Treasure

Jeff Albus

This is a segment from the Lightspeed newsletter. To read full editions, <a href="https://blockworks.co/newsletter/lightspeed">subscribe</a>.



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Every great innovation starts with a problem. For Solana, the issue was obvious. Blockchains were too slow, expensive and unapproachable for mainstream adoption. Ethereum struggled with congestion, Bitcoin was too rigid for complex applications, and no one else had made any meaningful strides to address the scalability problem. For one engineer, this would become an all-consuming technical challenge, leading him on a mission to build his own decentralized network capable of processing transactions at internet speed.



In 2017, Anatoly Yakovenko, a seasoned Qualcomm engineer, turned his attention to Web3. He was drawn by its potential to decentralize finance and reshape the internet. While the technology was promising, blockchain had begun to atrophy under a fatal flaw after nearly 10 years of relative triumph: It was too slow to scale. This inefficiency was a fundamental bottleneck. It was clearly preventing mass adoption in fields like real-time gaming, decentralized finance, physical infrastructure networks, AI inference and autonomous machine coordination.



The issue was that blockchains lacked a built-in clock. Each node in a decentralized system confirmed transactions sequentially, requiring network-wide agreement before finalization. This&nbsp; process was sluggish, and it made blockchain unfit for high-speed applications. Yakovenko’s breakthrough came with the introduction of proof-of-history (PoH), a conceptual cryptographic method that timestamps transactions before they enter the block, creating a verifiable sequence of events.



Unlike traditional validation — where nodes process transactions in sequence — PoH enabled simultaneous processing. This innovation was rocket fuel for efficiency, unlocking unprecedented throughput and eliminating congestion. Yakovenko assembled a team of engineers, including Greg Fitzgerald (also from Qualcomm) and Raj Gokal. They founded Solana Labs in 2018, inspired by the California beach town where Yakovenko spent time surfing.



In its early days, Solana Labs was bootstrapped through private fundraising rounds and raised approximately $20 million from venture capitalists and early crypto investors. The team built and tested a prototype network, proving PoH’s potential with benchmarks demonstrating over 50,000 transactions per second — many orders of magnitude faster than Ethereum and Bitcoin.



Solana officially launched its mainnet beta in March 2020, right as the Covid-19 pandemic sent global markets into chaos. Despite the timing, the network gained traction among developers and investors attracted to its promise of high-speed, low-cost transactions. The ability to process transactions for fractions of a cent made it an ideal platform for DeFi applications, gaming platforms and a multitude of experimental decentralized tools — all of which had, up until that point, been constrained by Ethereum’s slow speeds and high gas fees.



In June 2021, Solana Labs secured a $314 million funding round led by Andreessen Horowitz (a16z) and Polychain Capital. The legitimacy this runway brought the ecosystem allowed for rapid expansion and innovation. Solana soon became home to Serum (a DEX), Raydium (an AMM liquidity provider), Mango Markets (a margin trading protocol) and more. The end of 2021 saw the Solana price surge to highs of $260 — up from $0.50 just 18 months before — cementing its status as a top-five cryptocurrency by market cap. Investor confidence soared, and Solana’s momentum appeared unstoppable. By the end of 2021, Solana had evolved from an ambitious experiment into a major force within the crypto space. However, beneath its meteoric rise lay unseen challenges that would soon test the network’s resilience and stability. Next time: The fall. How the collapse of one of crypto’s biggest players sent shockwaves through the Web3 ecosystem, and why many believed Solana wouldn’t survive.



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Solana’s origins: Turning an idea into reality

Ben Strack

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Grayscale Investments has historically had a four-stage lifecycle for its products. A recent Cardano ETF filing signals that could be changing as <a href="https://blockworks.co/news/crypto-friendly-congress-steps-into-power">regulatory winds shift</a>.



The company typically first goes with private placement launches for accredited investors (like the Dogecoin Trust it launched a couple weeks ago).



Step two is obtaining public quotations for unrestricted shares of those private placements.



Grayscale then makes its products SEC-reporting companies, subjecting them to more disclosure and regulatory oversight.&nbsp;



Finally, it looks to uplist its products to an ETF when the regulatory environment allows for it (think last year’s conversions of GBTC and ETHE).



“Given the environment is rapidly evolving before our eyes, there may now be a few shortcuts appearing,” said Nate Geraci, president of The ETF Store.&nbsp;&nbsp;



Indeed, Grayscale appears to be skipping these steps in its quest to launch an ETF holding cardano (ADA). See NYSE’s 19b-4 filing for listing the planned product <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2025/SR-NYSEArca-2025-12.pdf">here</a>.&nbsp;



Grayscale does not currently have a trust holding ADA. And so, the direct filing for an ETF could signal optimism the SEC “is now open for business” and could move quickly to approve more spot crypto funds beyond bitcoin and ether, Geraci said.



The firm did not return a request for comment.&nbsp;



Various fund managers have live proposals for ETFs holding litecoin, solana, XRP and other crypto assets. We recently reported on <a href="https://blockworks.co/news/litecoin-etf-approval-odds-2025">the possible odds</a> of those launching this year.



To Geraci’s point, Bryan Armour, a director of passive strategies research at Morningstar, said he expects Grayscale to file directly for ETFs if the firm expects approval. The private trust/OTC route only makes sense if funds holding those assets are deemed “unavailable” from a regulatory standpoint, he added.



Geraci doesn’t exactly agree on that second point.&nbsp;



From a competition perspective, Geraci explained, he likes the idea of Grayscale bringing a private placement offering to market first (like it did with its latest DOGE Trust).



“It offers them the ability to get a head start on attracting assets prior to converting into an ETF,” he explained. “They can essentially front-run the competition.”



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Planned Cardano ETF signals a Grayscale strategy shift?

Casey Wagner

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President Trump released a fresh batch of cabinet nominations late last week and among them are two names familiar to the crypto industry: Brian Quintenz and Jonathan Gould.



Quintenz is being tapped to run the CFTC and Gould is Trump’s pick for comptroller of the currency. Neither nomination hearing has been scheduled yet.&nbsp;



Quintenz served under Trump as a CFTC commissioner from 2017 to 2021. Most recently he’s been the policy lead at a16z crypto. Republican Commissioner Caroline Pham, also seen as a crypto advocate, has led the agency since Trump’s inauguration.&nbsp;



Quintenz mentioned crypto in a post on X last week thanking Trump for selecting him.&nbsp;



“The agency is also well poised to ensure the USA leads the world in blockchain technology and innovation,” Quintez wrote. “I look forward to working with President Trump’s incredible financial regulatory team.”



