State Of Crypto 2025 | a16z Crypto — Eddy Lazzarin & Daren Matsuoka

This episode reveals crypto's pivotal transition from a speculative arena to a mature technological layer, as institutional adoption and regulatory clarity finally unlock real-world financial infrastructure.

The Price Innovation Cycle and Current Market State

• Daren Matsuoka from a16z Crypto opens by framing the market through their "price innovation cycle"—a feedback loop where price attracts interest, which brings in developers, who build products that attract new users. He notes that while past bull markets were driven by product innovation like DeFi Summer or NFTs, the recent price surge was different. It was fueled more by external factors like Bitcoin and Ethereum ETFs and memecoin activity, rather than a wave of new, developer-centric platforms.
• The 2022-2023 period was described as "dark days" due to the FTX collapse, the rise of AI shifting attention, and a full-blown regulatory attack in the US.
• Despite a flat developer count since 2022, Daren expresses optimism, stating the industry is now well-positioned for a developer-driven market. He points to the stablecoin trend and pending market structure legislation as key catalysts for a new inflow of talent.
• Daren argues, "This wasn't like the other bull markets that we've seen. The other bull markets were more driven by new products, innovation, lots of developer activity."

Bitcoin's Evolving Dominance and Market Role

• Eddy Lazzarin, CTO at a16z Crypto, addresses Bitcoin's market cap dominance, which has stabilized between 40-60% rather than continuing its decline as many once predicted. He attributes this stability to Bitcoin solidifying its narrative as a store of value, similar to gold, which has performed well recently.
• Eddy views Bitcoin's resilience as a product that has remained insulated from the regulatory pressures and product development complexities affecting the broader crypto ecosystem.
• He sees the sideways developer count for the rest of crypto not as a negative, but as a "positive indicator" of the industry's resilience, given the immense pull of AI and the harsh regulatory environment of the past few years.

Bitcoin's Correlation: Tech Stock or Digital Gold?

• The conversation explores Bitcoin's inconsistent correlation, sometimes trading like a tech stock (NASDAQ) and other times like a debasement hedge (gold). Eddy Lazzarin explains that Bitcoin is not a "pure digital gold" but a more complex asset with a unique history and evolving narrative.
• He argues that Bitcoin's price action is influenced by a "roller coaster of mania," regulatory developments (like the ETF approvals), and its cultural significance, which distinguishes it from a static asset like gold.
• Eddy suggests that Bitcoin's narrative is stabilizing, though he notes recent efforts to revive it as a technological platform could introduce new dynamics.

The Global Landscape of Crypto Adoption

• Daren Matsuoka presents a geographic analysis revealing a distinct split in how different economies engage with crypto. The data shows that developing nations lead in on-chain adoption and usage, while developed nations dominate web traffic related to token speculation.
• On-chain adoption is highest in countries like Argentina, Colombia, and Nigeria, where users leverage crypto to bypass unreliable financial infrastructure and political instability.
• Token interest and trading are concentrated in developed nations like Australia and South Korea.
• Daren summarizes the trend: "developed countries are doing a lot of the buying but developing countries are the ones actually doing the stuff on chain." This highlights crypto's dual role as both a financial tool for necessity and a speculative asset class.

Analyzing the Crypto User Funnel: Owners vs. On-Chain Users

• The discussion quantifies the crypto user base, distinguishing between passive owners and active on-chain users. a16z estimates there are 716 million global crypto owners but only 40-70 million monthly active on-chain users.
• This 10-to-1 ratio highlights a significant opportunity to convert passive holders into active participants by improving user experience and product utility.
• Eddy Lazzarin clarifies that "owning crypto" is a broad category, ranging from someone using USDT on Tron for payments to a sophisticated DeFi user.
• He emphasizes that the complexity of self-custody and on-chain interactions remains a major hurdle. "Try to do that on chain today. It's possible... But it's still incredibly difficult and I think we have a long way to go before it's a mainstream activity."

