Today’s 0xResearch newsletter tries to diagnose why crypto liquid funds have been flailing. Also, a new slate of non-custodial crypto-linked debit cards are coming our way, and we unpack some research about Hyperliquid’s “endgame.”

Permissionless IV is hitting Brooklyn on June 24-26. Tix are $499 — but refer 5 friends to the 0xResearch newsletter and score an exclusive 50% off. Scroll down to grab your code.

Gnosis Pay hits record volume:

Gnosis Pay posted a new all-time high in weekly volume last week — exceeding $2 million — driven largely by €1.8 million in EUR-denominated spending. But the fastest relative growth came from USDC, which jumped from $1k/week at the start of April to over $13k in early May, thanks in part to a new rollout in Brazil. Weekly payments also hit a new high, coming from around 3,500 active users earning upward of $38k in cashback (in the form of GNO, Gnosis Chain’s native token).

Unlike longstanding custodial crypto card options like Wirex and Crypto.com, Gnosis Pay is part of a new wave of self-custodial, Visa- and Mastercard-linked wallets that enable direct stablecoin spending at point-of-sale terminals. Others in this category include Holyheld, Fuse Wallet, and Argent (soon^TM). These options let users retain control and even earn interest in DeFi, while offering everyday payment features like any other debit card.

Gnosis Pay’s growth trajectory suggests that demand for noncustodial, crypto-native payments is slow but steady.

— Macauley Peterson

0xResearch Arena: It's Going Down at Permissionless IV

We're bringing the signal to Brooklyn — with a side of chaos.

Hosted by the 0xResearch crew and Blockworks Research analysts, this space is where the smartest minds in crypto go head-to-head in live debates, blitz chess, pull-up challenges, and the occasional dunk tank.

High traffic. High energy. No takes left untested.

Think you’ve got alpha? Come prove it. 

📅 June 24–26 | Brooklyn, NY

The state of crypto liquid funds

The following is part one of a multi-part series on the state of crypto liquid markets, based on several conversations with liquid funds.

It’s an open secret that most crypto liquid funds are underperforming.

Liquid funds work similarly to traditional hedge funds: Pick a market direction, deploy capital and outperform a benchmark.

Unlike hedge funds, however, the yardstick to beat is not a composite benchmark like the S&P 500. Crypto liquid funds are in the game to beat bitcoin.

For example, bitcoin appreciated ~110% in 2024. Any liquid fund performing below that benchmark is underperforming, or considered average at best.

Unfortunately, the rise of orange coin means liquid funds have a much harder job.

Bitcoin has generally held steady on a year-to-date basis while the rest of the altcoin market has plunged into oblivion.

Consider bitcoin dominance (BTC.D), which has steadily climbed over the past year to 63% today against a total crypto market cap of $3.3 trillion. 

Contrast that to last cycle’s market cap peak in November 2021 when BTC.D hovered at the 40-45% range.

VCs such as DBA’s Jon Charbonneau even question BTC as a benchmark. The appropriate benchmark may be a weighted-average basket of alts like ETH, SOL and BNB, Charbonneau said on the 0xResearch podcast.

This likely explains the noticeably bearish vibes in the Crypto Twitter echo chamber despite bitcoin hovering close to its all time-highs. Many higher risk-seeking investors are positioned on the thesis that altcoins would surge harder than bitcoin, and therefore have been “sidelined” from BTC’s rally.

Pantera’s Cosmo Jiang told me: “It’s not great right now. Most directional liquid funds are probably negative against BTC. For the market-neutral liquid funds, industry averages are irrelevant. Yet they too are having a bad year, but that means they’re generally flat on performance, not positive.”

Practically every liquid fund I’ve spoken to agrees that bitcoin has situated itself as an institutional/macro asset, or as “digital gold.” 

“We’re at an interesting point in the S-curve of bitcoin’s adoption where you see penetration rising quickly because of ETFs and the US government’s strategic reserve. Bitcoin inflows exceeded Nasdaq’s QQQ inflows last year, which is crazy,” Jiang said. “Most players still don’t appreciate the nuance that BTC performance is vastly different from the rest of the crypto market.”

It’s not just all about orange coin either, which is incidentally up 11% on the week.

The faltering performance of most liquid funds is impacted by a dark, looming cloud hovering over the altcoin market. The glut of L1/L2, DeFi, DePIN, AI and memecoins that already exist and are soon to be unlocked spells a bleak outlook, Defiance Capital’s Arthur Cheong told me.

“The unlock schedule for all alts, excluding ETH, is estimated to be $1 billion every month for the next two years. There simply isn’t that much demand for altcoins. The total capital by all crypto liquid funds comes up to ~$10-15 billion of capital,” Cheong said.

These structural dynamics too affect liquid funds specialized in market-neutral strategies.

“Even when projects try to sell their locked tokens over the counter (OTC) at 30-40% discounts, it’s hard to find a buyer. There’s a broad expectation by markets that altcoins will plunge,” Presto research analyst Min Jung said.

$60 billion in buying pressure would be needed to sustain the prices of the top 10 largest tokens (STRK, ENA, JUP, ONDO, etc.) launched in 2024, Presto wrote last year.

This mismatch in demand and supply means that liquid funds must work harder to pick the “right” winners. 

The “rising tide (BTC) lifts all boats (altcoins)” phenomenon of past cycles is no more.

In the second part of this series, we’ll look at:

• How liquid funds are grappling onto fundamentals to adapt.

• What crypto sectors are liquid funds looking at?

• Is the four-year cycle dead? 

• Is the L1 valuation premium dead? 

Keep your eyes peeled for part two later this week in the 0xResearch newsletter.

— Donovan Choy

Hyperliquid’s endgame

Hyperliquid is evolving from a perps exchange into a full-stack liquidity infrastructure platform. In its latest research report, “Builder Deployed Perpetuals: The Hyperliquid Endgame,” Blockworks Research unpacks HIP-3 — a proposed framework that lets anyone launch a perpetual market on Hyperliquid.

Previously, Hyperliquid's foundation controlled listings, but HIP-3 changes that with a permissionless auction system. Builders bid using HYPE for the right to deploy a single perp market. The winner gets a brief window to set contract specs, designate oracles, customize fees (up to 50%) and post a $23m security bond.

The goal is to decentralize responsibility and settlement risk, but it’s about more than just crypto markets. The platform’s potential may allow trading of tokenized stocks, prediction markets and even gaming skins, using the same backend. Hundreds of markets may be spun up, with users coming in via third-party frontends, not Hyperliquid’s native UI.

The report also highlights the deepening role of the HYPE token: now the gas for listings, a bond asset and the recipient of growing fee flows. With $13.5t in cumulative volume and automated market-making tools already live, Hyperliquid is positioning itself as the decentralized infra layer for perp trading.

Read the full breakdown from Blockworks Research.