IOSG Internal Memo (Part 1): How Do We Bet on Mainstream Assets in 2026?

Author | IOSG Ventures Team

1. Mainstream assets

1. Bitcoin

A year ago, we outlined two distinct paths for Bitcoin's development: the "optimistic outlook" believed that institutional adoption and government interest would drive the asset forward, while the "pessimistic outlook" argued that failure to achieve these milestones would trigger bearish sentiment and potential crisis scenarios.

Entering 2026, the actual development lies between these two extremes, but is closer to the lower limit of expectations.

BTC Put on Hold: What Happened in 2025

Government Action (Partially Successful): The US government adopted a more passive stance than expected. While generally supportive of the crypto industry, the government made it clear that it would not use taxpayer money to purchase Bitcoin, but would instead rely primarily on confiscated BTC to build its reserves. Trump's re-election brought crypto-friendly rhetoric and regulatory optimism, but actual government purchases appear to have been more wishful thinking. Promises of "innovative ways" to increase reserves have yet to translate into concrete action.

Central banks and sovereign wealth funds (mixed results): Most major central banks in the top 20 economies remained on the sidelines, with only a few exceptions. However, sovereign wealth funds began building exposure to Bitcoin, although the scale of these purchases remains difficult to assess.

Institutional Adoption (with mixed results): MicroStrategy continued its aggressive accumulation strategy for most of 2025, positively impacting prices. However, the market narrative has dramatically shifted. MicroStrategy publicly stated its willingness to sell BTC in certain situations, moving from pure accumulation to a more "BTC credit instrument" operating model. What was once a boost now appears to be turning into potential pressure and burden. In contrast, Bitcoin ETFs performed exceptionally well, with consistent net inflows throughout 2025, indicating strong demand from traditional financial institutions and retail investors for regulated Bitcoin exposure, making them one of the most reliable sources of demand that year.

Bitcoin Outlook for 2026: Macro Dependence and Catalyst Depletion

Depletion of unique catalysts

This cycle relies on a series of powerful Bitcoin-specific catalysts: the SVB bankruptcy and the USDC de-pegging crisis, the accumulation of ETF expectations throughout 2023, MicroStrategy's continued buying, the launch of spot ETFs in early 2024, and Trump's election victory. Each of these provides unique, focused buying pressure on Bitcoin.

Looking ahead to 2026, specific positive catalysts for Bitcoin appear scarce. Governments have indicated they are unlikely to become major buyers in the short term. Central banks are unlikely to change their risk assessments of BTC quickly. MicroStrategy has exhausted its capacity for large-scale incremental purchases and is shifting its focus towards potential sales. ETFs, while successful, have completed their initial adoption wave.

For Bitcoin to thrive in 2026, it will depend almost entirely on macroeconomic factors. The priorities are clear:

# AI Stocks and Risk Appetite; Bitcoin is increasingly following the fate of the hottest assets in each cycle. In the last cycle, it tracked Tesla's bottom and peak within a similar timeframe. This cycle, we're seeing the same pattern emerge with NVIDIA. Bitcoin's performance has become deeply correlated with high-beta tech stocks and the AI craze.

#Federal Reserve Policy and Liquidity: Whether the Federal Reserve continues its dovish policy and balance sheet expansion is crucial to the broader liquidity environment. Historically, liquidity conditions have been perhaps the most important factor in Bitcoin price movements. With the Fed cutting rates three times in 2025, the direction of monetary policy in 2026 will significantly impact Bitcoin's ability to attract sustained buying pressure.

Emerging risks in 2026: While unique positive catalysts appear scarce, the possibility of negative BTC-specific catalysts is more prominent:

# Pressure on MicroStrategy (now renamed Strategy): The factors driving Bitcoin higher in this cycle could become a burden in 2026. MicroStrategy's shift from "hold forever" to "willing to sell in certain circumstances" represents a fundamental change. The "circumstances" they outline refer to are when its mNAV falls below 1 and it needs to sell BTC to fulfill its obligations to creditors. Worryingly, when you zoom in, Strategy's model begins to resemble a Ponzi scheme; however, we believe these risks are unlikely to materialize in the short term, as Strategy has built up cash reserves using the ample liquidity of its shares, sufficient to cover its dividend-related obligations for the next three years.

