Risk assets split hard this week, with crypto taking the worst of it. US strikes near the Strait of Hormuz on May 25-26 broke the ceasefire and sent BTC below $73,000, with ETH under $2,000 for the first time since late March and the Fear and Greed Index at 22. Underneath the headlines, spot bitcoin ETFs logged a record ninth straight day of outflows, about $2.85 billion in all and the longest streak since the funds launched in January 2024.

The week split cleanly: AI hardware led while crypto fell across the board. Dell topped the basket at +25.4% on its AI-server earnings, and Micron rose 21.2% as it and SK Hynix each crossed a $1 trillion market cap, though Nvidia slipped 2.4%. Fintech was mixed, with Robinhood up 11.8% on its AI-agent trading launch and SoFi 8.4% on the SoFiUSD stablecoin, while Coinbase and Circle fell about 5.8% alongside the tokens. The major coins were uniformly lower: BTC -5.2%, ETH -5.8%, SOL -6.0%, BNB -3.0%, and XRP -4.3%, the last at its lowest since February, with UNI (-15.4%) the worst in the set. HYPE was the exception at +4.9%, holding a gain after a mid-week record near $64.63. The basket median fell 2.4% even as the S&P 500 rose 1.6% and the Nasdaq-100 2.9%.

Today We Highlight:

• AI hardware ripped: Dell crushed earnings on AI servers, while Micron and SK Hynix crossed $1T market caps.

• HYPE hit a record on SpaceX pre-IPO perps as private-market access moved on-chain.

• SoFi launched a bank-issued stablecoin and Robinhood opened equities trading to AI agents.

• ETH slid below $2,000 as a value-capture debate flared over David Hoffman’s exit and a leaner Ethereum Foundation.

1. Dell beats earnings on AI servers as Micron and SK Hynix cross $1 trillion

Dell reported fiscal Q1 results after the close on May 28 that reset the AI-hardware bar. Revenue of $43.84 billion grew 88% year over year, well above the roughly $35.4 billion consensus, and non-GAAP EPS of $4.86 nearly doubled the $2.94 expected. AI-server revenue rose 757% to $16.1 billion, with $24.4 billion of new AI orders booked in the quarter and a backlog of $51.3 billion. Management raised full-year revenue guidance to about $167 billion, up from a prior outlook near $140 billion, including roughly $60 billion from AI servers. The stock surged the most in two years and is up over 150% year to date. Dell separately won a $9.7 billion Pentagon software contract on Wednesday.

The memory side of the trade hit its own milestone. Micron and SK Hynix both crossed a $1 trillion market cap on May 27, joining Samsung, leaving the three memory makers collectively worth more than $3 trillion. The driver is a severe shortage of high-bandwidth memory and DRAM: contract prices rose roughly 90% to 95% quarter over quarter in Q1 per TrendForce, with further increases projected. SK Hynix shares have climbed more than 900% over the past year on its HBM lead. The proximate catalyst for the milestone day was a bullish UBS note, but the substance is the pricing and the sold-out capacity, not the rating change.

The strength across AI hardware traces to a single source: hyperscaler capital spending. Microsoft, Alphabet, Amazon, and Meta are on track to spend roughly $700 billion on data centers and chips in 2026, up more than 70% from 2025, and three of the four raised those budgets at their most recent earnings. That demand is why vendors like Dell and the memory makers keep beating estimates: order backlogs give forward revenue visibility, and supply stays tight enough that suppliers hold real pricing power, as the DRAM and HBM increases above show. Analysts have also repeatedly under-modeled the cycle, with Microsoft guiding 2026 capex to $190 billion against a consensus near $152 billion. The open question is durability: bulls argue the revenue growth justifies the outlay, while skeptics cite falling free cash flow, circular financing among AI firms, and valuations that leave little room for a slowdown.

2. HYPE and the race to put private markets on-chain

HYPE was the week’s most-watched crypto-native name, setting an all-time high of $64.63 on May 26 before sliding with the market to around $57 by May 28 and steadying into Friday, leaving it up about 5% on the week and outperforming the majors as bitcoin fell. The bid rested on growing institutional access. The first US spot HYPE ETFs, from Bitwise and 21Shares, launched in mid-May and drew early inflows. Around the same time, Coinbase listed HYPE and signed a USDC arrangement that lets Hyperliquid capture most of the yield on the roughly $6.8 billion of USDC held on the platform, a new recurring revenue stream. And on May 28, a Grayscale report flagged Hyperliquid as a breakout success, projecting around $800 million in annual revenue.

The third leg is Hyperliquid’s 24/7 commodity markets. Its permissionless HIP-3 perps have made it a round-the-clock venue for oil and metals, and during Iran flare-ups it has repeatedly captured the hedging flows that arrive when oil moves while traditional futures are closed. The volumes are real: single-day oil volume has topped $1 billion during peak volatility, and as recently as mid-May the WTI and Brent contracts carried combined open interest above $480 million, with oil at times the platform’s most active market after bitcoin. Because that activity generates fees that accrue back to the token, traders increasingly read the platform’s macro volume as a fundamentals signal for HYPE, and the same US-Iran ceasefire-extension uncertainty that pressured bitcoin this week coincided with HYPE outperforming the majors.

3. SoFi launches a bank-issued stablecoin: SoFiD

SoFi was the week’s standout fintech, up about 12% on Friday and roughly 8% on the week on the launch of SoFiUSD (ticker SoFiD), a move that lifted peers like Robinhood and Upstart and built on a record Q1 in which SoFi re-entered crypto trading. The token is a fully reserved digital dollar held against cash at SoFi Bank, built on BitGo and live on Ethereum and Solana; its roughly 15 million members can buy, sell, hold, convert, and redeem it 1:1 in the app, making SoFi the first US national bank to put its own stablecoin inside a consumer banking app.

The launch is a direct product of the GENIUS Act, the July 2025 law that lets bank units issue payment stablecoins under OCC supervision with full 1:1 reserves. Because it bans paying interest on the stablecoin itself, SoFi splits the products: SoFiUSD is a non-yield payment token that is not a deposit and not FDIC-insured, while the planned tokenized deposits are the interest-bearing, insured layer.

4. ETH's value-capture debate resurfaces as the Foundation slims down

ETH’s drop below $2,000 coincided with a resurfaced question: whether ETH the asset captures the success of Ethereum the network. Bankless co-founder David Hoffman, a longtime advocate, revealed he had sold his entire ETH after nearly nine years, teasing it May 21 and explaining it May 26: “the ETH is money thesis didn’t fail, it played out.” He stays bullish on the network but doubts ETH will be structurally rerated, since Ethereum has deliberately pushed value outward to layer-2s, apps, and stablecoins rather than capturing it at the base layer. The price reaction was muted, but the post drew over a million views and reopened the debate.

The debate overlaps with turnover at the Ethereum Foundation, where at least eight senior contributors have left or announced exits in 2026, five in May, hitting core protocol research hardest. In a May 24 post he stressed was his personal view, Vitalik Buterin defended the restructuring, describing a smaller EF that pursues “longevity over breadth,” sells less ETH, and narrows its mandate to core properties he labels CROPS: censorship and capture resistance, openness, privacy, and security. He noted the EF holds only about 0.16% of all ETH and that 90% of his net worth sits in it. Selling less eases a supply complaint but does not settle the value-capture question, and some read his neutral-infrastructure framing as confirming the gap Hoffman flagged, even as plenty of analysts still see upside from upgrades and ETF demand.

Charts of the Week

Courtesy of Artemis Insights

Thanks for reading! Stay ahead this week by using the Artemis Terminal to pull the underlying data on any of the stories above (CLARITY Act vote tracker, COIN Q1 segment revenue, USDC supply on Hyperliquid) or pull live numbers straight into your models with =ART() in Excel.

Disclaimer: This newsletter is produced by Artemis for informational and educational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security or digital asset, or an offer to provide advisory services. Artemis and its employees may hold positions in assets discussed. Figures are accurate to the best of our knowledge as of publication; markets move quickly.

This week we continued to see high dispersion in markets as indices were down on the week (SPY and QQQ -0.73%), and so were digital asset leaders like BTC (-4.33%) and ETH (-6.57%). Through this down market there have been some select winners. Hyperliquid, which we dive into below, hit new all time highs while privacy/AI tokens Zcash (ZEC), Venice (VVV) and Near (NEAR) were each up ~20%. Key macro drivers in markets this past week include:

• Kevin Warsh being sworn in as the new Federal Reserve Chair replacing Jerome Powell

• Oil continuing to trade at ~$100 as the US and Iran war continues

• US 30Y bond yields hit their highest levels since 2007

Today We Highlight:

• Hyperliquid: HYPE crosses $60, prints new ATH. We dig into why.

• Artemis Research: Crypto Factor Model Analysis: May 2026 Update

• Tokenized Stocks: The regulatory landscape is changing (too) quickly

1. Hyperliquid Hits New ATH

Hyperliquid took the spotlight once again this week as it printed fresh all time highs, the only major crypto asset to do so in many months. HYPE peaked at about $62 a token on Thursday.

A few drivers could be responsible for the dramatic 50% rise over the past month.

The real move started last Thursday, May 14th, with the news that Coinbase and Circle were aligning themselves strongly with the Hyperliquid ecosystem. The alignment manifests itself in a few steps:

• Firstly, Coinbase acquired the USDH brand assets from Native Markets. USDH was the original aligned quote asset on Hyperliquid, having won a (slightly controversial) bid last year beating the likes of PayPal, Paxos, Ethena and more. Having only reached ~80m in supply, USDH will be fully sunset in the coming months.

• Secondly, Coinbase and Circle will jointly operate Hyperliquid’s first V2 Aligned Quote Asset (AQAv2): USDC. USDC already has ~5B in supply on Hyperliquid, but by becoming an AQA, USDC becomes the default quote asset on Hyperliquid markets. More importantly for HYPE investors, any AQAv2 asset must share 90% of cost-adjusted reserve yield revenue on their Hyperliquid supply with the protocol.

This is really important because it could add an incremental ~$150M in revenue for the protocol, diversifying Hyperliquid’s revenue profile away from pure trading revenues. It also aligns the interests of 2 of the world’s largest digital asset companies (who are also the most influential in Washington), with Hyperliquid’s.

On the institutional side, last week both 21Shares and Bitwise launched HYPE ETFs, giving institutions easier exposure to the asset. Despite a relatively quiet first week, trading volume exploded this week, reaching nearly 100M in volume on Thursday.

Further showing institutional interest and growth in HYPE, HYPE DATs have been buying HYPE and now own nearly 10% of all HYPE supply, more than any other major asset. Hyperliquid Strategies (PURR) announced at earnings that they have another $100m to deploy, plus a $1B Equity Line of Credit facility. Expect this share to continue rising.

Hyperliquid fundamental metrics continue to strengthen across the board as HIP-3 markets reached new weekly highs at 2.6B in open interest across RWA perp markets. HIP-4 launched outcome markets a couple of weeks ago to more modest growth. Equity perpetuals, pre-IPO markets and prediction markets are all in the very early innings, and Hyperliquid is well positioned to capitalize on that momentum.

The combination of institutional access via ETFs and publicly listed digital asset treasury companies like PURR and HYPD alongside strengthening fundamentals in the form of revenue diversification and product adoption have driven HYPE to new all time highs. In spite of heavy competition, Hyperliquid has continued to impress and grow. We continue to monitor closely as the US regulatory landscape and markets evolve.

2. Artemis Crypto Factor Model Analysis: May 2026 Update

Executive Summary

• April marked a sharp reversal from the Q1 risk-off regime. The crypto market factor rallied +17.2%, led by BTC (+19.2%) and ETH (+19.5%), as the broader macro backdrop shifted toward optimism on Middle East conflict resolution and a powerful AI-driven rally in equities.

• Long-short factors posted muted but mostly positive returns as expected during a broad recovery. Value (+1.7%), Momentum (+0.9%), and Growth (+1.1%) all generated positive alpha, though the short legs were squeezed as previously oversold tokens snapped back. Fundamentals 1 was the only negative factor (-3.7%), driven primarily by PENDLE‘s sharp rally against its short positioning.

• Cross-factor themes included the DAO governance narrative (DEXE as a top contributor in both SMB and Momentum for the second consecutive month), explosive privacy coin demand (ZEC rallying 50%+ on SEC clearance and Grayscale’s first-ever privacy coin ETF filing), and a DeFi yield recovery led by PENDLE‘s sPENDLE tokenomics overhaul and Aerodrome‘s cross-chain expansion plans.

• Value (+13.3% YTD) and Stablecoins 1 (+2.1% YTD) remain the only factors positive for the year, while the market factor sits at -14.2% and BTC at -10.5%. Since inception, Momentum (547.7% cumulative) and Fundamentals 1 (519.3%) continue to far outpace passive crypto exposure, demonstrating the framework’s compounding advantage over full cycles.

Read the full piece by Maggie on our Substack

3. Tokenized Stocks

Tokenized equities (on-chain versions of public company stocks like Apple, Nvidia, Tesla, or ETFs) are one of the fastest-growing segments inside the broader Real-World Assets (RWA) boom, but they remain relatively small compared to tokenized Treasuries.

Current Market Snapshot

• Tokenized equities market cap: Roughly $1–1.6B (up sharply from ~$960M in March 2026 and ~$424M mid-2025).

• Dominant player: Ondo Global Markets leads with the majority of the market (~60% share), offering 100–260+ tokenized U.S. stocks and ETFs. Other activity on Ethereum, Solana, and BNB Chain.

• Broader RWA context: Total tokenized RWAs hit a record ~$33–34B (up 1,600% in two years), with equities still a smaller slice but accelerating.

These tokens typically offer price exposure, 24/7 trading, fractional ownership, and DeFi composability (collateral, lending, perps), but most are synthetic wrappers rather than native issuer-issued securities.

• Early this week (May 18–19): Bloomberg reported the SEC (under Chair Paul Atkins) was preparing to release an “innovation exemption” for tokenized stocks as soon as this week.

  • This would have created a lighter-touch framework allowing crypto-native platforms and DeFi protocols to trade third-party tokenized versions of U.S. public equities without issuer consent, enabling 24/7 trading under guardrails (disclosures, exposure limits, etc.).

• Today (May 22): The SEC delayed/postponed the innovation exemption amid significant pushback from traditional Wall Street players (stock exchanges, banks, Citadel, SIFMA, etc.).

  • Concerns raised: investor protections, handling of corporate actions (dividends, voting rights), liquidity fragmentation (parallel markets for the same stock), price discovery issues, and risks around synthetic tokens.

  • No new timeline has been given. Commissioner Hester Peirce has emphasized narrower, fully backed representations tied to federal securities laws.

ONDO and CFG were up double digit percents on the initial news before retracing nearly all their gains after the postponement.

Charts of the Week

• NVDA Q1 Earnings: Nvidia beat guided revenue expectations, reporting $81.6B in quarterly revenue, primarily from data centers.

• Ventuals Daily Open Interest passes $20M: As appetite for pre-IPO stock exposure surges, Ventuals has captured much of that growth, reaching $20M in open interest this week.

Thanks for reading! Stay ahead this week by using the Artemis Terminal to pull the underlying data on any of the stories above (CLARITY Act vote tracker, COIN Q1 segment revenue, USDC supply on Hyperliquid) or pull live numbers straight into your models with =ART() in Excel.

Disclaimer: This newsletter is produced by Artemis for informational and educational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security or digital asset, or an offer to provide advisory services. Artemis and its employees may hold positions in assets discussed. Figures are accurate to the best of our knowledge as of publication; markets move quickly.

Market Sentiment: risk-off. The week kicked off on the back foot with a hot April CPI print on May 12 (3.8% YoY, hottest since May 2023) and a record $635M single-day BTC ETF outflow on May 13. Kevin Warsh was confirmed as the next Fed Chair (May 13) and the Senate Banking Committee advanced the CLARITY Act 15-9 (May 14). Bitwise’s spot Hyperliquid ETF (BHYP) began trading on NYSE on May 15.

Across the digital finance basket, the week averaged -2.67% (median -2.66%). Green prints were sparse: BNB +3.57%, HYPE +2.35% (riding the BHYP tailwind), XRP +1.12% (CLARITY read-through), CRCL +0.29%, and HOOD +0.14%. The majors all closed lower: BTC -1.40%, ETH -3.61%, SOL -2.95%. The heaviest hits landed in DeFi: SKY -13.14%, POL -10.70% as Polymarket's chain-migration overhang kept pressing, and LDO -10.33% giving back the prior-week buyback rally. On the equity side, MSTR -5.42% led the decliners after a $12.54B Q1 GAAP loss and the smallest weekly BTC buy of 2026. Traditional indices weren't immune: SPY +0.21%, QQQ -0.32%, DIA -0.15%. Even GLD slipped -3.80%, taking some shine off the safe-haven trade.

Today We Highlight

• CLARITY Act clears Senate Banking

• Artemis Research Spotlight:

• Bullish buys Equiniti for $4.2B

• Coinbase becomes Hyperliquid's official USDC deployer

1. CLARITY Act clears Senate Banking

The Senate Banking Committee advanced the Digital Asset Market Clarity Act 15-9 on May 14. The vote was largely along party lines, with Democratic Senators Ruben Gallego (AZ) and Angela Alsobrooks (MD) joining all Republicans on the panel. Sen. Elizabeth Warren called it “a bill written by the crypto industry for the crypto industry,” but the bipartisan crossover is the structurally important read: it's the first time material Democratic support has materialized for a market-structure bill in committee.

What the bill does: classifies digital assets as securities or commodities and establishes formal SEC-CFTC jurisdiction lines. The SEC retains issuance and primary-market oversight; the CFTC takes secondary-market activity in non-security digital commodities. The framework operationalizes the SEC-CFTC MOU signed by Atkins and Selig on March 11 and the joint interpretation issued March 17.

Where it goes next: the bill heads to the Senate floor where it will be merged with the Agriculture Committee version. The 60-vote threshold means Republicans need ~5-7 more Democrats than the committee delivered. The legislative window is narrow: the August recess and the 2026 midterms compress the calendar.

Market reaction: XRP led on the print, briefly clearing $1.47 resistance before settling near $1.43. SOL and AAVE held bids better than ETH on the framing that both clear as commodities under the bill, removing a long-tail regulatory overhang. The BTC reaction was muted (BTC is already treated as a commodity), but the broader read-through is that altcoin beta finally has a structural rationale that isn't ETF approval. If the Senate gets to a floor vote by July, we'd expect the largest re-rate to land in tokens with active SEC litigation history.

2. Artemis Research Spotlight:

Artemis Research Spotlight: Why Coinbase wins in an AI-native finance world by Alex Weseley, Jon Ma, and Andrew Van Aken.

Artemis’s bull case argues Coinbase is mispriced as a cyclical crypto brokerage when it’s actually building the settlement, distribution, and commerce layer for AI-native finance. Target: $300B market cap by 2031 (~6x current, ~35% CAGR).

The thesis rests on two generational tailwinds the market is underweighting:

Stablecoins

The USDC distribution agreement with Circle is structurally a Coinbase asset, not Circle’s. Coinbase’s share of Circle’s reserve revenue has climbed from 32% in 2022 to ~50% in each of the last two years, earning ~100% yield on USDC held in its products plus a share of off-platform balances via the Payment Base waterfall (Q4’25 average USDC in Coinbase products: $17.8B, an all-time high). Critically, the contract is a “continuation lock”: it auto-renews if Product/Company/Reseller thresholds are met, and per filings cannot be terminated if they are. With Bessent forecasting $3T stablecoin supply by 2030 (Bain says $3.8T), this is durable infrastructure revenue, not at-risk consumer product.

Agentic commerce

The onchain data is decisive: 92.8% of agentic payment volume runs on Base, 99.8% settles in USDC, and 99.8% transits x402 (Coinbase-pioneered, now managed by Linux Foundation). Since October 2025, x402 has processed 180M+ payments, $47.5M of agent spend, across 5K+ merchants. Card rails can’t economically handle sub-cent API calls; stablecoins on L2s can. McKinsey calls $3-5T global agentic commerce by 2030; Gartner says $15T B2B via agents by 2028.

Bull-case math: assuming $5T agentic commerce by 2030 with ~20% settling in stablecoins, Coinbase captures ~$5B in agentic revenue across three lines: USDC float (~$4B from $200B × 4% × 50% share), CDP/AgentKit/Agentic.Market ($750M), and Base sequencer fees ($250M).

Link to the full article here.

3. Bullish buys Equiniti for $4.2B

Bullish (BLSH) announced on May 5 that it has agreed to acquire transfer agent Equiniti from private-equity firm Siris Capital for $4.2B. The consideration is $1.85B of assumed debt and $2.35B of Bullish stock, priced at $38.48/share based on the 30-day VWAP through May 4. Close is expected in early 2027 pending regulatory approval.

What Equiniti brings: nearly 3,000 issuer clients, 15,000 corporate clients, 20M shareholders, and ~$500B in annual payments processed. Pro-forma 2026E adjusted revenue is ~$1.3B and adjusted EBITDA-less-capex is over $500M. Bullish guides 6-8% annual revenue growth from 2027E-2029E with $100M+ of incremental EBITDA-less-capex per year.

Strategic read: the deal positions Bullish as the first crypto-native operator with a regulated transfer agent attached. In a market where the SEC has been quiet on tokenized public equities, owning the registry layer means Bullish can offer real-time cap tables, automated corporate actions, and tokenized share liquidity, particularly for non-U.S. investors, without renting that infrastructure from incumbents. It's an explicit bet that tokenization moves through the back-office stack before it shows up in front-end products.

Context vs. Robinhood: HOOD has gone the front-end route (tokenized SpaceX and OpenAI exposure offered to EU investors). Bullish is buying the plumbing. Both bets converge on the same end state: if the SEC ever blesses tokenized public equities in the U.S., the firm that owns the transfer-agent rail captures economics from both sides of the trade.

4. Coinbase becomes Hyperliquid's official USDC deployer

On May 14, Native Markets transferred the USDH brand assets to Coinbase, which became the official USDC treasury deployer on Hyperliquid. Circle takes the technical role for minting, redemption, and cross-chain transfers, and disclosed it will stake 500,000 HYPE (adding to a position established in September 2025) as it moves toward becoming a Hyperliquid validator. USDH remains redeemable for USDC or fiat during the migration period before being phased out.

Why this matters: USDC supply on Hyperliquid has roughly doubled YoY to ~$5B. By formalizing Coinbase as the deployer and Circle as the rails operator, Hyperliquid effectively converts its largest stablecoin float into a fee-and-treasury relationship with the two most regulated U.S. crypto entities. It also removes a clear regulatory tail risk for HYPE: a native stablecoin issued by a no-KYC perps exchange was always an audit-and-compliance question; an offshore-issued USDC stack with Coinbase managing treasury isn't.

Read on HYPE: the move is incremental cash flow to the Assistance Fund (the fee economics flow through buyback-and-burn) and a step toward institutional distribution. Combined with the Friday BHYP launch (the first U.S. spot HYPE ETF with staking), the chain now has a regulated wrapper on the equity side, a regulated stablecoin on the rails side, and the most efficient perps order book in the market.

The bull case from the April Hyperliquid Strategies ($PURR) deep dive looks materially closer to base case after this week.

Charts of the Week

Other Notable News

• Coinbase (COIN) reported Q1’26 on May 7: revenue $1.41B (vs. $1.52B est.), GAAP EPS -$1.49 on a $482M crypto markdown, adjusted EBITDA $303.3M. Transaction revenue -23% QoQ to $756M, subscription $583.5M, derivatives volume $4.2B (+169% YoY), all-time high 8.6% global crypto trading market share.

• Strategy (MSTR) reported Q1’26 on May 5: revenue $124.3M (+11.9% YoY), net loss of $12.54B driven by BTC fair-value markdown, BTC Yield 9.4% YTD, holdings 818,334. The May 5-11 weekly buy was just 535 BTC for $43M at $80,340/coin, the smallest weekly purchase of 2026. CEO Phong Le and Saylor for the first time disclosed conditions under which they would sell BTC (dividend funding and tax management when sales beat new equity issuance).

• Circle (CRCL) reported Q1’26 on May 11: revenue $694M (+20% YoY), adjusted EBITDA $151M (+24%), net income $55M (-15% YoY), USDC supply $77B, onchain transaction volume +263% YoY to $21.5T. Closed the Arc token presale ($222M raised at $3B FDV, a16z crypto leading). CRCL +16% on the print.

• Western Union launched USDPT on Solana May 4, issued by Anchorage Digital Bank. First MSB-distributed regulated stablecoin built for remittance corridors; “Stable by Western Union” consumer product slated for 40+ countries later in 2026.

• Bitwise BHYP began NYSE trading May 15. The first U.S. spot Hyperliquid ETF, and the first U.S. crypto ETF with in-house staking. 0.34% sponsor fee, waived to 0% for the first month on the first $500M of AUM.

Thanks for reading! Stay ahead this week by using the Artemis Terminal to pull the underlying data on any of the stories above (CLARITY Act vote tracker, COIN Q1 segment revenue, USDC supply on Hyperliquid) or pull live numbers straight into your models with =ART() in Excel.

Disclaimer: This newsletter is produced by Artemis for informational and educational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security or digital asset, or an offer to provide advisory services. Artemis and its employees may hold positions in assets discussed. Figures are accurate to the best of our knowledge as of publication; markets move quickly.

Executive Summary

• April marked a sharp reversal from the Q1 risk-off regime. The crypto market factor rallied +17.2%, led by BTC (+19.2%) and ETH (+19.5%), as the broader macro backdrop shifted toward optimism on Middle East conflict resolution and a powerful AI-driven rally in equities.

• Long-short factors posted muted but mostly positive returns as expected during a broad recovery. Value (+1.7%), Momentum (+0.9%), and Growth (+1.1%) all generated positive alpha, though the short legs were squeezed as previously oversold tokens snapped back. Fundamentals 1 was the only negative factor (-3.7%), driven primarily by PENDLE‘s sharp rally against its short positioning.

• Cross-factor themes included the DAO governance narrative (DEXE as a top contributor in both SMB and Momentum for the second consecutive month), explosive privacy coin demand (ZEC rallying 50%+ on SEC clearance and Grayscale’s first-ever privacy coin ETF filing), and a DeFi yield recovery led by PENDLE‘s sPENDLE tokenomics overhaul and Aerodrome‘s cross-chain expansion plans.

• Value (+13.3% YTD) and Stablecoins 1 (+2.1% YTD) remain the only factors positive for the year, while the market factor sits at -14.2% and BTC at -10.5%. Since inception, Momentum (547.7% cumulative) and Fundamentals 1 (519.3%) continue to far outpace passive crypto exposure, demonstrating the framework’s compounding advantage over full cycles.

Market Context

April marked a sharp reversal from March’s risk-off environment. It was the best month for markets in nearly 6 years, as investors priced in positive steps towards a resolution of conflict in the Middle East. US equities rallied hard with the S&P 500 rising about 10.4%, its best month since November 2020 and hitting new all-time highs. AI and tech dominated this rally (Communication Services +18.5% and Technology +17.5%) as investors renewed confidence in AI, cloud, infrastructure, and semiconductors. Emerging markets also gained (MSCI Emerging Markets +14.7%) powered by AI semiconductor supply chain gains in Taiwan (+26.2%) and South Korea (+38.2%). While tensions between the US and Iran continue to dominate headlines, markets are looking through the turmoil and are largely optimistic a resolution will take place.

For a more in depth look into how each of the strategies were built, see our Crypto Factor Model Analysis, Fundamentals 1 strategy, and Stablecoins 1 strategy. For a complementary guide on reading through this report, see our factors guide.

Performance Summary

In April, driven by a shift away from the risk-off regime that defined Q1 2026, crypto market recovery was broad but uneven across strategies. The market-cap-weighted index benefited the most from the rally as large-cap assets like BTC (+19.2%) and ETH (+19.5%) led the charge. SMB also posted a strong +9.2% as small caps participated meaningfully on the risk-on reversal. Stablecoins 1 gained +5.7%, continuing its role as a more defensive, positive-carry strategy that tracks capital flows across chains.

However, the long-short factors that have been the best performers over the prior months, Value (+1.7%), Momentum (+0.9%), and Growth (+1.1%), had relatively muted returns. This is expected as in a broad market rally, the short legs of long-short factors get squeezed as the tokens snap back aggressively, offsetting gains in the long leg. Fundamentals 1 was the only factor with a negative return in April (-3.7%), as its short leg experienced severe reversals from tokens like PENDLE and RAY that rallied sharply.

Overall, the factor framework behaved as designed. It limited the downside in the February to March drawdown and underperformed the market in a sharp recovery month. Since inception, Momentum (51.1% annualized) and Fundamental 1 (46.8% annualized) remain far ahead of the market factor (15.1% annualized). Value continues to stand out as the best YTD performer at 13.3%, having navigated both the drawdown and recovery with minimal volatility.

Market Risk Factor

Construction

Long-only portfolio of the top 10 assets by market cap, market cap-weighted, rebalanced weekly. Captures broad crypto market exposure similar to a crypto index.

Current Holdings

BTC (73.2%), ETH (13.1%), XRP (4.0%), BNB (3.9%), SOL (2.3%), TRX (1.5%), DOGE (0.8%), HYPE (0.5%), ADA (0.4%), BCH (0.4%)

Performance Metrics

The market factor’s +17.2% April return was a relief after months of decline. BTC surged +19.2% as institutional demand returned and a broader risk-on rotation rallied both crypto and equities mid-April. Despite the strong month, the portfolio remains well below its all-time high, with a max drawdown since inception of -66.5% reflecting the severity of the 2022 bear market and the early 2026 Iran war shock. The April rally narrowed the YTD gap between BTC (-10.5%) and the broader market factor (-14.2%), but the market index still lags BTC on a YTD basis, reflecting the ongoing underperformance of most altcoins relative to Bitcoin even during the recovery.

