The Market
After hitting a new yearly high last weekend, the crypto market has shown some signs of weakness as it anxiously digests news from the new administration regarding crypto policies.
If you’ve heard the story “The Boy Who Cried Wolf”, you know it’s becoming harder to excite the market with more positive rhetoric about crypto. We finally received Trump’s executive order on crypto on the third day of his presidency. The content of the EO is very positive for the industry, laying the groundwork for a pro-crypto environment that allows Americans to build on blockchain and own crypto. However, it lacks implementation details beyond establishing a working group. We believe the language is deliberately crafted: Trump acknowledges his intention to fulfill campaign promises to the crypto industry while deferring specifics to the working group.
Here are a few highlights from the EO:
Protect the Rights of American Citizens to Build on Blockchain and Own Crypto
This provision sets the foundation for American leadership in digital assets. The EO explicitly states that US citizens can lawfully develop and deploy on blockchain, transact without censorship, and maintain self-custody of crypto.
However, it remains unclear how DeFi projects will be regulated. The recent IRS DeFi broker tax rule has sparked debates about whether DeFi projects should be subject to the same regulation as CeFi broker -dealers. Additionally, the qualified custody requirement for RIAs could be impacted under this guideline, potentially giving crypto managers more custodial options.
Fair Banking Service for Crypto-Related Companies
The initiative is long overdue and highly anticipated. According to a recent AIMA survey, 75% of the crypto hedge funds reported difficulties securing banking services, not to mention crypto founders according to Choke Point 2.0. Offering fair banking services to crypto-related companies would enable them to shift from surviving to thriving.
Promotion of Stablecoin Over CBDCs
Trump has consistently opposed CBDC, viewing them as a significant threat to American financial sovereignty. Supporting stablecoins instead will open more doors for mainstream adoption, including fiat onboarding, payments and a wide range of opportunities to bring real-world assets yields on-chain.
Rescind SAB 121
While not part of the EO, the SEC’s announcement to rescind SAB 121 marks a clear reversal of Biden’s earlier veto. SAB 121 imposed prohibitively high capital requirements for banks and regulated broker-dealers to custody crypto. Its rescission provides CeFi entities with a real opportunity to participate in crypto growth and offers professional managers better options for crypto custody - an outcome that benefits both CeFi and crypto investors.
Establish the Working Group.
Although a working group defers implementation specifics, the EO specifies deliverables and a timeline. The work group must submit a comprehensive report to the President within 180 days, detailing regulatory and legislative proposals to advance the crypto policies. This milestone will be crucial as the crypto industry evaluates hope against reality.
The market hasn't been particularly excited about the EO, as BTC struggled to return to last week’s ATH of $108K. Still, BTC has managed to stay above $100K for the longest streak since it first broke the critical level. Meanwhile, the Altseason Index has hovered around 50, indicating that the broader crypto market hasn’t matched BTC’s excitement.
The much-coveted AI Agent sector hasn’t performed well either. According to Messari data, the top 10 AI Agent tokens tracked by Messari have retracted 83% on average from their ATH prices just one month ago.
Source: Messari, 1/25/25
Source: Messari, 1/25/25
Similarly, the memecoin sector has taken a hit. The top 10 Memecoins tracked by Messari have also averaged an 83% retracement. As Blockworks pointed out, while the rotation from DOGE to SHIB signaled the peak in the last cycle, predicting this cycle’s peak is more challenging. Currently, at least 10 Memes are trading above $1B in market cap, and memecoins have been tracking the BTC rally but rotated rapidly among themselves.
If past cycle patterns are any guide, this year has started more subdued compared to the 2021 bull market/ However, we could still be on track for a longer bull cycle resembling 2017. If the 2017 pattern holds–which coincides with Trump’s first term–we might see a peak by late April, aligning with the first 100 days of the new administration.
In the short term, the market remains cautiously optimistic about the regime change, giving the administration the benefit of doubt in steering the ship around. In the median term, the implementation of crypto-friendly policies will be key to make or break a bull market. As for the longer term, there are too many uncertainties to predict with confidence. However, global liquidity tends to follow a 5-6 year cycle, predicted to peak in the second half of 2025.
DeFi Update
If the crypto market cycle is an inevitable culmination of the liquidity cycle and the speculative nature of human behavior, one factor could change the dynamics of this cycle: the mainstream adoption of crypto as both a technology and an investment.
Crypto as an Investment
It’s worth noting that BTC ETFs still have significant tailwinds, with firms like Blackrock advocating for a 1-2% allocation to BTC in anyone’s portfolio. Additionally, CME’s plan to launch SOL and XRP futures this February paves the way for potential ETF launches on additional tokens. Several largecap multi-token ETFs are also in the pipeline, awaiting SEC approval. We see a strong probability of these approvals materializing this year.
Meanwhile, Coindesk Indices have launched CD20, CD80 and Memecoin Index to track a broader segment of the market. With Bullish offering perpetual futures trading on these indices, investors now have access to a wider part of the crypto market.
Crypto as a Technology
On the technology front, DEX trading volume has grown significantly, rising to 20% of CEX spot trading volume–double the level from just a year ago. Last week, we discussed the evolution of various AMM mechanisms, highlighting Jupiter’s advanced infrastructure of precise liquidity management. It’s no surprise that Jupiter recently announced its acquisition of a major stake of Moonshot, a popular mobile app often referred to as the “Robinhood for memecoin trading”. This move further expands Jupiter’s reach to mainstream retail traders. Jupiter itself also offers a mobile app, simplifying the trading experience for its DEX users.
Additionally, Wintermute announced the acquisition of $AERO tokens and max-lock it. Aerodrome’s innovative tokenomics, which allow token holders to earn trading fees and govern trading incentives, have made this move particularly appealing. We expect CeFi players to increasingly tap into DEXs for liquidity, and it's likely that DEXs will eventually play a larger role in crypto trading compared to CEXs.
Taking this a step further, with supportive policies rolling out for stablecoin and tokenization, DEXs may also play a significant role in providing liquidity for CeFi assets. The continuous improvement and adoption of DeFi is a testament to the mainstream adoption of blockchain as a technology. Once users experience the benefits of fast settlements and low transaction costs, it becomes harder to revert to outdated, less efficient systems.
Top 100 MCAP Winners
Onyxcoin (+196.95%)
GateToken (+25.61%)
KuCoin Token (+20.00%)
Lido (+12.56%)
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Top 100 MCAP Losers
Dogwifhat (-27.85%)
THORChain (-27.72%)
ai16z (-23.96%)
Fartcoin (-23.30%)
PENGU (-22.07%)
About Decentral Park
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About the Author
Kelly is Co-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.
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