- July 31, 2025
Vikara July 2025 Update – You can only walk halfway into a forrest.
This month, Ethereum became the 25th largest asset in the world, AAVE’s capital deposits surpassed the tenth largest US bank, and Helium surpassed 1.1 million daily users. Nobody cares.
The Genius bill was also signed into law in the US. Stable coins are now legal; tokens will be next. It feels surreal to be immersed within an ecosystem that has an endless list of positive fundamental tailwinds and yet the worst investor sentiment of any market we have been in.
We spoke to multiple industry friends this month and were shocked to learn here that the only people making consistent money are trade-fi bankers and VCs that are rinsing retail investors. It is crazy that these groups are selling assets at three times NAV that can be bought for zero premium.
What is obvious from our vantage point is that all roads are leading to crypto, and while it is frustrating to watch the pre-regulation grifting, we are positive that more and more investors will have access to buy the same great tokens that Vikara has spent hours researching
Outside of crypto, it seems notable to flag that 35% of US trade deals have been renegotiated, with price impacts able to be accurately forecast. The need to for the remaining trade holdouts to strike a deal is increasing and the noise around trade may be substantially reduced in the near term.
The Federal Reserve is determined to remain restrictive. While economic data is worse today than it was as it cut 50bps ahead of Bidens re-election campaign, markets are left wondering if this is a politically motivated Fed.
We don’t believe it is a left versus right issue, but more a US versus China one. US rates are an offensive weapon that are being used like any other military equipment. So as much as we like to talk about independence, rates will probably stay high until a trade deal with China is reached.
This point is important in the context of the public arm wrestle between Trump and Powell. They both believe they are serving America’s best interests. Regardless, will be replaced in May 2026 and markets will soon hear from next Chair-to-be who will be signing a different tune.
This is a backdrop duration assets have been waiting for, and crypto will be the first to respond.
Chart 1 – Ethereum is a top 25 global asset with a $436.84B market cap
Source: @stats_feed
Macro
The macroeconomic backdrop feels like ground hog day. Employment, consumption, savings, and delinquencies are rising while the Fed tells us everything is fine. Most indicators are screaming for rate cuts, while the Fed stares at the highest tariffs since the 1930s and stays on hold (Chart 2).
Chart 2 – U.S Effective Tariff rate (1900-2025)
Source: Blackrock Investment Institute, Census Bureau, Haver analytics
The Fed has taken the view tariffs will bring inflation, with fourteen FOMC members seeing upside risks to inflation and unemployment forecasts while none projected downside risks (Chart 3).
Chart 3 – FOMC members see upside risks to their inflation forecasts (2018-2025)
Source: @KobeissiLetter
The Fed’s fear about inflation isn’t supported by current data, with June PPI rolling despite 2Q having a seasonally upward bias for inflation (Chart 4).
Chart 4 – US PPI Final Demand YoY / US PPI Final Demand Less Foods and Energy (2011-2025)
Source: Bloomberg Finance L.P, @LizAnnSonders
CPI is also well anchored, despite rebounding modestly from May levels. Core prices rose 0.23% in June (annualizing at 2.9%), which is significantly lower than where it was feared to be despite considerable demand being pulled forward by the fear of trade wars (Chart 5).
Chart 5 – Consumer Price Index (2018-2025)
Source: @NickTimiraos, Macrobond, U.S Bureau of Labor Statistics
While many believe the declines in inflation are over, the new tenant rent index (which leads CPI rent and makes up ~30% of the Core CPI Inflation gauge), fell an unprecedented -9.3% YoY in Q2 2025. This should drive disinflation in shelter CPI into 2H25 (Chart 6).
Chart 6 – New Tenant Rent Index vs CPI Rent (2010-2025)
Source: @GlobalMktObserv
While US 2Q GDP is soft, the annualized growth rate of 3% will be used by the Fed to justify that there is nothing to see here (despite 2Q being driven by net exports as importers front ran tariffs) (Chart 7). In the first half, the US grew at 1.5%, its slowest 1H growth rate since 2022.
Chart 7 – Contributions to percent change in real GDP (2Q2025)
Source: US Bureau of Economic Analysis
While backward looking data is used to justify higher rates, real time data like the Richmond manufacturing survey is telling a different story. It shows employment remains weak and capital spending plans continue to fall (Chart 8).
Chart 8 – Employment and Capital Spending Plans in Richmond Fed district (2011-2025)
Source: Renaussance Macro Research, Macrobond
The weakness in economic activity is being confirmed by softening unemployment data that increasingly points to a Federal Reserve that is behind the curve. ADP payrolls show a clear weakening in US labour markets (Chart 9).