#The Four-Year Cycle Theory Paradox: According to cycle theory, we may already be in a phase that could be defined as a Bitcoin bear market. Cycle theory assumes that the Bitcoin market cycles every four years, with the peak of each cycle typically occurring in the fourth quarter. Following this pattern, the fourth quarter of 2025 should have been the price peak—in fact, Bitcoin reached around $125,000 during this period, which may mark the top of the cycle. However, the validity of this cycle theory is increasingly being questioned. We believe that the cycle theory is somewhat coincidental, primarily overlapping with broader macroeconomic cycles rather than representing an intrinsic pattern in Bitcoin.

Aside from concerns about an AI bubble and increased risk aversion, the main reason for BTC's poor performance in the fourth quarter of 2025 was the pressure from long-term holders who continued to sell as they adjusted their positions, believing in and acting according to cyclical theories.

The risks of self-fulfilling prophecies : Cycle theory creates a dangerous feedback loop.

Long-term holders expect the market to peak in the fourth quarter and are selling accordingly.

This selling pressure suppressed prices during what should have been the strongest period.

The resulting poor performance "confirmed" the cycle theory.

More holders are adopting this framework, amplifying future selling pressure.

Breaking the Cycle : If the macroeconomic environment remains robust, Bitcoin may eventually break free from these cyclical constraints and reprice itself upwards. The initial break from the cycle could actually be a positive catalyst that the market has not yet priced in.

#Technical Risks Enter Discussion: Bitcoin faces two long-term challenges: quantum computing vulnerabilities and questions surrounding its economic and security model. While the latter remains relatively obscure in mainstream discussion, quantum risks are increasingly entering public consciousness. More credible voices are expressing concern about Bitcoin's quantum resistance, which could undermine its narrative of a "secure, immutable store of value." However, the BTC community prefers this discussion to begin sooner rather than later, allowing time to explore potential solutions.

Bitcoin's 2026 Judgment: When Bitcoin enters 2026, it will not be in a uniquely advantageous position driven by a crypto-specific narrative, but rather as a macro-sensitive asset whose performance will largely reflect the broader risk markets.

Catalyst depletion: Bitcoin's specific positive catalysts have been largely exhausted or realized (government stance set, MicroStrategy capacity reached its limit, early ETF adoption wave completed).

Emerging pressures: Concerns surrounding MicroStrategy, cyclical theories, and quantum risks have entered public discussion. These concerns, evident in the mainstream community, could lead to repricing. However, given the market's potential over-pricing of these risks , and considering that these risks are unlikely to materialize within the next 12 months—given that Strategy has secured cash reserves to pay creditors for the next three years, it's unlikely to face critical issues in 2026; assuming the macroeconomic cycle continues, it's only a matter of time before cyclical theorists are proven wrong; and the likelihood of quantum risks impacting mainstream BTC perception is also low in 2026.

Macroeconomic Dependence: Performance will track AI stocks (particularly NVIDIA) and Federal Reserve policy decisions.

2. Ethereum

Looking ahead to 2025

Optimistic outlook – partially realized

Looking back at our 2025 outlook, several potential advantages for Ethereum have begun to emerge, though not yet fully realized: #Institutional Feasibility (Clear Success): This argument has proven correct. Ethereum's stablecoin dominance (with $45-50 billion in new issuance since the GENIUS Act) demonstrates that institutions choosing blockchain infrastructure consistently select Ethereum as the most trusted asset ledger. This is also reflected in institutional buyers, with ETH DATs able to raise substantial funds through major players like Bitmine. #Developer Ecosystem and Diverse Leadership (Clear Success): Predictions that Base, Arbitrum, and other L2s would drive adoption have materialized. Base, in particular, has become a key growth driver in the crypto consumer space, while Arbitrum has made significant strides in institutional work, bringing Robinhood into the broader Ethereum ecosystem. #ETH as the Only Alternative to BTC (Misjudgment): The two core long-term unique risks facing BTC—quantum vulnerabilities and security economics—are areas where ETH is better positioned and more future-oriented. ETH remains the only asset capable of serving as an alternative to BTC as a store of value. However, ETH/BTC price performance is unlikely to benefit from this positioning until these concerns are further validated in mainstream BTC discussions. #Resilience to Single-Entity Risk (Explicit Success): The absence of a MicroStrategy equivalent has proven to be a significant advantage, as MicroStrategies have shifted from being a facilitator of Bitcoin accumulation to a potential burden. While most DATs are likely short-lived, those holding substantial amounts of ETH have a more robust ownership structure and fewer strings attached than Strategies.

