The Cuban Missile Crisis lasted just thirteen days.

Thirteen days when the world genuinely teetered on the edge of nuclear war. Markets froze, leaders scrambled, and people braced for catastrophe. And then, almost as quickly as it began, the threat dissolved. Cooler heads prevailed. Life moved on, and the markets soon followed.

The first half of 2025 has packed what feels like an entire decade of geopolitical shocks, foreign policy events, market reversals, liquidity shifts, and asset class rotations into just six months. In Q1, it looked like the wheels were falling off. In Q2, the market shrugged, bought the dip, and ripped back to all-time highs.

Now, we’re left asking: did we live through a cycle that usually takes years?

"There are decades where nothing happens, and there are weeks where decades happen."

- Vladimir Lenin

A relief rally has erased the panic of early Q2’s tariff-induced tantrum, pushing equity indices back to record highs as sidelined investors rush to re-enter the market. In fact, May 2025 was the S&P 500’s strongest May of this century, and June extended those gains – the S&P ground its way back to all-time highs by quarter-end. This marks a stunning 25%+ surge off the April lows, reversing the tariff-driven correction.

Market sentiment flipped from fear to optimism almost overnight: the CNN Fear & Greed index, which plunged into extreme fear in April, has rebounded into bullish territory (mid-60s out of 100, indicating “Greed”).

Volatility (VIX) also collapsed, which closed above 60 during the trade scare, and has fallen back to the mid-teens – a sign that investors see calmer waters ahead.

Several catalysts converged in June to fuel this face-ripping rally:

1) US-China Trade Truce

A tentative trade agreement restored a fragile peace in the tariff war, removing a major tail risk. Negotiators put “meat on the bones” of a deal that freezes U.S. tariffs at 55% on Chinese imports (China retains 10% on U.S. goods) – steep but far better than the feared escalation to triple-digit tariff rates. Crucially, China agreed to lift export restrictions on rare earth minerals and resume issuing Chinese student visas, addressing key pain points. This de-escalation, which occurred before the July 8th soft deadline, delivered exactly the “optical tariff relief” we anticipated, shifting the narrative from trade panic to progress.

2) Cooling Inflation & Steady Data

Price pressures have been less sticky than feared (as we expected)– inflation came in cooler than expected and remains moderate. Meanwhile, growth is holding up: the labor market remains solid, consumer spending is steady, albeit cooling, and corporate earnings have not slowed significantly. The Atlanta Fed’s GDPNow tracker even flipped from predicting a Q1 contraction to ~3% GDP growth for Q2, underscoring real momentum in the economy. In short, the hard data never confirmed the recessionary fears from earlier in the year, and now even soft data (surveys, sentiment) is finally catching up and improving.

3) Fiscal Stimulus Optimism

The Trump administration doubled down on its pro-growth agenda with the “One, Big, Beautiful Bill”, a massive $4.5 trillion tax and spending package. President Trump insists that “growth will offset deficits,” and markets are inclined to agree. The Senate moved forward on this fiscal plan heading into July, which investors interpreted as a fresh stimulus that could boost economic growth in the second half of 2025, boding well for risk assets. The mere prospect of large-scale tax cuts/infrastructure spending has been a bullish macro catalyst, lifting cyclicals and “reflation trade” assets. In tandem with the trade truce, this fiscal push signaled that policymakers are determined to extend the economic expansion, another clear positive for risk assets.

4) Offside Positioning & Inflows

Perhaps the biggest fuel for the rally has been the human and algorithmic scramble to catch up.

We entered May/June with many investors badly offside – hedge funds, CTAs, and pension funds had de-risked amid the Q1 turmoil, leaving plenty of dry powder on the sidelines. This topic was discussed in detail in our previous Market Updates.

As the news improved, those players rushed back in, creating a powerful flow of funds into equities. For example, trend-following CTAs had to cover shorts and flip long; they bought an estimated $103 billion of global equities in May alone, pushing their U.S. equity exposure from a net short position to $17.5 billion net long by early June. Hedge funds also ramped up exposure aggressively, especially in the beaten-down tech sector. This rapid accumulation of technology in a decade came as managers realized they were underexposed to the market’s leaders. At the same time, corporations continued to devour their own shares through record buybacks, adding a structural bid to the market.

And retail investors kept coming. The GameStop psyche lives on – the instinct to fade Wall Street’s fear, buy the dip, and keep pressing risk when the pros are offside. Once again, Main Street beat Wall Street to the punch.

In short, a wave of mechanical and discretionary inflows flooded into equities through late Q2, lifting prices.

5) Under-positioned “Pain Trade”

Ironically, the very skepticism that drove many investors to the sidelines is now making the rally more robust. Even after weeks of inflows, positioning remains relatively moderate. Hedge fund gross leverage is in the 99th percentile of history, but that’s mostly due to rising asset values, while true net exposure only just climbed back above 50% (about neutral).

As we discussed last month, many funds are still underweight the year’s big winners. Hedge fund exposure to the “Magnificent 7” mega-cap stocks continues to decline even as those stocks roar higher. This creates a two-sided dynamic: on the way up, the market leaders can continue to climb “under their own power” (since few investors are fully long, there’s little profit-taking); and eventually, the performance pain of missing out forces more funds to chase the rally and re-risk their portfolios. It’s a classic “hated” rally – disliked by many but all the more durable for it. As we noted last month, it’s hard to break something that no one’s leaning on. Indeed, that adage is playing out: despite stretched valuations (P/E is a meme) and improved sentiment, the market’s resilience has been impressive because so few were fully invested. Every minor dip finds sidelined buyers who feel compelled to put cash to work.

The Israel-Iran Oil Shock: A Blip, Not a Regime Shift

In early June, markets briefly panicked as conflict between Israel and Iran escalated. Oil prices spiked. Inflation fears resurfaced. But the whole thing unwound just as quickly. Regarding oil prices, zoom out…

The oil rally was a short squeeze, not a structural move. The market realized there were no material supply disruptions, and oil retraced. Inflation expectations barely budged. This was a headline-driven dislocation (sound familiar?), not the beginning of a new inflationary spiral.

All told the second quarter of 2025 has been a historic reversal of fortune from the chaos of Q1. The S&P 500 is up roughly 10% for the quarter (wiping out Q1’s losses and then some), and the Nasdaq is up even more as growth stocks and Bitcoin rebounded sharply.

Importantly, this surge has been broad-based, extending beyond just Big Tech. Although tech and growth led the charge (aided by AI hype and still-strong earnings), we also saw a recovery in cyclicals, small caps, and crypto (more on that below). Consumer sentiment has begun to recover from deep pessimism, and fund managers’ cash levels are decreasing as FOMO sets in. Market sentiment has shifted from doom to boom.

That said, after such a rapid run-up, some near-term turbulence is to be expected. By late June, we observed some profit-taking and hedging ahead of the quarter-end. In particular, pension funds rebalanced their booming equity portfolios – Goldman estimated that approximately $28 billion of U.S. equities were set to be sold for the June quarter-end rebalance (in the 90th percentile of quarterly flows).

This forced selling hit the market in the final days of June (one reason we had a few soft sessions mid-week). However, that flow is now behind us. With the calendar turning, pensions and other rebalancers have completed their mechanical selling, removing a temporary overhang. We expect buyback activity and active investor buying to resume dominance heading into July as trade deals get finalized.

Looking forward, many want this to be a bull trap. After a 20%+ index gain in just 2–3 months, a breather would be both natural and healthy. Evercore ISI noted that after explosive “earnings season rallies” like those seen in Q1, the following month typically experiences choppy consolidation and a ~19% average spike in the VIX as volatility normalizes.

Stretched sentiment is another caution flag: the AAII bull-bear survey has flipped to its most bullish bias in over a year, and the Fear/Greed index, at around 65, is well off the extreme fear lows (though not yet euphoric).

Valuations, too, are becoming harder to ignore, with the S&P now back near ~20× forward earnings and the Magnificent 7 trading at hefty premiums after their rebound.

In short, the easy money from the April panic lows has been made.

Purely on a risk/reward basis, the entry point today is less attractive than it was earlier this year.

However, none of these factors imply a major top; they merely indicate the likelihood of normal volatility returning. Crucially, the bull case remains supported by positioning and policy. We expect to see a high above 6900 for the S&P 500, with Bitcoin moving towards $150k before year-end.

As described, investors are not maxed out long – far from it – and any positive surprises could force another round of catch-up buying. We still see underweight exposure across equities and crypto that needs to be rebalanced.

Additionally, corporate buybacks (while temporarily in blackout for earnings season) will resume and continue providing a bid.

And policymakers, both fiscal and monetary, are now tilting dovish (or at least less hawkish), which creates a favorable backdrop (see below).

The bottom line: this rally still has legs, albeit with more volatility and “two-way” action than the straight-up trajectory of the past month.

Policy & Rates: Fed Patience, Liquidity on the Rise

Markets have a short memory. For many, the Cuban Missile Crisis was quickly forgotten about. The same will happen with tariffs as they fade away from the front page.

If the first half of 2025 was all about trade policy dominating headlines, the back half of the year may be driven by monetary policy. So, where does the Federal Reserve stand after this tumultuous quarter?

In short, caught between improving economic data and uncertain inflation risks from tariffs, which we do not think is doubtful, as the “direction of travel is clear.” Lower.

The Fed held a key meeting in mid-June and, as expected, chose to keep the policy rate unchanged at 4.25–4.50%. Fed Chair Jerome Powell has adopted a cautious stance: with growth still okay and inflation not far from the target, the Fed doesn’t see an urgent need to cut rates yet. Powell testified to Congress that he was in “no rush” to ease policy while the fallout from the trade dispute was still unfolding.

Importantly, the Fed is closely monitoring tariffs. Powell noted that the new tariffs could boost inflation over the summer as import prices adjust. If that happens, it might delay rate cuts; however, this is not our base case, as we still believe cuts are forthcoming this summer…as do most of the banks.

Powell explicitly stated that he would not endorse a cut as soon as the July FOMC meeting – essentially pushing back against market doves – and would rather wait to see if tariff-related price increases actually materialize in the June/July data. We believe there are higher-than-market expectations for a rate cut in July.

From the Fed’s perspective, any inflation bump might be “short-lived,” but they need a few more months of clarity. The message from the Fed is simple: policy is on hold for now, but the Fed is not unwilling to cut later this year if conditions warrant.

The market has adjusted to this guidance. Whereas a month or two ago, futures were pricing in as many as four rate cuts in 2025 (a reflection of the Q1 growth scare), investors have pared back those bets. Currently, the consensus expects two quarter-point cuts by year-end (likely starting in September or Q4).

In effect, the Fed and the market are converging: some modest easing is expected later in 2025, but no sudden slashing of rates unless the economy turns sharply downward or the financial system shows signs of stress. This relatively slower trajectory of rate cuts has nudged bond yields up from their spring lows – the 10-year Treasury yield is back around 4.25% after dipping under 4% during the worst of the tariff panic. The yield curve remains inverted (short rates at ~4.36% vs. 10-year rates at 4.34%), but slightly less so than it was a few months ago.

It’s a sign that recession odds, as implied by bonds, have decreased somewhat now that a trade meltdown seems off the table.

Despite Powell’s cautious tone, it’s worth noting that pressure on the Fed to ease is building. President Trump has been publicly browbeating the Fed to cut rates much faster. He argues (on Truth Social and in press remarks) that with other central banks easing, the Fed is holding U.S. growth back – going so far as to say rates should be “2–3 percentage points lower” and personally insulting Powell as “very dumb” and “hardheaded” for not cutting.

While the Fed insists it doesn’t answer to politics, the reality is that they likely won’t want to over-tighten.

It’s telling that the Fed has already shifted its stance on liquidity. As we discussed previously, the Fed is ending quantitative tightening (QT) earlier than initially planned and has even hinted at backdoor ways to inject liquidity if needed (non-QE-QE).

Moreover, banking regulators have eased certain rules (for example, adjusting bank capital ratios and leverage requirements) to encourage lending. These steps amount to a subtle re-loosening of financial conditions after two years of tightening.

Behind the scenes, money markets are quietly loosening. Dealer balance sheets are flexible, banks are lending reserves into repo markets, and Federal Home Loan Banks (FHLBs), the government-sponsored entities that serve as critical short-term lenders to the banking system, are deploying more cash into repos. Liquidity is sneaking back in.

This chart tracks key money market spreads and liquidity flows. The signal is clear: the system is shifting from tight to loose. The reserve supply remains ample, funding demand is rising, and cash is being increasingly deployed, creating a perfect backdrop for stealth QE.

In practical terms, liquidity is making a comeback. Money supply contraction has stabilized, and bank lending, which wobbled during the spring uncertainty, is firming again now that credit fears have subsided. Real interest rates (inflation-adjusted yields) remain somewhat restrictive, but are likely to have peaked. If inflation stays mild and nominal yields hover in this range, real rates will gradually decline. And if the Fed does begin cutting by fall, which is our base case, we could see a meaningful decline in short-term rates by year-end. The Fed’s forecasts (the “dot plot”) now project about 50 bps of cuts by December, which would bring the Fed funds rate closer to ~3.75–4.0%.

This has two important implications:

Risk assets can breathe easier. A Fed on hold (and soon to ease) reduces the pressure on discount rates for equities. It also lowers the odds of a policy mistake-induced recession, which we see as a greater risk, and this is why we believe the Fed should cut in July. The fact that financial conditions have eased in recent weeks (helped by a weaker dollar and tightening credit spreads) is reflected in the rally we’ve seen. As one example, high-yield credit spreads narrowed back toward pre-tariff levels, and equity valuations expanded as investors grew confident the Fed “has their back” again.

The U.S. dollar and rates may become less dominant market drivers. With the Fed on pause/cutting (soon) and growth improving, the dollar index has softened (down from its highs), and capital is flowing out of safe havens into riskier bets. Emerging market equities and currencies have perked up alongside crypto, indicating a broader risk-on rotation as the specter of ever-tightening policy fades.

Of course, we’re not in full-blown stimulus mode, at least not yet.

In the U.S., pairing monetary easing with the aforementioned fiscal expansion (if Trump’s mega tax bill passes) would be a recipe for higher growth and higher deficits.

That raises longer-term questions (e.g., upward pressure on long-term yields, debt sustainability), but in the near term, it likely means even more liquidity sloshing around. The Treasury will issue more debt to fund spending, and the Fed may indirectly accommodate this. Indeed, some investors (like Arthur Hayes) speculate that the Fed could even resume outright QE if needed to absorb new Treasury supply, especially if foreign buyers balk at financing Trump’s widening deficits.

The dreaded “double tightening” (both fiscal and monetary tightening) has flipped to a “double easing” outlook for late 2025. Trade uncertainty is fading, the White House is priming the fiscal pumps, and the Fed is leaning dovish again. This sea change in policy stance is a big reason we remain constructive on risk assets, even after the big rally. Liquidity is the lifeblood of markets, and it’s starting to flow more freely. We are mindful of inflation and yield risks (we’ll be watching oil prices, wage data, etc.), but for now, the policy mix is favoring investors.

As the saying goes, “Don’t fight the Fed,” – and the Fed is no longer fighting us.

If the first half taught us anything, markets can compress decades into weeks. Sometimes, like in the Cuban Missile Crisis, what feels like the end of the world is just a moment. Panic can be brief. Resolutions can arrive faster than we’re prepared to believe.

Crypto

The Crypto Rally Few Are Actually Enjoying

The biggest rallies are always the loneliest. And this one belongs to Bitcoin.

Bitcoin’s surge back above $108,000, paired with Circle IPO, has reignited Wall Street and Silicon Valley’s interest in crypto.

What’s the killer app of crypto? Stablecoins. And now, thanks to regulatory clarity and the success of the Circle IPO, stablecoins have experienced significant growth, drawing institutional capital deeper into the crypto ecosystem. Circle’s IPO green-lighted Multi-Family Offices, Endowments, and Pensions for more crypto exposure, validated the thesis that real businesses with crypto-native rails can scale, exit, and provide traditional M&A and IPO pathways that don’t rely on token launches.

It signaled to Wall Street and Silicon Valley alike: this space is investable again. And just like that, the same people who said crypto was dead are now back at the cap table.

But this isn’t the broad-based crypto rally of prior cycles. It’s concentrated.

There’s nothing worse than watching a rally you don’t participate in. That’s what this crypto market feels like right now. Bitcoin’s ripping, but most people aren’t enjoying it.

Diversification = Diworsification

With Bitcoin cruising past $ 100,000, most investors expected altcoins to explode and their favorite memecoins from 2023 to 100x.

What did they get instead? Down another 50%-75%.

Only a handful of assets are moving in tandem with Bitcoin.

BTC’s dominance is surging, now above 65%, a level we haven’t seen since 2021.

The price is now within striking distance of its all-time highs, up ~50% from Q2 lows. Meanwhile, most major altcoins, such as Ethereum and Solana, remain 40–60% below their peaks.

The Altcoin Season Index has been stuck in the low-20s for months, firmly in “Bitcoin Season” territory. Historically, anything under 25 means very few altcoins are outperforming Bitcoin.

That’s exactly what we’re seeing: capital is concentrating on BTC (and, to a far lesser extent, a few blue-chip alts with strong narrative tailwinds like $HYPE) while everything else drifts.

Diversification has diluted returns in this cycle. Concentration has compounded them.

This level of outperformance by a few assets is nothing new.

We’ve seen this movie before.

Remember FAANG? Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet). They dominated equity returns from 2013 to 2021.

Or how about the “Magnificent 7” — the small chip company led by Jensen Huang, Nvidia, plus Apple, Microsoft, Alphabet, Amazon, Meta, and Tesla?

The outperformance was so extreme that allocators fired their active managers. Why pay for stock pickers when seven names are doing all the work?

Now, look at crypto.

What’s the point of a liquid crypto hedge fund? To beat the market.

What’s the benchmark? Bitcoin.

So what do hedge funds need to do to keep LPs happy? Outperform Bitcoin.

Unless a crypto hedge fund has been mostly long on spot BTC and HYPE, it has probably underperformed year-to-date.

That makes for some not-so-fun LP calls. Why pay for stock pickers when a few publicly traded, easy-to-buy names are doing all the work?

So, why has Bitcoin been attracting the bulk of flows?

Several factors are driving this “flight to quality” – where investors are piling into Bitcoin (and, to a lesser extent, a few other large caps) while leaving the rest of the crypto market behind:

1) The long-awaited wave of institutional money is finally materializing, and it’s overwhelmingly focused on Bitcoin.

Crypto investment funds have now logged 11 consecutive weeks of net inflows, totaling approximately $16.9 billion since mid-April.

Notably, Bitcoin accounted for roughly 83% of those inflows, whereas most smaller altcoin-focused funds experienced either trivial inflows or outflows.

Okay, so Bitcoin flows are crushing L1 governance tokens. But what about physical gold? Digital gold’s big brother is always part of the conversation, right?

Over a recent five-week span, U.S. Bitcoin ETFs attracted more than $9  billion of new capital, while gold-backed ETFs saw $2.8  billion of outflows in the same period.

Probably nothing.

Additionally, the major ETF issuers are actively promoting the BTC ETFs. Can we blame them? Absolutely not. It is an incredible business for them.

One of the most noteworthy, and perhaps the most discussed, aspects of ETFs is that most of these buyers are long-term investors. Think asset managers, hedge funds, endowments, pensions, etc.

While the media have emphasized this, and we tend to be contrarian, we do agree that these flows are stickier.

After the Circle IPO (an Asymmetric investment), we were receiving texts and calls from money managers in traditional finance (tradFi) asking about how to gain exposure for themselves and their clients.

The same ones who said crypto was a scam six months ago now want a 5-10% allocation.

2) The macroeconomic backdrop has been tailor-made for Bitcoin’s narrative.

Trump’s aggressive deficit spending, fiscal expansion, and tolerance for higher inflation are the perfect macro setup for Bitcoin.

Bitcoin is the bid in the reflation trade. The bid that doesn’t close at 4 p.m.

The U.S. dollar has weakened. The Fed is on pause. Liquidity is coming back.
When inflation runs hot, and policymakers don’t care, investors need hard assets.
Bitcoin has finally earned that seat next to gold.

3) Bitcoin has been de-risked.

Bitcoin has won the regulatory game.

The SEC has greenlit Bitcoin ETFs. U.S. banks can custody crypto.

Bitcoin is generally classified as a commodity, rather than a security.

And the stablecoin market? Thanks to bipartisan bills like the STABLE Act and the GENIUS Act, it finally has real rules.

This has unlocked massive institutional flows. Funds that were previously sidelined due to compliance risk are now buying size.

Meanwhile, most altcoins remain in a regulatory gray zone, with some being borderline unregistered securities, and nobody wants to be caught holding the “governance token” bag.

Flows confirm the bifurcation:

Year-to-date, Bitcoin fund inflows have dwarfed all other assets. Ethereum’s inflows are a fraction. Solana? Barely a blip. However, Solana is likely to see more interest now with ETFs going live and more treasury companies coming online.

“When in doubt, buy Bitcoin” has been the mantra.

All in all, this has led to outsized outperformance by Bitcoin, which we expect to continue as Bitcoin dominance continues to climb towards 70%.

Concentrate to Compound

As investors, the market is always right, and we must heed what it is telling us.

In 2023 and 2024, the market was telling us that it didn’t want any more crypto venture investments, as seen by the struggles in raising capital from existing LPs.

Now, the market is telling us that it wants liquid exposure but wants to be concentrated in Bitcoin, Circle, Hyperliquid, Solana, and maybe a few others. Consider the Bitcoin treasury companies. They are being launched at a pace that feels like every other day.

The combination of Bitcoin (the asset) and Solana (the infrastructure) as a “barbell” investment pair will likely remain effective in the long term. But moving forward, the weight is shifting. The anchor is heavier towards Bitcoin.

VC

Building Bridges to the Real World

The crypto VC landscape churns with a quiet intensity, funneling capital into innovations that aim to tether blockchain technology to tangible, real-world outcomes. Gone are the days of unchecked speculation; today’s VCs are investing in tokenized real-world assets, yield-generating DeFi infrastructure, and cross-chain connectivity solutions, signaling a sector that has matured in both ambition and discipline. Amid macroeconomic headwinds and evolving regulatory frameworks, these themes reflect a market focused on functionality, interoperability, and measurable impact.

Tokenizing the Tangible

Tokenized RWAs—including U.S. Treasuries, real estate, and corporate credit—are increasingly favored by VCs seeking to bring traditional finance into the crypto fold. As of June 2025, the RWA market is valued at $24 billion, representing a 380% increase from three years ago. Treasury-backed tokens account for $6.9 billion of that, with Ondo Finance leading the charge through its $1.1 billion in tokenized U.S. Treasuries and partnerships with BlackRock’s BUIDL.

Standard Chartered projects that tokenized assets could reach $30 trillion by 2034. Just this past week, Robinhood’s CEO announced its intent to get into the RWA scene - quite heavily, too. While regulatory fragmentation and valuation uncertainty remain obstacles, the sector’s momentum is unmistakable. This marks a clear departure from the speculative cycles of 2021–2022, where hype often outpaced utility.

DeFi’s Next Chapter

DeFi remains a magnet for VC activity, with $4.9 billion in crypto venture deals in Q1 2025. This includes major investments in platforms focused on liquidity solutions and sustainable yield. EigenLayer, which raised $70 million in June, exemplifies the growing demand for restaking protocols. Platforms like Hyperliquid and Aerodrome are also gaining traction as decentralized alternatives to centralized exchanges.

Still, challenges persist. Despite lofty valuations, most leading DeFi protocols generate less than $1 million in monthly recurring revenue, raising long-term sustainability concerns.

Cross-Chain Connectivity: Linking Liquidity

Fragmented liquidity remains one of the most significant friction points in crypto. VCs have responded by doubling down on cross-chain infrastructure, with projects like LayerZero and Axelar drawing significant capital.

In Q1 2025, approximately 30% of infrastructure-focused VC funding targeted cross-chain startups. Yet, risks remain: more than $2 billion has been lost to bridge exploits since 2020, including the infamous Ronin hack. As with previous waves of interoperability efforts, security and trust are foundational.

Macro Headwinds and Market Discipline

Wider macro conditions are applying new pressure. U.S. GDP contracted by 0.3% in Q1 2025, the first decline in over two years. Still, the Atlanta Fed’s GDPNow model forecasts a 3.4% rebound in Q2. This tightening environment has increased scrutiny on early-stage ventures, demanding clearer product-market fit and real-world traction.

From Hype to Utility

In mid-2025, crypto VC appears driven by pragmatism. With $4.9 billion deployed in Q1, capital continues to flow—but only toward ideas grounded in utility, security, and scalability. Tokenization, restaking, and interoperability are no longer speculative trends; they are now established realities. They are the foundation of a more disciplined and interconnected ecosystem.

If the current trajectory holds, crypto will look less like an experiment in permissionless finance and more like a core pillar of global financial infrastructure.

Bitcoin DeFi

The Evolving Bitcoin DeFi Ecosystem

We’re starting to see eggs hatch in the Bitcoin ecosystem. After nearly two years of heavy capital deployment into foundational infrastructure — including scaling solutions, staking mechanisms, interoperability layers, and wallets — that groundwork is beginning to pay off. The once-quiet build phase is giving way to visible traction, with mainnet launches, cross-chain integrations, and centralized exchange support accelerating the shift toward a more robust Bitcoin-native DeFi stack.

Recent developments:

• Botanix Launches Mainnet: Asymmetric Portfolio company Botanix, a Bitcoin L2 goes live with a 16-node federation, promising five-second block times, low fees and Bitcoin-native DeFi. Link

• Xverse (Leading Bitcoin Wallet) Goes Live on Starknet: BTCfi on Starknet is enabled through bridges for native Bitcoin assets and a unified user experience within the same mobile UI. Link

• Zeus Network Launches btcSOL: The launch enables Solana stakers to receive zBTC (a Bitcoin wrapper on Solana) instead of the typical SOL rewards they would receive. Link

• Citrea Solves ZK Proof within one Bitcoin Block: Citrea’s latest breakthrough enables ZK proof verification within a single Bitcoin block, advancing the path to ZK rollups on Bitcoin. Link

• Wallet of Satoshi Launches on Sparks: Enabling Bitcoin PayFi using Sparks with self-custody. Link

Bitcoin L2s

Bitcoin L2s are moving from theory to production. What began as exploratory research and testnets is now evolving into live, permissionless infrastructure. With Botanix launching its mainnet on June 30, we’re marking a major milestone in the maturation of Bitcoin’s L2 and DeFi ecosystem.

At the core of Botanix is the Spiderchain — a delegated proof-of-stake system built entirely on Bitcoin multisig. Validators stake BTC into on-chain multisig wallets that rotate based on stake weight and block proposals. These validators produce EVM-compatible blocks and relay commitments to the Bitcoin chain, enabling optimistic finality and cryptoeconomic security rooted in Bitcoin itself. The validator set is open and permissionless, and the use of native Bitcoin scripts (not wrapped tokens or alternate consensus) ensures the system can function trustlessly. This model resembles the rollup security approach pioneered in Ethereum — but rebuilt for Bitcoin, with a Bitcoin-first ethos.

Botanix’s mainnet now supports validator onboarding, BTC staking, and bridging. The team is focused on expanding ecosystem infrastructure, from explorers and wallets to DeFi primitives and dev tooling. Early integrations and grants are already underway, and the first native dApps are expected to launch in the coming weeks. As the Spiderchain grows, it can scale to support an increasingly complex onchain economy — without needing wrapped assets or third-party bridges. We're excited to see Botanix evolve into a foundational piece of the Bitcoin DeFi stack, offering builders a credible alternative to Ethereum or Cosmos while keeping Bitcoin at the center of the trust model.

Asymmetric is proud to announce our investment in Botanix. We're excited to support the growth of their expansive ecosystem and see Bitcoin gain strong economic incentives and yield generation as a natural byproduct of this activity.

Source: Botanix

Metaprotocols

Last month’s newsletter highlighted Alkanes, which we view as one of the most interesting metaprotocols emerging on Bitcoin today. It enables programmatic fungible tokens through indexer logic, offering a more expressive and modular framework compared to earlier standards like BRC-20 or Runes. We’re closely tracking the progress from the creators and paying attention to developer velocity around the protocol. While activity appears to have cooled slightly since its initial launch, we are "monitoring the situation". We are curious to see how new and existing teams will experiment with and build on top of this evolving primitive.

