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Empire Santi Thesis

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Learn your own triggers before you try to learn the markets.

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We don't get paid for effort, we get paid to be right.

I'll be raising a private equity fund to acquire traditional businesses that can benefit from business model transformations by adopting crypto mechanisms - Santiago R Santos

Context​

Beliefs​

Taken from Things I believe, Jan 2025

  • return dispersion will continue to grow in crypto
  • will become clearer which chains can support mainstream use cases, and which can't. The divide between have and have nots will only be more apparent - follow the users
  • storytelling will matter less and great execution will be apparent - it will shake up the top 100 market cap leaderboard
  • onboarding and retaining the next millions of users is all that matters. We have 30-60 million MAUs (see a16z report)
  • most of current valuations are very rich and predicated on some future state where we have orders of magnitude more economic activity onchain. Most of that valuation is terminal value based. That will break down quickly if users and protocols fees don’t increase orders of magnitude
  • we have 4 years to figure this out. Not another decade
  • don't become complacent because prices go up. If you have a big treasury, use it aggressively to acquire high LTV users (study AOL)
  • the tech is ready. We have excess block space, not enough demand for it
  • we have a go to market problem. The best tech doesn’t win necessarily. BD will become more important
  • moats in crypto are overstated. So are first mover advantages. Especially because everything is open source
  • making infrastructure decisions because that’s where TVL and users are today is a poor decision. The next wave of users won't have any chain loyalty. Focus on tech and BD
  • DePIN and stablecoins is the killer combo to scale and onboard the next mass wave of users on chain and retain them. It’s also the only way to break the over reliance on speculation and the self referential dynamic we see today
  • every major app that hits scale will launch their own chain
  • decentralized product, strategy and BD doesn’t work. Decentralized security but centralized product decision making

Practices​

Learn from experience via minimum staked experiments. Understand an error of process vs an error of outcome. Continuously refine your process as you gain more experience in the crypto markets.

It is vital to focus on process rather than outcomes to improve your decision-making over time.

  1. Develop a robust investment process:
    • Document your trades and investment thesis for each position
    • Constantly update and re-evaluate your thesis as new information emerges
    • Think in probabilities, not binary outcomes
    • Have clear scenarios mapped out for different price movements
    • Set price targets and stick to them
  2. Portfolio management:
    • Size positions appropriately based on conviction level
    • Take some profits when investments do extremely well (e.g. 10x+)
    • Maintain a diversified portfolio across different crypto sectors
    • Keep some cash/stablecoins on hand for new opportunities
  3. Due diligence:
    • Do thorough research before investing, don't just follow hype
    • Pay attention to on-chain metrics and community engagement
    • Join project Discord channels to gauge sentiment and progress
    • Look for projects with real traction and product-market fit
    • Be wary of projects with too many dependencies or unrealistic timelines
  4. Emotional management:
    • Recognize and be aware of your emotions, but don't let them drive decisions
    • Allow yourself to feel the full range of emotions, but respond rather than react
    • Have a support system or therapist to discuss your mental state
    • Exercise regularly to manage stress (e.g. heavy lifting)
  5. Learning and growth:
    • Be open to changing your mind as you gain new information
    • Learn from both your successes and failures
    • Document lessons learned after each market cycle
    • Stay curious and continue educating yourself on new developments
  6. Risk management:
    • Never invest more than you can afford to lose
    • Understand tax implications before engaging in trading/yield farming
    • Be extremely cautious with leverage
    • Have a plan for worst-case scenarios (e.g. exchange hacks, regulatory crackdowns)
  7. Long-term mindset:
    • Focus on projects you believe will succeed over a 5-10+ year time-frame
    • Don't obsess over short-term price movements
    • Be prepared for multiple market cycles and extreme volatility
  8. Network and community:
    • Build relationships with other investors and founders
    • Share your thoughts publicly to invite feedback and refine your thinking
    • Contribute to the ecosystem beyond just investing (e.g. content creation, mentoring)
  9. Work-life balance:
    • Set boundaries to avoid crypto consuming your entire life
    • Develop interests and relationships outside of crypto
    • Take regular breaks to maintain perspective
  10. Ethical considerations:
    • Only invest in and promote projects you truly believe in
    • Be transparent about your holdings and potential conflicts of interest
    • Consider the broader societal impact of the projects you support

Influences​

Three key investors whose approaches have significantly influenced his investment philosophy:

George Soros​

  • Author of "The Alchemy of Finance"
  • Emphasizes the concept of reflexivity in markets
  • Focuses on understanding psychological aspects of market behavior

Howard Marks​

  • Founder of Oak Tree Capital
  • Writes free investment memos available by subscription
  • Authored "The Most Important Thing"
  • Provides a more conservative investment framework

Stan Druckenmiller​

  • Known for ability to change positions quickly
  • Emphasizes importance of adapting and changing one's mind when presented with new information

Crypto Advantage​

The key advantage in is the ability to monitor and manage risk in real-time through on-chain data, rather than waiting for quarterly reports like in traditional finance.

Probabilistic Thinking

  • Think in terms of different scenarios
  • Consider multiple potential outcomes
  • Force yourself to entertain new information

Thesis Invalidation

  • Regularly question what could invalidate your investment thesis
  • Consider edge cases that could disrupt your assumptions
  • Maintain constant evolution of thinking rather than binary decisions

Positioning​

By incorporating these insights, investors can better navigate complex market conditions and make more informed decisions about when to hold assets, when to raise cash, and when to be more tactical in their approach.

