Tushar Jain: Market apathy signals a turning point, institutional adoption is reshaping crypto, and Layer 1s are misvalued compared to applications

Key takeaways

The current market disconnect between application value and market cap presents a clear investment opportunity.
Human nature often leads to buying at market peaks and selling at troughs, influencing market cycles.
Market apathy can signal a potential turning point, indicating that many investors have given up.
The crypto industry is resilient and unlikely to be over despite current price challenges.
Institutional involvement in blockchain technology suggests a foundational shift in adoption.
Capital waiting on the sidelines may indicate proximity to a market bottom.
The investable universe in crypto has expanded beyond Bitcoin and Ethereum.
Stablecoins are expected to grow due to positive tailwinds from various sectors.
The innovation between Ethereum and Solana is less meaningful compared to the proliferation of blockchains.
The sophistication of crypto market participants has increased, focusing on cash flows.
Assets are fundamentally valued based on the discounted value of their cash flows.
The market is misvaluing Layer 1s compared to applications, suggesting a shift in value.
DeFi protocols are generating real sustainable cash flows, highlighting their financial viability.
Token buybacks serve to return capital to investors, not necessarily to make the best trading decisions.
Markets prefer clarity over uncertainty, which can drive positive investor sentiment.

Guest intro

Tushar Jain is Co-Founder and Managing Partner at Multicoin Capital, where he leads portfolio construction, risk management, and trading. He previously founded ePatientFinder, a health IT startup that raised over $10M in venture capital and was acquired by Elligo Health Research.

Market dynamics and investment opportunities

“The current market presents a clear opportunity due to the disconnect between application value and market cap.” – Tushar Jain
Human nature drives market sentiment, leading to buying at peaks and selling at troughs.
“The things that haven’t changed are human nature… to capitulate at the bottom and to buy in at the top.” – Tushar Jain
The current market apathy is a sign that many investors have given up, which historically indicates a potential turning point.
“We are starting to see apathy in the market which is a good sign it shows you that a lot of people have just kinda given up or wash out of it.” – Tushar Jain
There is a 0% chance that the crypto industry is over, despite current price challenges.
“This time around I’m not worried about that at all like there’s basically a 0% chance that the industry is over.” – Tushar Jain
The involvement of large asset managers, regulators, and tech companies indicates a foundational shift in the adoption of blockchain technology.
“We have engagement at with the largest asset managers with the regulators with the politicians with the biggest tech companies like everyone has underwritten this technology.” – Tushar Jain
There is capital on the sidelines waiting to enter the crypto market, indicating we may be closer to the bottom.
“I feel like there is capital on the sidelines that is waiting to come in now… I can make the bullish case around that and say that must mean that we’re closer to the bottom.” – Tushar Jain
The crypto market may not need a severe negative sentiment to reach a bottom this time.
“I don’t feel like just anecdotally I don’t feel like we haven’t hit that neg like that negative sentiment yet doesn’t mean we have to maybe this time we don’t have to.” – Tushar Jain
The investable universe in crypto has expanded beyond Bitcoin and Ethereum to include various products and exposure methods.
“Historically there’s been a lot of correlation within crypto… now you’re at a point where you have other products and ways to get exposure.” – Tushar Jain