Top 5 Winners & Losers for April

ETH (+19.5%) was the top contributor by return, benefiting from the macro risk-on rotation and several institutional catalysts. BlackRock launched a staked Ethereum ETF (ETHB) that attracted tens of millions in daily flow. The upcoming Glamsterdam upgrade, targeting a significant gas reduction and parallel transaction execution, and the Ethereum Foundation’s 70,000 ETH staking commitment, signaling a shift from selling pressure to productive deployment of its treasury, were both additional forward catalysts. BTC (+19.2%) followed closely, driven by demand from digital asset treasury firms like Strategy (MSTR) and Bitmine sustaining strong demand, along with a weakening dollar and easing oil-war fears that supported risk assets broadly. HYPE (+12.5%) continued its multi-month outperformance as the platform hit a new all-time high of 6.9% open interest share relative to centralized exchanges. There were no negative losers in April, but TRX (+0.6%) and BCH (+0.7%) lagged significantly.

Size Factor

Construction

Equal-weighted long-short factor: long the smallest 50% of eligible assets by market cap, short the largest 50%. Minimum 40 assets (20 per leg). Breakpoint: 50th percentile of market cap.

Performance Metrics

SMB returned +9.2% in April, a recovery from the prior months of small-cap underperformance. YTD losses narrowed to -3.2% from -13.7% at the end of March, and the max drawdown since inception stands at -38.4%. The recovery was driven by the risk-on rotation: as sentiment turned, capital flowed back into smaller, more speculative assets that had been oversold in the February-March selloff. Small caps broadly rallied harder than large caps during April, which is the expected pattern in a market recovery.

Despite the strong monthly return, the SMB factor’s annualized return of 8.0% and Sharpe of 0.36 remain the weakest across all factors since inception. While the size premium for crypto exists over long periods, it is extremely volatile and tends to underperform during risk-off regimes that have dominated early 2026.

Top 5 Winners & Losers for April

DEXE (+114.91% as a long) was by far the top contributor, extending its rally that began in March. The DAO governance platform token more than doubled during the month, driven by surging demand for on-chain governance infrastructure as institutional capital increasingly sought DAO coordination tools. DEXE’s market cap climbed from roughly $350 million to over $680 million in April alone, with daily volumes regularly exceeding $30-50 million. High staking APRs (up to 102%) locked up circulating supply, amplifying the rally. LUNC (+72.48% as a long) was fueled by accelerating token burn mechanics. The community burned over 2 billion LUNC in April, with Binance’s monthly burn contributing hundreds of millions. The successful Cosmos SDK v0.53 integration improved cross-chain connectivity, and the upcoming v4.0.1 governance vote provided a forward catalyst. LDO (+49.16% as a long) rallied after the Lido DAO proposed a $20 million LDO buyback using treasury funds, signaling strong conviction in the protocol’s fundamentals. A whale purchase of $1.86 million in LDO followed the announcement. AERO (+46.49% as a long) benefited from growing Base ecosystem activity and anticipation of its cross-chain DEX launch planned for July 2026, with smart money wallets accumulating aggressively.

On the losing side, ZEC (-65.54% as a short) was the largest detractor. Zcash rallied explosively in April, up over 50% in the month, driven by the SEC’s January clearance (no enforcement action), Grayscale’s landmark filing to convert its Zcash Trust into the first-ever privacy coin spot ETF, and institutional accumulation by firms like Multicoin Capital and Cypherpunk Technologies. With 30% of ZEC supply in shielded pools and the 2024 halving tightening issuance, the supply squeeze punished the factor’s short positioning.

Value Factor

Construction

Equal-weighted long-short: long assets with the lowest Market Cap / Fees ratio (highest fundamental value), short assets with the highest MC / Fees ratio (most expensive). Minimum 30 assets (15 per leg).

Performance Metrics

Value returned +1.7% in April, a modest but positive result that extends its streak as the most consistent factor in 2026. YTD returns stand at +13.3%, the highest among all factors. The max drawdown since inception of -23.4% is considerably shallower than most other factors, reflecting Value’s defensive character across regimes. Value has navigated both the brutal February-March selloff and April’s recovery with remarkable stability.

Top 5 Winners & Losers for April

ARB (+47.2% as a long) was the top contributor, benefiting from a sharp L2 sector recovery. Arbitrum’s fee generation made it fundamentally cheap on a MC/Fees basis, and the broader market rally lifted L2 tokens that had been heavily sold off. AERO (+46.5% as a long) rallied on strong DeFi fundamentals (see SMB commentary for details). RAY (+34.7% as a long) and MORPHO (+33.4% as a long) also contributed from the long leg, both representing fundamentally cheap DeFi protocols that benefited from the sector rotation back into risk assets. JUP (+29.4% as a long) rounded out the winners as Jupiter’s dominance of Solana DEX aggregation continued to generate strong fees.

On the losing side, ALGO (-48.3% as a short) was the worst performer. Algorand rallied sharply despite its elevated MC/Fees ratio, as the token continued to benefit from the SEC’s declaration in March that it was a digital commodity, which resolved years of regulatory uncertainty. CHZ (-24.6% as a short) gained on World Cup-driven momentum. Chiliz’s roadmap for omnichain fan tokens and CHZ buybacks ahead of the 2026 FIFA World Cup continued to attract speculative flows.

Momentum Factor

Construction

Volatility-adjusted momentum: calculates 3-week rolling Sharpe-like score (mean return / std dev of daily return) for each asset. Long top 25% by filtered momentum, short bottom 25%. Equal-weighted, minimum 30 assets (15 per leg).

Performance Metrics

Momentum returned +0.9% in April, a marginal positive after March’s -1.3%, and YTD losses stand at -2.3%. While the monthly return was modest, the factor continues to exhibit extraordinary long-run performance: 51.09% annualized return with a 1.39 Sharpe ratio since inception, the highest among all factors. The muted April return reflects a challenging environment for trend-following strategies: the sharp reversal from March’s risk-off regime meant that many of the trends momentum was positioned for reversed quickly in April. Tokens that had been declining (and were therefore shorted) rallied, while some prior winners stalled.

Despite the flat monthly return, momentum’s -2.3% YTD loss is relatively mild compared to the market factor’s -14.2% and BTC‘s -10.5%, showing the factor’s ability to limit downside.

Top 5 Winners & Losers for April

DEXE (+91.8% as a long) was once again the top contributor across multiple factors. The momentum signal correctly identified DEXE’s strong uptrend early, capturing the bulk of its April rally (see SMB commentary). ZEC (+65.5% as a long) was the second-best performer, capturing Zcash’s explosive rally driven by the catalysts described in the SMB section. LUNC (+53.4% as a long) contributed as the burn-driven rally continued (see SMB commentary) and the Cosmos SDK v0.53 integration going live.

On the losing side, AXS (-30.5% as a short) was the largest detractor, rallying against the factor’s short positioning as gaming tokens benefited from the broader altcoin recovery. PENDLE (-22.7% as a short) hurt the factor meaningfully. The DeFi yield protocol rallied over 20% in mid-April as its new sPENDLE liquid staking model (launched January 2026) and ~$34 million annualized revenue attracted renewed investor interest, including from high-profile buyers like Arthur Hayes.

Growth

Construction

Equal-weighted long-short: composite score combining z-scores of 2-week trailing fee growth (pct change) and DAU growth (pct change). Long top 50% composite score, short bottom 50%. Eligibility requires DAU > 100 and weekly fees > $500. 30 assets (15 per leg).

Performance Metrics

Growth returned +1.1% in April, bringing YTD losses to -1.7%. The factor continues to display the lowest volatility among long-short factors at 23.0% annualized, reflecting the stability of its underlying signals (trailing fee growth and DAU growth). The positive monthly return represents a return to profit that was previously challenged in the risk-off environment when fundamental growth metrics provided less differentiation.

The Sharpe ratio of 1.53 and Sortino ratio of 2.82 since inception remain the highest of any factor, indicating that Growth’s quality-driven signal delivers the best risk-adjusted returns over full cycles. The max drawdown since inception of -14.4% is the shallowest among long-short factors after Value, reflecting the stability of the growth signal.

Top 5 Winners & Losers for April

MON (+45.8% as a long) was the top performer, correctly identified by the growth signal as exhibiting accelerating fees and user activity. XPL (+40.4% as a long) contributed over one week of positioning. ARB (+37.9% as a long) rallied alongside the L2 recovery, with Arbitrum’s fee growth confirming its position as the leading L2 by DeFi activity. ENA (+36.5% as a long) surged as Ethena’s synthetic dollar protocol continued to gain traction. Arthur Hayes’s visible accumulation of ENA tokens and growing speculation around a potential Bitwise ETF filing for ENA supported the rally.

On the losing side, AERO (-46.5% as a short) was the largest detractor. Despite Aerodrome’s strong fundamentals (see SMB commentary), the growth factor shorted it based on its composite ranking. RAY (-34.7% as a short) similarly rallied against the short position as Raydium’s Solana DEX volumes surged. MORPHO (-30.8% as a short) gained as the DeFi lending sector recovered. ZRO (-21.1% as a long) was a notable long-side loser as LayerZero’s price declined despite its earlier announcement of a Layer-1 blockchain backed by Citadel Securities, ARK Invest, and Google Cloud, as the initial excitement faded.

Fundamentals 1

Construction

Equal-weighted long-short quintile portfolio: composite score combining rank z-scores of DAU growth, inverted active revenue share, revenue stability, and MC/fees mean reversion. Long top quintile (~12 assets), short bottom quintile (~12 assets).

Performance Metrics

Fundamentals 1 returned -3.7% in April, the only factor to post a negative return during the month. YTD losses now stand at -6.6% and the max drawdown since inception is -21.7%. This underperformance during a strong market rally is attributable to the factor’s concentrated short positions in tokens that experienced unexpected reversals.

Despite the challenging month, the factor retains the second-highest annualized return (46.8%) and one of the best Sharpe ratios (1.46) since inception. The cumulative return of 519.3% compared to BTC‘s 65.8% highlights the long-term value of the composite fundamental signal.

Top 5 Winners & Losers for April

AXS (+20.6% as a long) was the top contributor, with the gaming token’s fundamental scores correctly positioning it on the long side as Axie Infinity’s fee generation and user activity showed improvement. ALGO (+11.1% as a long) continued to benefit from the SEC’s digital commodity declaration (see Value commentary).

On the losing side, PENDLE (-56.9% as a short) was by far the largest detractor (see Momentum commentary). The factor’s short positioning was based on PENDLE’s composite fundamental score, but the market rewarded its strong revenue generation with a sharp re-rating. RAY (-31.4% as a short) rallied as Raydium’s dominance of Solana DEX trading volumes continued to grow. JTO (-29.5% as a short) gained alongside the broader Solana ecosystem recovery. CHZ (-29.0% as a short) rallied on World Cup momentum (see Value commentary).

Stablecoins 1

Construction

Equal-weighted long-short quintile portfolio: composite score combining rank z-scores of stablecoins flow. Long top quintile (~3-4 chains), short bottom quintile (~3-4 chains).

Performance Metrics

Stablecoins 1 returned +5.7% in April, bringing its YTD return to +2.1%, one of only two factors (alongside Value) positive for the year. The max drawdown since inception of -31.8% reflects earlier drawdowns in the strategy’s history, though the factor has been on a strong run since mid-2025. The factor’s annualized return of 39.6% and Sharpe of 1.26 since inception demonstrate that stablecoin flows are a powerful signal for predicting relative chain performance.

Top 5 Winners & Losers for April

OP (+24.5% as a long) was the top contributor by a wide margin. Optimism attracted significant stablecoin inflows in April as the broader L2 ecosystem recovery took hold. As one of the leading Ethereum L2s, Optimism’s Superchain vision, a network of interconnected OP Stack rollups, continued to attract new chain deployments, driving stablecoin deposits into its ecosystem. TON (+9.6% as a short) contributed from the short leg as Toncoin experienced stablecoin outflows. TRX (+6.9% as a long) continued to capture the stablecoin transfer narrative, with Tron remaining the dominant network for USDT transfers globally.

On the losing side, APT (-14.1% as a short) was the largest detractor, as Aptos rallied despite showing negative stablecoin flow trends. The broader market recovery lifted all chains in April, making it harder for the stablecoin flow signal to fully differentiate.

Key Findings & Conclusion

April was a recovery month that tested the crypto factor framework in the opposite direction from the prior three months. After limiting losses during the February-March drawdown, the long-short factors naturally lagged the broad market during recovery. This is by design: the short legs that protected capital during the selloff gave back some returns as speculative assets bounced indiscriminately.

Several cross-factor themes emerged in April. The DAO governance narrative continued to drive DEXE, which appeared as a top contributor in both SMB and Momentum for the second consecutive month. Privacy coins saw explosive demand, with ZEC‘s rally driven by the SEC clearance, Grayscale’s spot ETF filing, and the growing narrative that AI surveillance will increase demand for financial privacy. DeFi yield protocols recovered sharply: PENDLE‘s rally (fueled by its sPENDLE tokenomics overhaul and strong revenue) was the single largest loss for Fundamentals 1, while Aerodrome‘s cross-chain expansion plans attracted institutional accumulation. The LUNC burn narrative gained renewed steam with over 2 billion tokens destroyed in April and a major network upgrade vote on the horizon.

Value and Stablecoins 1 remain the standout YTD performers at +13.3% and +2.1% respectively, while all other factors, including the market index at -14.2% and BTC at -10.5%, remain negative for the year. The framework’s cumulative value is best measured over the full backtest period: Momentum has returned 547.7% since inception versus BTC‘s 65.8%, Fundamentals 1 has returned 519.3%, and Growth has returned 326.9%.

Looking ahead, the key question is whether April’s recovery has legs or whether the ongoing Iran conflict and elevated oil prices will reassert downward pressure. If the risk-on environment persists, long-short factors may continue to lag the market in the near term, but their compounding advantage over full cycles remains compelling.

If you have any questions, feel free to reach out to team@artemis.xyz or shoot us a DM on X.com at https://x.com/artemis

Disclosure: This material is provided for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other form of advice. The views expressed are those of the authors and should not be relied upon as a recommendation to buy, sell, or hold any asset. The authors or affiliated entities may hold positions in the assets discussed. You should conduct your own research and consult appropriate financial professionals before making any investment decisions

The thesis is not simply that stablecoins grow. It is that Coinbase is structurally positioned to monetize that growth through USDC distribution, on-platform balances, Base, and its economic agreement with Circle.

If stablecoins become a major financial rail, Coinbase is not a passive beneficiary. It is one of the businesses most directly levered to the upside.

Stablecoins have become larger than crypto

Stablecoins used to be pseudonymous with crypto. As trading volumes and exchanges grew, the supply of stablecoins grew in parallel. But after 2021 we started to see something different. Usage metrics including transaction volume, daily active address and transactions continued to increase despite a downturn in crypto prices and trading. Stablecoins had “decoupled”, indicating broad based usage of all types of payments and store of value.

As more individuals adopted stablecoins, institutions followed. BlockRock launched a tokenized money market product, Circle had an IPO and regulation like GENIUS passed in the US. These developments turned many optimistic about the use of stablecoins, given their upgraded features to the traditional financial system. Even the US Treasury Secretary Bessent believes stablecoins could reach $3T by 2030, up almost 10x from today.

Coinbase is a clear beneficiary of the stablecoin mega-trend.

First, on-chain data tells a compelling story. Coinbase is the #1 holder of USDC on platform and is growing its lead over competitors. USDC on Coinbase is nearing an all time high as USDC is also hitting an all time high.

Second, we believe the USDC distribution agreement is Coinbase’s asset, not Circle’s. Circle’s share-of-revenue paid to Coinbase has climbed from 17.8% in Q1’22 to roughly 50% in each of the last two years.

The structural reason is straightforward: Coinbase earns roughly 100% of the yield on USDC held in its products and a 50% share of off-platform balances under the Payment Base waterfall. As Coinbase’s distribution grew (Q1’26 average USDC held in Coinbase products hit $19B, an all-time high), its waterfall share grew with it.

From an investor’s standpoint, Coinbase effectively gets issuer-like economics without the cost or overhead of being an issuer. The Collaboration Agreement runs in 3-year terms and auto-renews provided that three thresholds are met (Product, Company, and Reseller). Public filings indicate that, if those thresholds are satisfied, “the Circle Agreement cannot be terminated.” The renewal mechanism is not a renegotiation cliff, rather a continuation lock. As Coinbase is in full control of the renewal terms, this could be viewed as a perpetual agreement. For Coinbase, the upside scenarios (regulatory clarity drives stablecoin payments to scale, USDC market cap expands meaningfully) flow directly through the same contractual share. The contract is structured to compound Coinbase’s position regardless of who runs Circle.

Third, clear regulation is coming into play. The CLARITY Act’s relevance to Coinbase’s stablecoin economics is also greater than is widely appreciated. Coinbase’s distribution and reserve-share arrangements with Circle generate a revenue stream that, on current rate assumptions, rivals the issuer-level economics earned by Circle itself, and Coinbase’s USDC rewards program contributes a further line whose ultimate scale depends on how the Tillis-Alsobrooks compromise is finally drafted. The market underweights the magnitude and durability of these stablecoin-linked revenue lines and treats them as adjuncts to the exchange business rather than as core infrastructure economics in their own right. The CLARITY Act, by formalizing the broader regulatory architecture in which stablecoins clear, settle, and circulate — and by clarifying the registered intermediaries through which institutional stablecoin flows transit — strengthens that argument. It reframes Coinbase’s stablecoin franchise as the application layer of a regulated and rapidly institutionalizing system, rather than as a discrete consumer product line whose value rises and falls with retail token trading volumes.

Future Growth of USDC

As blockchain rails support increasingly interesting applications, USDC has been often used as the settlement or collateral asset integral to those applications. We’ve seen drastic growth in USDC supply in protocols like Polymarket, Hyperliquid, MakerDAO, etc. As new financial use cases emerge on blockchain platforms, USDC will continue to compound its position as core infrastructure.

We believe Coinbase is in a good position to capture the next wave of stablecoin use cases: payments. Payment types on card rails (B2B, B2C) have all increased significantly over the past year, and USDC has been gaining share in these types of transactions.

When looking at address to address transfers of USDC, a proxy for these types of transactions, we can see USDC gaining share against USDT.

Most investors think Stripe ($159B as of Feb ‘26) and Tempo are the clear winner of agentic commerce but a look at onchain metrics shows otherwise: 92.8% of real agentic payments volume happens on Base, while 99.8% are settled in USDC.

For a deeper look at how agentic commerce could create the next major source of stablecoin demand, read our full agentic Coinbase thesis here.

Conclusion

Coinbase has already proven to be the leader in USDC and USDC economics. As stablecoins continue to grow and see new use cases in trading and commerce, we believe Coinbase is well positioned to capitalize on all of these trends. As new entrants enter the space and regulation becomes clear, we believe there is a path for stablecoins to reach 3 trillion and for Coinbase to have a meaningful share of that on platform.

Disclosure: This material is provided for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other form of advice. The views expressed are those of the authors and should not be relied upon as a recommendation to buy, sell, or hold any asset. The authors or affiliated entities may hold positions in the assets discussed. You should conduct your own research and consult appropriate financial professionals before making any investment decisions

Agents are one of those platform shifts where the first-order use case is obvious, but the second- and third-order effects are impossible to predict. That uncertainty is precisely the investment case. Coinbase has a track record of entering frontier markets early (crypto, stablecoins), absorbing the initial ambiguity, and turning emerging primitives into scaled revenue lines.

For agentic commerce, the same pattern has formed: Coinbase has exposure to the stablecoin, the settlement layer, and the agent payment protocol that every credible path likely depends on.

Having already crossed $300 billion in supply, stablecoin growth represents a significant earnings vector for Coinbase through 2030 and beyond. The question is no longer whether stablecoins can reach mainstream scale, but what drives the next phase of growth. Agentic commerce could become that driver by creating an entirely new market dependent on stablecoins.

Agents are becoming a new class of internet user, company worker, buyer, and economic actor. Cloudflare expects AI bot traffic to surpass human traffic by 2027, Slack expects agents to outnumber humans on its platform within two years, Microsoft sees software users shifting beyond humans, and Jensen Huang has described Nvidia operating with 7.5 million agents for 75,000 employees.

Economic actors need money. AI agents will buy APIs, data, compute, inference, software, and services in real time. These payments will be high-frequency, small-dollar, global, and automated. Card rails were not set up for this: a $0.03–$0.04 fixed cost makes a $0.003 API call uneconomical, while stablecoins on blockchains can settle in seconds for fractions of a cent.

If agents become a primary user of the internet, they need three things:

• A programmable unit of exchange

• A low-cost settlement layer

• Developer infrastructure to hold balances, authorize spend, manage permissions, and transact without a human in the loop

Coinbase already has built all three:

• USDC as the programmable dollar

• Base as the low-cost settlement layer

• CDP / AgentKit / x402 as the developer and payment infrastructure stack

Coinbase is not the only company building for this. Stripe’s Machine Payments Protocol, Visa’s agent pilots, Circle’s Agent Stack, PayPal’s PYUSD-backed efforts are all credible. The difference is vertical integration: Stripe is anchored to card rails and its stablecoin position is still young; Visa and Mastercard face unit economics that don’t work below a cent; Circle has the stablecoin, but the chain is not yet live, and the developer ecosystem is more nascent; PayPal has the stablecoin but not the chain or the developer surface. Coinbase is the only player with issuance economics, a settlement layer, and a payment protocol under one roof, which is what allows USDC, Base, and x402 to compound on each other.

Coinbase’s stack is now starting to move into enterprise distribution. Coinbase recently announced that x402 and Coinbase wallet infrastructure are now integrated into Amazon Bedrock AgentCore Payments, AWS’s agentic payments product. This matters because it gives AWS developers a managed way to let agents discover services, pay in USDC, and transact with budget controls, compliance, and audit trails. For Coinbase, the bigger signal is enterprise validation.

This distribution milestone comes on top of early x402 protocol traction. Since October 2025, x402 has processed 178.7 million agentic payments, moving $42.4 million in agent spend across more than 5,000 merchants. Of that volume, 82.1% settled on Base and 99.8% settled in USDC. Right now, early agentic payments activity is defaulting to Coinbase in the form of Base, USDC, and x402.

Coinbase’s economic exposure is not limited to transaction fees. The larger opportunity is becoming the financial account layer for autonomous commerce.

The agentic bull case for Coinbase is material:

If agentic commerce reaches $7.5 trillion in annual volume by 2031, in line with the high end of McKinsey’s estimate, and 20% settles through stablecoin rails, this implies $1.5 trillion of annual stablecoin-based agentic payment volume.

If Coinbase compounds on its early lead, it could capture roughly $4.25 billion of annual revenue from USDC float, developer infrastructure, facilitator economics, and Base settlement.

The key point is simple: stablecoins gave the internet a payment layer. AI agents may give that payment layer its first native 24/7/365 user base.

If stablecoins are the monetary layer of internet-native finance, agentic commerce is one of the clearest reasons that layer compounds. And if agents become the next major user of the internet, Coinbase is positioned to own the financial stack they use to hold, route, and settle money.

Our view: the market is still underwriting Coinbase as a crypto exchange. It should be underwriting Coinbase as financial infrastructure for AI-native finance.

Disclosure: This material is provided for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other form of advice. The views expressed are those of the authors and should not be relied upon as a recommendation to buy, sell, or hold any asset. The authors or affiliated entities may hold positions in the assets discussed. You should conduct your own research and consult appropriate financial professionals before making any investment decisions

Intro

Artemis is a digital finance research firm that focuses on onchain data. We helped McKinsey estimate real stablecoin payment volume, written extensively about Agentic Commerce and what digital finance looks like in 2030. As crypto and AI converge, Coinbase will no longer be just a crypto exchange. It is becoming the settlement, distribution, and commerce layer for AI-native finance.

Most view Coinbase as just a crypto brokerage that is cyclical and trades along with crypto trading volume.

Not surprisingly, Coinbase trades in line with other brokerages like IBKR, Robinhood, Schwab

– versus Circle which captures a much higher multiple (103.9x NTM earnings) as a pure play bet on stablecoin growth.

Coinbase can become a $300B company (6x from today, 35% CAGR) in 2031 as the primary winner of stablecoins and agentic payments — NOT just as a crypto exchange. See our full model here.

Our core assumptions:

• Stablecoin supply hits $3T of supply in 2031

• Agentic commerce volume reaches $7.5T in 2031.

• We make the same assumptions on the core exchange business as the street - ~$6B in transaction revenue by 2028.

The market misses the fact that Coinbase benefits and wins from two generational tailwinds:

1. The rise of stablecoins and demand for digital dollars globally. US Treasury Secretary Scott Bessent forecasts stablecoin supply to reach $3T in 2030 (up 10x from today). Bain & Co thinks supply will be 12x by 2030, or $3.8T.

2. The rise of agentic commerce. McKinsey forecasts $3-$5T of global agentic commerce by 2030 and we predict 1/3rd of all commerce volume will settle onchain and leverage agentic payment protocols like x402, MPP, etc. We currently see on chain the rapid growth of agentic payments happening on blockchains:

Coinbase is a clear beneficiary of both these tailwinds and accrues value as the #1 largest and most regulated distributor of USDC and for having the #1 network for agentic payments.

Even when institutions are skeptical of DeFi and see crypto as “dead”, Coinbase will win not because of crypto and exchange trading volume but by being the most trusted and dominant stablecoin platform and payments infrastructure for agents.

Why Coinbase is winning from stablecoins

The market doesn’t understand that Coinbase is a clear winner from stablecoin growth – even when crypto trading volumes go down, stablecoin usage has continued to trend upwards historically.

The USDC distribution agreement is a Coinbase asset, not a Circle one. Circle’s share-of-revenue paid to Coinbase has climbed from 32% in 2022 to roughly 50% in each of the last two years. The structural reason is straightforward: Coinbase earns roughly 100% of the yield on USDC held in its products and a meaningful share of off-platform balances under the Payment Base waterfall. As Coinbase’s distribution grew (Q4’25 average USDC held in Coinbase products hit $17.8B, an all-time high), its waterfall share grew with it.

From an investor’s standpoint, the agreement is closer to Coinbase outsourcing the regulatory and reserve-management work to Circle than to Circle paying Coinbase for distribution. The Collaboration Agreement runs in 3-year terms and auto-renews provided that three thresholds are met (Product, Company, and Reseller). Public filings indicate that, if those thresholds are satisfied, “the Circle Agreement cannot be terminated.” The renewal mechanism is not a renegotiation cliff — it is a continuation lock. For Circle, walking away would mean cutting access to the largest single distribution channel for USDC. For Coinbase, the upside scenarios (regulatory clarity drives stablecoin payments to scale, USDC market cap expands meaningfully) flow directly through the same contractual share. The contract is structured to compound Coinbase’s position regardless of who runs Circle.

Future Growth of USDC

Outside of Coinbase, we also see many interesting use cases for USDC, especially in emerging protocols. We’ve seen growth in USDC supply in protocols like Polymarket, Hyperliquid, MakerDAO, etc., which has increased drastically over the past two years. As new financial use cases emerge on blockchain platforms, we see USDC continue to be used in these protocols.

Coinbase is in a good position to capture the next wave of stablecoin use cases, payments. Payment types on card rails (B2B, B2C) have all increased significantly over the past year, and USDC has been gaining share in these types of transactions.

When looking at address to address transfers of USDC, a proxy for these types of transactions, we can see USDC gaining share against USDT.

Is the market misinterpreting CLARITY?

The Digital Asset Market Clarity Act of 2025 (H.R. 3633), commonly referred to as the “CLARITY Act,” passed the U.S. House of Representatives on July 17, 2025 by a bipartisan vote of 294–134. The bill would establish a comprehensive regulatory framework for digital assets other than payment stablecoins. For Coinbase, the CLARITY Act represents the most consequential piece of pending U.S. legislation in the company’s regulatory environment, and would establish a substantially complete federal regulatory architecture for the digital asset ecosystem in which Coinbase operates.

The CLARITY Act’s relevance to Coinbase’s stablecoin economics is also greater than is widely appreciated. Coinbase’s distribution and reserve-share arrangements with Circle generate a revenue stream that, on current rate assumptions, rivals the issuer-level economics earned by Circle itself, and Coinbase’s USDC rewards program contributes a further line whose ultimate scale depends on how the Tillis-Alsobrooks compromise is finally drafted. The market underweights the magnitude and durability of these stablecoin-linked revenue lines and treats them as adjuncts to the exchange business rather than as core infrastructure economics in their own right. The CLARITY Act, by formalizing the broader regulatory architecture in which stablecoins clear, settle, and circulate — and by clarifying the registered intermediaries through which institutional stablecoin flows transit — strengthens that argument. It reframes Coinbase’s stablecoin franchise as the application layer of a regulated and rapidly institutionalizing system, rather than as a discrete consumer product line whose value rises and falls with retail token trading volumes.

Why Coinbase is winning agentic payments

Most investors think Stripe ($159B as of Feb ‘26) and Tempo are the clear winner of agentic commerce but a look at onchain metrics shows otherwise: 92.8% of real agentic payments volume happens on Base, while 99.8% are settled in USDC.

And of all agentic payment volume, over 99.8% of it happens on x402, the open payments protocol pioneered by Coinbase.

AI agents are shifting from assistants that answer questions to systems that transact on a user’s behalf, buying APIs, data endpoints, compute, inference, and services at sub-cent unit economics and machine speed.

Existing card rails were not designed for this. A typical card transaction carries a roughly $0.03 to $0.04 fixed cost before interchange, which makes a $0.003 API call uneconomic by two orders of magnitude. Stablecoins settled on high-throughput L2s clear for fractions of a cent in seconds, and require no human in the loop to open a billing relationship.

McKinsey projects $3 to $5T in global agentic commerce sales by 2030. Gartner estimates AI agents will intermediate over $15T in B2B purchases by 2028. Both numbers are directional and should be treated as such; however, what is not speculative is that if any of it materializes, it structurally prefers stablecoin rails, where USDC is already the default and Coinbase benefits directly.

The scoreboard

The x402 standard, an HTTP-native micropayments protocol co-developed by Coinbase (now managed by the Linux Foundation), has become the leading open protocol for agent-initiated payments. Since October 2025, x402 has processed +180M agentic payments, moving $47.5M in agent spend across over 5K merchants selling to agents.

