Arthur Cheong - Crypto After the Washout: The Case for Active Management - TOKEN2049 Singapore 2026 — Transcript

Full transcript

1. 0:08Good morning, everyone.
2. 0:09So, today I'm going to talk about
3. 0:12the case for active management in
4. 0:14crypto.
5. 0:15Yeah.
6. 0:17Almost a year 1 year ago, we have one of
7. 0:20the biggest liquidation day in the
8. 0:22crypto history.
9. 0:24More than 19 billions of position were
10. 0:27liquidated in 1 day.
11. 0:29So,
12. 0:30what the market have taught us after
13. 0:32that 12 months?
14. 0:34And my argument is simple.
15. 0:37This is the strongest case in years for
16. 0:39active management. Not as a slogan, but
17. 0:42backed by data.
18. 0:44And this is not because active managers
19. 0:46are like us are smarter, but because the
20. 0:49opportunities that in crypto has
21. 0:52changed.
22. 0:53The growth is no longer in all the
23. 0:56biggest assets and major.
24. 0:58I'll show you the number first.
25. 1:00Then walk through three case studies and
26. 1:02close with why I think what active
27. 1:04management means today.
28. 1:08So, I mentioned just now,
29. 1:11more than 19 billions were liquidated in
30. 1:131 day.
31. 1:15The normal reaction might be, "Okay,
32. 1:17this is a reset, flush the leverage.
33. 1:20We will come back higher again on the
34. 1:22majors."
35. 1:24And 12 months later, Bitcoin is still
36. 1:26down around 24% compared to 1 year ago.
37. 1:30Ether close to 30%. Solana
38. 1:3436%.
39. 1:36And actually in June this year, painful
40. 1:38memory,
41. 1:40Bitcoin traded below $60,000.
42. 1:43Roughly
43. 1:45like 50% uh more than 50% max drawdown.
44. 1:49So, if the strategy is just to, "Okay,
45. 1:51I'm buy the major and wait for the
46. 1:53market to rebound,"
47. 1:54most people still are not back to buy
48. 1:56yet.
49. 1:57Yeah. And that is the passive benchmark
50. 2:00of crypto what people usually benchmark
51. 2:01to.
52. 2:03And now what I will show you what have
53. 2:05happened to the same market in the same
54. 2:07period for the other asset class.
55. 2:12So here's the same 12 months, same
56. 2:15market side by side.
57. 2:18In the blue, you have the passive, the
58. 2:20majors.
59. 2:21Bitcoin down 24% yeah, and ether and so
60. 2:26more.
61. 2:27And the three tokens I'll use as a case
62. 2:29study today
63. 2:31Zcash up 483%
64. 2:34Hyperliquid up 145% and near up 114%.
65. 2:40And all three of them had a market cap
66. 2:42of above a billion dollar uh
67. 2:44at the day of the washout. So these are
68. 2:47not micro caps or as I like to
69. 2:49call it that you couldn't buy.
70. 2:51Hyperliquid was actually already a 10
71. 2:53billion dollar assets.
72. 2:55And measure against Bitcoin you look at
73. 2:57it.
74. 2:58Zcash have outperformed by 500%.
75. 3:01Hyperliquid 169%
76. 3:03and near 139%.
77. 3:07This is a huge amount of outperformance.
78. 3:10If you put all three of them in the
79. 3:12equal weight basket
80. 3:13they up around 250%
81. 3:16against roughly minus 30% for an equal
82. 3:19weight basket of the majors.
83. 3:22Now I'm not showing these to say
84. 3:25buy these three tokens.
85. 3:26I'm using this to explain that the gap
86. 3:30between the majors and the best
87. 3:31opportunities in the industry has never
88. 3:34been wider.
89. 3:35A strategy that only owns the largest
90. 3:38assets
91. 3:39miss everyone of these.
92. 3:45So this is the path, not just the end
93. 3:48point. So everything on this chart is
94. 3:51indexed to 100 on the day of the washout
95. 3:54on a log scale.
96. 3:56So, two things to notice.
97. 3:57First, the winner did not win all from
98. 4:00day one.
99. 4:02In fact, after the
100. 4:03from the first three month of the
101. 4:05washout, they all fell together.
102. 4:07Near trader below a dollar in February.
103. 4:10Hype
104. 4:11fell to about $21 in January.
105. 4:14And Zcash, or they like to call Z for
106. 4:17the core token, gave back his entire
107. 4:19November rally by early March.
108. 4:21If you had look at this chart in
109. 4:23February this year,
110. 4:25you would have seen Zcash roughly back
111. 4:27at where it started, and every other
112. 4:29line underwater.
