TL;DR:

• Last week, our Research Team attended TOKEN2049 and Solana Breakpoint in Singapore, gathering insights on key developments in the crypto space.

• Bitcoin remains dominant with ETF adoption progressing in phases, starting with retail and moving toward institutional investors.

• Stablecoins and tokenization are gaining momentum, with major players like PayPal, Société Générale, and Franklin Templeton expanding into tokenized financial products, from stablecoins to money-market funds to other traditional assets in the coming future.

• Ethereum is facing short-term uncertainty, as its modular architecture and rollups raise concerns about value extraction, while Solana's ecosystem continues gaining momentum, with major infrastructure upgrades and real-world use cases driving excitement.

• As market leaders in areas like smart contracts and decentralized finance are yet to be determined, we remain confident that diversified crypto investing remains the ideal strategy for gaining exposure to crypto as it steadily rises to mainstream adoption.

 

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Last week, our Research Team, represented by Head of Research, Pedro Lapenta, and Research Analyst, Lucas Santana, traveled to Singapore to attend two of the world's largest crypto conferences, TOKEN2049 and Solana Breakpoint. TOKEN2049 is a large generalist crypto conference, with more than 20,000 attendees, 400 expositors, numerous panels and keynotes, and more than 600 side events throughout the week. Solana Breakpoint is a smaller (but still big) conference focused on the Solana ecosystem, with this year’s edition having more than 6,000 tickets sold, hundreds of speakers spread across keynotes and debates, and more than 100 side events. After a full week of keynotes, panels and expositions, here are our key takeaways for investors.

 

1. Bitcoin stands alone, and ETF adoption will happen in waves

Everywhere we went and all discussions we attended, one first subject matter was unanimous: bitcoin has a simple and undisputed investment thesis, with no other contender defying its leadership. As remarked by Brett Tejpaul from Coinbase Institutional, “the coming of traditional asset managers to crypto shouldn’t be underestimated.” It’s clear to all participants that the adoption of spot bitcoin ETFs is progressing, but there’s a long way to go on institutional demand, with major banks, registered investment advisors (RIAs) and wirehouses still performing their diligence processes. As a consequence, bitcoin ETF adoption should come in waves, the first of which was in retail, with the full effect taking shape over the next few years.

 

2. Stablecoins are here to stay, and major players are entering

Stablecoins were the second consensus subject among the attendees of both conferences. As noted by Nic Carter in a great keynote covering his recent research piece titled “Stablecoins – The Emerging Markets Story,” stablecoins have decoupled from the ebbs and flows of crypto cycles, growing in adoption and market value irrespective of crypto bull and bear phases. In fact, most crypto volume is settled onchain via stablecoins, and, in emerging markets, stablecoin adoption is high, necessary and continues growing at a rapid pace. 

While de-dollarization seems to be a theme of growing geopolitical importance, when it comes to stablecoins, “crypto-dollarization” is happening fast, and it seems as though “crypto is good, not bad for the dollar.” Several recent launches like PayPal’s dollar stablecoin PYUSD and Société Générale’s euro stablecoin EURCV are gaining traction and being ported to new blockchains such as Solana, while new stablecoins like BitGo’s yield-bearing USDS are in the making. 

As big banks and payment companies come to this space, Jose Fernandez da Ponte, SVP of Digital Currencies at Paypal, highlighted that, for the first time in the past 20 years, payment innovation isn’t just happening in UX and fraud detection, but rather on the actual payment rails. When asked why PayPal isn't creating their own blockchain for PYUSD, Ponte answered that the company is focused on the application layer of payments, not the protocol on top of which services are built. As such, it’s better to outsource the infrastructure, with public blockchains being the novel payment rails where innovation is taking place.