When merchants make their services accessible for agent consumption, Coinbase’s L2 and USDC are already the default payment rails. Additionally, Agentic.Market gives Coinbase a path to own resource discovery. If agents use it to find, evaluate, and route to x402 services, value accrues not just through Base settlement and USDC volume, but through Coinbase’s position as the marketplace coordinating agent-to-service transactions.

How Coinbase monetizes

Coinbase captures agentic payment economics through four lines that compound around the stablecoin pillar: USDC float, Base settlement, CDP / AgentKit monetization, and Agentic.Market distribution.

1. USDC reserve yield. Coinbase’s highest-upside revenue line is not transaction fees, but float. Agent wallets need prefunded balances to authorize autonomous spend, pay for APIs, cover usage-based services, and settle machine-to-machine commerce in real time. As agents become economic actors, USDC balances held in Coinbase-controlled wallets become recurring, yield-generating deposits. Every dollar of agent-held USDC produces reserve income regardless of how quickly that dollar turns over.

2. Base sequencer economics. Every x402 or MPP-style transaction that settles on Base becomes a sequenced transaction that can generate priority fees. This line scales with transaction count, not just payment volume, which matters because agentic commerce is likely to be higher-frequency and smaller-ticket than human commerce. That said, sequencer fees are probably the smallest part of the upside because transaction costs trend lower over time.

3. CDP, AgentKit, and facilitator monetization. Coinbase can monetize the developer layer that lets agents hold wallets, manage permissions, sponsor gas, settle x402 payments, and interact with paid services. This includes facilitator fees on x402 transactions, wallet infrastructure, gasless transactions, key management, policy controls, and enterprise-grade developer tooling. If CDP becomes the default infrastructure stack for agentic payments, Coinbase earns platform revenue even when the end payment is low-value.

Sizing the upside

We assume $5T of annual agentic commerce by 2030. Most of this will still route through cards, ACH, bank payments, and account-to-account rails, especially for large-ticket consumer and enterprise purchases. But machine-native, high-frequency, cross-border, API-based commerce will disproportionately use stablecoins and payment standards like x402 and MPP.

We estimate that ~20% of agentic commerce settles through stablecoin rails, implying $1.0T–$1.5T of annual stablecoin-based agentic payment volume. Illustrative bull case revenue math is below:

• USDC float: $200B of average agent USDC balances × 4% reserve yield × 50% Coinbase-attributable economics = $4.0B

• CDP / AgentKit / facilitator / Agentic.Market: developer subscriptions, wallet infrastructure, x402 facilitation, marketplace routing, provider analytics, and distribution fees = $750M

• Base sequencer: $250B–$300B of agentic payment volume on Base, across tens of billions of transactions, at low per-transaction economics = $250M

This points to ~$4.25B of annual Coinbase-attributable agentic revenue. The important takeaway is that real value accrues if Coinbase becomes the operating account, developer platform, discovery layer, and settlement rail for autonomous commerce, which they have already made large strides towards in the past several months.

Why Coinbase and USDC wins

Coinbase’s advantage is that it controls four reinforcing layers of the agentic payments stack: USDC float, Base settlement, CDP / AgentKit infrastructure, and Agentic.Market discovery.

USDC is already the default settlement asset, which means builders integrate it first because it has the deepest tooling, liquidity, and developer support. Base then benefits as the natural settlement chain for USDC-native agent payments, with low developer friction and growing facilitator coverage. CDP and AgentKit sit one layer higher, giving developers the wallet, key management, gas sponsorship, and payment infrastructure needed to make agents economically active. Finally, Agentic.Market can become the discovery and routing layer where agents find, compare, and consume x402-enabled services. A competitor entering this market would need to replicate liquidity, settlement, developer infrastructure, and distribution simultaneously – while each new agent, merchant, and service makes the existing Coinbase stack harder to displace.

Conclusion

The market views Coinbase as a crypto exchange and misses that they are building the platform for AI-native finance. Global leaders forecast $3T in stablecoin supply and $5T in agentic commerce by 2030, and stablecoins have already decoupled from crypto prices. Coinbase has positioned itself to be a winner in that world and is showing an early lead. x402, USDC, and Base have become the de facto stack for agentic commerce, with each layer commanding a +90% share against competitors. Coinbase is uniquely positioned, having developed Base, incubated x402, and earn a favorable share in USDC economics. The mispricing has three legs. The Circle agreement is structured as a continuation lock, not a renewable contract, which means the stablecoin revenue line is durable rather than at risk. The CLARITY Act formalizes the regulated infrastructure layer Coinbase already operates, repricing the franchise from consumer product to core market plumbing. And the four-layer agentic stack (USDC, Base, CDP, Agentic.Market) compounds reflexively, with each new agent and merchant making the moat harder to attack. Coinbase should trade closer to the infrastructure comp set than the brokerage one. We think Coinbase becomes a $300B company off the back of these generational tailwinds, with the majority of revenue coming from subscription and services lines like stablecoins and agentic commerce.

Disclosure: This material is provided for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other form of advice. The views expressed are those of the authors and should not be relied upon as a recommendation to buy, sell, or hold any asset. The authors or affiliated entities may hold positions in the assets discussed. You should conduct your own research and consult appropriate financial professionals before making any investment decisions.

Market Overview: The Weekly Recap

Crypto and crypto-equities took the worst of last week’s risk-off move, with the basket median printing -3.70% and crypto-fintechs HOOD (-12.75%), SOFI (-12.12%), and CRCL (-9.13%) leading the drawdown. Traditional equities went the other way, with QQQ +2.51% and SPY +1.44% on the megacap earnings cluster, leaving crypto distribution names repriced harder than the underlying assets they trade. The macro backdrop turned hawkish into the move: headline PCE printed 3.5% YoY on April 30, the hottest reading since May 2023, and the FOMC held rates at 3.5% to 3.75%. U.S. spot Bitcoin ETFs flipped to three consecutive days of net outflows totaling roughly $491M into FOMC week. BTC closes the period near $76,300, having stalled twice at $80,000 resistance.

In the basket, POL (+0.92%) was the only green crypto print as Polygon picked up Meta, Visa, and Modern Treasury USDC integrations. AAVE (-1.55%) held up best in major DeFi on the DeFi United bailout proposal, while SKY (-6.61%) and LDO (-6.14%) gave back the prior week’s gains from the Treasury Management Function proposal and the $20M LDO buyback program respectively. The L1 majors traded in a tight band: BTC -2.52%, ETH -3.21%, SOL -3.62%, BNB -3.70%, with XRP at -5.01% the laggard. Among equities, eq-MSTR (-4.07%) tracked BTC’s stall, while the crypto-distribution names carried the heaviest losses on combined earnings disappointment and risk-off sentiment

Today We Highlight

• Robinhood and SoFi both reported revenue beats overshadowed by softer forward color; HOOD fell 12.75%, SOFI fell 12.12%.

• Polygon picked up Meta, Visa, and Modern Treasury USDC integrations in the same week Polymarket signaled chain migration.

• Strategy extended weekly BTC accumulation to four straight weeks, adding 3,273 BTC for $255M and bringing total holdings to 818,334 BTC.

• Aave service providers proposed “DeFi United” with Lido and EtherFi to cover KelpDAO bridge losses; AAVE held up best in major DeFi at -1.55%.

1. Robinhood and SoFi: earnings get repriced

Robinhood and SoFi both reported Q1 earnings the week of April 28, and both stocks sold off sharply despite topline growth. HOOD finished -12.75% on the week and SOFI -12.12%. The two prints share a common pattern: revenue held up across deposits, lending, and equities, but crypto-tied revenue contracted and the market repriced both names off their crypto-cycle multiples.

Robinhood missed on net revenue ($1.07B vs $1.14B consensus) and EPS ($0.38 vs $0.39), with the miss driven by crypto revenue falling 47% YoY to $134M on just $24B of notional volume. Equities revenue grew 46% to $82M, event contracts jumped 320% to $147M on a record 8.8B contracts, and net interest income added $359M (+24%). HOOD closed -13.24% on April 29 on volume 132% above average; Barclays and KBW both cut price targets. SoFi delivered record adjusted net revenue of $1.1B (+41% YoY) and a 31% EBITDA margin, but EPS of $0.12 came in line and ended a streak of beats. The selloff came from softer forward guidance, a 27% drop in Galileo platform revenue tied to Chime exiting, and credit metrics drifting the wrong way (personal and student loan charge-offs both ticking up). SoFi formally launched crypto trading on the platform during the quarter; CEO Anthony Noto called digital assets a strategic priority going forward.

Both companies are still executing on their core franchises and both have credible crypto growth ahead of them, including SoFi’s just-launched trading product and Robinhood’s tokenized stocks rollout. The question for the multiple is not whether crypto revenue recovers but how soon. Coinbase’s May 7 print will set the near-term ceiling on how the market values that recovery.

2. Polygon adds Meta and Visa, faces Polymarket migration

POL was the only token in the crypto basket to print green on the seven-day FOMC tape, closing +0.92% against a basket median of -3.70%. Polygon picked up USDC integrations from Meta, Visa, and Modern Treasury in the same week Polymarket signaled it intends to migrate off the chain.

The catalyst side. On April 29, Meta launched USDC creator payouts via Stripe, settling on Solana and Polygon. The product is live for creators in Colombia and the Philippines, with expansion to 160+ countries planned by year-end per Polygon Labs. Meta paid creators roughly $3 billion through monetization programs in 2025; even a small fraction moving on-chain meaningfully expands the surface area for USDC outside the U.S. This is Meta’s first stablecoin product since shelving Diem in 2022, and the strategic shift is that Meta is using a regulated third-party stablecoin (USDC) under the post-GENIUS Act framework rather than building its own.

The same week, Visa added Polygon to its stablecoin settlement program alongside four other networks. Visa’s stablecoin network is now running at $7B in annualized transaction volume and growing approximately 50% QoQ, implying a near-term run rate above $10B. Modern Treasury added USDC on Polygon to its Payments API. The chain itself ran roughly $37B in stablecoin volume over the trailing 30 days and generated $11M in Q1 network revenue, up from $2.1M the prior quarter.

The migration side. On April 24, Polymarket VP of Engineering Josh Stevens posted on X that “chain migration” is now a roadmap priority, citing insufficient block space, gas costs, and block times on Polygon. No target chain has been announced; an Ethereum L2 called “POLY” was on the table in December 2025, but Stevens did not confirm whether that remains the plan. Polymarket generates $2.5M to $4M in weekly fees on Polygon, accounting for 50% to 70% of the chain’s total transaction fee revenue, and consistently occupies three of Polygon’s top five gas-consuming contracts. The platform was valued at $9B in October 2025 following Intercontinental Exchange’s $2B investment.

The CLOB V2 upgrade Polymarket executed on April 28, migrating the exchange to a new collateral token (pUSD) and a rebuilt order book, runs on Polygon. That is a Polygon-native event and separate from the broader chain migration.

How the market priced it. That POL printed only +0.92% on a week stacked with Meta, Visa, and Modern Treasury integrations is the signal. The market is pricing both halves of the story rather than either alone: Polygon is adding the institutional payments rail at the moment it risks losing its largest crypto-native consumer application. The variable that determines whether POL re-rates higher or compresses from here is whether Polymarket’s migration timeline crystallizes into a confirmed exit or Polygon retains the platform through performance fixes. Stevens has committed to weekly engineering updates beginning in early May, which makes that timeline directly observable.

The bigger read for Polygon is that institutional distribution and crypto-native distribution are now competing inputs into the same fee base. Adding Meta, Visa, and Modern Treasury makes Polygon a payments rail; losing Polymarket would remove its largest crypto-native demand source. May’s question is whether the chain can keep being both at once.

3. Strategy adds another $255M, BTC Yield ticks to 9.6% YTD

Strategy disclosed on April 27 that it acquired 3,273 BTC for $255M during the week ending April 26 at an average $77,906 per coin. Total holdings stand at 818,334 BTC at a $61.81B cost basis (average $75,537 per coin), a position now slightly in profit at current prices. The week’s purchase was funded via 1,451,601 MSTR Class A shares sold under the at-the-market program. It marks the fourth consecutive week of buying, but at a meaningfully slower pace than the prior week’s $2.54B headline buy. MSTR shares closed near $172 on Monday after the disclosure, off the prior week’s high near $183, and finished the week at -4.07%.

mNAV sits at 1.28x, off the 2.4x peak from 2024 but well above the sub-1.0x readings that briefly forced an ATM pause in February. The capital structure has expanded beyond common-equity issuance: the company has $8.25B in outstanding convertible notes with strikes from $149.80 to $672.40 and a suite of preferred shares (STRC, STRD, STRK) issued through 2025. STRC’s volume-weighted average price of $99.76 in April held the dividend steady at 11.5% for a third consecutive month. The March $42B ATM filing across MSTR common, STRC, and STRK gives Strategy runway to keep accumulating through 2027 even at compressed premiums.

BTC Yield ticked from 9.5% to 9.6% YTD on the latest disclosure. Strategy has bought roughly 89,000 BTC year-to-date. The next disclosure is expected Monday May 4 for the week ending May 3.

At $41.8B in Bitcoin fair value, Strategy holds nearly 7x the BTC position of the next-largest public corporate holder (MARA, $6.0B).

4. Aave coordinates the “DeFi United” bailout after KelpDAO contagion

KelpDAO’s rsETH cross-chain bridge was drained of approximately $293M on April 19, the largest DeFi hack of 2026. The attacker overwhelmed a security checkpoint with junk traffic and submitted fake transfer requests; the exploit was later attributed to North Korea’s Lazarus Group.

The contagion ran deeper than the exploit itself. Because rsETH was used as collateral on Aave, the attacker borrowed approximately 82,600 ETH (~$195M) against unbacked tokens, leaving Aave with bad debt despite its own contracts being uncompromised. Aave’s TVL fell from $26.4B to $20.1B over two days. Total DeFi withdrawals across the sector reached $13B. Two follow-on hits landed within days: Volo Protocol on Sui ($3.5M, April 22) and GiddyDefi ($1.3M, April 23).

By midweek, Aave service providers launched “DeFi United,” a coordinated recovery effort with Lido Finance, EtherFi, and Aave founder Stani Kulechov among those proposing to put forward ETH to cover the rsETH backing shortfall. AAVE held up better than peers across the basket at -1.55% on the week as the bailout took shape and the bad-debt overhang began to clear. Lido separately launched a $20M LDO buyback program funded from treasury stETH; LDO had rallied to 10-week highs the prior week before giving back -6.14% on the FOMC tape.

Charts of the Week

Other Notable News

• Mastercard agreed to acquire BVNK Holdings, a London-based stablecoin infrastructure firm, for $1.5B plus up to $300M in contingent consideration, confirmed on the Q1 earnings call April 30. CEO Michael Miebach named stablecoins and agentic commerce as the two strategic pillars; Mastercard Agent Pay is in adoption by partners including OpenAI. Q1 net revenue grew 16% to $8.4B with adj EPS of $4.60 beating $4.41 consensus.

• Visa reported fiscal Q2 results on April 28: net revenue of $11.2B grew 17%, the company’s strongest quarter in four years. Adj EPS of $3.31 beat the $3.10 consensus. The board authorized a new $20B multi-year buyback.

• DOJ dropped its criminal investigation into the Federal Reserve and Powell late in the prior week, cited by Powell as a precondition for considering when to step down from the Board of Governors.

• Wisconsin AG sued Kalshi, Coinbase, Polymarket, Robinhood, and Crypto.com over sports prediction market contracts. Separately, the DOJ filed what appears to be the first U.S. insider-trading prosecution tied to a prediction market: a Special Forces master sergeant who placed roughly $33,000 on Polymarket hours before Trump announced Maduro’s capture, netting more than $400,000. The Senate also unanimously banned members and staff from using prediction markets.

  IBIT options open interest topped Deribit in late April, the first time U.S.-listed regulated BTC options have outpaced the dominant offshore venue.

• Morgan Stanley launched MSNXX, a $1 NAV government money market fund built as a stablecoin reserves portfolio for issuers.

The Week Ahead

The data calendar quiets after the dense April 29-30 cluster. The April nonfarm payrolls report on May 2 is the next major macro print. ISM manufacturing and services bookend the week. On the crypto-adjacent earnings side, Coinbase reports Q1 after the close on May 7, the first read on subscription and services revenue inside the company’s $550-630M Q1 guide and the first meaningful disclosure of Base onchain revenue. Strategy’s next BTC purchase disclosure is expected Monday May 4 for the week ending May 3.

The macro question remains the same as last week: whether the Iran war’s oil pulse continues to feed PCE prints or whether near-term de-escalation cools the inflation impulse. The crypto question: whether ETF flows return to inflows after the three-day reversal into FOMC week, and whether $80,000 stops acting as resistance and starts acting as support.

Disclaimer: This newsletter is produced by Artemis for informational and educational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security or digital asset, or an offer to provide advisory services. Artemis and its employees may hold positions in assets discussed. Figures are accurate to the best of our knowledge as of publication; markets move quickly.

The AI infrastructure buildout is one of the largest capital deployment cycles in technology history and it is constrained not by demand, but by the physical availability of power. The United States faces a projected power deficit of ~50 gigawatts through 2028.

Within this context, operators who already control energized large-scale power such as Bitcoin miners who secured grid infrastructure years in advance, find themselves uniquely positioned to capture a structural premium.

The conversion of mining infrastructure to high-performance computing (HPC) data centers is one of the few near-term ways to bring scarce power capacity to market.

01 The Industry Investment Thesis

Artificial intelligence workloads require sustained high-density power at a scale and speed that the existing grid interconnection process cannot deliver. Training large language models and running GPU-intensive inference tasks demands thousands of chips operating in proximity, drawing electricity at densities that dwarf conventional enterprise data center requirements. The result is a supply/demand dislocation in energized power that is structural, multi-year in duration and largely insensitive to macro conditions. The compute intensity of AI tasks is also evolving in ways that systematically increase power demand per unit of economic output: while a simple chatbot query is computationally modest, chain-of-thought reasoning tasks require 100x the compute, video generation 3,000x, and deep research tasks potentially 1,000,000x the baseline.¹ As AI use cases proliferate toward these more computationally intensive agentic applications, the length of tasks have been consistently exponentially increasing over the past 6 years, with a doubling time of around 7 months.² The aggregate power demand per user and per dollar of AI-driven economic activity will continue to increase regardless of efficiency gains at the chip level.

The Power Bottleneck: AI’s Defining Constraint

The single largest constraint on AI buildout timelines today is not chip availability or software capability, it is electricity. Hyperscaler capital expenditure alone is running at approximately $650 billion this year. Analysis of chip shipment forecasts and announced US data center construction suggests a power deficit of approximately 50 gigawatts between 2025 and 2028, driven by stronger-than-expected semiconductor demand.³ Data centers currently account for only 3–4% of total US grid consumption, but that figure is projected to reach 12% by 2028.⁹

The scale of individual lab demand illustrates the pressure. OpenAI’s compute footprint has scaled from ~600 MW to ~2 GW and is expected to reach ~6 GW this year, potentially 12 GW next year. Similarly, Anthropic is on a similar trajectory. For every $100 billion of AI revenue generated at 50% gross margins, labs must spend $50 billion on compute, equivalent to 5 GW of capacity at ~$10 billion per GW annually. Given this shortage against overwhelming near-term demand, time to power is the key focus.

The gap cannot be closed quickly. Grid interconnection queues now stretch to four or more years for large loads. ERCOT, the Texas grid operator, alone has approximately 458 GW of pending applications in its interconnection queue.⁴ In a recent survey, more than half of developers report that securing power has become more difficult over the past twelve months. Utility respondents say time-to-power will take 2 years longer on average than expected by hyperscalers and colocation providers.⁵ Even within ERCOT, widely regarded as the most accessible US interconnection regime, the minimum timeline is approximately 300 days under ideal conditions, with current average timelines running closer to 3–5 years due to study backlogs.⁶ PJM, the grid operator that covers Virginia, Ohio, Pennsylvania, and much of the Northeast, is broadly viewed as the most constrained region in the country today, with new large-load interconnection effectively stalled. PJM’s available supply capacity has declined 20% (40 GW) over the last four years, driven by plant retirements.¹⁰ Substations required for loads above 100 MW, now effectively universal for AI data center builds, add a further 18–24 months of delivery timeline, with large transformer procurement alone running 2–3 years.

The Power Cost Benchmark: Why Miner Conversions Win on Economics

Other than speed, the decision of where to source power is also a question of all-in cost per MWh, and that cost varies dramatically across the available options. Bitcoin miner conversions represent the lowest-cost path by a wide margin. Miners typically pass power through to tenants at $70–100/MWh, reflecting their underlying contracted rates of $30–50/MWh. Those economics largely reflect power contracts secured years ago, before scarcity became acute.

The alternatives each carry meaningfully higher costs and their own execution constraints:

• Nuclear: Securing a nuclear power purchase agreement currently costs approximately $80–100/MWh. Nuclear offers firm, 24/7 power with zero carbon emissions, making it attractive to hyperscalers with sustainability commitments, but existing capacity is limited, new nuclear technologies such as small modular reactors (e.g. OKLO, SMR) remain a decade away at scale, and the contracting process is competitive and slow. Constellation Energy (CEG), which operates the largest nuclear fleet in the US with 20 GW of capacity, has already leased ~10% of its fleet to hyperscalers.

• Natural gas turbines: Combined-cycle gas turbines are the conventional large-scale power solution, pricing at approximately $100/MWh all-in for behind-the-meter configurations. However, the market for new turbine orders is effectively backlogged. GE Vernova (GEV) and the small number of other major turbine OEMs have order books extending years out, making new turbine-powered capacity largely inaccessible for near-term data center buildouts regardless of price. GEV in particular has a $160B+ backlog and has seen its EBITDA margins expand from 8% in 2025 to 20% by 2028 as they are able to continue to take price.

• Fuel cells: Bloom Energy’s (BE) solid oxide fuel cells can be deployed faster than grid interconnection timelines and provide reliable baseload power, but at a cost of approximately $120–150/MWh, roughly 2x the all-in cost available through miner conversions. Suitable as a bridging solution or for smaller loads, but difficult to justify at scale.

• Alternative and exotic sources: A broader menu of generation technologies is available for behind-the-meter deployment, such as aircraft, ship and medium-speed reciprocating engines. These options are generally more expensive than grid-connected power, but developers choose them specifically to bypass interconnection queues and permitting timelines. Each technology can contribute meaningfully at the margin but none approaches the cost efficiency of pre-contracted miner power. More speculative configurations such as data centers in space are effectively pre-commercial and likely $1,000+ MWh today.⁷

The implication for investors is clear, operators with access to pre-contracted miner power at $30–50/MWh hold a structural cost advantage over every alternative path that is not replicable at any price in the near term, with a massive premium on near-term power availability. Announcements such as BE and Oracle’s recent 2.8 GW deal, along with Elon’s comments about data centers in space, highlight how acute the power shortage is and reinforce the view that BTC miner conversion, as the lowest-cost source of power, will be fully utilized before the market is forced toward more expensive and exotic alternatives.

A further structural advantage of Bitcoin site conversions has emerged beyond speed: political and community acceptability. Data center development has become an increasingly contentious issue, with communities pushing back against new builds over concerns about electricity bills and environmental externalities. Recent polling of US registered voters found that 60% hold AI data centers at least partly responsible for rising electricity prices ⁸. Bitcoin site conversions avoid this friction because they reuse existing grid access rather than requesting new incremental interconnection. An operator adding compute at an existing Bitcoin site does not increase the community’s electricity burden in the way that a greenfield data center does.

The Historical Role of Bitcoin Mining Infrastructure

Bitcoin mining’s role in the AI infrastructure story is primarily historical and structural. Over the preceding decade, miners accumulated large-scale power infrastructure in Texas and other low-cost power markets, securing firm grid interconnection agreements that are now extraordinarily valuable given the scarcity environment. The industry collectively holds over 10 GW of approved capacity across US-listed operators, the single largest pool of readily convertible energized power available to AI developers anywhere in the country. A widely-used industry reference metric puts the revenue potential of this asset class into sharp relief: for every gigawatt of reliably delivered AI colocation capacity, operators can generate approximately $1-2 billion in annual revenue.

For the largest cloud providers, third-party colocation is typically a capacity bridge rather than the preferred long-term model. Hyperscalers and neoclouds turn to third-party colocation specifically when their own data center capacity has been exhausted and hardware risks sitting idle in warehouses unpowered. Given the alternative, GPU fleets generating zero revenue and depreciating while awaiting internal data center completions, the premium paid for ready third-party power is economically rational. The current environment, where internal capacity is fully spoken for across every major cloud provider, has effectively made colocation a necessity.

The economics of mining itself are deteriorating structurally. The scheduled Bitcoin halving, which cuts block rewards in half approximately every four years, progressively compresses mining profitability. With the next halving expected in 2028, the relative attractiveness of contracted HPC cash flows should continue to improve versus pure-play mining economics. This creates a natural and self-reinforcing conversion incentive: as mining margins compress, the relative attractiveness of long-term HPC lease revenues which are predictable, inflation-linked, and completely independent of BTC price grows commensurately.

Site Selection

Miners possess the four physical ingredients that AI developers most need but cannot quickly acquire: firm grid interconnection, large contiguous land parcels, experience managing high-density electrical infrastructure, and often below-market power contracts. There are a few other considerations when evaluating specific sites for conversion:

The convertible share of US mining capacity is more limited than aggregate power figures suggest given power contract terms. Some miners secured favorable power pricing precisely because they agreed to operate as flexible load: when the grid requests curtailment, they shut down. This arrangement is acceptable for Bitcoin mining, which can pause and resume without consequence, but is structurally incompatible with HPC workloads that require continuous, uninterrupted uptime. A data center that may go offline for hours during periods of grid stress cannot credibly host GPU clusters running training jobs or serving live inference traffic. Miners whose power purchase agreements include curtailment provisions, and whose contracts are not near expiration, are effectively unable to convert regardless of their physical infrastructure quality. Those who can renegotiate to firm, non-curtailable power typically face a meaningful price step-up, a cost increase that must be absorbed into lease economics but that unlocks access to the full AI tenant market.

The physical demands of AI infrastructure are also increasing with each GPU generation. Current Blackwell/GB200 systems draw approximately 120 kW per rack; Nvidia’s next-generation Vera Rubin architecture is anticipated to require approximately 180 kW per rack; and NVIDIA’s subsequent Kyber platform is expected to approach 1 MW per rack, a step-change in density that further widens the gap between what legacy mining facilities can support and what leading-edge AI clusters require. Sites that can support next-generation rack densities should command a premium over facilities limited to prior-generation power and cooling configurations.

Workload type also shapes footprint requirements. AI training, which involves running large model training runs across thousands of GPUs simultaneously, concentrates into a small number of very large clusters, often 1 GW or more, where GPU interconnect density and proximity matter most and geographic location is secondary. AI inference, serving live user queries, has fundamentally different requirements: latency sensitivity means inference infrastructure must be distributed across many smaller metro-adjacent sites close to end users.This bifurcation means that the addressable market for large-campus operators (training) and smaller metro-area operators (inference) is genuinely distinct, and that the supply of suitable sites for each workload type differs materially.

Network connectivity is an equally important and often underweighted site selection criterion alongside power. Fiber availability is a gating input for both training and inference workloads, moving large datasets in and out of training clusters requires high-capacity, low-latency connectivity, and inference sites must be well-connected to serve end users with acceptable response times. A site with abundant power but weak fiber connectivity is effectively unusable for high-value AI workloads, regardless of its electricity cost profile.

“Access to energized, large-scale power is the scarcest resource in the AI economy and it cannot be manufactured on demand.”

The Colocation vs. Cloud Services Spectrum

Operators converting mining capacity to HPC can pursue two distinct business models with meaningfully different risk and return profiles.

HPC Colocation is the dominant structure in the current market: the operator constructs a powered shell providing electricity, cooling, and physical infrastructure, while the tenant owns the GPU equipment and IT stack. This model delivers highly predictable revenues (fixed $/MW/year with embedded annual 2-3% escalators) strong EBITDA margins of 80–90%, and significant leverage capacity through debt at 80% LTC. Equity value is estimated at approximately $5–10 million per gross MW. Converting an existing mining site to a fully liquid-cooled AI data center carries an all-in cost of approximately $10 million per MW, reflecting the scope of the rebuild required, which underscores why the quality of the underlying power asset, rather than the legacy mining facility itself, is the primary driver of value in conversion transactions.

Cloud Services is a higher-risk, higher-reward full-stack model in which the operator builds the powered shell but also acquires and operates GPU fleets, selling compute capacity to end users. IREN is a BTC miner which is converting its data centers and buying GPUs to sell to Microsoft directly. This puts them in similar competition with other neoclouds, such as CoreWeave and Nebius. This captures the full economics of GPU utilization but requires substantial ongoing capital expenditure with GPU useful life of 4-5 years, deeper technical capabilities on orchestrating GPU fleets, and exposure to GPU pricing, availability and utilization.

The Hyperscaler vs. Neocloud Tenant Dynamic

The tenant landscape divides into two categories with distinct commercial characteristics. Hyperscalers (e.g. Microsoft, Meta, Google, Amazon) offer superior credit quality and access to cheaper project financing, but negotiate harder on unit economics, prefer to control data center infrastructure, and typically achieve slightly lower developer EBITDA margins. Neocloud operators (e.g. CoreWeave, Fluidstack, Nebius, Lambda, Crusoe) typically have higher financing costs and therefore need to pay higher premiums.

The optimal tenant portfolio blends both: a hyperscaler anchor provides credit quality and lower financing cost; neocloud tenants provide yield enhancement and are typically quicker to execute. Deals partially backstopped by hyperscalers, where a hyperscaler guarantees a neocloud’s lease obligations in exchange for rights as Google has done with Fluidstack and a handful of miners, offer a middle path that has emerged as a meaningful structural innovation in the market.

02 Transaction Comparables

A growing dataset of executed transactions now provides empirical grounding for HPC data center valuations. The following table summarizes the most significant recent colocation deals across US-listed operators, illustrating the range of commercial terms.

