Weekly Stories - 1/24

This week in the newsletter, we write about the new administration’s recent pro-crypto policy moves in D.C., infighting in the Ethereum community among continued ETH underperformance, and the effect on Solana of the Trump family launching memecoins last weekend.

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Trump to Make USA “Crypto Capital of the World”

President Trump signs an executive order on crypto as major digital asset initiatives pile up. Three days after taking office as the 47th U.S. president (and only the second to ever win a second, non-consecutive term), President Donald J. Trump signed an executive order establishing the federal government’s approach to digital assets. Accompanied by White House Crypto & AI Czar David Sacks, Trump signed the order in the Oval Office early afternoon on Thursday, January 23.

But the crypto executive order was just the latest in a slew of positive headlines emanating from the new administration and Congress on crypto. Here is a timeline of recent events just since Trump took the oath of office at noon on Jan. 20:

Monday, January 20

• Trump named Commissioner Caroline Pham, who once proposed pilot programs to regulate crypto and has criticized the SEC’s approach to crypto regulation, as Acting Chair of the CFTC. Upon receiving the appointment, Pham wrote that “it’s time for the CFTC to get back to the basics.”

• Trump named Vice Chair Travis Hill to be Acting Chair of the Federal Deposit Insurance Corporation (FDIC), taking over for Marty Gruenberg, who had helmed the agency for nearly 20 years and recently came under fire for widespread harassment scandals and Operation Chokepoint 2.0. In a press release Tuesday, Acting Chair Hill wrote that one of the matters he expects “the FDIC to focus on in the coming weeks and months” was to “adopt a more open-minded approach to innovation and technology adoption, including a more transparent approach to fintech partnerships and to digital assets and tokenization.”

Tuesday, January 21

• Trump named Commissioner Mark Uyeda, a staunch critic of the last administration’s approach to digital assets, Acting Chairman of the Securities & Exchange Commission (SEC).

• Uyeda then announced “Crypto 2.0” -- a new SEC crypto task force led by Commissioner Hester Peirce, one of the most eloquent and prolific advocates for a progressive approach to digital asset regulation. According to the SEC, “the Task Force’s focus will be to help the Commission draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks, and deploy enforcement resources judiciously.

• Trump issued a “full and unconditional pardon” to Ross Ulbricht, the creator of Silk Road, the dark web marketplace that only accepted BTC for transactions. Ulbricht left federal prison on Tuesday night after 12 years behind bars after being imprisoned for operating the marketplace that had no restrictions on the items that could be bought or sold, including drugs or weapons. Ulbricht made his first public comments on X Thursday since leaving prison. In pardoning Ulbricht, Trump fulfilled a promise made repeatedly throughout the campaign to Bitcoiners and Libertarians alike.

Wednesday, January 22

• Coinbase filed an appeal at the Second Circuit Court of Appeals regarding the secondary trading of digital assets. The appeal comes after the U.S. District Court for the Southern District of New York (“SDNY”), which is currently hearing the SEC’s case against Coinbase, granted Coinbase the rare opportunity to file an interlocutory appeal – the right to argue before its trial in front of the appeals court that the case should be dismissed. If the SEC changes its position on secondary trading of digital assets, the case could become mooted.

Thursday, January 23

• Trump signed the “Strengthening American Leadership in Digital Financial Technology” executive order, known as the “crypto EO,” which recognized crypto’s “crucial role” in fostering innovation and economic development. The order revokes Fmr. Pres. Biden’s crypto EO (14067); makes it national policy to promote and protect self-custody, the rights to blockchain access, mining, validating, and uncensored transactions; prohibits the creation of a U.S. central bank digital currency; provide regulatory clarity and certainty based on “technology-neutral regulations”; and establishes a presidential working group to study the creation of a “national digital assets stockpile,” among other activities.

• The SEC issued Staff Accounting Bulletin (SAB) 122, which specifically rescinds the interpretive guidance from March 2022’s infamous SAB 121 that effectively prohibited banks from custodying client cryptoassets.