Source: Dune

And with that… I think it’s worth reflecting on just how far we’ve come. Just as we’ve watched Bitcoin’s application layer come alive through Ordinals, BRC-20, Runes, and now Alkanes, it’s worth remembering that Ethereum went through a similar evolution. In the early days of Ethereum, there were no standards—just raw smart contracts with isolated logic. Tokens existed, but they weren’t interoperable. Every dApp had its own way of tracking balances, transfers, and permissions. It wasn’t until the introduction of ERC-20 that a common standard emerged, giving rise to the ICO boom and enabling DeFi to exist through shared assumptions about how tokens behave.

Then came ERC-721, which did for NFTs what ERC-20 did for tokens. Before ERC-721, NFTs existed in concept — like CryptoPunks — but lacked a standardized interface. You couldn’t move them between marketplaces, wallets didn’t know how to display them, and developers had to reinvent the wheel every time they wanted to build with them. Once the standard was adopted, an entire universe of NFT infrastructure, marketplaces, games, and tooling was unlocked. The protocol became legible — interpretable not just by indexers and dApps, but by the entire ecosystem.

This history reminds us that it wasn’t raw programmability alone that made Ethereum thrive — it was the creation of metaprotocols, shared languages, and standards that allowed network effects to compound. Bitcoin is now entering that same phase, with its own metaprotocols bringing structure, legibility, and composability to an ecosystem that was once considered too rigid for such experimentation. Just as ERC-20 and ERC-721 breathed life into Ethereum, protocols like Runes and Alkanes are beginning to do the same for Bitcoin. Things could get very exciting here extremely quickly.

Bitcoin Staking

A key theme for June has been the resilience of Babylon’s staking ecosystem in the face of compressing yields. The current APY on Babylon sits around 0.39%, reflecting a natural decline as early high-yield incentives taper. Yet, what’s notable is that Babylon has not seen a significant drop in total value locked (TVL). This suggests that participants are beginning to see Bitcoin restaking not just as a yield play, but as a core primitive for new financial infrastructure.

One driving force behind this stability is the growing adoption of Liquid Staking Tokens (LSTs) as a wrapper for Bitcoin across EVM environments. LSTs issued through Babylon are becoming a common format for composability and integration — enabling staked Bitcoin to be rehypothecated, used in DeFi, or pledged as collateral across protocols without sacrificing native yield.

Bitcoin LSTs are now being integrated into structured products and yield strategies, including borrow/lending markets and collateralized positions — marking a key step forward in making Bitcoin productive across the broader DeFi landscape.

Lombard’s LBTC continues to be the most dominant LST operator with over 18,000 BTC and they have recently signed an exclusivity agreement with Katana (a yield oriented DeFi chain incubated by Polygon and GSR), to have Lombard be the only version of BTC available on that chain.

Source: BitcoinEcoTK

dApps

We view borrow-lending as one of the most significant long-term opportunities for Bitcoin. As Bitcoin continues to evolve from a passive store of value into an active layer of internet capital, the ability to borrow against BTC or use it as pristine collateral unlocks entirely new financial primitives — from leverage and liquidity access to structured products and real-world integrations. Native borrow-lending markets are essential infrastructure for a mature Bitcoin economy, enabling users to stay long BTC while accessing dollars, yield, or risk management tools without ever leaving the asset. This foundational layer will power everything from DeFi apps to institutional finance, and we believe it’s still early. For this reason we continue to be excited about Liquidium (Asymmetric PortCo) building an omni-chain lending dApp.

Liquidium is making fantastic progress and most recently announced a working demo which had a lender borrow USDT on Ethereum, directly against their Bitcoin on L1, and pay back this loan, which resulted in a successful cross-chain loan repayment.

Source: X

Omni-chain abstraction continues to be a recurring theme, and one which enables builders to create seamless interoperable UX. Notably, Circle Gateway is particularly interesting in this context — it enables a unified, chain-agnostic USDC balance that can be instantly accessed across multiple blockchains, making it a powerful unlock for borrow-lending against BTC. By eliminating the need to pre-fund liquidity pools on each individual chain, Bitcoin lending platforms can offer seamless, low-latency loans with USDC that’s available wherever demand arises — whether on Ethereum, Solana, or emerging Bitcoin-aligned ecosystems. This dramatically improves capital efficiency, reduces friction for users, and enables real-time margin management, making BTC-backed lending markets faster, more scalable, and responsive to liquidity needs across the crypto economy.

Team Updates 

• Joe was featured on Kyle Chasse’s Youtube episode “Wall Street Is KILLING Altcoins (They're Buying THIS Now)”

All Market Updates

• June 2025

• May 2025

• April 2025

• March 2025

• February 2025

• January 2025

• December 2024

• November 2024

• October 2024

• September 2024

• August 2024

• July 2024

• June 2024

• May 2024

• April 2024

• March 2024

• February 2024

• January 2024

• December 2023

• November 2023

• October 2023

• May 2023

• April 2023

• March 2023

• February 2023

• January 2023

• December 2022

• October 2022

• September 2022

• August 2022

Please let us know if you have any questions or comments. 

As always, thank you for your support.

– Asymmetric

Coming off the heels of a treacherous April, May turned out to be a face-ripping rally largely driven by retail investors, not the “smart money” crowd. Markets don’t need good news to rally, just fewer reasons to panic. In May, they got both. This past May was the best-performing May for the S&P 500 this century.

The quarter began in disarray, as markets reacted to self-inflicted wounds around tariff uncertainty. But beneath the headlines, the fundamentals were never broken. As we noted in April, the setup — solid data, sour (and frankly political) sentiment, and offside positioning — was ripe for a historic comeback.

And that’s exactly what happened.

We flagged that discretionary managers were re-risking across equities, credit, and even alts, while systematic funds were still sitting out:

“We’re seeing discretionary PMs warming back up… But the machines haven’t followed. Why? Because they don’t care about Powell or earnings. They care about price, vol, and correlation regimes. That’s it.”

In other words, humans were re-risking. The algorithms hadn’t caught up yet.

We also pushed back on the idea that soft data (surveys, sentiment) would drag hard data (jobs, earnings, spending) down with it. In fact, we leaned the other way: hard data would hold, and soft data would eventually catch up.

In May, we got:

• Cooler-than-expected inflation

• Strong job numbers

• Robust earnings across mega-cap tech are still expected to be robust.

• Steady consumer data

• And a flurry of dealmaking chatter from the White House

The “Trump put” was clearly found.

From last month’s Market Update:

“We expect the Trump administration to deliver some form of tariff relief—optically if not functionally—before July 8, which we are already starting to see. The deals will be light on details and heavy on headlines. That’s fine and how Trump operates…and how markets currently trade.”

As you can tell, there were plenty of positive headlines going around, the complete opposite of headlines that sent the S&P sharply lower earlier this year. As the narrative shifted from panic over policy to optimism about progress, equities surged higher. Strong consumer spending, stable data, and underweight positioning meant it didn’t take much for the S&P to snap back near its highs in just a few weeks.

At the end of May, we saw a brief pullback in equities and crypto as trade uncertainty reared its head again, with rumors over a deal with China souring, and U.S. pension funds forced to sell as they rebalanced their portfolios.

"US Pensions are modeled to SELL $19bn of US equities for month- end... $19bn to sell ranks in the 89th percentile amongst all buy and sell estimates in absolute dollar value over the past three years and in the 85th percentile going back to Jan 2000" - Goldman Sachs

That’s done. The rebalancing is behind us. However, trade uncertainty is lingering, yet we don’t think it will. Countries are highly incentivized to ink a deal by July 8th, unless the Courts step in, which could throw a curveball at Trump; however, this is not our base case.

So what about now? Equities are up 20% from their lows, and Bitcoin is up 40% from its lows. Does the rally still have room to go? Are we going to all-time highs? Yes, but expect some turbulence. Remember, we just witnessed a record-breaking performance for May, so a breather is both natural and healthy.

Positioning remains the key driver. Offsides exposure and record corporate buybacks were strong tailwinds for risk assets throughout May, which will continue, but have less of an effect.

"..the precedent for huge rallies during Earnings Season, similar to 1Q25’s, is that the month ahead returns are choppy with plenty of volatility - an average gain in the VIX of 19.0% " - Evercore ISI

Put differently: a breather was and is both needed and expected.

Gross leverage has climbed to the 99th percentile, but that’s mostly a function of rising asset prices — it tends to rise mechanically with the market. What’s more telling is that net leverage is now back above 50%, which speaks to actual risk appetite. That makes the entry point here, on a pure risk/reward basis, far less attractive than it was a month ago.

The next move likely hinges on trade headlines.

It’s hard to believe we don’t get some positive news before July 8th, the soft deadline for multiple trade partners.

Hedge funds are already moving and playing catch-up:

"HFs net bought US Info Tech stocks for a 3rd straight week and every day [last] week ... [the] week’s notional long buying in the sector was the largest in more than 10 years (+1.6 z score), pointing to a positive turn in sentiment."

If headlines cooperate, which we think they will (barring any curveballs from the courts), algos have room to re-engage.

One thing to note is that Hedge fund exposure to the Magnificent 7 continues to decline.

Why does this matter? It creates a two-sided dynamic:

• On the way up: These names can continue to grind higher without help from hedge fund flows, meaning hedge funds underperform as Mag7 rallies, especially if the rest of the book is value/cyclicals or short-duration tech.

• Eventual: The pain trade forces re-risking. Funds that are light on these names may be forced to chase performance, especially into quarter-end or if macro data surprises to the upside.

So, despite stretched sentiment and lofty valuations, the lack of positioning makes the rally more durable, not less. It’s hard to break something that no one’s leaning on.

While we will experience some short-term (really short-term) volatility with tariffs back in the spotlight and inflation reports over the next two weeks, the rally in equities has some legs as it becomes, once again, a hated rally.

The Macro Data Continues to Cooperate.

GDPNow forecasts remain robust and rising, helped in part by base effects from last quarter, but still point to real momentum. Inflation has been less sticky than feared, jobs data is fine (although unemployment is slowly rising), and corporate earnings haven’t meaningfully slowed.

We’re also finally seeing soft data start to catch up.

Sentiment, which had been deeply depressed earlier this year, is beginning to improve, driven in part by a more constructive tone on trade. The growth signal from soft data has solidified, even as the hard data remains steady. That divergence was central to our bullish view last month and is why we maintain a constructive view on the macro backdrop.

We’ve also noted a subtle, but important dynamic: consumers aren’t pulling back because they have to… they’re pulling back because they want to. Yet retailers like Walmart have not seen a slowdown at all.

Dollar General and Five Below, two discount retailers that import heavily from China, are having phenomenal years (stock price YTD below):

While headlines like “foreign travelers to the U.S. are down”, air travel overall is in lockstep with 2024.

And people are still dining out!

As we wrote about in August 2024, the economy represents a bimodal distribution, where the left mode of distribution is lower to middle class, and the right mode of the distribution is upper class to wealthy; the struggle is evident in the left mode of the distribution, while the right mode remains relatively unaffected. That is still the case nearly a year later:

On balance, the consumptive class’s foundation remains strong. What we need next is follow-through on trade policy. That’s the last piece. If we achieve this, both hard and soft data can continue to improve in tandem, driven by positive talks between Trump and Xi, thus lifting risk assets higher.

The Fed and the Liquidity Setup

Over the last two months, we discussed how we thought Bessent would push Fed Chair Jerome Powell to act, but I did not think it would be Trump doing additional pushing, in person. It was expected that Trump would continue to call JP to request rate cuts verbally, but it’s another thing to meet with him at the White House.

We continue to believe that rate cuts are likely to come this summer. Why? Because real rates are still restrictive, inflation is cooling, and the labor market remains stable, albeit slightly weak (the Fed needs to get ahead of this).

But rate cuts are only one piece of the liquidity puzzle.

The Fed has already signaled the end of QT and quietly hinted at a form of non-QE QE, a liquidity boost in everything but name. Meanwhile, bank regulation is also softening, clearing the way for easier credit conditions in the back half of the year.

Why does this matter? Trump pressuring Powell, QT winding down, and looser bank regulations all point to a more supportive policy backdrop. In a market still climbing the wall of worry, as economic boomers dust off valuation concerns and positioning remains low, this shift in liquidity will be the unlock for another leg higher, especially if US/China trade talks continue to improve, which appears to be happening now:

Crypto

Over the past five weeks, U.S. Bitcoin ETFs have attracted more than $9 billion in inflows. Gold ETFs? Down $2.8 billion. ETH has finally caught a bid too — and for the first time in a while, it looks real as these flows aren’t just traders putting on basis trades (CME open interest hasn’t kept up with the notional ETF inflows), they are accumulating real size.

In our last Market Update, we covered the importance of “asset issuance.” Since then, we’ve noticed a good bit of dialogue happening — some from institutions and some from Crypto Twitter (CT) researchers — expanding on the topic. While it’s encouraging to see this concept become more mainstream, a good bit of the discussion tends to miss the forest for the trees.

For example, take the notion of an asset issuer’s “moat.” Currently, no one has a true moat in the asset issuance space. It’s simply too early, and most protocols lack a true moat (where switching costs to the end user would be expensive). They instead have marketing.

What matters is who’s shipping product at a fast pace and who’s out-innovating the competition. Who’s actually building something sticky that drives value to the end-user? Copycats in crypto only validate the original innovation - very few leapfrog the first of something.

This dynamic is especially brutal in the borrow/lend category. Kamino is a product in the borrow/lend space that has continued to innovate and focus on driving value to the end-user, which is no surprise as to why it is the leading lending protocol on Solana (and it wasn’t first).

However, memecoin trading (the trenches) is exhausted. Trading volumes are down, and engagement is low.

One could discount the drop in activity as being cyclical, and usually, they’d be right.

But this time… there’s a new shiny object for crypto native traders → Hyperliquid.

Hyperliquid currently offers the best trading experience in crypto for any decentralized exchange (DEX), supporting both spot and perpetual (perps) trading.

Spot, perps, everything. Clean UI, buttery execution, CEX-like feel, without the KYC and withdrawal delays. Most retail investors and many funds that don’t actively trade have yet to use Hyperliquid and have likely missed the tripling of $HYPE over the past couple of months. Just like in TradFi, where algos were caught massively underweight and pensions had mechanical rebalancing to do, we’re seeing the same dynamic here: flows chasing performance, with $HYPE catching a sustained bid.

Why Hyperliquid Works

The common narrative surrounding Hyperiquid’s success is that it does not require Know Your Customer (KYC) verification, has niche listings, and engages in regulatory arbitrage.

That’s not wrong. But it’s not why they’ll stay dominant.

Hyperliquid has proven two critical things:

1. The founders and broader team are elite engineers with extensive experience in capital markets.

2. Hyperliquid has better spreads, better execution, and deeper order books than most CEXs and DEXs.

Want to buy a Bitcoin perp in size? Hyperliquid probably has the best fills.

Want to scalp memes with 5x leverage? Same story.

Want to run an ETH-BTC basis trade while farming $HYPE? Yep, you can do that too.

Hypeliquid also has the HyperEVM, enabling other teams to build on top of Hyperliquid’s L1. “Precompiles”, short for Precompiled contracts, is a technology that collects information generated from Hyperliquid L1 and makes it available for use in HyperEVM. Without Precompiles technology, all price data would need to be copied from Hyperliquid L1 to HyperEVM for smart contracts to read, which causes delays in the EVM block generation process as the number of assets to copy increases. In contrast, Precompiles collects information and includes it in each block, allowing requesters in HyperEVM to selectively utilize needed information, minimizing network load at the EVM level.

Precompiles enable direct querying of liquidity, oracle, vault, staking, and other information from Hyperliquid L1 in HyperEVM. While centralized exchanges like Binance have no way to utilize large orderbook liquidity in external DeFi protocols, Hyperliquid makes this possible through its liquidity program.

Now, with write and read precompiles going live soon, you can expect increased usage of the HyperEVM. Users can experiment with money markets using Felix, run a delta-neutral strategy on Liminal, or (once live) stake $HYPE with Kinetiq and leverage their liquid staking token ($kHYPE) to amplify their position on other DeFi platforms.

While Hyperliquid is not without its flaws (only 21 validators for the entire network), the team’s execution and the fanatical community behind Hyperliquid are undeniable. It is no surprise that $HYPE is now in the top 15 by market capitalization, and we suspect it is only a matter of time until it is in the top 10.

VC

Pioneering a New Horizon

The crypto VC landscape continues to hum with bold ambition, harnessing a resurgent market while dodging the ghosts of past exuberance. Three trends dominate: the fusion of AI and blockchain, a blockbuster funding surge, and the speculative allure of SocialFi with tokenized attention. Fueled by Bitcoin’s post-tariff rebound and a pro-crypto U.S. stance, crypto VC is carving a path of innovation grounded in discipline. Yet, macro volatility and speculative risks loom, demanding a focus on tangible value.

AI x Crypto: Promise Meets Pushback

The AI-blockchain nexus is a VC juggernaut, with $917M invested in decentralized AI projects, per Trammell Ventures. Firms like a16z, Pantera Capital, and Hack VC are backing Sentient ($85M seed for decentralized AGI), io.net ($30M Series A for a DePIN compute network), Hyperbolic ($17M for GPU tokenization), and Payman ($3M pre-seed for AI-driven crypto payments). These projects decentralize AI compute and data—io.net, for instance, connects 1.2 million GPUs globally, per its Q1 report, while Payman enables autonomous on-chain transactions. The AI token market, soaring from $2.7B in April 2023 to $39B by October 2024, is projected to hit $45B by early 2026 (CoinGecko). Yet, X posts like “AI x Crypto is just 2021 ICOs in disguise—where’s the real blockchain utility?” question whether blockchain is essential, warning of hype-driven valuations.

Funding Surge: Maturing Amid Risks

Q1 2025 saw $5.85B raised across 446 deals, a 61% leap from 2024, per CryptoRank and Galaxy. A $2B Binance deal led the way, joined by 12 rounds over $50M, including Allora Labs ($35M for AI analytics), Plume Network ($50M for RWA tokenization), and OG Labs ($35M for modular AI chains). CeFi ($2B), DeFi ($763M), and infrastructure ($506M) dominated, with later-stage deals capturing 65% of capital, signaling maturity. AI and DePIN reflect real-world utility, but $20B in locked token value from launches like Berachain (5% float ratio) risks volatility, per CryptoRank. New fund fundraising ($1.9B, $130B average fund size) remains constrained, with a declining median reflecting caution. The Atlanta Fed’s -2.8% GDP forecast for Q1 2025 tempers enthusiasm, though Bitcoin’s recovery from April’s $74,425 low shows resilience.

SocialFi and Tokenized Attention: A Risky Frontier

SocialFi, merging social media with DeFi, is a high-stakes VC bet. Re7 Capital’s $10M fund, backed by Lens founder Stani Kulechov and Farcaster’s Dan Romero, targets 30 early-stage startups, with 60% of capital committed and a June 2025 close planned, per industry reports. Lens Chain, a Layer 2 with sub-cent fees and 50ms finality, enables SocialFi apps in days, while Farcaster’s “frames” turn posts into mini-apps, hosting 200+ projects. Tokenized attention—e.g., Lens users earning 0.01–0.1 tokens per engagement—redefines monetization, bypassing Web2 gatekeepers. Yet, X posts note SocialFi’s unproven adoption and competition from centralized platforms, with Re7’s fund details lacking primary confirmation.

A Market Forging Value

The past month found crypto VC at a pivotal juncture, balancing bold innovation with hard-won pragmatism. The $5.85B raised in Q1 signals a market rebounding with vigor, yet the road ahead hinges on navigating macro volatility and speculative traps. AI x Crypto could redefine decentralized economies, but its success depends on proving blockchain’s utility beyond hype, as skeptics demand. The funding surge reflects a maturing sector, yet low float ratios and constrained fundraising signal a need for disciplined capital allocation. SocialFi’s tokenized attention models promise user-driven ecosystems, but scaling adoption against Web2 giants remains a hurdle. The path forward requires VCs to prioritize projects with tangible impact—AI compute networks that deliver, DeFi protocols with real-world utility, and SocialFi platforms that capture mainstream users. Regulatory clarity and Bitcoin’s resilience offer tailwinds, but a -2.8% GDP forecast and market correlations demand agility. As crypto VC pioneers this new horizon, its ability to bridge blockchain’s promise with measurable outcomes will shape a transformative future.

Sources: CryptoRank, Galaxy, Trammell Ventures, CoinGecko, Atlanta Fed, DefiLlama

Bitcoin DeFi

The Evolving Bitcoin DeFi Ecosystem

Bitcoin DeFi is entering a breakout phase. What was once a quiet build cycle is now turning into visible progress, as teams launch mainnets, ship cross-chain infrastructure, and integrate with top-tier centralized exchanges. With real yield, native assets, and trust-minimized bridges gaining traction, a credible alternative to wrapped-token DeFi is taking shape — rooted directly in Bitcoin.

Recent developments:

• Liquidium Aims to Launch Bitcoin Cross-Chain Lending: Asymmetric Portfolio company Liquidium, a Bitcoin dApp focused on NFT lending announced at Bitcoin Vegas they are expanding their scope to create a cross-chain lending dApp enabling Bitcoin to Stablecoin loans. Link

• Mezo Announces May Mainnet: Asymmetric Portfolio company Mezo, goes live with MUSD, a BTC-based stablecoin. Link

• Garden Finance Crosses $1.2Bn of Bitcoin Transferred: Garden Finance, a Bitcoin-to-Bitcoin stableswap powered by an intent-solver architecture — has surpassed $1.2Bn in total transaction volume. The protocol has generated nearly 39 BTC in fees to date, highlighting growing demand for seamless, capital-efficient BTC-native bridging. Link

• MagicEden Doubles Down on Bitcoin DeFi with Spark Partnership: Details of the partnership have not been announced, but hints suggest a performant trading environment for Bitcoin-native assets (fungibles). Link

• Oyl Launches Alkanes — Bitcoin Metaprotocol: After previously raising a $3M seed round, Oyl launches Alkanes, a Bitcoin metaprotocol which enables native smart contracts with WASM VM. Link

As the Bitcoin-native DeFi stack matures, momentum is shifting from speculative hype to product-market fit. Protocols are solving for usability, liquidity, and capital efficiency — without compromising on decentralization. Bitcoin is slowly making its way to be a cornerstone of every onchain environment.

Bitcoin L2s

Ecosystem integrations are accelerating as BitVM2 makes meaningful strides toward real-world adoption. This month, BOB (Asymmetric PortCo) a Bitcoin L2, in collaboration with Fiamma, launched a trust-minimized BitVM2 bridge on testnet, enabling the minting of bobBTC — a Bitcoin-backed asset usable across BOB’s EVM-compatible chain. This marks the first time a Bitcoin wrapper can be trustlessly bridged using Bitcoin-native validation rather than external multisigs or federations.

Why is this a big deal?

BitVM2 enables the execution of arbitrary computations (think smart contract logic) using Bitcoin’s native opcode set, but evaluated off-chain with on-chain fraud proofs. This allows trust-minimized BTC bridging — a foundational requirement for Bitcoin-native DeFi — without introducing external consensus layers. In essence, BitVM2 could unlock Bitcoin's version of Ethereum's rollup ecosystem.

Despite a noisy market, the core thesis for Bitcoin-based finance remains unchanged— and increasingly validated:

1. Bitcoin is the collateral of the internet: Programmability remains limited. L2s like BOB, Mezo, Bitlayer, Stacks, and Botanix aim to change that — without diluting Bitcoin’s trust model.

2. Institutional appetite for Bitcoin yield is rising: To capture it, we need capital-efficient, secure ways to deploy BTC in on-chain strategies (e.g., lending, basis trades, restaking).

3. UX is catching up: With one-click BTC staking, familiar EVM wallets, and smart BTC wrappers like bobBTC, Bitcoin DeFi is crossing the usability threshold.

4. Security is becoming programmable: BitVM2, Babylon staking, and native bridges are making Bitcoin a programmable trust anchor — not just a passive store of value.

While there are alternative approaches to Bitcoin interoperability — Stacks’ sBTC recently closed its third vault, demonstrating continued traction in its peg-out mechanism — new entrants are also recognizing the importance of Bitcoin-native collateral. Notably, Sui announced upcoming support for sBTC, marking the first time a non-Bitcoin chain will integrate with the asset. These developments highlight a growing demand for Bitcoin-backed assets across ecosystems, even as BitVM2-based solutions like bobBTC push for deeper trust minimization and native Bitcoin alignment.

Source: BitcoinEcoTK

Metaprotocols

Oyl Corp's Alkanes is a Bitcoin metaprotocol designed to enable native smart contracts on the Bitcoin network. It draws inspiration from Bitcoin metaprotocols like Ordinals and Runes, utilizing techniques such as the "witness envelope" to embed smart contract code directly into Bitcoin transactions.

Alkanes allows developers to deploy WebAssembly (WASM) smart contracts to the Bitcoin blockchain. These contracts are written in languages like Rust, compiled into wasm files, and embedded within Bitcoin transactions. The system leverages the Unspent Transaction Output (UTXO) model, enabling contracts to hold balances, interact with other contracts, and access transaction and block data. This design facilitates functionalities such as checking balances, reading/writing storage, and enforcing conditions on spending through Bitcoin's scripting capabilities.

Rebar Labs is a component of the Alkanes ecosystem aimed at enabling transaction ordering and execution within the Bitcoin mempool. As shown below as a mempool transaction with Rebar ordered transaction in blue:

Alkanes employs a WASM-based virtual machine for executing smart contracts, providing a secure and efficient environment for contract execution. The indexer for Alkanes is also built using WASM through a framework called Metashrew. Metashrew allows for deterministic and verifiable indexing of the blockchain, ensuring that the state derived from smart contract executions is consistent and reproducible. This setup supports functionalities like simulating contract executions, computing fuel costs, and accessing historical state data.

We’re excited to see teams like Oyl Corp pushing the boundaries of what's possible on Bitcoin by building metaprotocols like Alkanes to enable native smart contracts. Even if constrained by Bitcoin’s inherent throughput limitations, these efforts reflect a growing ecosystem-wide interest in extending Bitcoin’s functionality without compromising its core principles. The exploration of WASM execution, deterministic mempool ordering via Rebar, and programmable logic through covenants shows that innovation in Bitcoin-native development is accelerating in thoughtful, layered ways.

Bitcoin Staking

Institutions are finally getting a way to earn real yield on their Bitcoin — without giving up custody or taking on bridge risk. Enter lstBTC, a new institutional-grade Bitcoin yield product from CoreDAO and Maple Finance, designed to turn idle BTC into a performance asset. Backed by trusted custodians like BitGo, Copper, and Hex Trust, lstBTC enables accredited investors to earn 4–6% BTC-denominated yield while the underlying Bitcoin remains secured via Bitcoin-native time-locks, not smart contracts or synthetic wrappers. Yield is generated through Maple-managed, risk-optimized strategies like staking, lending, and basis trades, effectively creating a secure, transparent vault product with trading desk precision.

However, lstBTC is not permissionless — access is gated via KYC and restricted to institutions and accredited investors. While that limits open DeFi composability, it signals a powerful shift: regulated Bitcoin capital is being mobilized, not just held — and doing so with onchain primitives rather than off-chain IOUs.

Source: BitcoinEcoTK

dApps

At Bitcoin Vegas, the Liquidium team announced the next evolution of their product — expanding into cross-chain lending and borrowing of digital assets like Bitcoin, Ethereum, and Solana. While Liquidium’s v1 launched as a Bitcoin-native NFT lending dApp using Discreet Log Contracts (DLCs), the team is now building on a new technical foundation: ICP Chain Fusion. This approach allows smart contracts to seamlessly interact across multiple blockchains. Initially, it will enable instant NFT-backed loans on Bitcoin, with broader cross-chain lending capabilities to follow.

Connecting Bitcoin to assets and systems that already have clear product-market fit is one of the most exciting developments in Bitcoin DeFi. Liquidium’s deployment on ICP Chain Fusion is a strong example — enabling users to borrow stablecoins like USDC and USDT on the chain they desire stablecoins on, against BTC, abstracting wrapping through ckBTC.

What makes this integration stand out is the user experience, which you can try here as a demo: link. Instead of forcing adoption of new, siloed ecosystems, it leverages wallets and assets users already trust. By linking Bitcoin to familiar on/off ramps and stablecoin liquidity pools, it builds a more intuitive, capital-efficient borrowing experience.

This is how Bitcoin becomes usable in real-world DeFi — through elegant connections rather than isolated infrastructure. We are excited to see the incentives programs and campaigns that the team builds to attract substantial amounts of liquidity to compete against other lending dApps.

Team Updates 

• Joe spoke at Binance in Abu Dhabi and TOKEN2049 in Dubai at the end of April.

• Joe was mentioned in The Washington Post article “These young people see meme coins as their best shot at the American Dream”.

• Check out Joe’s NEWSBTC interview “Bitcoin To $400,000, Solana To $420, Ethereum Dead Weight, Says Fund Manager”.