Pessimistic outlook – largely avoided

The negative scenarios we outlined for Ethereum did not materialize as severely as expected: # Leadership Vacuum (Resolved): For a long time, there was a lack of a sufficiently strong figure to defend Ethereum's position in the broader crypto space. Vitalik's focus was scattered across many topics, and he was not the opportunistic CEO type of leader focused solely on price performance. Ethereum lacked an advocate of the Michael Saylor type until recently, which was one of the key reasons the price briefly fell below $1,500 earlier this year. Tom Lee then largely filled this void, becoming ETH's primary evangelist and advocate. He met the requirements: excellent sales skills, a prestigious position in the financial world, and alignment of interests with ETH's price appreciation. # Cultural Challenges (“Awakened” vs. “Pragmatic”) (Improving): Last year we wrote: "Ethereum's culture is generally considered more 'awakened' than other ecosystems, emphasizing inclusivity, political correctness, and community-driven ethical discussions. While these values can foster collaboration and diversity, they can sometimes lead to challenges such as indirect communication, moralizing, and hesitation in making bold, decisive decisions." Fortunately, the Ethereum Foundation has welcomed a new leadership that is more performance-oriented and able to tighten the organization to improve efficiency and impact. From a subjective perspective, the atmosphere of the broader community also seems to be changing to better adapt to the current environment.

Ethereum 2026 Outlook: Unique Drivers Positive for ETH/BTC. Ethereum shares macroeconomic risk characteristics with Bitcoin—sensitivity to AI stocks, fiscal policy, and the Fed's liquidity conditions. However, in terms of unique factors, Ethereum is clearly positioned better than Bitcoin in 2026.

Ethereum's advantages over Bitcoin: a. No major pressure: Ethereum does not face the same structural risks that weigh on Bitcoin. Most importantly, it lacks a leveraged entity equivalent to MicroStrategy, whose potential sell-off could destabilize the market. While most DATs are likely short-lived, entities holding large amounts of ETH use less leverage than Strategy. b. ETH is the only alternative to BTC: We misjudged the timing of this argument last year, but if any of the previously discussed unique risks to BTC materialize—including discussions surrounding quantum vulnerabilities and economic/security risks—this should provide a positive for the ETH/BTC ratio.

Unique Catalyst: Stablecoins and DeFi Dominance. Perhaps most importantly, Ethereum possesses a unique positive catalyst that is just beginning to emerge. After years as one of the “most disliked assets” in the crypto space—and after experiencing severe stress and volatility from 2023-2025—the conditions for Ethereum’s resurgence are ripe.

#Undeniable Stablecoin Leadership: The data speaks for itself: Ethereum dominates the stablecoin market. This is evident in several ways. a. Asset Balance: Ethereum accounts for nearly 60% of the total stablecoin market capitalization, demonstrating a clear network effect and market preference. b. Liquidity Dynamics: Since the GENIUS Act was announced, Ethereum has absorbed $450-500 billion in new stablecoin issuance. This indicates that when new stablecoin demand arises, it flows disproportionately to Ethereum.

#A Decade of Proven Reliability: Ethereum has not experienced any major performance issues or outages in the past 10 years. This operational record is indispensable and crucial to its positioning as the foundation of global liquidity infrastructure. When traditional finance considers blockchain integration, Ethereum's history of reliably managing billions of dollars in value provides unparalleled credibility.

# DeFi as Ethereum's Moat: Ethereum's DeFi ecosystem is arguably its most important competitive advantage. Ethereum is the only blockchain capable of effectively deploying hundreds of billions of dollars through battle-tested smart contracts. a. Time-tested security: Smart contracts like Aave, Morpho, and Uniswap have been operating for years, locking up billions of dollars in total value without major security breaches. While they represent huge "honeypots" for hackers, these contracts have proven their resilience. b. Deep liquidity, composability, and capital efficiency: The ability to combine different DeFi protocols creates network effects that are difficult for competing chains to replicate. Complex financial products can be built by combining existing primitives—a capability that requires technological infrastructure and deep liquidity. The best example is the composability of Ethena, Aave, and Pendle. This makes the Ethereum mainnet the sole hub for capital-intensive use cases.

