Since our post on RHC in July there has been a ton of activity and it’s worth covering the chain and opportunities onchain in more depth.

Robinhood Chain is in the middle of a rotation where capital and attention is flowing in. There are several different ways to play it. Today we will set the foundation then follow up on Thursday analyzing specific projects for paid subs.

The Money Flow

Token launchpad PONS went from $20 million market cap to more than $200 million in August. Delta, UP and NetNet all saw their valuations 10x in August. This is a big shift from the memecoin only pump we saw in the early couple of weeks on RHC. Trades in speculative assets like memes eventually create fees for the underlying protocols that service these markets, which then drives capital to their tokens as well.

The main opportunity right now is that the RHC ecosystem has established a foothold but everyone is still figuring out what everything is worth (a topic we’ll cover in greater detail in Thursday’s post).

For now just keep in mind that RHC is in the midst of a landgrab. Every protocol is competing to be the default venue for RHC participants now that the chain is doing billions of dollars of weekly trading volume.

If the RHC hype cycle continues we think there are a few predictable second order effects.

First, a lot more applications are going to show up. Crypto devs and traders go where the money is. RHC now has hundreds of millions of dollars of liquidity, billions in weekly trading volume and a relatively immature competitive landscape.

It’s much easier to become the leading protocol in a category that doesn’t have a clear winner yet than it is to launch another lending protocol on Ethereum and convince users to leave Aave.

The initial attention hurdle has been crossed and the onchain flywheel is spinning. RHC is now in the part of the onchain cycle where capital attracts applications, applications create new tokens, tokens attract traders and traders attract even more capital.

We mentioned in our July coverage of RHC that Robinhood is well positioned to learn from other failures/successes and meaningfully deliver on CEX to onchain distribution. The major crypto platforms now know they need both “IRL” distribution as well as an onchain ecosystem to remain competitive. Coinbase has its exchange plus Base. Kraken is integrating its operations further onchain with Hyperliquid (although Kraken’s Ink Chain seems to have struggled to gain ground).

The next step is likely that market participants try to find the RHC “beta” asset which becomes a token that lets you express the view on whether RHC itself keeps growing.

There is no native Robinhood Chain token today, so capital looking for broad RHC exposure has to find a proxy. This token could be a meme or it could be an entirely new category depending on where market attention flows.

The proxy winners are typically tokens that either serve as the first touchpoint for new entrants or the reason they onboarded in the first place.

Memes x Nasdaq Stocks

Usually when you buy a memecoin onchain you trade something like USDC or ETH for it. RHC has pools that pair memecoins with Stock Tokens like NVIDIA or HIMS.

As we’ve covered in the past there are major liquidity considerations with tokenized equities.

We saw this play out with “BONER”, a memecoin paired against RHC’s HIMS Stock Token. As traders bought BONER more HIMS tokens accumulated inside the BONER/HIMS liquidity pool which reduced the HIMS tokens onchain outside the pool. During weekend hours when the underlying stock wasn’t trading and new supply couldn’t easily come in to arbitrage the difference, the remaining onchain HIMS liquidity was very thin. The Stock Token went to $130 even though the actual HIMS shares had closed Friday at $28.84. The premium of course collapsed quickly once additional Stock Tokens could be created through traditional markets.

We’re seeing composability between tradfi assets and onchain speculation.. in the silliest and most crypto degen way possible.

Strategically this could end up being good for Robinhood’s business. Instead of Robinhood having to convince someone to buy their blockchain version of Nvidia instead of through their broker crypto developers create reasons for people to need Stock Tokens. Pairing with memecoin liquidity is just one way to drive more participation in Stock Tokens.

This is a key narrative to watch since it is a new spin on the onchain market which means it is not quite figured out yet (that means opportunity).

Understanding Onchain Hype Cycles

This chart below is one of the most important frameworks in crypto.

This simple diagram illustrates how the boom and bust cycles of crypto often play out. The first loop represents the birth of a new trend where onchain traders looking to make some quick money enter an area of the market that has some attention but isn’t fully figured out yet. As some initial money is made trading against each other, the attention on that “narrative” or set of projects starts to grow.

If the psychological pull and the money to be made are both enticing enough, each loop gets bigger and bigger as more entrants flood in to capture the profits until eventually there is a blowoff top. This is signaled by attention reaching the mainstream and means there are a couple of months at most until the narrative is entirely saturated. After this point, new entrants as well as the old ones who never stopped playing try to continue to farm a game that has already peaked, latching on to every potential bounce in hype despite the game becoming less and less profitable.

All speculative bubbles eventually pop. Unrealistic valuations with low or no cash flow propped up by mass delusion aren’t sustainable.

We are once again in the early part of this roller coaster. Participants have yet to recognize that their own apathy towards the market is keeping them out. Indeed, sheer laziness of other market participants can be your source of edge today. This will not be the case later in the crypto cycle. We will come back in the future and link this article when it plays out exactly as expected.

Altcoin attention during the 2024/2025 bull run was almost entirely driven by the memecoin casino and Hyperliquid. This trend started gaining steam in 2023 as a small handful of onchain traders gambled against each other on dogecoin derivative launches. This eventually snowballed into multi-billion dollar memecoins and really took off in March of 2024 as coins like WIF received listings from Robinhood. The popularity of PumpFun made new token launches both easy and addictive. Eventually the craze culminated with a memecoin drop from the literal president of the United States which topped the entire market. People who kept speculating on new memecoin launches after this period got rinsed, and many memecoin millionaires gave all their gains back.

RHC now has enough liquidity to attract developers, enough trading activity for protocols to generate meaningful profits and enough early winners to attract the next wave of traders. At the same time, the chain is still young enough that participants haven’t fully figured it out and the winners haven’t cornered their markets.

We’re currently going project by project through RHC and will publish our analysis on Thursday for paid subs.

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Paid subscribers also get access to:

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• Weekly Deep Dive Report

• A comprehensive bi-weekly DeFi Roundup

• Bi-weekly Q&A sessions with our team

Until next time..

Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

• We now have a full course on crypto that will get you up to speed (Click Here)

  • We offer the Prediction Markets module on a standalone basis (Click Here)

• Security: Our official views on how to store Crypto correctly (Click Here)

To the latest edition of DeFi Roundup, where we save you time by filtering the market and separating the signal from the noise. You don’t have to spend all week scrolling Crypto Twitter to stay current.

Market Context

After months of “boring” price action Bitcoin broke above $80K, prices we haven’t seen May. Most of the summer BTC was grind…

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This post is for the people who slowly checked out over the last 16 months and are ready to clock back in. If you stuck around - well done!

