Quick Macro Thoughts

• It’s a confusing time for crypto investors. Equities seemed poised for fresh all-time highs while crypto is stuck in neutral and has lagged stocks for weeks.
• Corporates are still raising capital aggressively to accumulate liquid crypto.
• The majors sit at tough resistance: BTC faces heavy supply in the 105–110k zone, ETH is pinned under its 200-day, and SOL is dealing with the exogenous pressures discussed later on in this note.
• Stocks are also approaching potential resistance at their record highs.
• The market seems to be waiting for a decisive break, either up or down in crypto or a clear breakout in equities (with crypto to follow), before putting fresh money to work. Keep in mind that the majors remain well above their April lows.

• Survey data continues to flag tariff worries (see comments videos from earlier this week). Companies are not rebuilding inventories and hiring remains sluggish while prices paid are trending higher.
• Meanwhile, inflation signals such as oil and copper are starting to push higher.
• Yields have slipped a bit but are still near year-to-date peaks.

This mix suggests a few things.

1. A tariff-driven hard landing is still possible over the next ~3-6 months and would hurt crypto in the short run. The monetary and fiscal response would certainly benefit the asset class.
2. The market is leaning toward the “Big Beautiful Bill” passing in its current form and believes the administration wants to run the economy hot, taking Bessent at his word.
3. Trump has already shown he does not want to risk a recession for a perfect trade deal. Combined with the downbeat surveys, that makes some kind of trade truce or deferral more likely than not. This supports strength in commodities and equities as of late. Trade is still the big wild card. If talks break down, the near-term bull case would be derailed, but waiting for concrete news before reacting makes sense.

• Crypto sold off sharply on Thursday after the Trump-Elon dust-up and chatter about a Trump-Xi meeting. Both headlines triggered a technical shake-out, but BTC found solid demand at its 50-day moving average. We flagged that bounce opportunity in Thursday night’s video, and BTC’s reaction at that level keeps us confidently long for now.
• Our current bias favors ETH over BTC and BTC over SOL. After the Pump.fun launch (see below), we will likely flip to favoring SOL over BTC.
• Over the next couple of weeks we also plan to tweak the Core Strategy portfolio toward assets that “showed their hand” during the April-May rally. Without naming names, there are projects on our radar that are generating fees hand over fist and carry favorable tokenomics. Stay tuned.

Pump.fun Token Sale: Near-Term Liquidity Suck, Medium-Term Tailwind

One of the bigger stories circulating this week is that Pump.fun, the Solana-based memecoin launchpad, is preparing for a $1 billion token sale at a $4 billion fully diluted valuation. While nothing has been officially confirmed, my sources indicate a two-part raise: a $200 million private round followed by an $800 million public sale, likely taking place within the next couple of weeks.

There is also growing chatter about a potential airdrop. That would not be surprising (in fact, if there is no airdrop, one should expect a riot) and could help recapitalize a large swath of on-chain speculators. A well-timed airdrop of that size could reawaken risk appetite across crypto.

From a fundamentals perspective, Pump.fun continues to deliver. The platform has generated over $700 million in fees and has enabled the minting of nearly 11 million tokens. Collectively, these tokens hold a market cap north of $4.5 billion (source: blockworks). Even with meme sentiment cooling off after the Trump, Melania, and Libra launches, the platform is still pulling in more than $10 million in weekly revenue.

In terms of the near-term market impact, this raise has contributed to some of the recent underperformance in altcoins relative to BTC and ETH. It is likely that investors are rotating capital out of current positions in anticipation of participating in the sale. In the short term, we think this presents a liquidity drag on SOL and other Solana-based altcoins.

Longer term, however, the raise could be constructive for Solana. Pump.fun has been a steady source of SOL sell pressure, having sent >$50 million worth of SOL to Kraken in recent weeks, presumably to sell.

If the raise is successful and they are sufficiently capitalized in USD, this pressure could ease significantly. That would remove a key overhang on the price. As previously mentioned, if there is a substantial airdrop, that could also reinvigorate activity among Solana-native speculators, which should be supportive of price as well.

One major question still hanging over the raise is why it is happening in the first place. The platform is generating strong cash flow and does not appear to need external funding. Some have speculated that there may be broader ambitions at play. One idea being floated is the launch of a standalone chain. For now, we will avoid too much speculation. It is also possible that they simply want to build a war chest that lasts through multiple market cycles. If those larger ambitions come to light, we will revisit the implications for the Solana-Pump.fun dynamic.

To summarize, this raise could be a short-term headwind for Solana and altcoin liquidity (particularly Solana-based ones), but a medium-term tailwind for both meme sentiment and the broader Solana ecosystem. It is an important development that we will continue to monitor.