• Dan spoke at Bitcoin Vegas at various events such as BitGo, Inscribing Vegas and Arch.

• Lukasz spoke at Consensus in Toronto and Bitcoin Vegas at the end of April.

All Market Updates

• May 2025

• April 2025

• March 2025

• February 2025

• January 2025

• December 2024

• November 2024

• October 2024

• September 2024

• August 2024

• July 2024

• June 2024

• May 2024

• April 2024

• March 2024

• February 2024

• January 2024

• December 2023

• November 2023

• October 2023

• May 2023

• April 2023

• March 2023

• February 2023

• January 2023

• December 2022

• October 2022

• September 2022

• August 2022

Please let us know if you have any questions or comments. 

As always, thank you for your support.

– Asymmetric

While April was a historic month, we’re not going to rehash Liberation Day—that bloodbath got its own set of headlines last month. But let’s be honest: not much has changed. Markets are still held hostage to tariff tweets. Liquidity is still razor thin. Algos are still driving market moves. And while fear indicators like credit spreads and the VIX have rolled over, we’re still trading in a regime where one man’s tweet can override every so-called “bottoming signal” on your dashboard.

Make no mistake—markets have flashed classic bottoming signals everywhere. Credit spreads? Peaked. VIX? Rolling over. Bitcoin? Closing the gap on gold. Pessimism? Still pinned at extremes. Technicals? Screaming capitulation. But none of it matters if price action is glued to headline velocity and liquidity depth is at record lows.

And yet, economists and strategists keep playing the same tired game—projecting GDP, payrolls, and PCE like it offers some edge. It doesn’t, in this market where it can all change with one tweet. The market and the economy are different animals. When GDP prints its worst, the market has often already bottomed. That’s why recession obsession is usually backward-looking. Yes, recession odds are high. But this is a policy-driven slowdown—tariff-induced, not credit-crisis born. It can be reversed just as easily. Our models suggest that it will probably reverse, especially as the labor market softens and inflation continues to drift lower. The Cleveland Fed tends to agree on inflation:

Meanwhile, the permabears are dusting off Ray Dalio’s Principles for Dealing with the Changing World Order to justify USD collapse narratives and de-dollarization trades. Don’t get us wrong—it’s a brilliant book, and many of its warnings hold long-term weight. But betting against the Dollar has been a money-losing strategy for decades. Someday, the U.S. will lose reserve status. Just not today. Fear sells—but it’s a terrible investment strategy. We’re aware of the narrative. We’re just not participating in it.

Most investors are still trying to forecast the future like it’s some economic Magic 8-ball—GDP, payrolls, PCE, rinse and repeat. But if you don’t understand what’s happening now, your hit rate will be worse than Jim Cramer’s. This isn’t a macro-driven market. It’s a tariff-driven market. Tariffs are the sun, and everything else—growth, inflation, earnings—is just orbiting debris.

Need proof? Look at the drastic revisions to Wall Street forecasts.

Q1 GDP came in at -0.3%. It was a known-known—entirely tariff-induced—and yet markets still flinched. However, they did come back to reality in short order. The intraday whipsaw was not because the data surprised, but because we’re still trading in a fragile, twitchy environment where shallow liquidity meets hypersensitive positioning.

Even mega-cap earnings, which by all accounts have been robust as expected, are being downplayed by CEOs offering cautious forward guidance—not because business is weak, but because they, too, don’t know how to price in tweet-driven trade policy risk.

Q2 GDP will likely limp somewhere between 0.5% and 1.0% annualized. Real growth is soft, inflation is above 2%, but it is trending lower. This isn’t a hard landing. It’s a grind. Cooling, not cratering.

And what about the U.S. consumer—the supposed weak link? They are still standing, and delinquencies are falling.

Real (inflation-adjusted) wages remain positive. While spending is becoming more selective (see Starbucks), it’s still healthy.

Just listen to the CEOs of the credit card giants:

“Our customer base is very different than our competitors' customer base. And it's really resilient and pretty stable. I think that they are continuing to spend, albeit at not levels that we saw coming out of the pandemic.”

— Stephen J. Squeri, American Express

“Consumer spending has remained resilient, with payment volume growth steady at 6% year-over-year… discretionary spending in some categories like airlines has softened slightly.”

- Ryan McInerney, CEO at Visa

Again, cooling, not cratering.

To keep the short story short: consumers remain healthy, although they are pulling back on spending due to tariff-induced uncertainty. Both "Main Street" and "Wall Street" are citing concerns over uncertainty surrounding tariffs (see our last Market Update), as some of the hard data is softening but could quickly reverse as the Trump administration walks back tariffs on China.

Credit markets tell the same story. Spreads have peaked and are drifting back toward equilibrium—even if that “equilibrium” still sits around 400bps.

Despite occasional headline-induced spikes, the Volatility Index (VIX) has also rolled over and continues to grind lower. Although spikes in the VIX are to be expected given the volatility of daily headlines, the local maximum is in.

And here’s something most people missed: on April 24th, we got a breadth thrust signal—the 16th time since 1939.

In plain English, we went from a market where only a few stocks were driving gains… to one where nearly everything started participating simultaneously. When that many names flip from red to green in ten trading days or less, it typically signals the start of a durable move higher, not a “dead-cat bounce” as markets become less sensitive to one stock’s earnings.

Taken together—falling credit spreads, compressing volatility, rare, internal strength signals like a breadth thrust, and a myriad of technical bottoming signals—suggest that the bottom is in or at least in the “bottoming” process.

Let’s rewind to April 7th.

No need to rehash every tick, but what mattered wasn’t the move—it was the rate of change. Trillions changed hands on air, driven not by conviction, but by near-record thin books.

At the time, S&P liquidity was among the worst we’ve seen in years. That’s why markets could swing 5–10% on whispers. This wasn’t about valuations or fundamentals. It was about depth—or the lack of it.

That structural fragility hasn’t gone away. Book depth has improved marginally, but we’re still in a twitchy, flow-sensitive regime. Psychology is fragile. The machines are still in charge.

That brings us to positioning. In this environment, flow drives price, and the flow has been one-sided. “Follow the flows.”

Systematic strategies are still short. This isn’t Tiger Global or Altimeter selling, it’s machines (think The Medallion Fund). We’re seeing discretionary PMs warming back up across equities, fixed income, and even alts. But the machines haven’t followed. Why?

Because systematic models don’t care about Powell. Or earnings. Or forward guidance. They care about price momentum, realized volatility, and correlation regimes. That’s it.

The big three:

• CTAs: Buy strength, sell weakness.

• Vol targeters: Cut exposure when volatility rises.

• Risk parity: Shift allocations as volatility relationships change.

When trends break down or volatility spikes, these strategies sell automatically. There are no meetings, no gut checks, just output = buy or sell. That’s why they often dump risk at the lows and chase near the highs. Their models are backward-looking by design, and they still see red.

That’s also why valuations can stay stretched and price action feels disconnected from sentiment at the highs and lows. The discretionary side is tiptoeing back in. However, the machines, representing 60–70% of equity flows, are still defensively positioned.

And here’s why this matters.

We’ve started to see flows turn: Treasuries recorded the largest four-week inflow since Q1 2023, and U.S. Bitcoin ETFs saw their third-highest inflow week of the year. These aren’t euphoric flows by any stretch of the imagination, but they are “bottoming” ones, suggesting that the worst of the fear trade is behind us.

To quote JP Morgan’s Michael Cembalest:

“The stock market is unique – it cannot be indicted, arrested or deported; it cannot be intimidated, threatened or bullied; it has no gender, ethnicity or religion; it cannot be fired, furloughed or defunded; it cannot be primaried before the next midterm elections and it cannot be seized, nationalized or invaded. It’s the ultimate voting machine, reflecting prospects for earnings growth, stability, liquidity, inflation, taxation and predictable rule of law.”

Markets don’t care about your opinion. They care about your positioning. You’re either on the right side of flow—or you’re not. If you have been sidelined since April 7th, you have missed an incredible short-term rally.

So, now what?

Equity markets have rallied hard off the lows, with the S&P 500 printing nine straight green days in a row at the time of this writing, a feat that hasn’t occurred since 2004.

Will we still experience down days and contemporaneous volatility shocks? Yes.

Are we going to re-test the lows? No, or put another way, it’s highly unlikely. Why?

Positioning. Institutional traders and investors are still wildly under-allocated and have already sold most of their positions. Given the lack of sellers as measured by positioning, it’s tough to see the market blowing through the lows, and dips are for buying.

We expect the Trump administration to deliver some form of tariff relief—optically if not functionally—before July 8, which we are already starting to see. The deals will be light on details and heavy on headlines. That’s fine and how Trump operates…and how markets currently trade. U.S. trading partners are incentivized to sign something before the clock runs out, even if they quietly renegotiate later to avoid maximum pain.

What about the Fed? Are cuts still coming? Yes.

Real rates remain restrictive, but the bond market and inflation forwards suggest the Fed will cut. The latest NFP print suggests a resilient labor market, with the unemployment rate steady at 4.2%, but revisions continue to come in lower.

However, even if cuts do not come this quarter, as noted last month, we expect to see some non-QE QE thanks to the Treasury:

As discussed in our last Market Update, the Fed has signaled an end to QT (good for liquidity-sensitive assets) while also being pressured on the regulatory front with the banking industry (i.e., credit). Credit is the lubricant for markets, and as this becomes more abundant due to deregulation, we should, again, see liquidity-sensitive assets outperform. This combination of rate cuts, the ending of QT, deregulation, and the introduction of non-QE QE bodes incredibly well for Bitcoin.

We said this last month:

“...Bitcoin, is historically less sensitive to earnings/guidance risk and is positioned to benefit from any liquidity tailwinds the Fed throws at this environment.”

We continue to hold this view. Bitcoin remains less exposed to earnings or margin compression and stands to benefit most from any Fed pivot or regulatory unwind. With the Fed dovish, tariffs easing, and liquidity expanding, Bitcoin dominance hasn’t peaked.

To sum it up, we think:

• Tariffs get eased—optically if not functionally.

• The Fed leans dovish, cutting and/or easing QT to counter tariff drag.

• Liquidity-sensitive assets outperform (Bitcoin especially).

• Earnings growth will be challenging for most corporations, but they will benefit from trade policy clarity and deregulation.

And if we’re right? Bitcoin dominance has not topped.

Crypto

There has hardly been a more exciting time in crypto. Headlines that once screamed “crackdown” now sound like onboarding campaigns. States, nations, and institutions are leaning in. Private crypto firms are filing to go public. SEC charges are getting dropped. Political momentum is here, louder and more durable than most expected.

And yet, markets haven’t exploded higher. Why?

It’s not that investors don’t understand Bitcoin—they’re still trying to figure out if it’s acting like the asset it’s supposed to be—a diversifier, a haven, a modern hedge.

Gold held up well during the recent selloff. Bitcoin, initially, didn’t. But as the dust settled, BTC found its footing, and ETF flows skewed positive again. The message? Institutions may still be skeptical, but they want exposure to the orange coin. Maybe not as a religion. But as a rotation.

While that debate plays out in committee rooms, Bloomberg panels, and dinner tables, capital is already rotating in. Just weeks after Liberation Day, we saw the largest weekly inflows into crypto funds this year, followed by the second largest the week after.

As mentioned in the Macro section, it’s a good sign that we’ve either found the bottom or are firmly in the bottoming process.

We are solely focused on majors, but I want to dive deeper into the weeds on the crypto front, more so than in the past.

I want to talk about asset issuance and why it’s not just a byproduct of bull markets and excess fervor but one of the few moats in crypto.

Asset issuance is the creation and distribution of new tokens.

From memecoins to tokenized T-bills and RWAs, creating and distributing new assets is the gateway to everything else: trading volume, fee generation, liquidity routing, and user acquisition. It’s the entry point to the entire on-chain economy.

Why focus here? Because issuance has been the single most lucrative vertical in crypto outside of stablecoins.

Just look at the top dApps on Solana. What do the biggest earners do? They control creation and/or flow.

What does the top earner do? They have created a platform where anyone can issue new tokens. Pump.fun turned token issuance into a consumer product. Anyone can launch a token. The fees? Compounded. The attention? Massive. And now they’re moving downstream—launching their own AMM to stop leaking revenue to Raydium.

Think about asset issuance as the gateway drug for all economic activity in crypto. Whoever controls that initial point of creation captures not just the issuance fees, but also:

• The initial distribution fees

• The trading volume that follows

• The AMM liquidity

• The downstream composability and innovation

• The long-term relationship with the token creator

• And critically—the flow

On the surface, most of Crypto Twitter (CT) sees this as a memecoin arms race. But it's much more than that when you think about it. It’s about controlling where assets (not just memes)—and attention—begin and the follow through (i.e. which AMM captures the volumes).

It’s impressive that Raydium is on the above list, as many DEXs/AMMs struggle to generate substantial revenue and retain some meaningful market share, as more centralized counterparties take market share due to better pricing/fills. How has Raydium done this? They have carved out a niche in the market with token issuance, largely in memecoins. However, with pump.fun launching their own AMM, they have lost meaningful market share. They know this.

So, how do you get it back? You take back asset issuance.

What's the "simplest" way to do this? Launch a competing launchpad. You might be thinking, "The last thing we need is another launchpad," and you're right. All these launchpads really do remind us of the NFT marketplaces that started popping up everywhere in 2021/22. Just a few survive and retain users/liquidity. We are still in the bundling phase of launchpads, not the unbundling. That will come later. These launchpads are likely to be commoditized tools in a larger strategy, controlling the flow of assets.

The Launchpad revenue won't matter much for Raydium as they will make more from controlling flow to their AMM, their money printer, in the long run, as they solidify some percentage of asset issuance on Solana.

Raydium's new launchpad, LaunchLab, is off to a strong start.

On April 27th, they did 15% of total launchpad volumes, which is better than any pump competitor has done.

Many tokens have already graduated and cleared a $1M+ market cap (the total LaunchLab token market cap ~ is $40 million at the time of writing), and the incentive model looks competitive—multiples better than Pump's.

One piece the markets have yet to fully price in is that LaunchLab isn’t just a launchpad—it’s a launchpad for launchpads.

Any team can now fork and deploy their own version, with custom bonding curves, fee parameters, and even a cut of post-graduation swap fees. In other words, LaunchLab isn’t just a product. It’s infrastructure. Raydium provides the rails. Others bring distribution. And regardless of who owns the UI, Raydium earns 25bps on all swap volume—a passive, scalable monetization layer. Want to launch on boopdotfun? On Bonk? Great! Do it, and after the token graduates, it moves to Raydium.

I imagine Raydium is leaning heavily into this B2B component as it plays well into their strengths: open infra, deep composability, and passive monetization. Just look at how well Bonk did with LetsBONK.fun. Bonk generated nearly $1m in fees in the first 3 days, which was made possible in partnership with Raydium/LaunchLabs. And where do these flows go after graduation? Again, it is the AMM money printer that is Raydium.

The real question is whether these incentives and customization are enough to start chipping away at Pump's grip on the market. LaunchLab favors the "one-hit wonder" strategy, with teams looking for more customization and creativity in launch and bootstrapping runway with rev share via trading volumes.

Pump's model is tuned for velocity. You get a flat SOL rate per token that hits a $69k market cap, and zero cut of protocol fees via PumpSwap. So the name of the game is launching as many tokens as possible and riding waves of hype.

LaunchLab, or forking your own version of it, is the way to go if you're gunning for a viral hit and care more for long-term success. If you're flooding the markets with meme after meme, Pump has historically stacked faster. Take Fartcoin, for example—if it did $5B in lifetime volume, LaunchLab's 10% cut of AMM fees would've netted the creator ~$1.25M. On Pump, that same token generated 0.5 SOL in earnings for the creator.

$1.25M vs essentially $0.

Same token, wildly different outcome for the creator.

I think this is one of the most exciting tools that comes with launching on Raydium/Bonk over pumpfun. You could launch here and bootstrap revenue if you are a creator or an early-stage team. While Pump might dominate the velocity of coins, even though a few wallets launch the majority, Raydium's LaunchLab will probably win out regarding teams wanting to build something more substantial. I do think, over time, LaunchLab launchpads take most of the velocity.

On CT, this entire battle over launchpads assumes the only assets to ever live on Solana will be memes, which I don't think will hold true. As the crypto ecosystem matures and regulatory clarity improves, we will continue to see more diverse assets come onto Solana:

• Equity-like assets

• T-bills

• Real estate

• Tokenized funds and investment products

• In-game assets

The two big asset issuers right now are Pump and Raydium, but Pump lacks composability. At the same time, Raydium is fully open-sourced, meaning Raydium should capture a lion's share of asset issuance on Solana outside of memecoins. Raydium's programs were among the first on Solana to support Token-2022 (now Token Extensions), which caters to institutional asset issuance, potentially putting Raydium in a position to build an institutional-facing product line.

Pump doesn't even have an IDL (Interface Definition Language) for their PumpSwap, so it's hard to picture a world where institutional teams, serious projects, or traditional finance entities would use them in their current state. They've optimized for memecoin velocity, not enterprise-grade reliability. However, this could all change overnight if they open up.

This might seem like a lot about asset/token issuance, but it's important to discuss as the launchpad war is more than just a mere memecoin launchpad war. It's about which platforms will become the fundamental infrastructure for the tokenized economy, and who ultimately controls the flow. It’s about owning the infrastructure to support the tokenization of everything, from memes to T-bills.

We believe teams focused on building robust asset issuance infrastructure, not just chasing memecoin velocity, will make the most durable businesses in crypto's next institutionalizing phase. These businesses also sit at the intersection of fundamentals and memetic value (i.e. the sweet spot).

VC

A Market at a Crossroads

The crypto venture capital landscape in April hums with a restless energy, caught between the promise of a rebound and the echoes of past turbulence. Over the past month, discussions have coalesced around surging funding rounds, the allure of crypto-AI integration, a shifting regulatory horizon, and the hard-won lessons of earlier excesses. Against a backdrop of economic turmoil stirred by Trump’s policies, crypto VC navigates a delicate balance, chasing innovation while grappling with volatility. This is a story not of clear victories or defeats but of a market adapting, reflecting, and redefining itself.

The Pulse of Funding: A Resurgent Tide

Venture capital in crypto is reclaiming its momentum, with a notable uptick signaling renewed confidence. In the first quarter of 2025, crypto startups raised $4.92 billion, a sharp rise from $3.63 billion in Q4 2024, according to DefiLlama. This past week alone saw $172 million in funding, more than double the $72 million raised in the prior week, with firms such as Amex Ventures, a16z, and Multicoin Capital backing projects ranging from stablecoins to payments. Felix Pago, a Miami-based startup that enables cross-border payments to Latin America, led with a $75 million raise, highlighting the appeal of real-world applications. High-profile deals, such as Toncoin’s $400 million investment from Sequoia and Ribbit, tied to Telegram’s billion-user base, and Haun Ventures’ $1 billion fund target, further amplify the narrative of selective optimism. Maven 11’s $107 million fund, focused on consumer apps and AI-blockchain intersections, and smaller raises like Across Protocol’s $41 million token sale and Crossmint’s $23.6 million for Web3 onboarding reflect a broad appetite for infrastructure and enterprise solutions, though Maven’s delayed close hints at cautious limited partners still wary of 2022’s losses.

This resurgence, while impressive, is tempered by perspective. Funding remains below the peaks of 2021-2022, and the concentration of capital in established ecosystems suggests a market favoring certainty over experimentation. We are seeing a market lean on proven players while testing new waters.

Crypto-AI: Ambition and Ambiguity

The convergence of blockchain and artificial intelligence remains a magnetic force for VCs, promising to redefine digital economies. With $917 million invested in decentralized AI projects, the sector is celebrated as transformative—Hack VC dubs it “the biggest source of alpha,” while Theta Capital views it as the decentralized foundation of AI. The AI token market’s growth is striking, ballooning from $2.7 billion in April 2023 to $39 billion by October 2024, with forecasts pointing to $45 billion by early 2026.

Yet, skepticism shadows the enthusiasm. On platforms like X, skeptics question whether these projects truly require blockchain, arguing that many are AI ventures disguised as crypto ventures to attract venture capital dollars. The risk of inflated valuations looms, echoing past crypto bubbles. This duality—ambition tempered by ambiguity—captures the crypto-AI narrative, where potential battles against the specter of overpromise.

Regulatory Winds and Political Currents

The regulatory environment, once a headwind, is turning favorable. The Trump administration’s push for Bitcoin reserves and the SEC’s Crypto 2.0 Task Force signal a pro-crypto shift, with recent SEC dismissals of lawsuits against firms like Coinbase and Ripple easing tensions. Yet, VC activity remains subdued, with some describing it as a “standstill” despite these gains. The Trump family’s World Liberty Financial, raising $550 million for a token sale and stablecoin, adds visibility but stirs concerns about political entanglements that could deter institutional VCs. The interplay of policy and politics is reshaping the landscape, offering opportunity laced with complexity.

Reckoning with the Past, Reimagining the Future

Crypto VC’s present is inseparable from its past. The 2021-2022 funding boom, fueled by loose capital, inflated valuations, and spawned tokens with scant utility, often leaving retail investors burned. Critics, including voices on X, label crypto VCs as “gamblers,” highlighting that new funds are hit hard by losses from speculative bets. Yet, crypto’s structure offers a unique edge: unlike traditional startups, crypto projects can unlock liquidity quickly through token sales, enabling faster returns for VCs, though volatility remains a double-edged sword, as noted by Fortune. Despite criticism, success stories persist—Paradigm and Multicoin posted substantial gains in 2024, with Multicoin up 56%, suggesting that disciplined strategies can thrive. This reckoning is driving a shift toward fundamentals, with VCs under pressure to back projects with lasting value over fleeting hype.

A Shift Toward the Tangible

Amid this introspection, crypto VC is pivoting toward tangible impact. Consumer applications—gaming, social platforms, and on-chain contests—are gaining traction. Bitcoin-focused startups are a standout, with a 50% spike in pre-seed deals and $1.2 billion invested from 2021 to 2024. In 2024 alone, these startups raised $234 million, representing a 30% increase in funded projects, including Bitfinity (layer-2), SatLayer (staking), and Mezo (DeFi), according to Trammell Venture Partners. A pie chart would illustrate this focus: 40% on consumer apps in blue, 30% on Bitcoin infrastructure in gold, 20% on AI-crypto in purple, and 10% on other bets in gray.

Not all trends, however, inspire equal confidence. Some VCs chase “mindshare-driven” narratives—AI tokens or memecoins tied to Trump or Melania branding—raising concerns about long-term sustainability. The focus on consumer apps and Bitcoin reflects a quest for adoption and stability, but the pull of speculative gains persists, highlighting crypto’s dual identity as both an innovation hub and a volatile frontier.

Navigating a Volatile Horizon

The economic backdrop looms large. Trump’s tariffs triggered market crashes, with Bitcoin dipping to $74,425 on April 6; its 0.77 correlation with the S&P 500 amplified losses. The Atlanta Fed’s forecast of a -2.8% GDP contraction for Q1 2025 fuels risk-off sentiment, slowing VC capital flows. Yet, crypto shows resilience: Bitcoin has rebounded after a tariff pause, and Q1 2025’s $4.92 billion in funding marks a recovery from the lows of 2024. Bitcoin’s outperformance against gold since the 2024 election offers hope, but its entanglement with traditional markets challenges its narrative as a hedge. This volatility shapes a cautious VC landscape, where opportunities coexist with uncertainty.

Reflections on a Market in Flux

Crypto venture capital is a market at a crossroads, poised between resurgence and restraint. The $4.92 billion raised in Q1, blockbuster deals like Felix Pago and TON, and the pivot to Bitcoin and consumer apps signal a sector regaining its footing. Yet, macro turbulence, past failures, and overhyped narratives like crypto-AI demand vigilance. The space is in a moment of transition, where ambition meets scrutiny. As regulatory tailwinds strengthen and lessons from 2021-2022 guide decisions, crypto VC is reimagining itself, seeking to bridge blockchain’s promise with real-world impact. The path ahead is uncertain, but in this flux lies the chance to redefine what’s possible.

Bitcoin DeFi

The Evolving Bitcoin DeFi Ecosystem

After a year of building in the shadows, Bitcoin DeFi pioneers are stepping into the spotlight – launching networks, conducting token generation events (TGEs), and deploying the infrastructure needed to onboard the next wave of users. SDK integrations with major CEXs like Binance and Bybit are bridging familiar workflows for institutional players, family offices, and TradFi funds, bringing them into the decentralized arena.

Recent developments:

• Arch Network Raises $13M Series A: Asymmetric Portfolio company Arch, a bridgement execution platform bringing smart contracts to the baselayer for Bitcoin and metaprotocols, announces raise led by Pantera Capital. Link

• Babylon Genesis Goes Live: Following a successful token generation event (TGE) and network launch, it's the first Bitcoin-Secured Network (BSN), anchoring its L1 security to Bitcoin via Babylon staking. Link

• Lightspark’s Spark Platform Launches: Now live on mainnet, Spark enables stablecoins and related applications to operate in a trust-minimized manner on the Bitcoin blockchain. Link

• Lombard Finance’s SDK Boosts Staking: Lombard Finance released a software development kit (SDK) enabling one-click Bitcoin staking and minting of LBTC, a liquid staking token. Integrated by Binance and Bybit, the SDK simplifies BTC routing to Lombard’s DeFi Vault, unlocking potential DeFi opportunities. Link

• Solv Finance Targets Middle East: Solv announced a Shariah-compliant BTC yield offering, expanding Bitcoin staking opportunities in the Middle East. Link

• BTCfi TVL Soars to $5.8B: Bitcoin’s total value locked (TVL) has reached $5.8B representing a dramatic increase of 1,350% from just $400M 1 year prior, driven by new protocols and integrations. Link

This emerging design space marks a clear pivot from custodial wrapped assets toward trust-minimized primitives anchored directly to Bitcoin. With $5.8B now locked in BTCFi protocols – a 13.5x increase over the past year – the foundation is set for a Bitcoin-native DeFi stack that is composable, interoperable, and decentralized.

Bitcoin L2s

Ecosystem integrations continue to deepen with further advances being made to BitVM. BOB (Asymmetric PortCo), in collaboration with Fiamma launched a trust minimized BitVM bridge on testnet, enabling bobBTC minting. Additionally BOB recently announced wallet support with Xverse, making it easier for Bitcoin-native users to access Ethereum-style apps on BOB's hybrid chain with simple 1-Click DeFi. This marks a key step in improving UX across the Bitcoin L2 stack as well as the convergence of the L1 and the L2 stacks. They have also added support for popular tooling like WalletConnect and RainbowKit, making it seamless for developers to port over existing EVM apps. Across the board, we’re seeing a push to bridge the familiar experience of Web3 with the unique constraints and security model of Bitcoin.

Source: BitcoinEcoTK

Teams like BOB and Bitlayer (Asymmetric PortCos), with their technical depth and user-centric approaches, are well-positioned to continue to lead on activity and TVL metrics. As Bitcoin L2s mature, they are poised to capture a larger share of DeFi activity, potentially processing 25% of BTC transactions in the coming years. With Bitcoin’s unmatched security anchoring these ecosystems, the convergence of Bitcoin-native innovation and cross-chain capabilities heralds a transformative era for programmable finance.

Source: BitcoinEcoTK

Metaprotocols

We are excited to announce that Arch Network (Asymmetric PortCo) has secured $13M in a Series A funding round led by Pantera Capital. Arch introduces the ArchVM which is a modified-SVM architecture, allowing Rust developers to build fast Bitcoin dApps and settle to the base layer. The metaprotocol is compatible with existing Bitcoin wallets like Xverse and interoperable with token standards such as Runes, BRC20, and Alkanes as well as non-fungible asset standards such as Ordinals. We are excited for the team as they continue to grow their ecosystem within Bitcoin.

Arch architecture has three core components as depicted in the below illustration.

1. ArchVM: a UTXO-aware VM capable of handling state changes and off-chain computation, enabling smart contracts accessible from the base layer with Solana-like TPS.

2. dPoS: decentralized validator network using a Proof-of-Stake consensus with the Arch token.

3. Cryptographic multisig: built using an implementation of FROST + ROAST signature schemes enabling key aggregation and multi-party computation.

