Macro Updates

BlackRock’s IBIT ETF recorded a $431 million single-day outflow last week, its largest since inception, ending its seven-week inflow streak. This outflow contributed to nearly $1 billion in Bitcoin ETFs withdrawals in the latter half of the week, coinciding with a 2% drop in Bitcoin’s price. Since the April tariff pause, Bitcoin ETFs gained $10 billion in inflows, followed by the recent $1 billion outflow. Similarly, following the U.S. election in November 2024, Bitcoin ETFs saw $14 billion in cumulative inflows over a month, followed by $2 billion in outflows.

On May 30, the FTX Recovery Trust launched its second phase of Chapter 11 bankruptcy distributions, disbursing over $5 billion to creditors with claims exceeding $50,000. This payout, representing about 2% of the current stablecoin supply, has sparked speculation that it can potentially increase crypto liquidity if reinvested. However, the resale of billions in claims, with prices rising from 15-40 cents in 2023 to around 70 cents by 2024 to hedge funds and distressed asset firms, may reduce this impact, as these buyers could be less inclined to reinvest in crypto than original claimants. On the other hand, $2.5 billion remains at risk of going unclaimed from nearly 400,000 users who haven’t completed mandatory KYC by the June 1 deadline. If forfeited, these funds could be redistributed to verified creditors or retained in the estate, potentially raising future payouts.

After exiting the EU due to the MiCA framework’s implementation, Tether is partnering with Oobit and StablR to launch a MiCA-compliant stablecoin initiative via its Hadron tokenization platform. Oobit, a crypto payments firm that received $25 million funding from Tether in 2024, integrates StablR’s fiat-pegged stablecoins, EURR and USDR, designed for compatibility with Visa and Mastercard. StablR, licensed as an Electronic Money Institution in Malta in 2024, uses Hadron to meet MiCA’s regulatory requirements. 

Last week, Circle froze Solana-based wallets holding $58 million in USDC, linked to alleged fraud in the Libra memecoin project, following a U.S. District Court temporary restraining order, as reported by Burwick Law. For context, Libra, tied to Argentine President Milei’s endorsement, reached a $4.6 billion market cap before dropping 99% within hours after his withdrawal of support. While fund freezing by a major stablecoin issuer like Circle might spark concerns about user autonomy and trust, it demonstrates a mechanism for ensuring compliance and halting illicit activities, thereby fostering arguably a safer crypto ecosystem.

Our take: The future of stablecoins relies on their ability to adeptly navigate diverse regulatory frameworks, leveraging mechanisms like asset freezes to enhance security and compliance while aligning with crypto’s ethos user autonomy, thereby fostering user trust and confidence; failure to strike this balance could push users toward traditional financial systems or competing centralized platforms.

Institutional Accumulation

Strategy has driven a surge in institutional cryptocurrency adoption by developing a model that uses equity and convertible debt to amass 580,250 Bitcoin at an average cost of $66,300 per coin, including last week’s 4,020 Bitcoin purchase. This approach, which positions Bitcoin as a corporate reserve asset, is part of its '42/42' plan to raise $84 billion, recently advanced by a $2.1 billion at-the-market offering of 10% Series A Perpetual Strife Preferred Stock (STRF). Strategy’s success likely has inspired a broader trend among public companies, with firms like Metaplanet adopting similar Bitcoin treasury strategies, while others pursue smaller equity raises or Bitcoin-backed products. This extends beyond Bitcoin: last week, SharpLink Gaming raised $425 million in private placement to build an Ethereum treasury, while earlier in May, Upexi used a similar strategy to raise $100 million. Many Solana-focused firms, including Upexi, stake their SOL to earn annual validator rewards, reinvesting yields to make their inventory productive.

Stock performance of public crypto vehicles (PCVs) varies, with some achieving significant gains and others facing challenges. Strategy’s MSTR rose 28x since the Bitcoin accumulation strategy announcement in 2020, outpacing Bitcoin’s 8x increase, while Metaplanet grew ~60x since its 2024 Bitcoin strategy began. SharpLink gained ~6x after its $425 million raise, supported by Joseph Lubin’s (Ethereum co-founder) board role. 