#Regulatory Clarity: Positive regulation surrounding the crypto industry should foster greater integration between traditional finance and crypto. The convergence of macro timing, regulatory clarity, and institutional adoption positions Ethereum as a major beneficiary of traditional finance entering the crypto space. With a robust blockchain track record and the ability to securely manage hundreds of billions of dollars in proven DeFi infrastructure, Ethereum offers institutions a combination of security, liquidity, and regulatory visibility that competing chains cannot match. After years of underperformance and skepticism, Ethereum may be poised for a sentiment reversal. Markets tend to reward assets that are "abandoned" once fundamentals begin to show significant improvement. Ethereum's infrastructure improvements, stablecoin dominance, and institutional adoption positioning could drive a repricing in 2026.

Ethereum Risks in 2026: The Battle of Asset Perceptions. While Ethereum's fundamental positioning looks strong heading into 2026, several risks could undermine its performance—most notably the ongoing debate about what ETH represents as an asset.

The debate over asset classification

#Core Debate: Unlike Bitcoin, which has reached a relatively clear consensus as a "digital gold" monetary asset, Ethereum is still in the process of market recognition and discovery. This ambiguity creates vulnerabilities that skeptics and conflicting interest groups can actively exploit.

# Two competing narratives: a. The monetary asset view (bullish): Advocates in the Ethereum community, including prominent figures like Tom Lee, have been pushing the "digital oil" analogy—positioning ETH as a practical, productive monetary asset. This narrative has gained traction, supporting a Bitcoin-like monetary premium valuation for Ethereum. b. The cash flow asset view (bearish): A significant segment of the market—including Bitcoin zealots and traditional finance skeptics—attempts to fundamentally differentiate Ethereum from Bitcoin. They argue that Ethereum should be valued like assets such as: BlackRock: valued at a fraction of its assets under management; Nasdaq or exchange operators: using a fee-based DCF (discounted cash flow) model rather than a monetary premium.

#Cognitive Manipulation; Ethereum is particularly vulnerable to narrative attacks because its value proposition is more complex than Bitcoin's simple "digital gold" story. We have witnessed in previous cycles how skeptics have a disproportionate ability to negatively impact perceptions of ETH as an asset.

#Why Ethereum is more vulnerable: a. A younger asset : Market consensus is less mature compared to Bitcoin's 15+ year track record; b. A more complex narrative: Programmability, DeFi, stablecoins, Layer 2—more difficult to distill into a simple narrative; c. Decentralized leadership: Multiple voices and interests make it easier for adversaries to create chaos.

Layer 2 Debates: As Ethereum's Layer 2 ecosystem flourishes (Base, Arbitrum, etc.), questions arise regarding value accumulation: a. Does L2 enhance or weaken ETH? If most activity and fees remain on L2, can mainnet ETH capture value? b. Liquidity fragmentation: Multiple L2 servers may dilute rather than enhance Ethereum's network effect.

We wrote about this topic earlier this year:

L2 fragmentation can be addressed through two main approaches:

1. Market dynamics (natural selection) may naturally integrate the ecosystem, leaving 2-3 dominant general L2s with significant activity, while others either disappear or shift to stack approaches—serving rollups for specific use cases.

2. Establishing robust interoperability standards can reduce friction in the broader Rollup ecosystem and weaken the potential for any single Rollup to build a dominant moat.

Ethereum should actively promote the latter scenario while it still retains influence over L2. This influence is diminishing daily, and the longer Ethereum delays, the less effective this strategy becomes. By fostering a unified L2 ecosystem, Ethereum can regain the composability advantage that once defined its mainnet, enhance user experience, and strengthen its competitive edge against monolithic blockchains.

Current assessment: While the L2 fragmentation debate continues, the Ethereum mainnet has successfully maintained its dominance in large-scale capital deployments. No L2 has sufficient influence to threaten the mainnet's value accumulation. However, if L2 continues to grow without sufficient interoperability standards, this remains a risk that needs to be monitored.

Ethereum's 2026 Judgment: Ethereum enters 2026 with a stronger unique positioning than Bitcoin, despite sharing similar macroeconomic sensitivities: # Stablecoin Dominance: Holding 60% of the stablecoin market capitalization, with $45-50 billion in new issuance since the GENIUS Act, demonstrating a clear institutional preference, it is most likely to benefit from further growth in the stablecoin market capitalization. # DeFi Moat: The only blockchain capable of effectively deploying tens of billions of dollars through battle-tested protocols (Aave, Morpho, Uniswap) and with proven security over the years. # Institutional Positioning: Given regulatory clarity, operational track record, and deep liquidity, it is most likely to capture traditional financial capital entering the crypto space. # No Stress: No MicroStrategy equivalent entity posing potential selling pressure; more resilient to single-entity risk. # Sentiment Reversal Potential: After years as "one of the most disliked assets," fundamentals are clearly improving, creating conditions for repricing. # Key Risks: Ongoing asset classification debates and attempts at cognitive manipulation remain major threats to valuation.