113. 4:31But,
114. 4:32the gap start to open from April
115. 4:34onwards.
116. 4:36And the drivers were very specific to
117. 4:38each assets.
118. 4:40Privacy ETF,
119. 4:42a derivative platforms taking market
120. 4:45share,
121. 4:46and a cross chain product with a real
122. 4:48volume, plus the AI narrative.
123. 4:51That's why I will keep coming back to
124. 4:53the idea that you have to look at these
125. 4:55assets one at a time.
126. 5:01Here's the same data in a different way.
127. 5:04The middle column is the max drawdown of
128. 5:06each assets.
129. 5:08The right column is where it end up as
130. 5:11of two days ago.
131. 5:13Look at the interleave, how they
132. 5:15interleave.
133. 5:16Zcash had the deepest drawdown of all
134. 5:18the six.
135. 5:19Minus 72%
136. 5:22and the best returns.
137. 5:24The rest
138. 5:25didn't done as well.
139. 5:27Like Solana
140. 5:29fell almost 70% at the worst and ended
141. 5:32up down 36%.
142. 5:34So, in fact, if you look at all the max
143. 5:35drawdowns, the major did not really do
144. 5:38much better than the three coins I
145. 5:40highlighted.
146. 5:41And yet, they are still negative
147. 5:43year-on-year basis. While the three
148. 5:45tokens I have selected,
149. 5:47they are already massively even after
150. 5:48suffering a very deep drawdown.
151. 5:52So,
152. 5:53they all suffer a huge correction.
153. 5:56The only question is
154. 5:59not what you own,
155. 6:01but are we being paid for owning these
156. 6:03assets?
157. 6:06Because
158. 6:07this matters for how active management
159. 6:10should be done.
160. 6:12I will argue that selection is the
161. 6:14source of return.
162. 6:16But the sizing and risk management are
163. 6:19what let you stay in the trade
164. 6:21long enough for you to collect it. Now,
165. 6:24there will be some obvious objection.
166. 6:27Cherry-picking, right? I picked the
167. 6:28three best assets
168. 6:30after the fact.
169. 6:32And I'm not arguing that you should go
170. 6:34and buy altcoins, okay?
171. 6:36In fact,
172. 6:37only nine of the top 50 altcoins have
173. 6:40outperformed Bitcoin on a one-year
174. 6:42basis. 41 did worse. And actually way
175. 6:46worse.
176. 6:48A passive A passive baskets of altcoins
177. 6:51would not have done better than Bitcoin.
178. 6:53And I'm not claiming these three tokens
179. 6:56or crypto are obvious.
180. 6:58In
181. 6:59I'm just claiming that they were
182. 7:01analyzable.
183. 7:03Each one had an evidence you could look
184. 7:05at in public
185. 7:07often before the price moved.
186. 7:10And that's what the case study will
187. 7:11show.
188. 7:12With this much dispersion,
189. 7:15market exposure doesn't pay you.
190. 7:17Picking the right asset does. So, the
191. 7:20main argument is
192. 7:22crypto is not one trade anymore.
193. 7:25For most of this industry history,
194. 7:27you can count 3 D as one.
195. 7:29Bitcoin went up, everything went up
196. 7:31more. Bitcoin went down,
197. 7:33everything went down more.
198. 7:35That has been the case for the past 7-8
199. 7:37years.
200. 7:39And that lead a lot of to think that,
201. 7:41"Hey,
202. 7:42owning the majors was a reasonable
203. 7:45approximation of owning crypto, the
204. 7:47asset class."
205. 7:49I will argue that that's no longer true.
206. 7:53The industry right now has distinct
207. 7:55businesses.
208. 7:57Privacy,
209. 7:59on-chain financial market,
210. 8:01cross-chain infrastructure,
211. 8:03and AI.
212. 8:05And I would like to use the word AI
213. 8:06again. AI AI AI.
214. 8:10So, they grow for different reasons,
215. 8:12different times.
216. 8:15The largest asset don't capture all the
217. 8:16growth anymore. And sometimes they don't
218. 8:19even capture any of it.
219. 8:21So, investors like us, we need to judge
220. 8:24the crypto opportunities one by one.
221. 8:28The same way like an equity investors
222. 8:29look at individual companies and not
223. 8:31just buy the index.
224. 8:36So, how do we judge the opportunities
225. 8:39one by one?
226. 8:40You start by asking the right question
227. 8:42for each asset. Then you go and find the
228. 8:44evidence.
229. 8:46Three case studies.
230. 8:48One,
231. 8:50Zcash.
232. 8:52What made investors reassess the value
233. 8:54of private digital money?
