From the moon and back to earth. What happened to crypto markets?

Hello friends, and welcome to The Unsophisticated Investor! Brought to you by Mark, Head of UK Expansion & Operations at Shuttle!

If you want to invest alongside the VC funds who've backed breakout companies like Revolut, Monzo, Asana, JustEat, Bolt, Lets Get Checked, Loom, Runna, Charlotte Tilbury, Deel, Aircall, AngelList, Carta, TransferWise and many more, regardless of your knowledge, network or net worth, then sign-up today using the link below.

A quick update first on the Drop we shared last Thursday

Since then, Shuttle members have committed more than half of the allocation we have available - not surprising given the experience of the founding team and other investors involved in the round! The round itself is unchanged, so a recap in case you missed it:

• Led by Passion Capital, the London fund behind Monzo, GoCardless, Lendable and Marshmallow - all backed from pre-seed.

• A team that's lived the problem. A CEO who is a Certified Financial Planner with a background at a leading wealth manager, and a CTO who held a senior Open Banking role at a global payments network and worked on its major Open Banking acquisitions.

• Real, growing demand. Fewer than one in ten UK adults take regulated advice, the adviser population is shrinking and ageing, and Open  Finance regulation is emerging across the EU and UK jurisdictions.

• Early validation. 100+ adviser discovery interviews and an MVP piloted with adviser firms, with positive early feedback and meaningful time savings on the tasks tested.

• Raising ~€1.9m to move from MVP to commercial launch and to fund an Open Finance (AISP) licence application.

Not a member yet? Join Shuttle to see who's behind this Drop and review the full offer information, including the Key Investment Information Sheet (KIIS).

Now, let’s get into it 👇

The industry’s wishlist

For a decade, the crypto industry’s core defence was that it just needed to be taken seriously. The narrative insisted that institutional capital and mainstream adoption were locked behind a wall of regulatory hostility. In the last 18 months, that wall was entirely dismantled. The United States passed its first federal stablecoin legislation, Europe switched on the world's most detailed crypto and digital asset rulebook, spot Bitcoin ETFs took in more than $50 billion, and headline figures suggest venture capital poured a record $50 billion into the sector. On top of this, Bitcoin hit a new all-time high of $126,198 in October to round it all off.

Then, the euphoria evaporated. Bitcoin ended 2025 down around 7% while the S&P 500 returned about 18% and gold rose more than 60%. As of writing, Bitcoin trades near $63,000, down nearly half from its peak in October.

For ten years the industry blamed a shortage of legitimacy. Legitimacy is now abundant and the market has largely stalled. The harder problem, and one it can’t lobby for, is that most of crypto has no particular job to do, while the corner of it that found a job got there by converting into synthetic US dollars.

Follow the capital, not the headlines

Interrogate the supposed record $50 billion funding headline, and the growth narrative quickly falls apart. A massive portion of that capital wasn't growth equity at all. After stripping out the likes of larger M&A transactions such as Naver’s $10 billion purchase of Dunamu (the operator of the Upbit exchange) along with corporate treasuries, debt and reserve vehicles built for one purpose: borrowing money to buy Bitcoin.

Set the takeovers aside and Galaxy Research puts actual investment into crypto startups at about $20 billion for 2025, up from roughly $12 billion the year before, but nothing like a boom, and a fraction of the $259 billion absorbed by artificial intelligence over the same period.

Capital has ruthlessly abandoned consumer applications, gaming, and NFTs (now under a tenth of funding), while money going into Ethereum's layer-2 networks fell 72% in a year. Instead, institutional money is funding market plumbing, exchanges, custody, trading and lending. The reason is that the exchanges themselves are quietly getting out of the crypto business. Coinbase now calls itself an “everything exchange” and has seen trading fees drop from around 77% of revenue in early 2022 to about 54%, as it moves into equities and payments. Kraken paid $1.5 billion for a futures broker to get a US derivatives licence. Ripple has bought seven companies in two years to build a full-stack financial firm. In order to survive and compete, many of the crypto exchanges are merging into more traditional images of the incumbents they set out to overthrow.  

 The accretive dilution trap: Michael Saylor's Strategy

The most glaring example of capital being utilised for leverage rather than innovation is found in the corporate treasury model. Michael Saylor's Strategy, previously known as MicroStrategy, holds more than 700,000 bitcoin, aggressively purchased using convertible bonds, preferred stock, and new equity issuances. Strategy is no longer a technology operating company in any meaningful sense, it is a leveraged Bitcoin derivative trading on public equity markets.

The engine of Saylor’s model is the Net Asset Value (NAV) premium. For two years, the company's shares have traded significantly above the market value of the underlying Bitcoin held on its balance sheet. This premium is the vital component that allows Saylor to issue stock while it is expensive, spend the raised capital on more Bitcoin, and ultimately end up with more Bitcoin per share than the dilution cost him.

This is accretive dilution in action, and it appears brilliant during a bull market. However, it runs on one fragile input: the public market's ongoing willingness to keep paying the premium. When macroeconomic sentiment turns, the mechanism works in reverse with devastating efficiency.

Following the implementation of new Financial Accounting Standards Board (FASB) fair value accounting rules in 2025, the reality of this volatility was exposed. These new accounting rules pushed a staggering $12.4 billion net loss through Strategy's balance sheet in the final quarter of 2025, nearly all of it generated on paper due to Bitcoin's price decline. What is left is a company whose solvency and premium depend entirely on retail and institutional investors agreeing to pay a dollar-fifty for a single dollar of underlying collateral. When the debt refinancing cycle inevitably turns and market enthusiasm wanes, that premium disappears, leaving equity holders exposed to catastrophic downside risk.