With the new funding, Arch Network plans to further develop its platform, expand its validator network, and support a growing ecosystem of Bitcoin-native dApps. This includes applications in decentralized exchanges (DEXs), lending platforms, stablecoins, and more, all aiming to operate without compromising Bitcoin's foundational principles.​

Bitcoin DeFi requires a unique custody construction, especially as institutional participation grows. Unlike Ethereum-based DeFi, which is typically accessed via non-custodial wallets or browser extensions, institutional allocators – such as family offices, hedge funds, and asset managers – operate under strict regulatory and compliance requirements. This means they can only custody assets with qualified custodians like Anchorage Digital or Fireblocks (via Fordefi), limiting their ability to directly interact with traditional DeFi smart contracts. As a result, Bitcoin-native DeFi protocols must design around these constraints – either by integrating directly with institutional custodians, building MPC-based access layers, or offering SDKs that allow BTC to flow into DeFi vaults while satisfying enterprise-grade custody and reporting standards. Arch is a team that has recognized this and is working with these partners to integrate its stack.

Arch's innovative architecture positions it as a pivotal player in the evolution of Bitcoin DeFi, offering a secure, efficient, and truly decentralized framework for financial applications on the Bitcoin network.​

Bitcoin Staking

In April, Babylon launched its Genesis chain, the first Bitcoin-Secured Network (BSN), with a successful Token Generation Event (TGE) for its BABY token, boasting a $880 million fully diluted valuation (FDV). The launch introduced Tower, a Babylon-native decentralized exchange (DEX), which saw $250M in BTC deposited. Along with this was the ability to unstake BTC, of which around $600M was withdrawn, dropping Babylon’s TVL from its peak of 55k BTC ($5.2B) to 49k BTC ($4.6B). Note, that the data depicted in the graph below displays a decline in may related to an LST provider data feed change.

Currently, Bitcoin deposits to stake within Babylon are open to the public for the first time after a four-month closure pre-TGE. The current yield is 1.31% which is paid in BABY tokens.

Source: BitcoinEcoTK

The current Bitcoin LST market has over $4B in TVL, primarily within Babylon. Lombard Finance has solidified its position as the leading LST provider, staking over 21,000 BTC through Babylon’s protocol by April 2025, capturing 40% of Babylon’s delegated stakes. Its flagship LBTC, a yield-bearing, cross-chain token backed 1:1 by BTC, powers $1.5 billion in TVL, with 60% fueling DeFi strategies on Pendle, Maple Finance, and Morpho. Lombard recently launched an SDK enabling one-click BTC staking and LBTC minting, integrated by Binance and Bybit. Lombard moved over 5,000 BTC to top finality providers – Figment, Galaxy, Kiln, and P2P – aiming to decentralize custody for LBTC holders.

Source: BitcoinEcoTK

dApps

One of our portfolio companies, Liquidium, has been a pioneer in Bitcoin-native lending, initially leveraging Discreet Log Contracts (DLCs) to enable peer-to-peer loans directly on Bitcoin L1. This architecture allowed users to post Ordinals as collateral and borrow BTC without wrapping assets or relying on third parties—preserving Bitcoin’s trust-minimized principles. Liquidium still uses DLCs for Ordinal-backed loans today, providing a fully native and non-custodial borrowing experience.

Now, the protocol has expanded its design with the launch of instant loans – a new mechanism purpose-built for fungible assets like BRC-20s and Runes. These loans are powered by ICP Chain Signature technology, enabling decentralized and programmable execution of Bitcoin transactions using threshold signatures. Lenders are able to configure their BTC liquidity within parameters of min-max LTV ranges dynamically managed based on the market price, borrowers can receive BTC instantly without needing a matched lender, bringing greater scalability and UX improvements to the BTCfi landscape.

Within a month of launching, lenders are gaining comfort in managing their liquidity in an in-app wallet address; in less than a month of launching, 80% of all loans for fungible tokens on Bitcoin are now derived from instant loan liquidity. We are excited about the new features the team is working on in stealth and should be able to share this soon!

Source: X (Robin, Liquidium)

Team Updates 

• Joe was on another episode of Bits & Bips “How to Reignite Market Confidence Amid Tariff Turmoil”

• Joe spoke at Binance in Abu Dhabi and TOKEN2049 in Dubai at the end of April.

All Market Updates

• April 2025

• March 2025

• February 2025

• January 2025

• December 2024

• November 2024

• October 2024

• September 2024

• August 2024

• July 2024

• June 2024

• May 2024

• April 2024

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– Asymmetric

This meme perfectly captures the first quarter of 2025, as it has been nothing short of exhausting. The S&P 500 and Bitcoin ripped to new all-time highs, only to be smashed down into correction territory as all risk assets moved toward a correlation of 1.

Crypto received the most positive headlines in its history, yet crypto had its worst first quarter since 2018.

Let’s relive this past trauma with a lengthy post with more charts than an AP calculus exam.

Tariff Timeline: The Catalyst for Market Volatility

At the start of the year, we emphasized that the first half of 2025 would be materially more challenging than the last. This call has played out, albeit much more aggressively than we had thought. Volatility has surged, correlations across asset classes have risen sharply, and risk assets have corrected—not because of fundamental weakness but due to an unpredictable and aggressive shift in U.S. trade posture as Trump and his administration are trying to reshape global trade.

• February 1: The U.S. imposes tariffs on Canada, Mexico, and China.

• February 4: China retaliates.

• February 10: The U.S. raised steel and aluminum tariffs to 25%.

• February 26-27: U.S. threatens EU with 25% tariffs; plans further China tariff hikes.

• March 3-4: Tariffs take effect (25% on Canada, 25% on Mexico, and 20% on China) with immediate retaliation.

• March 5-6: Partial automaker exemptions announced; some Canadian/Mexican tariffs postponed.

• March 12: Global steel/aluminum tariff expansion; exemptions removed.

• March 26: 25% tariff announced on all foreign automobiles and parts (effective April 2).

• March 31: Announcement of reciprocal tariffs targeting all countries globally.

• April 2: “Liberation Day” tariffs were announced, exceeding market expectations

• April 4: China’s 35% retaliation tariffs on all U.S. imports.

This is all good for America, right? Tariffs = more revenue for the U.S., right?

Didn’t Trump say, “WE'RE GONNA WIN SO MUCH YOU MAY EVEN GET TIRED OF WINNING AND YOU'LL SAY PLEASE PLEASE IT'S TOO MUCH WINNING WE CAN'T TAKE IT ANYMORE…”

What does “winning” look like?

Markets didn’t fall apart in isolation. They were already under pressure.

During Q1, soft data collapsed, and investor sentiment was deeply negative. Surveys showed growing pessimism, and business leaders cited uncertainty. But markets were trying to find footing, supported by a relatively strong fundamental backdrop: resilient labor markets, cooling inflation, and solid earnings.

It was a fragile balance. Investors were positioned for volatility and “reciprocal tariffs,” not for what looks like protectionism. The assumption was that trade would be tough but manageable. Going into “Liberation Day,” many market participants’ worst-case scenario was a 15% tariff rate. That rate would have been a negative shock to markets—but digestible. Instead, tariffs came out at a weighted rate of 24%, with expectations for that to climb toward 27% with Section 232 tariffs (national security tariffs on steel and aluminum).

The tariff announcement went far beyond market expectations. Instead of a phased, reciprocal approach, the administration imposed sweeping, high-impact measures. Markets immediately began repricing—not just tariffs, but retaliatory tariffs.

• Bearish sentiment (AAII Bears) jumped to the third-highest reading of all time — a contrarian indicator at this extreme level.

• The Volatility Index (VIX) closed above 45 for the first time since COVID.

• High-yield credit spreads meaningfully widened (albeit from record lows—not blowing out), signaling that it’s no longer just equity markets that are concerned.

• The Dollar Index (DXY) had a z-score move of -4.4, last observed during COVID.

• The day after “Liberation Day”, retail bought the dip harder than in over a decade…

  

• …only to get rinsed by the markets with another 5% drop. The S&P 500 fell more than 10% in two days, which is only the 4th time in history that it has happened. The other times were:

  • October 1987 – Black Monday Crash

  • November 2008 – Global Financial Crisis

  • March 2020 – COVID Crash

• The day after the retail rinsing, the Fear and Greed Index dropped to four (4).

• Hedge Funds’ L/S Ratio collapsed to the lowest on record.

  

• Tech stocks were particularly hard hit as supply chain concerns reemerged. Nvidia trades at a price-to-earnings (P/E) discount relative to the S&P 500.

• Blink twice at the chart; you may think the S&P 500 is trading like a memecoin.

Asset managers and OTC desks scrambled for protection. Those with downside hedges wanted more, and those without became forced buyers.

You even had legendary investor and HF/venture manager Brad Gerstner call for deals to be made to stop the bleeding.

After all this carnage, equity markets have now lost $10 trillion since President Trump was inaugurated. Is this what “winning” feels like, Mr. President?

The silver lining? Bitcoin and altcoins fared much better than equities (recently).

Relative to the Magnificent 7, Bitcoin is at its highest level ever!

Persistent Risks

Tariffs remain the biggest market risk—not just the immediate impacts but the second-order effects that could drag the U.S. into recession if meaningful progress isn’t made. Country-by-country renegotiations will take place, and deals will be made.

However, China is the key variable. Xi didn’t follow through on the “Phase One” deal during Trump 1.0, and now the stakes are even higher as both countries accelerate their AI arms race. That geopolitical overlay adds another layer of complexity—and volatility.

We still think it’s likely that Trump and Xi will eventually reach an agreement. But as we sit here today, Liberation Day was not a “clearing event.” Uncertainty remains elevated (at all-time highs based on some metrics), and markets haven’t gotten the clarity they hoped for.

As negotiations progress, we’ll closely watch whether semiconductors and pharmaceuticals remain exempt from tariffs. If either of those sectors gets pulled in, the risk of a more systemic repricing in large-cap tech increases meaningfully. However, as shown above, many of the innovation leaders and AI are already trading at historical valuation discounts.

Other than tariffs, we have noted that soft data is in the gutter and has started infecting some of the hard data (perception becomes reality), as seen in the VIX.

One of this market's defining features is the dramatic divergence between soft data (sentiment and surveys) and hard data (economic fundamentals).

Take, for instance, consumer-based inflation expectations vs market-based inflation expectations:

We expect CEOs on Q1 earnings calls (starting next week with banks) to sound cautious. Earnings will likely be solid, but guidance will be soft. We find it highly unlikely that any CEO will raise or maintain the guidance they anticipated before Liberation Day. If those stocks rally on soft guidance, the market has likely bottomed. If not, look out below:

Case in point: Lululemon reported solid Q4 earnings last week—beating on revenue, profits, and net income—but the stock sold off double digits. Why? Forward guidance flagged soft consumer traffic.

"We are operating within a dynamic macro environment that's really contributed to a cautious consumer..."
—Calvin McDonald, CEO, Lululemon

This is nuanced, though. Consumers are still earning a real wage. Disposable income is up, but spending is slowing. They’re choosing not to spend—they're not being forced to cut back.

It’s unlikely that hard data will confirm a negative feedback loop for a few more months—if at all.

Questions worth asking:

• Are mega caps pulling back on CapEx?

• Are data centers still being built?

• What are credit card companies seeing?

• Is AmEx flagging high-end consumer pullbacks?

A negative feedback loop may surface like this:

1. Consumer sentiment continues to deteriorate.

2. CEOs respond by pulling back on CapEx and hiring.

3. That pullback hits corporate earnings and profit margins.

4. Layoffs begin to accelerate.

5. GDP weakens.

6. Earnings expectations are revised lower, triggering another leg down in equities.

Some of these we are already seeing:

• University of Michigan Consumer Confidence: There was a steep drop at an alarming rate.

• Employment Expectations: Fear of layoffs is rising—even though job openings still exceed unemployed.

• NFIB Uncertainty Index: Near record highs—“Main Street” is nervous. Expect this to rise if no positive news on the tariff front, leading to negative feedback loops in the economy.

Where do we go from here?

At the start of the year, we said we were less optimistic about markets given two years of “up only,” record-high valuations, elevated concentration, and the likelihood of a more dogmatic Trump approach to trade than during his first term.

The era of easy money is over.

Still, we didn’t expect this inconsistency in language or policy execution—and frankly, protectionism out of the White House. These tariffs do not reflect “balanced trade,” which Robert Lighthizer has advocated for since Reagan was in office and was a close advisor to President Trump. Most market participants expect them to be rolled back quickly, but therein lies the rub.

Trump appears to be in his “IDGAF era.” Before Liberation Day, forced unwinds in multiplatform funds triggered mechanistic selling of momentum and “crowded” stocks, including crypto. Many participants lightened up (or were forced to), assuming April 2nd would not be worse than the consensus view of a 15% tariff rate.

The rate was worse than any economist expected, and the delivery, in true Trump fashion, looked more like a frat boy showing his fraternity brothers how to make $1M on his 14-team parlay than delivering news of the largest increase in tariffs since the 1930s.

The formula itself was an iconic facepalm moment.

The clearing events over the past 24 months were mostly market-driven and often became great buying opportunities. Hard data held firm while soft data fell apart. That dislocation has historically set up attractive entry points.

After a -10% move in two days, the math supports starting to put capital to work.

Especially if you are a long-term investor.

AAII bearish sentiment is near extremes (contrarian indicator).

Along with prime book capitulation.

Financial conditions have significantly tightened.

Positioning has fallen sharply to the lower end of its typical band, the lowest in two years (z score -0.73, 15th percentile as of April 3rd). Discretionary investors have cut their positioning from slightly above neutral last week to underweight (z score -0.45, 23rd percentile). At the same time, the positioning of systematic strategies also plunged to the lowest in two years (z score -0.71, 19th percentile).

It feels like Liberation Day should have been a market-clearing event, but it wasn’t.

Long-only (LO) funds relentlessly sold Thursday and Friday, and CTAs pressed their shorts (and, according to Goldman Sachs, are now short $24.7B in U.S. Equities). LOs offered tech, industrials, and financials - recall, the banks start reporting earnings this coming week.

Trading volume across the entire stock market was the highest ever. Just look at the $QQQ:

Real stress surfaced in the markets during the April 4th trading session. $HYT, Blackrock’s Corporate High Yield Fund, is now trading at a -6.26% discount to its NAV and was as low as an -8% discount during the trading day.

Fast money traders are rapidly increasing their short exposure.

The market was priced for a 15% tariff rate. The market was not priced for 24%+.

As mentioned earlier, retail aggressively bought the dip the day after “Liberation Day,” while hedge funds capitulated and pressed shorts. That tells us two things: hedge funds are repositioning defensively in response to second-order risks, while retail is still playing the 2020–2021 “buy the dip” playbook.

When institutional capital is de-risking and retail is stepping in, it often creates an air pocket in price discovery. And air pockets lead to violent, unhedged selloffs—especially in fragile sentiment environments like we saw on Friday.

And it should be no surprise; the top of the order book liquidity in SP500 futures contracts was ~$2M on Friday (the historical average is 6.5X that number).

Sweeping $75M worth of E-minis would cost a trader $2M.

However, this illiquidity and lack of positioning work both ways. If clarity improves and flows reverse, those same positioning gaps could fuel a sharp upside squeeze as hedge funds chase performance higher.

There’s also a near-term wildcard: These tariffs don’t fully go into effect for another week. A lot can happen between now and then. One or two headline-grabbing deals—whether real or symbolic—could be enough to change the expected trajectory. But for now, the administration seems willing to absorb some near-term pain in exchange for leverage, which is why the “Trump Put” still looks far out-of-the-money.

That’s the real difference between 2025 and past shock events. In 2008, we had Lehman. In 2020, we had lockdowns and coordinated stimulus. In 2025? We have Trump. There’s been no singular break—just political whiplash. Until something breaks more structurally, neither the Trump Put nor the Fed Put will likely show up in full force.

The Fed

Rate cuts might not be as bullish this time around for markets—they need clarity (and a massive drop in uncertainty) to regain their footing. However, as the Fed implements its put—and they will—assets that are hyper-sensitive to liquidity will rise (e.g., Bitcoin).

After the disastrous NFP print, the futures markets on Friday are now pricing between four and five rate cuts (100-125 bps) for 2025 (we’ve been asserting four cuts since the beginning of the year).

It's important to make this distinction clearly:

When we say “markets,” we’re not talking about everything. We’re talking about equities. And when it comes to equities, we’re cautious — macro headwinds are strengthening, and the path to policy clarity is murky at best, albeit they could be resolved via one Truth Social post…it is Trump after all.

But crypto? It's an entirely different setup.

Crypto, particularly Bitcoin, is historically less sensitive to earnings/guidance risk and is positioned to benefit from any liquidity tailwinds the Fed throws at this environment.

Despite being dead wrong all of 2024, Arthur Hayes may have struck (digital) gold with his latest piece. His latest read on the Fed is consistent with ours:

“The Fed is supposedly busy with its quixotic quest to bring the manipulated and fugazi metric of inflation below their made-up 2% target. They are actively removing money/credit out of the system by reducing their balance sheet, which is called quantitative tightening (QT). Because banks fucked up so badly in the 2008 Global Financial Crisis (GFC), regulators required them to pledge more of their own equity capital against treasuries that they purchased, called the supplementary leverage ratio (SLR). Therefore, banks cannot finance the government using infinite leverage.

However, it is very simple to change this state of play and turn the Fed and banks into inelastic buyers of treasuries. The Fed can decide, at a minimum, to end QT and, at a maximum, to restart QE. The Fed can also exempt banks from the SLR, allowing them to purchase treasuries using infinite leverage.”

The Fed continues to rescue markets. And they’re already signaling that they’re slowing the pace of QT. In their March statement:

"The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion."

This is a liquidity tailwind. The Fed is stepping in, but not yet with the urgency that would justify backing up the truck.

This is positive for Bitcoin, and paired with deregulation pressures from Bessent on Jerome Powell, it paints a rosier picture for liquidity-sensitive assets. However, equity markets are less sensitive to liquidity and face more geopolitical headwinds till Trump and the rest of the world can agree on “balanced trade”, and that’s why we think the breakout in Bitcoin vs. the Magnificent 7 is worth paying attention to. This could change if the tariff tantrum is over in the next few weeks as markets potentially reprice higher, but it is not our base case. Regardless, the outlook for Bitcoin looks more favorable than traditional equities.

As we lick our wounds from Q1, remember the golden rule in crypto: survival is all you need.

Crypto

The amount of positive headlines and regulatory breakthroughs to start the year has been better than any crypto investor could have imagined.

However, prices and volumes have collapsed. This has nothing to do with crypto fundamentals but is due to tariff-induced uncertainty, which we outlined in the “Macro” section. Let’s instead discuss a few things happening in the broader crypto economy.

As regulatory headwinds transform into tailwinds, M&A activity within crypto has accelerated, with 84 transactions completed in just the first quarter of 2025.

As many crypto startups hit peak revenues around the end of 2024, the “fundamentals” narrative took hold in many minds. This narrative is only heightened by the uptick in M&A, as companies flush with cash can inorganically grow, mimicking many high-growth compounders in traditional markets.

Many crypto participants are now fixated on "fundamentals," but the narrative remains deeply flawed.

Across the industry, fees are frequently confused with revenue, and regulatory uncertainties have historically blocked startups from distributing profits to token holders. With a pro-crypto U.S. administration now in place, regulatory clarity looms on the horizon, potentially unlocking revenue-sharing opportunities. Yet, this shift alone won't rescue struggling projects.

Consider the words from a fellow market participant:

"Just because you can now 'turn on the fee switch' doesn't mean investors will buy your project."

"Just because you have the fee switch on doesn't mean you have any fees/revenue to distribute back to users, which just makes the project worthless especially if there are real revenues being distributed elsewhere."

The fundamental truth is that the regulatory clarity provided by the current administration hasn't "saved" struggling tokens—it's exposed them to a more demanding standard. When projects can no longer hide behind regulatory uncertainty as an excuse for not delivering value, investors will ask harder questions about sustainable business models. Thus, crypto-native zombie protocols have been born.

Announcing buybacks or dividends doesn't inherently make a token valuable. True worth stems from building high-growth compounders akin to traditional tech giants—companies that generate substantial cash flows, reinvest aggressively, and continuously expand their capabilities and market dominance.

The renewed focus on fundamentals is a welcomed evolution.

But let’s be clear—this isn’t the present reality. It’s a roadmap but not the current terrain we are on today. Today’s market is still driven by vibes more than valuation models and retail more than institutions. Fundamental analysis may be a key factor in the future of crypto, but for most of crypto, that future hasn’t arrived yet. We have not heard of JP Morgan or Goldman Sachs analysts reaching out about underwriting crypto startups yet.

To highlight this, let’s look at the performance of some of these crypto assets implementing buybacks.

While it is unfair to show this chart without noting that the entire crypto market cap is down -17 % YTD, I am doing it anyway to show that issuing buybacks or dividends will not save a dying startup. We are not suggesting that any of the above are bleeding a slow death; in fact, a few of the above are in the top 10 earnings crypto startups. Announcing buybacks is a good start, but the fact is: buybacks ≠ number go up.

It is great that market participants are starting to look at these assets more as businesses; however, there’s a danger in being right too early. Investors like Pantera have been directionally correct in calling for fundamentals, but execution has lagged. Most tokens still trade more like fashion than financial instruments. Until institutional flows arrive—and tokenomics mature—expect fundamentals to influence, not dominate. Still, the winners will be those preparing for that shift now, not chasing it once it's already priced in.

VC

Crypto VC in the Trump Economy: Risks, Opportunities, and the Road Ahead

President Trump’s economic strategy is reshaping market conditions, and crypto venture capital (VC) is not exempt from the turbulence. With aggressive tariffs, mass federal layoffs, and a deliberate push toward an economic slowdown, investors are navigating a landscape that is both high-risk and full of strategic opportunities.

If this administration is, as some analysts suggest, taking a Paul Volcker-style approach to economic restructuring—deliberately triggering short-term pain for long-term stability—then VC firms must adapt to survive the turbulence and position themselves for the next cycle.

Short-Term Headwinds: Economic Uncertainty and Crypto VC Contraction

The most immediate impact of Trump’s policies is increased market volatility, which historically leads to a contraction in venture capital deployment. Risk capital tends to dry up in uncertain macro environments, and early-stage funding is often the first to be affected. GDP growth has already turned negative, with the Atlanta Fed projecting a contraction of 2.8% for Q1 2025. The combination of new tariffs and mass layoffs suggests that the broader economic environment will continue to favor a risk-off sentiment among investors.

Bitcoin and Ethereum are now trading with high correlation to macroeconomic trends. This means that uncertainty around tariffs, layoffs, and inflation will likely continue to impact price action. Crypto venture capital, in turn, will be affected by how institutional investors allocate capital in response to these conditions.

Venture capital relies heavily on liquidity, and an extended period of high interest rates could make it difficult for speculative investments to attract significant funding. If the cost of capital remains high, firms will likely shift investment criteria toward sustainable, revenue-generating projects rather than speculative early-stage ventures. Many venture funds may choose to wait for macroeconomic stabilization before committing large amounts of fresh capital to crypto startups.

Institutional investors, including pension funds and sovereign wealth funds, have already been hesitant to allocate capital to the crypto sector following the regulatory uncertainty and market downturns of the past two years. The Trump administration’s policies have not yet provided the stability needed to reverse this trend. While the administration has dropped several SEC enforcement actions and created the Crypto 2.0 Task Force under Hester Peirce, there is still uncertainty about how deep regulatory relief will go. The government’s push for a strategic cryptocurrency reserve, which includes Bitcoin and Ethereum, signals support for the sector. Still, many venture investors will likely wait for clearer policies before making significant capital commitments.

Long-Term Strategic Opportunities: Crypto VC’s Next Move

Despite these short-term challenges, there are several factors that could create long-term opportunities for crypto venture capital. The administration’s shift away from regulatory hostility suggests that U.S.-based crypto startups may have an easier time securing funding than they did over the past three years. The SEC’s new stance under the Crypto 2.0 Task Force is likely to lead to clearer pathways for tokenized assets, decentralized finance (DeFi) projects, and blockchain infrastructure companies.

Market downturns tend to eliminate weaker projects, leaving only the strongest teams and most sustainable business models. This was the case in 2018-2020 when the last major bear market cycle forced out underfunded projects and created opportunities for long-term winners in L1 protocols, DeFi, and NFT marketplaces. Venture capital firms that deploy capital into distressed assets, secondary sales, and undervalued crypto startups over the next year could see significant upside when macroeconomic conditions improve.

Bitcoin’s role as a macroeconomic hedge is also likely to expand. If tariffs and mass layoffs accelerate global de-dollarization efforts, Bitcoin could emerge as an even stronger store of value. The U.S. government’s strategic crypto reserve policy, which prioritizes Bitcoin and Ethereum, is a major institutional validation that could drive increased adoption at the sovereign and corporate levels. This would likely create new venture capital opportunities in Bitcoin-related infrastructure, including L2 scaling solutions, Ordinals and NFT ecosystems, and staking innovations.

While the current economic contraction presents challenges, the broader market cycle suggests that venture capital will eventually pivot back to risk-on investments. If Trump’s policies successfully stabilize inflation and create a more sustainable fiscal environment, institutional investors will likely reallocate capital to high-growth sectors by 2026-2027. The next Bitcoin halving in 2028 could also act as a catalyst for renewed investment in the sector, following historical patterns of market cycles that tend to align with Bitcoin’s supply reductions.

How Crypto VC Should Navigate This Cycle

The next 12 to 24 months will be defined by volatility and uncertainty, but these are also the periods when the most significant investment opportunities emerge. Venture capital firms that focus on late-stage investments in projects with strong cash flow and adoption will be best positioned to weather the downturn. Investing in distressed deals and secondaries will allow firms to enter high-potential projects at discounted valuations. The growing role of Bitcoin as a macroeconomic asset suggests that BTC-focused investments, including infrastructure, DeFi integrations, and staking models, could be key areas of growth.

Regulatory shifts, such as the government's move toward a more permissive stance, may also create opportunities for U.S.-based crypto startups. If macroeconomic conditions stabilize, capital will eventually flow back into growth sectors, and the firms that positioned themselves strategically during the downturn will be best prepared to capture the next wave of investment.

Despite the immediate challenges, crypto VC remains one of the most dynamic and high-upside asset classes. The firms that navigate this period with discipline, strategic capital deployment, and a long-term thesis will shape the next wave of blockchain innovation. History favors those who invest when others hesitate. The question now is who will play it right.

Bitcoin DeFi

The Evolving Bitcoin DeFi Ecosystem

While only 0.3% of BTC’s market cap is currently active in DeFi – compared to Ethereum’s 30 – we’re seeing unmistakable signals that the tide is turning. A new wave of Bitcoin-native innovation is emerging across L2s, metaprotocols, token standards, and interoperability layers, each unlocking more composability, usability, and capital efficiency for BTC.

Recent developments highlight just how fast the ecosystem is evolving:

• 1-click DeFi vault strategies from BOB (Asymmetric PortCo) now make it possible to access yield opportunities directly from leading Bitcoin wallets, abstracting away complexity and onboarding new users with minimal friction. Link.

• ckBTC on ICP continues to demonstrate the potential of native Bitcoin programmability, offering developers an alternate path to interact with BTC via canister smart contracts – demonstrating that existing chains are focusing on creating and executing on their Bitcoin DeFi strategies. Link.

• The launch of BRC-20 2.0 signals a maturation of Bitcoin token standards. Moving beyond the limitations of its ordinal-based predecessor, this programmable metaprotocol aims to bring a new era of on-chain logic and token-level flexibility to Bitcoin. Link.

• Meanwhile, non-custodial BTC bridges are arriving on Solana, using MPC networks to create a secure and user-friendly path to bring native Bitcoin into Solana’s high-speed DeFi ecosystem. Link.

• Developers are also exploring Near Chain Signatures leveraging MPC networks to unlock cross-chain interoperability for Bitcoin. Link.

Together, these shifts mark the beginning of a new design space – one that moves away from custodial wrapped assets and instead embraces decentralized, trust-minimized primitives that remain faithful to Bitcoin’s ethos.

We are seeing strong momentum in the development of ecosystems across various Bitcoin L2s, with teams actively building infrastructure, applications, and liquidity. The race remains open, with multiple contenders, including existing ETH L2s, vying to become the go-to environment for deploying smart contracts and facilitating complex interactions anchored to Bitcoin's security.

Notably, StarkWare (which has created the Ethereum L2 StarkNet) recently announced plans to evolve into a hybrid chain settling on both Ethereum and Bitcoin - link. While this move highlights growing interest in bridging the two ecosystems, it's worth noting that BOB, an Asymmetric portfolio company, has been pioneering this concept for some time. BOB is making strong progress using BitVM to enable trust-minimized Bitcoin settlement, positioning itself at the forefront of this emerging design space.

