Has regulation turned from headwind to tailwind?
For years, one of crypto’s biggest risks was that policymakers would strangle innovation. But this year, we’ve flipped the script. The White House, Congress, and regulators are not only tolerating crypto - they’re actively championing it.
The macro backdrop is tepid, but still generally on track.
The structural tailwinds are profound, and we think that despite the tepid macro backdrop, we’re still generally on track.
[TLDR] The game is still on. We stay fully invested, and think dips are still for buying.
Market snapshot
Crypto:
BTC +7%
ETH +48%
SOL +10%
Equities:
S&P 500 +2%
NASDAQ +2%
Gold:
Gold (-1%)
Regulation? Dreamy
GENIUS Act (stablecoin bill) passed into law.
CLARITY Act (framework for crypto outside of stablecoins) cleared the House and is heading to the Senate.
SEC Chair Paul Atkins announced Project Crypto - a movement to “modernize the securities rules and regulations to enable America’s financial markets to move onchain.”
White House crypto report (166 pages) laid out bold commitments:
Protect public blockchains & self-custody.
Guarantee nondiscriminatory bank access.
Promote USD stablecoins under the GENIUS Act.
Ban a CBDC.
Establish a Strategic Bitcoin Reserve and Digital Asset Stockpile.
Clean up tax and reporting rules.
Scott Bessent is calling for the Golden Age of Crypto. Trump is preparing an executive order to allow 401Ks to allocate to alternatives - including crypto.
Trump’s 401K announcement
US policy is becoming structurally bullish. Regulation is no longer a risk - it’s a catalyst.
This further shrinks the “left tail” risk of crypto as a sector. Very structurally bullish.
Who knew regulation could be dreamy?
Maco? Tepid
The last week brought some soft macro data, cooling both traditional and crypto markets.
Leverage spiked, driving market structure fragility: Open interest hit $87B (the highest in a year) before whipsawing down ~17%, exacerbating downward price movements following tariffs going live, Fed hawkishness, and weak employment data.
Before bouncing into the start of this week:
BTC down (-6%)
ETH down (-17%)
SOL down (-19%)
Total open interest
Weak jobs data: Non-farm payrolls +73K (below +110K forecast), with steep downward revisions. Unemployment rate ticked up to 4.2% (from 4.1% month prior).
Immigration slowdown masking labor weakness: Securing the border keeps the unemployment rate artificially low by reducing labor force participation rate. Adjusted, the unemployment is closer to 4.9%.
Business cycle still muted: ISM PMIs softened (manufacturing 48 vs. 49.5 expected, services 50.1 vs. 51.5 expected), but S&P PMIs told a different story (composite up to 55.1 vs. 52.9 last month). S&P PMIs align better with real economic activity, suggesting acceleration is underway.
Fed tilting towards easing: No rate cuts yet, but dissent is growing within the Fed (2 dissents for the first time in 30 years), and Polymarket odds 80%+ for a September cut.
These sorts of dips are to be expected, and macro - though tepid - plus Trump’s pressure set the stage for easing on the horizon.
Crypto fundamentals? Strong
ETH surged: +48% in July, and BTC dominance dropped from ~65% to ~60%.
BTC showed resilience: Galaxy sold 80,000 BTC ($9B+), and the market absorbed it with just ~3% drawdown in BTC before bouncing.
BTC has rate hit ATH: BTC’s hash rate hit 1 zettahash/sec - 100,000x the compute of the entire “Mag 7” combined - driving network security.
Positioning is still offsides.
Corrections are to be expected in crypto, and this one was due to leverage in the system, not fundamentals.
We’re holding strong with our view that the rest of the year looks quite good.
Policymakers are running it hot. Liquidity is rising. Tariffs aren’t as inflationary as feared. The business cycle should still heat up.
This is a setup that doesn’t come around often. Until something clearly and materially changes, we stay fully invested to ride this wave.
Until next month,
Devin