The Next Bull Market is Here, and Obvious | Spencer and Aleks, Blockchain Capital

Spencer and Aleks from Blockchain Capital argue the current crypto bear market is structurally different from prior cycles because it contains multiple simultaneous positive catalysts: the GENIUS Act and broader regulatory clarity, serious institutional entry while prices are down, and the mainstream growth of stablecoins and prediction markets as use cases that expanded even during the downturn. They place crypto at the equivalent of 2003 to 2004 on an internet S-curve analogy, with Solana launching in 2020 as the first scalable chain to gain real traction and L2s only becoming fast in 2024, making cheap and abundant block space a recent development analogous to the broadband shift of 2000 to 2005. Spencer estimates roughly 700 million crypto holders globally but only about 10 percent are on-chain active users, a gap he attributes to the immaturity of the consumer stack, which has only had usable primitives like embedded wallets and social recovery for about two to three years.

The most structurally significant shift they identify is where value accrues within crypto. In 2021, over 70 percent of fees went to infrastructure due to scarce block space, with Uniswap costing five to ten dollars per swap in 2019. In 2025, application layer fees surpassed infrastructure fees for the first time. Both Spencer and Aleks argue the fat protocol thesis was accurate until roughly 2022 to 2023 but ended when abundant block space replaced constrained block space, and they now describe the current meta as the fat app thesis, where applications capture value while protocols take a thin rake. Aleks notes that thin protocols on a massive global finance market could still be large in absolute terms even at a small take rate.

Blockchain Capital holds investments in all three major stablecoin issuers, Tether, Circle, and Paxos, made nearly a decade ago. The stablecoin market sits at approximately 300 billion dollars, and Spencer assigns over 90 percent confidence to it reaching two trillion dollars by 2030. He argues stablecoins are not primarily a payments product because dollars that move on-chain tend to stay on-chain, with a little over half of net new issuance immediately deployed as working capital into lending, exchanges, and perpetuals. Stablecoin velocity runs at approximately 120 times per year, meaning one billion dollars of net new issuance produces roughly 122 billion dollars of economic activity and approximately 19 million dollars of downstream on-chain protocol revenue annually, a figure that could fall to 10 million per billion if efficiency gains slow. Scaling to two trillion dollars implies multiplying that figure by 2000, producing what Spencer describes as massive downstream protocol revenue flowing primarily to Aave, Uniswap, Morpho, and derivatives venues.

On tokenized equities, Spencer argues the first wave of adoption mirrors stablecoins and will be driven by intense global demand for access, primarily benefiting international investors rather than Americans already well-served by existing products. He notes that the xStocks model from Backed, acquired by Kraken, offers full DeFi composability and is permissionless but offshore, and that xStocks holders own a debt instrument tied to a Cayman Islands SPV rather than an actual share, a structure insufficient to attract institutions holding billions in equities who require actual share ownership. Spencer predicts tokenized equities will exist as sidecars alongside the main public permissionless chain, with capital placed adjacent to it eventually having the opportunity to migrate into purely permissionless assets like ETH.

On the buy and burn model, Spencer credits MKR as the first to pioneer it and notes projects including Hyperliquid, Lighter, and Venice still use it. He argues the model persists because token holder rights remain legally unclear without the CLARITY Act passing and because it functions as a credibility signal in a market historically characterized by low-quality tokens. Aleks expects buy and burn will likely no longer be dominant in five years as the industry matures.

Spencer draws a structural analogy between crypto L1s and AI labs, noting both launched on white papers at multi-billion dollar valuations, that model benchmarks in AI parallel TPS benchmarks in crypto, and that hyperscaler distribution parallels exchange listings. He predicts an unwind of the alt lab thesis in AI would manifest as down-round structured financings, acqui-hires, and consolidation rather than a visible public price collapse, since private market valuations obscure the signals that token prices made transparent in crypto. Both Spencer and Aleks agree LLM weights are largely going to become a commodity but that the harness around them is not, and that for complex applications with significant feedback loops, value will accrue at the application layer. Spencer notes crypto investors are better prepared for the AI moat debate because crypto was always built on open source software that anyone could fork, meaning the industry never had software moats to begin with.

Blockchain Capital tokenized Fund Three on Ethereum in March 2017, capped at 10 million dollars despite demand Spencer described as potentially 100 million, drawing participants from roughly 80 countries. The fund has grown from that initial 10 million to approximately one billion dollars in assets. The permanent capital vehicle structure with no end-of-life means token holders exit by selling the token rather than redeeming from the fund, allowing Blockchain Capital to hold portfolio companies indefinitely, with Circle, Paxos, and Tether cited as investments that paid off in year ten under that structure.