jakiro
Author: Ignas | DeFi Research, compiled by: Shaw bitchain vision
I really like Ray Dalio’s “The Changeful World Order” model because it allows you to get out of the details and see the big picture.
Don’t be addicted to the daily trivial matters of cryptocurrency X, but focus on long-term trends of change.We should also view cryptocurrencies in this way.
This is not only about the rapid transformation of narratives, but also about how the order of the entire industry changes.
The cryptocurrency market is no longer the same as before, and it is no longer the same as in 2017 or 2021.
I think the following changes have occurred in the industry order.
Crypto Assets “Big Rotation”
The launch of spot exchange-traded funds (ETFs) is a huge shift.
Just this month, the U.S. Securities and Exchange Commission (SEC) approved the general listing standards for commodity exchange-traded products (ETPs).This means faster approval and more assets will enter the market.Grayscale has submitted an application through this new change.
The launch of Bitcoin ETF is the most successful issuance in history.Ethereum ETFs have started slowly, but now have billions of dollars in assets even in a weak market.
Buyers include pension funds, consultants and banks.Today, cryptocurrencies are in the same portfolio category as gold or Nasdaq.
The asset size managed by Bitcoin ETFs is US$150 billion, accounting for more than 6% of the supply.
Ethereum ETF accounts for 5.59% of the total supply.
All this happened only a little over a year.
ETFs are now the main buyers of Bitcoin and Ethereum.They transfer ownership basis from retail investors to institutions.You can see from my post below that giant whales are buying, while retail investors are selling.
More importantly, the old giant whale is selling assets to the new giant whale.
Ownership is rotating.Those who believe in the four-year cycle are selling.They expect the same plot to repeat itself.But things are changing.
Retail investors buying at lower prices are selling to ETFs and institutional investors.This transfer pushes the cost base higher.This also raises the lower limit of the future cycle, as new holders won’t sell after a small profit.
This is the “big rotation” of cryptocurrencies.Cryptocurrencies are moving from speculative retail investors to long-term allocators.
The general listing standard opens the next stage of this rotation.
In 2019, a similar stock rule tripled the issuance of ETFs.The same is expected for cryptocurrencies.New ETFs for numerous cryptocurrencies such as SOL, HYPE, XRP, DOGE are about to be launched to provide retail investors with the exit liquidity they need.
The key question remains: Can institutional purchasing power offset retail investors’ selling?
If the macroeconomic situation remains stable, I believe that those who sell now and look forward to the four-year cycle will buy it back at a higher price in the future.
The end of the era of market rallies
In the past, the cryptocurrency market had once risen overall.Bitcoin rose first, then Ethereum, and all other cryptocurrencies followed.The rise in small-cap currencies is because liquidity flows downward along the risk curve.
This time the situation is different because not all tokens are rising simultaneously.
There are millions of tokens now.New coins are launched every day on pump.fun, and the so-called “creators” shift their attention from old tokens to their own Meme coins.The supply of tokens surged, while retail investors remained unchanged.
Since there is almost no cost to issue new tokens, liquidity is spread out among too many assets.
Low circulation, high full dilution valuation (FDV) tokens were once popular and suitable for airdrops.Now retail investors have learned their lessons.What they want is tokens that can bring value returns, or at least have strong cultural influence (for example, UNI failed to rise despite strong trading volumes).
Ansem is right, we reach the pinnacle of pure speculation.The new trend is revenue because it is sustainable.Applications with high product market compatibility and reasonable fees will flourish.Other applications are not the case.
Two things are particularly prominent: users pay high fees for speculation, and the efficiency of blockchain infrastructure relative to traditional finance.The former has reached its peak, while the latter still has room for growth.
Murad adds another good point that I think Ansem overlooks.Tokens that are still popular are usually novel, quirky and misunderstood, but holders are all groups with firm beliefs.I’m the kind of person who likes novelty things (like my iPhone Air).
Cultural significance determines survival and failure.A clear mission, even if it may seem a bit unrealistic at first glance, can keep a community alive until it is widely accepted.
I would classify “Pudgy Penguins”, “Punk NFT” and “Memecoins” into this category.
However, not all shining new things will succeed.Runes, ERC404, etc. all made me realize how fast the freshness faded.Narratives can rise or die before reaching critical scale.
I think these views can explain the new order by combining them.Revenue screens out weak projects.Culture carries those misunderstood.
Both are important, but in different ways.The biggest winner will be the few tokens that combine the two.
