Macro Update

What began as a relatively muted week, despite key macro events like the FOMC, where J. Powell held rates unchanged (4.25-4.50), turned into risk off by the end: markets sold off into the weekend as geopolitical tensions escalated sharply, culminating in a U.S. strike on Iranian nuclear sites on Saturday. 

In response, Iran reportedly voted to close the Strait of Hormuz, triggering a spike in oil prices and reigniting concerns over inflation and broader economic fallout. However, following the initial headlines, the Polymarket probability of a July closure has since fallen to 25% from a high of 52%.

BTC started the week around 107K and traded in a relatively tight range despite macro catalysts and geopolitical tensions. As tensions mounted throughout the week, crypto grinded steadily lower, culminating in a sharp selloff over the weekend. We finished the week with BTC down -7.4%, ETH -19%, and SOL -17.3%. 

Alts bore the brunt of the move lower, with GMCI-30 down -9.87% vs GMCI Small Cap -17.51%, highlighting the risk-off rotation. At the sector level, L1s (ex-BTC) held up relatively better (-10.95%), while AI (-21.03%) and Gaming (-18.82%) underperformed.

Due to the ongoing underperformance of altcoins, particularly the smaller caps, BTC dominance climbed to 64%, its highest level since January 2021.

Looking at ETF flows, BTC extended its streak of inflows, while ETH saw momentum fade, registering just its second day of outflows this month ($-2.1m on June 13 and $-11.3m on June 21) amid the broader market selloff.

Finally, rising geopolitical tension sparked classic risk-off flows: oil prices rise, equities sell off and USD receives a bid, partially reversing what was on track to be the U.S. dollar index’s (DXY) worst H1 since 1986.

Our take:

“Markets are caught between geopolitical tension and U.S. policy headlines”

After weeks of resilience, digital assets finally cracked under rising geopolitical pressure, though BTC quickly reclaimed the $100K level, highlighting lingering bid-side support. Markets are now caught between shifting macro and geopolitical narratives, with cross-asset flows reflecting that tug-of-war.

We think the market may start turning its attention to July 9th, when the expiration of Trump’s 90-day pause on reciprocal EU tariffs can bring renewed focus on inflation dynamics and policy direction. In that context, this week’s DXY strength comes against a backdrop of unresolved trade tensions and lingering questions around fiscal sustainability.

GENIUS Act

On Tuesday, the U.S. Senate passed the GENIUS Act (68–30), a landmark crypto bill introducing new guardrails for stablecoins, including transparency mandates, AML/KYC compliance and more.

While it still needs approval from the House before reaching the President’s desk (likely late Q3), this marks a major step forward for the entire industry. Stablecoins are essential for blockchain-based systems to reach mainstream adoption. Stables serve as the mechanism of exchange, acting as the settlement asset in virtually any on-chain, economic transaction.

In anticipation of the GENIUS act vote, we have seen a number of Forbes 500 companies, more specifically Amazon, Walmart, JD.com, and (most recently) J.P. Morgan, coming out with a desire to explore stablecoins. 

Clear regulation also introduces increased complexity, especially for non-financial institutions, so it is to be seen how quickly these corporations can spin up their own stablecoin. That said, it is structurally bullish to see strong appetite for them.

Our take:

“As corporates with large distribution channels enter the arena, there could be more fragmentation of the stablecoin market”

To contextualise the possible entry of players like AMZN, JD, JPM, who have heavy, pre-existing distribution channels to push adoption of their potential stablecoin, we look at PayPal’s stablecoin (PYUSD) as a precursor.

To quantify PYUSD’s success since launch, we compared its outstanding supply over time with that of 21 stablecoins launched on Ethereum (L1) between 2020 and 2023.

For our cohort of 21 stablecoins, the outstanding supply of ETH-based stablecoins tends to peak within the first year, on average around day 314 (with meaningful variation across tokens), highlighting the importance of early, yet sustained traction.

Over 660 days in, PayPal’s PYUSD continues to grow, signalling sustained momentum driven by its distribution reach leading to unique use cases and defendable market share.

