IN TODAY'S ISSUE:
- Bitcoin bounced back this quarter, rising 30.7%, besting all asset classes and setting a new all-time high.
- Tariff tensions eased, boosting most asset classes, while investors increasingly turn to BTC as a non-sovereign store of value amid global uncertainty.
- Correlations with U.S. equities remain elevated as global risk sentiment, central bank policy, and geopolitical flashpoints remain dominant market narratives.
- Bitcoin treasuries proliferated, and while there has been little differential so far, we may see treasuries begin to diversify in strategy and geography.
- Capital markets were white hot this quarter, with new bitcoin treasury companies emerging, existing ones tapping markets, and crypto companies going public, with more waiting in the wings.
- Stablecoins, with Circle’s IPO and the advancement of legislation, continued to be highly topical as potential issuers line up.
- Altcoin ETFs and staking ETFs were recently approved by the SEC, setting the stage for significant proliferation in the coming quarter.
- Bitcoin’s dominance continues to rise as investors search for stores of value, and digital asset industry narratives, like memecoins, fall flat.
Performance Review
Bitcoin Bounces Back, Sets New All-Time High
Bitcoin surged 30.7% in Q2, rebounding sharply from a sluggish Q1 and setting a new all-time high of $112,000, surpassing the previous peak of $109,358 recorded in December of last year. The rally coincided with easing macroeconomic pressures, as the Trump administration implemented a 90-day moratorium on tariffs, giving financial markets room to recover from earlier self-inflicted strain.
While bitcoin led the charge, it wasn’t alone in posting gains. U.S. technology and growth stocks, international equities, and the Swiss franc also saw strong performance during the quarter. Still, bitcoin remained the standout during the quarter, outperforming all other major asset classes.
Part of bitcoin’s rise may be attributed to its elevated correlation with equities, but there also appeared to be a broader shift in investor sentiment toward haven assets. The Swiss franc, for example, gained significantly as concerns over trade tensions and the U.S.’s mounting debt burden weighed on market confidence. In contrast, the U.S. dollar lagged, finishing the quarter as one of the worst-performing assets.
With bitcoin’s Q2 performance, it brought its year-to-date returns back into the green, +15.4%. Bitcoin still trails behind gold and silver, which are having another standout year. Both are benefiting from investor demand for haven assets, while gold has also benefited from continued central bank buying. Non-U.S. stocks have also done well this year, benefiting from investor rotation away from U.S.-domiciled businesses. The U.S. dollar is one of the worst-performing assets this year. It is both an explicit goal of the administration to get the value of the dollar down to boost exports as well as the implicit byproduct of rising U.S. debt, which is exacerbated by the administration’s signature tax cut bill.
Middle of the Pack Historical Performance
While bitcoin was up 30.7% in the quarter, when ranked against past second quarters, the performance was just middle of the road, ranking 8th of 15. Historically, Q2 has been bitcoin’s strongest quarter, with a median return of +23.7% and a win rate of 64.3% (before this year). While 2025 didn’t reach the heights of past boom years, it was still ahead of the median return before this year.
Correlations with Equities Remain Elevated
Bitcoin’s correlation with U.S. equities remained elevated through the end of the quarter, closing at 0.48, a level near the higher end of its historical range. In contrast, its correlations with gold and the U.S. dollar continued to hover near zero. This persistent correlation strength with U.S. equities can largely be attributed to a series of macroeconomic and geopolitical developments, the tariff turmoil and the rising number of global conflicts, which significantly influenced investor sentiment and asset repricing across markets. Both equities and bitcoin responded sharply to these risk events.
Bitcoin, once celebrated for its low correlation to mainstream financial assets, has increasingly exhibited sensitivity to the same variables that drive equity markets over short time frames. The current correlation regime may persist as long as global risk sentiment, central bank policy, and geopolitical flashpoints remain dominant market narratives. However, bitcoin’s structural idiosyncrasies, such as its finite supply and decentralized nature, should reassert themselves as differentiators under different market conditions.
The Events That Shaped the Quarter
Tariff Turmoil
The new administration’s signature economic policy until the introduction of “One Big Beautiful Bill” has been the introduction of tariffs culminating on “Liberation Day” and the introduction of blanket “reciprocal tariffs.” The on-and-off-again nature of these tariffs roiled financial markets in Q1 and into Q2, causing stocks, bonds, and bitcoin to sink, and gold to rally. The onset of many of these tariffs was ultimately put under a 90-day moratorium to let the administration hammer out deals, allowing asset prices to recover, but that deadline is rapidly approaching on July 8th. With many tariff arrangements still to be finalized, their appearance could once again impact financial markets.
