Macro Uncertainty, Circle’s Surge, and Prediction Market Utility | Roundup

This episode unpacks the shifting crypto landscape, from geopolitical tremors impacting market sentiment and the unexpected surge of Circle, to the evolving utility of prediction markets and a critical re-evaluation of 'alt season' dynamics for discerning investors.

Geopolitical Tensions and Market Reactions

• The discussion opens with the hosts, Michael (Host), Michael (Guest), and Vance, touching upon the recent escalation between Israel and Iran. Michael (Host) notes the interesting phenomenon where Poly Market, a decentralized prediction market platform, reportedly moved about 20 minutes before traditional futures indices in response to the geopolitical events, highlighting a potential new source of early market signals.
• Vance expresses surprise at the market's relative resilience, considering the long-feared "worst-case scenario" of such a conflict. He references the history of US sanctions on Iran, noting how past administrations were hesitant to fully cut off Iranian oil due to price concerns. Now, with Iranian oil largely flowing to China (paid in Renminbi (RMB), the official currency of China, forcing Iran to spend it in China), Vance suggests China might bear the brunt of oil price hikes.
• Michael (Guest) shares data points suggesting the conflict might be limited: strikes reportedly avoided oil infrastructure, the US has air superiority, and Iran's missile arsenal (estimated 2000-2500) is being depleted. He opines, "I don’t think that there is if there is any sort of conflict officially... it will last for very much longer."
• The hosts observe the "fog of war" on Twitter, with misinformation spreading rapidly, such as a false report of an oil tanker on fire in the Strait of Hormuz (a critical oil transit chokepoint). Michael (Host) humorously suggests that when "crypto Twitter talking about macro, that's almost always a very reliable bottom indicator."
• Strategic Implication: Crypto investors should be wary of social media narratives during geopolitical events and consider alternative data sources like prediction markets for early sentiment, while also noting that widespread macro commentary from crypto natives can sometimes signal market bottoms.

Stablecoin Legislation and Circle's Market Performance

• The conversation shifts to positive developments in the stablecoin sector, specifically the "Genius Act" (a colloquial term for a stablecoin bill) passing the Senate with overwhelming bipartisan support, including 18 Democrats. This is seen as a significant step, especially given previous opposition from figures like Senator Liz Warren.
• This legislative progress coincided with a dramatic surge in the stock price of Circle (issuer of the USDC stablecoin), which hit nearly $200 on open markets. Vance attributes this to a "low float, high FDV" phenomenon, where limited available shares and high demand for a thematic play (stablecoins/crypto exposure) drive prices up sharply. FDV (Fully Diluted Valuation) refers to the total value of a crypto project if all its possible tokens were in circulation.
• Michael (Guest) compares Circle's surge to recent IPOs like Coreweave, noting the negative press preceding their strong market debuts. He suggests this is partly a reversion to the mean and a lack of access to quality crypto investments, leading to correlated bids in public crypto equities like Coinbase, which also rose significantly.
• Actionable Insight: The "Genius Act's" bipartisan support signals growing regulatory clarity for stablecoins, potentially unlocking institutional capital. Investors should monitor such legislative developments closely as they can significantly impact valuations of related public equities and private crypto companies. Circle's performance highlights the demand for regulated crypto exposure, even at high valuations.

The "Alt Season" Debate: Public Markets vs. Crypto Alts

• Michael (Host) introduces the idea that "alt season is happening in public markets," with speculative capital flowing into crypto-related stocks like Coinbase and Circle, and even treasury vehicles, rather than traditional crypto altcoins. An alt season traditionally refers to a period where alternative cryptocurrencies (altcoins) experience significant price increases, often outperforming Bitcoin.
• Vance is cautious about declaring a "real alt season on the NASDAQ" yet, stating it's too soon to tell and that recent IPO successes need sustained performance. He observes "hyper dispersion" in crypto markets, where only a few select alts like Sky (formerly Maker, a decentralized lending platform and stablecoin issuer), Syrup (another DeFi project), and surprisingly Farcaster (referred to as "Farcoin," a decentralized social media protocol) are outperforming, driven by specific narratives or fundamentals.
• Michael (Guest) argues that a true crypto alt season hasn't occurred because the prerequisite wealth creation from major assets like Bitcoin and Ethereum hasn't been substantial enough yet. He believes we are closer to the start of this wealth creation cycle. "We haven't seen a Bitcoin move and an Ethereum move and a Solana move that would be enough in terms of wealth creation to justify an alt season yet."
• Vance defines a classic alt season as a time of "zero cost of capital and there is no desire to underwrite fundamentals at all and everything goes up in a uniform fashion." He firmly states, "a classically oriented alt season not happening." Instead, he anticipates continued dispersion, with fundamentally strong projects like Sky and Syrup performing well, but not a broad, indiscriminate rally.
• Strategic Implication: Investors should abandon expectations of a traditional, broad-based altcoin rally. Instead, focus should be on identifying projects with strong fundamentals, clear value propositions, and robust tokenomics, as market performance is likely to be highly selective. The "alt season" narrative may be playing out more in regulated, publicly traded crypto equities.

