The Grays Currency

Byron Gilliam

This is a segment from The Breakdown newsletter. To read more editions, <a href="https://blockworks.co/brand/the-breakdown">subscribe</a>.



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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;We are not measuring the world, we are creating it.&#8221;&nbsp;



— Niels Bohr
</blockquote>



Two of history’s greatest minds — Albert Einstein and Niels Bohr — disagreed on the fundamental nature of reality.



Is the world around us, as Bohr argued, created only when we observe it?&nbsp;



Or does reality exist independently of our gaze, as Einstein believed?



The two greats debated it throughout the 1920s and ‘30s, and their disagreement has remained central to quantum mechanics ever since — forcing physicists to grapple with what their mathematical equations tell us about the nature of reality.



Until this week, when the debate was settled in favor of Bohr.



By bouncing a single photon off just two atoms, <a href="https://news.mit.edu/2025/famous-double-slit-experiment-holds-when-stripped-to-quantum-essentials-0728">scientists at MIT</a> showed that the behavior of the photon (wave or particle) remained unsettled until they had measured it.



This confirmed Bohr’s belief that observation is not simply a passive act of seeing what already exists, but an active process of creating the very thing being observed.



In other words: Observation changes the system being observed.



This is how markets work, too.



&#8220;Financial markets constantly anticipate events, both positive and negative,” George Soros wrote, “which fail to materialize exactly because they have been anticipated.”



For example: The US labor market is weakening, but because the Bureau of Labor Statistics observes it for us every month, markets have reacted in a way that will change the labor market.



After the BLS report this morning, 10-year Treasury yields fell 20 basis points, and <a href="https://polymarket.com/event/fed-rate-cut-in-2025?tid=1754065758939">Polymarket odds</a> of a Fed rate cut jumped 15 percentage points.



Moves like these can change things: The more that markets anticipate a recession, the less likely a recession becomes.



It works in the other direction, too.



At one point this week, each of the four AI hyperscalers — Microsoft, Alphabet, Amazon and Meta — were valued at over $2 trillion.



In total, the stock market is assigning $10 trillion of market capitalization to those four, based on the observation that they’re likely to be among the primary beneficiaries of next-generation AI.



If so, the act of observing the trend in AI will have played a large part in making AI happen.



Morgan Stanley estimates the four hyperscalers will invest $2.9 trillion in AI capex between 2025 and 2028, but that they’ll be $1.5 trillion short of cash needed to fund it.



Only the massive valuations markets have granted them will make up the difference.



In that sense, what AI becomes will depend, at least in part, on the market’s observations and predictions about it.



Sam Altman, for example, <a href="https://x.com/ns123abc/status/1950806901303754814">predicted</a> this week that we’re on a path to “superintelligence” — self-improving AIs that exceed humans in every domain.



“It&#8217;ll give people incredible superpowers that were sort of science fiction only a couple of years ago,&#8221; he optimistically predicts.



It may already be happening: &#8220;Over the last few months, we&#8217;ve begun to see glimpses of our AI systems improving themselves,” Mark Zuckerberg <a href="https://www.theguardian.com/technology/2025/jul/30/zuckerberg-superintelligence-meta-ai">said</a> on Wednesday, adding that “superintelligence is now in sight.”



The pace of this self-improvement may be about to accelerate.



Also this week, a team of researchers <a href="https://www.semanticscholar.org/paper/AlphaGo-Moment-for-Model-Architecture-Discovery-Liu-Nan/3c721709009511d70b5a1a87aa33dff957df35bc">released</a> an open-source model that “enables AI to conduct its own architectural innovation.”



Experts say this will transform AI research “from a human-limited to a computation-scalable process.”



In other words, AIs will now be bounded only by the amount of computing capacity that humans choose to give them — and the stock market, having observed the trend, is choosing to give them trillions.



Not even Niels Bohr could tell us what the consequences of that observation will be.



Let’s observe some charts and see what else happens.



The AI capex boom:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXco81VtzaDDJ_oU0QHxHEFLVzZAM4h7gbCYTDlaVOLuE1-TlznX_NTrGRrJvlXKQbfx5sRAW6cqbBfWdutDMpkUIClWIX6qgmpQ0PNSbZWOEXdrUXAJxCmR6MjvQ0bD7419bpld?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The Wall Street Journal <a href="https://www.wsj.com/tech/ai/tech-ai-spending-company-valuations-7b92104b?mod=e2twg">documents</a> the surge in capex among the four hyperscalers, which are on pace to collectively spend $400 billion this year alone.&nbsp;



Going all in:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfiBEk6gPS-wB4x19maBkyojgU64dquy-wmXqF7liSmOP9tsOpAhBscGimLUjvs_cwrnqBfnpSOB80Gr8t2V22SrIEc8URuIOzUi7J3TJDJGL_DGOL_JejG_iNPK-jqDoa2P0hfew?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The hyperscalers are both making more money and spending more of it on capex.&nbsp;



This morning’s unemployment data:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeV0Z3l7LxrD_u7kN65oyPZghMj3TRUoh7cycRaIwrFc1GtmWbjTsc2fL7MUtm0armFBHozV5BYHMFYQfMetmxCpV0hGFTKAWbDo9bPv33ulisJ2S_cojnrtTfjPpnQVGVjkJT2?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The US economy is estimated to have added only 73,000 jobs in July. But the shocker in this morning’s report was the 253,000 downward revision to the prior two months, taking the three-month average down to just 35,000. An economy that seemed surprisingly resilient suddenly looks <a href="https://x.com/Markzandi/status/1951283286959071744">unsurprisingly fragile</a>.



Contrary to popular belief…



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdV5U6mDAKg8c9Yxjit792Gi3Ltpt9AWQyXy2C2E2EhFa13islFuPLXASXyrMr7o_ogH2JLkAQ82MociYXftTIEPBorlNDZVCE-S0k0BZU6HGmkUc5dvocJouLWbR-uOcn7GPklsw?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



…the jobs do not seem to be going to China. Data from <a href="https://x.com/JonathonPSine">Jonathon Sine</a> shows that “China shed the equivalent of the entire US manufacturing sector (~15 million jobs) over the last 15 years.”



Inflation estimates are more of a guesstimate now:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdutUzvHyckYT0joxtaI0AzmPX34hCuN38St49CClhvSomA2FUl80MMvU2JgqIHxLj-o3YjhetA4c5CGbWeug3mhM70lwGjISUUW3IrI6Gb-k_ktce2UdotahBG1nqH3E7-QmLv?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



Thanks to funding cuts, the Bureau of Labor Statistics is collecting less inflation data, which means that a bigger portion of CPI is “imputed” (aka, guessed) based on the data it did manage to collect.



Not out of the inflation woods yet:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc3L2WQj9d5QoLIWMsOO7hslLnkaeTDvnOuapYrfe6TLUiEd6DC4ucIXkcHqVBIPC1kZUCNvBwGJPi-sdpX4J6tFapuxBhaWws9_iLnbC-dKT5wu6rf2TCOqcFxxdY1OiOzhAwS?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The two dissenting FOMC voters will feel vindicated by this morning’s weak jobs report. And the president will be even more irate than he was <a href="https://x.com/DavidBeckworth/status/1951014060465786937">yesterday</a>. But it might still be hard for Powell and the rest of the FOMC to agree on cuts when the price of core goods are rising at a 3.75% pace.



The price of copper is down, at least:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXehaPVtLe_dj3srQ7SZRUKEYZz7flLD8UWpcEt7wRYOWYBm-bkugtjzgpsGGO49kSbg6jtNre9vp2Zwia0OFLj988TUSSmCvx1pQj7K6T1x7X61XFEERLAAIirLVgX22mnnx9e9Eg?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



Copper futures fell 20% after it was announced that President Trump&#8217;s latest round of tariffs would exclude metals. That kind of whiplash policymaking is good for volatility traders and bad for anyone trying to run a business that requires copper.



Tariff update:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXckK9zwBADXIeVVTD6vOZbBnM1G3pqlN6Fl_Cv_iavC2PWCrMqhK4EGPERIJJa8VhempXyBx3IYTMlr0dtguk-KcLZJYtM1y5HsnetPwlGPl9WxvL0nVfwUvjPScCBovgCuLjferg?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



The pink line is the overall level of tariffs, according to what’s been announced. The black line is what importers have actually paid. The 10 percentage point difference between the two suggests that most of the impact on the economy is still to come.



Railroads next?



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXezBumsqxdj8JpRbe6uQjciA-WhFBbbMBX56kOLl2M4wG6Jg2oGB0qkNCQ4Qu6f94IL-S9Pq_-7cu3iVXarvPzjiJPBMWvWD4EUK9X14NCvScrp7rdrdGhB4eHSn8U5OKsSufar?key=F6qrqzkW-hiUC_t6nU_yig" alt=""/></figure>



As a percentage of GDP, AI infrastructure capex is already bigger than the internet telco boom, but still has a lot of upside to match the railroad boom.



What will AI become if the hyperscalers spend 6% of US GDP on it? Investors seem determined to find out.



