Bitcoin Is Undergoing an Uncomfortable Merger

Contribution by Peter

In its early years, bitcoin carried an almost anarchistic vibe. Techies, libertarians, and pioneers saw it as an escape route from the traditional financial system. They believed Wall Street would never provide a solution to the problems they saw in banks and governments.

Fast forward to today. BlackRock sells bitcoin ETFs, Morgan Stanley is pitching bitcoin to its clients, and Goldman Sachs wants to turn bitcoin into a productive asset. The world's largest financial institutions are embracing a technology with the potential to make them obsolete.

This theme was the subject of a lively conversation this week between Bloomberg analyst Eric Balchunas and podcaster Marty Bent.

Balchunas is one of the world's most prominent ETF analysts. He's someone from traditional circles who has visibly gained respect for bitcoin over the past few years. That makes his observations interesting—you don't have to worry about the maximalist platitudes that some early bitcoiners tend to repeat.

According to Balchunas, Wall Street and bitcoin have a peculiar relationship. Both camps underestimate each other. But ultimately, they will merge together. That sounds somewhat abstract, but Balchunas explains clearly in the podcast what he means.

Traditional investors, he argues, primarily underestimate why bitcoin even exists. In the ETF world, bitcoin is often viewed as digital gold. The deeper properties of the network itself? They're not particularly interested. "As long as it's good for my portfolio" is the prevailing mindset.

But it's precisely those properties that make bitcoin special. Balchunas highlights two: censorship resistance and protection against currency debasement.

The first one sounds abstract to Western investors. But in countries with capital controls and high inflation, it's anything but theoretical. In the conversation, examples like Iran and Zimbabwe are mentioned, where bitcoin isn't bought with price targets in mind, but because people simply want to hold money that's beyond their government's reach.

For the old guard, it's precisely such properties that give bitcoin its appeal. But they shouldn't develop tunnel vision about it, Balchunas thinks. Otherwise, they risk underestimating how much capital, reach, and legitimacy traditional financial players can bring. It's precisely through firms like BlackRock, Morgan Stanley, and Goldman Sachs that bitcoin gains access to millions of investors who would otherwise probably never open a wallet themselves.

Balchunas wonders aloud how important it is that bitcoin maintains its original cypherpunk foundation. With the necessary nuance immediately added: bitcoin itself doesn't actually change. Only the access points change. He sees bitcoin as having walked a unique path. Normally, Wall Street brings investments to retail investors. With bitcoin, it first emerged among individuals, and financial institutions followed later.

Either way, bitcoin has entered a phase of uncomfortable convergence. It's being absorbed by the very thing it fought against, with the result that its original identity is being overshadowed—temporarily or not.

Yet Balchunas ultimately seems most impressed by bitcoin itself. Not just by the price or the massive capital flows into ETFs, but by the fact that the network exists at all. He calls it "hard to believe" that a decentralized system without central leadership has been running flawlessly for seventeen years. Computers, nodes, and users don't need to know or trust each other, and yet the network keeps functioning.

Tick tock, next block!

More Alpha

Are you a Plus member? Then we continue with the following topics:

1. Saylor breaks the taboo on selling bitcoin
2. ARK Invest is cautiously bullish
3. Clarity, but no certainty yet

Below that, you'll find the news snacks—a handy overview of the news that actually mattered this past week.

1️⃣ Saylor breaks the taboo on selling bitcoin

Contribution by Erik

From the very first purchase in August 2020, Strategy founder Michael Saylor was unwavering: Strategy does not sell bitcoin. Until last Tuesday. During the Q1 earnings call he said: "We'll probably sell some bitcoin to finance a dividend payment." His CEO Phong Le was equally blunt: "We sell bitcoin if it's good for the company. We're not going to sit back and claim we'll never sell bitcoin."

Saylor loves analogies, and in this call he compares Strategy to what real estate developers do. "We look at it as if we're a real estate developer. [..] If you sell $100,000 worth of land to pay interest on a loan you took out to buy even more land, nobody would say that's bad for real estate prices. [..] We are a bitcoin developer. We buy it cheap, and sell it expensive."

It underscores a dual narrative Saylor has been telling for two years: in principle, he positions Strategy as a bitcoin treasury company, but when circumstances demand it, he calls it a bitcoin development company.

Growing dividend burden

In 2020, Strategy bought BTC with their cash reserves, then by issuing convertible bonds, and nowadays also with a range of new bond-like instruments. The so-called STRC is the most well-known of these. It's a share that largely behaves like a perpetual bond whose interest, disguised as a dividend, fluctuates; currently at 11.5%, it sits at the high end of the range. Strategy currently pays out approximately $125 million per month to holders of all its bonds combined.

That monthly payout has to come from somewhere. Strategy has multiple sources: cash, issuing new shares, and selling BTC. Rather than dogmatically sticking to the "never sell bitcoin" pledge, Strategy wants market conditions to dictate the choice. A key metric for this is the so-called mNAV. The mNAV is the premium the market pays for Strategy shares above the underlying bitcoin value. Currently, one MSTR share trades at 1.27 times the company's bitcoin holdings.