Market Timing and Cash Management​

  • Consider raising cash strategically during market drawdowns, particularly when you believe you're about 70% through a drawdown cycle.
  • Be cautious about timing cash raises, as markets can panic quickly and central banks may respond rapidly.

Market Environment Assessment​

  • Recognize that markets may be range-bound for extended periods. In such environments, consider raising cash near the higher end of the range.
  • Be aware that markets can break out of established ranges unexpectedly. Have a strategy for when this occurs to avoid being caught on the wrong side of a breakout.

Asset Selection and Holding Strategies​

  • Focus on owning high-quality assets for medium to long-term stability.
  • Adapt your strategy based on the market environment:
    1. In stable periods, focus on owning good assets and avoid excessive trading.
    2. In volatile periods, be prepared to be more tactical in your approach.

Macroeconomic Considerations​

  • Stay attuned to central bank actions, particularly as they navigate post-inflation economic landscapes.
  • Be aware that central banks may be prone to easing monetary policy early to avoid hard economic landings.

Risk Management​

  • Develop strategies for both range-bound markets and potential breakouts to manage risk effectively.
  • Balance the desire to capture low prices during drawdowns with the risk of further market declines.

Unlocks Thesis​

Token unlocks can create significant short-term price pressure, but also potential buying opportunities for those with available capital and a longer-term perspective.

  1. Token unlocks can put significant selling pressure on protocols, especially if there's not enough new liquidity coming into the market to absorb the newly unlocked tokens.
  2. Early investors, particularly those from the previous cycle, may be incentivized to sell unlocked tokens to get above their "high water mark" and start collecting carry again.
  3. Token Unlocks tracks the aggregate number of token unlocks happening per month or week. It would be insightful to overlay this data with stablecoin inflows to gauge market absorption capacity.
  4. Potential strategy: bid on protocols after unlocks have occurred and selling pressure has subsided, rather than trying to time the bottom.
  5. The speakers noted that projects with upcoming unlocks have vastly underperformed, as there's often little buying interest or liquidity for these tokens.
  6. They suggested that analysts should add indicators for when token unlocks start on price charts to better visualize their impact.
  7. The example of Arbitrum (ARB) was given, where the price dropped significantly after a major unlock event.
  8. The speakers emphasized the importance of having cash on hand to take advantage of opportunities created by unlock-related price drops.

Business on Crypto Rails​

Take conventional business operations and remove friction leveraging crypto rails.

Core Business Philosophy​

  • Focus on real utility over speculation
  • Abstract crypto complexity from end users
  • Lead with core services, not crypto features
  • Build businesses that can operate more efficiently using blockchain rails

The Broken Funnel Problem​

  • Current crypto onboarding is traumatic for users
  • Meme coins create short-term engagement but poor retention
  • Need better first experiences beyond speculation
  • Focus on servicing core products people already need

Strategic Approach​

Business Acquisition Strategy

  • Acquire existing successful businesses
  • Add crypto functionality to improve operations
  • Target businesses with clear value propositions
  • Scale through strategic acquisitions

Technology Implementation

  • Use programmable money to automate operations
  • Integrate stable coins for payments and yields
  • Build on high-throughput chains like Solana
  • Focus on capital efficiency and cost reduction

Go-to-Market Strategy​

User Experience

  • Make crypto invisible but beneficial
  • Focus on core service delivery
  • Provide feature parity or better with traditional options
  • Enable gradual discovery of crypto benefits

Business Development

  • Need boots on the ground approach
  • Focus on BD over just infrastructure
  • Strategic partnerships and acquisitions
  • Demonstrate clear cost savings

Value Creation Opportunities​

Financial Services

  • Automated yield generation
  • Programmable money management
  • 24/7 banking and trading
  • More efficient payment rails

Infrastructure Improvements

  • Reduce intermediaries
  • Lower operational costs
  • Increase capital efficiency
  • Enable faster settlement

Vision for Mass Adoption​

  • Target 100-500 million new users
  • Focus on retention over speculation
  • Build lasting user relationships
  • Create sustainable business models

DePIN​

Views DePIN as a promising sector that can make blockchain technology practical and impactful in the real world, while also disrupting traditional industries through improved efficiency and novel economic models.

  1. DePIN will be "explosive" and make crypto incredibly relatable as a primary non-speculative use case.
  2. DePIN projects like Helium can deliver cheaper, feature-competitive products compared to traditional carriers like AT&T or Verizon.
  3. DePIN allows capital-intensive businesses to bootstrap supply and demand more efficiently than traditional companies.
  4. It transfers CAPEX costs to users, improving unit economics and allowing for more capital-efficient scaling.
  5. DePIN projects can disrupt established industries like telecom by distributing costs and improving efficiency.
  6. He sees DePIN as a way to make blockchain technology practical and relatable to everyday users, similar to how email made the internet relatable.
  7. DePIN could shift the relationship between users and service providers, allowing users to become equity stakeholders in networks they use.
  8. Excited about projects like Andrina that are using blockchain to reduce costs and improve access to services like internet connectivity.
  9. Believes DePIN is "working now" and is somewhat surprised more people haven't paid attention to it, seeing it as an opportunity.
  10. Suggests that DePIN networks become more useful as they scale, reaching sufficient coverage or participation levels.

Predictions​

2025

Investments​

Media​