The immediate reaction from crypto Twitter was predictable: just relabel the yield. Call it staking. Call it liquidity provision. Call it ecosystem participation. The bill enumerates these as permitted activities — so if Coinbase creates a separate “staking account” for USDC and routes balances through some on-chain wrapper, hasn’t it threaded the needle?

I spent time in the bill text and I do not think this works. Here is why.

The Staking Loophole That Isn’t

The CLARITY Act defines staking with unusual precision. Three tiers. Self-staking: you run your own node, you stake your own tokens, you earn rewards from your own labor. Not a security under any reading of Howey. Self-custodial staking with a third party: you delegate validation rights to a node operator but maintain custody of your assets and private keys. The operator’s services are “administrative or ministerial” — not entrepreneurial. Still not a security. Custodial and ancillary staking services: Coinbase or Kraken holds your assets and stakes on your behalf. This one gets CFTC rulemaking and the most scrutiny, but it is explicitly permitted — and importantly, exchanges cannot condition account access on participation.

So staking is a carved-out activity-based exception to the yield ban. The temptation is obvious: take a user’s idle USDC, route it into something labeled “staking,” and pay yield.

The problem is that USDC is not a proof-of-stake token. You cannot “stake” USDC in any protocol-native sense. There is no consensus mechanism to validate, no network to secure.

The other option — deposit USDC into a DeFi lending protocol and call it “providing liquidity” — runs directly into the March compromise’s new weapon: the economic equivalence standard. The updated text prohibits yield offered “in any manner that is economically or functionally equivalent to bank interest.” If a user deposits USDC, clicks a button, and earns a quasi-fixed percentage with no meaningful change in risk profile versus just holding a balance — that fails the test. The label does not matter. The economic substance does.

The anti-evasion rulemaking — jointly directed to the SEC, CFTC, and Treasury within twelve months of enactment — is designed to police exactly this boundary. Any product where the user experience is “deposit stablecoins, earn yield, withdraw stablecoins” is dead on arrival regardless of what intermediate step you insert. The only surviving products are ones where the user takes on genuine economic risk or performs genuine economic activity that changes their position.

This is tighter than it looks on first read. And it raises the question that actually matters: why are the banks fighting so hard to prevent something that the legal structure already makes nearly impossible?

The answer took me somewhere I did not expect.

The Question That Reframes Everything

Here is where this started for me. A simple question I could not shake.

Fidelity pays me roughly 4% on cash. It labels this clearly: participation in a money market fund. The fund buys T-bills and overnight repo, passes through nearly the full yield minus a thin expense ratio, and is regulated under SEC Rule 2a-7. Not FDIC insured. I bear a tiny risk of the fund breaking the buck.

JPMorgan Chase pays 0.01% on a standard savings account.

Why?

If Fed funds sit at 4.25-4.5%, why can’t a bank pay depositors the risk-free rate? They earn it on reserves at the Fed. They earn it on their Treasury portfolios. What prevents them from passing it through?

The answer is not complicated, but its implications are enormous.

The Deposit Franchise

Banks make money on net interest margin — the spread between what they pay depositors and what they earn on assets. Industry average NIM runs 3-3.5%. If a bank pays 0.5% on deposits and earns 7% on mortgages, that spread funds everything: branches, compliance, employees, loan losses, shareholder returns.

If banks paid the full risk-free rate, there is no margin. No buffer for credit losses, no operating income, no return on equity. The business model ceases to function.

This is compounded by asset-liability mismatch. Banks borrow short (deposits are callable on demand) and lend long (30-year mortgages, 5-10 year commercial loans). When rates rise, long-duration asset values fall — but the bank’s funding cost should theoretically rise if depositors demand market rates. This is what killed Silicon Valley Bank. Most of the banking system is sitting on unrealized losses in their securities portfolios from the 2022-2023 hiking cycle. If they simultaneously had to pay market rates on deposits, the math breaks.

The key metric is deposit beta: the fraction of a Fed rate change passed through to depositors. Historically, cumulative betas on savings accounts are 40-60%. The Fed hikes 500 basis points, banks eventually pass through maybe 200-300. Slow to raise on the way up, fast to cut on the way down.

This asymmetry is not a bug. It IS the deposit franchise. The franchise value of a bank — what makes a charter worth anything — is the present value of that below-market funding advantage over time.

FDIC insurance is the quid pro quo. Depositors accept below-market rates because their money is insured. Safety and liquidity in exchange for cheap funding. The insurance suppresses rate sensitivity. Most retail depositors never shop rates. This is why betas are so low.

Layer on Basel III capital requirements (10-13% CET1, cost of equity 10-15%), Liquidity Coverage Ratio, Supplementary Leverage Ratio — all friction costs that further reduce what banks can offer depositors while remaining profitable.

So the answer to “why can’t banks pay 4%?” is structural: if they did, the banking system as currently designed would not generate enough margin to fund credit creation, absorb losses, and deliver returns. The deposit franchise is the engine of the entire model.

Now stablecoins are threatening to compete that franchise away.

What Circle Actually Built

Consider what USDC is mechanically. You give Circle dollars. Circle buys short-dated T-bills and overnight Treasury repo via the BlackRock-managed Circle Reserve Fund. You get a token representing a $1.00 claim on those reserves. Redeemable on demand. No loans made. No credit risk. No maturity transformation. The reserve portfolio is more conservative than most government money market funds.

Circle earned roughly $1.7 billion in reserve income in 2024. Tether earned over $6 billion. The risk-free rate, earned on reserves, retained by the issuer.

Coinbase has a revenue-sharing agreement with Circle on that income. So the user gets yield on USDC through Coinbase — funded partly by Circle’s reserve income — without the issuer technically paying interest. The GENIUS Act prohibits issuers from paying interest directly, but says nothing about third-party platforms offering rewards.

The banks see this for what it is: a money market fund with extra steps. But without Rule 2a-7 regulation, without investment company oversight, without the disclosures. And it directly competes with bank deposits for the same retail dollar.

At this point I realized my framing was wrong. This was not a “banks versus crypto” story. It was much older.

The Narrow Bank

A narrow bank takes deposits and invests exclusively in the safest, most liquid assets — Fed reserves, T-bills, overnight repo. No loans. No credit risk. No maturity transformation. It passes through the risk-free rate minus a small fee.

Irving Fisher proposed this in 1935 as the “Chicago Plan.” Milton Friedman endorsed versions of it. James Tobin advocated for “deposited currency” accounts at the Fed. The core idea: separate the payments system from the credit system, because bundling them creates the fragility that causes bank runs.

In 2017, TNB USA — The Narrow Bank — applied for a Federal Reserve master account. Its founder, James McAndrews, was a 28-year Fed veteran, former head of research at the New York Fed. The model: accept institutional deposits, park 100% at the Fed earning interest on reserves, pass through nearly all of it. No loans. No credit risk. Economically, the safest bank that could possibly exist.