• Sen. Cynthia Lummis (R-WY), a longtime advocate for Bitcoin and digital assets, was named chair of the Senate Banking Subcommittee on Digital Assets.

OUR TAKE:

From the Crypto Ball last Friday, which we co-sponsored and attended, through the issuance of Thursday’s crypto executive order, the last week has seen a whirlwind of activity. It is clear, after just a few days, that President Trump intends to take a very different approach to digital assets policy in America than his predecessor. The U.S. federal government’s war against crypto is over – now it is time to rebuild. While we are optimistic about the new regime for crypto in America, there is much work to be done and myriad stakeholders to include, reckon with, appease, consult, and appeal.

I will have a more substantive overview of the crypto EO in the coming days but suffice it to say the executive action represents a great step forward for executive policy on digital assets. The order explicitly makes it the policy of the United States that: self-custody, mining, validating, and transactional freedom should be protected; banks should not prevent lawful individuals or companies from fair access; the government must establish clear and progressive regulatory frameworks; and that the government should study whether and how to create a national digital assets stockpile. Coordinating all this will be difficult and the new Presidential Working Group on Digital Asset Markets will have its hands full. The extent to which this PWG is successful will hinge on a combination of its abilities to balance stakeholder needs, promote and support policymaking from within the federal agencies, and maintain credibility in the White House.

The lack of specificity in the EO on the “strategic bitcoin reserve” (SBR) caused Bitcoin to dip on the release of the order, with many in the Bitcoin community upset at the use of the term “digital assets.” If we're keeping score, studying and creating the stockpile but not buying it is explicitly what we predicted would happen in our 2025 predictions report, where I wrote on Dec. 27, 2024: “The U.S. government will not purchase Bitcoin in 2025, but it will create a stockpile using coins it already holds, and there will be some movement within the departments and agencies to examine an expanded Bitcoin reserve policy.” We don’t know if a more expanded reserve policy that includes purchases will be enacted, or which coins (if any) will become part of a national stockpile, but for now, the content of this executive order is exactly what we expected. There’s still a lot of time for more to happen – after all, it’s only day 3 of Trump’s second presidency. In any case, we view a stockpile alone as extremely bullish.

It’s important to step back and take stock of the monumental shift before us. In our view, the sweeping nature of the executive order represents a giant leap forward and clearly signals the White House’s intention to promote digital asset usage, adoption, markets, and more. When compared to Fmr. Pres. Biden’s 2022 crypto EO (which Trump’s EO rescinded), Trump’s EO is a world apart. Biden’s executive order, titled “Ensuring Responsible Development of Digital Assets,” made it U.S. policy to protect consumers, maintain global financial stability and mitigate systemic risk, mitigate illicit finance, and promote access to safe and affordable financial services. Only two of the six priorities mentioned competitiveness or innovation. Contrast that with Trump’s priorities, which are significantly more aligned with the desires of the crypto world. While the executive order doesn’t accomplish everything and is not as durable as formal rulemaking or legislation, it nonetheless signals that President Trump was serious about moving the U.S. into a digital golden era. - Alex Thorn

Community Reckons with ETH Underperformance

Community sentiment for ETH plummets as price continues to lag behind BTC and SOL and infighting in the Ethereum community worsens. Over the past two weeks, several prominent community figureheads such as Eric Conner, Mariano Conti, DCinvestor, Evan Van Ness, and Zack Rynes have publicly denounced Ethereum’s roadmap and leadership. Various proposals to revive Ethereum’s competitiveness and value have been fiercely debated in the community against a backdrop of the continued loss of ETH’s market share to BTC and SOL.

In response to mounting pressure against Ethereum, the Ethereum Foundation (EF) has announced a handful of structural changes within the organization to revive hope about the protocol. The EF launched an official X account on Monday, January 13, to increase communication and transparency about the organization’s activities. The EF then announced internal promotions for EF Researchers Hsiao Wei Wang, Alex Stokes, Barnabe Monnot, “Kevaundray”, and Caspar Schwarz Schilling.