 

3. Tokenization is expanding beyond stablecoins

Several panels and keynotes on tokenization took place in both conferences, with Franklin Templeton announcing that it’s bringing its tokenized money-market fund BENJI to Solana, after deploying the product in other networks like Stellar, Polygon, Arbitrum, and Avalanche. Securitize, one of the leading companies in the institutional tokenization frontier of crypto, also announced a partnership with Wormhole, a major bridge provider in Web3, to bring interoperability of tokenized assets, opening the floodgates for institutional tokenized assets to flow seamlessly across blockchains. 

After announcing EURCV coming to Solana, Société Générale’s Guillaume Chatain discussed the potential of bringing alternatives to certificates of deposits designed for money-market investors, and the issuance of tokenized structured products and digital bonds on public blockchains. This announcement made clear that tokenization is growing from just bare dollars to yield-bearing dollar-denominated funds to more complex products, in a trend that has the potential to reach all traditional assets and bring the speed, security and composability of crypto and decentralized finance to traditional financial products.

 

4. AI and crypto are rapidly converging  

Our Head of US and Europe Product, Dramane Meite, recently wrote an article on the intersection between artificial intelligence (AI) and crypto, showing how blockchain technology can keep AI in check and how the synergy between the two technologies can improve AI models and AI agents while bolstering the investment case for crypto assets and smart contract platforms. During both conferences, it became clear that these convergence is happening fast.

Decentralized Physical Infrastructure Networks (DePINs), an emerging crypto vertical encompassing distributed mesh networks for 5G, high performance computing, and distributed file storage, were a major topic of discussion. Among the many projects shown, Render, a distributed graphics processing platform, announced the completion of its migration to Solana and a new AI roadmap, which will bring AI verticals supporting compute workflows across machine learning training, inference, fine tuning, and generative imaging.

Jeremy Allairem (co-founder and CEO) from Circle, the issuer of the second largest dollar stablecoin in the world (USDC), gave a sneak peek into the use of USDC to enable AI agents to perform micropayments on behalf of humans to seamlessly and cheaply book a flight, buy a ticket for a show, or unlock paywalled content in websites. This can extend the growth and adoption of stablecoins in the crypto ecosystem, while potentially generating significant new demand for AI computing and refinement, and bolstering the activity of public blockchains.

 

5. Regardless of the US election outcome, crypto wins

Crypto regulation was also an important highlight, with particular focus on the upcoming US elections. A consensus among participants is that some policymakers, particularly Democrats, started confronting the crypto industry in the wake of the FTX debacle, in a strong reaction to the fraud perpetrated by executives and representatives of the now defunct crypto exchange. 

While the magnitude of the harm caused by FTX could serve as a good justification for a vendetta against the industry, it’s clear ever since that the fall of FTX had nothing to do with the failure of a major blockchain or crypto protocol. The consensus among participants is that having clear rules for the crypto market is paramount and it’s the industry’s duty to educate regulators and work alongside them to bring innovation and investor protection to the asset class. This will steadily lead us to transition from a state-of-affairs where regulators regulate by enforcement to a new standard where regulation offers proper guidance and frameworks for how service providers should operate in this industry. 

As noted by Jeremy Allaire, “technology doesn’t care about politics, and when it gives utility, regulators eventually embrace it.” Hence, more important than whether the next US president will be Republican or Democrat, is the fact that crypto regulatory efforts in the US are now bipartisan and that a new administration will be in the White House in the coming months. This can potentially put aside the residual antagonism against the industry and lead to the creation of robust regulation of stablecoins and service providers, and advance the regulated product roadmap beyond the spot ETFs currently available in the world’s largest capital market.

 

6. Restaking remains experimental, with risks still uncertain

Restaking is an emerging crypto primitive introducing the possibility of repurposing capital from large networks like Bitcoin and Ethereum to secure other blockchains and actively validated services (AVSs) in a shared security model. While participants agree that it gives birth to a decentralized Software-as-a-Service marketplace, consensus is that restaking will be nothing without protocols generating real adoption and revenues. Furthermore, experts in the field agree that the concept of shared security has never been done properly in the past, and that the whole restaking space is in the experimentation phase. 

