In today’s newsletter, Nassim Alexandre from RockawayX takes us through crypto vaults, what they are, how they work and risk evaluation.

Then Lucas Kozinski, from Renzo Protocol, answers questions about decentralized finance in Ask an Expert.

– Sarah Morton

Understanding vaults: what happens beyond the yield

Capital flowing into crypto vaults surged past $6 billion last year, with projections indicating it could double by the end of 2026.

With that growth, a sharp split has emerged between vaults with robust engineering and controls and vaults that are essentially yield packaging.

A crypto vault is a managed fund structure deployed on-chain. An investor deposits capital, receives a token representing their share, and a curator allocates that capital in accordance with a defined mandate. The structure can be custodial or non-custodial, redemption terms depend on the liquidity of the underlying assets and portfolio rules are often encoded directly into smart contracts.

The central question around vaults is exposure: what am I exposed to, and can it be more than I am being told? If you can explain where the yield comes from, who holds the assets, who can change the parameters and what happens in a stress event, you understand the product. If you cannot, the headline return is irrelevant.

There are three risk layers worth understanding.

The first is smart contract risk: the risk that the underlying code fails. When was the last audit? Has the code changed since? Allocation controls sit here as well. Adding new collateral to a well-designed vault should require a timelock that allows depositors to see the change and exit before it takes effect. Strategy changes should require multi-signature approval.

The second is underlying asset risk: the credit quality, structure and liquidity of whatever the vault is actually holding.

The third underappreciated risk is redemption: under what conditions can you get your capital back, and how quickly? Understand who handles liquidations in a downturn, what discretion they have and whether the manager commits capital to backstop them. That distinction matters most in the exact moments you would want to leave.

The quality of a vault is largely dependent on the quality of its curation. A curator selects which assets are eligible, sets parameters around them and continuously monitors the portfolio.

For example, most real-world asset strategies on-chain today are single-issuer, single-rate products. A curated vault, by contrast, combines multiple, vetted issuers under active management, giving diversified exposure without managing single-name credit risk yourself.

Then there is ongoing monitoring. Default rates shift, regulations change and counterparty events happen. A curator who treats risk assessment as a one-time exercise is not managing risk.

What makes crypto vaults different from a traditional fund is transparency; investors don’t have to take the curator’s word for it. Every allocation, position and parameter change happens on-chain and is verifiable in real time. For advisors familiar with private credit, the underlying collateral may be recognisable. What requires attention is the on-chain structuring around it: whether you have genuine recourse, in which jurisdiction and against whom. That is where curator expertise matters. A curator is the risk manager behind a vault. They decide what assets are eligible, set the rules capital operates within, and actively manage the portfolio.

Curated vault strategies typically target 9-15% annually, depending on mandate and assets. That range reflects risk-adjusted return generation within defined constraints.

Vaults also allow a more efficient way to access assets you already allocate to, with capabilities that traditional structures do not offer. For family offices managing liquidity across multiple positions, this is a practical operational improvement.

The key one is composability. On-chain, a vault can allow you to borrow against a collateral position directly, without the documentation overhead of a traditional loan facility. For family offices managing liquidity across multiple positions, this is a practical operational improvement.

Permissioned vault structures are also noteworthy, as they allow multiple family offices or trustees to deposit funds into a single managed mandate without commingling, each retaining separate legal ownership while sharing the same risk-management infrastructure.

The vaults that survive this scrutiny will be the ones where the engineering, mandate, and curator’s judgment are built to hold under pressure.

– Nassim Alexandre, vaults partner, RockawayX

Ask an Expert

Q: With “yield-stacking” and many layers of decentralized finance (DeFi) protocols, what is needed to mitigate risk in vaults?

The first thing is minimizing complexity. Every additional protocol in the stack is another attack surface. So if you don’t need it, cut it. We won’t deposit into protocols that have discretionary control over funds — meaning they can move capital wherever they want without user consent. We want transparency about what other protocols are doing with our capital, but privacy around our strategies so others can’t see anything proprietary.

Beyond that, it comes down to transparency and time. Users should always be able to see exactly where their funds are and what they’re doing. And any parameter changes — fees, strategies, risk limits — should go through a timelock so people have a window to review and react before anything goes live. Smart contract audits matter too, but audits are a baseline, not a safety net. The architecture has to be sound before the auditor even shows up.