One might expect regulators to celebrate this. They did the opposite.

The New York Fed sat on the application. For years. TNB sued. Then in March 2019, the Fed issued an advance notice of proposed rulemaking introducing the concept of Pass-Through Investment Entities (PTIEs). The proposed rule would give the Fed discretion to pay narrow banks a lower interest rate on reserves — potentially zero — while continuing to pay full rates to traditional banks.

The Fed was proposing to destroy the narrow bank business model before it could be tested.

In December 2023, after more than six years, the Fed formally denied TNB’s master account. The letter stated that providing TNB a master account “would pose undue risk to the stability of the U.S. financial system.” The reasoning: granting access could lead to “a proliferation of such entities.” Depositors might prefer the safer institution. Banks that take risk would lose deposits to banks that do not.

Read that carefully. The Fed argued that a bank taking no risk has an unfair advantage over banks that do take risk. The “unfairness” is that deposits are safer. The “advantage” is that depositors might prefer safety.

The deeper irony: the Fed itself operates the Overnight Reverse Repurchase facility, which lets money market funds effectively hold reserves at the Fed. The ON RRP peaked at $2.5 trillion. The Fed created a narrow bank for institutional investors and then refused to let anyone else operate one.

The PTIE rule was never finalized. The Fed did not need it. Master account denial was enough. Custodia Bank got the same treatment. The narrow bank concept was killed — not because it was unsafe, but because it was too safe.

The End-Run

Here is where the two stories converge.

Circle does not need a Fed master account. It holds T-bills and repo in the open market. The narrow banking function — safe, liquid, short-duration assets backing demand claims — happens entirely outside the Fed’s perimeter.

The stablecoin market now exceeds $300 billion. That is $300 billion in demand claims against short-duration, low-risk portfolios. It is the narrow banking system that the Fed prevented from existing inside the regulated perimeter, now existing outside it.

The stablecoin industry did not set out to build narrow banks. But that is what it built. And the entire regulatory fight — GENIUS Act, CLARITY Act, the yield compromise — is the same fight that TNB lost, replaying at a scale the Fed did not anticipate.

The Fed’s defensive apparatus was built to defend a gate. Stablecoins walked around it. Which is why Congress is now being asked to build a new gate — a statutory prohibition on yield pass-through, because the Fed’s administrative tools do not work against entities outside its perimeter.

The Classification Trap

Even if the industry won the political fight and Congress permitted yield pass-through, a deeper problem remains. The obstacle is not just political. It is legal.

The entire stablecoin architecture rests on one premise: stablecoins are payment instruments. Not securities. Not deposits. The GENIUS Act codified this. That classification keeps them out of the SEC’s jurisdiction, out of the Investment Company Act, out of deposit regulation.

The moment you add yield, the classification collapses.

USDC passing through reserve income to holders hits every prong of the Howey test: investment of money, common enterprise, expectation of profit, derived from the efforts of others. The token becomes a security. If the structure pools assets and distributes returns, it is an investment company under the 1940 Act. Now you need a board, SEC registration, Rule 2a-7 compliance, broker-dealer distribution. Every transfer is a securities transaction.

The value proposition of stablecoins — permissionless, programmable, composable — breaks under the securities framework because every interaction requires a registered intermediary.

So the industry faces a binary it cannot publicly acknowledge. What makes stablecoins useful (frictionless payment instrument) requires them to NOT be securities. What makes them attractive as savings (yield) would make them securities. These properties are legally mutually exclusive.

The activity-based rewards carve-out is not a random compromise. It is legal engineering — a narrow overlap zone where a payment instrument can generate yield-like returns without triggering reclassification. Staking is in the exceptions not because Congress loves validators, but because staking is legally distinguishable from earning interest on a balance: you perform a service and get compensated, rather than depositing capital and earning a return.

The Two-Token Future

So where does this land?

The most likely equilibrium is structural divergence: payment stablecoins and tokenized money market funds become two separate products, regulated under two separate regimes, interoperable on-chain.

The payment stablecoin — USDC, USDT — remains a non-yield-bearing payment instrument. Light regulation. OCC/CFTC oversight. Permissionless transfer. DeFi composability. The token you use to pay, to settle, to move dollars. No yield. The issuer keeps reserve income.

The tokenized money market fund — BlackRock’s BUIDL, Franklin Templeton’s BENJI, and products not yet launched — becomes the yield-bearing digital dollar. SEC-regulated. Rule 2a-7 compliant. Distributed as on-chain tokens. The token you hold when you want yield.

Two tokens. Two regulatory regimes. Two economic functions. One blockchain.

This is why Circle applied for a national trust bank charter. It is why Circle is supporting the Fed’s “skinny master account” proposal — a payments-only account that does not pay interest, does not provide Fed credit access, and is subject to balance caps. Settlement access without yield. Circle gets direct Fedwire settlement for USDC minting and redemption, eliminating dependence on correspondent banks. The skinny account is the Fed’s TNB lesson applied prophylactically: let payments firms into the perimeter for settlement while structurally excluding them from interest on reserves.

Circle is positioning for both sides of the divergence. USDC is the payment rail. A future tokenized fund product — or deeper integration with BlackRock’s infrastructure — is the yield layer. One company, two products, two regulatory regimes, same blockchain.

The DeFi composability layer eventually bridges the gap at the user level. Smart wallets and protocol-level routing will shuttle between stablecoins and tokenized MMF shares in real time. From the user’s perspective: a single dollar-denominated asset that pays yield and works for payments. Two tokens behind the scenes, one experience on the surface.

What This Means

The stablecoin yield debate is not about crypto versus banks. It is about whether the deposit franchise — the banking system’s ability to fund itself with below-market-rate deposits — deserves statutory protection from technological competition.

The banks have a point. Deposits fund loans. Loans fund mortgages, businesses, consumers. Stablecoin issuers take the same dollars and buy T-bills — funding the government, not the private economy. Large-scale migration could compress NIM, reduce lending, and alter monetary transmission.

But the counter-argument is equally real. The deposit franchise is a rent — a subsidy to bank shareholders funded by the financial inertia of retail depositors. Technology has been competing this rent away for fifty years. Money market funds in the 1970s. Online banks in the 2000s. Stablecoins now. The banking system adapted each time. NIM compressed but did not collapse. Credit creation continued through securitization, bond markets, and channels that do not depend on cheap sticky deposits.

The CLARITY Act will pass in some form. The yield compromise will hold. The banking lobby will get its statutory protection against passive stablecoin yield. And the market will route around it — not through regulatory arbitrage, but through structural differentiation of payment instruments and investment products that the law itself mandates.