Stablecoins and blockchain innovation

Stablecoins are expected to continue growing due to positive tailwinds from various sectors.
“I think no one discounts now the demand side of the house which is stablecoins are gonna continue to grow it has very positive tailwinds with agentech commerce and you know just businesses and cross border and what have you.” – Tushar Jain
The innovation between Ethereum and Solana is not as meaningful as the proliferation of various blockchains.
“The innovation between ethereum and solana zero to one ethereum and all the high throughput blockchains I would argue not as meaningful but we have like this plethora of blockchains.” – Tushar Jain
The top 10 tokens require significant capital flows to drive meaningful price performance.
“For the top 10 tokens you need a lot of flows to drive meaningful price performance and I could I just have a hard time seeing a lot of flows coming into like you know some of the top 10 relative to like sort of you know the public equities.” – Tushar Jain
The sophistication of market participants in crypto has dramatically increased, leading to a focus on cash flows.
“The sophistication of these participants has increased dramatically over this last cycle we are seeing professional investors as opposed to amateur investors come into the industry and professional investors understand that the thing that matters is cash flows.” – Tushar Jain
Assets are fundamentally valued based on the discounted value of their cash flows, akin to the theory of gravity in finance.
“It’s kinda like the theory of gravity in my opinion like it I believe it is a fundamental truth of finance that assets are worth the discounted value of their cash flows.” – Tushar Jain
The recent market correction has washed out unsophisticated retail investors, leading to a healthier market environment.
“We’ve seen the unsophisticated retail actors kinda get washed out we’ve seen the people who are betting on narratives and momentum and using lots of leverage get wrecked this last cycle.” – Tushar Jain

Valuation and market shifts

The market is misvaluing Layer 1s compared to applications.
“I think the market is just wrong they’re wrong they’re valuing the wrong thing and yeah like what you just said santi of applications capture 60% of the value but have a minority of the market cap that to me looks like an opportunity that that is very clearly an opportunity.” – Tushar Jain
The next cycle will likely see a shift in value from Layer 1s to applications.
“I think it’s setting up for the pair trade of the next cycle is that because we are seeing the market participants change and evolve.” – Tushar Jain
DeFi and deep end protocols are generating real sustainable cash flows.
“These have real sustainable cash flows you know helium has at and t paying to offload data onto their network and they’re paying tens of thousands of dollars a day to do that.” – Tushar Jain
The narrative that cash flow used for token buybacks is inefficient is misguided.
“I think that’s just a load of crap like you have no counterfactual at all when you’re making that claim you have no idea what it would look like if those cash assets were not used to buy back tokens.” – Tushar Jain
The primary purpose of a buyback is to return capital to investors, not necessarily to make the best trading decisions.
“The point is to return capital to its investors that is the point and so if it returns capital at a higher price versus a lower price either way it returned that capital to investors and so it did its job.” – Tushar Jain
Markets are hesitant to invest in assets with perceived uncertainty due to complex structures.
“I do agree and I think it comes down to one major thing which is that markets hate uncertainty and with the two cap table structure right now markets perceive some uncertainty on value capture and they’re not sure what should I buy.” – Tushar Jain

Regulatory impacts and market clarity

The separation of token and equity cap tables in projects like Helium is due to regulatory requirements.
“The reason why there’s a separate token and equity cap table is a regulatory hangover it’s because of when helium launched you couldn’t have those things be combined you had to keep them separated.” – Tushar Jain
The trend of aligning token and equity structures will become a megatrend in the crypto industry.
“I think you’re going to see this as a megatrend across all of these crypto businesses that have this regulatory hangover and have real revenues.” – Tushar Jain
Markets prefer clarity over uncertainty, which can drive positive investor sentiment.
“The markets hate uncertainty they love clarity and that could be a catalyst for repricing all these things.” – Tushar Jain
Tokens can reach a point where their buyback mechanisms drive price increases, especially when market caps are low.
“I do think tokens get to an inflection point where their market caps and floats gets small enough and the buyback becomes large enough such that the buyback itself can start to drive the price.” – Tushar Jain
The excitement around AI could drive new interest in tokens, making them more appealing to investors.
“What they’re building needs to be so exciting for people that… they wanna go out there and buy that token.” – Tushar Jain
Active management in investing should only be pursued if it can outperform the market after fees.
“Active management only works if you can like destroy the market net of fees… if you can’t substantially beat that benchmark net of fees obviously adjusted for vol then you shouldn’t be running a fund anyway.” – Tushar Jain