Chart 9 – ADP National Employment Repost SA Private Nonfarm Level Change (2021-2025)
Source: Bloomberg, Finance L.P, @KathyJones
Federal government job openings, one of the largest employers during the Biden administration, are now back below the lowest levels since 2020 (Chart 10).
Chart 10 – Federal Government Jb Openings: Lowest since Covid (2004-2025)
Source: @zerohedge
US job postings on Indeed dropped to their lowest since February 2021. They are now near the pre-2020 levels and have been declining for over three years (Chart 11).
Chart 11 – US Job Openings on Indeed (2021-2025)
Source: Indeed, @GlobalMktObserv
Challenger job cuts continue to trend well above any other year in the past 15 years with healthy economic growth (Chart 12).
Chart 12 – Challenger Job Cuts (2009-2025)
Source: @GlobalMktObserv
A record number of Americans expect higher unemployment in the next 12 months (the highest reading since the financial crisis with all prior readings at this level occurring within a recession) (Chart 13).
Chart 13 – UMich Expected Change in Unemployment During the New Year (1980-2024)
Source: Bloomberg Finance L..P, Liz Ann Sonders
Worsening employment data is translating into slower consumer consumption, both in nominal and real terms, and is substantially below where it has been for years (Chart 14).
Chart 14 – Personal consumption (% growth at seasonally adjusted annual rate) (2006-2026)
Source: Bureau of Economic Analysis
At the same time, U.S. imports of consumer goods have plunged at the largest rate in history over the past 3 months (Chart 15). To reiterate what should be clear from the data, it is hard to believe inflation comes roaring back when consumers are this weak.
Chart 15 – US Import Consumer Goods (19960-2024)
Source: Bloomberg Finance L.P, @KevRGordon
On the positive note, ~35% of US trade relationships are now negotiated, with China, Mexico, and Canada being the three largest outstanding countries yet to complete. This is timely as China is in a tough spot, with exports to the US down 24% q/q in June (Chart 16).
Chart 16 – China’s Exports to the US / China’s export to everyone else (2022-2025)
Source: Haver @robin_j_brooks
China is also dealing with severe deflation, with producer prices decelerating again in June (Chart 17), making it the 33rd consecutive month of factory-gate deflation and the longest streak on record.
Chart 17 – China PPI (2010-2025)
Source: Augur infinity, @KobeissiLetter
We are hopeful that its economic situation helps a deal be struck in the coming 90-days. If a deal is consummated, markets will look towards a 2026 that has a lot less trade noise. This will come right on time for the US, as the Conference Board leading index continues to fall (Chart 18).
Chart 18 – Conference Board LEI Drawdown from ATH (1973-2025)
Source: NBER, @nsquaredvalue
As trade uncertainty clears up, the Fed’s inflation concerns should abate. This could facilitate a period of economic growth where US household balance sheets expand over a sustained period (Charts 19).
Chart 19 – U.S Household Debt-to-asset ratio (1970-2020)
Source: Federal Reserve, RSM US, @Barchart
The optimist within us knows that markets can change quickly to the upside once the Fed finally acknowledges the elephant in the room.
On-chain lending is quietly scaling. At $300B, @Aave would rank among the top 10 U.S. banks by deposits. If @SecScottBessent ’s $2–$3T stablecoin projection plays out, Aave growing in tandem is the base case — not the bull case.
Figure 1 – Aave vs. Banks
Source: @WillPeets, @0xKolten
Digital Assets
July was a better month for non-BTC tokens, led by a resurgence in Ethereum’s token Ether (ETH). While BTC is near all-time highs and ETH had a very good July, many large cap tokens are still down on the year, with many down substantially from their all-time highs, as noted in the following chart and data.
Chart 20 – Top 100 Tokens 2025 Price Performance: 71% of the top 100 tokens are down YTD
Source: Haruko; CoinMarketCap; Vikara; data as of July 25, 2025; excludes stablecoins, wrapped, bridged and staked tokens and gold tokens (PAXG, XAUT)
Summary statistics from price performance data on the top 100 tokens.
- 39% of tokens are down more than 80% from their all-time high prices
- 29% of tokens are up YTD, with only 17% of tokens up more than 20% on the year
- Average and median performance from all-time high prices for top 100 tokens is down 65.1% and down 70.5% respectively
- Average and median YTD price performance for top 100 tokens is down 13.9% and down 27.8% respectively
Take NEAR Protocol (NEAR) for example, which is down nearly 50% YTD. The AI-focused layer 1 employs sharding technology that splits the blockchain into smaller segments, enabling parallel transaction processing. This is critical for AI applications that require handling large datasets and complex computations efficiently. They recently launched NEAR Intents, which allows developers to build intent-powered AI agents, enhancing user-driven AI interactions.
