Multicoin Partner Dialogue: Crypto Market Has Hit Bottom, Three Cryptocurrencies to Watch in This Cycle

Source: "When Shift Happens"

Compiled by: Felix, PANews

Tushar Jain, managing partner at Multicoin Capital, recently shared his views on the current crypto market in the podcast "When Shift Happens." He pointed out that the crypto market has hit bottom and is entering a new turning point, elaborating on the investment logic behind Solana, Hyperliquid, and Zcash.

PANews has summarized the highlights of the interview.

Host: Do you think we are at a turning point now?

Tushar: Yes, life is good, and the market is starting to move in our favor again. This is the most exciting part of the cycle. I believe we are at a turning point. There are several signs to prove this: First, you must see market sentiment truly hit bottom before it reverses, just as in a bull market, sentiment must reach euphoria before it peaks. Secondly, when bad news no longer causes the market to decline, that is a signal of a turning point; similarly, when good news no longer drives the market up, that is also a turning point. Last month, we experienced some significant bad news, such as major hacks, but this did not trigger a massive sell-off, which is a huge signal. Additionally, the rate of application adoption has been increasing, and there is a disconnection between price and fundamentals. So I think this is a perfect storm.

Host: Everyone knows you and Multicoin are super bullish on Solana. Have you changed your view on Solana? When you say you are optimistic about both Solana and Hyperliquid, how do you allocate your positions?

Tushar: This is a question of time dimension. I still believe Solana is the right technical architecture for internet capital markets; you need a permissionless open-source chain to integrate everything into one platform. I still have confidence in its performance and architecture. But at the same time, we are seeing derivative trading volume shifting towards Hyperliquid. I currently hold significant positions in both assets and am optimistic about both. Solana is the leader in spot trading, and I believe it will carry the spot trading of tokenized securities, but Hyperliquid is clearly ahead in derivatives. Rather than being an extremist, it's better to think probabilistically and hold both. I am not a "maximalist" for any asset and will not stubbornly stick to a position or viewpoint.

Host: How would traditional financial issuers choose? Can this help us determine who the biggest winners will be?

Tushar: Traditional financial issuers will not issue assets on Hyperliquid. We see institutions like Galaxy issuing stocks on Solana. The core difference here is "trustworthy neutrality." Solana has a trustworthy neutrality that Hyperliquid lacks. This is a trade-off: Hyperliquid lacks trustworthy neutrality and has opaque validator nodes in exchange for better performance, which users accept because they can verify the chain and see the exchange's real-time solvency. Solana, on the other hand, is not only open-source on the client side but also has an extremely strong validator community, which comes at a cost. Traditional financial institutions place great importance on trustworthy neutrality; Goldman Sachs would never settle on a chain of a competitor like Stripe, and JPMorgan would not settle on DRW's chain. They would never give such significant power to a competitor.

Host: Since you are optimistic about both SOL and Hyperliquid, how do you decide on position sizes? Is it a 50-50 split?

Tushar: Position management is an art, not a science. For long-term investors, trying to allocate positions precisely using quantitative models is a trap. You should concentrate your funds on the assets you are most optimistic about; what’s the point of putting money into your tenth favorite asset? When deciding on positions, you need to consider external investors' demands, tax costs (for example, we held SOL long before we got HYPE), and the "minimizing regret framework." Imagine a year or two from now, if you were wrong about one of the assets, which would make you feel more foolish?

Host: Looking ahead to 2026, which asset do you see as the most obvious opportunity?

Tushar: A very obvious choice for me is Zcash (ZEC). Although its position is relatively small due to liquidity and market cap constraints, Multicoin has already accumulated a significant proportion of the total supply. I like its momentum, use case, and community; it reminds me of early Bitcoin. When I saw it rise last year, I spoke with many early supporters, and even when the price fell, they still held their beliefs. This is not a short-term hot money game. Additionally, Zcash lacks fundamentals (no cash flow or income), which means its value entirely depends on people's consensus, giving it greater upside potential. As a store of value, the larger it is, the better.