Have a great weekend, observant readers.



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<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



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The Breakdown Newsletter

Friday charts: The observer effect

Jack Kubinec

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



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It’s been a week and a half since <a href="https://blockworks.co/news/jito-upgrade-block-assembly-marketplace">Jito announced BAM</a> (Block Assembly Marketplace), Solana’s most <a href="https://x.com/Lightspeedpodhq/status/1951269192943968490">significant</a> transaction processing upgrade ever.



In my view, much of the public messaging surrounding the upgrade has focused on BAM’s privacy-preserving use of TEEs and ability to give apps better control over transaction execution. What hasn’t been covered quite as much, which both of my guests on the Lightspeed podcast spoke about this week, is how BAM plans to create additional revenue for Solana apps.



BAM plugins are programmable interfaces that apps can use to control how transactions are sequenced. One potential example could be taker speed bumps, a spread-tightening mechanism that the perps DEX Hyperliquid has deployed to great effect.



These plugins will also come with some “TBD fee model,” <a href="https://www.youtube.com/watch?v=nCnxsT5iCyA&amp;t=2301s">Jito Labs CEO Lucas Bruder told me</a>, meaning applications can start generating revenue from the sequencing of transactions through BAM. This value is currently being captured by takers or arbitrageurs in the market, Bruder added.



If BAM works as advertised, plugins could provide applications with a hefty payday.



“What I think we’ll see is applications earning multiples more than validators and stakers,” <a href="https://www.youtube.com/watch?v=oIYN4Xbuw_4&amp;t=1357s&amp;pp=0gcJCccJAYcqIYzv">Blockworks Research Analyst </a><a href="mailto:carlos.campos@blockworks.co">Carlos Gonzalez Campo</a> said.



While Crypto Twitter will probably be none too happy to see more revenue flowing to the likes of pump.fun, keeping applications happy is important if Solana wants to be the <a href="https://blockworks.co/news/solana-market-microstructure-ace">internet’s financial ledger</a>. One of Ethereum’s most successful apps in Uniswap recently created its <a href="https://blockworks.co/news/0xresearch-newsletter-uniswap-layer-2">own layer-2 </a>chain in Unichain, thereby internalizing more value relative to its home chain. And without changes to how value is shared, Solana’s popular apps may someday find it prudent to do the same.&nbsp;



Bruder hopes Solana apps will send this new revenue source back to their native tokens.



“Hopefully [apps] share those fees with the token holders and we&#8217;ll see a mass repricing of Solana DeFi,” Bruder said.



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



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Jito

Jito’s BAM upgrade set to make Solana apps richer

Ben Strack

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Coinbase had a down second quarter from a revenue perspective, but remains undeterred in ultimately trying to bring every asset class onchain.&nbsp;



First, some numbers.



The company’s total revenue of $1.5 billion in Q2 was 26% lower than the prior quarter. Transaction revenue took the biggest hit, dropping 39% quarter over quarter to $764 million amid lower volatility. Subscription and services revenue fell 6% to $656 million.



Worth noting: Competitor Robinhood also saw April-June transaction revenue plummet — dropping 36% to $160 million.



COIN shares were trading around $318 in the early afternoon — down 16% on the day. HOOD’s stock price was pretty flat halfway through the session.



We noted <a href="https://blockworks.co/news/coinbase-outlooks-mixed-q2-2025-earnings/">nuanced outlooks</a> from analysts heading into Thursday’s Coinbase report. And indeed — despite the overall revenue decline — the company claimed some victories.&nbsp;



Its stablecoin revenue, for example, grew 12% from the prior quarter to $332 million as average USDC balances held in Coinbase products reached $13.8 billion.



<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">Coinbase&#39;s stablecoin revenue is up 44% year-to-date vs. the same period last year, despite 100bps of rate cuts since then. <a href="https://t.co/Z1BoNH8Bhl">pic.twitter.com/Z1BoNH8Bhl</a>&mdash; Ryan Rasmussen (@RasterlyRock) <a href="https://twitter.com/RasterlyRock/status/1951023174575157418?ref_src=twsrc%5Etfw">July 31, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Coinbase expects stablecoin revenue momentum to continue given USDC’s new all-time high market cap in July. The company is thus projecting higher Q3 subscription and services revenue ($665–$745 million).&nbsp;



Executives also said they expect July transaction revenue to be $360 million — already nearly half of Q2’s total.



Beyond the numbers, CEO Brian Armstrong on Thursday labeled the number one thing Coinbase’s customers want from the exchange: enabling many more assets to trade in a “one-stop shop” on crypto rails. Coinbase is calling it the Everything Exchange.



Integrating decentralized exchanges into its app will help on the crypto-tokens front. And now Coinbase is working toward bringing tokenized equities “to meet the moment in this new regulatory environment.”



To that last point, Armstrong’s comments came just hours after SEC Chair Paul Atkins made a <a href="https://blockworks.co/news/sec-chair-atkins-project-crypto">speech of his own</a>.&nbsp;



<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 portion of SEC chair Paul Atkins&#39; response to yesterday&#39;s White House report. &quot;Project Crypto&quot; underway &#8230; <a href="https://t.co/yO5g0S806i">pic.twitter.com/yO5g0S806i</a>&mdash; Ben Strack 🟪 (@strack_ben) <a href="https://twitter.com/strack_ben/status/1950975816323493918?ref_src=twsrc%5Etfw">July 31, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



And Atkins’ comments followed the White House&#8217;s release of its “Strengthening American Leadership in Digital Financial Technology” <a href="https://www.whitehouse.gov/wp-content/uploads/2025/07/Digital-Assets-Report-EO14178.pdf">report</a>.



The report acknowledges tokenization benefits like “the programmability and peer-to-peer transferability of assets, operational efficiencies…and increased transparency relative to traditional finance markets.”&nbsp;



All things much of the industry <a href="https://blockworks.co/news/stablecoins-tokenization-blackrock-galaxy-das">has already heard</a>, sure — but now the government is saying it formally.&nbsp;



At the same time as Coinbase’s update, Strategy reported its Q2 results. That included $10 billion of net income and ample forward-looking commentary.



Executives outlined a multi-year plan to retire its outstanding convertible debt and replace it with a preferred stock-focused funding model as it continues to accumulate bitcoin. Strategy’s holdings stand at 628,791 BTC.&nbsp;



Strategy’s corporate treasury (~$74 billion worth of BTC) is the fifth-largest in the world, Benchmark analyst Mark Palmer pointed out in a Friday note. Strategy CEO Phong Le envisioned a scenario in 3-5 years where the company’s capital base surpasses that of Berkshire Hathaway ($348 billion).



Palmer raised his MSTR price target to $705, which assumes BTC will hit $225,000 by the end of 2026. MSTR shares were going for $376 at the time of writing — down 6% on the day.



There’s a taste of where these chief crypto stocks stand. No financial advice here.



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Coinbase

Coinbase eyes ‘Everything Exchange’ despite Q2 revenue decline

Donovan Choy

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/0xresearch" target="_blank" rel="noreferrer noopener">subscribe</a>.



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The 13-year-old design software company Figma IPO’d on the NYSE yesterday.



As I write this edition, Figma’s stock is trading at $115. That’s a ~250% pop from its $33 opening price — above Circle’s June <a href="https://blockworks.co/news/circle-shares-nyse-day-one">IPO pop of 168%</a>, and far above the average 17% day-one IPO pop of past decades.



Great success! But according to the Crypto Twitter commentariat, that’s “<a href="https://x.com/j0hnwang/status/1950957474359488614">legalized theft</a>.”



Specifically, theft by the investment bankers from the retail public.



The general idea underlying this criticism is that:



Investment banks deliberately underprice IPOs below fair value, then allocate shares to their preferred hedge funds and clients. These guys flip them for an easy profit at the expense of unsophisticated retail investors that naively buy into the IPO hype once the stock is already trading higher.



Retail investors lose because IPO offer prices are determined by private markets (as opposed to, say, Hyperliquid pre-launch perps that allowed price discovery pre-PUMP ICO).



Plus they <a href="https://x.com/nearcyan/status/1951012496380404021">don’t</a> get to buy in early — Wall Street does.



This status quo isn’t all that different to memecoins.



Recall the Javier Millei-affiliated <a href="https://blockworks.co/news/libra-latest-solana-memecoin-episode">LIBRA memecoin launch</a> in February. As my colleague David Canellis <a href="https://blockworks.co/news/libra-memecoin-sausage-gross">wrote</a>:&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8230; 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.
</blockquote>



It was kind of an open secret in crypto anyway.



But in TradFi, it’s all perfectly legal as per capital market rules. Namely, the Securities Act of 1933, which forces companies to lock in a fixed public offer price before trading.&nbsp;



Like the genesis of most government regulations, the Securities Act wasn’t intended to enrich Wall Street at retail’s expense: It started out as well-meaning and targeted real abuses by bucket shop salesmen in the 1930s.