Source: BOB

Bitcoin DeFi is far from reaching its potential as only 0.3% of Bitcoin’s market cap is active in DeFi right now compared to 30% for Ethereum. As long-term aligned investors, we’re encouraged to see the Bitcoin L2 ecosystem entering a maturation phase where fundamentals, thoughtful design, and true alignment with Bitcoin’s architecture are beginning to matter more. While early entrants often ported over Ethereum-based technologies without fully adapting them to Bitcoin’s unique constraints and values, we’re excited by the conviction and technical depth of the teams we’ve chosen to back such as Bitlayer and BOB which consistently lead in TVL and network activity month over month.

Source: BitcoinEcoTK

Metaprotocols

Fractal Bitcoin emerged as one of the most successful examples of a metaprotocol-first approach on Bitcoin. Initially leveraging the BRC-20 token standard to spark experimentation and user engagement, the Fractal ecosystem rapidly scaled, eventually justifying its own dedicated merge-mined blockchain. Today, Fractal is secured by over 500 EH/s — more than 50% of Bitcoin’s total hashrate — and consistently ranks in the Top 10 by daily PoW activity according to f2pool, with mining support from major pools like Antpool, Binance Pool, Luxor, and others.

Source: F2Pool

The momentum from its BRC-20 roots catalyzed the growth of a vibrant ecosystem. From DeFi apps like PizzaSwap and stablecoins like sUSD, to community-driven governance, NFTs, and atomic swaps, Fractal is proving how Bitcoin-native experimentation at the metaprotocol layer can evolve into full-fledged L1 innovation.

Much like BRC-20 experimentation was enabled by the Fractal team, we are excited to see that a significant portion of CAT Protocol development is taking place on Fractal Bitcoin, which has OP_CAT enabled, an important opcode not yet activated on Bitcoin mainnet. This makes Fractal a natural sandbox for building and refining the Covenant Attested Token (CAT) Protocol, a novel UTXO-based token standard that is fully enforced by Bitcoin Script at Layer 1.

Unlike existing token protocols on Bitcoin that rely on off-chain indexers, CAT tokens are miner-validated and consensus-enforced, with all token logic and data stored directly on-chain. This architecture eliminates centralization risks, while unlocking powerful features like modularity, programmable minting, SPV compatibility, and cross-chain interoperability. With support for both fungible (CAT20) and non-fungible (CAT721) tokens, the CAT Protocol introduces a composable foundation for smart contract applications – such as AMMs, lending, and staking – built entirely within Bitcoin's security model. Fractal’s early adoption of OP_CAT is positioning it as a proving ground for the future of trustless tokenization on Bitcoin.

Source: Fractal

Bitcoin Staking

Institutional interest in Bitcoin staking is on the rise, as evidenced by CoreDAO's recent partnership with Maple Finance, CopperHQ, BitGo, and Hex Trust to introduce lstBTC, an institutional-grade liquid staking Bitcoin solution: link. Notably, institutional investors are already deeply integrated with custodians – and in many cases, this is the only compliant and risk-managed way they can gain exposure to Bitcoin due to regulatory requirements, internal risk frameworks, and operational mandates.

Source: BitcoinEcoTK

The demand for yield on Bitcoin is clearly growing, as users seek ways to make their BTC productive rather than letting it sit idle. As shown in the latest yield data, a variety of protocols – including Pendle, Indigo, Umami, and Yearn – are offering competitive APYs. For instance, LBTC (CORN) on Pendle currently leads with an 18.8% APY, followed by iBTC on Indigo at 17.9% and GMWBTC on Umami at 16.9%. These yield opportunities span across different wrapped and tokenized forms of Bitcoin, signaling a broader ecosystem of Bitcoin-backed assets being deployed in DeFi protocols to generate returns.

Source: BitcoinEcoTK

dApps

One of our portfolio companies, Satflow (Bitcoin DEX) launched ‘Satflow Week’ a multi-day campaign highlighting a wave of product upgrades, new user incentives, and marketing initiatives aimed at accelerating platform growth as they have been iterating on their product in stealth over the last few months. One of the most meaningful updates is the introduction of creator royalties and affiliate rewards – enabling 0.5% fees to be paid out instantly and trustlessly to creators and referrers on every trade. Combined with Satflow’s continued 0% marketplace fee model, this creates a more positive-sum and creator-aligned ecosystem that may inspire more artists, collectors, and influencers to list and trade on Bitcoin.

Another major milestone is the rollout of cross-marketplace aggregation, allowing users to view real-time floor prices and listings from competing marketplaces like Magic Eden and buy those assets directly through Satflow’s UI. Users can also list their own assets across marketplaces with fee-adjusted pricing in just one click, simplifying execution and unlocking better liquidity. This move positions Satflow not just as a standalone marketplace, but as the default trading terminal for Bitcoin-native assets.

We’re excited to see the team continue to grow the scope of their roadmap and push the boundaries of what’s possible in Bitcoin-native trading.

Team Updates 

• Crypto 101 featured Joe in the 644th episode of their podcast “Trading Insights During this Volatile Market with Asymmetric's Joe McCann”.

• Joe was mentioned in AMB Crypto article “TRUMP, MELANIA, LIBRA, and more – Are memecoins now all about ‘influence for sale?’”.

• Watch Joe on Unchained’s podcast “Joe McCann on Why Bitcoin Is the King and Memecoins Are Over—For Now”.

• Joe was back on Bits and Bips: “Why the Stock Market Wipeout Might Not Achieve What Trump Wanted”.

• Joe’s commentary was highlighted in Coin Bureau’s article by Jasir Jawaid “Crypto's Crossroads: Has the Industry Lost Its Way? Experts Weigh In”.

• Joe will be speaking at Binance in Abu Dhabi and TOKEN2049 in Dubai at the end of April.

• Don’t miss Joe’s commentary in CNBC’s article “Bitcoin-related startup deals soared in 2024 alongside crypto prices, research shows”.

All Market Updates

• March 2025

• February 2025

• January 2025

• December 2024

• November 2024

• October 2024

• September 2024

• August 2024

• July 2024

• June 2024

• May 2024

• April 2024

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• December 2022

• October 2022

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• August 2022

Please let us know if you have any questions or comments. 

As always, thank you for your support.

– Asymmetric

November 2022 was a month I, and anyone involved in crypto, will never forget. On the heels of the Terra Luna implosion, Three Arrows Capital failure, BlockFi, Celsius and Voyager blow-ups, November’s left-tail event made the prior catastrophes look tame - the FTX collapse.

Coming into the eleventh month of the year, risk assets had been bludgeoned due to global central banks’ coordinated monetary tightening policies aiming to bring down inflation. Stocks were falling. Bonds were falling. Crypto was falling.

Sentiment amongst market participants was dire and depressing. Then FTX happened. It was surreal to say the least that the final act of the year would become one of the biggest frauds in U.S. history.

Would you believe me if I told you that sentiment in crypto in the past few weeks was even lower than during the FTX collapse?

Yes. It’s true.

On February 26th, 2025, the Crypto Fear & Greed Index registered a 10.

Typically these sentiment readings happen when there’s some disturbingly bad news…like a massive exchange imploding.

What were the headlines for crypto in the past few weeks?

Let’s start with the SEC:

• Binance lawsuit dropped

• Coinbase lawsuit dropped

• OpenSea lawsuit dropped

• Robinhood lawsuit dropped

• Uniswap lawsuit dropped

• Gemini lawsuit dropped

• Justin Sun lawsuit dropped

• Consensys lawsuit dropped

• Kraken lawsuit dropped

• Yuga Labs lawsuit dropped

• DRW lawsuit dropped

• SEC clarifies that memecoins are not securities

• SEC creates a Crypto Task Force

• SEC and CFTC confirm joint effort to tackle crypto regulation

That’s just the SEC.

Beyond that, we observed headline after headline that those of us in crypto could only dream of from the investigation into Operation Chokepoint 2.0 to SAB-121 being repealed to President Trump demanding a Stablecoin bill be on his desk to sign by “August.”

Kraken has confirmed they are filing for an IPO.

Gemini has confirmed they are filing for an IPO.

Bitgo is “considering” an IPO in 2025.

The biggest banks in the world, from Bank of America to Morgan Stanley to JP Morgan, explicitly state they will offer crypto services.

Dutzende of crypto ETFs have been filed, from Solana to Ripple to Litecoin to Trump’s own coin, $TRUMP.

Last but not least, President Trump signed an executive order creating a Strategic Bitcoin Reserve. This comes after over a dozen states have bills to create their own Strategic Bitcoin Reserves.

And this is just the U.S.

The rest of the world is also moving forward with crypto. According to recent 13-F filings, Mubadala, the U.A.E.’s second largest sovereign wealth fund, became the seventh largest holder of $IBIT, Blackrock’s Bitcoin ETF.

So how has the price reacted?

Poorly, to say the least.

Bitcoin’s peak-to-trough for the year is -28%.

Altcoins and memecoins are even worse.

Ethereum’s peak-to-trough for the year is -47%.

Solana’s peak-to-trough for the year is -57%.

Dogecoin’s peak-to-trough for the year is -73%.

TOTAL2 (the total crypto market cap sans Bitcoin) is back to the 2021 highs, having remained flat for almost four years.

The longer tail of tokens (née shitcoins) are down 80-99% depending on the token.

On top of it all, crypto fund-related products saw the largest outflow on record.

Huh?

“That doesn’t make sense,“ you must be thinking.

You are correct—it doesn’t make sense! However, the market has other headwinds with less to do with crypto and more with traditional finance (tradFi).

Over the past month, momentum and high beta stocks have been absolutely destroyed.

Take a look at the six-month momentum factor as of March 7th, 2025:

Over two years of gains wiped out in 13 days.

The speed of this move is simply incredible.

The beta factor also crashed, from 180 to 130 in 13 days.

Last but not least, the realized volatility factor has plummeted as well.

According to Deutsche Bank, at the close on March 7th, Investor Positioning is 38%, a level not seen since last summer, around the time of the Japanese Bank/Yen Carry trade VaR shock.

If one considers crypto one of the purest forms of beta and momentum, it starts to make sense why prices have been crushed in the face of such incredibly positive headlines.

Risk assets have sold off dramatically since Trump became President, largely due to his alleged Tariff policies, which trigger fears about inflation, which triggers fears of a weaker consumer, which triggers fears of a growth slowdown. Moreover, the Department of Government Efficiency (DOGE) is stoking fears of layoffs and a cut in government spending (although this is patently false).

Speaking of fear, how is the VIX doing?

Are you scared yet?

I recently learned a number of hedge fund “pods” got liquidated over the past couple of weeks at some of the world’s largest, most successful hedge funds, amounting to tens of billions of dollars in losses. The markets’ movements have been forcing professional investors to de-risk.

Fear is in the air, but there are reasons to remain bullish.

First, yields have started to come down significantly. Since Trump took office, the 10Y yield has come down nearly 60 basis points. Mortgage rates have followed suit as well.

The futures markets are back to pricing in three additional cuts this year from the Federal Reserve (my target for 2025 has been and continues to be four cuts).

The U.S. Dollar has topped and is following roughly the same trajectory as when Trump took office.

Global liquidity is rising.

China has set its highest deficit in 30 years (fiscal stimulus).

And is injecting billions into their banks (liquidity).

Moreover, there appears to be a path to peace in the Ukraine/Russia conflict and the Middle East; if anything, this is bullish for humanity, let alone markets.

Oil has topped and continues to move lower as OPEC recently capitulated and decided to unwind their planned production cuts in April, which implies nearly +2.2M additional barrels a day of supply. The lifting of Russian sanctions could also increase global supply. Oil tagged $65.50, its lowest price in over six months. In addition, Trump has a clear desire to increase energy production in the U.S. and as a result, gasoline prices at the pump should drop, putting more money in consumers' pockets.

Is this the bottom? No one knows, but one thing I know for certain is that volatility is back and not subsiding anytime soon.

Volatility is the price you pay for returns.

VC

Crypto M&A is undergoing a quiet revolution—a shift that’s reshaping the market as both investors and founders begin to see deals not merely as one-off transactions, but as strategic pivots for long-term growth. There’s a growing consensus that we’re on the cusp of a more robust, mature merger and acquisition environment in the crypto space, driven by renewed venture capital enthusiasm and the promise of a friendlier regulatory landscape.

In recent months, multiple voices in the industry have pointed to this trend. For example, a recent study from The Block highlights how top venture capital firms are anticipating an uptick in crypto M&A activity as the market matures. Investors are increasingly viewing mergers and acquisitions as essential tools for consolidating market share, scaling operations, and ultimately, fortifying competitive positions in an ecosystem that has historically been fragmented.

Insights from Montague Law offer a nuanced perspective on venture capital's evolving role. No longer confined to fueling early-stage innovation, VCs are taking on a more active role in later-stage consolidation. They’re providing not just capital but also strategic guidance, which is proving invaluable in an industry where regulatory uncertainties and rapid technological changes can derail even the most promising ventures.

Data from Architect Partners’ 2024 Year-End Crypto M&A and Financing Report underscores this renewed investor confidence. Although many deals remain tactical and modest in size, the report shows a clear recovery in transaction counts and a bounce-back in private financing activity.

This suggests that while the market may still be in its early consolidation phase, the underlying momentum is building towards larger, transformative deals that could redefine the crypto landscape.

Recent policy insights from Troutman Pepper Locke add another layer to this evolving narrative. Their recent report outlines a potential easing of regulatory burdens—a development that many in the industry see as a significant tailwind. With a lighter regulatory touch, compliance costs could drop, and antitrust scrutiny might ease, thereby creating a more conducive environment for larger mergers and acquisitions. This policy shift could remove some of the long-standing barriers that have previously held back strategic deals in the crypto arena.

Together, these threads paint a picture of an industry in transition. Venture capital is no longer just about seeding the next big innovation—it’s about actively shaping the market’s future through strategic consolidation. The data is clear: deal activity is picking up, investor confidence is growing, and there’s a palpable sense of optimism that the regulatory landscape will soon catch up with the fast-evolving needs of the crypto world.

For founders and investors, these developments are more than just signals of market recovery—they’re a call to reassess strategies. Whether you’re considering an acquisition as a path to scale or weighing the benefits of a public exit, the time to explore these opportunities is now. As crypto continues to evolve, the next few years could very well define the next chapter of the industry—one where strategic mergers and smart capital deployment drive innovation, market consolidation, and ultimately, a more resilient crypto ecosystem.

Bitcoin DeFi

The Evolving Bitcoin DeFi Ecosystem

At ETHDenver, the Bitcoin DeFi narrative was notably strong, even as Ethereum's presence felt more muted. The event underscored Bitcoin’s ability to support multiple parallel innovations, with more teams than ever experimenting across different aspects of its ecosystem. Builders are leveraging Bitcoin’s sound money properties to position it as a premier staking asset, while others are exploring trust-minimized ways to bring BTC into external execution environments.

Beyond staking and interoperability, Bitcoin is increasingly being utilized as a foundational security layer. Teams are developing checkpointing mechanisms that extend Bitcoin’s PoW security to new ecosystems, while others are building directly on Bitcoin as a data availability layer, fostering a native on-chain economy. This breadth of experimentation highlights Bitcoin’s expanding role in DeFi, security models, and infrastructure development.

Bitcoin L2s

Asymmetric is an investor in various Bitcoin L2s such as BOB, BitLayer and Mezo, and we wanted to highlight some of the progress that one of our portfolio companies has been making within this category, outside of consistently being among the top Bitcoin L2s in total transaction activity and TVL.

Source: BitcoinEcoTK

BOB is a Bitcoin L2 designed to be the liquidity hub for Bitcoin DeFi yield. The four pillars of success for BOB are targeted as:

1. BOB's Modular EVM Framework: Built on OP Stack, BOB seamlessly integrates with Ethereum’s DeFi ecosystem, accelerating adoption by leveraging existing tooling instead of proprietary solutions. This enhances composability and enables developers to build within a familiar environment, with Bitcoin as the dominant functional asset in dApps.

2. Trustless Bitcoin Bridge (BitVM2): Developed by Robin Linus, BitVM2 enables BTC to move onto L2s without custodians, using Bitcoin’s own script capabilities. Unlike wrapped BTC models, it ensures Bitcoin remains verifiable and enforceable under its consensus rules, enabling decentralized onboarding while preserving security.

3. Bitcoin-Secured Network: BOB will inherit Babylon-staked Bitcoin for enhanced chain-level security. While Bitcoin-based security is essential for any Bitcoin L2, it doesn’t have to rely solely on PoW.

4. Performance Boost via Flashblocks: Built on OP Stack, BOB benefits from Flashblocks, reducing settlement times and improving execution latency. This enhances Bitcoin DeFi’s trading and yield-generation experience.

We are excited to see the roadmap of BOB continue to expand and our thesis be validated.

Source: BitcoinEcoTK

Metaprotocols (Ordinals, Runes, BRC-20s)

When Runes were introduced in April 2024, Bitcoin users expected them to revolutionize Bitcoin-native tokenization, driving significant on-chain activity and adoption. Unlike BRC-20 tokens, which rely on the Ordinals protocol and require JSON inscriptions on individual satoshis, Runes introduced a more streamlined UTXO-based model. This innovation was designed to minimize inscription overhead, reduce on-chain bloat, and improve capital efficiency by enabling batch minting and native token transfers.

However, Runes have struggled to meet expectations due to capital inefficiencies in minting. Unlike Ethereum and Solana - where token creation is fast and low-cost - Runes and BRC-20 require high miner fees, multi-block wait times, and significant upfront costs. This structure benefits miners but limits adoption, as capital is burned in fees rather than allocated to liquidity or development. While Runes streamlined certain aspects of the on-chain UX, it too continued with a high-cost distribution model leading a declines of on-chain activity surrounding the etching/minting of the tokens.

Source: Dune

Despite these challenges, Bitcoin-native token standards continue to evolve. Projects like OdinFun are introducing a Runes launchpad with an AMM on ICP, offering a more scalable and cost-effective approach. As the ecosystem matures, Bitcoin’s fungible asset landscape is set to improve, bringing it closer to the seamless experience of other blockchains while maintaining Bitcoin’s security and decentralization.

Bitcoin Staking

Babylon is a Bitcoin staking protocol with a roadmap structured into three key phases, each progressively unlocking Bitcoin’s security for broader blockchain applications. A crucial part of this vision is SatLayer (Asymmetric PortCo), which serves as Babylon’s key restaking partner, enabling Bitcoin’s economic security to be utilized across decentralized networks and applications.

Phase 1: Bitcoin Timestamping (Concluded)

​Babylon's Bitcoin Timestamping Protocol enhances the security of Proof-of-Stake (PoS) blockchains by anchoring their data to Bitcoin's immutable ledger. This process involves creating concise, verifiable representations of PoS blockchain data, which are then embedded into Bitcoin transactions using techniques like the OP_RETURN script. Importantly, this method does not require modifications to Bitcoin's base layer, nor does it necessitate direct BTC transactions from the PoS networks. By leveraging Bitcoin's robust security, PoS chains can bolster their resilience against attacks without altering Bitcoin's core protocol. ​

Phase 1 has concluded with 54,093 BTC staked with a total of 3 “Caps”.

Source: DefiLlama

Phase 2: Bitcoin Staking & Restaking (Testnet & Rollout)

The second phase introduces Bitcoin Staking, allowing BTC holders to stake their Bitcoin to secure Proof-of-Stake (PoS) networks without giving up custody. This unlocks Bitcoin’s latent economic power, enabling BTC to secure L1s, L2s, and appchains without requiring native staking tokens.

A critical part of Phase 2 is Bitcoin Restaking, which enables Bitcoin LSTs to be reused for additional validation services beyond securing a single chain. SatLayer plays a key role in this by enabling the restaking of Bitcoin LSTs for Bitcoin-validated services, expanding the range of applications that can be secured by BTC. This allows LST holders to compound yield opportunities while securing decentralized infrastructure such as oracles, bridges, rollups, and other Bitcoin-aligned services.

Phase 3: Bitcoin Finality & Security (Future Development)

The final phase will bring Bitcoin Finality, effectively allowing blockchains to leverage Bitcoin’s security to finalize transactions with Bitcoin-validated checkpoints. This would enable Bitcoin to serve as a finality layer for PoS and modular blockchains, significantly reducing the risk of reorgs or validator attacks. By anchoring blockchain states directly to Bitcoin in a decentralized manner, Babylon aims to turn Bitcoin into a global security layer for Web3.

Babylon’s native token $BABY has signaled a near-term TGE and other partners and protocols built on Babylon will likely have their TGE’s shortly follow. Notable are the current and expected yield through staked Bitcoin which are incentivized through token rewards shown below.

Source: BitcoinEcoTK

dApps

While marketplace volume for NFTs on Bitcoin (Ordinals) has slowed down recently due to market conditions, Ordinals have established clear product-market fit for NFTs by enabling fully on-chain data storage on Bitcoin, unlike Ethereum-based NFTs, which often rely on off-chain metadata and IPFS links. This ensures permanence, immutability, and true ownership for digital art and collectibles on the most secure blockchain.

Source: Dune

However, as an asset class, art is inherently low-frequency — trading volumes remain cyclical, largely driven by collector demand, market sentiment, and speculative waves. Despite this, active traders have found ways to introduce liquidity and price discovery mechanisms, with innovations such as in-mempool trading playing a key role.

Satflow (Asymmetric PortCo) is working towards in-mempool trading that allows traders to execute trades before transactions are confirmed on-chain, leveraging Bitcoin’s transaction pool (mempool) as a real-time order book. This method enables:

• Arbitrage Opportunities: Traders can identify underpriced Ordinals before final settlement and execute transactions accordingly.

• Front-Running & MEV Strategies: Some traders actively optimize transaction sequencing to capitalize on price inefficiencies in pending trades.

• Enhanced Market Liquidity: By allowing price adjustments before final confirmation, in-mempool trading creates a more dynamic and responsive market.

Satflow is positioned to leverage these market dynamics by integrating efficient order execution mechanisms for Bitcoin-native assets.

We are excited to share further progress that Satflow and the team are working on currently that would enable a better UX for the underlying assets, while eliminating the friction that exists to currently use Bitcoin-based dApps.

Team Updates 

• Joe was interviewed by Decrypt’s Sebastian Sinclair for “Bitcoin Slides as Macro Uncertainty and AI Weakness Fuel Risk-Off Sentiment”

• Watch Joe on the Bits + Bips episode “Could the LIBRA Scandal End the Memecoin Craze?”

• Read Joe’s interview with Business Insider “A hedge funder shares his precise strategy for finding high-upside meme coins, and lays out his bets for 2025”

• Check out Joe on the Trends with Friends episode “Enough Infrastructure - It's Time To Build Consumer Applications!”

• Don’t miss Joe on the most recent episode of "Speak Up with Anthony Scaramucci”

All Market Updates

• February 2025

• January 2025

• December 2024

• November 2024

• October 2024

• September 2024

• August 2024

• July 2024

• June 2024

• May 2024

• April 2024

• March 2024

• February 2024

• January 2024

• December 2023

• November 2023

• October 2023

• May 2023

• April 2023

• March 2023

• February 2023

• January 2023

• December 2022

• October 2022

• September 2022

• August 2022

Please let us know if you have any questions or comments. 

As always, thank you for your support.

– Asymmetric

In last month’s Market Update™, I asserted that the “easy money” was over. January proved rather difficult for traders and crypto investors, or at best, “choppy.” Even though Bitcoin finished up over 9% for the month, volatility in the crypto markets officially came back, in both directions, up and down.

But Joe, up 9% is pretty damn good, you say! Indeed, it is, but the broader crypto market was down. The “OTHERS” index (all coins not in the top 10 by market capitalization) was negative for January.

Why?

In a word: Trump.

Three days before Trump’s inauguration, the Trump organization decided to last their own memecoin, $TRUMP, and it was a wild success, arguably the most successful memecoin launch in history, achieving a fully diluted valuation of over $75B within 48 hours.

$TRUMP was also launched on Solana, not Ethereum or the dozens of L2s available, but on Solana, given its scalability and speed characteristics and favorability amongst memecoin traders. The chain suffered zero issues and hummed right along. Issues for users were at the wallet provider layer, with apps like Phantom scrambling to fix bugs, given the size and scale of activity.

Since $TRUMP was launched on Solana, new users needed to fund their Solana wallets and ultimately transact in $SOL. Consequently, $SOL achieved a new all-time high (ATH) of just under $300 a token, a +3750% increase from the lows just a couple of years back.

Right, so $SOL and $TRUMP were winners, but why did $OTHERS become losers? In short, liquidity.

When the $TRUMP memecoin launched, money was frantically rotating out of seemingly every other token and into $TRUMP and $SOL by proxy. The dispersion of negative returns across the broader crypto ecosystem was enormous - everything was red.

This raises, not begs, the question: where does all the new liquidity come from?

The headlines since Trump has taken office are historic by any measure, but as they relate to crypto, they are previously unfathomable.

Executive Order (EO) 14178, "Strengthening American Leadership in Digital Financial Technology," was not only pro-crypto, but it was an utter rebuke of the prior administration's attempts at crippling the industry.

This executive order outlines the administration's policy to support the responsible growth and use of digital assets and blockchain technology across all sectors of the economy. Key provisions include:

• Revocation of Previous Policies: The order revokes Executive Order 14067 of March 9, 2022, titled "Ensuring Responsible Development of Digital Assets," and the Department of the Treasury's "Framework for International Engagement on Digital Assets" issued on July 7, 2022.

• Prohibition of Central Bank Digital Currencies (CBDCs): It prohibits federal agencies from establishing, issuing, or promoting CBDCs within the United States or abroad, citing concerns over financial stability and individual privacy.

• Establishment of the President's Working Group on Digital Asset Markets: The order creates a working group within the National Economic Council, chaired by the Special Advisor for AI and Crypto. This group is tasked with proposing a federal regulatory framework for digital assets within 180 days and evaluating the potential creation of a national digital asset stockpile.

• Promotion of Dollar-Backed Stablecoins: The administration aims to promote the development and growth of lawful and legitimate dollar-backed stablecoins worldwide to uphold the sovereignty of the U.S. dollar.

• Ensuring Access to Banking Services: The order emphasizes protecting and promoting fair and open access to banking services for all law-abiding individuals and entities, including those involved in the digital asset sector.

This is just the Executive Order.

In addition to the EO, David Sacks is leading the crypto and AI policy initiatives and has recently stated on the All In Podcast that a Stablecoin bill could be passed within “months” and the market structure bill (i.e., what are commodities, securities, collectibles, etc.) “sometime this year.”

Moreover, the heads of massive banks, from Bank of America to Morgan Stanley, have publicly stated they will offer “crypto services” to their customers.

A proliferation of ETF filings has filled the queue at the SEC, from obvious ETFs like Solana to memecoins like Dogecoin, Bonk, and even $TRUMP. In fact, the Trump Media and Technology Group has recently filed to trademark investment products targeting Bitcoin and others.

And I’m barely scratching the surface here. The number of positive headlines for crypto has never been this high.

That’s where your liquidity comes from.

For quite some time, crypto natives have mostly engaged in a player-versus-player (PvP) trading environment within the crypto ecosystem, with a “hot ball of money” rotating from one token or ecosystem to another. New money must come in for the industry to move away from a zero-sum environment and toward an expansive one.

With the repeal of SAB-121, banks can now functionally custody crypto on their balance sheets. This will have a 100x bigger impact than the Strategic Bitcoin Reserve.

With spot ETFs being filed and ultimately approved, retail investors who don’t want to (or know how to) set up a crypto wallet can buy memecoins like $BONK (via ETFs).

Stablecoin integration into payment systems and banking services can act as a trojan horse for increased mainstream cryptocurrency adoption.

Recently, Patrick Collison, the co-founder and CEO of Stripe, tweeted:

If you add all this up, an enormous amount of liquidity will enter the (crypto) system.

How will it get there is the obvious question?

Consumer apps.

As I recently mentioned in my interview with the legendary Raoul Pal, the time for the consumerization of web3 is now. There has been an over-investment in “infrastructure” by many of my VC brethren, backing even more L1 protocols and proxies to them. The latest VC-backed infrastructure investment to “go public” is Berachain. Its token generation event was earlier this week, and the price is suffering the same fate as many other VC-backed infrastructure investments: down only.

In the 1990s, myriad VCs backed companies laying the physical infrastructure for the Internet itself. What were they doing in 2005-2009? Investing in apps like Twitter, Groupon, Square, Instagram, etc.

VCs have been investing in web3 infrastructure for nearly 10 years now…and for some reason, they keep investing in it today.

The $TRUMP memecoin launch was enough proof that the available infrastructure is “good enough,” the focus should be on applications, not infrastructure (beyond niche/specific infrastructure).

That’s why we at Asymmetric are launching crypto’s first-ever, early-stage VC fund explicitly focused on consumer applications. To bring all the new liquidity into the system, we believe the conduit for said liquidity will be consumer-facing applications, primarily on mobile phones, but not strictly limited to them.

