Unpredictable Markets

Contribution by Peter

The most basic prediction market is simple to understand: You pose a question with two possible answers, let people place bets, and the prices reveal how likely the market considers each outcome. Those who get it right receive one dollar per share, paid for by the participants who bet on the wrong horse.

Anyone placing a bet expects the outcome to be determined fairly. The question is set in advance, and then reality decides who wins. Platforms like Polymarket and Kalshi run on that presumed objectivity, but in practice it turns out to be a fragile promise. Two recent stories illustrate why.

The first story centers on markets that track bitcoin's price movement. Will the price be higher or lower an hour from now? Such contracts are also offered for shorter periods. Polymarket, for instance, opens and closes a new market every five minutes asking whether the bitcoin price will be higher at the end than at the beginning.

There is, however, a crucial difference from predictions about, say, the weather or an election. A trader cannot single-handedly influence the outdoor temperature. The same goes for an election result. But a price that is formed on a financial market can, in theory, be pushed around.

Three researchers from Stanford and SMU examined what happened around the settlement of these contracts. What did they find? Some traders first take a position on Polymarket, then push the bitcoin price past the required threshold in the final seconds. A temporary nudge that only needs to last long enough to make a contract pay out. Binance turned out to be the exchange of choice for this.

The researchers identified 821 wallets that regularly participated in these suspicious rounds. Together, they earned $8.2 million in two months. Most of that bill landed on unsuspecting traders who suddenly found themselves facing a decidedly unpredictable market.

The trio does offer a straightforward solution: by extending the time window, this form of manipulation quickly loses its profitability. With 15-minute contracts, it has virtually disappeared.

In the second story, the result isn't being rigged — the question itself is in dispute. Polymarket ran a market asking whether Strategy would sell bitcoin by May 31 at the latest. On June 1, the company reported that it had indeed sold 32 bitcoin between May 26 and 31. Those who had bet on Yes thought they had won. After all, the sale took place before the deadline.

Yet the market resolved to No. Polymarket added a clarification after the fact: not only the sale, but also the public confirmation of it, needed to have occurred before the deadline. A vote through the system used to settle disputed markets confirmed that outcome.

Two traders filed a lawsuit against Polymarket in New York on July 3. They argue that the rules were changed after the fact. According to them, the market asked whether Strategy would sell bitcoin — not whether that sale would also be publicly announced before May 31. They want the payout they were counting on.

The case goes beyond one poorly worded market. Polymarket wraps itself in a veneer of objectivity, where predetermined rules lead to a verifiable outcome. But how much is that promise worth if the platform can retroactively "clarify" what a question meant?

First, it must be determined whether the case can stay in New York. That alone would be a breakthrough, since Polymarket didn't set up shop in Panama for nothing. Only then would an actual hearing on the merits follow — one that could provide the desired look behind the curtain.

The clarity that could emerge from this isn't only useful for traders, but also for the core product of prediction markets: information about the future. A forecast is most valuable when it solely expresses what is going to happen in the world, rather than who can move the market at the last second, or how the referee will interpret the rules after the game.

More Alpha

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

1. New nonprofit becomes Wall Street's Ethereum front desk
2. New Clarity Act text incoming: Senate may still get a shot before recess
3. Asia: from stablecoin hype to outright bans

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

1️⃣ New nonprofit becomes Wall Street's Ethereum front desk

Contribution by Erik

For the second time in a month, a new organization has emerged to take over tasks from the slimmed-down Ethereum Foundation. After Ethlabs, which is handling protocol upgrades, Ethereum Institutional now positions itself as Wall Street's go-to contact. The funding, however, raises some questions about the promised neutrality.

On July 1, the launch was celebrated in New York: an independent nonprofit presenting itself as the one-stop shop for financial institutions interested in the Ethereum ecosystem. Funding comes from, among others, Ethereum co-founder Joe Lubin, as well as BitMine and SharpLink — the publicly traded companies that amassed 5.7 million and 887,000 ETH respectively over the past year.

The Foundation slims down, successors step up

The timing of the launch is no coincidence. In our June 29 edition, we described how the Ethereum Foundation reduced itself to "one of many stewards." A fifth of staff was let go, and a tighter budget is being maintained going forward.