234. 8:58Second question Second asset, hype.
235. 9:02What is the right valuation multiple for
236. 9:04the most successful decentralized
237. 9:06trading platform in crypto?
238. 9:10Third, Near.
239. 9:14Can crypto actually
240. 9:16captures economic value from AI
241. 9:19adoption? Or is it just a story?
242. 9:27So, let's start with Zcash, up 483%.
243. 9:31Market cap went from about $3.7 billion
244. 9:34to $22 billion dollar
245. 9:37The question is what make the market
246. 9:38assess what private digital money is
247. 9:41worth.
248. 9:42So the first thing is some of the
249. 9:44evidence was public before the big move.
250. 9:48On the left you can see that
251. 9:50the total share of Zcash supply held in
252. 9:54the shielded which means the private
253. 9:56pools
254. 9:58are around 8% in early 2024.
255. 10:01They went to around 11% at January 2025.
256. 10:05And 18% by around October 2025.
257. 10:09So people were actually already choosing
258. 10:11to use the privacy before the price told
259. 10:14them to.
260. 10:16And today
261. 10:17it's around 29%.
262. 10:20On the right you can see that
263. 10:23on the first week of October Jaxxie
264. 10:26the main Zcash wallet shipped private
265. 10:29swaps to near intense.
266. 10:31You can go for Bitcoin, Solana
267. 10:34or USDC straight into shielded
268. 10:37Zcash without a centralized exchange.
269. 10:40Naval Ravikant, a very famous angel
270. 10:43investor
271. 10:44had posted Bitcoin is insurance against
272. 10:48fiat
273. 10:49and Zcash is insurance against Bitcoin.
274. 10:52And boy, that narrative really took off.
275. 10:57Winklevoss Capital led a $59 million
276. 10:59raise for Treasury company that turned
277. 11:01out to be a Zcash Treasury.
278. 11:04And Grayscale had a Zcash trust dating
279. 11:07back to 2017 which that make it a ready
280. 11:10route to an ETF.
281. 11:13And to be fair, Zcash already rallied
282. 11:15like
283. 11:164x
284. 11:17in even in October 2025.
285. 11:20So the signals were already there
286. 11:22and not secrets.
287. 11:25But underwriting this thesis
288. 11:27is not easy.
289. 11:30If you look at it
290. 11:31they went through a lot of volatility
291. 11:33and drawdowns throughout the period.
292. 11:36So there was a lot of details there.
293. 11:38I'm not going to go through it all of it
294. 11:40one by one, but the most notable one is
295. 11:43and you look at point three,
296. 11:45there was a dispute and clash in
297. 11:47governance between the core dev team.
298. 11:49So that actually led the price to
299. 11:51correct significantly
300. 11:52in around January. Obviously in
301. 11:54February,
302. 11:55the majors also
303. 11:57dropped significantly. So that dragged
304. 11:58the market down as well.
305. 12:00But the market the Zcash price slowly
306. 12:03recover
307. 12:05and in
308. 12:06the point four, a major crypto fund
309. 12:09multi-coin disclose a position in Zcash.
310. 12:12That led the coin to rally, but in just
311. 12:14one month
312. 12:15one of the scariest event for Zcash had
313. 12:18happened.
314. 12:19A counterfeiting bug was found in the
315. 12:21orchard shielded pool.
316. 12:23And the bug that had been live since
317. 12:252022.
318. 12:27It was fixed very quickly, but nobody
319. 12:29could prove that it had not been
320. 12:32exploited.
321. 12:33And Zcash fell about 50% in two days.
322. 12:38But we have recovery afterwards.
323. 12:42There was an ironwood upgrade in July
324. 12:44and the exploit was fixed.
325. 12:48There was no evidence that the shielded
326. 12:50pool was ever exploited
327. 12:52and the market recover.
328. 12:54And in August,
329. 12:56the first US spot
330. 12:58Zcash ETF started trading.
331. 13:01And that ETF attracted 200 plus millions
332. 13:04of inflows in the first few weeks.
333. 13:08So there was a lot of events and they
334. 13:11did not come
335. 13:12in together.
336. 13:14The usage came first and then came
337. 13:17access
338. 13:18and then came the institutional
339. 13:20ownership.
340. 13:21And it happened despite two crashes.
341. 13:24One was with was a real flaw in the
342. 13:26systems.
343. 13:29So, what's the takeaway from Zcash?
344. 13:33First,
345. 13:36the usage. 29% of all Zcash right now
346. 13:39sits in a shielded pool, which is what
347. 13:41make Zcash different from all the other
348. 13:43cryptocurrency out there.
