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- [00:00]
Mona L Isa
Although it might not look like it to people on the outside, it feels like we're in a strange bear market. There's a very small handful of assets that are holding up and staying close to their highs. But if you look at the broader market of tokens which have traditionally performed well or been more correlated to Bitcoin, there, there's huge underperformances. We've seen huge down moves and within this space I feel that there's a bear market within a, within a market. If that makes sen.
- [00:34]
Jen
Are we in a strange bear market? Our next guest says when we look outside the major market cap tokens, we see a different story. Founder of Avant Garde Finance and Enzyme Mona L Isa joins the show now to unpack this more. Mona, welcome to Markets Daily.
- [00:51]
Mona L Isa
Thanks for having me.
- [00:52]
Jen
Jen, what are you watching this morning?
- [00:55]
Mona L Isa
Well, you know, every time I turn on my sort of cornmarket.com lately, it's more or less flat. So I don't think a lot has been happening recently other than in a couple of assets that are being singled out. Really. It feels to me like the market is trading very sideways. And although it might not look like it to people on the outside, it feels like we're in a strange bear market. So what do I mean by that? There's a very small handful of assets that are, that are holding up and you know, staying close to their highs. But if you look at the broader market of tokens which have traditionally performed well or been more correlated to Bitcoin, you know, there, there's huge underperformances. You know, we've seen huge down moves. And within this space I feel that there's, you know, a bear market within a bet within a market, if that makes sense. So on, on some of those kind of smaller medium sized tokens. And I'm turning my focus a little bit more towards that because you're starting to see token, some tokens trading at ridiculously low market caps. And when you take a zoom in and some of the projects, we've been doing some digging into some of these projects, you know, they're not your, you know, they're, they're actually legitimate projects that have been around for seven, eight, nine years. They're generating serious amounts of revenue and they're just trading at ridiculously low market caps. So you know, obviously it's interesting to spot these opportunities and identify them and, and you know, you know, and sort of dip in if it makes sense.
- [02:37]
Jen
Is there a particular project you're watching or particular crypto that you think is trading Much lower than its value and that investors should be watching right now.
- [02:50]
Mona L Isa
Well, the one that I'm like slightly obsessed about, and this is no secret, we like it a lot as a firm. So you know, disclaiming that here, but the one that I'm sort of obsess of about at the moment is Power swap. So if you don't know Powerswap Power Swap is a one of the top three DEX aggregators by volume. They generated last month $400,000 in fees and they are trading at, that's annualizing at $5 million per year. And their market cap is around $20 million now fully diluted. So you know, when you look at that and you look at like some of the valuations other similar protocols are trading at or so other market cap, you know, fees, fee to market cap ratios of other similar protocols, that looks like relative, very deep, relative value to me.
- [03:43]
Jen
You said we're in a strange bear market. Curious to hear your thoughts on why you think that is. Is that because of what's going on in the macro landscape? Is it because of what's going on when it comes to global economic policy and what needs to happen to get us out of this strange bear market?
- [04:02]
Mona L Isa
Yeah, that's a really good question. So when I say strange, I mean, you know, bitcoin is still flirting with its all time highs. I mean we're not quite there, but we're very close. But when you look at other, you know, tokens of pretty high profile projects in the defi space, for example, you know, they're sort of 80, 90% off their highs. So that's creating a lot of pain in the space which isn't headlined because usually when people talk about the market they're looking at Bitcoin or Solana or Ripple. But when you actually look at some of the projects in the ecosystem, they're really struggling. And, and that doesn't get talked about as much. But that also, you know, in past bear markets when bitcoin, when, when bitcoin is down, everything else is down. When bitcoin is up, everything else is up generally speaking. Right. And that's why, that's why I characterize it as a strange bear market because we're sort of having a dislocation between bitcoin. You sort of asked why. I can only. But I would imagine that the US political landscape has obviously, you know, encouraged a lot of people or in some people's minds it's de risked crypto a lot. But if you're a large institution who's Never touched crypto before and suddenly you're like, oh, okay, you know, Trump is pro crypto. One of the first assets you're going to buy is Bitcoin because it's the one you're not going to get fired for. You know, it's the obvious one to buy and similar to the other top three, five tokens and most liquid tokens. So it kind of makes sense and I suppose it's a characteristic of new money coming in, potentially not fully understanding the full ecosystem yet. But I guess we will get there. As people, investors mature and start to look at the space more broadly, you will see some of the sort of small mid caps catch up and also if they don't, then it's a huge M and A opportunity.
- [06:01]
Jen
I want to talk about M and A in just a second, but let's dig a little bit more into defi. I've had some guests come on the show recently and said, you know, don't be surprised if there's, if we see another defi summer on the horizon. Just talk to me a little bit about what you're watching from a defi perspective and how you expect defi to perform as the year goes on.