Who would fill the gap? First Ethlabs on June 22, and now Ethereum Institutional as the commercial and policy counterpart. Both run on the same backers. The press release describes the division of labor as follows: 

"Ethlabs and Ethereum Institutional complement each other as the pillars of Ethereum's next chapter: one drives innovation at the protocol level and core infrastructure, the other ensures institutions have a credible, dedicated partner to guide them through large-scale deployment."

What Institutional will do

As a strong product, Ethereum has always sold itself. Because Ethereum was the first blockchain with smart contracts to break through, it has built up a lead over competing projects. And so it now has a compelling pitch to banks: it hosts roughly $150 billion in stablecoins and approximately half of all real-world assets on crypto rails, such as on-chain equities and bonds.

For the Ethereum Foundation, marketing was always a dirty word: it wanted to remain credibly neutral. Only in the past year did the Foundation set up an institutional team. And now there's Ethereum Institutional. That includes education and organizing events.

And no, we probably won't see Vitalik Buterin rapping in a t-shirt with a bison on it ("Eth-two-point-O-yo!"). The era of suits has arrived for Ethereum.

Neutral?

The organization bills itself as a neutral counterpart, but together BitMine and SharpLink hold more than 6 million ETH. The biggest funders thus have a direct financial interest in every institution that signs on to Ethereum. That doesn't necessarily undermine the message, but "independent front desk" might not be entirely accurate.

Either way, Wall Street now has one Ethereum phone number to call.

2️⃣ New Clarity Act text incoming: Senate may still get a shot before recess

Contribution by Erik

The important upcoming U.S. crypto legislation, the Clarity Act, has reached what may be its last chance to pass this year. A new, merged text could appear this week. The biggest obstacle remains the ethics provision that Democrats are demanding. They want an end to the conflicts of interest between Trump's family businesses and crypto policy.

CoinDesk sources report that the text merges input from the Senate Banking Committee and the Agriculture Committee. Proponents are aiming for a Senate floor vote the week of July 20.

This brings the bill into what is likely its decisive phase. In our June 15 News edition, we already wrote: if no full Senate vote is scheduled by early July, it would slip to September or later. That first hurdle was not cleared — the Senate went on July recess without a vote. The new text is the attempt to turn the tide before the Senate calendar and broader Washington politics significantly reduce the chances for 2026.

What the bill is supposed to do

The Clarity Act aims to do for the broader crypto market what the Genius Act did last year for stablecoins: create a federal legal framework. At its core is the jurisdictional split between the two U.S. regulators, the CFTC and SEC. This would end years of legal tug-of-war over which watchdog oversees which token. For exchanges and other crypto companies, it would mean clarity on where they stand.

Ethics provision remains the sticking point

The biggest sticking point remains the ethics provision. Last week we described how crypto was President Trump's largest income source last year. Democrats are demanding restrictions on senior government officials' business ties to the crypto sector. Several Democratic senators have indicated they cannot support the bill without that provision.

Less relevant for Bitcoin

For Bitcoin, it matters less whether the bill passes or not. Bitcoin has been treated as a commodity by the CFTC and the courts for years. But the Clarity Act is of major importance for the rest of the crypto market.

The next two weeks may therefore determine whether the bill still has a serious shot in 2026. Though even that window isn't set in stone: the crypto lobby is seeking support on both sides of the aisle, even if that means pushing past the November midterm elections.

3️⃣ Asia: from stablecoin hype to outright bans

Contribution by Peter

Anyone taking a crypto tour of Asia this week will encounter just about everything — except consensus. One country is racing to build exchange products and payment networks, while another is guarding the tightened policy handbrake. Crypto has become a litmus test in Asia: how far can you let new technology in without losing control over money, taxes, and energy?

The first stop is Japan. There, the tone is one of normalization. Finance Minister Satsuki Katayama said Japan wants to continue discussions on allowing exchange-traded funds backed by crypto. In other words: products that let investors gain exposure to Bitcoin or other cryptocurrencies through the stock market, without needing to understand the underlying technology themselves. That fits Japan's style: cautious, regulated, and moving forward slowly. Now that these kinds of funds are gaining ground abroad, Tokyo wants to ensure its own market doesn't fall behind.

Then there's South Korea, where stablecoins have been placed high on the political agenda. Korean policymakers have noticed that stablecoins have been warmly embraced by neighboring Japan. The country's central bank therefore wants to move quickly on a legal framework for a won-denominated stablecoin. Banks are expected to play the lead role — not just any tech or crypto company. Bank of Korea governor Shin Hyun-song is reportedly somewhat uneasy about this: stablecoins are convenient for payments, but they also touch on monetary policy, capital flows, and regulation.

