Crypto After the Washout: The Case for Active Management

Transcript

Good morning, everyone. So, today I'm going to talk about the case for active management in crypto. Yeah. Almost a year 1 year ago, we have one of the biggest liquidation day in the crypto history. More than 19 billions of position were liquidated in 1 day. So, what the market have taught us after that 12 months? And my argument is simple. This is the strongest case in years for active management. Not as a slogan, but backed by data.

And this is not because active managers are like us are smarter, but because the opportunities that in crypto has changed. The growth is no longer in all the biggest assets and major. I'll show you the number first. Then walk through three case studies and close with why I think what active management means today. So, I mentioned just now, more than 19 billions were liquidated in 1 day. The normal reaction might be, "Okay, this is a reset, flush the leverage.

We will come back higher again on the majors." And 12 months later, Bitcoin is still down around 24% compared to 1 year ago. Ether close to 30%. Solana 36%. And actually in June this year, painful memory, Bitcoin traded below $60,000. Roughly like 50% uh more than 50% max drawdown. So, if the strategy is just to, "Okay, I'm buy the major and wait for the market to rebound," most people still are not back to buy yet.

Yeah. And that is the passive benchmark of crypto what people usually benchmark to. And now what I will show you what have happened to the same market in the same period for the other asset class. So here's the same 12 months, same market side by side. In the blue, you have the passive, the majors. Bitcoin down 24% yeah, and ether and so more. And the three tokens I'll use as a case study today Zcash up 483% Hyperliquid up 145% and near up 114%.

And all three of them had a market cap of above a billion dollar uh at the day of the washout. So these are not micro caps or as I like to call it that you couldn't buy. Hyperliquid was actually already a 10 billion dollar assets. And measure against Bitcoin you look at it. Zcash have outperformed by 500%. Hyperliquid 169% and near 139%. This is a huge amount of outperformance. If you put all three of them in the equal weight basket they up around 250% against roughly minus 30% for an equal weight basket of the majors.

Now I'm not showing these to say buy these three tokens. I'm using this to explain that the gap between the majors and the best opportunities in the industry has never been wider. A strategy that only owns the largest assets miss everyone of these. So this is the path, not just the end point. So everything on this chart is indexed to 100 on the day of the washout on a log scale.

So, two things to notice. First, the winner did not win all from day one. In fact, after the from the first three month of the washout, they all fell together. Near trader below a dollar in February. Hype fell to about $21 in January. And Zcash, or they like to call Z for the core token, gave back his entire November rally by early March. If you had look at this chart in February this year, you would have seen Zcash roughly back at where it started, and every other line underwater.

But, the gap start to open from April onwards. And the drivers were very specific to each assets. Privacy ETF, a derivative platforms taking market share, and a cross chain product with a real volume, plus the AI narrative. That's why I will keep coming back to the idea that you have to look at these assets one at a time. Here's the same data in a different way.

The middle column is the max drawdown of The right column is where it end up as of two days ago. Look at the interleave, how they interleave. Zcash had the deepest drawdown of all the six. Minus 72% and the best returns. The rest didn't done as well. Like Solana fell almost 70% at the worst and ended up down 36%. So, in fact, if you look at all the max drawdowns, the major did not really do much better than the three coins I highlighted.

And yet, they are still negative year-on-year basis. While the three tokens I have selected, they are already massively even after suffering a very deep drawdown. they all suffer a huge correction. The only question is not what you own, but are we being paid for owning these assets? Because this matters for how active management should be done. I will argue that selection is the source of return.

But the sizing and risk management are what let you stay in the trade long enough for you to collect it. Now, there will be some obvious objection. Cherry-picking, right? I picked the three best assets after the fact. And I'm not arguing that you should go and buy altcoins, okay? In fact, only nine of the top 50 altcoins have outperformed Bitcoin on a one-year basis. 41 did worse. And actually way worse.

A passive A passive baskets of altcoins would not have done better than Bitcoin. And I'm not claiming these three tokens or crypto are obvious. In I'm just claiming that they were analyzable. Each one had an evidence you could look at in public often before the price moved. And that's what the case study will show. With this much dispersion, market exposure doesn't pay you. Picking the right asset does. So, the main argument is crypto is not one trade anymore.

