Crypto Long & Short: Understanding how the GENIUS Act adjusted bitcoin’s monetary value
In this week’s Crypto Long & Short, Ravi Tanuku discusses how the GENIUS Act did more than just regulate stablecoins; it adjusted Bitcoin’s monetary premium. Jesper Johansen then explains why looped ETH staking no longer requires a lending market.
What to know:
— Ravi Tanuku discusses how the GENIUS Act adjusted bitcoin’s monetary premium
— Jesper Johansen explains looped ETH staking without exposure to the lending market
— Key headlines that institutions should focus on by Francisco Rodrigues
— “NEAR Intents fee run-rate remains steady as price rebounds from $1 lows” in Chart of the Week
Thanks for being with us!
Expert Insights
The GENIUS Act Adjusted Bitcoin’s Monetary Value
— By Ravi Tanuku, managing member & general partner at Natural Capital & Director at Krakacquisition Corp.
Gold has outperformed Bitcoin by nearly 100% since July 18, 2025, in the same macro environment, yet with opposite outcomes.
The typical explanations falter under the simplest inquiry: if this is merely a cyclical peak, why is gold still performing well?
Bitcoin didn’t falter due to cycles, sentiment, or quantum risks. It declined because the U.S. government created a superior alternative to what Bitcoin offered to millions globally and enacted it into law on that date. The GENIUS Act regulated stablecoins backed by 100% reserves in U.S. dollars or Treasuries. This effectively established a government-approved substitute for Bitcoin, shifting demand for a “digital dollar” from Bitcoin to stablecoins.
What bitcoin was genuinely utilized for
The standard narrative posits that bitcoin serves three purposes: access to dollars, digital gold, and speculation. However, most discussions emphasize the latter two. Adoption data reveals a different story.
According to Chainalysis, the leading crypto-adopting nations are Nigeria, Vietnam, Turkey, Argentina, and Ethiopia. The common denominator isn’t speculation or sound money ideology; it’s capital controls and currency devaluation against the dollar.
This trend indicates that bitcoin’s primary real-world function was as an alternative access point to dollars for consumers and businesses constrained by their governments. While speculative flows and institutional vehicles like ETFs can exceed dollar values at any moment, access to dollars was the most consistent demand. It provided the structural support that gave bitcoin its baseline and its long-standing connection to the global M2 money supply.
Risk-adjusted data illustrates this concretely. Since the November 2021 cycle peak, a buyer in Nigeria, Turkey, Ethiopia, or Vietnam who held bitcoin experienced 26 of the following 52 months underwater compared to someone who merely held U.S. dollars. Both delivered strong absolute returns in local currency terms: bitcoin yielded 275%, while dollars returned 172%. However, bitcoin’s annualized volatility was 68% compared to 18% for dollars, resulting in a Sharpe ratio of approximately 0.5 versus 1.5 for holding USD. Bitcoin’s maximum drawdown was 66%, while the dollar holder’s was just 6%.
These buyers weren’t engaging in speculative bets on digital gold; they were attempting to hold onto dollars. Bitcoin was simply the best available means, with returns attributable to dollar exposure rather than bitcoin itself. A regulated stablecoin could capture the same currency depreciation tailwind without the drawdowns.
The transition was already in motion before the GENIUS Act. As reported by Artemis, B2B stablecoin transactions surged 30 times to over $3 billion monthly by early 2025, primarily driven by cross-border settlements. The Act accelerated a trend that was already evident.
What followed
The stablecoin market capitalization increased from approximately $211 billion in January 2025 to over $306 billion by October, marking a 45% rise. Monthly issuance doubled from about $6.6 billion pre-GENIUS to over $13 billion in the three months following the Act’s passage. Bitcoin dropped by 43%. Capital didn’t exit crypto; it simply ceased to rely on bitcoin to achieve its objectives.