Latest AI agentic developments made it clear: any piece of work I’ll do before setting up my agentic rails risk of being inaccessible by agent, because even progression of thought is important. All the small research inputs I gather into the finalized thesis need to be able to be revisit, update and rethought. So couple weeks ago I’ve embarked on a journey of setting up an AI OS for the fund and I think you should do the same.

The bigger point first

I genuinely believe that every company being started today should be built on AI rails from day one. Not as an add-on. Not as a “we’ll integrate AI later” roadmap item. From the foundation.

The reason is simple: quality of the foundational models and their agency e.g. an ability to not just answer a question but iterate on a specific task using the context ****just broke some invisible threshold of being a decent employee.

A simple test here: connect Claude Cowork, or Codex to all the tools you use and run a prompt: “Make an audit of everything you have an access to. My role is X, try to make sense of everything I do and how you can help me, save results to local context”

And I’m not all that unicorns and butterflies futurist about AI replacing entire teams or so. I take a stance of organizations even keeping the same roles like engineering, research, marketing etc and maybe even the same people, but every person will be using agents to automate their individual tasks, validate/correct and be more productive in multiples, not just in percentage.

For every founder and a manager that poses the task of building their organization and toolset in a way that enables employees to use agents. It’s a real responsibility as on the organizational level these orgs will become more competitive to those that are not enabling their workforce.

While building AI enabled work environment is a responsibility of a founder, becoming AI native is a responsibility of every employee for the same reason: otherwise you will be outcompeted by your peers.

And, sadly, not everyone is able to learn and rebuild into the new identity so I suggest hiring only AI native people who have already upgraded themselves.

Designing the system

Here are several key principles for the system I used:

• AI Availability

  • Every part of the stack should be available for AI, preferably without Browser interaction in between. This is the core of how you should operate. Even if you don’t enable AI now, the data should be structured, documented and available

• Composability with existing tools.

  • We’re trying to keep most of the tools as they are: knowledge databases, communication channels, spreadsheets. They’re all amazing and allow collaboration and data representation, you don’t really want to just chat with AI all the time. If AI isn’t doing great you should be able to go and manually do your work

• Flexibility and interchangeability

  • The AI world will evolve, some models and tools are better than others. You want to be able to change model, tool, context without too much work

• Simplicity

  • In a bigger org you can and you should put a special team maintaining your org wide AI tools, but to begin with it shouldn’t be cumbersome as it will be a bottleneck for everyone.

Exact tool stack I use

Building this OS is mostly configuring existing apps vs building something completely new:

1 - Local folder

This is where The Context lives. You can and probably should have a canonical version of this folder maintained at your company level for everyone to download and use. It’s the base for any agentic work today and you can use this folder with Cowork/Codex/OpenClaw.

The first file is a 250-line master context document — the full company DNA. Mission, Philosophy, Values, Launch Goals, Thesis (liquid and venture), all 8 Notion database schemas with their relationships, portfolio data, current critical path. Claude loads both files and becomes something that functions less like a chatbot and more like a co-GP who remembers everything.

When I say “X” it knows I mean a potential anchor LP. When I say “CFM” it knows that’s my law firm. It knows my CRM pipeline stages, my thesis themes, my deal evaluation criteria. The context is the product.

Cool part that you can effectively steer the entire company by updating the canonical folder. Imagine your employee receives his daily brief every time with explanation how his tasks are connected to the overall company objectives!

The second is called CLAUDE.md. About 200 lines. Every time I start a session with Claude, it loads automatically. It contains who I am, how my fund works, every person I work with and their roles, internal jargon and acronyms, which tools live where, and — this is the part people find funny — instructions about how my brain works.

I have ADHD tendencies. I procrastinate on big ambiguous tasks. So I literally wrote instructions telling Claude: break big tasks into small steps, never present a wall of work, notice when I’m yak-shaving and redirect me.

Yes, I taught my AI how to manage me. And it works.

2 - Notion as the global knowledge database

I’ve picked it because frankly I love Notion as a default knowledge database for a company regardless of an AI. Also because the team gets AI and built an amazing MCP that can access tables and their specific views and operate over them. And it replaces Granola by taking and keeping all the meeting notes.

Everything is a database: instead of following mostly page based structure I use databases everywhere: Marketing output table, CRM table, Dealflow table, Research Table - this is a structured AND migratable way of organizing. Table entries can be effectively Tagged in columns so that model can access the high level data without going to the content itself.

On top of that Notion has already have a beta version of Agents configurable inside with various triggers.

3 - Obsidian

I’m a big fan of Outliner apps, started way ago with Workflowy then migrated to Dynalist, turns out Obsididian is created by the same team as Dynalist so it makes sense. I’ve tried to migrate to Obsidian multiple times but now the time has come. This one serves as my personal scratchpad and I love it, and since it’s all based on .md files AI works greatly with it.

4 - Superhuman, Notion Calendar, Figma, Slack, Telegram, Airtable

Nothing specific here, just a great set of tools each having an MCP server. I use this one for Telegram https://github.com/chaindead/telegram-mcp

Core fund systems, all connected

The fund OS has three big parts, each built on interconnected Notion databases with shared taxonomy.

Research

This is a four-layer pipeline: Research Inputs (atomic signals — a tweet, a Dune query, a founder call note) then Research Projects (deeper dives) then Crystalized Thesis and Changelog (timestamped conviction updates) then Marketing Output Pipeline (content derivatives). Every signal gets tagged with track, thesis theme, sector, source. When I ask Claude “what’s our current thinking on CEX unbundling?” it traverses all four layers.

Relations

One CRM database where every person lives — LP, founder, advisor, service provider. Linked to Dealflow (companies), Meeting Notes (transcripts from calls), Tasks, and Follow-ups. It’s a relational graph that Claude can navigate. “When did I last talk to Mike?” — it checks CRM, pulls the meeting note, surfaces the follow-ups. All connected.

Content

Content isn’t a separate workstream — it’s a derivative of research. Every newsletter, deck update, LP memo traces back to underlying thesis work through the Marketing Output Pipeline. When it’s time to write, I’m never starting from blank. Claude pulls recent signals, references active research, drafts something grounded in real conviction changes.

What a day looks like

I ask for a /briefing. Claude scans nine sources simultaneously — Telegram messages, Gmail inbox, today’s calendar, Notion CRM contacts needing follow-up, overdue follow-ups, open tasks, dealflow changes, our shared TASKS.md working list, and Airtable portfolio updates.

It synthesizes into a single prioritized output. What needs action today. What’s coming this week. What’s FYI.

After a /call, I say “update the CRM.” Claude pulls the meeting transcript from Notion, extracts key info, updates the contact record, creates follow-up items, links everything together.

I constantly pour /research Inputs into the database of everything relevant to my thesis and how the space evolves. Claude take the first go on each of them. Later we organize this into groups and come with a bigger research points that later become materials.

When I’m stuck on a big task — which happens more than I’d like — Claude breaks it into the smallest possible first step and just gets me started. Because that’s literally in the instructions.