But today’s capital market laws hard-wire pricing power and share-allocation discretion into the traditional IPO.



<h2 class="wp-block-heading">Project Crypto</h2>



SEC Chair Paul Atkins unveiled yesterday <a href="https://www.sec.gov/newsroom/speeches-statements/atkins-digital-finance-revolution-073125">Project Crypto</a>, an initiative <a href="https://blockworks.co/news/sec-chair-atkins-project-crypto">meant to achieve</a> “President Trump’s vision of making America the crypto capital of the world.”



It reads almost like a Christmas wishlist for the industry: most crypto assets will not be securities, create exceptions and safe harbors for ICOs and airdrops, protect software engineers, protect self-custody, make onchain software part of securities markets, etc.



<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 SEC&#39;s new &quot;Project Crypto&quot; is the most bullish thing I&#39;ve seen in a long time from a regulator. Read the speech, it&#39;s incredible: * Almost all tokens are not securities * Want to discourage decentralization kabuki theater * Americans should not get excluded by IP/VPN blocks…&mdash; Haseeb ＞|＜ (@hosseeb) <a href="https://twitter.com/hosseeb/status/1950966199116009656?ref_src=twsrc%5Etfw">July 31, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



But the devil’s always in the details.



And no one scrutinizes the details, except for the lobbyists and lawyers at the policymaking table.



How will this wishlist interact with existing laws? What will they morph into 10 or 50 years from now?



No one knows — just like how no one could’ve expected the Securities Act of 1933 to enable “legalized theft” today.



Government regulations are bad not because they were badly designed or that policymakers are evil per se, but because they are created and exist in a set of institutions that are static.



We like to think of the “government” as a precise machinery that voters can modulate to create laws that thwart specific problems. We like to think the government would remove laws that are deemed bad.&nbsp;



But democracy is more messy in practice. In reality, policymakers are saddled up with special interests, and uninformed voters dominate elections.



It’s what economist Mike Munger calls a “<a href="https://fee.org/articles/unicorn-governance/">unicorn problem</a>.”



Atkins’ words today are a breath of fresh air in the post-Gensler era. But don’t be surprised when today’s rules eventually harden around whoever learns to game them best. It’s just politics.



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

0xResearch Newsletter

Imagine if Figma’s IPO had Hyperliquid’s pre-launch perps

David Canellis

This is a segment from the Supply Shock newsletter. To read full editions, <a href="https://blockworks.co/newsletter/supply-shock" target="_blank" rel="noreferrer noopener">subscribe</a>.



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When it comes to Bitcoin mantras, “not your keys, not your coins” is as pure as it gets.



But there are levels to it. Sure, you might be self-custodying, but you might still be required to trust a wallet explorer, for example, to tell you your BTC balance.



Run your own full node, however, and you’ll only ever need to trust your own copy of the Bitcoin ledger.



So here&#8217;s one of Bitcoin’s oldest cautionary tales about why the above still matters, a decade and a half later.



Picture this: It’s mid-2011, and there are two major exchanges to buy and sell bitcoin: Mt. Gox, operating out of Japan with about 80% global market share, followed by TradeHill, based in California.



Eastern Europe had its own primary venue: Bitomat from Poland.&nbsp;



Bitomat’s trading volume was small compared to Mt. Gox, only about 17,000 BTC per <a href="https://web.archive.org/web/20110604053716/http://bitcoincharts.com/markets/">month</a> — far below Mt. Gox’s 1 million BTC (worth $7.5 million at the time). But it was still enough for Bitomat to be considered the third-largest bitcoin trading platform in the world.



Until trouble struck.&nbsp;



On August 1, 2011, Bitomat’s admins disclosed the worst had happened: They had accidentally deleted the wallet.dat file for the platform’s hot wallet, immediately losing access to its users&#8217; bitcoin, which coincidentally amounted to 17,000 BTC.



The exchange itself had been paused for about a week by that point. Bitomat’s administrator, Bartek Szabat, had noticed that the main server — powered by an Amazon EC2 virtual machine — had been running at full capacity, and opted to boost its allocation of RAM.&nbsp;



That would’ve required the virtual machine instance to be rebooted.&nbsp;



But the admin had forgotten to enable persistent storage in the cloud server’s configuration settings. So, when the server was rebooted after adding more RAM, the local storage of the virtual-machine instance itself, which contained the exchange’s only wallet.dat file, was wiped, taking the private keys of Bitomat’s users along with it.&nbsp;



Amazon Web Services was unable to recover the file.



In an open letter to the Bitcoin community, Szabat asked for help in investigating the situation (the post has been automatically translated and edited for clarity):&nbsp;



“At the moment, I am unable to clearly determine the cause of crashes. I suppose that it is the result of actions of third parties, which are causing the server to crash to hide their illegal activities, or intentionally wanting the website to disappear,” he wrote.&nbsp;



“If my suspicions are confirmed, I will tell the police and prosecutors, [and] at the same time, take possible action through which it would be possible to recreate lost data. But I need to interact with the server&#8217;s owner [Amazon Web Services], and that, as I mentioned above, is difficult…&nbsp;



“At the same time, I am counting on your help in solving the problem. I realize that the situation is very difficult, and you fear for the fate of your BTC. We are constantly working on a solution to the crisis, and I&#8217;m open to your suggestions.”



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeB6CCaazWIdtzRy4vveH17ALpny7F86E8JlkG3ChzCKRO6OnyDAKCdZEFr1nkZGWzVS6yhgTpkiSa9f9jt4EzDuY9BHxPv861xadQlLaPs4c1J2igSnqkxQG76oggIrhFyywZhqg?key=QW7c4J6OZHHxNOfUyB3E4A" alt="" style="width:700px;height:auto"/><figcaption class="wp-element-caption">Hacker News users had the right idea in July 2011 — only keep bitcoin in exchanges for as long as you need to.</figcaption></figure>



Szabat then offered to sell Bitomat the euro equivalent of 17,000 BTC ($220,000 then, $1.95 billion today), in an overt effort to make users whole.&nbsp;



“I wish to inform you that I had several conversations with potential investors from home and abroad,” he said, and directed anyone interested to reach out via email.



It was actually Mark Karpeles and Mt. Gox that answered the call. The deal meant Bitomat would shut down altogether and its domain would instead forward existing users to a Polish-language localized version of Mt. Gox, where they could log in as normal and trade bitcoin via a new Polish złoty pair.



“The acquisition of Bitomat.pl is a windfall for its users, especially in the wake of such a sudden and unsettling event. Also, for the first time ever on a bitcoin exchange, users are now able to access a substantially larger market with their local currency, so we think it’s a happy ending all around,” Karpeles <a href="https://siliconangle.com/2011/08/11/mtgox-acquires-bitomat-pl-in-bid-to-restore-confidence-in-bitcoin-market/#:~:text=Thursday%2C%20August%2011%20trading%20on,on%20the%20new%20site%20seamlessly">said</a> at the time.&nbsp;



Mt. Gox had only months earlier suffered through two of its many hacking incidents, one for 80,000 BTC ($~65,000) when a thief was able to copy the platform’s own wallet.dat file, and another for 300,000 BTC ($~1.5 million) two months later, with the hacker eventually returning all but 3,000 of the stolen coins.&nbsp;



Of course, Mt. Gox would go completely belly-up nearly three years later, potentially affecting any Bitomat users who had migrated over for a second time.&nbsp;



There’s no question that modern day crypto exchanges, at least the top-tier ones, are different beasts compared to the earliest platforms like Bitomat and Mt. Gox. But for all their assurances, we can never really know for sure how well exchanges are storing user bitcoin.&nbsp;



This is both the coolest and hardest part of using Bitcoin: It takes trust to trade bitcoin and significant operational security to store it yourself (although multi-sigs do help). Anything else is just managing exposure.&nbsp;



If it were easy, everyone would do it. Until then, in exchanges we trust.



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<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



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<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Bitcoin

The exchange that accidentally deleted its 17K Bitcoin wallet file

Katherine Ross

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



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Comparing the slew of new digital asset treasury (DAT) companies to the ICO era is “apt,” Electric Capital’s Avichal Garg told Empire co-hosts Jason Yanowitz, Santiago Santos and Rob Hadick on <a href="https://blockworks.co/podcast/empire/7ffa3c40-6e62-11f0-a847-7f882b11347f">today’s weekly roundup</a>.&nbsp;



“ I think the most interesting question here is how long does it last? And is any of it actually durable?” he asked.&nbsp;



“Most of [the capital] doesn&#8217;t get anywhere, but actually, we got Ethereum outta the ICO cycle, right? You got a $500 billion asset that has had a transformative impact, right?” he continued.&nbsp;



But Garg isn’t fully on the “this is all bad” train. He believes that certain implementations are going to be very interesting. 



