The pillars of cryptocurrencies, stocks, and bonds support each other, while gold and BTC jointly underpin U.S. Treasuries as collateral. Stablecoins bolster the global adoption rate of the U.S. dollar, making the process of deleveraging more socially distributed.
Author: Zuo Ye
Cycles stem from leverage. From the rapidly born and rapidly dying meme coins to the technological waves of the 80s, humanity has always found some force, belief, or organizational method to create more wealth. Let’s briefly review the current historical coordinates to frame why the intertwining of cryptocurrencies, stocks, and bonds is important.
Since the late 15th century's Age of Discovery, the core economies of capitalism have undergone the following changes:
• Spain and Portugal — Physical gold and silver + brutal colonial plantations
• The Netherlands — Stocks + corporate structure (Dutch East India Company)
• Britain — Gold standard + colonial arbitrage (military rule + institutional design + imperial preferential treatment)
• The United States — U.S. dollar + U.S. Treasuries + military bases (abandoning direct colonization while controlling key outposts)
It is important to note that latercomers absorb the advantages and disadvantages of their predecessors. For example, Britain also adopted corporate and stock systems, and the U.S. engaged in military rule. Here, the focus is on the innovative points of the new hegemon. Based on the above facts, we can identify two major characteristics of the classic capitalist trajectory:
• Hegemonic Copernican Law: Just as animals tend to evolve to larger sizes, the scale of core economies will continue to grow (Netherlands -> Britain -> United States);
• Economic Debt Cycle: Physical assets and commodity production yield to finance, a classic capitalist strong nation's trajectory relies on new financial innovations for fundraising and profit;
• Leverage ultimately collapses: From Dutch stocks to Wall Street's financial derivatives, pressure on returns diminishes the appeal of collateral, debts cannot be cleared, and new economic entities take their place.
The United States has reached the limit of global dominance, and the next phase will be a long ending moment of "you within me, I within you."
U.S. Treasuries will eventually become uncontrollable, similar to the British Empire after the Boer War. However, to maintain a dignified end, financial products like cryptocurrencies, stocks, and bonds are needed to extend the countdown to debt collapse.
The pillars of cryptocurrencies, stocks, and bonds support each other, while gold and BTC jointly underpin U.S. Treasuries as collateral. Stablecoins bolster the global adoption rate of the U.S. dollar, making the process of deleveraging more socially distributed.
Six Combinations of Cryptocurrencies, Stocks, and Bonds
Everything that brings joy is merely a dream.
Becoming larger and more complex is a natural law for all financial instruments and even living organisms. When a species reaches its peak, disorder and internal competition follow, with increasingly complex features and traits reflecting the heightened difficulty of mating.
Token economics originated from Bitcoin, creating an on-chain financial system from nothing. With a market cap of $2 trillion for BTC, compared to nearly $40 trillion for U.S. Treasuries, it is destined to only serve a relieving role. Ray Dalio frequently advocates for gold as a hedge against the dollar, which is similar.
Liquidity in the stock market has become a new pillar for tokens, with the emergence of marketable pre-IPO tokenization. Stocks on-chain have also become a new vehicle after electronic forms, and the DAT (Treasury) strategy is set to be a key focus in the first half of 2025.
However, it is important to note that the on-chain transformation of U.S. Treasuries goes without saying, but the issuance of tokens and corporate bonds on-chain is still in the experimental phase, though small-scale practices have finally begun.
Image description: Growth in the number of ETFs
Image source: @MarketCharts
Stablecoins have become an independent narrative, with tokenized funds and debts becoming new synonyms for RWA (Real World Assets). Index funds, anchoring more concepts of cryptocurrencies, stocks, and bonds, are also beginning to attract capital. Will the story of traditional ETFs/indexes consuming liquidity be replayed in the crypto space?
We cannot make a judgment on this, but the emergence of altcoin DAT and staking ETFs has officially announced the arrival of a rising leverage cycle.
Image description: Forms of combining cryptocurrencies, stocks, and bonds
Image source: @zuoyeweb3
Tokens as collateral are increasingly losing strength in both DeFi and traditional finance. On-chain, we need USDC/USDT/USDS, which are essentially variants of U.S. Treasuries. Off-chain, stablecoins need to become the new trend. Before this, ETFs and RWAs have already made their own practices.
