Crypto, Stocks, Bonds: A Leveraged Cycle Perspective

Chainfeeds Guide:

Crypto, stocks, and bonds serve as mutual pillars; gold and BTC jointly support US Treasuries as collateral, while stablecoins underpin the global adoption of the US dollar, making the deleveraging process more socialized in terms of loss distribution.

Source:

Author:

Zuo Ye

Opinion:

Zuo Ye: Financial instruments and biological evolution share similar patterns: once they reach their peak, complex and chaotic internal competition emerges. Since the birth of bitcoin, tokenomics has built an on-chain financial system out of nothing. Although bitcoin's current market cap of 2 trillion USD is impressive, it still pales in comparison to the nearly 40 trillion USD scale of US Treasuries, and is destined to play only a partial mitigating role. Similar to Ray Dalio's frequent advocacy of gold as a hedge against the US dollar, bitcoin also serves as a buffer rather than a complete replacement. As the market evolves, stock market liquidity is gradually becoming a new pillar for the token system. The possibility of pre-IPO tokenization has emerged, and stock tokenization is seen as a new vehicle following electronification. The DAT (Treasury) strategy is becoming the main trend for the first half of 2025. Meanwhile, the tokenization of US Treasuries and corporate bonds is gradually moving from concept to practice, still in the exploratory stage but already seeing small-scale implementation. Stablecoins have gained an independent narrative status in this process, tokenized funds and debt products are increasingly seen as synonymous with RWA, and composite ETFs, anchored to the concept of crypto, stocks, and bonds, are starting to attract capital. Whether the market story will repeat itself in the crypto space remains to be seen, but the rise of altcoin DATs and staking ETFs marks the official arrival of a new leverage cycle. Under the current market structure, crypto company IPOs are the highest-end and rarest track, with only a handful of companies able to list on US stock exchanges, making it extremely difficult to sell themselves as assets. In contrast, reselling quality assets is more feasible, as seen in BlackRock's dominance in spot BTC and ETH ETFs, with newer staking and general ETFs gradually becoming the focus of competition. DAT strategy companies demonstrate unique advantages, having completed a three-way rotation among crypto, stocks, and bonds: issuing debt with bitcoin as collateral to support their stock price, and continuing to accumulate bitcoin, thus earning market recognition for their asset safety and representativeness. ETH treasury companies like BitMine and Sharplink have only achieved "crypto-stock linkage" and have yet to convince the market of their ability to issue debt based on their own assets, as evidenced by their mNAV being below 1. In the future, if ETH gains broader recognition, high-leverage competition will produce winners, but most long-tail projects will be eliminated during the leverage up and down cycles. Although the scale of stock tokenization is not large, it has the broadest application prospects: currently, stocks are stored electronically, but in the future, they may circulate directly on-chain, where tokens are stocks and stocks are assets. Robinhood is building its own ETH L2, and projects like xStocks and SuperState are pushing stock tokenization onto both Ethereum and Solana. Meanwhile, the tokenization of US Treasuries and funds is gradually giving rise to "standalone server" players like Ondo, but the future of RWA must expand beyond US Treasuries to gain long-term growth momentum. The so-called leverage cycle is essentially a self-fulfilling loop. In bull markets, institutions tend to leverage up to buy high-volatility assets, while retail investors sell BTC/ETH and stablecoins to chase altcoins. But when the market turns bearish, institutions prioritize selling secondary assets to preserve core collateral, while retail investors are forced to sell high-value assets to maintain leverage, ultimately concentrating losses among retail investors. The end of the cycle is often accompanied by a complete collapse of leverage: if retail investors lose the ability to maintain positions, the cycle ends; if institutional blowups trigger systemic crises, retail investors are still the main victims, as high-value assets have already been absorbed by institutions. This pattern explains why when bitcoin falls, altcoins fall even harder. Looking further, the combination of crypto, stocks, and bonds synchronizes leverage and volatility, with tokens, stocks, and debt interacting with each other. Suppose there exists a hybrid stablecoin partially anchored to US Treasuries and adopting a delta-neutral strategy; it could link crypto, stocks, and bonds, making market volatility a hedging or even profit opportunity. ENA/USDe already exhibits some of these features, but higher leverage cycles will bring more intense risks, potentially triggering multiple on-chain blowups and repeating the cycle of institutional exit and retail takeover. If this spills over to the US stock market, the result could be similar to the 1998 LTCM crisis. Since there is no Federal Reserve on-chain and no ultimate liquidity provider, the market may fall until it can fall no further. After a long period of clearing, a new cycle will restart based on value created by real labor, and stablecoins will gradually be pegged to BTC/gold, moving toward a smoother leverage curve.