Author: Alana Source: substack Translator: Shan Eoba, Jinse Finance
Since the last update, there have been three major turning points that have impacted (or may impact) the current state of the crypto industry:
1. President Trump won the election, and it appears we will have the most crypto-friendly Congress in history.
2. An AI agent called Truth Terminal has started discussing a token called $GOAT.
3. Hyperliquid airdropped its token, generating widespread attention in the industry.
Here is an analysis of the potential impacts of these events:
New Government
It's hard to know exactly what the new government and Congress will actually do. I hope it's a combination of the following: more ETFs, clearer guidance on how traditional financial institutions can embrace digital assets (through legislation, institutional-level rulemaking, or a combination), stablecoin legislation, and perhaps some decentralized revenue-generating protocols to redistribute yields.
This could manifest in the startup market in a few ways:
1. Risk reduction, increased competition
The risk of certain business models may decrease, such as institutional-grade staking. If staking is incorporated into ETFs, market risk will shift to being product and team-driven.
2. Growth and quality improvement of the customer base
As traditional financial institutions can more easily embrace crypto, the market will see an influx of higher-quality customers. For example: over 2,000 large commercial banks and 3,000 brokerages may need digital asset custody and security services, opening up a whole new market for crypto protocols and software-as-a-service companies.
3. Developers benefit
The current lack of regulatory framework consumes developers' resources, time, and capital, and may even prevent some projects from launching. Clearer regulation will boost developer confidence, increase productivity, and attract more entrepreneurs.
Overall, we are about to enter the most developer-friendly environment in the 15-year history of the crypto industry. The developers and other investors I've interviewed have expressed palpable excitement. I can't wait.
Truth Terminal
Truth Terminal has sparked interest and development in AI agents and frameworks that support crypto technology.
To be honest, it doesn't seem like many agents are really doing anything unique and interesting with crypto technology yet. The most notable "actions" are capital accumulation - in the form of trades, and more commonly, airdrops from those trying to get the agents to post about their tokens.
As far as I know, most agents currently have little to no economic relationship with their tokens. (The only exception I can think of is Botto.) It's still not entirely clear how consumers will use these agents beyond just buying the tokens. There is more active participation in using these protocols compared to the DeFi summer. The challenge is that it's still unclear what "using" the agents actually looks like. My colleague Jesse wrote a great piece introducing at least one compelling model:
As AI automates daily objectives, the human's role can be minimized, focusing on providing capital, driving guidance, long-term planning, and other resources that models cannot grasp.
The next step for these agents is obviously to start deploying that capital. This could be through trading, venture investing, providing liquidity to protocols, staking tokens to run validators, creating additional assets, and so on. Humans can help set parameters or investment goals.
More broadly, there are several factors that may continue to drive the development of the crypto AI agent category. First, today's agents are still in their infancy. As they start executing more effective tasks and/or collaborating with each other, the excitement and fundamentals should both grow. Second, some agent innovations are being driven by forces outside of crypto. The broader AI industry is full of talent working to improve agents and underlying models. As these researchers continue to expand the capabilities of agents, crypto developers can leverage that work as a foundation, then integrate crypto in unique and interesting ways.
Agents are just one part of the crypto x AI stack. Underneath, these agents need access to compute, run reasoning, integrate new training data, make payments, and so on. Over the past year, many teams have been working to build high-performance infrastructure. Variant has invested in several projects: Hyperbolic provides verifiable reasoning and computation, Sapien is expanding access to cost-effective training data, and an unannounced project is working on decentralized training. We are actively investing in more.
Why is crypto-native infrastructure essential for agent innovation? Agents should be able to sell equity in themselves, self-fund their operations and infrastructure needs, and interact with other agents (and have verification mechanisms when taking information from other agents, i.e. "agent oracles") - all without risking their operations being censored or shut down. Decentralized infrastructure plays a key role in eliminating platform risk and enabling these agents to get funded.
Hyperliquid Airdrop
The third turning point is the Hyperliquid airdrop. It caused a stir in the industry. The project was entirely self-funded, so there were no "insider" non-team allocations. Nearly a third of the supply was airdropped to the project's historical users, creating a massive wealth creation event. Most importantly, the product itself is widely used and loved; it's something users want to own.
So the Hyperliquid airdrop is like a lightning rod illuminating other financing dynamics that have emerged over the past half-year. The market is increasingly trending towards two themes: 1) giving retail investors more equal access to the allocations that institutional allocators get, and 2) avoiding the negative impacts of unlocks (where a known portion of insider tokens will become liquid on a certain date, diluting the existing circulating supply).
There has been a lot of discussion in the industry around alternative financing and launch strategies. Hyperliquid has brought an amplifier to this category. None of the following are direct analogues, but I think they align with the discussion of why Hyperliquid's launch has been so impactful. With that in mind, we're seeing teams pursue some methods to try to achieve similar ultimate goals, including:
Community financing rounds on platforms like Echo, where individual accredited investors have a chance to invest in private rounds. These platforms allow the project community to participate, while also expanding the capital options available to founders. These are becoming increasingly popular. Again, this is not a direct comparison to an airdrop: private rounds typically have vesting schedules, whereas the Hyperliquid airdrop was immediately liquid. But overall, community rounds seek to achieve a similar end goal of providing community members access to valuations/allocations typically reserved for institutional allocators.
Launching tokens first, then building the product. The tokens provide a funding source for developing the product and attracting third-party contributors. Notably, this is the reverse of Hyperliquid's approach: build the product first, then issue the tokens. So this is not the same thing - but it's trying to give early project users a chance to contribute, participate in development, and speculate.
Completely avoiding unlocks, and letting investors choose to sell at token generation. If early investors do choose to realize returns, the effect could be a temporary price dip - which in turn gives community members a chance to enter at attractive valuations. We've seen a couple of these cases already; I think they'll become more common.