For most of this industry history, you can count 3 D as one. Bitcoin went up, everything went up more. Bitcoin went down, everything went down more. That has been the case for the past 7-8 years. And that lead a lot of to think that, "Hey, owning the majors was a reasonable approximation of owning crypto, the asset class." I will argue that that's no longer true. The industry right now has distinct businesses.

Privacy, on-chain financial market, cross-chain infrastructure, and AI. And I would like to use the word AI again. AI AI AI. So, they grow for different reasons, different times. The largest asset don't capture all the growth anymore. And sometimes they don't even capture any of it. So, investors like us, we need to judge the crypto opportunities one by one. The same way like an equity investors look at individual companies and not just buy the index.

So, how do we judge the opportunities one by one? You start by asking the right question for each asset. Then you go and find the evidence. Three case studies. One, Zcash. What made investors reassess the value of private digital money? Second question Second asset, hype. What is the right valuation multiple for the most successful decentralized trading platform in crypto?

Third, Near. Can crypto actually captures economic value from AI adoption? Or is it just a story? So, let's start with Zcash, up 483%. Market cap went from about $3.7 billion to $22 billion dollar The question is what make the market assess what private digital money is worth.

So the first thing is some of the evidence was public before the big move. On the left you can see that the total share of Zcash supply held in the shielded which means the private pools are around 8% in early 2024. They went to around 11% at January 2025. And 18% by around October 2025. So people were actually already choosing to use the privacy before the price told them to.

And today it's around 29%. On the right you can see that on the first week of October Jaxxie the main Zcash wallet shipped private swaps to near intense. You can go for Bitcoin, Solana or USDC straight into shielded Zcash without a centralized exchange. Naval Ravikant, a very famous angel investor had posted Bitcoin is insurance against fiat and Zcash is insurance against Bitcoin.

And boy, that narrative really took off. Winklevoss Capital led a $59 million raise for Treasury company that turned out to be a Zcash Treasury. And Grayscale had a Zcash trust dating back to 2017 which that make it a ready route to an ETF. And to be fair, Zcash already rallied like 4x in even in October 2025. So the signals were already there and not secrets.

But underwriting this thesis is not easy. If you look at it they went through a lot of volatility and drawdowns throughout the period. So there was a lot of details there. I'm not going to go through it all of it one by one, but the most notable one is and you look at point three, there was a dispute and clash in governance between the core dev team. So that actually led the price to correct significantly in around January. Obviously in February, the majors also dropped significantly. So that dragged the market down as well.

But the market the Zcash price slowly recover and in the point four, a major crypto fund multi-coin disclose a position in Zcash. That led the coin to rally, but in just one month one of the scariest event for Zcash had happened. A counterfeiting bug was found in the orchard shielded pool. And the bug that had been live since 2022. It was fixed very quickly, but nobody could prove that it had not been exploited.

And Zcash fell about 50% in two days. But we have recovery afterwards. There was an ironwood upgrade in July and the exploit was fixed. There was no evidence that the shielded pool was ever exploited and the market recover. And in August, the first US spot Zcash ETF started trading. And that ETF attracted 200 plus millions of inflows in the first few weeks.

So there was a lot of events and they did not come in together. The usage came first and then came access and then came the institutional ownership. And it happened despite two crashes. One was with was a real flaw in the systems. So, what's the takeaway from Zcash? First, the usage. 29% of all Zcash right now sits in a shielded pool, which is what make Zcash different from all the other cryptocurrency out there.

And ownership. You have a Nasdaq-listed company who owns about 1.8% of the supply. And institutional assets. The ETF which took in a lot inflow in the first few weeks. Those are real changes in how the private money get used and who owns it. And what does it cost to hold? A 72% drawdown at the worst. A 50% in 2 days. And next year, we have some regulatory change that might affect the liquidity of the asset.

The EU AML rules. the lesson is the thesis was right, but you still have to survive the drawdown to get paid. So, this is active management. It's not about trading every single move, but it's about having a thesis and sizes that so you can still hold it through while being wrong for a while. Obviously, that's for active manager like us, sometimes we like to think we are too smart. We try to trade it more, but actually sometimes we end up um making less.

