The Changing Perspective on Crypto: When Fundamentals Begin to Matter

The Common Perspective on Crypto

In the Crypto landscape, past bull markets were largely driven by overall market momentum, where nearly all assets saw gains. The strategy was simple: hold positions for the long term, and the specific tokens chosen were less important than the type of token. Traditionally, Bitcoin would hit new highs first, followed by other primary blockchain tokens, and eventually, the rest.

This cycle, however, saw a shift. Investors, recognizing previous trends, jumped straight into the most volatile assets. Even as Bitcoin remained 50% below its peak, memecoins surged in February. This premature move might explain why Bitcoin and Ether are struggling while other tokens plummet. Similar to the observer effect in quantum mechanics—where the act of observation alters the behavior of particles—watching financial markets changes their dynamics.

Quantitative hedge funds constantly adapt their strategies because once a pattern is identified, it is quickly traded out of existence. This is why technical analysis often falls short; the idea that patterns like the Fibonacci sequence can persist contradicts financial reasoning. The current underperformance of the crypto bull market suggests that the predictable pattern of altcoins rising after Bitcoin was so apparent that it preemptively triggered a wave of selling.

This realization is prompting a reevaluation across the industry. Traders, investors, and developers are beginning to understand that the old strategies no longer apply. The key question now is: what will the new strategies look like?

While it’s still early to define, signs are emerging that the crypto industry’s greatest fear may come true: a need to understand fundamentals.

Historically, the seemingly arbitrary valuations given to memecoins, governance tokens, and defunct projects led many to believe that valuation in crypto was a joke. However, the lesson from the current cycle appears to be that the notion of valuation being a joke is itself flawed. As nearly all tokens decline, the number of investment proposals based on valuation principles is increasing. Previously, being early to new trends—like re-staking, modular finance, or decentralized computing—was enough. Now, there are too many theme-based tokens for the available pool of investors.

For the first time in crypto, there’s a need to differentiate between tokens using measurable criteria—this is known as fundamental analysis. This shift doesn’t make crypto less exciting; on the contrary, it introduces a new level of sophistication and engagement.

Take Ethereum, for example. Traditionally, its investment appeal was based on slogans like “world computer” and “ultra-sound money,” which are compelling but lack quantifiable metrics. Now, some argue that primary blockchain platforms should be valued by the fees and revenue they generate. Multicoin Capital believes Ethereum is overvalued by $340 billion compared to Solana, while Van Eck sees Ethereum as undervalued by $2.4 trillion over the next five years. Such significant disagreement is rare in traditional finance.

The excitement doesn’t end there. Van Eck also sees huge potential in GEODNET, a decentralized GPS service, predicting its GEOD token could increase fiftyfold by 2030. Such bold forecasts are almost unheard of in traditional finance, except perhaps from firms like Ark with their optimistic projections on Tesla.

The Ways We Analyze and Evaluate Crypto Tokens

M31 Capital recently provided an analysis on Subsquid, a blockchain data provider, suggesting a potential 250-fold increase for its SQD token. Normally, such predictions would be dismissed as exaggeration, but M31’s detailed assumptions on market size, share, profit margins, and valuation multiples add credibility. They compare Subsquid’s token to The Graph’s GRT, which trades at an 18 times higher valuation—such a discrepancy is almost nonexistent in traditional finance.

In crypto, we’re beginning to see investment research of the same quality as that found in investment banking applied to venture capital-like projects. This fusion creates an intriguing and unique scenario. This kind of analysis will increasingly shape the industry. If we start evaluating crypto tokens based on traditional metrics like price-to-earnings ratios and comparative tables, we’ll start to see tokens designed to look good by those standards. As physicist Werner Heisenberg noted, “What we observe is not nature itself, but nature exposed to our method of questioning.”

Therefore, the way we analyze and evaluate crypto tokens will fundamentally alter their nature. This shift is likely to lead to a more mature and fundamentally driven market, ultimately benefiting the industry as a whole.

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