For everyone else, the evidence for crypto has only gotten stronger. It’s time to update your views.

On Tuesday we wrote about what to do when Bitcoin jumps from $60K to $80K and you feel underexposed. …

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Almost every question in our recent Q&A boiled down to some version of “should I buy now?”

BTC is up roughly 25% in a week. ETH and SOL have moved ~30%. After months of weak sentiment people are worried about being underexposed.

Funny enough we wrote almost exactly what to do in the opposite scenario about a year ago.

Back then readers wanted to know how aggressively to buy when markets were falling. Today people want to know how aggressively to buy when markets are ripping.

We asked our readers to review last year’s post because the underlying problem is the same.

Instead of asking “is this asset attractive at today’s price” people are constantly asking “did I miss it?”

The first question is a more rational approach, while the second question is almost entirely driven by fear.

Your Strategy

Your strategy depends on whether you’re investing or trying to time the market.

The mistake you are probably making right now is combining three different questions into “should I buy?”

“I want to own BTC for 5+ years and I’m underallocated”

is a different question from:

“I think BTC will go from $80K to $100K over the next few months”

which is very different from:

“BTC just went up 25% and I feel like I’m missing out”

If you have a five year thesis on Bitcoin, not buying because you thought you could save another 5-10% on your entry is counterproductive. Unless you have demonstrated an ability to forecast short-term market movements over a meaningful period of time, you should assume you are going to get those calls wrong about as often as you get them right.

The first step before we move forward is to forget the price you missed.

Bitcoin was $60,000 and now it is $80,000. Now $80,000 feels expensive. The market does not care about your feelings or that you had the opportunity to buy at $60,000.

The only relevant question today is whether the expected return at the current price is attractive relative to the risk you are taking. Had people asked this same question at $60K it would have likely yielded a reasonably good buy signal.

What Should You Do?

Let’s break this down depending on the likely situations people are in.

Already appropriately allocated

Do nothing. You don’t need to react every time the market moves in the direction of your thesis. If you already own the amount of BTC or ETH that makes sense for your portfolio a rally is not automatically a reason to increase or decrease your position.

Sometimes your existing position is doing exactly what you bought it to do and you just need to avoid overthinking it.

Long-term thesis, materially underallocated

If this is you, then you should have been buying already and have some exposure given how long we spent at the recent lows (we had mentioned we were buying in the $60s for months in recent Q&As).

If your exposure is very low obsessing over a perfect entry can end up being quite costly. You essentially have two competing risks:

1. You buy today and the market retraces 15%-25%

2. You wait for that retracement and it never comes

Our guess is a lot of people are in trouble because instead of scaling into a position they are trying to make a binary decision between being all in and waiting for a crash.

If you’re investing for the long run your goal is not to achieve the lowest possible cost basis. Too many people are trying to be geniuses instead of making money.

Here’s a good thought exercise for you. If you were not allowed to look at the current price or chart of Bitcoin, what prices would you be happy owning it at? Would you be happy you owned BTC at $80K? Would you have been happy owning it in the $60s? The answer to these questions should give you a sense for the level of conviction you actually have in crypto markets.

Which brings us to our next group.

You only became interested because the price went up

Every two weeks we publish a DeFi Roundup for paid subs. We’ve consistently said that everyone is checking out because crypto markets are boring for now and they will regret it.

Look, we get it. Everyone lives a busy life. You’re not breathing crypto 24/7 like our team. It’s not your fault, and it’s not too late. Crypto bear markets can last 12-18 months and are followed by years of big opportunities. If this was truly the turning point there is a lot more to come, especially in the alt coin market.

If you’re in this group your real issue is you haven’t developed your own conviction around crypto markets yet. That is the crux of what we focus on at DeFi Education. On Thursday we will publish an article that helps you develop this conviction (or realize it’s not for you!). This way you’ll never miss a market bottom or fail to take profit on your gains because you’ll have a deeply rooted understanding of how crypto markets work and the level of belief you personally want to operate with.

However, this article will only be for paid subs (a measly $100/year so you actually commit to paying attention).

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On Tuesday we looked at what happens when both equity and tokens are part of the same project. Today we’ll talk about how to actually ascribe value to the token.

Some things to understand before we get into specifics:

1. Venice’s $100 million of annualized revenue is reported by the founder and does not mean it is guaranteed or contractual. It…

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Unlike stocks or bonds, a crypto token does not inherently represent a legal claim on anything. A token is a digital asset whose rules are defined by code.

Tokens can have functional features that have nothing to do with money, such as storage for computing. People can decide they want to make use of a token and find a way to purchase that token, ascribing it a “value.”

The existence of the token could mean something important, but it could also mean nothing at all.

Meanwhile, stocks and bonds have financial value backed by well established legal agreements.

Common stock represents an ownership interest in a company (you get to share in the upside). Bonds are a legal obligation between borrower and lender that require the borrower to meet certain obligations (interest payments, principal payments, etc.).

A company’s “capital structure” is its composition of equity and debt that make up its value.

A typical (highly simplified) company might look something like this:

• Enterprise value: $100

• Cash: $10

• Debt: $50

• Equity value: $60

Simplified Enterprise Value = Equity Value + Debt - Cash

Here’s how a DAO or crypto venture might look:

• Treasury: $10

• Token market cap: $50

• Venture entity’s equity value: $10?

• Debt: $0

This becomes confusing.

Does the treasury belong to the corporate entity or to the token holders?

What we end up with is something like having two overlapping capital structures.

Understanding what value is captured where could be the difference between your tokens going up 10x or being worth zero from a single tweet announcement.

When Pump.fun acquired trading terminal Padre last year, the existence of a PADRE token didn’t mean PADRE holders owned the company being acquired or were entitled to the acquisition proceeds. The token collapsed and Pump.fun eventually promised holders an airdrop after the fact.

The dual token/equity structure is once again under scrutiny today due to the structure at Venice/VVV.

Venice announced it crossed $100 million in annualized revenue, making it one of the most commercially successful businesses at the intersection of crypto and AI. We covered Venice in a deep dive back in February (we’re usually 6 months ahead of Crypto Twitter narratives).

There are effectively two ways to own exposure (and only one that public market investors can play).

Value is available at Venice (the private company) and VVV (the publicly traded crypto token).

Last month, Venice raised its first outside funding round of $65 million in a Series A led by Dragonfly at a $1 billion equity valuation. Coinbase Ventures, F-Prime, North Island Ventures and others participated. At the time Venice had 3.5 million registered users and was processing approximately 1.3 trillion AI tokens per month.

