November was a pivotal month in the crypto world, marked by groundbreaking developments and notable events. Ethereum introduced pre-confirmations on its mainnet, significantly enhancing transaction finality and user experience. The Hyperliquid token genesis event stood out with its fair launch, distributing 31% of tokens directly to the community and raising $2.17 billion in 24 hours. Meanwhile, Donald Trump’s election sparked anticipation of a pro-crypto stance from the White House, including discussions around a national Bitcoin strategic reserve. These milestones underscore the industry’s accelerating innovation and its growing entanglement with global politics and finance.
The month of November was full of fundamental advancements in the crypto environment, specifically multiple upgrades for the Ethereum network. First and foremost, a big topic was the ‘Beam Chain’ proposal by Justin Drake. This proposal is informally referred to as ‘Ethereum 3.0” and proposes to redesign and modernize Ethereum’s consensus layer. This change enables more scalability and security for the network; more specifically, the proposal aims to scale Ethereum by reducing slot times from twelve to four seconds, SNARKify the consensus layer to take advantage of recent cryptography advances, and ultimately maintain Ethereum’s characteristic decentralizing by lowering the staking requirement from 32 ETH to 1 ETH. While the Beam Chain proposal is not yet a fleshed out spec, the developer community of Ethereum had a mixed response to the proposal, with some arguing that the proposal’s timelines are not urgent enough to maintain Ethereum’s competitiveness against higher throughput chains such as Solana. Another significant out-of-protocol upgrade for Ethereum was the mainnet introduction of pre-confirmations. These pre-confirmations will allow validators to providing assurances that transactions will be included in the next block prior to finalization of a block, effectively cutting down the twelve second blocktime which it now takes for a transaction to be practically finalized and thus drastically improving the UX of these otherwise slow mainnet transactions. This opens up an exciting new design space in which Ethereum block proposers can also start selling their blockspace ahead of time, increasing the level of sophistication and financialization of the network.
Donald Trump was officially elected as the next president of the United States, with many anticipating a more favourable crypto stance to come from the White House. He has already publicly assembled a group of pro-cryptocurrency advocates, including members of Congress and financial officials, to shape his administration's crypto policies. As part of this transition to a new administration, Gary Gensler, who served as head of the Securities and Exchange Commission (SEC) for 4 years, will be stepping down. Beyond the expectation of generally favorable pro-crypto legislation such as capital gain tax reductions on crypto holdings, more substantial plans have also been discussed; one of the more significant ones is the potential formation of a national BTC strategic reserve. A similar bill was introduced in Brazil and Pennsylvanian lawmakers introduced the ‘Pennsylvania Bitcoin Strategic Reserve Act’, intending to invest up to 10% of the state treasury fund into Bitcoin. The serious discussions around these types of proposals underline that capital allocation towards our industry has definitively entered the Overton window.
On the back of these developments, the appetite for liquid tokens has surged, prompting a significant shift in institutional portfolio strategies. While Bitcoin has cemented its status as a core asset, liquid tokens present distinct opportunities for growth and diversification. When juxtaposing Bitcoin’s stability with the higher-risk, higher-reward profile of liquid tokens, findings reveal that portfolios with modest allocations (1-3%) to liquid tokens have consistently outperformed the traditional 60/40 equity-bond portfolio, albeit with greater volatility. This demonstrates that liquid tokens, much like early-stage tech investments, can deliver outsized returns and amplify diversification.
For a deeper dive into this analysis and its implications, explore the full research paper by M11 Funds. It unpacks the strategies, data, and opportunities that underscore this shift.
Another sign of our industry’s maturity was the amount of M&A activity this month. On the back of the billion dollar Bridge acquisition by Stripe last month, this month saw asset manager Bitwise acquire staking platform Attestant, while Crypto.com acquired Fintek Securities, an Australian-regulated brokerage firm. Coinbase acquired Utopia Labs to build out its on-chain payments infrastructure. Furthermore, Dune accelerates its data simulation and analysis capability with their smlXL acquisition. And finally, Arca and BlockTower merged in an all-equity deal to form a leading crypto asset management firm.