<iframe loading="lazy" width="560" height="315" src="https://www.youtube.com/embed/PaVPrpVcVbE?si=zouWPSgZE9_6ueOU" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen></iframe>







Obviously, ETH, SOL and bitcoin will continue to dominate. But some of the smaller assets that are being bought up by various treasury companies may not have the same staying power.&nbsp;



“ Some of the longer-tail assets, I think, [are] gonna be very hit or miss. Some of them are clearly gonna not be around, and some of them actually have a shot of being around, because the exposure into a new capital market is sort of like front-running an ETF,” Garg explained.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXccMmREvUkmZ_WTG58wY364w_0vOSTOFUvM4IMxQYWo0FOi3R1ZE4V3_LzkU36rfiwe8qmhKs2qiSzMZr7Y1dW5rea47oYZWwatIAMLdgkOKF83vd5XZ_DOUBK6Zm0TGGcYBsOA-g?key=Yx0Tl2Txu21qGhcaj7BIFw" alt=""/><figcaption class="wp-element-caption">Source: Blockworks Research</figcaption></figure>



Hadick added that he thinks there’ll be a lot of M&amp;A and capital activism, which means that the door for drama is wide open, depending on who and how folks approach activist stakes.&nbsp;



He also noted that we’re already seeing exhaustion in the market around these things, which is not super surprising given the sheer amount of announcements we’re getting weekly.&nbsp;



“ You clearly don&#8217;t need 30 of these, right? At the end of the day, the amount of copycats that are popping up right now is just astronomical, honestly,” he told the Empire crew.&nbsp;



The other thing to add — a very good point from Santos&nbsp;— is that hedge funds generally are not able to buy ETFs, which means that they’re closely watching these treasury companies and looking for opportunities they otherwise wouldn’t have.



“Other than retail, hedge funds that want to express a view on anything will buy these DATs. And I think that&#8217;s where you could see this [continue] for an extended period of time where you have a lot of demand coming in that way,” Santos added.&nbsp;



Though, as Blockworks’ Dan Smith noted, the ETH treasuries saw low trading volume on Thursday.



<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">Yesterday was the lowest trading volume day for ETH treasury companies since the initial announcements The group combined for $1.4b, down 76% from the recent highs <a href="https://t.co/WDhUSHsqRs">pic.twitter.com/WDhUSHsqRs</a>&mdash; Dan Smith (@smyyguy) <a href="https://twitter.com/smyyguy/status/1951209977856823739?ref_src=twsrc%5Etfw">August 1, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



I’m still wary of one too many DATs causing the whole thing to crumble, but I can’t argue with Hadick, Garg, or Santos, who have some very valid points.&nbsp;



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



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<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
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Empire Newsletter

Why the appetite for DATs isn’t waning yet

This is a segment from The Breakdown newsletter. To read more editions, <a href="https://blockworks.co/brand/the-breakdown">subscribe</a>.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
&#8220;What unites people? Armies? Gold? Flags? Stories. There&#8217;s nothing more powerful in the world than a good story.&#8221;



— Tyrion Lannister
</blockquote>



<a href="https://blockworks.co/analytics/launchpads">Blockworks Research launchpad dashboard</a>



Here’s an incredible chart from Blockworks Research:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeXiGhOCL9YR33PP0PCMop0-hVjhw_i4zo868Zzt6FlzOiYxkG-_AyfgZgK-T1scrBx38uaefUW7PWxQFNO2L-BkaFi6bi2tc7grQ4gAGDr7O8aT_AsNL4EfxHvlBbM-MUNuQMbPQ?key=yoZ4ihdHd6uoHnz_rRLS0g" alt=""/></figure>



Incredible because it illustrates just how fast fortunes can change in the low-moat business of crypto.



As measured by trading volumes, Pump.fun (in green) went from a nearly 100% share of the market for launchpad tokens on June 9 to under 10% now.



But the even more incredible part might be what happened in between: the Pump.fun ICO.



Has there ever been a similar case where the underlying business of a company was collapsing in the same moment that investors were eagerly sending the company their money?



The closest I can find is when Blue Apron IPO’d in 2017, just a week after Amazon bought Whole Foods.&nbsp;



The prospect of Amazon delivering groceries the way it delivers everything else suddenly made Blue Apron’s business of delivering meal kits seem doomed.



It was — and most investors seemed to know it. The IPO was re-priced sharply lower, the stock immediately fell even further than that and the company was eventually acquired for less than one-tenth its valuation at IPO.



Crypto investors, by contrast, seemed weirdly eager to buy into a similar setup, with Pump.fun in the role of Blue Apron and Bonk.fun in the role of Amazon.



Bookmark the dashboard to see if they can rewrite the ending.



<a href="https://blockworks.co/analytics/treasury-companies">Blockworks Research DAT dashboard</a>



Another new Blockworks Research dashboard is the best way to follow the story of crypto treasury companies without having to pay attention to crypto treasury companies.



On multiple metrics, the story seems to be losing steam.



The collective mNAV (multiple of net asset value) for treasury companies investing in ETH and SOL, for example, has fallen below the mNAV for bitcoin treasury companies — which might be a sign that the MicroStrategy phenomenon is not as easy to replicate as its emulators seem to think.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcC-by3m_pod8uIc4XUEfcSICDHwgq0e-kSsPHcbhqVAJjae_OXwFGYpUr86hlr1OCCFeQuauhgHwu1ZHKWVlhegOjIqjdumHvrX8j6NKtq0y6XYNLg846A-T0-r_oBbWOtNGDzCQ?key=yoZ4ihdHd6uoHnz_rRLS0g" alt=""/></figure>



Personally, I blame this week’s announcement of a <a href="https://www.businesswire.com/news/home/20250728220301/en/Mill-City-Ventures-III-Ltd.-Announces-%24450000000-Private-Placement-to-Initiate-Sui-Treasury-Strategy">SUI treasury company</a>, which has surely taken things too far.&nbsp;



What would Michael Saylor say???



<a href="https://www.moneyness.ca/2023/08/who-are-money-launderers-in-tornado.html?m=0">Someone laundered the money</a>



Tornado Cash has long been a cause célèbre in crypto circles, mostly on the basis that code is speech.



The case that the prosecution just finished making against co-founder Roman Storm, however, is not that he wrote the code, but that he owned and controlled Tornado Cash.



Whatever the merits of that argument, it’s interesting to think through the implications should the jury return a non-guilty verdict for Storm — because someone laundered the money.



“Somewhere in the Tornado Cash stack,” JP Konig <a href="https://www.moneyness.ca/2023/08/who-are-money-launderers-in-tornado.html?m=0">wrote</a> when Storm was indicted, “someone is committing the crime of money laundering.”



The US government says that someone was Storm and his co-founder, Roman Semenov.



If a jury disagrees, it presumably means someone else was responsible, because no one disputes that money was indeed laundered.



“Crooks depositing dirty ether are still ending up with laundered ether, so there is by definition a ‘someone’ in the stack who is providing laundering services to them,” Konig wrote.



Could that someone be the users of Tornado Cash?



“A person who is aware that criminals are depositing dirty money into Tornado Cash smart contracts, yet decides to deposit their own funds into those same smart contracts…ticks all the boxes for a money laundering charge.”



No user of Tornado Cash could plausibly claim ignorance of its use for money laundering. So, if the co-founders don’t take the rap, users might have some explaining to do.



“Counterintuitively, the indictment [of Roman Storm] seems like a win…for fans of decentralized finance, or DeFi,” JP Konig concluded.



If so, a win for Roman Storm could, counterintuitively, turn into a loss for DeFi.



<a href="https://www.nasdaq.com/events/consensys-rings-closing-bell-celebrate-ethereums-10th-anniversary">Ethereum closing bell</a>



The 10th anniversary of Ethereum’s founding was celebrated yesterday with a ceremonial ringing of the closing bell for Nasdaq.



It’s surprising just how unsurprising that seems.&nbsp;



Crypto, conceived as an alternative financial system, is suddenly most celebrated by the traditional system it was meant to replace.



Crypto is worth more on the stock market than it is in crypto markets; stock market investors value Circle at 10x what crypto investors probably would have; crypto IPOs are hotter than crypto ICOs.



And no one seems particularly surprised about it.



TradFi is having a crypto moment. I get it.



But what’s unclear to me is whether crypto is changing finance or finance is changing crypto.



In the case of Ethereum, the community has been executing on its technical roadmap, but the token was languishing, which made people question the roadmap.



Now, the token is hot again, but only because the stock market has somewhat arbitrarily decided to like it for reasons unrelated to its technical development.



Is that good?



In investing, everything is a story and the stories determine what kind of businesses get built.



Now, Wall Street seems to be writing a new story for ETH and that might affect what kind of Ethereum gets built.



Jim Cramer, for example, says he’s buying ETH as a hedge against inflation and if that’s a story that catches on, it might just become that.



Ethereum isn’t a company, of course, so maybe it’s exempt from the perception-is-reality dynamics of TradFi.



Still, my guess is that celebrating Ethereum’s 10th birthday on a stock exchange will have an effect on what it becomes by its 15th or 20th.&nbsp;



<a href="https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-the-presidents-working-group-on-digital-asset-markets-releases-recommendations-to-strengthen-american-leadership-in-digital-financial-technology/">A golden age of digital assets is coming</a>



In a statement this week, the White House declared its ambition to usher in “a golden age of crypto,” along with a report on the regulatory and legal changes that will make this possible.



