Episode Summary
Executive Summary: Michael Nado argues that crypto valuations should increasingly be grounded in on-chain fundamentals, not narrative alone. Comparing Solana to Ethereum-plus-L2s across users, fees, DEX volume, stablecoin velocity, TVL, and dev activity, he concludes Solana is still undervalued at an 83% discount, but only modestly: he expects SOL to outperform ETH later in the cycle, with ETH first benefiting from ETF and TradFi catalysts.
Main Topics: Fundamentals as the basis for crypto valuation (Priority: 5/5): The discussion frames crypto assets like equity-like capital assets, using on-chain KPIs rather than tribal or purely technical arguments to assess relative value. Solana vs Ethereum on-chain fundamentals (Priority: 5/5): Nado compares Solana against Ethereum plus major L2s across users, fees, DEX volume, stablecoin volume, TVL, and core developers to judge relative strength. Value accrual and network design (Priority: 5/5): The conversation explores how Ethereum’s modular L2 stack and Solana’s monolithic architecture affect fee capture, MEV, and token value accrual. Catalysts for ETH and SOL (Priority: 4/5): Ethereum’s ETF, BlackRock/RWA tokenization, and Base are contrasted with Solana catalysts like Firedancer, Blinks, and continued retail adoption. Decentralization vs investor relevance (Priority: 4/5): The speakers debate whether decentralization concerns should influence pricing now or mainly matter over the long run through their impact on fundamentals. Cycle outlook and relative performance (Priority: 5/5): Nado predicts ETH may outperform first, while SOL could gain later in the bull cycle, with Solana re-rating modestly against ETH rather than flipping it.
Key Arguments: Fundamentals matter because markets eventually coalesce around KPIs that help investors compare crypto assets, even if current prices are driven by narrative. Daily active addresses, fees, DEX volume, stablecoin velocity, TVL, and dev activity provide a more objective cross-chain valuation framework than tribal discourse. Solana’s recent growth is real, but its TVL remains much lower than Ethereum’s, suggesting Ethereum is still more mature and capital-efficient. Fees matter most because they represent paid demand for block space; bots and MEV activity still count because they generate revenue and validate real usage. Solana’s monolithic design lets the token capture more value directly today, while Ethereum’s L2 modularity pushes more execution revenue to L2s and sequencers. Ethereum’s current weakness is partly a temporary consequence of scaling choices and EIP-4844, which lowered fees and created short-term confusion in value capture. TradFi adoption is likely to strengthen fundamentals-based analysis and support ETH via ETFs, BlackRock tokenization, and Coinbase/Base distribution. Solana’s user experience is currently better, but Ethereum’s account abstraction and ecosystem integrations may close that gap over time. Decentralization concerns should be watched, but Nado believes their effect will eventually show up in on-chain fundamentals if they matter economically. Nado’s base case is not a Solana flippening; instead, Solana should re-rate higher versus ETH while Ethereum remains the larger and more established asset.
Data Points: Solana discount to ETH: 83% - Current market cap discount discussed in the episode and title of the report. Solana share of Ethereum market cap: 17% - Approximate relative market cap at time of recording. Solana share of ETH market cap in Dec. 2022: 3% - Post-FTX bottom when Nado first dug into Solana fundamentals. ETH + L2 daily active addresses vs Solana: Solana at ~50% - Q2 comparison of active users on Solana versus Ethereum plus top L2s. Solana average active users in Q2: 1.3 million - Quarterly average daily active users on Solana. Solana fees in Q2: $151 million - Fees generated by Solana in Q2 relative to Ethereum plus L2s. Solana fees vs ETH + L2s: 27% - Solana’s fee revenue as a share of Ethereum plus top L2s. Solana DEX volume in Q2: $108 billion - DEX trading volume on Solana during Q2. Solana DEX volume vs ETH + L2s: 36% - Solana’s share of Ethereum plus L2 DEX volume. Solana stablecoin volume in Q2: $4.7 trillion - Stablecoin transfer/usage volume on Solana during Q2. Solana stablecoin volume vs ETH + L2s: 2x - Solana stablecoin velocity exceeded Ethereum plus L2s over the same period. Solana TVL in Q2: $4.3 billion - Average total value locked on Solana in Q2. Solana TVL vs ETH + L2s: 7% - Solana’s share of Ethereum plus L2 TVL. Solana core devs in Q2: 59 - Average active core developers on Solana according to Token Terminal. Solana core devs vs ETH + L2s: 11% - Solana core developer activity relative to Ethereum plus L2s. Estimated ecosystem devs on Solana vs ETH: ~30% - Nado notes that broader ecosystem development is about one-third of Ethereum’s. ETH market cap target: $1.8 trillion - Base-case cycle target used to estimate ETH price. ETH implied price at $1.8T: Just under $15,000 - Approximate peak ETH price if market cap reaches $1.8 trillion. Solana market cap target: $450 billion - Base-case cycle target used to estimate SOL price. SOL implied price at $450B: Above $900 - Approximate peak SOL price if market cap reaches $450 billion. Potential Solana re-rating vs ETH: 25% - Nado’s projected SOL-to-ETH market cap ratio later in the cycle. Stablecoin volume share of TradFi: >60% algorithmic - Used to justify counting bots/algos as valid fee-paying activity.
Pivotal Quotes: "Bots are people too, and memes are assets too." — Michael Nado: Explaining why he counts bot-driven activity and meme coin trading as meaningful network usage. "I think the biggest signal is always like, what are people paying for?" — Michael Nado: Describing why fees are his top fundamental metric. "The conclusion is that number is still too low." — Michael Nado: His final answer to whether Solana should trade at an 83% discount to Ether.
Implications: The episode suggests crypto investors may increasingly use fundamentals-based relative valuation. ETH likely benefits first from institutional catalysts, while SOL remains an attractive but more limited outperformer later in the cycle.