Future trends and investment strategies

Future investment opportunities will likely arise from public companies leveraging blockchain technology to enhance their business value.
“I think the bulk of the future opportunities will likely come from finding great businesses which are likely in the public equity markets that can leverage parts of the blockchain stack to just make their business better.” – Tushar Jain
There will be three to five tokens each year that will have outsized performance.
“There’s gonna be a ton of opportunities in the top 200 tokens where you can find asymmetric trades in a given year it’ll probably be three to five tokens that have outsized performance for whatever set of reasons.” – Tushar Jain
Investing in crypto is fundamentally a bet on growth rather than cash flow.
“If you’re investing in this industry you’re betting on growth… you’re betting that stable coin growth will continue, you’re betting that defi growth will continue, you’re betting that blockchains are fundamentally useful.” – Tushar Jain
Investors should focus on sustainable margins when evaluating crypto opportunities.
“You need to apply that frame over to crypto investing and look at okay let’s use the ai example… the value has gone down so you need to apply that frame over to crypto investing.” – Tushar Jain
The entities that will continue to make money in a frictionless DeFi world are those that own customer relationships and those that benefit from significant network effects.
“Who still makes money in that world right when when all the friction is gone who still makes money and I think there are two places that make money the first is whoever owns a customer relationship… the second place that makes money is a place where there’s a huge network effect and there is a huge network effect to liquidity.” – Tushar Jain

DeFi and AI-driven market changes

The proliferation of AI will lead to the emergence of more micro-focused companies with a deeper understanding of niche customer sets.
“What I expect to see is due to proliferation of AI we’re gonna see a lot more micro-focused companies that have just much deeper understanding of a niche set of customers than these broader companies.” – Tushar Jain
You don’t want to be in the middle of the DeFi ecosystem; the best positions are owning customer flow or liquidity.
“And I think you don’t wanna be anywhere in the middle I don’t think you wanna be at the base layer either and so that’s why I think you know the big pair trade of this cycle is going to be apps versus l ones.” – Tushar Jain
The crypto markets are incredibly inefficient and driven by emotional participants.
“The markets are really inefficient and they’re emotional and you see emotional market participants go and drive prices to completely irrational levels.” – Tushar Jain
Meme coins have established themselves as a viable investment category.
“I do think meme coins as a concept are here to stay but they have a huge unlock coming.” – Tushar Jain
There will likely be significant selling pressure in the crypto market over the next few months.
“I think there’s gonna be a huge amount of selling pressure coming in the next few months that’s pretty reasonable.” – Tushar Jain
The market is currently undervaluing certain projects like Camino due to idiosyncratic reasons.
“I think it’s criminally undervalued right now… I think the market is wrong with Camino.” – Tushar Jain

Investment strategies and market efficiency

The valuation of Hype at about 40 times is fair given the current market landscape and competition.
“I think that’s actually kinda fair where it’s at… trading at about 40 times feels right in an in a place where new competitors can pop up.” – Tushar Jain
In a bear market, it’s crucial to conduct idiosyncratic underwriting to understand assets specifically.
“In a bear market you need to do the idiosyncratic underwriting you need to try and peel it apart and understand the asset very specifically and then understand where you disagree with the market.” – Tushar Jain
The most efficient product will ultimately prevail over those with better user experience but less efficiency.
“If I think about you know what this looks like twelve or twenty four months from now… the most efficient product that an ai agent will use for a very specific task will be the winning instrument or platform to bet on.” – Tushar Jain
The future of commerce will likely involve agent-based applications that streamline user experiences.
“If that’s what the end state looks like what are the bets you’re gonna make today how would you construct a portfolio today that would win in that end state.” – Tushar Jain
Stablecoin transfers do not deliver significant value to blockchains as they are essentially free.
“I actually don’t think stablecoin transfers deliver almost any value to a blockchain because they have to be essentially free and so why does the blockchain make money off of that?” – Tushar Jain
The most efficient payment method in the future will likely be stablecoins on platforms like Solana.
“The most efficient way to do that is going to be a stable coin on solana paying you know zero gas fees basically.” – Tushar Jain