L2 monitoring: Fragmentation concerns exist, but the mainnet maintains the dominance of large capital, and it is extremely unlikely that anyone will threaten its role as the core asset ledger for large funds: 1) Large capital is primarily concerned with security; 2) Gas costs are disproportionate to transaction size, making Ethereum extremely cheap for large investors; 3) DeFi moat.

Solana

Looking ahead to 2025

Looking back at the potential paths we outlined for Solana in our 2025 outlook, reality ultimately presents a mix of two scenarios—but leans more towards the negative.

• "From Hunter to Prey" (Fully Realized): This has now been fully realized. The emergence of Hyperliquid has done particularly bad damage to the Solana narrative. This chain, which has for years claimed to be the most scalable and best suited for CLOB (Central Limit Order Book) exchange platforms, now finds itself being surpassed precisely in this use case.

• Overexposure to Meme Culture (Absolutely Accurate): This concern has proven entirely valid. The ephemeral nature of meme-driven growth is now evident. In hindsight, this is clear—meme casinos have a user churn rate exceeding 98%. Solana's main argument was "buying digital Macau," but many overlooked the fact that this digital Macau's odds were set 98% against users. This has the potential to leave Solana with a lasting brand stain, especially as institutions now seek more capital-driven sustainable directions.

• DePIN Leadership (Unproven): This argument has not yet materialized. While Solana continues to nurture the DePIN vertical, it has not yet translated into the expected breakthrough adoption or narrative dominance.

• Developer leadership in cutting-edge verticals (results mixed): Solana demonstrated agility and continues to attract builders, particularly in the consumer startup space. However, advancements in wallets and cross-chain infrastructure are making the choice of underlying chain increasingly irrelevant for most consumer applications. Anyone who has used Privy and Fun.xyz's latest deposit solutions can attest to this trend.

Solana 2026 Vision: Finding Sustainable Narratives

Solana shares the same macroeconomic sensitivities as Bitcoin and Ethereum, but faces a more complex and unique risk profile – with more negative than positive factors heading into 2026.

Meme Coin Aftermath

Solana emerged from one of the most explosive meme coin cycles in crypto history. While this brought a lot of short-term attention and activity, it also brought unsustainable dynamics and brand risks: the meme coin frenzy on Solana exhibited worrying characteristics.

• Extreme user churn: Over 98% of users churned—meaning almost all participants lost money, while platforms like Pump.fun, insiders controlling the Solana blockchain space, and problematic teams behind many projects profited on the profitable side of the trades.

• Legal challenges: Recent lawsuits have targeted Pump.fun and Solana themselves, accusing them of promoting unfair gambling activities.

• Brand risk: What appears to be short-term success—massive trading volume, wallet creation, and attention—may prove to be a brand liability. The “crypto casino” narrative could hinder institutional adoption and regulatory goodwill. As the Meme coin cycle runs its course, Solana faces the challenge of shedding this association.

Centralization becomes inevitable

Solana's integrated high-throughput architecture is designed to support applications on a global scale with minimal latency. However, this design choice is increasingly revealing concerns about centralization.

It's becoming increasingly clear in the blockchain industry that you have to make a choice: either build an integrated and centralized solution optimized for performance, or embrace a modular path with greater decentralization. Solana chose the former—prioritizing scalability and speed through centralized physical infrastructure. While this achieves impressive throughput, it fundamentally limits Solana's credibility for applications requiring true decentralization and censorship resistance. Double Zero is a project that, if successful, will lead to further centralization of physical infrastructure around dozens of high-bandwidth fiber optic providers.

Can Solana maintain its "integration"?

While Solana doesn't shy away from making centralized trade-offs, the question remains: to what extent can it uphold the premise of an "integrated chain"? Much of the discussion at the Solana Breakpoint has focused on whether Solana can support more complex smart contract logic and heavier computations, or whether it's primarily designed to maximize throughput for relatively simple transaction logic.

Complex applications require fragmented state : Developers building complex applications on Solana are increasingly leaving the main state.