Let me be real: it’s duct tape

Some reality: I’ve only spent a week building this. TASKS.md is a markdown file, not Asana. Portfolio TVPI in Airtable is manually updated. The briefing sometimes surfaces garbage. Claude occasionally invents a database field that doesn’t exist.

But that’s the point. It doesn’t need to be perfect. It needs to be better than doing everything manually, and it is. Dramatically.

The rough edges are a feature, not a bug. They keep me honest about what the AI can and can’t do. And they keep the system grounded in tools I can always fall back to.

What’s next

What I described above is the foundation. Here’s where it’s going.

AI deal sourcing. This is the big one. Scrolling Crypto Twitter, on-chain revenue data via Dune, GitHub developer activity monitoring, accelerator batch tracking, governance signals — all of these can feed into a sourcing agent that scores opportunities against our 8 venture themes and 3 liquid strategies. EQT built Motherbrain and sourced $100M+ in investments through AI. With modern agent frameworks, a crypto-native solo GP can build something comparable for a fraction of the cost. Because on-chain data is transparent and queryable in ways TradFi data simply isn’t.

Telegram intelligence. I live in Telegram, every crypto fund manager does. Right now Claude can read my messages. But it can’t organized Folders. Next step: organized monitoring across 50+ channels with automated signal extraction. Morning digest: “Three founders mentioned stablecoin rails. Two alpha groups discussing this DEX. One LP pinged you at 2am.”

Vector memory. Right now the context system is structured markdown. Works great, doesn’t scale. The next evolution is embedding every meeting transcript, research note, and email thread into a searchable semantic store. So Claude doesn’t just know what’s in its current context window — it can recall anything from any past interaction.

That’s the difference between an AI that’s useful today and one that compounds knowledge over time.

The playbook

If you’re building a company right now — fund, startup, agency, whatever — here’s what I’d tell you:

Start with traditional tools. Notion, Airtable, Google Workspace, whatever you want. Things humans can operate directly.

Add a structured context layer. Write down who you are, how you work, what your priorities are, how your systems connect. This sounds basic but it’s the highest-leverage thing you can do. The context file IS the operating system.

Connect everything through AI. MCP, agent frameworks, structured memory. Let the AI traverse your entire operation, not just answer one-off questions.

Keep humans in the loop. Not because AI is bad — because hybrid systems are more robust. The AI handles volume and context-switching. Humans handle judgment and relationships.

And hire AI-native people. Operators who build workflows, not just use features.

I’m Alexander Salnikov, GP at Concentrated Capital. We invest in onchain fintech at the convergence of TradFi and DeFi — stablecoin infrastructure, wallets, DeFi primitives. If you’re building in this space or interested in the hybrid venture + liquid model, reach out: alexander@concentrated.vc

More at concentratedcapital.substack.com

I’ll be honest I wish I’d updated you, my readers, more often. Last month has been busy and fun. I’m running a deep research and continuing to flesh out my thesis, it is coming together nicely and I’m asking you for some more patience to get to it.

Meanwhile, I had an honor to be invited to YPO regional chapter with a task to educate and bring up to speed the group of highly successful entrepreneurs with businesses outside crypto and often outside digital at all.

It isn’t a simple question, how could I condense all the crypto context into a single 30 minute keynote. Luckily I was also in the process of deepening my thesis and was solving a similar problem: reflecting on the overall journey of all of us as an industry and where it leads us to next.

I’ve selected the following structure for the keynote:

• First of all, key innovation that gave birth to the industry we know. It always starts with a breakthrough idea and a nonlinear distribution of it, infecting the world

• That key idea unleashed the Cambrian explosion of experimental applications of it, some of which were sticky and some didn’t work out

• These experiment directions move over their lifecycles and stages of maturity: Solidified, Established, Emerging.

Sharing the deck with you, it gives a bird’s-eye view of the industry and what we were able to achieve in the last 15 years. Feel free to borrow and reproduce if you ever have a similar goal.

Deck: 15 Years of Crypto Theses

I am proud of how it turned out to be, 10 days preparation was worth it. Please click through if you didn’t.

Deck: 15 Years of Crypto Theses

Market Update

Thesis holds

Our Four Year cycle thesis holds since formulated end of November.

TGA

Although we expected the Treasury General Account to be spent rapidly after shutdown reopening, the government isn’t rushing into emptying it. After the modest drawdown of $200B it began to even get refilled and is sitting back at $1T mark. As a reminder, funds sitting in this account is a liquidity withdrawn from the system and funds spent - liquidity injection.

This partially explains short term crypto weakness and inability to take the 104/110k levels back despite liquidations being unbalanced in a record level

Liquidation map

New Fed Chair and thesis

Meanwhile one big risk to our thesis has been mostly addressed: new Fed Governor pick. To reiterate, the risk was that the new fed would play the Trump promises of running economy hot. Lowering rates alone wouldn’t do the trick, but massive expansion of Fed balance sheet might have been so impactful that it would invalidate our thesis of weak 2026.

The chair pick Kevin Warsh is known for being a vocal advocate against balance sheet expansion. But keeping the rates low. Which is good for our thesis and short term bad for risk assets.

The market has incorporated this sharply with Bitcoin breaking sharply down towards $81k level and triggered historic pop of the commodities markets. It was always meant to pop at some point, the announcement just helped a little.

You can follow condensed train of thought of the new Fed chair here:

and here

Iran

Another short term risk to the markets is Iran escalation. Two weeks ago when protests suddenly broke out US vowed to support protesters if force would be used against them. US ended up being loud but backing down last minute due to the lack of forces in the region: military was busy with Venezuela and other groups. Since then carrier groups and battleships were given orders to arrive in Middle East, this buildup is close to the final stage and we expect the Round Two of the tensions to take place in February

Will be back soon

Spending time reflecting on the crypto industry evolution and putting together the deck helped me sharpen the thesis. Looking forward to getting back to you with it updated.

Intro

Today we’re going to explore one critical theory about bitcoin price - the 4 year cycle where ~1.5y bear cycle is followed by a ~2.5 year bull run as for the fourth time the market seems to have topped right at the point of the end of the 4y cycle. As financial markets are supposed to be pricing in predictable and periodic behaviors, this theory has to stop working at some point and this cycle we’re seeing multiple different attempts to justify that “this time it’s going to be different” attributed to institutional adoption, longer cycle of business activity and diminishing effect of mining rewards.

History of 4y cycle theory

The theory is mainly attributed to the Bitcoin halving happening every 4 years and igniting the bullrun by reducing the system inflation rate in half. First halving happened in 2012 and was a significant 30% to 15% yearly inflation reduction. Second in 2016 cut 10% to 5%, third in 2020 to 2.5% and finally the last in 2024 to 1.25% inflation.