Several important observations emerge from this dataset. Revenue per critical IT watt has generally been trending upwards, reflecting intensifying demand and a tight power supply environment. The value creation per watt generated in successive transactions has been increasing materially, from approximately $5-8/watt in mid-2025 transactions to approximately $10+/watt towards the end of 2025. The broader comp dataset, which shows a rising trend across consecutive deals, suggests the market for energized power is tightening rather than normalizing. Contract tenors have also held consistent with 10–15 year initial terms, with 2–3 five-year renewal options, which improves the terminal value.

03 Operator Landscape: Live Comp Sheet

BTC miner prices are very volatile with an average of 3x beta to Nasdaq and 1.2x to BTC and 10-30% short interest. To keep the analysis useful over time, investors should use the live comp sheet to track where each operator is trading and how it compares with implied NAV.

The comp sheet is intended to be a live valuation tool and comparability across operators requires a standardized lens. One useful cross-sectional measure is adjusted equity value per approved megawatt, calculated as market cap plus debt, less crypto assets, cash, and conversion capex already spent, primarily construction in progress. This adjustment helps normalize for differences in capital structure and project timing, giving investors a cleaner read on how much approved HPC capacity the market is already pricing in.

As an example, using a $7 million per MW benchmark then shows where each operator trades relative to NAV.

How to use the sheet

• Start with the deals. The announced transactions here provide a useful reference for where key valuation metrics, including EV per gross MW, revenue per MW, EBITDA margin, and unlevered yield, have cleared.

• Select an approved MW value assumption. On the main comp sheet, the chosen value per approved MW can be applied across the peer set. While a single benchmark is useful for screening, individual operators may justify different values depending on power cost, tenant mix, and site quality.

• Assign a pipeline probability for each operator. The land and pipeline disclosures here show what each company has said about sites beyond currently approved capacity, allowing investors to apply their own probability of conversion. Pipeline value is currently defaulted to zero.

• Analyze the results. The sheet shows the EV/MW multiple implied by the market and the upside or downside relative to NAV. BTC balances update live, so digital asset value flows through in real time.

The sector has 13 GW of approved power and is valued at ~$4M equity value per approved MW. Since May of 2025 and following a wave of neocloud deal announcements, the miners on average have gained 142% vs. the S&P 500’s 10% vs. Bitcoin’s -35% over the same period. The market has started to recognize but not yet fully priced the conversion opportunity.

04 Valuation Framework

Businesses transitioning from Bitcoin mining to HPC data center operation require a multi-part valuation framework that separately values each company’s specific contracted deals and probability of pipeline and economics, cross-checked against the growing dataset of executed transactions.

Investment Framework

Discounted NAV: Key Inputs and Sensitivities

• Revenue per MW: Executed leases have cleared at $1.24–$2.17 per critical IT watt per year, with an average of $1.73. The largest single-campus assets, which can accommodate hyperscale training workloads, may command a premium for their scale advantages: resource pooling, simpler operations management, and proximity to major metro markets for inference latency.

• EBITDA margin: Pure colocation with tenant-owned IT achieves EBITDA margins of 80–97% with an average of 85%. Power is the primary operating expense, so margins are driven largely by the spread between the original power lease rate and current market rates, as well as data center premium.

• Construction cost and leverage: Capex buildout ranges widely from $3/MW to $14/MW depending on the quality of the existing facility, the planned upgrades (e.g. liquid cooling), time to build, labor costs and how much the tenant is willing to shoulder the construction cost (e.g. in the early Feb. 2025 CRWV/CORZ deal, CRWV shouldered the majority of the capex buildout). At 80% LTC debt financing at 7–9% interest, the observed range in recent project financings, the equity value range spans approximately $5–11 million per gross MW, with the widest spread driven by the interaction of capex assumption, leverage, and discount rate.

• Discount rate: The appropriate cost of equity for HPC colocation with contracted, infrastructure-like cash flows with high quality tenants is in the range of 9–13%. A 9% rate reflects a hyperscaler-anchored portfolio and 13% is appropriate for neocloud-only books with concentrated tenant credit. Cloud Services businesses, which carry GPU refresh risk and utilization cycle exposure, will require higher discount rates.

• PUE: Power Usage Effectiveness of 1.2-1.5 is the range observed across executed transactions. A 1.2x PUE, the best-in-class figure achievable with advanced cooling, generates 25% higher revenue per gross MW than a 1.5x PUE site at the same headline contracted capacity, creating a material differentiation between operators investing in cooling infrastructure versus those converting legacy mining facilities with limited cooling upgrades.

The REIT Conversion: Material Optionality

An underappreciated dimension of value is the REIT conversion or strategic acquisition optionality embedded in large-scale data center portfolios. An illustrative analysis on a fully built-out 1 Gross GW campus (666 critical MW) generates annual revenue of $1.3 billion at $2M/MW, EBITDA of $1.2 billion at 90% margin, and at a 20-25x EV/EBITDA multiple. These multiples are consistent with where traded data center REITs such as Equinix and Digital Realty have traded. This results in a $27 billion enterprise value. Assuming an initial buildout cost of $10M/MW ($6.6B) with 80% LTC results in an initial equity cost of $1.3B and debt of $5.3B. The resulting equity value is $22 billion. This represents ~17x on the equity invested in construction.

Even a partial monetization, such as a sale-leaseback of completed phases to a data center REIT, would crystallize embedded value at multiples well above current market implied valuations and provide capital to fund subsequent phases without dilutive equity issuance. This optionality is excluded from most base-case models and represents a layer of upside that is real, precedented in the broader data center industry.

05 Investment Selection Criteria

Not all participants in this space warrant equivalent conviction. The following criteria differentiate operators with durable competitive advantages from those exposed to commodity dynamics or execution risk.

Power Portfolio Quality

• Scale and quality of energized power: Operators with 500+ MW already contracted and revenue-generating have passed the most difficult execution hurdles. Large single-campus sites, where total potential capacity exceeds 1 GW, command a premium for their ability to serve hyperscale training workloads that require physically co-located compute. The benefits of scale include optimized resource pooling across GPU jobs, higher overall utilization, simpler operational management, and greater flexibility in tenant configuration. Critically, the power must be firm, contractually non-curtailable, rather than flexible load. Mining sites with interruptible power agreements are structurally incompatible with AI tenants regardless of their physical scale, and the ability to demonstrate firm, uninterrupted power delivery is now a threshold requirement in tenant due diligence.

• Pipeline credibility and queue seniority: Applications that have already been included in ERCOT batch zero. A significant share of pending interconnection applications are speculative, submitted without committed capital behind them, which clogs queues for legitimate applicants.

• Power cost advantages: Sites with below-market power contracts ($40–50/MWh versus $70–80/MWh in primary markets) offer a structural cost advantage that compounds over multi-decade tenors. Critically, they also provide a higher-quality conversion proposition for tenants, lower power cost at source means the developer can offer competitive lease rates while maintaining strong margins.

• Site attributes beyond power (fiber and community): Network connectivity is a gating input that is frequently underweighted in site-level analysis. A site without high-capacity fiber access is effectively unusable for inference workloads regardless of its power profile, and training clusters require robust connectivity to move large datasets. Equally important, and increasingly so, is community perception and local political positioning. Data center opposition has intensified as electricity prices rise; communities that feel they are subsidizing hyperscaler power costs become increasingly hostile to new builds. Operators who reuse existing mining sites avoid new interconnection requests and thus sidestep this friction.

Execution Capability and Financial Position

• Construction track record: Management teams that have successfully delivered data center builds on time and on budget at significant scale command a valuation premium. A small initial GPU or HPC proof-of-concept build, even at modest scale, provides validation of design and execution capabilities that substantially de-risks subsequent announcements of larger colocation deals.

• Balance sheet and self-funding capacity: Excess cash plus bitcoin holdings represent internal capital that can fund equity checks without dilutive external financing. Operators with meaningful mining cash flows can bridge between phases without returning to capital markets at inopportune times.

• Tenant diversification: No single tenant should represent more than 50% of contracted revenue. A mix of hyperscaler and neocloud tenants provides credit protection and commercial flexibility. The hyperscaler backstop structure, where a major cloud provider guarantees a neocloud lease, is the optimal structure for investors seeking credit quality while preserving yield.

Relative Value: The Market-Implied Conversion Screen

• Adjusted equity value vs. approved capacity: The central valuation signal in this space is the gap between the market’s implied HPC conversion (adjusted equity value divided by $7M/MW) and the operator’s actual approved power capacity. Operators where this ratio is below 50%, implying the market assigns zero value to more than half of approved capacity, represent the most asymmetric entry points, assuming the underlying conversion thesis is credible.

• Platform optionality beyond current campus: Operators who have reviewed multiple prospective sites beyond their primary campus and progressed a subset for further development transform the HPC buildout from a single-asset story into a replicable platform business. Each incremental site adds optionality not captured in base-case SOTP models and supports a platform multiple premium over single-asset valuations.

“The floor valuation is contractually anchored by long-dated leases. The optionality is not fully priced while having bounded downside.”

06 Key Risks & Mitigants

A few of the key risks and their corresponding structural mitigants are detailed below.

07 Catalysts

The following observable events are likely to materially re-rate valuations over the next 12–24 months.

• ERCOT approval announcements: ERCOT has transitioned to a batch approval process with batch zero likely being approved by 1Q27. Approvals are binary events that have historically produced significant single-session share price moves for affected operators. Critically, approval unlocks the immediate ability to announce tenant agreements, management teams have indicated the pace of tenant interest is such that announcements would likely follow within weeks of grid clearance.

• Continued large-scale tenant announcements: The commercial terms disclosed in lease announcements (revenue per MW, contract tenor, tenant identity and credit profile) allow for direct NAV recalibration. A hyperscaler anchor deal, indicating lower yield but superior credit relative to neocloud deals to date, would be read as de-risking the portfolio and could attract a REIT-style valuation multiple for the contracted portfolio.

• Strategic M&A (hyperscaler acquisition of an operator): Direct hyperscaler acquisition of a miner-developer would validate the strategic value of energized power assets at multiples well above current market levels, crystallizing embedded value and re-rating the entire comparable set. This precedent has already been partially set (Google getting equity via warrants in CIFR and WULF) and represents a plausible exit pathway for multiple operators.

• Activist pressure on reluctant operators: Several operators have been slow to pivot from Bitcoin mining to HPC, and activists have increasingly stepped in to force the issue. BTDR reversed course on conversion following shareholder pressure, and Starboard Value has publicly pushed RIOT to accelerate its HPC strategy. Additional campaigns are likely at operators whose market-implied conversion discount is widest, and each successful campaign acts as both a company-specific and sector-wide re-rating catalyst.

• Continued headlines on power and compute scarcity: Each new report of compute and power shortages reinforces the scarcity narrative. Sustained media coverage tightens the spread between energized power and the broader market, and has historically coincided with sector-wide multiple expansion.

• Next Bitcoin halving (expected 2Q28): Block rewards will be halved again, accelerating the economic rationale for conversion for any remaining pure-play miners and further reducing the opportunity cost of pivoting to HPC colocation, incrementally expanding the supply of motivated conversion candidates.

08 Conclusion

The AI infrastructure buildout is the dominant capital deployment theme of the current technology cycle, and power scarcity is its defining constraint. The United States faces a 50 GW power deficit for data centers through 2028, a gap that cannot be closed quickly through the normal grid interconnection process. Within this context, operators who already control energized large-scale power, assembled through Bitcoin mining operations over the preceding decade, hold a structural advantage that billions of dollars in fresh capital cannot quickly replicate.

The transaction dataset is now sufficient to anchor valuation with confidence: deals have cleared at $1.25–$2.20 per critical IT watt per year with 80–97% EBITDA margins and equity values of $5–10 million per gross MW in colocation. Applied against the publicly disclosed approved capacity of listed operators, the sector in aggregate is pricing approximately 50% of approved capacity as converted, with optionality in the pipeline.

The most asymmetric opportunities are where this ratio is lowest: operators with large approved portfolios, credible execution track records, and adjusted equity values implying conversion of only 35–45% of approved capacity. For these operators, each incremental grid approval and tenant announcement is a step-change event and the gap between the contracted-capacity valuation floor and the full-portfolio bull case is wide enough to generate compelling returns even under base-case conversion assumptions.

Footnotes

1. Applied Digital

2. METR

3. Morgan Stanley

4. ERCOT

5. 2026 Data Center Report, Data Center Frontier

6. ERCOT

7. Economics of Orbital vs Terrestrial Data Centers

8. The Center Square

9. U.S. Department of Energy

10. S&P Global Market Intelligence

Shortly after raising $800M from the likes of Jane Street, Citadel Securities, valuing the firm at $20B, Payward (Kraken’s parent company) confidentially filed an S-1 with the SEC signaling its intent to go public. This would make Payward the second publicly traded crypto exchange after Coinbase. 4 months later, in March 2026, they froze their IPO plans citing difficult market conditions.

A first pass would read this as a failed and shelved IPO. But in the five months since the filing, Kraken has accelerated momentum by:

• Becoming the first digital asset company with a Master Account at the Federal Reserve

• Closing its acquisition of Backed Finance, vertically integrating issuance for tokenized equities

• Announcing its partnership with Nasdaq to build a gateway for tokenized assets

• Closing its $550M acquisition of Bitnomial, and obtaining the full set of CFTC licenses

• Announcing that Deutsche Boerse acquired a $200M secondary stake

That is a lot of activity for a business the market views as simply a crypto exchange. The $20B was reaffirmed in April 2026 by the Bitnomial transaction, per Payward’s press release (Payward). This piece argues that at $20B, the payoff distribution is asymmetric: downside bounded by the crypto-exchange floor, upside open-ended on execution of the clearing, tokenization, and charter stack.

The Business Today

In 2025, Kraken generated $2.2B in adjusted revenue (+33% YoY), with $531M in adjusted EBITDA. On the operational side they ended the year with 5.7M funded accounts (+50% YoY), $48B in assets on platform (+11% YoY), and $2T in platform transaction volume (+34% YoY). Kraken’s revenue mix is more diversified than most would assume: 47% trading, 53% asset-based (custody, yield, payments, financing). On any given day, the majority of Kraken’s revenue does not come from trading. (Kraken Financials)

The Upside Levers

The Regulatory Stack

Kraken has spent over five years and billions of dollars assembling a regulatory and infrastructure stack that is unique in the crypto industry.

The Bitnomial acquisition is highly significant as it gives Kraken all three CFTC licenses required for a full-stack domestic crypto derivatives business. Designated Contract Market (DCM) is the exchange license, Derivatives Clearing Organization (DCO) is the clearinghouse, and Futures Commission Merchant (FCM) is the brokerage.

“The shape of a market is determined by its clearing infrastructure, not its front end. The US has had no clearing infrastructure built for digital assets. Bitnomial spent a decade building it: crypto settlement, crypto collateral, continuous 24/7 markets. These are capabilities that cannot be retrofitted onto legacy systems.” — Arjun Sethi, Co-CEO

Coupled with the NinjaTrader acquisition which gave them retail futures distribution to 2M users, this gives Kraken a vertically integrated derivatives stack from UI to clearing. Being first to combine DCM, DCO, and FCM with physically-settled, crypto-native collateral and 24/7 markets under one roof matters. Clearinghouses are natural monopoly businesses with strong economies of scale. Once institutional firms connect to Kraken’s DCO and build their risk systems around it, switching costs are significant. CME didn’t dominate futures because it had the prettiest front end, it dominated because everyone cleared there.

The broader crypto industry is converging on regulated infrastructure through different paths. Coinbase recently received conditional approval for an OCC national trust charter, which provides federal uniformity for custody and settlement across all 50 states — a natural fit for a company that custodies assets for most US spot crypto ETFs. Kraken’s Wyoming SPDI is a state-level charter but with broader functional powers: it can accept deposits, offer payment services, and operate under fiduciary duty. That distinction matters because it allows Kraken’s roadmap to extend into banking products (deposit accounts, stablecoin issuance, FedNow-powered payments) that a custody-only charter would not support. The Fed Master Account, secured in March 2026, is the infrastructure layer that activates those capabilities.

Tokenization and xStocks

Kraken launched xStocks in partnership with Backed Finance in June 2025, enabling 24/5 trading of tokenized US stocks and ETFs. In less than a year, the product has grown to +$320M in AUM, and 100+ tokenized stocks across Ethereum, Solana, Ink and Ton. xStocks is the largest tokenized stocks product in the world today.

In December 2025, Kraken announced its acquisition of Backed Finance, the Swiss issuer that mints the tokens. Kraken now owns the full vertical: issuance (Backed), trading (Kraken), settlement (Ink) and custody.

This momentum compounded with announcement of the Nasdaq partnership:

“Nasdaq’s partnership with Payward... will be focused on designing an equities transformation gateway to enable issuers and investors to move seamlessly between permissioned and permissionless environments.” (Nasdaq)

Kraken is becoming the owner of the critical infrastructure that connects legacy securities with public blockchains. Nasdaq’s Equity Token framework is expected operational H1 2027, with Payward as the primary settlement layer. (Nasdaq has partnered on tokenization before, including with Ondo and Republic. Commercial terms are undisclosed, and the product is not yet live.)

Coinbase and Robinhood have announced tokenized stock ambitions, but as of April 2026 neither has shipped a backed product. Kraken’s xStocks already have $323M in AUM, 140K on-chain holders, and DeFi composability across multiple protocols. Kraken has a first-mover position, but at $320M AUM it’s better understood as option value than as a moat. The Nasdaq partnership is the catalyst that could convert that option into something durable.

Ink: The Toll Booth

Ink is Kraken’s Ethereum L2 on the OP Stack. Mainnet launched December 2024; TVL is around $270M (after the KelpDAO exploit). App revenue grew from $500K in October 2025 to $5.77M in January 2026. Kraken runs the only sequencer, meaning 100% of gas fees flow to Kraken.

If xStocks settlement migrates fully to Ink, every tokenized equity transfer, DeFi interaction, and lending transaction will generate fees for Kraken’s sequencer. It functions as a toll booth between traditional finance and on-chain markets. Ink is early relative to more established L2s like Coinbase’s Base which generated roughly $75M in sequencer revenue in 2025, making it the largest L2 by that metric. But Ink’s trajectory is steep and it has a differentiated asset (xStocks) to drive activity that other L2s lack.

The Platform Vision

Management has been explicit about the growth vectors: expanding asset classes (”Tokenized equities, FX, futures, and real-world assets extend that same infrastructure…”), asset productivity (”Custody, payments, yield, financing, and settlement activity…”), and global expansion via a “single global core” supporting localized onramps (Kraken).

Asset productivity matters most for valuation. The pattern is familiar: Schwab’s 2003 bank charter was widely questioned for a discount broker; NII eventually became its largest revenue source. The analogy has limits, though. When Schwab got its charter it was already the largest US discount broker with $800B in client assets. Kraken has $48B on platform and a brand-new Fed account. The better near-term comp is SoFi: NII grew from $252M (2021) to $2.2B (2025), yet SoFi trades at ~$23B. The market credits banking economics but does not hand out a growth premium. Kraken’s differentiation has to come from the crypto-native angle.

The early evidence is there. Instant USD withdrawals (24/7/365, 1.5% fee, $50 cap) likely run on FedNow. Krak App has 450K+ downloads across 130 countries (The Block). The Unified Wallet already cross-margins spot, margin, and futures within crypto. The logical next step, unified margin across crypto + xStocks + NinjaTrader futures, would be a highly differentiated product, and Kraken’s license stack is uniquely suited to build it.

The Stablecoin Gap

Stablecoins remain Kraken’s most significant competitive gap. Coinbase’s USDC revenue-sharing arrangement generated an estimated $1.35B in 2025, high-margin and recurring. Kraken has no equivalent. USDG (a consortium stablecoin with Robinhood, Paxos, Galaxy) has a $1.95B market cap versus USDC’s ~$76B. Kraken also has a distribution partnership with Circle and plans to issue its own MiCA-compliant stablecoin via Ireland. Closing this gap, whether through USDG scale, a US stablecoin under the SPDI post-GENIUS Act, or some other mechanism, is a key strategic question.

Valuation

Kraken does not fit one bucket. It spans crypto exchange, futures clearing, tokenized securities, banking, and L2 infrastructure.

At $20B, Kraken is priced roughly fairly for what the market can verify today: a cyclical exchange at 8-9x revenue with a maturing derivatives stack. Sophisticated investors, including those in the November 2025 round, priced in what they could see. What’s less priced is the distribution of outcomes from here. The downside is anchored by the exchange floor: base case implied EV sits in the $20-27B range even if the platform thesis never materializes. The upside depends on execution across three independently live but unproven catalysts: Bitnomial clearing scale, xStocks in the US, and banking products on the Fed master account. A bet here is not a bet that the market is wrong about today’s Kraken. It’s a bet that the distribution of outcomes from $20B is asymmetric, with bounded downside and open-ended upside on execution.

Risks

• Crypto cyclicality is the biggest near term risk. Revenue swung from $696M (2023) to $2.2B (2025). Staking, margin interest, and custody fees all correlate with crypto prices. No matter how you slice the 47/53 mix, Kraken’s revenue is crypto-beta.

• US xStocks approval is the biggest catalyst and biggest uncertainty. Without the US, xStocks is meaningful, but not thesis-changing.

• The regulatory moat erodes over time. As crypto regulation clarifies, more companies acquire more licenses. Kraken’s advantage is the combination and head start, not permanence.

• The institutions will come. If tokenized equities will proliferate meaningfully as we believe, BlackRock, JPMorgan, Fidelity, and Goldman will enter with larger balance sheets, deeper relationships, and existing distribution.

What could go right

• US xStocks launch: step function in volume, users, and narrative

• Banking products on Fed master account: recurring, non-cyclical revenue

• Cross-margin product: attracts institutional capital without a current home

• Bitnomial clearing infrastructure: enables physically-settled crypto derivatives at scale

• Stablecoin issuance under SPDI charter: direct NII stream

• NinjaTrader cross-sell: 10% conversion of 2M futures traders = 200K high-value accounts

Kraken is the first crypto-native firm to assemble the full US clearing stack and holds the largest tokenized-equities product globally. Whether that advantage compounds or gets competed away will define whether this is a $20 billion exchange or something considerably larger. No other company has clearing, tokenized equities, a bank charter, and a Fed master account under one roof. Any single piece is replicable. The combination, assembled first, is what makes the bet.

A note on what’s new at Artemis. This newsletter marks the first issue under our new Artemis platform: our full digital-finance research and investment platform. Artemis now ingests the same public-company fundamentals you’d get from CapIQ or FactSet (filings, transcripts, KPIs, IR presentations) and combines them with our blockchain, stablecoin, and protocol data in one workspace. If you’re covering COIN and Aave in the same model, or modeling Circle’s float against USDC supply growth, this is the stack we built for you.

Market Overview: The Weekly Recap

Market Sentiment: cautious risk-on. Prices have continued to rebuild meaningfully off the February lows this week. The U.S.–Iran two-week ceasefire pulled geopolitical risk premium out of commodity and crypto markets, and spot BTC ETF flows turned net positive for the second week in a row. Sentiment sits in greed territory: 62 for crypto, 68 for equities (Artemis).

Assets across digital finance returned an average of 10.66%, led by AAVE, DRIFT, HOOD, COIN and CIRCLE, each of which returned above 20%. Crypto majors BTC, ETC and SOL returned about 5% each.

Today We Highlight

• Aave “Will Win” vote passes. The DAO now captures 100% of Aave-branded app-layer revenue. Arguably the most consequential DeFi governance event of the year so far.

• Artemis Research Spotlight:

• Robinhood leads digital finance stock growth as earnings approach April 28th.

1. Aave Just Rewired Itself Around $AAVE

The Aave DAO has spent the better part of four months re-litigating a deceptively small question: who owns the front end? The dispute traces to late 2025, when delegates flagged that a CoWSwap integration on Aave’s interface had quietly routed swap-related fees away from the community treasury to an external recipient. That surfaced a deeper tension. Aave Labs had been building application-layer products (Aave Pro, Aave App, Horizon, Aave Kit) that sat atop the permissionless protocol but whose economics bypassed AAVE holders entirely. The Labs vs. DAO split, in other words.

On April 12, the “Aave Will Win“ (AWW) proposal passed with overwhelming support: 75% of voters voted in favor (aave.com). The proposal does three things: (i) redirects 100% of revenue from every Aave-branded product to the DAO; (ii) pays Aave Labs a one-time package of $25M in stablecoins plus 5,000 AAVE; and (iii) consolidates brand and economic rights under the token itself. An on-chain AIP ratification still has to clear. That’s the real catalyst.

Aave protocol revenue hit $140M in 2025 and is tracking to roughly match that in 2026. The incremental piece is app-layer revenue: swaps on Aave.com and Aave Pro are already running at $10–20M/year that previously accrued to Labs, with Aave App, Horizon, and Aave Kit layered on top. A conservative 10× revenue multiple on ~$20M of incremental accrual is roughly $200M of implied fundamental value, or ~13% of AAVE’s fully-diluted cap. AAVE traded up nearly 30% after the vote.

Now execution has become the biggest question for Aave. BGD Labs, the DAO’s primary technical contributor, wound down its partnership on April 1 (BGD governance post, Feb 2026). ACI, another leading service provider for Aave, is choosing to leave the ecosystem in July of this year. V4’s cross-chain hub-and-spoke rollout, which Stani has publicly targeted as a trillion-dollar credit layer, now needs to ship without its most senior engineering counterparty.

2. Artemis Research Spotlight: $PURR

Artemis Research Spotlight: Hyperliquid Strategies ($PURR): The Only DAT With a Productive Underlying Asset by Zheng Jie Lim.

The framing: most DAT vehicles wrap an asset that either earns nothing (BTC) or runs at a negative operational cash flow once staking emissions are netted against fees (ETH: $526M fees vs. $3,035M in emissions; SOL: $680M vs. $3,936M). Hyperliquid is the outlier. It generated $857M in 2025 fees (of which $797M from perps at a 2.72 bps take rate), with 99% of earnings flowing to the Assistance Fund for buyback-and-burn ($837M on $857M of fees). Staking emissions come from a pre-allocated reserve rather than fee revenue, which the piece argues is the right way to evaluate operational cash flow. On that basis, HYPE is the only major crypto asset with positive underlying unit economics. Per outstanding HYPE (477M), that works out to roughly $1.76 of earnings per token. Hyperliquid is also the highest revenue generating company in the world per employee:

The vehicle: PURR (NASDAQ) is a zero-debt, zero-preferred, zero-convertible wrapper around 18.8M HYPE plus $112.6M cash, trading at ~1.12x mNAV with a $30M buyback program (~$10.5M deployed, retiring ~3M shares) and a $1B equity line as optional dry powder. Cap table anchored by Paradigm, D1, Galaxy, and Pantera; board includes Bob Diamond (ex-Barclays), David Schamis (Atlas Merchant / ex-JC Flowers), Eric Rosengren (ex-Boston Fed), and Larry Leibowitz (ex-NYSE COO). The piece frames the structure as the inverse of the Strategy trade: Strategy issued equity at premium to fund BTC accumulation (a mechanism that breaks when the premium compresses, which is where the category sits today at ~1.15x mNAV); PURR’s buyback program mechanically increases HYPE-per-share only when the stock trades below NAV.

Growth vectors laid out in the note: HIP-3 (permissionless perps, 500k HYPE stake per market, expanding TAM from $3–5T crypto derivatives toward the >$100T global derivatives market), HIP-4 (options + prediction markets, mainnet Q4 2026), builder-routed distribution (~40% of DAUs already flow through third-party frontends), and USDH (native stablecoin, 50% of reserve yield to the Assistance Fund, currently ~$1M/yr to buybacks at $93M supply, scaling to $40–100M/yr at $2–5B supply).

Valuation summary:

• Base: HYPE at $76 by 2030 on $1.71B of earnings at 20x P/E, PURR held at 1.1x mNAV → $10.59/share, +63% over 5 years.

• Bull: HYPE at $127, mNAV 1.3x → $20.84, +220%.

• Bear: HYPE at $27 at 16x P/E, mNAV 0.95x → $3.32, -49%. Bear-case mitigant: zero liabilities mean no forced-selling dynamic, the protocol still generates $782M of fees at trough, and the token remains deflationary net of emissions.

Key risks: HYPE drawdown, potential CFTC/SEC enforcement on Hyperliquid’s no-KYC operations (where PURR itself actually benefits as the regulated wrapper), equity-line dilution if drawn at the wrong price, and general DAT-premium compression.

Full note on Artemis Research.

3. Robinhood leads Digital Finance theme growth

HOOD was +31.16% on the week, the best-performing name on the crypto-adjacent equities list (ahead of COIN +22.93% and CRCL +20.30%). The stock had seen a nearly 60% drawdown since October highs before the rebound. A major catalyst this week was the SEC’s reversal of the “pattern day trader” rule, which had been an inhibitor to retail trading volume. This is expected to bring more trading volume to Robinhood, arguably the biggest beneficiary of this rule reversal.

Fundamentals:

Robinhood has also seen exceptionally strong fundamental growth. KPIs have grown significantly over recent quarters. The growth in Gold Subscribers is a particularly important metric to look at since it is a key component of Robinhood’s non-trading revenue.

Robinhood saw record quarterly revenue in Q4 2025, growing at 26.5% YoY. Revenue growth was driven by strong net interest income growth. NII made up about 30% of Robinhood’s top line in Q4 2025, and grew 38.9% YoY.

The sell-side view: Bernstein reiterated Outperform with a $130 PT on April 14, ~60% above spot. Their thesis centers on Bitstamp, the $200M institutional crypto exchange Robinhood closed in June 2025, which now drives ~60% of HOOD’s total crypto transaction volume. Bernstein models 2026 crypto revenue at $1.1B (+23% YoY, 31% above consensus) (Bernstein via Parameter, Apr 17; Robinhood/Bitstamp press release, Jun 2, 2025).

HOOD is one of the clearest expressions of retail brokerage and crypto infrastructure converging into one product surface.