Host: What does Zcash represent to you?

Tushar: It represents a return to the "cypherpunk" values that built this industry. I support stablecoins and RWA on-chain, but they are essentially centralized and can be frozen. This industry is built on the foundation of "self-sovereignty," while now the mainstream is catering to regulation. Currently, Bitcoin, in my view, has been captured by institutions (like BlackRock and MicroStrategy). With the debate over quantum risks facing Bitcoin, early cypherpunk Bitcoin supporters may fork to the other side, so I believe Zcash represents the original intention of the industry, and more OGs will join.

Host: How do you value an asset like Zcash that has no income?

Tushar: For assets with business income, I look at their cash flow and give a price target based on a price-to-earnings ratio. But for an asset like Zcash, I look at its market cap ranking. Is it currently ranked 20th, 15th, or 10th? I believe it can enter the top five. This method can also adjust with the overall market (for example, whether Bitcoin is at $80,000 or $200,000).

Host: For assets like this, do you hold until it enters the top five, or do you engage in swing trading?

Tushar: We never actively engage in swing trading; it's too difficult, and humans cannot control emotions. Many fund managers try to buy high and sell low, only to get slapped in the face from both ends. I am extremely averse to technical indicators; I draw a few lines, and then a news event (like geopolitical conflict) happens, and the charts become useless. We are "actively managed," not "actively traded."

Host: So for income-generating assets like SOL or HYPE, what is your valuation framework?

Tushar: For them, you must forecast forward. You need to think about what the key drivers of the business are, what claims token holders have on income, and then look at what options are available in the market. Additionally, you need to consider execution risk and factor it into the discount rate (for example, Ethereum's risk is lower than Solana's because it is older and more decentralized). These numbers are just reference indicators; ultimately, qualitative judgment is necessary.

Host: How do you choose the timing for buying? How did you manage to accurately bottom HYPE?

Tushar: Trying to accurately bottom is not a repeatable skill. My framework is the "three-part method": suppose I want to invest $100, I would immediately buy one-third; then, within a set time period (like one to two months), I would dollar-cost average the second third; the final third is kept as flexible funds, and if there is a significant drop during the dollar-cost averaging period (like a 10% drop in a single day), I would buy the dip. This greatly reduces the regret of missing out.

Host: Two significant events have occurred in the past few weeks. The first was the Zcash code vulnerability incident, which caused the price to plummet, yet you increased your position. What happened?

Tushar: In simple terms, the Zcash core team discovered a potential double-spending vulnerability in the Orchard privacy pool while checking the code with AI tools and fixed it. The market panicked, thinking someone had infinitely minted tokens. However, in reality, transparent addresses were unaffected, and the privacy pool's "revolving door" mechanism (which records the total amount of funds in and out) showed that no hacker had withdrawn funds in large amounts. I did not make any moves on the day of the incident (I dislike trading when emotions are extremely volatile and liquidity is poor). After observing for a few days and confirming that no hacker exploited the vulnerability, I believed this was irrational panic in the market, triggering a chain of stop-losses, so we significantly increased our position in Zcash. The team will launch a new pool called Ironwood in July, which I see as just a false alarm.

Host: The second event is that Multicoin recently released a report predicting that HYPE will reach $319 within two years. You hold a large amount of HYPE; do others think you are just "shilling"? Are the conservative assumptions in it too aggressive?

Tushar: We do hold positions, but everyone should look at our reasoning logic and draw their own conclusions. The assumptions we set are not aggressive:

First, the annual compound growth rate of crypto derivatives is 35%: it was 45% over the past five years, and we have cut a quarter off the growth rate.

Second, DEX occupies 32% of the derivatives market share: it has risen from nearly zero in 2022 to 16% now, doubling to 32% within two years is in line with trends.