The VVV token has a market cap of ~$650 million.

In summary, what we have is:

• Venice equity: $1 billion valuation

• VVV: $650 million circulating market cap

• Venice annualized revenue: $100 million

So where is this value creation actually going to flow?

The Equity Side

The equity side is relatively simple. Shareholders own part of Venice the corporation. If Venice eventually becomes worth $5 billion or $10 billion the equity holders participate in that appreciation according to the rights attached to their shares. The Series A investors didn’t just buy equity though.

The investment included:

• 8.98% of Venice equity

• A 1.5 million VVV vesting token grant

• The right to purchase another 5 million VVV over the following eight years

Note: management announced investors would pay an additional $66.5 million to Venice to purchase the 5 million VVV, implying an exercise price of $13.30.

The Token Side

VVV currently has several primary functions. You can stake it to earn additional VVV. Holding and staking certain amounts can provide access to paid Venice products such as Venice Pro. VVV is also the asset required to create DIEM, Venice’s tokenized AI compute product.

Users stake VVV and then lock that staked VVV to mint DIEM. Each staked DIEM provides $1 of Venice API credit per day and the DIEM can later be burned to unlock the corresponding staked VVV.

All that is to say there is actual demand tied to using the product.

Venice has implemented mechanisms through which platform revenue is used to purchase and burn VVV. More Venice revenue means more VVV purchases and burns which lowers VVV supply and offsets some emissions. It has also introduced fixed token burns associated with new Venice subscriptions (separate burn amounts for Pro, Pro+ and Max subscriptions).

Buying VVV does not mean you own part of Venice. However, the tokenomics are such that more demand for platform means built-in demand for the token.

Despite its better than usual tokenomics structure, economic alignment is still not ownership. Tokenholders benefit from Venice’s growth only to the extent that the business grows and token value capture mechanisms remain in place.

That brings us to the core investment question: can Venice operate a token that captures enough of the economics created by the company that both assets can become valuable simultaneously?

A company could theoretically become worth $10 billion and its token becomes worth several billion if the token serves as a key piece of the network and increasingly large amounts of revenue create structural demand for the token.

The crypto industry has spent years experimenting with what tokens are actually supposed to represent. Governance rights and “community ownership” has proven to not be enough. Giving users a token while a private company captured the actual profits was also obviously not enough.

How We’re Thinking About it

The biggest risk with a equity plus token structure is obvious by now (and covered by us many times over the years). The company owns the valuable business while tokenholders get some vague combo of governance, utility and promises about decentralization.

In this case, founder Erik Voorhees is arguing that Venice’s shareholders are strongly incentivized to increase the value of VVV.

Venice owns:

• The operating company and its contractual rights to future cash flows

• A large treasury position in VVV

If Venice sends $10 million of company cash toward VVV, VVV holders benefit. Venice shareholders also benefit because the company owns a large amount of VVV.

The statement that “no revenue has flowed to equity” is largely meaningless since equity does not need to receive a dividend to gain value. And while diluting equity instead of selling the token is a noble claim, investors aren’t in the business of losing money. Presumably, there is a plan presented to investors in the Series A that sees them making a return on their equity investment (and yes, part of this would be the token grant/warrants).

Ultimately a founder’s priority is managing all stakeholders and capital providers. You, as the public market retail investor, are just one type of stakeholder, and should always think critically about anything presented by management.

Autist note: Be mindful of the circularity problem here. Venice equity owns a huge VVV treasury. VVV is valuable partly because Venice promises to direct economic value toward VVV. So Venice equity is more valuable because it owns VVV while VVV is more valuable because Venice equity controls a business that supports VVV. There is some genuine underlying value because Venice has a real operating business but the cross-ownership means reflexive valuation / double counting risk. You cannot just say Venice’s total ecosystem valuation is $1 billion valuation + $650 million VVV market cap.

So Which Side Is Actually Capturing the Value?

Voorhees’ argument is more compelling than what we typically get in these situations, so VVV definitely warrants a deeper look.

Venice is VVV’s largest holder. Management owns significant VVV. Its new investors own both equity and token exposure. Venice chose to dilute its equity rather than sell VVV. And actual Venice revenue is already being used to purchase and burn tokens.

But there is still an important distinction between management being incentivized to make VVV valuable and the claim VVV will have on Venice’s economics.

If Venice grows from $100 million to $500 million of revenue, what percentage of that incremental economic value actually reaches VVV?

This is the billion dollar question and answering it requires going considerably deeper than the headline tokenomics.

On Thursday, we’re going to put numbers around it for paid subscribers. We’ll break Venice/VVV into its component pieces and analyze the specifics around valuation and value capture so you can decide whether VVV is capturing enough value to be investable.

Become a paid subscriber to get Thursday’s Deep Dive.

Subscribe now

Paid subscribers also get access to:

• All of our past posts

• Weekly Deep Dive Report

• A comprehensive bi-weekly DeFi Roundup

• Bi-weekly Q&A sessions with our team

Until next time..

Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

• We now have a full course on crypto that will get you up to speed (Click Here)

  • We offer the Prediction Markets module on a standalone basis (Click Here)

• Security: Our official views on how to store Crypto correctly (Click Here)

To the latest edition of DeFi Roundup, where we save you time by filtering the market and separating the signal from the noise. You don’t have to spend all week scrolling Crypto Twitter to stay current.

Important Security Update - Coldcard Hack

For anyone who has crypto in wallets generated by a Coldcard any funds should be immediately tran…

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The broader market backdrop is increasingly disconnected from crypto. The S&P 500 closed at a record high today as cooler inflation data reduced concerns around further rate hikes while Bitcoin is trading around $63,500.

There’s no sugar coating it - crypto markets are weak right now. However, there are still companies making moves in toda…

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Today we continue our coverage of crypto public companies - this time with CRCL.

We covered CRCL recently for paid subs, highlighting the fact that the selloff driven by an unproven competitor was likely overblown.

Q2 2026 at a Glance

At first glance, the quarter looks fairly uneventful. USDC circulation ended at $73.3 billion, up 19% YoY. Total revenue and reserve income increased just 7% to $701 million. Adjusted EBITDA increased 8% to $143 million. Meanwhile, USDC onchain transaction volume increased 151% to $14.8 trillion.

How can USDC usage grow 151% while Circle’s revenue grows only 7%?