In particular, there are many open questions on how shared security will work and, as noted by Lucas Bruder from Jito Labs, “no one has figured out slashing for restaking, nor what to do with slashed assets.” While this emerging primitive seems attractive in principle, as of now, some risks and possible cascading effects haven’t been fully mapped out, implying that it’s likely too early for most industry participants, particularly institutions, to start interacting with it in search of enhanced yield generation on staked assets.

 

7. Ethereum’s modular architecture creates short-term uncertainty

ETH’s underperformance against BTC and Solana (SOL) was another highlight of the two conferences, followed by the possibility that Ethereum’s scalability roadmap through rollups may be extracting value from the network’s base layer. This concern has been further emphasized after the network’s most recent upgrade, Dencun, which significantly decreased Ethereum’s block space usage, turned ETH inflationary again and reduced fee revenue on the network by more than 99% in the past six months. 

In a debate on the argument for Ethereum and second layer solutions, Eli Ben-Sasson from StarkWare, company behind the development of Ethereum layer-2 Starknet, noted that “whether L2s are parasitic and extract value from Ethereum is a question we’re still early to ask since most people don’t use blockchains today.” These discussions take place while the Solana ecosystem gains further momentum, with many people arguing that the complexity and fragmentation of Ethereum’s rollup-centric scaling may be causing users, developers and companies to reconsider the tech stack of the platform, migrating in part or in full to competitors. 

The key takeaway here is that, while some could argue a few years back that Ethereum would continue being the undisputed leader among smart contract platforms, recent network upgrades and the current complexity of the Ethereum modular structure is at least in the short-term setting the network back. This seems to be harming the overall sentiment in the Ethereum ecosystem and potentially explains the lackluster performance of ETH against other large capitalization assets such as BTC and SOL.

 

8. Solana looks well-positioned to continue growing

The biggest highlight of both events was perhaps the excitement in the Solana community, with many projects, companies and ecosystem leaders showing new developments, real-world use cases on stablecoins and tokenization, and advancements in Solana’s technological stack and client diversity. The latter, in particular, was spearheaded by a keynote on the current development stage of Firedancer, a new Solana network client developed by the Jump Trading Group, which brings a new and independent implementation of the Solana protocol. 

Jump is known for its expertise in high-frequency trading, and the team is striving to put forth what people in the community believe will make Solana the “Decentralized Nasdaq” of blockchains. The client is expected to be released in the next few quarters, and aims to set the transaction throughput on the network to a target of 1 million transactions per second, solving for high scalability while protecting validators from outages during periods of network overload as seen in 2022. Combine that with the coming of PayPal’s and Société Générale’s stablecoins, Franklin Templeton’s BENJI, and the completion of the migrations of Render and distributed 5G network Helium to the platform, and Solana looks well-positioned to continue growing in the coming years.

 

The case for crypto index investing remains strong

Last week was a remarkable opportunity to get the temperature of the crypto industry, joining thousands of people involved in this emerging asset class, from technology to products to regulation. 

We left Singapore with a clear sense that the ecosystem remains vibrant, there’s a lot of things yet to be built, and there are some hiccups and risks to be fully mapped out for the new primitives in this space to come into fruition. There’s a lot of excitement in the community to keep pushing the technology forward, work with regulators to foster innovation alongside investor protection, and welcome traditional finance to embrace blockchain technology and crypto assets. 

More importantly, perhaps with the exception of bitcoin and stablecoins, it’s evident that the winners of other verticals in crypto, such as smart contract platforms and decentralized finance applications, are yet to be defined. This makes the case for diversified crypto investing as strong as ever, and reassures our thesis that crypto index investing remains the ideal way for investors to gain exposure to this vibrant asset class as it continues gaining momentum towards mainstream adoption.

 

 

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