Third, Hyperliquid maintains a 30% share of decentralized derivatives: this is also conservative because trading volume data can be easily manipulated (many other exchanges have fake trades), but currently, Hyperliquid occupies 59% of the real open interest (OI) across the network, and this data is hard to fake. As other platforms stop subsidizing, Hyperliquid's actual share should rise further.

Fourth, USDC collateral grows linearly with trading volume: as long as traders' leverage preferences remain unchanged, stablecoins used as collateral will naturally grow in proportion to trading volume and open interest.

Host: Has the bottom of the market been reached?

Tushar: Accurately predicting the bottom is extremely difficult, but I believe the price low may have passed. Excluding macro black swans (like an escalation of the US-Iran war), we have already seen the "extreme apathy" phase. Bad news no longer causes the market to decline, and the uncertain have already left; what remains are the absolute believers. However, this does not mean there will be a "V"-shaped reversal directly taking off; the market may experience a period of sideways movement and apathy, requiring time to build a new narrative.

Host: Can you elaborate on the advantages of investing?

Tushar: If you have no advantage, you should buy index funds and go to the beach. There are four sources of advantages in investing. First, channel/information advantage (others will call you with insider information); second, analytical advantage (you understand the asset better than others); third, behavioral/psychological advantage (you deeply understand and can control your emotions, which is the hardest); fourth, structural advantage (like long-term funding structures). We invest in Zcash mainly because of a strong behavioral psychological advantage (seeing the market extremely pessimistic but holders' beliefs are firm), along with some channel information advantages.

Host: What does Ethena represent to you? You built a large position last year.

Tushar: Ethena, along with Aave and Morpho, is in the same lane: matching lenders who want yield with borrowers who want leverage. We hold multiple projects in this field (including Kamino on Solana) because the lending market has clear scale effects, and liquidity will concentrate towards the top.

Host: To what extent do you evaluate founders?

Tushar: We place great importance on founders. Our evaluation framework has three multipliers. First, the total market size a few years down the line; second, long-term profit margins (whether there are scale effects to avoid profits being eaten by competition); third, execution risk. Ethena's founder, Guy Young, is one of the most capable founders in the DeFi space, significantly reducing execution risk and enhancing valuation potential.

Host: If you are a long-term investor, when do you lock in profits?

Tushar: For our fund, the so-called monetization is converting assets into Bitcoin. When the market is extremely euphoric, we sell high-risk assets for Bitcoin to reduce Beta risk; when the market crashes, we use Bitcoin to buy into projects we like. We only sell in three situations: first, when we find a better asset; second, when the investment logic is falsified; third, when market valuations are excessively euphoric, overdrawing expectations for many years to come. Since we commit to operate fully for our investors, our "cash" is Bitcoin.

Host: What do you think of Ethereum?

Tushar: It's hard to evaluate. They have been telling everyone to use L2 for scaling for the past 6 or 7 years, and now they suddenly want to increase the gas limit to scale back to L1. No one can clearly say what their plan is. The foundation and Vitalik do not want to hold too much power; they want the market to explore, but the market is a good follower, not a good leader. Although spot trading has lost to Solana and derivatives have lost to Hyperliquid, Ethereum's market cap resilience still surprises me. The only reasonable explanation is that people see it as a "store of value asset" or a better Bitcoin.

Host: Your partner Kyle left Multicoin, which made many people pessimistic. Why are you still here?

Tushar: I was also surprised he left, but I respect his decision. This prompted me to rethink my motivation. I don't use the framework of "living every day as if it's the last"; instead, I ask myself, "If I have 10 more years to live, what do I want to do?" The answer is I want to win; I enjoy the sense of accomplishment when I am right when others are wrong. I believe blockchain is the underlying architecture of future capital markets, replacing the outdated systems we have now. When Zuckerberg refused Yahoo's $1 billion acquisition offer, he said, "If I take the billion, I would just start another social media company, so why would I leave this one?" This strengthens my belief.

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