The Market
It has been a good week for risky assets, especially crypto. As ~30,000 people gathered in Singapore for the Token 2049 conference, the market is finally warming up to the improved macro outlook. The S&P 500 is up ~1.51%, while BTC has surged ~8.66%, and altcoins have finally caught up, rising ~13.43% over the week.
What’s important to note is that the Fed acknowledges the economy is slowing but remains strong, while still deciding to cut the rate by 50bps. This has set a favorable backdrop for liquidity to flow from lower-yielding safe assets to riskier assets. More importantly, the Fed’s rate cut has given other countries room to follow suit without concern over their currency appreciating against the dollar. In fact, central banks around the world are now on an easing path as the US finally opens the liquidity gates.
On the political front, after Trump bought burgers for supporters using BTC at New York City’s famous Bitcoin pub, Harris finally warmed up to crypto with a public statement supporting AI and crypto. While details of her policy around crypto are yet to be revealed, this shift in tone is encouraging and reduces the crypto market’s dependence on the election results.
As BTC climbed above the $60K level, ETF flows have resumed over the past two weeks. Even more encouraging is the SEC’s approval of options on IBIT, BlackRock’s spot BTC ETF. Once listed, the availability of options could be very bullish for spot prices, as it allows institutions to trade with leverage on an asset with a finite supply. For bullish investors, call options could magnify buying power for the same capital that would otherwise be limited to spot purchases. For bearish investors, put options could help mitigate spot selling pressure.
With the favorable macro backdrop and the recovery of ETF flows, market sentiment is improving. According to Kaito, overall sentiment is climbing back to levels last seen in February 2024, which preceded the Q1 market top by about a month.
The funding rate has returned to positive territory at around 0.07bps since September 14, but it remains well below the high of 7bps seen during the Q1 market top. This suggests that BTC’s price still has room to potentially reclaim its all-time high in October.
DeFi Update
The Decentral Park team spent a week in Singapore attending Token2049 and Solana Breakpoint. There were so many side events and gatherings throughout the week that it was literally impossible to cover everything. Compared to last year, the spirit is definitely higher, although the optimism is more controlled due to macro uncertainty and the early-stage nature of many new developments. Here are a few takeaways:
DeFi is no longer the hottest topic, but real progress toward mainstream adoption is being made
It’s been almost seven years and two crypto cycles since the first DeFi protocol (AAVE) was built. Despite the boom and bust of token prices, DeFi projects are relentlessly building, with the endgame being to provide a better experience than CeFi with lower friction and no centralized counterparty risk. Major improvements have been made toward this goal:
Breakthroughs in product innovation have deepened liquidity in DeFi: The Concentrated Liquidity Market Maker (CLMM) model on DEXs has drastically improved capital efficiency for market makers. This has attracted more CeFi market makers to provide liquidity on DEXs, driving the DEX to CEX spot trading volume ratio past its ATH from the last cycle.
On the lending side, DeFi has not only brought real asset yield on chain, but also broadened native DeFi yield opportunities with sophisticated yield strategies curated by managers on Morpho vaults, innovative structured products from Pendle and restaking yield offered by EigenLayer.
Better UX and lower transaction fees have attracted migration from CeFi to DeFi: DEX aggregators like Jupiter have provided rich trading features such as limit orders, DCA, and VWAP while giving users access to the best liquidity across Solana DEXs. Execution often matches CEX levels but with much lower fees. Jupiter has also announced Jupiter Mobile app, enhancing the trading experience on mobile.
Innovative tokenomics design creates a win-win for both users and investors: Newer generation DEX such as Aerodrome have optimized the vote-escrow mechanism so that token holders earn revenue from the DEX while liquidity providers are compensated by token emissions governed by the holders. This encourages active participation in ecosystem growth. With this design, Aerodrome has dominated dominated the liquidity on Base, despite Uniswap’s dominance in overall DEX volume.
TON ecosystem is entering a rapid development phase
There were at least five major TON ecosystem events during Token2049, and each was oversubscribed. Thanks to its Telegram partnership and the rapid rise of TON’s price, the foundation's financial resources have grown. Durov’s arrest has not detered the development efforts in the ecosystem.
We’ve seen many mini-apps popping up on TON, trying to tap into the 900M user base, with some gaining impressive growth and revenue, such as Catizen, the mini-game platform that was just listed on Binance.
Although there is criticism regarding the similarity between mini-apps and concerns over inflated user stats, we view TON as entering its wild growth phase. Apps are competing for a bigger pie, and we’ve heard of dev teams collaborating to feature each other’s apps in their respective channels to access larger user pools. At this stage, we aren’t too concerned about the quality of the mini-apps as long as new users are being acquired and innovation continues.
Web3 gaming narrative might fade but that’s when real developments work starts
While TON mini-games have garnered attention due to rapid user growth, these games are not on par with the high-quality Web3 games built on larger platforms like Immutable and Ronin. The long-term goal is to launch high-quality Web3 games that rival Web2 AAA titles. This year, the focus has shifted from bringing Web2 games on-chain to integrating Web3 components into Web2 games. While asset ownership remains attractive to gamers, not every game component needs to be on-chain. Recent launches like Guild of Guardians, Lumiterra have shown encouraging user stats, and Sony launching Soneium chain reaffirms Web2 giants' commitment to this space. With the hype gone, real progress is being made—this is the best time for builders to stay and continue building.
It is still early for finding PMF in Crypto x AI but funding is pouring in
A significant amount of VC money is flowing into the AI space, both in Web3 and Web2. However, Crypto x AI feels more like a forced marriage at this stage, as we have yet to see mass adoption of crypto in AI development. Blockchain offers powerful tools for large-scale coordination through token incentives, which is why we see numerous crypto projects focusing on shared computing resources and open-source inference platforms. But several challenges remain, at least in the short term:
Quality of service: Having many GPUs does not necessarily guarantee sufficient computing power. Proper orchestration is needed to achieve optimal performance. Similarly, in the inference layer, high-quality models are scarce. Building these requires time, talent, and access to good data.
Accessibility: Using Crypto x AI platforms can be complex. For instance, deploying a computing project on Akash requires specifying GPU and memory needs in a specific code format and monitoring progress to ensure that enough payment supports the calculation. While some computing platforms offer vertical integration with pre-built models, this limits the types of tasks they can perform.
Demand: We are still in the early stages of mainstream AI adoption, and much foundational work remains on the model and hardware side. Crypto is playing an important role in bootstrapping AI infrastructure and giving AI startups easier access to funding. However, it will take time for AI to experience its "zero-to-one" moment before crypto can accelerate its growth from "one to many."
Top 100 MCAP Winners
Bittensor (+90.21%)
Immutable (+40.45%)
SUI (+39.03%)
SEI (+34.37%)
Aptos (+34.33%)
Top 100 MCAP Losers
UNUS SED LEO (-5.32%)
Kaspa (-3.41%)
Monero (-2.91%)
XRP (-0.33%)
About Decentral Park
Decentral Park is a founder-led cryptoasset investment firm comprised of team members who’ve honed their skills as technology entrepreneurs, operators, venture capitalists, researchers, and advisors.
Decentral Park applies a principled digital asset investment strategy and partners with founders to enable their token-based decentralized networks to scale globally.
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.
About the Author
Kelly is Portfolio Manager and Head of Research at Decentral Park Capital. Investing across sectors with a thesis driven, deep research approach.
Prior to this, Kelly has led research and product efforts at CoinDesk Indices and Fidelity Digital Asset Management. Kelly has been a TradFi investor for 15 years before joining the crypto space.
You can follow Kelly on Twitter and LinkedIn for more frequent analysis and updates.