Q: At what point does institutional capital inflow compress DeFi yields to the level of traditional risk-free rates, and where will the next “alpha” be found?

It’ll happen eventually in the most liquid, simple strategies. But here’s what traditional finance (TradFi) can’t replicate: composability. The underlying instruments might be identical — take the USCC carry trade as an example — but in DeFi you can plug that same position into a lending market, use it as collateral, provide liquidity to a DEX pool and do all of that simultaneously. That’s not possible in TradFi without significant infrastructure cost.

The alpha won’t disappear. It’ll just move to whoever builds the most efficient capital pathways between strategies. The people who figure out how to stack yields across composable layers while managing risk properly will consistently outperform. And that gap between DeFi and TradFi infrastructure costs alone keeps the spread wide for a long time.

Q: How will the integration of Real World Assets (RWAs) into automated vaults change the correlation between crypto yields and global macro interest rate cycles?

Yes, crypto yields will become more correlated with macro as RWAs come in. That’s just the nature of bringing rate-sensitive assets on-chain. But I think people underweight the other side of that tradeoff.

Before RWAs, crypto holders had a binary choice: keep stables on-chain and earn crypto-native yields, or pull everything out and deposit into a brokerage. Now you can hold stables on-chain and access the same strategies you’d find in TradFi, without leaving the ecosystem. And crucially, you can layer on top of them — borrow against your RWA position, deploy that capital into a lending market, LP against pools that use these assets as collateral. The capital efficiency you get from that kind of setup is just not available in traditional finance. So yeah, more macro correlation — but also more optionality for where to deploy capital, which should push rates up over time as liquidity deepens.

– Lucas Kozinski, co-founder, Renzo Protocol

Keep Reading

Anchorage Digital has announced the launch of Stablecoin Solutions, a federally regulated service that enables banks to conduct near-instant USD settlements globally via blockchain technology. This move by Anchorage Digital, the first federally chartered crypto bank in the U.S., aims to modernize cross-border settlements while adhering to stringent regulatory standards.

The new offering consolidates minting, redemption, custody, fiat treasury, and settlement under Anchorage Digital Bank, N.A., operating under the oversight of the Office of the Comptroller of the Currency (OCC). This positions Anchorage to offer a seamless integration of stablecoin technology within traditional banking frameworks, eliminating the complexities of state-by-state licensing.

“Stablecoins are becoming core financial infrastructure,” said Nathan McCauley, co-founder and CEO of Anchorage Digital. “Stablecoin Solutions gives banks a federally regulated way to move dollars globally using blockchain rails, without compromising custody, compliance, or operational control. This is about modernizing settlement while preserving the standards the financial system depends on.”

Stablecoin Solutions aims to compress settlement timelines from days to minutes, reduce trapped liquidity, and mitigate counterparty and settlement risks by replacing traditional banking methods like correspondent banking and nostro/vostro pre-funded accounts. The offering supports various stablecoins, including Tether’s USA₮ and Ethena Labs’ USDtb, providing banks with flexible, stablecoin-agnostic rails.

Anchorage Digital’s foray into stablecoin solutions aligns with broader trends in the crypto industry, where major players like PayPal are also expanding their stablecoin activities.

This article was generated with the assistance of AI workflows.

Bitcoin price is compressing into a tightening triangle structure, signaling a major decision point as converging support and resistance suggest an imminent volatility expansion in the near term.

Bitcoin (BTC) price action has entered a constructive consolidation phase, forming a clear triangle pattern that reflects growing market equilibrium. After recent volatility, the price has entered a period of compression, with dynamic support and resistance continuing to narrow. This behavior often precedes significant directional movement, as markets rarely remain compressed for extended periods.

Triangle formations typically represent a balance between buyers and sellers before a decisive breakout occurs. In Bitcoin’s case, price remains inside the structure, meaning the breakout has not yet been confirmed. However, as the price approaches the apex of the triangle, the probability of a volatility expansion increases substantially.

The market is now nearing a macro decision point where momentum will likely return and determine Bitcoin’s next trend phase.