The point CEO Phong Le calculated in the call: at an mNAV above 1.22x, it's smarter to issue shares and buy bitcoin with the proceeds, because you're then swapping expensive shares for cheap bitcoin. But below that threshold, it flips. Then the shares are relatively cheap compared to their underlying bitcoin, and it's wiser to sell bitcoin to cover dividends.

So the men are walking back their bold "never sell" promise. It was as if a real estate developer swore to never sell land, regardless of the price. Sometimes selling land is simply the smartest move. Not because you lack confidence in real estate, but because at that moment you can create more real estate per share by selling tactically than by continuing to hoard.

Inoculating the market

Strategy has evolved in recent years from a software company to a provider of complex financial products. Saylor is like a central banker with a dual mandate. He must keep STRC shareholders and MSTR shareholders satisfied. And in a sense, he has a triple mandate: he also doesn't want to disappoint his base of bitcoin maxis, although that may well happen.

During the call, Saylor said at one point: "We'll probably sell some bitcoin [..] just to send the market the message that we've done it."

There's a certain irony in one of the biggest bitcoiners having become a kind of central banker, who must maintain credibility and calm the market by sending certain signals.

It remains to be seen whether this pivot actually has that effect. So far, Strategy has always managed to dominate the narrative. No matter how many hot takes circulate on X—for and against—ultimately the market will judge. Will Strategy still be able to raise sufficient capital? We'll keep watching. Saylor himself responded on X with a new slogan:

2️⃣ ARK Invest is cautiously bullish

Contribution by Peter

ARK Invest gave its latest bitcoin report the telling title After The Fall. The fall, then, is already behind us. Although the report was recently published, it's based on data through March 31, 2026. It therefore covers an analysis of bitcoin's first quarter of this year. During that period, bitcoin's price fell 22 percent and closed around $68,000.

That drop took bitcoin below three levels that ARK analysts consider important: the 200-day moving average, the cost basis of short-term holders, and ARK's own average on-chain purchase price. In technical terms, that paints a weak picture.

The Bitcoin Quarterly: Q1 2026

The Bitcoin Quarterly Q1 2026 report includes market summary, on-chain activity and technicals, ETFs, Digital Asset Treasuries (DATs), derivatives, liquidity, and macroeconomics.

Ark InvestMore from David Puell

Network activity also looks lackluster. The number of active entities on the bitcoin network declined, as did miner revenue. ARK adds another risk angle: quantum computing. According to the report, new research from Google and Caltech shows that the urgency to make bitcoin quantum-resistant has grown on a shorter timeline than previously thought.

You might think: this sounds rather bearish. But that doesn't appear to be the analysts' base case. ARK sees too many signals that point to bottom formation. The market has cooled off significantly, for instance. Premiums on derivatives markets have pulled back sharply, indicating that speculative exuberance has faded. And here and there, despondency is setting in—the feeling that hardly anyone is in a rush to buy bitcoin anymore.

But not all bottom signals have triggered yet. ARK's capitulation levels, for example, haven't been reached. It looks at the realized price, the average purchase price of all bitcoin in circulation, measured by the moment coins last moved. In previous cycles, a decline toward those zones often marked a bottom. ARK is essentially saying: the market is vulnerable, but may not be fully wrung out yet.

Yet the ARK analysts are also somewhat caught between two stools. Because there are also indicators that suggest the bottom can only be found in the rearview mirror.

While the price fell, steadfast investors—on X they're the people with diamond hands—were buying the dip. The supply held by so-called conviction buyers rose from approximately 2.13 million to 3.60 million BTC. That's a 69 percent increase in a single quarter. ARK interprets this as accumulation by long-term investors seizing the decline as an opportunity.

The institutional side of the market also remained remarkably calm. The US spot bitcoin ETFs collectively held nearly 1.3 million bitcoin. In those terms, the price decline failed to trigger mass capitulation. That's important, ARK believes. Because if those investors stay put during a steep correction, it says something about their time horizon.

On top of that, ARK sees a more favorable macro picture emerging. US jobs numbers have been revised sharply downward, and "real" core inflation—ARK uses Truflation's figures for this—dropped to 1.11 percent. That could give the Fed room to cut rates sooner. For risk assets, including bitcoin, that's typically a tailwind.

On balance, ARK entered the second quarter cautiously bullish. The undercurrents look stronger than the price suggested: reduced speculation, calm ETF investors, solid accumulation by long-term holders, and a macro backdrop that's shifting.

3️⃣ Clarity, but no certainty yet

Contribution by Peter

On X, it sounds as though the American crypto world is about to score a historic victory. Polymarket odds are climbing, major crypto accounts are talking about a breakthrough, and Brian Armstrong, the CEO of Coinbase, summed up the sentiment in three words: "Mark it up."

In other words: put that bill on the agenda.