On Wednesday, a new organization called Etherealize supported by the EF and Ethereum cofounder Vitalik Buterin came out of stealth mode. Led by former bond trader at Nomura Holdings and UBS Group Vivek Raman, Etherealize will function as the BD and marketing for the Ethereum ecosystem, according to the organization’s X profile. Despite all these announcements and assurances from representatives of the EF like Buterin and Executive Director Aya Miyaguchi that more announcements are still to come, the frenzy on social media about Ethereum’s dire state and lagging token performance has not abated.

OUR TAKE:

Ethereum’s persisting underperformance in the markets is shaking up confidence in some of the staunchest and most longstanding supporters of the cryptocurrency. Calls to accelerate Ethereum’s technical roadmap, replace the EF’s leadership, dissolve the EF entirely, and scrap scaling efforts through L2s have reached a frenzy on X. All highlight increasing desperation within the community to see market conditions improve for ETH. (ETHUSD finished 2024 +43% while SOL was +78% and BTC was +114%).

Frankly, nothing will improve the outlook for ETH except increased usage on-chain. New users on chain buying ETH-denominated assets, and driving fees and revenue from L2s to Ethereum L1 will be what lifts Ethereum out of its rut. To this end, the leading use cases for Ethereum among non-crypto native companies like major fashion brands and banks are NFTs and RWAs, respectively. Another emerging use case that is particularly compelling and promising on Ethereum through the scaling effects of L2s is gaming.

In prior crypto bull cycles, ICOs, DeFi apps, and NFTs were all at one time or another responsible for heightened usage on-chain and subsequent appreciation of ETH price. The reason on-chain Ethereum usage has not led to a price appreciation in this cycle so far is largely due to the fact Ethereum is scaling through L2s, meaning activity and therefore market share is now dispersed across over 50 protocols, instead of one. This is a wildly effective way to scale a blockchain but it also means wildly more usage, over 50 times say, is needed for L1 usage of Ethereum and ETH price to rise. Meanwhile, the on-chain assets driving new users to buy have largely been carried on Solana and denominated in SOL. For Solana, where on-chain activity remains largely concentrated on one protocol, spikes in usage can lead to immediate price appreciation. However, even Solana, despite its supposed differentiated and "high performance” technical architecture, still struggles to support demand for the memecoin trading activity happening on its platform today. Like Ethereum, it will very likely need to scale over time by adopting an L2 framework.

The regulatory outlook for crypto services and applications for the next four years in the U.S. is positive. The adoption of cryptocurrencies is expected to take off to new heights and in some respects, especially in the case of the adoption of Bitcoin, it already has. There is only one general purpose blockchain with proven resiliency, decentralization, and scalability to meet the demand that is coming to public blockchains. If there is any future for NFTs, RWAs, DeFi, fundraising through blockchains, gaming on blockchains, decentralized social media, any conviction at all about the future of commerce and the internet being built in part or in full on public blockchains, the blockchain ecosystem with the most credibility today to make this future a reality is still Ethereum. - Christine Kim

Trump Family Launches Memecoins on Solana

Last Friday on January 17, Trump’s team launched a new memecoin on Solana with the ticker $TRUMP. Interest in the token quickly picked up, and it briefly overtook SHIB as the #2 most valuable memecoin at a market cap of $15bn (based on circulating supply) at its peak on Sunday (behind DOGE). Later in the weekend, the Trump team then announced the launch of a new memecoin with the ticker $MELANIA, which preceded a decline in $TRUMP price of nearly 60% within minutes before it slowly began to recover. These actions sparked a significant increase in network activity on Solana, which saw several new records set including total network fees, SOL price, and single-day DEX volume of $35.9bn (highest across ALL blockchains by several factors). However, the increased network activity on Solana also led to partially degraded network performance (e.g., elevated tx failure rates as reported by Phantom and delayed Coinbase sends/receives with Solana). The source of the issue was degradation in Jito’s block engine, which forced users into the network’s default scheduler.

