Organizer: Jsquare / DFG
Guest lineup:
James - Founder and CEO of DFG
Du Jun - Founder of Vernal
Lily - Co-founder of D11-Labs
Yang Mindao - Founder of dForce
Host: Angela Tong - CMO of DFG & Jsquare
Topic 1: What are the core driving factors for BTC reaching new highs? Is it sustainable?
1. This year, the total market capitalization of cryptocurrencies surpassed $400 billion, BTC broke through $120,000, and over 90% of Ethereum addresses are already profitable. In your opinion, what is the 'trigger' for this wave of increase?
James: From an overall logical perspective, the main reason is still quantitative easing. During a rate hike cycle, both cryptocurrencies and the stock market typically enter a bear market or experience corrections. Currently, we are in a rate-cutting cycle, where market funds are ample, and quality assets naturally attract more buying support. Additionally, this round of market movement is accompanied by significant events like the approval of Bitcoin ETFs and large purchases of Bitcoin by companies like MicroStrategy, further driving funds, especially from institutions and retail investors, directly or indirectly into the crypto industry. The combination of these two factors is a key reason why Bitcoin has risen to $120,000 and has not yet corrected.
Mindao: In this wave of market movement, the funding aspect is a very critical factor, especially since the capital structure has fundamentally changed. Taking Bitcoin ETFs as an example, the assets under management have grown to about $150 billion in the past two years, plus MicroStrategy's approximately $70 billion, totaling over $200 billion. In previous cycles, the market mainly relied on leveraged funds within the crypto circle to drive the market through a cycle of 'leveraging—de-leveraging.' In contrast, ETFs and MicroStrategy are fundamentally equity funds rather than leveraged funds. For example, MicroStrategy's ATM financing is pure equity, with no concept of a margin call; the terms of the issued convertible bonds also lack a price liquidation mechanism. Therefore, even if the token price declines, these types of funds will not be forced to sell, making it difficult to trigger a cascading crash. From Bitcoin's rise from $50,000 to $70,000, this more than $200 billion in funds has an average entry cost between $70,000 and $80,000.
At the same time, Ethereum has risen by 25%-30% in the past two weeks, but the on-site funding rate is only about 10%, far lower than the 20%-50% of previous high-leverage periods, which also reflects that this wave of market movement is led by low-leverage, long-term allocated equity funds. This is one of the important reasons why Bitcoin and Ethereum can break new highs, and this trend may continue. Previously, arbitrage in the crypto circle was mainly concentrated in offshore exchanges, while now more arbitrage occurs between ETFs and CME futures, involving capital scales of $20-30 billion. Therefore, ETFs are not only passive investment targets but are also becoming important tools for arbitrage and hedging in compliant markets, and even may possess options attributes in the future. With this type of capital continuously flowing in, the scale of the 'traditional crypto stock' asset class is expected to expand further, which is also an important force supporting Bitcoin to break through $120,000 and even higher.
2. Have ETFs or U.S. stock fund flows truly become a 'new necessity'? Is there data to support this?
Lily: I feel that this round is the most blurred one between the crypto space and the stock market that I have experienced. I have a very seasoned friend in the crypto space who has recently interacted with many institutions on Wall Street; he says that almost all Wall Street institutions related to crypto are now trying to do crypto stocks, trading, or similar businesses.
From a macro perspective, the U.S. GDP accounts for less than 30% of the global total, but the dollar accounts for about 60% of global foreign exchange reserves, and also occupies more than half of cross-border payments. This inequality mainly comes from 'trust'—everyone believes that the U.S. is the strongest sovereign nation, and its currency has the strongest credit backing. However, this trust has begun to waver in recent years. Trump has repeatedly stated that he 'doesn't want to be the world's police,' focusing more on domestic welfare, leading to doubts about the long-term value of dollar assets and U.S. treasuries globally. Therefore, one of the biggest consensus behind this round of market movement is that 'the credit of the dollar is weakening.' The world is beginning to look for inflation-resistant assets that are worthwhile to hold long-term, which is also one of the reasons behind the surge in gold and Bitcoin.
