Cycles originate from leverage. From the fast-growing and fast-dying Meme coins to the 80-year technological Kondratieff cycle, humans can always find some kind of power, belief, or organizational method to create more wealth. Let us briefly review the current historical coordinates to frame why the interweaving of coins, stocks, and bonds is important.

Since the Age of Discovery at the end of the 15th century, the core economies of capitalism have undergone the following changes:

• Spain and Portugal – Physical gold and silver + brutal colonial plantations

• Netherlands - Stock + Company System (Dutch East India Company)

• Britain - Gold Standard + Colonial Scissors Gap (rule by force + institutional design + imperial preferential system)

• United States - US dollar + US debt + military bases (abandon direct colonization and control important bases)

It is important to note that later generations often incorporate the strengths and weaknesses of their predecessors. For example, the United Kingdom also adopted the corporate system and the stock system, and the United States also exercised military rule. This is where the innovation of the new hegemon is highlighted. Based on the above facts, we can find two major characteristics of the trajectory of classic capitalism:

• Cope's Law of Hegemony: Just as animals tend to grow larger during evolution, core economies will continue to grow larger (Netherlands -> UK -> US);

• Economic debt cycle: the production of real assets and goods will give way to finance, a classic trajectory of a capitalist power, which is a process of raising funds and making profits through new financial innovations;

• Leverage eventually collapses: From Dutch stocks to Wall Street derivatives, pressure on returns eclipses collateral, debt cannot be liquidated, and new economies take its place.

The United States has reached the extreme scale of its global domination, and what follows will be a long final moment of "I am in you and you are in me."

U.S. debt will eventually become uncontrollable, just like the British Empire after the Boer War, but to maintain a decent ending, financial products such as currency, stocks, and bonds are needed to extend the countdown to the debt collapse.

Cryptocurrency, stocks and bonds support each other. Gold and BTC jointly support US Treasury bonds as collateral, and stablecoins support the global adoption rate of the US dollar, making the losses in the deleveraging process more socialized.

6 ways to combine cryptocurrencies, stocks, and bonds

Everything that makes people happy is nothing but a dream.

Becoming larger and more complex is the natural law of all financial instruments and even organisms. When a species reaches its peak, it is followed by disordered involution. The increasingly complex horns and feathers are a response to the increasing difficulty of courtship.

Token economics originated from Bitcoin, creating an on-chain financial system out of nothing. Compared with the nearly $40 trillion in US debt, the $2 trillion BTC market value is destined to only play a mitigating role. The same is true for Ray Dalio's frequent calls for gold to hedge the US dollar.

Stock market liquidity has become the new pillar of tokens, the Pre-IPO market has the possibility of tokenization, and stocks on the chain have become a new carrier after electronicization, and the DAT (treasury) strategy is the main axis in the first half of 2025.

However, it should be noted that there is no need to say much about the on-chainization of U.S. Treasury bonds, but the issuance of bonds based on tokens and the on-chainization of corporate bonds are still in the trial stage, but have finally begun to be practiced on a small scale.

Image Caption: Growth in the number of ETFs Image Source: @MarketCharts

Stablecoins have become an independent narrative, tokenized funds and debt will become new synonyms for RWA, and index funds and comprehensive ETFs anchored to more cryptocurrency, stock, and bond concepts are also beginning to see inflows of funds. Will the story of traditional ETFs/indexes swallowing up liquidity be repeated in the cryptocurrency world?

We cannot judge this, but forms such as altcoin DAT and pledged ETFs have already announced the official emergence of an upward cycle in leverage.

 Image caption: Combination of cryptocurrencies, stocks and bonds Image source: @zuoyeweb3

Tokens as collateral are becoming increasingly ineffective in both DeFi and traditional finance. USDC/USDT/USDS are needed on the chain, which are all variants of US Treasury bonds in some form. Stablecoins are needed off-chain to become a new trend. Before this, ETFs and RWAs have already made their own practices.

