The pipelines were always the prize

There is a reading of this market that treats the current wave of wind-downs as a verdict on the technology itself. BitMEX¹, the venue that pioneered the crypto perpetual contract, will close on 23 September after an eleven-year run. BitMart followed within days, announcing its own wind-down for January. Movement Labs and Storj filed for Chapter 11 in the same week. If your thesis was that crypto would replace the financial system, recent events look like evidence that it failed. Our thesis was never that crypto would replace finance. It was that blockchain would replace finance's infrastructure. What we are watching now is not a collapse. It is a sorting.

The rails have never been busier

Consider what is actually travelling across those rails. A few days ago, Hyperliquid, one of the world's largest decentralised derivatives venues, generated more volume from real-world assets than from crypto for the first time: 54% of total volume, some $26 billion in equities, indices and commodities, exceeding the combined crypto perpetual volume of every other decentralised exchange. Since June, single stocks have become the dominant real-world asset category on the platform, now representing 61% of that volume, led not by a token but by SK Hynix, the Korean semiconductor manufacturer. If you want to learn more about Hyperliquid please do read our research piece.

The most successful piece of crypto-native market infrastructure now derives the majority of its activity from traditional financial assets. The infrastructure won. Crypto, on its own infrastructure, has become the minority user. The same convergence is happening in the opposite direction.

CME Group and Cboe continue to expand their crypto product suites, while crypto venues increasingly list equity, ETF and commodity contracts as investors gravitate towards markets that trade longer, and ultimately around the clock. This former point will create a few reorganizations in the operation teams which are well used to leave the office the minute the market closes. 

JPMorgan's Kinexys platform has processed more than $4 trillion in transactions since launch and now averages over $7 billion of daily volume across eight currencies. BlackRock's tokenised Treasury fund has surpassed $2.5 billion in assets, operates across eight blockchains, and this year became tradable on Uniswap while also being accepted as collateral on Binance. America's largest banks are now building a shared tokenised deposit network through The Clearing House. None of these institutions is buying the ideology. Every one of them is buying the plumbing.

What the shakeout is actually selecting for

So why are so many crypto-native firms winding down? The answer has remarkably little to do with blockchain. 

The first reason is the absence of a durable moat.

A perpetual venue, a portfolio tracker or a DEX aggregator were businesses whose primary competitive advantage was simply being early. That worked while the incumbents were absent. Once institutions with global distribution, trusted brands, regulated balance sheets and decades-long client relationships entered the market, "being first" stopped being enough. Hyperliquid is not the exception that disproves this rule, it is the rule expressed twice. The businesses that survive are no longer crypto companies. They are infrastructure companies that happen to settle transactions using blockchain technology and are largely indifferent to the asset travelling across the network. The ones that disappeared were services. And services get absorbed.

The second reason is regulation. More specifically, compliance.

Compliance is a moat. The only question is who already owns it.

When MiCA's transition period ended on 1 July, thousands of unlicensed providers were legally required to cease serving European customers. Industry participants described it as a wipeout, potentially affecting millions of users. That is regulation doing exactly what regulation has always done. It raises the fixed cost of participation to a level that only institutions already designed to operate inside that framework can comfortably absorb. Traditional financial institutions have spent the better part of a century learning how to live with regulatory complexity. Much of the crypto industry has not, and many participants will never get the opportunity.

The United States is now moving through the same filtering process. The debate surrounding the Clarity Act has become less about whether digital assets belong inside the regulated financial system and more about how conflicts of interest should be managed once they are.

Whenever that legislation ultimately lands, it is likely to do in America what MiCA is already doing in Europe: establish clear operating rules for regulated institutions while significantly raising the barriers to entry for everyone else.

Why this outcome was inevitable

Perhaps none of this should surprise us. Financial infrastructure has always rewarded scale, trust, regulation and distribution. Those are powerful network effects that technology alone rarely overturns. Blockchain changes the technology stack. It dramatically improves settlement, transparency and programmability. It does not eliminate the importance of balance sheets, regulatory licences, client trust or global distribution. If anything, it increases the value of institutions capable of combining those advantages with better infrastructure. That is why the long-term winners are unlikely to be those with the most elegant blockchain protocol. They will be those capable of integrating blockchain infrastructure into institutional finance.

Who is eating whom?

For much of the past decade, the dominant narrative suggested that crypto would eat finance. The evidence increasingly points in the opposite direction. Traditional finance is absorbing blockchain's settlement infrastructure, always-on market structure and programmable asset capabilities, while leaving behind much of the ideology that originally accompanied them.

Is that a defeat for blockchain? Only if one assumed that the technology and the industry built around it were always the same thing. They never were.

A blockchain does not care whether it settles Bitcoin, a tokenised Treasury bill or a share of SK Hynix. The pipes are being rebuilt, quietly, by many of the same institutions early crypto advocates believed they would eventually replace. That was always the more probable outcome.

And for those who viewed blockchain not as an insurgency against finance but as the next generation of financial infrastructure, it is also the more valuable one.

The winners will not be those who tried to replace Wall Street. They will be those who quietly rebuilt the pipes beneath it.

¹- ^{CoinShares managed to find a record of our very first trade on BitMEX, dating back to 2014, a quarterly futures contract where we were already acting as a liquidity provider using our first proprietary trading system, Emergence, built in the basement of the very first Ledger office. Emergence and its many upgrades served us well for a decade before being retired in 2024, making way for its successor, Matrix. Looking back at that first trade is a reminder of how much both our industry and our company have evolved over the past twelve years. Thank you, Arthur, Sam and Ben, for your contribution to that incredible journey. It was quite an adventure.}