.tech fix this? 

Maybe!

Friend.tech’s token launch was unusual in that 100% of the supply was airdropped to users — a stark contrast to the usual playbook of reserving the vast majority of tokens for developers, investors, and a treasury.

But how does the team get paid then? How do investors make a return? How does the treasury fund new projects?  

We don’t know, but the most crypto-possible solution would be to issue another token!

Tokens aren’t equity, so the team and investors haven’t given anything away by issuing the one they issued and nothing says you can’t issue another one.

The next one wouldn’t be equity either, but it might have governance rights, in which case it’ll probably be treated as if it’s equity.

If so, it’s unclear why the current one would have any value — and that’s probably why it’s trading at a market cap of only $200 million.

That seemingly modest valuation suggests to me that buyers are aware that the token they’re buying is not equity and that another, entirely different token might be coming.

The notable thing really is that they know all that and still want the existing one anyway, just because.

Crypto is fun like that.

Q: How much new money do we need?

The one thing the crypto industry is really good at is generating tokens (there are a lot of them) and the one thing the crypto industry is pretty bad at is generating revenue (there’s not much of it).

So, the financing needs are high — according to one estimate, the crypto ecosystem might need as much as $500 million of inflows per day to absorb a tsunami of unlocked tokens that’s about to hit.

$500 million. Every day!

I can’t imagine where that type of money would come from — and that’s only for tokens that are already launched. 

Anecdotally, the supply of new tokens appears to be far in excess of demand, as well. 

It seems like both types of sellers will have to either not sell or sell at much, much lower prices.

Q: What’s the next meta then?

DePIN!

Well, let’s hope so, anyway, because decentralized physical infrastructure networks represent everything that’s been lacking in this current lackluster cycle.

DePINs are 1) fair launch (earn tokens by providing infrastructure), 2) useful in the real world (maps! Cheap cell plans! GPUs!) and 3) just the thing to bring new users into crypto (Uber drivers using Hivemapper dashcams, for example). 

They also have a giant addressable market in "AI compute," as Blockworks research analyst Ryan Connor details here.

It remains to be seen whether crypto tokens can incentivize a decentralized network of people to provide the computing power needed by a decentralized network of users.

But that sounds familiar, right?

The first-ever DePIN was Bitcoin — and that, at least, is a meta cycle we know can work. 

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  1. How the latest TradFi blockchain trial could mark the ‘five-yard-line’ for mass adoption — Read

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The Future Of Liquid Staking On Solana

This week we welcome FP Lee to the show for a discussion on the growth of liquid staking on Solana. We deep dive into launching LSTs, value accrual, solving liquidity issues & some of the products sanctum is building. Enjoy!

Watch or listen to Lightspeed on YouTube, Spotify or Apple.

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