The PCV trend may drive crypto market growth, but for companies using debt instruments, such as convertible bonds or preferred stock offerings, it introduces leverage that amplifies both gains and risks. Firms like Strategy, which has funded its Bitcoin purchases partly through convertible debt, face heightened exposure to crypto price volatility. A sharp token price decline, exemplified by the 30% Bitcoin drop from $109,000 in January, that led to a 50% decline in Strategy’s stock, could pressure leveraged PCVs, particularly those with high debt-to-equity ratios, risking margin calls or forced liquidations. As more companies adopt this blueprint, reliance on debt may vary, potentially leading to looser financial structures with weaker covenants or riskier borrowing terms, increasing systemic vulnerabilities. For instance, altcoins like Ethereum and Solana often face sharper price downturns than Bitcoin, potentially causing greater strain on firms like SharpLink or Sol Strategies. These risks may be exacerbated by unfavorable market dynamics like $300 million weekly Bitcoin ETF outflows, though diversified crypto holdings or stricter regulatory oversight could help mitigate potential instability.

Our take: As bond market instability undermines confidence in traditional safe assets, the future will likely see more corporations adopt cryptocurrencies as alternative reserves, driving the growth of public crypto vehicles (PCVs). However, this shift ties corporate fortunes to crypto’s unpredictable cycles, requiring more precise risk management.

Crypto Revenue Models

Crypto projects are generating revenues at a pace that rivals, and in some cases surpasses, traditional tech startups. Axiom, a Solana-based memecoin trading and sniping platform, reached $100 million in revenue in the first four months of its launch. In May, it generated $62 million in fees fueled by adding new features like real-time X monitoring, advanced bundle scanners, and a tiered reward system that redistributes up to 43% of fees to top traders, boosting user engagement and retention. To highlight Axiom’s rapid growth, in comparison, tech startup Cursor AI took 12 months (fastest growing SaaS company) to reach this revenue milestone, while Pump.fun took eight months. The memecoin infrastructure sector has risen since the 2024 memecoin mania, fueled by retail traders’ appetite for high-risk, high-reward opportunities. Furthermore, other products like BullX and Photon also cater to retail traders’ demand for high-velocity trading with ~1% fees and gamified incentives, achieving $400 million and $210 million in revenue since 2024, highlighting strong product-market fit for memecoin infrastructure tools. In market downtrends, their utility and revenue dropped as appetite for speculation waned, but memecoins led a recovery since the April tariff pause, with memecoin platforms capitalizing on renewed speculative fervor to drive revenue.

Shifting to the broader DEX landscape, revenue remains highly cyclical, driven by market activity and trading volume. For instance, Solana’s leading DEX, Raydium, saw weekly fees drop to $4 million in May 2025 from $8.5 million in January, when it recorded $295 million monthly revenue, the highest monthly revenue ever for a DEX. Similarly, Uniswap generated $90 million in May, 40% below its January peak. However, DEX-specific events can create an aberration- Meteora maintained 80% of its January revenue in May, bolstered by its integration with the Believe launchpad ecosystem.

In contrast, stablecoin issuers like Tether and Circle stand out as consistent revenue generators that are relatively unaffected by the market environment. In May, Tether and Circle achieved all-time high revenues of $578 million and $191 million, respectively, surpassing their December 2024 figures of $532 million and $133 million during the post-election euphoric period. Stablecoins generate revenue primarily from interest on U.S. Treasury and cash equivalent reserves backing their tokens, driven by high yields (e.g., 4–5% on Treasuries). Their appeal lies in their dual utility: in bull markets, they fuel crypto trading and DeFi activities by providing liquidity and facilitating transactions; in bear markets, they serve as a safe haven for capital preservation. By acting as the backbone of transaction velocity and capital stability, stablecoins remain infrastructural to the crypto ecosystem.

Our take: The crypto revenue barbell hinges on two extremes: stablecoins like USDT and USDC, offering steady Treasury-backed yields as a safe haven, and memecoin platforms like Axiom, driving speculative hypergambling with fast-paced, gamified trading tools. Until robust DeFi ecosystems emerge, this dynamic is likely to persist.