Altcoins have experienced a five-year period without a major rally, prompting many traders to lose confidence in the sector. However, crypto analyst Lark Davis believes this sentiment shift presents an opportunity, citing an economic signal that has recently turned positive for the first time in years.
Davis argues that the largest gains in an upcoming altcoin cycle may not come from coins that have already rallied significantly. He noted that coins like Hyperliquid, Zcash, and NEAR have already experienced substantial appreciation, with Zcash rising 20 to 30 times from its lows, limiting further upside potential.
The Case for Overlooked Small Caps
Instead, Davis sees opportunity in established small-cap protocols that have generated substantial revenue but remain overlooked by the market due to diminished attention to the crypto sector. He suggested some of these assets could appreciate 10 to 30 times from current levels.
Starknet Assessment
Davis expressed skepticism about Starknet, which has recently attracted significant attention. He cited the project's track record of delayed deliverables and criticized its planned rebranding as a quantum-resistant layer 1. According to Davis, Starknet's fully diluted valuation of approximately $1 billion and market value of roughly $750 million do not align with its on-chain activity, which recorded only about 5,000 active addresses in 24 hours compared to Cardano's approximately 15,000.
Davis named NEAR as a preferable alternative, noting it has already implemented quantum resistance, demonstrates real adoption, and trades approximately 75% below its record high. He also identified Sui as a layer 1 that has not yet experienced significant appreciation.
Aerodrome as a Value Case Study
Davis highlighted Aerodrome, the leading exchange on Base, as an example of a strongly-performing protocol trading at a reasonable valuation. The protocol is scheduled to complete a merger with Velodrome on October 21, expanding across seven chains including Base, Arbitrum, and Robinney Chain.
Aerodrome has expanded its share of tokenized stock trading volume on EVM chains from 9% to 40% over the past 30 days and has distributed more than $500 million to voters over three years, surpassing any other exchange.
Valuation Comparison
A comparison with Uniswap shows significant valuation differences:
- Aerodrome: $1.8 billion fully diluted valuation, $14.38 billion in 30-day volume, $11.4 million in 30-day fees
- Uniswap: $6.7 billion fully diluted valuation, $79 billion in 30-day volume, $132 million in 30-day fees
Aerodrome is valued at approximately one quarter of Uniswap, and Davis suggested this valuation gap leaves room for appreciation given the returns generated for token holders. He also noted a technical chart showing Aerodrome breaking out after years of trading near 30 cents.
Davis cautioned that Aerodrome has already rallied ahead of the October 21 launch date, and a potential "sell the news" decline could follow the event, suggesting investors need not rush to enter positions.
