Evan Feng: Analyst of the Month

Welcome to the eleventh edition of the Analyst of the Month.

Our mission at Artemis is to help shape crypto into a more fundamentals-driven asset class by building the on-chain metrics that matter with  leading analysts and protocols.

Every month we highlight a leading analyst who takes a long-term view of crypto.

This month, we highlight Evan Feng, Partner & Director of Research at CoinFund, a cryptonative investment firm founded in 2015 that takes a fundamental approach to digital investing.

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

My career began traditionally, pursuing a Wall Street career after studying finance, accounting and philosophy in college, completing a 2-year investment banking analyst program at Barclays and then making the transition to buyside equities, first at Citadel and then Point72. These opportunities offered me the chance to become a professional investor, honing my skills via training and building reps in the constituent parts of the full investment process, from idea generation and modeling to thesis development, position management and portfolio construction.

However, my more exciting journey into web3 began with my self-directed discovery of the crypto majors, which really began in earnest with when I read the Bitcoin white paper in early 2017 between my two long/short equities stints, and starting to buy BTC and ETH shortly thereafter. Even after I started at Point72, my continued research and growing personal exposure to crypto took up much of my free time on nights and weekends, and I knew it was only a matter of time before I would be working full time in the industry.

Looking back, there are many reasons why I immediately grokked the technological, economic, and social impact of blockchain longer-term, but also the immediate benefits of the bearer assets such as bitcoin, given both my ideological love of freedom and distrust in centralized power, political and economic. While I still believe we’re early in the global adoption of web3, I still feel some FOMO over not having done my initial research even earlier given how quickly I fell down the rabbit hole, especially since I’ve had some light brushes with bitcoin (around the 2013-2014 era with Cyprus, MtGox being headlines that I saw but never followed up on).

Why did you decide to join CoinFund? What is your role as partner and Director of Research at CoinFund??

I had been following CoinFund since the days of being a nights-and-weekends enthusiast, having been to a few CoinFund events during that period. I was excited to hear in 2020 that CoinFund was looking to grow the investment team, and found a natural fit across a variety of dimensions, given the unique mix of web3 nativity and long-term belief alignment (see earlier question), varied and relevant experiences across the leadership team, and proven ability to navigate the complexities of investment management in such a greenfield industry that came not only with the challenges of actually investing, but also addressing operational, legal, and regulatory risks that could all come at once.

My role today combines elements of being an individual contributor across the venture and liquid strategies where I lead venture deal processes and token recommendations respectively, but also have responsibility for hiring and mentorship, thesis creation, investment process optimization, and more. While the actual investing is of course the most important contribution from a pure returns-generating perspective, I also enjoy helping on everything from our research subscriptions, CRM dashboarding and portfolio support results quantification, to name a few. Ultimately I think of myself as one of the frontline members in helping unblock inefficiencies in our investment process, whether informational, operational, or organizational.

Before CoinFund, you spent time investing in long/short equities in TMT at Citadel and Point72. What were some of your learnings from investing in equities that apply to investing in digital assets?

My time in traditional finance was an invaluable crash course in investing discipline. While crypto markets have unique quirks, many of the core principles carry over. In both equities and crypto, I’ve found many more similarities than differences. One key skill is identifying the metrics that truly matter for an asset and developing a robust framework for forecasting them. While fundamentals for tokens are still being decided by the market, the level of sophistication, data availability, and bottom-up analysis continues to improve meaningfully.

Another invaluable skill is building an authentic network outside of the internal team-level debates and thesis work to pressure test ideas and get an outside view. In the venture world this of course helps with deal sourcing and reference checks, but in liquid investing these relationships are an important sounding board and source of potential reality checks that uncover blind spots or sensitivities that might be missed otherwise. Said another way, checking your ideas with your network helps to suss out a weighting of the risks and rewards that may better approximate market expectations.

Finally, setting up thesis invalidation points, whether governed by price performance, or ideally other non-price factors ahead of time can help keep yourself honest and preserve capital and time by lowering the risk of thesis creep. Examples might include reevaluating sizing if an expected catalyst does not materialize or drives a different reaction than expected (suggesting perhaps it was more priced-in, or the following roadmap is more sparse than you were thinking). Ultimately, while crypto investing demands a new lens, the bedrock principles of intellectual honesty, diligent research, and continuous iteration are timeless.

What do you think most equity investors get wrong when looking into investing in liquid tokens?

