Making the Most of the Bull Market
Level 1 - NGMI
Welcome Avatar!
The crypto bull market is upon us — and things are only going to get crazier from here. Altcoins will blow past your wildest imaginations. Coins with multi-billion dollar market caps will go up 30, 40, 50%+ in a day. Every thematic part of crypto will get a repricing as people seek the edges of what crypto has to offer.
If you’ve been following along over the years you’ll know that we tend to cover all aspects of the crypto industry with a specialization on DeFi. In crypto bull markets you tend to see a lot of rotations between different core themes. DeFi will remain a core focus for the crypto market, and we anticipate a lot more innovation will occur in the space under a crypto-friendly U.S. administration.
If you’re new here, welcome! You’re entering at the most exciting time to be in crypto that only comes around once every four years. Everyone knows the last “leg” of the crypto cycle brings the craziest returns. By the end of it you’ll see hundreds of millions of dollars if not billions of dollars flying around onchain based on a few tweets. We’ve been writing this publication for over three years now and we compiled all the most important aspects of crypto into a course to get people up to speed quickly. You can access that here if you want to be sure to understand the intricacies of the crypto sector.
Today we want to talk about the onchain landscape.
Onchain Landscape
The cryptoverse consists of things on “onchain” (as in, anything done on a blockchain) and everything external that interfaces with onchain (“offchain”).
Onchain includes DeFi protocols that allow you to trade, borrow and lend. Any token you buy first originates onchain, even if you buy it offchain on a centralized exchange like Coinbase. You can think of offchain as being the real world.
Why care about onchain when you can just stick to Coinbase? Well, usually by the time something gets to a major U.S. exchange like Coinbase most of the gains have already been made. You’re generally buying the best-in-class tokens which act more like market beta than anything else. That doesn’t mean buying those tokens is a bad thing, but if you really want to be on the cutting edge you have to be onchain.
At the time of writing there are a handful of core onchain ecosystems to focus on each with their own hubs of innovation and speculative activity. These include:
Ethereum: General purpose smart contract blockchain (“Layer 1”). You’ll find some of everything here, but where Ethereum truly stands out is in the large amount of capital onchain allocated to DeFi. Many of the most innovative protocols and inventions have come from Ethereum’s passionate developer community. The highest value NFTs and tokens have also historically been on Ethereum.
Solana: A competing general purpose blockchain (Layer 1). Solana is similar to Ethereum with different technical tradeoffs. Solana is the leading chain for memecoin volume and activity.
Base: The Ethereum L2 founded by Coinbase. They aim to be a general purpose solution like Ethereum. Core areas are DeFi and memecoins.
Others: Hyperliquid (L1), Sui (L1), Arbitrum (L2), Avalanche and a plethora of Ethereum L2s. There are tons of other blockchains and L2s competing for users alongside the ones we’ve listed. They all have their own unique aspects to them but in most cases whatever you can do on one chain you can do on another.
That may sound like a lot to choose from, so we’d suggest just focusing on Ethereum, Solana, and Base until there are compelling reasons to use others. We are users of Hyperliquid for perpetual futures but from an onchain ecosystem perspective it’s still a relatively new player (sidenote: we recommend steering clear of perpetual futures for new entrants to the industry). Note that the above descriptions are not set in stone. These ecosystems are like living breathing organisms and are constantly under development.
What is there to do Onchain?
There are an ever growing number of use cases onchain. DeFi is chief among them, with over $100 billion of capital locked in DeFi protocols across all chains. There are always new applications born on chain, and crypto is perhaps the only industry in the world where anyone from anywhere with any amount of capital can get in at ground zero either by purchasing a token or earning an airdrop.
The total crypto market cap is ~3 trillion.
The combined market cap of the three largest blockchain networks is ~$2.2 trillion, or 70%.
Stablecoins account for $183 billion, or ~6.1%. This means that smaller layer 1 blockchains, layer 2 blockchains with a token, and all the applications which make crypto useful account for around 14% of crypto’s market cap.
Without these applications there would be nothing to do on chain except send/receive tokens (couldn’t even swap).
As we onboard the next billion users to crypto, our thesis is that the majority of the value will be captured by the application layer. The total value of DeFi applications should therefore grow faster than the total value of Layer 1 chains, and the outsized returns will be made backing the very best apps.
What we aim to do is get ahead of the core verticals that will matter in crypto, find the applications, protocols, and tokens inside of those verticals and bet on the winners. We look for projects made by all-star teams in it for the long haul, building market leading applications.
Over our years in crypto what we’ve found is
Crypto participants are excited by unique and novel ways of doing things
Tokens can serve as a user acquisition tool for these new projects
The first mover to acquire users for a novel / unique use case often ends up with a significant market share advantage
Being up to date on the industry and the seismic shifts that occur when a breakout new protocol or application achieves success, is paramount for outperformance.
One of our high conviction protocols to farm for an airdrop was Hyperliquid, which we covered throughout 2024 for paid subscribers. This will net many people 6+ figure airdrops of one of the breakout, market leading protocols to come out of crypto in the last few years. We also were high conviction on the transition of crypto culture to memecoins over the last 6 months, and have shared a list of our holdings.
We typically do one post a week for all readers and two posts a week for paid subscribers. Sign up today to succeed in the golden crypto bull run.
Subscribed
The balance of the post is for paid subscribers and consists of where we are spending our time and capital time today in crypto, as well as our high level market views.