- January 31, 2025
Vikara January 2025 Update – A new dawn for the crypto industry
The truth isn’t afraid of being questioned. Trump’s freeze in three plus trillion of US foreign aid and government spending may finally prove that inflation is driven by fiscal and monetary irresponsibility. We believe US inflation declines quickly in 2025, which will be very supportive of digital assets.
Trump is forcing fiscal responsibility, by shrinking and increasing transparency in spending programs, enabling private business growth through incentives and tariffs, and executing his promise of pivoting the direction of the US back towards its own borders. Love him or hate him, America has pivoted, and this requires an updated macro framework.
While it is a much smaller country, Argentina’s Milei has shown that governments can reverse inflation quickly with cuts to government spending. In a mere 12 months, Argentina’s inflation has moderated by 60% from the highs (Chart 1)
Chart 1 – Argentina inflation (%YOY) [Red line shows when Milei took office] (2009-2024)
Source: TradingView.com
Trump is about to Milei the US, putting the balance of risks for inflation to the downside, in our view. A strong border and deportations will create rental slack, a shrinking government will loosen labour markets and Made in America will accelerate capex. Tariffs are unlikely before inflation is under control and even then are unlikely to be implemented across a wide swath of the economy.
The Federal Reserve will need to see this substantial shift in the macro landscape before acting, but it continues to commit to being data dependent, which is the best possible place if it can indeed act quickly in the event our thesis is correct.
While digital assets (outside of Bitcoin) have been volatile, the combination of poor sentiment and the incoming pivot in monetary policy bodes really well for the space. Tighter fiscal policy will drive looser monetary policy. The 2025 setup remains very supportive, in our view.
We have taken advantage of the recent volatility and increased weightings across our best ideas, with many of them sold heavily post the pivot at the December Fed meeting and the launch of the Trump meme coin.
While many are questioning whether we will ever have an altcoin cycle again, we have never been more convicted that 2025 is the year of price growth. Macro cycles drive investor allocation and digital assets, not four-year egg timers or unlimited banana zone charts. The cycle is here, and we are positioned for it.
Macro
Starting with Argentina, which has spent the past twelve months walking the path that Trump is trying to replicate, shows how quickly a budget surplus can occur post the adoption of a sustainable fiscal spending plan (Chart 2).
Chart 2 – Argentina government budget balance (ARS Billion) (2017-2024)
Source: TheDailyShot.com
Once the money printer is turned off, and expectations of an ever-growing budget are realigned, pricing expectations fall quickly. Argentina’s inflation is now rapidly declining (Chart 3).
Chart 3 – Argentina CPI (MoM) (2017-2024)
Source: TheDailyshot.com
In response to lower inflation, Argentina’s central bank has been able to quickly pivot to looser monetary policy (Chart 4). We expect US monetary policy follows a similar path.
Chart 4 – Argentina’s inflation versus rates (2018-2024)
Source: Refinitiv Eikon, BCRA, TheDailyShot.com
People still fear another wave of inflation, despite fiscal and monetary policy reverting back to trend (Chart 5). We do not see the required backdrop for another wave of inflation, but quite the opposite.
Chart 5 – Real M4 Money Supply (Index) (2012-2026)
Source: @EPBResearch
Cleveland Fed’s New Tenant Rent, the base rent a tenant pays for newly leased space, declined 2.43% in December. Assuming all tenant rents follow, over 30% of the US CPI basket may become a tailwind to CPI (Chart 6). Lower immigration and the potential for larger scale deportations also decreases demand.
Chart 6 – New Tenant Rent (YoY) [white] and All Tenant Rent (YoY) [yellow] (2004-2024)
Source: @TheBondFreak
Then there is the freeze for federal government employees, which has been running at 350,000 jobs per month. This freeze will see labour market slack created, even if there are government employees working second jobs (Chart 7).
Chart 7 – New Hires: US Government (2022-2024)
Source: FRED
While manufacturing optimism and future orders are rising, job openings remain in a downward trend and are getting back to a place that seems much more balanced (Chart 8).
Chart 8 – Manufacturing Job Openings (2000-2024)
Source: MacroEdge Research, JOLTS
The US manufacturing sector should strengthen from here, but a rebound in capital expenditure will take time to flow through to new hires (Chart 9).
Chart 9 – Capital Spending Intentions (2002-2025)
Source: @RenMacLLC
Wage growth continues to suggest a more balanced US labour market, with the Atlanta Fed wage growth tracker continuing its downward trend through December (Chart 10).