While the move from 2.5% to 1.25% inflation may sound insignificant it still amounts to $35-82B of selling pressure removed from the system depending on the price range during the entire 4y cycle. Which is comparable to the whole net inflows into Bitcoin ETF. Basic arithmetic says if Bitcoin price doubles in a cycle and reward is cut in half then dollar terms of “net inflows” = “removed net outflow” would stay the same. We’re seeing this hold so far as the price indeed tripled between second and third cycle and doubled between the next two.

Now let’s examine the chart that made headlines in the early cycles of Bitcoin life called Rainbow Price. It explores the rainbow shape range between upper and lower bound on logarithmic scale of bitcoin price.

It’s obviously wrong on capturing the upper bound, but it’s surprisingly good at capturing the bottom one. The reason for the underperformance is relatively obvious - the range size is equal and assumes tops and bottoms are in equal distance from each other on a logarithmic scale! Meaning exponentially away from each other on a normal scale, while in reality we’re seeing the opposite. The market shows us clearly diminishing swings in terms of low to high multiples.

https://x.com/peterlbrandt/status/1995511746711470307?s=46

Which leads me to the following formula for a 4 year cycle.

Four year cycle as a decaying oscillation of an exponential Bitcoin price discovery

The chart below is my main target and the most important piece of the research on how I predict the market will do its course in the next 4y cycle. 4 year cycle exists but it’s getting smaller eventually transitioning to an S&P alike steady growth dependent on money expansion and BTC network growth Key levels: Current Cycle peak 125k already passed Bear market low - 60k, with brief distortions to downside 50s Next cycle - diminishing bull to 200k

Let’s first examine why we’re even looking at an exponential chart, well there are several reasons for it.

First - Bitcoin is a network and its value follows a power law. Every new person joining acceptance of bitcoin is receiving an opportunity to transact with every other person meaning total value of the network is N(N-1) and follows Metcalf’s Law.

Second - Dollar inflation is real and it’s following compound interest formula making overall inflation exponential as well.

Third - Exponentially diminishing bitcoin inflation.

All three of these points are exponential components of bitcoin price. So overall value of bitcoin is exponential and we can go even further and say that even in the exponential world it’s growing with a non-linear speed. In the beginning the network was growing exponentially faster and now is growing exponentially slower.

Bubbles and price discovery

Why am I calling the theory pendulum - due to similar reflexivity and damping oscillations. Halving gave the industry a drum beat, when halving happens everyone expects returns, cranks up leverage, goes into debt and buys. People know it is a bubble, people know it will go down, they just expect to exit before the others. Decentralized Ponzi scheme operating on a heart beat of 4y.

What follows when the music stops? A massive disappointment, calling Bitcoin dead and fixing the losses, blaming the tech just because someone else has won and you didn’t. Volatility is a feature not a bug, that allowed the industry to grow this explosive way because truly the reason - many people DO want a game like that. Truth be told main crypto marketing - people getting rich quick for no reason. I often wonder what would happen if bitcoin chose not a step function reward halving but a steady smooth decrease, after all it was possible to program any inflation function into the protocol.

Thus main reasons for the bullrun are:

• Expectations of a bullrun

• Hidden and explicit leverage

You can kinda spot the reflexivity right there in the definition. If it is that simple why hasn’t it been caught yet and stopped being active?

The industry is deeply reflexive in a complex way, when bullrun starts we’re seeing influx of new users, influx of token issuance, increase in volume, lending in DeFi is growing and all fundamental metrics start to look like we’ve finally got underlying asset strength.

Hidden and explicit leverage

While there’s a lot of explicit leverage on exchanges, the past cycle was a perfect example of hidden leverage: Rampant lending between counterparties and unseen operations inside FTX. 3AC had 3b in money lent to it. FTX misappropriated 20B of customer funds into multiple assets running a 5B venture fund alone. Celsius and BlockFi high APY lending. All of it was interconnected.

This cycle hidden leverage are DATs. DATs accumulated a record $100B in assets, seemingly run by sophisticated market players but it’s not the case. Why were sophisticated players doing PIPEs into DATs? Because they expected retail to pump the stocks once public. In reddit MSTR is advertised as leveraged Bitcoin bet, why buy just BTC if you can buy MSTR and they will increase your BTC per share with issuance of new stock. Issuance of new stock ATM puts into disadvantage the person who joined the stock last and gives advantage to the participant who joined earlier which is almost a definition of a Ponzi.

Deleveraging

All bubbles operate on the metric of rate of new people joining the frenzy. At some point the velocity of new people drops and we’re seeing the unwinding of the cycle. The main feature of this unwinding is overarching deleveraging with contagion. It happens at the market top and is always sudden and unexpected pop.

• Luna collapse triggering 3AC collapse triggering FTX collapse

This cycle we saw the peak of the bubble in September, new DATs and ATM issuance have been announced every day and mNAVs been compressing steadily. Around beginning of Oct all DATs except MSTR had been trading below 1mNAV and stopped buying. China trade talks and rare earth announcement was the last straw.

Oct 10/10 is when this bear market started

The deleveraging feature and $19B liquidations that happened on Oct 10 is my main reason to believe we’re in a bear market. We reached the peak, popped and now seeing slow contagion. The industry got better yes and we’re not seeing dead bodies of huge companies, but the contagion is slow and going from the futures market to the spot. Retail is the key driver for the cycles and retail has been hit hard. Now what do you do when you’re hit hard on futures? You capitulate and liquidate your spot holdings to save yourself. You sell DATs stock, you pull money out burned. You just need the asset to rip to find an exit point. BTC quickly recovered to 115, to get sold more, to get to 100, to recover to 110 to get sold more, to 100 then to 105 to get sold more and finally breaking through the 100k support.

If the theory is right what next?

This is how the earlier exponential chart that honestly looked depressing looks like in a linear scale. Pretty good right?

In the depth of a bear market we will see:

• Many DATs unwind. Have to sell assets to support mNAVs

• Biggest DATs to face extreme stress questioning their existence, but ultimately withstanding like MSTR

• Some political reversal of carte blanche

• High US inflation, talks about tightening

• External geopolitical event marking the bottom

• AI Bubble to pop

Room for optimism and exit opportunities before that

There are multiple short to medium term optimistic points that could play out:

• Liquidation maps suggest we have $10B in short liquidations up to $100k from today’s 90k and only $5B in long liquidations to $78k from current 90k

• US govt TGA accumulating 1T in assets it couldn’t spend due to shutdown

• Market Structure Bill and SEC Crypto Exemption rules

All of those support a pullback up to $100k price level in the next 3 months, mainly fueled by TGA spend up to a point in March when next taxes are due to begin TGA refill marking the next liquidity stress.

Then we go into Midterms preparation that are historically weakening macro and S&P movements, current projected probability of 77% Democrats taking House will lead to future unwind of Trump bump.

