This episode unpacks the surge in institutional crypto appetite, highlighted by Stripe's strategic acquisition in the wallet space and the legislative momentum behind the Genius Act, signaling a maturing landscape for Crypto AI investors and researchers.
Episode Introduction: AI, Crypto, and Market Dynamics
- David and Ryan kick off by discussing the Limitless podcast, which now hosts the AI roll-ups previously on Bankless.
- They touch upon a contrarian take regarding Apple's WWDC AI strategy, with host Josh suggesting Apple is playing a "high IQ 40 chess thing," contrasting with general Twitter sentiment that Apple "flubbed the ball."
- David mentions his $200/month subscription to ChatGPT-4o Pro, noting its powerful but slow output. Ryan humorously questions his ability to prompt a "PhD level researcher," leading to a discussion on the art of prompting advanced AI models.
- David: "I just aped into it cuz you guys told me to. And it's 03 Pro and it's it's good, right? It it takes a long time to think."
- Strategic Implication: The discussion around prompting advanced AI models like ChatGPT-4o Pro underscores the evolving human-AI interaction. For researchers, mastering prompt engineering is becoming critical to leverage these tools effectively for complex analysis and insight generation.
Crypto Market Price Action: Bitcoin and Ethereum ETFs Shine
- Ryan reports Bitcoin is up 2.8% on the week, trading around $107,600.
- A key highlight is BlackRock's Bitcoin ETF (IBIT), which became the fastest ETF to break $70 billion in assets under management, significantly outpacing historical ETFs like Gold, though inflation adjustments are a caveat.
- Ethereum (ETH) shows stronger weekly performance, up 5.6% to $2,738.
- The Ethereum ETF is experiencing a positive trend with 18 consecutive days of inflows, totaling $3.7 billion in net inflows. Ryan notes, "Maybe the institutions are kind of changing their mind on Ether, the asset. Maybe they're starting to get bullish."
- The hosts discuss a chart comparing ETH price to stablecoin supply on Ethereum. David expresses skepticism about a direct correlation, stating, "I do not consider these things to be correlated."
- Actionable Insight: The sustained inflows into ETH ETFs, despite mixed retail sentiment, suggest growing institutional conviction. Crypto AI investors should monitor these institutional flows as they can be leading indicators of broader market shifts and impact projects at the intersection of AI and Ethereum.
Macroeconomic Overview: Inflation, Fed Policy, and Political Dynamics
- Ryan discusses recent inflation data, which rose less than expected. The annual inflation rate stands at 2.4%, below forecasts.
- This led figures like JD Vance to criticize the Federal Reserve, with Vance stating, "The refusal by the Fed to cut rates is monetary malpractice," urging for rate reductions.
- The Polymarket recession odds for 2025 have decreased to 26%, down from a high of 60% during earlier tariff concerns. Polymarket is a decentralized prediction market platform where users can bet on the outcomes of real-world events.
- The relationship between Elon Musk and Donald Trump appears to be mending, with Musk expressing regret over some previous posts.
- Strategic Implication: Lower-than-expected inflation and reduced recession odds could create a more favorable environment for risk assets, including crypto. However, the politicization of Fed policy remains a key uncertainty for investors to track.
Surging Institutional Appetite for Crypto
- David highlights a tweet from Ansom summarizing the strong institutional interest: "Appetite for crypto exposure has never been higher."
- Examples cited include Michael Saylor's continued Bitcoin purchases, Circle's IPO being significantly oversubscribed, and Plasma's $500 million ICO filling rapidly.
- Adding to this sentiment, the New York Post published an article titled "How to buy Pepecoin," indicating mainstream media attention on speculative crypto assets.
- Actionable Insight: The confluence of institutional buying, successful crypto-related IPOs, and even mainstream media coverage of memecoins points to a broad-based increase in crypto interest. Researchers should analyze the drivers and sustainability of this appetite, particularly how it might spill over into AI-crypto projects.
The Genius Act: Landmark Stablecoin Legislation Advances
- Ryan provides an update on the Genius Act, a significant piece of stablecoin legislation. It passed a key procedural vote in the Senate 68-30, making its final passage next week highly probable.
- Senator Thune: "Cryptocurrency is here to stay and it's time that we bring it into the mainstream. Passing the Genius Act is a good first step."
- Key provisions of the Genius Act include:
- Reserve Requirements: Stablecoins must be 1:1 backed by cash reserves.