349. 13:46And ownership. You have
350. 13:49a Nasdaq-listed company who owns about
351. 13:511.8% of the supply.
352. 13:53And institutional assets. The ETF which
353. 13:56took in a lot inflow in the first few
354. 13:57weeks.
355. 13:59Those are real changes in how the
356. 14:01private money get used and who owns it.
357. 14:05And what does it cost to hold? A 72%
358. 14:07drawdown
359. 14:08at the worst.
360. 14:10A 50% in 2 days.
361. 14:13And next year,
362. 14:14we have some regulatory change that
363. 14:16might affect the liquidity of the asset.
364. 14:19The EU AML rules.
365. 14:21So,
366. 14:23the lesson is the thesis was right, but
367. 14:25you still have
368. 14:26to survive the drawdown to get paid.
369. 14:30So, this is active management. It's not
370. 14:32about trading every single move,
371. 14:34but it's about having a thesis
372. 14:36and sizes that so you can still hold it
373. 14:38through
374. 14:39while being wrong for a while.
375. 14:41Obviously, that's for active manager
376. 14:42like us, sometimes we like to
377. 14:44think we are too smart. We try to trade
378. 14:46it more,
379. 14:47but actually sometimes we end up um
380. 14:50making less.
381. 14:54And next, we move on to hyperliquid.
382. 14:56I'll go a little bit faster because
383. 14:58we're running a bit short of time, but
384. 15:00okay, this is probably one of the most
385. 15:02consensus trade for all the smart money
386. 15:04in crypto.
387. 15:06I mean, the question is I think the
388. 15:07thesis very well understood. Hyperliquid
389. 15:10is the most successful uh decentralized
390. 15:13trading platform in crypto.
391. 15:15The question to ask in October last year
392. 15:17is what is the right valuation
393. 15:20for hype.
394. 15:23So,
395. 15:25Hyperliquid probably have one of the
396. 15:26best run in the past 2 years in crypto.
397. 15:29They keep winning.
398. 15:31Really good executions.
399. 15:33By all metrics, they've done very well.
400. 15:36Um the the the market share of open
401. 15:38interest across all perps venue,
402. 15:40including
403. 15:41decentralized exchange,
404. 15:43have climbed to around 12% as of
405. 15:46now.
406. 15:48Open interest is a record high.
407. 15:50And
408. 15:51a lot of hype were being bought back
409. 15:53over the years.
410. 15:54But the revenue have stayed flat because
411. 15:57we're in a crypto bear market, and
412. 15:58naturally people trade a lot less.
413. 16:03So, by any measure,
414. 16:05this is a best one of the best business
415. 16:08you can find in crypto. But that's not
416. 16:10the questions.
417. 16:13The question to ask is, what is the
418. 16:14right valuation multiple for hype?
419. 16:17Last year, it was trading at around 9x
420. 16:20on the
421. 16:21um market cap to revenue.
422. 16:24And now it's trading around 32 times.
423. 16:27And I will argue that
424. 16:30when people really
425. 16:31start to see that hype have staying
426. 16:34power, they continue to win,
427. 16:36you are seeing the valuation multiple
428. 16:38keep getting re-rated.
429. 16:40So, it came went from trading in the
430. 16:43discount compared to all the other
431. 16:45centralized crypto platform like
432. 16:47Coinbase or Robinhood
433. 16:49um to trading at I would say
434. 16:52still on par with them.
435. 16:54Um and that took around 1 year. If you
436. 16:56look at it, like Coinbase trade at
437. 16:57around six times revenue, adding around
438. 17:00like 50 times profit.
439. 17:02Uh and Robinhood is around 21 times
440. 17:04revenue and probably around like 50 to
441. 17:0770 times profit.
442. 17:09So,
443. 17:10hype is still trading at like I would
444. 17:12say there's still a lot of room for
445. 17:13growth compared to two of them. But the
446. 17:16re-rating process was really on how the
447. 17:18market perception of them have changed
448. 17:21given the continuous execution, and you
449. 17:24need to look beyond the metrics of
450. 17:26revenue only.
451. 17:30The third case study, NEAR.
452. 17:33NEAR has positioned itself as the
453. 17:34blockchain for AI.
454. 17:36And its co-founder Illia Polosuk the
455. 17:39Transformer paper, which
456. 17:42make LLM possible.
457. 17:46The question we ask is, can a crypto
458. 17:48actually capture economic value from AI?
459. 17:53So, for NEAR,
460. 17:54there's three bucket of evidence. Deploy
461. 17:57and measurable,
462. 17:59deploy but no usage data you can
463. 18:02measure,
464. 18:03and the narrative.