“Looking forward to more SEC-CFTC cooperation,” SEC Commissioner Hester Peirce replied, adding that “this time” the agencies will <a href="https://blockworks.co/news/new-sec-crypto-task-force">focus on crypto</a>.&nbsp;



Gould most recently practiced at Jones Day, a law firm that has represented Trump’s campaign. He served at the OCC as chief legal officer during Trump’s first term.&nbsp;



Prior to Jones Day, Gould had a brief stint as the chief legal officer of Bitfury, a crypto infrastructure company.&nbsp;



The crypto industry is fired up for a few reasons. First, these are two major positions in the financial regulation space — a space that in recent years has taken a harsh approach to crypto.&nbsp;



The OCC specifically supervises US banks, a sector of the financial industry many crypto companies have felt ignored by. These frustrations were brought to light during recent <a href="https://blockworks.co/news/congress-crypto-regulation-updates">Congressional hearings</a> unpacking so-called “<a href="https://blockworks.co/news/operation-choke-point-2-0">Operation Chokepoint 2.0</a>.”&nbsp;



Much of the crypto industry has also recently advocated for Congress to give more power to the CFTC to oversee the crypto industry. With Republicans in control of both chambers, this could be the year a market structure bill makes it over the finish line. Plus, Peirce’s comments signal that the agencies are not looking to get involved in a turf war.



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Latest Trump nominees have ties to crypto 

David Canellis

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In The Prestige, Michael Caine’s character John Cutter is a veteran illusion architect who knows how the magic sausage is made better than most.



As it goes, there are three parts to every great magic trick. And it actually runs analogous to LIBRA, the colossal screwup of a memecoin initially endorsed by renegade Argentine president Javier Milei.



<ol class="wp-block-list">
<li>“The Pledge” involves the magician showing the audience something ordinary, like a deck of cards, or in crypto’s case, a Solana memecoin.</li>
</ol>



<ol start="2" class="wp-block-list">
<li>“The Turn” sees the magician take that ordinary thing and make it do something extraordinary — like disappear (in LIBRA’s case, pump to a $4.5 billion market cap).</li>
</ol>



<ol start="3" class="wp-block-list">
<li>“The Prestige” involves returning the thing from the ether to complete the illusion. “Because making something disappear isn&#8217;t enough; you have to bring it back.”</li>
</ol>



LIBRA is stuck between stage two and three. After doing 20x in its first hour alongside Milei’s endorsement, LIBRA spectacularly crashed 97% over the next seven and is yet to rebound in any meaningful way.



The bulk of the collapse occurred as project insiders dumped upwards of $87 million worth of LIBRA, as tracked by Bubblemaps, leading Milei to distance himself from the project and <a href="https://www.nytimes.com/2025/02/15/world/americas/argentina-milei-crypto-trump.html">order an official investigation</a>.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/search?q=%24LIBRA&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$LIBRA</a> TEAM IS CASHING OUT They already made $87M by removing USDC and SOL from liquidity pools <a href="https://t.co/hRGnRPTDiE">https://t.co/hRGnRPTDiE</a> <a href="https://t.co/aiDmODKi6o">pic.twitter.com/aiDmODKi6o</a>&mdash; Bubblemaps (@bubblemaps) <a href="https://twitter.com/bubblemaps/status/1890567816752873794?ref_src=twsrc%5Etfw">February 15, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Instead of illusion ingénieur John Cutter spilling the beans on magic, we have memecoin fixer Hayden Davis, also known as Kelsier, telling us exactly what occurs behind the curtain.



Davis, in an <a href="https://www.youtube.com/watch?v=EqizJTbxAEM">interview</a> with Coffeezilla overnight, described himself as the “launch strategist” for LIBRA, MELANIA and others. He says he’s now fearing for his safety and is unsure of what to do with all the money.



As Davis put it, anyone launching a memecoin in 2025 must fight against unseen forces that nobody has figured out how to beat: onchain snipers who will bid up fresh memecoins at the drop of a hat, only to dump them soon after on anyone buying into the pump they created, usually killing the project in the process.



Which is why Davis opted to snipe LIBRA and MELANIA first — max bidding tokens on the way up and unloading them on the way down, with the supposed intention to rebuy the token once again after the initial wave of external snipers had unloaded their clips.



“Every single time, the snipers walk away with $80 million, $100 million, $200 million, and they just disappear. Meanwhile, the project gets blamed, and so do I,” Davis told Coffeezilla.



&#8220;So do I think that sniping is the most ethical thing in the world? No. But do I think that anyone has figured out a better way to deal with it? Also no. If anyone has a better solution, I’d love to hear it. But nobody has given me one.&#8221;



It all makes fertile ground for an insider cabal to profit in secret, while the general public — albeit cognizant that they’re gambling in an onchain casino — is largely unaware of the rules of the game.



Davis, if he were Michael Caine starring in a crypto version of The Prestige, would say that the restorative third act LIBRA would involve imbuing it with some utility, magically turning it from empty memecoin into “SocialFi” offering with some intrinsic value.



“Like, imagine if you had big influencers, big figures like Dave (Portnoy) getting involved, and these tokens started cross-promoting each other, burning tokens, adding utility,” Davis said. “Then maybe there’s an actual chance that these projects could become part of a real SocialFi ecosystem.&#8221;&nbsp;



Dave Portnoy actually lost $5 million trading LIBRA, which Davis says he directly refunded shortly after.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">For the record I could care less that people know Hayden paid me back. I was fully planning on saying it on the live stream but he caught me off guard by texting me in the middle of it and asking me not to mention it. You can actually see my eyes read the text in real time… <a href="https://t.co/DR4pqpDKhS">pic.twitter.com/DR4pqpDKhS</a>&mdash; Dave Portnoy (@stoolpresidente) <a href="https://twitter.com/stoolpresidente/status/1891285564713836830?ref_src=twsrc%5Etfw">February 17, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



In the meantime, Davis, who said he still believes Milei will turn back around and endorse the token again, says he’s holding onto the extracted capital as leverage as investigations start to play out.



Perhaps stranger things have happened, but maintaining the illusion of an impending climactic third act goes one step further than Sam Bankman-Fried did in his now-historic <a href="https://www.bloomberg.com/news/articles/2022-04-25/sam-bankman-fried-described-yield-farming-and-left-matt-levine-stunned">interview</a> with Money Stuff’s Matt Levine in April 2022 — about eight months before his arrest.



Bankman-Fried had described yield farming tokens in matter-of-fact terms — black boxes that do “literally nothing” but were dressed up to look like a “life-changing, world-altering protocol that’s gonna replace all the big banks in 38 days or whatever.”