- Issuer Eligibility: Regulated banks, credit unions, and crypto/fintech firms (with a new OCC license) can issue stablecoins. Tech platforms like Apple and Amazon are barred.
- AML/KYC: Issuers will follow current AML/KYC rules (customer identification, SARs, sanction screening). Crucially, transfers between non-custodial wallets and from custodial to non-custodial wallets are preserved without additional AML/KYC, a win for DeFi.
- Opposition, led by figures like Senator Elizabeth Warren, sought stricter AML/KYC. Senator Bennett proposed an amendment to bar high-ranking officials from issuing crypto, which did not pass.
- The bill could be finalized and signed into law as early as the third week of July.
- Strategic Implication: The Genius Act, if passed, would provide much-needed regulatory clarity for stablecoins in the US, potentially unlocking further institutional adoption and innovation. For AI projects leveraging stablecoins for payments or decentralized commerce, this is a critical development.
The Clarity Act and the Decentralization Test
- Ryan discusses the Clarity Act (formerly FIT 21), a House bill aiming to define the distinction between commodities and securities for tokens.
- A core component is a proposed decentralization test. Criteria include:
- Functional and live mainnet.
- Programmatic operations (enforced by code, no off-chain discretion).
- Distributed ownership (insiders <20% of supply).
- Governance limits (no single group >20% on-chain voting power).
- Initial analysis suggests Bitcoin, ETH, Monero, and Litecoin would likely pass. XRP, BNB, Tron, Aptos, Sui, and many DeFi tokens like UNI and AAVE might not meet these stringent criteria. Ryan notes, "Feel like that's a pretty stringent that's a pretty high bar."
- Austin Campbell, a previous guest, believes the bill is too ambitious and may be unbundled.
- Actionable Insight: The decentralization test within the Clarity Act could profoundly impact the classification and regulatory treatment of numerous crypto assets. AI researchers working on decentralized AI networks or tokenized AI models should closely monitor this legislation, as it could define the legal landscape for their projects.
Circle's IPO Performance and Stablecoin Summer Narrative
- Circle's stock (ticker not explicitly mentioned, but context implies a recent IPO) is trading around $110, valuing the company at approximately $25 billion, maintaining a 3-4x multiple over its IPO price.
- David suggests non-crypto natives are driving this valuation: "I see people are aping in people are not thinking. People are trying to buy a narrative and Circle is the only way to express that narrative."
- Analysts express caution, noting Circle is trading at ~140x earnings. Kathy Wood's Arc Invest was an early IPO buyer.
- Ryan explores the "Stablecoin Summer" narrative, questioning if assets like Aave, Maker (Sky), Athena, Frax, or even ETH are benefiting. David remains skeptical about a direct link between their performance and Circle's IPO.
- Strategic Implication: Circle's strong post-IPO performance, despite high valuation metrics, indicates significant investor interest in the stablecoin sector. This could create a favorable funding environment for projects building stablecoin-related infrastructure, including those integrating AI for risk management or yield generation.
Plasma ICO and the Year of Crypto IPOs
- The Plasma ICO on Kobe's Echo platform saw immense demand. Plasma is a Layer 1 blockchain optimized for Tether-based payments, aiming to offer lower fees than Tron.
- Its deposit cap, allowing users to reserve a spot in the pre-sale by depositing Tether, was rapidly filled up to $1 billion.
- This signals strong appetite for cryptonative ways to gain exposure to the stablecoin theme.
- The hosts anticipate 2025 will be the "year of crypto IPOs."
- Gemini has confidentially filed for a US IPO.
- Kraken and Phantom wallet are also rumored potential IPO candidates.
- Actionable Insight: The success of Plasma's initial offering and the pipeline of crypto IPOs suggest a buoyant market for new listings. Investors should scrutinize the underlying technology and tokenomics of these new offerings, particularly those at the AI-crypto nexus, beyond the general market enthusiasm.
Stripe Acquires Privy: A Major Move in Web3 Wallets
- Stripe, the global payments giant, announced its acquisition of Privy.
- Privy provides infrastructure for embedded, non-custodial wallets, simplifying user onboarding in Web3 applications. It powers wallets for apps like Friend.tech and Bankerbot, with around 75 million accounts created via its technology.
- This follows Stripe's earlier acquisition of Bridge, a company enabling businesses to create stablecoins backed by US Treasuries and manage compliance.