Chart 10 – Atlanta Fed Wage Growth Tracker Median Wage Growth (1997-2024)
Source: @LizAnnSonders
While we have been told US labour markets are strong, official labour market statistics continue to be revised lower. In 2Q24, official job market statistics show a 163,000 net employment decline, with eight out of the 13 industry sectors declining (Chart 11).
Chart 11 – Quarterly private sector gross job gains and losses (seasonally adjusted) (2023-2024)
Source: BLS
Backwards looking US government labour statistics are at odds with many of the real time statistics that we are focused on. Layoff and hiring rates being at all-time lows at the same time supports our view that labour markets are well balanced (Chart 12).
Chart 12 – Layoff Rate: Cyclical Sectors and Hiring Rate: Cyclical Sectors (2001-2025)
Source: @EPBResearch
If it wasn’t for the uncertainty around US trade policy (Chart 13), markets would be much more focused on the economy slowing and would be calling for looser policy from the Federal Reserve.
Chart 13 – US Trade Policy uncertainty index (1985-2030)
Source: Goldman Sachs; @WallStJesus
Trump has been clear that he will focus on inflation before moving to trade policy. As markets better understand Trump’s priorities, the US dollar, rates, and inflation should begin to weaken (Chat 14).
Chart 14 – Bloomberg Dollar Spot Index around Election Days (2016-2024)
Source: TheDailyShot.com
Republicans seem to understand Trump’s priorities, with the University of Michigan’s one year inflation expectations highlighting that lowering inflation is step number one in the new admin’s agenda (Chart 15).
Chart 15 – UMich One Year Inflation Expectations By Party Affiliation (2021-2025)
Source: University of Michigan & WSL Election, @M_McDonough
Trump knows US consumer balance sheets are in a reasonable position, with US household leverage (as measured by debt as a % of assets) at multi-decade lows (Chart 16).
Chart 16 – US Household Debt-to-Asset Ratio (1970-2020)
Source: Federal Reserve, RSM US, @Callum_Thomas
Knowing this, he can aggressively attack inflation and rates. Refinancing a substantial portion of US debt at higher rates will undo many of his policy actions to cut US government spending, making lowering rates Trump’s top priority (Chart 17).
Chart 17 – Government versus corporate interest paid (1960-2020)
Source: SG cross Asset Research/Derivativec, Bloomberg, @ollariconsulting.com
As inflation starts to fall, Trump can move onto trade policy. The second and third industrial revolution were all about offshoring and globalization. The fourth industrial revolution is about onshoring and protecting critical manufacturing infrastructure (Chart 18).
Chart 18 – Tariffs Revenue as a Share Total Federal Receipts (%) (1798-2023)
Source: Whitehouse, Census, CEA calculations
Trump is incentivized to extend hiring and budget freezes as long as possible to ensure that a deflationary impulse is sent through the US economy. At the same time, China is experiencing an air pocket as its sovereign debt crisis accelerates.
We expect all of the US factors to show up in the data by the middle of the year, enabling consensus to shift from higher for longer, to lower is needed (a market structure we saw briefly at the start of 2024). As this shift happens, we expect digital asset markets to be a very large beneficiary.
Digital Assets
January was a chaotic month for crypto markets. From Donald Trump launching his own meme coin to AI tokens collapasing on the (yet to be substantiated) news that a Chinese AI company was going to send Silicon Valley to it’s death throes, volatility increased while the alts market once again drifted lower.
That said, Bitcoin, which has historically led the rest of crypto higher, namely in the last year of the four-cycle cycle, is closely tracking previous cycles, in particular 2017 (Chart 19).
Chart 19 – BTC cycle bottom to top ROI (2015-2017 orange; 2023-2025 pink)
Source: Into the Cryptoverse.
We may sound like a broken record, but crypto reacts positively to lower rates and liquidity. Case in point. Fed changed their message on December 19, calling for fewer rates cuts in 2025. Alt coins preceeded to dump. Many of us have seen the GMI chart that graphs the BTC price versus global liquidity. Crypto loves more money.
Chart 20 – GMI Total Liquidity Index ($bn) (12-week lead) (LHS) vs Bitcoin (RHS)
Source: Global Macro Investor (GMI); Bloomberg; LSEG Datastream
We raise this again as Trump is already calling for lower rates. Who’s surprised? Experts claimed interest rates can only go higher because Trump’s policies like mass deportation and broad tariffs will put pressure on domestic costs and prices. It’s unlikely either will happen.