The approval of ETFs has played a key role. Many Wall Street institutions previously could not directly hold cryptocurrencies due to compliance issues, but they can allocate indirectly through ETFs, serving as proof of assets, allowing crypto assets to formally enter the view of traditional finance and blurring the boundaries between traditional and crypto. The launch of ETFs poses a significant challenge to centralized exchanges. After MSTR, we see more and more treasury funds allocating tokens like Ethereum, for example, Cathie Wood buying BMNR, which also encourages traditional financial circles to understand crypto more deeply.
However, I believe the current enthusiasm on Wall Street for crypto is slightly exaggerated; this heat may undergo cyclical adjustments, but it is still in an upward phase. A large amount of traditional capital is actively participating. I am familiar with investment banks that work with crypto in the U.S.; they are facilitating some well-known practitioners in Asia and the U.S. to issue new stocks, and raising $500 million to $1 billion is relatively easy. So currently, this wave of trend is still at a very high level in terms of capital size, enthusiasm, and recognition and consensus from Wall Street.
3. Does Hong Kong's immigration policy support crypto ETFs as proof of assets? Beyond U.S. stocks, has capital from the Hong Kong stock market flowed into the crypto space?
Lily: The Hong Kong stock market is currently in a clear bull market phase. I was one of the early private bullish individuals between 2023 and 2024. Whether it is the recent IPO scale or various movements related to the crypto industry, it all shows that market sentiment is high. Taking Boya as an example, despite its red chip structure and financing channels not being fully opened, the market is still highly sought after, with the current PB exceeding two times, even approaching three times, surpassing benchmarks like MSTR. Recently, the market has reacted very positively to any large investments related to crypto, and stock prices often rise rapidly. Established Hong Kong stocks like OSL, Blue Harbour, and New Fire have shown significant recent gains; traditional payment companies like Lianlian have also performed well after transitioning to Web3. Overall, Hong Kong stock targets are scarce, while market enthusiasm for crypto is high. Many A-share analysts are also discussing whether similar stablecoin concepts can be introduced in A-shares, becoming a hot topic.
4. The U.S. House of Representatives passed three cryptocurrency bills; how will the current policy direction affect BTC's subsequent performance?
Mindao: I think the passing of these three bills may not have such a direct impact on Bitcoin (BTC). The Genius bill mainly involves stablecoins, while the Clarity bill may have a greater impact, focusing on clarifying which regulatory body is responsible for the market. The most important significance of these three bills is to provide a very clear framework for many compliant exchanges and asset issuers. For example, we see that Coinbase has already allowed the establishment of perpetual contract trading in the U.S., and I believe this will directly drive the trading demand for Bitcoin. Overall, I think the biggest beneficiaries this time may still be Ethereum, DeFi, and stablecoins as projects serving as new financial infrastructure.
Lily: In the long run, these changes are definitely positive overall. Bitcoin, as the 'system' of the entire crypto space, will only be accepted by more people as the industry becomes more open. But in the short term, I agree with Teacher Mindao's view that there won't be particularly direct impacts. The more significant meaning is to bring more regulations to the entire industry, which is something many people have long anticipated. If we want this industry to develop long-term and give birth to truly great companies, then at this stage, in order to get more ordinary people to accept this industry, we must rely on more legislative support.
Topic 2: Is the warming signal of ETH real? What does it mean for the future market?
1. With ETH included in multiple listed companies, is this a long-term benefit for ETH?
James: It is not surprising that Bitcoin rose to $120,000 and then consolidated, with mainstream funds shifting to speculate on Ethereum. Prior structures had indicated that Ethereum had gained a certain degree of recognition from mainstream capital, and its DeFi chain TVL data is relatively credible. During the transition from bull to bear in 2021, Ethereum and Bitcoin experienced similar declines, making it an anti-dip asset. In this bull market, mainstream funds typically prioritize allocating Bitcoin to establish a bullish market structure; now that Ethereum is experiencing a catch-up, this is a logical natural development. From our perspective, Ethereum remains attractive in the long term. On one hand, it is recognized by mainstream players, and on the other hand, its on-chain DeFi applications are active, with TVL accounting for over 50%-60%. Currently, the TVL and FDV have not reached new highs; in contrast, Solana has issued more.