In our previous breakdown CRCL’s Wild Swings Explained we argued that buying CRCL today is somewhat like buying a short-duration fixed income fund levered to growth in USDC supply. We also laid out our bear/base/bull valuation framework and argued that the stock ultimately comes down to three variables:

1. Interest rates

2. USDC supply growth

3. How much of the reserve economics Circle retains

Q2 lets us refresh our inputs on the above variables and introduces guidance from the launch of Arc.

The Core Business Hasn’t Changed

Rates

The first thing worth pointing out is that despite all the discussion around payments, AI agents, tokenization and Arc, Circle is still largely a reserve income business.

Circle generated $668 million of reserve income during Q2, compared with $701 million of total revenue and reserve income. That means 95% of the top line still came from earning interest on the assets backing USDC.

To quickly recap for new readers, the business remains fairly simple.

Someone deposits $1 with Circle and receives 1 USDC. Circle takes the dollar and primarily holds cash and short duration U.S. government assets. Those assets generate yield. Circle keeps some of that yield and shares some with distribution partners.

The more USDC circulating the larger the reserve base. The higher prevailing short-term interest rates are, the more money those reserves generate. Since the reserves are short duration Circle’s portfolio reprices quickly when rates move.

In Q2, Average USDC circulation increased 25% YoY to a record $76.5 billion buy reserve income increased just 5% because Circle’s reserve return rate fell 66 basis points to 3.48%.

Supply

USDC ended Q2 at $73.3 billion up 19% YoY but it ended Q1 at approximately $77 billion, meaning supply actually declined around 5% since last quarter.

Average USDC outstanding was an all tim high at $76.5 billion which means Circle carried a larger reserve base over the quarter even though supply weakened towards the end of the quarter.

Usage metrics were quite strong. USDC onchain transaction volume increased 151% YoY to $14.8 trillion. Circle processed approximately $170 billion of minting and redemptions during the quarter. Management also said real world payment volumes using digital dollars increased 84% YoY. However, these transactions are not necessarily driving huge revenue increases (most of that still comes from interest earned while the dollars sit in the reserve).

Think of transaction activity as being more valuable from a strategic/adoption standpoint than for its direct contribution to the bottom line. Circle needs to eventually turn that activity into fees and other products.

Reserve Economics

Headline revenue is misleading because Circle pays large distribution incentives to companies that help drive USDC adoption. Circle generated $701 million of revenue and reserve income during Q2 but incurred $412 million of distribution, transaction and other costs.

Circle generated $289 million of Revenue Less Distribution Costs (“RLDC”), representing a 41.2% RLDC margin. RLDC increased 15% YoY and the margin improved 3 points. QoQ the RLDC margin has been basically flat.

Circle had $12.4 billion of USDC (17% of circulation) on its own platform infra. That’s up 106% YoY, but down from $13.7 billion since Q1. Coinbase represented ~30% of USDC supply at Q2 end.

What about the Stablecoin Cabal?

When Open Standard announced OUSD in June with companies including Visa, Mastercard, Stripe, BlackRock and Coinbase, CRCL shares took a hit.

We argued at the time that the market was looking at two separate risks.

1. Circle’s distributors might eventually promote a competitor

2. OUSD’s model of returning most reserve economics to distribution partners could put pressure on Circle’s economics

We also argued that the immediate financial impact was likely being exaggerated. OUSD wasn’t live, had no operating history and was unlikely to materially affect Circle’s 2026 earnings. Open Standard still says OUSD will launch later this year.

In the latest earnings call Circle’s management was asked about this directly. The team’s response was essentially that Circle already runs a large distribution incentive model, has >150 economically incentivized distribution partners, can structure agreements alongside Coinbase and continues working with many of the same companies backing OUSD (~70% of the companies “participate in Circle’s network”).

There is some merit to these arguments but we wouldn’t discount the competitive threat entirely. Yes Circle can simply partner with and pay companies to distribute USDC. The threat around the economics Circle may have to offer to keep USDC competitive remains.

If competition makes distribution more expensive, USDC can continue growing while CRCL captures less value from each dollar of supply.

As of now this is just a risk we’re monitoring.

Market Reaction

The initial reaction was negative. CRCL fell nearly 4% in early trading and touched $59.12 as investors focused on the revenue miss. This reversed and shares finished the earnings day at $63.30 (basically ended flat on the day).

CRCL is up about 5.8% today to ~$71 as interest rate expectations have moved higher again. Oil prices and inflation concerns have shifted the rates backdrop and markets are now pricing a September Fed hike ahead of tomorrow’s CPI report at a coin flip. Reserve income is essentially a function of USDC in circulation × the reserve return rate, with reserve assets earning rates close to SOFR.

Bitcoin is down ~0.6% and Coinbase is down ~1% today. You might recall in our June coverage of Circle we mentioned that CRCL can trade opposite the rest of crypto because on shorter time horizons it behaves more like a rates bet.

Arc Developments

Circle sold $242 million of ARC tokens to institutional investors before Arc’s public mainnet launch. Management expects approximately $180 million of those proceeds to be recognized as revenue during 2026 as product milestones are completed.

The network launches publicly on September 16. BlackRock, DTCC, Galaxy, ICE, Mastercard, Standard Chartered, Visa and others will participate as validators. BlackRock intends to deploy BUIDL on Arc and Circle is working with DTCC toward tokenizing DTC custodied assets on the network.

The same old caveat that we applied to OUSD applies here - large corporate logos do not mean adoption. In crypto, a big stack of logos can actually be a countersignal.

Autist note: management raised 2026 RLDC guidance from 38-40% to 41.7%-43.7%, but this includes accounting recognition of Arc’s token presale revenue. Normalizing for the presale, margins remain around 39% (midpoint of prev. range).

Looking Ahead

Q2 doesn’t materially change the three variable framework we previously identified for analyzing CRCL.

• Rates: still the macro variable that CRCL is most sensitive to. A 25% increase in average USDC supply translated into only 5% reserve income growth because reserve yields fell 66 bps.

• USDC supply: nothing spectacular this quarter - we lean positive/optimistic. Supply fell from $77 billion to $73.3 billion QoQ even while usage continued growing rapidly, but average supply outstanding was strong.

• Margins: better YoY and still above 40%, but essentially flat QoQ. Distribution economics remain one of the biggest long-term variables to keep an eye on.

Longer term we’re continuing to monitor developments around diversifying Circle away from being a purely rates bet. Its Circle Payments Network, Arc, and other institutional integrations are longer dated diversification bets.

For paid readers: our previous CRCL deep dive goes one step further and puts numbers around this framework with a valuation scenario analysis based on USDC growth, reserve yields and RLDC margins. We’ll be digging into more crypto public company earnings over the coming weeks, so join the paid list for access.