Market perceptions and technological impacts

Stablecoin transfers are unlikely to generate significant revenue.
“I think it’s gonna be a bunch of stablecoin transfers fantastic good for you stripe I don’t think that token makes any money because who’s paying for stablecoin transfers no one no one’s gonna pay for that stuff.” – Tushar Jain
The success of prediction markets relies on having a stablecoin to settle bets for a good user experience.
“You needed a stable coin to settle that bet otherwise the user experience is absolutely broken.” – Tushar Jain
Web three social fundamentally misunderstands the customer by inserting financial incentives where they are not wanted.
“I think it does not function… it’s inserting financial incentives in an area where people don’t want that financial incentives work in an area with scarcity and social media is not an area with scarcity.” – Tushar Jain
The market has shifted from seeking new ideas to focusing on building sustainable businesses that compound over time.
“We’ve moved beyond the phase of oh there’s gonna be new exciting ideas and we are now in the phase of build a real business that makes money off of ideas that actually work and compound.” – Tushar Jain
Investing in a company like Revolut may be more advantageous due to its strong customer relationships and ability to capture value.
“The strengths that revolut has is that they understand their customer and they own the customer relationship… they can verticalize and therefore capture more of the value that they create with their customers.” – Tushar Jain
Fintech companies are likely to adopt stablecoins to enhance their margins.
“All these fintechs are going to adopt stablecoins to capture more margin so I think that opportunity is really clear.” – Tushar Jain

DeFi dominance and economic forecasts

Aave’s potential as a clearing layer for global liquidity is a unique advantage that Revolut cannot replicate.
“The opportunity for aave to be a clearing layer for global liquidity around assets and borrowing against those assets in a secured way is much easier… revolut is not gonna be the money market layer for tokenized equities bonds dpins and defi tokens against cash.” – Tushar Jain
DeFi protocols like Aave are likely to become natural monopolies in the global borrowing and lending market.
“I do think these are natural monopolies… a defi borrow end protocol is powering the vast majority of borrow end transactions in the entire world.” – Tushar Jain
Owning a DeFi protocol like Aave is more appealing than owning a traditional financial service like Revolut.
“Would I rather own Aave at 2,000,000,000 or Revolut at a 100? I think I’d rather own Aave at 2 than Revolut at a 100.” – Tushar Jain
The public equity markets are currently not rewarding the biggest spenders in capital expenditures.
“I think the public equity markets at least momentarily has stopped rewarding the biggest spenders from building out these data centers.” – Tushar Jain
The market is indicating that the rate of change for capital expenditures is going to slow down.
“Then you kinda peel it peel that onion a little bit and you say then what’s happening… the second derivative of growth so the rate of change for capital expenditures is gonna slow down.” – Tushar Jain
The path to significant unemployment may take longer than anticipated due to market dynamics.
“My takeaway was directionally right but the magnitudes might be totally off which can yield very different outcomes on how you set up a book.” – Tushar Jain

AI and economic implications

AI is a net deflationary force that will lead to a redistribution of surplus through monetary and fiscal stimulus.
“You’re going to see a lot of the surplus that is created by ai get redistributed back to people through monetary and fiscal stimulus because ai is a net deflationary force.” – Tushar Jain
We are likely to see increased stimulus without spiking inflation, which will positively impact asset prices.
“I think that’s my base case that’s what we’re gonna see is we’re going to in an ideal soft landing type scenario see stimulus ratchet up now ahead of big job losses such that it’s very smooth and by the way as an aside i think that’ll be very good for asset prices especially high beta assets.” – Tushar Jain
Many jobs labeled as necessary are actually ‘fake jobs’ created by regulatory regimes and cannot be automated away.
“You can’t automate away fake jobs… so many of the jobs that they’re saying are gonna go away are fake jobs they’re not they’re not real jobs and that they don’t actually need to exist to do something productive.” – Tushar Jain
Volatility in the market is expected to increase due to growing uncertainty.
“My house view is like vol is only gonna continue to go up because the world just sort of became more uncertain…” – Tushar Jain
Crypto is highly sensitive to external factors, which influences its volatility.
“Crypto is just one of those industries that is hypersensitive to everything else that’s going on in the world…” – Tushar Jain
AI could act as a deflationary force, making cash and long-duration fixed income more valuable.
“If ai is this hugely deflationary force that means having some cash or longer duration fixed income is valuable…” – Tushar Jain