2. Can the return of ETH prices pull attention back to the Ethereum ecosystem?
James: First of all, I don't think there is a problem of 'taking back'; even during the peak of Solana, its market capitalization was never close to Ethereum's. In terms of TVL, over 50% has always been on Ethereum. The industry hotspots, such as the meme coin trend driven by Trump coin, may cause the Solana ecosystem to become a bit hot, but I believe Ethereum's position has always been that of the chain king; it’s just a matter of how far it is from others.
Mindao: I find it interesting that now when we discuss Ethereum and Solana, we are actually discussing whether the future of blockchain is a multipolar world or a unipolar world. Ironically, the Ethereum community often says 'Bitcoin is the idea, Ethereum is the execution,' meaning Bitcoin is the ideal, while Ethereum is the implementation. Although the 'multi-chain' concept was first proposed by Polkadot and Cosmos, it is Ethereum that has executed it well. One could say Ethereum 'copied the homework,' but did it more successfully.
Returning to this cycle, I believe the future will definitely be a multi-chain world. Early on, BSC, Huobi, and OK had their own EVM chains, and this round Coinbase and Kraken have also launched L2 based on Ethereum. Recently, Robinhood issued assets on Arbitrum and plans to launch its own L2 based on the Arbitrum Stack in the future. In the future, companies like JP Morgan or BlackRock that want to create chains or issue assets will also hope to do so in a controllable environment, further validating the multi-chain trend.
One advantage of Ethereum is that it is more willing to be compatible with traditional finance. If viewed from a political perspective, there are 195 sovereign countries in the real world, indicating that the pattern is destined to be multipolar. The blockchain world will not just have three or four chains dominating. In this multipolar pattern, Ethereum's multi-chain architecture may allow it to become the core of blockchain infrastructure.
At the same time, the strategies of Ethereum-related companies differ from Bitcoin. Companies with Bitcoin treasuries like MicroStrategy are more like passive reserves; whereas Ethereum-based companies, like Sharplink, not only bring stock market capital onto the chain but also push on-chain assets towards the stock market, such as actively participating in on-chain DeFi, like Staking and LSD. In the future, if companies like Sharplink and Bitmine invest their TVL into DeFi, it may drive a round of infrastructure upgrades. What I look forward to seeing is: listed companies issuing DeFi convertible bonds and putting them on-chain, directly interacting with DeFi protocols. Even protocols like AAVE, I hope that one day they can issue convertible bonds on the stock market, using the raised funds to feed back on-chain liquidity. For example, recently Ethena announced it would go public through a SPAC reverse merger, planning to list as a stablecoin protocol; this also reflects the trend.
Dujun: First, why do I have faith in Curve? Because it essentially serves as the 'foreign exchange market' of the on-chain world. If this can be achieved, it will be a $10 billion-level company, while its current market capitalization is only about $1 billion. There are basically no real challengers, including Uniswap v3, which has not yet reached the stage where it can challenge it. Moreover, due to the founder Michael's lending collapse incident, this project has now achieved complete decentralization. So this is why I am optimistic about Curve. Second, whether it was last year or now, I have always been quite bullish on Ethereum. One point worth emphasizing is that in today's entire blockchain world, aside from Bitcoin, the only one that has truly achieved full decentralization while maintaining a relatively neutral identity is Ethereum. Other chains either lack sufficient decentralization or have not yet reached a high enough level of technological maturity.
When we discuss what problems blockchain can solve, I think we should first focus on the 'finance' sector, such as putting real-world assets (RWA) on-chain. So which chain will these assets choose to deploy on? Clearly, it will not be various small chains. Because large funds at the level of $1 billion or $10 billion, institutions, or even sovereign countries will only choose a chain with a high degree of decentralization and neutrality, which is Ethereum. Therefore, I believe that from the current situation, Ethereum does not yet have a real challenger. In terms of maturity, ecosystem, and the number of developers, it is the strongest. So I remain firmly optimistic about Ethereum. If blockchain can really rise on a large scale in the future, then Ethereum will definitely be a very high-quality core target.