Subscribe now

Paid subscribers also get access to:

• All of our past posts

• Weekly Deep Dive Report

• A comprehensive bi-weekly DeFi Roundup

• Bi-weekly Q&A sessions with our team

Until next time..

Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

• We now have a full course on crypto that will get you up to speed (Click Here)

  • We offer the Prediction Markets module on a standalone basis (Click Here)

• Security: Our official views on how to store Crypto correctly (Click Here)

On Tuesday, we explained how Bitcoin miners accidentally accumulated one of the most valuable assets in the AI economy. Their power.

For years BTC miners acquired land, negotiated grid connections, built substations and developed campuses capable of hundreds of megawatts. When AI companies suddenly needed tons of electricity, miners found …

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Bitcoin miners have accumulated one of the most valuable assets in the AI boom - large blocks of power connected to the grid.

That’s why we’re keeping a close eye on this upcoming crypto public company earnings calendar.

By analyzing public crypto companies we can learn more about:

• Changes in interest from major non-crypto institutions in crypto

• How crypto executives are approaching key political/regulatory changes

• What segments of crypto are public companies allocating the most resources

• Changes in adoption in major profit centers (stables, trading, custody, etc)

Over the next few weeks, crypto companies will be reporting their earnings. We’ll cover what you need to know so you don’t have to parse every filing yourself (note: only paid subs have complete coverage since we do two extra posts per week for them).

Initiating coverage of crypto public companies is how we kept subscribers ahead of the Great Bitcoin Mining Pivot years ago. Today we’ll break down and provide updates on this transition.

Background

Bitcoin miners spent several years (most notably 2020 - 2022) racing to secure cheap electricity. They bought land, negotiated with utilities, built substations and filled industrial sites with machines that mine Bitcoin.

Now instead of using all that electricity to run Bitcoin mining operations they want to use it to run AI data centers. Note that they’re not pulling out the mining machines and plugging in NVIDIA chips. BTC mining machines can’t be converted into AI servers. The infrastructure (buildings, cooling systems, electrical layouts, etc) is typically unsuitable for advanced AI workloads.

The best conversion candidates have four things:

1. A large grid connection

2. Dependable power

3. Enough land for expansion

4. Access to high capacity fiber

Why AI Has a Power Problem

Training a major AI model requires thousands of specialized chips working together for weeks or months. Once that model is released it serves millions of users which requires continuous computing capacity. More advanced applications like reasoning models, agents, video gen etc require far more computation than asking a chatbot for a grocery list. An AI company may need hundreds of megawatts at one campus, which can take years.

The US Department of Energy estimates that data centers used ~4% of electricity in 2023 and could consume anywhere between 6 and 12% by 2028. Simply producing enough electricity across the country isn’t enough. The electricity needs to be available where the data center is built.

Frontier language model training compute has grown roughly fivefold per year since 2020 with leading models increasing by about 10,000 times over that period. Even as algorithms and chips become more efficient developers have historically reinvested much of the efficiency gain into larger models, longer contexts, more data and more experiments.

Herein lies the problem. Leading AI companies can easily raise money, and order chips. You can’t just snap your fingers and create 300MW of power.

AI companies reserve infrastructure ahead of actual usage because the opportunity cost of lacking compute exceeds their cost of temporary underutilization. This creates demand for large blocks of future power.

Why Miners Have a BTC Problem

Bitcoin mining is a difficult business.

A miner earns revenue by contributing computing power to the Bitcoin network. Its share of the rewards depends on how much computing power it controls relative to every other miner. If competitors add more machines each existing machine earns less Bitcoin.

The amount of new Bitcoin paid to miners is also cut in half every four years. Operators have to be become more efficient, find cheaper electricity or hope Bitcoin’s price rises enough to compensate (usually need all of the above!). A company can spend hundreds of millions of dollars on equipment without knowing what each machine will earn several years later.

In contrast, AI data center leases can be more attractive. Instead of unpredictable BTC revenue the operator could sign a contract lasting 10-20 years, paid in dollars. This is also a deal that is easier to finance than a forecast based on future BTC prices.

The Transition

A Bitcoin mine is best understood as a power intensive industrial site that contains specialized computers.

An AI data center is a far more complex industrial site containing expensive general purpose computing clusters that must communicate continuously and remain available.

This means not every mining operation can become an AI campus. A mining facility can be extremely basic. Some are essentially warehouses or outdoor containers with fans. Bitcoin machines can tolerate heat, dust, brief outages and fluctuations that would be unacceptable for AI.

A BTC miner’s ASICs are usually irrelevant to the conversion. A miner’s advantage is generally lower development cost and shorter lead time for the first few layers of infrastructure like land, interconnection, substations and utility service.

Of course, BTC miners aren’t the only source of power for AI companies. That means they have to be competitive on a few factors. The economics are being compared on:

• Cost of miner conversion: value of reusable assets + retrofitting cost + loss of mining profit, if any

• Greenfield data center: land, interconnection, utility upgrades, construction, financing cost and value of time spent waiting

• Traditional colocation lease: rent and passthrough costs, adj. for availability and delivery timing

In essence, miners should win where the site saves 1-3 years of development time, delivers a scarce and large power block or allows the AI company to compete faster on services. This is weighed against the high capex for conversions.

Autist note: Core Scientific helped establish the model in 2024 when it agreed to provide 200 MW of infrastructure to CoreWeave under 12-year contracts initially estimated to produce more than $3.5 billion in cumulative revenue. Core Scientific presented the deal as a way to gain stable, long-term, dollar denominated revenue while reducing exposure to Bitcoin volatility. This created the blueprint for the rest of the mining industry.

Note that while AI leases are more predictable than mining revenue they come with a different set of risks. The headline contract values are actually the sum of payments over a 10-25 year time frame depending on the deal. If projects start to run over time/budget or require repeated capital raises these numbers could still generate a poor equity return.

What Happens Next

From 2026 to 2028 we get to see which former miners can deliver complex data centers on time (and on budget).

The pivot is likely to reduce the capital that North American miners allocate to ASICs. Dollars that would previously have funded new mining machines are now being directed towards AI data centers. Core Scientific attributed a 45% YoY decline in Bitcoin production in the first quarter of 2026 partly to its strategic reallocation toward colocation. Keel Infrastructure (f/k/a) Bitfarms has said it does not intend to invest incremental capital in expanding hashrate.

The implication? Bitcoin adjusts mining difficulty as computing power enters or leaves the network. If miners exit blocks may temporarily slow after which lower difficulty improves the economics for remaining miners.

