Crypto Current #98

Polymarket secured CFTC approval to re-enter U.S. markets. Kalshi raised $1 billion at an $11 billion valuation just weeks after closing a $300 million round. Coinbase is preparing to launch its own prediction-market product, while Robinhood is extending its offering through a Susquehanna-backed joint venture operating a CFTC-licensed exchange and clearinghouse. The bull case would see prediction markets restructuring how sophisticated investors price information and express conviction. Below, we explore why the peer-to-peer model matters and what institutional capital sees in this infrastructure build.

What's happening in crypto?

Crypto markets saw a modest Thanksgiving bounce after the mid-month sell-off, with conditions still normalising in the wake of the 10/10 liquidation event. Large caps steadied, with Bitcoin flat for the year despite supportive regulatory developments and large-scale ETF inflows. Among stronger performers, Aave and Ethena rose 12% and 10% respectively over the week.

DACM Insights: RealVision

Amid recent market volatility, DACM CIO Richard Galvin joined Raoul Pal on RealVision to discuss the structural shifts shaping digital assets - including the changing ownership base, the rise of DATs, the disconnect between strengthening fundamentals and recent price action, and how shifts in market structure and liquidity are contributing to that divergence.

The discussion offers a useful perspective on several factors influencing both short-term dynamics and the structural opportunities ahead, including the regulatory developments being led out of the US.

You can watch the full conversation by clicking the image below.

Crypto neobanks: Consolidation accelerating

The past fortnight has seen a cluster of moves that point to crypto infrastructure consolidating around established financial services players. Klarna launched KlarnaUSD on Stripe's Tempo blockchain, marking the first major bank to issue a stablecoin on the platform built by Stripe and Paradigm. CEO Sebastian Siemiatkowski, formerly a crypto skeptic, declared that "crypto is finally at a stage where it is fast, low-cost, secure, and built for scale." The stablecoin targets cross-border payments, a market McKinsey estimates will process $27 trillion annually via stablecoins.

Kraken followed with the launch of its Krak Card, a Mastercard-powered debit card offering 1% cashback and access to 400+ crypto and fiat assets across the UK and EU. More significantly, the exchange confidentially filed for an IPO with the SEC after raising $800 million at a $20 billion valuation. With Q3 revenue hitting $648 million (up 114% year-over-year) and adjusted EBITDA margins of 27.6%, Kraken's filing signals that crypto-native firms can achieve the metrics traditional capital markets demand.

On the custody side, Paxos acquired institutional wallet provider Fordefi for over $100 million. Fordefi's multi-party computation infrastructure serves roughly 300 institutional clients and processes $120 billion in monthly transaction volume. The acquisition gives Paxos, which issues PayPal's PYUSD stablecoin, direct access to DeFi infrastructure for its institutional base.

Perhaps most telling is the $10.3 billion merger between South Korean internet giant Naver and Dunamu, operator of the Upbit exchange. The combined entity plans to launch a won-backed stablecoin and build an Ethereum layer-2 network for retail payments. Naver Pay already processes 80 trillion won annually, and Upbit controls over 70% of Korean crypto trading volume. The merger positions the combined firm for a Nasdaq IPO while creating an integrated crypto-fiat infrastructure at a national scale.

Established financial firms are making capital-intensive commitments to build crypto infrastructure as a core part of their operations. The consolidation suggests the technology has moved beyond the sandbox into deployment at scale.

Prediction markets: What’s the big fuss?

What Are Prediction Markets?

Prediction markets allow participants to trade binary contracts on observable events - for example, will the Fed cut rates in December, will a specific bill pass Congress, or will unemployment exceed 4% next quarter? The concept has existed for decades, but recent infrastructure and regulatory developments have accelerated their popularity.

Two platforms now dominate the space. Polymarket, crypto-native and decentralized, processes over $4 billion in monthly volume and recently secured CFTC approval to re-enter U.S. markets through registered intermediaries. Kalshi operates as a CFTC-regulated exchange using fiat rails, with $50 billion in annualized volume and a freshly-minted $11 billion valuation following sequential fundraises from Sequoia, CapitalG, Andreessen Horowitz, and Paradigm. Coinbase and Robinhood are also moving into the category - Coinbase by preparing its own product, and Robinhood through its Susquehanna-backed, CFTC-licensed expansion - bringing established retail distribution to the model.

The volumes remain small compared to traditional derivatives markets, but the growth trajectory is steep. Kalshi's trading volume increased roughly 166x year-over-year. Google Finance now integrates real-time pricing from both Kalshi and Polymarket. The infrastructure is maturing rapidly.

The PvP model: Why this matters

Traditional sports betting and bookmaking operate on a house model: the bookmaker sets odds designed to guarantee profit regardless of outcome. Sharp bettors who consistently find an edge get limited or outright banned. The bookmaker's incentive is opacity. Broadcasting attractive prices invites sharps to exploit them, so the best odds stay quiet, and access gets restricted.

Prediction markets operate peer-to-peer. Prices clear based on actual supply and demand between participants, not a house edge. The platform facilitates matching but has no inherent stake in which side wins. This creates fundamentally different incentives around transparency.

Both the platform and participants benefit from publicizing odds. Sharps want liquidity to place larger positions. Platforms want volume and broad participation. There's no reason to hide prices or limit successful traders. Liquidity attracts more liquidity, and the feedback loop encourages broadcasting market movements widely.

The model enables efficient pricing on obscure events where traditional bookmakers wouldn't bother. It allows expressing complex, correlated views across multiple markets simultaneously. A participant can effectively trade their worldview: if X regulatory change passes, then Y sector outperforms, hedged against Z macro outcome. Traditional finance offers no clean way to express that combination outside of building bespoke derivative structures.

Over 90% of markets on Polymarket resolve accurately one month out. Source: Dune.

Why institutional capital cares now

Regulatory legitimacy arrived faster than most expected. The CFTC treating prediction markets as proper financial instruments, rather than grey-market gambling, removes a significant overhang. Venture capital followed: Sequoia doesn't write $1 billion checks into structurally flawed businesses.

The information infrastructure argument resonates with institutional allocators. Prediction markets reward accuracy over engagement. Social media optimizes for virality, creating incentive structures that amplify noise. Prediction markets penalize noise with capital loss. During the 2024 U.S. elections, prediction markets consistently outperformed traditional polling aggregates, adjusting in real-time as new information arrived.

There's also an interesting edge case around what some call "bounty markets." When markets exist on outcomes that human actors can influence, the market itself creates implicit bounties for changing those outcomes. Someone holding a large position that "Company X will be acquired by year-end" has a financial incentive to make that acquisition happen. We saw this play out when Coinbase CEO Brian Armstrong trolled prediction markets during their Q3 earnings call, deliberately listing keywords to settle $84,000 in mention market bets. The dynamic sounds like manipulation, which it is, but it also reveals market sophistication and the possibility of exploitable betting opportunities when those incentives become transparent.

Outlook

Prediction market infrastructure is maturing quickly. The platforms provide new ways to express conviction, hedge complex views, and price information outside traditional market structures. Whether this becomes a mainstream asset class or remains a specialized tool for sophisticated participants, the build-out is worth watching. The capital and regulatory clarity are already committed.

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Established in 2017, DACM is an institutional investor focused on the digital asset sector. Our team invest across the digital asset sector, from early-stage venture partnerships to listed and derivative markets. DACM has developed a fundamental investment philosophy designed for family office and institutional investors, tested across multiple market cycles.

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