Raoul Pal & Jamie Coutts: Undervalued Crypto Chains Hyperliquid & Tron

Valuing Crypto Chains: Network Effects vs. Revenue

• 💡 The discussion contrasts valuation methods for smart contract platforms, moving from Metcalfe's Law to traditional revenue-based models.
• 🚀 Hyperliquid is highlighted as a platform potentially valued on network effects rather than its current revenues, similar to early Amazon.

Undervalued Chains: Hyperliquid and Tron

• 📊 Hyperliquid and Tron are presented as the cheapest smart contract platforms when measured by fees or revenues, trading at significantly lower multiples than Solana and Ethereum.
• ⚠️ The market appears to be pricing in the risk associated with Tron, while Hyperliquid's valuation is shifting towards Metcalfe's Law as it grows into a network with other applications building on it.

DeFi Protocols and Traditional Investment

• 💰 High-quality DeFi protocols are discussed as potentially mispriced relative to smart contract platforms, trading at multiples between 5x and 20x fees.
• 📈 Traditional fund managers like Franklin Templeton are noted for exploring these protocols, attracted by their growth and reasonable multiples, a strategy akin to 'Growth at a Reasonable Price' (GARP).

Valuation Strategies in Crypto

• 🧠 A justifiable valuation thesis can be built around these protocols, appealing to hedge fund managers who may not fully grasp Metcalfe's Law.
• 🔑 Despite their strengths, applications like Uniswap may underperform Layer 1 blockchains in terms of overall returns.