In the latest episode of The Blockcrunch podcast we have Hal Press, Founder of North Rock Digital, share his transition from equities to crypto, identifying investable narratives and planning the trade, 1 vertical that Hal is looking at right now.
Read our notes below to learn more.
Introduction of Filecoin
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Introduction to Hal Press
Founder of North Park Digital.
Known by his audience on Twitter for his constant timely market commentary.
Previously spent five years at Morgan Stanley before becoming a long-short investor in Tech at Maverick Capital.
North Park Digital’s Thesis
He believed that Blockchain innovation is a step-function technology innovation that will unleash a lot of future.
The crypto market is the least efficient liquid market that exists in the world today.
He viewed Equity investors as sort of pros so he rather competed against a less efficient environment which he thinks exists in crypto.
Running a long short book requires you to have the ability to short things, and that's not as easy as it is in the equity space.
In equities, you will run a long short book primarily based on fundamentals whereas in crypto they play a role but they're certainly not as powerful at the driver as they are in equities.
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Equities investing vs. Crypto investing
The asset is worth the current value of future cash flows.
He doesn’t think that the earnings actually directly drive price and equities either.
What the company earns more or less money does not actually create buy or sell pressure in the stock, what creates the buy or sell pressure in the stock is the investor that bases their buy or sells decisions off of the fact that the company is making or losing more money.
The only thing that actually drives prices is the supply and demand for the actual asset.
Identifying Investable Narratives
He believed that crypto is a game of positioning for narratives before they exist.
The narrative is a reason to expect future price appreciation.
No one will buy or sell something because they think there are really good things happening at this very moment, you're buying and selling because you are speculating something's going to happen in the future so you care about the future price appreciation and that’s a narrative.
You have to understand broad market conditions because certain narratives might take hold in a bull market that won't take hold in a bear market.
You have to understand the positioning of the asset at the current time.
How Hal Press played the Ethereum merge
One of our core philosophies at the fund is this idea of 90:10 which is 90% of an Investor's job is sitting on your hands doing nothing, 10% of the time is spent to truly optimizing those 10% and monetizing them with concentrated positions.
They learned everything they could about the merge.
They formed as many connections as they could to try to get their best sense of the merge timing.
They research all the different assets to try to figure out which things they thought would benefit most from the merge.
Find a narrative that actually is going to impact price.
Anything that has the ability to directly impact tokenomics is quite powerful and that's why the merge was so appealing.
Thesis on Short BTC Long ETH
The core reason for the bias is that I care a lot about structural tokenomics. Eth and Bitcoin have different structural tokenomics.
ETH has $5M of buy flow and Bitcoin has about $10M of cell flow.
Everyday Bitcoin needs to attract 15 million dollars more of buyers all else equal, otherwise, ETH/BTC goes up.
ETH is pretty dominant in terms of its position as the number one L1 in the space.
I actually think of ETH competing directly with Bitcoin for the store of value utility.
ETH is a far better SOV than Bitcoin.
Some activities will move to L2s from L1.
If fees are quite low then the added benefit of L2 is reduced.
Positioning, Sizing, and Exiting trades
He doesn’t think that there's a ton of value in picking a Beta Direction, he thinks that there's more value in harvesting the Alpha.
There has an extremely high conviction that year-end was a good buying opportunity.
You look for a confluence, everyone has different things that they look at but what you look for is when all of those things align and that doesn't happen all the time but it does happen from time to time and when it does that's when that's when you have a real signal.
They have a framework. It's different for size, times, and types of bets. They have a benchmark that they use for different types of bets and then based on their conviction and what they view as the risk-reward they will flex that higher or lower.
On the side of caution in terms of sizing because they have very high confidence in their ability to be right more often than their wrong.
It's a fine line between monetizing things appropriately but also never putting yourself at risk of having material damage.
They believe in concentrated bets fewer than many bets more often.
Exiting is much harder than entering. Although both are sort of relevant, it requires discipline, process, planning, and being extremely honest with yourself.
1 Vertical that Hal Press is bullish on
They have been most vocal on the liquid staking derivative trade into withdrawals. They planned it well in advance ever since the merge happened.
An example of the confluence, where you had a sort of macro sell-off, it was the right time to invent, the individual names were getting sold, and everything aligned.
The thing with exiting is it's hard to forecast the right time in advance because it depends on how the situation unfolds.
I don't have a predetermined plan at this point.
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TODAY'S EDITION IS BROUGHT TO YOU BY ZKX
ZKX is building the first perpetual futures exchange on StarkNet with self-custody and true community governance.
They're launching ZKX Yakuza, a gamified Community Incentives Program which includes the Ambassador, Contributor Programs & Testnet.
Participate to access exclusive Yakuza NFTs and rewards in future ZKX tokens!
Click now on the Oyabun blog, where the story begins, and find clues to what lies ahead in ZKX Yakuza!