The U.S. Department of Justice is investigating Tether (USDT) for alleged ties to money laundering and sanctioned entities. Tether CEO Paolo Ardoino dismissed these claims and called them “old noise”. Tether netted an annual profit of $6.2 billion last year with only 125 employees, but this success does not come unnoticed as the investigation highlights further intensifying regulatory scrutiny on stablecoins. Despite this, Cantor Fitzgerald launched a $2 billion BTC lending program via Tether, providing a pathway for BTC-backed loans, while DBS Bank and Paxos introduced the USDG stablecoin (“Global Dollar”) for experimenting with digital currencies.
In a regulatory windfall, Tornado Cash, a so-called mixer protocol that anonymizes cryptocurrency transactions, saw courts rule in their favor in their Coinbase-backed countersuit against the U.S. Treasury. In 2022, they alleged that Tornado Cash had aided in the laundering of $7 billion of hacked and stolen funds, which led to sanctions on Tornado Cash and cases against contributors. This month however, the court ended up ruling that the U.S. Treasury acted beyond its authority in its 2022 sanction, stating that since Tornado Cash’s code can neither be owned or controlled, it could not be deemed ‘property’ and would thus fall outside the OFAC mandate to regulate. The ruling underlines the need for non-restrictive modern regulation for these types of smart contract-based decentralized services.
The highly anticipated token genesis event of Hyperliquid took place this month. Emphasizing a unique fair launch, where 31% of all native tokens were distributed directly to the community, promoting broad participation and ownership. The distribution event saw a total value of $2.17 billion in the first 24 hours. This marks a significant step toward decentralizing the Hyperliquid layer 1 blockchain and sets the stage for the upcoming launch of their HyperEVM and the open-sourcing of their code. Other crypto-native applications that saw significant traction last month were prediction markets, which gained significant attention, largely driven by the U.S. presidential elections. Notably, Polymarket polls accurately predicted a Trump win, showcasing their forecasting potential. However, following the election, the platform saw a substantial drop in users which was likely due to many cashing out their winning bets. Furthermore, one of the breakout applications of these month were crypto-native AI agents, which gained footing in the industry mostly due to activity on Coinbase’s layer 2 network Base. These are autonomous AI’s that exist onchain and manage their own twitter accounts to post and interact with real twitter users. Within this sector, projects like ai16z (a decentralized AI hedge fund) and Virtuals (a platform enabling co-ownership and management of AI agents) have gained significant traction. Notably, portfolio company Spectral has recently pivoted to an AI agent platform with the launch of Spectral Syntax V2, empowering users to create, own, and govern autonomous AI agents on-chain, and has been performing exceptionally well in this emerging space.
Portfolio company Eclipse launched its mainnet this month, opening up Ethereum-based users and liquidity to interact with well-known SVM-based applications that were previously only accessible on Solana. The network already counts more than 60 dApps and service providers available to users since day one. Additionally, Eclipse partnered with portfolio company Renzo to offer a liquid staking token for Solana called ezSOL. Portfolio company Polymer launched Polymer Hub, a real-time interoperability protocol that enables Ethereum rollups to communicate across ecosystems and coordinate as fast as they can produce blocks. On the back of the aforementioned introduction of pre-confirmations on Ethereum mainnet, the Bolt protocol from portfolio company Chainbound went live on the Holesky testnet, with its next stop being mainnet as the Lido DAO voted to work towards integrating their pre-confirmation software into their validator setup. Finally, the $3 million seed round for BarterSwap, which was led by us, was announced. Barter has continuously been one of the top solver operations on DEXs such as CoWswap, and will use their funding to build solving infrastructure to help scale unify liquidity and order flow across DeFi.