• Jupiter's Choice: Jupiter, one of Solana's flagship DeFi protocols, has decided to launch JupNet—a separate environment to compete with Hyperliquid—instead of building it on the Solana mainnet. This represents a significant acknowledgment that Solana's global state cannot adequately support certain application needs.

• "Network Extensions": Neon Labs and similar projects are building what they call "Solana extensions," but functionally resemble Layer 2 solutions. These fragment Solana's state, allowing developers to control their own block space and execution environment—effectively acknowledging the limitations of a monolithic global state. The argument is that even if Solana can theoretically support any logic, in practice, most computationally intensive tasks can only be executed across multiple blocks. In this case, the platform has no control over the execution order, which can potentially break the fundamental logic of transactions. While these "extension" solutions are touted as scaling Solana's capabilities while maintaining a unified state, the reality is more fragmented. Developers need isolated environments with predictable performance, pushing the architecture towards a more modular approach similar to Ethereum.

Competitive repositioning problem

Awkward Middle Ground

Solana is currently in an uncomfortable position between two dominant forces. Ethereum dominates the narrative of liquidity, stablecoins, and DeFi with its battle-tested infrastructure. Hyperliquid dominates the high-performance order book narrative that Solana has cultivated over the years. Solana must demonstrate a competitive advantage in at least one of these areas, or risk being perceived as neither sufficiently decentralized nor maximally scalable.

Before Hyperliquid, Solana had a relatively unique positioning—a somewhat centralized but highly scalable integrated chain. Solana actively promoted the narrative that its architecture made it ideal for global order books and high-frequency trading applications. This narrative has become awkward. Today, no competing order book on Solana can match Hyperliquid's trading volume and performance.

Drift may be one of the more mainstream Solana protocols for perpetual contracts, but it still doesn't have a strong competitive edge against Hyperliquid. So while Solana spent five years defending its position as the most scalable chain, it's now in a very awkward position when the advanced order book isn't even competitive on the Solana blockchain, and activity is primarily driven by Meme coins, which lack sustainable dynamics.

This places Solana in a similar position to Ethereum 18 months ago, when Ethereum was sandwiched between Bitcoin and Solana—Solana absorbed the activity while Bitcoin remained the clear store of value. Now we see Solana positioned between Ethereum and Hyperliquid: Ethereum dominates liquidity, DeFi, and stablecoin-related activity, while Hyperliquid dominates the order book and CLOB perpetual contract exchange business. If Solana fails to choose one and competitively win, it could have a very negative impact on Solana's narrative.

The Path Forward: Proven Adaptability and Survival

Professional Execution: It's commendable that Solana remains one of the most professionally operated blockchain organizations in the industry. The Solana Foundation demonstrates a high level of attention to detail and rapid execution. This should not be underestimated—Solana has repeatedly proven its ability to identify opportunities and facilitate effective transformation.

Moving away from the casino narrative: Recent efforts suggest that Solana is trying to move away from the “crypto casino” narrative and find more sustainable, fundamental use cases. This was evident in the recent Solana Breakpoint event, which was more of a fintech atmosphere than a speculative focus.

Challenge: Solana must successfully expand in at least one of the following two directions to maintain its competitive position:

#Capture liquidity and DeFi; Build a robust DeFi ecosystem that can compete with Ethereum's maturity and liquidity depth.

• Given the DeFi moat that the Ethereum mainnet possesses, this is a tough battle. However, Solana seems to be moving in the right direction. Some examples include trying to think like a CEX and even listing non-Solana assets on-chain to provide Solana traders with more options. I strongly support this move, as it was part of a governance proposal we made to Arbitrum over a year ago as a solution to accelerate its DeFi positioning.

#Capture Order Book Transactions: Develop a competitive CLOB perpetual contract exchange capable of challenging Hyperliquid's dominance.

• Unfortunately, Solana doesn't seem to have any competitive contenders in this race, as some of the major Hyperliquid competitors, such as Lighter and Aster, are outside the Solana ecosystem.

Solana's 2026 ruling: Solana faces more unique risks than opportunities heading into 2026.

Meme Coin Exhaustion: The unsustainable Meme Casino cycle that fueled recent activity is coming to an end, leaving behind over 98% user churn and brand damage.

Legal and Brand Challenges: Lawsuits alleging unfair gambling practices threaten regulatory goodwill and institutional adoption prospects.