An old adage I tend to live by as an investor is, “When everyone is looking in the same place for value, it is rarely there.” That could not be more true in the current infrastructure-focused VC community in web3 and is part and parcel of our desire to back the best founders focusing on apps, where the true value lies.

Macro

The Federal Reserve

As of early February 2025, the Federal Reserve (Fed) has maintained the federal funds rate within the target range of 4.25% to 4.50%, following a series of rate cuts totaling 100 basis points over the past three meetings. This decision reflects the Fed's assessment of a robust U.S. economy characterized by steady growth and a strong labor market. Fed Vice Chair Philip Jefferson emphasized that while inflation is expected to decrease gradually, there is no immediate need to rush further rate cuts. He advocates for a cautious approach, planning to reduce monetary policy restraint gradually.

On the other hand, Richmond Federal Reserve President Thomas Barkin recently stated that he “still leans towards cuts this year” and “sees no sign of the U.S. economy overheating.” Minneapolis Fed President Neel Kashkari recently stated, “If we see good inflation and the labor market stays strong, that would move me to support a further rate cut.”

The Fed's current stance aims to balance the dual mandate of promoting maximum employment and ensuring price stability. Despite recent rate reductions, the policy remains "meaningfully" restrictive, with the target range still above the long-run neutral estimate of 3.0%. This approach provides the Fed with flexibility to respond to evolving economic conditions, including uncertainties arising from recent tariff and immigration policies. We still maintain that rates are too restrictive, and the Fed will continue to cut in 2025.

China

China's economy faces challenges, with sluggish growth persisting into 2025. The nation has relied heavily on external demand and a weaker renminbi (RMB) to bolster export competitiveness. In response to recent U.S. tariffs, the People's Bank of China maintained the RMB's exchange rate at 7.169 per dollar, signaling an intent to defend the currency's value despite external pressures.

However, the benefits of a weaker RMB are diminishing. While it has historically aided export competitiveness, the depreciation has led to increased import costs, complicating the economic outlook for 2025. Chinese policymakers are cautious about significant currency appreciation, drawing lessons from historical precedents like the Plaza Accord, which adversely affected Japan's economy. Given the current economic conditions, China will likely maintain a weaker currency to support growth despite the associated challenges.

The Impact of Trump's Alleged Tariff War

President Donald Trump's recent imposition of tariffs—25% on imports from Mexico and Canada and 10% on Chinese imports—has escalated global trade tensions. These measures have prompted swift retaliatory actions from the affected countries, leading to concerns over disrupted supply chains and increased costs for businesses and consumers.

The economic implications of these tariffs are significant. Analyses suggest that the new tariffs could reduce overall U.S. imports by 15%, potentially leading to weaker GDP growth, higher unemployment, and increased inflation. Industries with complex cross-border supply chains, such as automotive and electronics, are particularly vulnerable to these disruptions.

Financial markets have reacted negatively to the escalating trade tensions. Major stock indices in the U.S., Europe, and Asia have experienced declines, reflecting investor concerns over the potential for a global economic slowdown. The tariffs have also led to increased volatility in commodity markets, with oil prices surging due to anticipated supply disruptions.

However, the history of Trump’s “trade war” suggests the opposite of the fear-mongering from many financial analysts. Government receipts rose significantly in the last trade war.

It is clear that Trump will be cutting taxes for Americans and businesses and will likely finance those cuts with increased tariff revenue and the effect of DOGE.

It is worth noting the macroeconomic differences this time around:

The thematic deltas are stark: inflation is much higher, the deficit much wider, and growth globally subdued.

The Impact of the Price of Oil

Recent geopolitical developments, particularly the imposition of U.S. tariffs on major oil exporters like Canada, have introduced volatility into the oil markets. The 10% tariff on Canadian oil imports is expected to disrupt supply chains, potentially leading to higher energy prices. This move could slow U.S. economic growth and contribute to inflationary pressures.

On the global stage, U.S. sanctions on countries like Iran aim to reduce their oil exports to zero, further tightening the global oil supply. Iran's oil minister has warned that such sanctions will destabilize energy markets, emphasizing the need to depoliticize the oil market to ensure energy security.

However, the market is showing the opposite. Trump is focused on decreasing oil prices and has made it a priority for the U.S. to extend its lead as the world’s largest energy producer. Crude oil is hovering just above $70 a barrel, and the latest build-up of oil inventories suggests that oil prices are going lower…much lower.

It’s difficult to experience a re-acceleration of inflation with oil prices falling.

The U.S. Dollar

The U.S. dollar exhibited notable strength in early 2025, reaching a 20-year high against the Canadian dollar following the announcement of new tariffs. This appreciation reflects investor confidence in the U.S. economy and the dollar's perceived safe-haven status amid global trade uncertainties.

However, the dollar's strength presents a mixed bag of economic implications. While a stronger dollar benefits U.S. consumers through cheaper imports and more affordable foreign travel, it poses challenges for U.S. exporters by making their goods more expensive in foreign markets. This dynamic can reduce export competitiveness and potentially widen the trade deficit.

The Trump $DXY and 10Y U.S. Treasury fractals are finally beginning to repeat. This bodes well for risk assets overall.

The Credit Cycle

The credit cycle appears mid-expansion, with economic indicators suggesting this trend could continue into 2025. Accommodative central bank policies, stronger corporate profits, and improved productivity have contributed to a favorable growth environment.

In this context, banks are exhibiting a renewed readiness to lend. A stable economic outlook and a cautious yet accommodative monetary policy environment have bolstered banks' confidence in extending credit to businesses and consumers. This resurgence in lending activity is expected to support ongoing economic expansion, facilitating investment and consumption that drive growth.

Overall, the mid-expansion phase of the credit cycle, supported by favorable economic indicators and a cautiously accommodative monetary policy, positions banks to actively participate in fueling economic growth through increased lending activities.

CapEx and AI

In recent years, U.S. corporations, particularly within the technology sector, have significantly escalated their capital expenditures (CapEx), with a pronounced focus on artificial intelligence (AI) infrastructure. This surge in investment underscores the strategic importance of AI in driving innovation, enhancing competitiveness, and shaping the future trajectory of these companies.

Tech Giants Leading the Investment Charge

Several major technology firms have announced substantial CapEx plans centered on AI development:

• Alphabet (Google's Parent Company): In 2025, Alphabet plans to invest $75 billion in capital expenditures, a notable increase from the $52.5 billion spent in 2024. This investment is primarily directed toward AI infrastructure, including the expansion of servers and data centers, to support the growing demands of AI applications.

• Microsoft: Microsoft has reaffirmed its commitment to AI by planning to spend approximately $80 billion during its current fiscal year on AI-enabled data centers. These facilities are designed to train large language models and deploy AI and cloud-based applications, reflecting Microsoft's strategic focus on integrating AI across its product and service offerings.

  cfodive.com

• Meta (formerly Facebook): Meta has projected capital expenditures between $60 billion and $65 billion for 2025, with a significant portion allocated to AI infrastructure. This investment aims to enhance Meta's AI capabilities, particularly in areas such as content recommendation algorithms and virtual reality applications.

  finance.yahoo.com

Strategic Drivers Behind Increased AI Investments

Several strategic considerations drive the heightened focus on AI-related capital expenditures among U.S. tech corporations:

1. Competitive Pressure: The rapid advancements by competitors, including emerging firms like China's DeepSeek, have intensified the race to develop more efficient and powerful AI models. DeepSeek's recent achievements in creating advanced AI models at lower costs have prompted U.S. tech giants to accelerate their investments to maintain a competitive edge.

2. Infrastructure Expansion: The growing demand for AI applications necessitates substantial investments in infrastructure, particularly in data centers equipped with high-performance computing capabilities. Companies are scaling up their infrastructure to support the training and deployment of complex AI models, which require significant computational resources.

3. Long-Term Value Creation: Investments in AI are viewed as pivotal for long-term value creation, enabling companies to innovate, improve operational efficiencies, and open new revenue streams. Companies aim to enhance user experiences and drive growth by embedding AI into products and services.

Broader Economic Implications

The substantial increase in AI-focused capital expenditures by U.S. tech corporations has several broader economic implications:

• Supply Chain Impact: The surge in demand for AI infrastructure components, such as advanced semiconductors and specialized hardware, is influencing global supply chains. Companies like Nvidia, known for their high-performance GPUs essential for AI workloads, are experiencing increased demand, leading to strategic partnerships and supply chain adjustments.

• Labor Market Dynamics: The expansion of AI initiatives contributes to job creation in specialized fields, including data science, machine learning, and AI research. Additionally, the construction and maintenance of new data centers generate employment opportunities in various sectors.

• Regulatory Considerations: The rapid growth in AI capabilities and investments is attracting attention from regulators concerned about data privacy, ethical AI use, and market competition. Companies may need to navigate evolving regulatory landscapes as they expand their AI operations.

The increased capital expenditures by U.S. corporations, especially within the tech sector, underscore a strategic commitment to advancing AI capabilities. These investments are poised to drive innovation, shape competitive dynamics, and have far-reaching implications for the broader economy.

VC

Infrastructure Overinvestment: A Critical Reflection for 2025

In previous market updates, we advocated a new paradigm shift for crypto Ventures, stressing the importance of innovation in front-facing Web3 applications and user adoption. In order for that shift to occur, VCs need to take a hard look at infrastructure and ask some serious questions. For several years now, billions of dollars have poured into layer-1 blockchains, cross-chain solutions, wallets, custody providers, and various middleware projects. While this influx of capital has undoubtedly advanced the crypto ecosystem, it has also created an oversaturated landscape. The question today is: Are we funding progress, or are we funding redundancy?

The Infrastructure Boom: Context and Challenges

Between 2020 and 2024, crypto infrastructure funding reached unprecedented levels. Buoyed by the bull market and the promise of Web3, venture capitalists raised massive funds to support startups building the backbone of the decentralized economy.

Projects like Solana, Avalanche, and Aptos received hundreds of millions of dollars (Messari), while newer entrants like Monad, a high-performance layer-1 blockchain, raised $225 million in a single round. The numbers are staggering, yet they beg the question: how many blockchains and infrastructure layers does the market truly need?

Take layer-1 blockchains (L1’s) as an example. Ethereum remains a significant force, and other chains like Solana and Binance Smart Chain continually carve out vital niches (Solana recently became the first chain to pass $200B in DEX volume).

However, many new chains struggle to differentiate themselves, often touting marginally faster transaction speeds or lower fees—features that existing chains are also working to improve (Decrypt). Meanwhile, cross-chain solutions have proliferated, with protocols like Wormhole, Axelar, and LayerZero leading the pack (The Block). While interoperability is critical, the sheer number of similar projects raises concerns about overlapping functionality and diminishing returns.

Exhaustion Creeps Up

1. Slowing Innovation: Many recent projects feel iterative rather than revolutionary. The emphasis on minor technical improvements rather than groundbreaking use cases suggests that the low-hanging fruit of infrastructure innovation has been picked.

2. User Adoption Lagging Behind: Despite significant advancements in infrastructure, user adoption of decentralized applications (dApps) remains limited. Infrastructure has outpaced the development of compelling applications that can attract and retain mainstream users (DappRadar).

3. Funding Fatigue: Data from 2024 indicates that venture funding in crypto infrastructure began to decline, with fewer deals and lower average check sizes (Crunchbase). This suggests that even investors are starting to recognize the saturation point.

4. Bubble Risk: Similar to past tech booms, speculative hype has driven overfunding in some sectors, creating a market where only a few key players will ultimately emerge as winners. This mirrors Howard Marks' cautionary view that optimism leads to pricing errors, particularly in emerging technologies like AI and crypto.

Take Warning

Investors should be wary of VC funds that continue to allocate heavily to infrastructure projects. The ecosystem’s foundation is robust; further investments risk fueling redundancy rather than growth. Instead, VCs must critically evaluate whether new infrastructure proposals address genuine market gaps or merely rehash existing solutions.

Take Monad as an example. Despite its impressive $225 million raise, questions remain about its differentiation in a market already crowded with high-performance blockchains. There have been criticisms regarding Monad's substantial funding and the perceived lack of deliverables. Notably, Andre Cronje, co-founder of Sonic, addressed such concerns this past month. He criticized Monad for not conducting basic investigations and for changing its narrative—initially promising a parallel Ethereum Virtual Machine (EVM) but failing to meet performance goals. Cronje highlighted Monad's delays and lack of tangible progress despite significant funding. Additionally, industry observers have noted the challenges Monad faces in delivering on its promises. For instance, achieving a nine-figure valuation before the Monad blockchain has even launched has been described as "quite surprising," indicating skepticism about the high valuation in the absence of a live product. The risk of overfunding similar projects could divert resources away from more impactful innovations.

Where We Go From Here

We hold a position that a shift in attention from infrastructure to applications and real-world use cases is in order. The following areas are only a handful of examples but represent more promising opportunities:

1. Consumer-Ready dApps: Gaming, decentralized social media, and NFT-related platforms have shown potential to attract mainstream users. Projects focusing on user experience and tangible value propositions deserve more attention (CoinDesk).
   

2. Regenerative Finance (ReFi): Innovative financial models that integrate environmental and social impact with blockchain technology are gaining traction. These projects can align with broader global priorities and offer both utility and sustainability (Medium).
   

3. Enterprise Solutions: While retail adoption has been the primary focus, enterprise-grade blockchain solutions remain underexplored. Supply chain, identity verification, and data security are areas ripe for blockchain disruption (Forbes).
   

4. Capital Efficiency: Rather than funding new infrastructure projects, VCs should focus on scaling existing solutions to improve usability, security, and integration with traditional finance systems.

Wrapping Up

The crypto industry has made tremendous strides in building a resilient and scalable infrastructure. However, as 2025 gets underway, the focus must shift. The time for investing in every new infrastructure project has passed, and anyone bullish about infrastructure in 2025 is spinning their wheels. Instead, we must direct resources toward applications and use cases that can drive real adoption and deliver value to users. By doing so, we can ensure that the capital flowing into the crypto ecosystem fosters meaningful progress rather than unnecessary duplication.

The infrastructure race is over; the race for utility begins.

Bitcoin DeFi

The Evolving Bitcoin DeFi Ecosystem

With over 80 projects in development, the Bitcoin L2 race is hotly contested. Asymmetric’s portfolio companies—Bitlayer, BOB, and Mezo—are at the forefront, collectively surpassing $850M in TVL. BitLayer and BoB are live on mainnet, while Mezo has amassed $242M TVL in testnet. Multiple TGEs and mainnet launches expected in Q2-Q3 2025 will further accelerate adoption.

As interest in Bitcoin’s Layer 1 ecosystem grows, teams are developing metaprotocols that abstract a separate execution layer, enabling smart contracts on Bitcoin without the need for bridging. This approach ensures seamless integration with wallets and native assets. Asymmetric has backed Arch Network in this space, with another investment announcement forthcoming.

Bitcoin staking is gaining institutional traction, with Babylon Labs securing over 58,000 BTC ($5.9B TVL) as a core economic security layer for PoS chains. SatLayer (Asymmetric PortCo) is pioneering Bitcoin restaking, integrating with projects like Pendle and Morpho to unlock yield opportunities for BTC holders.

Bitcoin-native dApps like Liquidium (Asymmetric PortCo), which allow for folks to borrow Bitcoin using their Ordinal asset as collateral are driving DeFi innovation. While January’s loan volume was down, the launch of instant loans is expected to boost activity by simplifying access to liquidity.

Bitcoin L2s

At the start of 2024, there were few Bitcoin L2s. This sector has since seen explosive growth, with over 80 Bitcoin L2s currently in development. Asymmetric has invested in three key players—Bitlayer, BOB, and Mezo—positioning itself at the forefront of this emerging market (marked in red below). Many Bitcoin L2s are expected to launch their mainnets or TGEs by 2025.

Asymmetric’s portfolio companies continue to lead in this sector, with Bitlayer ($396M) and BOB ($224M) already live on mainnet. Meanwhile, Mezo, despite still being in testnet, has amassed $242M in TVL, cementing its position as a dominant player within the Bitcoin L2 ecosystem. A large reason for their lead in TVL is due to their focus around creating trust-minimized bridge designs for Bitcoin to their respective networks. Bitlayer and BOB are focusing on BitVM applications, while Mezo is leveraging their Threshold Network.

Bitlayer has announced the design of their bridge, called the Finality Bridge, built on BitVM Alliance research, which enables secure, trust-minimized cross-chain transactions. Designed for Bitlayer, it mints YBTC, a 1:1 pegged, yield-bearing asset, for use within its ecosystem.

BOB is making grounds with their R&D and partnership with Fiamma. The prototype leverages BitVM2 to enable complex smart contracts on the Bitcoin network without requiring protocol changes, thereby unlocking new use cases and scalability. Separately, we are excited for the integration of Chainlink for oracles on BOB which enable data feeds necessary in DeFi applications.

Source: BitcoinEcosystemTK

Bitcoin L2s are experiencing strong growth in TVL, highlighting the increasing demand for DeFi on these networks as liquidity hubs.

Metaprotocols (Ordinals, Runes, BRC-20s)

While Bitcoin does not have a universally accepted fungible token standard, Runes are still the most active transaction type on Bitcoin, surpassing BRC-20, and Inscription/Ordinals (NFTs). Since their late April launch, Runes transactions have been the primary driver of Bitcoin’s network fees, even exceeding those from Ordinals (NFTs). There has recently been a resurgence of interest around BRC-20 in the last few months as discussions continue around BRC-20 2.0 which introduces programmability modules, which we are tracking closely.

Source: BitcoinEcoTK

We are highly optimistic about new metaprotocols that abstract a separate consensus mechanism which enable seamless interactions directly from the Bitcoin base layer—without the need for bridging. This approach ensures the most native and frictionless experience while providing direct access to Bitcoin’s vast user base.

Extending natively from the base layer offers several advantages:

• No need for users to leave Bitcoin, ensuring native security and liquidity.

• Seamless wallet integration with platforms like Xverse, MetaMask, and Phantom, delivering a familiar UX.

• Leveraging Bitcoin’s strong network effects, tapping into $2B+ in native assets as programmable collateral.

As Bitcoin’s ecosystem continues to evolve, so too does our definition of what a programmability on Bitcoin should look like. There are now many flavors of metaprotocols ranging from some that focus on security and Bitcoin alignment such as Glittr (an Asymmetric PortCo), ensuring all data is settled directly on Bitcoin’s L1, and those which abstract a separate consensus mechanism like Arch Network (an Asymmetric PortCo) for smart contracts but are natively interoperable with Bitcoin L1, which sacrifice decentralization for functionality.

We are excited to share future investments within this category within the coming months.

Bitcoin Staking

In January 2025, institutional interest in Bitcoin staking continued to grow, driven by the maturation of L2s and the development of staking protocols. Platforms like Figment have been instrumental in providing secure, institutional-grade staking infrastructure, supporting the expansion of Bitcoin staking ecosystems, more details: here.

A key highlight was the growing integration of Bitcoin restaking through SatLayer (Asymmetric PortCo), allowing BTC holders to secure additional networks while earning rewards.

Babylon Labs remains a leader in Bitcoin staking, with over 58,000 BTC staked, representing $5.9 billion in Total Value Locked (TVL). Following the closure of deposits after Cap-3 in December, Babylon is expected to launch its mainnet this quarter, potentially reopening deposits with a capped limit on Bitcoin.

Additionally, EigenLayer could introduce BTC restaking opportunities using wrapped Bitcoin, further expanding staking-based yield strategies.

Source: DefiLlama

dApps

Liquidium (Asymmetric PortCo), a leading NFT and fungible lending platform on Bitcoin, is leveraging the Internet Computer Protocol (ICP) to enable vaults for Bitcoin, allowing users to access instant loans seamlessly. By integrating ICP's advanced smart contract capabilities, Liquidium enhances the efficiency and security of Bitcoin-backed lending, providing a trust-minimized solution for borrowers seeking liquidity without needing intermediaries. The liquidity in these vaults—managed through ICP canisters—can then be accessed directly from the Bitcoin base layer, ensuring a seamless and decentralized lending experience. This innovation strengthens Liquidium’s position at the forefront of Bitcoin DeFi, offering a scalable and efficient solution for unlocking Bitcoin liquidity.

To see this in action, check out the demo here: Liquidium Demo.

While loan volume for the month of January is down, we anticipate that the launch of instant loans will be a significant product iteration that drives more activity on the platform. By streamlining the borrowing experience, instant loans eliminate the need for users to wait for a lender to accept their loan request in a peer-to-peer model. Instead, borrowers can access liquidity with a single click, greatly simplifying the user experience and making Bitcoin-backed lending more accessible and efficient. This enhancement is expected to increase engagement and adoption, reinforcing Liquidium’s role as a leading innovator in Bitcoin DeFi.

Source: Dune

Law & Regulations

Donald Trump has made it clear: he wants the U.S. to be the "crypto capital of the planet." His vision includes a Bitcoin strategic reserve, a revival of crypto mining, and a move towards deregulation. These are bold ideas, and if realized, they could dramatically reshape the landscape of digital assets in the U.S.

But does deregulation truly mean progress? And how much of this vision will translate into tangible policy changes?

Deregulation: More Clarity, Not Just Less Regulation

Crypto leaders are hoping for a shift away from regulation by enforcement. The industry needs clear, thoughtful policies—not just a regulatory pause that could be undone by the next administration.

The key issue here is the outdated regulatory framework. U.S. securities laws are structured around traditional asset classes like debt and equity, but crypto often falls into a grey area. The infamous Howey test, used to determine whether something is a security, wasn't designed for digital assets. This lack of clarity has led to a patchwork of enforcement actions rather than consistent rules.

Deregulation isn’t about removing guardrails entirely—it’s about ensuring that crypto projects know what rules they’re playing by. Otherwise, any reprieve under Trump could be short-lived if future administrations bring back heavy-handed enforcement.

Enforcement: Striking the Right Balance

One of the biggest shifts could come from Trump’s expected nomination of Paul Atkins, a well-known crypto advocate, as SEC chair. If confirmed, Atkins would likely steer the SEC away from aggressive enforcement actions against legitimate crypto companies and focus on actual bad actors—Ponzi schemes, fraudsters, and outright scams.

The issue of primary vs. secondary sales is a critical one. Some court rulings, like Judge Analisa Torres’ decision in the Ripple case, suggest that once tokens hit secondary markets, they shouldn’t be considered securities transactions. If Trump’s SEC embraces this stance, it could remove one of the biggest roadblocks for U.S. exchanges trying to compete with their offshore counterparts.

However, regulatory clarity is still needed on airdrops, play-to-earn tokens, and other novel distribution methods. If these are treated as securities sales, many crypto projects will continue operating in legal limbo.

The Role of Crypto Exchanges: Beyond Broker-Dealer Regulations

One of the biggest lessons from the FTX collapse was that exchanges need better oversight—but not necessarily through securities regulations. Many argue that consumer protections under money transmission laws would have been more effective than forcing exchanges into broker-dealer frameworks.

Japan offers an interesting case study. Its financial authorities regulate crypto more like money than securities, which meant that Japanese customers were largely protected when FTX imploded. The U.S. could learn from this approach rather than forcing crypto assets into a regulatory structure that doesn’t fit.

NFTs, Tokenized Assets, and Stablecoins: Avoiding the Securities Trap

Another area of interest is how the Trump administration will handle NFTs, tokenized real-world assets, and stablecoins. Unlike speculative crypto assets, these categories often fail the Howey test and shouldn’t be treated as securities.

However, regulators have often taken a broad-brush approach. Clear guidelines could encourage more innovation while protecting investors. Trump’s own campaign embraced NFTs, so there’s a strong incentive for his administration to provide this clarity.

Custodial Services: Unlocking Institutional Growth

One of the most damaging SEC policies in recent years was the requirement that public companies holding crypto on behalf of customers record those assets as liabilities on their balance sheets. This has made it nearly impossible for banks and other financial institutions to offer crypto custodial services at scale.

Congress passed a bipartisan repeal of this rule, but President Biden vetoed it. If Trump reverses this policy, it could open the floodgates for institutional adoption of crypto.

What Comes Next?

The crypto industry has long asked for clear, predictable rules. If Trump follows through on his promises, his administration could provide the clarity that has been missing for over a decade.

Congress also seems ready to move forward, with stablecoin legislation and broader crypto regulatory frameworks gaining momentum. If these proposals can avoid a presidential veto, they may finally bring the legal certainty the industry needs.

Of course, promises made on the campaign trail don’t always translate into policy. But for the first time in a long time, there’s real hope that the U.S. could take a leadership role in crypto innovation rather than driving projects offshore. The next few years will be critical in determining whether the U.S. truly becomes the “crypto capital of the planet” or continues to lag behind more forward-thinking jurisdictions.

Team Updates 

• Joe was interviewed by Bloomberg’s Suvashree Ghosh in “Bitcoin Retakes $100,000 as Congress Set to Certify Trump Win”

• Raoul Pal hosted Joe on his Real Vision podcast “Solana, Dogecoin & Beyond: What’s Driving Crypto Innovation?”

• Catch Joe’s commentary in The Block’s article “Ahead of Trump's inauguration, experts weigh in on a 'pivotal moment' for crypto”

• Benzinga quoted Joe in their article “Trump Inauguration To Trigger $250K Bitcoin Rally Or A Plunge Below $100K: Analysts Weigh In”

• CBS featured Joe in their article “Donald and Melania Trump debuted meme coins, $Trump and $Melania. Here's what to know.”

• Joe was mentioned in MarketWatch’s article “Bitcoin needs to see these catalysts to hit $120,000”

• Check out Joe in The Street Roundtable’s article “Pro-crypto voices highlight risks of Trump family crypto projects”

• Read Joe’s commentary in the Markets Insider article “Why Solana could be the big winner of the meme-coin frenzy”

• Joe was interviewed by David Kushner, of Business Insider, for “How a shady hustler in Dubai turned celebrity meme coins into a crypto grift”

• Joe and Dan were in Dubai for Satoshi Roundtable XI

All Market Updates

• January 2025

• December 2024

• November 2024

• October 2024

• September 2024

• August 2024

• July 2024

• June 2024

• May 2024

• April 2024

• March 2024

• February 2024

• January 2024

• December 2023

• November 2023

• October 2023

• May 2023

• April 2023

• March 2023

• February 2023

• January 2023

• December 2022

• October 2022

• September 2022

• August 2022

Please let us know if you have any questions or comments. 

As always, thank you for your support.

– Asymmetric

The easy money has been made.

2024 was a historic year for myriad reasons, but as it relates to crypto, let’s review the performance of some cherry-picked data and why 2025 might not be as easy for my fellow crypto brethren and sistren.

Discarding USDT and USDC, the largest stablecoins by market cap, we observe that the best-performing major in 2024 was not Bitcoin or a Layer 1 protocol, but, yes, again, a memecoin.

No matter how many VCs (including myself) opine that the future of finance is driven by their bags, $DOGE outperformed all the majors.

I’ve written extensively over a year about why and how memecoins will continue to garner the attention of speculators (née gamblers) and financial nihilists.

It turned out to be true, and boy, did memecoins outperform. For example, $PEPE was up over 14x for 2024, and the total market cap of memecoins reached nearly $200B.

Let that sink in.

200 billion dollars worth of value for “assets” written off by academics and traditional finance as “worthless.”

On the other hand, what assets underperformed in the same year that the Bitcoin and Ethereum spot ETFs were launched?

Avid readers of the Asymmetric Market Update will not be surprised to hear my fundamental bearishness on Ethereum and Ethereum-adjacent assets. Beyond a tactical trade here and there, I still see no reason to own much of anything in the Ethereum ecosystem, particularly the failed scaling solution known as Layer 2s.

Ironically, Coinbase’s L2, Base, picked up an enormous amount of activity and interest…yet it doesn’t have a token.

Are L2’s a contrarian play for 2025? I think not.

Ethereum and its ecosystem currently lack any real catalyst on the horizon for 2025. There is the Pectra upgrade, an improvement to the network that will presumably “set the stage” for future scalability improvements which raises (not begs) the question - if Ethererum is going to be scalable what is the point of a L2?

Moreover, the staking yield of Ethereum has dropped from 5.5% to 3.0% annualized since the Merge in September 2022. On Coinbase, the APY is less than 2%.

The one-month growth rate of active validators is now falling raising concerns that validators may be unstaking given the underperformance of $ETH and the paltry staking yield.

Is longing $ETH a contrarian play for 2025? Maybe.

It all comes down to flows.

Bitcoin remains the king of crypto and 2024 was a year where its price action was largely dominated by one thing: ETF flows.

Q1 of 2024 was the genesis of Bitcoin spot ETFs, and flows dominated the price action. Q2 and Q3 were 6 months of boring, sideways action leading up to the U.S. Presidential election, where Trump won in historic fashion.