The 160-page document makes clear just how committed the administration is to digital assets, detailing a broad suite of industry-friendly policies that I have no doubt will go a long way toward realizing that vision.



But the golden age of crypto will begin when none of that matters.



Crypto will only be ascendant when it’s routinely exchanged peer-to-peer, not when “regulators provide clarity regarding BSA obligations and reporting.”&nbsp;



When people routinely pay for everything in crypto, without any need for on- and off-ramps&nbsp; “with built-in AML and KYC protocols.”



And when DeFi is sufficiently self-sovereign that it can safely operate without studying the “AML/CFT obligations of actors within the decentralized finance ecosystem.”



In fairness, the full report refers to &#8220;digital assets” throughout and the statement frames the White House’s goal as “positioning America as the leader in digital asset markets.”



Which is good. 



I hope it really does usher in a golden age of digital assets.  But whether that, in turn, leads to a golden age of crypto…is an entirely different question.



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Thursday links: Dashboards, money laundering and a golden age of ‘crypto’

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



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SEC Chair Paul Atkins dropped a crypto market bombshell this morning.



“Today I am announcing the launch of ‘Project Crypto’ — a Commission-wide initiative to modernize the securities rules and regulations to enable America’s financial markets to move onchain,” Atkins said in a <a href="https://www.sec.gov/newsroom/speeches-statements/atkins-digital-finance-revolution-073125">speech</a> to the America First Policy Institute.&nbsp;



Atkins’ talk came a day after President Trump’s crypto working group released its report, which contained a <a href="https://www.bloomberg.com/news/articles/2025-07-30/trump-crypto-group-unveils-proposals-to-boost-digital-finance">slew</a> of fairly boring crypto-linked policy suggestions.&nbsp;



Atkins has injected some excitement with his pledge to move financial markets onchain, though his speech was somewhat light on the particulars. Will onchain markets run alongside traditional financial rails, or replace them altogether? Will those outside the US be allowed to invest? Curious observers will have to wait on more concrete answers.



“No one knows what it means but [it’s] provocative,” a host of crypto podcast The Rollup <a href="https://x.com/ayyyeandy/status/1950960636239765729">said</a> of Atkins’ pledge on X, channeling Blades of Glory.&nbsp;



Nonetheless, Atkins’ onchain-markets line feels like a new high-water mark in the crypto industry’s repaired marriage with US regulators. It’s one thing to drop a bunch of onerous lawsuits, as the SEC has. It’s another thing altogether to begin the process of moving the world’s largest financial markets onchain.



In other words, crypto replacing TradFi rails is quickly going from a crypto investor’s pipe dream to a crypto investor’s PIPE dream.



Blockworks co-founder Mike Ippolito asserted onchain financial markets are “[m]assively bullish Ethereum,” which makes sense given retail giant Robinhood’s planned move to begin <a href="https://blockworks.co/news/robinhood-l2-staking-us">tokenizing US equities</a> on Arbitrum.



But Ethereum’s chief competitor in Solana will be looking to capitalize on the major shift in regulatory winds as well.



The Solana Policy Institute lobbying group has already begun <a href="https://www.theblock.co/post/358641/solana-phantom-orca-superstate-compliant-tokenized-securities-sec">pitching</a> the SEC on a framework to compliantly bring tokenized securities onchain. The SPI asked the SEC for exemptive relief for blockchain infrastructure, which would essentially allow crypto infrastructure to operate outside of existing regulations. Based on Atkins’ speech this morning, it seems like the SEC may be happy to oblige.



“I&#8217;m absolutely blown away by the breadth of the ambition of the agenda laid out in Chair Atkins&#8217; speech. Project Crypto, led by the SEC, is going to revolutionize financial markets generally, and ensure that the US remains at the forefront of Internet Capital Markets,” Solana Policy Institute CEO <a href="mailto:miller@solanapolicyinstitute.org">Miller Whitehouse-Levine</a>, who attended Atkins’ speech today, said.



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</ul>

institutional adoption

SEC Chair Paul Atkins pledges to move financial markets onchain

Felix Jauvin

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Fed Chair Jerome Powell did quick work in yesterday’s FOMC meeting to quell any speculation about a September rate cut.&nbsp;



With no meeting until September, optionality to guide toward a cut during next month’s Jackson Hole symposium, and two more jobs reports and inflation reports to look at before the next meeting, there was very little incentive for Powell to signal any <a href="https://blockworks.co/news/dovish-fed-fomc-july-2025">sort of dovishness</a>.&nbsp;



As the dust settled, odds of a rate cut in September lowered from 58% to 39%.&nbsp;



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeEmCzJqEJLR8Xveli0iBX3Ir-HjqZvRqZpulVQzONVkYdX42y5U40IVzn3LQJd9WImZgdBaUI8sMiYcFoFUytYJMQ-Ly16mHI1b2wiNidhDGBKXmh_22a5gS8ebzhb1mMYVtMaDw?key=ydIfj8BMlBf4wg6CCFVUAQ" alt="" style="width:669px;height:auto"/></figure>



Despite the hardline stance against any sort of easing from Powell, the committee was much less aligned beneath the surface about the path of policy.&nbsp;



For the first time in 30 years, we saw two FOMC governors dissent on the decision. Governor Waller and Governor Bowman both dissented to cutting rates at this meeting.&nbsp;



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcNdK1eKksKWVlbFWkNPH-OxFkBogla9ZnugPAABnlR8kGbhT5oln2MAxQDBbrKuDr0vdQG4wKtqicpWI3uHu1Huc2tkh2YHXzXtPHRjHR3shPzRWQ_1iF0OvTtkGR5V_M-_5R2?key=ydIfj8BMlBf4wg6CCFVUAQ" alt="" style="width:660px;height:auto"/></figure>



A dissent of this magnitude highlights the fork in the road in the context of <a href="https://blockworks.co/news/fiscal-dominance-isnt-about-interest-rates">US monetary policy</a>.



Governor Waller has advocated for preemptive insurance cuts due to what he sees as emerging risks in the labor market and a high conviction that tariff inflation will be transitory.&nbsp;



Contrasting the unemployment rate with the “jobs hard to get less jobs plentiful” data point, you can see where he’s coming from regarding emerging risks to the labor market.&nbsp;



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeq68aczE-V2W9xmZpF8kzUX_-1BHwNcpyJoSfiJw3yQYSo8A8eLAe8cy0cJy-DCRLS8gtqjUQ93oqywDEDdAynK7InaJZR0uwwcSUtX41P3BdFglgJFvNpJaYuYBJh0pAFs5O6?key=ydIfj8BMlBf4wg6CCFVUAQ" alt="" style="width:694px;height:auto"/></figure>



That said, it’s clear that inflation is starting to tick up due to tariffs. Today we received core PCE data (the Fed’s preferred inflation metric), and no matter which way you try to annualize the data, it’s clear that inflation is skewed higher, not lower. <img loading="lazy" decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXf0Hdc-YYMKirK4ZspiM03yLv2PEU0LIHoUoV8YbWZjyKfV9tfkDuDNrTaOZ0x6HwwsbKtdJcOyVv31xMFpBDObkm1nKrkXj6CZVqw7ou6dGHZh0hW0MkHccKxmTCA5nNV0n-ukSQ?key=ydIfj8BMlBf4wg6CCFVUAQ" width="624" height="387">



Picking apart services inflation from goods, it becomes crystal clear that the stickiness of inflation is being manifested by higher goods inflation brought on by tariffs. This is quite different from the past two years, where goods were outright deflationary and it was services propping things up:



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXe6H76xOKkY0ckrl2tFEf7NN6F-YjNzVfr4xQPOX9my5pu3sSty73CxLbBybK4dhXpnMmSCXk5AT8TUmr9-6B2qioJSw9xc8EqXcRuiIIfGBvz1OoMipSgE4t5MAKjrAnV0nnVmHQ?key=ydIfj8BMlBf4wg6CCFVUAQ" alt="" style="width:635px;height:auto"/></figure>



This combination — paired with continued political pressure for it to cut rates —&nbsp;puts the Fed in <a href="https://blockworks.co/news/inflation-breakevens-eroding-fed-independence">a tough place</a>.&nbsp;



When Powell was asked about whether he was willing to “look through” tariff-related inflation as a one-time price adjustment, he sternly responded that “by not hiking rates right now, we already are.”&nbsp;



That sounds like a shot across the bow directly at the Trump administration. As we finish off the data-heavy week, tomorrow’s jobs report — if it comes in hot — could well be the nail in the coffin for any potential rate cut in September.



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Federal Reserve

Powell remains resolute amid dissents

Molly Jane Zuckerman

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NFTs, meet the Labubu —&nbsp;your worst enemy.



The possibility of crypto has long led artists to dream of creating characters that become universally beloved while also making a ton of money.