Competitive Shift and Awkward Positioning: Hyperliquid's dominance in CLOB/order book undermines Solana's core narrative of being the scalability leader in this use case for years. Sandwiched between Ethereum (liquidity/DeFi/stablecoins) and Hyperliquid (order book), it lacks a clear competitive advantage in either direction.

Integration issues; the shift of major projects (Jupiter, Neon Labs) to fragmented state solutions demonstrates the limitations of supporting complex applications with global state.

A glimmer of hope; a professionally managed organization with proven adaptability; capable of identifying new narratives, but must demonstrate success in DeFi competition or order book trading to avoid being irrelevant in the middle ground.

Summary: The Crypto Landscape in 2026

Macroeconomic dependence dominates: The three major cryptocurrencies (Bitcoin, Ethereum, and Solana) all exhibit similar macroeconomic sensitivities to AI stocks, Federal Reserve policy, and fiscal spending. However, their unique positioning differs significantly.

Bitcoin: As a purely macro beta asset, crypto-specific catalysts will have been exhausted by 2026; however, the market’s over-pricing of potential negative catalysts could itself lead to positive results.

Ethereum: Positioned best among the three, it possesses unique positive drivers (stablecoin dominance, DeFi moat, institutional preference) and can outperform even under neutral macroeconomic conditions, provided the integration of off-chain and on-chain finance continues. The main risk remains perception and consensus regarding the ETH asset class.

Solana faces a unique and challenging landscape, marked by meme cycle exhaustion, brand concerns, and competitive shifts. Successfully capturing the DeFi or order book market is crucial to avoid insignificance in the middle ground, despite its strong organizational execution capabilities.

2. Take a holistic view

The preceding analysis examined the specific positioning of Bitcoin, Ethereum, and Solana in 2026. Each faces its own opportunities and risks. However, to truly understand the trajectory of crypto, we need to step back and examine the larger picture. The structural bullish factors underpinning the entire crypto argument operate on a decades-long timescale. These macro forces provide the ultimate foundation for all crypto narratives.

The continued growth of BTC is positively impacted by currency devaluation.

Since 2000, gold has yielded an annualized return of approximately 12%, while the S&P 500 has returned approximately 6%. Meanwhile, the M2 money supply has grown by about 6% annually.

The implications are profound: adjusted for currency devaluation, the S&P 500 has provided virtually no real return over the past 25 years. In other words, when measured by the expansion of the monetary base, stocks have merely served as a store of wealth. And this preservation is only effective when you invest 100% of your net worth in the index.

This understanding is central to the non-inflationary assets argument. As long as major economies rely on sustained money supply growth, depreciation will remain a major driver of non-inflationary asset appreciation in the long run. Breaking this link with the current economic agenda will be difficult—there is little incentive to do so: governments lack the discipline to address debt problems; moreover, too much power is concentrated in financial markets, which disproportionately benefit from depreciation in the denominator from the non-investment class.

Global fiat currency runs

"Capital flows to where it is popular and stays where it is treated well."

The story of currency devaluation is directly linked to a broader phenomenon: a growing distrust of the traditional financial system. For high-net-worth individuals, ordinary citizens, and sovereign nations, cryptocurrencies have become an important tool for hedging against economic uncertainty in the 21st century.

The driving factors are converging from multiple directions simultaneously.

Capital controls: Headlines about potential capital controls are no longer confined to emerging markets. The UK has proposed a £20,000 limit on stablecoins. Discussions about whether major economies might restrict capital flows mark a new era of financial repression. Earlier last year, Trump also suggested taxing capital outflows from the US—a historic precedent few anticipated.

The weaponization of currency: The freezing of Russian assets and similar actions against the former Venezuelan leadership provide clear evidence of this decade-long trend. The weaponization of the financial system is accelerating. This creates a strong incentive for states and individuals to seek alternatives to traditional banking channels. The US government has been openly exploring innovative means to pressure counterparties. The more unpredictable the sovereigns of the current financial system, the stronger the incentive for ordinary participants to hedge with alternatives. Hedging options vary: states have the ability to store precious metals and break free from dependence on the existing financial system; while individuals are limited to Bitcoin.

Grey economy growth: Sanctioned countries are increasingly turning to cryptocurrencies for trade. Russia's use of cryptocurrencies for oil transactions and Iran's acceptance of cryptocurrencies to purchase weapons systems demonstrate necessity-driven adoption. New channels emerge when traditional ones are blocked.