Topic 3: Why is the performance of altcoins so divergent? Is there still an opportunity for linkage?
1. Has this round of altcoin linkage ended, or has it not truly begun?
Lily: I believe that the altcoin market has not truly begun in this round; it is far from ending. Of course, differentiation is inevitable. Projects like EOS have passed their peak and are more about making new attempts. Just like the stock market, the strongest 50 companies from a hundred years ago are completely different from today; whether they can last depends on whether the team continues to operate. Currently, the general direction for altcoins mainly divides into two categories:
The first category is emotion-driven, such as the meme coin representative Pump. Although it has recently corrected, its circulating market cap still reaches several billion dollars, with daily earnings also in the millions. The core of these projects lies in 'human nature' and 'narrative,' and many CEX contracts amplify this gambling mentality.
The second category is application-driven, and I personally firmly support DeFi. Because the first thing that Crypto changed is actually the financial system, especially the payment system. For example, the recently hot Xstock allows the issuance and trading of stocks on-chain, achieving 7x24 hours without market closure, which is hard for the traditional market to achieve in the short term. For instance, Nasdaq plans to achieve spot trading 7x24 by 2026, while the options market has no timetable at all. DeFi's advantage is that it can already provide these infrastructures; it just needs more liquidity and user education. In the future, the pricing mechanism of traditional assets may also migrate on-chain. Therefore, I believe that DeFi projects like Curve, which can serve real financial scenarios, will become important foundational infrastructures for the entire industry. Of course, the combination of AI and Crypto is also worth paying attention to. AI for Crypto and Crypto for AI both have opportunities, but currently, aside from data rights and some interactive scenarios, they may not have found the actual points that can unleash enormous energy. However, it will definitely be one of the big sectors worth betting on in the future.
2. How do you view the subsequent development of the AI and DeFi sectors?
James: Bitcoin itself is a product of the financial crisis; it was precisely because of problems in the traditional financial system that Bitcoin was born. If we are to find the most 'practical' direction in the blockchain industry, then DeFi is undoubtedly the most solid and meaningful. Currently, mainstream DeFi protocols, especially Blue Chip-level ones, are generally profitable from a financial data perspective, and their product systems are quite mature. Comparing traditional finance and on-chain DeFi, the differences are significant. Offline financial services are more aimed at high-net-worth clients, and ordinary people find it difficult to access quality services; whereas DeFi is fairer and more open. Traditional financial institutions can even ban accounts based on vague user agreements, while on-chain rules are transparent and trustworthy. Moreover, DeFi is continually evolving in terms of product experience, stability, and innovation. Although there were security issues during the past DeFi Summer, the mainstream protocols on Ethereum have now matured, can achieve stable profitability, and continue to provide quality services. Therefore, we will also focus on allocating leading projects in the DeFi sector in the secondary market, such as DEXs, lending, etc. In the long run, DeFi is also the sector we are most optimistic about among all sectors.
As for the AI direction, I don't have a technical background, so my understanding is limited. Currently, most Crypto + AI projects are still discussing narratives, and there are not many that have truly landed products. Whether this sector can grow in the future depends on whether it can achieve large-scale applications and have real users using the products. If it only discusses concepts, the narrative heat will be hard to sustain, and investment risks will also be higher. But once a blockbuster product appears, it may lead to explosive growth. Many CryptoAI projects are still valued relatively low; for example, the ones we mainly hold like Render and Near are not considered expensive. The key moving forward will still depend on whether there are practical implementations.
Dujun: At that time, the focus was mainly on the infrastructure sector. Because at that stage, besides stablecoins, the industry had not produced too many practical results. The investable projects were limited, and there weren't many stories to tell. Everyone generally had a logic: without a complete infrastructure, applications naturally find it hard to develop. This is actually a 'chicken-and-egg' problem; many believe it's 'because there is no Douyin that 5G cannot emerge,' but I believe it's '5G must exist for Douyin to emerge.' So at that time, about one-third of our projects were in the infrastructure direction, such as account abstraction, data analysis, L2, parallel EVM. These projects are more on the technical layer, which was a relatively reasonable choice at the time.
