The Current Storm
Let’s not sugarcoat it: crypto markets are currently in shambles. Investor sentiment is abysmal. I’ve watched this industry through multiple cycles, and this sentiment feels as low as I’ve seen. The funding environment has gone from challenging to catastrophic. Nearly every project is cutting salaries to zero and trimming all fat. It seems that, once again, it will be only the mission-driven visionaries who can survive on ramen and conviction that survive. It’s an exciting and historic time to be alive, and working at the exhilarating and occasionally nauseating intersection of crypto, finance and AI. Of these three, the crypto industry has taken it the hardest over the past 12 months.
The Crypto Bucket Shop
What stings most is the reputational shift, because we worked long and hard as an industry to re-earn the trust of the investing public post FTX. Crypto always had its rogues, but now it seems people in positions of power are engaging in behavior that, at least to casual observers, looks deeply improper. I think back to my days at Lord Abbett, & Co. a well run, privately owned investment company in New Jersey, where the behavioral standard was always that “We must avoid even the appearance of impropriety.” I wish we had more of that thinking in today’s administration. It’s been going on for a while and I nearly wrote a holiday piece called “How the Grinch Stole Crypto” referring to a certain person who claims to love crypto but doesn’t seem exactly on mission…but I shelved it. Too depressing for Christmas, and too polarizing.
As the head of a crypto-focused company, I acutely feel the loss of our industry’s aspirational image as a “for-the-people, by-the-people” movement. I think we look instead more akin to Wall Street 120 years ago, before all the regulation that makes our equity markets the safest in the world. Today in crypto, shady deals and dubious launches have fleeced investors out of billions, and for the first time it is the people at the top sometimes pulling the levers. That’s when fraud becomes corruption. I’m not saying we are there yet as an industry – we aren’t, and the current trajectory is concerning. Stock trading, 120 years ago was also wild and free like crypto is today. Back in 1906, traders like Jesse Limermore became the first experts in speculation psychology. At that time you could trade stocks on nearly every corner in New York. These “bucket shops” were unregulated betting parlors where people wagered on stock price movements without actually owning the stocks and with often manipulated prices. Some of these financial wizard operators grew skilled at fleecing unindoctrinated investors for their own gains. The public took losses and also lost trust. Sound familiar? It does to me too, and it did not end well then (See also Panic of 1907 and the classic book on trading and Reminiscences of a Stock Operator by Edwin Lefèvre).
Discipline in the Darkness
History teaches us that market cycles punish emotion and reward processes. The dot-com survivors who stuck to fundamentals built empires. The 2008 contrarians who underwrote assets rather than fleeing built generational wealth. Our 2018 and 2022 crypto winters eventually gave way to explosive rallies. Professional investing demands we understand why we bought something, monitor how it’s performing, and refuse to abandon our thesis because the market is having a tantrum.
Crypto is a pure risk asset; a speculative bet on the rapid technology adoption curve. In 2025, investors were mesmerized by AI’s technological miracle; in 2026, they’re hoarding cash against global uncertainty (Russia-Ukraine being just one of about ten major issues). The good news: liquidity always returns. The bad news: there’s no reason to expect global volatility to subside in the near future.
The Q1 Catalyst That Wasn’t
We anticipated a major rotation in Q1 as around $30 Billion in crypto capital that is currently locked in treasury and DAT management vehicles would be free to flow back into native crypto assets and small-cap (non-Teasury eligible) tokens. These treasury and DAT equity structures had been trading at nice premiums; so we anticipated that once the six-nine month lockups expired, widespread redemptions and on-chain redeployment. Instead, the treasury/DAT marketplace flipped from premiums to discounts. This slows withdrawals and the return of this capital to native crypto markets. There is still more consolidation needed in the sector but that capital is hibernating, waiting, but not gone. It needs a bull market’s excitement to reignite premiums in the market. So unfortunately, that capital is trapped, for now, and it can’t be the catalyst to arrest the current market pessimism.
Finding Value in the Wreckage
Here’s where discipline separates us from the herd: we’re not rearranging growth forecasts because of market madness. Take Helium: one of our favorite projects saw user and revenue growth of 600-700% in 2025. The token? Down 90%. It now trades for less than some memecoins launched yesterday on Pump.fun. This isn’t rational; its capitulation. As professional investors, our job is to recognize when fundamentals and price have decoupled and to not let emotions cloud our professional judgment.
Tailwinds for Blockchain
Kevin Warsh, the likely next boss at the Federal Reserve, has a deep understanding of crypto and is already articulating visions of symbiotic integration of blockchain and traditional banking. What’s next? Maybe a Federal Reserve for crypto? Even without him supporting World Liberty Financial for that role (which he will), Kevin Warsh is clearly a solid win for crypto.