Charts of the Week

Chart 1: HIP-3 Open Interest has stalled but remains above $2 billion

Chart 2: We highlight the effect of incentives on prediction markets in our new Prediction Markets dashboard: Dashboard Link, Analysis Link

Other Notable News

• Morgan Stanley launches MSBT at 0.14%: First spot BTC ETF issued directly by a major U.S. bank. Over $100M in week-one flows.

• Schwab introduces spot crypto trading: Schwab is one of the world’s largest brokerages, and is planning on a phased roll out of spot crypto trading to its 38.5m accounts.

• SEC CLARITY Act roundtable held April 16. Market-structure bill has bipartisan noise but no markup date. Watch the Senate Banking Committee calendar next week.

Thanks for reading! Stay ahead this week by using the Artemis Terminal to pull the underlying data on any of the stories above (Aave revenue, Robinhood financial and comps, HIP-3 OI by market type) or pull live numbers straight into your models with =ART() in Excel.

Disclaimer: This newsletter is produced by Artemis for informational and educational purposes only. It does not constitute investment advice, a recommendation to buy or sell any security or digital asset, or an offer to provide advisory services. Artemis and its employees may hold positions in assets discussed. Figures are accurate to the best of our knowledge as of publication; markets move quickly.

The market is pricing PURR as another digital asset treasury copycat — an MSTR-style vehicle where a premium lets management issue equity, buy more tokens, and accumulate more per share. We think that framing misprices the business. Strategy spends $2.3 million a day to service $835 million of annual preferred and convertible obligations on top of 780,897 bitcoin that earn nothing, and its mNAV has collapsed from peaks above 6x to 1.15x today. PURR carries zero debt, zero preferreds, and zero recurring obligations, and owns 18.8 million HYPE tokens in the only major protocol that produced positive earnings in 2025: $857M of fees ($797M from perps at a 2.72 bps take rate), 99% of which flows to the Assistance Fund — $837M of Earnings bought back and burned at near-zero operating cost. The token is structurally deflationary: ~19M HYPE bought back annually against ~7M emitted from staking reserves. The stock trades at 1.12x mNAV. Our base case carries HYPE to $76 on $1.71B of 2030E Earnings at 20x P/E, holds PURR at 1.1x mNAV, and implies a $10.59 share of ~63% upside over five years. Bull case at $127 HYPE and 1.3x mNAV implies ~$20.84, +220%. Bear case compresses HYPE to $27 at 16x P/E and 0.95x mNAV at −49%.

Comps:

PURR is the only DAT that combines a productive underlying, positive earnings, and zero liabilities.

What Does $PURR Do?

Hyperliquid Strategies Inc (NASDAQ: PURR) is a digital asset treasury company whose sole mandate is to accumulate and hold HYPE, the native token of the Hyperliquid protocol. The company was formed in December 2025 via an $888M business combination involving Sonnet BioTherapeutics, Rorschach I LLC (a Paradigm-affiliated SPAC), and a new entity spun up by Atlas Merchant Capital.

The balance sheet is the cleanest in the DAT category: 18.8M HYPE, $112.6M of cash, zero debt, zero preferreds, zero convertibles. A $30M stock buyback program was authorized in January 2026. As of February 3, 2026, $10.5M was deployed, retiring ~3.0M shares and pulling the fully diluted count to 150.8M. A $1 billion equity line sits on top of the cash position as optional dry powder for HYPE drawdowns.

The underlying is the asset that makes this structure unusual. HYPE is an equity-like claim on Hyperliquid, a perps exchange that generated $857M in 2025A fees with 11 employees (~$78M rev/employee, the highest of any company in the world).

The Fee Machine

Hyperliquid is an exchange.

The model is a volume × take-rate business with near-zero marginal cost.

The fee waterfall breaks down into six line items:

Thesis #1: The Only Underlying Asset That Earns

Every DAT on a U.S. exchange today wraps an asset that either earns nothing (BTC) or runs at a loss once you account for the tokens minted to keep the chain alive. Ethereum generated $526M of fees but paid $3,035M in staking emissions; Solana generated $680M but paid $3,936M. Hyperliquid generated $857M in fees. Earnings definitions matter here. For Hyperliquid, earnings = fees after the 1% HLP vault cut (3% pre-Aug 30, 2025), with 99% flowing to the Assistance Fund for buyback-and-burn: $837M on $857M of fees. For Ethereum and Solana, the comparable figure is fees minus staking issuance, since their chains cannot function without token emissions to pay validators. This is a true operational cost, and both are negative at time of writing. Hyperliquid’s $312M of staking emissions are drawn from a pre-allocated reserve, not from exchange revenue, so they sit below the line. On the adjusted basis ($545M), Hyperliquid is the only protocol with positive underlying cash flow assets. The performance gap shows up on DAT balance sheets. BMNR’s average ETH entry was $2,826; Forward Industries bought SOL at $232. Both are underwater.

PURR is the only DAT sitting on meaningful unrealized gains, up roughly $600M on its HYPE position. The underlying asset isn’t just productive, it’s appreciating.

Five growth drivers are compounding this advantage:

1. HIP-3: Hyperliquid becomes a listing platform. Live since October 2025, HIP-3 lets any builder stake 500,000 HYPE to deploy permissionless perps on any asset — commodities, equities (China, Korea, Japan), FX, exotics. This transforms HL from a crypto trading venue into a general listing layer. TradeXYZ’s crude-oil HIP-3 market processed $305M of weekend notional during the Strait of Hormuz crisis; cross-asset weekend prices tracked TradFi reopen at R² = 0.785 (Shaunda from Blockworks). The listing TAM expands from $3-5T of crypto derivatives to the >$100T global derivatives market. Each HIP-3 deployment requires a permanent 500k HYPE stake. HIP-4 carries the same requirement. Twenty markets at scale retire ~10M HYPE (2.1% of Outstanding Supply) from the float permanently.

2. DAT as a builder partnership. At current prices, 500k HYPE is roughly $23M. Most builder teams cannot self-fund that stake. A large holder like PURR (18.8M HYPE) is a natural counterparty: financing or partnering on HIP-3/HIP-4 deployments in exchange for a share of the market’s fees. This creates a revenue stream and ecosystem influence that individual HYPE holders cannot replicate at scale.

3. HIP-4: options and outcome contracts. Testnet launched March 2026; mainnet targeted Q4 2026. Deribit, which got acquired by Coinbase, traded over $1,875B in options notional value in 2025, making up over 85% of the market (~$2.2T). Options are just ~3% of crypto derivatives today (as Coinglass sizes the total crypto derivatives volume at $85.7T). If onchain options reach 15% penetration and HL captures half, that’s $165B of volume at ~8bps (options carry wider spreads than perps, deribit charges 12bps) = $135M/yr in fees. Our Base model assumes $50M in 2026E scaling to $130M by 2030E. Prediction-market outcome contracts open a second HIP-4 fee line (Annualized fees for Polymarket are reaching $700M).

4. Builder codes: negative CAC distribution. ~40% of HL DAUs already route through third-party frontends (Phantom is the largest). Builders earn a rev-share for every trade routed — $40M+ paid out to date (Dwellir). Compare Coinbase’s $400-600 retail CAC per funded account: HL’s is negative. This is why the model grows perp volume from $2.9T (2025A) to $5.2T (Base 2030E). The distribution layer is outsourced.

5. USDH: native stablecoin with revenue sharing. Native Markets won the USDH bid (Sept 2025). Reserves sit in a BlackRock-managed fund; 50% of reserve yield routes to the Assistance Fund.

At current supply (~$93M) and 3.7% T-bill yields, USDH contributes ~$1M/yr to the AF buyback. At $2-5B supply, that scales to $40-100M/yr. With the addition of HIP-4 which could only be traded on USDH, this could be a massive tailwind for the Native Markets stablecoin.

None of this expansion requires Hyperliquid to hire. Every growth vector (HIP-3 listings, HIP-4 options, builder distribution, and USDH float) is outsourced to external teams who take listing and distribution risk in exchange for a rev-share. The 11-person core team writes the protocol and the fee plumbing. This is a platform-scaling model: throughput, listings, and frontends grow without headcount.

Thesis #2: Buy the Wrapper at Cost

Strategy issued equity at a premium, converted the cash to BTC, and called it financial engineering. The mechanism inverts the moment the premium collapses, which is where the entire DAT category sits today (Strategy at 1.15x, down from 6x). PURR runs the opposite trade: the stock sits at ~1.12x NAV, and the $30M buyback program deploys only when the market prices PURR below the tokens it already owns. Every dollar deployed sub-NAV mechanically increases HYPE-per-share. The mechanism works both ways. Below NAV, management buys back stock and each remaining share represents more HYPE. Above NAV, they can issue shares at a premium and use the proceeds to buy more HYPE, also increasing HYPE-per-share. Either direction accretes value to existing holders.

No other DAT operates this way. Strategy, BMNR, and Forward Industries issue shares to buy tokens but have no buyback mechanism when the premium compresses. Their shareholders absorb the dilution on the way up and get nothing back on the way down.

Where direct HYPE wins: no corporate overhead, no dilution risk from the equity line, no regulatory risk specific to PURR management, and 100% of the token upside. Staking/airdrop optionality accrues only to direct holders.

But the wrapper offers four things direct HYPE doesn’t:

1. Automatic accretion without additional risk: the buyback described above is funded by cash already on the balance sheet. No margin calls, no liquidation risk, no action required from the holder. A direct holder can lever up through perps or borrowing, but that adds counterparty and liquidation exposure.

2. The regulatory moat: PURR and HYPD are the only two NASDAQ-listed vehicles for HYPE exposure, and any enforcement action on Hyperliquid’s no-KYC operations pushes institutional demand INTO the wrapper

3. Zero obligations: no debt service, no forced selling, no preferred shares.

4. Tax efficiency: PURR is taxed as a standard equity. Holders who hold for over a year pay long-term capital gains (20% federal max), can hold shares in IRAs and 401(k)s for tax-deferred or tax-free growth, and use tax-loss harvesting against other equity positions. Direct HYPE holders pay ordinary income tax (up to 37%) on every staking reward the moment it’s received, have no access to tax-advantaged retirement accounts, and face unresolved IRS guidance on airdrop cost basis. For a top-bracket U.S. investor, the wrapper roughly halves the tax drag.

The underlying exchange produces $1.76 of earnings per Outstanding HYPE ($837M ÷ 477M Outstanding Supply - we introduced this metric with Pantera Capital back in August 2025).

Valuation & Scenarios

Valuation is a two-step chain: first we value HYPE on fundamentals (2030E earnings × P/E ÷ Outstanding Supply), then we value PURR as NAV per share at that HYPE price multiplied by a target mNAV.

HYPE Scenarios

We value HYPE on earnings (fees × 99% after HLP) multiplied by a terminal P/E:

PURR Scenarios

Translating HYPE scenarios to PURR uses Adjusted NAV per share = (18.8M HYPE × price + $112.6M cash − $95.8M DTL + $4.5M adj) ÷ 150.8M FD shares, then applies a target FD mNAV. DAT stocks with productive underlyings have historically re-rated to 1.1x–2.0x NAV in up cycles; category norm at par is 1.0x.

Base case: HYPE at $76 by 2030, Adjusted NAV per share of $9.63, held at 1.1x NAV, implying a $10.59 stock and +63% upside over five years.

Bull case: HYPE reaches $127 by 2030, Adjusted NAV of $16.03, re-rate to 1.3x NAV, implying $20.84 and +220% upside.

Bear case: HYPE compresses to $27, Adjusted NAV drops to $3.49, mNAV slips to 0.95x, implying $3.32 and –49% downside. Base case returns ~10% annualized, but the distribution is asymmetric: bear downside is floored by zero liabilities and a protocol that still generates $782M of fees at trough, while bull upside compounds from both HYPE appreciation and mNAV re-rating.

Management & Cap Table

PURR is a balance sheet vehicle. The only job is capital allocation: when to buy HYPE, when to buy back shares, when to draw the equity line, and when to sit still. The team running that decision has 80+ combined years in capital markets, bank balance sheet management, and exchange infrastructure. Paradigm, the largest crypto-native fund in the world ($12.7B AUM), anchored the SPAC. D1, Galaxy, and Pantera round out a cap table that bridges TradFi and crypto. Diamond’s institutional network doubles as a distribution channel for allocators who want HYPE exposure but can’t custody tokens or navigate crypto tax complexity.

• Bob Diamond (Chairman) — Former CEO of Barclays; co-founder of Atlas Merchant Capital.

• David Schamis (CEO) — Co-founder of Atlas Merchant Capital; ex-JC Flowers partner.

• Eric Rosengren (Board) — Former President, Federal Reserve Bank of Boston (2007-2021).

• Larry Leibowitz (Board) — Former COO of the New York Stock Exchange; Operating Partner at Atlas Merchant Capital

Anchor investors include Paradigm, D1, Galaxy, and Pantera.

Risks

1. HYPE Price Drawdown

PURR is a levered claim on HYPE’s price. A broad crypto bear market compresses volumes, fees, and the buyback pool. Our bear case models this: TAM plateaus at $85T, HL share holds at 3%, take rate drifts to 2.3 bps, P/E de-rates to 16x, implying $27 HYPE and $3.32 PURR (−49%). Outstanding Supply is ~477M; Bear assumes a 35% team claim rate in 2026–27.

Mitigant: Zero liabilities mean no forced-seller dynamic. Even in the bear case, Hyperliquid still generates $782M of fees and $774M of earnings — the buyback-and-burn continues to exceed staking emissions, and the token remains deflationary (−23M HYPE/yr net). The $1B equity line is optional, not mandatory.

2. Regulatory Action on Hyperliquid

Hyperliquid operates without KYC. The Futures Industry Association has filed formal complaints with U.S. regulators requesting enforcement on U.S.-person access to offshore perps. An adverse action would compress HYPE directly. The HIP-3 expansion into TradFi assets (silver, oil, equities) increases regulatory surface area — commodity perps may draw CFTC attention beyond the crypto-specific enforcement actions seen to date.

Mitigant: PURR itself is a fully compliant NASDAQ-listed entity. A regulatory action would most likely push U.S. institutional demand into the PURR wrapper, which is the regulated way to own HYPE economics.

3. Equity Line Dilution

The $1B equity line can be drawn if HYPE dips, but drawing at the wrong price dilutes existing holders. At the bear-case $27 HYPE, PURR Adj NAV is $3.49/share — drawing at that level would issue shares below $6.51 spot.

Mitigant: The line is optional and at management’s discretion. Current posture is buyback, not issuance — $10.5M of the $30M authorized program was deployed by early Feb 2026, retiring ~3M shares and pulling FD count to 150.8M. The Paradigm-led cap table has no incentive to dilute itself.

4. DAT Premium Compression

Any premium that opens above NAV in a rally can compress quickly when sentiment turns. Strategy’s 6x mNAV premium collapsed to 1.15x FD in under 12 months. In the bull case, PURR re-rates to 1.3x NAV ($20.84); if sentiment reverses and the multiple compresses back to 1.1x, the loss is capped at the mNAV delta.

Mitigant: PURR trades at 1.12x mNAV today. The premium is 12 cents on the dollar versus Strategy’s peak of $5+ on the dollar. The asymmetry runs upward: 1.3x in a bull cycle is modest relative to the 2.0x+ that DAT stocks with productive underlyings have historically reached. At 1.0-1.1x, the wrapper’s value is the underlying asset.

Disclosure: This material is provided for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other form of advice. The views expressed are those of the authors and should not be relied upon as a recommendation to buy, sell, or hold any asset. The authors or affiliated entities may hold positions in the assets discussed. You should conduct your own research and consult appropriate financial professionals before making any investment decisions.

Geopolitics dominated again — but this week it broke the other way. After five weeks of war-driven compression, Tuesday night’s (April 7, 2026) Trump-Iran ceasefire announcement triggered one of the sharpest single-day risk reversals in recent memory. The Dow surged 1,325 points (+2.85%) on Wednesday, its best day since April 2025. The S&P 500 jumped 2.51% to 6,782, breaching its 200-day moving average for the first time since the conflict began. WTI crude collapsed 16.4% to $94.41 — its biggest daily drop since April 2020 — as Iran confirmed it would allow passage through the Strait of Hormuz for the two-week truce period. The deal is fragile: Iran’s parliament speaker briefly claimed a US violation Wednesday afternoon, and JPMorgan cautioned that “a two-week pause is not a resolution.” The clock expires April 22.

Crypto finally caught a bid. BTC surged from ~$68K to ~$72.7K on the ceasefire news, finishing the week up ~9% and triggering nearly $600M in leveraged liquidations — over $400M from shorts that had piled in during weeks of range-bound drift. ETH gained ~9.3% on the week. The standout was ZEC, up a striking +59.7%, though on idiosyncratic rather than macro drivers. HYPE continued its strong run, up +16.8%, while SKY gained +4.97%. On the losing side, DRIFT extended its post-exploit collapse, down another -28.1% on the week following the $285M April 1 hack, and TAO gave back -16.59% after its recent surge. Equities proxies tracked closely with the relief rally: eq-COIN +3.6%, eq-QQQ +4.46%, while eq-HOOD (-2.11%) and eq-CRCL (-2.46%) lagged on continued CLARITY Act yield-ban uncertainty.

The week’s average across tracked assets came in at +1.25%, median +1.25% — a modest but real improvement from the prior four weeks.

Today We Highlight:

• Morgan Stanley MSBT — the first US bank spot Bitcoin ETF

• CLARITY Act: Senate returns April 13 — the next major catalyst

• Corporate Bitcoin buying: Strategy crosses 767K BTC as DAT total nears 900K

• Artemis Analyst Sector Deep-Dives: Agentic Payments, Lending, Trading, Neobanks, and Prediction Markets

1. Morgan Stanley MSBT: the first US bank spot Bitcoin ETF

On April 8, Morgan Stanley launched the Morgan Stanley Bitcoin Trust (MSBT) on NYSE Arca, becoming the first major US bank to issue its own spot Bitcoin ETF. The fund drew ~$34M in net inflows on day one. Bloomberg ETF analyst Eric Balchunas placed the debut in the top 1% of all ETF launches and projects $5B AUM in year one.

Why does the fee matter?

MSBT launches at 0.14% — 11 basis points below BlackRock's IBIT at 0.25%. On a $100K investment that's $110/year in savings. Narrow in absolute terms, but it sets a new floor. Fee compression in Bitcoin ETFs is accelerating, and Morgan Stanley just fired the loudest shot yet.

Why is Morgan Stanley's distribution so powerful?

Morgan Stanley's 16,000 wealth advisors oversee $9.3 trillion in client assets. Previously they could recommend third-party Bitcoin ETFs; now they can recommend one that keeps the fee in-house. That internal incentive shift is structural — and it means new long-duration capital gets directed to MSBT rather than existing funds. The first week of flows will be the real tell.

Is MSBT a standalone product or something bigger?

It's the wedge. Morgan Stanley filed for Ethereum and Solana trusts in January, applied to the OCC for a National Trust Bank Charter in February covering custody and staking, and plans to launch retail spot crypto trading on E*Trade in H1 2026. The pattern is clear: Morgan Stanley is building a full-stack digital asset business under its own brand. MSBT is how they get distribution.

Custody: Coinbase (cold storage).

Cash custody and administration: BNY Mellon.

Authorized participants: Jane Street, Virtu Americas, Macquarie Capital.

Benchmark: CoinDesk Bitcoin Benchmark 4PM NY Settlement Rate.

What this means for the Bitcoin ETF landscape?

IBIT remains structurally protected by its liquidity depth and options ecosystem, most active traders won't leave for 11bps. But the long-duration capital flowing through wirehouse advisors is a different market entirely. The landscape is bifurcating: IBIT for traders, MSBT for allocators.

2. CLARITY Act: Senate returns April 13 — what to watch

The Senate returns from Easter recess on April 13 with the CLARITY Act heading for Senate Banking Committee markup in the final weeks of April. This is the most consequential near-term regulatory catalyst for crypto — and the one most likely to move individual names.

What's actually been agreed?

The yield language is "99% resolved" per Senators Tillis and Alsobrooks: passive yield banned, activity-based rewards permitted. That same logic is now baked into the FDIC's GENIUS Act proposed rule — the two regulatory tracks are moving in deliberate lockstep.

What's still unresolved?

Two things.

First, DeFi scope — the “digital asset service providers” language leaves it ambiguous whether protocols like Aave or Morpho are in scope, and that ambiguity alone is a headwind for the sector.

Second, token classification provisions that determine the SEC vs. CFTC jurisdictional split. XRP has been the primary beneficiary of optimism on this front.

On the winners side: Coinbase benefits most clearly, as the yield ban improves USDC distributor margins while its OCC trust charter positions it as the institutional plumbing layer the new framework requires. Circle's $900M+/year revenue share from Coinbase is untouched, though the retail yield acquisition story weakens. Tether is largely unaffected — its model already aligns with the framework.

Why does the timing matter now?

Market participants have been treating CLARITY as a second-half 2026 story. With the Senate back April 13, final-week markup sessions in April are now realistic. That timeline repricing alone could move names.

3. Corporate Bitcoin buying: Strategy crosses 767K BTC as DAT total nears 900K

Strategy added another ~4,871 BTC early in the week, pushing its total to 767K BTC as of April 9 — extending its lead as the dominant corporate holder by a wide margin. The broader Digital Asset Treasury (DAT) cohort now collectively holds ~899.9K BTC across seven tracked entities, approaching the psychologically significant 900K mark. That's roughly 4.3% of total Bitcoin supply sitting on corporate balance sheets.

How does Strategy compare to everyone else?

The gap is extraordinary. Twenty One Capital sits at 43.5K, Metaplanet at 35.1K, Bitcoin Standard Treasury Company at 30K, Strive at 13.1K, Nakamoto Holdings at 5.8K, and American Bitcoin at 5.4K. The next six combined don't reach 20% of Strategy's stack.

Are these companies actually making money?

Not yet, at current prices. Strategy is sitting on approximately -$2.9B in unrealized losses against its blended cost basis. Most of the DAT cohort accumulated heavily during BTC’s $80K–$100K+ run in late 2025, meaning the majority are currently offside. The ceasefire rally this week provided partial relief, but a sustained break above $80K is what most of these balance sheets need to return to breakeven.

The accumulation continues regardless. Strategy’s behavior through the drawdown reflects the thesis it has always operated on: price is irrelevant at the margin, supply absorption is the objective.

Charts of the Week

Privacy Coins lead all sectors in performance

USDs Stablecoin Supply Surges +36% since December 2025

Hyperliquid leads 7D Top Net Flows Chart

Other notable news

• Polymarket exchange upgrade — Rebuilt trading engine, new smart contracts, and a native Polymarket USD collateral token replacing USDC.e, rolling out over 2-3 weeks. Comes as daily fees hit $1.9M.

• Polygon Labs — $100M stablecoin payments raise — Early talks to raise $100M for a regulated stablecoin payments business. Would put Polygon in direct competition with Stripe/Paradigm-backed Tempo, which launched mainnet last month.

• ZachXBT — North Korean IT worker network — Data from an internal DPRK payment server exposed 390 accounts running ~$1M/month through fake identities and crypto-to-fiat networks. The most detailed public view of North Korea’s crypto laundering infrastructure to date.

• Canary Capital PEPE ETF S-1 — Filed following prior MOG and Pengu filings. Whether the SEC engages substantively will signal how far the new regulatory posture actually extends.

• France crypto wallet declaration law — Taxpayers holding >€5K in self-custody must now declare to tax authorities. Significant expansion of crypto surveillance in the EU’s largest retail crypto market.

• Coinbase ASIC license — First crypto exchange to secure an Australian Financial Services Licence. Consistent with the broader Coinbase institutional buildout narrative this week.

• Roman Storm / Tornado Cash — Prosecutors rejected the bid to dismiss charges; retrial on money laundering and sanctions counts stays open. The most-watched smart contract developer liability case remains live.

Thanks for reading! Stay ahead this week by using the Artemis Terminal or pulling live data with =ART() in Excel.

Disclaimer: The authors of this content, as well as affiliates of Artemis Analytics, may have financial interests in the protocols or tokens mentioned. This does not constitute investment advice or a recommendation to buy, sell, or hold any asset. The information provided is for educational purposes only and should not be relied upon for financial, legal, or tax decisions. Readers should assess their own circumstances before making any financial choices. Views expressed may change without notice, and Artemis Analytics is not liable for any losses resulting from the use of this content.

Main Takeaway: Stablecoin capital flows between chains predict cross-sectional L1 returns, delivering a 1.67 Sharpe over 5 years that is almost entirely independent of broad crypto market direction.

Executive Summary

• We constructed a weekly-rebalanced long-short factor from tracking stablecoin flows.

• The raw strategy delivers a 1.67 Sharpe and +83.6% annualized return over five years, with a -43.9% max drawdown. Adding a volatility-targeting risk overlay compresses the Sharpe to 1.17 but cuts the max drawdown to -31.9%.

• The factor is effectively market-neutral and inversely correlated with down markets: market beta is -0.03 (not significant) with an R² of 0.1%. In BTC-negative months, the raw factor averaged +6.8% while BTC averaged -10.9%.

• Annualized alpha is +73.8% for the raw factor after controlling for market exposure (t-stat 3.31, p = 0.001), statistically significant at the 1% level.

• The factor is the least-correlated factor in our stack (max pairwise correlation 0.16) and retains significant alpha (t-stat 2.54) after controlling for all other factors simultaneously in a spanning regression.

• The long leg generates 84% of returns. The factor is fundamentally a positive-flow detector for mid-cap L1s and L2s rather than a structural short on mega-caps. Five chains (Polygon, Mantle, Optimism, BSC, Sei) account for 84% of total returns.

Goal

Stablecoins 1 was created to test the theory that stablecoin flows can predict L1 performance. The core idea is that stablecoins moving onto a blockchain is a leading indicator that the chain’s native token is about to appreciate. For example, when dollars in the form of stablecoins (eg. USDC, USDT, etc.) flow onto Solana, it signals capital is arriving. That same capital will buy SOL, pay SOL gas fees, provide liquidity in SOL pools, and generally drive demand for the SOL token. On the other hand, when stablecoin supply is shrinking, capital is leaving, and the chain’s token will underform.

This thesis, if true, should produce returns that are independent of the broader crypto market because the factor trades on relative capital allocation between chains rather than market direction. We test this independence property below.

To learn more about our methodology, request detailed testing results, or explore commercial opportunities, please reach out to the Artemis team.

Process

Stablecoins 1 is a long-short factor using on-chain data to look at stablecoin and L1 data sourced from Artemis.

Every week, the strategy looks at all 18 chains (Ethereum, Solana, BNB, Arbitrum, etc.) and ranks them by signals that all measure stablecoin flow direction. The signals are then converted to a rank score to see how each chain stands relative to its peers, averaged into a composite score, and sorted into quintiles. The strategy longs the top quintile (about 3-4 chains with strongest inflows) and shorts the bottom (about 3-4 chains with the worst outflows), holding for one week, and then rebalances.

We also explored adding risk overlays to limit downside. Positions are scaled each week to target 20% annualized realized volatility with a leverage cap of 1.5x, and exposure is further reduced during deep drawdowns measured against a rolling peak. Using a rolling peak ensures that we can resume the full-size trading strategy after extended flat periods, avoiding permanent deleveraging after a deep drawdown. Unlike Fundamentals 1, there’s no BTC regime filter because the factor naturally backs off during down crypto markets as capital leaves, stablecoin supply contracts, and the strategy’s exposure shrinks.

Performance & Results

Backtested Performance

We look at the performance of Stablecoins 1 since its inception on March 1, 2021. We can compare looking at the raw factor without the risk overlay and the factor with volatility scaling.

Returns are gross of transaction costs as realized performance would depend on execution costs and liquidity at time of trade. However, we have found this strategy to be highly cost resilient. The breakeven transaction costs are estimated to be 197 bps per trade. This is a result of moderate weekly turnover (57.9%) and high liquidity of L1 tokens.

The raw long-short strategy delivers the highest annualized return (+83.6%) and the best Sharpe (1.67), with cumulative returns of +2,164% since inception. Adding the risk overlay reduces the Sharpe to 1.17 but also cuts the max drawdown from -43.9% to -31.9% and the worst month from -25.3% to -20.8%. The risk overlay trades roughly half the raw return in exchange for a meaningfully smoother profile.

Looking at yearly performance, Stablecoins 1’s strongest years were 2021 (+262% raw) and 2025 (+315% raw), with more muted performance in 2022 (+47%) and 2023 (+20%). 2024 was the factor’s one losing year (-13% raw, -18% with overlay), driven by a single sustained drawdown (sets the -43.9% max drawdown) from September to November where chains the signal identified as capital-losing outperformed chains it identified as capital-attracting for roughly two months. The factor recovered fully in Q1 2025 and went on to deliver its best year on record. Solana in particular contributed disproportionately to this period. Short positions on Solana have been the single largest negative contributor across the entire backtest, suggesting the signal does not capture Solana’s idiosyncratic dynamics well, and the September-November 2024 window was one of the periods where this weakness was most acute.

The 2024 drawdown coincided with a period of stagnant aggregate stablecoin supply. Total stablecoins in circulation across the universe had been roughly flat since mid-2022 and didn’t resume meaningful growth until November 2024, as the chart above shows. Cross-sectional factors like this one work best when capital is actively moving at scale: when aggregate supply is expanding, the marginal dollar of new stablecoin issuance has to pick a chain, and those choices reflect real allocation decisions that the factor can profitably rank. When aggregate supply is stagnant, the cross-sectional signal is noisier because the flows that do exist are smaller and more likely to reflect idiosyncratic activity (exchange migrations, bridge events, yield rotations) rather than genuine capital migration. Our regime analysis found that the factor earned +93.9% annualized in weeks when aggregate stablecoin supply was expanding vs +30.2% in contracting weeks, still positive, but meaningfully weaker. The regulatory clarity provided by the GENIUS Act in 2025 and the subsequent institutional issuance wave are plausible drivers of the renewed aggregate growth visible from late 2024 onward, and the factor’s 2025 performance (+315% raw) is consistent with a signal that was always there but needed sufficient flow volume to produce clean cross-sectional dispersion.