The more money was piled into those completely useless boxes, the higher token valuations went, making headway for early participants to massively profit off of newer entrants. That left Levine to summarize Bankman-Fried’s position as: “I&#8217;m in the Ponzi business and it&#8217;s pretty good.”



For what it’s worth, The Prestige dramatically ends with gruesome details about the lengths to which two magicians went to maintain their “disappearing man” illusions: a mass grave of drowned clones in one instance, and a wife that chose suicide over living with the deceit of being duped by her husband and his secret twin brother.



If crypto can’t move on from these types of predatory token launches, then its future could end up even gorier — tight regulation of memecoin launchpads by way of a US government agency. Yeuch.



Fingers crossed that it’s possible for Davis’ interview with Coffeezilla to be the deathknell for these types of memecoins, in the same way that the Bankman-Fried chat largely put an end to high emission yield farming.&nbsp;



I’m not sure crypto wants to be fooled anymore.



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LIBRA showed us how the memecoin sausage is made — it’s gross

Jack Kubinec

This is a segment from the Lightspeed newsletter. To read full editions, <a href="https://blockworks.co/newsletter/lightspeed">subscribe</a>.



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Solana is in love with memecoins, and it just got a Valentine’s Day gift.



The Solana memecoin launchpad pump.fun released a mobile app this morning, representing the viral platform’s first major update since it <a href="https://blockworks.co/news/pumpdotfun-suspends-livestream-feature">disabled livestreams</a> in November. It’s further confirmation that apps users can play with on their phones are becoming table stakes for crypto projects, roughly a month after Donald Trump embraced a mobile memecoin app for his <a href="https://blockworks.co/news/trump-memecoins-rock-solana">token launch</a>.



Perhaps true to form for a platform initially dubbed 4chan for memecoins, pump.fun mobile is a bit rough around the edges. The app’s onboarding process is quite smooth — I entered my email, and pump created a crypto wallet for me, courtesy of Privy — but I found it hard to land transactions without manually adjusting my priority fee and slippage.&nbsp;



By the time I got my transaction through on a dog-themed Valentine’s Day memecoin, early buyers had already nuked the chart to go invest in fresher tokens, and I was left holding a big bag of worthless dogwifrose.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcoOFc4I3lceVrDG41Y0T4fCJhJAWlAxf2u3Xli9Ikxt38hE_nYymGIsLoYaodAxSYlQRFmG_y-QuIfr6fRYWc-SIEWObsTw7YxOOe2STHlYVn41eylE982i2sjH731j3Slcg9xHA?key=tuvzs0i8J4eYRURHd5aQRSro" alt=""/><figcaption class="wp-element-caption">Transactions failing as I tried to buy a memecoin called dogwifrose</figcaption></figure>



The app’s early users seem to be facing some of the same struggles. Pump.fun has a 2.5 star rating on Apple’s App Store and a 2.1 star rating on the Google Play Store (as a note, many of these reviews came before today’s public launch).&nbsp;



“Is it my internet or [is] the pumpfun app kinda slow,” one user asked on X.&nbsp;



Pump.fun going mobile doesn’t seem to be driving much new usage on day one. The platform has seen 27,000 token launches today, according to a Dune dashboard, which is currently down from a range of 48,000-54,000 daily token launches earlier this week.&nbsp;



Still, a mobile app is a longer-term play, and longtime readers of Lightspeed know that we have learned better than to bet against pump.fun’s continued success. A little more than a year after first launching, the platform has <a href="https://dune.com/adam_tehc/pumpfun">generated</a> around $548 million in revenue.  My gut tells me that to take the mantle from Moonshot — the <a href="https://blockworks.co/news/jupiter-majority-stake-moonshot">Trump-favored and Jupiter-owned</a> mobile memecoin app — pump.fun will have to fix the mobile transaction landing woes, even if that means giving users slightly worse prices. Retail users hoping to hit a 100x trade likely wouldn’t be too rankled by a few extra percentage points of slippage if that means their transactions are actually making it to the blockchain.



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Pump.fun releases mobile app

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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President Trump yesterday said his team is off to the races with reciprocal tariffs. Advisers have been instructed to come up with new tariff levels that consider fees and taxes placed on US exports.&nbsp;



The timeline is a bit uncertain. But Commerce Secretary nominee <a href="https://blockworks.co/news/trump-nominates-commerce-dept-leader">Howard Lutnick</a> said the studies may be completed by early April. Lutnick, if confirmed, will work with the office of the US Trade Representative on establishing the new levies.&nbsp;



The import taxes, Trump said, will be designed on a country-by-country basis in order to offset tariffs on US exports and non-tariffs barriers, like exchange rates and value-added taxes.&nbsp;



Markets took Trump’s announcement well, a sign that his comments were not as bad as investors had feared, or at the very least it’s going to take several weeks for tariffs to be implemented. The S&amp;P 500 and Nasdaq Composite both reversed midway through Thursday’s session to close 1% and 1.3% higher, respectively.&nbsp;



The uncertainty around the nature of the tariffs and when they may start is going to leave investors uneasy. But generally, we expect talk of tariffs — and therefore market impact — to die down a bit over the few weeks while advisers conduct their trade studies.&nbsp;



In the meantime, it’s primarily going to be data moving markets. Next week we’ll get some key manufacturing numbers as well as the minutes from the Fed’s FOMC meeting last month, both of which will be useful in determining how long the interest rate-cutting cycle may be paused.



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Reciprocal tariffs may be coming, but markets don’t care much just yet 

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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When Coinbase reports its quarterly results, crypto and TradFi investors alike tend to tune in.&nbsp;



COIN, after all, is, in the words of Oppenheimer analysts, a gateway for customers to access Web3 given its “leading and focused position in crypto, which benefits the company as onchain becomes the new online.”



And it’s public — unlike some others <a href="https://blockworks.co/news/crypto-ipos-bringing-back-retail">waiting their turn</a>.&nbsp;



Onto the results from yesterday: The crypto exchange’s $2.2 billion of net revenue last quarter was up 143% year over year.



That was $305 million above Oppenheimer analysts’ estimate.



Transaction revenue was nearly $1.6 billion, a 172% increase from Q3. So-called subscription and services revenue grew 15% over that span, to $641 million.



