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Long-standing expectations foresaw Cryptocurrency evolving into on-chain enterprises characterized by well-defined business models, sustainable cash flows, and the creation of long-term economic value. The prevailing belief is that crypto, encompassing public blockchains and the associated protocols and businesses, will metamorphose into a universally acknowledged global asset class. Gradually integrating into internet-native business models across diverse industries, this transformation will steer investment focus from speculative and narrative-driven approaches to a more robust foundation rooted in value and fundamentals.
Unveiling othe Evolution of Value Investing
Today’s maturity in traditional markets, boasting a staggering nearly $110 trillion in global equities, particularly $45 trillion in the United States, is a testament to centuries of technological and social progress. With 61% of Americans holding stocks and 53% of US households engaging in the stock market, this intricate market structure is no accidental feat.
Recognizing the vital role of access to information, public blockchains emerge as unique problem-solvers. Entities like Token Terminal leverage these blockchains to present data in ways that empower crypto firms, investors, and regulators. Real-time insights, such as the escalating leverage within the crypto ecosystem, serve as valuable tools for regulatory purposes.
In the realm of quality data, a paradigm shift is underway. While crypto markets historically thrived on speculation and narratives, a discernible transformation is unfolding. Take Uniswap’s fees and P/F (price to annual fees) ratio over the past year as an example—a glimpse into the evolving landscape where the market can now draw informed conclusions.
Turning attention to lending/borrow protocols, Aave’s journey is depicted through active loans versus the daily P/S (Price to Sales) ratio since its launch. With Aave’s revenue model hinged on a percentage of interest and liquidation fees from supply-side lenders, investors are now equipped to dissect correlations between active loans, interest rates, and protocol revenue. The market, armed with such quality data, is poised to determine the efficacy of metrics like P/F (price to annualized fees) for relative comparisons among decentralized exchanges.
Exploring the Nexus of Speculation and Innovation
At the heart of every transformative innovation lies speculation, which catalyzes the birth of novel industries. This historical pattern echoes through pivotal eras like steel and electricity, the age of oil, the advent of automobiles and mass production, and the evolution of railways. More recently, speculation has propelled us into the age of information and telecommunications.
Guided by history, speculative capital paves the way for productive capital to discover its optimal applications. Sustainable business models organically surface, infrastructure solidifies, utility becomes ingrained, and rules and regulations take shape. Over time, the market achieves consensus on the optimal utilization and valuation of emerging technologies and the businesses harnessing them.
In the contemporary landscape, we witness this unfolding drama in the realm of blockchain technology and Web 3. This dynamic ushers in a new data layer for the internet, introducing shared global accounting ledgers and digital property rights.
The foundational infrastructure is now robustly established, technology is on the brink of scalability, sustainable business models are sprouting, utility is solidifying, cash flows are materializing, and economic value is burgeoning. This transformative phase ushers in a fresh set of fundamentals, providing investors with novel methods to gauge value and analyze on-chain data.
The Future of Financial Offerings and Indices in Crypto
The convergence of crypto, historical innovations, and investor psychology sparks a shift from speculative and narrative-driven investing to a focus on value and fundamentals as the industry matures.
A wave of novel financial products is entering the market, strategically crafted to provide investors with comprehensive access to crypto assets, gauged by clear product/market fit metrics such as cash flows and user engagement.
While the Bitcoin ETF commands current attention, our anticipation extends beyond its debut. We foresee Ethereum (ETH) emerging as a notable contender. Moreover, with the prospect of new rules and regulations shaping the industry, we anticipate an explosive influx of diverse financial products.
Peering into the future, we reiterate: that crypto boasts fundamentals and relies on top-tier data providers. This dynamic lays the groundwork for major players in Traditional Finance (TradFi) to harness on-chain data, paving the way for innovative indices. Envisioning a post-regulation landscape, on-chain data is poised to fuel a groundbreaking era in financial innovation.
As these indices and financial products permeate global asset management firms, the impending surge of “smart money” is poised to gravitate toward the highest-quality projects. Securing an investment edge necessitates early access to quality data, positioning savvy investors ahead of the market curve.
Navigating the Crypto Landscape for Projects
For crypto projects, the key takeaway lies in identifying a robust product or market fit and subsequently securing a listing on platforms like Token Terminal.
The prospect of significant capital pools investing in unlisted projects seems implausible. Unlisted endeavors may risk being relegated to a perceived “second-tier” status, lacking market evaluation of their fundamentals.
As major Traditional Finance (TradFi) players enter the crypto realm, the strategic move is to list with a data provider. This not only provides visibility for your project but also opens the door to potential inclusion in new indices embraced by asset managers worldwide.
In essence, aligning with a data provider increases the likelihood of large capital pools discovering and investing in listed projects as the crypto landscape continues to evolve.
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