Bitcoin price key technical points

• Bitcoin trading inside a clear triangle formation, signaling compression
• Apex zone approaching, increasing breakout probability
• $76,700 high-timeframe resistance becomes upside target, if bullish break occurs

The current triangle formation is defined by converging dynamic support and resistance aligned closely with the value area low and value area high. Each rejection from resistance and defense of support has gradually tightened price action, reducing volatility and forming a classic apex structure.

Such formations indicate that neither buyers nor sellers currently dominate the market. Instead, liquidity builds on both sides as participants wait for confirmation of direction. As compression increases, even modest momentum can trigger a sharp expansion once price escapes the pattern.

Importantly, Bitcoin has not yet broken out. Until a confirmed move occurs, price remains in consolidation rather than trend continuation.

Higher Lows Suggest Constructive Momentum

One notable feature within the triangle is the development of higher lows forming near the value area low. These higher lows indicate that buyers are stepping in earlier on each pullback, gradually applying upward pressure on price.

While this does not guarantee a bullish breakout, it does suggest constructive underlying demand. Markets forming higher lows during consolidation often lean toward upside resolution, particularly when support continues to hold consistently.

This behavior reflects accumulation rather than distribution, strengthening the possibility of a bullish expansion once the triangle resolves.

Apex zone becomes the market decision point

The apex of the triangle represents the most critical area in the current structure. As the price reaches this narrowing zone, the market is forced into a decision. Breakouts from triangle patterns frequently occur near the apex because the price has little room left to consolidate.

However, direction alone is not enough. Volume confirmation will be essential. A breakout accompanied by increasing volume would validate participation returning to the market and significantly improve the probability of sustained follow-through.

Without volume expansion, breakouts risk becoming false moves that quickly reverse back into the range.

Upside scenario targets $76,700 resistance

If Bitcoin breaks to the upside with strong volume confirmation, attention shifts toward high-timeframe resistance near $76,700. This level represents a major technical objective and aligns with prior supply areas within the broader trading structure.

A successful breakout would signal the end of the consolidation phase and the beginning of a new expansion leg, potentially attracting momentum traders and renewed market participation.

What to expect in the coming price action

From a technical, price-action, and market-structure perspective, Bitcoin is approaching a macro decision point. The triangle formation indicates compression, and compression almost always leads to expansion.

In the immediate short term, traders should expect increasing volatility as price interacts with the apex zone. A confirmed breakout supported by rising volume will likely dictate the next major move.

While higher lows favor a bullish resolution, confirmation remains essential. Until the breakout occurs, Bitcoin remains in consolidation, but the technical evidence suggests that a significant move is approaching rapidly.

The upcoming sessions are likely to define Bitcoin’s next directional trend as the market prepares for an imminent expansion of volatility.

TLDR

• ProShares launched the GENIUS Money Market ETF (IQMM), designed to support stablecoin issuers with liquid, short-term U.S. government securities.
• The ETF is structured to comply with the GENIUS Act, which mandates stablecoin issuers to back their tokens with safe, liquid assets.
• IQMM focuses on cash and Treasury bills with maturities of 93 days or less, ensuring liquidity for stablecoin issuers.
• The GENIUS Act, signed into law in July, requires stablecoins to be backed 1:1 by assets that are easily convertible to cash.
• The launch of the ETF comes as the stablecoin market approaches $300 billion, with projections for significant growth in the coming years.

ProShares introduced the GENIUS Money Market ETF (IQMM) on Thursday, a product designed for the growing stablecoin market. This fund aims to support stablecoin issuers by investing in highly liquid assets that meet the requirements of the GENIUS Act. The move comes as the stablecoin sector is projected to grow significantly in the coming years.

ProShares IQMM ETF Targets Stablecoin Issuers

The ProShares GENIUS Money Market ETF (IQMM) was launched to address a gap in the stablecoin market. Under the GENIUS Act, stablecoin issuers must back their tokens with assets that are liquid and low-risk, such as U.S. Treasury bills. IQMM is designed to invest solely in short-term, liquid U.S. government securities, meeting the law’s reserve criteria.

The law restricts eligible reserve assets to Treasury bills with maturities of no longer than 93 days. ProShares designed the fund to comply with these rules, ensuring that issuers can quickly access liquidity without selling longer-term bonds at a loss during periods of market volatility.