Flows ramped significantly after his win only to turn drastically negative the last two weeks of the year when Jerome Powell gave a hawkish press conference, triggering one of the most bizarre moves in recent memory - a 74% rise in the VIX on the day where the Federal Reserve cut 25 basis points.

Huh?

I ran an analysis going back to the inception of the VIX (1993) and the percentage move of the VIX when the Fed cut 25 basis points or more.

The move in the VIX on December 18th, 2024, was a 6.9 standard deviation move.

To put that type of move into perspective, the odds of a nearly seven sigma move are 1 in 191.6 trillion in a Gaussian distribution of outcomes, virtually impossible to observe, yet it happened, but what followed was more telling.

Funding spreads for equity index futures collapsed.

Stock market breadth was horrendous.

And crypto was not invincible to the whims of the stock market.

Flows completely collapsed from December 18th into year-end, and prices followed.

I would be remiss not to mention the decoupling of crypto from global liquidity in Q4 as well.

I have been and continue to be in the same camp as Michael Howell and Raoul Pal, who state that global liquidity is the only game in town regarding risk assets and their rise and fall. I also share their view that at some point in 2025, global liquidity is set to peak - this timing is precarious and incredibly difficult to forecast.

Although 2024 started off the year with a rise in global liquidity, Q4 saw continued weakness and has plunged the 3-month annualized percentage change to levels not seen since late 2022.

As I wrote about in October 2024’s Asymmetric Market Update™️, China continues to be the final boss, in my opinion, as it relates to Bitcoin’s continued rise…and for good reason: they are in a liquidity trap.

At the time of this writing, the 10-year Chinese Government Bond (CGB) yield has recently dropped to a record low of 1.592%, marking a decline of 7 basis points over a span of 48 hours. This decline has widened the spread against the 10-year U.S. Treasury yield to 295 basis points.

The Yuan continues to weaken as a result of the successful weaponization of the U.S. Dollar as demonstrated by a continually weak Japenese Yen.

All the while, the People’s Bank of China (PBoC) is still not injecting liquidity into their system.

On the one hand, a weaker China is bearish for global growth but beneficial to U.S. exceptionalism, as well as a strong U.S. Dollar.

Yet historically, a stronger Dollar is bearish for Bitcoin.

What is one to do?

Now, many potential catalysts for Bitcoin (and crypto generally) will rise in 2025. Here are a few:

• A Strategic Bitcoin Reserve (at the U.S. Federal level)

• Strategic Bitcoin Reserves (at the U.S. State level)

• Strategic Bitcoin Reserves (for other countries globally)

• The removal of SAB-121

• Clear regulations out of the SEC and CFTC on crypto

• The Stablecoin Bill

• The Market Structure Bill

• U.S. banks offering prime brokerage and trading services

• The consumerization of web3/crypto (adoption)

• A Chinese Bazooka of liquidity

However, these potential catalysts are just that - potential. In the meantime, one must continue to observe the flows, and for better or worse, those flows are dominated in the U.S, as witnessed by the Coinbase Premium.

The Coinbase Premium (or Discount) is the spot price of Coinbase versus the spot price on Binance and the delta between the two for an asset, in this case, Bitcoin.

We at Asymmetric have open sourced the Coinbase Premium indicator for TradingView users.

The Coinbase discount in notional terms can appear wide given the rise in Bitcoin’s price, so one must consider the price of Bitcoin in relation to the discount. A better metric is the percentage discount or premium to get a better sense of how deep the discount/premium is on a relative basis.

If we look at the discount in relative terms, we'll see that at year-end, the discount was, in fact, the widest since the FTX collapse, or nearly 25 basis points.

Clearly, the FTX collapse was a catalyst for the discount to widen, but Terra Luna's collapse was even more impactful, given the discount was even wider on May 12, 2022.

Now, the difference is not a negative idiosyncrasy driving a wide discount but is due to something much easier to understand - Bitcoin ETF flows.

Since the Bitcoin ETFs launched in 2024, the Coinbase Discount/Premium has been driven almost entirely by ETF flows. On days when the ETFs see major inflows, a Premium is observed, and the opposite is also true.

Since the FOMC meeting on December 18th, U.S. ETF holders have been selling their Bitcoin ETFs at a rapid pace.

Given the aforementioned, shouldn’t we simply buy Bitcoin when a Coinbase Premium is observed and sell when a Discount shows up?

In 2024, yes. That was the easy money.

Now, the easy money is over.

Macro

The final month of December was one of the more bizarre Decembers in recent history, providing a 2025 outlook that can only be described as being “clear as mud.”

FOMC

Jerome Powell’s communications on the U.S. presidential election could not have been more different in the final two months of 2024.

November FOMC: Regarding the recent U.S. presidential election, Powell stated that the election would not directly factor into monetary policy decisions in the near term.

December FOMC: Powell noted that the incoming Trump administration has shifted expectations for the next year, and some Fed officials have started incorporating potential new policies into their forecasts. However, the exact policies and their impact remain uncertain.

It is difficult to comment on that outrageous 180-degree change and its incoherence.

The election will not change policy expectations.

The election did change some people’s policy expectations even though “exact policies and their impact remain uncertain.”

Left speechless, we digress.

Clear as mud.

Treasury

There was an expectation that the Treasury General Account (TGA) would be drawn down towards the end of the year, over $800B USD. The election changed that.

• Like it or not, Yellen evaporated in a malaise that can only be described as shell-shocked and pouting. Apparently, her civic duty wasn’t politically agnostic as the mantra would have us believe.

• The debt ceiling turned into a debacle with the pork-barrel bill on incoherence for the final grift by the outgoing administration that was killed by Elon Musk and his (alleged) crusade against government largesse.

US TREASURY SECRETARY YELLEN: THE TREASURY EXPECTS TO REACH NEW LIMIT BETWEEN JANUARY 14 AND JANUARY 23, AT WHICH TIME IT WILL BE NECESSARY FOR TREASURY TO START TAKING EXTRAORDINARY MEASURES.

“Extraordinary Measures” simply refers to running down the TGA to fund government operations as a stop-gap. One way or another, the TGA has to be legally entered for the fiscal year. However, delaying that from q4 to q1 had an impact on market liquidity and, hence, asset prices.

Government Spending

You can’t consider the debt ceiling without discussing government spending.

We have repeatedly written about outsized US government spending as the primary driver of the above-trend GDP under Biden. Some expect this to continue or increase under Trump. That is in direct opposition to the newly created Department of Government Efficiencey (DOGE), Elon Musk and Vivek Ramaswamy’s mandate. So, are we removing government waste or continuing/increasing the multi-decade path? Clear as mud.

Immigration Policy

If exceptionally large immigration is generally accepted as a driver of GDP/growth plus inflation in housing, food, etc., then what does the end of mass immigration (net deportation, in fact) mean?

Clear as mud.

Deregulation

Deregulation is clearly pro-growth. That said, history has shown deregulation to be unequivocally deflationary. That opposes inflationary impulses that the market seems to expect with the Trump administration.

Clear as mud.

Artificial Intelligence (AI)

AI's impact and true use cases are mostly left to the imagination at this point. No one knows the precise implications of AI. One can argue about efficiency gains for corporate profitability, potential job losses, etc. (all sound like deflationary impulses). All we can say for certain is the AI boom has led to massive capital expenditures (CapEx) by large corporations thus far.

Even AI itself is under attack from competition and deflationary impulses. The comedy of self-cannibalization could be a glimpse into what AI will mean at a high level. Nothing about that is inflationary.

ALIBABA'S CLOUD UNIT: ANNOUNCES PRICE CUTS OF UP TO 85% ON LARGE-LANGUAGE MODELS

US Interest Rates

Unacceptable inflation readings leading to inflationary impulses…that would have to overwhelm the deflationary impulses discussed above, right?

Continued massive government deficit spending?

Or was December’s move in rates just year-end liquidations and balance sheet constraints?

Not to beat a dead horse, but when one can’t examine the market and even define the narrative driving the price action, the picture becomes clear as mud.

Foreign Exchange (FX)

US Dollar FX could imply similar stories to US Fixed Income but has an added wrinkle. FX, by definition, is relative to another currency.

• Is the US particularly strong?

• Is every other currency that weak?

The result of both is a broadly stronger USD. But, the market outcomes of those two scenarios are very different.

Strongest Q4 for USD Since 2016

Quantitative Tightening (QT)

On December 27th 2024 Andreas Steno Larsen commented, “with SOFR spiking to 4.53% yesterday and the SOFR-Fed Funds spiking to approx 20bps, we may end up surpassing the quarter-turn stress in September/October. The NY Fed Desk has obviously added repo auctions to ensure that the situation remains under control, but it goes to show that we are only a few hundred billion from reaching more permanently critical liquidity levels in the US, as this is a window-dressing turn spike caused by inflows to the ON RRP.”

It is impossible to know the true “excess reserves” as they involve a human behavioral component at the balance sheet/risk management level. But given evidence like the aforementioned SOFR behavior, we are getting close to the end of the road for QT. We do not think it is a bold statement to say that funding rate spikes in conjunctions with USD FX spikes are standard indicators of tightening USD liquidity. Between the lack of draw down in the TGA, Powell speaking in an incoherent hawkish manner, plus QT ongoing, it is not a big leap to infer USD liquidity is getting tight. In this case, it is more like vodka than mud.

China

We have written extensively on the liquidity trap in China. They have added some support to their stock market. Thus far, they have done relatively little on the fiscal side, which, as Japan clearly showed in the past, is the only way to end the negative feedback cycle and move into a pro-cyclical growth reinforcing stance. Is 2025 more words and limited actions by China like 2024?

Clear as mud.

CHINA'S 10-YEAR GOVERNMENT BOND YIELD DROPS 3 BASIS POINTS TO 1.64%, HITTING A NEW HISTORICAL LOW.

A Silver Lining?

We believe that growth will hold up while inflation stays tame (if not drift to the target of the next year or more). In that scenario, real rates can easily come down to 1.5% (or lower), which enables another 100bps of cuts without too much imagination. As this comes to fruition, money will again flow from wealth preservation assets to wealth creation assets.

All one needs to know about that is the following:

*US MONEY-MARKET FUND ASSETS HIT RECORD $6.85T AS OF DEC. 31

Conclusion

There is incredible monetary policy uncertainty (US and foreign). Given a new administration, that is not surprising.

1. Will DOGE be effective?

2. How much deregulation gets done?

3. What will the administration’s position be on running continued large deficits?

4. Does the efficiency boom continue?

5. What will China do?

That said, given our view on the economic data, we are broadly constructive assets over the course of the year.

• We think front-end fixed income is a buy on any weakness.

• If history is any guide, the USD is about to peak cyclically, in line with our interest rate view.

• We think Bitcoin (assuming the Trump rhetoric is delivered) is a clean buy over the course of the year. We could envision some early-year weakness for technical reasons. But any dip is a buy to hold for much higher levels later this year.

Analysts suggest the Federal Reserve can’t stop Donald Trump from creating a US Bitcoin Reserve via an executive order using the Treasury’s Exchange Stabilization Fund. Polymarket is pricing approximately a 25% chance of an SBR being implemented relatively quickly. If this were to move to 100% (i.e., it happens with a reasonable time to implementation), then we believe Bitcoin’s price moves up to $150,000 and then swiftly to $250,000 in 2025 with little effort.

VC

A Strong 2024 Closing

2024 began with a wave of optimism. Unfortunately, that optimism was not reflected as well as we all hoped. Signs of life in the CryptoVC space came in February but otherwise stabilized through Q3. The fourth quarter, however, marked a decisive turnaround culminating in December’s impressive $3.08B raised across the highest number of fundraising rounds for the year. This sharp Q4 resurgence underscores renewed investor confidence, driven by larger deal volumes and a more favorable market outlook. The alignment between the number of rounds and total capital raised highlights the growing momentum in the crypto space as 2024 came to a close.

Crypto Venture’s Outlook for 2025

The crypto Venture capital predictions for 2025 are coming in hot. Top forecasts highlight a decisive shift toward user-facing applications, stablecoin adoption as a tool to lower business transaction costs, and significant advancements in infrastructure scalability. While venture capital has historically focused heavily on infrastructure and decentralized finance (DeFi), this trend is gradually shifting. Foundational technologies like zero-knowledge proofs (ZK) and modular blockchains still attract considerable investment, but the recognition of over-allocation to these sectors is driving a recalibration toward user-centric solutions. For example, VanEck’s predictions highlight stablecoins’ growing role in global commerce, with daily settlement volumes projected to reach $300 billion by the end of 2025.

Meanwhile, Coinbase reports that stablecoins settled an impressive $27.1 trillion in transactions through November 2024, underlining their utility in global capital flows and commerce.

Firms like Andreessen Horowitz (a16z) forecast advancements in AI-managed wallets and decentralized autonomous chatbots, further emphasizing the importance of usability and engagement in the crypto landscape. These trends underscore the industry’s maturation and its focus on solving real-world problems through innovation.

Crypto is now at a pivotal moment. Venture capital in the space is poised to shift focus, with trends pointing toward increased emphasis on user-facing applications, stablecoin adoption, and improved user experiences. Here are the key themes we will be watching in the coming year.

The first major area of focus is the rise of user-facing applications. While the crypto ecosystem has made significant strides in building robust protocols and infrastructure, user adoption remains a challenge. As we have noted in previous updates, complex interfaces and fragmented ecosystems have created barriers for new users. To bridge this gap, venture capital will likely prioritize projects that simplify onboarding processes and offer intuitive user interfaces. Applications with clear value propositions, catering to both retail and institutional audiences, will take center stage. Examples include wallets with seamless fiat-to-crypto transitions, decentralized finance (DeFi) platforms featuring intuitive dashboards, and NFT marketplaces integrating social and gaming features. These innovations will be instrumental in driving mass adoption.

Another pressing topic for 2025 is the role of stablecoins in reducing transaction costs. Many businesses, especially in e-commerce and cross-border payments, grapple with high fees imposed by traditional financial systems. Stablecoins provide a compelling alternative, offering lower costs, faster settlements, and greater transparency. Businesses are expected to increasingly adopt stablecoins for operational efficiency and to mitigate currency volatility. Such a trend may attract significant venture investment into solutions like payment gateways and treasury management tools, further integrating stablecoins into the global financial landscape. The Coinbase report also highlights how stablecoins are enabling compliance-friendly cross-border payments, which are steadily becoming important for businesses operating internationally.

In parallel, key performance indicators (KPIs) will shift. The crypto industry’s focus will transition from speculative token trading and Total Value Locked (TVL) to more adoption-driven metrics such as daily active users (DAUs), transaction volumes, and user retention. Projects that align their growth strategies with user-centric KPIs will gain a competitive edge. DAOs, gaming platforms, and cross-chain protocols that incorporate loyalty rewards and community incentives will demonstrate the power of these new benchmarks.

Cross-border business enablement represents another promising frontier. Crypto ventures have an unparalleled ability to address inefficiencies in areas like remittances, supply chain transparency, and international payroll. Regulatory clarity, anticipated in major jurisdictions by 2025, will enable compliant and scalable solutions. Startups focusing on regulatory-friendly stablecoin payment systems and identity verification tools can help businesses navigate multiple jurisdictions, unlocking new opportunities for global operations. Additionally, the adoption of decentralized identity systems streamlines compliance and Know Your Customer (KYC) processes, further enhancing cross-border efficiency.

Meanwhile, the importance of infrastructure upgrades for scalability and security cannot be overstated. Despite ongoing advancements, issues such as network congestion and security vulnerabilities continue to hinder mainstream adoption. To address these challenges, investments will continue to flow into Layer-2 solutions, zero-knowledge proofs, and modular blockchain architectures. These innovations will enhance throughput, ensuring that applications can scale seamlessly while maintaining decentralization and security. As infrastructure strengthens, users will enjoy frictionless experiences, paving the way for broader adoption. Moreover, the tokenization of real-world assets (RWAs) is poised to transform financial markets, with projections indicating growth to $2-30 trillion in the next five years, presenting another lucrative opportunity for venture investment.

Alongside technical improvements, cultural and behavioral shifts will play a pivotal role in shaping the industry. Cryptocurrency markets' speculative nature will gradually give way to applications that deliver tangible everyday value. Education will be critical in this transition. By highlighting crypto's practical benefits—such as financial inclusion, cost savings, and global accessibility—the industry can foster greater trust and engagement among users.

2025 holds immense promise for the crypto industry. Focusing on user-facing applications, stablecoin adoption, and infrastructure development underscores the sector’s commitment to solving real-world problems. Crypto ventures have a unique opportunity to onboard the next billion users by prioritizing simplicity, accessibility, and utility. For venture capitalists, the coming year represents a chance to back builders who deliver scalable, secure, and impactful solutions—reshaping the narrative for crypto’s mainstream breakthrough.

Bitcoin DeFi

The Evolving Bitcoin DeFi Ecosystem

Ordinals, Runes, and BRC20 continue to drive growth in the Bitcoin ecosystem, totaling $2.6B in market value. Fractal Bitcoin (Asymmetric PortCo), has processed over 1 billion transactions and now secures 60% of Bitcoin’s hashrate, establishing itself as a core scaling platform for Bitcoin assets.

Bitcoin L2s are growing rapidly in TVL, with Asymmetric’s BitLayer, BoB, and Mezo leading the charge. BitLayer and BoB have processed millions of transactions, and several Token Generation Events (TGEs) in Q1 2025 are expected to boost this ecosystem further.

Babylon Labs remains a leader in Bitcoin staking with over 58,000 BTC staked (representing 0.3% of all Bitcoin). Its partnership with SatLayer (Asymmetric PortCo) facilitates restaking across multiple blockchains, with BTCfi seeing adoption in protocols like Pendle and Morpho, generating yield and liquidity for users.

Bitcoin-native dApps like Liquidium (Asymmetric PortCo), which leverages Ordinals and Runes as collateral for lending, are gaining traction. Liquidium has seen sustained volumes, with fungible tokens outpacing NFTs in loan activity for the second consecutive month.

December highlighted Bitcoin’s ongoing evolution towards becoming feature-equivalent to other blockchains like Ethereum.

Metaprotocols (Ordinals, Runes, BRC-20s)

Ordinals (Bitcoin NFTs), Runes, and BRC20 (both Bitcoin Token standards) are currently the most widely adopted metaprotocols in the Bitcoin ecosystem. Collectively, they represent a total market value of $2.6B. This has led teams such as Fractal Bitcoin (Asymmetric PortCo) to build native scaling solutions enabling additional expressivity and scalability of Bitcoin and its growing assets.

Since the mainnet launch three months ago, the platform has rapidly emerged as one of the leading forces within the Bitcoin ecosystem. Achieving impressive milestones, Fractal has solidified its position as a key player in Bitcoin’s expanding landscape:

• 60% of Bitcoin's hashrate is now merged-mining Fractal, underscoring its critical role in securing the network.

• Fractal has processed over 1 billion transactions, a testament to its scalability and robustness.

• The platform has amassed 186 million unique addresses, indicating strong adoption and interest from the Bitcoin community.

As the ecosystem continues to grow, an increasing number of projects are building on or integrating with Fractal, positioning it as a foundational layer for the future of Bitcoin. Among the most prominent assets on Fractal are: CAT20, BRC20, and Runes.

With its increasing adoption and expanding ecosystem, Fractal Bitcoin continues to be a powerful force driving innovation on the Bitcoin blockchain. By providing a seamless platform for developers and users alike, Fractal is unlocking new possibilities for tokenization, decentralized finance, while maintaining the security and immutability of the base layer.

Source: BTCEcosystem

Bitcoin L2s

Bitcoin L2s are showing strong growth in TVL, demonstrating the demand for DeFi on L2s as liquidity hubs. Asymmetric’s portcos continue to lead in TVL. Both BitLayer ($520M) and BoB ($256M) have both had their mainnet launches and while still on testnet, Mezo ($285M) is also a dominant player in TVL within the L2 category.

Source: BTCEcosystem

Transaction volumes on L2s have surged in 2024. Notably, Bitlayer (Asymmetric PortCo) has processed 4.6 million transactions, while BoB (Asymmetric PortCo), has seen 2.6 million transactions. This growth is driven by the expanding DeFi ecosystem on these networks. As more apps launch on Bitcoin L2s, these platforms are becoming vital to Bitcoin’s scalability. The rise in transaction volumes on Bitlayer and BOB highlights their critical role in the broader Bitcoin L2 ecosystem.

Source: BTCEcosystem

As we move into Q1 2025, the L2 ecosystem is poised for several high-profile Token Generation Events (TGEs) expected to bring increased awareness and interest to these solutions. These TGEs are anticipated to draw attention to the rapidly expanding Bitcoin L2 space, showcasing their innovation.

Bitcoin Staking

Babylon Labs continues to be a leader in Bitcoin staking, with over 58,000 BTC staked, representing $5.4B in Total Value Locked (TVL). The new inflows are a result of the opening of cap-3, which, unlike prior caps, is a time-based cap rather than a Bitcoin-based cap.

Asymmetric is an investor in SatLayer, Babylon’s exclusive restaking partner, enabling users to use their Bitcoin LSTs (currently staked within Babylon) to secure critical pieces of infrastructure such as app chains, oracles, and bridges. SatLayer has $31M in LSTs restaked across three blockchains: Ethereum, BNB Smart Chain, and BitLayer (Asymmetric PortCo). More recently, they announced that support for the Sui Network is coming soon, which will enable BTCfi on the chain (link).

Source: DefiLlama

Additionally, BTCfi has been adopted by protocols such as Pendle, which is tokenizing the principal token, the LST, and the yield token, which can then be sold to market participants. Users are trading future token yield directly for immediate cash flow. Of the $4.8B in staked assets within Pendle, $585M is related to BTCfi LSTs, or 12.1%. Users can generate up to 10.5% in fixed yield on their deposits (1.1% from swap fees and interest, with the remainder in token incentives).

Another DeFi protocol that has adopted BTCfi is Morpho, a borrow-lend marketplace that optimizes yields for both lenders and borrowers through a peer-to-peer matching mechanism. While not directly adopting LSTs, Morpho enables the staking of Bitcoin wrappers, which constitute $138M of the $4.9B in deposits, or 2.8%. Users can generate up to 7.1% in yield on their deposits (1.2% from borrow fees, with the remainder in token incentives).

Yield-bearing opportunities for Bitcoin are also starting to emerge on Stacks, a Bitcoin L2, through the recent launch of sBTC (Stacks native Bitcoin wrapper), with borrow-lend platforms such as Zest offering up to 6.1% yield, primarily provided in token incentives to help bootstrap activity.

dApps

The L1 ecosystem continues to evolve with the growing prominence of Ordinals and Runes, catalyzing the development of innovative dApps directly on the Bitcoin blockchain. Asymmetric is an investor in Liquidium (lending/borrowing dApp) and SatFlow (marketplace/DEX).

Although we have not seen the peak volumes of March 2024, when Ordinals assets reached record trading volumes and higher values, growth in this category remains robust. Weekly volumes for both Bitcoin NFTs and Bitcoin tokens have sustained momentum into December, with fungibles leading the way in loan volume for the second month in a row. This emerging sector presents substantial opportunities for teams with strong first-mover advantages and effective distribution strategies, positioning them for continued innovation and expansion in Bitcoin-native DeFi

Source: Dune

Law & Regulations

The IRS Crypto Rule: What You Need to Know About the Delay and Its Impact

The IRS’s crypto reporting rule and the introduction of Form 1099-DA stirred significant debate. Designed to increase transparency and compliance, the rule quickly became controversial due to its broad scope, particularly its focus on DeFi and unhosted wallets. Now delayed until 2026, the rule raises questions about the balance between regulation and innovation. Let’s breakdown what the rule aimed to achieve, why it was delayed, and how its potential overreach could have impacted the crypto ecosystem.

What Is the Rule?

Under the proposed regulation, anyone classified as a “broker” would need to report crypto transactions to the IRS and users via Form 1099-DA. This form captures essential details like:

• When the asset was acquired (acquisition date).

• How much it cost (cost basis).

• When it was sold or swapped (disposition date).

• How much was earned (proceeds).

While this aligns with how stockbrokers report trades, applying the same framework to the crypto space—particularly DeFi—created major challenges. For example, if you use a DeFi lending platform like Aave or Compound, there’s no central entity managing transactions. The platform operates entirely through smart contracts, which don’t know your name, let alone how much ETH you’ve deposited. Asking a DeFi protocol to file a tax form for you would be like asking a vending machine to issue you a receipt and send a copy to the IRS.

The rule also sought to classify wallet providers as brokers. So, if you used MetaMask to swap ETH for DAI on Uniswap, the IRS might expect MetaMask to report your trade. But MetaMask doesn’t have access to your personal information; it’s just a tool to interact with the blockchain. This would force wallet providers to collect data they’ve intentionally avoided, compromising user privacy and trust.

DeFi and the Practical Realities

The broad definition of “broker” posed a serious problem for DeFi platforms, as well as self-custody wallets. Let’s say you transferred Bitcoin from Coinbase to your Ledger hardware wallet. This kind of self-transfer isn’t a taxable event—it’s just you moving your assets. But under the proposed rule, Coinbase might need to track and report it as a transaction. For Ledger, compliance would be impossible without compromising its core principle: putting control entirely in the hands of the user.

Now imagine using Uniswap to swap tokens. You’re not signing up for an account or providing any personal information. You connect your wallet, make the trade, and the blockchain records the transaction. But the IRS’s rule could have required Uniswap—or worse, your wallet provider—to report details of your trade. It’s not just impractical; it fundamentally misunderstands how DeFi operates.

This overreach didn’t stop at wallets or protocols. Concerns were raised that even smart contract developers—people who write code for decentralized platforms—might fall under the definition of a broker. That’s like holding a car manufacturer responsible for traffic violations committed by drivers.

Why the Rule Was Delayed

Facing significant pushback from the crypto industry, lawmakers, and even some regulators, the IRS delayed implementation until 2026. The ambiguity around who qualifies as a broker was a key issue. While centralized exchanges like Coinbase might reasonably fit the bill, the inclusion of DeFi protocols, wallet providers, and developers created logistical and ethical headaches.

The delay also acknowledges the impracticality of enforcement. DeFi platforms don’t have the tools—or the centralized authority—needed to collect and report user data. Instead of fostering compliance, the rule risked driving innovation offshore, as platforms and developers sought to escape the burden of overly broad regulations.

What the Delay Means

For now, DeFi platforms and wallet providers can breathe a sigh of relief. But the delay doesn’t mean the rule is gone—it’s just postponed. Here’s what this means for different players:

• For Developers and Platforms: They have more time to advocate for clearer rules that don’t lump decentralized protocols into the same category as centralized exchanges. This could lead to more balanced regulations that encourage innovation rather than stifle it.

• For Users: You’re still responsible for tracking your own transactions, especially if you’re using DeFi. Tools like crypto tax software remain essential, as Form 1099-DA won’t cover most decentralized activity, even when it’s eventually implemented.

• For Regulators: The delay provides an opportunity to refine the rule’s scope. A narrower definition of “broker” could ensure that reporting requirements apply only to centralized entities that actually have access to user data.

Final Thoughts

The IRS crypto rule isn’t just about improving tax compliance—it is a sweeping measure that risked undermining the core principles of DeFi and self-custody. The delay is a chance to get it right.

Team Updates 

• Watch Joe on Fox Business: “Bitcoin is a ‘digital representation’ of gold: Joe McCann”

• Joe was interviewed by Jenn Sanasie from Coindesk MarketsDaily - “Why Wall Street is Missing the Cultural Wave”

• Catch Joe on Money Untold in “Don't Let This Happen To You During This January Bitcoin Dip... Joe McCann Reveals Insider INF”

• Joe was featured on Yahoo! Finance again “Bitcoin prices could re-ignite in 2025 from DeFi uses, Trump admin”

All Market Updates

• December 2024

• November 2024

• October 2024

• September 2024

• August 2024

• July 2024

• June 2024

• May 2024

• April 2024

• March 2024

• February 2024

• January 2024

• December 2023

• November 2023

• October 2023

• May 2023

• April 2023

• March 2023

• February 2023

• January 2023

• December 2022

• October 2022

• September 2022

• August 2022

Please let us know if you have any questions or comments. 

As always, thank you for your support.

– Asymmetric

After a record-breaking performance for Asymmetric in November, it is incredibly difficult to narrow down the list of topics to cover in this month’s Asymmetric Market Update™️. Sure, everyone knows what happened with the election, the new Treasury Secretary, Gensler’s resignation, the appointment of David Sacks as the “Crypto and AI Czar, the announcement of the new SEC Chairman, Paul Atkins, and Microstrategy’s massive move.

