The integration of on-chain finance and traditional finance may give rise to the largest cycle in the history of cryptocurrencies.

Written by: Matt Hougan, Bitwise CIO

Translated by: Saoirse, Foresight News

The cryptocurrency market has finally shown signs of bottoming out. Since July 1, Bitcoin has risen by 9%, while the Nasdaq 100 index has fallen by 6% during the same period. The inflow of funds into crypto ETFs has turned positive, and market sentiment continues to warm up. While it is still uncertain whether the market has fully stabilized, various positive signals have prompted many to start questioning the subsequent market trends.

Last Friday, an investment advisor asked me, "If the market has bottomed, what assets will lead the next cryptocurrency bull market?"

Generally speaking, this question is difficult to answer during a crypto winter. The main storyline of a new bull market often becomes clear only after the market has run its course.

But this time, I believe the answer is right in front of us: the core narrative of the next cryptocurrency bull market will be the integration of on-chain finance and traditional finance.

In other words, the future market's key points of focus will revolve around stablecoins, asset tokenization, all-weather trading, instant settlement, and the growth of institutional-grade decentralized finance (DeFi) to a scale of trillions of dollars. Blockchain will disrupt the existing financial system, just as the internet reshaped the media and retail industries in the early 21st century. I expect this may be the largest cryptocurrency cycle in history, for two reasons: first, this market movement relies on real application value and revenue drivers, rather than mere market speculation; second, the market targeted in this cycle is much larger than previous cycles – aimed at the global financial market rather than confined to the crypto industry itself.

Some people may feel that these trends are self-evident: asset tokenization will inevitably lead the next bull market, stablecoin scale will eventually exceed trillions of dollars, and major Wall Street institutions will sooner or later migrate on-chain. After all, crypto infrastructure has numerous inherent advantages over traditional financial systems: all-weather trading is far more convenient than limited trading hours; instant settlement is superior to T+1 delivery; global interoperability transcends regional limitations. I am not alone in holding this view; the chairman of the U.S. Securities and Exchange Commission, the CEO of the world's largest asset management company, and the CEO of the world's largest bank all agree.

However, even if the trends seem clear, the vast majority of investors have not yet positioned their assets for this outlook. Many are still wondering whether the crypto industry has already "run its course." Within this cognitive gap lies a tremendous investment opportunity.

So, how should we position ourselves for the new bull market? We can focus on two representative entities propelling the industry integration from different directions: Hyperliquid (token HYPE) and Robinhood (stock code HOOD).

Breaking Out from the Crypto Industry

Hyperliquid (HYPE) is a layer one public chain (similar to Ethereum and Solana) with a native focus on building a perpetual derivatives trading market centered around crypto assets. Initially, investors used the Hyperliquid platform to speculate on cryptocurrencies like Bitcoin and Ethereum.

However, the platform quickly expanded its business scope due to its excellent technical experience – ease of use, instant settlement, and all-weather trading advantages. Today, nearly half of the trading volume on the Hyperliquid platform comes from traditional assets such as oil, silver, and the S&P 500 index. The platform is also continuously expanding into commodity spot trading, prediction markets, and options businesses, while forming competitive pressure against various trading platforms including CME, Nasdaq, Intercontinental Exchange, Kalshi, and Coinbase.

Hyperliquid has seen rapid development, putting immense pressure on competitors. CME has even sued the U.S. Commodity Futures Trading Commission (CFTC) in an attempt to block the regulatory acceptance of the perpetual futures product launched by Hyperliquid.

Even in the midst of a crypto winter, the HYPE token has still risen by 146% this year. The growth data is backed by real support: the total revenue of the Hyperliquid platform exceeded $1 billion in June, and full-year revenue is expected to reach $800 million. The platform intends to use 99% of its revenue to buy back its native token HYPE in the open market, continually reducing the circulating supply. In my view, even if the HYPE price doubles again, its valuation will still remain within a reasonable range.

Entering from Traditional Finance

Robinhood has chosen to stand on the side of traditional finance to promote this industry integration.

Robinhood itself is a traditional securities brokerage firm, competing with institutions like Charles Schwab for retail and professional investors. For a long time, Robinhood's attitude towards crypto assets has been much more open than its peers; it was also the first large broker to launch direct cryptocurrency trading features.