We’ll likely see geographic redistribution. ASICs will move to sites AI companies don’t want. Private miners, being less driven by appeasing investors compared to listed companies, may gain some market share. Less aggressive ASIC spending overall means less competition for each block reward, so companies that retain cheap power and new machines could gain share as the largest companies shift focus.

The industry itself is splitting into a few different businesses. Hut 8 reported 949 MW of contracted AI capacity backed by $26.6 billion of expected base-term contract value and $7.5 billion of project financing. Its BTC mining has been largely placed into its American Bitcoin subsidiary.

MARA has stated plans to continue mining alongside AI development so that power remains productive while HPC capacity is deployed.

Core Scientific and Terawulf are largely becoming colocation operators that build facilities for customer but do not own the GPUs. They earn contracted revenue while the tenant or cloud provider supplies the computer equipment.

A smaller subset like IREN and HIVE are trying to own GPUs and sell AI cloud services. This lets them increase $/MW revenue but adds risk in the form of GPU utilization and hardware obsolescence.

Recent agreements show just how large the opportunity has become. TeraWulf disclosed a 20-year lease with Anthropic for approximately 401 MW of critical IT load in Kentucky. Cipher has signed long-term arrangements involving Fluidstack, Google support and AWS.

Given the size of the opportunity, we likely see a new hierarchy for power assets:

1. Large, reliable power blocks near fiber and population centers, will be reserved for AI. AI companies get the best sites

2. Sites that are cheap but too remote, interruptible or poorly connected will remain Bitcoin mines

3. Marginal mining sites will be shut down when Bitcoin revenue no longer covers costs related to electricity, maintenance, etc

For paid subscribers we will do a deeper breakdown once the miners/pivoters have finished reporting earnings. In that post we’ll talk about the key drivers from an equity perspective and dive deeper into the economics of the end markets these companies serve. We’ll also look at which miners are actually converting this into hard cash.

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Paid subscribers also get access to:

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Until next time..

Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

• We now have a full course on crypto that will get you up to speed (Click Here)

  • We offer the Prediction Markets module on a standalone basis (Click Here)

Security: Our official views on how to store Crypto correctly (Click Here)

To the latest edition of DeFi Roundup, where we save you time by filtering the market and separating the signal from the noise. You don’t have to spend all week scrolling Crypto Twitter to stay current.

Market Context

Another snooze fest in majors. BTC has chopped around $63 - $65K for the last two weeks. If you’re actively trading BTC righ…

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Every crypto cycle produces success stories of participants putting a relatively small amount into the right altcoin and it delivering a 10-20x or more in a short amount of time.

While the largest crypto assets like BTC and ETH offer a long-term track record of survival and liquidity, altcoins can offer the chance for a small position to p…

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Here is a sentence you have read a hundred times this year (and should stop caring about): “crypto is down.”

While true, this statement is completely useless and unactionable. Depending on what you’re holding, your book is either down more or less than “crypto.”

The Bitwise 10 Large Cap Crypto Index is down 29% YTD while Bitcoin is down approximately 26%.

This year, a very narrow cohort of assets has run hard while long tail assets have gotten crushed. HYPE is up 134% YTD and Morpho is up 78%. Maker, Tron and Ondo are also in the green. On the other end, Bitcoin is down 26%, ETH 35%, Aave 34%, Solana 42%, XRP 43% and Sui 54%. The return spread between HYPE and SUI is 190 percentage points.

That spread is the size of the prize for getting the one thing right we have preached for the last three years on DeFi Ed: asset selection.

Regime Changes Drive Your Returns

There is a reason index funds exist in equities and why hedge fund analysts can make millions in some environments then end up fired. It comes down to regime changes.

In a broad “beta regime”, most assets are rising. Picking the best token still helps but simply having market exposure is usually enough to make money. In a narrow “selection regime” a small group of winners must carry a large group of losers. Diversification actually stops protecting you because the basket is filled with assets that are diversifying you away from the few things that are working.

The 2020 to 2021 bull market was the clearest beta regime. In 2021, 226 of 280 tracked coins (81%) finished the year positive. Total crypto market cap increased 188%. You could own BTC, an “ETH killer,” a metaverse token, a DeFi governance token or a dog coin and have a decent chance of looking intelligent by year end.

Beta regimes are the time to left curve. The market rewards exposure more than precision (and brain power).

Today is not that market.

The 9% Club

In a sample of 556 coins, only 48 had positive returns through July 2026. In other words, 9% of the investable universe is up and 91% is flat or down. The dataset does have limitations including survivorship bias and minimum liquidity thresholds but those limitations actually make the results look better than they are.

Total crypto market cap fell 12.6% in Q2, ending June around $2.1 trillion. That was the market’s third consecutive negative quarter and left total capitalization 52% below the October 2025 peak. Bitcoin fell 14.2% during the quarter and ETH fell 25.4%. On the flip side, HYPE broke into the top 10 as Hyperliquid continued expanding.

Crypto cycles repeatedly alternate between periods when exposure is enough and periods when survival depends on selection.

In 2017, nearly everything associated with a blockchain could attract speculative capital. Then in 2018 less than 1% of coins ended the year positive. The average return of the top 100 coins was -83%. In 2021, 81% of a basket of coins ended the year positive. In 2022, only 2% ended the year positive and the top 100 fell 76%.

Knowing what regime you’re in and how to participate in each regime is the difference between a good year and being completely wiped out.

When nearly everything goes up your opportunity cost for picking the wrong winner is limited because your 2nd and 20th picks probably also go up. When only 9% of assets are positive every mediocre position you put on sandbags the few winners in your portfolio.

If you had an equal weight portfolio with one asset up 130% and nine assets down 50%, the portfolio is still down 32%. You found a winner and still lost money because you diversified into assets that had no reason to exist.

Herein lies one of the biggest pitfalls in crypto - a basket of familiar names. Familiarity does not mean quality. A token surviving long enough to become recognizable does not mean it will recover its old high, regain users or earn a new valuation. And yet people rush into chasing coins they recognize when an influencer on Crypto Twitter talks about it. Human nature doesn’t change despite multiple cycles of learning the same lessons!

Crypto tokens typically lack the properties that create a valuation floor. There’s no true monetary demand, productive cash flows, creditor claims, redemption value or a buyer of last resort (see: 2022 bankruptcies). The “floor” is simply the price at which another speculator is willing to take the other side. In other words, it’s not a floor at all.

