Gm, and happy Thursday!

Kevin Warsh’s first FOMC set the town hawkish, guiding for a firm stance on price stability and a higher-for-longer policy regime, with risk assets selling off modestly on the back of this.

Meanwhile, onchain equities are in a bull, with spot volumes reaching new all-time highs. Whether it’s trading, leverage, or borrowing, this sector shows growing traction. Enjoy!

Wednesday welcomed Kevin Warsh’s first FOMC as Chairman of the Federal Reserve, where all 12 on the committee voted to keep rates steady at 3.5% to 3.75%. Perhaps the more important takeaway from this FOMC was not the level of the FFR, but rather, the language used by the new Chairman to deliver it. Rather than letting liquid markets respond to the Fed, Warsh guided towards a committee that will endeavor to let the Fed respond to liquid markets instead.

“Financial market prices are probably the most important source of information to guide central bankers,” Warsh said, adding, “But when all the financial markets are doing is reflecting back what we've said, then we're taking the most important source of information, and we're being blind to it.” 

Beyond this, the dot plot points to a “higher-for-longer” regime, with an increasing share of the committee projecting a hike this year. The plot pointed to easing and cuts just a few months ago. 

The tone was set firmly that price stability remains the goal of the Fed, and the policy lever will be used accordingly to achieve this. Markets sold off modestly on the back of this, with crypto leading to the downside. While the Nasdaq and the S&P 500 traded down 0.3% and 0.8%, respectively, BTC was down 1.9%, with the majority of crypto sectors moving even lower on the day. 

Crypto markets still show signs of stress, and STRC traded down to fresh lows of $89, now paying an effective dividend yield of 12.9%. For MSTR, the credit spread continues to widen. While the instrument offered an attractive Sharpe of 4 and volatility of 2% just a few months ago, the recent devaluation puts the Sharpe at .32 and the volatility at 24%. So long as BTC’s returns stay below the dividend obligation on this instrument, the viability of this product remains in question. It’s this very question that has the market pricing it off par, requiring a higher yield to hold the paper. 

Strategy, which still has options and cards to play, now faces a trilemma of competing interests among MSTR common shareholders, STRC preferred holders, and the implications for BTC. If Strategy wants to bring STRC back to par, it has three primary options:

1. Increase the dividend yield to 12.9%, the rate currently required for STRC to trade at par. However, this would increase Strategy's liability burden and reduce its duration of coverage.

2. Repurchase and retire some STRC at a discount, funding the buyback through BTC sales. This would reduce the liability but would also realize losses for common shareholders.

3. Do nothing and hope market conditions improve.

In context, though, the annual dividend obligation on STRC remains ~$1.15B. Should BTC be sold to cover dividends, which is perhaps the most likely outcome, these flows still sit beneath that of the ETFs, which move billions monthly. 

— Luke

Stocks as Collateral

Nest Protocol on Solana (not to be confused with Nest on HyperEVM)  launched nUSD (not to be confused with the Neutrl dollar), a stablecoin backed by tokenized US equities and USDC. The design borrows the CDP framework from MakerDAO but swaps out crypto collateral for xStocksFi tokens tracking equities like SPY, AAPL, NVDA, and TSLA. Depositing those tokens mints nUSD at a stability fee set by protocol governance — currently 3% APR. Staking nUSD into snUSD targets 6% APY paid from borrower stability fees, Kamino lending yield on PSM reserves, and liquidation penalties.

The collateral, liquidity, and price feeds Nest depends on are all native to Solana, which accounted for 96% of all onchain tokenized equity trading volume globally and hit a new all-time high in tokenized equity spot volume of $137M on Tuesday. The protocol's three core dependencies (xStocksFi for collateral, Pyth for price feeds, and Kamino for PSM yield) require no bridges, which is significant for a system where liquidations need to clear before prices move.

US equities trade 6.5 hours a day and can halt mid-session. Nest handles this by leaning on Pyth's confidence intervals: when reported price uncertainty exceeds a protocol threshold, the liquidation engine pauses rather than acting on a potentially stale feed. That behavior is correct, but it means under-collateralized positions can persist overnight, which puts real weight on the initial LTV buffers. xTSLA carries a 60% max LTV and a 72% liquidation threshold for exactly this reason.

The protocol crossed $100K in TVL this week, but the revenue distribution logic is already running. First realized revenue split 22 cents across the insurance fund (20% allocation while under threshold), snUSD stakers, and a NEST buy-and-burn engine. The broader pitch is a user who owns tokenized equities, wants liquidity without selling, and would otherwise pay retail margin rates. At 3% APR, Nest undercuts every major brokerage. Whether that proposition scales beyond the existing xStocks holder base is the question the next few months will answer.

— Nick

DAS is back!

Crypto's premier institutional event returns this fall in Singapore + London. Grab your seat in the most important room in the industry today.

Are HIP-3 Newcomers Cooked? 

Ponyo, a core contributor at Four Pillars and Hyperliquid researcher, published a thread arguing that HIP-3's apparent winner-take-all outcome at the listing layer is a structural feature rather than a design flaw. Shared liquidity with no cold start collapses niche protection for new deployers, making TradeXYZ's position at this layer close to irreplaceable. The more interesting competitive surface, the argument goes, lies at the demand layer, where frontends that arrive with pre-existing audiences, regional distribution, or regulated wrappers can extract value through builder codes without needing to win the listing race first.

Vitalik's Stablecoin Is Basically a Covered Call 

Dan Rysk, founder of Rysk Finance, published a thread arguing that Vitalik's recent proposal to build an algorithmic stablecoin using option-like claims structurally replicates a synthetic covered call. The design splits one unit of ETH into two claims, one capped at a strike price and one holding the upside, eliminating liquidations but requiring continuous rolling of deep in-the-money positions as ETH moves toward the strike. The harder problem, per Rysk's own experience building a similar primitive, is finding a standing supply of depositors willing to hold leveraged long ETH in this specific form at scale, without incentives or emissions bootstrapping the other side.