Backed and unbacked

To navigate this environment, it is important to recognise the fundamental dividing line in digital assets, and the one the industry actively blurs. The market is fracturing between crypto that is backed, and crypto that is not.

The backed version is stablecoins: tokenised fiat reserves operating on distributed ledgers. The adoption metrics for these backed assets run entirely contrary to the stagnation and volatility seen in unbacked tokens. Total supply of stablecoins reached $317 billion by April 2026, according to Federal Reserve figures, representing an increase of more than 50% in just fifteen months. Visa estimates that stablecoins settled $27.6 trillion in volume in 2024 alone.

The corporate activity surrounding stablecoins underscores their utility. Stripe acquired a stablecoin developer for $1.1 billion; Circle completed its public listing; and just recently, Velocity, a year-old settlement startup, closed a $38 million Series A round backed by Dragonfly, FirstMark, Activant Capital, and others. Velocity’s underlying business model is engineered specifically to help corporate Chief Financial Officers adopt stablecoin infrastructure for cross-border treasury management. It is designed for absorption into the existing commercial banking architecture, not its overthrow.

In short however, a stablecoin is simply a United States dollar equipped with lower settlement latency. Its utility is defined entirely by price immutability. When a commercial merchant in Lagos or a retail saver in Buenos Aires acquires a stablecoin, they are buying US dollar stability to escape local currency depreciation, not participating in a speculative crypto asset ecosystem.

Consequently, the single most successful product generated by fifteen years of complex crypto engineering is an optimised distribution rail for the exact fiat currency it set out to make obsolete. This structural migration is vacuuming capital, engineering talent, and essential liquidity away from unbacked tokens.

Extractive monetisation at the top of the market

This structural divide is starkly visible at the top of the market, where the year’s most conspicuous financial gains accrued to brand equity and insider leverage rather than technological innovation. In his June financial disclosure, President Trump reported over $1 billion in crypto income for 2025. A subsequent Reuters investigation calculated the family’s collective wealth extraction across four digital asset ventures at roughly $2.3 billion, an amount surpassing the total fee revenue generated by BlackRock’s flagship Bitcoin ETF over the exact same period.

The core products driving this revenue, a memecoin, a governance token, and a stablecoin, perfectly illustrate the boundary between backed utility and unbacked speculation. The backed USD1 stablecoin functions as a standard, asset-backed settlement tool, yielding interest generated by underlying reserves. Conversely, the unbacked $TRUMP memecoin and the World Liberty Financial (WLFI) governance token functioned as pure extractive monetisation mechanisms.

These unbacked tokens left retail buyers holding the bag, with approximately $700 million in realised losses and $674 million in paper losses, respectively. Crucially, WLFI holders are locked into an illiquid structure by a governance vote that restricts retail selling until 2030, structurally institutionalising retail participants as exit capital while insiders extract immediate liquidity.

While the White House rejects assertions of conflicts of interest and the issuing entity insists the tokens are not traditional securities, the economic mechanics are unequivocal. Institutional insiders and brand entities captured massive, asymmetric upside without delivering underlying economic utility. An industry actively lobbying for institutional trust and mainstream integration cannot survive repeated cycles of retail extraction. When a market bypasses the indirect investor protections of traditional equities, it ceases to be an investment vehicle and becomes a mechanism for transferring wealth from the unsophisticated to the highly connected.

Retail interest is fading

This leaves the core promise upon which the entire industry was built. For a decade, the line was that regulatory uncertainty was keeping the mainstream consumer away, and that clarity would inevitably bring them in. Washington, Brussels, and London have now all provided that requested clarity, and the mainstream has definitively stayed home.

The FCA's December 2025 survey of the British public provided a damning indictment of the "legitimacy" thesis. The share of British adults holding crypto dropped from 12% to 8% in a single year, marking the first clear contraction since the pandemic. This drop occurred while overall awareness of the asset class held steady at a near-universal 91%. Only one in twenty current holders first bought their assets after October 2024; the rest arrived years ago during previous hype cycles, and nobody is taking their place.

The Unsophisticated Investor take

Ultimately, the cryptocurrency market is suffering from a structural divide rather than a mere lack of mainstream legitimacy. While the industry spent a decade lobbying for regulatory clarity and institutional access, which it finally achieved, these milestones have so far failed to spur broader consumer adoption because the unbacked token market still lacks fundamental utility. Instead, capital, engineering talent, and institutional focus have migrated toward stablecoins, which ironically serve to optimise the traditional US dollar banking system rather than replace it.

Meanwhile, the unbacked, speculative side of the market is increasingly dominated by extractive monetisation mechanisms, where highly leveraged corporate treasuries and insider-driven token launches capture liquidity while retail participants are structurally positioned as exit capital. In a year when crypto was touted to go to the moon, it currently looks like it’s stuck on earth. 

What we’ve been working on at Shuttle

• Closing our drop 6 (still time to sign up if you haven’t already) 🤝

• Building our new product for fund service entities🧑‍💻

• In the final stages of negotiation with our new payment partner 📃

The Unsophisticated Investor is brought to you by Mark, Head of UK Expansion & Operations at Shuttle. Shuttle's mission is to break down the barriers to private markets and make wealth-building opportunities accessible beyond the ultra-wealthy elite. To do it, we're building Europe's private market infrastructure platform for running investment operations. By stripping away the legal friction and admin for deal managers, we make it easier than ever for high-performing opportunities to open up to a wider, modern network of investors.

Mark
Shuttle’s Head of UK Expansion & Operations