The biggest surprise, Oppenheimer’s Owen Lau told me, was the higher-than-expected participation from the retail segment — showing such users are “gradually coming back.” See, for example, the “consumer” line in the chart below.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeWr-jn1FRkgNWITopySCbliiuEXeyLGEJSWnWOmv9gdlroXdqEw0R_XCJQdmmEZHpPdsSsJW4bk9D_HbhZ7i7QxyXKv_UjB9miz4OvdA6cjqNYeR3a2EP_kUliQ70dkU03JCjVeQ?key=pR55TriNLz_IB-A4BWeYJbgp" alt=""/></figure>



Sure, this was during a quarter where <a href="https://blockworks.co/news/bitcoin-all-time-high">bitcoin</a> and a number of <a href="https://blockworks.co/news/solana-sets-all-time-high-of-263">other</a> crypto assets hit all-time highs following the <a href="https://blockworks.co/news/donald-trump-declared-president-2024-election">victory</a> of Donald Trump and <a href="https://blockworks.co/news/crypto-friendly-congress-steps-into-power">crypto-friendly</a> Congressional candidates.&nbsp;



But even as BTC has remained range-bound in recent weeks below its peak, Coinbase’s early 2025 numbers appear to be strong.



Its 2025 transaction revenue stood at $750 million as of Feb. 11, the company said. Coinbase is forecasting Q1 subscription and services revenue to slightly increase to between $685 million and $765 million.



On that point, Morningstar analyst Michael Miller said his eye will be on the exchange’s USDC revenue in Q1 given the stablecoin recently hitting an all-time high market cap.&nbsp;&nbsp;



“I’ll be curious to see what a full quarter will look like at its scale and if USDC continues to take market share away from other stablecoins,” Miller told me.



COIN’s price was around $278 at 2 pm ET — down nearly 7% on the day.&nbsp;



Oppenheimer’s price target for the stock is $388, while Miller believes the shares are “overvalued” as, post-election, “the market is pricing in too much growth.”



You might recall one of Bitwise’s 10 predictions for 2025 was <a href="https://blockworks.co/news/2025-crypto-industry-predictions">Coinbase surpassing Charles Schwab</a> as the world’s most valuable brokerage. The asset manager said it expects its stock will top $700 per share, citing continued growth in its stablecoin business, L2 Base, and staking and custody services.&nbsp;&nbsp;



Bitwise senior investment strategist Juan Leon has this November 2023 tweet pinned:



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">How can <a href="https://twitter.com/search?q=%24COIN&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$COIN</a> get to $1,000 in this <a href="https://twitter.com/hashtag/crypto?src=hash&amp;ref_src=twsrc%5Etfw">#crypto</a> cycle? • 2023 Net Revenue Estimate: $2.6B • 2025 Net Revenue Estimate: $14.5B • 2023 Monthly Transacting Users Estimate: 8.5M • 2025 Monthly Transacting Users Estimate: 32M • 2023 Assets on Platform Estimate: $130B • 2025…&mdash; Juan Leon (@singularity7x) <a href="https://twitter.com/singularity7x/status/1729553963677053106?ref_src=twsrc%5Etfw">November 28, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Another catalyst to watch for, Lau said, is COIN’s possible inclusion in the S&amp;P 500.&nbsp;



And then, you know, all the potential regulatory tailwinds that come from having a pro-crypto president, Congress and <a href="https://blockworks.co/news/sec-chair-nominee-crypto-past">SEC</a>. Coinbase CEO Brian Armstrong said “it’s hard to overstate the significance of this change” given it is likely to pressure increased crypto adoption worldwide.&nbsp;



“Up to 10% of global GDP could be running on crypto rails by the end of this decade,” Armstrong said on Thursday’s earnings call — noting Coinbase will be “the preferred partner” due to its “trusted and scalable infrastructure with the longest track record.”



The company said it’s chatting with regulators and legislators to help shape US crypto regulation.



The chance of a stablecoin bill and digital asset market structure bill passing in the 119th Congress? Compass Point’s Ed Groshans, in a Friday note, said 75% and 60%, respectively.



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Coinbase Q4 takeaways, updated outlook

Donovan Choy

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/research">subscribe</a>.



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The permissionless nature of crypto means anyone with a computer and internet connection can have a bag. That makes it really hard to value tokens.



Price-to-sales multiples of L1s like Cardano or Ripple trade at absurd four to five figure ranges, far above actual value-generating L1s like Solana (32x) and Ethereum (227x).



Then there are tokens like OM (who?) that are clocking in the highest price gains of 47.6% since the industry’s biggest liquidation earlier this month.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The best advice I can give crypto founders right now is to find the <a href="https://twitter.com/search?q=%24OM&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$OM</a> market maker and hire them. <a href="https://t.co/0NuazFN4N7">pic.twitter.com/0NuazFN4N7</a>&mdash; Lai Yuen (Former .eth) (@0xlaiyuen) <a href="https://twitter.com/0xlaiyuen/status/1888823059584602544?ref_src=twsrc%5Etfw">February 10, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



No rational explanation exists. It’s all narrative and “speculative premiums.”



But is that going to stop investors from trying to formally value tokens? No, because there is a lot of money to be made from unearthing the gems.&nbsp;



In the short history of this industry, investors have <a href="https://youtu.be/aCHY9iPS8sI">tried to value</a> L1s with a variety of now-abandoned tools like the stock-to-flow model, total-value-locked to market cap ratios or proof-of-stake staking cash flow yields.



The latest shift in investor sentiment around token valuations is doubling down on an emphasis on the importance of fundamentals.



Maelstrom fund <a href="https://x.com/MaelstromFund/status/1889706122107338761">points</a> to Vertex perps DEX, arguing that markets are “underestimating” the DEX’s growth and that it “should” be trading at a 200% to 300% greater valuation in line with its peers.



1kxnetwork fund’s recently <a href="https://x.com/pet3rpan_/status/1887140527310864481">published</a> Ronin chain thesis points to the gaming chain’s deflationary burn of SLP, plus rising daily active users and breakout revenue-generating game Pixels ($20.7 million in 2024).



Applications like Raydium, Hyperliquid, Metaplex, GEODNET, and Jupiter are all trading at reasonably “rational” P/S ratios that are based on consistent cash flows and more measurable growth potential.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdXdgcWvGoqtpq_ESTlfJ9JukSDa8GGFbvuPles2tYtLJlUgD_lU5BXqQ7qTOsoEK1zrNsE51XT16BW8vVVmHlV5yCo2UMX3Y_88DSo9Sd4DGc5Bb3GJcyOc5JsV68WB6BGnEk-Qg?key=ttbwXyG5YLiXMxIfjc4w1cbH" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://x.com/artemis/status/1890162713244102993">Artemis</a></figcaption></figure>



Many of these projects are also engaging in huge token buybacks, often perceived as a “fundamentals-driven” strategy to improve the attractiveness of price multiples.



Jupiter’s token <a href="https://x.com/JupiterExchange/status/1890089764218630253">buyback</a> program may quite possibly be the largest (in USD terms) with a commitment of 50% protocol fees. That comes up to a buyback of ~9.4% of JUP’s total circulating supply, based on this rough <a href="https://x.com/alpha_pls/status/1883496465160458659">estimate</a>.