The Era of Institutional Adoption: Reality vs. Hype

• Eddy Lazzarin, drawing from years of experience, notes a significant shift in the quality of institutional involvement. While past cycles were filled with superficial "proof of concept" projects from innovation departments, today's initiatives from firms like BlackRock, Stripe, and Visa are concrete and commercially driven.
• He attributes this change to the maturation of blockchain infrastructure, which now offers sub-second, sub-penny transactions, making real-world applications feasible.
• Eddy observes that institutions are building specific, actionable products with clear business cases, such as Stripe's payment solutions and Robinhood's Layer 2 integration for tokenized equities.

Stablecoins: The Engine of Institutional Interest

• The conversation pivots to stablecoins as the primary driver of institutional entry. While some may see this as a less "crypto-native" application, Eddy argues it's a crucial gateway.
• Institutions are drawn to stablecoins for clear benefits like cost savings and technical simplification in payments and settlement.
• Eddy's key insight is that once firms integrate blockchain infrastructure for stablecoins, they build adjacencies that make it easier to adopt other crypto functionalities. He states, "even if they come for the stable coins, they stay for the crypto."
• The success of products like BlackRock's BUIDL fund, which tokenizes real-world assets, demonstrates that these are no longer theoretical ideas but revenue-generating realities.

The Geopolitical Significance of Stablecoins

• The discussion highlights the strategic importance of stablecoins for the United States. With foreign central banks diversifying away from U.S. Treasuries and into gold for the first time in 30 years, stablecoins present a new, powerful channel to export U.S. debt.
• Stablecoin issuers are already a top-20 holder of U.S. Treasuries, and over 99% of stablecoins are denominated in U.S. dollars.
• This creates a strong incentive for the U.S. government to support the stablecoin ecosystem, as it helps maintain the dollar's global dominance. Eddy notes that stablecoins are "removing the car dealerships" by giving global users direct, efficient access to dollars and Treasury yields.

Stablecoins Decouple from Trading, Proving Product-Market Fit

• Daren Matsuoka points to a critical data trend: stablecoin transfer volume has decoupled from crypto exchange trading volume. This indicates that stablecoins have achieved product-market fit beyond their initial use case of settling speculative trades.
• The report shows stablecoin annual transaction volume at $9 trillion (adjusted), rivaling major payment networks like Visa ($16 trillion).
• This growth is driven by use cases in payments, remittances, and as a savings vehicle, particularly in emerging markets. The low cost of on-chain transactions is enabling an explosion of activity that is impossible in traditional financial systems.

The Rise of Decentralized Exchanges (DEXs)

• A key indicator of crypto's maturation is the steady growth of decentralized exchanges. DEXs now account for nearly 20% of total crypto spot trading volume, up from virtually zero in 2019.
• DEXs are non-custodial platforms that allow users to trade digital assets directly from their own wallets without an intermediary.
• This trend is seen as a direct response to the failures of centralized custodians like FTX, as users increasingly prioritize self-custody and transparency.
• As DEX volume approaches 50% of the total market, it will mark a pivotal shift where price discovery begins to happen on-chain, reducing the industry's reliance on centralized entities like Binance.

The On-Chain Perpetual Futures Boom

• The report identifies perpetual futures as a dominant force in on-chain activity. This financial instrument has become the ideal product for traders seeking leveraged exposure to crypto assets.
• Perpetual Futures (Perps) are a type of derivative contract that allows traders to speculate on the future price of an asset without an expiration date.
• Top perpetual exchanges are generating trillions of dollars in volume and over a billion dollars in annual revenue, demonstrating massive demand for sophisticated on-chain financial products.

Prediction Markets: Beyond Political Betting

• Prediction markets saw a surge in activity around the U.S. election but have maintained momentum through other avenues, particularly sports betting. Eddy Lazzarin suggests that the underlying architecture of prediction markets is technically superior to traditional sportsbooks.
• He argues that on-chain prediction markets offer more dynamic pricing, lower fees, and greater liquidity, which could force traditional players to adopt similar models.
• The ultimate vision is for these markets to become composable financial primitives—building blocks for other, more complex on-chain financial products.

Blockchain Scalability: A Solved Problem?

