Cody Poh: Analyst of the Month

What is your story? What was your journey into investing and into crypto?

My journey into crypto investing happened only three years ago when I was still in the senior year of college. Back then I was running a campus venture fund where we supported the local entrepreneurship ecosystem and invested in projects founded by university founders. 

It was where I came across several blockchain based projects; and quickly became intrigued by the potential of the blockchain technology. I began researching and investing into crypto since then and also started off my career in consulting with McKinsey in Hong Kong where I covered mostly healthcare companies as I graduated from school.  

I was doing some degen yield farming on the side but soon realized that I could not keep up with all the developments in the market since crypto is so fast paced. I also knew that I wanted to go to the buy side one day given my interest in venture capital and working with founders. Hence I took a leap of faith and joined Spartan Capital roughly two years ago; currently focusing on infrastructure projects and DeFi applications in the public market. 

What advantages do you think you have as a crypto investor being based in HK that investors in the U.S. or in Europe don’t appreciate or understand?

I think crypto natives in Asia are generally more receptive to new ideas. For instance last cycle we witnessed the success of GameFi projects such as Axie Infinity with the participation of gamers in Southeast Asia. Subsequently gaming focused DAO and guilds were launched to propel the growth of these web3 games; and most of them actually come from Asia. 

Whereas from my regular interaction with investors based out of the U.S. and Europe; I have the impression that they care more about regulatory risks and actual blockchain use cases that could disrupt traditional finance incumbents (e.g. real world assets and cross border payments) instead. When it comes to investing, investors from the West tend to care much more about fundamentals and numbers while Asia investors could be more reflexive if necessary. 

I still believe that speculation is a big part of the crypto industry given its nascency and being close to the actual user base in Asia gives me earlier access and insights to what the crowd is excited about.

You were at McKinsey prior to Spartan Group? How did that shape your mental models as an investor at Spartan Group?

I met amazing mentors and colleagues during my short stint at McKinsey. The experience shapes how I think about businesses fundamentally. I often find skills required in consulting transferable to crypto investing. 

As consultants, we spent most of our time identifying moving parts of businesses and breaking down components into quantifiable units. By doing so we could properly size the impacts of specific subject matters and make the right recommendations to the companies that we serve.

This mental model is still relevant to making liquid crypto investments, especially as numbers and tractions are usually readily available on chain and through analytics platforms like Artemis. I would still ask myself the same set of questions while doing deep dives into projects; and spend time trying to break down financial components into smaller bits and quantifying levers.

What do you think most liquid token investors get wrong?

I have been publicly bullish on the Cosmos ecosystem on Crypto Twitter with app chain tokens such as Osmosis and Injective given how they innovate business models for base layers. What app chains are trying to do would present strong investment cases for liquid token investors; and I believe this is still widely misunderstood by the market. 

Typical layer 1 and 2s are effectively selling blockspaces for gas fee, and as more performant chains (e.g. Monad and Sei) are launched and cheaper data availability solutions (e.g. Celestia, Avail or even Ethereum after the 4844 upgrade) emerged; this would eventually become a race to the bottom. 

Cosmos app chains adopt different approaches by bundling their core product offerings to the value accrual to the chain; while simultaneously building out proper ecosystems. For example Osmosis has multiple DeFi primitives built on top of the DEX based app chain while value accrual is actually a function of swap trading volume instead of transaction count. It wouldn’t require a whole lot of users for Osmosis to create the same level of value accrual (in terms of fees and revenue) as some more expensively traded alternative layer 1. The market will start pricing app chains by benchmarking other base layers as these ecosystems continue to mature; only to find out that the investment case is actually a lot more compelling.

How much do fundamentals matter in crypto markets today?

While I do agree that the crypto market today is still largely driven by short-term emotions and narratives and that sometimes metrics lag price movement; I strongly believe that fundamental analysis will play an increasingly important role today and in the coming cycles. 

One contributing factor is the increasing participation of institutional investors today compared to the previous cycle. These seasoned investors tend to take a page from traditional finance practice and analyze tokens in very similar and more established methods (e.g. looking at fees and revenue metrics; and users growth etc.).  As more institutional capital flows into the on-chain economy and thinks and behaves in a more fundamental way; it would eventually offset price fluctuation driven by short term narratives and hype. 

As a fundamental driven crypto hedge fund; we also like to think about the risk reward of each trade regardless of time horizon. Fundamental analysis is therefore integral to the investment process; because sticking to fundamentals gives us a clearer picture of upside and downside and allows us to see through short term nuances which could often be deceiving.

What are some theses in crypto that you’re currently researching or excited about?

I am excited about decentralized physical infrastructure networks (DePIN) as it is one of the few use cases in crypto that actually solves real world issues. DePIN is also relatively uncovered and widely misunderstood by the market as they solve complex and specific problems in their respective industries. 

I think DePIN projects could be serious contenders to existing businesses given how they could offer lower costs structurally by bootstrapping distribution through token rewards and effectively spreading out upfront costs to the entire network. I also like how incentives are perfectly aligned among the team, the product offered and investors for some DePIN projects. Products and services offered by these networks would actually improve exponentially with token prices as it incentivizes more distribution and coverage. 

As a result we have witnessed teams accruing more earnings and value to the token and not over inflating token rewards during the bootstrapping phase. The alignment of interest is indeed a rare occurrence in crypto and I am excited to see flywheel effects bringing more upside to DePIN projects in the coming cycle.

What are the most interesting applications that you’re excited about in crypto?

I am very excited about restaking applications such as EigenLayer and Babylon; and also find similar concepts like Mesh Security intriguing. I believe restaking applications would find their product market fit in no time and we have already seen early signs of that with EigenLayer amassing more than 1bn in total value locked after they lifted the deposits limits. 

Restaking applications perfectly combine the need of the yield hungry farmers with the supply side - which are applications seeking for more security or having trouble bootstrapping the upfront economic security. EigenLayer excites me the most with the widest suite of actively validated services they plan to offer; from data availability to decentralized sequencing and oracles.

How have you been able to use Artemis in your fundamental research?

Artemis is the center of our daily workflow; we automate spreadsheets to track relevant metrics for verticals that we cover using the Artemis API; and also directly look at the Artemis dashboard to find out fundamental metrics across blockchains and specific categories such as perpetual exchanges and lending and borrowing market. 

I also like how the Artemis team has been responsive to feedback and comments from us; and the way they keep shipping new features from time to time - huge fan of Artemis and I would suggest Artemis to all liquid crypto investors out there! 

How to get in contact with Cody?

You can find or reach out to Cody on Twitter or LinkedIn
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