Supporting the point that “fundamentals are back” is also the ugly reality of declining L1/L2 valuations.



The fabled “Layer-1 premium” is slowly evaporating. L1s in the previous cycle like Starknet raised at eye-popping valuations of $8 billion, while newer L1s command less than half of those valuations (Berachain $420 million, Story Protocol $2.25 billion, Celestia $3.5 billion).



The <a href="https://x.com/Febers4/status/1889671466041614568">down-only price action</a> of most L1s/L2s in the last 12 months will likely grind future valuation numbers down even further.



Application revenues are also beginning to outpace the revenues of the underlying L1 and L2 protocols, Blockworks’ <a href="https://x.com/smyyguy/status/1890088127617987066">Dan Smith</a> points out.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXckuTfvYMVthDMuaxyo0WxSxozxN-4YZwPobsaPPaUmQcT4K2xIruQAn44yJA8BoUb5E6Zfje61ASi_i5aQkpFxQgaNovSof5RToq6Ni6pKsbnVvOBvhcSZ84MaeImh33tyn1u0?key=ttbwXyG5YLiXMxIfjc4w1cbH" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://app.blockworksresearch.com/analytics/l1">Blockworks Research</a></figcaption></figure>



This all hinges on the growing disdain of the industry’s <a href="https://blockworks.co/news/crypto-infrastructure-bloat">infrastructure bloat</a>. The fat protocol thesis is no longer, now is the era of <a href="https://x.com/jon_charb/status/1890210333714960787?s=19">the fat app thesis</a>.



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Crypto fundamentals are back

Katherine Ross

This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire">subscribe</a>.



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You don’t need to understand it to use it.&nbsp;



That’s Empire co-host Santiago Santos’ ideal situation in building Inversion Chain.&nbsp;



Confused? Think about the 1990s. Businesses used “.com” and — outside of the somewhat ridiculous Homes.com commercial we saw during the Super Bowl — dot com isn’t really used anymore. If you don’t believe me — or Santos — bring it up to your local Gen Zer and you’ll quickly see how out of tune it is.&nbsp;



Point being that the internet is just a part of doing business nowadays. And for Santos, crypto or crypto rails are following in the same path. He doesn’t need to market Inversion Chain to the masses. They won’t know of it unless they pay attention during transactions with potential projects like Helium.&nbsp;



But let me back up: For you lot, my goal is to ensure you understand it — even if you don’t need to.&nbsp;



Inversion Chain was announced by Santos this week, though he’s more or less been thinking about it since he left ParaFi over four years ago. Seven months ago, he started planning and now he’s hiring.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">It’s been inspiring seeing the reception to Inversion over the last 24 hours. Fired up So far almost everyone has rallied behind the vision and mission: build the best user acquisition channel for crypto and accelerate mainstream adoption. The mission transcends maximalism at…&mdash; Santiago R Santos (@santiagoroel) <a href="https://twitter.com/santiagoroel/status/1889905071888146727?ref_src=twsrc%5Etfw">February 13, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



There isn’t a set timeline for launch just yet, though Santos told me the goal is “as soon as possible.”&nbsp;



The L1 will be built on Avalanche because, as Santos noted, it’s one of the only places to truly customize the chain for specific use cases and support that covers the gambit.&nbsp;



There are added bonuses, like permissioning your network at the validator, privacy, EVM compatibility and native interoperability as well.



Making his own chain was the clear path for Santos after looking around.



“Having our own chain lets us purposefully build a stack exactly to the specs of the businesses that we acquire and really allows us to go tailor-made,” he explained. “I believe in a multi-chain world.”



Right now, we’re not keeping users. As Santos pointed out to me, folks are coming on chain through an exchange with some sort of speculation in mind — and that’s not totally a bad thing, given that there’ll be room for speculation in crypto (just like there’s room for speculation in stocks), but the goal is to retain users and show them to use cases crypto has to offer.&nbsp;



Which is where Santos hopes we end up, with people not having to think twice about the crypto of it all.&nbsp;



“I think we’re selling ourselves short as an industry, and we can lead. The focus is very specific: You lead with a core service like mobile and FinTech — and when I say FinTech, it really is a stablecoin,” Santos explained.&nbsp;



“My singular focus is to create an onboarding acquisition channel for the next 100, 200, 500 million users that will come onchain.”



Sounds pretty bullish to me. Something Santos explained to co-host Jason Yanowitz on this <a href="https://blockworks.co/podcast/empire/d5b1522c-eaa5-11ef-a4ec-5ff0abfd24ce">morning’s Empire Round Up</a> — was his idea of building Berkshire on-chain.



Santos explained that the analogy “would be what AOL did at the peak of the .com bubble. The stock was quite inflated, so what did they do? They go and acquire Time Warner, a real business,” he said.



“And I think the role [of] the foundations is to really accelerate the adoption of crypto, the uptake. I don&#8217;t think they&#8217;re being strategic enough. The opportunity here is to use, eventually, that Treasury value in a very strategic manner to go and acquire businesses and anchor them to the chain and activate that user base to come on chain,” he continued.&nbsp;



If executed properly, then Santos thinks that the flywheel for the economic activity on that chain is one where you&#8217;re going out and continuously acquiring more businesses, bringing on more users, and that generates” more and more activity.&nbsp;



Bringing it back to Berkshire: For Santos it’s creating an operable base from which you can go and explore other ways to not only be profitable but also not be front and center for the userbase.&nbsp;



If you’re not following along, think about how Warren Buffett does things (and put aside your thoughts about him from an anti-crypto perspective). He goes and finds potentially successful investments but it’s not like we necessarily interact with Berkshire itself on any given day as customers.&nbsp;



They exist in the background, as necessary as your shadow.



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Exclusive: Inversion Chain’s plan to be the Berkshire of crypto

This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire">subscribe</a>.



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Outside of L1s, this was also a big week for token announcements.&nbsp;



OpenSea <a href="https://blockworks.co/news/opensea-announces-token-and-open-beta">teased</a> SEA and a new platform, and Doodle’s <a href="https://www.theblock.co/post/340760/nft-brand-doodles-to-launch-solana-based-token-called-dood">plans</a> to launch its own token.&nbsp;



Does it mean that NFTs are back? Eh. But for <a href="https://thedrop.beehiiv.com/subscribe">The Drop’s</a> Kate Irwin, it’s a vibes booster for people, one that’s perhaps necessary right now.



(ICYMI: The Drop is our newest newsletter, and I’ve been following Irwin’s reporting in Web3 and gaming for a few years now.)