Analysis Against the Market

We can compare the performance of Stablecoins 1 with and without the overlays to market (using BTC as proxy for broad crypto market exposure).

Stablecoins 1, both with and without the risk overlay, dramatically outperformed the market. In terms of monthly outperformance, the Raw L/S strategy beats BTC in 41 of 61 months (67%), and the risk-overlay version beats BTC in 36 of 61 months (59%). BTC delivered only +3.5% annualized over the backtest period with a Sharpe of 0.06 and a -74.5% max drawdown, so both versions of the stablecoin factor offer much better risk-adjusted returns than simply holding crypto.

The more interesting property is the factor’s behavior across market regimes. We split the backtest into months where BTC was positive (31 months) and months where BTC was negative (30 months) and measured the factor’s performance in each.

Stablecoins 1 underperforms BTC in rallies (+5.9% vs 13.6% average monthly) because the short leg acts as a drag when most tokens are rising, which is the expected cost of market neutrality. But in BTC negative months, the raw factor averaged 6.8% per month while BTC averaged -10.9%. Not only is the factor positive during drawdowns, it actually performed slightly better in down months than up months. The short leg of chains with contracting stablecoin supply tends to fall greater than the long leg during selloffs, generating positive spread returns exactly when broad crypto exposure hurts the most.

This asymmetry makes Stablecoins 1 valuable as a portfolio diversifier as its return stream actively profits during crypto bear markets.

Market Independence

To test Stablecoins 1’s independence from broad market dependence, we regressed the weekly returns against BTC.

The raw long-short factor has essentially zero market beta (-0.03) and an R² of just 0.1%, meaning less than one-tenth of one percent of the factor’s return variation is explained by whether crypto is going up or down. A t-test on the null hypothesis that beta equals zero fails to reject (p = 0.65), confirming that the long-short construction is statistically indistinguishable from market-neutral. After applying the risk overlay, market beta moves slightly to -0.04 with an R² of 0.4% and is still not statistically different from zero (p = 0.32).

Annualized alpha is +73.8% for the raw factor (t-stat = 3.31, p = 0.001) and +41.6% after the risk overlay (t-stat = 2.66, p = 0.008). Both are statistically significant at the 1% level, indicating the stablecoin factor generates significant returns that cannot be attributed to market exposure.

One question worth addressing is: is this factor a bet on one stablecoin issuer over another? We checked by computing the dollar-weighted USDC, USDT, and “other” share of every long and short pick across the full backtest. The long book averages 46% USDC, 37% USDT, and 17% other stablecoins (DAI, FDUSD, native chain stables, etc.), while the short book averages 37% USDC, 40% USDT, and 23% other. The 9% USDC tilt on the long side is real but modest. The more interesting gap is in the “other” bucket: the factor is meaningfully less likely to go long chains dominated by native or algorithmic stablecoins (cUSD on Celo, FDUSD on BSC). This is consistent with Stablecoins 1’s core thesis of rewarding chains attracting external stablecoin capital and penalizes chains dependent on internally-minted stables. Notably, the chains that drive most of the strategy’s returns span the full composition spectrum (Polygon at 52% USDC, Mantle at 54% USDT, BSC at 54% USDT, Sei at 95% USDC), which is the strongest possible evidence that the factor is a flow-direction bet rather than a stablecoin-issuer bet.

Where the Alpha Comes From

To find what is driving our 1.67 Sharpe, we attributed Stablecoins 1’s cumulative return to each chain individually, splitting contribution between long-leg and short-leg trades using the per-asset weights and forward returns from the backtest.

The long leg is doing nearly all the work. Of the strategy’s total contribution, 84% comes from long positions and only 16% comes from shorts. The factor’s primary alpha source is identifying which chains are gaining capital, not which are losing it.

The alpha is concentrated in mid-cap L1s and L2s. The top five contributors are Polygon (+19.5% of total returns), Mantle (+18.8%), Optimism (+17.9%), BSC (+14.8%), and Sei (+13.0%). Together these five chains account for 84% of total strategy returns. They share a profile: chains in the $1-15B stablecoin supply range, mature enough to have meaningful flows but not so dominant that their cross-sectional signal is washed out by a massive base. None of them are in the small-newcomer tier (Sonic, Kaia) or the mega-cap tier (Ethereum, Tron). The factor is fundamentally a positive flow detector for the mid-cap segment.

L2s worked particularly well on this signal. Arbitrum, Optimism, and Mantle together represent 3 of 18 chains (17%) but contribute roughly 40% of total returns, almost entirely from the long side. The cross-sectional signal works particularly well on L2s, likely because L2 stablecoin growth tends to reflect genuine adoption (bridging from L1 to access cheaper transactions) rather than the trader-driven flows that dominate large L1s.

Factor Correlation

We wanted to ensure that Stablecoins 1 is capturing return variation not already covered by factors we already have. To evaluate this, we computed the pairwise correlation between the Stablecoins 1 (S1) and every other factor in our research stack: Fundamentals 1 (F1), SMB (size), Value, Momentum (Momen), Growth, Market (BTC).

Stablecoins 1 is the least-correlated factor in our entire stack. Its maximum absolute correlation with any other factor is 0.16 (with Value), which shows low pairwise correlation between factors we’ve already built out.

We also ran a spanning regression to make sure that Stablecoins 1 isn’t well-explained by a combination of other factors as well. We regressed Stablecoins 1’s weekly returns against all six other factors simultaneously and tested whether the intercept (alpha) is statistically different from zero. We found an alpha t-statistic of 2.54 (statistically significant at the 1% level), with an R² of just 6.1%. In other words, 94% of the Stablecoin Factor’s variance cannot be explained by any linear combination of our other factors. Whatever this factor is capturing, it is genuinely orthogonal to every other alpha source we have built.

When we tested multi-factor portfolios across our existing factors, Stablecoins 1 consistently appeared at 10-20% weight in all top-performing combinations. This shows that the factor is genuinely orthogonal and profitable: too small a weight to dominate, but always present.

Stablecoins 1 is not a substitute for any factor we already have; it’s not a repackaging of momentum, value, or size when you regress them out. It measures something different (capital migration between chains as a leading indicator of token returns) and it gets paid for measuring it.

Key Takeaways

• Stablecoin capital flows predict cross-sectional L1 returns. Stablecoins 1 delivers a 1.67 Sharpe with +83.6% annualized return over five years, with a conservative out-of-sample Sharpe estimate of 0.96 after a degrees-of-freedom haircut.

• Stablecoins 1 is the most market-independent alpha source we have built. Market beta is -0.03 with an R² of just 0.1%, and Stablecoins 1 is the least-correlated factor in our entire stack (max pairwise correlation 0.16). Annualized alpha is +73.8% (t-stat 3.31) for the raw factor after controlling for market exposure.

• It performs best in down markets. Across 30 BTC-negative months in the backtest, the raw factor averaged +6.8% per month while BTC averaged -10.9%. Stablecoins 1 doesn’t just survive crypto bear markets, it actively profits from them.

• The alpha comes from being long mid-cap chains. The long leg generates 84% of returns, and the top five contributors (Polygon, Mantle, Optimism, BSC, Sei) account for 84% of total returns.

• Stablecoins 1 is genuinely orthogonal to every other factor we have built. After controlling for all other factors simultaneously in a spanning regression, the stablecoin factor retains a t-statistic of 2.54 and an R² of just 6.1% meaning 94% of its variance is unique. Adding it to existing multi-factor portfolios consistently improves Sharpe.

• Performance has been resilient across multiple market regimes, with strong years in 2021 (+262%), 2022 (+47%), and 2025 (+315%). Stablecoins 1’s one losing year (2024, -13%) coincided with stagnant aggregate stablecoin supply growth, and performance recovered immediately when the ecosystem resumed expanding.

If you have any questions, feel free to reach out to team@artemis.xyz or shoot us a DM on X.com @Artemis.

Thesis Summary

SoFi Technologies is one of the largest neobanks in the United States and one of a handful of fintechs to hold a national bank charter, providing structural advantages in cost of funding, product breadth, and regulatory positioning. The company delivered its first $1 billion revenue quarter in Q4 2025, grew members 35% to 13.7 million, and achieved nine consecutive quarters of GAAP profitability. Financial Services and Technology Platform now represent 57% of revenue and are growing 61% year-over-year, driving rapid diversification away from historical lending dependence. CEO Noto’s expansion into crypto (SoFi USD stablecoin, crypto trading), business banking, and international payments via SoFi Pay opens multiple new growth vectors. At $15.85—down 42% year-to-date and 52% from the 52-week high—the stock trades at ~10.7x FY2026E adjusted EBITDA despite guiding for 30%+ revenue growth in FY2026. The average analyst price target of $25.70 implies 62% upside. The selloff appears driven by broad market risk-off (tariff fears, macro uncertainty) rather than fundamental deterioration, creating an asymmetric risk/reward profile.

2. Company Overview

Business Description

SoFi Technologies was founded in 2011 as a student loan refinancing company and has since transformed into a comprehensive digital financial services platform. Under CEO Anthony Noto, who joined in 2018, SoFi obtained a national bank charter from the OCC in January 2022—a pivotal strategic move that enabled the company to take deposits, fund lending at lower cost, and offer FDIC-insured accounts. Revenue has compounded at nearly 50% annually from $240 million in 2018 to $3.6 billion in 2025, while the member base grew from 650,000 to 13.7 million.

The company operates three reportable segments: Lending (personal loans, student loan refinancing, home loans), Financial Services (SoFi Money, SoFi Invest, SoFi Relay, SoFi Credit Card, SoFi Smart Card), and the Technology Platform (Galileo and Technisys, providing banking-as-a-service infrastructure to other fintechs and financial institutions globally). SoFi’s “one-stop shop” model enables members to borrow, save, spend, invest, and protect within a single integrated app, driving a 40% cross-buy rate and deepening multiproduct relationships.

In 2025, SoFi expanded aggressively into crypto—becoming the first nationally chartered bank to offer crypto trading, launching the SoFi USD stablecoin on public blockchain, and deploying SoFi Pay for international payments across 30+ countries. Business banking and institutional crypto services are planned for 2026, representing the next wave of product expansion. Nine sell-side analysts cover the stock with a consensus Buy/Hold rating and an average price target of $25.70.

Products & Services

• Personal Loans: SoFi’s largest lending product, targeting prime borrowers refinancing high-rate credit card debt. Per management, SoFi originates roughly 15% of total U.S. prime personal loan volume.

• Student Loan Refinancing: The company’s founding product. Per company disclosures, SoFi saved members over $400 million in interest on 2025 refinances alone. Addressable market: ~$400 billion.

• Home Loans: Record $3.4 billion in FY2025 originations, with Q4 running at a $4.5 billion annualized pace. Per management, 90% of SoFi members with mortgages currently hold them at other institutions.

• SoFi Money: High-yield checking/savings account with up to 4.50% APY and FDIC insurance. 97% of deposits are direct-deposit customers, indicating high-quality primary relationships.

• SoFi Invest: Brokerage platform offering stocks, ETFs, crypto, IPO access, private market funds, and Level 1 options. Revenue grew 2.2x year-over-year in 2025.

• SoFi Relay: Free credit monitoring and financial tracking dashboard serving as the top-of-funnel member acquisition tool.

• SoFi Smart Card: All-in-one debit/credit card with up to 5% grocery cashback. Per CEO Noto, built and launched in 4.5 months using the in-house tech platform.

• SoFi Crypto & SoFi USD: First national bank to offer crypto trading and issue a stablecoin. SoFi USD is backed 1:1 by cash at the Fed master account with zero credit, liquidity, or duration risk.

• SoFi Pay: Blockchain-powered international payments across 30+ countries including Mexico, India, Brazil, Philippines, and Europe.

• Galileo (Technology Platform): Card issuing, payments, and digital banking API platform powering other fintechs and financial institutions. Known as the “AWS of Fintech.”

• Technisys (Technology Platform): Cloud-native core banking platform enabling enterprise clients to modernize their banking systems. Expanding into Latin America and the Middle East.

Market Positioning

SoFi is one of the largest neobanks in the United States and one of the most comprehensive fintech platforms globally. Its national bank charter differentiates it from most digital-only competitors (e.g., Robinhood, Cash App, Chime) who rely on sponsor banks. This charter enables SoFi to offer higher APYs while maintaining healthy margins—deposits sit in an FDIC-insured account earning interest, whereas funds at non-bank competitors earn nothing while awaiting deployment. The combination of lending, banking, investing, and technology infrastructure under one roof is unique among publicly traded fintechs and positions SoFi at the intersection of multiple secular growth trends: digital banking adoption, crypto/blockchain infrastructure, and the unbundling of traditional financial services.

3. Financial Analysis

Revenue growth reaccelerated in FY2025 to 36% from 28% in FY2024, driven by the rapid scaling of Financial Services (which grew 88% year-over-year in Q4) and the loan platform business. The company crossed $1 billion in quarterly revenue for the first time in Q4 2025. Revenue has compounded at a nearly 50% CAGR since 2018, yet the company remains in the early stages of penetrating its addressable markets. Management has guided for 30%+ revenue growth in FY2026, with a long-term aspiration for sustained growth at similar rates, supported by expanding crypto services, business banking, and international expansion.

Adjusted EBITDA grew 58% year-over-year in FY2025 to $1.05 billion, with margins expanding from 25% to 29%. Q4 margins hit 31%, surpassing the company’s original long-term target of 30% set at IPO. The incremental EBITDA margin of ~41% demonstrates strong operating leverage. FY2025 GAAP net income of $481 million appears to decline from FY2024’s $499 million, but this is misleading: Q4 2024 included a ~$271 million non-cash DTA valuation allowance release that inflated FY2024 results. Stripping that out, underlying profitability improved significantly, as evidenced by net income margins expanding sequentially from 9.3% in Q1 to 17.0% in Q4 2025.

Stock-based compensation peaked at $306 million in FY2022 and has since moderated to approximately $250–$270 million annually, even as headcount and scope have expanded. More importantly, SBC as a percentage of revenue has declined sharply—from 24.5% in FY2021 (the SPAC year) to 7.3% in FY2025—as revenue growth has far outpaced compensation expense. The cumulative dilution remains significant: diluted shares outstanding have grown from 527 million post-SPAC to 1.25 billion, a 137% increase. However, the rate of dilution is slowing, and if absolute SBC remains flat while revenue scales toward $5 billion+, the SBC-to-revenue ratio should converge toward the 3–5% range typical of mature fintechs.

SoFi’s balance sheet strengthened dramatically in FY2025. The company raised $3.2 billion in new capital, growing tangible book value by $4.3 billion to $8.9 billion ($6.98 per share). Total debt was cut by 40% from $3.2 billion to $1.9 billion, flipping the company from a net debt to a $3.0 billion net cash position. Deposits grew 44% to $37.5 billion, now representing 95.1% of total funding—up from 89.1% in FY2024—replacing higher-cost warehouse borrowings. CEO Noto described this as a “fortress balance sheet” that provides “a broad range of optionality.”

SoFi maintains an exceptionally high net interest margin of 5.85%—well above traditional bank peers—reflecting its focus on higher-yielding personal and student loans funded by lower-cost deposits. The deposit franchise has scaled at a remarkable pace, growing from $7.3 billion (first full year post-charter) to $37.5 billion in three years. Critically, 97% of deposits come from direct deposit customers, indicating high-quality primary banking relationships that are naturally sticky. As CEO Noto noted, SoFi’s structural advantage in deposit pricing comes from its profitable lending business, which allows it to offer top-quartile APYs while still generating strong spreads.

4. Growth Drivers & Member Metrics

Unlike traditional banks that grow primarily through rate competition and branch expansion, SoFi’s growth engine is built on a digital flywheel: brand awareness drives member acquisition, product quality drives cross-buy, and cross-buy drives lifetime value and operating leverage. This section examines the key growth vectors and their trajectory.

SoFi added a record 1 million members in Q4 2025 alone—the first time the company achieved seven-figure quarterly member growth—bringing total membership to 13.7 million, up 35% year-over-year. Product adoption is accelerating even faster: 1.6 million new products were added in Q4, and the cross-buy rate reached 40%, up 7 percentage points year-over-year. Management attributes this to the “one-stop shop” strategy: a single integrated app where members can borrow, save, spend, and invest. The 2026 guidance targets at least 30% member growth, implying ~17.8 million members by year-end.

Fee-Based Revenue Diversification

One of the most significant structural shifts in SoFi’s business is the rapid growth of fee-based, capital-light revenue. Fee-based revenue hit a record $443 million in Q4, representing $1.8 billion on an annualized basis, up 50% from the prior year. This includes interchange, brokerage fees, referral fees, and loan platform business commissions. The loan platform business—where SoFi originates loans on behalf of third-party partners—generated $3.7 billion in originations in Q4 alone, earning fees without deploying balance sheet capital.

New Growth Vectors

• Crypto & Stablecoin: SoFi Crypto (first nationally chartered bank to offer consumer crypto trading), SoFi USD stablecoin (backed 1:1 by cash at Fed master account), and plans for institutional crypto trading, custody, and stablecoin-as-a-service for B2B clients.

• Business Banking: Launching in 2026. SoFi aims to be the bank for businesses transacting in both fiat and cryptocurrencies, filling a critical market gap. Will include institutional trading, digital asset custody, and 24/7 settlement via SoFi Exchange.

• International Expansion: SoFi Pay now covers 30+ countries. Medium-term plan to offer full SoFi Pay to non-U.S. users, serving as a global brand-building channel. Technology Platform (Galileo/Technisys) already expanding to Latin America and Middle East clients.

• AI & Product Innovation: SoFi launched its own Agentic AI ETF and is leveraging AI across product quality and marketing efficiency. Goal is to drive “escape velocity” in customer acquisition cost efficiency.

5. Valuation

Methodology

Primary Methods: Comparable Company Analysis using EV/EBITDA and P/TBV (important for bank stocks) as primary multiples, supplemented by a scenario-based valuation framework. For a bank holding company, Price-to-Tangible Book Value provides a fundamental floor, while EV/EBITDA captures the growth and operating leverage of the non-lending segments.

SoFi’s growth profile (+36% revenue growth) is second only to Upstart (+59%) and comparable to Affirm (+39%) within its peer set, but with significantly better profitability than either. The company’s net interest margin of 5.85% and 95% deposit-funded model distinguish it from non-bank fintechs. At a P/TBV of ~2.3x, SoFi trades at a meaningful discount to most fintech peers despite superior growth and an improving margin trajectory. The -42% YTD decline has compressed multiples to levels that appear disconnected from fundamentals: EV/FY2026E EBITDA of ~10.7x for a company guiding 30%+ growth is well below the typical growth fintech range of 15–25x.

The base case of $22.50 per share (+42% upside) assumes SoFi meets its FY2026 guidance of ~$1.6 billion adjusted EBITDA and the market rewards execution with a 16x forward multiple—below the peer median but reflecting fintech-bank hybrid discount. The bull case at 22x assumes margin upside from accelerating fee-based revenue and successful crypto/business banking launches. The bear case reflects a recession scenario where lending volumes decline and the stock de-rates to deep value bank multiples.

6. Bull / Bear Thesis

Bull Case

1. Financial Services Flywheel Reaching Escape Velocity: Financial Services and Technology Platform grew 61% year-over-year in Q4 and now represent 57% of revenue. Fee-based revenue hit a $1.8 billion annualized run rate. As these capital-light segments continue to scale, margins should expand toward 35%+ adjusted EBITDA and the market should re-rate SOFI closer to software/platform multiples rather than bank multiples.

2. Crypto First-Mover Advantage as a National Bank: SoFi is the first nationally chartered bank to offer crypto trading, issue a stablecoin, and deploy blockchain-powered payments. The combination of FDIC insurance + crypto infrastructure positions SoFi as the trusted bridge between traditional finance and digital assets. SoFi USD and business banking could unlock an entirely new B2B revenue stream as infrastructure provider for banks and fintechs.

3. Deposit Machine Creates Structural Funding Advantage: Deposits grew 44% to $37.5 billion and now fund 95% of liabilities. With 97% direct deposit penetration and a 4.50% APY that most competitors cannot match profitably, SoFi’s cost of funding should decline as rates fall while maintaining deposit growth. CEO Noto noted this advantage will “make itself more clear” as rates decline, as SoFi can maintain top-quartile APY funded by lending spreads.

4. Massive Insider Buying Signals Management Confidence: CEO Noto purchased $1 million in SOFI stock in March 2026 amid the selloff. Combined with 2026 guidance for 30%+ growth through 2028 and the company’s track record of meeting or beating guidance, insider buying at these levels signals conviction that the selloff is unwarranted.

5. Valuation Disconnected From Fundamentals: At $15.85, SOFI trades at 10.7x FY2026E adjusted EBITDA and 2.3x tangible book value for a company growing revenue 30%+, generating a Rule of 40 score of 68%, and with nine consecutive quarters of GAAP profitability. The average analyst price target of $25.70 implies 62% upside. Historical dislocation of this magnitude in high-quality growth fintechs has typically resolved favorably for investors.

Bear Case

6. Consumer Credit Deterioration in a Macro Downturn: SoFi’s $15+ billion personal loan portfolio is sensitive to employment and consumer spending. Tariff-driven inflation and a potential recession could increase default rates and force higher provisioning, compressing margins. The company’s limited track record through a full credit cycle creates uncertainty about loss severity.

7. Persistent Share Dilution From Stock-Based Compensation: Diluted shares outstanding have grown from 527 million post-SPAC to 1,252 million in FY2025—a 137% increase. While absolute SBC has moderated from its $306M peak to ~$262M and fallen from 24.5% to 7.3% of revenue, the cumulative dilution is substantial. Continued SBC to attract talent represents ongoing per-share value erosion that must be offset by earnings growth.

8. Lending Revenue Concentration and Rate Sensitivity: Despite diversification efforts, lending still represents 52% of revenue and is sensitive to interest rate movements. Rising rates increase funding costs and can dampen loan demand; falling rates too quickly compress net interest margins. The bank’s 5.85% NIM, while strong, could face pressure in a rapidly shifting rate environment.

9. Crypto Execution Risk: SoFi’s ambitious crypto strategy (stablecoin, business banking, institutional trading) introduces operational complexity and regulatory risk. The regulatory framework for bank-issued stablecoins is still evolving, and the Clarity Act has not yet been enacted. Crypto revenue is inherently cyclical and sentiment-driven.

10. Intense Competition Across All Segments: SoFi competes with well-capitalized incumbents in every segment: JPMorgan, Goldman Marcus in banking; Robinhood, Schwab in brokerage; LendingClub, Upstart in lending; Stripe, Marqeta in infrastructure. The “one-stop shop” model requires SoFi to be competitive in each category simultaneously.

Base Case

SoFi delivers on its FY2026 guidance of ~$4.65 billion in adjusted net revenue and ~$1.6 billion in adjusted EBITDA, supported by continued 30%+ member growth and expanding fee-based revenue. Crypto and business banking products launch but do not contribute materially until late 2026 or 2027. Credit quality remains manageable but provisions increase modestly due to macro uncertainty. The stock re-rates from current levels toward the $20–25 range as the market recognizes that the YTD selloff overreacted to macro fears. At 16x FY2026E EV/EBITDA, the base case price target is approximately $22.50—representing 42% upside from current levels.

7. Risk Factors

Company-Specific Risks

• Credit Quality: SoFi’s unsecured personal loan portfolio is the largest revenue driver and is sensitive to employment levels and consumer spending. A spike in unemployment could lead to higher-than-expected defaults.

• Stock-Based Compensation & Dilution: Diluted shares have grown 137% since FY2021 post-SPAC. SBC as a percentage of revenue has improved significantly (24.5% → 7.3%), but the cumulative dilution is already embedded in the share count. Continued SBC must be offset by earnings growth to create per-share value.

• Execution Across Multiple New Verticals: SoFi is simultaneously expanding into crypto, stablecoins, business banking, international payments, and new lending products. Managing multiple growth vectors increases operational complexity.

• FY2025 Net Income Anomaly: GAAP net income declined from $499M (FY2024) to $481M (FY2025) despite revenue growth, primarily because Q4 2024 included a ~$271M non-cash gain from releasing a deferred tax asset valuation allowance (adjusted Q4 2024 net income was only $61M). While the underlying profitability trend is improving, this creates an optically unfavorable Y/Y comparison.

Industry & Macro Risks

• Tariff-Driven Recession Risk: Escalating tariffs and trade uncertainty could trigger a consumer recession, reducing loan demand, increasing credit losses, and compressing valuations for the entire fintech sector.

• Interest Rate Sensitivity: SoFi’s bank model is sensitive to rate movements. Rapidly falling rates could compress NIM; rising rates could dampen loan demand and increase funding costs.

• Regulatory Burden: As a bank holding company, SoFi faces heightened regulatory oversight (OCC, Fed, FDIC). Consumer lending regulations could increase compliance costs or restrict product offerings.

Concentration Risks

• Revenue: 52% from lending products; Financial Services (43%) growing rapidly and approaching parity

• Geographic: 100% United States (international expansion via SoFi Pay and Galileo is nascent)

• Product: Personal loans represent the single largest revenue contributor; student loans subject to federal policy changes (OBBB legislation)

• Platform: Technology Platform client concentration; loss of a major Galileo client could impact segment revenue

8. Scoring Framework

Disclaimer: This report is produced by Artemis for informational and educational purposes only. It does not constitute investment advice, a recommendation, or a solicitation to purchase, sell, or hold any security. The analysis, scores, and outlook labels contained herein reflect the research team’s assessment based on publicly available information at the time of publication and are subject to change without notice. Readers should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions. Artemis, its affiliates, and its analysts may hold positions in the securities discussed in this report. Past performance is not indicative of future results. The information in this report is believed to be accurate but is provided “as is” without warranty of any kind. Artemis disclaims all liability for any errors, omissions, or losses arising from reliance on this report.

© 2026 Artemis. All rights reserved.

Conclusion:

The market is pricing Circle as a rate-sensitive money market fund — a bet on the Fed Funds Rate sitting on blockchain rails. We think this framing misprices the business. USDC supply grew 72% in 2025 to $75.3 billion even as the Fed cut rates 75bps over the second half of the year, demonstrating that USDC demand is driven by genuine utility adoption rather than pure yield-seeking behavior. Our base case projects the total stablecoin market reaching ~$1.5 trillion by 2030, with average USDC supply at $284B billion. Even with reserve yields expected to compress, we expect Circle’s reserve income to grow to $9.2 billion in 2030 (~3.5x from 2025) as supply growth overwhelms rate compression. Combined with Circle Payments Network (CPN) scaling to $350 million in revenue and distribution costs declining from 60% to 55%, our base case projects total revenue of $9.8 billion and net income of ~$1.8 billion by 2030.

Several tailwinds are supporting this trajectory: the GENIUS Act has created a federal stablecoin framework favoring compliant issuers; Circle Payments Network is gaining early traction with 55 financial institutions enrolled and $5.7 billion in annualized TPV, providing a transaction-based revenue stream that diversifies away from rate sensitivity; and stablecoin adoption is broadening across B2B payments, cross-border settlement, and DeFi. Our base case produces 2030E EPS of $6.73, implying a price target of ~$168 at a 25x terminal P/E, representing 83% upside from current levels.

Comps Table:

There is no direct public comp for a stablecoin issuer monetizing reserve float. Our comp set spans companies that share key attributes of Circle’s business: float-based revenue models (Schwab, Interactive Brokers), digital payments infrastructure (PayPal, Wise, dLocal, Bill.com), crypto-native platforms (Coinbase), and high-growth infrastructure with usage-based economics (Snowflake, Confluent).

What Does Circle Do?

Circle is the issuer of USDC, a dollar-denominated stablecoin pegged 1:1 to the US dollar. When a user deposits USD, USDC is minted; when they redeem, it is burned. The reserves (approximately 43% reverse repos, 43% T-bills, and 14% bank deposits, custodied at BNY Mellon and managed via BlackRock’s USDXX fund) generate yield that constitutes Circle’s primary revenue.

The critical cost structure nuance: Coinbase, as USDC’s primary distribution partner, receives 100% of reserve income on USDC held on its platform and 50% on off-platform USDC. In 2025, Coinbase took $1.35 billion, 51% of Circle’s gross reserve income. Including non-Coinbase distribution (12.7%), total distribution costs consumed ~61% of reserve income, leaving a 39% gross margin. We model distribution costs declining from 60% to 55% by 2030 as non-Coinbase distribution grows, and new financial institutions, banks, and custodian partners negotiate deals more favorable than Circle’s current one with Coinbase. This drives gross margin expansion from 39% to 54% over the projection period.

Beyond reserve income, Circle’s most important growth lever is Circle Payments Network (CPN), a cross-border B2B settlement network built on USDC. CPN launched in May 2025 and has enrolled 55 financial institutions with $5.7 billion in annualized TPV and a 500-FI pipeline. We model CPN scaling to $175 billion in TPV by 2030 at a 0.2% take rate (aligned with the 20bps blended cross-border rate), generating $350 million in transaction-based revenue. This revenue is rate-insensitive and diversifies Circle away from pure reserve yield dependency. Additional revenue lines (referred to as “Other revenue” in our model) include CCTP (47–50% of cross-chain bridge volume) and Arc settlement infrastructure, which we model at $207 million combined by 2030E.

Thesis #1: Supply Growth Overwhelms Rate Compression

The total stablecoin market expanded from ~$137 billion in 2022 to ~$308 billion in 2025. Our model projects ~$1.5 trillion by 2030, a ~37% CAGR. Today, total stablecoins in circulation (~$316B) represent roughly 1.4% of the $22.7 trillion US M2 money supply. Our base case implies ~6%, still a modest share of dollar-denominated liquidity.

We predict USDC maintains 22–25% market share (modestly declining from 24.8% as white-label and bank stablecoins fragment the space), producing $338 billion in USDC supply by 2030 (~4.5x increase from today). Put simply, even if Circle’s effective reserve yields fall, the sheer growth in USDC supply — from $63 billion to $284 billion on average — more than compensates. As a result, reserve income rises 3.5x, from $2.64 billion to $9.24 billion.