So why is Vernel still continuing to incubate infrastructure today? Because the logic of infrastructure has changed today. In the past, it was public chains and data; now it is more security-related. The biggest challenge currently is: how to allow users to enter the on-chain world more conveniently, safely, and trustworthily. Although some previous projects (like account abstraction and gas-free transactions) solved part of the 'usability' problems, security issues remain serious, such as frequent hacks, scams, and the proliferation of junk tokens. Now thousands of coins can be issued daily, but behind them, there may only be dozens or even a few people operating repeatedly. How can wallets identify these malicious behaviors? How to prevent scams? Including how wallets will face compliance and anti-money laundering issues when stablecoins are widely used in the future? For example, KYT, how to identify funds coming from sanctioned addresses or illegal accounts? These all belong to the category of 'new-generation infrastructure.' Therefore, we will still incubate some technical projects, but the direction will lean more towards security and compliance. Overall, in each of our project cycles, about one-third to one-quarter will still focus on this direction.
Mindao: In this cycle, our definition of the 'altcoin season' has also changed. Looking back at the cycles of 2013, 2017, and 2021, everyone defined altcoin season as 'most coins other than BTC and ETH reaching new highs.' But I believe that in this cycle, the 'altcoin season' we previously understood may not really arrive. Why? Mainly because the structure of funds has changed significantly as I just mentioned. For example, why has Ethereum obviously underperformed Bitcoin this round? It’s because Bitcoin has over $200 billion in institutional funds behind it, including ETFs, MicroStrategy, etc. This type of funding is completely different from the high-leverage funds in the traditional crypto circle. Looking back at previous cycles, the market's pricing benchmarks have also changed: from 2013-2015, dominated by BTC; after 2017, Ethereum gradually became the pricing unit; and later, stablecoins began to become popular, now the vast majority of tokens are priced in USDT. Once priced in stablecoins, the market's 'resonance' effect is not as obvious as in previous cycles. Because stablecoins are no longer directly linked to the prices of BTC and ETH, which weakens the logic of 'leading the pack.'
With Ethereum and Bitcoin reaching new highs, the biggest beneficiaries are still those foundational protocols that accommodate the overflow of TVL. Recently, the overall TVL of DeFi has approached historical highs, but this does not stem from innovations within the protocols themselves. Most DeFi protocol structures were basically established back in 2019, such as AMM, lending, asset management, etc., lacking substantial breakthroughs. The growth of TVL and transaction fees is more a result of the natural push from rising token prices rather than efforts from the projects themselves. This also highlights the key differences between DeFi and other altcoins (like Meme, AI, GameFi)—the former can naturally accommodate the liquidity that comes from the main chain's appreciation, while the latter finds it difficult to do so. However, from an investment perspective, I do not agree with the statement that 'DeFi is a threefold leverage of ETH.' This is not because DeFi cannot capture value, but due to the current structure of funds. The market's main players prefer to directly allocate BTC or ETH as asset reserves or underlying assets for ETFs rather than further sinking into DeFi projects.
Topic 4: How are institutions and the stock market changing the Web3 landscape?
1. From the perspective of capital flow, is Wall Street really 'entering the market' or 'in and out quickly'?
Lily: Not all Wall Street funds are long-term funds; this is something everyone needs to understand. I have participated in the operations of many crypto companies in the U.S. stock market and am very familiar with several projects. Many hedge funds in the market are very actively participating in PIPE (private investment in public equity); they buy chips at a discount and then conduct large-scale sell-offs the day after the PIPE issuance, creating massive transactions. This type of fund operation does not necessarily indicate a long-term value view of the industry, but their entry is indeed beneficial for the industry. Because the LPs of these funds are various retail investors, family offices, or institutional investors, in a sense, this is also a form of 'breaking the circle.'
The entire Wall Street's participation in crypto is becoming more and more formalized. For example, everyone has long paid attention to the inflow of funds into ETFs and is trying to build models to predict BTC's price movements: how much net inflow funds to the ETF correspond to BTC potentially rising by how much; this model has already formed a certain reference value. Similarly, we can also look at the capital flows of crypto stock companies in a similar way. For example, some companies announce they will support Ethereum, and the funds actually invested behind them may come from money originally allocated for real estate and other assets. This will tighten the connection between Ethereum and traditional funds. In addition to Bitcoin, all other chains are essentially 'application chains.' Platforms like Ethereum, Solana, and BSC rely more on breaking circle applications and user scenarios. As more and more institutions invest through the primary market or directly use products to enter the industry, it will drive more positive effects.