Bitcoin Treasuries Enter Next Phase
Bitcoin treasuries, which started out as corporate bitcoin treasuries but eventually morphed into purpose-built bitcoin treasury corporations, were the most important development within the Bitcoin ecosystem during the quarter. Strategy (formerly MicroStrategy) pioneered this strategy in 2020, which gradually spread to Metaplanet and Semler Scientific in 2024. In Q2, we saw the emergence of companies like Twenty One, Nakamoto, Strive, and ProCap whose sole purpose is to acquire as many bitcoins as possible. Even Trump Media and Technology Group (DJT), the public company in which the President has a 41% stake, enacted a corporate strategy after selling convertible notes, as did GameStop, which acquired bitcoins as part of its corporate investment strategy.
The trend seems to show no signs of slowing down, as now there is a whole host of smaller companies enacting similar strategies, diversifying the digital assets in their treasury outside of just bitcoin as well as expanding to new geographies. We think that strategy will likely work for U.S. companies that are differentiated in some way, either by their marketing reach, treasury management activities, the composition of the digital assets in their treasury, or their trading geography. Digital asset treasury companies trading in jurisdictions where investors don’t have access to spot ETFs seem like an easy win.
While bitcoin treasuries have been highly topical, their effectiveness has been varied across the landscape as measured by the equity premiums to the net asset values. Some companies trade at a substantial premium to their NAVs, nearly 10x for Nakamoto, while other companies, like Trump Media, trade at substantial discounts. However, the two that trade at the biggest discount, Trump Media and GameStop, had implied values of the operating companies that were hard to justify based on traditional financial metrics. Their current discount to NAV may be just reflective of a change in the value of the underlying operating company rather than the ineffectiveness of their bitcoin treasury.
Capital Markets Activity Heats Up
With growth in treasury companies, capital markets activity ramped significantly during the quarter. At the money (ATM) equity offerings, private investment in public equity (PIPEs), convertible notes, special purpose acquisition companies (SPACs), reverse mergers, de-SPAC transactions, preferred stock issuances, and IPOs were all in the mix this quarter. On top of that, numerous crypto companies have lined up or are expected to go public. Bullish, Kraken, TRON, and Gemini have all announced or have been reported to be in the works to go public. We wouldn’t be surprised to see acquisitions and mergers to be part of the capital markets activity going forward, given the supportive backdrop for the industry.
Stablecoins Continue to be Front and Center
Stablecoins were highly topical this quarter, highlighted by two events: Circle’s blockbuster IPO and the progression of stablecoin legislation.
Circle, the issuer of the U.S. dollar-pegged USDC stablecoin, officially went public on June 4th, marking one of the most anticipated crypto-related listings to date. While the company’s initial fully diluted valuation was set at $8.1 billion, trading in the secondary market quickly accelerated, briefly pushing Circle’s market capitalization to a peak of $58.6 billion before moderating to $40.0 billion today.
This market debut came on the heels of reports that Circle rejected a $5 billion acquisition offer from Ripple, signaling the firm’s confidence in its long-term growth trajectory and strategic positioning in the stablecoin ecosystem.
Other corporations have taken notice of the stablecoin industry too, with numerous banks and retailers rumored to be lining up issue stablecoins. Fiserv launched a new stablecoin, FIUSD, for financial institutions. Stripe enabled stablecoin payments on its platform as well. World Liberty Financial, the DeFi platform closely linked to the President, launched its own stablecoin USD1.
This activity all comes ahead of the official regulation of stablecoins. The Senate passed its version of stablecoin legislation this quarter, the GENIUS Act, pushing the focus to the House, which can either pass its version, the STABLE Act, the GENIUS Act itself, or some modified version of the two. Either way, the President is likely to sign the bill into law as soon as it hits his desk.
Fed Stands Pat on Rates
The administration’s on-again, off-again actions with tariffs not only roiled financial markets but also made for significant uncertainty in setting monetary policy. With inflation receding, there have been strong urgings from within the administration for the Fed to lower interest rates, with V.P. Vance calling Powell’s inaction “monetary malpractice.” The Fed has firmly stayed put on interest rates, waiting to judge the impact of tariffs on prices and employment, its two key objectives. While there is growing market support for rate cuts in the back half of the year, it may take some time before tariffs are enacted, and we know their impact.
Hash Rate Rises Then Dips
Bitcoin’s difficulty, which can be used to infer the network hash rate, is up 6.5% this year. This comes on the heels of a 7.5% reduction in difficulty over the weekend, likely driven by curtailment associated with high electricity prices in the U.S. Even though difficulty was up 15.1% this year just before the cut, this growth rate is a marked step down from years prior. Difficulty rose 50.0% in 2024, 114.7% in 2023, and 40.5% in 2022. Given how summer weather and electricity prices in the U.S. are now impacting network hash rate, we would expect hash rate to remain volatile until the fall. While we expect network hash rate to continue to grow, only after the summer volatility would we get a good reading on the trajectory.