- [06:25]
Mona L Isa
Yeah, defi is, it's, it's really interesting because there's a, there's a couple of things to unpick here. So you may have seen, I think it was yesterday or the day before there was some article or note about stablecoin TVL being the largest it's ever been in defi. And one of the reasons for that is also because the market has been moving sideways for a few months. So if the market's moving sideways or if your tokens or tokens in general are moving down and people are afraid that their token will go down, they want to diversify, move into stablecoin. But why hold stablecoin if you can be earning yield on stablecoin in DeFi? And so there's a lot of supply in lending protocols and there's a lot of attempts in defi to generate yield on stablecoin. We're actually on the avant garde finance side seeing the most inflows ever in our history in our stable yield coin products. But what is interesting is that traditionally in bear markets, defi yield tends to become uncorrelated to treasury yield. In this case, we haven't seen that yet. Defi yield and treasury yields are more or less on par. And that could be for a number of reasons. It could be because generally speaking, markets are moving sideways. So there's not a huge demand for leverage. Arbitrage opportunities maybe are lower because there's not enough as much liquidity. And yeah, it could be a number of reasons, but interestingly we haven't seen that dislocation or lack of correlation yet.
- [08:04]
Jen
There's always this kind of underlying narrative driving the industry at any given moment. And right now I feel like one of them is this narrative around real world assets. And I'm just curious to hear what your perspective is on real world assets. I know that total value locked has exceeded $10 billion. There really is this drive for defi infrastructure to solve a lot of the problems that we see in CEFI to get these real world assets on chain. What's your perspective on this convergence of CEFI and defi and will that ultimately help the defi ecosystem?
- [08:41]
Mona L Isa
Yeah, definitely. I mean it's happening. You're seeing a lot of real world assets. They do have different come to market as you said, like there's no lack of TVL there, but they do have in many cases different characteristics because they are securities or they're classified as securities. Which means people generally speaking have to KYC AML before they get into them. Means that the underlying tokens are non transferable and so by definition they're not as composable with the rest of defi as defi as non security tokens. So that poses a bit of a challenge to the composability and to the two worlds becoming fully integrated. But as that gets resolved, you know, the two worlds definitely will continue to converge more and more. And one way that we've tackled that is we became the first on chain asset manager to become regulated. It was nearly two years ago now and that enables us to do a mixture of both. But I think we're one of the few players to be able to do that to do both of those things at once. But you know, again we, we also have to kyc our investors into those products etc so it's not open to the masses and that, you know, until it is or until there's some legislation that puts securities and defi tokens on par with one another, it will be difficult to unlock that full that that those two worlds fully coming together.
- [10:17]
Jen
I want to come back to something you said earlier, which was that M and A is increasing in crypto. I think about the last time We M&As kind of dominated the headlines was in the last bull market. Really. And you mentioned we're in a strange bull market. Talk to me a little bit about what you're seeing in terms of M and A and how we make sense of that against I guess what's, what we're seeing happening in the crypto markets.
- [10:44]
Mona L Isa
Yeah it's, it's a little bit like politics. It's becoming more and more polarized. There's people who are doing really well and people who are not doing very well at all and they're. Because of that, you know, there is definitely fire to do M and A. Just in the last few months alone we've seen Cantor Equity acquire 21 Capital. We've seen Kraken acquire NinjaTrader, we've seen Ripple recently acquire Hidden Road and Stripe acquire Bridge. I mean this is just a few like there's dozens of M and A, you know, activity in the equity world and that's because there's a lot of good. Partly because some, some of these companies want to grow faster but don't have the expertise in house. So partly it's strategic and sometimes in some cases are willing to pay very high multiples just to get to save a year or two of building out that functionality and that skill base themselves. And in other cases because assets are distressed and I think where you'll see that more and more is in the token world where assets are super distressed. Not all of them obviously, but some, some assets are becoming quite distressed or very cheap. And from a strategic perspective or a just a pure kind of financial perspective, it becomes very interesting to pursue a roll up strategy to increase your revenue and your, broaden your, you know, broaden your sort of target market. And, and it hasn't really been done in so far. Enzyme actually acquired a majority stake in Miso Finance an options protocol in December last year. But other than that I haven't seen it done a lot. But I think it's something that will really increase this year if we don't see, or if we continue to see depressed valuations in revenue generating protocols.
- [12:32]
Jen
You know, we, we saw in the headlines last year, and I really am just asking for your opinion here that Ripp made a bid for Circle. I'm wondering if you're able to kind of make sense of that for our audience. What does it tell us when Ripple, this company that has really been fighting for the space, that has been successful in fighting for the space for so long, creating a name, creating a community for itself, goes to acquire another huge company that's operating in a different, I guess, realm of the crypto markets. What does that tell you when we, when we start to develop narratives about where we're going where we're going to see mainstream adoption.
- [13:12]
Mona L Isa
I think it tells you that a lot of these bigger companies have maybe stopped growing as much as they were like five, six years ago. And therefore they're looking for the next leg of growth. And rather than building out that, you know, functionality or skill set themselves, they can just acquire that growth through M and A. And I think that's, if I were to guess, like, you know, a lot of the deal terms and stuff are not public, but if I were to guess, I would say that that's a large reason, you know, people are thinking, is the revenue that I'm making sustainable? Is it still, am I still going to be able to grow at this rate in five years? And if not, what do I need to do to continue to grow at this rate? And sometimes the answer will be, well, I need to, you know, I need to grow horizontally or vertically so that I can my targets, my customers can become more sticky or I can cross sell products to my clients or whatever. And therefore, as a result of this realization, it becomes strategically interesting to purchase assets in this market.
- [14:15]
Jen
Mona, thanks so much for joining Markets Daily today. It was a pleasure.
- [14:19]
Mona L Isa
It was a pleasure too. Thanks for having me. Jen.
- [14:24]
C
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