Their head of investor relations recently summarized the project’s statistics, including 100% uptime since launch and 3.1m daily active users.
Figure 2 – Post from NEAR’s head of investor relations
Source: x.com @alex_scharrer
Meanwhile, NEAR is down 46.4% YTD, down 19.9% from January 1, 2024 and down 87.0% from its ATH on January 16, 2022.
Chart 21 – NEAR Price Performance (January 1, 4 – July 28, 2025)
Source: Tradingview
Seems like a potential opportunity.
On the sentiment front, things are improving, although still nowhere near a euphoric market. Below are five broad indicators we follow that may provide insight into where, how and if altcoin market participants are positive or negative and in turn buying or selling altcoins.
First, daily centralized exchange volume has more than doubled from $30bn on July 8 to $70bn on July 27 but is still well below levels reached in 4Q24 and 1Q25 when volumes surged above $130bn.
Chart 22 – Daily Centralized Exchange Volume (7DMA)
Source: The Block
Next are sentiment indicators “fear and greed” and “altcoin season”, both which are off their 2025 bottoms, but both at levels that indicate the market is by no means overheated.
Figure 3 – Crypto Fear & Greed Index
Source: CoinMarketCap
Figure 4 – Altcoin Season Index currently at 41 (last 90 days)
Source: CoinMarketCap
Last is Google worldwide searches for the words cryptocurrency and Bitcoin over the last 12 months. Both are well below levels reached last November-December and are trending lower the past two weeks.
Chart 23 – Google worldwide searches for “Cryptocurrency” LTM
Source: Google Trends
Chart 24 – Google worldwide searches for “Bitcoin” LTM
Source: Google Trends
While ETH has recovered after a terrible first few months of 2025, most altcoins have not, which is reflected broadly in the simple sentiment indicators above.
While Ethereum’s recovery and crypto regulation captured most of the headlines, other industry news we found of interest is below.
- Anchorage Digital launched a new stablecoin platform, a turnkey solution for institutions to launch and distribute fully regulated digital dollars. They also announced a strategic partnership with Ethena Labs, the creator of USDe and USDtb, to bring USDtb to the US through their Anchorage Digital Bank.
- JPMorgan Chase is exploring offering loans backed by clients’ cryptocurrency holdings, specifically Bitcoin and Ethereum, with a potential rollout as early as 2026, following June 2025 approval of loans against crypto ETFs, such as BlackRock’s iShares Bitcoin Trust (IBIT).
- Vietnam launched a national blockchain called NDAChain network to power a decentralized identity solution that allows digital contract signing and counterparty verification.
- Grove, a credit protocol backed, announced a partnership with the tokenization platform Centrifuge (CFG) to launch two Janus Henderson products on Avalanche (AVAX), the Janus Henderson Anemoy AAA CLO Fund (JAAA) and the Janus Henderson Anemoy Treasury Fund (JTRSY).
- PayPal is releasing a new platform that facilitates US merchants accepting payments in >100 cryptocurrencies, targeting overseas transactions and increasing the utility of its own stablecoin.
- PNC Bank is set to offer crypto services to clients through a new partnership with Coinbase, where PNC clients can buy, sell and hold digital assets without logging out of their PNC accounts.
On the regulatory front, three cryptocurrency bills passed the US House of Representatives this month, during what was dubbed “Crypto Week.” The former was signed into law by President Trump with the latter two moving to the Senate for further consideration.
- GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act): establishes a regulatory framework for stablecoins, by setting requirements for stablecoin issuers to hold reserves equivalent to the stablecoins issued, includes anti-money laundering rules and aims to enhance consumer protections and financial stability.
- CLARITY Act (Digital Asset Market Clarity Act): aims to provide a cryptocurrency market framework, defining when a digital asset is considered a commodity (regulated by the Commodity Futures Trading Commission (CFTC) or a security (regulated by the Securities and Exchange Commission (SEC)).
- Anti-CBDC Surveillance State Act: prohibits the Federal Reserve from issuing a central bank digital currency (CBDC), citing concerns about potential government surveillance and control over citizens’ finances.
This represents the most significant and positive progress US lawmakers have made on cryptocurrency regulation to date. And like him or not, President Trump is delivering on initiatives he promised the crypto bros who helped finance his campaign.
Tokens
First, the potential leading candidate for biggest grifter of all time, pump.fun, launched its PUMP token. Selling out in 12 minutes at a price of $0.004, they raised $600m dollars.
Figure 5 – Pump.fun token sale
Source: x.com @pumpdotfun
As expected, PUMP went down, sitting at $0.00237, more than 40% less than where they priced their pre-sale two weeks ago. Pump.fun team winning, most everyone else losing, again.