BOK Governor Urges Swift Won-Stablecoin Law

Bank of Korea Governor Shin Hyun-song has raised the need for swift legislation regarding the Framework Act on Digital Assets (second-phase legislation) relate

BusinesskoreaLee Song-hoon

Kazakhstan is taking yet another route. President Tokayev has signed a decree intended to act as an adrenaline shot for the local crypto market. The country wants to move trading to licensed platforms, introduce tax incentives, and even deploy energy from oil and gas sources for Bitcoin mining. Consumers are already seeing crypto pop up more and more in their daily lives. Banks are collaborating with Binance, among others, to enable USDT transactions at thousands of payment terminals. Merchants receive the payment in their local currency as usual.

But the tour also has a harsher side. In Malaysia, more than 75,000 mining rigs have been seized since 2022. That took roughly 3,000 raids by police agencies, resulting in 629 arrests. The operations target illegal miners who cause problems by tapping power from the grid on a massive scale and tampering with meters. Trading in cryptocurrencies is legal in Malaysia.

Malaysia Seizes Over 75,000 Crypto Mining Rigs in Power-Theft Crackdown - Decrypt

More than 3,000 raids since 2022 have led to 629 arrests, as authorities target miners siphoning electricity from the national grid.

DecryptDecrypt Agent

And then there's India. Cryptocurrencies have occupied a gray area there since 2018, when the courts struck down the central bank's push for an outright ban. That decision is up to lawmakers. A bill that circulated in 2021 was never formally debated. Since then, the central bank has continued to press for a hard line as the most vocal critic. Last week, it reiterated its concerns about tax evasion, foreign exchanges, anonymous wallets, and methods to circumvent capital controls.

The picture is clear: Asia is experimenting, taming, accelerating, and banning all at once. Japan thinks like a securities market, South Korea like a banking nation, Kazakhstan like a growth hub, Malaysia like a power-grid enforcer, and India like a regulator determined not to lose control over money flows. The technology is the same everywhere, but each country projects its own fears and ambitions onto it.

🍟 Snacks

To wrap up, some quick bites:

• Japan's PM pledges support for Web3 companies. Sanae Takaichi spoke at WebX 2026 to outline her government's startup policy. She framed cryptocurrencies not as speculation, but as innovation, capital markets, and growth. Over the past year, stablecoins, tokenization, and on-chain infrastructure have gained ground in the Land of the Rising Sun. With her speech, Takaichi is mainly signaling policy continuity: digital assets remain part of Japan's economic agenda. Singapore, Hong Kong, Dubai, and South Korea are the main competitors as Web3 hubs.
• BNB Chain building new network for AI-agent trading. The new blockchain is set to go live in early 2027, with transactions confirmed within 50 milliseconds. The goal is a trading experience closer to a centralized exchange, without users having to custody their assets with a third party. The technical design is geared toward agentic trading and includes features to prevent validators from profiting by reordering transactions (MEV). That comes at the cost of transparency: a public mempool is absent from the design.
• Chainlink gaining ground as a secure bridge between blockchain networks. Since May, projects with a combined $7.2 billion-plus in assets have migrated over, including Kelp, Lombard, Solv, and now Mantle. The catalyst was a security vulnerability at competitor LayerZero that caused hundreds of millions of dollars in damages earlier this year. Since then, projects have been looking much more carefully at the infrastructure their tokens move over. In recent years, so-called "bridges" have often proven to be the weakest link.
• Circle becomes first stablecoin issuer approved to form a national trust bank. On Friday it received the green light from regulator OCC. The new entity is called Circle National Trust and may custody digital assets, with the potential to later manage USDC's reserves under federal supervision. This makes the infrastructure behind USDC less dependent on individual banking partners. For Circle, it's also a reputational win: no other stablecoin issuer has embedded itself this deeply into the U.S. financial system.
• Bitcoin "possibly" getting a spot in Trump Accounts. On July 4, the doors opened in the U.S. to a new type of investment account for children: Trump Accounts. Those who open an account for their child receive a $1,000 gift from the government. Dell founder Michael Dell has pledged an additional $250 in seed capital. The account balance is invested automatically, initially solely in a fund tracking the S&P 500. Will Bitcoin get a place in there too? "Something could happen," Trump said at the accompanying press conference.

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