Technological advancements and productivity

The timeline for deep tech innovations has decreased due to advancements in AI.
“Now with ai i think that the timeline to those innovations has decreased…” – Tushar Jain
The most effective researchers and engineers have become significantly more productive due to advancements in technology.
“Because the most effective researchers and the most effective engineers have just gotten a 100 to a thousand times better and more productive because of this technology.” – Tushar Jain
We will see ASICs for every kind of workload due to AI advancements in chip design.
“Another theory that i have is i think we’re gonna see asics everywhere because chip design has been one of the most human capital constrained things out there.” – Tushar Jain
AI will drive capital formation through the lowest friction methods, making crypto an attractive option.
“I think crypto is really exciting because once again I think it is the lowest friction way to trade or have capital formation.” – Tushar Jain
Having liquidity allows investors to take advantage of market dislocations.
“There’s a lot of dislocation and having liquidity allows you to potentially take advantage of some of that in the liquid side.” – Tushar Jain
In a future with advanced AGI, humans will seek experiences like space travel and longevity.
“Let’s assume we get to like this world of agi and everyone’s got a ton of free time and ton of resources what are the things humans will wanna do… space travel seems to be one we wanna go colonize other planets we wanna live longer.” – Tushar Jain

Long-term investment perspectives

Investing should focus on long-term human desires rather than short-term market noise.
“Everything in the middle is just kinda noise for me at least.” – Tushar Jain
Investing in sectors that are resistant to AI is crucial.
“I don’t know if I wanna buy saas at four times because the per seat model is going away and like one thing is clear like credit cards don’t work if you wanna pay like on a on a like an agentic workflow kind of style you’d probably use stablecoins.” – Tushar Jain
Stablecoin adoption is likely to increase as traditional payment methods become less effective.
“I think we’re on the right side of the trade like go long stablecoin adoption.” – Tushar Jain
Not owning underperforming assets can lead to better investment outcomes.
“Sometimes not owning things that you think are gonna do poorly is enough to generate outperformance.” – Tushar Jain
Relying solely on technical analysis can lead to poor investment decisions.
“I still do think a lot of that is very silly drawing drawing lines on charts to then say when you buy or sell something… it avoids that outcome in in a world we’re in today because the the world is telling you where capital wants to flow.” – Tushar Jain
Investment strategies should vary based on the time horizon, using different indicators for short-term versus long-term investments.
“I built a bunch of tools for myself… to map out over if your investment time horizon’s twelve months right so if your investment time is another day then you’re you’re using a whole bunch of different things.” – Tushar Jain

Accessibility and technology balance

The democratization of entertainment finance has made it accessible to anyone with a Solana wallet.
“What we’re seeing is the democratization of entertainment finance before you needed to have like a 9 figure family office in order to do entertainment finance and now you just need a solana wallet and load up pump fun and you’re off to the races.” – Tushar Jain
Relying too much on AI tools can undermine one’s critical thinking and instinct.
“I do think like is my skill actually going down like my my critical thinking and and am I now second guessing myself.” – Tushar Jain
AI tools can facilitate personalized experiments in health and fitness, moving beyond traditional clinical research methods.
“I think clinical research is an industrial age process… running experiments on a one of one is really interesting and powerful like does this work for me and help me design that experiment.” – Tushar Jain
AI will enable individuals to improve rapidly across various domains by providing access to expert guidance.
“I think that’s what you’re gonna see with an ai world is you’re gonna see people who have motivation and desire to improve get them get better way faster at a whole variety of things.” – Tushar Jain
Having a diverse identity helps maintain rational decision-making during market downturns.
“If you have a diversity of identities that makes you much more secure and it allows you to zoom out and say okay well this part is not going so well right now that’s okay… I can zoom out and then I can be much more rational because of that.” – Tushar Jain

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