To summarize, there are roughly six types of cryptocurrency, stock, and bond combinations in the market:

• ETFs (futures, spot, pledged, general)

• Coin-shares (financialization to transform on-chain usage)

• Cryptocurrency company IPOs (Circle represents the “hard cap” of the stablecoin trend)

• DAT (MSTR CoinShares vs ETH CoinShares vs ENA/SOL/BNB/HYPE Coins)

• Tokenized US Treasury bonds and funds (Ondo RWA theme)

• Pre-IPO market tokenization (no volume, dangerous dormant cycle, on-chain transformation of traditional finance)

The end and exit timing of the leverage cycle cannot be predicted, but the basic features of the cycle can be outlined.

Theoretically, when the altcoin DAT appears, it has already reached the top of the long cycle. However, just as BTC can hover around $100,000, the USD/USD bond has decided to be completely virtualized, and the released momentum requires a long time for the market to digest. This digestion is often calculated as 30 years: from the Boer War to Britain's abandonment of the gold standard (1931-1902=29), and the Bretton Woods system (1973-1944=29).

Ten thousand years is too long, we must seize the day. At least before the 2026 midterm elections, Crypto still has a good year.

 Image caption: Current status of the cryptocurrency, stock, and bond markets. Image source: @zuoyeweb3

According to statistics of the current market structure, cryptocurrency company IPOs belong to the highest-end and most niche track, and only a very small number of cryptocurrency companies can complete US stock IPOs. This also shows that it is the most difficult to sell themselves as assets.

As a second best option, it would be simpler to resell existing high-quality assets. For example, BlackRock has become an undisputed giant in the field of spot BTC and ETH ETFs, and the newer pledged ETFs and general ETFs will become the new highs and lows of the competition.

Secondly, DAT (Treasury) Strategy is far ahead and is the only player to complete the three-way rotation of coins, stocks and bonds. That is, based on BTC, bonds can be issued to support stock prices, and spare funds continue to buy BTC. This shows that the market recognizes the security of BTC as collateral and also recognizes that Strategy itself "represents" the asset value of BTC.

BitMine and Sharplink, companies in the ETH treasury sector, have at best only achieved the currency-stock linkage. They have failed to convince the market based on their own bond issuance strength (excluding the part of bonds issued through capital operations when purchasing coins). In other words, the market partially recognizes the value of ETH, but does not recognize the value of the ETH treasury company itself. The mNAV being lower than 1 (the total value of the stock price is lower than the value of the assets held) is just a result.

However, as long as the value of ETH is widely recognized, the high-leverage competition will produce winners. In the end, only the long-tail treasury companies will fall through, and the rest will gain the representativeness of ETH and become the winners after the leverage/deleveraging cycle.

The scale of future tokenized stocks is not comparable to DAT, IPO or ETF at present, but they have the greatest application prospects. Today's stocks are in electronic form and stored on various servers. In the future, stocks will circulate directly on the chain. Stocks are tokens, and tokens will be any asset. Robinhood built its own ETH L2, xStocks came to Ethereum and Solana, and SuperState's Opening Bell helped Galaxy tokenize stocks on Solana.

In the future, tokenized stocks will compete between Ethereum and Solana, but this scenario has the lowest imagination space and highlights the technical service color, representing the market's recognition of blockchain technology, but the asset capture ability will be transmitted to $ETH or $SOL.

The tokenized U.S. Treasury bonds and fund sectors are showing a trend of becoming Ondo stand-alone players. The reason is the combination and diversion of U.S. Treasury bonds and stablecoins. The future of RWA needs to explore more non-U.S. Treasury bond areas, just like non-dollar stablecoins. In the long run, the market size is huge, but it will always be long-term.

Finally, there are two ways to conduct Pre-IPO. The first is to raise funds first and then buy equity. The second is to buy equity first and then distribute it in token form. Of course, xStocks is involved in both the secondary stock market and Pre-IPO. However, the core idea is to tokenize and incentivize the private market, thereby stimulating the publicization of the private market. Pay attention to this statement. This is the path of expansion of stablecoins.