As for the token itself, it is difficult to accurately assess without seeing the tokenomics. If the design includes strong value accrual and a substantial community distribution (similar to Hyperliquid) the token should perform well. Regardless of where one stands on memecoins more broadly, it is clear that on-chain gambling has product-market fit. Pump.fun is the venue of choice. When comparing against the top nine crypto projects with liquid tokens, Pump.fun stands out. Only PancakeSwap trades at a lower multiple of trailing 90-day revenue, and that is during a downturn in the meme landscape.

To summarize:

• SOL and SOL-based altcoins may face continued near-term pressure as investors rotate into the Pump.fun sale, creating a temporary liquidity drag
• Solana could benefit in the medium term if the raise reduces SOL treasury sales and a sizeable airdrop revives on-chain speculation
• The Pump.fun token could perform well if its tokenomics mirror Hyperliquid’s model, with strong value accrual and broad community distribution

Circle: Challenging Economics, Compelling Stablecoin Trade

Overview

Circle Internet Group is a fintech company founded in 2013. It issues and redeems USD Coin (USDC), a fully collateralized dollar stablecoin backed by short-term US Treasuries and cash. Circle also operates Circle Mint for institutional on- and off-ramping, developer APIs for on-chain payments, and a tokenized Treasury fund (USYC). As of June 5, 2025, USDC in circulation was about $61 billion and cumulative transfer volume exceeded one trillion dollars. Circle is a MiCAR-authorized e-money issuer in the EU and state-licensed money-transmitter in the US.

Key Takeaways

• Float‑driven model. Roughly 98% of 2024 revenue came from interest on USDC reserves. Fee revenue is still immaterial.
• Distribution drag. About 60% of gross reserve income was paid to partners such as Coinbase in 2024 (61% in Q1 2025). The net take‑rate is sensitive to how much USDC sits on Circle’s own platform (only 5.7% as of March 2025). These distribution costs are quite damaging to the company’s margins. We estimate a 50% distribution cost going forward, which might be generous to the company.
• Rate sensitivity. We estimate that every 25 bps cut in the reserve rate reduces 2026 EBITDA estimates by roughly $100 million dollars, holding all else equal.
• Growth offset. Faster stablecoin adoption can mitigate lower rates but growth must equal over 10% to offset each 25 bps rate cut.

Float-Driven Model / Distribution Drag

EBITDA Sensitivity Analysis

Using the assumptions in our illustrative analysis below, each 25-basis-point reduction in the reserve return rate trims EBITDA by about $100 million. Fed funds futures currently price in roughly four cuts through 2026, suggesting a step-down in margins if nothing else changes.

Offsetting this margin compression requires substantial growth. Our sensitivity analysis indicates that every 25-basis-point cut will demand more than 10% growth in either overall market size or Circle’s share to keep EBITDA flat.

Illustrative Analysis

Our illustrative valuation sets out bear, base, and bull scenarios for Circle. The day-one jump in the share price led some observers to question whether the IPO was severely mispriced. At $31, however, the offer price falls between our bear and base cases, suggesting that the underwriters were reasonably accurate (we likely have a more sanguine view on the growth of the stablecoin market). The model remains highly sensitive to our assumption of continued explosive growth in the stablecoin market cap and to movements in interest rates.

• Base case (~$59 PPS). With a 3.5% yield and 30% share of a fast-growing stablecoin market, Circle produces about $850 million EBITDA. A 14x multiple implies a $12.7 billion market cap, or roughly $59 a share.
• Bear case (~$21 PPS). Slower adoption and lower yields squeeze EBITDA to $321 million. At 12x, equity value falls toward $4.6 billion and the share price to $21.
• Bull case (~$120 PPS). Faster adoption and 4.0% yields lift EBITDA nearly $1.6 billion, supporting a $26 billion market cap and a three-figure share price.

Circle operates in a vertical we expect to grow exponentially over the next decade, but it is not the market leader and lacks control over distribution. It is levered to interest rates, with lower rates hurting earnings. In a world where rates fall while stablecoin adoption rises, investors may be better served by liquid crypto assets and equities more directly tied to crypto prices. The optimal backdrop for Circle is one where short-term rates stay elevated while fiscal policy supports crypto demand. Looking forward, we see more scenarios that pressure the business at current pricing than scenarios that unlock significant upside.

Stablecoin Exposure in Public Markets

Despite these concerns, we have high conviction in the long-term trajectory of stablecoin usage. Stablecoins expand global access to the U.S. dollar and improve B2B, P2B, and P2P payments. With U.S. stablecoin legislation on the horizon and few publicly traded pure-plays, Circle remains one of the only ways to gain direct exposure to this theme. For that reason, we would lean toward the upper end of our illustrative valuation range rather than fade CRCL shares here. We are adding it to our list of crypto equities, but remain cognizant of its status of something to trade, not own.