How to find 100x cryptocurrencies in a bull market?

Arthur0x Personal Background

Arthur says he entered the crypto space in 2017 at the age of 20. Due to its global nature and active participation, he found the crypto industry very interesting. After exploring different roles within the industry, including running his own startup and working for Layer1 protocols, Arthur achieved success in investing.

He added that he became a fundamental-based investor, focusing on potential use cases of cryptocurrencies beyond speculation. This prompted him to dive deep into DeFi in early 2019 and leverage opportunities brought by DeFi Summer.

Market Conditions

Arthur mentioned that since the last conversation three years ago, the crypto market has undergone significant changes. Many well-known organizations or individuals have collapsed, and the crypto space has experienced a reshuffle. Especially in the lending sector, which no longer exists, this shift has impacted market infrastructure.

Arthur believes that while it may take time for people to readjust, the demand for leverage will always exist. He predicts that transparency and audit requirements will increase before under-collateralized loans become more common again.

Arthur expressed a bullish outlook on the current market conditions. While he does not think the market will reach the peaks of 2021, he believes it has bottomed out and is currently experiencing a small bull run.

Advantages of the Liquid Crypto Market

Arthur emphasized that unbalanced capital inflows can distort the structure of the crypto market. He categorizes market participants into four groups: retail investors, crypto companies, large corporations, and VCs. Among them, capital inflows from VCs can disrupt the natural flow of the market.

He explained that due to the influence of VCs on market dynamics, retail investors often hold a negative view of VCs. He believes it is important for retail investors to understand how VCs operate and their role in shaping the market.

Arthur discussed some distortions caused by unbalanced capital inflows:

• Overvaluation of certain projects due to excessive VC funding.
• Misallocation of resources, with projects prioritizing fundraising over product development.
• Increased competition among projects for VC funding, leading to inflated valuations.

He emphasized the need for a balanced market structure where each category of participants plays its role, and no group dominates excessively. He suggested that a healthy market structure would allow fair competition and innovation.

Arthur stated that due to the frequent volatility of cryptocurrencies, many investors choose to invest through venture capital trading. They seek private deals and hold their investments until the lock-up period ends. Large institutions usually do not buy crypto assets directly.

He added that healthy capital markets require early-stage VCs and public market investments. Due to the volatility of crypto prices, many investors focus only on risk funds. However, liquidity in public markets is crucial for providing accurate market signals.

Arthur noted that in the crypto space, there is an oversupply of capital chasing a limited number of quality private deals. Institutional investors often overlook good projects with liquid tokens because they primarily invest in risk funds. This distortion has gradually been corrected over the past 6-12 months, but before that, about 80% of crypto financing was concentrated in risk funds.

Fundamentals vs Narrative

Arthur stated that fundamentals are important in crypto investing but differ from traditional stock markets’ definitions. Community and narrative are considered part of the fundamentals in crypto investing. While narratives drive attention-based markets, empirical evidence shows fundamentals still play a role.

He added that evaluating the fundamentals of cryptocurrencies involves more than just cash flow income. Community engagement and other intangible factors are part of fundamental assessment. Having good fundamentals alone may not be enough; new information or developments can influence prices.

Arthur said that the narrative-driven nature of the crypto market is influenced by attention-based markets. Narratives about speed, innovation, and other factors can attract attention. It is still unclear which has a greater impact on price increases in the next adoption wave: fundamentals or narratives.

He added that without new information affecting prices, good fundamentals alone may be insufficient. Strong fundamentals combined with new marginal information can influence price trends.

“Home Run Trades” Characteristics

Arthur said that home run trades involve identifying those that ultimately trend bigger than expected, with examples including DeFi, gaming, and NFTs.

Deep Tide Note: Home Run Trades are typically used in finance and investing to refer to trades that yield exceptionally high returns.

He added that entering trends early is crucial for maximizing returns. Scaling positions depends on risk appetite and market volatility. There are no strict rules for position size, but for high-conviction investments, it is usually between 10%-20%.

Decentralized Derivatives

Arthur mentioned that decentralized derivatives are seen as a promising area within DeFi. The derivatives trading sector is expected to generate annual revenue of $10 billion to $15 billion. Certain subcategories within DeFi still have growth potential and can offer good risk-adjusted returns.

He said that assuming total crypto leverage trading volume remains unchanged, decentralized platforms are expected to grow five to ten times due to increasing market share. This growth presents opportunities for significant returns.

dYdX & Unlock Impact on Price

Arthur expressed high confidence in the decentralized platform dYdX. He mentioned that they are the lead investor in dYdX’s Series B funding round and remains optimistic about the project.