However, under the current legal framework, will there be room for regulatory arbitrage? We can only say that there is an expectation, but it will take a considerable amount of time to adjust. Pre-IPO will not be made public soon. The core of Pre-IPO is the issue of asset pricing power, which is not a technical issue at all. Many Wall Street distributors will do their utmost to prevent it.

In contrast, the equity distribution and incentive distribution of stock tokenization can be decoupled. "People in the cryptocurrency circle don't care about equity, but care more about incentives." As for regulatory issues such as tax reporting of equity income, they have long been practiced around the world, and chain-based operations are not an obstacle.

In contrast, Pre-IPO involves Wall Street's pricing power, while stock tokenization will amplify Wall Street's gains, distribution channels and the entry of more liquidity. These are two completely different situations.

The upward cycle converges, and the downward cycle squeezes

The so-called leverage cycle is a self-fulfilling prophecy. Any good news is worth rising twice, which continuously stimulates the increase in leverage. However, institutions cross-hold different collaterals. In the down cycle, they will give priority to selling secondary currencies and flee to safe collateral. Retail investors are not free to act and ultimately bear all losses actively or passively.

When Jack Ma bought ETH, Huaxing Capital purchased BNB, and CMB International issued the Solana tokenized fund, a new era entered our era: global economies remain connected through blockchain.

The United States is the limit under Cope's Law. It is already the lowest-cost and most efficient ruling model, but it faces an extremely complex and intertwined situation. The Monroe Doctrine of the new era does not conform to objective economic laws. The Internet can be divided, but the blockchain is wonderfully and naturally integrated. Any L2, node and asset can be integrated into Ethereum.

From a more organic perspective, the combination of cryptocurrencies, stocks, and bonds is a process of exchanging chips between market makers and retail investors, which is similar to the principle of "when Bitcoin rises, altcoins cannot keep up; when Bitcoin falls, altcoins fall even more", except that the latter is more common in on-chain ecosystems.

Let's discuss this process:

1. During rising periods, institutions rely on leverage to flee to high-volatility assets with lower collateral prices. During falling periods, institutions prioritize selling altcoins to maintain their holdings of high-value assets.

2. Retail investors experience the opposite trend. During bullish periods, they tend to sell more BTC/ETH and stablecoins to buy more volatile assets. However, due to the limited size of their funds, once the market turns bearish, retail investors will need to further sell BTC/ETH and stablecoins to maintain high leverage in altcoins.

3. Institutions are naturally able to tolerate larger drawdowns, and retail investors' high-value assets will be sold to them. Retail investors' ability to maintain leverage will also increase institutions' tolerance, forcing them to continue selling assets.

4. The end of the cycle is marked by the collapse of leverage. If retail investors are unable to maintain leverage, the cycle ends. If institutional investors collapse, triggering a systemic crisis, retail investors will still suffer the greatest losses, as their high-value assets have already been transferred to other institutions.

5. For institutions, losses will definitely be socialized. For retail investors, leverage is their own noose, and they have to pay institutions. The only hope is to get ahead of other institutions and retail investors, which is as difficult as landing on the moon.

The grading and assessment of collateral is just superficial; the core is to price the leverage ratio based on expectations of the collateral.

This process is not enough to explain why altcoins will always fall harder. We can add that retail investors are more eager for leverage to increase than issuers. That is to say, retail investors hope that each asset pair is 125x. However, in a downward cycle, the actual counterparties in the market will become retail investors themselves. Institutions often have more assets allocated and more complex hedging strategies, which also need to be borne by retail investors.

In summary, coins, stocks and bonds make leverage and volatility synchronized. We use the perspective of financial engineering to look at tokens, stocks and debt. We imagine a hybrid stablecoin that is partly based on US Treasury bonds and adopts delta neutrality. This allows a stablecoin to connect the three forms of coins, stocks and bonds. Only then can the market volatility allow the hedging mechanism to take effect and even make more profits, that is, they rise in the same frequency.

ENA/USDe already partially possesses this characteristic. Let us boldly predict the trajectory of the leverage cycle. Higher leverage will attract more TVL and retail transactions. Eventually, volatility will reach a critical point. Project owners will prioritize protecting the USDe anchor rate and abandon the ENA coin price. Subsequently, the DAT company's stock price will fall, institutions will withdraw first, and retail investors will eventually take over.