In his first week back in office, Trump trolled the Federal Reserve Board with the following:
- “with oil prices going down, I’ll demand that interest rates drop immediately” and
- “I think I know interest rates much better than they do, and I think I know it certainly much better than the one (Jerome Powell) who’s primarily in charge of making that decision.”
In 2019 he did the same. In August 2019, rates were at 2.25%. Trump proceeded to blast the Fed over the succeeding months (Figure 1).
Figure 1 – President Trump trolling Fed in 2019
Source: x.com
Whether this led to two 25 bps cuts, even as the economy was expanding, is impossible to know, but surely the president’s trolling didn’t hurt the lower rate cause.
As noted above, who’s surprised (besides Wall Street economists and CNBC talking heads)? Trump wants and needs a weaker dollar. He loves leverage. He measures his success by how well the economy (and stock market) are doing. And maybe now how well crypto is doing!
Summary. Rates cannot go higher in a Trump world. Crypto likes lower rates. And lower rates dramatically increase the odds we move into the Banana Zone.
Chart 21 – Banana Zone
Source: Global Macro Investor (GMI); LSEG Datastream
Staying on the topic of Trump, yes, the POTUS did launch his own meme coin days before he took office. And yes, it did reach a $75bn fully diluted valuation (only 20% of tokens in supply though), making it one of the highest valued tokens in all of crypto.
There have been many, many takes on the TRUMP launch ranging from this is what the cycle needed to go higher as the President of the United States demonstrated his support for crypto by launching his own token to others thinking it’s criminal.
Some pros and cons from our POV.
Positives
- Bringing new people and volume to crypto evidenced by:
- Six-month-old app Moonshot added over 250k new users in 48 hours post TRUMP launch and became the #1 most downloaded app in app store (Figure 2).
- Solana wallet Phantom received over 8m requests per minute the second day after launch (Figure 3).
- Nearly half of the wallets were brand new demonstrating that the launch brought new people to crypto (Figure 4).
- A survey by NFTEvening claimed “42% of TRUMP token buyers are first time crypto investors.”
Figure 2 – Moonshot distinct traders (daily)
Source: Dune
Figure 3 – Phantom wallet experienced a surge in requests post TRUMP launch
Source: x.com
Figure 4 – Age of wallet that owns TRUMP / MELANIA
Source: Chainalysis
- Brings attention to crypto as a potential new capital market to many that have ignored it to date (like the 20+ people that contacted us after the launch, some of whom we haven’t heard from in years). Note keyword “crypto” reached its highest search interest on Google since November 2021, the peak of the last crypto cycle.
- Solidifies Trump as the crypto president.
Negatives
- Short-term it sucked liquidity into TRUMP. Not great for tokens that are purported to have actual utility.
- Solana broke. Again. Hopefully one day Solana Labs will fix it once and for all.
- Potential conflict of interest concerns launching Trump family tokens immediately prior to him taking office. The Washington Post headline was sensible – “Trump promotes meme coin, raising ethics issues as value soars.” Add the fact that MELANIA token was launched shortly after TRUMP and with anticipation Barron may be on the horizon.
- Socials filled with new market entrants angry about not being able to buy or more importantly sell TRUMP. Surely many don’t know about slippage. Optimized slippage on Jupiter to buy MELANIA was 12% two hours after launch. That’s wide. Fees on Solana much higher than normal due to “congestion.”
- Potentially increase the negative perception of crypto as evidenced by an NFTEvening survey that found “55% believed Trump was manipulating the crypto market” and “75% considered the TRUMP token bad for crypto.”
While the TRUMP token hype has died off, the price is still significantly higher than at launch, sitting at an FDV of $27bn and 707k onchain holders (Chart 22).
Chart 22 – Trump token performance (January 19 – January 30)
Source: TradingView.com
Many have made money off it’s rise, including Trump, who at one point became one of the richest people on the planet. Whether the gains make their way into other tokens, are off-ramped as fiat or just sit in wallets into perpetuity as a Trump v2 “souviner” (we think the latter is way larger than people realise) is the big unknown. But it’s unlikely The Don will do anything to harm his new found crypto king status.
While the TRUMP token stole most of the headlines, other news we found of interest during the month.
- Helium Mobile (MOBILE), a decentralized, blockchain-based wireless network, announced a partnership with DAWN, a decentralized broadband protocol built by Internet service provider Andrena, to establish the world’s first fully decentralized “last-mile Internet” solution.
- Solana (SOL) DEX Jupiter (JUP) acquired a majority stake in Moonshot, the platform that arguably benefitted the most from the TRUMP token launch, besides Trump himself
- Transak, a Web3 payment infrastructure provider has partnered with the blockchain-based uranium trading marketplace, Uranium.io, to launch a trading platform that allows retail investors to purchase tokenized shares of uranium with cryptocurrency or credit cards for as little as a $10.