It&#8217;s not an impossible fantasy. It&#8217;s at the heart of pretty much all NFT collections, and no matter what the creators say about their mission to build community, money is the bottom line.



The blueprint for obsession already exists —&nbsp;look at Pokémon, My Little Pony, Yu-Gi-Oh!, Beanie Babies. People have proven they are willing to spend probably too much money and too much time collecting many versions of cute little things. That’s a given.&nbsp;



And yet, essentially all NFT collections have failed at creating lasting public interest in their version of “cute little things,” perhaps with the exception of Pudgy Penguins and their Walmart plushies.&nbsp;



But they’re clearly no Labubus.



It’s so humbling to see a completely non-blockchain, non-NFT, non-crypto collectible do what NFT collections have been trying to do for years, essentially overnight.



Labubus, sinister yet cute tiny monsters, were created by Hong Kong-Belgian artist Kasing Lung back in 2015. They only became the phenomenon they are today after partnering with toymaker Pop Mart for mass distribution in 2019. BlackPink’s Lisa (arguably one of the world’s largest popstars) wearing a Labubu on her purse in April 2024 did not hurt.



<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">Our biggest FAN. <a href="https://twitter.com/hashtag/LISA?src=hash&amp;ref_src=twsrc%5Etfw">#LISA</a> <a href="https://twitter.com/hashtag/LABUBU?src=hash&amp;ref_src=twsrc%5Etfw">#LABUBU</a><a href="https://twitter.com/hashtag/BLACKPINK?src=hash&amp;ref_src=twsrc%5Etfw">#BLACKPINK</a> <a href="https://twitter.com/search?q=%24labubu&amp;src=ctag&amp;ref_src=twsrc%5Etfw">$labubu</a><a href="https://twitter.com/hashtag/labubuOnSol?src=hash&amp;ref_src=twsrc%5Etfw">#labubuOnSol</a> <a href="https://t.co/kzAUTATJaG">pic.twitter.com/kzAUTATJaG</a>&mdash; Labubu Fans (@labubufans) <a href="https://twitter.com/labubufans/status/1928724825733845398?ref_src=twsrc%5Etfw">May 31, 2025</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



What makes it such a laugh riot to me, an NFT skeptic, is that beloved worldwide phenomenon Labubus, physical plushies, can attribute their success to accidentally following the NFT “guide to success” that has failed so miserably with “digital” plushies.&nbsp;



What’s that guide? Rarity, exclusivity, community.



Labubus often come in “blind boxes,” meaning that it’s a crapshoot what your Labubu will look like. As Psychology Today <a href="https://www.psychologytoday.com/nz/blog/the-mind-of-a-collector/202507/what-labubu-dolls-say-about-us">writes</a>,&nbsp;



“This uncertainty is not unlike a slot machine, which taps into our brain’s reward circuits. A limited edition of ‘secret’ Labubus can spark joy, and even an obsession. Then, collecting is more than acquisition; it becomes a ritual, a source of community, and possibly a point of pride.”



This sounds like the “About” section on every failed NFT collection’s website, right after they explain their rare attributes, surprise mint schedules, and link to their community Discord.&nbsp;



More celebrities besides Lisa have more recently been spotted with a Labubu accessory —&nbsp;Rihanna, Kim Kardashian and Dua Lipa, to name a few.&nbsp;



And while some of the more well-known NFT collections did have their celebrity followers too (most notably Justin Bieber’s Bored Ape and Jay-Z’s CryptoPunk), we now cringe when we look back on the celebrity-studded NFT craze. Nobody is cringing that hard at Labubus — yet.



Yes, Labubus are probably also over-hyped, and yes, it is funny to see Labubus at both the playground and the bar. But they might’ve unlocked the long-lasting charm that no NFT collectible has come close to achieving.&nbsp;



Why am I so certain that you’ll never see a Pudgy Penguin bag charm on a Kardashian arm anytime soon?



There’s a whimsy to the Labubu that has always eluded NFT art. Maybe it’s the whiff of the cash grab that surrounds all NFT art, even when it comes to the coolest and cutest of the digital creatures. Maybe it’s that NFTs are inaccessible to anyone who isn’t hip to the technology.&nbsp;



There’s no denying the fact that Labubus have made it where NFTs have so far failed.



Let’s just hope that Labubus don’t come to the blockchain and prove me wrong.



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Labubus have succeeded in every way that NFTs have failed

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I’m a Firefox user. I say that with pride and shame.



Pride because I’ve stayed loyal to a browser that once upon a time was the “cool” alternative to Internet Explorer.



Shame because I know the world has moved on to Chrome.&nbsp;



The irony is that despite my “loyalty” to Firefox, it only exists thanks to Chrome.



85% of the Mozilla Foundation’s revenue ($570 million) comes from a revenue-sharing agreement with Google, where Mozilla takes a share of ad revenue generated by Google searches from Firefox users.



Google also pays out billions to OEMs like Samsung, Motorola and AT&amp;T to ensure Chrome (and Google Search) is preinstalled on their hardware devices.



It’s the price Google pays for maintaining the browser’s dominant (~70%) market share.



It was also always the plan. During Chrome’s 2008 launch, Sundar Pichai <a href="https://www.promarket.org/2024/08/08/chrome-is-the-forgotten-fulcrum-of-googles-dominance/">stated</a> upfront that Google’s core business depends on dominating the browser market.



If Google doesn’t control the browser market, less people are Googling, which means less ad revenue.&nbsp;



In other words, it all comes down to owning the end user.



Now Chrome’s decades-long dominance may be facing its first-ever serious competitive threat.



A slew of AI-first browsers, notably Perplexity’s recently-announced <a href="https://www.perplexity.ai/comet">Comet</a>, are looking to reinvent the browser experience.



Based on all the information our browsers know about us — our history, bookmarks, credentials, web behavior — AI-first browsers like Comet can become an “active participant” and “embedded” part of our workflows, Delphi’s Can Gurel <a href="https://www.delphiintelligence.io/research/browser-wars-got-personal?utm_source=twitter&amp;utm_medium=social&amp;utm_campaign=Browserwarsintel#browser-war-iii">pointed out</a> in “Browser Wars Got Personal.”



If a browser-integrated AI agent can find and make restaurant reservations for me, I no longer need Google.&nbsp;



Again, it comes down to owning the end user.



Crypto isn’t an exception to this rule. A similar phenomenon is playing out in Solana’s memecoin land.



Of late, Pump has been losing market share to LetsBonk — putting out $229 million in trading volumes compared to LetsBonk’s $1.1 billion in the last week.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXfCuPzytdbx_b4N5rZEUZK5ox4wWg8sFLY3GJfZl0a3Nml73wQcbiO_PwGG-B6gwBuV6QGUwFy75KY5hBeKB_DWTLC6x6SIOdOanXkmHrFLbgDKEdOGUjloOqVB9leBBQ8FxL5t?key=Wntvl5Sn4L_8fKC76FtKdw" alt=""/></figure>



Pump’s revenues have seen a steep decline.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc8x2owpsoec1PgL32U8aCeRhupEAT4B8s0a-tuFFwYk9PY0-6Mkx60Bh-W7INz9kX_0J7QjF8WkS_u0YLl2wm6b5peIOGsfbR2dL-R1-v8IfL5OHNBuTUNnuAA-v78Ykx8CxTRpg?key=Wntvl5Sn4L_8fKC76FtKdw" alt=""/></figure>



Yet while order-flow volumes are bouncing between Pump and LetsBONK, it doesn’t affect the revenues of the dominant trading bot Axiom.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdvO9PyG9i4gpLBhIoB838V_VvcIOxkA0V1aZgQ1j5ivftgIG56NNBJ7JnsoUob9GjMzngD5I27n2fPx6C4lka-OVGcIjmhXAZw88X1s51Q6jZH70ZVi4r3fdaR8sx3udndKIEngw?key=Wntvl5Sn4L_8fKC76FtKdw" alt=""/></figure>



That’s because while memecoins are launched on Pump or LetsBonk, degen traders are in Axiom’s frontend UI.



Launchpad bonding curves are permissionless, so Axiom simply looks at every new token, detects which launchpad contract it came from and builds a buy/sell button around it.



And traders stick around on Axiom for its comprehensive suite of pro tools like advanced charts, wallet trackers and the integration of other popular trading products (Hyperliquid perps), rebates, etc.



In other words, Axiom — like Google — owns the user. It monetizes whatever launchpad is hot by pointing to any launchpad contract.



Whether it’s web search or onchain degen trading, the game is the same: The interface that commands daily habit and captures the last click captures the money.



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Why owning the end user is profitable – lessons from Axiom and Google

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It’s the final day of July, so I figured, why not look back at this month and recap what happened from a market point of view?



I wouldn’t blame you for forgetting some of the big events that happened just this month, such as bitcoin topping a fresh all-time high (though it’s backed down slightly since), the passage of the GENIUS act, and ETH being up 56% in the past month.&nbsp;



Speaking of ETH, Kraken’s OTC desk noted: “ETH has broken decisively above the long-standing pivot at $2,813, a level that had capped price for over a year. This breakout marks a significant structural shift and clears the path towards the next major resistance zone near $4,000, which now comes into view as the next upside target.”