Crypto Equities Zoom Back
With the bounce in both bitcoin spot prices and U.S. equity indices this quarter, it’s no surprise that crypto-related stocks zoomed back. Coinbase and Galaxy both more than doubled this quarter, while miners on a market-cap-weighted basis were up 71%. This makes sense as equities, especially miners, have operating and capital structure leverage to the price of bitcoin – equity prices should go up or down more than the price of bitcoin based on this. Even with the massive bounce in miner stocks, as a category, they are still only up 3% year to date, whereas more general crypto companies are up 33%.
Crypto Equities Comp Sheet (PDF)
IBIT Dominates as ETFs Kick It Into Overdrive
As of quarter-end, U.S.-listed spot bitcoin ETFs collectively manage $134 billion in assets under management (AUM), an impressive milestone considering these products have been on the market for less than a year and a half.
For perspective, spot gold ETFs in the U.S., including long-established funds like GLD (launched in 2004), hold approximately $175.5 billion in AUM. This means bitcoin spot ETFs have already amassed around 76% of the total AUM in the U.S. spot gold ETF market. The total value of gold is roughly ten times greater than that of bitcoin, which suggests a stronger investor appetite for bitcoin in ETF format compared to gold.
Looking Ahead
Legislation For Stablecoins
Stablecoin legislation is nearing final approval following its passage in the Senate. The key question now is whether the House will move forward with the STABLE Act, reconcile it with the Senate’s GENIUS Act, or simply adopt the GENIUS Act as passed. Additionally, the House is considering the CLARITY Act, which offers a more comprehensive regulatory framework for digital assets. While pairing stablecoin legislation with the CLARITY Act is an option, doing so would likely delay its enactment, potentially pushing a stablecoin-specific framework, which both the President and industry stakeholders are eager to see passed this summer, many months into the future. Our view is that stablecoin legislation is likely to be enacted within the next few months, with broader digital asset regulation following at a later stage.
A Flurry of Regulatory Approvals
At the close of the quarter, the SEC approved the conversion of the Grayscale Digital Large Cap Fund (GDLC) into an ETF. GDLC holds a diversified basket of digital assets, including BTC, ETH, XRP, SOL, and ADA. Additionally, the SEC authorized the launch of the REX-Osprey Solana + Staking ETF, which not only includes the SOL token but also incorporates staking rewards. These approvals mark a notable policy shift under the SEC’s new leadership, signaling broader regulatory openness to digital asset ETFs beyond just BTC and ETH, as well as to products that integrate staking features. These changes could usher in dozens of new crypto ETFs, which have already been filed by issuers in expectation of the shifting winds at the SEC, and are waiting on approval.
Commissioner Hester Peirce also revealed that the SEC is actively working on permitting in-kind creation and redemption processes. This operational model, long favored by industry participants, would enhance efficiency and enable tighter trading spreads for investors.
Looking forward, the SEC may also be called upon to provide guidance on tokenized securities, a growing area of interest for major market participants such as Coinbase, Robinhood, and others.
Bitcoin Treasury Differentiation
Bitcoin treasuries continue to grow, though current strategies have remained largely undifferentiated, primarily distinguished by the nature of the entities and the personalities behind them. However, this may soon change. We have already seen digital asset treasury companies expand to assets beyond bitcoin. Geographic diversification is also likely to accelerate, with the possibility of “Strategy-like” public companies emerging in various regions where access to bitcoin ETFs remains limited.
To date, most corporate bitcoin treasuries have followed straightforward buy-and-hold approaches, funded through a mix of equity, debt, and preferred instruments. Going forward, we expect companies to distinguish themselves through more sophisticated treasury management practices. This could include actively generating yield on their bitcoin holdings through methods such as lending, option overwriting, or even staking—offering real returns rather than the "bitcoin yield" promulgated by some in the industry.
Strive, for example, has already laid out elements of an active management approach, setting a potential precedent. As the space matures, we anticipate that more companies will adopt differentiated strategies that reflect broader financial and operational goals.
Bitcoin Dominance Continues to Grow
Bitcoin’s market dominance, its share of the total crypto industry market value, has been steadily rising since bottoming during the 2021 cycle. Historically, bitcoin tends to regain dominance during market downturns, as altcoins typically decline more sharply, as seen in 2018 and 2022. Conversely, it usually loses ground during speculative peaks, like in 2017 and 2021. This cycle, however, that hasn’t happened yet.
Investor focus on non-sovereign stores of value, such as gold and bitcoin, has remained strong, and no other digital asset fits that narrative as effectively as bitcoin. While a wave of new altcoin ETFs could potentially shift market dynamics, early indicators, such as tepid demand for ETH ETFs, suggest they may not be as popular as issuers hope.
Although fresh narratives or use cases may still emerge, the dominant industry theme this cycle so far, an explosion in memecoins, has not meaningfully challenged bitcoin’s hold on market share.