Chart 25 – PUMP token price performance since launch
Source: Tradingview
As an aside, Solana, which has benefitted from the grift via pump.fun and now LetsBONK, Bonk’s memecoin launchpad competitor, are driving Solana’s fee. 62% of Solana’s revenue in June 2025 came from memecoin Dapps, a monthly record. Not sustainable.
Chart 26 – Solana DApps Revenue Share by Category
Source: Syndica
A second, likely higher profile, legal grift happening at the moment is the treasury token bonanza. Call us sceptical, but when venture capitals and large financial institutions are frothing to push money into a single asset, “treasury” token strategies, of course at pre-public launch valuations (see David F Bailey effectively bragging here: https://x.com/1914ad/status/1939429601698091416?s=46) some digging must be done.
Two points to highlight. First, some tokens holders are contributing in kind to the deals, some with “locked tokens” (meaning the potential multi-year lockups are transferred to the new owners, the treasury co!), and getting an immediate uplift in NAV. So, get out of your unlocks while getting a valuation uplift. Nice if you can get it!
But as we have questioned since the beginning of the treasury token push – are the NAV premiums sustainable? We doubt it. And who’s going to hold the instos inflated bags? Once again, retail.
Second, we question the veracity of something like Sonnet’s pivot from a biotech business to a Hyperliquid (HYPE) treasury token business, raising $888m (numerology much), with the pivot funded by VCs Paradigm, Galaxy Digital, Pantera Capital, D1 Capital and Republic Digital. While Hyperliquid has gained significant traction in perps trading, the single asset risk for a $15bn business trading near all-time highs seems high. We will be closely watching the premium to NAV for this and many other treasury token launches. Reminds us of the SPAC frenzy of a few years ago. Needless to say, most of us know how that ended.
On a much more positive note, one sector of crypto we find of interest is Payment Finance (PayFi). PayFi is not new. Think credit cards, trade finance or global remittances, all of which are massive traditional finance verticals. But when moved on-chain, it integrates traditional payment systems with decentralized finance (DeFi) to create faster, cheaper, and more inclusive financial solutions by bridging traditional payment activity, like payroll, invoices, remittances, or credit card settlements with on-chain liquidity and programmable smart contracts.
Instead of waiting days or weeks for funds to be paid or settle, PayFi protocols enable users to borrow or earn yield instantly, based on the cash flows they’re entitled to receive. In many ways it’s analogous to invoice factoring or supply chain financing in traditional financial markets. A summary table on the key features of PayFi is below.
Figure 6 – Key features of PayFi
Source: Vikara Capital
As with all crypto subsectors, the first question that should be answered is whether this is a real use case or is a solution looking for a problem. We believe it is the former in the case of PayFi. A summary table on the potential benefits of PayFi is below.
Figure 7 – Benefits of PayFi
Source: Vikara Capital
PayFi is underpinned by a Huma Finance proposed six-layer technology stack, which is a framework designed to facilitate efficient and compliant payment financing solutions (Figure 8).
Figure 8 – PayFi six-layer technology stack
Source: Huma Finance.
Figure 9 – PayFi six-layer technology stack details
Source: Vikara Capital
How does PayFi work in practice?
The primary reason it is more than hype is that it solves liquidity issues for many individuals and small to medium sized businesses.
Take, for example, a mid-sized oil producer based in Indonesia that delivers crude oil to a refinery in Singapore. The refinery agrees to pay $1m for the shipment with 60-day payment terms, straining the oil company’s cash flow for operational expenses such as payroll and equipment maintenance. The oil company can use a PayFi platform such as Huma Finance to tokenize the invoice and access immediate funds via a DeFi liquidity pool. The oil company receives $950k immediately, while the LP investors earn 8% APY (over 60 days that is $12,500) with Huma charging 1.5% origination fee ($15,000) with the net amount to Huma as margin. See a detailed example of PayFi flow below.
Figure 10 – Oil Company PayFi example
Source: Vikara Capital
While PayFi is a fraction of the size of the traditional finance businesses it’s competing against, it is poised to become more than just a typical “no product, no solution, hype-driven” crypto narrative, driven by recent US regulatory progress, technological advancements, and growing market demand for efficient, blockchain-based payment solutions. That said, utility tokens, or tokens in businesses that are providing an in-demand service that have real revenue, such as Huma (HUMA), have largely struggled since the end of 2021. When that rotation comes, which we are of the belief it will, businesses like Huma seems a reasonable place to start.
A more detailed report on Huma will be sent to our LPs in coming weeks. If you want a copy, please email us.
Luke McFarlane
Co-Founder & Portfolio Manager
Vikara Capital
Mark Riccio, CFA
Co-Founder & Portfolio Manager
Vikara Capital
Contact Us
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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