Summer Simmer or Surge?

“Sell in May and Go Away”, the oft-repeated phrase that many assume to be the playbook as we head into the summer. While perhaps there is historically some truth to that sentiment, this summer may be gearing up to be anything but quiet for crypto markets. With the big caveat that there still remain macro risks associated with lingering trade uncertainty and the follow-on impacts (e.g. what happens once the 90-day pause expires in July) and the rapidly-increasing tensions in the Middle East, on the industry micro-structure level, digital assets are poised for explosive growth. The upcoming legislation in the US may prove to be the green light the industry is waiting for. Due to the rapidity and sheer number of announcements over the past few months, we are going to simply provide bullet-points highlighting some of the most impactful and salient developments. As you read this, keep in mind that the median investor still has 0 exposure to spot crypto in their portfolio. 

Onchain Development Heating Up

The largest ‘centralized’ actors in crypto are increasingly driving activity onchain:

• Coinbase, the largest US exchange, announced it is incorporating Base decentralized protocols directly into its main app and interface, potentially onboarding millions of more users to native onchain protocols. It also recently petitioned the SEC to allow it to engage in tokenized equity trading. Since January, Coinbase has tied decentralized lending protocol Morpho (~$6.3 billion TVL) into its products to offer collateralized Bitcoin lending, a program which has already grown to over $500 million in loans since going live

• Kraken, the second largest US exchange, has already announced it is rolling out tokenized equities on Solana and using native decentralized protocols to facilitate liquidity. In similar fashion, Bybit, the 2nd largest crypto exchange in the world recently announced it is building its own native decentralized exchange on Solana as well.
• Binance, the largest centralized exchange in the world, is in the midst of a $100M onchain liquidity incentivization campaign to encourage BNB ecosystem projects to exchange listings around the world
• Galaxy Digital (fresh off its Nasdaq listing) is partnering with decentralized protocol Liquid Collective to offer institutional staking of Ethereum and eventually, Solana
• Some of the biggest custodians in the world, including BitGo, already offers clients native Solana staking through decentralized protocols like Marinade (~$2 billion TVL)

Meanwhile, native onchain protocols are seeing incredible success – here are a few examples:

• If decentralized lending protocol Aave were a US bank, it would be in the top 50 in terms of assets with $45.5 billion locked in its smart contracts, with a year-end goal that would put it just outside the top 40 of US banks

• Maple Finance is seeing the deposits on its platform and resultant revenue go vertical as it continues to push as the main DeFi-TradFi interface with partnerships with institutions such as Bitwise and Cantor Fitzgerald. Maple now has nearly $2.5B AUM, up from just $400M in January.

And to better contextualize how large onchain activity is growing, decentralized trading activity continues to rapidly gain share versus centralized exchanges and is now over 30%. 

2025 is shaping up to be the year of the Public Markets & M&A activity:

• Circle, the issuer of $62B-stablecoin USDC, recently held a massively oversubscribed IPO, raised $1.1B in an upsized offering, and has since seen its stock rise nearly 700% since going public just 1 week ago
• Galaxy Digital ($8 billion market cap) secured its uplisting to Nasdaq in May
• Major exchanges and custodians such as Gemini, Kraken, Uphold, and Bitgo have all filed, or are likely to file, to go public this summer
• There has been an explosion in so-called crypto ‘Treasury Companies’ in jurisdictions around the world that are implementing the same strategy as (Micro)Strategy. Many are similarly targeting Bitcoin, but there has also been a marked increase in companies replicating the model for other major assets:
  • Tether (the issuer of $156-billion stablecoin USDT that generates $13 billion in net profits annually) and Softbank teamed up with Cantor Fitzgerald to create TwentyOne, a Bitcoin-focused treasury company that has raised $685M to acquire Bitcoin and maximize BTC-per-share
  • One of the co-founders of Ethereum and Ethereum-focused development shop Consensys, Joe Lubin, recently launched $425-million SharpLink to do the same for ETH
  • There are at least four focusing on Solana, one of which (DeFi Development Corp) just secured a $5 billion equity line of credit to tap into to acquire SOL
  • These non-Bitcoin companies also actively using onchain decentralized protocols to maximize tokens accrued per share. DeFi Dev Corp for example, runs their own validators via Sanctum’s decentralized staking infrastructure and their own liquidity pools on decentralized exchange Orca and lending pools on decentralized lending protocol Kamino

• Stripe acquired Bridge (stablecoin infrastructure) for $1.1B in April and recently followed that up with another acquisition of Privvy (wallet infrastructure) for an undisclosed amount in early June
• Also in April, Ripple (enterprise-focused blockchain) acquired prime brokerage Hidden Road for $1.25B
• Robinhood acquired Canadian crypto-exchange and infrastructure provider WonderFi for $250M at it continues to build out its crypto-native offerings. Robinhood had previously purchased crypto exchange Bitstamp in 2024 for $200M
• Coinbase acquired crypto derivatives exchange Deribit for $2.9B in May

This public activity is a sign of increasing TradFi Convergence:

• Robinhood – offering onchain tokenized US equities for European markets (likely on Solana or Arbitrum) and is moving into crypto’s most innovative product, perpetual futures
• The largest bank in the world, JP Morgan, whose CEO hasn’t historically been vocally anti-crypto, just trademarked ‘JPMD’ for its digital asset services and is reportedly set to pilot transfers of its own USD stablecoin on Base with plans for additional currency denominations in the future
• Further, JPM in partnership with several of the other largest banks in the world, Bank of America, Wells Fargo and Citi, are exploring a jointly issued stablecoin
• Meanwhile, PayPal’s stablecoin has been circulating for years, and Fidelity’s ($6 trillion AUM manager) stablecoin contracts are already live
• Societe Generale, France’s 3rd largest bank (€150B AUM) launched its USD stablecoin last week to complement its already-circulating Euro stablecoin
• Revolut, with 40 million customers globally, continues to natively support chains, with Solana as its latest addition this week
• Global payment giants Visa, Mastercard, Paypal, Shopify, Stripe are all heavily involved in stablecoin activity already
• Coinbase has partnered with Stripe and Shopify to enable 24/7 global stablecoin payments and settlement for merchants
• The largest companies in the world are starting to show interest with Uber, Walmart, Amazon, Meta, Apple, X, Google, AirBnB, and DoorDash (among countless others) all reportedly looking into stablecoin use in some form
• On that note, stablecoins are already doing $34 trillion in transaction volume per year (2x Visa’s annual volume, for reference). We can expect this to go vertical once stablecoin legislation passes in the US

ETFs have proven to be hugely successful products, with more coming

• BTC ETFs have continued to set records in performance and investor interest since going live – securing $70 billion in net inflows in the US in just 341 trading days, almost 5x quicker than the previous record holders VOO (S&P 500) and GLD (gold). Over the past five weeks, U.S. Bitcoin ETFs have attracted more than $9 billion in inflows. Meanwhile Gold ETFs are down $2.8 billion. 

• ETH ETFs, though relatively slow out of the gate compared to Bitcoin ETF flows, have started to turn strongly positive lately as well as ‘traditional’ investors begin to better understand the value proposition of the network and look towards the potential positive catalysts stemming from US legislation

• There are 8 ETFs filed with the SEC for Solana spot ETFs (the next largest and most performant general purpose chain). Uniquely, these have all been filed with provisions for staking included, setting them apart from other US ETF products that have until now been prohibited from including staking. Solana regularly offers 8-12% yield to stakers. These are likely approved in the next 3-5 weeks.
• In addition to those, there are applications for ETFs for at least another 8 assets that are likely to be approved in 2025
• As a quick reminder, we do not expect all of these to perform exceptionally given the underlying assets for some are difficult to justify as investments, but we believe a few (most importantly, the SOL products) have the potential to be quite successful. We explored this in more depth earlier this year: https://www.tritonliquid.com/research/the-etf-edition

Regulatory Clarity Finally Coming to the US: SEC and Legislation

• GENIUS Act (stablecoin legislation) – expected to pass the Senate June 17, with the House to pass later this summer. Expect this to be the greenlight for the banks and major fintechs to get involved in stablecoins at scale. The signs are all there that the biggest financial institutions in the world are gearing up to be major players in the stablecoin game.
• CLARITY Act (market structure legislation) has passed the House Financial Services Committee (32-19 vote) and the House Agriculture Committee (47-6 vote). The bill still needs to pass the House and then Senate, but is working its way through and could potentially be passed later this year, but more likely in early 2026
• The SEC has continued to make a concerted effort to clarify what is and what is not legal for US-based operators. Recently, they have put out clear guidance that native staking is not a security, that activities like mining cannot be seen as securities
• The new chair of the SEC, long-time crypto proponent Paul Atkins, recently announced an ‘innovation exemption’ to help shield decentralized protocols from undue regulatory burden effectively providing a regulatory sandbox in which they can build

Macro appears to be mediating

• It increasingly appears that the US has found itself in a neutral rate environment. The Fed has shown a resistance to cutting rates and the market is currently pricing in just a 57% chance of a cut in September. Core indicators such as unemployment and PCE in the US have continued to hold up, though may be starting to show signs of softening under the surface. There is a chance of a surprise cut but we see little reason to believe we are in an overly restrictive environment that necessitates aggressive Fed action. This is aided by the lower than expected inflation we’ve seen this quarter.

• Global trade uncertainty also continues to be easing following the April whipsaw; it remains to be seen what happens with following the 90 day pause (expiring early July), but US action to date has signaled a willingness to find deals and further push out timelines to reduce market pain
• Expansionary tax legislation passing in the US in the coming months
• Pivot by Treasury Secretary Bessent’s explicit messaging of “the US can outgrow the debt”, away from more overt austerity
• While on the topic of Bessent, he fully understands and promotes the promise of stablecoins – “ we will use stablecoins to help keep the US the dominant reserve currency” - and views them as a way to bolster US borrowing in the future:

Interesting onchain flow activity: BTC, ETH, SOL Exchange Balances making new lows

• All great in theory, but any evidence of actual buying ahead of this? We can look at exchange balances for major assets as a loose proxy for ‘available to sell’ supply – rising amounts coincide with softer markets, decreasing amounts with stronger markets. BTC has hit a 5-year low and continues to drop rapidly. ETH has been in a nearly straight-down trend for a few years and has accelerated its decrease again, and SOL, though newer, has started to see a drastic decrease since 3Q 2024. The last two times we saw this pattern lines up to the rapid SOL run ups from $20 to $200 in late 2023 (note the increase as profit taking started) and again in late 2024 where it ran from $120 to $250.

Conclusion

We have shifted our fund view toward a more bullish stance this summer given the above-referenced points. As always, we encourage investors to set up a call with us to talk about how we can provide exposure to the growth of this space. At Triton, we have constructed a portfolio that we believe will benefit from the growth of this space, and we continue to actively manage this book in accordance with the rapidly evolving nature of this space.

Please email charles@tritonliquid.com (Triton Chief of Staff) in order to set up a call with Chris Keshian (Triton founder and CIO).

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