She and I chatted about the tokens and OpenSea’s OS2 and she explained that there’s another part to this: XP, which is not a token but is earnable and is “core” to the OS2 rewards program.&nbsp;



“There&#8217;s a lot of other moving pieces as well, besides just the token, which is exciting, because then it&#8217;s not a memecoin. It&#8217;s actually a utility token that has a place in the OpenSea ecosystem,” she added.&nbsp;



Phew. Nice to have an announcement not focused on memecoins.



My big thing is whether or not this comes a little too late. When Irwin and I chatted this through, she made the sage point that this could be simply because OpenSea was worried about the potential regulatory issues that could arise (they were served with a <a href="https://blockworks.co/news/sec-issues-wells-notice-opensea-nfts">Wells notice after all</a>) and now, well, that’s no longer a problem.



But, unfortunately for OpenSea, they are following in Magic Eden’s footsteps after it <a href="https://blockworks.co/news/magic-eden-airdrops-me-token">launched a token first</a>. It, notably, hasn’t dulled the excitement around OS2 or SEA though.  This could also be the beginning of a new wave of tokens, Irwin noted — especially because there is an appetite for tokens that have actual utility and not just speculation.



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OpenSea and Doodle token teasers are a potential vibes booster for crypto

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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When it comes to crypto adoption, we’ve repeatedly heard how much room there is to run.&nbsp;



If you took a liquor shot every time someone said “early innings” at a crypto conference, you’d have trouble walking a straight line out of there. The need for “more education” is another phrase we hear ad nauseam.



But a recent CoinShares survey of financial advisers confirmed some of this, with specifics. We referenced one stat from it in yesterday’s edition (79% saying their role is shifting to risk management as clients invest in crypto on their own).



There are a few more worth pointing to. CoinShares CEO Jean-Marie Mognetti said he was perhaps most struck by a belief 62% of advisers hold: Recommending bitcoin doesn’t align with their obligation to act in their client’s best interest.



“This highlights a significant perception gap between regulatory approval, client demand and advisers&#8217; fiduciary concerns,” he told me.&nbsp;



Then there was the 55% who said recommending digital assets would harm their reputation with colleagues. This, Mognetti explained, “underscores the cultural and institutional barriers that still exist within traditional financial circles.”



It wasn’t long ago that <a href="https://blockworks.co/news/matt-hougan-crypto-reputational-risk">Bitwise CIO Matt Hougan argued</a> Trump’s election win and a <a href="https://blockworks.co/news/crypto-friendly-congress-steps-into-power">pro-crypto Congress</a> “removes the last vestige of reputational risk from crypto.”



Not everyone feels that way apparently, even with 85% of the advisers that CoinShares surveyed saying their organization’s sentiment toward crypto (and how they’re advising clients) changed since the election.



Another fascinating finding: Gen Z and Millennial advisers are more likely to think recommending speculative assets doesn’t align with their fiduciary duty — and to say that “threats outpace innovation.”



While this younger demographic is often more open to digital assets, they also seem to face “stronger resistance from more established industry norms and colleagues,” Mognetti said.



Back to the education point: Though 71% say their firm is educating them on crypto, 84% are likely to pay for such education (mostly via online courses and conferences).



Also, 43% of advisers cite crypto platforms publishing biased information as a barrier. So maybe read Forward Guidance instead.



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Advisers on crypto: Takeaways from another survey

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Robotics and crowdsourced data startup Frodobots has raised $6 million in seed funding to create BitRobot, which will be a Solana-based embodied AI research network.



BitRobot will aim to connect different subgroups in robotics research using a shared token and network to solve resource allocation and data scarcity. Protocol VC led the funding round, which also drew participation from Big Brain Holdings, Solana Ventures, Virtuals Protocol and Solana co-founders Anatoly Yakovenko and Raj Gokal, among others. Frodobots previously also raised $2 million in pre-seed funding.



Frodobots started out building sidewalk robots that slowly trawled global city streets to build giant crowdsourced datasets including things like audio, video and GPS data. The project aims to add token incentivization to become part of the decentralized physical infrastructure (DePIN) movement.&nbsp;



Over the past several months, however, Frodobots’ ambitions have widened: The lab’s co-founder Michael Chung Yeung Cho said the goal is now to launch BitRobot and “solve embodied AI.” Frodobots will be a subnet in the BitRobot network.



“If we were to be successful, we would be on par with the Teslas and the DeepMinds of the world,” Cho said, adding that the new project would help generate a “series of really performant foundational robotics models that can be deployed across all kinds of robots.”



The problem, Cho and his co-founder Jonathan Victor explained, is that rich robotics data is scarce, and robot developers are working on subsets of a bigger shared problem. Large language models have the entire internet to train on, Victor said, but most robotics businesses outside of Tesla’s self-driving unit are “starting effectively from zero.”



That’s partly because while a new AI model, for instance, could be benchmarked digitally in an hour, robotics faces the bottleneck of having to test products in the real world. You can’t know if a self-driving car really works until you drive it for a trillion miles, Cho said.



BitRobot will create a shared network of “subnets” so that pooled resources and data can more efficiently create robotics data. Humans, fleets of humanoid robots and Frodobots’ sidewalk bots are example subnets, according to a document shared with Blockworks.



With BitRobot, massive amounts of resources could be shifted between researchers based on need, and a DePIN token reward system could align the economic incentives. There is also cross-embodiment learning, which suggests that AI models trained on one type of robot — such as a robotic arm — can effectively transfer learned skills to entirely different robotic systems, like drones or wheeled robots. This works because many robotic tasks share core design needs.



A white paper containing more details on BitRobot, as well as the project’s tokenomics, will be released in a few weeks.



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Frodobots raises $6M for Solana-based robotics network

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President Trump’s <a href="https://blockworks.co/news/trump-appoints-crypto-council-head">crypto advisory council</a>, established by <a href="https://blockworks.co/news/trump-vs-biden-crypto-orders">executive order</a> during his first week in office, may not be shaping up to be exactly what the industry had envisioned.&nbsp;



<a href="https://unchainedcrypto.com/trump-is-having-second-thoughts-about-his-crypto-council/">Unchained</a> reported yesterday that the council may be scrapped altogether. In its place, according to unnamed sources, the Trump team would organize “policy summits” to discuss legislation with industry stakeholders.&nbsp;



I’ve also heard that policy summits are on the table. Two other sources familiar with the matter told me that if there’s an advisory council at all, it would likely be made up of government employees rather than industry executives.&nbsp;



It’s no secret that a lot of people wanted roles on that council. The <a href="https://nypost.com/2025/02/04/business/everyone-in-crypto-begging-for-a-spot-on-trump-advisory-council/">NY Post</a> reported there were at one point two dozen seats up for grabs, although I haven’t been able to confirm that figure.&nbsp;



What I’m hearing: Trump’s team is trying to avoid having too many cooks in the kitchen.&nbsp;



On the one hand, they’re in a tough spot. They want to avoid alienating certain sections of the industry —&nbsp;many of which were big donors during the campaign — but the act of bringing everyone together will lead to inter-industry conflict. Enter the “policy summit” pitch.&nbsp;



It wouldn’t be unprecedented. The House Financial Services GOP retreat earlier this month featured a 45-minute presentation and Q&amp;A with a16z’s Chris Dixon, according to people familiar. Industry execs and lobbyists are on the Hill all the time trying to inform policy.&nbsp;



We’ll be monitoring the council situation. You just monitor your inbox.