In summary, the market has roughly seen six combinations of cryptocurrencies, stocks, and bonds:
• ETFs (futures, spot, staking, general)
• Crypto stocks (financialization methods transforming on-chain uses)
• Crypto company IPOs (Circle represents a phase of the stablecoin trend's "hard top")
• DAT (MSTR crypto stocks vs. ETH crypto stocks vs. ENA/SOL/BNB/HYPE coins)
• Tokenized U.S. Treasuries, funds (Ondo RWA theme)
• Pre-IPO market tokenization (not yet significant, dangerous quiet period, on-chain transformation of traditional finance)
The end of the leverage cycle and the timing of exit cannot be predicted, but the basic appearance of the cycle can be outlined.
Theoretically, when altcoin DAT appears, it is already at the top of a long cycle. However, just as BTC can hover around $100,000, the dollar/U.S. Treasuries will determine complete virtualization, and the momentum released will require the market a long time to digest. This digestion can take as long as 30 years: from the Boer War to Britain abandoning the gold standard (1931-1902=29), and the Bretton Woods system (1973-1944=29).
A thousand years is too long; we only strive for the present. At least before the mid-term elections in 2026, crypto still has a year of good times.
Image description: Current state of the cryptocurrency, stock, and bond market
Image source: @zuoyeweb3
Analyzing the current market structure, crypto company IPOs belong to the highest-end, most niche track, with only a few crypto companies able to complete a U.S. stock IPO. This also indicates that selling oneself as an asset is the most challenging.
As a second option, reselling around existing quality assets will be simpler. For example, BlackRock has become an undisputed giant in the spot BTC and ETH ETF space, and newer staking ETFs and general ETFs will become new competitive heights.
Furthermore, the DAT (Treasury) strategy company stands out as the only player to complete the three-way rotation of cryptocurrencies, stocks, and bonds. Based on BTC, it can issue bonds, thereby supporting stock prices, while excess funds continue to buy BTC, indicating that the market recognizes BTC's safety as collateral and acknowledges the asset value represented by the strategy itself.
In the ETH treasury company sector, BitMine and Sharplink have at most only completed the linkage of cryptocurrencies and stocks. They have not convinced the market of their own bond issuance strength (excluding the part of capital operations when buying coins that issues bonds), meaning the market partially recognizes ETH's value but does not recognize the value of ETH treasury companies themselves. An mNAV below 1 (total stock value below the value of held assets) is merely a result.
However, as long as ETH's value is widely recognized, high-leverage competition will produce winners, and ultimately, only long-tail treasury companies will fall, leaving those who acquire ETH as the representatives, becoming the winners after the add/remove leverage cycle.
Currently, the scale of tokenized stocks does not match that of DAT, IPOs, or ETFs, but it has the most application prospects. Today's stocks are in electronic form, stored on various servers, while future stocks will circulate directly on-chain. Stocks will be tokens, and tokens can represent any asset. Robinhood is building its own ETH L2, xStocks is coming to Ethereum and Solana, and SuperState's Opening Bell helps Galaxy tokenize stocks to Solana.
Future tokenized stocks will compete between Ethereum and Solana, but this scenario has the least imaginative space, highlighting the technical service aspect, representing the market's recognition of blockchain technology. However, the asset capture ability will transmit to $ETH or $SOL.
In the field of tokenized U.S. Treasuries and funds, there is a vague trend of becoming a single-player in Ondo, due to the diversion of U.S. Treasuries and stablecoins. The future of RWA needs to explore more non-U.S. Treasury areas, similar to non-dollar stablecoins. In the long run, the market scale is enormous, but it will always be long-term.
Finally, Pre-IPO adopts two methods: first, raising funds before buying equity; second, buying equity before tokenizing and distributing. Of course, xStocks belongs to the secondary stock market, and Pre-IPO is also doing this, but the core idea is to tokenize the unlisted market to incentivize, thereby stimulating the publicization of the non-public market. Note this expression; this is the path of stablecoin expansion.