“Waiting for a recovery” is not a strategy when the asset’s users, liquidity and reason for existing are gone. A token down 95% needs a 1,900% gain just to return to its starting point. A token down 99% needs to rise 9,900%. Zoom out on the charts of some of these tokens that are having “bounces” in recent weeks. You might find that a token got your attention after being up 20-30% due to a low liquidity squeeze, but it’s still down 95% in the last 18 months.

This should all feel intuitive. In bearish market conditions everyone checks out of crypto both financially and mentally, which means tokens are available for pennies on the dollar. Picking the right assets can yield a life changing profit if they recover or grow. However, most crypto tokens have no floor from underlying fundamentals or otherwise any reason to exist so when you’re wrong your token will go -99% instead of recovering.

Selection is More Than Finding a Good Protocol

The obvious conclusion is that you need to pick better assets. However, if you’ve been reading us for any meaningful amount of time you would know that “good project” is an inadequate framework.

Let’s take Aave for example. It’s one of the most established lending protocols in DeFi, yet its token is down 34% YTD. A useful and battle tested protocol can still be a weak investment over a particular period because token returns also depend on valuation, broader market dynamics, supply, catalysts and token value capture.

Your selection criteria should have at least the following five components:

• Rising relevance: sustained increase in users, volume, deposits, open interest and fees. Qualitative relevance such as narratives and attention also fall into this bucket. Note that metrics should be adjusted or appropriately discounted for token incentives, sybil activity, wash trading, looping and other subsidized or artificial usage.

• Token value capture: as the market matures we will see a growing demand for tokens to have clear value capture or a defined path to it. Especially true in selection regimes. We have written dozens of posts on tokenomics over the years and have an entire section dedicated to this in our course - take the time to understand this!

• Favorable supply dynamics: Unlocks, emissions, treasury sales and insider ownership often overwhelm genuine demand. A token can be fundamentally improving while its float expands faster than the market can absorb, which often makes it uninvestable for a long period of time.

• Valuation: Valuation can be a meme at times in crypto due to the lack of comparability across demand/supply dynamics for tokens. We would maintain that tokenomics are the more important variable. Valuations are most important when a) a token is valued at the extremes (too high or too low) and b) when there exist very clean comparables with well accepted metrics to compare across (e.g. among dexes)

• Relative weakness: You often hear people say “relative strength” is an indicator a token’s success. Since tokens are easily manipulated we are skeptical of relative strength in most cases. Instead we’d argue that relative weakness is a much clearer signal (to stay away). Relative strength can be gamed, but there’s typically no point in faking relative weakness.

Note: this framework is not for identifying every future winner. The goal in the current regime is to keep bad assets out of your portfolio.

Concluding Thoughts

Your portfolio isn’t a museum. You don’t just put in every thesis you have ever found interesting. Every position consumes capital and attention. When more than 90% of assets are flat or negative the threshold for inclusion must be kept high.

This is the environment where discipline matters most. Select carefully, size appropriately and remain willing to change your mind when the evidence changes.

When the next regime shift arrives there will be a time to press exposure again.

To go deeper on how we evaluate tokens, paid subscribers can read our ongoing work on tokenomics, valuation, supply dynamics and individual protocols.

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Paid subscribers also get access to:

• All of our past posts

• Weekly Deep Dive Report

• A comprehensive bi-weekly DeFi Roundup

• Bi-weekly Q&A sessions with our team

Until next time..

Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

• We now have a full course on crypto that will get you up to speed (Click Here)

  • We offer the Prediction Markets module on a standalone basis (Click Here)

Security: Our official views on how to store Crypto correctly (Click Here)

We have long stated that the best DeFi and crypto protocols would not compete with the crypto ecosystem. They would compete with their traditional counterparts and capture users outside of crypto. Disruption generally starts with cheaper, simpler, or more accessible alternatives at the bottom of a market. Over time as these innovations im…

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We commonly get asked about where to find safe, easy and high yields onchain in crypto.

A lot of simple looking yields in crypto are actually fueled by multiple layers of complexity from both a technical standpoint and a financial standpoint. Different yield products are often stacked to provide the final “x% APY” number you’re shown. This is a major issue in the crypto space that has historically led to some of the biggest financial blowups crypto have seen.

These products are often presented like a high yield savings account but they come with significantly more risk.

Robinhood recently began rolling out Robinhood Earn, which lets eligible users lend USDG through a self-custody wallet at an estimated 7% APY. Coinbase similarly lets users lend USDC through Morpho vaults curated by Steakhouse Financial.

These products look simple because they are part of Coinbase and Robinhood’s interfaces. Underneath, users are depositing into onchain credit markets which come with unique demand, collateral and onchain dynamics most users aren’t truly equipped to understand.

Today we’ll shed light on this so our readers can look beyond the surface level return indicators and make sure their hard earned capital only goes where it’s best rewarded.

All Yields Have a Player

You deposit your asset into a smart contract and start earning yield. Someone on the other side is paying you that yield for their own purpose. In TradFi this payor is easily identified. When you buy T-Bills the US government is paying you. When you buy corporate bonds the company is paying you interest. When you buy a house you pay interest on your mortgage. You get the point.

DeFi yields are often packaged up and use non-traditional products. A product can often combine several sources. A displayed 7% yield could consist of 4% in borrower interest, 2% in token incentives and 1% temporarily paid by a platform trying to acquire or retain customers.

In TradFi, a yield curve shows how much interest investors demand to lend money for different lengths of time.

Think of it like this:

• To lend someone money for 3 months you might accept 3%

• To lend them money for 2 years you might want 4%

• To lend them money for 10 years you might want 5%

The longer your money is locked up, the more uncertainty you face, so longer loans usually pay more. Plot those interest rates from shortest to longest maturity, and you get the yield curve.

A normal yield curve is when longer-term lending pays more than short-term lending. People expect economic growth, inflation, or higher future interest rates.

A flat yield curve is when short and long-term rates are similar and it means investors are uncertain about the future.

An inverted yield curve is when short-term lending pays more than long-term and it happens when rates are currently high but investors expect slower growth and lower rates in the future.

The main takeaway is a yield curve shows what the market is charging for time and uncertainty.

In contrast, the onchain yield landscape is better understood as a hierarchy of cash flow quality. The primary drivers of returns and risks for various yield types are shown below to help with decision making.

For a chain-agnostic investor, the framework we suggest is to sort yield by what ultimately funds it.

Native staking and top tier DeFi protocol lending yields are usually the place to start.

AMM liquidity provision returns can look attractive but net outcomes are highly dependent on the fact that impermanent loss can dominate fees earned, especially in volatile pairs.

Liquid staking is economically close to native staking but adds code and secondary market discount risk.