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The advisory council that may not be 

Felix Jauvin

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forwardguidance">subscribe</a>.



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A lot has changed in the six months since the Fed decided to <a href="https://blockworks.co/news/treasury-yields-on-the-rise">cut rates</a>.&nbsp;



If we rewind back to September, things looked very different:



<ul class="wp-block-list">
<li>The unemployment rate was looking weak and had surged to 4.2%, triggering the Sahm rule and causing a cacophony of concerns that a recession was imminent.</li>
</ul>



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeipYKDPTaXosKM0XXDfYUqA41i93sp7tG6ObRX2wJ_QF5NUsALsPsBaAKJD57g62peXw8nZHVIQZ3xkQQxqQtPx7JVlrkzi0JAmCgGXZ6I7KDG2WBlaeMJLt4cHSv4ljRvgiFcLg?key=kjWSye0LKEZ2ZNu3yDR95a1x" alt=""/></figure>



<ul class="wp-block-list">
<li>At the same time, inflation looked like it was close enough to the Fed’s 2% target that it could forego concerns about stable prices and hone in on supporting the labor market by beginning to cut the fed funds rate.</li>
</ul>



With this balance in mind, the Fed went ahead and cut 100 basis points in that time up until today:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc1sVeB-n2hGRryeMExy1pZqn4ySn4OY9HFmQvyIVaKX2eajxlZGFQOBBttrSTGrpUKVoFi_FEmuIHZLiTj4YJlPBZBrmKeTuQOecJgwZY87F4U7q-f2CiGxUrh6uEi532wVUqYgQ?key=kjWSye0LKEZ2ZNu3yDR95a1x" alt=""/></figure>



During these months, it became easy to be complacent that we were set into an easing cycle and it was time to ride that wave.&nbsp;



However, coming back to the present day, the environment could not be more different. For all intents and purposes, the cutting cycle is over.&nbsp;



Looking at the labor market, it has improved significantly. Comparing the unemployment rate to the Fed’s forecast from only December, we can see that it has come down significantly.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdW_7-hJvlEqvj-K5AnU352EjtKR3If4MOp0FgDluNBoTL1JuQdlXNa0nMh43FrTAMUtEDM9Rdpwy3EdZoVsUjqxdMe3wdOhq_jc3vlBbNAIriv54O0mVZGbW90t7LmFoCzTs9eIg?key=kjWSye0LKEZ2ZNu3yDR95a1x" alt=""/></figure>



Therefore, if one is looking to the employment side of the Fed’s dual mandate, there is no reason whatsoever for it to be easing at this juncture.&nbsp;



And so, the onus for any marginal easing from the Fed falls to the inflation side of the dual mandate.&nbsp;



This week we received the <a href="https://blockworks.co/news/first-2025-inflation-print">CPI print for January</a>, and it was a hot one by all accounts.



Core CPI came in at 0.4%, a notable jump higher from recent data.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc8eIJo23vwtJMmSvPcTTkLRTTCZaGg4de6DrhwQJVvCyqyLoJhcLuuEkp_uHYYAVvTjUYJ7PQQ5EkENBSAAyV2otAAh3WVAffqmfHmnRRZTne4QXJBpRRuQUeffHxjkJM0zGqx?key=kjWSye0LKEZ2ZNu3yDR95a1x" alt=""/></figure>



The theme of the inflation story over the last two years has been goods disinflating while services remain stubbornly high. As seen in the chart below, the major issue today is that goods are inflating again and services are refusing to take the baton of disinflation: <img loading="lazy" decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdtxrTxJjfxrbmG56fLSEwTL9_EHvXUHxhikS5eknV3_Q0FGSOSSlUZPvWp3MSrC4mL6eJfBqupk4Js3GEbEPiPTVe5ImHmtAJNKQX1HIE0tnCV_UREoq4pziKYS9wdKBAlXvxv1A?key=kjWSye0LKEZ2ZNu3yDR95a1x" width="480" height="480">



The simple takeaway from this granular data is that inflation is remaining above the Fed’s 2% target and bouncing around the 3-4% level. As long as this is occurring, there’s little reason for the Fed to cut rates when both sides of its dual mandate are seeing such strength.&nbsp;



Putting it all together, we are now seeing a rate-cutting cycle that is seemingly over. As it stands today, the market has moved from expecting a rate cut in March to the end of this year instead:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXedzUg08_FjkBwZLD8-p1EyH3IuLE4ciUWcdhrMwBmOLPkyuKE1KR5Wg-Qw73q-JhGHpwZgMWcHvStVVIsUbJdby61YDwgcRBOnJL8nhYkP8mPUMaVBoklfRc_-DVE5osLRv7_mbQ?key=kjWSye0LKEZ2ZNu3yDR95a1x" alt=""/></figure>



If the data continues to come in above the Fed’s targets, it’s reasonable to think that these cuts will continue to get pushed out until they no longer exist.



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The cutting cycle is dead. Long live the cutting cycle

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When I interview Web3 founders, I like to ask one question: “Which thinkers in history inspire you?”



One name invariably comes up more than any other: Friedrich Hayek.



Aave’s Stani Kulechov, Base’s Jesse Powell and many more said the same.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Reality: Ethereum is the most capitalistic network.&mdash; Stani.eth (@StaniKulechov) <a href="https://twitter.com/StaniKulechov/status/1889956363255816280?ref_src=twsrc%5Etfw">February 13, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Polymarket founder Shayne Coplan even mandates Hayek’s famous essay “The Use of Knowledge in Society” as compulsory reading for employees, according to <a href="https://www.forbes.com/sites/ninabambysheva/2024/07/31/meet-the-26-year-old-building-a-billion-dollar-prediction-marketplace/">Forbes</a>.