At the current stock price, a reverse-DCF implies the market is discounting ~$120–150 billion of USDC supply by 2030, which is roughly a 60–100% increase from today. Our base case models a 350% increase. That gap is the core of the investment case.

Thesis #2: Agentic Commerce Will Drive the Next Wave of Stablecoin Demand

AI agents are on a trajectory to autonomously execute transactions by 2030. McKinsey projects $3–5 trillion in global agentic commerce sales by 2030; Gartner estimates AI agents will intermediate over $15 trillion in B2B purchases by 2028. These transactions structurally require stablecoin rails:

Stablecoins are becoming the settlement layer for this emerging agent economy, and Circle’s business model scales with it. As agents hold USDC in wallets to fund autonomous transactions, Circle earns yield on every dollar sitting in those reserves. The larger the pool of agent-held USDC, the larger the revenue base, regardless of transaction frequency.

USDC is already the default stablecoin for agentic payments. In the six months since the x402 payment standard (HTTP-native micropayments) gained traction, it has processed ~$106 million in volume across ~177 million transactions. Over 99.6% of this volume has been settled in USDC.

The first-mover advantage creates a flywheel where new builders default to USDC-support because it has the deepest integrations, which deepens the integrations further, which makes it harder for alternatives to break in. We do not model agentic revenue in the base case but agentic demand is embedded as upside optionality in our bull scenario. If even 1–2% of McKinsey's low-end $3 trillion projection settles on USDC rails, that implies $30–60 billion in incremental USDC float in agent wallets, all of which Circle may earn passive yield on.

Valuation & Scenarios

We value CRCL using a terminal P/E on 2030E EPS. Our base case produces net income of $1.84 billion on 273.9 million diluted shares, yielding EPS of $6.73. A 25x terminal P/E — a premium to the comp-weighted average, reflecting Circle’s structural growth trajectory, CPN-driven revenue diversification, and regulatory moat— implies ~$168 per share in 2030, representing 83% upside from current levels.

The 25x multiple sits between JPMorgan (JPM) at ~15x and Coinbase at ~38x, appropriate for a high-growth infrastructure business transitioning toward recurring, rate-insensitive revenue.

Base Case: Assumes continued execution on supply growth and CPN scaling, with the stablecoin market reaching $1.5 trillion and USDC maintaining 22.5% share. Distribution costs decline modestly to 55% as new financial institution partners negotiate lower revenue shares. Exit at a 25x terminal P/E on 2030E earnings, implying a price target of $168.34 — 82.7%% upside with a 16.3% IRR.

Bull Case: Assumes accelerated stablecoin adoption driven by favorable regulation, CPN network effects, and widespread TradFi onboarding. Total stablecoin market reaches $2.3 trillion with USDC capturing 30% share. Distribution costs compress to 50% as non-Coinbase origination scales. Exit at a 35x terminal P/E on 2030E earnings, implying a price target of $482.10 — over 423% upside with a 51.2% IRR.

Bear Case: Assumes stablecoin adoption slows, white-label stablecoins erode USDC market share to 20%, and rate cuts compress reserve yields to 2.75%. CPN traction disappoints. Exit at a 15x terminal P/E on 2030E earnings, implying a price target of $46.92 — approximately 49% downside with a -15.5% IRR.

Management

We view management quality as above average for the crypto infrastructure space, with particular strength in regulatory navigation (49 state MTLs, first-mover MiCA compliance).

• Jeremy Allaire co-founded Circle in 2013 and serves as Chairman and CEO. A serial entrepreneur (previously CTO of Macromedia, founder/CEO of Brightcove, IPO 2012), Allaire pivoted Circle from a consumer payments app to stablecoin infrastructure, launched USDC with Coinbase in 2018, navigated a failed SPAC in 2022, and completed a traditional IPO on the NYSE in June 2025.

• Heath Tarbert serves as President, elevated from Chief Legal Officer in January 2025. Tarbert is the former Chairman and CEO of the CFTC (2019-2021), former Assistant Secretary of the U.S. Treasury, and former CLO of Citadel Securities.

• Jeremy Fox-Geen has served as CFO since January 2021. Previously CFO of iStar/Safehold (NYSE-listed REITs) and CFO of McKinsey & Company’s North American business. He oversaw Circle’s IPO and manages the USDC reserve architecture supporting $70B+ in circulation.

• Dante Disparte serves as Chief Strategy Officer and Head of Global Policy and Operations. Previously founding executive and Vice Chairman of the Diem Association (Meta’s stablecoin project), he leads global regulatory strategy, public policy, market expansion, and international operations.

Primary management risk is founder concentration and elevated post-IPO SBC (over $500M in 2025, including $424M in IPO-related RSU acceleration), which is already normalizing (Q3 and Q4 2025 SBC ran at $59M and $48M respectively, trending toward a sub-$200M annual run-rate).

Risks

White-Label & Platform-Native Stablecoins

The most underappreciated risk to USDC’s market share is platforms, major applications, and financial institutions launching their own branded stablecoins. For example, Hyperliquid has USDH, PayPal has PYUSD, Fidelity has FIDD, and JPMorgan has JPMD. And recently, Polymarket recently introduced “Polymarket USD,” which is a USDC wrapper today, but likely a stepping stone toward independent settlement. If this playbook scales under the GENIUS Act framework, USDC could slowly lose its position as the default settlement rail. Our base case models USDC market share declining from 24.8% to 22.5% by 2030 to reflect this fragmentation.

Mitigant: White-label stablecoins still need reserve infrastructure, compliance, and — most importantly — deep liquidity. Given USDC is integrated across every major exchange, wallet, DeFi protocol, and bridge, a new branded stablecoin would need to replicate that liquidity network before it could function as a standalone settlement token. Deep liquidity pools, tight spreads, and instant redeemability are not easy to bootstrap, and fragmented stablecoins with thin liquidity create worse execution for users. The switching costs to bootstrap fully independent reserves are high enough that most platforms may never complete the transition.

Federal Funds Rate Sensitivity

Reserve income is directly tied to interest rates. Every 100bps of cuts on $284B average USDC (2030E) equates to ~$2.8B in lost gross reserve income. If the Fed cuts to 2.0%, 2030E reserve income falls 25–30% versus our base case. Kalshi prediction markets currently price a 63% probability of further cuts before 2027.

Mitigant: Even at a 2.5% yield, $284B in average USDC produces $7.1B in reserve income, which is still 2.7x the $2.64B earned in 2025 at 4.19%. Supply growth overwhelms all but the most extreme rate scenarios.

Single-Product Concentration & Coinbase Dependency

USDC reserve income was over 96% of 2025 revenue. Coinbase controls ~67% of US crypto exchange share and takes 51% of reserve income. As previously mentioned, Coinbase launches its own stablecoin, renegotiates terms aggressively, or if regulatory headwinds slow USDC supply growth, the entire revenue base is at risk.

Mitigant 1: Given that Coinbase earns $1.35B annually from their arrangement with effectively zero balance sheet risk, it seems unlikely that they would choose to launch a competing stablecoin. If they did, it would require Coinbase to build regulatory infrastructure and liquidity that Circle spent years constructing.

Mitigant 2: The market made a similar critique of Visa for years (that they was a single-product business), but Visa’s value-added services generated over $10.9 billion in 2025 (up 24% YoY), demonstrating its reduced dependence on interchange fees. We see CPN as the key diversification lever for Circle. By end of 2030, we project CPN will generate $350 million in transaction-based revenue (~4% of total), which is both rate-insensitive and independent of the Coinbase relationship. Over time, institutional and B2B USDC origination that bypasses Coinbase should also organically reduce blended distribution costs.

Tether Resilience & Competitive Landscape

USDT currently has nearly 2.5x the supply of USDC, and Tether is actively closing the regulatory gap that USDC has capitalized on. In January 2026, Tether launched USAT, a GENIUS Act–compliant stablecoin issued through Anchorage Digital Bank (OCC-regulated), giving Tether a path into the US institutional market it was previously locked out of. If Tether successfully runs a dual strategy (USDT for global liquidity, USAT for US compliance), USDC’s regulatory moat narrows considerably.

Mitigant: The competitive landscape is nuanced. USDT dominates centralized exchange trading outside the US and emerging-market remittances, while USDC dominates DeFi collateral (default on Aave, Compound, Uniswap), US institutional adoption, cross-chain bridging (CCTP at 47–50% of bridge volume), and B2B payments ($235B in 2025, +733% YoY, with USDC capturing ~65%). These are effectively different products serving different TAMs. With that said, our thesis is built upon total stablecoin market expansion rather than marketshare gains at Tether’s expense. Both stablecoins will grow considerably.

Disclosure: This material is provided for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other form of advice. The views expressed are those of the authors and should not be relied upon as a recommendation to buy, sell, or hold any asset. The authors or affiliated entities may hold positions in the assets discussed. You should conduct your own research and consult appropriate financial professionals before making any investment decisions.

• Prediction markets turn uncertainty into a tradable asset, where prices reflect financially backed probabilities rather than opinions.

• The industry is scaling rapidly, but growth today is driven by sports, not the high value information markets that define its long-term thesis.

• Crypto rails remove geographic and settlement constraints, enabling global participation and improving signal quality through scale.

• Regulation determines whether liquidity concentrates into deep global markets or fragments into weaker local ones.

• There is a growing gap between what prediction markets are becoming (information infrastructure) and how they generate revenue today.

Prediction markets generated $63.5 billion in volume in 2025.

More than three times what they processed the year before. In the first 86 days of 2026, Kalshi and Polymarket alone combined for $52.7 billion, $28.3 billion on Kalshi and $24.3 billion on Polymarket (Artemis). Annualize that and you get $223 billion. The industry tripled last year and it is on pace to triple again.

Three years ago, prediction markets processed less than $100 million a month. Today they process that amount in hours. Every event – whether it’s a Federal Reserve decision, election, geopolitical escalation, or earnings outcome – can now be expressed as a market with a price. That price isn’t a forecast, but a financially backed probability that is continuously updated as new information enters the system.

Polls collect opinions, models process historical data, and analysts publish views - all of them suffer from the same structural flaw: there is no cost to being wrong, which makes accuracy effectively optional. Prediction markets get rid of that flaw by attaching financial consequences to forecasts, so that being right results in profit while being wrong leads to a direct monetary loss.

The Federal Reserve itself confirmed that prediction markets can produce more accurate and more responsive forecasts than traditional methods. In a January 2026 research paper, the Fed found that Kalshi’s prediction markets were a “statistically significant improvement” over Bloomberg consensus for forecasting headline CPI. The mode of Kalshi’s distribution perfectly matched the realized federal funds rate by the day of every FOMC meeting since 2022 (Federal Reserve FEDS 2026-010).

Why Now

Prediction markets have existed for decades. The Iowa Electronic Markets, for example, launched in 1988. Another platform called Intrade ran for years before collapsing in 2013. The underlying idea traces back even further to Friedrich Hayek, who argued that markets are the most efficient mechanism for aggregating dispersed information. While the idea was always compelling, the execution never worked due to structural constraints: limited distribution, fragmented liquidity, and slow, localized settlement. All of these have rapidly improved.

Distribution is native

Prediction markets are now being embedded directly into brokerages, media platforms, and APIs. Robinhood added event contracts alongside equities and options. Media platforms like CNN are now starting to display probabilities next to headlines and every news cycle becomes immediately actionable.

Acting on a macro view once required opening accounts, funding them, and waiting for market hours, but that friction has largely disappeared. Prediction markets are becoming a default interface for interacting with or trading on uncertainty.

Settlement is global

The second shift is more important. On traditional financial rails, prediction markets are constrained by geography, regulation, and settlement speed. But on crypto rails, those constraints disappear.

A user in New York, Lagos, or Jakarta can see the same market, the same price, and the same opportunity and make trades with effectively instant settlement times.

Prediction markets become more accurate as participation increases. Restricting markets to a single country produces structurally inferior signals. Expanding them globally improves the quality of the output. Crypto does not just make prediction markets more efficient, but makes them more truthful.

The Regulatory Dynamic

Regulation has legitimized prediction markets, but it has also exposed a clear economic conflict. Prediction markets sit at the intersection of finance and betting, and do not fit cleanly into either category. That mismatch is where the tension comes from.

This conflict is most visible in sports. States have a direct stake in sports betting. The US market processed $165 billion in 2025, generating billions in tax revenue (SportsHandle). That system was built through a state-by-state licensing process, where operators like DraftKings and FanDuel pay significant fees, partner with casinos, and operate under high tax rates (Legal Sports Report).

Prediction markets overlap with that same category but operate under a different framework. From the state’s perspective, prediction markets divert activity away from taxed sportsbooks and bypass a regulatory system that took years to build. This is why sportsbooks are pushing back. Not because prediction markets are flawed, but because they disrupt the economics of an already regulated industry.

At the same time, the CFTC is moving to regulate prediction markets, while courts decide the limits of its authority. This tension determines the end state for prediction markets. If they are pushed into a state-by-state model, liquidity will fragment. However, if they’re allowed to operate under a unified financial framework, liquidity will concentrate and prediction markets will scale into a global system for pricing uncertainty.

The Structural Risk

Today, most of the revenue in prediction markets comes from sports.

In Kalshi, sports account for roughly 83% of total notional volume. Polymarket is more diversified, but even there, sports dominates accounting for 38.4% of total notional volume. (Artemis)

This creates a clear mismatch. Current growth is driven by sports markets, which anchor perception around betting and is the one that is most exposed to regulatory pressure. As a result, the revenue base today looks much closer to sports betting than financial infrastructure.

That concentration introduces a timing risk. If regulation tightens around sports before other categories reach scale, the industry’s primary source of revenue slows before its long-term model is fully built.

Valuations, however, are clearly pricing in that future. Kalshi at $22 billion and Polymarket targeting a similar range imply a market far larger than sports betting alone, one that expands into institutional grade information markets. That transition hasn’t happened yet, which is the central tension: prediction markets are being valued as information infrastructure, but today they are still monetized like sports products.

Sports markets provide growth, but that’s not the long term moat. The real value lies elsewhere.

Where Prediction Markets Actually Win

The underlying product is real and powerful in various other categories that go beyond sports.

Politics

The 2024 election was the proof. Polymarket’s Presidential Election Winner market generated $3.7 billion in total trading volume. On the Monday before the election, Polymarket had Trump at 58% vs Harris at 42%, while traditional polls showed a dead heat (CNN). The market was right. A peer-reviewed study from IMDEA Networks Institute, analyzing 86 million bets, found Polymarket is accurate more than 94% of the time a full month before an outcome is definitively known (arXiv:2603.03136).

Prediction markets don’t replace polling but incorporate it. Polls become inputs, while prices reflect the aggregation of all information under incentives where being wrong costs money.

Economics and policy

The most important category, and where the real moat lives.

Kalshi now provides intraday trade data for macroeconomic indicators including CPI (month over month, year over year, calendar year), Core CPI, PCE inflation, unemployment, payroll releases, GDP growth, and recession probability.

The Fed’s own research validates the product. Economics and technology markets surged by 905% and 1,637% respectively in 2025. While the volumes are small today, the signal quality is already institutional grade. A market-implied probability of a rate hike is not just a data point, but it is also a signal that influences portfolio allocation, risk management, and strategic decision making at the highest levels of finance.This is where prediction markets transition from consumer product to financial infrastructure.

Why Crypto Rails Matter

The transition from consumer product to financial infrastructure depends on scale and scales with access.

Kalshi operates within the United States, a market of roughly 330 million people. Polymarket operates globally, using crypto rails to onboard users anywhere with an internet connection and a wallet. This difference changes the size of the market entirely.

A user in New York, Lagos, or Jakarta can access the same market at the same price. Participation is permissionless and distribution is effectively global. This is why crypto is a distribution advantage. Crypto also changes how markets are created. Instead of relying on centralized operators, independent resolvers and oracle systems can define and settle outcomes, allowing markets to scale far beyond what any single platform could support.

Trading venues are converging toward this model. Robinhood integrated event contracts alongside equities, options, and crypto. Around the same time, Hyperliquid launched prediction market-style contracts through HIP-4.

Market Landscape

While there are many participants, the market structure has been a duopoly from the start. Kalshi and Polymarket control 97.5% of volume. What is changing is not consolidation but stratification: a clear stack is forming around these two platforms.

The Super-App Disruption

Platforms like Robinhood and Coinbase are no longer just distribution layers. They are moving into the exchange layer itself.

Robinhood has already demonstrated the demand. Prediction markets became one of its fastest-growing products, with over 12 billion contracts traded in 2025 and more than one million users. It also accounts for a majority of Kalshi’s volume which creates a clear incentive to internalize that flow. In January 2026, Robinhood acquired MIAXdx, a CFTC-licensed exchange and clearinghouse, through a joint venture with Susquehanna..

Coinbase is following the same playbook. It first integrated prediction markets through Kalshi contracts, then moved to build its own infrastructure by acquiring The Clearing Company. The strategy is straightforward: aggregate demand first, then vertically integrate. If this works, the existing market structure changes. Kalshi’s positioning relies on being the regulated exchange layer, but that advantage weakens if distribution platforms control both the user and the venue. The moat shifts from licensing to distribution.

Polymarket faces a different constraint. After exiting the US market following a $1.4 million CFTC settlement in 2022, it scaled globally on crypto rails. Its re-entry through QCEX introduces a different product, one that is more restricted, broker-routed, and fully KYCed compared to its permissionless global offering. As a result, the product that succeeded internationally is not the same one competing in the US, where incumbents already control distribution and funding rails.

This leads to a likely separation of roles. Distribution platforms control users and order flow, exchanges provide infrastructure and compliance, and crypto-native platforms dominate global access. Prediction markets continue to grow across all three layers, but value capture concentrates at the point closest to the user.

Winners and Losers

The emergence of this system creates a new hierarchy of winners.

Distribution platforms win.
Platforms like Robinhood and Coinbase sit directly in front of the user. They control onboarding, capital, and order flow. As they vertically integrate into exchange infrastructure, they capture both volume and margin. They are not just participants in prediction markets. They are becoming the primary interface.

Infrastructure providers survive, but capture less value.
Kalshi is best positioned to become the regulated backbone of the system, licensing contracts, clearing trades, and providing compliance infrastructure. But its role shifts from owning the user to servicing those who do. The model looks closer to Visa than a consumer bank.

Global crypto-native platforms remain differentiated.
Polymarket retains an advantage outside the United States, where permissionless access, instant settlement, and broader market coverage matter more than regulatory compliance. It becomes the default venue for global users, controversial markets, and crypto-native flows.

The losers are those without distribution or liquidity.
Traditional polling organizations lose relevance as financially-backed probabilities replace opinion-based forecasts. Smaller prediction market platforms struggle to compete without liquidity or embedded distribution. Sportsbooks face structural pressure as prediction markets increasingly overlap with their core product, already contributing to an estimated $600 million in lost tax revenue.

The End State

Prediction markets expand the scope of what financial markets can price. Today, markets price assets: equities represent ownership in companies, bonds represent claims on future cash flows. Prediction markets price outcomes.

Anything uncertain can become a market: political events, economic indicators, technological developments, environmental outcomes. The result is a system where uncertainty itself becomes financialized.

The numbers make the trajectory clear. 2024: ~$16 billion total volume, proof of concept via elections. 2025: ~$63.5 billion, 4x growth as sports drives scale. 2026 run rate: $200 billion+, regulatory clarity becomes existential (Artemis).

Conclusion

Prediction markets represent a shift in how the world processes uncertainty. They take something intangible, the likelihood of future events, and turn it into something that can be priced, traded, and acted upon.

The question is whether the thing that makes them valuable, pricing uncertainty, is the same thing that makes them scale. Right now, the answer is no. Sports make them scale, but information makes them valuable. The gap between those two facts is where the entire industry’s future will be decided. At scale, this is not just a new market, but a new way of pricing information itself.

Disclaimer: The authors of this content, as well as affiliates of Artemis Analytics, may have financial interests in the equities or tokens mentioned. This does not constitute investment advice or a recommendation to buy, sell, or hold any asset. The information provided is for educational purposes only and should not be relied upon for financial, legal, or tax decisions. Readers should assess their own circumstances before making any financial choices. Views expressed may change without notice, and Artemis Analytics is not liable for any losses resulting from the use of this content.*

Executive Summary

• March was defined by the US-Israel war with Iran, which began February 28 and led to the closure of the Strait of Hormuz, disrupting 20% of global oil supplies and driving energy prices up 42%. Despite this, crypto was oddly resilient: the market factor fell just -1.81% while the S&P 500 dropped over 7%, suggesting much of the forced selling had already been flushed out in February’s -23.49% drawdown.

• Value remains the strongest YTD performer among long-short factors at +10.33%, benefiting from its defensive profile as overvalued tokens in the short leg sold off harder than fundamentally cheap longs.

• Even in a month where all five factors posted flat or negative returns, the long-short framework continues to significantly limit losses relative to passive exposure. YTD, the market factor is down -26.36% and BTC is down -24.9%, while Growth (-4.24%), Fundamentals 1 (-6.08%), and Momentum (-7.14%) have all preserved substantially more capital. The framework’s value is most apparent in drawdowns, not just in months where factors generate positive alpha.

• The AI narrative was one of the few pockets of strength: NEAR rallied +25.32% after launching its “Confidential Intents” privacy upgrade and positioning itself as blockchain infrastructure for AI agents. TAO also surged, punishing short positions in SMB (-81.69%) and Fundamentals 1 (-73.81%).

• DEXE was the single most impactful long position across factors, appearing as the top winner in both SMB and Momentum at +117.93%. On the short side, DeFi lending tokens AAVE, KMNO, and MORPHO all declined as a hawkish Fed hold at 3.5-3.75%, an unusual Aave liquidation event, and token unlock dilution pressured the sector.

Market Context

Sentiment around the past month has been mostly cautious as the war between US and Iran progressed. On February 28, the US and Israel launched surprise airstrikes on Iran, killing Supreme Leader Ali Khamenei. Iran retaliated with drone strikes and fighting has continued between the two countries. The Strait of Hormuz closed, disrupting 20% of global oil supplies, which drove energy and oil prices up 42% in March. The IEA agreed to release a record 400 million barrels of crude oil in response.

Despite the chaos, crypto was oddly resilient relative to equities. The crypto market failed to recover, but also didn’t dip further. The market fell -1.81% over March and BTC fell -2.39% over the month. Meanwhile, S&P fell over 7%, which could indicate that we’re at a bottom for the crypto market.

For a more in depth look into how each of the strategies were built, see our Crypto Factor Model Analysis and Analysis of Fundamentals 1 strategy. For a complementary guide on reading through this report, see our factors guide.

Performance Summary

All metrics are calculated from inception (Feb 20, 2022).

Despite the broad stagnation of the market, the multi-factor framework continues to demonstrate its value. Value was near-flat in March (+0.02% return) and remains the strongest YTD performer among the long-short factors at +10.33%. The long-short construction across all factors limited drawdowns relative to long-only crypto exposure.

Market Risk Factor

Construction

Long-only portfolio of the top 10 assets by market cap, market cap-weighted, rebalanced weekly. Captures broad crypto market exposure similar to a crypto index.

Current Holdings

BTC (71.7%), ETH (13.0%), BNB (4.5%), XRP (4.4%), SOL (2.5%), TRX (1.7%), DOGE (0.8%), BCH (0.5%), HYPE (0.5%), ADA (0.5%)

Performance Metrics

March was an uneventful month for the broad market factor, returning -1.81%. This was much less severe than February’s -23.49% drawdown, but the market remains -49.33% below its all-time high, and YTD losses stand at -26.36%. BTC continues to dominate the portfolio composition at 71.89% weight and its -2.39% return was the primary driver of the monthly decline.

Top 5 Winners & Losers for March

HYPE was the standout performer at +30.58%, building on momentum of the exchange’s growing volumes and ecosystem expansion. TRX (+10.73%) continued to benefit from the stablecoin narrative as a primary rail for USDT transfers. ETH was essentially flat at +1.48%. On the losing side, BCH (-20.77%) led declines followed by ADA (-11.55%) and DOGE (-5.11%). Every asset in the top 5 losers is a long-only holding and losses were concentrated in the smaller-weight assets. BTC was the 5th largest loser, but at 71.89% weight, was the dominant contributor to the overall negative return.

Size Factor

Construction

Equal-weighted long-short factor: long the smallest 50% of eligible assets by market cap, short the largest 50%. Minimum 40 assets (20 per leg). Breakpoint: 50th percentile of market cap.

Performance Metrics

SMB returned -5.48% in March, making it the worst performing long-short factor for the month. YTD losses are now -13.70% and the max drawdown deepened to -38.98%. The continued underperformance of small caps relative to large caps is consistent with a risk-off environment where liquidity-driven selloffs hurt smaller, less liquid assets more. However, the factor’s annualized return of 40.31% and Sortino ratio of 2.72 indicate the size premium still remains over the full sample.

Top 5 Winners & Losers for March

DEXE (+117.93% as a long) was by far the top contributor, driven by a surge in its governance token demand and staking activity. FET (+43.84% as a long) benefited from continued AI narrative momentum. WLD (+28.94% as a short) and ATOM (+26.97% as a short) contributed as short winners, reflecting weakness in large-cap infrastructure and interoperability tokens. On the losing side, TAO (-81.69% as a short) was the largest loss as the AI-focused token rallied sharply in March. MYX (-57.20% as a long) continued its trend from last month as a volatile position across factors. IP (-51.35% as a long) fell as token unlocks scheduled for March created supply overhang concerns, but these unlocks were later delayed to August. Additionally, PIP Labs, the core development team behind Story Protocol, reduced its staff by about 10% in early March 2026 as part of a broader wave of crypto layoffs. LIT (-42.85% as a long) is a low-liquidity micro-cap that gets pushed around by broad market moves, so was hurt by the general risk-off sentiment in March.

Value Factor

Construction

Equal-weighted long-short: long assets with the lowest Market Cap / Fees ratio (highest fundamental value), short assets with the highest MC / Fees ratio (most expensive). Minimum 30 assets (15 per leg).

Performance Metrics

Value was effectively flat in March, returning +0.02%. Despite this, the factor still has the best risk profile of all factors with a max drawdown of just -1.26% and YTD return of +10.33%. This continues from the pattern last month where Value benefits from risk-off environments as the speculative, expensive assets in the short leg sell off, offsetting any weakness in fundamentally cheap long positions.

Top 5 Winners & Losers for March

The short leg benefited from continued declines in overvalued tokens like IP (+38.30% as a short), which fell amid token unlock fears and a 10% staff reduction at its core dev team PIP Labs, and WLD (28.94% as a short) and ATOM (26.97% as a short), which continued to sell off as large-cap infrastructure tokens lost favor in the risk-off environment. Meanwhile, the long leg was dragged down by the broader DeFi selloff: MYX collapsed on thin liquidity, LIT (-42.85% as a long) continued its decline as a micro-cap token in the midst of a rebrand with negligible trading volume, and HNT (-24.14% as a long) and INJ (-20.26% as a long) fell alongside the broader altcoin drawdown driven by the Iran war shock and hawkish Fed hold.

Momentum Factor

Construction

Volatility-adjusted momentum: calculates 3-week rolling Sharpe-like score (mean return / std dev of daily return) for each asset. Long top 25% by filtered momentum, short bottom 25%. Equal-weighted, minimum 30 assets (15 per leg).

Performance Metrics

Momentum returned -1.26% in March, a reversal from February’s strong +11.27%. The factor’s YTD loss is -7.14% and the max drawdown from ATH is -7.14%. The negative monthly return reflects that trend persistence was less rewarded and reversals in positions offset gains in the short leg. Despite the underperformance this month, the factor still has the highest annualized return (71.11%) and a Sharpe ratio of 1.43 since inception.

Top 5 Winners & Losers for March

DEXE (+117.93% as a long) was the top contributor, with the momentum signal correctly identifying its strong uptrend. MYX (+57.20% as a short) was the second-best performer, with the factor correctly shorting the token as it continued to decline. IP (+51.35% as a short) and LIT (+39.39% as a short) also contributed as short winners. On the losing side, SNX (-26.02% as a long) was the biggest loss as the token initially had positive momentum that reversed sharply. TRUMP (-21.09% as a long) also hurt, entering the portfolio on a brief momentum signal before declining. FARTCOIN (-20.57% as a short) and S (-20.31% as a short) were short losers that rallied against the factor’s positioning, while HNT (-20.02% as a long) pulled back after its strong February performance.

Growth

Construction

Equal-weighted long-short: composite score combining z-scores of 2-week trailing fee growth (pct change) and DAU growth (pct change). Long top 50% composite score, short bottom 50%. Eligibility requires DAU > 100 and weekly fees > $500. 30 assets (15 per leg).

Performance Metrics

Growth returned -1.60% in March, bringing its YTD return to -4.24%. This factor continues to exhibit the lowest volatility of the long-short factors at 22.84% annualized. The negative monthly return reflects fundamental growth signals (fee growth and DAU growth) providing less differentiation between assets as the market unease compressed factor spreads.

Top 5 Winners & Losers for March

NEAR (+25.32% as a long) was the top contributor, with the growth signal correctly identifying accelerating on-chain activity. NEAR benefited from the AI narrative momentum as on March 3, co-founder Illia Polosukhin shared a vision of NEAR enabling AI agents on the blockchain and the protocol released a privacy upgrade called “Confidential Intents”. AAVE (+18.99% as a short) contributed as a short winner following an unusual liquidation event on March 10 due to a configuration problem in CAPO and broad DeFi selloff due to a hawkish Fed and the Iran War. KMNO (+18.77% as a short) and MORPHO (+16.46% as a short) also contributed from the short leg as part of the DeFi sell-off. HYPE (+15.89% as a long) confirmed its strong growth profile. On the losing side, SEI (-30.01% as a long) was the largest loser despite screening for positive growth metrics; it declined sharply alongside broader L2 weakness. ZRO (-19.20% as a short) was the most notable short loser as the price rallied following an announcement of its own Layer-1 blockchain backed by Citadel Securities, ARK Invest, and Google Cloud.

