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Why Solana DeFi Is Crypto's Biggest Opportunity | Ansem

By Lightspeed

Published on 2023-08-08

Crypto trader Ansem explains why Solana DeFi is poised for massive growth, outlines his bullish thesis on SOL, and shares insights on the future of blockchain ecosystems.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

The Rise of Solana DeFi

Solana's decentralized finance (DeFi) ecosystem is emerging as one of the most exciting and potentially lucrative opportunities in the crypto space. According to renowned trader and crypto influencer Ansem, Solana DeFi is poised for massive growth and adoption in the coming months and years.

In a recent podcast appearance, Ansem laid out his bullish thesis on Solana and explained why he believes it represents such a compelling opportunity for investors and developers alike. As someone who has been deeply involved in the Solana ecosystem since 2021, Ansem has unique insights into its evolution and potential.

Why Solana DeFi is Undervalued

One of Ansem's core arguments is that Solana DeFi is currently significantly undervalued compared to Ethereum DeFi. He points out that while Ethereum DeFi protocols like Uniswap, Aave, and Maker have grown into multi-billion dollar projects, Solana has yet to see the emergence of comparable DeFi giants.

"Solana DeFi hasn't had that emergence yet," Ansem explains. "The first cycle for Solana was basically just the token. SOL went parabolic, but all of the early apps on Solana were not - essentially nobody on Solana made money off any of the early DeFi apps."

This creates an asymmetric opportunity, in Ansem's view. The Solana ecosystem has matured significantly over the past two years, with a growing developer community and improving infrastructure. Yet the valuations of Solana DeFi protocols have not caught up to reflect this progress.

The Maturing Solana Ecosystem

Ansem highlights how much the Solana ecosystem has evolved since 2021:

"I think Solana has done that over the past couple of years, but now you have a ton of really strong DeFi teams that don't have tokens and are like launching their incentive programs to try and get users on their platforms."

He points to projects like Drift and Marginfi as examples of high-quality Solana DeFi protocols that are seeing significant user growth, despite the bear market conditions. Drift, for instance, has grown from around 1,000 monthly users to 2,500 in recent months.

This organic growth is happening even as public sentiment around Solana remains quite negative in the aftermath of the FTX collapse. For Ansem, this divergence between improving fundamentals and poor sentiment creates an ideal setup for investors.

Solana's Technical Advantages

A key pillar of Ansem's Solana thesis is the blockchain's technical capabilities, particularly its high throughput and low transaction costs. He argues that Solana is simply better equipped to handle the demands of a global-scale DeFi ecosystem compared to Ethereum's base layer.

"I want to build any global application in my head. I want to build something for 10 million plus people that are going to be using every day. And just the way that Solana is architected, it just makes the most sense," Ansem states.

He points out that even Layer 2 solutions on Ethereum struggle with scalability during periods of high demand, whereas Solana's base layer can handle far greater throughput natively.

Overcoming Past Challenges

Ansem acknowledges that Solana has faced significant technical challenges in the past, particularly around network congestion and outages. However, he argues that many of these issues have been resolved through upgrades in 2022, though public perception has not yet caught up to this reality.

"I think what people miss is a lot of the upgrades that happened during mid 2022 on Solana that kind of made these congestion issues not as much of a problem before," he explains.

This creates another asymmetric opportunity, in Ansem's view. Solana has made major technical strides, yet is still trading at similar price levels to early 2021 when it faced far more significant growing pains.

The Importance of Community

While Ansem is bullish on Solana's technical merits, he places equal importance on the strength of its community and ecosystem. He argues that this "community aspect is one of the most important pieces of building out an L1 blockchain."

Solana has a significant advantage in this regard, having had two years to build out its community of developers, users, and supporters. Ansem contrasts this with newer L1 competitors:

"Teams like Sui, Aptos, I think Mina has another good one, say they're going to have to do a lot of legwork on that part as far as building out community, building out their developer community, just getting people excited about their ecosystem."

This community advantage creates a moat that will be difficult for newer chains to overcome, in Ansem's view.

The Next Six Months are Critical

Ansem believes the next six months represent a crucial period for crypto, and Solana in particular. He argues this may be the last opportunity for retail investors to gain outsized exposure to the asset class before institutional involvement drastically changes market dynamics.

"This is the last bear cycle, in my opinion, where you kind of have that outsized opportunity as a retail trader, retail investor, to get into a really early asset class that has outperformed everything else in the past decade," Ansem states.

He points to moves by major financial players like BlackRock to launch spot Bitcoin ETFs as a sign that crypto is on the verge of much greater institutional adoption. Once this occurs, Ansem believes the extreme volatility and outsized returns of past crypto cycles may diminish.

