Hi everyone, and happy Friday. Crypto markets moved broadly higher today as the CLARITY Act advanced through the Senate Banking Committee, helping digital assets continue to outperform equities. While regulatory momentum remains a key tailwind, some of the most interesting developments are still happening onchain. Below, we break down the latest market action and dive into Papertrade.xyz, a new perp protocol experimenting with 1000x leverage, zero fees, and a token model where traders earn exposure by losing money.

Today saw broad green across crypto as the Digital Asset Market CLARITY Act passed the initial stage, with the sector decisively outrunning equities. BTC rose 2.1% on the day, ETH added 1.1% and SOL 1.3%. Perps led the one-day board at +13.5% and DeFi followed at +10.2%, while the S&P 500 managed +0.6%, the NASDAQ +0.3%, and gold slipped 0.9%.

The Senate Banking Committee advanced the CLARITY Act 15 to 9, with Democrats Ruben Gallego and Angela Alsobrooks crossing over to join every Republican. That bipartisan committee pass is the outcome the market was hoping for, and it keeps the bill's momentum intact. Next comes a full Senate floor vote needing 60 votes, then reconciliation with the Senate Agriculture Committee's version. 

The limited scale of the one-day move suggests much of this was already priced in. The Perps sector move was driven less by the vote than by Hyperliquid: Coinbase became the official USDC treasury deployer, and USDC will convert to an aligned stable, routing 90% of cost-adjusted reserve yield on USDC supply back to Hyperliquid. On the current $5B USDC base, that implies roughly $137M to $160M in annualized revenue at a 3% to 3.5% yield, a 22% to 26% step-up from where the protocol sits today.

However, zooming out, the monthly picture is more convincing. Modular leads at +50.7%, Privacy +35.5%, Crypto Miners +32.6%, Solana Eco +29.6%, and AI +27.3%; BTC is also up 9.8% on the month against the S&P's +7.3%. The 30-day trend shows momentum genuinely building across crypto, and a credible federal framework advancing through Congress gives it something to build on.

— Sam

The PAPER Experiment

Crypto continues to produce novel forms of financial engineering and this week one of the more interesting launches came from Papertrade.xyz. The protocol offers 1000x leveraged perps with zero fees, zero funding and zero slippage.

Under the hood, every trade routes against a single LP pool that mirrors Hyperliquid prices. Users never interact with Hyperliquid’s orderbook directly. Instead, the protocol reads Hyperliquid’s mid price on entry and exit, then settles trader PnL against the LP. The model works because profitable trades are haircut while losing trades fully accrue to the LP. The closer a trade is to breakeven, the larger the haircut tends to be, while larger directional wins keep more of their profits.

What makes the design particularly interesting is the PAPER token itself. PAPER is minted directly to losing traders, meaning the only way to acquire the token is by losing money on the platform. A portion of trading losses flows back to PAPER stakers as USDC dividends, creating a reflexive system where trader losses fund protocol yield. Early losers are effectively rewarded with future cash flows if the platform continues to grow.

To test whether the mechanics could actually work, I simulated every BTC and ETH trade closed on Hyperliquid over the last 365 days, assuming Papertrade captured 1% of those volumes while mirroring trader percentage gains and losses. Under those assumptions, average daily volume ranged around $50M, with the LP steadily growing over time despite trader wins and losses remaining roughly balanced overall.

The key driver behind the LP growth was the haircut applied to winning trades. Under the modeled assumptions, winning traders netted around $80.6M, while losing traders lost roughly $79.9M over the period, yet the LP still trended upward steadily due to the tax structure applied to profitable trades.  Extreme liquidation days such as 10/10 proved especially lucrative, with trader losses significantly outweighing profits during periods of volatility.

The model also creates unusual token dynamics. Since PAPER is minted through losses, there are scenarios where intentionally losing small amounts becomes economically rational if the implied value of PAPER exceeds the cost of the loss itself. Under the simulation, early staking yields were exceptionally high before gradually normalizing as supply expanded and LP growth slowed.

Of course, reality will likely be far messier than the model. Retail participation will probably dominate early activity, and intentional loss farming could create significant volatility around the launch phase. Still, this is one of the more creative market structures crypto has seen in a while and a fascinating experiment worth monitoring closely.

— Kunal

1. OBEX: Sky's Accelerator for Real-World Yield

Nick Carpinito of Blockworks Research breaks down OBEX, the Framework Ventures-run accelerator carrying a $2.5B USDS deployment mandate from Sky, designed to manufacture stablecoin demand by routing capital into real-world yield.

The inaugural cohort spans eight projects across seven asset classes, with $1B authorized and $611M drawn. The catch is every drawn dollar still sits in Maple's syrupUSDC rather than the mortgages, energy, and AI CapEx the cohort targets, pending Sky governance approval.

At current draw, OBEX generates ~$24.1M in annualized stability fee income for Sky, scaling to ~$98.8M at full deployment, near Grove parity.

2. Solana: Stablecoin Landscape

Joe Cho of Blockworks Advisory maps Solana's stablecoin market, where circulating supply hit $15.96B at end-April, up 19.3% year-over-year, and the issuer base has diversified well beyond Circle and Tether.

The catch is usage. USDC's supply share has fallen from 78% to 55%, but it still clears 82.6% of transfer volume; the top two stablecoins handle ~92%. That makes Solana the most diverse stablecoin ecosystem by issuer, yet activity stays concentrated.

Cho frames three plays to close that gap: Tether's $127.5M Drift recovery partnership, PayPal's PYUSD integrations, and Western Union's USDPT remittance rail.