Fundamentals 1

Construction

Equal-weighted long-short quintile portfolio: composite score combining rank z-scores of DAU growth, inverted active revenue share, revenue stability, and MC/fees mean reversion. Long top quintile (~12 assets), short bottom quintile (~12 assets).

Performance Metrics

Fundamentals 1 returned -3.85% in March, bringing its YTD to -6.08%. Despite the difficult month, the factor retains the highest Sharpe ratio (1.68) and second-highest annualized return (56.0%) of any factor since inception. The max drawdown from ATH deepened to -13.89%, reflecting that the factor was actively exposed to the market throughout March. The factor’s composite signal, which combines DAU growth, revenue quality, revenue stability, and valuation mean reversion, struggled to generate positive spread in a month where geopolitical shocks overwhelmed fundamental differentiation.

BERA (+33.13% as a short) was the top contributor to returns. Berachain is now trading 97% below its all-time high as its Proof-of-Liquidity model has struggled to generate sustained demand, and the risk-off environment accelerated the selloff. ALGO (+26.11% as a long) rallied after the SEC declared it a digital commodity, resolving years of regulatory uncertainty. CHZ (+15.77% as a long) benefited from momentum around the 2026 FIFA World Cup as Chiliz released its roadmap targeting omnichain fan tokens and CHZ buybacks. RSR (+14.81% as a short) continued to slide amid low adoption and broader altcoin weakness. NEAR (+13.96% as a long) was lifted by the AI narrative after its “Confidential Intents” launch and co-founder Illia Polosukhin’s vision of NEAR as infrastructure for AI agents. On the losing side, TAO (-73.81% as a short) was by far the largest loser as the AI narrative rallied. RENDER (-39.97% as a short) similarly rallied on the decentralized GPU computing narrative. MYX (-21.22% as a long) collapsed on thin liquidity, SEI (-21.08% as a long) declined alongside broader L1 weakness despite positive fundamental scores, and LIT (-18.23% as a long) fell as a micro-cap with negligible volume in the midst of rebranding to Heima.

Key Findings & Conclusion

March was a quiet month for crypto factor strategies, with the market returning -1.81% and no long-short factor generating meaningful positive returns. Factor spreads compressed as the Iran war shock drove correlated moves across assets, making it difficult for relative value signals to differentiate winners from losers.

Value continued to demonstrate its defensive properties, returning +0.02% and maintaining one of the lowest max drawdowns from ATH (-1.26%) across the factors. While the remaining long-short factors all posted negative returns in March, the YTD picture shows their value: the market factor is down -26.36% and BTC is down -24.9%, but Growth (-4.24%), Momentum (-7.14%), and Fundamentals 1 (-6.08%) have all significantly limited losses relative to passive crypto exposure. Even SMB, the worst-performing factor YTD at -13.70%, has cut the market’s drawdown roughly in half.

A few cross-factor themes stood out in March. The AI narrative drove selective strength: NEAR rallied on its Confidential Intents launch and AI agent vision, while TAO surged sharply, punishing short positions in multiple factors. DeFi lending was broadly weak: AAVE fell after a CAPO oracle misconfiguration triggered unusual liquidations, and both KMNO and MORPHO declined on token unlock pressure and the broader sector selloff. DEXE was the strongest single asset across the factor universe at +117.93%, appearing as the top contributor in both SMB and Momentum. Meanwhile, ZRO (LayerZero) showed how different signals can diverge on the same token: it rallied after announcing its own L1 blockchain backed by Citadel, ARK Invest, and Google Cloud, making it a winner in Value (correctly long) but a loser in Growth (incorrectly short).

In a month where broad crypto exposure lost -1.81% and the S&P 500 fell over 7%, the long-short factor framework limited losses across the board. The framework’s value is clearest in cumulative YTD numbers: while the market factor is down -26.36%, Value is up +10.33%.

If you have any questions, feel free to reach out to team@artemis.xyz or shoot us a DM on X.com at https://x.com/artemis

Disclosure: This material is provided for informational purposes only and does not constitute investment advice, financial advice, trading advice, or any other form of advice. The views expressed are those of the authors and should not be relied upon as a recommendation to buy, sell, or hold any asset. The authors or affiliated entities may hold positions in the assets discussed. You should conduct your own research and consult appropriate financial professionals before making any investment decisions.

Market Overview: The Weekly Recap

Oil and geopolitics dominated this holiday-shortened week (markets closed Friday for Good Friday). WTI crude surged above $112/bbl after Trump’s Wednesday address failed to outline an endgame for the Iran conflict, though equities showed resilience. The S&P 500 eked out a small weekly gain (+0.3%, closing at 6,583), its first since the war began, while the Nasdaq snapped a five-week losing streak despite remaining in correction territory (>10% below its record high). Gold pulled back ~2.8% to ~$4,676/oz on de-escalation signals, continuing its underperformance as a safe haven during this conflict.

Crypto was weaker. BTC fell ~4% to ~$66,900, ETH dropped ~5% to ~$2,057, and SOL slid ~8% to ~$79 (Solana took an extra hit from the $285M Drift exploit on April 1). HYPE held up relatively well given the upcoming unlock overhang, and XRP caught a bid on continued CLARITY Act optimism.

Today We Highlight:

• Drift Protocol’s $285M Exploit — Solana’s largest-ever DeFi hack was a combination of a governance failure, social engineering, and a Solana feature called “durable nonces” weaponized into a week-long setup.

• Coinbase Wins Conditional OCC Trust Charter — A federally regulated crypto custodian is no longer hypothetical.

• HYPE’s First Major Token Unlock (April 6) — 9.92M HYPE (~2.7% of circulating supply) hitting the market.

• CLARITY Act Stablecoin Yield: “99% Resolved” — The compromise bans passive yield, permits activity-based rewards.

• Artemis Analyst Sector Deep-Dives: Agentic Payments, Lending, Trading, and Neobanks

1. Drift Protocol’s $285M Exploit

On April 1, 2026 – in what Drift’s own team acknowledged was “not an April Fool’s joke” – an attacker drained ~$285 million from the Drift Protocol on Solana. This was the largest DeFi exploit YTD and one of the biggest in crypto history. The DRIFT token crashed immediately.

What makes this exploit distinct is the attack vector (this was not a smart contract vulnerability). The attacker exploited a combination of Solana’s durable nonce feature, weak multisig governance, and social engineering, a playbook much harder to audit away than a reentrancy bug.

How It Worked

Solana has a feature called durable nonces that lets transactions be pre-signed and executed later. The attacker exploited this to stage the entire heist over a week before draining funds in under 12 minutes.

On March 27, Drift migrated to a new 2-of-5 multisig with no timelock. The attacker tricked two signers into approving what appeared to be routine transactions, gaining admin control. From there, they listed a fake token (CarbonVote Token), wash-traded it to trick oracles into treating it as real collateral worth ~$785M, then executed 31 rapid withdrawals. They drained USDC, JLP, and other tokens across multiple vaults.

Why This Matters

The Drift exploit surfaces a class of risk that smart contract audits cannot catch: operational security and governance design failures. Drift’s security setup only required 2-of-5 keyholders to approve transactions, meaning the attacker only needed to compromise two people to gain instant, full control. And because durable nonces let signed transactions sit dormant for weeks before execution, the attack was effectively invisible to monitoring tools until it was too late.

For Solana DeFi broadly, this is a confidence hit. TVL across Solana protocols is likely to face redemption pressure in the near term, and expect every major protocol to re-examine its multisig setup and governance upgrade process in the coming weeks.

2. Coinbase Wins Conditional OCC Trust Charter

On April 2, Coinbase received conditional approval from the Office of the Comptroller of the Currency (OCC) for a national trust company charter – the most significant regulatory milestone for a crypto-native company since the SEC/CFTC unified guidance in March.

The entity, Coinbase National Trust Company, will be headquartered in New York and operate as a federally regulated digital asset custodian once it meets the OCC’s preopening conditions. It’s important to clarify that Coinbase is not becoming a bank. It will not take retail deposits, will not engage in fractional reserve banking, and will not be FDIC-insured. This is a non-insured national trust company focused on custody, safekeeping, and fiduciary services.

What does Conditional Approval Mean?

“Conditional” means Coinbase still has to build out compliance, pass regulatory reviews, and satisfy AML requirements before final approval (a process that typically takes 12 to 18 months). However, the signal matters more than the timeline. A national trust charter replaces Coinbase’s current patchwork of 50+ state licenses with a single federal regulator (the OCC), and positions it as a qualified custodian under SEC rules. This designation is a requirement that institutional allocators need before they’ll park assets with you.

The Strategic Play

The trust charter is about Coinbase’s revenue diversification away from trading fees:

• Institutional custody: A federally chartered trust company is a stronger counterparty for pension funds, endowments, and sovereign wealth funds considering digital asset allocations.

• Stablecoin issuance: If finalized, the charter opens a potential path to issuing stablecoins and tokenized securities under federal supervision.

• CLARITY Act positioning: A national trust charter is complementary to the CLARITY Act framework, alluding to the fact that Coinbase is building the institutional plumbing in anticipation of the regulatory structure.

Coinbase is now one of eleven companies in various stages of the OCC trust charter process, a pipeline that barely existed six months ago. The race for a federal crypto banking license is accelerating.

3. HYPE Token Unlock (April 6): Headline Fear vs. Actual Supply Impact

On April 6, the next tranche of Hyperliquid’s core contributor vesting will become eligible for claim. The vesting schedule allows up to 9.92 million HYPE (~$357M at ~$36) but the Hyper Foundation has committed to distributing only ~330,000 HYPE (~$12M), consistent with its pattern of claiming just 1-18% of the theoretical max each month. The headline number overstates the actual supply impact by roughly 30x.

HYPE is down over 7% this week to ~$35. HIP-3 open interest has hit all-time highs, with commodities, equities, and indices now making up >80% of volume, led by the S&P 500 perpetual contract via trade[XYZ] and S&P Global.

Three factors suggest the unlock won’t meaningfully move supply:

1. Protocol revenue runs at $676M–$843M annualized, with 97% flowing into HYPE buybacks and burns – dwarfing the ~$12M committed unlock.

2. Core contributors are incentivized to hold. Aggressively selling would crater the value of their remaining vesting allocation.

3. Five months of unlock data show the team consistently claims a small fraction of the eligible amount, giving the market a reliable baseline.

4. CLARITY Act Stablecoin Yield: “99% Resolved”

Senators Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) confirmed an agreement in principle on stablecoin rewards, backed by the White House. Senator Lummis described it as “99% resolved.” The framework bans passive yield (i.e., earning returns simply for holding a stablecoin) but permits activity-based rewards tied to payments, transfers, and wallet usage.

Who Wins, Who Loses

Circle ($CRCL): More nuanced than the initial 22% stock drop suggested. The bill bans retail passthrough of yield, not issuer-to-distributor payments. Circle pays Coinbase over $900M/year in revenue share – that relationship is untouched. The bull case for them is if Coinbase keeps collecting from Circle but can’t share it with users. This means the distributor margins on USDC would actually improve and Coinbase would further incentivize them to push USDC adoption. However, the bear case is that, without yield as a selling point, retail has less reason to hold USDC. ARK bought $16M of CRCL on the dip.

Tether/USDT: Largely unaffected – Tether doesn’t pass yield to holders. The framework arguably legitimizes its model.

DeFi protocols: The language targets “digital asset service providers,” leaving it unclear whether decentralized lending protocols like Aave or Morpho are in scope. Expect this to be litigated.

Charts of the Week

Polymarket Daily Fees Reach $1.9 Million

Kalshi Volume Extends Run With 8 Straight Monthly ATHs

USDD Stablecoin Supply Reaches $1 BILLION

Coinbase Perp Volumes Surge, Reaching 81.4B in Q1

Other Notable News

• Aave launches v4 on Ethereum after two years of development, expanding DeFi into real-world credit and improved lending usability

• Ethereum’s Glamsterdam upgrade targets June 2026 — the most significant technical overhaul since the Merge, with gas limit increasing from 60M to 200M per block and throughput scaling to 10,000 TPS

• RLUSD (Ripple’s stablecoin) surpasses $1B in market cap within its first year, as regulated stablecoin issuers gain share in the institutionalization era

• Solana hits 10 billion cumulative transactions while Ethereum reaches 200 million — different scales reflecting different architectures and use cases

• Oil spikes above $113/bbl WTI as Strait of Hormuz disruption fears intensify — the largest supply disruption in the history of the global oil market per the IEA

Thanks for reading! Stay ahead this week by using the Artemis Terminal or pulling live data with =ART() in Excel.

Disclaimer: The authors of this content, as well as affiliates of Artemis Analytics, may have financial interests in the protocols or tokens mentioned. This does not constitute investment advice or a recommendation to buy, sell, or hold any asset. The information provided is for educational purposes only and should not be relied upon for financial, legal, or tax decisions. Readers should assess their own circumstances before making any financial choices. Views expressed may change without notice, and Artemis Analytics is not liable for any losses resulting from the use of this content.

• Coinbase filed for a national trust charter.

• NuBank received conditional approval from the OCC to establish a US national bank.

• PayPal applied to create PayPal Bank

• Revolut, after years of regulatory limbo, obtained its full UK banking license and is pursuing a US national banking charter.

• Kraken became the first crypto company to secure a Fed master account.

Four of the world’s largest fintechs made the same bet at the same time.

For the past 15 years, the story of neobanking has been the unbundling of the financial services stack. In the US, the playbook was simple: excel at one thing and hand off the regulatory complexity to sponsor banks. SoFi excelled at student loans, PayPal at online payments, Kraken and Coinbase at crypto trading. Now they are rebundling and going after the full stack.

Meanwhile, a second shift is underway. In 2025, there was $33 trillion in adjusted stablecoin transfer volume on public blockchains, rivaling major payment systems like ACH and Visa (Artemis). Decentralized finance lending protocols like Aave have surpassed $1 trillion in cumulative loans originated. NYSE, NASDAQ, and CME are partnering with crypto firms to build tokenization infrastructure.

The neobank stack is undergoing a dual compression that is changing what it means to be a bank. From the top, neobanks are vertically integrating by acquiring charters, and collapsing the middleware layers that have historically collected rent. From the bottom, public blockchains are exposing permissionless financial plumbing that lets any developer build money movement and financial products without a banking relationship. The neobanks that own both the legacy stack and the emergent blockchain stack will define the next decade of finance.

In our 2030 Digital Finance Manifesto, we introduced Steven, a 25-year-old whose entire financial life runs through a neobank: investing, saving, earning yield, receiving payments, and managing credit, all in one place. We identified neobanks as one of five pillars of digital finance. This is our deep dive into that pillar.

The first trillion-dollar standalone neobank is within reach.

The Stack

What is a neobank?

A neobank offers banking products without being a bank (at least historically). They partner with sponsor banks for deposits, FDIC insurance, and payment network access, and build the customer-facing product on top. This lets them move fast, but it also means the most valuable economics of the banking relationship sit with the sponsor, not the neobank.

Every existing legacy bank is vertically integrated across the stack, or at least significant portions of it. Neobanks stripped it apart and rebuilt each component on modern infrastructure. Marqeta focused on card issuance, Alloy on KYC, and Plaid on account connectivity. This created a modular ecosystem, where new players could pick and choose their stack as if they were picking ingredients off a shelf. We’ll break down the stack into 6 layers:

Layer 1: Foundations

This layer is the bedrock on which everything else is built. This is the layer that holds assets and does the ledgering. In the legacy financial system, companies in this layer follow the most stringent regulations, but they also have access to the very core of the financial system: the Fed and the payment networks. In the modern stack, blockchains play this role as the core ledgering system that holds financial assets.

Traditionally, a neobank seeking to take on customer deposits would partner with a real chartered bank, known as a sponsor bank. The sponsor manages the regulatory overhead, the relationship with the FDIC for deposit insurance, as well as access to payment networks. Since the deposits sit on the sponsor bank’s balance sheet, they can use them to fund loans and generate net interest income. That’s interest income neobanks are foregoing as rent.

Now, the biggest neobanks are bypassing sponsor banks entirely and going after their own full banking charter in order to own the economics themselves. At a certain scale, the rental relationship stops making economic sense.

NuBank, already a chartered bank in Brazil, received conditional approval for a US national banking charter by the OCC in January 2026, while Revolut applied for a full banking charter in March 2026 (immediately after receiving its UK banking charter). SoFi has been a chartered bank since 2022 and the effect on its business has been dramatic, growing quarterly net interest income from $94.9M to $617M in four years.

Crypto companies are also pushing into this layer: Kraken has a trust charter and a Fed master account, and Coinbase is going after its own trust charter. As Jason Mikula of Fintech Business Weekly put it: “what it means to be a bank is rapidly changing” (Substack).

Layer 2: Settlement Rails

This layer glues the foundations together. These rails enable banks to coordinate and settle assets between them, and are where real value movement happens. In the US, there are several key systems that settle and move value:

• FedWire, a real-time gross settlement system (only during business hours)

• FedNow, a new, 24/7/365 public-sector instant payment system

• DTCC, infrastructure for securities clearing, trading, settlement and more

• Swift, a messaging system for global inter-bank payments

Every one of these networks is gated. Connecting to FedWire, requires having a Master Account at the Federal Reserve, which means you have to be a chartered bank or trust. Touching the ACH network, requires being a member of NACHA, which requires being a federally insured depository institution.

Public blockchains show up again in this layer. They are the first financial rails in history that are public and permissionless, allowing any developer to plug into them. If you want to send $10,000 worth of USDC on Ethereum, you call a smart contract function. You don’t need a charter or a sponsor bank. Modern blockchains settle in milliseconds, never shut down, and charge sub-cent fees.

Layer 3: Abstraction

The raw rails are where value moves, but they are complicated and often gated. Most companies don’t want to get bank charters in order to integrate directly with Fedwire, and they don’t want to manage Ethereum node infrastructure. The abstraction layer exists to solve this. These are the companies that sit on top of the rails and make them usable.

For card payments: Marqeta and Lithic provide card issuing infrastructure. You tell them what kind of card you want, and they handle the Visa/Mastercard integration. Stripe and Adyen offer a single interface that abstracts away the complexity of moving money across ACH, card networks, and more.

For blockchains: Bridge (acquired by Stripe for $1.1 billion in February 2025) lets businesses accept stablecoin payments without managing wallets. Zero Hash provides trading, custody, and settlement infrastructure across 80+ digital assets. Alchemy, Infura, and QuickNode all offer APIs and tools that enable developers to build on blockchains without worrying about managing nodes.

Unit, Treasury Prime, and Synctera sit under Banking-as-a-Service, middleware that connects non-bank fintechs to sponsor banks. A now infamous BaaS provider, Synapse, went bankrupt in April of 2024 after internal ledgers failed to reconcile with their partner bank ledgers, resulting in up to $95 million unaccounted for or frozen across more than 100,000 customers (banking.senate.gov). This incident didn’t kill BaaS, but it did show the limits of the model and led to increased regulation in this part of the stack such as the “Synapse Rule” (American Banker). It signaled to major neobanks that they shouldn’t trust their entire deposit base to a middleware layer out of their control.

Brokerage and clearing firms like Apex, Alpaca and Drivewealth enable neobanks to offer securities trading without having to build their own clearing and settlement infrastructure. For example, Coinbase and Cash App use Apex, while Revolut uses Drivewealth. One logo stands out here: Robinhood. They decided to vertically integrate and own the economics instead of paying a fee to a third party provider for a service so core to their business.

Layer 4: Compliance and Identity

Every financial transaction requires knowing who’s on the other end. KYC (know your customer), AML (anti-money laundering), and fraud prevention form an entire industry.

On the traditional side, Alloy, Sardine, Persona and others provide identity verification, transaction monitoring, and fraud detection. These companies sit between the application and the financial products, ensuring every neobank customer is who they say they are.

On the blockchain side, firms trace onchain transactions to flag illicit activity. As stablecoins become more regulated, onchain compliance becomes more important — you need to know that the USDC flowing through your neobank didn’t originate from a North Korean wallet.

This layer isn’t where the value accrues, but these firms provide a critical service to their clients, ensuring a more safe, compliant and trustworthy financial system.

Layer 5: Product Infrastructure

This is the layer that answers the question: what products can neobanks plug into so they don’t have to build them from scratch?

Money movement companies allow neobanks to embed payments and other money movement features directly into their products. For example, a neobank looking to issue a stablecoin would use Bridge, while a neobank looking to offer international transfers could work with Airwallex or Sphere.

Savings, Yield and Investment is where DeFi shines. Neobanks can use Aave or Morpho on the backend to generate yield, no loanbook required. Or, they could offer a yield via staking products like Lido or Jito, which expose users to the native issuance and fee rewards of the Ethereum and Solana networks. Uniswap and Jupiter provide APIs enabling trading of thousands of assets including tokens, perps, and soon, RWAs. The US Treasury shows up in this layer as they are the issuers of risk-free rate assets.

Lastly, DeFi protocols like Aave and Morpho don’t just offer yield, they allow users to borrow against their capital. Coinbase launched crypto backed loans using Morpho and bitcoin backed mortgages with Better. Maple offers institutional grade borrowing and lending facilities. Figure offers white label lending infrastructure that apps and partners can plug into.

Layer 6: The Application Layer

This is where neobanks thrive and where the customer actually interfaces with the stack described above. The application layer breaks loosely into three categories, though the lines are blurring fast.

The Full-Stack Neobanks are Revolut, Robinhood, Coinbase, Kraken, SoFi, and Slash. These are all platforms that offer a suite of products that spans both the traditional financial stack and the blockchain stack. SoFi has a banking charter and is now issuing its own stablecoin SoFiUSD. Coinbase and Kraken each have their own public blockchain and are integrating more deeply with the US financial system via charters and Fed master accounts.

In the Fiat-First sector we have Nubank, Chime, Monzo, N26, Starling, Dave, and Mercury. These started from traditional banking products and are expanding through traditional rails and products.

Lastly, there are the Crypto-Native Financial Apps like EtherFi, RedotPay, Kast, and Phantom. These are firms born from public, permissionless blockchains, that take advantage of the lower operating costs that stablecoins provide. They integrate with onchain financial products, allowing users to pay in stablecoins, access DeFi yields, and trade onchain assets.

The pattern emerging across all three sectors is rebundling. Every successful neobank started with an initial wedge, and is expanding toward a single surface that handles a user’s entire financial life. The winning app is the one that is able to offer both the best of traditional banking and the emerging global onchain economy.

Business Models

Renting the Stack

Under the traditional model, a neobank partners with a sponsor bank and issues cards through a program manager, which structurally limits its ability to capture core banking economics. A traditional neobank’s primary revenue source is interchange, the 1-2% fee merchants pay on card transactions. The neobank may add a subscription tier (Chime’s SpotMe, Dave’s membership fee) or earn some referral fees, but interchange is the core. This business model allows neobanks to get off the ground, but it doesn’t scale into high-margin, durable businesses. Interchange is a thin margin that scales linearly with transaction volume. The most lucrative parts of the financial relationship are the net interest margin (NIM) on deposits, the lending income, and the investment yield. All of those economics flow to the sponsor bank. The neobank has the customer relationship, but not the balance sheet or the economics.

Owning the Stack

The economics change significantly when a neobank gets its own charter. A chartered bank can take customer deposits and use them to fund loans, or invest in interest-bearing assets, while keeping the spread. A traditional incumbent bank today typically offers less than 0.5% yield on savings accounts while making 6% on a mortgage and pocketing the 5.5% difference (FDIC). Since obtaining its bank charter in 2022, SoFi has grown net interest income tenfold, from $252M in 2021, to $2.2B in 2025 (Artemis).

A chartered bank also gains access to the core payment and settlement systems in the US. It connects directly to Fedwire, ACH, FedNow, avoiding per-transaction fees that intermediaries typically charge.

Stablecoin-First Banks

Neobanks that build using blockchains and stablecoins as the backend will have a few ways to generate revenue.

The first and most powerful is generating net interest income, a model reserved for stablecoin issuers like Circle, or SoFi. The second is interchange. All neobanks will have cards, and they will collect interchange on payments. Cards are a consumer’s favorite payment modality, and that isn’t changing any time soon. Stablecoin-first neobanks can also charge fees on trades, or take a portion of the DeFi yield they generate on the backend. The design space for a stablecoin neobank is wide open, which is why hundreds of millions of funding dollars have poured into backing startups in the space in the past year.

The Blockchain Thesis

The Stablecoin Inflection

Stablecoins are at an inflection point. They are the first use case of blockchains that has found non-speculative product market fit. The proof is in the numbers: stablecoin payment volumes doubled in 2025 to $390 billion annualized, with key sectors like B2B payments growing 733% YoY (Artemis, McKinsey). While stablecoin payments still represent < 1% market penetration in key payment verticals, the growth is undeniable. 2025 was also a watershed year for stablecoins from a regulatory perspective. Passage of the GENIUS Act provided stablecoin issuers a regulatory framework for operating in the US. The result is that even though crypto market cap has fallen about 50% since 2025 highs, stablecoin supply has actually continued to grow, reaching $313bn by March 2026 (Artemis).

Stablecoins bring dollars onto blockchains. Those dollars will seek to be productive, flowing into decentralized finance protocols to earn yield or provide liquidity.

For years, decentralized finance was the territory of crypto-natives exploring the frontier of the onchain economy. While the world looked the other way, they created composable building blocks for global financial products. Aave has facilitated >$1 trillion in loans, making it the de facto place to borrow against your crypto. Morpho has built the infrastructure for curated, risk-isolated lending vaults that have attracted institutional capital, including a partnership with Apollo Global. Yield-bearing stablecoins like Sky’s sUSDS, Ondo’s USDY, and Ethena’s sUSDe grew 80% in 2025, outpacing growth of non-yield-bearing stablecoins (Artemis). These tokens allow holders to earn yield generated by lending activities, treasury yields or trading strategies.

Neobanks that build using stablecoins instantly get a vast set of financial products that they can simply plug into with a few smart contract calls. Public, open source protocols mean developers don’t have to negotiate with anyone, or sign any contracts to integrate a product. This creates a major opportunity for builders attacking the stack from below.

Where This Is All Going: The Neobank of 2030

Charter Convergence

In the next 5 years, any neobank hoping to win at scale will either hold its own banking charter or be in the process of acquiring one. Beyond a certain scale, the economic gains far outweigh the risks(recall what happened to Synapse). More importantly, the regulatory environment has been constructive in recent years. The OCC is approving bank/trust charters (NuBank), the Fed is opening master accounts (Kraken), and state regulators are competing to attract fintechs (Wyoming SPDI).

That said, the sponsor bank model will not die. Column and Lead Bank provide a modern version of a useful and necessary service. But for neobanks scaling to tens of millions of users, the economic loss is too significant not to go after a charter.

Stablecoin-Native Accounts Become the Default

By 2030, the default neobank will offer stablecoin powered digital wallets, savings and yield powered by DeFi protocols, and exposure to tokenized real world assets. Neobanks will bridge the legacy and onchain worlds. Paychecks will arrive by ACH and automatically be converted to USDC where it will earn the risk free rate.

This is Steven’s world from the Manifesto. His neobank is the single financial surface that aggregates investing, saving, getting yield, obtaining credit, and sending money globally. The money moves on whatever rail makes sense: ACH for the landlord, USDC on Solana for paying an international employee, stablecoin on Morpho for savings yield.

By 2030, the distinction between a “bank account” and a “crypto wallet” will have dissolved, leaving in its wake a far superior banking product.

The First Trillion-Dollar Neobank

NuBank is valued at $70B, Revolut $75B, and Stripe $159B. J.P. Morgan, the world’s most valuable bank, has a market cap of about $800B, ten times that of NuBank or Revolut. JPM’s business model is meaningfully different including physical branches, corporate banking, investment banking, asset management. But the comparison is illuminating. A full-stack neobank with NuBank’s efficiency ratio (<20%), Revolut’s product breadth, and Coinbase’s blockchain integration (stablecoin yield, onchain rails, DeFi access) would have a revenue-per-user and margin profile that traditional banks cannot match.

Winners and Losers

Winners:

• NuBank: they are already a leader in LatAm with 130m users and have conditional approval to establish a US bank

• Revolut: established leader in the EU expanding in the US with a bank charter application

• Robinhood: leading the wave of retail investing and financial literacy, their distribution is undeniable, and their product velocity is to be envied

• Ethereum: More crypto assets by value sit on Ethereum than any other chain, it has strong Lindy effects, it seems every major exchange is building an Ethereum L2 (Ink, Base, Robinhood Chain)

• Solana: Second most value locked in DeFi applications, third most value in RWAs and stablecoins, significantly more performant than Ethereum

• Morpho: Indications that it is the protocol that institutions are choosing for onchain asset management and vaults

• Circle and Tether: defacto stablecoin winners due to existing distribution and liquidity

• The Federal Reserve System: stablecoins will generate more demand for US dollars

Losers:

• Cross-border remittance providers like MoneyGram or WesternUnion will have margins crushed

• Correspondent banks will lose billions in revenue as margins for cross border payments

• Middleware dependent neobanks that never invested in their own infrastructure

Who to watch:

• Column: chartered bank built from the ground up for developers

• Lead Bank: charter + modern infrastructure

• Coinbase: could be a winner with differentiated blockchain-based products

• Kraken: challenger in the US, Fed master account, coming after Coinbase

• Stripe: Going all in on blockchain tech with Bridge + Privy + Tempo

• Phantom: already have millions of users for their wallet product, expanding into neobanking services, wallet is very trading focused

• Hyperliquid: Will have the deepest onchain liquidity and best asset offering, enabling neobanks to offer any trading functionality on top

Conclusion

The neobanking stack is compressing from two sides. From the top, neobanks are seeking charters and collapsing the layers between them and the rails that move value. From the bottom, blockchains are removing layers of traditional intermediaries and exposing the bare metal rails to any developer.

Neobanks will drop the “neo” and just become “banks”, while blockchains and stablecoins allow anyone to build a global, self-custodial financial services product at a much lower cost. Assets and capital must flow between the legacy and blockchain financial systems. The banks that win will be those that straddle both worlds, capturing more users, creating better, stickier products and building the first trillion dollar bank.

Explore the full Artemis Neobank Market Map to see every player across all six layers.

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