Overall, the integration of traditional finance and the crypto world is beneficial for the entire industry to be better known by more people. But we can also see the problems: Many funds on Wall Street are also leveraged, and when the market enters a downward cycle, many crypto-stock companies will face net asset values below their market value, meaning that their market capitalization is lower than their book assets. In the past, Grayscale has experienced a backward situation, and this will happen again in the future, especially for long-tail companies. The truly long-term and committed companies to crypto, like MicroStrategy, are very few.
2. Has the preference of VCs, CEXs, and traditional funds changed for entrepreneurial projects?
James: Currently, during the bull market phase, when cryptocurrency prices are rising, many 'crypto-stock' companies naturally prefer to benchmark against crypto assets, and even have a very positive attitude. However, once we enter a bear market and prices continue to decline, the asset values of these companies may be greatly discounted, and backward situations may occur. I completely agree with this point. Therefore, we have always been very cautious in our investments. Although we have received many good investment invitations, various crypto-stock companies hope we participate, such as buying Ethereum, Solana, or other crypto asset firms, we have not yet invested in any of them. Of course, this does not mean we won't invest in the future; it just means we will be more cautious. Especially for those companies that are not mainstream, have not reached the top, but have very high valuation premiums, we believe they hold little value for long-term investors. In contrast, we prefer to invest in companies that truly have product capabilities, clear business models, and even profitability, companies like Circle, Ledger, and CoinLis that are leaders in their fields with real users and revenue. This type of company aligns more with our investment logic that focuses on 'long-term value.'
Mindao: The recent 'crypto-stock' craze on Wall Street is indeed hot, but from my perspective, there are not many crypto-stock enterprises that truly hold long-term value. Leading companies related to Bitcoin, such as MicroStrategy, do hold value because they use real capital to issue bonds and stocks, utilizing structured products to net buy Bitcoin in the market. In contrast, Ethereum and other public chain crypto-stock enterprises have structural differences. Many of these companies raise funds through PIPE offerings, bringing in large holders who already own the tokens, and then use the raised funds to buy back tokens, essentially transferring from 'left pocket to right pocket,' which does not represent real new capital inflow. This type of operation carries risks that cannot be ignored, especially during downtrends when it becomes easier to expose these risks. The current market's sensitivity to the 'market capitalization premium' of crypto stocks (market capitalization divided by the number of tokens corresponding to each share) is not enough. Some Ethereum-related crypto-stock enterprises have reached a premium of 2-4 times; if they continue to issue through ATM offerings, their behavior resembles the Rebase model of early algorithmic stablecoins—continuously issuing at high premiums to dilute existing shareholders, forming an arbitrage cycle. Only a few companies like MicroStrategy can maintain a premium above NAV through financial tools and sustain their market value during bear markets through buybacks. But this is nearly impossible for most crypto-stock companies. To achieve a long-term positive cycle, these companies must quickly become industry leaders, becoming core liquidity counterparts that institutions for arbitrage and hedging cannot bypass. Otherwise, they mostly remain in the 'trading stocks with tokens' arbitrage logic, similar to the gameplay of early DeFi Summer. Therefore, we always maintain a high level of caution when facing these projects, focusing on whether they possess real product capabilities, financial tool combinations, and long-term value.
Dujun: I think we can look at this issue from a different perspective. As for listed companies like New Fire, we won't elaborate on specific situations here; just pay attention to official announcements. But whether it is issuing tokens or running a listed company, ultimately it comes back to a fundamental question: What value has your company created? How do you make money? What is your cash flow situation? From this perspective, I am actually quite grateful for this wave of market movement. Because it has made it clearer for us—good projects are good projects, and trash is trash. Therefore, whether it’s companies in the primary market or those already listed, they must ultimately return to fundamentals and the real ability to create value and cash flow.
