The Catch-up Trade: RedStone Is Looking Good Here

Disclosure - These are my opinions and none of this should be taken as financial advice. I'm an investor in RedStone and have held a long-term position in Chainlink

I'll keep this relatively short, but I wanted to briefly touch on something I've seen play out many times in crypto and traditional finance. It's called "the catch-up trade".

Also, I'll get to what triggered this a little bit later in the article.

First off, what is a catch-up trade?

In most cases, I think the messaging above is bad advice. Leaders are leaders for a reason and underperformers are typically underperforming for one reason or another.

Generally speaking, I just want to have exposure to the category leader. However, if you're always focused on the leader you may not see emergent competitors coming up in your rearview mirror. In other words, you may totally miss value.

Being a category leader isn't an anointed title and needs to be earned every single day. There's always someone gunning for top spot and more market share.

All that to say, there's something really interesting happening in the Oracle space that I'm now keeping a closer eye on.

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The Category Leader

There's no disputing Chainlink is the OG of the oracle space. Their tech has been battle-tested and relied upon for many years. DeFi might not have existed or happened in the same way if it weren't for them.

On top of that, the Link Marine community they've created over the years is in a category all of its own.

They're also starting to address some of the longstanding criticisms token holders have had regarding token value accrual.

In the past, there was never a great deal of transparency when it came to onchain/offchain token value accrual, but they've started to confront this head on with the Chainlink Reserve:

Over the past many years, $LINK has always been in a small index basket I'd tell my friends to buy:

This grouping has always felt like it covered a lot of the bases. All of that said, I see an opportunity emerging. Which brings me to RedStone.

The Emergent Competitor

Back in 2023 it seemed like every new DeFi team I was talking to would mention RedStone and that's how they initially came on my radar.

Then the LRT boom happened and they were part of the backbone of that entire movement.

I ended up meeting Marcin and some other team members at ETH Denver and was just blown away by their growth and trajectory.

Whenever you see that sort of drive and execution, those are the teams/founders you want to bet on (thankfully I was lucky enough to invest).

So what triggered this writeup?

I actually hadn't been paying close attention to the disparity in price between $LINK and $RED until I stumbled across this piece by Route2FI:

This section right here is especially important:

Basically, its a ratio between how much onchain value is being secured (TVS) to the fully diluted value of the token (FDV).

Personally, I don't think $LINK is even expensive at 3.6 - they have lots of interesting business lines coming online that I think can substantiate that value and more.

However, I do think $RED is a massive relative value with a TVS/FDV ratio of 17.5.

For example if you take the ratios of $LINK, $PYTH and $API3 and take an average, you get 5.53.

I know there's a lot more nuance to these valuations, but I do think TVS/FDV is an easy starting point and simple heuristic to use in this case.

I also know that RedStone has a lot of major innovations in the works and expect this TVS number to continue to grow.

Lastly, I don't expect the $LINK price to stay static, I think it's going to continue to rise. That said I think $RED is going to start to close that gap and begin to "catch-up".

That’s all for now, thanks for checking it out!

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