OUR TAKE:

The launch of President Trump’s memecoin showcases the virality of memecoins and the wealth/liquidity effect of a single token across the Solana ecosystem (including the liquidity drain from the launch of MELANIA) and the crypto market more broadly. $TRUMP was not the President’s first onchain project. He has also launched a series of NFTs on Polygon and Bitcoin Ordinals called “Trump Digital Trading Cards,” not to mention the Ethereum-based DeFi protocol World Liberty Financial. These, however, did not come close to the scale of the $TRUMP token on Solana in terms of adoption or value, which was able to go from launch to a top 20 token by market cap virtually overnight. To offer some context of the speed at which it grew, the token’s market cap cleared that of what is now considered to be an “OG” memecoin in SHIB in less than 48 hours. It also scaled to many multiples higher than other memecoins that are considered to be “large caps” in the category, such as WIF and ai16z. This underscores just how quickly memecoins, by way of virality and their more liquid nature, can gain momentum and scale.

The launch of $TRUMP and $MELANIA also highlighted how big of an impact a single token can have on an ecosystem and the market as a whole. Essentially the entire market, from BTC to DeFi tokens and other memecoins, was down in the day that followed the initial launch of $TRUMP as users flooded onto Solana to buy the token. Many on X referred to it as “the blackhole” as the token was vacuuming up liquidity from all corners of the market. The launch of $MELANIA, on the other hand, showed how this dynamic works in the opposite direction. Within minutes of the First Lady’s token launch, the price of $TRUMP cratered with traders rotating into the new token and/or taking profit on the original trade.

The weekend’s activity on Solana and the network’s performance through it all also highlighted some key components of the network’s infrastructure. While the network did not experience any downtime, a major feat in itself, it was exposed that the network is highly reliant on Jito’s block engine to process transactions smoothly at scale. The network was able to function fluidly through the greater part of the weekend with median fees remaining mostly at bay and the source of transaction failures primarily being the result of transaction parameters not being met upon execution (e.g. slippage settings exceeded), instead of networking failures. However, when Jito experienced severe degradation, the network slipped into chaos where fees for certain types of transactions spiked some 28,000% and users struggled to get transactions picked up. - Zack Pokorny

Charts of the Week

Solana shattered a number of records over the weekend in the wake of President Trump’s memecoin launch. The most impressive was DEX volume which reached a new daily all-time high of $35.9bn on January 17, clearing the network’s previous daily record of $7.1bn set around the election on November 18 by a factor of more than 5x. Since the record-setting day, DEX volumes on Solana have remained elevated, averaging $26b/day over the last five days through January 21.

For reference, other chains with more established DeFi ecosystems (e.g. Arbitrum, Base, BSC, and Ethereum) do between $1bn and $4bn of volume daily. Solana’s sustained daily volume in excess of $20bn is orders of magnitude higher than the closest competitors. Moreover, Solana’s record $35.9 billion of daily volume is almost 3x higher than the previous single day all-time high volume out of any chain in history. The previous record of $13 billion of daily volume was set by BSC in Spring 2021.

Other News

• President Trump tasks working group to evaluate creation of national digital assets stockpile

• President Trump says US will be 'world capital of artificial intelligence and crypto' in Davos speech

• Ross Ulbricht makes first public statements after being pardoned by Trump

• Bitwise files Dogecoin ETF registration, firm confirms

• CME staging website suggests XRP, Solana futures will go live on CME on Feb. 10 pending regulatory approval

• Hong Kong’s Legislative Council discusses new stablecoin bill amid crypto hub push

• Jupiter to distributes over $600 million in ‘Jupuary’ airdrop

• SEC Commissioner Hester Peirce to lead new crypto task force

• Circle acquires tokenization startup Hashnote