Another correction up during downfall - AI IPOs

Both Anthropic and OpenAI are expected to run IPOs somewhere next year with Anthropic seeming to try to frontrun the OpenAI one and go first. On the back of spectacular AI run those are supposed to do well with OpenAI targeting 1T valuation.

Optimism around both of them since they’re a reason for national glory will definitely draw liquidity support from the government and will boost all risk assets with it.

Then both will start publishing quarterly revenue numbers and the whole world will be reminded of their insane multiples and slower revenue growth that can’t justify trillions in infra spending. That pop will start the final leg of a bear market into the beginning and the first half of 2027. Which would be a great opportunity to buy and a beginning of a new 4y cycle.

Thesis risks

Do we have any external factors that can significantly alter the course of action? There are multiple theories on why this cycle may be different from the others:

• Fed pivot and violent debasement trade

• Elongated business cycle due to AI Capex boom

• No more cycles due to institutional adoption

Let’s review them one by one:

Fed Pivot and violent debasement

Part 1 - Rates

This is probably the main counter argument for the thesis that is likeliest to happen since it stays on point with the core Bitcoin thesis: broken financial system pushes the fed hand into only one available option - real negative yields (high inflation and low fed rate) for an extended period of time to tackle US govt debt crisis. So to rephrase this risk: bitcoin can win too fast.

Lots of price action in 2025 was so called Animal Spirits: violent retail driven appreciation of all sorts of risk assets: Crypto, IPOs, Uranium, Quantum, Meme Stocks. Dollar lost 10% of its value, everything pumped. I dwell on the specificity of cross-sector play here, those sectors aren’t correlated in their fundamentals, but through risk and liquidity.

Trump is pushing hard on interest rates to come down and will soon announce clearly political choice of a Fed chair that will help him fulfill the agenda. That can cause a return of Animal Spirits and continuation of a risk assets rally.

Two things can stop that from happening:

• It’s already priced in. Since Trump took office everyone fairly understood what he’s trying to accomplish

• Bond market revolt and aggressive yield growth for treasuries

According to fedwatch the market is currently pricing in around slightly north of 3-3.25% as the target rate for the end of 2026, which is just two more rate cuts after the upcoming Dec 10 cut. If the Fed pivots into aggressively more dovish stance the market could still reprice 2 more cuts.

The best read on this I had is from Alex Kruger and can be read here: https://x.com/krugermacro/status/1995874965841645887?s=46

Part 2 - Balance sheet expansion (Not QE, QE)

Another, sometimes even more impactful tool of Fed is balance sheet operations effectively a money emission in case there’s not enough buyers for govt and agency securities fed steps in. Up until Dec fed was running QT - offloading $100B of securities from its balance sheet bloated during covid stimulus times, total amount offloaded - more than $2T, yes T. Now we can say oh my god, the QT ends and massive liquidity drain changes to balance sheet expansion again, that should be incredible for risk assets.

The big hidden factor in this picture is Overnight Reverse Repo facility, effectively another pocket of Fed where excess liquidity can park to earn yield which stored the excess $2.4T at the peak level. Prolonged QT running first depleted this facility effectively not changing the liquidity in the outer system.

Facility was depleted in August and starting Sept we saw SOFR rates start to climb up and Bank reserves to climb down which is a signal of real liquidity extraction from the system. Since Aug fed balance sheet reduction accounted for about $500-600B and bank reserves dropped $300B - real effect of QT.

On Dec 10 meeting Fed has announced temporary $40B a month balance sheet expansion to prepare for April 15 tax season and then returning to target of $20B a month balance sheet expansion. This is not comparable with trillions of 2021 covid balance sheet expansion. Here below are the charts for proposed balance sheet expansion in the next 6 years. Most notable is a second chart - balance sheet share of Nominal GDP - effectively fed says they will keep balance sheet flat as a share of GDP, which is reasonable and as it should be, fed doing its plumbing work for GDP growth.

To sum up - fed isn’t expected to do money printer goes brrr and just wants economy to run its course. Unless again a massive pivot from the new Fed chair.

I take this risk seriously as the main counter thesis for 4y cycle.

AI Boom

I have the least amount of knowledge about this part so approaching this carefully. AI boom is fueling the economy and massive capex spending with all projections now totaling $1.5T in datacenter construction is a massive driver. There’s a common risk in this spending which is unsubstantiated AI revenues, OpenAI revenue for example still sits at around 20B which brings concerns to the market. We’re seeing early cracks in the story with datacenter bonds CDSs starting to spike. All in all I see this sector as exacerbating future bear market rather than countering it as OpenAI and Anthropic targeting IPOs in 2026. IPO season is usually the peak of the market with disillusionment following when companies start to publish quarterly reports. We can expect end of 2026 and beginning of 2027 as AI bubble unraveling which is perfect timing with crypto bear market. Will it mean that crypto will continue to rise in 2026 and hit new ATHs? I don’t think so, we’re seeing crypto to decouple from S&P in the latest couple months showing that internal crypto related downward pressure overstates the global S&P positivity. S&P had a correction and now correction is over, it’s back to ATH while crypto is still 25% down. We can expect crypto to softly rise on S&P moving up and crypto going twice as hard down on S&P weaknesses.

No more cycles due to institutional adoption

There’s a clear trend on the institutional adoption coming both from the adoption of ETFs as well as regulatory clarity. One telling point is low ETF outflow rate, about 5% with the recent 30% market plunge. What if the main market participants just buy and hold?

I see this risk as the fundamental reason why pendulum will stop at some point and converge to a global macro S&P style growth for Bitcoin and the reason why the range on the exponential chart is shrinking.

Why I’m not thinking this is yet true? The overall ETF inflows are still relatively low, sitting at $60B which is still lower than total DATs accumulations of around $100B that are mainly retail driven.

Additional reads and materials

https://www.lynalden.com/december-2025-newsletter/

https://x.com/ramahluwalia/status/1997499964356702302?s=46

https://x.com/milkroadmacro/status/1997357889833652724?s=46

https://x.com/jameseastonuk/status/1997252175764893818?s=46

https://bitcointreasuries.net/public-companies/microstrategy

https://x.com/cointelegraph/status/1997267355055825138?s=46

https://x.com/santiagoroel/status/1997245918278541634?s=46

Macro - All eyes on Fed and TGA

• S&P started its correction when, on Oct 29, the Fed expectedly cut rates by 25 bps but mentioned that the December rate cut is far from given, which triggered markets repricing cuts. Before these remarks, the market was pricing in steady 25 bps decreases toward the long-term target of 2.75%.

• Last week Thursday’s sell off deepened on the Fed telegraphing no rate cut in December by multiple channels (FED’S DALY: REALLY THINK THERE IS A PREMIUM ON WAITING TO DECIDE ON RATES UNTIL YOU HAVE AS MUCH INFORMATION — https://x.com/BloombergTV/status/1988981949826757013?s=20). Chances of a rate cut were lowered to 40% on Polymarket.