However, under the current legal framework, whether there will still be space for regulatory arbitrage can only be said to be expected, but it will require a considerable amount of time to adjust. Pre-IPO will not quickly become public; the core of Pre-IPO is the issue of asset pricing power, which is fundamentally not a technical problem. Many distributors on Wall Street will do everything to prevent it.
In contrast, the distribution of rights and incentives in stock tokenization can be decoupled. "People in the crypto space care less about rights and more about incentives." As for tax issues related to equity income and other regulatory matters, there have already been practices globally, and on-chain transformation is not a barrier.
Comparatively, Pre-IPO will involve Wall Street's pricing power, while stock tokenization will amplify Wall Street's profits, with distribution channels and more liquidity entering. These are two completely different situations.
Rising cycles converge, while falling cycles clash
The so-called leverage cycle is a self-fulfilling prophecy. Any good news is worth a twofold increase, continuously stimulating higher leverage. However, institutions holding different collateral will prioritize selling off secondary coins during a downturn, fleeing to safer collateral. Retail investors have limited freedom of action and ultimately absorb all losses, either actively or passively.
When Jack Ma buys ETH, Huaxing Capital purchases BNB, and China Merchants International issues Solana tokenized funds, a new era enters our time: global economies maintain communication through blockchain.
The U.S. is at the limit under the Copernican Law, already the lowest cost and highest efficiency mode of dominance. However, it faces an extremely complex interwoven situation. The new Monroe Doctrine does not conform to objective economic laws; the internet can be fragmented, but blockchain is wonderfully and naturally unified. Any L2, node, and asset can merge into Ethereum.
From a more organic perspective, the combination of cryptocurrencies, stocks, and bonds is a process of capital exchange between institutional and retail investors, similar to the principle of "when Bitcoin rises, altcoins lag behind; when Bitcoin falls, altcoins fall even more," though the latter is more common in on-chain ecosystems.
Let’s discuss this process:
In the rising phase, institutions rely on leverage to flee to high-volatility assets with lower collateral prices. In the downturn phase, institutions will prioritize selling off altcoin assets to maintain high-value asset holdings;
The retail process is the opposite. In the rising phase, retail investors will sell more BTC/ETH and stablecoins to buy high-volatility assets, but constrained by the overall scale of funds, once the market turns bearish, retail investors will need to further sell BTC/ETH and stablecoins to maintain high leverage in altcoins.
Institutions can naturally accept greater drawdowns, and high-value assets from retail investors will be sold to them, while the behavior of retail investors maintaining leverage will also increase the institutions' tolerance, leading retail investors to continue selling assets;
The end of the cycle is marked by the collapse of leverage. If retail investors are unable to maintain leverage, the entire cycle ends. If institutions collapse, causing a systemic crisis, retail investors will still suffer the greatest losses, as high-value assets will have already been transferred to other institutions;
For institutions, losses will inevitably be socialized, while for retail investors, leverage is their own noose, and they still have to pay institutions. The only hope is to run ahead of other institutions and retail investors, a challenge as difficult as landing on the moon.
The grading and assessment of collateral are merely superficial; the core is pricing leverage based on expectations of the collateral.
This process still falls short in explaining why altcoins always drop harder; it can be further supplemented. Retail investors are more eager for leverage to rise than the issuers themselves, meaning retail investors hope for every asset pair to be 125x. However, in a downward cycle, the actual counterpart in the market will become the retail investors themselves, while institutions often have more complex asset allocations and hedging strategies, which retail investors must bear.
In summary, cryptocurrencies, stocks, and bonds synchronize leverage and volatility. We dive into this from a financial engineering perspective, imagining a mixed stablecoin based on U.S. Treasuries that adopts delta-neutral strategies, allowing a stablecoin to connect the three forms of cryptocurrencies, stocks, and bonds. Only then can market volatility activate the hedging mechanism and even yield greater profits, resulting in synchronized rises.
ENA/USDe already partially possesses this characteristic. Let’s boldly predict the trajectory of the downward leverage cycle: higher leverage will attract more TVL and retail trading, ultimately reaching a critical point of volatility. The project parties will prioritize protecting the USDe peg, sacrificing the ENA coin price. Subsequently, the stock price of DAT companies will fall, institutions will withdraw first, and retail investors will ultimately take over.
