Source: "When Shift Happens"

Compiled by: Felix, PANews

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

PANews has compiled 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 think we are at a turning point now. There are several signs to prove this: First, you have to see market sentiment truly bottom out before it can reverse, just as in a bull market when sentiment must reach euphoria to peak. Second, when bad news no longer leads to market declines, that is a sign of a turning point; likewise, when good news no longer causes the market to rise, it's also a turning point. Last month we experienced significant bad news, such as major hacks, but this did not trigger mass sell-offs, which is a huge signal. Additionally, application adoption rates have been increasing, creating a disconnect between price and fundamentals. So, I believe this is a perfect storm.

Host: Everyone knows you and Multicoin are strong bulls on Solana. Have you changed your view on Solana? How do you allocate positions when you say you are optimistic about both Solana and Hyperliquid?

Tushar: This is a matter of time dimension. I still believe Solana is the right technological architecture for the internet capital market; you need an open-source chain that is permissionless to integrate everything into one platform. I remain optimistic about its performance and architecture. But at the same time, we see derivatives 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 facilitate spot trading of tokenized securities, but Hyperliquid is clearly ahead in derivatives. Instead of being an extremist, it’s better to think probabilistically and hold both. I am not a "maximalist" for any asset and will not stubbornly advocate a specific position or viewpoint.

Host: How do 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 shares on Solana. The core difference here is "trustworthy neutrality." Solana has a level of trustworthy neutrality that Hyperliquid lacks. This is a trade-off: Hyperliquid sacrifices trustworthy neutrality and has opaque validator nodes for better performance, and users accept this because they can verify the chain and see real-time solvency of the exchange. On the other hand, Solana is not only client-side open-source, but it also has an extremely strong validator community, which certainly comes at a cost. Traditional financial institutions place a high premium on trustworthy neutrality; Goldman Sachs cannot settle on a chain of its competitor 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 the position sizes? Is it fifty-fifty?

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

Host: Looking ahead to 2026, which asset seems to be the most obvious opportunity to you?

Tushar: An extremely obvious choice for me is Zcash (ZEC). Despite having a relatively smaller position due to liquidity and market cap constraints, Multicoin has already accumulated a significant proportion of the total supply. I like its momentum, use cases, and community; it reminds me of early Bitcoin. When I saw it appreciate last year, I communicated with many early supporters of it and found that even when the price fell, they still held onto their beliefs, indicating this is not a short-term speculative game. Additionally, Zcash lacks fundamentals (no cash flow or income), which means its value completely relies on people's consensus, thereby granting it a larger upside potential; as a store of value, the larger its size, the better.

Host: What does Zcash represent to you?

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

Host: For an asset like Zcash that has no income, how do you value it?

Tushar: For assets with business income, I look at their cash flow and assign a price-to-earnings ratio as a target price. But for an asset like Zcash, I consider its market cap ranking. Where 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 changes (such as Bitcoin at $80,000 or $200,000).

Host: For such assets, 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 can't control their emotions. Many fund managers attempt to buy high and sell low, only to be slapped from both sides. I intensely dislike technical indicators, drawing a few lines only for the real world to crash when a piece of news (like geopolitical conflict) occurs, rendering the charts 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, predictions must look forward. You need to think about what the key drivers of the business are, what claims token holders have on income, and then see what options are available in the market. Additionally, consider execution risk and factor it into the discount rate (for example, Ethereum carries more risk than Solana because it is longer-standing and more decentralized). These figures are just reference metrics; ultimately, qualitative judgments need to be made.

Host: How do you choose the timing for purchases? How did you precisely time the bottom for HYPE?

Tushar: Attempting to time the bottom precisely is not a repeatable skill. My framework is a "third method": If I want to invest 100 bucks, I will immediately buy a third; then, within a set period (like one to two months), I will dollar-cost average the second third; the final third is reserved for maneuvering, and during the dollar-cost averaging period, if there’s a significant drop (like a 10% drop in a single day), I will buy the dip. This greatly reduces the regret felt from missing out.