Vaults and aggregators improve convenience and sometimes capital efficiency, but they also add many layers of code and curator risk.

Synthetic carry, points farming and leveraged strategies can produce the highest returnsbut they are also the categories most likely to compress suddenly when funding normalizes, emissions decay or airdrop expectations fade. These sources of yield can also end up costing you big depending on what you had to deposit to participate. This would have to be the most actively managed strategy.

What Actually Drives Onchain Yields

The main historical pattern since about 2020 is that yields spiked when crypto native leverage demand, trading activity or token incentives surged. Speculative appetite was the core driver of all yields onchain. In recent years, onchain treasury products have brought yields onchain that are unrelated to crypto’s speculative appetite.

Crypto Market Cycles

When spot and derivatives volumes surge, profitable uses for stablecoins increase, borrow demand rises, perp funding turns positive, liquidations increase, and onchain opportunities become richer. Onchain yields go up because there is significantly more financial activity.

An important consideration: just because yields are higher in a bull market does not mean they are worth it. In may cases there are higher torque opportunities to pursue than high single digit or low double digit stablecoin yields. Taking a portfolio approach to onchain yields and trading is the best approach (i.e. some portion in yield others in onchain trading opportunities).

In bull markets, consider opportunity cost. In bear markets consider downside risk for low yields.

Macro Opportunity Cost

It was commonly said that short-term treasuy yields drive onchain stablecoin lending yields. The actual pass through isn’t really there. Crypto-specific drivers have dominated yields, and its often the case that DeFi stablecoin rates do not adequately compensate for risk versus T-Bills. We believe this is largely because a lot of capital in crypto has to invest in crypto. Risk free rates definitely have some impact (there will be less demand for a DeFi yield as it approaches the risk free rate) but we don’t consider the risk free rate to provide a true “anchor” for yields onchain.

Token Emissions and Incentives

The 2020/2021 cycle was dominated by yield farming and eventually led to the collapse of most tokens as there was far too much supply coming online relative to the demand interested in buying it.

As the market smartened up and yield farming became too efficient we saw the proliferation of points programs, which gave teams the ability to decide distribution mechanics after the fact. Read more on points program dynamics below.

The Yield Compression Problem

The issue with onchain yields (and an onchain economy that is circular/closed off to tradfi markets more broadly) is that high onchain yields contain the seeds of their own decline.

For example, suppose a lending market has $100 million supplied, $80 million borrowed and borrowers paying 8%. New lenders see the attractive rate and deposit another $100 million. If borrowing demand does not change, utilization falls from 80% to 40%. The interest rate paid to suppliers declines.

Yield is highest when capital is scarce. Once an opportunity becomes safe, easy and widely distributed, capital enters until the excess return disappears.

In January 2024 we wrote our first post on Hyperliquid, calling it a farming opportunity (congrats to all the multi-millionaires minted from that post). At the time Hyperliquid’s HLP market making vault was returning a 284% APR (annualized based on 30-day returns) and had only $19 million of capital in it. Today it has nearly $300 million in TVL and produces a single digit return at best. In 1H 2025 during bullish conditions HLP peaked at over $500 million TVL and yielded ~11% annualized.

All that is to say, when you find a truly asymmetric yield farm you get aggressive. Until then, be cautious with your capital and make sure you understand the risk/reward profile.

Scarce capital alone does not mean yields are worthwhile. There has to be underlying, organic demand. Organic yield comes from a real user paying for a useful service and can be long-term sustainable as long as the project keeps growing. Inorganic yield comes from a protocol incentivizing people to deposit and is temporary. Inorganic yield lasts only as long as someone is willing to fund the subsidy. As rewards decline the users/depositors pull capital.

Note that organic and inorganic does not mean safe or unsafe. Organic yields can be high because people are taking extreme risks or because markets are temporarily stressed (e.g. borrowers may pay 20% during a speculative frenzy).

How to Evaluate DeFi Yields

You should now understand the various tradeoffs of different yield sources. Below is a framework you can use when looking at new opportunities. We suggest breaking each yield into 5 layers.

1. Base Yield: What is the return produced without token incentives or temporary subsidies? (good/ethical projects will show the breakdown directly on the vault interface)

2. Economic Payer: Who is the player on the other end paying the yield and why are they willing to pay? Is it a corporate entity, other protocol, leveraged trader, DEX user, etc

3. Packaged risk: Understanding the many layers of protocols, collateral assets, entities, and trading venues will help you stay out of situations that have high blow up risk. In 2022 multi-billion dollar crypto companies were packaging and placing risk across the sector which led to their eventual implosions

4. Exit conditions: When can your position be redeemed, and are there cases where your capital could be trapped?

5. Expected loss: What could cause principal loss, how severe could it be and how frequently might it occur? A 12% APY is unattractive if there is a 10% annual chance of losing half your capital

The yield you are receiving should compensate you for the risks you are taking on. Below you can see some modeled out returns for an illustrative yield farm where you deposit a stablecoin and earn a base yield from borrowers plus an incentivized token yield. Note that for new/untested protocols where a 7%+ token yield is actually more likely, you would want to model in far more aggressive assumptions around principal loss and factor in risk of a total zero.

*We will send out the excel backup to this exhibit for paid subs to use on Thursday so you can plug and play

For those on the hunt for onchain yield, make sure you diversify your risk and don’t put the entirety of your crypto capital into a single vault (especially if the protocol hasn’t been battle tested over multiple cycles).

Don’t confuse a smooth interface and well-known exchange brand with a simple investment.

Safe, easy and high yield rarely coexist for long. When an opportunity offers all three your first assumption should be that one of them has been misunderstood. Only after doing more research (or asking us directly in our Paid Q&As!) should you determine whether you’ve found an opportunity with genuine edge.

Want more in-depth crypto insights from our seasoned team? Upgrade to the paid sub.

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Paid subscribers also get access to:

• All of our past posts

• Weekly Deep Dive Report

• A comprehensive bi-weekly DeFi Roundup

• Bi-weekly Q&A sessions with our team

Until next time..

Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

• We now have a full course on crypto that will get you up to speed (Click Here)

  • We offer the Prediction Markets module on a standalone basis (Click Here)

Security: Our official views on how to store Crypto correctly (Click Here)

To the latest edition of DeFi Roundup, where we save you time by filtering the market and separating the signal from the noise. You don’t have to spend all week scrolling Crypto Twitter to stay current

Market Context

Bitcoin has held up above $60,000 for the last two weeks and has traded in a narrow range up to $65,000. The ETHBTC ratio has…

Read more