He said not all unlock events are equal and two factors should be considered:

• Investor base: Long-term oriented VCs are more likely to hold, while smaller investors may sell.
• Project performance: If a project achieves expected returns or investors realize their thesis was wrong, they may choose to sell.

He added that cryptocurrencies are a reflexive asset class, meaning market conditions influence investor sentiment. In a bear market, investors may be pessimistic and consider selling. Conversely, during a bull market, they may see further growth potential and hold their investments.

Arthur said that unlock events can act as catalysts for price volatility and attract attention to projects. However, unlock events alone should not be the sole basis for investment decisions.

He added that despite significant investments in decentralized derivatives projects, none have yet replaced dYdX as the market leader.

Arthur believes that from a valuation perspective, dYdX is not expensive compared to similar projects. He added that many investors prefer to hold leading categories with good performance rather than sell their positions.

Arthur’s Favorable Tracks

Arthur stated that decentralized derivatives trading protocols offer investment opportunities due to their revenue-sharing models with token holders. These protocols generate value from trading volume, making them investable and exposing them to the crypto market.

He added that Layer1 solutions like Solana and Layer2 solutions like Polygon are also considered trustworthy investments. Solana showed significant growth and resilience during market downturns. Due to Polygon’s informational asymmetry advantage, there is a bullish outlook on it.

L1 & L2

Arthur said that the dominance of EVM in the Layer2 ecosystem is unlikely to disappear soon. Incentives for developers, user base, and tooling make non-EVM chains struggle to compete with established EVM ecosystems. While success for non-EVM chains is not impossible, it is highly challenging. L2 solutions that succeed without adopting EVM (e.g., Solana and Cosmos) are outliers rather than norms.

He believes Polygon’s underlying technology, especially its zkEVM, is a key factor in its bullish outlook. He highlighted potential challenges for optimistic rollups, such as lack of fraud proof and withdrawal delays. From a technical perspective, ZK-Rollups are expected to gain more adoption in the future.

He mentioned that developers prefer building on familiar smart contract languages, making zkEVM an attractive choice. The market may overlook these factors, making Polygon one of the best current L2 solutions.

Gaming

Arthur believes that gaming is highly compatible with cryptocurrencies due to its community-driven nature. Gaming is considered a major industry, even larger than the combined revenue of music and movies. Cryptocurrencies can bring improvements to the gaming industry.

He added that tokens can derive value based on their design, such as through governance or in-game currency. Timing plays an important role in the success of token integration into games.

He also said that Web3 gaming offers game studios an opportunity to reach a global audience without relying on traditional publishers. Large publishers often cut a significant portion of game revenue and impose restrictions on studios. Some mid-sized studios see Web3 as a way to bypass these challenges, especially in Asia.

Arthur stated that not all games have the same lifespan; some types have shorter lifecycles. Single-player games with limited playable content may not be suitable for crypto integration. MMORPGs and strategy games are considered to provide more lasting gaming experiences. Community engagement and active user bases contribute to the success of these game types.

He prefers longer-lifespan games over short-term projects. Different game genres have varying longevity, affecting their suitability for crypto integration.

Atom & Osmosis Operating Logic

Arthur said that Osmosis should be viewed as a combination of DEX and Layer2 protocols. It is the central liquidity pool of the Cosmos ecosystem, acting as an IBC hub. Historically, Cosmos projects faced liquidity and accessibility issues, which Osmosis aims to solve.

He added that Osmosis has become the de facto IBC hub for Cosmos application chain tokens. Many prominent projects within the Cosmos ecosystem have launched on Osmosis, increasing demand for its token. $OSMO is used as the base pair for trading other Cosmos application chain tokens via IBC.

Arthur stated that if liquidity flows into the Cosmos ecosystem, Osmosis will benefit greatly. Pairing new Cosmos tokens with $OSMO on the DEX will create more demand for $OSMO . Decentralized derivatives are expected to gain market share in CEXs, further benefiting Osmosis. Considering these factors, investing in Osmosis can offer good risk-adjusted returns and capture ecosystem growth.

Common Traits of Successful Traders

Arthur said that risk management is crucial for successful trading. Lack of risk management can lead to significant losses. Some traders, despite having various advantages and resources, suffer losses due to poor risk management, and this is an example.

He added that successful traders have a trading framework aligned with their style and are able to stick to it. It is easy to be influenced by others’ opinions in the market, but having a clear framework helps avoid unnecessary risks. **$BTC **$ETH **$LTC **