Host: Two major events have occurred in recent weeks. The first was the Zcash code vulnerability incident, leading to a price crash, but you instead 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 using AI tools to check the code and fixed it. The market panicked, fearing that someone had infinitely minted tokens. However, the transparent addresses were unaffected, and the privacy pool's "turnstile" mechanism (which records the total funds entering and exiting) showed that no hackers had significantly withdrawn funds. I didn’t take any action on the day of the event (I don’t like to trade when emotions are highly volatile and liquidity is low). After observing for a few days and confirming that no hackers exploited the vulnerability, I believed this to be irrational market panic, triggering a chain of stop-losses, so we significantly increased our position in Zcash. The team will launch a new pool called Ironwood, which has undergone "formal verification" in July, and I regard this as a mere false alarm.

Host: The second event is that Multicoin recently released a report forecasting HYPE will reach $319 within two years. You hold a large position in HYPE; do you think others perceive you as merely "shilling"? Are the conservative assumptions inside too aggressive?

Tushar: We do hold a position, but everyone should look at our reasoning and draw their own conclusions. Our set assumptions are not aggressive:

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

Second, DEX occupies 32% of the derivatives market share: having increased from nearly zero in 2022 to 16% now, doubling to 32% in two years aligns with trends.

Third, Hyperliquid maintains a 30% share of decentralized derivatives: this is also conservative, as trading volume data is prone to inflation (many other exchanges engage in wash trading), but currently, Hyperliquid holds 59% of the real open interest (OI) in the entire network, which is hard to falsify. As other platforms stop subsidy schemes, Hyperliquid's actual share should increase.

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

Host: Has the bottom of the market arrived?

Tushar: It is extremely difficult to predict the exact bottom, but I believe the price low may have already passed. Excluding macro black swan events (like an escalation of war between the US and Iran), we have witnessed the "extreme apathy" phase. Bad news no longer leads to market declines, weak hands have left, and what remains are the true believers. However, this does not mean it will immediately take off in a "V" shape; the market may undergo a period of consolidation and apathy, needing time to build a new narrative.

Host: Can you elaborate on the advantages of investment?

Tushar: If you don't have an advantage, you should buy index funds and go to the beach. Investment has four sources of advantage. One is channel/information advantage (others will call you with insider info); second is analytical advantage (you understand the asset better than others); third is behavioral/psychological advantage (you know and can control your emotions, which is the hardest); fourth is structural advantage (like long-cycle capital structures). Our investment in Zcash primarily stems from a strong behavioral psychological advantage (seeing the market extremely pessimistic while holders remain steadfast in their beliefs), along with some channel information advantage.

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

Tushar: Ethena, along with Aave and Morpho, operates in the same lane: matching lenders seeking yields with borrowers looking for leverage. We hold several projects in this sector (including Kamino on Solana), as the lending market has clear economies of scale, and liquidity will concentrate towards the leaders.

Host: To what extent do you assess the founders?

Tushar: We place great importance on the founders. Our evaluation framework includes three multipliers. One is the total market size in a few years; the second is long-term profit margins (whether there are economies of scale to prevent profits from being consumed by competition); the third is execution risk. The founder of Ethena, Guy Young, is one of the most capable founders in the DeFi space, significantly lowering execution risk and increasing valuation potential.

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

Tushar: For our fund, "realizing" means converting assets into Bitcoin. When the market is extremely euphoric, we sell high-risk assets for Bitcoin to lower beta risk; when the market drops, we buy the projects we like with Bitcoin. We only sell in three scenarios: first, we find a better asset; second, the investment logic is disproved; third, the market valuation is excessively euphoric, overextending future expectations for years. Since we commit to operating our entire fund, our "cash" is Bitcoin.

Host: What are your thoughts on Ethereum?

Tushar: It is difficult to assess. For the past 6 or 7 years, they have been telling everyone to use L2 for scaling; now they suddenly want to raise the gas limit back to L1 for scaling. No one can clearly state 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 great follower and not a good leader. Although spot trading has lost to Solana and derivatives have lost to Hyperliquid, the market cap resilience of Ethereum still surprises me. The only reasonable explanation is that people consider it a “store of value asset” or a better Bitcoin.

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

Tushar: I was also surprised by his departure, but I respect his decision. This prompted me to re-evaluate my motivations. I do not work under the "live every day like it might be the last" framework, but rather ask myself: "If I have another 10 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 infrastructure of future capital markets that will replace the currently outdated systems. When Zuckerberg rejected Yahoo's $1 billion acquisition years ago, he said, "If I took the $1 billion, I would just go start another social media company; why would I leave this one?" This strengthened my belief.

Related reading: Detailed overview of the Multicoin report: Hyperliquid (HYPE) has five-fold upside potential

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