Noah: Crypto faces a crisis of faith demanding productivity, Theia’s long-only strategy amid limited token supply, and the rising importance of narratives in attracting capital | Empire

Key Takeaways

• Crypto is facing a crisis of faith, needing increased productivity to outperform traditional markets.
• Theia operates as a liquid fund, focusing solely on long positions without holding cash.
• Current market conditions have led to a concentrated investment strategy in key opportunities.
• The lack of new tokens in the market affects the attractiveness of investment opportunities.
• Historical crypto valuations have been rich, especially before 2021, due to high growth prospects.
• Crypto markets are evolving to resemble traditional markets as investor sophistication increases.
• Narratives play a crucial role in attracting talent and capital in today’s market.
• Valuation in crypto is influenced by traditional market pricing and investor interests.
• The pipeline of new tokens is limited, with many being of low quality.
• Liquid funds in crypto have generally underperformed compared to Bitcoin.
• The market is driven by quant funds and momentum traders rather than fundamental investors.
• Prediction markets are expected to become an important part of finance in the future.
• Apple Wallet is likely to evolve into a crypto wallet in the near future.
• On-chain demand for real yield assets is lacking, hindering their growth.
• Institutional capital needs to become comfortable with underwriting risks associated with on-chain assets.

Guest Intro

The guest featured on Empire is a notable figure in the crypto industry, providing insights into the evolving landscape of digital assets. With a background in managing liquid funds and a focus on long positions, the guest offers a unique perspective on market dynamics and investment strategies. Their experience in navigating the challenges of limited token offerings and the influence of traditional market metrics on crypto valuations makes their insights particularly valuable. This episode delves into the current state of the crypto market, the role of narratives in business growth, and the future of prediction markets.

Crypto’s crisis of faith and productivity challenges

• Crypto is experiencing a crisis of faith that could hinder its performance compared to traditional markets.

• I think that crypto is kind of in a not an existential crisis but in a crisis of faith where people need to become more productive otherwise it’s not going to outperform market that is in general like allocating resources more productively.

  — Noah

• The need for increased productivity in the crypto industry is crucial for its future success.
• The current sentiment in the crypto market reflects a lack of confidence and direction.
• Productivity improvements are necessary for crypto to remain competitive with traditional markets.
• The crisis of faith in crypto highlights the importance of innovation and efficiency.

• Crypto should be viewed as a long tail risk asset, requiring an understanding of traditional markets.

  — GuestName

• Understanding traditional financial markets is crucial for crypto investors to make informed decisions.

Theia’s investment strategy and market positioning

• Theia operates as a liquid fund that does not hold cash and focuses solely on long positions.

• Theia is a liquid fund and doesn’t hold cash so within that context we can maneuver but at no point will we ever hold cash or go short so we’re purely focused on being long only fundamentals.

  — Noah

• Theia’s unique investment approach differentiates it from other funds in the market.
• The focus on long positions reflects a strategic commitment to market fundamentals.
• Theia’s strategy is influenced by current market conditions and investment opportunities.
• The lack of new tokens coming to market affects Theia’s investment strategy.

• The current market environment has led to a concentrated investment strategy focused on a few key opportunities.

  — Noah

• Theia’s approach highlights the importance of adaptability in a rapidly changing market.

Historical and current valuation trends in crypto

• Valuations in crypto have historically been quite rich, especially before 2021.

• I probably side more with Santiago if I had to choose between the two views I think that valuations historically in crypto over the past five years have been quite rich.

  — GuestName

• The growth prospects in crypto were high before 2021 due to an underpenetrated total addressable market.

• Earlier than 2021 there was good reason for it and that the growth prospects were quite high tam was pretty underpenetrated.

  — GuestName

• Current valuations are influenced by a limited supply of investment opportunities.
• Crypto is somewhat overpriced due to an imbalance between demand and supply of investment opportunities.

• I think it’s fair to assume that crypto is somewhat overpriced just on the byproduct of there being too much demand for this stuff.

  — GuestName

• The hyper growth seen in crypto previously may be difficult to replicate due to supply constraints.

The evolving role of narratives in market dynamics

• Narratives are crucial for attracting talent and capital in today’s market.

• Our view is these are kinda compressing actually narratives matter more today because a lot of times they help you attract talent and you’re seeing this especially on the ai side where if you can kind of establish yourself with a narrative of hey we’re the company doing this and we’re the best company doing this that helps you attract one capital and then two talent.

  — GuestName

• A compelling narrative can help a company grow, but it must be backed by reality.

• You have to also be right… you do ultimately need to be to be right in sun sun and like an example for me is actually I was like a tesla bull for a long time… but in reality elon did an unviewable job.

  — GuestName

• The obsession with narrative could lead to narrative exhaustion in the startup ecosystem.

• We’ve almost all become so obsessed with this idea of narrative that it’s like if everybody’s creating a narrative all day long does it exhaust this idea of a narrative.