465. 18:06So, if you look at
466. 18:08the measurable data, the intense, which
467. 18:11you can think of as a way of uh moving
468. 18:13your asset cross-chain without all the
469. 18:16technical complexity.
470. 18:18And you can even do that for assets with
471. 18:21no smart contracts capability like
472. 18:23Zcash,
473. 18:24and any of the
474. 18:26uh other um chains have no smart
475. 18:28contract capabilities.
476. 18:30A lot of the on-chain Zcash privacy
477. 18:32demand are routed via NEAR right now,
478. 18:35and it has grew a lot over the past 6 to
479. 18:3812 months.
480. 18:41You also have NEAR AI crowd, which prior
481. 18:43and private inference, so that nobody
482. 18:45can see what are you talking to your
483. 18:47favorite LLM.
484. 18:49They also launched uh Iron Claw, which
485. 18:51is a private version and a of and their
486. 18:54own version of the Open Claw
487. 18:56uh Open Claw like open-source AI agent
488. 18:58framework.
489. 18:59These are the real products, and the
490. 19:01narrative and what they're really
491. 19:03working on is
492. 19:05AI agent conducting transactions on NEAR
493. 19:08blockchain.
494. 19:09Yeah.
495. 19:13And the value capture have also started
496. 19:15to caught up.
497. 19:17We have
498. 19:18all the near intense generating 23
499. 19:21millions of NYS buyback to the near
500. 19:24blockchain and actually still increasing
501. 19:26on a double digit percentage on a
502. 19:27month-on-month basis. Granted,
503. 19:30it is a little bit volatile.
504. 19:33There's also the inflation reduction.
505. 19:36Uh there was a governance proposal being
506. 19:38proposed right now,
507. 19:39uh which is I think likely to pass, that
508. 19:41reduce the token supply.
509. 19:44So, all these narrative combined
510. 19:47have um
511. 19:48set up near for a very
512. 19:51uh good
513. 19:52catalyst rally.
514. 19:54And in September this year, which was
515. 19:56last month,
516. 19:57we have private perpetuals routed to
517. 19:59hyperliquid on near.com and the first
518. 20:02spot US
519. 20:04uh spot in near ETF on the US market.
520. 20:10So, product and assets are the one that
521. 20:13re-rated near
522. 20:15this time.
523. 20:20So,
524. 20:22let me put it all together. What does
525. 20:23active management mean in crypto today?
526. 20:27So, four things. One, we need to judge
527. 20:29each asset on its own.
528. 20:32Privacy, on-chain finance, and AI are
529. 20:36all different businesses.
530. 20:38Each needs its own questions and its own
531. 20:39evidence.
532. 20:41If you just own a single crypto beta,
533. 20:44you have missed all three.
534. 20:46Two, we should find the evidence before
535. 20:48the price.
536. 20:49And in every case, you have start to see
537. 20:51some public
538. 20:52fundamentals on the public day
539. 20:54dashboards
540. 20:56ahead of the price actions.
541. 20:58And none of it was secret.
542. 21:01Three, you should know what the token
543. 21:02holders actually capture and what you
544. 21:04actually pay.
545. 21:07And the fourth is you should size for
546. 21:08the drawdowns and re-underwrite on the
547. 21:11new facts.
548. 21:12And I think this is really the essence
549. 21:14of crypto management, active management
550. 21:16in crypto, because
551. 21:19there's always new facts and
552. 21:20circumstances that emerge,
553. 21:22and you need to keep re-underwriting the
554. 21:24thesis.
555. 21:26And all three of them, the big winners,
556. 21:28they all fell between 56 to 72% inside a
557. 21:31year
558. 21:32and a lot of bad events.
559. 21:35So, if your position size can't survive
560. 21:37the drawdown,
561. 21:38you can't collect the return.
562. 21:41And when the fact or price change,
563. 21:44your view should, too.
564. 21:45None of this is exotic, but what is new
565. 21:47that crypto now reward this active
566. 21:51management.
567. 21:55So,
568. 21:56I'll conclude that
569. 21:58what I've said so far,
570. 22:00I believe that right now in crypto,
571. 22:03owning the market beta alone
572. 22:05doesn't pay as well as it used to,
573. 22:07but selection did.
574. 22:09If you just own the major, you're still
575. 22:11down on a year-on-year basis,
576. 22:13but if you actually own the right asset,
577. 22:15you're up between 150%
578. 22:18to 480%.
579. 22:20So, we should always judge
580. 22:22each opportunity on its own in crypto
581. 22:24right now.
582. 22:27And that is my case for active
583. 22:29management in crypto.
584. 22:31Thank you.