GM, this is your Daily Bolt briefing
The market remains bearish, with delays in potential positive catalysts. Nonetheless, it’s important to keep a nuanced perspective. In today’s edition, we’ll be giving you some notes breaking down how this cycle compares to bear markets past, what to expect going forward, and more.
Don’t forget to tune in to today’s episode of Metrics Matter at 11AM EST featuring Nick Drakon and Souvlaki. On the table for this episode are the impacts of the Curve exploit situation and the DeFi ecosystem’s reaction.
Stay alert, stay informed ⬇
1/ The Block - Crypto's 'Best Bear Market Of All-Time' with Alok Vasudev
Preview: Alok Vasudev from Standard Crypto talks about Standard Crypto’s thesis, crypto market maturity, and more! Click here to listen to the full episode (41 mins).
Read our Note (5 mins) and save 36 mins.
In this episode of The Block which took place on July 31, 2023, Frank Chaparro is joined by Alok Vasudev from Standard Crypto to discuss Standard Crypto’s thesis, crypto market maturity, and more! Read our notes below to learn more.
Exploring the Future of the Crypto Market
Alok says that the quality of deals has improved in bear markets. He sees fewer people chasing hype and more serious contenders in the market. He has been busy dealing with serious entrepreneurs.
Frank mentions the rise of second-time crypto founders who've been in the space for a while and are ready to make their mark.
Alok agrees, saying that many of the best founders have learned from previous experiences in the crypto market and this has helped them understand the market better. This experience is key in creating the right products and employing the right market strategies.
Alok thinks that Larry Fink changing his stance on crypto is a big deal. He believes that crypto is on the right side of history and people are slowly adopting it. He says that compared to the previous cycle, the crypto space has progressed by leaps and bounds.
He thinks that the equilibrium prices for crypto assets should reflect the progress made in the space. Alok also sees the current moment as the start of the institutional adoption of Bitcoin, which he believes will continue in the future.
When asked about the biggest alpha in the market, Alok shares that every crypto cycle has a new advancement on blockchain that solidifies the bull run. He feels that it's a good time for applications and that the infrastructure is no longer as constrained as it used to be. He urges the need for courage in investing in applications that utilize blockchains.
The Future of Infrastructure and Applications in the Crypto and Social Media Spheres
Frank believes that there is potential for more consolidation at the infrastructure level. He wonders what's missing that prevents an explosion at the application layer.
Alok doesn't believe the issue is with technology. He thinks that they already have enough and that the right timing and product are required. He points out the significant growth in wallet usage over the past year, with people now using their wallets actively and daily. He says this shift has now equipped enough people to try out these applications.
According to Alok, they have now reached a scale where they can begin to form network effects within new products. This change makes it possible to create consumer networks with interesting scales.
Frank mentions that on platforms like Lens protocol, they see double or triple the engagement compared to Twitter. He wonders if this higher engagement could be due to a sense of crypto comradery among the users.
Alok agrees with Frank, saying that the narrowed scope of conversation on decentralized social networks inherently increases resonance with the user base.
He thinks these networks could benefit from rethinking the status games of social networks and possibly integrating more crypto capabilities.
Alok believes it's essential for these networks to start relatively niche and grow their own celebrities instead of bringing in established ones.
Alok says that starting with a group of crypto people is a good strategy, as they are still niche and are on the right side of history, setting them up as future famous.
He mentions that integrating crypto features into the social network's product, such as NFTs and blockchain-aware following can be a unique way for users to express themselves.
Reflecting on the Evolution and Potential of Crypto Gaming
Frank asks about the thinking on the gaming side of investments, particularly considering the current market cycle.
Alok believes a good strategy is to look back at the previous cycle and identify what caught attention but didn't stick, like CryptoKitties in 2018 and 2019. He argues it's important to learn from the past and take things to the next level, referring to CryptoKitties as an example that highlighted the potential of NFTs despite its flaws.
He points out that initial reactions to projects like Axie Infinity might be dismissed due to imperfections, but the correct perspective is to acknowledge the potential they demonstrated despite their flaws.
Alok thinks that the future of crypto gaming is still largely undiscovered, but says that the success of games like Axie Infinity has inspired interest in the industry among established game developers. He gives the example of Limit Break studio, whose founder (Gabriel Leydon) was spurred into exploring crypto because of Axie Infinity.
Alok says that their investment thesis hasn't significantly changed; they remain primarily focused on supporting inspiring entrepreneurs rather than chasing specific theses.
Frank asks if Alok has developed an interest in AI, to which Alok responds with skepticism about the current AI/crypto hype, though he acknowledges a likely future intersection between the two.
Alok says that he believes in looking for opportunities in technologies that have reached a significant inflexion point, like Zero-Knowledge Proofs (ZKPs), whose maturation he considers a potential game-changer for the next market cycle.
Decoding Crypto Trends
Alok says this is the best bear market ever as after each bull phase, crypto lands at a higher low point than before. Despite losing momentum, crypto has considerably advanced, providing more capability to build on a blockchain.
Frank agrees and emphasizes the value still present in crypto, using the examples of three DeFi apps tracking a hundred million of Accounting Rate of Return (ARR) this year in a bear market and Tether hitting an all-time high during the bear market.
Alok says that the bear market reveals the fundamental power of a decentralized protocol. He compares DeFi protocols to the platonic ideal of venture capital investments as they require low capital, have network and platform effects for defensibility, and exhibit strong operating leverage due to high margins.
Alok anticipates that social networks will become more fun and unique, gaming will expand with more games being launched on new platforms, zk will help fortify weaknesses in crypto and prevent fraud, and a potential Bitcoin renaissance is underway as the ecosystem becomes more dynamic for developers and tech enthusiasts.