- Ryan: "It seems like Stripe is like just going all in to stable coins."
- Strategic Implication: Stripe's acquisition of Privy signals a deep commitment to integrating Web3 wallet infrastructure into its payments ecosystem. This could significantly lower barriers to entry for mainstream adoption of crypto payments and dApps, benefiting AI projects that rely on seamless user onboarding and transactions.
Poly Market Integrates with X (Twitter)
- Poly Market, the prediction market platform, announced a formal integration with X (formerly Twitter).
- This will allow users to see and potentially interact with Poly Market predictions directly within the X interface.
- X's AI, Grock, is also being integrated into the Poly Market UI to provide context on prediction markets.
- Shane Coplin, CEO of Poly Market: "The top two truth seeking apps on the internet are stronger together."
- Actionable Insight: The integration of prediction markets like Poly Market into major social platforms like X could mainstream decentralized information markets. For AI researchers, this offers a rich new data source for sentiment analysis and event probability, while AI investors can use these markets to hedge or gain exposure to specific outcomes relevant to the crypto-AI space.
Morpho Labs: Aligning Incentives in DeFi
- David highlights Morpho Labs for its approach to tokenomics and founder commitment. Morpho is a DeFi lending protocol.
- Morpho founders contractually agreed not to angel invest or advise other companies to maintain focus.
- The project features a single token, MORPHO, designed for full alignment, contrasting with models like Uniswap where Uniswap Labs (equity) and UNI token holders can have misaligned incentives. The Morpho Labs entity is controlled by the token.
- Morpho V2 is launching, described directionally as an "order book for loans" with modular features like KYC/compliance for institutional access.
- This ties into a broader discussion, referencing Felipe from Thea Capital, about evolving DeFi tokens from "lemons" (neutered assets) to fully aligned, value-accruing assets similar to equities.
- Strategic Implication: Morpho's model of strong incentive alignment between the development team, the protocol, and token holders is a crucial consideration for DeFi. AI projects building decentralized financial applications should study such models to ensure long-term sustainability and community buy-in.
Former SEC Chair Paul Atkins Champions DeFi
- Paul Atkins, a former SEC Chair (and touted by Trump as his pick for a future SEC Chair), delivered a speech titled "DeFi and the American Spirit."
- Atkins: "The American values of economic liberty, private property rights, and innovation are in the DNA of DeFi or decentralized finance."
- He criticized the previous (referring to the Biden administration's SEC under Gensler) administration's approach of discouraging DeFi through lawsuits and regulatory threats.
- This marks a significant tonal shift from the current SEC's stance and actions like SAB 121 (an accounting bulletin that made it difficult for banks to custody crypto).
- The SEC under potentially new leadership is reportedly hosting roundtables on tokenization and DeFi, rolling out FAQ sheets, and signaling carve-outs for regulated Alternative Trading Systems (ATSs) for crypto.
- An ATS (Alternative Trading System) is a non-exchange trading venue that matches buyers and sellers of securities.
- Actionable Insight: A potential shift in SEC leadership and approach towards DeFi could dramatically alter the regulatory landscape. Crypto AI investors and researchers should monitor these developments closely, as a more favorable regulatory environment could accelerate innovation and adoption in the US.
Trump's Continued Crypto Engagement
- World Liberty Financial, a financial entity associated with Donald Trump, is reportedly acquiring the Trump-themed memecoin (TRUMP) for its treasury.
- David expresses skepticism: "To me it just reads like he's taking pocket money from one pocket and putting it in a different pocket."
- The episode concludes with a "Moment of Zen" featuring a clip of Donald Trump speaking at a Coinbase conference, where he referred to himself as "the first crypto president" and pledged to end the "Biden administration's war on crypto."
- Strategic Implication: Regardless of personal views, the increasing engagement of high-profile political figures like Trump with the crypto industry is a significant trend. This political maneuvering can influence regulatory outcomes and market sentiment, making it an important factor for strategic planning in the Crypto AI space.
Conclusion: Navigating a Bullish and Evolving Crypto AI Landscape
This episode underscores a period of heightened institutional interest and regulatory evolution in crypto. For Crypto AI investors and researchers, tracking legislative progress like the Genius Act and Stripe's infrastructure plays is crucial for anticipating market shifts and identifying opportunities at the intersection of these transformative technologies.