- Enel Group, an Italian energy company, partnered with crypto wallet provider Conio to allow fractional ownership of solar panels through tokenization on L1 Algorand (ALGO).
- Maple Finance (MPL) debuted a Bitcoin-linked yield offering for institutional investors promising BTC yields and downside protection.
- A US court in Texas overturned sanctions on Tornado Cash (TORN), a decentralized non-custodial privacy solution that enables users to break links in onchain transactions and enhance transaction privacy between deposit and withdrawal addresses.
- Telegram announced that it will only support Toncoin (TON) and the TON network for its apps and services and cease supporting all other blockchains.
- Tokyo Stock Exchange-listed Metaplanet announced a $745m capital raise with the proceeds to be used to buy Bitcoin, marking the largest BTC-focused equity funding in Asian stock market history. This follows NASDAQ-listed Semler Scientific announcing a $75m convertible notes offering with the proceeds to fund further Bitcoin purchases (they already hold 2,321 BTC).
- Meta (Facebook) shareholders submitted a proposal urging the company to add Bitcoin as a corporate treasury asset.
- Standard Chartered launched crypto custody services in Europe after obtaining a digital asset license in Luxembourg.
In regulatory news, the Trump adminstration began by unwinding rules that were put in place to stifle the crypto indsutry over the last several years. The most notable was cancelling SAB 121, an accounting rule that forced banks to treat Bitcoin and other tokens as liabilities on their balance sheets. The rule was introduced in 2022 and subjected digital assets to strict capital requirements, significantly raising the financial and regulatory risks of offering crypto custody services, effectively blocking banks from adopting crypto.
President Trump issued a digital asset-centric Executive Order titled “Strengthening American Leadership in Digital Financial Technology” who’s goal is to promote United States leadership in digital assets and financial technology while protecting economic liberty.
While there are numerous positive actions in the executive order ranging from industry regulation to banning CBDCs to protecting and promoting fair and open access to banking services, many investors were expecting an official announcement of a Strategic Bitcoin Reserve (SBR). Instead, we got this:
“The Working Group shall evaluate the potential creation and maintenance of a national digital asset stockpile and propose criteria for establishing such a stockpile, potentially derived from cryptocurrencies lawfully seized by the Federal Government through its law enforcement efforts.”
Some are saying there is nothing concrete and hence the SBR is up in the air while others are saying this opens the national reserve (stockpile) to more than just BTC. Interestingly, gambling platform Polymarkets is putting it at only a 16% chance within the first 100 days.
Chart 23 – Will Trump create an SBR in his first 100 days?
Source: Polymarket
Recall Senator Cynthia Lummis already put forward a bill called the Boosting Innovation, Technology and Competitiveness through Optimized Investment Nationwide (BITCOIN) Act to Congress last July. Gosh they love the acronyms in DC.
Since then, both parties have embraced crypto, especially the once hostile Dems, while the various agencies have been cleared of the anti-crypto combatants (looking at you Sherrod Brown and Gary Gensler).
So why not put forward a bill that both parties support? This is a much better path long-term than a unilateral decision by the new President.
In personnel moves, WY Senator Cynthia Lummis was naturally chosen to chair the Senate Subcommittee on Digital Assets while Mark Uyeda is now Acting Chair of the SEC. Chair Uyeda also announced the formation of a new “Crypto Task Force” dedicated to developing a comprehensive and clear regulatory framework for crypto assets (Figure 5).
Figure 5 – SEC Crypto 2.0
Source: SEC.gov
Lastly, there are rumours, substantiated by Eric Trump, that the Trump admin will look to implement a zero capital gains tax policy for investment into US-based crypto companies. It would have to go through a proper legislative process, but the premise is a great one. CoinGecko has a “Made in the USA” category that list all US-based tokens. The top 10 are below (excludes stablecoin USDC).
Figure 6 – Top 10 US-based crypto companies with listed tokens ranked by market cap
Source: Coingecko.
The Biden-admin SEC didn’t go down without a bang. They filed a lawsuit against Nova Labs, the company behind the open-source telecommunications network Helium (HNT), only a few days before Trump took office.
The SEC alleges that the company violated securities law by offering unregistered securities, including “Hotspot” devices used to mine the HNT token and the “Discovery Mapping” program, which rewards users for sharing their private data.
Helium’s founder blasted the SEC (Figure 7).