Stablecoin success is heavily dependent on their ability to spin up a network effect (size, velocity, interoperability, etc.) quickly. Generally speaking we believe there are three core strategies:

• First Mover (e.g. Circle, Tether)
• Innovator (e.g. Ethena)
• Distribution-backed (e.g. PayPall)

Next we look at the ETH-based stablecoin landscape today. Below shows the year in which they launched (x-axis), how much % the total supply is down from peak (y-axis) and their current size (bubble size + number post name = current rank).

What we find is that there are broadly three periods stages of ETH-based stablecoins. There are three eras in ETH-based stables:

• Early Movers:

USDT, USDC, and DAI (now sDAI) emerged in a greenfield environment during the previous decade. They established strong network effects early and remain dominant today.

• Stablecoin Market Consolidation (2020– early 2023):

Most stablecoins launched in this period failed to scale. The market was noisy, and few issuers had either real innovation or the distribution needed to gain lasting traction. As a result, this era produced few lasting contenders.

• Innovators & Distributors (Since 2023):

A new cohort is emerging made up of two distinct groups:

• Innovators like USDe (Ethena) and GHO (Aave), launched by established crypto-native platforms, are underpinned by novel value propositions that set them apart from traditional stablecoins.
• Distributors like PayPall (PYUSD, launched Aug 2023) are leveraging existing user bases and infrastructure to drive adoption. PYUSD is now >660 days in and still growing, well beyond the 314-day average peak seen in prior stables.

It’s likely we’re entering a new era of stablecoin launches led by distributors, i.e. institutions with built-in scale. PYUSD has proven the model, and future launches from the likes of JPMorgan, Amazon, and others could increase competitive pressure on both new entrants and incumbents, ultimately fragmenting the stablecoin landscape further. 

The stablecoin space continues to heat up, especially following last week’s GENIUS Act, with a few smaller headlines adding fuel. Meanwhile, CRCL is trading at a $65B market cap, up roughly 7.6x since its June 5th IPO.

A Closer Look At Base

Coinbase had a string of positive developments this week. Not only did it secure a partnership with JP Morgan to develop their Base (L2) deployed “deposit token” (as discussed above), on Friday, CB also officially obtained a MiCA licence from Luxembourg’s financial regulator (CSSF). In doing so, it became the first U.S.-based crypto exchange to achieve full regulatory approval under the European Union’s new crypto framework.

As a result, the coinbase shares are now trading at $308, only ~13% removed from its 52 week range top end.

Our take:

“If JPMorgan aims to leverage Ethereum’s security, decentralization, and settlement assurances within a permissionless environment, Base is a logical choice for the time being”

First, quickly on CB’s new MiCA Licence: this is significant, as it clears the path for further institutional adoption in the region as fiat ramps, trading activity and investment products with crypto underlyings move to a local, regulated framework.

On the CB & JPM partnership. To contextualize JPM’s choice, let’s have a closer look at Base’s position across other L2s. We start with looking at the monthly active users (MAU) across different L2s as well as ETH’s number of transactions as a share of total EVM transactions (across these L2s). 

Active Users - Base successfully tapped into Coinbase’s distribution, primarily via CB Wallet, to drive a sharp increase in MAUs, while other L2s saw broad-based market share declines. Across all tracked L2s, there are ~45 million monthly active users, with Base accounting for ~83% (or 37 million), including overlaps from users active on multiple chains.

Looking outside EVM, Base is still tracking 2.6x behind Solana in terms of MAU (99m vs 37m), Base still has the largest user base of all L2s that leverage Ethereum’s security, decentralization and settlement. So if that is what JPM is after, why did it go for Base?

It is even more clear when looking at the activity (number of daily transactions) of stablecoins across the major L2s (Base, Arb One & OP).

• Momentum - Base has seen a ~4.7x increase in daily stablecoin activity over the past year vs Arbitbrum One (~1.2x) and OP Mainnet (~3.2x)

• Size - Daily, ~2.6m stablecoin related transactions are happening on Base, which is 2.07x the velocity of Arbitrum One and OP mainnet combined.

After a closer look, JPM likely selected Base due to its combination of Ethereum-level security and strong user growth within the broader EVM ecosystem.