In the short term, however, we may be in for a somewhat volatile start to August, given Trump’s tariff deadline and other macroeconomic factors. Though even bearing that in mind, Kraken’s OTC report suggests that the momentum has already softened for bitcoin.



The good news: bitcoin managed to bounce back from an initial dip after Galaxy unloaded 80,000 BTC for a client.&nbsp;



“One core explanation behind the resilience lies in the continuous strong accumulation from BTC treasury vehicles and ETPs throughout July,” K33 noted. That helped to offset the “sale order effect in the broad market. This resilience has reignited risk appetite, with perpetual futures open interest climbing toward Q4 2024 highs, though funding rates have remained neutral.”



I don’t think anyone will be surprised by the next stat that K33 pointed out: While July tends to be a more chill month, this July bucked the trend.&nbsp;



“Average daily trading volumes over the past week come in at $4bn. This reflects a 12% decline from last week’s level but remains well above May to June levels,” K33 said.&nbsp;



Like I noted above, the first week of August may not be very smooth, but the volatility may not be here to stay.&nbsp;



Looking at CME data, K33 analysts said that the “August premium over July futures initially reflected confidence, but compressed post-expiry to levels not seen since May, signaling cautious medium-term positioning during a seasonally quieter period.”



At least we’re at the tail end of the dog days of summer.&nbsp;



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Bitcoin loses momentum to close out July, as ETH eyes new upside target

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<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">
“The continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.&#8221;&nbsp;



— Financial Report of the United States Government
</blockquote>



There once was a happy time when Fed chairs felt free to lecture politicians on their irresponsible spending habits.



In <a href="https://www.washingtonpost.com/archive/politics/1990/07/19/fed-would-lower-rates-if-congress-cuts-deficit/d1a24805-d603-436b-92c0-5779ffdc5c99/">1990</a>, for example, Alan Greenspan told Congress he would lower interest rates, but only if it cut the deficit.



In <a href="https://www.upi.com/Archives/1985/02/20/Volcker-says-Congress-must-cut-deficit/9515477723600/">1985</a>, Paul Volcker even specified a number, telling Congress that the Fed&#8217;s “stable” monetary policy was contingent on Congress cutting about $50 billion from the federal budget deficit.



(Oh, for the days when $50 billion of federal debt wasn’t just a rounding error.)



In both cases, the Fed chairs were not-so-subtly threatening Congress and the White House with recession: That’s a nice economy you&#8217;ve got there. Would be a shame if something happened to it.



Now, however, it’s the other way around, with President Trump lecturing the Fed on interest rates.



In just the last few weeks, the president has opined that the fed funds rate is “AT LEAST 3 points too high,” insisted there is “no inflation” and mocked the Fed Chair as Jerome “Too Late” Powell.



This, too, is a shakedown: That’s some nice central-bank independence you’ve got there…



President Trump lobbied for lower interest rates during his first term as well. Like nearly every modern US president, he wanted the Fed to stimulate the economy.



This time, however, it’s about much more than that: Trump wants the Fed to finance the deficit.



The Trump vs. Powell showdown is ostensibly about the current level of interest rates (which the FOMC left unchanged today, presumably to the president’s displeasure).



But what the president has been threatening is “fiscal dominance” — the state of affairs when monetary policy is subordinated to the needs of government spending.



“Our Rate should be three points lower than they are saving us $1 trillion a year (as a Country),” the president recently <a href="https://truthsocial.com/@realDonaldTrump/114902704048179740">wrote</a> on Truth Social (in his signature style of random capitalization).



With repeated such statements, Mr. Trump has made history by being the first US president to explicitly call for fiscal dominance.



But he’s far from the first to acknowledge the possibility.&nbsp;



When Volcker and Greenspan threatened Congress with rate hikes, it brought the usually hidden link between monetary and fiscal policy out into the open.&nbsp;



It worked for them: Both Fed chairs had some success in using the threat of recession to get Congress to address its deficit spending, which is a hopeful precedent.



But that tactic seems unlikely to work this time.



Chair Powell has often warned about the risks of growing deficits, and even explained that higher deficits could mean higher long-term interest rates.&nbsp;



But it’s hard to imagine him making an explicit threat in the way Volcker and Greenspan did — perhaps because he knows he’s bargaining from a much weaker position.



In the 1980s, the most-feared effect of higher interest rates was recession, which the Fed was willing to risk in order to get Congress to change its free-spending ways.&nbsp;



Back then, lawmakers faced a ballooning defense budget and a stagnant economy, both of which seemed manageable.&nbsp;



At just 35% of GDP, the national debt seemed manageable too.



Now, with federal debt at 120% of GDP, the US <a href="https://www.wsj.com/politics/policy/debt-has-always-been-the-ruinof-great-powers-is-the-u-s-next-02f16402">spends more on interest payments</a> than it does on defense:



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXflkgNB1zlYtVD1qwbyfEhsXMynn4rcesXGWNtdFWBmiuFkjXtq077kd8t-pS_jjRqUSVVscyZT69E2YRXT5hiYlJtWWHkMGTHI9nrgi7UExqtw-mbAzffDpztweWIWx3hx6uVMvw?key=iWJ7_ctUrfu-bNc4jMJZgw" alt=""/></figure>



The fast-rising blue line above may now be the biggest budgetary problem.



This puts the Fed in a bind because raising interest rates to encourage fiscal sanity would only exacerbate the problem it wants lawmakers to address.



The Fed could risk it, of course.&nbsp;



But if rate hikes drive the deficit even higher, who blinks first: the Fed or the White House?



Before answering, consider that 73% of federal spending is now non-discretionary, vs. just 45% in the 1980s.



To believe the Fed can win a showdown over deficits is to believe Congress will make significant cuts to non-discretionary spending like Social Security and Medicare.



This seems, well, unbelievable.&nbsp;



Now, especially, with a president who appears wholly unperturbed by the country&#8217;s growing indebtedness.



This may come from his experience as an over-indebted real estate developer in the 1990s.



&#8220;I figured it was the bank&#8217;s problem, not mine,” Trump later <a href="https://www.amazon.com/Think-Big-Make-Happen-Business/dp/0061547840">wrote</a> of not being able to service his debts. “What the hell did I care? I actually told one bank, &#8216;I told you you shouldn&#8217;t have loaned me that money. I told you that goddamn deal was no good.'&#8221;



Now, as president, when Trump tells Powell that interest rates should be lower, what he’s really saying is that the national debt is the Fed’s problem, not his.



He’s not wrong.&nbsp;



“When interest payments on the debt rise and primary surpluses are politically off the table,” David Beckworth <a href="https://macroeconomicpolicynexus.substack.com/p/the-consolidated-government-budget">writes</a>, “something else has to give. That something is more debt, more money creation, or both.”



Yes, the Fed could run the Volcker/Greenspan playbook and threaten Congress with higher interest rates.



But Powell presumably knows that following through would only exacerbate a problem that might ultimately be the Fed’s to fix — and pull forward the time by which it’s forced to fix it.



“If debt levels are too high and growing,” Beckworth explains, “it becomes the Fed’s job to accommodate — by suppressing interest rates or monetizing debt.”&nbsp;



That, and not President Trump, he warns, is the real existential threat to the Fed: “When the central bank is forced to accommodate fiscal needs, it loses its economic independence.”&nbsp;



Beckworth remains hopeful that it might not come to that.&nbsp;



And maybe it won’t. We’ve just seen how unpopular inflation is, so maybe if we get another bout of it, voters will force lawmakers to address the deficit.



But he despairs that the focus on Trump’s demands for lower interest rates is a distraction: “What we are witnessing is less about Trump himself and more about the growing and unavoidable fiscal demands being placed on the Fed.”



President Trump is the first to start explicitly making those demands, presumably because he knows the US government’s current fiscal policy is unsustainable.&nbsp;



But everyone knows that, even the government itself.



The only question now is: Who’s going to deal with it?



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<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Fiscal dominance: Behind the Fed’s growing and unavoidable burden

Jeff Albus

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



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When building on Solana up until now, you&#8217;ve really only had two bad choices for storing and delivering your app&#8217;s data.



You could lean on Web2 giants like Cloudflare or AWS, which are fast and easy, but very much centralized and outside the crypto ethos. Or you could try to piece together more decentralized fixes using IPFS, Arweave, and other assorted gateways — bearing in mind that, while these latter methods do work, they require lots of duct-tape and set-top thwacking to dial in.



Decentralized CDN Pipe Network aims to change all that with Firestarter Storage, an infrastructure play designed to transform Pipe into a full-stack Cloudflare alternative for the Solana ecosystem.



Until now, Pipe has operated behind the scenes, powering Solana&#8217;s full <a href="https://blockworks.co/news/solana-proof-of-history">proof-of-history</a> archive and snapshots via its Firestarter infrastructure.