Then an even more terrifying multi-leverage cycle will emerge. ENA treasury investors will sell their stocks to maintain their own value in ETH and BTC treasury companies. However, there will always be companies that cannot maintain and slowly collapse. First, small currency DATs will be exploded, and then large currency small DAT companies will be exploded. Finally, the market will be in a panic and observe the slightest movement of Strategy.

Under the cryptocurrency-stock-bond model, the U.S. stock market becomes the ultimate source of liquidity and will eventually be broken down by the linkage effect. This is not alarmist. Even with regulation, the U.S. stock market still could not prevent the LTCM quantitative crisis. Now Trump is leading everyone to issue currency. I don’t think anyone can prevent the outbreak of the cryptocurrency-stock-bond linkage.

Global economies are connected on the blockchain and will explode together.

At this time, the movement is in the opposite direction. Any place where there is still liquidity, whether on or off the chain, whether in the six ways of currency, stocks and bonds, will become an opportunity window for seeking exit. The most terrifying thing is that there is no Federal Reserve on the chain, and the ultimate absence of liquidity providers will only allow the market to fall to the bottom and eventually reach heat death.

Everything will end, everything will begin.

After a long "pain period", retail investors gradually accumulated the sparks to buy BTC/ETH/stablecoins by delivering food, and gave them to institutions with a new concept that would set the field on fire. A new cycle began again. After the financial magic was eliminated and the debts were cleared, the value created by real labor would still be needed to put an end to everything.

Readers may notice, why don’t we talk about the stablecoin cycle?

Because stablecoins themselves are an external manifestation of cycles, just as BTC and gold support shaky US Treasury bonds, stablecoins support the global adoption of the US dollar. Stablecoins cannot form cycles on their own and must be coupled with underlying assets to generate real returns. However, stablecoins bypass US Treasury bonds and are more anchored to safer assets like BTC and gold, thus smoothing the cyclical leverage curve.

Conclusion

From the Six Classics annotating me, to me annotating the Six Classics.

On-chain lending is not involved. The integration of DeFi and CeFi is indeed underway, but it is not closely related to cryptocurrency stocks. DAT is somewhat involved, and it will be supplemented by articles such as institutional lending and credit models in the future.

The focus is on examining the structural relationship between cryptocurrencies, stocks, and bonds, as well as what new products and new directions will be created. ETFs have solidified, DATs are still competing, stablecoins are expanding on a large scale, and on-chain and off-chain opportunities are the greatest. Cryptocurrencies, stocks, and Pre-IPOs have unlimited potential, but it is difficult to transform traditional finance in a compatible way, and no internal circulation system of its own has been built.

Coin-stocks and Pre-IPOs need to resolve equity issues, but "resolving equity issues" cannot solve the problem. Economic effects must be created to break through supervision. Facing supervision will only fall into the shackles of bureaucracy. The history of stablecoins is the most obvious, and surrounding the cities from the countryside is the most effective.

The IPO of cryptocurrency companies is the process of traditional finance redeeming and pricing cryptocurrencies. It will become increasingly dull afterwards. If you want to go public, do it as early as possible. Once the concepts are fully utilized, it will be quantitative valuation, just like Fintech and manufacturing. The imagination space will gradually decrease with the number of listings.

It is difficult to generate excess profits from long-term investments in tokenized U.S. Treasury bonds (funds), and it has nothing to do with retail investors. It also highlights the technical use of blockchain.

This article mainly provides a static macro framework and lacks dynamic data, such as Peter Thiel’s participation in the allocation and investment of various DATs and ETFs.

When leverage is withdrawn, whales and retail investors move in opposite directions. Whales will prioritize selling secondary assets and retain core assets, while retail investors must sell core assets to maintain secondary asset leverage. In other words, when Bitcoin rises, altcoins may not rise, but when Bitcoin falls, altcoins will definitely fall sharply. All of these require data to explain, but we are currently unable to do so and can only build a static framework to clarify our thinking.