Then the macroeconomic environment provided a clear test of the digital gold narrative. By late 2025, cyclical reacceleration emerged across the real economy. Commodities surged. Gold, silver, and copper reached new highs through January 2026, while Bitcoin declined alongside SAAS stocks and unprofitable tech companies. By the fourth quarter of 2025, its quarterly correlation with IGV reached +0.64, the highest since the 2022 bear market.
In this cycle, the market did not view bitcoin as a monetary hedge.
The upcoming challenge
The CLARITY Act aims to classify bitcoin as a commodity. This classification could be significant. Currently, Bitcoin exists in a regulatory gray area that complicates its inclusion in institutional portfolios alongside gold and silver. Achieving formal commodity status would alter the compliance dialogue, create inclusion criteria for indices, and provide pension funds and endowments a framework for allocation.
The GENIUS Act may have permanently affected the dollar access use case. The CLARITY Act could potentially rejuvenate the digital gold narrative under a new regulatory framework.
The challenge isn’t whether bitcoin will rebound after CLARITY. Any oversold asset can recover in response to a catalyst. The real test is the correlation regime. Within one to two quarters post-CLARITY, will Bitcoin begin to recouple with gold? Or will it continue to trade alongside long-duration growth assets?
There’s an irony here. The crypto sector has spent years advocating for regulatory clarity, yet the first major regulation formalized a competitor that rendered bitcoin’s core function outdated. Whether the second significant regulation will provide it a new structural identity or confirm that the previous one is lost remains an open question.
Observe what bitcoin trades with, not just where it trades. The correlation regime will be the key indicator.
Principled Perspectives
Looped ETH Staking Without Lending Market Exposure
— By Jesper Johansen, CEO & founder, Northstake
Most leveraged staking strategies on Ethereum operate using a similar approach: deposit ETH, receive a liquid staking token, borrow against it on a lending platform, and repeat. It can be effective — until it isn’t. Liquidation risks, fluctuating borrowing rates, and smart contract vulnerabilities across multiple platforms make this method precarious at an institutional level.
There is a more straightforward route. One that achieves a comparable yield without ever engaging a lending protocol.
The rates and the spread
Current native Ethereum validator staking yields about 2.9% APY. Lido’s stETH — the largest liquid staking token — generates around 2.4%. The difference arises because Lido distributes rewards among all stETH holders, including ETH that is idly sitting in entry and exit queues earning nothing. The more activity in the queue, the broader the spread.
This rate differential fluctuates but recently reached 50 basis points. This differential forms the basis of this strategy.
How it functions
Strategy execution utilizes Lido V3 staking vaults and Northstake’s Staking Vault Manager to capture and loop the rate differential. A vault operator stakes ETH natively on Ethereum validators, earning the full ~2.9% APY. Then, stETH is minted against that staked position — not through borrowing, but via Lido’s native minting mechanism within the stVault. The minted stETH is traded for staked ETH, which can be consolidated back into the vault’s validators using EIP-7251 consolidation. Each loop increases exposure. Minted stETH can also be traded for liquid ETH and staked in the stVault, though this subjects it to the entry queue.
After ten loops, the strategy yields approximately 6.6% APY — nearly double the base staking rate. A liquidity buffer of 6.94% is maintained as a reserve. The entire position can be unwound as quickly as the validator exit queue allows, currently around eight days, or instantly by depositing stETH back into the vault to reduce vault liability while ETH is unstaking.
Importantly, no lending protocol is involved. The leverage is structural, created entirely by utilizing the rate differential of stETH within Lido’s vault architecture. There are no liquidation thresholds, no variable borrowing costs, and no reliance on a lending market.
Example: Uses wstETH (non-rebasing version of stETH) and assumes secondary market instead of consolidation.
The risks are real but understood
Duration risk is the main concern. Initial seed capital must navigate through the validator entry queue, currently around 56 days. Subsequent scaling employs validator consolidation instead of the queue, but full deployment still requires 60–76 days depending on consolidation cycles.
Underperformance or slashing events by validators can diminish the spread. If the rate differential narrows, additional loops can be added; if it widens excessively, the position can be reduced by partially unstaking.