  — GuestName

• Narratives can significantly influence a tech company’s ability to raise capital and succeed in the market.

• I think that in the current market structure tech companies can go from zero to being a $10,000,000,000 tech company relatively quickly if they have the right products… being able to raise is partially a function of narrative.

  — GuestName

The importance of understanding traditional markets for crypto investors

• Understanding traditional financial markets is crucial for crypto investors.

• I think having a really good read on the public equity markets for financial services and just generally traditional fintech is important… I think a lot of the ways that we think about valuation is partially anchored to the way that traditional markets are priced.

  — Noah

• Valuation in crypto is influenced by traditional market pricing and investor interests.

• Having a view on how traditional markets are priced or what things traditional investors care about is important to our framework.

  — Noah

• Private market valuations must consider public market multiples.

• The public version of these companies trade at different multiples… we have to think through cool what exists today in the world what do we believe and like what’s a realistic multiple that this thing is gonna need to exit at.

  — Noah

• Crypto should be viewed as a long tail risk asset, requiring an understanding of traditional markets.

• I still view crypto as kind of like a long tail risk asset and so you kinda in my view have to at least have some framing of what’s going on in traditional markets.

  — GuestName

Challenges and opportunities in the current token market

• The pipeline of new tokens coming to market is limited and many are of low quality.

• A lot of the tokens still coming to market aren’t really high quality and so I think a lot of liquid funds right now have been ever since probably the 2025 spending more and more time on public equities.

  — GuestName

• The addressable market opportunity for liquid funds is growing, but not as quickly as desired.

• There is a somewhat narrow mandate that we’re exposed to the addressable market opportunity is growing but not growing as fast as we’d like it to.

  — GuestName

• Investing in public equities may offer a different volatility profile compared to liquid tokens.

• These public equities have a different volatility profile and to some extent do not have the same direct correlation.

  — GuestName

• Liquid funds need to diversify their investments beyond just liquid tokens to achieve better outcomes.

• You need to have some discretion over being in like fully invested in application tokens or l ones or being invested in something else that is a different risk profile because there’s benefits per fully diversification.

  — GuestName

The potential of prediction markets in finance

• Prediction markets will become an important part of finance in the future.

• I think that they’re gonna be an important part of finance in the future.

  — GuestName

• The current structure of prediction markets has significant issues, particularly with liquidity.

• I do think they have a issue today like the top of book liquidity issue is is real today and it’s not clear to me that the current structure is the final form of what these things will look like.

  — GuestName

• Prediction markets allow for speculation on individual variables, which can benefit investment strategies.

• I think there’s a lot of benefits to having ability to speculate on individual variables and other like non security like assets simultaneously.

  — GuestName

• Current prediction markets have significant structural issues that distort market behavior.

• You can’t rebalance into you know some other asset like the losing side literally goes to zero and so you don’t have a salvage value which I think also kinda distorts the market the way you do in with like normal spot or derivative markets.

  — GuestName

The future of financial technology and consumer applications

• The cost to build financial primitives is decreasing, leading to new opportunities in consumer applications.

• I think that companies that have good distribution the cost to build financial primitives their existing products however we kind of define that barrier is coming down.

  — GuestName

• Traditional financial institutions may struggle to pivot into crypto without cannibalizing their existing business.

• I think that playing long financials isn’t particularly interesting just because even if they’re able to pivot to doing something within crypto it’s probably going to cannibalize their business more than the upside of doing something in crypto.

  — GuestName

• Interchange fees on credit cards are expected to compress significantly over the next decade.

• I think for example like the interchange on credit cards is going to compress an order of magnitude over the next decade and there’s gonna be a lot of opportunity from that.

  — GuestName

• Apple Wallet is likely to evolve into a crypto wallet in the near future.

• I think the apple wallet is probably the best positioned wallet in crypto even though it’s not a crypto wallet today… I feel pretty confident that it will be at one point in the in the not so distant future.

  — GuestName

The role of smart contracts in transforming finance

• Smart contracts can reduce costs in financial transactions, making previously unprofitable businesses viable.

• Smart contracts rip out a lot of costs in in that area and and it makes businesses that might otherwise not have been profitable or or possible like very much so at and at larger scale.

  — Noah

• On-chain demand for real yield assets is lacking, which is hindering their growth.

• The on chain demand has not been there in terms of like longer term right you have a little bit of mercenary capital who says hey I need this yield and I’ll do it for the three months and these this is what I want and like that I think is holding back is holding back like any wave of these types of assets coming on chain.

  — Noah

• Institutional capital needs to become comfortable with underwriting risks associated with on-chain assets.

• We need a little bit of that kind of institutional capital to get comfortable saying okay this is being done like in the background and I’m just interested in being able to underwrite the actual risk that I’m used to underwriting.

  — Noah

• Bridging the gap between code and legal aspects is essential for bringing high-quality assets on-chain.

• One of the issues that comes from trying to do this is the bridging of the code versus the legal aspects.

  — GuestName