At the same time, Robinhood fully agrees with my proposed view of "industry integration." The company's CEO, Vlad Tenev, stated that asset tokenization "will ultimately reshape the entire financial system"; the crypto industry and traditional finance "have long existed as two independent systems, but they will eventually fully integrate." He predicts that the boundaries between the two will ultimately disappear.

On July 1, Robinhood fully bet on this trend by launching its self-developed layer two blockchain, Robinhood Chain. This public chain is open to users in 120 countries (not yet supporting the U.S. region), allowing users to trade tokenized stocks 24/7. The chain is also compatible with mainstream decentralized finance protocols: users can swap assets on Uniswap, collateralize assets for loans on Morpho, or stake assets as margin and trade perpetual contracts on the Lighter platform. Within just two weeks of its launch, the on-chain managed asset scale of Robinhood Chain exceeded $300 million, processing 3.6 million transactions daily.

This segment is worth reading carefully: earlier this month, Robinhood managed to establish a set of financial services in 120 countries solely based on technology, enabling users to buy and sell tokenized stocks in real time, engage in margin trading and leverage operations, with a large number of users already participating.

Skeptics may argue that early on-chain transactions concentrated heavily on meme coins rather than stocks, which is indeed true. However, the trading volume of tokenized stocks has already reached a practical scale, and there is a real user base; I expect both types of trading volumes will continue to grow.

One thing I am very sure of is that Robinhood's major competitors are closely monitoring this project and are starting to consider: Should we also follow suit? Should we create Schwab Chain, UBS Chain, or Bank of America Chain? The trading activity displayed in the early days of Robinhood’s launch is something no institution can overlook.

Two Types of Investment Targets that Will Stand Out

I believe the new bull market will be large enough to drive most assets in the industry upwards. I remain optimistic about major crypto assets like Bitcoin, Ethereum, and Solana, as well as crypto-related publicly traded companies.

However, there are two types of investment targets that will have particularly outstanding upward potential.

1. Hyperliquid Track: Native crypto financial applications with real revenue and high-quality token economic models

The core advantage of Hyperliquid, distinguishing it from other crypto applications, is its stable real income and a well-designed token mechanism (with 99% of revenue used for buyback and destruction of HYPE). Many investors have seen numerous crypto applications enjoying large user bases and trading volumes, yet consistently low token prices, while Hyperliquid’s model just happens to align with this type of investor's demands.

In the long run, I believe many emerging crypto projects will emulate HYPE's token mechanism, giving rise to a batch of potentially promising new token investment opportunities. Meanwhile, I also pay attention to mature projects that have established business scales and actively bind token value and platform usage deeply. For example, Uniswap and Aave are two massive platforms that are quickly optimizing their token economics; Morpho is also moving in the same direction.

2. Robinhood Track: Mature traditional enterprises developing business based on crypto infrastructure

Industry disruption will reshape the market share landscape. The popularization of stablecoins, asset tokenization, and the landing of blockchain trading infrastructure are the most significant technological changes that the financial markets have seen in the past fifty years, and tremendous transformations are quietly occurring.

To discover winners, focus on those companies that have already launched large-scale crypto businesses, rather than merely staying in the proof-of-concept phase. Concept pilot projects are low-cost and easily gain media attention, but they struggle to accumulate effective experience. Robinhood’s industry insights, accumulated from its officially running public chain across 120 countries, are far beyond what any small pilot project can compare to.

Companies I am keeping an eye on include Coinbase, Figure, BlackRock; I am also watching Visa, Stripe, and even JPMorgan. Of course, there are other participants, but the companies mentioned above are genuinely deeply invested in this transformation.

Grasping the Major Trend of Industry Integration

There has long been a consensus in the crypto industry: the greatest success of blockchain is signified by the "invisibility" of the technology – when blockchain is deeply embedded into the underlying architecture of the financial system, users may not even perceive the existence of blockchain when using services.

I firmly believe that when the next bull market arrives and traditional finance and the crypto industry become inseparable, the vision mentioned above will become a reality. Investors should align with this trend and position themselves in advance.

Note: Sometimes, judging a company's positioning in the crypto field requires looking at its actual actions, rather than its public relations rhetoric.