Stablecoin order gives cryptocurrencies credibility
Initially, traders held USDT or USDC to buy bitcoin and altcoins.New inflows are bullish as they will translate into spot buying.At that time, 80% to 100% of stablecoin inflows were ultimately used to purchase cryptocurrencies.
Now things have changed.
Stablecoins enter the fields of lending, payments, income, treasury and airdrop mining.Some of these funds have never been exposed to buying spot bitcoin or Ethereum.However, it still boosts the entire ecosystem.Trading volume on L1 and L2 increased.DEX liquidity is enhanced.Revenues in lending markets such as Fluid and Aave have increased.The money market of the entire ecosystem is deeper.
A new development is the payment-first L1 protocol.
Tempo developed by Stripe and Paradigm uses EVM tools and native stablecoin AMM to achieve high-throughput stablecoin payments.
Plasma is a Tether-backed L1 network designed for USDT with new banking services and bank cards for emerging markets.
These blockchain networks push stablecoins to the real economy, not just for transactions.We are back to the big trend of “blockchain for payment”.
What this might mean (to be honest, I’m still not sure).
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Tempo: Stripe’s distribution network is huge.This helps the widespread popularity of cryptocurrencies, but may bypass spot demand for Bitcoin or Ethereum.Tempo may end up like PayPal: huge capital flows, but little value accumulation for Ethereum or other blockchains.What is unclear at this point is whether Tempo will issue tokens (I think there will be) and how much fee income will flow back into the cryptocurrency.
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Plasma: Tether has dominated the issuance of USDT.By connecting to blockchain + issuers + applications, Plasma can incorporate a large portion of emerging market payments into a closed ecosystem.It’s like a contrast between the closed Apple ecosystem and the open internet advocated by Ethereum and Solana.It sparked a competition with Solana, Tron and EVM Layer2 for USDT default chain status.I think Tron suffers the most in this regard, and Ethereum is not a payment chain at all.However, Aave and other projects released on Plasma are a huge risk for Ethereum…
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Base: The savior of the Ethereum L2 network.They will continue to drive higher fees on Ethereum and DeFi protocols as Coinbase and Base push payments through Base apps and earn USDC revenue.The ecosystem remains fragmented but fierce competition, further expanding liquidity.
Regulation is adapting to this shift.The GENIUS Act is pushing other countries to catch up with the development of stablecoins around the world.
The U.S. Commodity Futures Trading Commission (CFTC) just allowed the use of stablecoins in derivatives as tokenized collateral.This adds non-spot demand from the capital market on the basis of payment demand.
Overall, stablecoins and the new stablecoin L1 network give cryptocurrencies credibility.
The former gambling venues are now of geopolitical significance.Speculation remains the primary purpose, but stablecoins have obviously become the second largest application scenario for cryptocurrencies.
Winners are blockchains and applications that can capture stablecoin traffic and convert it into sticky users and cash flow.The biggest unknown is whether new L1 networks like Tempo and Plasma can become leaders in locking value within their ecosystems, or whether Ethereum, Solana, L2 networks and Tron can fight back.
The next major deal will take place on September 25 with the launch of the Plasma main network.
DAT: New leverage and IPO for non-ETF tokens
Digital Assets Treasury (DAT) scares me.
Every bull cycle, we will find new ways to increase token leverage.This can drive up the price better than simply buying spot, but the closing process is always cruel.When FTX collapsed, forced sell-offs from centralized finance (CeFi) leverage hit the market hard.
The leverage risk in this cycle may come from DAT.If they issue stocks at a premium, borrow, and convert their funds into tokens, they can amplify returns.But when market sentiment changes, the same structure may also amplify the sell-off.
Forced redemption or exhaustion of stock buybacks can trigger huge selling pressure.Therefore, while DAT broadens investment access channels and brings institutional funds, it also adds new systemic risks.
We give an example of what happens when mNAV > 1.In short, they send ETH to shareholders, and those shareholders are likely to sell.However, despite the “airdrop”, the BTCS traded at 0.74 mNAV.This is awful.
DAT, on the other hand, is a new bridge between the token economy and the stock market.
As the founder of Ethena wrote:
My concern is that we have exhausted cryptocurrency native capital and cannot bid for altcoins that have exceeded the peak of previous cycles.If we compare the nominal total market cap peaks of altcoins in the fourth quarter of 2021 and the fourth quarter of 2024, you will find that their highest values are roughly the same: slightly below $1.2 trillion.After inflation adjustment, the values between the two cycles are almost exactly the same.Perhaps this is the upper limit of bidding for 99% of illusory assets that global retail capital can support?