Avid readers of the Asymmetric Market Update™️ will recall that in last month’s writeup, we asserted that if Trump wins the election, Bitcoin is going straight to $100,000 before yead end.

It did exactly that.

Instead of rehashing all of November’s news, I’m instead going to talk about stocks.

No, not in how you think, but in terms of how stocks “work” for investors.

Barring obvious nuance, there are three major things that stocks do:

1. Issuance (via IPO, direct listing, or a secondary offering)

2. Buybacks (the company buys back stock in the open market, thus reducing the size of the public float/supply)

3. Dividends (pay shareholders some percentage of the company’s profit)

Now, let’s juxtapose that with the way things work for cryptocurrencies:

1. Issuance (via ICO, initial coin offering, or TGE, token generation event)

2. Buybacks (buy back tokens on the open market and burn them, usually conducted by a DAO, but anyone can choose to burn their tokens)

3. Dividends (pay token holders some percentage of the protocol’s revenue)

Items #1 and #2 have been around for quite some time, but item #3 has mostly been nonexistent.

And rightfully so. Founders of web3 protocols and services have lacked regulatory clarity from the SEC for years and have wisely decided to not share protocol revenue as to minimize the risk of receiving an enforcement action or a Wells Notice from the SEC as their token could appear to be a security.

However, since Trump won the election and the popular vote, and Republicans now control the House and the Senate (i.e., a Red Sweep), we are seeing a number of proposals drafted for various protocols to turn on the “fee switch”, or simply distribute a portion of the protocol revenue to token holders/stakers.

Take Wintermute’s proposal for the Ethena protocol.

Or the proposal for Asymmetric portfolio company, Jito.

Both of these proposals suggest paying token holders (stakers) a portion of the protocol revenues, completing the holy trinity of how stocks work for investors, but for token holders.

To be clear, these proposals haven’t been implemented yet but the fact they are even being proposed and well received is a stark change in action and acceptance.

For the longest time, skeptics of governance tokens have questioned the fundamental value of said tokens if there was no way to share in the revenue generated by the protocol. I assert that this is all going to change under the new regulatory regime, spearheaded by President-elect Trump.

The era of speculation being the sole use case of cryptocurrencies is well behind us. I envisage a scenario where loads of governance tokens will start to catch major bids as more of these protocols begin to pay “dividends.”

Which leads me back to Trump.

All eyes are on his administration ushering in a new era for crypto in the United States, which clearly will impact policy globally. If Trump makes good on his campaign promises (and it appears he will), crypto will have the steel boot removed from its throat and can finally compete as an alternative financial system.

Burn the boats, we’re never going back.

Macro

“I keep getting older. Data stays the same trajectory.”

Let’s pick up where we left off in our November commentary:

“Certain historical events have deemed “macro” analysis locally unimportant: wars, natural disasters, elections, etc. Luckily, we have (or have recently had) all of the above. That said, the predominant driver of the next phase of markets will be the US Election. The predominant traditional macro data that will drive Fed policy for the next two (at least) FOMC meetings will be US Employment. We will focus on those two things.

Given the economic data evolution, our view is essentially unchanged over the previous month. The election results were the main driver of markets and dwarfed any other micro or macro data with respect to market movements. We are now past the election. There is a window here where the data re-asserts itself as the primary driver of US markets before Trump takes over and implements (or does not) his various policies. We are in wait-and-see mode for the political, fiscal, regulatory, tax, etc., outcomes of the red sweep.

Given all of that, let’s dig into the data that matters in the window to pre-inauguration and policy change:

In November, we stated:

“US Employment - When the Macro Becomes the Micro”

The FOMC has been very clear that real rates are restrictive. They have repeated that they have begun normalizing real rates and will continue to do so. They have also stated that they could accelerate this process should they see weakness in the labor market. Though the labor market is in good shape, broadly speaking, it is certainly decelerating at best. Pundits calling for the FOMC to pause rate cuts (ceterus paribus with the election) are completely missing the point. The fed will (and should) continue normalizing rates to be less restrictive. The labor data indicates this is the correct path for the FOMC.”

We maintain our view that the Fed will cut rates 25bps on the 18th of December FOMC meeting.

This week Powell said: FED IS TRYING TO BE IN A MIDDLE PLACE WHERE POLICY IS LESS RESTRICTIVE SO INFLATION CAN FALL, BUT NOT DAMAGE LABOR MARKET.

Those words are pretty clear to us. As we stated, the labor market will prove to be the driver of the FOMC in the coming months. Powell is unambiguously stating exactly that.

Employment

October payrolls revised from 233K to 184K, the biggest negative revision since May 2023.

The Unemployment Rate (UR) released in December was .004, away from rounding to 4.3%. That reverses the dip in the UR completely and puts the FOMC on alert for a possible uptick in unemployment. As we have discussed previously, historically, there is a particular non-linearity about the UR. Everything is fine, then it really isn’t.

The Sahm Rule is back into play now that the UR rate (after “un-triggering” the Sahm rule on the UR dipping back below 4.2 pre-election). The market prognosticators oscillate between:

1. The economy/inflation is too hot.

2. Employment is cooling down, so we risk recession.

It seems pretty clear that we are in the middleof transitioning from 1) to 2) above. Nothing illustrates this more simply than the city surprise index of US economic data:

The aforementioned all suggest plenty of reasons for the Fed to continue normalizing real rates and removing restrictions. Given the non-linearity of unemployment, risk management favors cutting sooner rather than later, with the data appearing to have peaked and rolled a bit.

Inflation

Inflation - the other half of the Federal Reserve’s mandate. We view this as less relevant CURRENTLY to monetary policy. Inflation has been pulling back to target (albeit on a choppy downtrend), and real rates are still historically high. So, though inflation is currently playing second fiddle to employment, we always have one eye on it for any material change that would affect monetary policy.

Interesting (to us) Inflation Data

Both prices paid (blue) and supplier deliveries (orange) components in the ISM Manufacturing PMI ticked lower in November, but this does not indicate any major inflation risk.

Not unrelated to the above chart, soft commodities (chart below) indicate a directionally shifted softening of inflation ahead.

In our November commentary, we stated that a Trump Red Sweep would mean oil structurally over time. So far, that has been the case, and we believe it will continue to be, putting further downward pressure on energy and headline inflation.

Fear Porn

The “CMBS Crisis” really came front and center for analysts in March of 2023. At the time, that, coupled with the fear of a shortage of bank reserves, caused bank equities to tank and the market to seize up. The Fed came in with the par lending facility to plug this accounting capital hole. As time goes on, it becomes relevant again when these loans are due for re-financing. That time is now and peaks in the next couple of years. The banks either need to roll the debt (extend and pretend), or they reposses and sell the properties for recovery value, taking losses for whatever they sell it for that is less than their current CMBS marks + any other reserves they have taken. It is well telegraphed, so we do not believe it becomes anything like a systemic issue, but it is something to keep an eye on again.

The Baltic Dry Index is at a new 8-year low for this time of the year, a dramatic drop in the last few weeks.

Given the state of European and Chinese growth, the above graph should not come as a surprise. That graph is here to indicate that globally, we do have some potential growth concerns. The US economy has been the main driver of global growth for some time now. It is time for the EU and China to do some real stimulus, or they are going to have an economic disaster on their hands.

Given the above, it is not surprising that a large portion of the G20 is already meaningfully into rate-cutting cycles. This will continue.

Liquidity - US and Global

The market is hyper-focused on US interest rate policy. Thus far, there is very little talk about excess reserves and tapering further or ending QT. As you can see below, RRP has steadily drained down to approximately $130bln from $2.5trln+. That is an incredible change when one thinks about it. The trillion-dollar question is, “What is the long-run equilibrium rate for RRP?”. We suspect, just like employment, the function around excess reserves in the system is non-linear. Everything is fine, then it’s really not. Similar to rates, risk management would suggest the Fed tapers QT again sooner rather than later to lengthen the runway of QT but also shorten the tail of running off the runway and crash landing. We are keenly listening for any commentary on QT/excess reserves from Federal Reserve officials.

We have harped on about the importance of global liquidity for asset prices for months. Lately, global liquidity has actually been reduced (see below), while at the same time, quite a few global central banks have cut rates.

As those two directionally opposed outcomes have occurred, US stocks, Bitcoin, etc., are at all-time highs. What do we take from this? Nothing. We clearly stated that the Trump effect would trump (pun intended) all of the immediate data when it came to asset prices. Clearly, this has been the case. So now we wait and watch.

Conclusion

We are in wait-and-see mode for the political, fiscal, regulatory, tax, etc., outcomes of the red sweep. We know that US interest rates are restrictive, and the FOMC is very aware of this. What we do know is that employment seems past its peak (though still in quite strong shape). We know that inflation has continued to pull back to target, albeit on a bumpy path thus far. Given this, it is clear the FOMC is going to cut 25bps at the FOMC meeting on December 18th. January is currently priced for another 6bps of cuts (effectively, the FOMC is expected to not cut in January with a higher probability they cut 25bps again by the end of q1). We do not have a strong view on whether the Fed cuts in January or later in the quarter, but we do believe they continue to normalize rates with a sensible target of 3.5% (ceterus paribus, given we do not know how Trump policy evolves).

Also, from our November monthly:

“Trump Wins - Red Sweep of Congress

• Bitcoin going much, much higher is the most obvious trade for this. Not only will we have a full set of crypto-friendly regulations within 90 days of Trump taking office, but the strategic BTC reserve at the US Treasury seems like a high-probability event.”

Our prediction of Bitcoin behavior on a red sweep played out as expected. Bitcoin has now traded over $100k for three days in a row. Bitcoin is acclimating to these levels before its next leg up. Assets get volatile (up and down) when they go into price discovery mode, which is where Bitcoin is now. So we are aware of incoming volatility, but we believe that is within the larger uptrend that will continue into Q1.

We are constructive markets (crypto specifically) from now into Q1. You have the holy trinity:

1. There is a favorable growth backdrop in the US, such that recession fears are not on people’s minds at this time, keeping the risk-taking appetite strong.

2. The Fed consistently and publicly states that it wants to reduce the restrictive levels of interest rates (real rates).

3. The regulatory and policy seachange is coming to the US concerning crypto.

Sometimes (rarely), predicting the price movements just isn’t that hard. Analysis paralysis could prove very expensive in a seminal time like now. Follow the flows.

VC

Rearview Mirror

Q4 is shaping up to be nearly everything Asymmetric anticipated. After a year of what felt at times like aimless ambiguity, Crypto VC is closing on very bullish prospects for next year. 2024 was defined as a year of recovery and recalibration for the space. Some predictions came to fruition, but others lagged, and the sector faced notable challenges – all setting the stage for what is likely to be a transformative 2025.

Predictions Realized

Several projections for 2024 materialized, notably the resurgence of VC investments in the crypto sector. After a downturn in 2023, Q1 2024 blasted off, providing a significant uptick, with investments reaching $2.4 billion—a 40.3% increase from the previous quarter. This surge was driven by factors such as legal victories for Ripple and Grayscale, as well as the approval of Bitcoin ETFs in the U.S.

Another anticipated development was the growing intersection of AI and crypto. Startups at this nexus attracted substantial funding, exemplified by Together AI's $106 million raise. This trend underscored the industry's shift towards integrating AI capabilities within blockchain applications.

Unmet Expectations

Despite the overall positive trajectory, certain expectations fell short. The anticipated widespread adoption of DeFi platforms did not fully materialize, with user engagement and transaction volumes remaining below projections. Additionally, while institutional interest in crypto assets grew, the influx of traditional financial institutions into the space was more gradual than many had hoped.

Challenges 

The Crypto VC landscape undoubtedly encountered obstacles throughout 2024. Regulatory uncertainties, particularly in the U.S., created a cautious investment environment. The SEC’s stringent stance led to delays in project approvals and heightened scrutiny of crypto ventures. Moreover, the collapse of major crypto entities in 2022 left a lingering skepticism among retail investors, impacting market dynamics.

Getting Too Hot 

The convergence of AI and crypto, while promising, exhibited signs of overheating. The rapid influx of capital into crypto-AI startups raised concerns about the sustainability and practical applications of such ventures. Industry experts cautioned that many projects might capitalize on the hype without delivering tangible value, potentially leading to market corrections. Despite the bearishness, the general sentiment in the industry suggests that while some projects failed to meet expectations, others continued to attract substantial funding, indicating a complex and still-evolving investment landscape.

Infrastructure Deals Dominated

In 2024, infrastructure deals became a focal point in the Crypto VC arena. Venture capitalists directed significant funds towards projects to enhance blockchain infrastructure, recognizing the necessity for robust and scalable systems to support the growing ecosystem. This trend is expected to persist into 2025, with VCs continuing to prioritize investments in infrastructure to facilitate the development of more efficient and secure blockchain networks.

Bitcoin Halving Event and Market Dynamics

The Bitcoin halving event in April 2024, which reduced the mining reward from 6.25 BTC to 3.125 BTC, has historically influenced market dynamics by decreasing the rate of new Bitcoin supply, potentially leading to price appreciation. This supply shock often attracts increased investor interest, impacting venture capital flows into the crypto sector. The 2024 halving is expected to continue this trend, contributing to more bullish market sentiment and encouraging further investments in blockchain and cryptocurrency ventures.

Emerging Fields: Decentralized Science (DeSci) and Beyond

Beyond traditional sectors, 2024 saw the rise of Decentralized Science (DeSci), which leverages blockchain to democratize scientific research funding and data sharing. This movement aims to reduce reliance on traditional funding bodies and promote open-access research. Additionally, the concept of Software-Defined Cryptography emerged, emphasizing cryptographic agility to swiftly adapt to new algorithms and standards without overhauling existing infrastructure.

Bullish Sentiment For The Incoming Trump Administration

The election of Donald Trump has injected renewed optimism into the U.S. crypto VC sector. Trump's campaign promises to make America the "crypto capital of the planet," and his commitment to fostering a favorable regulatory environment have been well-received by investors. This has been reflected in the Bitcoin price surge, which, unless you’re living under a rock, has reached record highs following his election victory.

Industry leaders anticipate that the new administration will implement legislative and regulatory changes that favor the crypto sector, including replacing outgoing SEC Chairman Gary Gensler. This anticipated shift in regulatory approach is expected to create a more conducive environment for crypto ventures, encouraging further investments and innovation in the space.

Outlook for 2025

Looking ahead, 2025 is poised to be a transformative year for Crypto VC. The maturation of blockchain technologies and clearer regulatory frameworks are expected to foster a more stable investment climate. The anticipated Bitcoin halving event in April 2024 will likely influence market dynamics, potentially driving up prices and attracting further investment.

Additionally, the continued integration of AI into blockchain applications is expected to yield innovative solutions, provided that investments are directed toward projects with demonstrable utility. The focus will likely, and should, shift towards sustainable growth, with VCs prioritizing ventures that offer real-world applications and long-term viability.

As we move into 2025, we anticipate the space emphasizing strategic investments, regulatory clarity, and the responsible integration of emerging technologies to drive the next wave of innovation in the crypto space. 

Bitcoin DeFi

The Evolving Bitcoin DeFi Ecosystem

Bitcoin DeFi continues its upward trajectory as foundational infrastructure and innovative use cases mature.

Metaprotocols like Ordinals (NFTs) and Runes (tokens) are driving increased activity on Bitcoin’s base layer. Arch Network (Asymmetric PortCo), which recently launched on testnet, is enhancing expressivity for these L1 assets, unlocking new possibilities for Bitcoin-native applications.

L2s are showing accelerated growth in total value locked (TVL), fueled by a surge of dApps enabling users to earn yield on their Bitcoin. For example, BOB (Asymmetric PortCo) has seen TVL grow over 200% in the past 30 days. BOB also published its Vision Paper, outlining how its L2 could serve as the backbone for Bitcoin DeFi in EVM-compatible environments.

Staking is evolving as Bitcoin’s liquidity and security extend beyond PoS chains. Babylon’s restaking integration with SatLayer (Asymmetric PortCo) exemplifies this trend, supporting apps and infrastructure across the ecosystem. Additional details can be found here: PR Newswire

For the first time, lending dApp Liquidium (Asymmetric PortCo) has seen collateralized lending on Runes exceed activity on Ordinals, signaling a shift in dynamics. Builders are increasingly delivering trust-minimized, decentralized applications, supported by metaprotocols like Arch Network.

November highlighted Bitcoin’s continuing transition from a static asset to a dynamic force in DeFi.

Metaprotocols (Ordinals, Runes, BRC-20s)

Bitcoin metaprotocols are redefining the boundaries of what's possible with the world's most secure blockchain. By building on Bitcoin's immutable foundation, these innovative protocols unlock new use cases like tokenization, decentralized finance, and smart contracts, all without altering Bitcoin’s base layer (ie. Almost like augmented reality glasses, you see the metaprotocol as a translucent overlay on Bitcoin blocks. It processes additional instructions ex: smart contracts, tokens, or data, without modifying Bitcoin’s core).

Ordinals enabled for NFTs on Bitcoin, and Runes enabled token issuance. Both have been able to capture assets/tokens with a combined market cap over $2Bn.

Building on this foundation, Arch Network (Asymmetric PortCo) emerges as a key metaprotocol designed to enhance Bitcoin’s programmability while maintaining seamless interoperability with assets like Ordinals and Runes. Arch Network acts as a layered framework, enabling the development of decentralized applications (dApps) and DeFi platforms on Bitcoin without overburdening its base layer.

Key aspects of Arch Network include:

• Interoperability: Supports Ordinals, Runes, and other Bitcoin-native assets, enabling developers to build applications that leverage these innovations.

• Efficiency: Provides high-throughput, off-chain processing while settling securely on Bitcoin’s base layer.

• Composability: Bridges Bitcoin-native assets with broader dApp ecosystems, unlocking new opportunities for liquidity and functionality.

By integrating with Ordinals and Runes, Arch Network amplifies Bitcoin’s potential as a platform for decentralized finance.

Bitcoin L2s

Bitcoin Layer 2 (L2) projects have experienced explosive growth, increasing over sevenfold from 10 projects in 2021 to 75 in 2024, according to Galaxy’s Bitcoin L2 Research (Nov 20, 2024). These L2 solutions aim to expand Bitcoin’s utility by enabling advanced applications and unlocking liquidity for DeFi, payments, and fungible token ecosystems.

Venture capital investment in Bitcoin L2s has surged, with $447 million allocated since 2018, and over 36% of that funding directed in 2024 alone. This influx of capital is fueling innovation, positioning Bitcoin L2s to attract significant liquidity from both native BTC holders and existing wrapped BTC markets.

Galaxy estimates that by 2030, $47 billion worth of BTC could be bridged into Bitcoin L2s, representing 2.3% of Bitcoin’s circulating supply—up from just 0.8% as of November 2024.

This growth aligns with our view that Bitcoin L2s are poised to unlock substantial opportunities in decentralized finance, and can be evidenced below in the recent TVL growth of these chains (BOB and Bitlayer are Asymmetric Portcos).

We are particularly excited about Mezo (Asymmetric PortCo) which has recently launched their testnet and is gearing up for their mainnet launch in the first quarter of 2025. Mezo is taking a Bitcoin-first approach with initial dApps to build a vibrant DeFi ecosystem and while not included within the graphic below, they have been able to amass a TVL over $300M, which would rank it among the top of all Bitcoin L2s.

Source: BitcoinEcoTK

Bitcoin Staking

Babylon Labs has emerged as a leader in this space, with nearly 24,000 BTC staked, representing $2.2 billion in Total Value Locked (TVL). However, Babylon is just one player in the broader landscape of Bitcoin staking only focused on securing PoS blockchains. Their recent partnership with SatLayer (Asymmetric PortCo), expands the scope through restaking to secure other pieces of critical infrastructure such as app chains, oracles and bridges. This is done with the introduction of additional extension smart contracts that implement Bitcoin slashing.

While Babylon has chosen to launch with fixed caps for cap-1, and cap-2, their most recent cap-3 which is launching on Dec. 10, will not have a cap on the amount of Bitcoin able to be staked, we expect this value to grow substantially as we report on this in our next monthly newsletter.

Source: DefiLlama

Alternative protocols are enabling Bitcoin holders to earn rewards across various chains through strategies such as borrowing and lending, covered calls, and liquidity provision via staking vaults. These protocols offer competitive yields, expanding the ways Bitcoin holders can participate in decentralized finance. However, accessing these yields involves additional risks, as they rely on wrapped Bitcoin as the underlying asset on different chains. This introduces risks such as blockchain vulnerabilities, wrapped asset security, and smart contract reliability. The next visual provides a snapshot of the yields offered by these platforms, highlighting the current opportunities and associated risks.

Source: BitcoinEcoTK

dApps

Bitcoin’s Layer 1 ecosystem is experiencing a significant shift with the rise of Ordinals (Bitcoin NFTs) and Runes (Bitcoin fungible tokens), driving the creation of innovative decentralized applications (dApps) directly on the Bitcoin blockchain.

A key example of this new wave of Bitcoin-native dApps is Liquidium (Asymmetric PortCo). Unlike traditional DeFi platforms, Liquidium allows users to borrow and lend BTC using Runes and Ordinals as collateral through Discrete Log Contracts (DLCs). This innovative approach enables more flexible, trustless lending and borrowing, with BTC as the primary asset being leveraged against the collateral in the form of Ordinals and Runes. By utilizing DLCs, Liquidium allows users to engage in decentralized, Bitcoin-backed financial agreements with enhanced security and privacy, extending Bitcoin's utility in the DeFi ecosystem.

Growth in this category is promising, with weekly volumes climbing after a slowdown over the summer toward this category, and for the first time ever, fungibles have shown dominance over NFTs in the volume of loans

Source: GeniiData

Law & Regulations

A Pivotal Moment for Crypto Innovation

The recent election cycle has sparked questions from crypto founders about what the outcomes mean for their projects. While speculation abounds, the reality is that this marks a pivotal moment for the industry—a chance to build on bipartisan progress and bring the transformative potential of crypto to the forefront. Over the coming months, you’ll hear plenty of noise about the legislative and regulatory landscape. While much of it will be premature, one thing is clear: the environment for innovation in the U.S. has never been more promising. With a government that appears poised to support technological progress, we see an opportunity to establish a framework that nurtures crypto innovation while ensuring consumer trust.

This could pave the way for realizing the potential of blockchain technology. From enabling digital ownership and empowering creators to providing low-cost, cross-border stablecoin transactions, decentralized social networks, and innovative business models for small enterprises, the possibilities are vast. Blockchain could also power physical infrastructure like energy grids and democratize fields like AI and gaming. The U.S. has the chance to lead this wave of transformation.

Regulatory Clarity and Opportunities for Builders

Regulatory clarity will play a crucial role in enabling this future. While the environment may become more accommodating, the principle that “where there is trust, there is regulation” still holds. Projects must continue to prioritize reducing centralized dependencies and increasing transparency to navigate regulatory scrutiny effectively.

We’re optimistic that 2024 could bring significant advancements, particularly with clearer guidelines for perpetual trading and token launches in the U.S. The Commodity Futures Trading Commission (CFTC) could take a more progressive stance, potentially opening pathways for perpetuals under well-defined conditions that protect consumers. Similarly, the evolving approach to token launches might provide a lawful, structured framework for projects to distribute control and build communities within U.S. borders.

For those hesitant to integrate tokens into their ecosystems due to past uncertainties, this shift could offer the confidence needed to proceed. New structures, such as the Decentralized Unincorporated Nonprofit Association (DUNA), are being developed to help projects align with U.S. regulations, manage liability, and enable sustainable economic activity.

A New Chapter for U.S. Crypto Markets

This shift could also mean moving beyond the era of enforcement without clarity—a system that stifled legitimate projects while failing to curb bad actors. Clearer rules would empower regulators to shut down fraudulent schemes while fostering a fair environment where genuine innovators can thrive. Entrepreneurs should see this as both an opportunity and a call to action: develop projects that showcase how decentralization reduces risks and opens the door for adaptive regulatory approaches.

The future is particularly exciting for perpetual markets. With the right advocacy and frameworks, the CFTC may establish pathways that allow perpetuals to operate in the U.S., balancing innovation with consumer safeguards. Similarly, tokens launching directly in the U.S. could become the norm rather than the exception, provided projects align with principles-based guidance and demonstrate strong decentralization and compliance mechanisms.

The opportunity to build in the U.S. has never been greater. Builders should feel empowered to push boundaries responsibly, knowing that the emerging regulatory clarity is designed to support innovation while protecting consumers. We’re at the cusp of a new chapter for crypto, and the steps taken now will define its trajectory for years to come.

Team Updates 

• Catch Joe on the When Shift Happens podcast with Kevin Follonier.

• CoinMarketCap featured Joe in the article “Joe McCann Interview: Solana is the Actual Decentralized SuperComputer”.

• Joe spoke on two panels at the Propy’s Web3 and Property Rights Summit in Miami: “Real Life Applications Onchain Through Tokenized Complex Financial Instruments” and “VCs: Web3 Investment Trends”.

• Yahoo! Finance’s article “Bitcoin could hit $100K under Trump: Asymmetric CEO” highlighted Joe.

• Reuter’s article “Cryptoverse: ‘Elation’ as bitcoin basks in Trump glow” highlighted Joe.

• Joe was a guest on a Trends with Friends episode “Meme Coins, Solana's Rise, the Future of Crypto”.

• Watch Joe on Paul Barron Network’s Tech Path “Solana Hits All-Time High! w/ Joe McCann”.

• Jordan Smith with CNBC Crypto World interviewed Joe for “Trump picks former SEC Commissioner Paul Atkins to lead agency: CNBC Crypto World”.

All Market Updates

• November 2024

• October 2024

• September 2024

• August 2024

• July 2024

• June 2024

• May 2024

• April 2024

• March 2024

• February 2024

• January 2024

• December 2023

• November 2023

• October 2023

• May 2023

• April 2023

• March 2023

• February 2023

• January 2023

• December 2022

• October 2022

• September 2022

• August 2022

Please let us know if you have any questions or comments. 

As always, thank you for your support.

– Asymmetric

Have you had enough coverage about the election yet? Yeah, me, either. It is the most important topic globally, and for good reason. The next President of the United States will shape the future of global policy and financial markets. Although most of us are exhausted from the rhetoric and gyrations in the polls, on November 5th, 2024, Americans who have not already voted will vote for the next leader of the free world…but will election night actually showcase the winner?

There is a non-zero chance that we won’t know who the next President will be until days, weeks, or even months after election night concludes, as the Supreme Court may be called in to determine the election results. In fact, the number of lawsuits already filed is reaching nose-bleed heights.

Nonetheless, the question remains - how does one trade the election?

As I mentioned on myriad podcasts and interviews in October (see the Team Updates below), I largely discount polls to zero and look to markets, not just prediction/betting markets but capital markets, for signals.

Polls are incredibly biased and only a fraction of the actual populace. If someone is having dinner with their family and the phone rings, they may say something quickly to get off the phone, but most importantly, a response to a question lacks skin in the game.

The highest form of signal is when someone puts their money where their mouth is.

Now, there are myriad prediction/betting markets for the Election:

• PredictIt

• Intrade

• Polymarket

• Drift Bet

• Hedgehog

• Kalshi

• Betfair

• Betonline

The list goes on.

All of these prediction markets have Trump favored as the winner.

But these betting markets are the equivalent of a binary option contract: either the event happens and you win, or it doesn’t, and you lose.

Clearly, it's a bit tricky to hedge a binary outcome.

However, looking into other areas of the capital markets, they also suggest a Trump victory.

For example, let’s examine the yield curve.

The orange line represents the yield curve from a month ago, whereas the blue line represents the yield curve as of the close of the markets on November 1st, 2024.

You’ll notice a steepening of the yield curve and the precipitation of the selloff in government paper. This implies investors require a higher yield to fund the U.S. government's deficits, and according to several analysts, a Trump administration would likely run higher deficits than a Harris administration.

Moreover, Morgan Stanley noted near the end of October, “capital markets have broadly aligned with the prediction markets. As reflected in the Republican (MSZZREP) and Democratic (MSZZDEM) baskets we track, stocks exposed to Republican win outcomes have risen.”

Can all these market participants be wrong? Of course, but probabilistically, when multiple signals point to a Trump victory, I tend to favor those with skin in the game versus those without.

If we assume a Trump victory, what does that mean for crypto? We’ve been wargaming this outcome for months at Asymmetric, and although none of this is financial advice, this is how we position ourselves.

First, even though Bitcoin's dominance (BTC.D) has been at its highest level in years, we still see it as the leader of the majors (top 20 by market capitalization). BTC.D has cleared a key technical level (the 50% Fibonacci retracement) and is now testing the 38.2% retracement level—a move through these levels increases the probability of a full retrace to ~73% dominance.