And next, we move on to hyperliquid. I'll go a little bit faster because we're running a bit short of time, but okay, this is probably one of the most consensus trade for all the smart money in crypto. I mean, the question is I think the thesis very well understood. Hyperliquid is the most successful uh decentralized trading platform in crypto. The question to ask in October last year is what is the right valuation for hype. Hyperliquid probably have one of the best run in the past 2 years in crypto.

They keep winning. Really good executions. By all metrics, they've done very well. Um the the the market share of open interest across all perps venue, including decentralized exchange, have climbed to around 12% as of now. Open interest is a record high. And a lot of hype were being bought back over the years. But the revenue have stayed flat because we're in a crypto bear market, and naturally people trade a lot less. So, by any measure, this is a best one of the best business you can find in crypto. But that's not the questions.

The question to ask is, what is the right valuation multiple for hype? Last year, it was trading at around 9x on the um market cap to revenue. And now it's trading around 32 times. And I will argue that when people really start to see that hype have staying power, they continue to win, you are seeing the valuation multiple keep getting re-rated. So, it came went from trading in the discount compared to all the other centralized crypto platform like Coinbase or Robinhood um to trading at I would say still on par with them.

Um and that took around 1 year. If you look at it, like Coinbase trade at around six times revenue, adding around like 50 times profit. Uh and Robinhood is around 21 times revenue and probably around like 50 to 70 times profit. hype is still trading at like I would say there's still a lot of room for growth compared to two of them. But the re-rating process was really on how the market perception of them have changed given the continuous execution, and you need to look beyond the metrics of revenue only.

The third case study, NEAR. NEAR has positioned itself as the blockchain for AI. And its co-founder Illia Polosuk the Transformer paper, which make LLM possible. The question we ask is, can a crypto actually capture economic value from AI? So, for NEAR, there's three bucket of evidence. Deploy and measurable, deploy but no usage data you can measure, and the narrative.

So, if you look at the measurable data, the intense, which you can think of as a way of uh moving your asset cross-chain without all the technical complexity. And you can even do that for assets with no smart contracts capability like Zcash, and any of the uh other um chains have no smart contract capabilities. A lot of the on-chain Zcash privacy demand are routed via NEAR right now, and it has grew a lot over the past 6 to 12 months.

You also have NEAR AI crowd, which prior and private inference, so that nobody can see what are you talking to your favorite LLM. They also launched uh Iron Claw, which is a private version and a of and their own version of the Open Claw uh Open Claw like open-source AI agent framework. These are the real products, and the narrative and what they're really working on is AI agent conducting transactions on NEAR blockchain. And the value capture have also started to caught up.

We have all the near intense generating 23 millions of NYS buyback to the near blockchain and actually still increasing on a double digit percentage on a month-on-month basis. Granted, it is a little bit volatile. There's also the inflation reduction. Uh there was a governance proposal being proposed right now, uh which is I think likely to pass, that reduce the token supply. So, all these narrative combined have um set up near for a very uh good catalyst rally.

And in September this year, which was last month, we have private perpetuals routed to hyperliquid on near.com and the first spot US uh spot in near ETF on the US market. So, product and assets are the one that re-rated near this time. let me put it all together. What does active management mean in crypto today? So, four things. One, we need to judge each asset on its own.

Privacy, on-chain finance, and AI are all different businesses. Each needs its own questions and its own If you just own a single crypto beta, you have missed all three. Two, we should find the evidence before the price. And in every case, you have start to see some public fundamentals on the public day dashboards ahead of the price actions. And none of it was secret. Three, you should know what the token holders actually capture and what you actually pay.

And the fourth is you should size for the drawdowns and re-underwrite on the new facts. And I think this is really the essence of crypto management, active management in crypto, because there's always new facts and circumstances that emerge, and you need to keep re-underwriting the thesis. And all three of them, the big winners, they all fell between 56 to 72% inside a year and a lot of bad events. So, if your position size can't survive the drawdown, you can't collect the return.

And when the fact or price change, your view should, too. None of this is exotic, but what is new that crypto now reward this active management. I'll conclude that what I've said so far, I believe that right now in crypto, owning the market beta alone doesn't pay as well as it used to, but selection did. If you just own the major, you're still down on a year-on-year basis, but if you actually own the right asset, you're up between 150% to 480%.

So, we should always judge each opportunity on its own in crypto right now. And that is my case for active management in crypto. Thank you.