GENIUS Act Compliance Ensures Stability

The GENIUS Act, signed into law last July, is central to the structure of IQMM. The law aims to create a safer, more stable environment for the stablecoin market by requiring 1:1 backing with liquid, safe assets. ProShares’ ETF aligns with the law’s requirement, ensuring that stablecoins are supported by assets that can easily be converted to cash.

By focusing on cash and short-dated government securities, the fund provides issuers with the liquidity needed for daily redemptions. This ensures that stablecoin issuers can meet user demands without having to sell more volatile, longer-dated securities during times of stress in the financial markets.

Stablecoin Market Growth Prompts Regulatory Action

The launch of the IQMM fund occurs as the stablecoin market approaches $300 billion in circulation, with Tether’s USDT and Circle’s USDC leading the sector. Policymakers are preparing for rapid expansion, with some forecasts suggesting stablecoin circulation could reach $2 trillion by 2028. Wall Street projections are more optimistic, with some firms predicting the market could grow as large as $4 trillion.

Treasury Secretary Scott Bessent has indicated that stablecoins could become a significant part of the financial system in the coming years. His forecasts suggest the market could grow substantially by the end of the decade.

A research paper at the U.S. Federal Reserve praised the usefulness of prediction markets — specifically looking at Kalshi — in getting a real-time handle on economic policy.

“Kalshi’s forecasts for the federal funds rate and [the U.S. Consumer Price Index] provide statistically significant improvements over fed funds futures and professional forecasters, all while providing continuously updated full distributions rather than infrequent point estimates,” according to the paper published on Thursday.

And the markets, in which retail investors can buy contracts in virtually any yes-no question in such diverse fields as economics, politics and sports, are looking at topics on a live basis that other sources of information don’t.

Prediction markets “provide unique insights — particularly for variables like [gross domestic product] growth, core inflation, unemployment and payrolls, for which no other market-based distributions currently exist.”

And in this study, Kalshi predictions “perfectly matched the realized federal funds rate by the day of each meeting since 2022, a feat not achieved by either surveys or futures.”

Part of the secret sauce that sets prediction markets apart as a useful tool may be the inclusion of retail participants, which makes them “distinct from institutionally dominated markets,” the paper noted.

Public Bitcoin miners are planning about 30 gigawatts of new power capacity aimed at artificial intelligence workloads, nearly three times the 11 GW they currently have online, as they race to offset shrinking mining margins and reposition for the next growth cycle.

The buildout, compiled by TheEnergyMag across 14 publicly traded Bitcoin (BTC) miners, underscores how aggressively the industry is pivoting away from traditional hashpower amid persistently weak hashprice conditions.

On paper, the planned expansion amounts to what TheEnergyMag described as “a small country’s worth of power infrastructure.” In reality, much of the 30 GW sits in development pipelines, interconnection queues or early-stage plans, rather than operational facilities.

The widening gap suggests competition is shifting from ASIC efficiency to securing power, financing and delivering data centers on time.

“This is the megawatt arms race of the AI boom,” TheEnergyMag said, adding that monetization ultimately depends on whether AI demand remains strong enough to justify the scale of investment.

Related: The real ‘supercycle’ isn’t crypto, it’s AI infrastructure: Analyst

AI pivot delivers early revenue gains for some miners

The shift toward artificial intelligence infrastructure reflects an increasingly hybrid strategy among established Bitcoin miners, with some companies already reporting meaningful revenue contributions from AI and high-performance computing (HPC) workloads.

One example is HIVE Digital, which recently posted record quarterly revenue driven in part by its AI and HPC business lines. The company reported fourth-quarter sales of $93.1 million, up 219% year on year, even as Bitcoin prices declined during the period.

Investors, too, are attuned to the shift. Earlier this week, Starboard Value went public with its suggestion to Riot Platforms management that they accelerate the miner’s expansion into HPC and AI data centers.

The push to diversify comes as mining profits have taken a hit since the 2024 Bitcoin halving, which cut block rewards and squeezed margins across the industry.

Conditions have gotten even tougher since the fourth quarter, when heavy selling pressure sent Bitcoin tumbling from its record high above $126,000. Prices eventually stabilized in February, after briefly falling to below $60,000.

Despite these headwinds, US-based miners showed resilience at the start of the year, with output rebounding after a severe winter storm temporarily disrupted operations.

Related: Paradigm reframes Bitcoin mining as grid asset, not energy drain