This episode unpacks Variant's crypto trends report, revealing how the industry is shifting from speculative asset accumulation to building the foundational infrastructure for a new, tokenized global economy.
Crypto Market Downturn Analysis
- The hosts, Danny and Bock, open with an analysis of the current crypto market downturn, noting the clear downtrend from previous highs. They discuss the perspective that crypto assets behave more like cyclical commodities than buy-and-hold equities, as they are historically non-revenue-generating and driven by narrative cycles. This framing suggests that long-term holding strategies successful in equities may not apply universally in crypto.
- The conversation highlights a shift in the market, with a growing focus on projects with real revenue and sustainable business models, separating them from purely speculative assets.
- They touch on the role of Digital Asset Treasuries (DATs), which were once 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 Alana and the Variant Crypto Trends Report
- Alana, an investment partner at Variant, joins to discuss the firm's comprehensive crypto trends report. She explains that Variant is an early-stage, crypto-native venture capital firm focused on how crypto makes the world more productive and gives users ownership. The report, inspired by Mary Meeker's renowned internet trends reports, was designed to tell a cohesive story about crypto's evolution through data.
- Alana frames crypto's growth through three compounding S-curves: asset creation, asset accumulation, and asset utilization.
- A key initial insight from her research was that the accumulation of non-Bitcoin crypto assets by traditional funds was slower than expected, primarily due to persistent custody challenges. Alana notes, "My hope is that over time we see maturation in that people can just go and buy the assets directly instead of buying some proxy for many of the assets."
Asset Accumulation and Market Concentration
- The discussion turns to the dominance of top crypto assets like Bitcoin. Alana explains that this concentration is driven by the Lindy effect—the idea that the longer a non-perishable thing like a technology or an idea survives, the greater its future life expectancy. New investors, both retail and institutional, gravitate toward established assets like Bitcoin because they are perceived as safer and have more historical data for underwriting risk.
- The top 10 crypto assets have consistently represented nearly 90% of the total market capitalization, a trend that has held for years.
- This concentration is reinforced by institutional behavior, as funds and organizations unfamiliar with crypto default to the most established, "Lindy" assets when seeking exposure.
The Future of Top Crypto Assets
- Looking ahead, Alana suggests the high concentration at the top of the market may not be permanent. She anticipates a future where crypto assets are valued more like traditional equities, based on multiples of earnings and sales. This shift depends on the maturation of market infrastructure, including custody, security, and standardized metrics for fundamental analysis.
- Strategic Implication: Investors should watch for the emergence of projects with strong business fundamentals and clear revenue models, as these are the most likely candidates to challenge the incumbent top assets over the next 5-10 years.
- The lines between traditional equities and tokens may blur as more crypto-native companies go public and traditional companies tokenize their stock on-chain.
The Explosive Rise of Decentralized Exchanges (DEXs)
- Alana highlights the shocking acceleration in market share for DEXs (Decentralized Exchanges), which are automated, on-chain trading platforms. After years of stagnant growth, DEX market share surged by 10 percentage points in 2024 and another 10 in the first half of 2025. This growth was primarily catalyzed by an explosion of new token creation, particularly memecoins, which were only available on-chain.
- This trend forced users to set up wallets and interact with on-chain protocols, acting as a "gateway" to broader DeFi engagement.
- In response, centralized exchanges like Coinbase have begun integrating DEXs into their platforms, particularly on their native L2, Base, signaling a future where centralized frontends distribute access to on-chain protocols.
DEX Innovation and Cross-Chain Trading
- The conversation compares the DEX landscapes on different blockchains. While Solana's ecosystem, exemplified by Jupiter, has focused on user-facing product aggregation (e.g., DCA, limit orders), the EVM (Ethereum Virtual Machine) ecosystem has seen significant backend improvements in protocols like Uniswap V4, enhancing capital efficiency and liquidity depth.
- Alana argues that user-facing features are primarily a product challenge, not a protocol limitation, and can be built on top of any robust backend.
- Actionable Insight: The future of on-chain trading will be cross-chain. Investors and researchers should focus on protocols and aggregators that provide the best execution, liquidity, and speed, regardless of the underlying chain, as that is where trading volume will ultimately flow.
The Evolution of Crypto Wallets
- The discussion addresses the persistent friction in wallet user experience. While wallets like Phantom are becoming destinations with integrated features, the "connect to login" flow remains standard. Alana envisions a future with embedded wallets and a unified asset pool, where a user's assets are accessible across multiple applications without being treated as separate, siloed balances.
- This evolution is critical for abstracting away the complexity of managing assets across different chains, which remains a major pain point even for crypto-native users.
- The solution could come from wallets, chains, or bridging protocols, presenting a significant opportunity for innovation.
The Proliferation of Stablecoins
- Alana presents a core thesis from the report: "everyone is going to want a stablecoin." As the cost and complexity of issuing a stablecoin and creating a wallet drop, any entity with distribution and customer deposits—from fintech companies to major brands—will see it as a logical step to create their own "branded money" and capture yield.
- This will lead to significant liquidity fragmentation, creating a major market opportunity for interoperability networks that can abstract away the friction of exchanging different stablecoins, similar to how Visa and Mastercard networks handle transactions between different banks.
- Companies like M0 are building unified liquidity pools, while others are creating exchanges optimized for stablecoin-to-stablecoin swaps.
Stablecoin Defensibility and Market Dynamics
- The conversation explores what creates a defensible moat for a stablecoin. Historically, defensibility came from deep integrations into market infrastructure, such as Tether (USDT) being the primary base pair on centralized exchanges or Circle (USDC) being the collateral of choice in DeFi. This created strong liquidity network effects and high switching costs.
- In the future, Alana believes defensibility will shift towards distribution. A stablecoin integrated into a massive payment or user network (e.g., Stripe, Robinhood) could build an insurmountable moat through sheer scale.
- If a new, dominant stablecoin were to emerge for institutional use, Alana predicts it would likely be a consortium-led effort from major financial players, similar to Visa, rather than an existing issuer like Circle or Tether.
New Frontiers for Stablecoin Utility
- Beyond payments, the hosts and Alana explore untapped opportunities in the stablecoin market. Two key areas stand out as ripe for innovation and investment:
- Last-Mile Liquidity: The process of off-ramping stablecoins into local fiat currency in foreign countries remains a significant challenge. Building robust infrastructure for this is a critical, underserved market.
- Non-USD Stablecoins: While USD stablecoins were driven by their use as a trading pair, other currency stablecoins (e.g., Mexican Peso) will likely gain traction by offering access to local, high-yield government debt (like CETES). This creates an opportunity to build on-chain foreign exchange (FX) markets.
The Geopolitics of Digital Currencies
- The episode concludes by examining the broader geopolitical implications of stablecoins. While USD-backed stablecoins are seen as a tool for extending US financial influence, the panel discusses a future with competing "spheres of influence" around different major currencies.
- In a world where national currencies become more politicized, a non-sovereign asset like Bitcoin could emerge as the ultimate neutral reserve currency.
- Alana remains optimistic, suggesting that economic interdependence through shared currency networks, like the Euro, can be a stabilizing force, and the rise of new currency blocs does not necessarily mean a zero-sum conflict.
Conclusion
This discussion highlights a critical shift in crypto from speculation to utility, with stablecoins and DEXs forming the bedrock of a new financial infrastructure. Investors and researchers should focus on the protocols enabling asset utilization and companies building defensible moats through either deep liquidity networks or massive distribution channels.
