Felipe Montealegre, Founder and CIO of Theia, just told us we're nearing the end of a four-year bear market for liquid tokens. And he's putting money behind it, deploying aggressively into what he calls "the best opportunities in four years."
As a liquid crypto investment fund since 2021, Theia has been skeptical of the fat protocol thesis (L1s accrue all value excluding a select few special snowflakes) versus valuing 99% of tokens, associated mostly with financial applications, by using DCF (discounted cash flows). This led them to avoid alt-L1s, L2 tokens, and every narrative token trading at 100x revenue. It was painful watching everything pump. But the thesis held seems to be proving right now becoming a consensus where crypto tokens are being valued on future cash flows, not just hyper speculative narratives.
The conditions for a healthier market are finally aligning. Valuations have been beat down so far they're actually cheap. Tokenholder rights are being solved: teams finally realize they need to give proper protections or their tokens won't trade well. And third, revenue growth is returning as regulations clear and real businesses emerge (not just memecoin casinos).
Felipe's framework for finding alpha sounds simple but is counterintuitive: maximize edge, not just Brier scores. Brier score measures how often you're right. Edge measures true predictions that deviate from consensus. John Kelly proved that maximizing edge leads to the fastest long-term portfolio compounding. So the question isn't "Will I be right?" It's "Am I contrarian enough on the things I'm right about?"
The bear market rewarded mercenaries and punished fundamentals investors. But that's finally reversing and in a new Edge Podcast, we get into why and how!
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🔗 Guest Links 🔗
► Theia and Felipe on X: x.com/TheiaResearch
► Theia Mental Models: latticeworkofmentalmodels.com
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