• Eddy Lazzarin makes a bold claim: blockchain capacity is no longer the primary bottleneck for adoption. With aggregate transaction throughput exceeding 3,400 TPS—approaching the scale of NASDAQ—the challenge has shifted from infrastructure to product development and regulation.
• "I think we're well beyond the point that blockchain capacity is the limiting factor, aren't we?" Eddy asks, asserting that the industry can now handle mainstream payment volumes cheaply and efficiently.
• The remaining hurdles are building user-friendly applications, integrating public-private key cryptography into mainstream apps, and navigating the regulatory landscape.

The Valuation Dilemma: Monetary vs. Cash-Flow Assets

• The speakers tackle the complex question of how to value Layer 1 tokens like ETH and SOL. Eddy Lazzarin argues against forcing them into simple buckets like "digital gold" or "cash-flow asset."
• He proposes analyzing them based on their unique bundle of properties: ETH serves as default collateral, benefits from a fee burn mechanism, and is a trusted censorship-resistant asset.
• Daren Matsuoka adds that valuation models are evolving. The recent willingness of protocols to "turn on the fee switch" and distribute revenue to token holders is creating a new, more tangible path to valuation that was previously unavailable.

The Shifting Landscape of On-Chain Revenue

• While Bitcoin and Ethereum historically dominated on-chain revenue, the landscape is now far more diverse. Chains like Solana and applications like Hyperliquid are capturing significant economic activity, driven by high demand for their blockspace.
• This metric, while nuanced, reflects how much users are willing to pay to use a network.
• The shift indicates a maturing ecosystem where value accrues not just to the base layers but also to specialized applications and high-throughput chains that cater to specific use cases like perpetual trading.

The Quantum Threat to Bitcoin

• Eddy Lazzarin addresses the long-term risk posed by quantum computing, which could theoretically break the cryptography securing older Bitcoin addresses. As much as 6 million BTC could be at risk, creating a multi-hundred-billion-dollar incentive for whoever develops a sufficiently powerful quantum computer first.
• While the consensus is that this threat is likely 20+ years away, it forces a difficult future decision for the Bitcoin community.
• Potential solutions, such as a hard fork to secure the vulnerable funds, would challenge Bitcoin's core ethos of immutability, presenting a fascinating governance dilemma.

The Intersection of Crypto and AI

• The conversation concludes with the increasingly clear synergies between crypto and AI. Daren Matsuoka outlines several key areas of convergence that have moved from theory to practice.
• Proof of Humanity: Systems like Worldcoin, with 17 million verified users, are becoming essential tools to distinguish human activity from AI-generated content.
• AI Agent Payments: Crypto provides the only viable, programmable payment rails for autonomous AI agents to transact with each other.
• Decentralized Compute: As AI becomes more powerful and centralized, decentralized compute networks offer a crucial alternative to keep AI open, permissionless, and neutral.

Future Outlook: Crypto's Transition to Adulthood

• Looking ahead, Daren Matsuoka uses the analogy of the crypto industry turning 18 next year. After 17 years of adolescence, it is finally being taken seriously, with mature infrastructure, emerging regulatory clarity, and real institutional adoption.
• Eddy Lazzarin reinforces this, stating that the consequences of recent regulatory wins and the product-market fit of stablecoins will lead to a wave of new products and integrations in the coming years.
• He predicts, "we're going to see the consumer-facing consequences of all this backend stuff, regulatory, infrastructure, everything."

The Million-Dollar Question: Is the Bull Cycle Over?

• When asked about the current market cycle, both speakers express uncertainty, arguing that the growing complexity of the crypto ecosystem makes traditional cycle analysis difficult.
• Eddy Lazzarin states, "it's getting a little harder to tell," because crypto is no longer driven by a single feedback loop but by numerous factors including macroeconomics, regulation, and diverse product ecosystems.
• Daren Matsuoka adds that the recent price run-up was not driven by the typical product-innovation cycle, but the industry is now perfectly positioned for one, suggesting underlying fundamentals are stronger than ever.

Conclusion

This episode underscores crypto's graduation from a speculative niche to a foundational technology. Investors and researchers should shift focus from timing market cycles to tracking the integration of crypto infrastructure into mainstream finance and AI, as this is where sustainable, long-term value will be created.