Crypto Infrastructure: Public vs. Private, Token Unlocks, and Founder Guidance

• Michael (Host) reflects on the 2020-2021 cycle where CeFi (Centralized Finance) infrastructure companies (custodians, prime brokers like BlockFi, Anchorage) raised at massive valuations. He contrasts this with on-chain infrastructure projects that also saw high valuations but face different pressures if they have liquid tokens, particularly around unlocks.
• Vance emphasizes that token unlocks can severely pressure prices, especially if the cap table (list of investors) is weak. "If you want me to tell you how painful the unlocks are going to be, just tell me who your cap table is." He stresses that it takes a long time for fundamentals and market dynamics to play out, and the "public market liquidity" pitch by VCs for token investments often overlooks the need for a venture mindset.
• Michael (Guest) advises founders against large community airdrops (free distribution of tokens), citing data that 90% of airdropped tokens are sold within 72 hours. He also questions outdated practices like allocating 50% of tokens to the community solely for decentralization arguments, suggesting these norms need re-evaluation as regulatory clarity (like a potential market structure bill) emerges. "The whole concept [of massive airdrops for community] is completely outdated."
• The discussion touches on the need for founders to manage their token as a product, but Vance cautions against excessive shilling, noting that successful projects often let the business speak for itself, with on-chain data providing transparency.
• Actionable Insight for Researchers & Founders: Scrutinize tokenomics, especially unlock schedules and investor compositions, as these significantly impact long-term price performance. Founders should rethink traditional token distribution strategies like large airdrops, focusing instead on sustainable models and clear disclosures. The industry is moving towards more institutionalized practices.

Industry Evolution: Pragmatism Over Ideology and VC Approaches

• Michael (Host) observes a healthy churn in the industry, moving from a highly ideological base towards pragmatism, where projects "has to make money and it has to work."
• Vance criticizes large funds that fail to support "serious builders with serious use cases" like DeFi (Decentralized Finance), instead chasing implausible narratives. He argues these funds can be "net negatives for crypto" if they ignore fundamentally sound projects like Hyperliquid or Sky/Maker because they don't fit a preconceived mold or because they've already exited positions.
• Michael (Guest) warns against venture investors pushing a perspective they want to see (like "crypto for consumer") rather than investing in what's actually working, drawing parallels to the dot-com bust and failed CleanTech investments. "You really have to take a realistic perspective of do you want this to be the case or is this something that you're starting to see the kernel of truth around?"
• Michael (Host) emphasizes that founders must "meet the market where it's at," serving current demand rather than building for a hypothetical future market.
• Regarding LP demands for theses, Michael (Guest) explains their firm builds theses by observing consistent patterns of world-class founders tackling similar ideas, rather than predefining a vertical and then seeking founders.
• Strategic Implication: Investors and researchers should favor projects demonstrating real-world traction and sound business models over purely ideological or speculative ventures. The ability to adapt and invest in emergent, working solutions, even if they deviate from established VC patterns, is crucial.

The Future of Stablecoins: Bank Involvement and Market Impact

• The conversation revisits stablecoins, with Michael (Host) noting JP Morgan's filing for JPMD, a permissioned USD deposit token on Base (Coinbase's Layer 2 network), for institutional client money movement.
• Vance believes new bank-issued stablecoins like JPMD represent a net capital infusion into crypto, as they'll need to pair with existing stablecoins or be used in DeFi lending markets, thereby growing the on-chain ecosystem. He also suggests monetization for stablecoin projects will come through "breakage" – users forgetting funds on-chain.
• Michael (Guest) clarifies a previous point about stablecoins eroding bank NIM (Net Interest Margin) – the difference between interest income generated and interest paid out. His updated understanding is that stablecoins on a bank's balance sheet would be treated like a product (e.g., a money market fund), not directly impacting NIM in the way deposits do. He also highlights innovative products like Coinbase allowing USDC to be held in a Morpho vault (a DeFi lending protocol) to earn yield until spent, a concept traditional banks should adopt.
• Actionable Insight: The entry of traditional financial institutions like JP Morgan into the stablecoin space, coupled with enabling legislation, is a strong bullish signal. Crypto AI investors should explore opportunities around infrastructure supporting these new stablecoins and DeFi integrations that enhance their utility and capital efficiency.

Prediction Markets: An Emerging Force for Information and Speculation

• Michael (Host) expresses bullishness on prediction markets, platforms where users bet on the outcome of future events, seeing them in their "early innings." He highlights their potential to incentivize the surfacing of credible information, akin to an SEC whistleblower program on a global scale, potentially creating new business models for journalism and influencers.
• Vance sees prediction markets as "really, really positive in general" and agrees with their potential connection to real-time news and events, citing Poly Market's early reaction to geopolitical news.
• Michael (Guest) discusses the challenge of liquidity for prediction markets focused on financial questions (e.g., Fed rate hikes), as traditional financial instruments for these views have vastly more depth. He notes, "That’s like a 10x or 100x difference in liquidity [needed]." However, for crypto-native or bespoke questions, like the tenure of a project CEO, prediction markets could offer unique insights.
• Michael (Host) suggests prediction markets could absorb speculative premium from commodity markets, offering a more direct way to bet on events (e.g., geopolitical risk) without distorting prices of essential goods. He also notes the different approaches of Poly Market (direct-to-consumer) and Kalshi (a regulated prediction market that white-labels and integrates with platforms like Robinhood).
• Strategic Implication for Researchers & Investors: Prediction markets are an emerging crypto-native application with significant potential. Researchers can study their accuracy and information-surfacing capabilities. Investors might consider platforms themselves or tools that leverage prediction market data for insights, especially as liquidity and diverse use cases (from news verification to financial hedging) grow.

This discussion highlights a crypto market demanding tangible value and strategic adaptation, moving beyond speculative hype. Investors and researchers must prioritize projects with clear utility, sustainable tokenomics, and real-world adoption, particularly within the evolving stablecoin ecosystem and data-driven platforms like prediction markets.