That's set to happen on Thursday, May 14. That's when the Senate Banking Committee takes up the Clarity Act, the legislation that brings order to the US crypto market. According to CoinDesk, the markup is scheduled for 10:30 AM local time. That sounds technical, but it's an important moment. During such a session, the committee goes through the text line by line, discusses amendments, and decides whether the proposal can advance to the next stage.

So this isn't a final vote. The president won't be signing anything on Thursday. But after months of delays, it is the first real gate the bill must pass through.

The core of the bill is simple: get crypto out of the gray area. Currently, companies often only learn after the fact that regulators believe they've done something wrong. A token can be a security under one interpretation and a commodity under another. For entrepreneurs, that's unworkable. For investors too. And for large financial players, it can be a reason to stay on the sidelines.

That's why the market is watching Washington with some nervousness. The US has spent years regulating through lawsuits and threats. Regulators have since promised to do better. And the Clarity Act is supposed to put that shift in black and white.

In recent weeks, the biggest Clarity debate has centered on stablecoins. Banks fear that stablecoins will drain deposits, especially if users can also earn yield on such balances. That yield is often higher than what banks pay their customers. Crypto companies want to leverage precisely that opportunity to attract and reward users. The emerging compromise appears to be: no passive yield that resembles bank interest, but rewards tied to activity.

Banks still consider that too loosely defined. The American Bankers Association, among others, warns that the ban on stablecoin yield remains easy to circumvent. It may not be called interest, but users still receive a reward that economically does almost the same thing.

Banking Industry Says Clarity Act Stablecoin Proposal Would Enable 'Evasion' - Decrypt

Banking groups say the proposed compromise language in the Clarity Act leaves loopholes regarding stablecoin yield.

DecryptSander Lutz

On the political front, the dossier still faces some hurdles. Senator Elizabeth Warren weighed in, demanding that Meta provide clarity on any stablecoin plans. Her concern is logical from her worldview: if big tech companies start offering financial services through stablecoins, power shifts toward parties that already wield enormous data, distribution power, and influence.

Additionally, Senator Kirsten Gillibrand entered the debate. She says she won't vote for the bill without an ethics amendment. With it, she wants to address conflicts of interest around crypto and political families—a reference to the crypto interests surrounding Trump and his circle.

Regardless, the market sees momentum building. After years of gridlock, crypto legislation in Washington is finally back on track. But the train is only heading to the first station. After the markup, texts must be reconciled, the Senate must vote, it must be harmonized with the House of Representatives, and the president must sign. The White House is targeting July 4, Independence Day, as a symbolic moment. Great for optics, but not a hard deadline.

🍟 Snacks

To wrap up, some quick snacks:

• Brussels wants Europeans to invest more, and is looking to finfluencers for help. According to the European Parliament, they can help young people manage their money more wisely. Concerns about misleading content and insufficient transparency are being set aside for now. Behind this lies a bigger economic goal: Brussels wants European citizens to save less and make more capital available for investment. Europeans collectively hold around €10 trillion in savings accounts.
• Morgan Stanley launches crypto trading with a price war. Since last week, clients can buy crypto through E*Trade. The bank charges just 0.5% in transaction fees, cheaper than competitor Schwab and lower than some US crypto exchanges. Analysts expect other players to follow quickly. We saw the same thing around the launch of bitcoin ETFs. The first funds opened with high margins, only to later converge as a group toward near-zero trading costs. This race to the bottom now appears to have begun for exchanges as well.
• Prediction markets are growing fast, but profits mostly end up with professional players. Data from The Wall Street Journal shows that a very small group of traders captures the lion's share of profits. They use algorithms, large datasets, and high-frequency trading to exploit small price discrepancies. In other words, scale, speed, and information advantage determine the outcome. Retail participants, according to the paper, overwhelmingly lose money, often through impulsive bets on sports outcomes or political events.
• Feud between World Liberty Financial (WLFI) and Justin Sun escalates into two lawsuits. Sun is a major investor in the Trump-affiliated project. It froze a large portion of Sun's tokens, worth tens of millions of dollars, over alleged prohibited transactions. Sun therefore accuses WLFI of extortion, and filed a lawsuit in California. WLFI maintains nothing is wrong, and responded with a defamation suit in Florida. Both parties are holding firm to their positions for now.
• The market for tokenized real-world assets has grown strongly in just over a year. According to a new report, the sector tripled in size to over $19 billion. Trading volumes are also rising sharply. Tokenized government bonds, gold, and equities were the main growth drivers. Traditional assets are increasingly acquiring the properties crypto was known for: 24/7 trading, global access, and instant settlement. Major exchanges and financial players are now positioning themselves firmly in this sector, with the battle centering on distribution, regulation, and access to liquidity.

Thank you for reading!

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• Bart Mol (@Bart_Mol)
• Peter Slagter (@pesla)
• Bert Slagter (@bslagter)
• Mike Lelieveld (@mlelieveld)

We appreciate your continued support and look forward to bringing you more comprehensive analysis in our next edition.

Until then!