Solana's Potential to Outperform

Given this backdrop, Ansem is particularly bullish on Solana's potential to outperform larger crypto assets like Ethereum in the coming bull cycle. He argues that Solana's much smaller market cap gives it more room to grow explosively as the broader crypto market expands.

"If the ecosystem doesn't die, it's very unlikely that you have a 250 billion dollar asset outperformed something that's 10 billion dollars," Ansem explains, referring to the relative market caps of Ethereum and Solana.

This dynamic creates an attractive risk-reward profile for Solana in Ansem's view, especially given its technical capabilities and maturing ecosystem.

The Need for Honesty in Crypto Discourse

While Ansem is clearly bullish on Solana, he emphasizes the importance of honest and balanced discourse around different blockchain ecosystems. He criticizes the tribal mentality that often leads supporters of one chain to unfairly attack others.

"I'm supportive of everybody in crypto that's building something to bring the user in the crypto and like move the space forward. I'm fully in support of all that," Ansem states. "I support Ethereum, I support Cosmos, like all, all the rollups. I like all those teams."

However, he also believes it's important to be candid about the strengths and weaknesses of different chains. Ansem argues that many in the crypto space intentionally obfuscate or misrepresent technical realities to pump their own bags, which he sees as detrimental to the industry as a whole.

Onboarding the Next Wave of Crypto Users

Looking beyond trading opportunities, Ansem is focused on how crypto can expand its user base and bring in people who are completely new to the space. He believes projects that can onboard new users in an intuitive way represent some of the most exciting opportunities in crypto.

Ansem points to Drift House, a Solana-based NFT platform, as an example of effective user onboarding:

"They do drops with art, but instead of doing mints, they do free drops for people every week. And they give out all these art. So people who subscribe to different artists on their platform. And then you can tip the artists if you really like their work and then share and send other people."

This frictionless approach has allowed Drift House to onboard hundreds of thousands of new wallets to the Solana ecosystem, many of whom go on to explore other Solana applications.

The Potential of Crypto Gaming

Ansem remains bullish on the potential of blockchain gaming, despite the struggles of many early attempts in the space. He believes there's still a major opportunity for simple, engaging games that incorporate crypto elements in a natural way.

"I don't think anybody's really hit it hard yet. You need something that doesn't really have to be all that complicated," Ansem explains. He points to viral mobile games like Flappy Bird as examples of the type of simple but addictive gameplay that could work well with crypto integration.

The Role of Twitter in Crypto

Twitter plays an outsized role in the crypto ecosystem, serving as the primary hub for information sharing, community building, and narrative creation. Ansem, who has been active on the platform since 2012, believes it's an invaluable resource for anyone involved in crypto.

"There's no other place on the internet where you can get such a large concentration of alpha information, free information, people, like all these different types of discussions only live there on Twitter," he explains.

However, Ansem also acknowledges the darker side of crypto Twitter, particularly the prevalence of anonymous accounts that engage in toxic behavior. He advises users to be discerning and focus on genuine connections rather than getting caught up in the noise.

Maintaining Balance in Crypto

While Ansem is clearly passionate about crypto and bullish on its future, he emphasizes the importance of maintaining balance and perspective. He cautions against becoming overly obsessed with crypto at the expense of real-life relationships and experiences.

"Keep your balance between crypto and whatever you got going on in life," Ansem advises. "During bull markets, you're going to make a ton of money if you are online all the time 24 hours, like not sleeping, not getting good rest. But the issue with that is when market turns, it's a lot more difficult for you to unplug and then go back to whatever else you were doing."

This balanced approach has likely contributed to Ansem's longevity and success in the volatile world of crypto trading and investing.

The Future of Blockchain Ecosystems

While Ansem is particularly bullish on Solana, he also has interesting perspectives on other blockchain ecosystems. He sees potential in the Cosmos ecosystem, for instance, particularly its focus on interoperability and customizable application-specific blockchains.

Ansem also believes that Ethereum layer 2 solutions like Optimism and Arbitrum will play an important role in scaling the Ethereum ecosystem. However, he questions whether their current valuations fully account for challenges around centralization and scalability.

Conclusion: A Unique Moment of Opportunity

In Ansem's view, the current moment represents a unique confluence of factors that make Solana DeFi an incredibly compelling opportunity. The combination of technical progress, ecosystem maturity, depressed valuations, and impending institutional adoption creates an asymmetric setup for potential gains.

However, he emphasizes that this opportunity may be fleeting. As the crypto industry matures and attracts more institutional capital, the days of explosive 100x gains may become increasingly rare. For retail investors and traders willing to do their research and take calculated risks, the next six to twelve months could be a critical window of opportunity in the Solana ecosystem and the broader crypto space.