Institutional Shaking: Criminal investigations into Federal Reserve officials and political interference in central bank appointments have eroded confidence in the institutions that underpin the credibility of fiat currencies. Once trust is lost, it is difficult to rebuild. Any failure of traditional institutions proves to be a boon for crypto assets.

Economic populism: Whether from the left or the right, populist movements share a common thread—distrust of the existing financial system. Both ends of the political spectrum now contain voices questioning the current financial order. On one hand, Mamdani calls for a land without billionaires. On the other hand, right-wing economic populists call for the banks to be subjugated. The centrist is shrinking.

Billionaire Tax: Proposed wealth taxes in several jurisdictions have created an incentive for capital flight to assets that are harder to track and seize. Whether these policies are wise or not, their impact on capital flows is predictable.

Taken together, these forces explain why borderless, efficient, and sovereign-free orbits have an increasingly clear product-market fit in today's era.

The end of a 70-year trend

The pressures described above are not merely theoretical. They are already evident in how central banks and sovereign wealth funds allocate reserves.

Perhaps the most important macroeconomic chart for understanding the current landscape is the composition of global international reserves. Over the 70 years following World War II, the US dollar's share of global reserves has steadily increased. At its peak, the dollar dominated more than 60% of global reserves.

But around 2020, things changed. Gold's share of reserves began to increase for the first time in 70 years. This represented a fundamental shift. Central banks were no longer just talking about diversification—they were taking action. If this trend continues—and geopolitical drivers suggest it will—it creates structural buying pressure on hard assets. Bitcoin is poised to capture a portion of this demand.

The Crypto Trinity: Digital Gold, Digital Oil, Digital Dollar

With increased regulatory clarity, it's helpful to understand what crypto actually offers. The ecosystem has matured into different value propositions, each serving a different purpose.

This framework clarifies why different crypto assets serve different purposes—and why the entire ecosystem is greater than the sum of its parts. Bitcoin captures the narrative of value storage. Ethereum powers a productive on-chain economy. Stablecoins bridge traditional finance to the crypto world. And DeFi provides the infrastructure for borderless financial services.

A clear path forward

Understanding these different roles makes it easier to assess future growth potential. Both pillars of the crypto argument—digital gold and the digital economy—have enormous room for expansion.

Digital Gold (BTC vs. Gold Market Cap): Bitcoin's market capitalization of approximately $1.8 trillion currently represents about 6% of gold's market capitalization of approximately $32 trillion. A rise to only 10-15%—still a modest assumption for an asset positioned as "digital gold"—means significant upside potential from current levels. Gold itself is projected to surge by 2025, greatly expanding the target.

Digital Economy Growth (Stablecoins vs. M2 Supply): Stablecoins currently account for about 1% of the M2 money supply. A rise to 10%—reflecting mainstream adoption of the digital dollar—would represent a tenfold expansion of the stablecoin market. The infrastructure is under construction. The question is how fast adoption will occur.

The Road to a $2 Trillion Stablecoin

Crypto serves both ends of the spectrum. On one hand, developed economies view alternative financial tracks as a hedge against the current financial system. On the other hand, leaders of the current financial system are making rulings in favor of crypto because they need alternative buyers for the dollar and dollar-denominated debt—especially now that the long-term dollar trend is reversing.

We expect stablecoins to surpass a market capitalization of trillions of dollars within the next decade. The US recognizes their strategic importance for two key reasons.

Financing debt: Stablecoin issuers must hold reserves, typically U.S. Treasury bonds. Every dollar of stablecoin issued increases inelastic demand for government bonds.

Extending Dollar Hegemony: The digital dollar extends the dollar's influence beyond traditional banking channels. In a world where the dollar's dominance is threatened, stablecoins offer a new way to maintain influence.

These figures already reflect this dynamic. Tether now holds approximately $135 billion in U.S. Treasury bonds. This makes it the 17th largest holder of U.S. government debt globally—surpassing the holdings of Germany, the UAE, and Saudi Arabia.

We believe that stablecoin issuers will soon become the largest financiers for the U.S. government. This creates a strong alignment of interests between crypto adoption and U.S. government policy objectives—a structural advantage that few market participants fully recognize.

*Note: Part 2 is incomplete. Please see "IOSG Internal Memo (Part 2): From Market Clearing to Finding the Next Ten-Fold Track" for the remaining content.