Equity investors often underestimate the importance of community in crypto. In web3, a fervent, evangelical user base can drive powerful network effects and create a flywheel of adoption and token demand. The strength of community is an important metric that doesn’t really exist in equities, especially prior to the wallstreetbets era - but in web3 it is one of the most important. While difficult to quantify, this isn’t impossible whether from an initial user acquisition / k-factor perspective, or a monetary one (where early token appreciation gains concentrated amongst VC, or perhaps more broadly distributed amongst the community). 

Equity investors getting up to speed on crypto might also be overly focused on valuation multiples, for example when looking at fully-diluted value as a numerator, and protocol revenue (if accruing) as the denominator, especially when this is contrasted with much higher quality metrics like EBITDA or free cash flow from the equities world. However, dismissing “expensive” tokens as uninvestable due to optically eye-popping multiples might miss dynamics that could include 1) volume growth of orders of magnitudes which may not be achievable for a mature stock, 2) fee and price share growth of these protocols, 3) and staking rewards and token burns that can drive demand beyond pure cash flows.

Tokens are a fundamentally new asset class that require a novel valuation approach. Misapplying equity heuristics can lead to missed opportunities in this fast-moving market.

We talk a lot about web2 games like Diablo 4 and how you got to level 100 in Hardcore Mode. Congrats on the investment in Gunzilla! How far along is Web3 Gaming in your opinion and what do you think will catalyst mass adoption?

As a lifelong gamer, web3 gaming feels both inevitable and in its infancy at the same time.

On-chain gaming is inevitable because the limits of the types of experiences that can be created by game devs that have the option of incorporating web3 into their experiences is definitionally more complete, than purely via web2 games. I’m not saying that all game logic, live operations, settings, and player inventories need to be fully on-chain, but rather there is a balance between off-chain and on-chain backends that should maximize fun and thus long-term player base sizes and monetization, even when narrowing the lens to only look at humans (versus anything agentic) playing these games, though we already see experimental networks like Parallel’s Wayfinder setting up non-human participation potential for games.

It is definitely early, somewhere between crawling and walking, and nowhere near running. Until recently, most web3 games had serious drawbacks in the user experience within the core gameplay loops relative to comparable web2 games. Today we are getting to parity on this front with games not only like Gunzilla, but fairly broadly across a variety of genres including ARPGs (both mobile and high-definition), first and third-person shooters, sports and sports-manager games (covering real and fantasy sports), and of course on-chain casinos. When you add on top of these core experiences, actually open economies, and the ability to speculate on a meta-game level, you will start to see a more mass-market appeal to a world of gamers that have been hungering for less exploitative and more participatory economics.

What are some theses that you get excited about in the markets today?

Aside from gaming, the intersection of web3 and AI is captivating. From on-chain machine learning to decentralized data markets, the possibilities are immense. We've written about this in the context of our investments in PrimeIntellect, Bagel, and Giza.

Decentralized physical infrastructure networks (DePin) are another compelling frontier. Projects incentivizing the decentralization of resources like wireless connectivity, energy (especially given compute-driven needs), and logistics could yield more efficient and robust systems.

Real-world assets (RWAs) on-chain feel underrated. If regulation clarifies around fiat-backed stablecoins, we could see a surge in institutional and retail demand for these on-chain representations of traditional assets.

Lastly, while we haven’t yet had a breakout moment in DeSci (decentralized science), early experiments like ResearchCoin, MoleculeDAO and VitaDAO are fascinating projects looking to enhance the speed to market, transparency, and results-driven alignment of traditional R&D processes.

What applications within crypto are you most excited about in the long run? 

Separate from the theses areas mentioned above:

I remain excited about the basic applications of the major crypto networks, Bitcoin and Ethereum. They benefit most from the Lindy effect, and are now proven through time and battle-tested across a variety of geographies, regulatory, and market regimes. Their importance has also only increased in as their moneyness, distribution, and utility have continued to steadily increase, even against the backdrop of a high nominal interest environment post-ZIRP.

In addition, I'm particularly intrigued by the potential for decentralized social media. Empowering users with ownership over their content, data, and social graphs could usher in a new era of online interaction and coordination, displacing entrenched web2 platforms. These networks could also natively support better, lightweight advertising loads given the potential for greater UGC and AI to drive lower cost to create, enabling brands to potentially pass those savings to early adoptions or respondents to a given product campaign. 

The end state of productive assets is also potentially under-appreciated. For example, restaking platforms like our portco etherfi are interesting given strong PMF already could drive a sticky userbase towards other products that mirror more active asset management use cases, as more AVSes or programmatic yield optimization. The end state of more abstracted, automatic, and risk-managed on-chain assets that are semi-autonomous in staying close to the desired efficient frontier of risk on a user-customized basis seems both achievable and valuable as a native application of web3 technologies.

How to get in contact with Evan?

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