Ansem's insights offer a valuable perspective for anyone looking to navigate the complex and rapidly evolving world of crypto. While his bullish stance on Solana is certainly noteworthy, perhaps even more valuable is his emphasis on genuine engagement, balanced living, and honest discourse within the crypto community.

Facts + Figures

• Solana DeFi protocols like Drift have grown from around 1,000 to 2,500 monthly users recently

• Marginfi on Solana has reached around 5,000 monthly users

• Drift House, a Solana NFT platform, has onboarded 700-800k wallets, with 250k going on to use other Solana apps

• Solana's TVL is currently around $300-320 million, about 3% of staked value compared to 60% for Ethereum

• If Solana's TVL ratio increased to 30% (half of Ethereum's), TVL would jump to $3 billion

• Solana traded around $37-38 before the FTX collapse, then fell 80% from its highs

• Ansem believes Solana should be valued at around $40 based on fundamentals without the FTX impact

• BlackRock alone manages $10 trillion in assets, while the entire crypto market cap is around $2 trillion or less

• Bitcoin's previous all-time high was around $20k, before reaching $69k in the last cycle

• Ansem predicts less parabolic moves for major assets like Bitcoin in future cycles as the market matures

• Solana had 4 outages in 4 months previously, but only 1 in the past 9 months after recent upgrades

• Ethereum's market cap is around $250 billion, while Solana's is around $10 billion

• Kobe's investment strategy suggested 40-50% allocation to Bitcoin, 30% to mid-cap alts, and smaller allocations to riskier assets

• Ansem predicts 14 out of 20 points in a hypothetical 5-on-5 basketball game with crypto people

Questions Answered

Why is Ansem bullish on Solana DeFi?

Ansem is bullish on Solana DeFi because he believes it represents an undervalued opportunity compared to Ethereum DeFi. While Ethereum has seen the emergence of multi-billion dollar DeFi protocols, Solana's ecosystem is still maturing and many strong projects don't yet have tokens. This creates potential for significant growth as the ecosystem develops further and valuations catch up to fundamentals.

What technical advantages does Solana have over other blockchains?

Solana's main technical advantages are its high throughput and low transaction costs. Ansem argues that Solana's architecture makes it better suited for building global-scale applications that can support millions of daily users. Unlike Ethereum's base layer or even some Layer 2 solutions, Solana can handle far greater transaction volume natively without significant congestion or high fees.

How has the Solana ecosystem evolved since 2021?

Since 2021, the Solana ecosystem has matured significantly. There is now a much larger and more active developer community, stronger DeFi teams, and improved infrastructure. Ansem notes that many of the technical issues Solana faced in the past, such as network congestion and outages, have been largely resolved through upgrades in 2022. However, public perception has not yet caught up to these improvements.

What role does community play in blockchain success?

Ansem emphasizes that community is one of the most critical factors in the success of a blockchain ecosystem. He argues that Solana has a significant advantage in this regard, having had two years to build out its community of developers, users, and supporters. This community creates a moat that will be difficult for newer competing chains to overcome, even if they have strong technical capabilities.

Why does Ansem believe the next six months are crucial for crypto?

Ansem sees the next six months as a critical period because he believes it may be the last opportunity for retail investors to gain outsized exposure to crypto before increased institutional involvement changes market dynamics. With major players like BlackRock moving to launch Bitcoin ETFs, Ansem predicts that crypto will soon become a more mainstream asset class, potentially reducing the extreme volatility and outsized returns of past cycles.

How does Ansem view the potential of blockchain gaming?

Despite the struggles of many early blockchain games, Ansem remains bullish on the potential of crypto gaming. He believes there's still a major opportunity for simple, engaging games that incorporate crypto elements in a natural way. Ansem points to viral mobile games like Flappy Bird as examples of the type of addictive gameplay that could work well with crypto integration.

What advice does Ansem give for navigating crypto Twitter?

Ansem sees Twitter as an invaluable resource for crypto information and networking, but advises users to be discerning. He recommends being genuine in interactions, responding to people consistently, and focusing on building real connections. Ansem also warns about the prevalence of toxic behavior from anonymous accounts and emphasizes the importance of maintaining a balanced perspective.

How does Ansem approach risk management in crypto trading?

While the transcript doesn't directly address Ansem's risk management strategies, he emphasizes the importance of maintaining balance between crypto involvement and other aspects of life. This balanced approach likely extends to his trading, helping him navigate the extreme volatility of crypto markets. Ansem also stresses the value of being early to new projects and narratives, which could be seen as a form of risk management through asymmetric betting.

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