This episode unpacks Variant's crypto trends report, revealing how the industry is shifting from speculative cycles to sustainable, utility-driven economies built onchain.
Crypto Market Downturn and Evolving Asset Models
- The hosts begin by analyzing the current crypto market downturn, noting Bitcoin's decline and the broader trend away from the highs seen earlier in the year. They discuss the argument that many crypto assets behave more like cyclical commodities than buy-and-hold equities, as they have historically been non-revenue-generating and driven by narrative cycles.
- This perspective suggests that traditional long-term holding strategies from equity markets may not apply directly to all crypto assets.
- The conversation highlights a slow but significant shift in the industry toward valuing tokens based on revenue and sustainable business models, separating fundamentally strong projects from purely speculative ones.
- There's a discussion on the role of Digital Asset Treasury companies (DATs), which were initially seen as indiscriminate buyers but are now becoming potential sellers as their share prices fall below their net asset value (NAV), adding to market pressure.
Introducing Variant's Crypto Trends Report
- Alana from Variant Fund joins to discuss their comprehensive 150-slide crypto trends report. She explains her inspiration came from Mary Meeker's renowned internet trend reports, aiming to create a narrative-driven analysis of crypto's future. Alana frames the industry's growth through three compounding S-curves: asset creation, asset accumulation, and asset utilization.
- Actionable Insight: Alana notes that the accumulation of non-Bitcoin crypto assets by traditional funds is slower than anticipated, primarily due to persistent custody challenges. This signals a significant infrastructure gap and an opportunity for solutions that simplify institutional custody for a wider range of digital assets.
The 'Lindy Effect' and Market Concentration
- The discussion turns to the persistent market dominance of top crypto assets like Bitcoin. Alana attributes this to the Lindy effect, a theory suggesting the longer an asset has been around, the more likely it is to persist, making it a "safer" entry point for new and institutional investors.
- The top 10 crypto assets have consistently represented nearly 90% of the total market capitalization, a trend that has solidified over time.
- Alana suggests this concentration may change as the market matures. She anticipates a future where assets are valued on fundamentals like earnings and sales, similar to equities, shifting focus to projects with the best products and business models.
- Alana states, "Anytime somebody invests in an asset, it's just a way to express a belief about the world." This highlights that market cap is driven by a combination of utility, narrative, and collective belief, which takes time for newer assets to build.
The Explosive Growth of Decentralized Exchanges (DEXs)
- A key trend identified is the dramatic acceleration of market share capture by Decentralized Exchanges (DEXs), which are peer-to-peer marketplaces that allow users to trade cryptocurrencies without a central intermediary. After years of slow growth, DEX market share surged in 2024.
- This growth was primarily catalyzed by an explosion of new token creation, particularly memecoins, which were only accessible onchain. This forced users to set up wallets and interact with DEXs, creating a gateway effect for broader onchain activity.
- The trend has pushed centralized exchanges like Coinbase to integrate DEX liquidity directly into their platforms, particularly for assets on their native L2, Base.
- Strategic Implication: This signals a major shift where new asset creation happens permissionlessly onchain, while distribution may occur through centralized frontends. Investors should watch for platforms that successfully bridge these two worlds.
Wallet Infrastructure and the User Experience
- The conversation explores the evolution of crypto wallets from simple tools to integrated platforms. While wallets like Phantom are becoming destinations for users, the experience of managing assets across different chains remains fragmented and frustrating.
- Alana envisions a future of embedded wallets, where a user's assets exist in a single global pool accessible across multiple applications, moving away from the repetitive "connect wallet" flow.
- Solving the cross-chain asset fragmentation is identified as a major pain point and a significant opportunity for wallets, bridges, or chains to innovate and capture market share.
The Future of Stablecoins: Branded Money and Fragmentation
- Alana predicts a massive proliferation of stablecoins, with every company holding dollar deposits—from fintechs like Stripe to enterprises like Cloudflare—eventually issuing their own "branded money" to create new revenue streams.
- This will lead to a highly fragmented market, creating a critical need for stablecoin interoperability networks. These networks will function like credit card processors (e.g., Visa), abstracting away the complexity of swapping between different branded dollars so transactions feel seamless to the user.
- M0 is mentioned as a project building a unified liquidity protocol to solve this fragmentation from the ground up.
- Actionable Insight: The rise of "stablecoin-enabled markets" presents a major investment opportunity. Researchers and investors should focus on infrastructure plays that solve for interoperability, liquidity, and last-mile off-ramping to local fiat currencies.
Stablecoin Defensibility and Non-USD Opportunities
- The discussion analyzes how stablecoins build defensibility. Historically, this was achieved through deep liquidity and integration as a base trading pair in DeFi and on centralized exchanges (e.g., Tether, USDC).
- Going forward, Alana argues that defensibility will increasingly come from distribution. A platform with a massive user base (like Stripe or a major bank) can create a powerful moat for its native stablecoin.
- A major untapped opportunity lies in non-USD stablecoins. Unlike USD-based ones driven by trading, the incentive for holding something like a Mexican peso stablecoin will be access to local, high-yield government debt (e.g., Cetes), creating onchain foreign exchange (FX) markets.
Global Currencies and Bitcoin's Role
- The episode concludes with a macro discussion on the future of global finance. The proliferation of USD stablecoins is seen by some as a tool for extending U.S. monetary influence.
- However, Alana speculates on a future with multiple "spheres of influence" around different major currencies, potentially diminishing the dollar's role as the sole global reserve asset.
- In such a world, a non-sovereign, politically neutral asset becomes more attractive. Alana suggests, "The only non-political currency is like a non-sovereign currency or asset like Bitcoin." This positions Bitcoin as a potential ultimate safe-haven asset if global currency markets become increasingly politicized.
Conclusion
This conversation reveals a crypto market maturing beyond speculation, focusing on infrastructure for asset accumulation and utilization. Investors should monitor the rise of onchain economies, particularly in stablecoin innovation and DEX market share, as key indicators of sustainable growth and real-world adoption.
