👀 The next Solana

GM everyone. This is 2036.

So far in this cycle, the winning trade has been buying Solana and its memes.

Look at the returns from this year alone: almost everything except for SOL and memecoins is in the red.

Now - I expect Solana will continue outperforming for the rest of the cycle as it becomes the widely accepted no-brainer trade.

But on its way to becoming the consensus trade, Solana’s outsized future returns will slowly fade.

And trades that are largely ignored today will go on to outperform even Solana.

You see, every cycle has both:

• an obvious winner most people ignore for too long because of the anchoring of past cycles

• a non-obvious winner that blows everything out of the park

Two cycles ago, Bitcoin was the obvious winner, but in terms of returns, ETH took the crown.

Last cycle, ETH was the obvious winner (up 50X), but Solana was where the money was at (up 100X).

In this cycle, Solana is the obvious winner, but people anchored in BTC or ETH from past cycles still ignore it.

So that begs the question: what’s the non-obvious winner this cycle that will outperform even Solana?

That question has been the talk of the town recently, and I think there are 2 ways to answer it.

1/ Extrapolate the past into the future 🔮

Every single cycle, the best risk-adjusted returns have been found in Layer 1s. Bitcoin, ETH, Solana, Avalanche, etc. are all Layer 1s.

Every cycle has new Layer 1s. And those are the ones that, on a risk-adjusted basis, tend to do best.

This cycle - the thinking goes - is no different.

In every cycle, these winning Layer 1s follow a similar price pattern:

• launch and do 5-10X

• drop -80%

• soar 100-200X as the bull market intensifies

Here’s the thing: the layer 1s of this cycle - TIA, SEI, SUI, etc. - are exactly on that path.

They’re all down -80% from their peak in March…

Will one or several of them pump 100-200X from here?

It’s possible, but before we get too excited, let’s look at the second approach…

2/ Discarding old narratives and building your thesis from the ground up 🏛️

You see, ETH became massive because it was so vastly different from Bitcoin.

And Solana took off because it was 100X cheaper and 10X faster to use than Ethereum.

But the new Layer 1s today are not 100X better than existing chains.

The closest one is Sui, a Layer 1 built by ex-Facebook engineers. It is faster than Solana, but at this point, I’m not 100% convinced that the incremental speed matters enough.

Sure, it could be useful in some applications, like gaming—one of my highest-conviction late-cycle crypto bets.

But an upcoming Solana upgrade could compete with that.

Right now, no one is using these Layer 1s seriously. There aren’t enough developers, apps, and users.

And many of them are already trading at $10 billion + valuations that make it hard to justify further 100X returns.

In other words, if no chain can compete with Solana or ETH, there’s no inherent reason for it to outperform.

Now - I’m personally inclined to go with this approach.

But of course, this could be a midcurve take that I’ll regret later.

Remember, prices drive narratives.

If TIA/SUI/SEI do a 10X from here, new narratives will form around them that will convince even more people that they will kill Solana/ETH, etc.

Remember, no one wanted to buy Solana at $1, but at $200 - it was the greatest invention since sliced bread 🍞

Maybe the most insane returns over the next 6-18 months will come from buying the new Layer 1s today, which are currently down 80%. Maybe every cycle is indeed the same.

Who knows.

In any case, I’m not sure there’s an obvious new winning Layer 1 just yet. So if you’re going to take the bet, I think it makes sense to diversify.

TIA, SUI, SEI, and APTOS are probably good places to start.

As narratives emerge and prices move, I’ll keep monitoring the Layer 1 trade closely.

And as always, I’ll keep you in the loop.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.