• Government reopen on Nov 12 provided a small relief rally, an opportunity to go further risk off (I have not used that).

• AI bubble fears still going through the market with Oracle CDS uptick. Nvidia highly beating expectations on earnings has not helped the market recover, erasing gains the same day as analysts are concerned with Nvidia financing its clients. Example: $10B Anthropic deal leading to $30B in promised datacenter usage — https://www.bloomberg.com/news/articles/2025-11-20/a-hedge-against-ai-crash-emerges-as-oracle-cds-market-explodes.

• Macro is healing: TGA has just started to be spent down from $1T to $928B as of Nov 19. Meaningful spend of $200–300B and a couple weeks’ delay is positioning us for the end of macro correction in December — https://x.com/zerohedge/status/1990765251810505143 and https://fiscaldata.treasury.gov/datasets/daily-treasury-statement/operating-cash-balance

  

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• While first cracks appear in the AI theme, it’s far from doom and gloom. I do not expect a proper bubble bust right now up until the OpenAI IPO. When OpenAI starts to publish quarterly revenue, it’s going to be more obvious that revenue growth is slower than expected by all this spending. Convergence of bear market crypto and AI bubble burst will create a great buying opportunity at the end of 2026 to first half of 2027.

Industry Notes:

• What’s driving the crypto bear market aside from macro weakness? Santiago from Inversion Capital published a newsletter and a podcast with a simple headline: Have we earned being a $3T industry? We’ve got everything we wanted from regulatory support, institutional adoption, and ETF flows, yet still struggled to attract users with wallet counts sitting at 30–60m monthly active. Ethereum is trading at 200–400x P/S (not P/E), and Solana is trading at 20–60x P/S (far more reasonable btw). https://x.com/santiagoroel/status/1990430092997050753 and https://x.com/santiagoroel/status/1991877125516009513.

• Monad ICO has shown weakness, being filled only 35% after a couple of days. Currently we’re sitting at a 90% fill ratio one day before the sale end. This reminds me of 2017 ICO days, when ICOs were bid first two days and last two days. Struggling to fill but filling eventually shows correct pricing — not leaving money on the table, while still showing overall market weakness.

• Circle is back below its first day trading open at $69. The highest performing IPO of the year gave it all back, but still is way above the IPO price of $31. Circle has an incredible network effect which it will find a way to monetize and is a great candidate for a 2026–27 buying spree.

Deals

Introducing a new category in Weekly with updates regarding the deals I’ve entered before or am considering now. I’m going to be publishing interesting targets even if I’m not bidding due to off-thesis or other reasons, so feel free to reach out for an intro.

• Kraken - tiny bright spot of hope amid the bloodbath - has announced a $200m round at $20B from Citadel as well as confidentially filing for IPO in Q1 2026. Latest earnings show Q3 $628m revenue (+50% QoQ, +112% YoY) and $178m adjusted EBITDA (+124% QoQ). https://blog.kraken.com/news/q3-2025-financial-highlights. I entered this deal at $10B. Kraken is one of the few companies that can still pull off an IPO in this market, but I don’t expect them to repeat Circle success, targeting a conservative $25–30B valuation.

• XPlace - pre seed Solana credit card company, a competitor of Pyra. Similar to Etherfi Cash model, where you can spend from the card borrowing against your SOL holdings. Founded by a UK team with prior experience in microcredits for the Mexico market. Excited about this one, though card issuing crypto neobanks are oversaturated, and I’m still lacking this fintech DD framework, which I’m working on.

• Early stage Hyperliquid mobile trading app by Suhil Kakar from TAC. Unbranded yet. Hyperliquid native app is generally the market category I’m excited about.

• Brightside.gg by Yash Jhade - lighter mobile trading app similar to the above, notably not as crowded as Hyperliquid, while Lighter is steady #3 by perp DEX open interest behind Hype and Aster.

• Partner VC deals: Embed Protocol - token/action recommendation model for onchain users with Coinbase and Farcaster as clients. Overherd - anonymous social network with USDC payouts by Yik Yak founder. Blockscout - veteran crypto blockchain explorer by Igor Barinov.

Late cycle signs:

• Timing. We’re in perfect position to be topping if one believes 4 year cycle still exists. I do let’s see several views on why. One - we’re still in price discovery stage and cycle volatility goes down, 2017 cycle did 20x higher highs and 20x lower highs, 2021 cycle bitcoin did 3x higher highs and 4x lower highs. 2025 cycle did 2x higher highs and will do a moderate higher lows. Cycle stops and bitcoin turns into stable macro asset once we’re in percentage higher highs and higher lows territory. Two - cycle runs on leverage explicit and hidden and euphoria cycling with despair. Have we experienced excessive euphoria this cycle? We certainly did: DATs mania was an altseason of this cycle. For two years everything has been up and to the right and we have to have a hangover.

• DATs and MSTR are not buying anymore. In contrast to ETFs flows that partially got inflows from people that do not want to sell their holdings for a long time, DATs were almost explicitly marketed as a leveraged play on cryptos. Buy dat and accumulate more asset per share. All mNAV premiums have collapsed, flywheel is dead. And we’re yet to see the reverse process of that. First dat’s has started to liquidate their holdings, one of them selling 970 btc and Solana FORD dat rebuying it’s shares with 1B that was supposed to go to solana buying. Dat’s have accumulated record 80B. Prediction - dat’s will experience serious stress, worst one will be unbundled alltogether, best ones like MSTR will stay afloat but will fly close enough to induce panic even there.

  

• Bear market starts with Deleveraging event. When cycle existed the behavior is formed, excess leverage explicit and hidden boils up then collapses, rinse repeat. Last cycle without knowing everyone was rehypothecated with FTX, Luna, 3AC, Celsius, BlockFi. Excess leverage built up until it didn’t and we saw a several liquidation cascades. First Luna collapes, that drove market down and brought FTX collapse etc. This is a deleveraging effect. We saw Oct 10 as the first deleveraging effect of this cycle. When people blow up on leverage they liquidate spot and cash out. Is there another deleveraging event coming triggered by Venezuela strike for example?

• Macro. DATs mania coincided with IPO mania, AI boom(bubble?), Gold boom. All while Dollar index is down 10%. This process is slowing down now. First cracks appear in AI theme, NVDA is correcting, CDS on AI bonds are up. Saying this Macro cycle is less at stress here, inflation has not picked up critically yet, AI debt is still small and OpenAI to IPO in a year or so, has some room to go.

• Humor one. Dyno coins pump ZEC, DASH, ICP, get sudden liquidity. Has whales cashed out and playing on bones? Recent cycle people don’t eve know these tickers.

