Tushar Jain and Pranav Kanade from Multicoin Capital join the Empire podcast to discuss crypto market cycles, valuations, and the intersection of AI with blockchain technology. Tushar, a four-cycle veteran, believes the crypto phoenix is about to hatch from its ashes, while Pranav brings institutional allocation perspectives from recent investor meetings.

The conversation explores the fundamental disconnect between value capture and market capitalizations in crypto, with applications generating 60% of actual value but commanding minority market share. They examine specific protocols like Hyperliquid, Helium, and Aave while discussing how AI will reshape both crypto adoption and traditional finance.

The discussion extends beyond crypto to macro themes, including the Citrini research report on AI's economic impact, portfolio positioning strategies, and the importance of maintaining diverse identities as investors. Both guests share insights on technical analysis adoption, AI tool usage, and the evolution from narrative-driven to cash flow-focused crypto investing.

Phoenix Rising: Where We Are in the Crypto Cycle

Tushar believes "we're at the point where the Phoenix has already burnt down and is about to hatch" with the new crypto cycle emerging.

Unlike previous bear markets, there's "basically a 0% chance that the industry is over" due to engagement with largest asset managers, regulators, and tech companies.

Pranav observed 70% of allocators at iConnections had frameworks for understanding blockchains, versus 20% wanting to "YOLO" in 2023.

The market shows apathy rather than hate - "the opposite of love is not hate, it's apathy" - indicating potential bottom formation.

The Great Valuation Disconnect: Apps vs L1s

Applications capture 60% of crypto value but have minority market cap - "That to me looks like an opportunity. That is very clearly an opportunity" - Tushar.

Professional investors now focus on cash flows as "the discounted value of cash flows" becomes the fundamental truth driving repricing.

Top revenue generators include Hyperliquid at $800M annually, Solana at $720M, with most trading at far lower price-to-sales ratios than traditional SaaS.

"The pair trade of the next cycle" is applications versus L1s as sophisticated investors replace retail momentum traders.

AI Agents Will Choose Crypto Rails Over UX

AI agents will prefer "the most efficient way" to transact using stablecoins on blockchains, bypassing traditional payment UX like Visa cards.

The future resembles the movie Her where "you're going to probably have something that's like an agent app store rather than pure app" interfaces.

Specialized agents outperform generalized ones - "an agent where you say, your focus or job is to be the best YouTube content creator" works better.

Stablecoin transfers deliver "almost any value to a blockchain because they have to be essentially free" - revenue comes from trading and DeFi.

Protocol Cash Flows and Value Capture Reality

Helium now generates positive cash flow from operations with "AT&T paying to offload data onto their network" at tens of thousands daily.

Hyperliquid makes "hundreds of millions of dollars a year in annualized cash flow" while Aave generates "tens of millions" annually.

Token buybacks work because "the purpose is to return capital to its investors" regardless of timing - "that narrative is just a bunch of crap".

Markets hate uncertainty - Helium's dual cap table structure causes undervaluation despite strong fundamentals and regulatory clarity.

The Citrini Report and AI Economic Disruption

The Citrini research suggests massive AI-driven job displacement, but Tushar argues it ignored "the scale of monetary and fiscal policy response."

AI creates deflationary pressure, enabling "tons of stimulus without spiking inflation" and potentially massive asset price support.

"You can't automate away fake jobs" - many positions exist for political reasons like union labor requirements, not productive necessity.

Hyperscaler stocks are down year-to-date despite increased CapEx guidance, suggesting market skepticism about AI spending sustainability.

Portfolio Positioning for an AI-Driven World

Tushar's PA includes cash for deflation protection, "moonshot deep tech bets," nuclear investments, and real estate because "AI is not making any more land."

Pranav focuses on "having liquidity allows you to potentially take advantage" of market dislocations while making long-duration moonshot bets.

Investment themes include space travel, longevity, and "in-person experiences" as humans seek differentiation in an AI-abundant world.

"Not owning things that you think are going to do poorly is enough to generate outperformance" in passive investing environments.