I don’t know what Vitalik would say. But given his close association with many George Mason scholars — like <a href="https://marginalrevolution.com/marginalrevolution/2018/07/conversation-vitalik-buterin.html">Tyler Cowen</a> and <a href="https://vitalik.eth.limo/general/2024/11/09/infofinance.html">Robin Hanson</a> — it wouldn’t be a stretch to consider him something of a Hayekian (George Mason is a university renowned for its Hayekian scholarship).



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfxrXmdlk1vz3kHP39bW-BQRudp_5TkkqOowhNvb2xCP1Yt9ywC4dey3_J0Y3-aTflHtwFh_Mwd8B6XXZAvXmMYscsCnLe80yxrURAzY2JKxV5qXICMuAT7FzvU_1vA6JVApoFFrQ?key=wRDchsL9xz3IML1H0rj2VGRs" alt=""/></figure>



For the uninitiated, Hayek was a 1974 Nobel Laureate and a pioneer of the Austrian School of Economics, a school of thought closely associated with free market libertarianism and early Bitcoin thinking.



Hayek’s key insight was that markets work best when individuals can freely act on their local knowledge.&nbsp;



For individuals to do so requires economic certainty provided by a rule of law, a free price system, robust property rights and a profit-loss calculus that is not distorted by state regulation.



When this “recipe” of institutions is in place, the outcome is market innovation.



These ideas are consistently applied in crypto. For example:



<ul class="wp-block-list">
<li>The idea of immutable smart contracts comes as close to having sacrosanct property rights in a rule of law. In the real world, laws are subject to constant rent-seeking pressures to change.</li>



<li>Capital markets are permissionless. Anyone can write a smart contract and issue assets without approval. In the real world, regulators give approval.</li>



<li>Anyone can launch an unsustainable liquidity mining campaign with their token, but the unsustainability inevitably shows up in falling prices in a free price system. In the real world, prices are distorted by regulations that benefit incumbents like tariffs.</li>



<li>Ethereum’s open source culture enables the endless code-forking of protocols with incremental improvements and the composable nature of DeFi. This is closely related to Hayek’s ideas around “<a href="https://en.wikipedia.org/wiki/Spontaneous_order">spontaneous orders</a>” (and how market competition acts as a knowledge “<a href="https://www.adamsmithworks.org/documents/garret-edwards-competition-discovery-procedure">discovery procedure</a>”). In the real world, intellectual property laws don’t allow for this.</li>
</ul>



The institutional design of the Ethereum protocol (or any other blockchain for that matter) is the furthest thing from “communism,” where market processes are controlled from the top-down and where people are outlawed from acting on individual information.



Even Ripple cannot unilaterally inflate the total token supply of XRP. That’s the rule of law (immutable smart contracts) at work.



Ethereum <a href="https://blockworks.co/news/ethereum-foundation-governance-debate">critics</a> <a href="https://x.com/ameensol/status/1889758396166926527">complain</a> that the “culture” of Ethereum is left-leaning. They point to the Ethereum Foundation or Gitcoin’s initiatives on “public goods” funding.



But these public goods are crowdsourced by private funding. No taxpayers were fleeced.



Gitcoin’s quadratic funding mechanism matches more central funds based on the amount of individual contributor funding.



That is a blatantly market-oriented idea. It’s a fundraising process that works best when markets signal they want it — plus it’s all onchain (property rights).



Contrary to popular belief, capitalism is not about unbridled greed. Neither is it against communal public goods. Both exist in all political systems.



Capitalism is a <a href="https://www.amazon.sg/dp/0199219206?ref_=mr_referred_us_sg_sg">liberal archipelago</a>. You’re free to work on Wall Street, or go live in a socialist commune.



Therein lies the beauty of the crypto industry. No one cares what your political identity is. You can be a raging Milton Friedman acolyte or a diehard 19th century Trotskyist.



But no matter which political tribe you preach, everyone has to abide by the blockchain’s rule of law.



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Ethereum’s political identity is on trial (again)

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I’m going to be honest with y’all: I’ve been down bad with the flu this week but from where I’m sitting, CT’s vibes are still off.&nbsp;



And, unfortunately, Bitwise’s crypto asset sentiment index is <a href="https://experts.bitwiseinvestments.com/cio-memos/the-most-important-chart-in-crypto-right-now?_gl=1*aqblej*_gcl_au*MTE4ODUxNjMzMi4xNzMxOTQwODUy&amp;_ga=2.20635067.245398238.1739373176-805437865.1731940852">echoing</a> the same vibes we’ve picked up on.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXewFS4h-8fK5B2_fdbOmTe7sh4_6sPtgkGCtXqAgauI23X5GJxfdPxveWCs48a8Mb4Rzr2spA4vtr5nyXr2Ig95pEQJ4LcIxdZywLuxGypdGhYqqLgyUrT-GbOGyzJMm1g9QChDlA?key=JOAUs5lZRL4PgoRC0B8h7JAu" alt=""/></figure>



Everyone’s left wondering — unless you’re David — where altcoin season is and if it’s even possible at this point. (If you didn’t <a href="https://blockworks.co/news/altcoin-season-may-already-be-here">read yesterday’s Empire</a>, then you’re in for a somewhat optimistic surprise about altcoin season’s potential.)



Is this potentially a sign that we’re still early in the cycle? Perhaps, given that historically altcoin season comes at the tail end of the bull market, but we can’t ignore that things are different this time around.&nbsp;



For Bybit, one potential difference is the institutional entry because they’ve changed the way that capital has traditionally flown. And, to add to that, Bitwise’s Matt Hougan said that the institutional sentiment in crypto is “the most bullish I’ve ever seen.”



But those institutional investors? They’re not going to swap out their bitcoin holdings for altcoins even with a friendlier regulatory environment, which could explain some of the down bad energy we’re seeing.



Though Bybit’s not willing to throw in the towel just yet, with analysts <a href="https://learn.bybit.com/crypto-insight/bybit-x-block-scholes-institution-report-altcoin-rotation-why-this-time-is-different/">noting</a> that “robust stablecoin supply growth and record exchange volumes point to ongoing retail engagement, suggesting that while the script may have changed, an altseason-like frenzy could yet materialize if the right confluence of events aligns.”



This could be likely, especially when looking at Robinhood’s <a href="https://investors.robinhood.com/static-files/42ec63c5-2eb5-4d25-8030-18da1827ce06">earnings</a> from last night. Revenue from crypto trading in its last quarter surged 700%.&nbsp;



I obviously have to caveat that this data is from the prior quarter before we saw the market selloff, but I don’t think that actually makes a huge difference here.&nbsp;



The point remains that retail has come running back.



Vibes are one thing, but data is another and I’m more inclined to lean into the data personally.



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