Figure 7 – Helium founders response to SEC lawsuit
Source: x.com
If his claims are true, which we have to assume they are, it’s a fitting end to a group of unelected bureacrats that seemingly took the law into their own hands and wasted companies time and many millions of taxpayer dollars.
At the state level, a Utah House committee passed a bill allowing the state to buy crypto. The bill now needs to pass in Utah’s House and Senate before being approved by state governor Spencer Cox, who is pro-crypto.
In Arizona, the Strategic Bitcoin Reserve Act (SB1025), passed the Arizona State Senate Finance Committee and would allow the state to invest its treasury in Bitcoin.
A bill dubbed the Bitcoin Freedom Act in Oklahoma has been filed that will allow Oklahoma residents to opt to receive salaries in Bitcoin and enable vendors to accept BTC payments.
January was the month of new beginnings. To the end of Operation Chokepoint 2.0, to an executive order focus solely on crypto, to the Fed Chair Jerome Powell openly supporting banking services to the industry, we find it hard not to be excited even as alt coins try to find their way to the Banana Zone.
Tokens
As we’ve been preparing a paper on AI Agents, we comped the size of the meme coin market to gauge the potential size of the former’s market. This naturally led us to pump.fun. While we’ve been no fan of pump.fun, some stats shocked us.
Pump.fun launched at the beginning of 2024 but didn’t gain traction until March. In little more than a year, nearly 7m tokens have been launched on the platform (Figure 8).
Figure 8 – Total tokens deployed on pump.fun (as at 31 January 2025)
Source: Dune
That said, not all make it to an exchange. According to data from @evelyn233, 40% of contracts deployed have moved off the platform onto an exchange. Of the 6.98m contracts deployed, 2.8m tokens have become tradable on a dex like Jupiter using the above data.
Here’s the shocker. According to Coin Gecko, only 24 tokens have a market capitalization over $50m. That’s 0.00086%. Not great odds of hitting a banger.
Figure 9 – Pump.fun deployed tokens with market cap >$50m
Source: Coin Gecko
Even when lowering the bar to $20m, only an additional 22 make the cut. So of the 2.8m tokens that have moved from pump.fun to an exchange, 46 have a market cap greater than $20m. This pours water on the idea that the masses are becoming meme coin millionaires.
Who is benefitting is pump.fun, the dexs like Jupiter, Raydium, and Orca, and Solana itself. Pump.fun has earned over $500m in fees since launch.
When comparing Solana dex volume versus other chains, Solana dominates (Figure 10).
Figure 10 – All Chain DEX Volume
Source: Dune
Raydium has been the leader. In early December, the dex had a weekly volume of $23bn between December 2 and December 9. Raydium has become a much better experience since v3 in our opinion.
This has been reflected in dex token prices. Raydium (RAY) token is up nearly 560% over the past year.
Chart 24 – LTM Raydium (red) vs Jupiter (red/green)
Source: Tradingview.com
We’ve long been a critic of pump.fun, but this data point solidifies our view that most of the value accrual is to the owners of pump.fun (we believe it could be detrimental to the Solana ecosystem over the long-term). Note that pump.fun generated nearly 60% of Solana dex volume this month prior to the TRUMP token launch, for example.
We understand the arguments that gains made on pump.fun make their way into other tokens, some which have purported utility. We’re really not sure that’s true as it seems to be a game of musical chairs so far. We do appreciate that most participants know this. It’s effectively a gambling platform. And it’s generally very small dollars.
The question is what happens to the beneficiaries of this meme coin boom once the music stops? Hopefully by then utility tokens are back in vogue to supplant what is likely to be falling meme-driven volume and fees over time.
Luke McFarlane
Co-Founder & Portfolio Manager
Vikara Capital
Mark Riccio, CFA
Co-Founder & Portfolio Manager
Vikara Capital
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Vikara is a liquid, open-ended fund investing in digital assets (excluding Bitcoin and Ethereum) with no lockups (add or redeem monthly). Vikara’s proprietary investment and rigorous risk management processes aim to outperform the broader digital asset markets. Founders have over 40 years combined investment experience at Millennium, Balyasny, Platinum, Merrill Lynch and Macquarie.
Vikara, in Sanskrit, describes the process of change. Its definition is constantly evolving, changing with economic cycles, technology, and geopolitics. It is a transformation of thought or logic, a modification in the direction of travel, an alteration in action or participation. It is one thing to want change, but another to drive it. We believe in a world where commerce doesn’t need intermediaries. Where people are paid directly for content, time, and effort. Where privacy, data and free speech is given, not something to opt-in for.
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