Crypto Weekly Roundup: Rotation Games

Disclaimer: This post contains the thoughts of a medium stupid person (me) on crypto, a volatile and risky asset class. It is not investment advice, and you should do your own research. All information is for educational purposes only. Please don’t take risks with money you’re not willing to lose.

Last week’s newsletter feels like a lifetime ago. I’ve gone through every emotion from the initial Solana pump to the subsequent rotations to $TIA and $AVAX, to the widely called-for dump we’re now working through.

The market has been quite clear about one thing though. It is Solana season.

Celestia ($TIA) caught a turbo bid over the last few days as well, but people tried to will a clear rotation into a few different ecosystems since Solana briefly stalled out, and mostly they were just wrong.

You can see a large segment of Crypto Twitter continue to assure themselves that the FTX overhang will dump Solana back down to the same level as their bags any day now. I think it’s going to be quite a painful cycle for those people.

We’ll get into the deep dive on Genesys Go’s Shadow ($SHDW) down below, but the Solana ecosystem is just coming to life, and comps to Ethereum eco-coins are impossibly undervalued if you’re a believer in the Solana thesis that paying $100 to cancel an Opensea listing isn’t the pinnacle of blockchain technology. Therefore the most obvious play of the first part of the cycle is betting on the Solana ecosystem to catch up. Simply put, the cope from ETH maxis will be glorious.

View of the Market:

Everything continues to move in the right direction. Just yesterday inflation came in significantly lower than expected at 3.2% YoY, and rates collapsed again, down over 50 bps from the top a few weeks back.

The market is now pricing in the first cuts from the Fed in June, moved up from July. Stocks ripped on the news, and it seems all but certain the Fed is done hiking this cycle.

For once in my life, I nailed a macro take.

The Bull Case for $SHDW:

Now to the good stuff. I’ve been accumulating some $SHDW for the past week or so. I own 40k $SHDW as of the time of this writing. I’ve been tweeting a bit about it and wanted to lay out the full bull case for the people who didn’t have enough Solana friends during the bear market

$SHDW or Shadow Token is the native token of Genesys Go, a dePIN (short for Decentralized Physical Infrastructure Network) provider focused on “scalable object storage designed for Web3 builders.”

The TLDR of how to think about them from a markets perspective is basically “Filecoin on Solana”. The idea is to have “decentralized storage” instead of utilizing traditional services like AWS S3, or in some cases Google Big Query. It allows devices as small as smartphones to run SHDW nodes to help provide the decentralized storage space and earn the token from the end user (in this case various apps on Solana) in the process.

All of that is sort of technical mumbo jumbo, but one simple example of a use case would be NFTs. Right now, the token representing an NFT is decentralized, but the actual image really isn’t in many cases. It’s often just a link to the jpeg on an AWS server. The image itself isn’t stored in any kind of decentralized manner. The idea for Genesys Go (one Filecoin and Arweave have already built into Ethereum) is that the image could be stored in an immutable way that is not reliant on Amazon’s servers to produce the image for the end user.

The actual long-term use cases would stretch far beyond hosting jpegs of cute penguins, but that’s the concept in very basic terms. You can imagine the value of immutable data stored on-chain as crypto apps expand and develop.

The tech is interesting, but the strategy and execution to date is the main reason it’s developed a sort of cult following in the Solana community. The launch was one of the best executed I’ve seen in crypto, even if it fell victim to market cycle timing.

They first launched an NFT project in late 2021 as an initial fundraising method. The Shadowy Super Coder DAO could be staked for a year to earn $SHDW, followed by the official launch of the token in January 2022 in their IDO (initial dex offering).

An IDO is sort of like an ICO, except it swaps the middle letter.

The actual difference is it goes through a DEX instead of just sending ETH to a random address and hoping you get some new coin at a later date.

It actually traded reasonably well until it finally fell apart with the broader market. It also had a near death experience with the collapse of FTX and most of the liquidity pools were reset in December ‘22.

The tokenomics are really well designed. The team burned about 30 million of the 200 million total supply, and it is currently about 85% unlocked, with the full vesting to the NFTs complete in the next few months.

It’s also designed to utilize the token in various ways, including paying for storage, and incentivizing node operators.

Essentially there are two tiers to access the storage services.

For Mutable Data Storage: 1GB = $0.05 USD per year

For Immutable Data Storage: 1 GB = 0.25 SHDW

They’ll be launching their D.A.G.G.E.R. network soon, which will allow decentralized operators to earn SHDW from devices as simple as their mobile phones in exchange for helping to provide the actual decentralized storage space.

Since this bull cycle kicked off at the end of September it’s been trading as a high beta $SOL, which makes sense as its usage should scale directly with the network.

It’s also quite exciting for the same reason that a lot of Solana is exciting right now. It has direct comps to existing projects on Ethereum, and on that relative basis, it’s very undervalued.

Filecoin topped around $12 billion last cycle, but even if SHDW only gets to FIL’s current level, it would have to do about a 35x from here. At $50 million total market cap, it’s an extremely cheap way to bet on a really incredible team that has been executing like crazy for nearly two years through the toughest times in crypto.

It’s now my 4th biggest bag so obviously I like them, but more than that this exact model of fundraising and execution is the reason I began to believe so strongly in crypto in the first place. This is the future of innovation and value capture, and Genesys Go & $SHDW are the ideal example of what it’s supposed to be.