The GENIUS Act for stablecoins has passed congress and is law. Because of it banks now know how to move onto blockchain. Huge dollar sums are being tokenized and moved between banks every day with exponential growth rates. The Canton Network figured it out. Already more than $6 Trillion dollars worth of tokenized assets have traded on their platform. That’s not a typo. They are completing more than $300Billion dollars worth of cash settlements between banks every day. They are partnered with JP Morgan and Bank of New York. Next up are securities and all tokenizing all banking deposits. We have been talking with Canton about the best ways for structuring platforms for Main Street banks to tokenize deposits (echoing our past work on stablecoin regulation, development, and education.) All digital money is being pushed on to blockchains for their superior safety, speed and interconnectivity. Money is being forced on-chain, and money on-chain is the lifeblood of higher prices for tokenized projects
On the technology frontier AI continues its rapid ascension and there is no doubt in my mind that blockchain plays an increasingly important role in AI’s future. Blockchain solves all sorts of problems for AI companies. Transparent, auditable AI training needs blockchain, Agents deploying compute and doing value transactions need blockchain, Ethical AI needs blockchain. Blockchain provides the safety rails to the AI industry. Looking forward, as individuals and businesses really start integrating with and training Agents to know the personal workings of confidential systems, blockchain is needed again to safeguard that information and ring fence the Agent. If I train an Agent on my data or my business internal operations, that needs to be blockchain-based. That way I can keep my Agent and my sensitive information safely in my digital wallet. Considering the growth of AI, and the perceivable pivot towards on-chain solutions, we believe that blockchain-AI companies are the most undervalued components of the AI industry.
The Infrastructure of the Inevitable
We’re about to witness an explosion in tokenization. And, believe it or not, a Wall Street-powered explosion of retail involvement in crypto is still on schedule for 2026. In every industry companies outside crypto are recognizing value creation potential in offering tokens and tokenized assets to their communities. There will be massive value unlocked for assets with communities. (Think sports teams, theme parks, major league franchises and other established brands of significant magnitude.) Once a few succeed, entire industries will follow suit. Money talks, and tokenization unlocks more of it for holders of desirable Real World Assets (RWAs).
Maybe the Best news of All
Here’s the best news that few are taking into consideration: Wall Street is officially long the crypto trade. They are biding their time, yes, but they’ve already built the platforms, products, and distribution processes to package and promote crypto through every imaginable (fee collecting) vehicle: ETFs, tokenized deposits, interbank swaps, futures, perpetuals, prediction markets, insurance, tokenized assets and more. Wall Street has decided that crypto is happening. All this infrastructure doesn’t get built for a pilot program; it gets built for scale to be sold, not passively offered. The plans won’t be scrapped because crypto had a bad January. By the second half of the year, expect Wall Street’s thundering herd to be working feverishly afraid of year end sales goals and bonuses.
Staying Tied to the Mast
Odysseus lashed himself to the mast to survive the sirens’ call. We’re doing the same. People in crypto suffered severe negative effects in 2025, and fresh capital has been largely absent under the conditions described above. But tokenizing assets brings dollars into the ecosystem by definition. This is mathematics, not hope.
My advice: remain tied to the mast. If you have additional capital, you should be deploying it here. I’m putting new money into the market every single day, primarily in small-caps, AI-focused blockchain, and beaten down DePIN names. Get this exposure through our Decentralized AI Strategy and Small Coin Strategy. Both of these teams are thought leaders in the crypto industry, are fundamentally driven, and deeply analytical. Last year they outperformed their respective market indexes by approximately 40 percent each, (40%!!) with the Small Coin Strategy clocking its sixth consecutive year of outperforming its benchmark by at least 10 percent.
Diamond Hands
I know these sell offs are challenging, but we are here to guide you. This is our 4th sell off of this magnitude as a firm. Each a little different but all with similar feelings. Staying long is the right move. Nothing is wrong with crypto technology nor has blockchain’s promise to the world diminished, thankfully it’s just problems with everything else!
It will take time for these issues to subside, but they will. The point of maximum pessimism may already be behind us, or just ahead. We will abide and ride it out, as we always do. I hope each of you stay safe and solvent. If positions feel too large, reduce risk enough to stay disciplined and clear-headed, but do not exit the market. Crypto can move quickly to the upside too and don’t forget… even the Grinch eventually brought the presents back.
Disclosures: This article is for informational purposes only and should not be considered financial, legal, tax, or investment advice. It provides general information on cryptocurrency without accounting for individual circumstances. Sarson Funds, Inc. does not offer legal, tax, or accounting advice. Readers should consult qualified professionals before making any financial decisions. Cryptocurrency investments are volatile and carry significant risk, including potential loss of principal. Past performance is not indicative of future results. The views expressed are those of the author and do not necessarily reflect those of Sarson Funds, Inc. By using this information, you agree that Sarson Funds, Inc. is not liable for any losses or damages resulting from its use.