Now, with Firestarter Storage, Pipe graduates from decentralized transport to a full-stack cloud competitor, combining origin storage, CDN delivery and edge compute into a Cloudflare-class system — but decentralized from the ground up.



Developers can tap into the same backbone to serve anything from pay-as-you-scroll video to edge-optimized AI workloads.



&#8220;Storage from day one has been a critical element of Pipe Network&#8217;s service as a decentralized CDN running a global network of over 280,000 points-of-presence (PoP) node operators,&#8221; said David Rhodus, founder of Permissionless Labs.



&#8220;This would be impossible without origin support, which is already holding Solana&#8217;s full data set — 1 PB containing 350 million files — and cutting sync time by up to 30% through Solana Snapshots.&#8221;



Unlike legacy CDNs, Firestarter serves content directly from Pipe&#8217;s native storage layer, meaning it never leaves the Pipe Network.



Content lives entirely within the decentralized system, with pricing bundled at the protocol level — 1 $PIPE token per gigabyte for the base tier.&nbsp;



For developers, this manifests entirely new architecture capabilities: streaming micropayments per byte, geo-pinned smart contracts with hard data sovereignty guarantees, and pop-level compute for edge inference and ultra-low-latency gaming.



&#8220;Pipe&#8217;s unified fabric lets frontend code stream satoshi-sized, onchain payments per byte, so devs can launch pay-as-you-scroll video and per-query dataset APIs instead of pre-purchasing bandwidth buckets,&#8221; Rhodus told Lightspeed.



A critical differentiator is Pipe&#8217;s ability to meet jurisdictional and defense-grade requirements.



As Rhodus explained, &#8220;Firestarter nodes can be whitelisted to run only inside a customer&#8217;s jurisdiction, with remote-attested proofs that no replica ever leaves the boundary.&#8221;



With Firestarter now public, Pipe Network is positioning itself as a new foundation for real-time, decentralized content distribution, with sovereignty, speed and cost-efficiency converging at the protocol layer.



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Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Lightspeed Newsletter

Pipe Network debuts Firestarter Storage for Solana developers

Casey Wagner

The presentation portion of Roman Storm’s criminal trial came to a close Wednesday afternoon with the prosecution and defense each making their final pleas to the jury.&nbsp;



Both sides spent over 90 minutes on their closing arguments. The government opted to close with an additional 45-minute rebuttal. Attorneys on both sides focused on the same essential facts of the case, but urged the jury to come to different conclusions.&nbsp;



“This is a story about greed,” government attorney Benjamin Gianforti said at the beginning of his closing arguments. “It’s a story about helping criminals hide bags and bags of money.”&nbsp;



“Tornado Cash made dirty money clean money, and made it impossible to tell the difference,” he added.&nbsp;



The defense does not argue the truth of this second statement: they admit that criminals did use Tornado Cash for illicit activities, but this was never Storm’s intent in creating the software.&nbsp;



Storm created Tornado Cash to give users the ability to keep their financial transactions private, defense attorney David Patton told the jury.&nbsp;



“Did that also make it extremely useful to criminals? You bet it did,” Patton said.&nbsp;



The “privacy argument,” prosecutor Nathan Rehn said during the government’s rebuttal, is simply a “cover story.”&nbsp;



Storm not only knew criminals were using Tornado Cash to launder money, he supported them, Rehn argued.&nbsp;



The government presented messages to the jury in which Storm calls reports of hackers using Tornado Cash “advertising.” They also submitted photos of Storm and his co-developers wearing Tornado Cash T-shirts with images of a laundry machine.&nbsp;



These messages and photos are a mischaracterization, Patton later insisted. The shirts were a joke, and there are many communications that show Storm was not “celebrating hackers’ use of Tornado Cash.”&nbsp;



As for the prosecution’s claims that Storm “made millions” from Tornado Cash, the defense again maintained that this was a misleading portrayal of reality. The money Storm made came from selling the TORN token, which, Patton added, lost value when reports of criminals using Tornado Cash surfaced.&nbsp;



“They weren’t getting a cut” of money hackers laundered through Tornado Cash, nor did developers charge fees for using the software, Patton added.&nbsp;



After two weeks of witness testimony, jurors received charge instructions late Wednesday afternoon, the final step before the group heads to the deliberation room.



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Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

Roman Storm

Tornado Cash trial is now in the jury’s hands

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Despite Coinbase’s second quarter milestones, not all is rosy for the crypto exchange as it gets set to discuss its Q2 results tomorrow.



Coinbase’s stock price roughly doubled during the quarter — performance Oppenheimer analysts attributed to its S&amp;P 500 inclusion and progress around the GENIUS Act (progress that led to <a href="https://blockworks.co/news/trump-signs-genius-law">its ultimate passage</a> earlier this month).



COIN shares were trading around $382 on Wednesday at 1:30 p.m. ET — up 9% from a month ago.&nbsp;



And yet, in other ways, COIN’s setup ahead of the quarterly print is “unfavorable,” Oppenheimer’s Owen Lau and Guru Sidaarth wrote in a note. They estimate Coinbase’s Q2 trading volume to be ~$220 billion, marking a 44% decline <a href="https://blockworks.co/news/coinbase-outlooks-q1-results-deribit-analysts">from the prior quarter</a>.



Morningstar analyst Michael Miller noted that transaction volume will always be a key data point, given transactions account for Coinbase’s largest revenue stream.&nbsp;&nbsp;



Beyond that, though, Miller will be listening for commentary on pricing pressure (or lack thereof) as competitors like Robinhood ramp up their crypto offerings in a friendlier regulatory environment.&nbsp;



“I’ll also be looking for any data or commentary on the firm’s <a href="https://blockworks.co/analytics/base/base-overview/base-stablecoin-supply-and-transfer-volume">Base transaction volume</a> and revenue and how much USDC is on the firm’s platform and products,” Miller told me. “While Coinbase is still heavily exposed to cryptocurrency trading, USDC and Base have enjoyed a lot of momentum this year.”



Miller, in a Monday note, revealed he had increased his COIN “fair value estimate” from $170 to $205. A part of that was indeed due to USDC’s market cap eclipsing $60 billion and overall bullish sentiment after the stablecoin-focused GENIUS Act became law. If you forgot, Coinbase earns interest income on the USDC it holds on its platform.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcxoVOjxECsiraxBs-F32R7RMas5TsgXnD6OsYK_TVqFJZb0x4VXaZA72hqhn3zzG932EqmSISMNtPCLgQW3eGbWpqh73UmBVPDeYlCsYj54nKSu6NzV_wOgXDNuAwHLnlcnROB9A?key=wc4qbIEt1FJXnWzzwbFkzg" alt=""/><figcaption class="wp-element-caption">Source: rwa.xyz</figcaption></figure>



Despite Miller’s COIN upgrade, he still considers shares “significantly overvalued” as the market reacts to recent crypto price surges.&nbsp;



The Oppenheimer analysts see things a bit differently. They have a COIN price target (in the next 12-18 months) of $417.



Lau and Sidaarth note Coinbase’s US derivatives and International Exchange notional values were more resilient than spot trading volume — up 22% and 28%, respectively, quarter over quarter. That’s an area they’re more focused on after <a href="https://blockworks.co/news/coinbase-deribit-deal-focus-derivatives">Coinbase’s Deribit acquisition</a>.&nbsp;



Maybe Coinbase CEO Brian Armstrong will give us a sense of other <a href="https://blockworks.co/news/coinbase-circle-amazon-of-crypto">possible acquisition targets</a>. As far as link-ups go, Coinbase on Wednesday revealed a partnership with JPMorgan Chase that lets Chase customers link their bank accounts to Coinbase wallets.&nbsp;&nbsp;



Lau told me he’ll be seeking expense guidance from Coinbase executives tomorrow, as well as any update on July trading revenue.&nbsp;



Coinbase is pretty connected in DC, and could also offer thoughts around when they expect the CLARITY Act to become law. That bill, which would create a definition for “digital commodities,” got the <a href="https://blockworks.co/news/us-house-passes-clarity-act">House’s blessing</a> on July 17.“Passage of the CLARITY Act will support <a href="https://blockworks.co/news/crypto-treasury-companies-alt-season">Altcoin Summer</a>, following the Stablecoin Summer after the passage of the GENIUS Act,” Lau explained.



Add it to the list of things we’re monitoring. Never a dull moment.



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Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>



<li><a href="https://blockworks.co/newsletter/empire">Empire</a>: Crypto news and analysis to start your day.</li>



<li><a href="https://blockworks.co/newsletter/forward-guidance">Forward Guidance</a>: The intersection of crypto, macro and policy.</li>



<li><a href="https://blockworks.co/newsletter/thedrop">The Drop</a>: Apps, games, memes and more.</li>



<li><a href="https://blockworks.co/newsletter/lightspeed">Lightspeed</a>: All things Solana.</li>



<li><a href="https://blockworks.co/newsletter/supply-shock">Supply Shock</a>: Bitcoin, bitcoin, bitcoin.</li>
</ul>

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