This is why DAT is important.
Retail capital may have reached its peak, but tokens with real businesses, real revenue and real users can enter a larger stock market.Compared with global stock markets, the entire cryptocurrency market is simply insignificant.DAT opens a door to the inflow of new capital.
Not only that, because few altcoins have the expertise needed to launch a DAT, those that succeeded in doing so once again shifted their focus from millions of tokens to a few assets with consensus value.
Another point he made is that net asset value premium arbitrage is not important…it is bullish.
Except for companies like Michael Saylor’s Strategy that can optimize capital structure with leverage, most DATs cannot maintain a premium above net asset value (NAV) for a long time.The real value lies not in the premium game, but in the acquisition of investment opportunities.Even if the net asset value and capital inflows remain stable one-to-one relationship, it is much better than having no investment opportunities at all.
ENA and even SOL’s DAT are criticized because they are regarded as tools for cashing out venture capital tokens.
ENA is particularly vulnerable to shocks due to huge venture capital funds.However, due to improper capital allocation, the size of private venture capital funds far exceeds the demand in the liquidity secondary market, so exiting DAT is good because venture capital companies can then allocate funds to other crypto assets.
This is important because venture capitalists have suffered a hard hit during this cycle because they are unable to exit their investment.If they can sell their assets and gain new liquidity, they can eventually fund innovation in the cryptocurrency space and drive the industry forward.
Overall, DAT is bullish on cryptocurrencies, especially those that do not have access to ETFs.They allow projects like Aave, Fluid, Hype, and other real users and revenue to transfer investment exposure to the stock market.
Of course, many DATs fail and have spillover effects on the market.But they also bring in initial public offerings (IPOs).
The RWA revolution means our financial life can be chained
The total on-chain RWA market has just exceeded US$30 billion, and it has increased by nearly 9% in just one month.The chart is still rising.
Treasury bonds, credit, commodities and private equity are now tokenized.The speed of breakthrough is rising rapidly.
Real-world assets (RWA) brings the global economy to the chain.Some major shifts include:
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Previously, you had to convert cryptocurrency into fiat currency to buy stocks or bonds.Now, you can continue to hold Bitcoin or stablecoins on the chain, transfer to Treasury bonds or stocks, and custody them on your own.
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DeFi has escaped the “Ponzi scheme-like cycle” that was once the engine of many protocol growth.It brings new revenue streams to DeFi and L1/L2 infrastructure.
A major change lies in collateral.
Aave’s Horizon allows you to deposit tokenized assets like the S&P 500 and use it as collateral for borrowing.But its total lock-in value (TVL) is still small, at just $114 million, which means RWA applications are still in a relatively early stage.
Traditional finance (TradFi) makes it almost impossible for retail investors to do this.
RWA ultimately makes DeFi a real capital market.They set benchmark interest rates through government bonds and credit.They expand global impact coverage so that anyone can hold U.S. Treasuries without passing through U.S. Bank (which is becoming a global focus).
BlackRock launches BUIDL and Franklin launches BENJI.These are not fringe projects, but bridges to bring trillions of dollars in assets into the cryptocurrency space.
Overall, RWA is the most important structural change at present.They make DeFi closely related to the real economy and build tracks for a world that operates completely on a chain.
Four-year cycle
The most important question for the cryptocurrency native market is whether the four-year cycle has ended.I heard that the people around me were already selling out and looked forward to it happening again.But I believe that as the cryptocurrency order changes, the four-year cycle will still reappear.
This time it’s different.
I firmly believe in this because:
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ETFs turn Bitcoin and Ethereum into institutionally configurable assets.
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Stablecoins have become a geopolitical tool and are now entering payments and capital markets.
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DAT opens a path for tokens without ETFs to enter stock capital flows, and also provides exit for venture capital and helps emerging companies obtain financial support.
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RWA brings the global economy to the chain and creates benchmark interest rates for DeFi.
This is not the casino in 2017, nor the craze in 2021.
This is a new era of structure and adoption, where cryptocurrencies are blending with TradFi while still being driven by culture, speculation and belief.
The winners of the future are not investors who blindly follow the trend and buy all kinds of assets.
Many tokens may still repeat the mistake of price plunges every four years.You need to choose carefully.
The real winners will be those projects that adapt to macro and institutional changes while maintaining the cultural gravity of retail investors.
This is the new order.
