Inflection Point Cross-Post: Crypto Is Forcing Traditional Finance To Upgrade

Matt Hogan reported conducting more than eight sales calls in a single day and speaking with over 40 advisors, the most since he joined Bitwise. Unusually for a market pullback, advisor interest centered on stablecoins and tokenization rather than Bitcoin, and advisors were asking whether the bottom was in rather than expressing fear. The two approaches advisors were most actively considering were buying an array of tokens in the stablecoin and tokenization space or investing in crypto-linked companies, with Figure and Circle resonating most strongly. Hogan cited Figure as an example of blockchain reducing the cost of issuing home equity loans from roughly three thousand dollars to a couple hundred dollars, and argued that the application and company layer of crypto may matter more going forward than the infrastructure layer.

The stablecoin versus tokenized deposit distinction carries significant structural consequences. A stablecoin runs on 100 percent reserves backed by short-term treasuries, while a tokenized deposit runs on the fractional reserve system and carries the credit risk of the issuing bank. Tokenized deposits are not fungible with each other, meaning a JP Morgan tokenized deposit differs from a small bank tokenized deposit, whereas stablecoins from a single issuer like USDC or USDT are interoperable across the broader system. Hogan argued that a run on tokenized deposits could occur at crypto speed and produce an SVB-style event, and that banks favor tokenized deposits because fractional reserve banking gives them the ability to create money, a superpower they are unwilling to surrender. A consortium of the largest American banks announced creation of their own tokenized deposit network, assumed to use private rather than public blockchain rails, attempting to solve the singleness of money problem by collectively underwriting the 20 largest institutions. Senator Cynthia Lumis stated that Jamie Dimon either did not read the updated stablecoin bill or was intentionally misrepresenting it. The Genius Act passed but a rulemaking process is expected to run until the end of this year or the beginning of next year.

The CFTC allowed Kalshi to list Bitcoin perpetuals in the US and explicitly characterized the instrument as a futures contract rather than a swap, a distinction with major implications for investor access and permissible leverage. Swaps are bilateral instruments suited for institutions negotiated counterparty by counterparty, while futures are more accessible to retail investors. Under US law futures historically required a set expiry date, making perpetual derivatives fit no existing regulatory category, and some issuers including Coinbase had structured perps with expirations set five years in the future as a compliance workaround. The CFTC noted that the funding leg of a perp resembles a swap because parties exchange payments over time based on a reference price without a specific termination date, but requiring an ISDA agreement for perps was described as something that would completely destroy the perps market given that retail is the primary user base. Perps also unify liquidity, whereas dated futures fragment it across front month, two-month, and three-month contracts, creating liquidity risk for longer-dated positions.

The CFTC created a narrow pathway allowing Coinbase, as a CFTC-regulated futures commission merchant, to intermediate certain Deribit perpetuals for US clients by treating those contracts as foreign futures under Regulation 30 of the Commodity Exchange Act. This was described as the first time US persons can interact with offshore perpetuals without the activity being characterized as participation in unregistered swaps. Deribit is regulated in Dubai and complies with AML and KYC requirements, which made it easier for the CFTC to accommodate than a decentralized protocol. The same FCM foreign futures pathway under Regulation 30 was identified as the best potential option for Hyperliquid to extend into the US market, though extending it to a decentralized entity would likely require a new CFTC rule rather than an existing off-menu option.

Strategy sold 32 Bitcoin worth approximately 2.5 million dollars, and Bitcoin moved from approximately 73,000 dollars to 71,000 dollars in direct response. Bitcoin subsequently dropped from the low 70s to below 60,000 dollars, though participants attributed the larger move to a NASDAQ decline of 4 percent, a positive jobs surprise increasing the credibility of a rate hike scenario, the SpaceX IPO drawing capital from an overlapping holder base, and Blackstone gating its leading private credit fund. If Strategy begins regularly selling Bitcoin, the market may reframe it from a leveraged accumulation vehicle to a Bitcoin risk management and hedge fund, changing the investor underwriting calculus. Bitcoin fell 17 percent in the week under discussion, with combined ETF and Treasury flows showing significantly more selling than buying, and participants predicted Bitcoin and broader markets will likely struggle at current price levels for at least a few more months.

Mark predicted the Federal Reserve will likely need to raise rates by end of 2025 or Q1 2026, citing five consecutive months of rising PCE and anticipated additional inflation from tariffs and oil prices not yet fully passed through. The Strait of Hormuz closure was described as already the largest supply shock in history, with six to eight weeks of transit time meaning oil supply disruption would persist even if the strait reopened immediately. Iran has reportedly discussed Hormuz insurance being paid in Bitcoin.