Then, a more terrifying multiple leverage cycle will emerge. ENA treasury investors will sell stocks to maintain their value in ETH and BTC treasury companies, but some companies will inevitably fail, slowly blowing up. First, small coins like DAT will be blasted, followed by larger coins and smaller DAT companies, ultimately leading to a market panic, observing the slightest movements of Strategy.
Under the model of cryptocurrencies, stocks, and bonds, the U.S. stock market becomes the ultimate source of liquidity, which will eventually be breached under the linkage effect. This is not alarmism; even with regulation, the U.S. stock market could not prevent the LTCM quantitative crisis. Now, with Trump leading everyone to issue coins, I do not believe anyone can stop the explosive linkage of cryptocurrencies, stocks, and bonds.
Global economies are interconnected on the blockchain, all set to explode together.
At this point, in the opposite direction, everywhere liquidity still exists, whether on-chain or off-chain, regardless of the six methods of cryptocurrencies, stocks, and bonds, will become windows of opportunity for seeking exits. The most frightening aspect is that there is no Federal Reserve on-chain; ultimately, the liquidity providers will be absent, leaving the market with nowhere to fall, leading to a final heat death.
Everything will end, and everything will begin.
After a long "pain period," retail investors will gradually accumulate the spark to purchase BTC/ETH/stablecoins through delivering takeout, presenting a new concept to institutions that could ignite a new cycle. After eliminating financial magic and clearing debts, real labor-created value will still be needed to put an end to everything.
Readers may wonder why we do not discuss the stablecoin cycle?
Because stablecoins themselves are merely the external form of the cycle. BTC/gold supports the precarious U.S. Treasuries, while stablecoins support the global adoption rate of the U.S. dollar. Stablecoins cannot form a cycle on their own; they must couple with more fundamental assets to possess real yield capabilities. However, stablecoins will bypass U.S. Treasuries, anchoring more to safer assets like BTC/gold, which will soften the leverage curve of the cycle.
Conclusion
From the six classics to my interpretation of the six classics.
On-chain lending has not yet been explored; the integration of DeFi and CeFi is indeed underway, but it is not closely related to cryptocurrencies and stocks. DAT involves some aspects, and future articles will supplement institutional lending and credit models.
The focus is on examining the structural relationship between cryptocurrencies, stocks, and bonds, and what new varieties and directions will emerge. ETFs have already solidified, DAT is still in fierce competition, stablecoins are expanding on a large scale, and the greatest opportunities lie both on-chain and off-chain. The potential of cryptocurrencies and Pre-IPO is limitless, but it is challenging to transform traditional finance through compatible methods without establishing its own internal circulation system.
Cryptocurrencies and Pre-IPO need to address equity issues, but "solving equity issues" cannot resolve them; economic effects must be created to break through regulation. Facing regulation will only lead to the shackles of bureaucracy, as seen most clearly in the history of stablecoins, where surrounding the city from the countryside is the most effective strategy.
Crypto company IPOs represent the redemption and pricing process of traditional finance for cryptocurrencies, and this will become increasingly mundane. To go public, it is best to do so early; once the concept is exhausted, it becomes quantitative valuation, just like Fintech and manufacturing, where the imaginative space will gradually diminish with the number of listings.
Tokenized U.S. Treasuries (funds) are a long-term layout, making it difficult to achieve excess profits, and they have little to do with retail investors, further highlighting the technical use of blockchain.
This article primarily presents a static macro framework, with insufficient dynamic data, such as Peter Thiel's participation in various DAT and ETF financing and investments.
Additionally, during the withdrawal of leverage, whales and retail investors move in opposite directions. Whales will prioritize selling off secondary assets while retaining core assets, whereas retail investors must sell core assets to maintain leverage on secondary assets. This means that when Bitcoin rises, altcoins may not necessarily rise, but when Bitcoin falls, altcoins will certainly plummet. All of this requires data to illustrate, but currently, the capacity is lacking, so we can only establish a static framework to clarify our thoughts.
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