Crucially, you can always exchange 1 stETH for 1 ETH with Lido. A depegging of stETH does not result in a negative carry, due to how Lido’s stVaults manage vault liability. In the worst-case scenario, if stVault liability becomes unhealthy, Lido performs a forced rebalance of the stVault, unstaking ETH to reduce the liability.
Adding downside protection using CESR
One noteworthy emerging development: staking risk insurance products are now available that can guarantee a minimum yield benchmarked to the Composite Ether Staking Rate (CESR), which represents the average annualized yield from validators. Under these policies, if a validator underperforms relative to CESR due to slashing, technical failure, or operational error, the insurer covers the shortfall. For institutional investors requiring yield predictability, this transforms the strategy’s variable return profile into something akin to a fixed-income instrument — leveraged staking yield with a guaranteed floor.
Who is this suited for?
Institutional capital is transitioning into staking structurally rather than speculatively. They seek strategies that can provide enhanced yield without introducing lending market exposure or unnecessary complexity. For asset managers, this strategy can also aid in reinforcing liquidity management of staked ETH ETFs.
The spread is present. The infrastructure and tools to capture it are available.
Headlines of the week
— By Francisco Rodrigues
Institutional crypto continued to evolve this past week as the SEC moved towards tokenized stocks in DeFi and approved cash-settled bitcoin options for Nasdaq. Prometheum established broker-dealer distribution for onchain securities, while prediction markets faced an insider trading probe by the House Oversight Committee just as Hyperliquid deepened its involvement in the same product area.
— SEC to propose tokenized stock framework as Wall Street efforts deepen: The planned innovation exemption would enable third parties to issue tokenized public equities for DeFi trading without issuer approval, extending the March approval of Nasdaq’s tokenized securities framework.
— Bitcoin options are coming to Nasdaq. Here’s what it signifies for you: The SEC conditionally authorized Nasdaq PHLX to list cash-settled, European-style bitcoin index options under QBTC, which tracks the CME CF Bitcoin Real Time Index.
— Hyperliquid is emerging as a competitor to traditional exchanges and prediction markets, says FalconX: HIP-3 markets are attracting pre-IPO bets on Cerebras, Anthropic, and SpaceX, with HIP-4 outcome contracts targeting Polymarket and Kalshi, and HYPE up 94% in three months.
— Congress targets Polymarket and Kalshi with a major insider trading investigation: House Oversight Chair James Comer sent letters to Shayne Coplan and Tarek Mansour requesting records by June 5 on identity verification, geo-restrictions, and unusual trading detection, after Bubblemaps highlighted 80 Polymarket bets with a 98% win rate linked to U.S. military operations.
— Prometheum believes Wall Street distribution is the key missing link for tokenized securities: The SEC-registered firm launched infrastructure to enable broker-dealers and RIAs to offer tokenized securities and crypto assets through conventional brokerage accounts, encompassing issuance, trading, custody, clearing, and settlement.
Chart of the Week
NEAR Intents fee run-rate remains around $36 million annualized as price rebounds from $1 lows
Weekly fees on NEAR Intents annualized to $36 million as of the week ending May 24, maintaining a range of $32–58 million since late February after peaking at $124 million in mid-November — even as NEAR fluctuated from $3.16 in late September to a low of $1.06 in late February, before recovering to $2.7 at the start of this week.
Listen. Read. Watch. Engage.
— Read: In Crypto for Advisors, Sarah Cummings from Morgan Stanley Investment Management shares insights and considerations when evaluating crypto ETFs.
— Watch: “Morgan Stanley’s ETF boom, Grayscale’s staking initiative, and BitGo’s IPO: Wall Street’s crypto race is on.”
— Engage: David LaValle, President of Decryptnews Data & Indices, will be moderating a panel at SPI’s Solana Summit on Tuesday, June 16 in Chicago.
Looking for more? Get the latest crypto news from decryptnews.com and market updates from decryptnews.com/institutions.
Note: The opinions expressed in this column are those of the author and do not necessarily represent those of Decryptnews, Inc., Decryptnews Indices, or its owners and affiliates.