Market response and is there hope?:

• NFA DYOR. I’m usually 90% allocated for my own personal funds in a bull run and 70% allocated before a bear market. In the bear market trades are obvious and easy as it should be. The hard part is bear market no one has cash. This cycle my plan is to be 70% cash and 30% allocated or even less in prep for the bear market. Currently I sit at around 45% cash, recently increased from around 20% cash.

Relief rally or if there is hope?:

• Government reopen liquidity injection. TGA is overfilled around $150B because of the shutdown, furloughed workers receiving backfilled checks and fed (planned) stop of QT Dec1 create a good position for risk assets to have a relief rally. Fed is expected to even start expansion of it’s balance sheet but at modest $20B a year and targets a fixed balance sheet to nominal GDP rate.

• Clarity Act. Initial plan to pass clarity act before the end of the year was derailed by Senate standoff as well as exacerbated by government shutdown. Currently polymarket chances for it passage in 2025 sits at 37%. As the bill comes to fruition markets are expected to react positively. As GENIUS act was sell the news for Circle I expect Clarity to be sell the news for broader crypto as, opposed to ETFs, market structure bill doesn’t change crypto adoption overnight and requires a buildout stage.

Counter Thesis:

• Money printer goes BRRR. Fed cutting aggressively into inflation, tariffs overturned, FED to expand balance sheet way more aggressively than 20B a months, another 10% of dollar debasement. Neverlasting rally. Something to be aware of.

In other news this week:

• Coinbase - with a liquidfy and echo aquisition coinbase turnes itself into full cycle exchange starting with token formation, private deals, public sales and secondary market and derivatives. Interestingly enough coinbase model for ICOs follows an IPO mindset where you have to hold what you purchased for at least 30 days otherwise you’re not receiving an allocation next time.

• Uniswap redirects all revenue from labs company to foundation and token buybacks. Effectively that means that token is it’s true stock. Currently trading at 20x multiple but that counts wash volume dependent on fees being exactly 0.

• Market Clarity draft released. Nice readout by Lex Node on the structure. https://chatgpt.com/s/t_69125b8b643c81918e52013d5984ac04

• I see these three news in a bucket and how they show us the direction for the markets: tokens = crypto native equity with revenue rights and shareholder votes. ICOs = IPOs, market needs some regulation to remove fraud, insiders etc and everyone is happy. Internet capital markets that are up 24/7 with instant settlement a lower barrier to entry keeping the best parts of the traditional models.

Ever since arriving in the U.S. with Rarible, I’ve had an everlasting feeling of a roaring economy, an entrepreneurial spirit, and, finally, a subtle sensation of high trust and integrity – a system where the combination of strict regulation and a reputation-first approach creates a necessary safety for capital.

It’s hard to describe – coming from a low trust economy it feels like nonsense to give someone else capital for their full personal discretion and expect not a fight for protecting it, but rather a shared journey of pursuing success.

Naturally, I started to receive offers from incredible founders to participate in their funding rounds.

The first one was Aptos – a billion-dollar valuation deal by a team building a next-gen blockchain inside Facebook, who decided to continue their work after the Libra project was shut down.

Looking back, I understand now how grateful I am for the opportunity I was presented.

It ended up launching at a $10B FDV and, while bringing financial results for me, it also defined the qualities of the kind of project I want to invest in:

• Industry-scale mission
  Built inside Facebook, the project targeted billion-user-scale issues like scalability, finality, and security.

• Olympic team
  You can’t call it “strong” or “good” – it’s not a percentile of talent.
  It’s simply the top 1–10 people in a field, aimed at solving Olympic-level impediments.

• Led by a Tier-1 VC
  Unsurprisingly, I found that teams like this are consistently backed by a16z – the strongest VC in the world. Yes, sometimes they come late, sometimes they do too many deals, but if you reverse the question and look at the biggest market-share companies in their sectors – DEXs, lending, bridging, NFT, social – you’ll see they’re backed by them.

• Market Size and Escape Velocity
  Going “public” through tokens was a key crypto innovation in capital structure – spawning myriads of projects looking to launch a token for an obscure idea.

  Those deals came endlessly; many investors got burned – seeing token launches under $100M, Tier-2 exchange listings, and then limbo.

  Every important crypto problem solved today is at least a billion-dollar problem. A project achieving product-market fit in such a sector never struggles with private funding, Tier-1 exchange listings, or secondary market liquidity. Access becomes the real problem.

I was fortunate enough to be in this Olympic-level game myself by co-founding Rarible. We were the second-largest NFT marketplace. Our token reached a $1B market cap. We generated over $300M in NFT trading volume, onboarded some of the world’s most recognized artists to Web3, and facilitated millions of their fans to transact in crypto – for many, their very first time.

I was also fortunate to compete against an a16z-funded, mission-driven team – witnessing firsthand the immense strength of talent networks, business connections, and execution speed.

I was fortunate being on both sides – receiving and giving away network effect – showed me how powerful it is. It drives a lion’s share of project outcomes. Everything in crypto is a network of people interacting with each other.

I was also, paradoxically, fortunate to live through a bear market – when everything goes south. We optimized team efficiency multiple times, reinvented the business model to a more sustainable B2B one, with a completely different distribution.

Through this journey, I formed hundreds of like-minded founders and investors, joining tens of dense private communities, and built my Twitter profile organically.

Often, an opportunity is just one written DM away from you.

I was able to participate in around 25 funding rounds of incredible teams – all sourced through this network and by being present at the “happening places” – crypto conferences around the world, in relentless pursuit of connecting with industry-changing individuals.

I’m happy to preserve the values and qualities of the projects I described above in my portfolio. I’m proud to be an investor in LayerZero, Matter Labs, Mocaverse, Story Protocol, Farcaster, GenSyn, WalletConnect – each of them solving a billion-dollar problem at least and moving our industry forward.

They say the best motivation is when you simply can’t not do it. The journey I’ve shared primed me not to be able to do anything else.

About a year ago, it became clear that I’ll spend the next 10 years of my prime career – from 30 to 40 – pursuing the industry’s immense growth alongside the best minds in this market, which is expanding simultaneously in multiple directions and solving world-class challenges.

I now have far more deal flow and access to opportunities than I have capital available – which led me to the decision to open up for external capital and form Concentrated Capital.

This will be a pool of capital directed at the core problems of the industry I live and breathe in.

This is happening. I welcome you to this inner circle – in whatever capacity you see fit for yourself:
observer, referrer, advisor, portfolio company, co-investor, LP, partner, or simply a dear friend.

Overly excited,
Alex

P.S. Stay tuned for the next letter. In this one, I’ve shared my motivation and the venture side of my story. I’ll also be covering liquid market updates, industry-level news, and reviews of the sectors I’m following.
P.P.S. It wasn’t easy to send this first letter – I truly appreciate your support and feedback. You can simply reply here.

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